[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]




 
WHERE IS THE PEACE DIVIDEND? EXAMINING THE FINAL REPORT TO CONGRESS OF 
                 THE COMMISSION ON WARTIME CONTRACTING

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

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                            October 4, 2011

                               __________

                           Serial No. 112-85

                               __________

Printed for the use of the Committee on Oversight and Government Reform


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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana                  ELIJAH E. CUMMINGS, Maryland, 
JOHN L. MICA, Florida                    Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania    EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio              CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York          GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona               MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho              DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania         BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee          PETER WELCH, Vermont
JOE WALSH, Illinois                  JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina           CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida              JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                     Robert Borden, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on October 4, 2011..................................     1
Statement of:
    Henke, Commissioner Robert J., Commission on Wartime 
      Contracting, accompanied by Commissioner Clark Ervin, 
      Commission on Wartime Contracting; Commissioner Katherine 
      Schinasi, Commission on Wartime Contracting; Commissioner 
      Christopher Shays, co-chair, Commission on Wartime 
      Contracting; Commissioner Charles Tiefer, Commission on 
      Wartime Contracting; and Commissioner Dov S. Zakheim, 
      Commission on Wartime Contracting..........................     9
Letters, statements, etc., submitted for the record by:
    Henke, Commissioner Robert J., Commission on Wartime 
      Contracting, prepared statement of.........................    13


WHERE IS THE PEACE DIVIDEND? EXAMINING THE FINAL REPORT TO CONGRESS OF 
                 THE COMMISSION ON WARTIME CONTRACTING

                              ----------                              


                        TUESDAY, OCTOBER 4, 2011

                          House of Representatives,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:06 a.m., in 
room 2154, Rayburn House Office Building, Hon. Darrell E. Issa 
(chairman of the committee) presiding.
    Present: Representatives Issa, Burton, Chaffetz, Walberg, 
Lankford, Amash, Labrador, Meehan, DesJarlais, Guinta, 
Farenthold, Cummings, Towns, Maloney, Kucinich, Tierney, Clay, 
Cooper, Connolly, Quigley, Davis, Welch, Yarmuth, Murphy, and 
Speier.
    Staff present: Thomas A. Alexander, senior counsel; Michael 
R. Bebeau, assistant clerk; Richard A. Beutel, senior counsel; 
Robert Borden, general counsel; Molly Boyl, parliamentarian; 
Lawrence J. Brady, staff director; John Cuaderes, deputy staff 
director; Adam P. Fromm, director of Member liaison and floor 
operations; Linda Good, chief clerk; Frederick Hill, director 
of communications; Justin LoFranco, press assistant; Mark D. 
Marin, senior professional staff member; Beverly Britton 
Fraser, Scott Lindsay, and Carlos Uriarte, minority counsels; 
Kevin Corbin, minority deputy clerk; Ashley Etienne, minority 
director of communications; Carla Hultberg, minority chief 
clerk; Lucinda Lessley, minority policy director; Dave Rapallo, 
minority staff director; and Suzanne Sachsman Grooms, minority 
chief counsel.
    Chairman Issa. The committee will come to order, please.
    The Oversight Committee exists to secure two fundamental 
principles: first, Americans have a right to know the money 
Washington takes from them is well spent and, second, Americans 
deserve an efficient, I repeat, efficient, effective government 
that works for them. Our duty on the Oversight and Government 
Reform Committee is to protect these rights. Our solemn 
obligation is to hold government accountable to taxpayers, 
because taxpayers have the right to know what they get from 
their government. We will work tirelessly in partnership with 
citizen watchdog groups to deliver the facts to the American 
people and bring genuine reform to the Federal bureaucracy.
    Today, more than ever, our opening statement that we do at 
the beginning rings true with the panel of witnesses we have 
here, and I will say led from the middle by Congressman Chris 
Shays, former member of this committee, and, I guess I will 
include, who would be sitting in my chair had he not gone on to 
these other pursuits. Welcome, Chris.
    And the other members of the Commission on Wartime 
Contracting, who, in August, released a final report with 
alarming findings about waste and abuse that has occurred in 
Afghanistan and Iraq. Over the course of 2 years, the 
Commission has conducted 25 hearings, which for Chris Shays is 
only about average, issued five special reports and two interim 
reports. Its final report presents a sobering view of waste and 
fraud in the war on terror.
    An estimated $1.25 trillion has been spent on operations in 
Iraq and Afghanistan. The report estimates that since 2002, 
important, since 2002, early on in the Bush administration, the 
Defense Department has spent $206 billion of their contract 
obligations in support of the wars in Iraq and Afghanistan. At 
least $31 billion, and possibly as much as $60 billion, has 
been lost to contract waste and fraud in America's contingency 
operations in Iraq and Afghanistan.
    It is appropriate for the Commission and Congress to assess 
these costs and the reasons so much taxpayer money has been 
squandered to waste and fraud. The waste and fraud associated 
with these expenditures is mind-numbing.
    With the coming transition of operations from DOD to State 
Department in Iraq, as well as the continued surge in 
Afghanistan that includes civilian and Federal work force, 
costs associated with contractors are likely to increase. For 
example, the State Department will increase its manpower from 
8,000 to 17,000. The great majority of those will be 
contractors for security, medical maintenance, aviation, and 
other functions.
    The State Department is building a virtual private army of 
private security contractors in Iraq. Some have estimated that 
as many as 5,500 new contractors will be necessary to protect 
and operate the U.S. embassy and its facilities and functions 
throughout Iraq.
    In Afghanistan, the number of civilian employees drawn from 
Departments such as State, Treasury, Justice, and Agriculture, 
has tripled since 2009. That is the number of civilian 
employees has tripled since 2009, rising from just over 300 to 
over 1,000 as of June 2011. Supporting and protecting this 
growth in additional staff will require continued use of 
private contractors under the current plan.
    We have reached a point where we are now forced to treat 
contractors as the default option. This is because Federal 
agencies can't complete mission-critical functions, nor can 
they manage an overseas large contractor force of unprecedented 
size that at times has outnumbered troops in the field.
    When President Obama took office, he pledged to eliminate 
waste, fraud, and abuse in these areas. And I might comment so 
has virtually every president. Instead, we are growing more and 
more reliant on contractors. New and increasing problems have 
come at a time when President Obama has failed to fill key 
leadership positions that ensure effective oversight is 
unbroken. He has failed to implement essential measures to 
combat the waste and fraud. The record of waste and fraud will 
continue unless the administration takes concrete actions to 
protect precious taxpayer dollars.
    The United States has not achieved peace, and will not get 
a peace dividend unless we, in fact, are able to stem waste, 
both created within our Government and by our partners in Iraq 
and Afghanistan.
    Today we will examine these difficult challenges and 
explore the conclusions and recommendations offered by the 
Commission on Wartime Contracting. But before we do, I want to 
make one thing very clear: operations in Afghanistan and Iraq 
have levied a heavy human toll: 7,520 Americans and coalition 
soldiers have been lost. Our brave men and women serving on the 
front lines continue to do an outstanding job fighting our 
enemies and securing freedom for those who terrorized or would 
terrorize us and oppress other nations.
    Nothing in this hearing, nor the recommendations the 
Wartime Contracting Commission, is intended to question their 
efforts or their commitment. Congress must recognize we are not 
there in harm's way, and those who are there in harm's way are 
doing the best they can. Rather, it is for this committee to 
evaluate the systems and the recommendations of this Commission 
to recognize this is not a problem that began on this 
President's watch; this is not a problem that will end, no 
matter what we do. But we do have an obligation to do 
everything we can to assist the administration by systems and 
support to reduce waste and fraud, to reduce inefficiency, and 
to provide our best advice, both through this Commission and 
through our own efforts to an administration who has in fact 
countless thousands of men and women in harm's way.
    With that, I will recognize the distinguished ranking 
member for his opening statement.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    First, let me say that I understand Mr. Mike Thibault will 
not be able to be with us this morning. I understand that you 
will be putting his full statement in the record, which we 
would appreciate and would join you in. Mr. Thibault worked 
with our committee closely in the past and we sincerely 
appreciate his career of public service and his expertise.
    Chairman Shays, it is great to have you back again before 
the committee which you served on so many years.
    And thank you to all the Commissioners for being with us 
today.
    Over the past decade, the United States has grown 
increasingly reliant on contractors to provide support services 
to the military, the State Department and USAID. In Iraq and in 
Afghanistan, contractors outnumber service members and they 
perform essential tasks such as shipping supplies through 
hostile territory and providing security to bases and 
personnel. Since 2001, we have spent more than $200 billion on 
these contracts.
    After an extensive bipartisan investigation, the Commission 
on Wartime Contracting estimated that as much as $60 billion 
may have been lost to waste and fraud due to a lack of 
effective competition, oversight and enforcement in contingency 
contracting. Although the scope of this contracting problem is 
daunting, it is not new to this committee. Under Chairman Henry 
Waxman's leadership, the committee examined problems with the 
military's LOGCAP contract for logistical support, the 
Government's multiple contracts with Blackwater USA for 
security services, and the State Department's bloated billion 
dollar contract to build the U.S. embassy in Baghdad.
    Chairman Towns continued this work by examining the systems 
used by the executive branch to track contractors waste in 
USAID's reconstruction contracts. And under Representative 
Tierney's leadership, the National Security's Subcommittee 
uncovered evidence that the U.S. trucking contractors and their 
private security providers were involved in a massive 
protection racket that sent U.S. taxpayer dollars into the 
hands of warlords, power brokers, and the Taliban.
    Our committee's oversight efforts have resulted in 
significant changes. In Iraq, the State Department has 
dramatically increased its management of private security 
contractors and the number of use of force incidents has 
plummeted. In Afghanistan, General Petraeus responded to 
Chairman Tierney's investigation by issuing new contracting 
guidelines and charging two task forces with tracking U.S. 
contracting dollars to reduce corruption.
    But despite these worthy investigations to root out waste, 
fraud, and abuse after it happens, more must be done to prevent 
waste from occurring in the first place. In its final report, 
the Commission has given us a roadmap, and a very good one at 
that, for reform that includes 32 recommendations for both 
Congress and the executive branch. These reforms require 
increasing competition, oversight, and enforcement. If we 
cannot put in place the personnel to oversee contractors in war 
zones, then we need to rethink the mission, rather than blindly 
pressing forward with poorly designed contracts.
    Finally, to the Commissioners, let me thank you for 3 years 
of dedication and hard work. You pursued your mandate in a very 
vigorous, fair, and bipartisan manner in the best tradition of 
the Truman committee. You have accomplished your mission by 
providing us with a historical account of the mistakes that 
were made and a guidebook to the reforms necessary to prevent 
them in the future. Now it is up to us, the Congress, to 
implement your recommendations.
    Mr. Tierney has taken the lead in introducing a bill to 
implement one of the Commission's principle recommendations, 
establishing a permanent inspector general for the contingency 
operations. I urge my colleagues to support that legislation 
and I hope that the chairman will work with me and 
Representative Tierney and others on the outside to focus more 
of our committee's resources on this issue. I agree with the 
chairman, this is indeed a bipartisan effort. We must address 
this in a bipartisan way, just as the Commission has set a 
wonderful example for us. And we do appreciate you.
    So I am looking forward to hearing the testimony and with 
that, Mr. Chairman, I yield back.
    Chairman Issa. I thank the gentleman.
    We will now recognize the chairman of the Subcommittee on 
National Security, Mr. Chaffetz, for his opening statement.
    Mr. Chaffetz. Thank you, Mr. Chairman.
    And thank you to all of you who have poured years of talent 
and expertise and effort into producing such a quality 
document. Thank you for your time and effort. I only hope that 
we look toward it and we implement it and we make positive 
changes. So, again, thank you.
    The American people are faced with the prospect that their 
Government has wasted somewhere between $31 and $60 billion on 
contracting since 2002. From your report, in Chapter 3, I will 
read, ``The Commission estimates that at mid-range, waste and 
fraud during contingency operations in Iraq and Afghanistan 
averaged about $12 million every day for the past 10 years.''
    According to the Commission, this is due to ill-conceived 
projects, poor planning and oversight, poor performance by 
contractors, criminal behavior, and just good old fashioned, 
blatant corruption. This is unforgivable. While some may agree 
or disagree with our engagements in Iraq and Afghanistan, it is 
universally unacceptable to waste taxpayer money. According to 
the Commission, ``Unless changes are made, continued waste and 
fraud will undercut the effectiveness of money spent in future 
operations.''
    These observations aren't new, however. Many, including 
this committee, have highlighted the waste, fraud, and abuse 
since the wars began, and I compliment Mr. Tierney and others 
who have spent a lot of time highlighting this.
    Unfortunately, oversight has not improved, necessarily, 
during this administration. As it doubles down on foreign 
policy agenda, this administration intends to dramatically 
increase the use of contractors before first addressing the 
lack of oversight.
    I would like to read from the Executive Summary, page 2 
here. It says, ``The number of Defense Department, Department 
of State, and U.S. Agency for International Development, USAID, 
contractor employees in Iraq and Afghanistan has varied, but 
exceeded 260,000 in 2010. The contractor employee count has at 
times surpassed the number of U.S. military personnel in the 
two countries. Most contractor employees are third-country 
nationals and local nationals. U.S. nationals totaled more than 
46,000, a minority of those employed,'' something that we 
obviously need to look at.
    In Iraq, for example, the State Department's footprint will 
increase to nearly 17,000 after the Department of Defense 
withdraws on December 31, 2011. Many of these will be private 
contractors. To that end, the President and the Secretary of 
State will hire an additional 5,500 private security 
contractors to compensate for the troop withdrawal. This 
private army will fill the gap left by our troops. In other 
words, the President will remove the troops, but increase the 
level of private security contractors.
    At the same time, the President is doing little to 
strengthen the oversight. According to the Commission's report, 
the State Department ``is struggling to resolve budget issues 
and prepare requirements for awarding large number of 
contracts, along with mobilizing the many U.S. Government 
civilians needed to effectively manage these contracts.''
    Thousands of contractors operating without proper oversight 
is an unacceptable scenario. It will lead to the same type of 
waste, fraud, and abuse that is at issue here today.
    There are solutions, however. As a first step, President 
Obama and the Senate should fill critical vacancies within the 
Federal Government. Currently, the State Department and the 
SIGIR are leaderless. USAID IG is retiring at the end of this 
month. These are basic steps in very critical components and 
personnel that we need in place in order to make sure that the 
proper oversight is in place.
    I again look forward to hearing from the panel. I 
appreciate the work of the Members that have done here before, 
but thank you again for your good work, and I look forward to a 
candid discussion today.
    Yield back.
    Chairman Issa. Thank you.
    We now recognize the subcommittee ranking member, the 
gentleman from Massachusetts, Mr. Tierney, for his opening 
statement.
    Mr. Tierney. Thank you, Mr. Chairman, and thank you for 
calling this hearing today. I want to thank all the 
commissioners for their great work over the past 3 years. I 
think it is a great example of public service. Your previous 
public service meant that none of us were surprised by the 
effort and the expertise that you brought to it, but I 
certainly want you to know that we can't express our gratitude 
probably loud enough and clear enough, and I hope the American 
people understand the sacrifice that you put into doing this 
job. You had many other things you could have been doing with 
your time and effort, so your citizenship is greatly 
appreciated.
    And I was pleased to have Jim Leach, my Republican 
counterpart, cosponsor the legislation that became the 
Commission on Wartime Contracting, so I take special pride in 
the success that you have had and the fact that you did a good 
job. And with the leadership of Mike Thibault and my friend, 
Chris Shays, who just left one hat and put on the other hat and 
went about doing the same thing he had always been doing, which 
was good, thorough oversight work, and we appreciate that.
    And if it hadn't been for Senators Webb and McCaskill and 
others in the Senate who picked up the cudgel there and moved 
forward, it may never have become legislation. So we think it 
is a great bicameral, bipartisan effort on that which was 
important.
    We fashioned this after the so-called Truman Commission, 
and we did that on the notion that people would know that it 
was not going to be partisan and the idea was not to be 
attacking any executive or administration in particular, but 
the notion that whenever we get into a contingency operation, 
there will be those who try to take advantage of the situation 
in some circumstances and, without any purposeful bad acts, 
lend themselves to mismanagement or abuse on that. So the 
Commission was authorized and charged with identifying the 
scope of the wasteful contingency contracting and recommending 
reforms, and you did just that.
    But the results of your work are sobering, as many have 
already mentioned. Billions of dollars wasted by agencies that 
had little capacity to manage the contractors or to even hold 
them accountable, and billions of dollars more have been 
dedicated to projects that were poorly conceived and probably 
unsustainable by the host government. So these findings are 
consistent with the committee's own oversight of private 
security contractors in Iraq and Afghanistan.
    I think we have already mentioned here that last year I led 
a 6-month subcommittee investigation of the $2 billion 
Department of Defense trucking contract in Afghanistan. Our 
investigation found that the trucking contract had spawned a 
vast protection racket in which warlords, criminals, and 
insurgents extorted contractors for protection payments to 
obtain safe passage. Our investigation further showed that 
senior officials within the U.S. military contracting chain of 
command had been aware of that problem but had done little to 
address it. Two weeks ago, the National Security Subcommittee 
had a followup hearing with three Defense Department witnesses 
to address those issues.
    I asked General Townsend, the Director of the Pakistan-
Afghanistan Coordination Cell of the Joint Staff whether 
contractor protection payments to warlords, power brokers, and 
insurgents were necessary for safe passage in Afghanistan. He 
said they were, and in many cases they don't have a choice, in 
his exact words. I then asked Gary Motsek, the head of the 
Contingency Contracting at the Department of Defense, whether 
such payments are legal under U.S. law. He stated that they 
absolutely were not legal.
    So, in other words, the Department of Defense designed a 
critical contract to which it was necessary, in their terms, 
for the contractors to make illegal protection payments that in 
many cases were used against the very forces to attack our 
troops. It is just unheard of, I think, in other situations.
    So my fear is that the committee's and your investigations, 
the Commission's investigations are only the tip of the 
iceberg, and I think your work has shown that as well.
    Much of the Afghan economy now centers around the United 
States and international military presence. Many of the Afghan 
elite have their own logistics contracts with the United 
States, and a significant portion of these funds seem to end up 
supporting the Dubai real estate market, rather than jobs in 
Afghanistan.
    Today, the business of Afghanistan is war. How can we ever 
hope to extricate ourselves from that war when so many Afghans 
benefit from the insecurity that is used to justify our 
continued presence? To my mind, we have crossed the tipping 
point in which the size of our military footprint inadvertently 
fosters further instability. Every additional soldier and every 
additional supply convoy that we send to Afghanistan further 
fuels the cycle of dependence, corruption, and endless war.
    Simply stated, we cannot afford to fail at getting a handle 
on contingency contracting waste, fraud, and abuse in Iraq and 
Afghanistan. Not only does this squander precious taxpayer 
resources; it can seriously undermine the mission and even fund 
those who attack our brave men and women in uniform. In that 
vein, I have introduced legislation to establish a special 
inspector general for overseas contingency operations.
    The efforts of the Commission, along with the special 
inspector general for Iraq and the special inspector general 
for Afghanistan have shown the critical importance of realtime 
oversight in our overseas operations. We need to preserve the 
unique capabilities of these three entities in a single, 
permanent inspector general with a flexible deployable cadre of 
oversight specialists. I urge my colleagues to join me in this 
legislation.
    Finally, I am also working to tackle many of the 
Commission's other legislative reform recommendations, which 
were excellent and on point. It is a challenging task, but with 
your great work that will serve as a blueprint for our efforts 
that go forward. I want to thank you again for your service and 
your testimony here today. I look forward to our discussion.
    And I want to thank you again, Mr. Chairman, and Mr. 
Chaffetz as well, for keeping this a nonpartisan, bipartisan 
effort that is all about oversight and making sure that this 
institution of Congress does its job with respect to any 
administration that might be in at any particular time. Thank 
you.
    Chairman Issa. I thank the gentleman.
    All Members will have 7 days to submit opening statements 
and extraneous material for the record. Additionally, the 
Commissioners here who will not be giving opening statements, 
there will be just one, I believe, your opening statements or 
other prepared remarks or extraneous material will be placed in 
the record, including Mr. Thibault, who unfortunately was 
diverted, his plane was literally diverted or he would be with 
you. Without objection, that is so ordered.
    We now recognize the panel. The previously mentioned 
Honorable Chris Shays is the Republican co-chair of the 
Commission on Wartime Contracting. Congressman Shays 
represented Connecticut's 4th Congressional District from 1987 
until 2009, and he is sorely missed. Commissioner Clark Kent 
Ervin was Inspector General of the Department of Homeland 
Security from 2003 to 2005; Commissioner Robert J. Henke was 
the Assistant Secretary for Management at the Department of 
Veterans Affairs from 2005 to 2009; Commissioner Katherine 
Schinasi was the Managing Director for Acquisition and Sourcing 
Management at the Government Accountability Office, our wing 
that we trust so much for the work that we must do; 
Commissioner Charles Tiefer is a Professor of Law at the 
University of Baltimore Law School; Commissioner Dov S. Zakheim 
was the Controller for the Department of Defense from 2001 to 
2004.
    Lady and gentlemen, pursuant to the committee rules, I 
would ask you all to rise to take a sworn oath. Please raise 
your right hands.
    [Witnesses sworn.]
    Chairman Issa. Let the record indicate that all witnesses 
answered in the affirmative. Please be seated.
    My prepared statement says in order to allow sufficient 
time, look at the light. It is going to be different this time. 
I understand only one Commissioner will be speaking, within any 
amount of reasonable time you may have time to deliver your 
entire prepared statement and such remarks as you may want to 
have represent all of the Commissioners.
    With that, Mr. Henke, you are recognized.

   STATEMENT OF COMMISSIONER ROBERT J. HENKE, COMMISSION ON 
 WARTIME CONTRACTING, ACCOMPANIED BY COMMISSIONER CLARK ERVIN, 
   COMMISSION ON WARTIME CONTRACTING; COMMISSIONER KATHERINE 
   SCHINASI, COMMISSION ON WARTIME CONTRACTING; COMMISSIONER 
CHRISTOPHER SHAYS, CO-CHAIR, COMMISSION ON WARTIME CONTRACTING; 
COMMISSIONER CHARLES TIEFER, COMMISSION ON WARTIME CONTRACTING; 
    AND COMMISSIONER DOV S. ZAKHEIM, COMMISSION ON WARTIME 
                          CONTRACTING

    Mr. Henke. Thank you, Mr. Chairman. Chairman Issa, Ranking 
Member Cummings, members of the committee, good morning and 
thank you for inviting us here today.
    I am Robert Henke, a member of the Commission on Wartime 
Contracting in Iraq and Afghanistan, which completed its 
official work last Friday. Previously, I served as the 
Assistant Secretary for Management at the Department of 
Veterans Affairs and as Principal Deputy Comptroller at DOD.
    I am presenting this statement on behalf of Commission co-
chairs Christopher Shays and Mike Thibault, and my fellow 
Commissioners Clark Kent Ervin, Katherine Schinasi, Charles 
Tiefer, and Dov Zakheim, who are here, and Grant Green, who 
could not be with us today.
    I respectfully request that our full written statement be a 
part of the record, as well as a copy of our report, 
Transforming Wartime Contracting.
    Chairman Issa. Without objection, so ordered.
    Mr. Henke. We very much appreciate the opportunity to 
appear before this committee, the Committee on Oversight and 
Government Reform. Our eight reports to Congress are a direct 
match with this committee's central mandate: the need for 
vigorous oversight and fundamental reforms.
    The Commissioners would emphasize that we have operated not 
only as a bipartisan body, but truly as a non-partisan body. 
Our reports have no dissenting views. We are unanimous both in 
our findings and in our recommendations.
    We unanimously conclude that the need for change, whether 
through laws, policies, practices, and, ultimately, 
organizational culture, is urgent, is urgent for five reasons.
    First, reforms can still save money in Iraq and 
Afghanistan, avoid unintended consequences, and improve our 
foreign policy outcomes there.
    Second, the dollars wasted and the dollars still at risk 
are significant. The Commission estimates that at least $31 
billion, and possibly as much as $60 billion, of the $206 
billion spent on contracts and grants in Iraq and Afghanistan 
has been lost to waste and fraud. We have also warned that many 
billions more, possibly even exceeding the billions already 
lost, may turn into waste if the host governments cannot or 
will not sustain U.S.-funded programs and projects.
    Third, although U.S. policy has for more than 20 years 
considered contractors to be part of the ``total force'', we 
went into Afghanistan and Iraq unprepared to manage and oversee 
the thousands of contracts and contractors used there. Think 
about that for a minute. We went into Iraq and Afghanistan, we 
went into war unprepared. Some improvements have been made, 
yes, but after a decade of war, the Government remains unable 
to ensure that taxpayers and warfighters and diplomats are 
getting good value for contract dollars spent.
    Fourth, new contingencies, whatever form they take, will 
occur. And, strikingly, Federal agencies have acknowledged that 
they cannot perform large operations without contractor 
support. They are very candid in that regard.
    Fifth, and finally, reform is urgent because failure to 
enact powerful reforms will guarantee that new cycles of waste 
and fraud will accompany the response to that next contingency.
    Our work in Iraq and Afghanistan found problems similar, or 
even identical, to those in peacetime contracting, including 
poor planning, limited or no competition, weak management of 
performance, and insufficient recovery of over-billings and 
unsupported costs.
    Of course, the wartime environment brings tremendous 
additional complications. The dollar volumes swell dramatically 
and the urgency of dynamic operations and hostile threats 
directly impact contracting decisions, execution, and 
oversight.
    Now, despite those tremendous challenges, we are clear, as 
a Commission, that contracting and contractors have provided 
vital and, for the most part, highly effective support for U.S. 
contingency operations.
    However, the bottom line is this: we rely on contractors 
too heavily, we manage them too loosely, and we pay them too 
much for what we get. The wasteful contract outcomes in Iraq 
and Afghanistan demonstrate that Federal agencies' dependence 
on contractors, while acknowledged, is not thought to be 
important enough to warrant the thorough planning and superb 
execution that a contingency, that wartime, demands. The 
Commission has concluded that the problems need to be attacked 
on several levels.
    The first is holding contractors accountable. Federal 
statutes and regulations provide ways to protect the Government 
against bad contractors and to impose accountability on them. 
Unfortunately, we found that these mechanisms are often not 
vigorously applied and enforced. And incentives to constrain 
waste are often not in place.
    The Commission's research has shown, for example, that some 
contractors have been billing the Government for years using 
inadequate accounting systems that don't pass muster. 
Recommendations for suspension and debarment go unimplemented 
with no documentation for the decision. Past performance data 
on how a contractor performs is very often unrecorded and even 
less likely to be used for the next contract award. Staffing 
shortages have led to a Defense Contract Audit Agency backlog 
of nearly $600 billion in unaudited work, delaying recovery of 
possible overpayments.
    The Government has also been remiss in promoting one of the 
most effective of all disciplines: competition.
    We recommend better application of existing tools to ensure 
accountability, and strengthening those tools. Our report 
contains recommendations to bolster competition, improve the 
recording and use of past-performance data, expanding U.S. 
civil jurisdiction as part of contract awards, and requiring 
official approval of significant subcontracting overseas.
    The second level is holding the Government itself more 
accountable for the decision to use contractors and the 
subsequent results. Taking a harder look at what projects and 
programs to undertake with contractors must also include 
thinking more carefully about whether to use contractors in 
foreign policy situations. Our report recommends careful 
consideration of the risks created by contracting, and phasing 
out the use of private security contractors for some functions.
    Another part of the Government's problem is resources. As 
this committee knows well, both the military force structure 
and the Federal acquisition work force were downsized during 
the 1990's. This ensured that if a large and prolonged 
contingency should develop, the military would greatly increase 
its reliance on contractors while, at the very same time, its 
ability to manage and oversee those contractors had been 
significantly reduced.
    Now, even when the Government has good policies in place, 
effective practices, which are often different, ranging from 
planning and requirements definition to providing adequate 
oversight of performance and coordinating interagency 
activities, are lacking.
    We have recommended steps that would improve the 
Government's handling of contingency contracting. They include 
developing deployable acquisition cadres and professionals, 
elevating the positions and the importance of agencies' senior 
acquisition officers and the importance of acquisition as a 
core competency, and creating a ``J10'' contingency-contracting 
directorate at the Pentagon's Joint Staff, where the broad 
range of contracting activities is still treated as a minor 
subset of logistics.
    Considering this committee's broad and cross-agency 
mandate, I would also call special attention to two 
recommendations with a whole-of-government approach.
    The first is to establish a dual-hatted position for an 
official who would serve both at the Office of Management and 
Budget and simultaneously on the National Security Council. 
Such a dual-hatted person would promote better visibility, 
coordination, budget guidance, and strategic direction. They 
would link foreign policy goals with budget resources.
    The second is to create a permanent IG organization for use 
during contingencies. The special IGs for Iraq and Afghanistan 
reconstruction have performed valuable service, but they will 
go away, leaving the need to reinvent them and suffer delays in 
deploying IG staff when the next contingency does emerge. The 
work of SIGIR and SIGAR have shown the drawbacks of creating 
organizations that that are limited in functional authority, 
geographic location, and time. A permanent contingency IG with 
a small but deployable and expandable staff, trained in the 
unique circumstances of a contingency operation, can provide 
cross-agency oversight from day one of a contingency.
    More details on these recommendations appear in our final 
report, 240 page, Transforming Wartime Contracting.
    Now, in compliance with its authorizing statute, our 
Commission has closed its doors. But the problems we have 
diagnosed remain very much alive. Corrective action, in some 
cases requiring limited financial investments, are essential on 
both the Government and the contractor side of the equation to 
reform contingency contracting.
    Your sustained attention during and after the reform 
process will be essential to ensure that reforms are 
institutionalized and that ultimately cultures are changed.
    In summary, Mr. Chairman, Ranking Member Cummings, wartime 
contracting reform is an essential, not a luxury good. Whatever 
form it takes, there will be a next contingency, and the 
responses to that contingency will all but certainly require 
contractor support. The Government would be foolish to ignore 
the lessons of the past decade and refuse to prepare and refuse 
to prepare for better use of contracting resources. Once the 
wars in Afghanistan and Iraq fade into the past, it will be all 
too easy to put off taking action. Your committee is in a 
superb position to prevent exactly that from happening.
    Mr. Chairman and members of the committee, this concludes 
our formal statement. We very much appreciate this opportunity 
to be here with you today in a dialog, and we would be happy to 
answer any questions you may have.
    [The prepared statement of Mr. Henke follows:]

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    Chairman Issa. Thank you. With that, I will recognize 
myself for a first round of questions.
    Commissioner Schinasi, there have been a number of 
suggestions coming out of the Commission, obviously your 
colleague just mentioned a permanent IG to oversee 
contingencies. If we do not have the IGs that are already 
authorized in place on a consistent basis, are we fairly, in 
your opinion, seeing how much would be done, how much waste 
would be reduced, or are we asking for yet another IG, while in 
fact, if that position remains unfilled, we would be at least 
in as much trouble as far as if we have a new IG and that one 
has no leader? So I would like your thoughts on that.
    Ms. Schinasi. Mr. Chairman, as you might expect, I am a 
supporter of the IG community, coming out of the accountability 
community after many years.
    Chairman Issa. It wasn't an accident I called on you.
    Ms. Schinasi. But this also was a unanimous recommendation.
    Chairman Issa. And I understand the recommendation for yet 
another IG. But, I would like and with your experience, when 
you have a vacancy and you have a series of Actings, or even 
sometimes the Acting is gone for a while, what does that do to 
the effectiveness of an IG organization?
    Ms. Schinasi. I think what you see in the example of the 
Special Inspector General for Afghani Reconstruction is a 
perfect example of that. It took a long, long time to set that 
organization up; it took longer to staff it. It was difficult 
to find a leader. That leader, as you know, left the 
organization and it is now without a leader. It is clearly not 
as effective an organization as it needs to be.
    That said, what we are trying to do with this 
recommendation is to avoid that from happening in the future.
    Chairman Issa. But that begs the same question. If there is 
no contingency going on at a given time, isn't it likely--and, 
by the way, I am supportive of the basic recommendation, but I 
still have to ask if we don't think we have a contingency at 
some time, isn't it likely that that position will stay open so 
that instead of being shovel-ready, they will be scrambling to 
regrow a hollowed-out position at the very moment that the fit 
hits the shan?
    Ms. Schinasi. And I appreciate that question. I think one 
of the things that surprised me was just how involved we have 
been in contingencies. You can define that in different ways.
    Chairman Issa. I would make the point that we are always in 
contingencies and that once we have this position it will 
always have something to do.
    Let me go on to a couple more questions. Commissioner 
Shays, for you I have the question isn't it true from history 
that the Truman Commission was actually put together, to a 
great extent, because they wanted to have a friendly person 
looking after FDR's spending in the war and they hoped that he 
would be kinder and gentler, but, in fact, because he was early 
in a war, and ongoing, and held hundreds of hearings, traveled 
extensively along with the other Members of what was 
effectively a wartime-standing committee, not really a 
commission, but really a committee of a senator, that you had 
vigorous oversight? Isn't the history of that that committees 
like ours, or some committee of Congress, needs to be charged 
from the beginning of the war with an ongoing oversight of the 
conduct and expenditure of that war, similar to Truman?
    Mr. Shays. The answer is yes, and this committee is a great 
example, because you don't just look at DOD, you look at State, 
you look at USAID. You aren't stove-piped. And I will tell you 
what happens when you start looking at waste, fraud, and abuse 
is you get really angry, because what is happening is 
treasonous action is taking place. The people who commit fraud 
are basically committing, in my judgment, treason. So I imagine 
that Senator Truman at the time just got pissed off.
    Chairman Issa. Commissioner Henke, because you haven't 
served on this side of the dais, this may be more appropriate 
to ask you. One of the problems that your Commission report has 
seen is that we are about to go to a large standing army of 
contractors very similar to Blackwater. How would you view that 
we should intercede in a policy decision that has been made, 
that will in fact cause a large amount of contractors to be 
there under State Department, who are doing what I think on 
both sides of the dais we would call an inherently governmental 
task of being effectively quasi-military supporters of the 
State Department's agenda in Iraq?
    Mr. Henke. Mr. Chairman, a couple of weeks ago OMB 
published a new guidance letter on defining what inherently 
governmental is, and, long story short, on that list for the 
first time they included security in a combat zone. Those 
aren't the precise words, but that is the meaning. We strongly 
think that is the right answer; that OMB took a risk-based 
approach to that.
    Now, the challenge with doing anything different in the 
short term for the State Department is it takes years to grow 
diplomatic security agents or security specialists. It would be 
difficult, if not impossible, for the State Department to grow 
5,500 or 7,000. So right now they are in that situation that we 
described and that you used in your opening statement: they 
have no choice; they got there by default. They don't have the 
organic capacity to be expeditionary, to be in a combat zone 
for very long, and State is facing a very dynamic situation in 
Iraq and they have no choice but to go out and contract for the 
security that they need.
    Mr. Zakheim. Mr. Chairman, if I could add.
    Chairman Issa. Yes, please.
    Mr. Zakheim. First of all, it is my understanding, and it 
is worth this committee to explore, whether State actually 
considers that it is limited by the OMB circular. My 
understanding is that it doesn't think so; it thinks it is only 
applying to DOD, and that is a major issue right there.
    Second, one possibility, one possible way around the 
dilemma that Bob Henke just laid out before you, which is a 
very real dilemma, is to have better oversight. If you are 
stuck with contractors, at least have people that oversee them. 
And if you cannot get people from within the State Department, 
get them from other Federal agencies.
    I don't know that there is a law that prevents that; people 
are secunded to other agencies all the time. So there are ways 
of dealing with it if the Government wanted to. The problem all 
along has been implementation and will.
    Chairman Issa. Thank you.
    With that, I recognize the ranking member for his 
questions.
    Mr. Cummings. Just to follow up on what you just said, 
Commissioner. We are better than this, aren't we? In other 
words, we, as a country, are better than what we are doing 
right now. It sounds like if there was a will, we would find a 
way. And there has to be a will. I can't hear you. I want this 
on the record. You can respond.
    Mr. Zakheim. No, I couldn't agree more, sir. I have served 
in the executive branch twice, at pretty senior levels, and 
that is exactly the case. When there is no will, there are 
millions of reasons why you can't do anything. And when you 
want to do something, it is amazing how quickly it can get 
done. So I fully agree with what you are saying, it comes down 
to the will of the executive branch to implement what this 
committee and the Congress are concerned about.
    Mr. Cummings. Commissioner Shays, the final report 
estimated up to $60 billion may have been lost to contracting 
waste and fraud in Afghanistan and Iraq. In other words, up to 
30 cents of every dollar may have gone down the drain. I was 
watching you, Commissioner Shays, when you were talking about 
treason just a few moments ago, and I could see it really 
upsets you, as it would upset all of us, particularly when we 
are scrapping for dollars and we got this Super Committee 
meeting about trying to figure out where we save money. And 
then for people to see money going down the tubes like this, 
its got to be aggravating.
    But it does something else: it causes citizens, if they are 
watching this, to say, you know what? They don't get it. So 
they lose confidence in government. And that is something that 
we have been tackling here, trying to address.
    So, Commissioner Shays, what is the single-most important 
thing we can do to tackle this waste, fraud, and abuse in 
contingency contracting? I was just telling staff it sounds 
like this stuff is so big that we need to take it chunk by 
chunk, and I am trying to figure out what is the first chunk we 
take.
    Mr. Shays. Could you ask other Members as well?
    Mr. Cummings. Sure.
    Mr. Shays. I would say, if I am only given one, we are 
trying to do too much. We are just trying to do too much and, 
as a result, we are not thinking the projects out well, we are 
not overseeing them well, and we are not even really evaluating 
do we really need it. Do we really need to do as much as we are 
doing? If you are only giving me one choice, that is my choice.
    Mr. Cummings. Commissioner Tiefer, if you don't mind, since 
you are from my neighborhood. The University of Baltimore is 
literally within 5 minutes of my house.
    Mr. Shays. Sir, don't talk about the University of 
Baltimore; he will keep you here all day talking about it. 
[Laughter.]
    Mr. Cummings. Welcome.
    Mr. Tiefer. It is a fine neighborhood, Baltimore.
    Mr. Cummings. Yes. Thank you.
    Mr. Tiefer. My particular interest in the Commission was in 
chapter 3, which was about lack of competition and serious 
waste and so forth, and I would say the number one thing that I 
personally think we could do better and we are not doing well 
enough is compete these contracts. It would be so easy to set a 
level of competition and say that the Defense Department must 
meet it for its contingency contracts.
    Mr. Cummings. But Professor, you hear all the time, when 
you see these 60 Minutes shows and shows like that and they say 
there are only a few companies, and I am talking about 
sometimes they say two or three, that can do certain things, 
that can provide certain types of security. Have you all found 
that to be true? And how does that affect competition?
    Mr. Tiefer. The answer is no. And I will take a precise 
point. In Afghanistan, we have a contractor that handles north 
Afghanistan for logistics and a contractor that handles south 
Afghanistan for logistics, and when new work comes in, as in 
connection with the big surge that we had, it automatically, 
without competition, goes to one or the other. We don't compete 
it at all, even though there are obviously two contractors in 
place, at least, who could do the work.
    Mr. Cummings. And I would imagine that if people see that 
early on, we keep hearing that when companies cannot see the 
future, that they don't hire and whatever. I guess if they know 
that the game is already rigged before they even get in the 
game, they are definitely not going to be hiring people because 
they figure they are not going to get the job.
    Mr. Ervin. May I add to that, Mr. Cummings?
    Mr. Cummings. Yes.
    Mr. Ervin. I completely agree with what Professor Tiefer 
said about the importance of competition among contractors, but 
I think the missing piece that we haven't talked about a lot 
today in the hearing is the importance of having an alternative 
to contractors. The reason there is no option, largely, but to 
use contractors, whatever the state of competition is among 
contractors, is that there is not sufficient organic capacity 
within Government itself to perform these core missions, to do 
logistics, to do reconstruction, to do security.
    So at the same time that we promote more vigorous 
oversight, at the same time we promote more competition among 
contractors, we have to, even in these tight budgetary times--
and I would argue especially because of these tight budgetary 
times--regrow organic capacity within Government so that we 
have an alternative to contracting.
    Mr. Cummings. You know, you make a good point. When I was 
chairman of the Coast Guard Subcommittee, one of the things 
that we discovered when we were doing Deepwater was that we 
didn't have in the Coast Guard the acquisitions people. So when 
they put together a contract, they put a contractor together 
that was controlled by the contractors. They decided when 
performance was done, when bonuses were done, everything.
    So now we had to go backward because we were buying boats 
that didn't float, so we had to go backward and then get the 
Coast Guard to grow in-house the things that they needed, and 
now they are doing pretty good; very good, as a matter of fact. 
So you make a good point.
    Again, I want to thank all of you for being here. I have to 
be over in another hearing with Fed Chair Bernanke, but thank 
you all for what you are doing, and we are going to do 
everything in our power to bring life to what you all have 
done. We really do appreciate it. Thank you.
    Mr. Chaffetz [presiding]. Thank you.
    I will now recognize myself for 5 minutes.
    And, again, I can't thank you enough for the great work 
that you have done. I want to explore a little bit this 
recommendation number 9, creating a permanent office of 
Inspector General for contingency operations, which, as I read 
and I look at it, seems to me to be really a very negative 
consequence of what is happening at State, Department of 
Defense, and USAID, primarily, in that they are failing.
    As you point out on page 17 of your report, the United 
States has engaged in 56 ventures abroad for other than normal 
peacetime purposes since 1962. In other words, this isn't brand 
new. These contingencies, as you point out also on this, for 
the past 12 years, the United States has always and 
simultaneously been engaged in two or more overseas.
    So the question that really begs to me is that you are 
recommending that we create another IG, and yet I look at the 
IGs and they are failing. Three of the five IGs that we are 
supposed to have in place have not been either recommended by 
the President or confirmed by the U.S. Senate. So we have three 
openings out of the five, and yet you want to have a sixth.
    Mr. Ervin. May I start there, Mr. Chaffetz?
    Mr. Chaffetz. Yes.
    Mr. Ervin. As you know, I as the Inspector General, the 
first Inspector General, in fact, of the Department of Homeland 
Security, and before that I was the Inspector General of the 
State Department, so I am very focused on the inspector general 
community. I really agree, largely, with the premise of your 
question, and the chairman raised this issue as well.
    It troubles me that we have the vacancies in the inspector 
general community that we have, and I am especially troubled by 
the longstanding, I think it has been 3 years or so, vacancy at 
the State Department. There is an impending retirement that you 
are referencing at AID IG and there has been this vacancy in 
SIGAR.
    Having said all that, and I urge the administration to fill 
those vacancies very, very quickly, and the Senate to confirm 
whomever is selected by the administration, but at the same 
time I think it is important that our recommendation also be 
implemented, and let me explain the distinction.
    Even if there were, and there should be, as I say, even if 
there were confirmed inspectors general in those three 
agencies, DOD, State, AID, it is still important to have a 
special inspector general for the following reasons. First of 
all, each of those statutory inspectors general is limited 
jurisdictionalized only to that particular agency, point one. 
The special inspector general would have jurisdiction over the 
range of agencies that relate to contingencies, all three of 
them. And, further, there would be the opportunity, because of 
that interagency oversight, to ensure that the whole range of 
issues is fully vetted.
    Mr. Chaffetz. One of the questions that I hope the 
committee continues to explore is what in the world is wrong 
over at the Department of Defense. I want to read here from 
page 162, and this has to do with the Defense Contracting Audit 
Agency, which seems aptly named. It says, and you mentioned 
this in your opening statement, The current unaudited backlog 
stands at $558 billion, having risen sharply from $406 billion 
in only 9 months. At current staffing levels, DCAA has reported 
that the backlog will continue to go virtually unchecked and 
will exceed $1 trillion by 2016.
    Mr. Zakheim. Can I try to deal with that?
    Mr. Chaffetz. Yes, please. Try to tackle that one. That 
would be great.
    Mr. Zakheim. Absolutely. When I was Undersecretary of 
Defense Comptroller, DCAA was under me. DCAA simply doesn't 
have enough people.
    Mr. Chaffetz. How many people are there?
    Mr. Zakheim. When I was there, it was about 4,000. They 
have added, I think, about another 1,000. It is nothing 
compared to the level of contracting that is going on, and to 
the number of contracts that are going on. These are very, very 
professional folks. Most of them now have CPAs. Many of them 
come from the outside and then come into government, much as 
lawyers do nowadays. But we just don't have enough of them.
    And this goes to the point that was made earlier by 
Commissioner Henke and some of my other colleagues, and we all 
believe this very strongly, that even in this time of cutting 
budgets and deficits, there has to be some spending to save 
money, and it is a matter of being penny wise and pound 
foolish. If we don't get these people in, we are going to wind 
up hurting both the Government and industry; the Government 
because there might be money that could be recovered, and 
industry because they are not getting paid when they should get 
paid. If the audit isn't completed, they have a problem too.
    Mr. Shays. I am going to change the word might to will, 
because it is just a proven fact that if you had these audits, 
you are going to discover bills that were submitted that were 
either fraudulently submitted or, frankly, just mistakes, and 
they were paid more than they should be paid.
    The outrage is that all these companies have to keep these 
records on file for 2, 3, 4, 5, 6, 7 years. And guess who pays 
for their having to do that? The Government pays for their 
keeping the records.
    So this $500 billion that we are talking about is going to 
just accelerate if you don't reverse it.
    Mr. Chaffetz. Well, I guess, to my colleagues, what I would 
highlight here is also that the GAO just recently released a 
report in September 2011 documenting that there are at least 
58,000 contracts awarded between fiscal year 2003 and 2010 that 
must still be reviewed and closed out. But I agree with you, 
the numbers are absolutely staggering. I would call upon the 
White House, please prioritize these IGs, get them nominated 
and get the Senate over there to do their jobs. We have three 
of the five that are unfilled, and that is just inexcusable in 
my opinion.
    I yield back.
    We now recognize Mr. Towns, I believe, for 5 minutes.
    Mr. Towns. Thank you very much, Mr. Chairman. Let me begin 
by saying it is very good to see my former colleague back and 
see that he is doing well, and also to thank members of the 
Commission for the outstanding work that you are doing.
    You know, there are people that will say that even though 
the recommendation of the IG is made, the problem in terms of 
getting it funded, which will probably be around $21 million, 
that would just not happen. But when I look and I read the 
extent of fraud and abuse, and one stunning example, an 
inspector general found that the U.S. Government paid $900 for 
a control switch that was worth only $7. In other cases, 
contractors were found over-billing the Government with markups 
ranging from 2,300 percent to 12,000 percent for goods and 
services.
    This is a course of action that cannot and must not 
continue. And I hope that this Congress, led by this committee, 
can accept the Commission's recommendations and put measures in 
place that are necessary to show Americans that the Government 
can be better stewards of taxpayers.
    How do we make the case with those folks that are saying 
now here you go again, you want to spend additional resources, 
you want to spend additional money? What do we say to them?
    Mr. Zakheim. Well, we say to them you will save a lot more 
than you will spend. You just mentioned it yourself, sir. We 
are talking about not just $900 items, we are talking about 
fraud with payments to protection payments and protection 
rackets in Afghanistan that some estimates put over $350 
million. Our report documents case after case of projects that 
are in the millions, sometimes in the billions. If you weigh on 
the one hand the small amounts of money you are talking about, 
say the $21 million you mentioned, against these huge amounts, 
it is kind of a no-brainer.
    Mr. Shays. Congressman Towns, Commissioner Tiefer spent a 
lot of time on chapter 3. Chapter 3 deals with the inattention 
to contingency contracting leads to massive waste, fraud, and 
abuse. Our problem with Mr. Tiefer was that this book would 
have been three times as thick if we let him put in everything 
he wanted to put in. So we limited him to 40 cases, but it 
could have been many more.
    You read that and you don't go through the argument that 
you are presenting.
    Mr. Towns. Yes, Commissioner.
    Ms. Schinasi. Yes. If I could just add to that too. This is 
a perfect time to be making these sorts of investments because 
as we are looking at, particularly in the Department of 
Defense, but also the State Department and USAID, how they can 
best position themselves for the future with fewer resources, 
this is the perfect time to say we can make investments, we can 
reallocate some of our resources to try and prevent this waste, 
to try and get a better return on the investment we make and 
the taxpayer dollars we spend. So I would argue this is the 
time to be making these sorts of resource allocation decisions.
    Mr. Tiefer. Congressman Towns, I thank the chairman for his 
kind remarks and I assure him that his editing improved the 
product, that the good stuff is in our report. But let me give 
you an example of where, if we had the personnel, if we had a 
limited amount of money for more personnel, we could save a lot 
of money.
    We have giant contracts that come to an end and we should 
compete them right then. We had a food service contract that 
came to an end, and because we didn't have the personnel to 
move fast enough to compete now, that got extended on a sole-
source basis, a $4 billion extension on a sole-source basis 
because the agency just wasn't ready to compete it at that 
point.
    Mr. Towns. Thank you very much, Mr. Chairman. I see my time 
has expired.
    Mr. Chaffetz. The gentleman yields back.
    We will now recognize the gentleman from Oklahoma, Mr. 
Lankford, for 5 minutes.
    Mr. Lankford. Thank you, all of you, for the long work and 
the tedious work that I am sure you have done through a lot of 
wonderful conversations. There is a section you have in chapter 
7 that is very interesting to me dealing with the complexity of 
suspensions and debarment. I don't know who was the one that 
focused in on that information, but I would like to get a 
chance to talk about that and how we can resolve that.
    A couple questions I had initially on it is when you are 
dealing with the complexity of suspension and debarment, are 
you dealing specifically with foreign contractors, U.S. 
contractors, or both on it?
    Mr. Tiefer. We are dealing with both, but we did not deal 
with domestic non-war contractors. We wanted strong reforms, 
but for overseas contracting. Techniques that reduce the amount 
of procedure, but we were not trying to impose them on 
domestic, non-wartime contractors.
    Mr. Lankford. Did you come up with recommendations out of 
this? Obviously, reading through this brief report that goes 
through that section on suspension and debarment, 
recommendations on how to be able to resolve that, because 
obviously that is not just an issue we deal with in contingency 
operations; that is something we deal with governmentwide, is 
the suspension and debarment issues that we have, on how often 
they are used, the complexity, the process. Are there 
recommendations that are coming out of this as well?
    Mr. Tiefer. There are. There are several. I will name one, 
which was that in appropriate cases it should be possible to 
suspend and debar on a documentary record without holding sort 
of a mini trial, as is required domestically. We have seen 
instances where it is almost impossible to pull together 
witnesses from Afghanistan to do a suspension trial.
    Mr. Shays. If I could just elaborate a speck on that. With 
your permission, sir?
    Mr. Tiefer. Yes. Absolutely.
    Mr. Shays. When I served on this committee, I was stunned 
by the rights that we give contractors when they work with the 
Government, and even when we overpay, it may take us a year to 
adjust it to pay them what they should be paid. If a private 
business wants to engage a contractor, they are limited by the 
contract, but they don't have any privileges before then. We 
give privileges before a contract, we give privileges during a 
contract, we give privileges after a contract.
    This committee needs to examine, in times of war, should we 
be giving contractors so many rights and privileges that can 
drag out the decision for a year? So what the Government 
agencies decide to do is say it is not worth waiting a year to 
resolve it, we will just keep them.
    Mr. Lankford. Did you run into situations where it was a 
sole-source and you would see a need for a suspension or 
debarment, but instead of actually debarring them, they would 
say they are essential, we can't function without them, so we 
know they are a bad actor, but we don't have any other folks 
that can help us?
    Mr. Shays. Countless times.
    Mr. Lankford. Okay. How do we get around that? It that a 
matter of we don't have enough competition in those areas, we 
are not raising up, or is that something inherently 
governmental that we are trying to outsource into contracting 
and now running into problems?
    Mr. Ervin. Can I start there?
    Mr. Lankford. Absolutely.
    Mr. Ervin. I think it is all those things. It is, as I said 
earlier, the lack of organic capacity so that we don't have any 
alternative but to use contractors; two, there is limited 
competition among contractors; three, there is very limited 
oversight capacity on the part of the Government, DCAA, GAO, 
the inspectors general, etc. So that is why these 
recommendations in our report are all of a piece; it is a 
package. It is important to put all these things together in 
order to solve the problem, it seems to us.
    Mr. Lankford. Other comments on that, because I have one 
other issue? Go ahead.
    Mr. Henke. One comment, Mr. Lankford. You remember, 
perhaps, the September 2009 incident at the Kabul Embassy, with 
the contractors partying, drinking, having a great time and 
embarrassing the Nation. They were providing security at the 
embassy. That contractor, because State didn't have the option 
of saying go home tomorrow, we are bringing in our own people 
to provide security, that contractor stayed there for, I think, 
more than 18 months after that incident, still in place, still 
billing the Government, still operating; and that is 
unacceptable.
    Mr. Lankford. But have they been disbarred since then? That 
becomes a different issue. They are fulfilling the rest of that 
contract, which has a whole different set of issues. But was 
there a process in place to say, yes, we are debarring them and 
there is no future contract?
    Mr. Henke. I do not believe State pursued that and, in 
fact, I believe the contractor--this was a low-bid contract 
because State is required, strangely enough, by law, to have 
low-bid contracts for security at embassies. That doesn't make 
any sense.
    Mr. Lankford. Let me make one other quick comment. You have 
an extensive section here on foreign contractors using human 
trafficking. Obviously, that is a very stark comment, that some 
of the work that is happening in Iraq and Afghanistan is 
basically done with slave labor or people compelled to be able 
to work in this for whatever amount that is done. How extensive 
do you think that is?
    Mr. Zakheim. What we understand is that it is really quite 
extensive, because what they do is they bring people in, hold 
on to their passports and essentially lock them up as 
prisoners. It is virtually slave labor.
    Mr. Lankford. And we are aware of that. You are saying the 
U.S. Government, the people on the ground are aware of that 
either after the fact, after it is over, or during the process.
    Mr. Zakheim. At a minimum, everybody is aware of it now 
after our report, and, of course, a lot of people were aware of 
it before our report. And, again, to get to the point about 
suspension and debarment, what are we going to do, bring 
witnesses in from these companies? What we have to do is use 
the rules that are available to us, modify them slightly, and 
suspend these people. They are not even Americans, for God's 
sake.
    Mr. Lankford. Thank you.
    With that, I yield back.
    Mr. Shays. I would just say that if we had had more time, I 
think we would have gotten into the trafficking issue, because 
I think there is a lot more to this story than any of us have 
confronted.
    Mr. Chaffetz. Now recognize the gentleman from 
Massachusetts, Mr. Tierney, for 5 minutes.
    Mr. Tierney. Thank you, Mr. Chairman.
    We could be here the rest of the day or the week on this. 
You did a great job, and that is what we asked you to do. I 
want to make a number of points here and then ask some 
questions as well.
    But first and foremost, Mr. Ervin, thank you for continuing 
the argument on the special inspector general for contingency 
operations, because I am trying to convince my friend, the 
chairman here, that his name would be of value as a sponsor on 
that bill, and I wanted to add to the point. Besides the matter 
that this person would be able to cross different agencies, and 
they do overlap, and that is essential, the other thing, I 
think, is lessons learned. We failed to learn the lessons of 
Iraq. When we set up a whole different body over in 
Afghanistan, they had to start from scratch. They took nothing 
of the lessons learned from Iraq over. A contingency inspector 
general would be able, at the outset, to go in there with that 
knowledge of those lessons learned, would have, in fact, a 
whole repository of them maintained and be able to go in from 
the outset, and I think that is important, don't you?
    Mr. Ervin. I completely agree with that. I completely agree 
with that, sir. That person would be in place right at the 
outset, needless to say.
    Mr. Tierney. And I think if somebody that was going in 
there were smart, they would use them for the advice on how to 
set up, not just wait for them to start overseeing immediately 
on that.
    Second point, Mr. Henke, you make a great point about the 
organizational restructuring that needs to happen within the 
Department of Defense, State, and all those, and I think part 
of that means giving value to those positions. People go into 
those departments thinking, geez, it is bookkeeping, it is 
accounting, it is overseeing. We have to find a way for those 
agencies to give it value to be in that position, because if 
they are going to save us the kind of money they are, it has 
value in more sense than just the dollar, it is an important 
position to have. So we are going to be looking to your work on 
that to try to see how we can work with the departments and 
change that factor.
    Overriding on that is if we try to do too much, as 
Congressman Shays said, and if we can't man enough people there 
to man it, and we don't have enough resources even to manage or 
oversee it, maybe we ought to rethink the mission. And I think 
that is a lot of what is going on here, whether we should be 
there or not, or be there in the way that we are ought to 
somehow be dictated on what our capacity is, and to do it well 
and to do it right.
    The accountability aspect on it, we ran into this, Mr. 
Lankford, on the Waton Risk Management that Mr. Chaffetz and I 
were dealing with just the other day. We recommended debarment 
as a result of our investigation; the Department of Defense 
told us they were going to do that and off they went. Then we 
find out only at the second hearing Mr. Chaffetz had, well, not 
to much. They basically let Waton off with a slap of the wrist 
by saying they couldn't do trucking contracts. Well, they 
weren't doing them anymore anyway. And Rohullah, who is the 
warlord, he just got off on some flimsy notion that he didn't 
understand what people were talking about when the 
investigation went on. But the Department never went in and 
held its own investigation.
    So we have a lot of work to do in that area to make sure 
that there is accountability and competition, the whole notion 
of the food and oil and lack of competition there; and the 
problem with contracting itself, the idea that we haven't done 
a good job legally of getting contracts that are meaningful. 
When you can have a situation as we did in the trucking matter, 
where there was no insight, no vision into the subcontracting, 
they basically contracted to a bunch of middlemen who didn't 
even own trucks or security agents, and left it up to them to 
subcontract the contractors and security, and we didn't retain 
the right to look at those subcontractors and to get any 
information with respect to them. That is a notion that you 
were very helpful in pointing out and going on that. So thank 
you and kudos for all of those different areas.
    My question to you is on sustainability. What does Congress 
have to do to make sure that we don't invest in projects in 
contingency areas that can't be sustained by the host 
government?
    Ms. Schinasi. I will start on that, Congressman, because it 
relates to your point on the mission; if we can't do it, maybe 
we shouldn't be doing it. And sustainability was important 
enough to us, it is a chapter in this report, but we also have 
an entirely separate special report on that. In that, we make a 
recommendation that you should be canceling projects that are 
not going to be sustainable.
    That is something that can happen right now. We have 
recommended that you go in and you evaluate the projects that 
we are putting money into now, and that you cancel those that 
you cannot guaranty sustainability for. That is a short-term, 
immediate dollar value task, I think, that the agencies can 
take on.
    Mr. Zakheim. We also recommended, and this is, I think, 
very essential to your concerns, annual reports about the whole 
contingency contracting area, and that would give you a vehicle 
for double-checking on sustainability. In other words, if, for 
some reason, a project got started and it slipped passed, you 
could catch them; you have an opportunity every single year to 
catch them.
    Mr. Tierney. Thank you.
    Mr. Shays. Congressman Tierney, what is stunning to us is 
that the number of wastes that we have determined, $30 to $60 
billion, and many think it is closer to $60 billion, we do 
think the non-sustainability question will clearly equal the 
$30 billion-plus. And it is just a whole other amount that you 
would need to add to our waste figure, and it is a very real 
figure.
    Could I just respond to the special IG effort that you are 
making?
    Mr. Tierney. Sure.
    Mr. Shays. In support of the Chaffetz Special IG Act of 
2011, Mr. Chairman, you are in the best position to see this 
because you know sometimes the Armed Services Committee, 
because of the relationship they have with the military, isn't 
looking at things they need to look at. You know sometimes the 
Foreign Affairs Committee of Congress sometimes isn't going to 
get at something you know you need to look at because of the 
relation they have.
    The IGs that work in the departments develop relationships. 
There are certain things they are willing to do and there are 
certain things they are not willing to do, unless you are 
someone like Mr. Ervin, who didn't care what they thought. But 
a lot of them it is a club. A lot of them don't want to offend 
the department they are in. And that is why you sometimes need 
the competition.
    And I will just end by making this point. I remember when I 
was chairing this committee we didn't look at something I 
wanted to look at. My staff didn't want to look at it and then 
the Armed Services looked at it and it was a huge issue, and 
thank goodness they looked at it. And sometimes we looked at 
issues they didn't look at. So I just think that the chairman 
is in the best position to see the value of this.
    Mr. Tierney. And they are all pretty busy, let's face it. 
The Department of Defense Inspector General, the State 
Inspector General, USAID Inspector General, they have a full 
plate without even contingency operations. They just have a 
full plate all the time with the amount of money that they are 
in charge of. You put in contingency operations, it is like a 
whole different ball game.
    Mr. Shays. It is an add-on.
    Mr. Henke. Mr. Tierney, can I chime in on that?
    Mr. Tierney. Sure.
    Mr. Henke. One of the things we learned in our work, State 
Department set up, I think in 2005 or 2006, a Middle East 
Regional Office, MERO they called it, to do audit work 
overseas. They had such a demand for it. So they set it up late 
and 2 or 3 years later they did a review to see how their audit 
quality was, and it wasn't good and they had to stand it down. 
So they don't flex well to new, unique circumstances.
    Mr. Tierney. Mr. Chairman, your indulgence has been great. 
I have just one last comment to make on that issue, besides my 
undying gratitude for the work that the Commissioners have 
done.
    This committee perhaps ought to consider, and our 
subcommittee in particular, using our Members well. Each one 
will want to tackle some of the recommendations, one or more of 
the recommendations, to see if we need to translate that into 
legislation and how we do that, and if we need to just do 
follow-up with the agencies and how we do that, so that this is 
not one product that just sits on the shelf. I think it is too 
valuable and I think the work was too good for us, and fits so 
squarely in the overarching part of this and it gives us all 
something as a non-partisan that we can work on together, that 
I think it would be a great notion and a great example for 
Congress. So I just ask that you entertain that thought and, 
again, thank you all.
    Mr. Chaffetz. Very good. Thank you.
    We will now recognize the gentleman from Michigan, Mr. 
Walberg, for 5 minutes.
    Mr. Walberg. Thank you, Mr. Chairman, and thanks as well to 
the Commission for the grim work you were asked to do and that 
you did do. We trust that it will indeed have beneficial 
outcomes as we tackle it.
    Along with the costs and the problems with the contracts 
while they are in operation, the GAO just released a report in 
September documenting that at least 58,000 contracts awarded 
between fiscal year 2003 and 2010 still need to be reviewed and 
closed out. Delays in the contract closeouts potentially waste, 
in fact, not potentially, but they do waste millions of dollars 
as improper payments, waste, fraud, etc., become difficult or 
almost impossible to detect and recoup. This is because files 
are lost, memories fade, and contractors disappear in the 
contingency zone.
    Let me ask this question, Commissioner Zakheim. How 
important are timely contract closeouts to prevent waste, 
fraud, and abuse?
    Mr. Zakheim. Well, obviously, they are extremely important. 
If you don't close out a contract, for a start, you can still, 
in theory at least, and in practice for most of the time, spend 
money, and that money probably should not be spent. It is 
taxpayer money and it is probably going in the wrong way to the 
wrong people. And we have seen cases, for example, where 
contractors are using their people maybe one-fifth of the time 
and being paid full-time, again, because it takes so long to 
close out. So when you look at thousands upon thousands of 
contracts that have not been closed out, which means they 
haven't been properly audited, by the way----
    Mr. Walberg. So no oversight or anything is going on.
    Mr. Zakheim. Well, that is exactly right, and that is what 
Commissioner Shays said a little bit earlier. If you are not 
auditing a contract for years and the Government is actually 
paying for the time in between the audit actually having to 
take place, the taxpayer is being hit with a double whammy: in 
the first place, they may have been overcharged and, in the 
second place, they are then paying for the time that is not 
being covered because the audit hasn't been done. That is just 
ridiculous.
    Mr. Walberg. Congressman Shays, based on that--and good to 
see you again.
    Mr. Shays. Nice to see you. Thank you.
    Mr. Walberg [continuing]. What steps should DCAA and DOD be 
taking to accelerate this process?
    Mr. Shays. I may not be the best one on the Commission to 
answer that question, but let me just say, first, honesty. Just 
look at the numbers. And also I need to say that Congress needs 
to share in this burden. This isn't just the administration; 
Congress needs to be advocating that these positions be filled.
    Mr. Walberg. Who would you suggest would be the best one to 
answer this?
    Mr. Zakheim. I will take that one on, again, because DCAA 
was under me, sir. I would just emphasize the need to hire more 
DCAA people, more auditors. If you don't have auditors, you 
don't do audits. It is as simple as that.
    Mr. Henke. Sir, if I may contribute to that as well.
    Mr. Walberg. Yes.
    Mr. Henke. We are not talking about thousands of people. 
DCAA is scrapping to get 100 auditors added next year and then 
100 auditors added in 2013 to attack this backlog of work. 
Maybe one of the things the committee could look at is making 
that entity funded on a fee basis, instead of discretionary 
appropriations, so that they are able to scale up and perform 
the work that they are being asked to do.
    Mr. Tiefer. Congressman Walberg, let me add, and it is 
Commissioner Thibault, who was deputy at DCAA, worked very hard 
on the specifics of the personnel and the shortfall of the 
personnel and the scale of the unaudited contracts. What we 
found was that DCAA was responding to necessary priorities. 
They are short on personnel and they had a choice between 
auditing the backlog or handling their real-time 
responsibilities, such as when a new billion dollar or multi-
billion dollar contract is awarded, they are supposed to audit 
the proposals to see that the contract that is issued is right. 
So they, in effect, sacrificed letting the backlog grow and 
grow, and that is how it grew and grew; they met their current, 
but not their old needs.
    Mr. Walberg. Thank you. Let me ask one final question.
    Representative Shays, is the Obama administration aware of 
this problem?
    Mr. Shays. Oh, I think so. And I hope Congress is as well.
    Mr. Walberg. Thank you.
    Mr. Chaffetz. Thank you.
    We are now going to recognize the gentleman from Virginia, 
Mr. Connolly, for 5 minutes.
    Mr. Connolly. Thank you, Mr. Chairman.
    One of the things I find interesting in this whole 
discussion is that Congress almost never takes responsibility 
for our contribution to the problem.
    Mr. Shays, when you were in Congress, we had leadership, 
especially in the Armed Services Committee at the time, that 
actually pooh-poohed the idea of the need for more expertise in 
hiring of contract managers, procurement and acquisition 
expertise. And, as a result, we quadrupled outside contracting, 
but increased contracting personnel by only 3 percent at the 
Federal Government. And now we are surprised that we can't 
account for all of the dollars we have appropriated.
    Anyone disagree? But I think I heard unanimity that one of 
the answers was we need more capability at DCAA and in auditing 
functions to be able to account for those dollars we are 
appropriating. Anyone disagree with that?
    Mr. Shays. No. But I think one reason why this Commission 
was able to be so bipartisan is we realized the fault lay with 
both parties and all the branches.
    Mr. Connolly. Because we have had a rather mindless dialog 
sometimes here in this Congress about the need to shrink the 
size of Federal Government, and we never talk about the need to 
invest, actually, for a substantial payoff down the road. 
Obviously, if we could have saved the $31 billion to $60 
billion you estimate has been wasted, either due to fraud or 
loss, somehow, whatever we invested in additional personnel 
would have been more than returned back. And I assume that is 
in part your testimony as well, that those relatively modest 
investments up front would have big payoff in helping to deter 
what your report so ably documents, sadly, in both Iraq and 
Afghanistan.
    Mr. Zakheim.
    Mr. Zakheim. Well, I can't disagree with you. Part of the 
problem is that we are going to have to play catch-up ball. As 
Commissioner Shays, the blame lies everywhere. It started in 
the 1990's, when we were having a so-called peace dividend, and 
it turned out that a chunk of that dividend was to cut the very 
people you are just talking about. So there is some blame 
there. There is blame later on, in the early part of this 
decade, when large contracts were let and were not definitized 
properly. And one could go on and on.
    I think the point of our Commission report, and I think 
where we all agree, regardless of our politics, is that there 
is something that needs to be done; it needs to be done now; it 
needs to be done in the interest of this country and its 
taxpayers; and politics don't enter into it.
    Mr. Connolly. Well, of course, politics actually do enter 
into it when you decide on a budget and what investments you 
will or will not make. I wish politics didn't enter into it, 
but they very much do. I would be glad to bring you to the 
floor of the House and you could watch some of our debates, 
where often we seem to know the cost of everything and the 
value of nothing around here.
    Let me ask. The estimate of loss is $31 billion to $60 
billion. That is a pretty wide array. Why such a wide array in 
your report? And second point, and then I will shut up, how 
much would you attribute that to lost money indigenously, where 
you are hiring local trucking companies and convoys, and they 
just off with the cargo or lose the fuel, or whatever it may 
be?
    Mr. Zakheim. I think that one might fall to me. First of 
all, we applied a very broad definition of waste, really to 
look at opportunity cost; how much money you could have spent 
on other things. And we include in our definition excessive 
requirements that weren't adjusted afterwards; we include 
rework that was required on poorly done jobs; we include poor 
projects that didn't fit the local cultures or the local 
politics; we include unanticipated security costs.
    In other words, you have a contract and all of a sudden you 
discover you have to hire security because it is a dangerous 
area. We include questionable payments to contractors and we 
include poor oversight. And as was mentioned earlier, we don't 
include sustainment costs.
    Now, why such a wide range? Well, you can't really do a 
bottom-up study of this because we simply don't have enough 
information on all these contracts. Look, you heard 58,000 of 
them haven't even been finalized yet. So we just don't have 
enough information to build a bottom-up number, although, as 
was mentioned and Commissioner Tiefer led on this, we sure 
found an awful lot of examples that are in chapter 3.
    A top-down estimate is insufficient. If you really want to 
do a proper parametric estimate--and our number really is kind 
of; we say 10 to 20 percent of that $206 billion--but if you 
really wanted to have all the parameters, you simply couldn't 
do it, again, because that would not capture the individual 
projects. So top-down doesn't do it, bottom-up doesn't do it.
    And fraud, that part, which is based on another estimate by 
the certified fraud examiners, which is for the civilian side, 
that is 7 percent, we assume 5 to 9 percent, that one doesn't 
work either precisely because of the point you made: we don't 
know how much has been siphoned off by all these crooks. It is 
just hard to get to.
    And it goes to something that the Commission is very 
concerned about: visibility over subcontracts. Those are the 
guys who are actually paying these crooks off. And you probably 
saw on page, I think it is, 73 of our report we actually show a 
bill that Commissioner Shays and I were given a copy of when we 
were in Afghanistan, and these are a bunch of crooks, 
insurgents, saying, well, if you want protection, here is the 
number to call. I mean, it is something like out of HBO.
    Mr. Tiefer. If I can add briefly. One of the things that 
extended the array of waste was the change from Iraq to 
Afghanistan. In 2008, when you set us up and sent us out, Iraq 
was the big contracting problem. Now Afghanistan. Well, the 
problems are quite different. You have payoffs protection to 
insurgents in Afghanistan. Mr. Tierney and Mr. Chaffetz have 
been looking at that; they led the way. That wasn't a problem 
back there in Iraq. You have a country that is so poor in 
Afghanistan that it has very little absorption capability, 
which means they can't sustain what we are building when we are 
gone. Iraq wasn't poor in the way Afghanistan is poor. So we 
have a whole new set of problems.
    Mr. Chaffetz. Thank you.
    We now recognize the gentleman from Idaho, Mr. Labrador, 
for 5 minutes.
    Mr. Labrador. Thank you, Mr. Chairman.
    Congressman Shays, I found your comment to be fascinating 
and I want to explore it a little bit, that we are doing too 
much. You said that the one recommendation you have is that we 
are doing too much. Could you elaborate on that a little bit?
    Mr. Shays. Well, the genesis is really a dialog that took 
place among the Members. At first we thought we just have to 
manage these contractors better, and if we manage them better 
we won't have waste. And then we realized that it was more than 
that, that if we couldn't manage them better, maybe we 
shouldn't do as much because we can't manage them. And then we 
began to realize, my gosh, even if you can manage them, we 
began to just see so many things happening.
    I mean, when you have a wonderful contract in Afghanistan 
that costs $18 million fitting their culture, doing 
agricultural work, and all of a sudden the Federal Government 
decides they are going to increase the program to $350 million, 
instead of $18 or whatever it was, but much less than the $350, 
and then they have to finish it by the fiscal year to start to 
spend, that is crazy; and we just saw it time and time again.
    We simply think we just got beyond our capability to manage 
and, frankly, we even went farther than that.
    Mr. Labrador. Because I agree with you. I had the 
opportunity to be in Iraq and Afghanistan earlier this year, I 
am a freshman Member, and it was eye-opening to see what we are 
doing, what we are trying to accomplish there, and just all the 
money we are wasting. It was sad.
    And I can see why you are angry, and I assume every member 
of this panel is angry, because this is not just we are 
mismanaging; this is that we are wasting the money of the 
American people. And I am frustrated and I get frustrated when 
I hear, especially from some Members on my side of the aisle, 
that we can't do anything about fraud, waste, and abuse in the 
military. We should look at all of the other areas, but we 
can't do it in the military. It just blows my mind.
    So any of the recommendations that you gave in this report, 
do they address this particular issue? Because I think that is 
what I am more concerned about, because I read these 25 
recommendations and what I see is better management. And I 
don't think we can manage because, I agree with you, we are 
doing too much. Which of the specific recommendations do you 
think hits at the heart of your concern?
    Mr. Shays. Well, I will answer it this way. One of the 
answers--in a sense, everybody takes the blame. The problem is 
if everybody takes the blame, nobody is responsible. We have 
tried, in our report, to start to have people accountable, so 
the dual-hatted person that would actually have to be approved 
by the Senate but would have a right to make decisions in the 
NSC and also at OMB, that person, right at the top, would have 
to answer about the waste and all the money being spent.
    Having a J10, somebody within the Joint Chiefs that is 
focused on all the contracting; and when contracting doesn't 
turn out right, they are going to go right to that J10. Having 
the key management positions that we advocate in State and in 
Defense and USAID, that person in charge of this, then they are 
going to feel a little responsible for saying, you know what, I 
think we are doing too much, I think we are wasting money, and 
it is going to fall on my desk and I am going to have to take 
the hit. I think they are going to start to force some 
accountability.
    Mr. Labrador. So your hope is that these people say we are 
doing too much. But it seems like we are doing nothing, at 
least on our side, and I mean both Republicans and Democrats. 
We are doing nothing to tell maybe the military or other 
agencies that we are doing too much in these areas. Do you have 
any specific recommendations?
    Mr. Shays. Well, one of the values of this committee, 
again, is that I think this committee is a little more willing 
to look at DOD in a fresh way and say, you know, you are also 
part of the mix. So not quite addressing the answer, but I see 
that my colleague, Mr. Ervin----
    Mr. Ervin. If I could just add one thing to this that I 
think might be helpful, sir. I think our present fiscal 
situation is actually, as dire as it is, helpful in this 
regard. The fiscal situation the country finds itself in today 
is, needless to say, very different from the way it was 10 
years ago. We simply cannot afford to undertake the range of 
missions now that we could 10 years ago. So I think this kind 
of question, whether we should engage in it at all, whether it 
is contractors or organically, oversight or not, will be 
preceded necessarily so by a question of whether we should 
undertake it at all given the state of our finances now.
    Mr. Labrador. You know, and I agree with you, and thank you 
for your answers. Thank you for your work; thank you for being 
here. I just wish I would see that more in Members of this 
Congress. I still see too many Members of this Congress saying 
that we need to give the military a pass, when we get reports 
like yours and I can see how we can actually make a huge 
difference by making very small changes. Thank you very much.
    Mr. Chaffetz. Thank you. The gentleman yields back.
    We will now recognize the gentleman from Vermont, Mr. 
Welch, for 5 minutes.
    Mr. Welch. Thank you very much, Mr. Chairman. Thanks for 
your good work on this, and I really appreciate the cooperation 
that you and Mr. Tierney, your predecessor, have shown on this 
and the remarks of my colleagues.
    And, of course, Mr. Shays, welcome to you and to all the 
contractors. Two things. You have done a great job, and it is 
so refreshing to have content that we can put our arms around 
and find common ground to hopefully get something done, because 
most of us would prefer to get something constructive done, and 
you have really established a platform.
    I just want to make one general comment and then ask a few 
specific questions. The general comment, I think, is that if we 
assign this huge job, like the war in Iraq or war in 
Afghanistan, to the military and they have limited resources, 
contracting allows the illusion that there is a capacity that 
doesn't exist, because all we have to do is throw money at the 
problem; and, obviously, it doesn't work.
    So the real discipline has to be on what it is we expect--
what assignment we impose on the military. And if we are 
unwilling to address the capacity question that you have 
identified, then it is going to result in failure no matter how 
much oversight we have.
    In the Tierney work that he did, on getting that bottle of 
water from here up through Pakistan, through Afghanistan, 
journeys that you have taken many times, Mr. Shays, to that 
forward operating base or that bullet, whatever has to be done 
by the military to get that bullet, to get that bottle of water 
to our soldier on that forward operating base, they are going 
to do, and they will deal with all the chaos and all of the 
mismanagement and all the wasted money afterwards. 
Understandable, but that is our problem. So thank you so much 
for focusing on that.
    But on a couple of specific questions coming up, as you 
know, we are going to be transitioning, we are transitioning in 
Iraq, and among the tasks that we are going to be asking the 
State Department now to do are activities traditionally done by 
the military, and certainly seen, I think, by most of us 
traditionally as governmental functions. They will be serving 
as a quick reaction force to rescue hostages or to respond to 
attacks on the road.
    I will ask you, Mr. Henke. Does the OMB guidance apply to 
the State Department and its contractors?
    Mr. Henke. Yes, sir, it does. The devil, of course, is in 
the details of how they interpret the words in the OMB 
guidance. The short answer is the question now becomes what do 
agencies do with that guidance. They have now put security in a 
combat zone on the list. Now, State will perhaps argue to you, 
A, we don't do combat and, B, we don't support DOD, who does 
combat; we are a separate agency. That is all well and good, 
but I think that leads to the conclusion that State would 
offer, that the embassy in Kabul is like any other embassy 
anywhere and can be guarded by contractors. Yes, it is more 
high-risk, but it is still appropriate. OMB guidance would 
disagree with them.
    Mr. Welch. What about like a hostage rescue team? Would 
that be an activity that is inherently a governmental function?
    Mr. Henke. If you are going to rescue people who are 
engaged in combat, yes, sir, that is correct.
    Mr. Welch. And then what about convoy security through 
insurgent controlled territory in Afghanistan, would that be 
appropriate for contractors under the new OMB guidance?
    Mr. Henke. Well, the words in the guidance are this: 
security operations--this is on the list of inherently 
governmental--security operations performed in direct support 
of combat as part of a larger integrated armed force. So those 
convoys that are providing military articles and military 
goods, it seems to me they are in direct support of combat 
operations.
    Mr. Welch. Well, I want to thank each and every one of 
you----
    Mr. Shays. Could I just----
    Mr. Welch. Sure, Mr. Shays. Yes, go ahead.
    Mr. Shays. Because one thing is getting lost that we don't 
want to get lost. Inherently governmental means the government 
should do it. If it is not inherently governmental, it doesn't 
mean the government shouldn't do it. And our whole point in our 
chapter is that we look at risk, and if the risk is high, even 
if it is not ``inherently governmental'' but the risk is high, 
we would be leaning toward suggesting that the government do 
it.
    What is very disconcerting about Ambassador Kennedy's 
response, basically, DOD is leaving Iraq. They are transferring 
their responsibilities to State and State is now saying we are 
doing it, but it is not inherently governmental. They are 
literally saying that. We fear that they are saying it because 
they don't want to appear like they are not abiding by the law.
    Mr. Welch. Thank you very much. Thank all of you.
    Mr. Chairman, I look forward to being a lieutenant for you 
and the ranking member. I think we have a good issue here, good 
committee to work on it. Thank you.
    Mr. Chaffetz. Thank you, Mr. Welch. Appreciate it.
    We will now recognize the former chairman of this 
committee, the gentleman from Indiana, Mr. Burton, for 5 
minutes.
    Mr. Burton. Chris, good seeing you again, buddy.
    Mr. Shays. Great to see you.
    Mr. Burton. Wish you were back.
    I just have one question, and any one of you can answer it. 
And I don't want to be redundant; you may have answered this 
before, and I was in a Foreign Affairs Committee meeting, so I 
apologize. You said that there ought to be some kind of a 
commissioner to oversee these issues, and it seems to me, and I 
know Mr. Tierney has a bill dealing with that, it seems to me 
that just seems like another layer of bureaucracy that we would 
have to deal with.
    If the people who are supposed to review these contracts 
and watch over waste, fraud, and abuse, if there is a buddy-
buddy relationship, as you say there is, it seems to me that we 
ought to get rid of them and replace them with somebody that is 
not biased in any way. But to come up with another layer of 
bureaucracy to oversee the ones who may be buddy-buddy with the 
contractors just doesn't make sense, especially at a time when 
we have these fiscal problems. I know we are not talking about 
a lot of money, but these things have a way of mushrooming.
    So I would just like to get your comment on that. And our 
committee on Government Reform and Oversight, if we had 
commissioners like you that talked about specific problems with 
an agency, where they are not policing it properly, we could 
make the request that that person be replaced so that there 
wouldn't be the buddy-buddy relationship that you are talking 
about. But I would just like to get your comments once more on 
whether or not we ought to have this new layer of bureaucracy 
or new commissioner to oversee all this.
    Ms. Schinasi. Congressman Burton, I will take a shot at 
that, if I may.
    Mr. Burton. Sure.
    Ms. Schinasi. I think what Commissioner Shays was referring 
to were the individual IGs in the agencies as getting too 
close, sometimes, to the management of those agencies.
    Mr. Burton. No, I understand that.
    Ms. Schinasi. What we are talking about, what we saw in the 
contingency operations is really their multi-agency flavor. It 
is not just one agency that is spending money; all across the 
Government, I think there are 17 agencies who are spending 
money in Afghanistan right now. So what we are looking for in 
the special inspector general is not another layer as much as 
an individual who has the authority to look across the 
different agencies. So we would replace the special inspector 
general for Iraq, we would replace the special inspector 
general for Afghanistan. Those offices have done some good work 
that the individual agencies were not able to do----
    Mr. Burton. Okay.
    Ms. Schinasi [continuing]. Because they didn't have the 
authority. So it really is meant to be sort of an efficient way 
to look at the money that the U.S. Government as a whole is 
spending in these contingencies.
    Mr. Burton. Mr. Chairman, that is the only question I had. 
Thank you very much.
    Mr. Chaffetz. Thank you.
    We will now recognize the gentleman from Illinois, Mr. 
Davis, for 5 minutes.
    Mr. Davis. Thank you very much, Mr. Chairman.
    Congressman Shays, it is always good to see you, and it is 
good to know that you are still involved in public interests 
and public service activity. I want to thank you and all of the 
other members of the Commission for the tremendous work I think 
you have done.
    Looking at this report sort of affirms for me a lot of 
things that I had thought, but didn't necessarily have the 
information or the data to go on. I mean, I thought it, and 
then when I read it I am saying, yeah, that is kind of the way 
it is, that is how difficult it is. As a matter of fact, I 
thought of in some societies, in some communities, in some 
neighborhoods in different places throughout the world there is 
a saying that if you find a sucker, bump his head. That is just 
sort of the way the culture evolves. And it seems to me that 
there are a lot of people in these countries who become 
involved, in one way or the other, who kind of see this is an 
opportunity to feed from the trough; and if there is an 
opportunity, they just can't resist, they just can't not do it.
    So my question sort of becomes I guess whether or not this 
is almost seen as policy, that we hire especially if we are in 
different countries and we have war taking place. Do we hire 
all of these contractors as a way of kind of mollifying, to 
some degree, some of the elements that might be there, that 
just makes it possible or more possible that we can function 
and operate?
    Mr. Zakheim. Well, we do have policies as you describe 
them, they are called Iraqi First and Afghanistan First, and 
you want to hire locals. The problem is twofold. The first is 
it is one thing to hire locals, it is another thing to flood a 
country with money; and my colleague, Commissioner Tiefer, 
mentioned that. When you are putting as much money into 
Afghanistan, or virtually as much as its entire gross domestic 
product, and six times as much as its budget, then you have a 
problem. There is money coming off of trees, as far as the 
Afghans are concerned. So lesson number one is maybe you should 
look much more carefully at how much a country can absorb 
before you start pouring the money in.
    Lesson number two is if you are going to have local 
contractors and you are going to have them because you have a 
policy that you want to at least have people not alienated by 
your presence, then, for God's sake, supervise them, and that 
is what we have recommended in our Commission report, that in 
whatever the circumstances in the United States or elsewhere in 
peacetime, when you are involved in a contingency and you are 
using local subcontractors, the U.S. Government should be able 
to look at their books; and if their books aren't clean, we 
throw them out.
    Mr. Tiefer. Mr. Davis, what Commissioner Zakheim said was 
exactly right about the Afghan contractors and the Iraqi 
contractors. I would say you will find in our report 
recommendations to have stronger controls over foreign 
contractors in part because the Kuwaiti contractors, we 
depended upon them for the Iraq war and they took us to the 
cleaners. It should have been American businesses.
    If someone was going to grow in wartime, at least it could 
have been an American business. Relatively small Kuwaiti 
businesses grew to large size. Public Warehouse Inc., which 
currently has an indictment where the press has estimated to 
settle that case would cost them $750 million. First Kuwaiti, 
which built the Baghdad embassy, which has an unpaid bill, 
according to the inspector general, of $124 million. The 
Kuwaitis took us to the cleaners.
    Mr. Zakheim. Yes. And our report, to augment that, I would 
say we want the ability to look at all foreign subcontracts, 
not just the ones in theater, which is what you were referring 
to, but Kuwaitis or anybody else. Anybody who is doing business 
with the United States ought to be auditable.
    Mr. Davis. Tough job. I thank you very much.
    And thank you, Mr. Chairman. I yield back.
    Mr. Chaffetz. Thank you.
    We will now recognize Mr. Murphy from Connecticut for 5 
minutes.
    Mr. Murphy. Thank you very much, Mr. Chairman.
    Let me add my thanks to Congressman Shays, one, for your 
long service to our State of Connecticut, but also for your 
great work on this committee. I know how seriously you took 
this work, and I think we are all incredibly pleased, as Mr. 
Welch said, to see some real concrete proposals before us. It 
is not often that this committee gets to see this kind of 
volume of good forward-looking work.
    I want to build on Representative Tierney's questions about 
sustainability, because I think this is key. And I am so glad 
that you focused in on this issue. But your suggestion in some 
ways is a pretty radical suggestion because your first bullet 
point says essentially what you have already repeated, that we 
should examine completed and current projects for a risk of 
sustainment failure and take appropriate action to cancel or 
redesign these programs.
    Now, a couple pages earlier you point out that just in the 
next year we are going to spend $13 billion on building up 
security forces alone, and the total revenue coming in to the 
Afghan revenue today is $2 billion, not enough to even cover 
one-sixth of the expense of the security investment alone. And 
though I think there is a lot of hope for some long-term new 
revenue sources related to mineral production, that is a real 
long-term pie-in-the-sky prognosis.
    So I guess my question is what are you really recommending 
here? Because a suggestion that you cut off all programs that 
can't sustain themselves is perhaps a recommendation to stop 
funding the buildup of the Afghan national security forces. It 
is a prescription to essentially end support for a lot of the 
main core missions that we have been doing here. You note that 
the other side of this is to just admit that the American 
taxpayer is on the hook for a lot longer than we are, and that 
is the other side of this, is that maybe we just have to have a 
clear understanding that we are going to be in to paying for 
particularly the security forces much longer than the American 
public may understand.
    But I guess I am trying to get my hands wrapped around how 
radical a recommendation is the idea that we should end 
projects that aren't sustainable.
    Mr. Ervin. Why don't I start? I think your analysis is spot 
on, sir. There is no question but that a lot of these projects, 
you talked about the security forces in particular, cannot be 
sustained absent continued American investment, and I think we 
have to be honest about that. We have a choice: either the U.S. 
Government continues to undertake these projects if we 
ultimately conclude that, notwithstanding our fiscal situation, 
they are critical to the national security of the United States 
or we determine that they are not critical to the U.S. 
Government's national security and we can't afford it and, 
therefore, we have to stand down.
    Mr. Zakheim. General Caldwell has already said that he is 
planning to ratchet back the cost of training the Afghan 
forces. That tells me, again, when the Government wants to 
respond, it can respond. Now, as Commissioner Ervin says, it is 
still going to cost us money, we might as well be honest about 
it. But at least if we focus much more carefully on these 
projects and we decide that we do need them, as we need to 
train the Afghan forces, then we can cut these projects down to 
size, and that is exactly what General Caldwell is doing.
    Mr. Shays. I want to add my voice. It is a tremendously 
insightful question and I think really what we are saying is 
obviously we can't just eliminate everything that we think they 
can't sustain, but we have to reduce the amount or the size of 
projects to fit our capability to sustain them in the future.
    Mr. Murphy. Let me just drill down, in my remaining time, 
to one specific issue you raised, which is with the SURP funds. 
When I was in Afghanistan last, it was a particular point made 
by our commanders in the field, how important these SURP funds 
were to them in terms of building out their support amongst the 
community. But I think you raise a very important point that 
there is a very different analysis in whether it is important 
for the hear and now of building local support and whether it 
can be sustained in the long run.
    Recommendations or ideas on how we better control the usage 
of SURP funds? Because this is going to be a major debate here, 
and I would be interested to see if there are specific 
recommendations to make sure that sustainability is part of the 
commanders' decisionmaking process or part of the approval 
process.
    Mr. Henke. Sir, briefly, I would say I would recognize SURP 
for what it is, and I think it is an adaptation, it is DOD's 
willingness to say we can do that, just give us the resources 
to do it, even if it is not their core mission. When SURP was 
originally brought about, it was on the order of $150, $180 
million with seized Iraqi assets. No one thought that it would 
grow to be a $2 billion program where we are buying a generator 
complex in Kandahar for $240 million.
    So, number one, look at the capacity of the agencies who 
should be doing those things, diplomacy and development 
missions. They have the mission; they don't have the money. 
State has the money, DOD has the money and the ability to send 
forces to go do that. So, number one, look at the existing 
agency who might be doing that mission if they were more fully 
staffed, and don't let things like SURP get out of control. No 
one thought that it would be used to be basically a defacto 
development program. A long way from $100 for a door, $300 for 
a new well to let's build a quarter billion dollar power plant 
in Kandahar.
    Ms. Schinasi. And if I might add to that, we spent a lot of 
time during one of our hearings pursuing just this question and 
we asked the question of the different agencies, have you all 
come together to talk about the military time line is today, 
today, today; the development time line that they are trying to 
work on is much longer. The projects are totally out of sync. 
And we got no answer back from the agencies are you all working 
together to bring the knowledge to the resources, as Mr. Henke 
just said, that we need to to get done the mission. But SURP is 
clearly something that we found was one of those missions where 
you just throw more money at it and it will be fixed, when that 
is clearly not the case.
    Mr. Murphy. Thank you very much, Mr. Chairman.
    Mr. Chaffetz. Thank you.
    We now recognize the gentlewoman from New York, Mrs. 
Maloney, for 5 minutes.
    Mrs. Maloney. Thank you very much, and I want to thank all 
of the members of the panel who served on the Commission on 
Wartime Contracting, especially my good friend and former 
colleague, Christopher Shays. Just yesterday the bill we worked 
on went into effect for the victims compensation fund for the 
9/11 workers. I appreciate your tremendous leadership. Thank 
you for your service in so many areas.
    And I compliment you on this report, and you make a number 
of recommendations which I think are important. So many reports 
come back to us and then they never say what you should do, but 
you were clear in your recommendations to increase competition. 
And in your written testimony you decry the fact that even 
after 8 years in Iraq there are still multi-billion dollar 
contracts that have never been effectively re-competed, and you 
state that you believe that there is $30 to $60 billion lost in 
contract waste, fraud, and abuse.
    So it seems like some of these contractors are being 
treated like they are too big to fail. Well, in the Financial 
Services Committee, on which Chris and I both served, we passed 
legislation to end too big to fail. We can't afford it in this 
country. We cannot afford bailouts. And in your report it 
almost sounds like a bailout or a gift to give a sole-source 
huge contract for items that are easy to produce and get to the 
troops, such as food, fuel, logistical support. This isn't 
high-tech, highly difficult things; these are things that I 
think many of my constituents in New York and probably yours, 
Christopher, former ones in Connecticut, would like the 
opportunity to bid on the opportunity to provide these 
services.
    So my question is you have some recommendations. Mr. 
Chairman, let's start implementing. Let's rebid some of these 
contracts and see if we can lower the cost for the American 
taxpayer.
    In the city of New York we found in our studies that there 
were sole-source contracts, and when we bid them competitively 
to the lowest responsible bidder--you had to have a record, you 
have to be doing it well--it saved literally hundreds of 
billions of dollars in the city of New York. So I think that in 
the Federal Government, where it says that you are spending 
$200 billion in contracts alone in logistics, that we could 
save a lot of money; and this is within the jurisdiction of 
this committee.
    And my question to you, Mr. Shays, is there any 
understanding of how much this would save in taxpayers' money 
if we were able to competitively bid them, bid them now and 
when they expire, for food, for fuel? How difficult is it? We 
have people moving food and fuel all over the country. Why not 
let the taxpayers, other taxpayers have a chance to bid and see 
if they can provide it at a lower price, probably more 
efficiently and effectively?
    And I agree with your report that it is ridiculous to give 
these sole-source contracts. Once you get it, you have it for 
life. That is not the American way. And particularly in 
Afghanistan and Iraq we should be watching every dollar. I 
agree with Commissioner Tiefer, who said these contracts should 
be going to American companies, they should be providing these 
services and growing American jobs, but let's put some 
competition in the system.
    So my question, Commissioner Shays, have you done any 
studies on what would happen if we competitively bid, oh, say, 
the delivery of fuel? It would probably bring down the cost by 
billions.
    Mr. Shays. Being the wise man that I am, I am going to ask 
the expert on this issue to respond to the question, Mr. 
Tiefer, who will, I think, give you a good answer.
    Mr. Tiefer. Thank you.
    Mr. Shays. It better be a good answer.
    Mr. Tiefer. I will start by saying there is a great 
bipartisan tradition about competition on this committee. This 
is the committee that wrote the Competition in Contracting Act 
itself, which is still the loadstar, the central principle for 
competition.
    Mrs. Maloney. But they didn't use it in Iraq and 
Afghanistan.
    Mr. Tiefer. No, they found exceptions and they have gotten 
around it.
    Mrs. Maloney. I can see when you are going in in an 
emergency, but now, when we are looking to save dollars, there 
is absolutely no reason why we can't rebid all of these 
contracts and save taxpayers money.
    Mr. Tiefer. We used the figure of 11 percent as the amount 
of money that would be saved because the Army had used that in 
its decision, which, unfortunately, went the wrong way, about 
whether to give a sole-source extension to the LOGCAP contract 
in Iraq for its last year.
    Among the particular things that concerned us, which are 
loopholes, in effect, in the Competition in Contracting Act is 
that the logistics contract in Afghanistan, the one that is 
held by only two companies, they have a 5-year-long contract.
    Mrs. Maloney. When you say logistics, does that include 
fuel and food when you say logistics? What is logistics?
    Mr. Tiefer. It is not bulk commodities, but it is the 
dining halls, which is the preparation of the food, the 
providing of the food to the troops and the civilians.
    Mrs. Maloney. So that is just providing the food What about 
importing the food or buying the food, is that part of it?
    Mr. Tiefer. That is separate. There have been scandals in 
the supplying of the bulk food. That is where the $750 million 
indictment of Public Warehousing was. There have been scandals 
in providing the fuel. That is the Kurgistan scandal about how 
we made payoffs to the family of the corrupt ruler. But the 
particular of the logistics contract, which is the single 
biggest contract, is that it won't be competed for an entire 5 
years because the agency says it doesn't have the personnel to 
compete it in 3 years, which is absurd.
    Mrs. Maloney. Well, I agree it is absurd. And if they don't 
have the personnel to compete it, then I think this committee 
could direct that personnel be shifted over there so that we 
could compete it. But are there other contracts that we could 
compete and see if there are savings? It is ridiculous to give 
a sole-source in this situation.
    Mr. Shays. Just to add a perspective, what was most 
disconcerting for us was when you start the process, you are 
going to want to deal with one contractor and you are not going 
to want to let out a lot of bids. But after you are into the 
second and third year, then we wanted to see a lot more 
competition. So we have evolved where there is a lot more 
competition. The sole-source is not the rule, it is the 
exception, but it seems to be the exception on the bigger 
dollar items, which then causes us concern. Just to provide the 
perspective.
    Mrs. Maloney. But why don't we change that, Commissioner 
Shays? We can change that. This Commission could direct to 
competitively bid the larger contracts. I believe you would 
save money by the billions. I really do believe that. And we 
are in a financial crisis now.
    Mr. Shays. Well, we were concerned that they didn't go to 
LOGCAP IV soon enough, that they allowed it to continue in 
Iraq. We voiced our concern. We don't have the clout that you 
all have, and you all can continue this, looking at what we 
have done, looking at what we recommended, looking at what we 
argued for, looking at where we have had success, seeing where 
we haven't yet.
    Mrs. Maloney. Well, who stops it? Who stops it when you try 
to make these changes?
    Mr. Shays. Well, it is DOD or State that basically says, 
you know, they are comfortable with this contract, and that is 
the bottom line, and we are at war and so be it.
    Mr. Chaffetz. Thank you.
    We are going to start a second round. If you want to come 
back, I will recognize you again, but I would like to recognize 
myself here for just a couple of follow-ups, and then I think 
we will be pretty well close to the end here.
    There is something dramatically wrong, particularly, it 
strikes me, at the Department of Defense. We have been doing 
this for a long time. We talked about don't want to offend 
people, and they get too cozy in the relationships. I just want 
to go a little bit deeper. And having done this, Commissioner 
Ervin, maybe you can start.
    What specifically do we need to do to get them to work? And 
I don't buy the answer that it is always just more money. They 
have hundreds of billions of dollars at the Department of 
Defense. Perhaps they are not prioritizing that properly, but 
the numbers are absolutely staggering. And I know you have a 
whole report here, but for this hearing, what else can we do to 
get these IGs to actually do what they are already charged to 
do?
    Mr. Ervin. Right. Well, I guess it is a number of things. 
First of all, we need to fill the vacancies that exist with 
regard to the statutory IGs, as we discussed earlier, at the 
State Department; and there will soon be a retirement, I 
understand, at AID, so we need to fill that.
    Second, we need to make sure that those three statutory IGs 
are effectively resourced, that they have the necessary 
resources, money, so that they can hire not just the numbers of 
people, auditors, investigators, inspectors, but also the 
people with the requisite expertise. And I think this is 
another example where our present parlous economic state is 
actually helpful, because there are lots of people out there 
who used to be employed by the private sector, that aren't 
employed now, that would do terrifically good jobs, it seems to 
me, in these positions.
    All that having been said, I still, we all still believe 
that it is critical that there also be, complimentarily, a 
special inspector general position for a number of reasons, as 
we said before. That person would have interagency 
jurisdiction, which the statutory inspectors general do not. 
Unlike the statutory inspectors general, that special inspector 
general would focus specifically and exclusively on contingency 
operations. So, as I have said before in other contexts, all 
these recommendations are of a piece, in other words, a 
complete package, so I think we need to do all of this at the 
same time. And we would save the Government money, ultimately, 
if we were to do it.
    Ms. Schinasi. I would just like to add a different 
perspective, a little modification of that. We clearly support, 
as my colleague just said, the need for the oversight, but I 
would also argue that better management would help a lot. And 
you wouldn't need as much oversight if you could get the better 
management. And because of that we have recommended new 
positions be created in the executive branch to realize that 
managing contractors and managing contracts and deciding 
whether or not to actually use a contractor work force to carry 
out the mission of the Government is something that is part and 
parcel of a core mission for the Government. It is not the back 
office administrative business who cares, let them take care of 
it; it needs to also be incorporated into management.
    Mr. Chaffetz. Well, the Obama administration is about to 
see a major surge in contractors there in Iraq, 17,000 
contractors, 5,500 private security contractors as the military 
goes away. Aren't we just playing a little bit of a shell game 
here and are they prepared to deal with what is going to happen 
in less than 90 days from now?
    Ms. Schinasi. Our recommendations were that they needed to 
pay more attention to getting those contractors in place and 
then overseeing their operations.
    Mr. Zakheim. We have been following this closely, 
obviously, for some time, and I think it is fair to say that we 
are very, very worried. And as you heard earlier, we think that 
there needs to be oversight.
    Mr. Chaffetz. Well, what are those worries? What are you 
worried about?
    Mr. Zakheim. The worries are very simple. I can give you 
the worst case. The worst case is you have another Niger Square 
thing, which is to say, as happened in Iraq, some contractors 
go after somebody they think is shooting at them, there is a 
mob scene, the contractors are killed, everything spins out of 
control. I mean, it is a nightmare. And when you have 17,000 of 
them, as you say, you are asking for trouble, and without 
oversight. They can't hire these people, they can't train them; 
you have heard that.
    Mr. Chaffetz. So if you are a contractor in Iraq, you are 1 
of these 5,500, who is your commander in chief? Who do they 
report to?
    Mr. Zakheim. Well, in theory they are reporting to the 
embassy. But, you know, the Deputy Chief of Mission and the 
Ambassador is not going to be managing operations with security 
contractors; you have to have people accompanying them, 
government civilians, who will keep an eye on them and ensure 
that nothing untoward happens; and without that we are simply 
asking for trouble. It is going to happen.
    Mr. Chaffetz. I think Commissioner Shays said earlier when 
everybody takes blame, nobody is responsible. Did I get that 
quote right?
    So let's talk about these 5,500 security contractors. Who 
is ultimately responsible for those people? Who do we hold 
responsible for that? The Secretary of State?
    Mr. Zakheim. In theory, it is the Ambassador and, through 
the Ambassador, the Secretary of State. Good luck.
    Mr. Tiefer. If I could mention a legal point here. There is 
a giant loophole as far as legal accountability, as far as 
prosecutability of security people for doing something like 
Niger Square. The current statute clearly covers the military 
who are outside the United States. The contracting industry has 
taken the position though that the statute, it is called the 
Military Extraterritorial Jurisdiction Act, doesn't apply to 
State Department contractors.
    So we recommended that--we are not the first, this is a 
recommendation that goes back to 2007--we recommended to just 
extend the military act to cover State Department civilians. 
Well, you are going to have a private army in Iraq which, in 
theory, the people there cannot be criminally prosecuted even 
if they committed homicide.
    Mr. Shays. One of the things that the State Department did 
that made a lot of sense, a few years ago we just had 
contractors providing all security for State, and we had 
problems. So the State then put in charge a DS agent, one of 
their own agents in charge of every convoy and so on if the 
State was involved. The amount of incidences were reduced 
significantly. But they can't do this to the extent now. In 
fairness to State, they are being asked to do something that I 
don't know how they are going to do it. They are being asked to 
basically do what the military did.
    My complaint with what State is doing is that they are not 
acknowledging that it is something that the Government should 
do. And by not acknowledging it, you all aren't getting the 
information you need to say, my gosh, we have a very serious 
problem here. They are saying, no, none of this is inherently 
governmental. That is simply wrong; it is inherently 
governmental. They are asking people to do something they 
shouldn't be doing.
    Mr. Chaffetz. Well, to the rest of my committee members 
here, this is one of the big concerns that we have. We can see 
it coming, we know it is about to happen. We are playing a 
little bit of a shell game, drawing down the military but 
bringing back up the security forces through contractors, and I 
truly do worry about it. We do have an upcoming hearing about 
the transition that will continue to provide some more insight.
    I would like to recognize the gentlewoman from New York if 
she has some additional questions; otherwise, I think we will--
--
    Mrs. Maloney. I do have questions, because I feel that if 
we are in these countries--personally, I think we should bring 
our men and women home, but given the point that you say that 
in the contract they don't adjust for the ability to 
competitively bid in the future, should the impact on future 
competition be factored into decisions about how to design the 
initial contract, Mr. Shays.
    Should we do a contract from the beginning that requires 
competitive bidding in another year? Would that help 
particularly in areas that are less complicated than troops, 
such as food, fuel, and logistics? How hard is that? I could 
even run the food. I could run the logistics.
    Mr. Shays. I think it should be the rule, but there will be 
some exceptions in the beginning of an operation.
    Mrs. Maloney. In the beginning, but you could put a 
timeframe on it. And in your testimony you argue that the 
wartime environment brings tremendous additional complications, 
just what you were saying. Yet, the same basic rules apply 
whether an agency is contracting for laundry services or ball 
bearings in Kansas, it is the same basic rules. So do these 
additional complications suggest the need for special 
contracting regulations tailored to the wartime environment?
    Mr. Shays. Yes.
    Mrs. Maloney. You believe so. And do you see any reason why 
we couldn't take--take, for example, a food contract. Why can't 
we take the food contract and competitively bid it?
    Mr. Tiefer. We support that very much. In terms of length 
of time, there is a specific nuance in our chapter 3 I want to 
bring out here, which is that the current practice has not only 
been that the contractor gets whatever the term is in the 
contract and virtually automatically gets option years. We 
found no serious review of decisions whether to give the fourth 
year or the fifth year out of a 3-year plus two option year 
contract.
    But at the end the extension contract, and we had three 
billion dollar level examples, is sole-sourced to the 
contractor who has had it for the previous 5 years. To take the 
translator contractor, which hasn't been mentioned, although 
the food service one works the same way, the food one works the 
same way, the translator contract was extended in two five $500 
million slices, sole-sourced to the contractor who had held it 
previously. We could very well put a contract strategy in place 
that would not let that happen.
    Mrs. Maloney. Well, let's go over what the contract 
strategy would be. First of all, it would be to make a list, 
advertise and make a list of, say, 10 qualified bidders. These 
are people that are providing services in the United States, 
they are successful, they have financial resources. So you have 
a qualified list. Then let the qualified list bid on the 
contract, and the lowest bidder would win. And I would bet my 
right arm we would save billions of dollars under that 
scenario. Is there any way you would improve that roadmap?
    Mr. Shays. I just would say that they are providing, in the 
case of the cafeteria, they may be providing food, but they are 
providing it in an area where the logistics requires them to 
have some unique capabilities. And we wouldn't always advocate 
the lowest bidder, we would want the low bid.
    Mrs. Maloney. Lowest responsible bidder.
    Mr. Shays. Yes, exactly. So I just make a point that I 
would feel terrible leaving and ending this Commission and 
acting like, well, providing food in Afghanistan and Iraq is 
the same as providing it somewhere else. It isn't.
    Mrs. Maloney. But, Mr. Commissioner, in the RFP or in the 
request for proposal you could put the specific requirements 
in. Do you believe that other American companies aren't capable 
of providing translation, logistics, fuel----
    Mr. Shays. Congresswoman Maloney, you and I do not have a 
basic disagreement. I just wanted to qualify your comments to 
make sure we realize that there are some unique parts to this. 
Otherwise, I think the Commission would look foolish in making 
an assumption like it is just like doing it in New York City or 
somewhere else.
    Mrs. Maloney. What I think we should do, because I like to 
do things and not just talk, could we see if the Commission 
could take one area of these three billion dollar contracts 
that they are giving out sole-source, one area, probably the 
simplest with the less complications and go forward and see if 
we can competitively bid it?
    Mr. Shays. We no longer exist. We ended our work this 
September and now we are on to new things.
    Mrs. Maloney. Congratulations on your report.
    Mr. Shays. Thank you.
    Mr. Chaffetz. Now recognize the chairman of the committee, 
Mr. Issa, from California.
    Chairman Issa. I thank the chairman. And I want to follow 
up on what I heard while I was in a meeting in the back.
    Professor Tiefer, Commissioner, SIGAR, obviously there is 
bipartisan support for reform, but isn't there a bigger problem 
that when Americans or, in some cases, non-Americans, but under 
the American umbrella, operate overseas, we don't have a 
uniform standard today, period? Our military men and women have 
one standard; our State Department covered employees have 
another; our contractors have yet another; and we could go into 
a couple other derivatives. In any reform we do, not just 
closing the loophole, not just assuring that a contractor who 
violates law overseas can be held accountable in the United 
States, but shouldn't we also try to have a uniform 
presentation of what an American or agent of America would 
expect in a foreign nation while doing the bidding of the 
American people?
    Mr. Tiefer. Well, on the main aspect of what you are 
saying, that is exactly right; it is currently a patchwork 
system. It has been moved this way at one time, a different 
direction another time, another direction a third time. So, 
yes, there is no uniformity and consistency as if it had been 
thought out.
    Chairman Issa. It was a rhetorical question to get you to 
go further.
    Mr. Tiefer. Okay. Thank you. Why would we want to put a 
patch on a particular hole right now? Because right now there 
is no immunity from Iraqi justice for the security personnel 
that we have in Iraq. Now, while we had military people doing 
that, Iraqis had this attitude as elsewhere, well, they will be 
controlled, they will be prosecuted, they are under American 
law, they can even be court-martialed under American law. That 
is fine with us.
    Chairman Issa. Heck, they can be court-martialed for not 
paying their just debts. We have a pretty strong UCMJ.
    Mr. Tiefer. If given a choice, I would much rather be in 
civil court than in court-martial. But what is going to happen 
if there are incidents involving these civilian security 
contractors for the State Department is that we are going to 
have this choice: we can either let Iraqi justice proceed--and 
my sympathy is for the contractors faced in that situation--or 
we can hustle them out of the country before the Iraqis get to 
them, which will not aid in our relations with the Iraqis.
    Chairman Issa. Good point. I want to follow up on one last 
question, and I think this probably goes to Commissioner Henke 
and to Commissioner Zakheim, and I will start with you, 
Commissioner.
    You made the point of secunding those people from DOD to 
State if that allows us to have this inherently governmental 
job be done by trained, experienced, prepared government people 
who understand rules of engagement and can make such 
adjustments. If you could elaborate a little bit on--let's 
assume for a moment that that is a model not just in one 
country where we agree to remove our uniformed armed forces, 
but taken to all other hot spots in which the State Department 
today is using alternatives to, if you will, their own forces. 
How could we do that in a way that protected that status of 
forces, if you will, that normally the uniformed military has 
when they are secunded to the State Department?
    Mr. Henke. Well, as you just heard from my colleague, 
Commissioner Tiefer, it is just much too complicated when you 
are dealing with civilians. I mean, our whole approach to 
civilians is so outdated. Now, I am speaking personally. I know 
the Commission is over, but we have been speaking as a 
Commission. I am just speaking as an individual.
    Chairman Issa. Once a Commission, always a Commission.
    Mr. Henke. Well, that is right.
    Chairman Issa. You just can't make recommendations the way 
you could if you were----
    Mr. Henke. We are still living with living with the 1883 
Civil Service Act, with Chester Arthur Allen's Act. It is 
crazy. And one of the problems we face is that we simply have 
not updated the role of civilians in the 21st century. So your 
concern is part of that. We ought to be able to secund 
civilians. We ought to be able to have some uniform code of 
civilian justice, to give it a name, that applies to all 
civilians, wherever they are serving, whoever they are serving. 
Once you do that, it becomes a lot easier to augment the State 
Department, or any other agency, for that matter, in a variety 
of contingency situations. We simply don't have that. We have, 
as Commissioner Tiefer said, a patchwork and nothing more.
    Chairman Issa. I think I will end with Commissioner Henke. 
You have seen DOD in your two roles. I was taking Commissioner 
Zakheim at a different point, which was these are active duty 
military personnel who would, like a military liaison officer, 
work for an ambassador, would in fact run a garrison, if you 
will, potentially out of uniform but still active duty 
military. That is the only instant fix we would have that I can 
see for replacing DOD uniformed people in our current situation 
of 5,500 promised and needed, but promised not to be uniformed 
military.
    Do you see any way for us to, if you will, dot the I or 
turn a circle into a box? Because I am very concerned, and I 
think both sides of the aisle should be concerned, that another 
square somewhere in Iraq could turn into a real problem for the 
State Department with some of those 5,500 people, and then the 
question is are these military or at least Federal employees 
who have the full faith and it is somebody in the chain of 
command's mistake, or is it ``you hired a bad contractor and 
now we have to deal with it.''
    And it goes beyond the question of who tries it; it is a 
question of we are going to be responsible for those people, 
even if they are contractors. How are we going to ensure that 
all the way through the Secretary of State and the President 
there is some accountability for an army that is larger than 
most units I served in in the Army myself?
    Mr. Henke. Mr. Chairman, I think there has to be a way to 
figure out along the continuum of embassies that State has. 
There are some that are low threat, low risk, some that are 
medium, some that evolve into a high risk; and as long as the 
management controls are in place for contracted security, and 
they are vetted contractors and they are trained and certified 
contractors, there is this idea out there about a third party 
certification, like an ISO 9000 certification for private 
security. That makes a lot of sense.
    Another idea is don't require in law the State Department 
to choose, that they must choose low price, low bid, 
technically acceptable contracts for security; give them the 
ability to say I want to do best value security in that high 
risk circumstance. When it gets beyond high risk and it gets 
into combat, that is the province of the military, and State 
and DOD have to be able to figure out, without subordinating 
State to DOD and making it an arm of DOD. Nobody wants that.
    But there needs to be a way to operate as separate agencies 
but recognize the gate guards at the Kabul embassy who were 
attacked on September 13th, OMB issues this policy guidance on 
September 12th that says, look, security in combat is 
inherently governmental; here is a list of other ideas. The day 
after the Kabul embassy was under attack for 4 or 5, 6 hours 
and several people were killed. If that is not combat, I don't 
know what is. And State and DOD have to be able to figure out a 
way to operate more seamlessly for us to have an effective 
foreign policy apparatus.
    Chairman Issa. Any other guidance you could give us on 
something we may legislate from any of the Commissioners?
    Ms. Schinasi. I would just add something on this question 
that is beyond what we looked at while we were operating, but 
there are an awful lot of other trained security forces 
throughout the civilian side of the U.S. Government, and one of 
the things that we saw in looking at Iraq and Afghanistan is 
that really the rest of the civilian government was not 
participating in a way that we thought was useful for what is a 
common U.S. policy.
    Chairman Issa. Thank you.
    Thank you, Mr. Chairman.
    Mrs. Maloney. Would the gentleman yield?
    Chairman Issa. Of course.
    Mrs. Maloney. In line with the gentleman's question, and I 
think the Commissioner, you raised a lot of good points. Combat 
is very, very different. I am not questioning the standards, 
but what happens when we have a multi-million dollar contractor 
that is an exclusive provider of an essential service that is 
needed? Say there is some serious abuses that were alleged 
against some of the providers, that they were very, very 
serious abuses, and we have had hearings on them, specifically 
Blackwater. But what happens when the contract is let 
appropriately, it is professional people, but there are some 
serious abuses? Then who is accountable in that type of 
situation?
    Mr. Henke. Contractually?
    Mrs. Maloney. Yes. Say you have a contractor providing an 
essential service and then there are serious abuses that become 
almost international outcries. Who is responsible then, the 
contractor or how do you handle it? You know, in certain cases 
they said we are private contractors and no one was 
accountable. So I just wonder what your answer is.
    Mr. Henke. In the example of the Kabul embassy, where we 
had the guards who were drinking and partying and cavorting off 
duty, the contractor was responsible, the government overseers 
were responsible. But you know, ultimately, they besmirched the 
reputation of the United States, and that is why, to me, that 
is the very definition of high risk and where we don't want to 
have a foreign policy outcome at risk because of the way a low 
bid contractor performs in a combat zone.
    Chairman Issa. Thank you.
    Thank you, Mr. Chairman.
    Mr. Chaffetz. Thank you.
    Again, on behalf of the committee and the U.S. Congress, 
thank you for your great work, an awful lot of time and effort 
and talent going into this. We do appreciate it.
    I would like to give you an opportunity for any other final 
comments that you would like to share with us.
    Mr. Shays. Thank you, Mr. Chairman. I would love to jump in 
just for a second and say, first, the Congress and the general 
public wanted the military to be the tip of the spear, so we 
have put all our resources to say, you know, you fight the 
fight; and that, I think, makes sense. It does mean that you 
can't go to war without contractors.
    So this Commission is not besmirching the fact that we have 
to depend on contractors; that was by design. What is of 
concern is that the QDR, the Quadrennial Review of the 
Military, hardly makes mention of the fact that we depend on 
contractors, we need to integrate them in a way that is 
effective. We are saying that we think we are over-dependent on 
contractors. That is another issue. But we clearly understand 
that we have them and we need them.
    My colleague, Ms. Schinasi, made this reference to the fact 
of a concern about the number of civilians, and the fact is we 
have a huge number of military, a huge number of contractors, 
and I was really stunned by the low level of civilian 
Government employees, who are actually in theater. There is 
such a difference. And then I became even more stunned by, and 
stunned is the word, we have to entice civilians, civil 
servants, I mean, to go there by doubling their salary, giving 
them hardship pay, oversea pay, overtime; and it is amazing the 
number of employees who make twice-plus what they made here. 
And that is an issue I think we didn't really fully address, 
but what do we do to get more civil servants taking a role in 
that area.
    And then if I could add and if I could get the attention of 
Mr. Issa, I would love it. Mr. Chairman, I just want to say to 
you, in closing----
    Chairman Issa. Yes, Mr. Commissioner.
    Mr. Shays. I just want to thank you for your opening words, 
how gracious they were. I want to thank you for your concern 
about this very issue that you have worked with others on both 
sides of the aisle to get at waste, fraud, and abuse on a 
bipartisan way. I appreciate, and the Commission appreciates 
the work that you have done.
    We also want to thank Mr. Tierney years ago reaching out to 
the Republican side to establish this Commission, which then 
leads me to my final comments that I will make as a 
Commissioner.
    Michael Thibault, my co-chairman, did a terrific job. He 
encountered a huge serious illness in his family that caused 
him to pay great attention to that. He lost family members. He 
has missed both hearings because of being with family at a time 
of some great grievance. So he didn't have the opportunity to 
present at the Senate or here. I just want to be on record as 
saying how much we valued his work. And then to say that I have 
never had such an easy job being a co-chairman, because I 
worked with such extraordinary people.
    So, in conclusion, I just thank Congress for giving me this 
opportunity, the speaker for giving me the opportunity and 
Mitch McConnell for allowing me to be the co-chairman as well, 
and thank you for allowing me to put that on the record.
    Chairman Issa. Thank you. But I did note that you were 
saying you got an upgrade in your colleagues after leaving 
Congress.
    Mr. Shays. You know, I found myself going there and I 
thought I better back off. But, Mr. Chairman, I should also say 
we do have one criticism of this committee. We had a very fine 
counsel named Rich Beutel, who was working, and the next thing 
we knew, he decided to raise the status of his position and 
work for this committee. But we missed him.
    Chairman Issa. Well, you know, we don't pay a lot, but we 
offer long-term employment, something your Commission couldn't. 
Thank you. [Laughter.]
    Mr. Chaffetz. Thank you again, all. We appreciate it.
    The committee stands adjourned.
    [Whereupon, at 12:36 p.m., the committee was adjourned.]
    [Additional information submitted for the hearing record 
follows:]

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