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



 
   ARE CHANGES IN SECURITY POLICY JEOPARDIZING USAID RECONSTRUCTION 
                 PROJECTS AND PERSONNEL IN AFGHANISTAN?

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


                                HEARING

                               before the

                   SUBCOMMITTEE ON NATIONAL SECURITY,

                HOMELAND DEFENSE AND FOREIGN OPERATIONS

                                 of the

                         COMMITTEE ON OVERSIGHT

                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 29, 2012

                               __________

                           Serial No. 112-149

                               __________

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


         Available via the World Wide Web: http://www.fdsys.gov
                      http://www.house.gov/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

    Subcommittee on National Security, Homeland Defense and Foreign 
                               Operations

                     JASON CHAFFETZ, Utah, Chairman
RAUL R. LABRADOR, Idaho, Vice        JOHN F. TIERNEY, Massachusetts, 
    Chairman                             Ranking Minority Member
DAN BURTON, Indiana                  BRUCE L. BRALEY, Iowa
JOHN L. MICA, Florida                PETER WELCH, Vermont
TODD RUSSELL PLATTS, Pennsylvania    JOHN A. YARMUTH, Kentucky
MICHAEL R. TURNER, Ohio              STEPHEN F. LYNCH, Massachusetts
PAUL A. GOSAR, Arizona               MIKE QUIGLEY, Illinois
BLAKE FARENTHOLD, Texas
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 29, 2012...................................     1

                               WITNESSES

Mr. Steven J. Trent, Acting Inspector General for Afghanistan 
  Reconstruction
    Oral statement...............................................     5
    Written statement............................................     7
Mr. J. Alexander Thier, Assistant to the Administrator and 
  Director of the Office of Afghanistan and Pakistan Affairs, 
  U.S. Agency for International Development
    Oral statement...............................................     9
    Written statement............................................    11

                                APPENDIX

Professional Services Council, Submitted Statements..............    29
The Honorable Jason Chaffetz, A Member of Congress from the State 
  of Utah, opening statement.....................................    43
Letter to The Honorable Jason Chaffetz from Steven J. Trent, 
  Acting Special Inspector General for Afghanistan Reconstruction    45
Follow-up Questions for the record from Steven Trent, SIGAR, and 
  J. Alexander Thier, USAID......................................    46


   ARE CHANGES IN SECURITY POLICY JEOPARDIZING USAID RECONSTRUCTION 
                 PROJECTS AND PERSONNEL IN AFGHANISTAN?

                              ----------                              


                       Thursday, March 29, 2012,

                  House of Representatives,
       Subcommittee on National Security, Homeland 
                   Defense, and Foreign Operations,
              Committee on Oversight and Government Reform,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 9:35 a.m., in 
Room 2154, Rayburn House Office Building, Hon. Jason Chaffetz 
[chairman of the subcommittee] presiding.
    Present: Representatives Chaffetz and Tierney.
    Staff Present: Ali Ahmad, Majority Deputy Press Secretary; 
Thomas A. Alexander, Majority Senior Counsel; Robert Borden, 
Majority General Counsel; Will L. Boyington, Majority Staff 
Assistant; Molly Boyl, Majority Parliamentarian; John Cuaderes, 
Majority Deputy Staff Director; Mitchell S. Kominsky, Majority 
Counsel; Justin LoFranco, Majority Press Assistant; Jaron 
Bourke, Minority Director of Administration; Devon Hill, 
Minority Staff Assistant; Peter Kenny, Minority Counsel; Rory 
Sheehan, Minority New Media Press Secretary; and Carlos 
Uriarte, Minority Counsel.
    Mr. Chaffetz. The Committee will come to order.
    I will state the Committee mission statement.
    We exist to secure two fundamental principles. First, 
Americans have a right to know that the money Washington takes 
from them is well spent and, second, Americans deserve an 
efficient, effective government that works for them. Our duty 
on the Oversight and Government Reform Committee is to protect 
these rights. Our solemn responsibility is to hold government 
accountable to taxpayers, because taxpayers have a right to 
know what they get from their government. We will work 
tirelessly in partnership with citizen watchdogs to deliver the 
facts to the American people and bring genuine reform to the 
Federal bureaucracy.
    This is the mission of the Oversight and Government Reform 
Committee
    I want to thank everybody for their participation in 
today's hearing, which is entitled, ``Are Changes in Security 
Policy Jeopardizing USAID Reconstruction Projects and Personnel 
in Afghanistan?'' I would like to welcome Ranking Member 
Tierney and members of the Subcommittee and members of the 
audience that are here with us today.
    National Security Subcommittee has a long history of 
overseeing U.S.-funded reconstruction efforts abroad. Last year 
alone, the Subcommittee held six hearings on Iraq, Afghanistan, 
and the billions spent on earthquake relief in Haiti.
    We have seen a common theme: the Federal Government appears 
to be incapable, at least thus far, of tracking its 
expenditures. Time and again it cannot readily provide data, 
simple data, such as the amount of money spent, the number of 
projects completed, the number of projects ongoing, and whether 
projects are on time, on budget, and whether they were actually 
completed. The simple request, for instance, know the location 
or see a photo is often met with bewilderment and inability to 
provide that information.
    The failure to track this data in real time demonstrates an 
extreme lack of oversight. It also tells this Congress that 
bureaucrats in Washington have little visibility or control 
over the billions of dollars spent overseas. I continue to work 
on a piece of legislation that will hopefully rectify this. 
Hopefully we can do that in a very bipartisan way.
    Oftentimes, the Inspectors General are the last bastion of 
accountability in the Executive Branch. Unfortunately, 
President Obama has failed to appoint replacements for the 
State Department, Defense Department, USAID, and SIGAR, the 
Special Inspector General for Afghan Reconstruction, which is, 
in essence, all the major players in Afghanistan. We don't have 
even an appointment, let alone a Senate confirmation, for the 
major people that are responsible for the oversight within 
Afghanistan.
    In fact, the State Department has not had an IG since 
December 2007. This is just inexcusable and I think a 
disservice to the American people, and it makes me wonder if 
this President, President Obama, simply doesn't want somebody 
looking over his shoulder and want people in there on a full-
time basis with the authority to get the job done. I think it 
is inexcusable to have so many vacancies at this point.
    In some cases there is significant disagreement between the 
agencies and the oversight community. We saw this recently with 
the Special Inspector General for Afghan Reconstruction and 
USAID. On March 9th, 2012, Mr. Steven Trent sent a management 
alert to Dr. Ken Yamashita regarding Afghan President Karzai's 
Presidential Decree 62, PD 62, as it is called. PD 62 mandates 
that U.S. implementing partners cannot use private security 
companies after March 20th, 2012. Instead, the contractors and 
nongovernment organizations must contract with the recently 
formed Afghan Public Protection Force, or the APPF. So in 
addition to providing goods and services at no cost to the 
Afghan people, the American people must also pay President 
Karzai for security.
    Mr. Trent's management alert outlined several core 
concerns: one, the transition to using the Afghan Public 
Protection Force may cause taxpayers an additional $55 million 
during the first year on 13 different projects. Part of this is 
due to a staggering 20 percent profit margin demanded by 
President Karzai. Number two, the Afghan Public Protection 
Force may not be capable of providing adequate security for the 
implementing partners; and, third, approximately 1.34 billion 
U.S. dollars in taxpayer funded projects may be at risk of 
modification or perhaps even termination.
    According to International Relief and Development, a 
nonprofit NGO, the transition to APPF may increase costs by 
approximately 15 percent. This expense is then passed on to the 
American taxpayers. In response to SIGAR's concern, Dr. 
Yamashita wrote the following on March 13th, 2012: ``USAID 
acknowledges the issues identified in the observations, but 
rejects the SIGAR management letter in its entirety due to the 
inadequate comparisons, speculative assumptions, and inaccurate 
statements within the document.'' USAID did not merely object 
to SIGAR's findings, it rejected them in its entirety.
    We often see contrasts, we often see disagreements on 
particular points, but what strikes me about this particular 
one is just the total and complete dismissal of this report 
from top to bottom. Thus, we are holding this hearing.
    The purpose of today's hearing is to reconcile these 
assessments. In doing so, we will take a broader look at 
whether this new security policy makes sense, whether it is in 
the best interest of the American taxpayer, and whether we can 
exceed under this rubric.
    The American people have little patience for government 
waste and lack of progress in Afghanistan. If, after 10 years, 
we are no closer to defining and achieving success, then 
Congress and the Obama Administration should reassess our 
future in Afghanistan.
    I hope that our discussion today will provide some clarity. 
I look forward to the hearing and the panel. I appreciate the 
two gentlemen who are joining us today and their commitment to 
our Country and our betterment, future. I really do appreciate 
their expertise and look forward to a good discussion.
    I would now like to recognize the Ranking Member, the 
gentleman from Massachusetts, a friend, Mr. Tierney, for his 
opening statement.
    Mr. Tierney. Thank you very much, Mr. Chairman. Thanks for 
having this hearing.
    Thanks to both of you gentlemen for coming here and 
testifying today.
    I can't let go unanswered just the comment that the 
Chairman made with regard to not having appointments in various 
important positions. I agree that there are a number of 
important positions that need to be filled in this Country and 
that are not filled, but I do take note of the insistence in 
the Senate of having cloture votes on every single thing that 
comes down the line, and the amount of obstruction that has 
gone on with regard to the President's attempts to appoint 
everything from the Consumer Protection Bureau to the FHFA 
director to judges to the National Labor Relations Board.
    When you have a minority party and minority leadership that 
says that their sole goal in life is to make sure that this 
sitting President doesn't win a second term, I think that that 
is the indication of why things aren't getting done in this 
Country in large scale, and particularly why we don't have 
appointments in very important places and I would question 
whether or not that is the best thing for this Country.
    And I think if we want to start talking about working in a 
bipartisan way, that is a darn good place to start. Let's fill 
these positions so that we can move forward and keep this 
Country safe and keep our economy moving on that basis. So 
before we start loading up criticism at any one president on 
that basis, let's get the congressional places functioning, and 
particularly the Senate, with regard to allowing people to be 
nominated and then have a debate and vote on that.
    This is important business that we are talking about here 
today. These are people that are working very hard to try and 
make the policy of the past government and the current 
government work in Afghanistan, and people are putting their 
lives at risk. We have to make sure that we are doing 
everything we can to keep them safe and that the security 
mechanisms that are put in place actually are effective. I have 
some serious questions about that and I have talked to Mr. 
Thier about it and would be happy to have the conversation with 
Mr. Trent about just how we are proceeding over there and 
whether or not it is the most efficient way, whether or not it 
is the safest way, and whether or not we are just throwing bad 
money after worst on that.
    I would just ask the Chairman, with unanimous consent, to 
enter my written remarks into the record, then we can proceed. 
I think it would be instructive to hear the witnesses and have 
an exchange of questions.
    Mr. Chaffetz. Without objection, so ordered.
    In the spirit of flushing this out, my criticism of the 
President thus far is that in most cases there hasn't even been 
a nomination. So I agree the stagnation in the Senate is 
clearly a problem, and a bipartisan problem. I don't know what 
that other body does, quite frankly, all day. They ought to 
give up the wheelchair races and the Wednesday night Bingo and 
actually do something.
    Mr. Tierney. If the Chairman would yield for a second. And, 
therefore, you see the President's frustration. When he 
nominates people, they end up having to withdraw because they 
can't get action. So if the Senate would show a little bit of 
an attempt here to work as a government should work, then I 
think the whole thing would move a little bit more smoothly.
    Mr. Chaffetz. And I would concur and work with you. My 
criticism of the President thus far is the lack of nominations, 
and we will continue to work on that, because I think 
ultimately our goal is the same and I think we are unified in 
that. We need people with authority, confirmed by the Senate, 
in these active positions.
    Nevertheless, maybe we will have another hearing about 
that.
    Let's move forward, though. Members will have seven days to 
submit opening statements for the record.
    We would now like to recognize our panel. Mr. Steven Trent 
is the Acting Special Inspector General for Afghan 
Reconstruction and Mr. Alexander Thier is the Assistant to the 
Administrator for the Office of Afghan and Pakistan Affairs at 
the U.S. Agency for International Development. Both gentlemen 
have very distinguished careers and backgrounds, very well 
qualified for their positions. We appreciate their 
participation here today.
    Pursuant to Committee rules, all witnesses will be sworn in 
before they testify, so if the gentlemen would please rise and 
raise your right hands.
    Do you solemnly swear or affirm that the testimony you are 
about to give will the truth, the whole truth, and nothing but 
the truth?
    [Witnesses respond in the affirmative.]
    Mr. Chaffetz. Thank you. Let the record reflect the 
witnesses answered in the affirmative.
    In order to allow time for discussion, we would like you to 
limit your testimony to five minutes. We will obviously submit 
your entire opening statement for the record. But at this time 
we will now recognize Mr. Trent for five minutes.

                    STATEMENTS OF WITNESSES

                  STATEMENT OF STEVEN J. TRENT

    Mr. Trent. Mr. Chairman, Ranking Member Tierney, and 
members of the Committee, thank you for inviting me here today 
to discuss changes in Afghanistan's private security contractor 
policies and their impact on USAID reconstruction projects and 
personnel in Afghanistan.
    President Karzai's decision to dissolve private security 
contractors, or PSCs, and transfer the responsibility to an 
Afghan state-owned enterprise ultimately affects all U.S. 
international reconstruction programs. Under a two-year 
bridging strategy, the new Afghan Public Protection Force, 
known as the APPF, was to assume security responsibilities for 
all development projects and convoys by March 20th of this 
year, and for all military construction sites and bases a year 
from now.
    The transition most immediately affects AID, as the largest 
single funder for development projects in Afghanistan. SIGAR 
has conducted a number of PSC-related audits and is currently 
conducting an audit of the cost of PSCs used by AID's 
implementing partners from 2009 through 2011. Earlier this 
month SIGAR alerted AID to issues we believed warranted 
immediate consideration in light of this transition to the 
APPF.
    Our primary concerns are over increased costs and the 
possible disruption or termination of reconstruction projects 
if the APPF cannot provide the necessary security. Security 
costs for reconstruction projects have steadily and 
significantly increased in recent years. Our ongoing audit work 
indicates that AID-implementing partners employing PSCs are 
currently spending an average of 14 percent of the value of 
their contracts on security services. We noted one project 
whose security comprised 42 percent of the overall contract 
value.
    SIGAR's analysis found the transition to the APPF may 
increase Afghan labor costs by as much as 25 to 46 percent and 
expat labor costs by as much as 200 percent. In January of this 
year, AID released an analysis of its implementing partners' 
contingency plans for the transition. This analysis concluded 
that if the APPF cannot provide necessary security, at least 10 
major AID funded projects, valued at nearly $900 million, would 
be at risk of termination. Another 19 projects, worth about 
$450 million, would need to be modified.
    Although AID disagreed with our alert letter, neither AID 
nor any of the U.S. Government agencies involved in 
Afghanistan's reconstruction systematically tracks security 
costs. No one knows how much the transition to the APPF is 
going to cost, but all agree it will cost more. How much more 
will ultimately depend on the APPF's capacity to provide the 
full range of security services. The true increase in cost may 
not be known for a year or more as the fledgling APPF develops.
    I think it is important to realize that the current rush to 
establish contracts with the APPF is not the end game. At the 
moment, we have more questions than answers about how the APPF 
is actually going to operate. The bridging strategy called for 
developmental assessments of the APPF at the 6, 9, and 12 month 
marks. The six-month assessment, completed in September of 
2011, found that the APPF was not ready to assume essential PSC 
responsibilities, such as training, equipping, and deploying 
guard forces to meet contract requirements. The December 
assessment at the 9 month mark has not been finalized, and we 
are now at the 12 month assessment point.
    SIGAR has suggested that AID determine if funding will be 
available to cover additional security costs for projects that 
will continue after the transition and assess the effect 
increased security costs will have on project implementation. 
SIGAR also suggested that AID address increased security costs 
before deciding to make a new award. In other words, AID should 
carefully and objectively consider whether the expected 
benefits of a reconstruction project outweigh the rising costs 
of security.
    Security is central to the reconstruction effort and SIGAR 
will continue to closely monitor transition to the APPF, assess 
transitional outcomes, and keep key policy and decision makers 
informed about the results of our work.
    Thank you, and I am happy to take any questions from the 
Committee.
    [Prepared statement of Mr. Trent follows:]
    [GRAPHIC] [TIFF OMITTED0] 74755.001
    
    [GRAPHIC] [TIFF OMITTED] 74755.002
    
    Mr. Chaffetz. Thank you.
    Mr. Thier?

                STATEMENT OF J. ALEXANDER THIER

    Mr. Thier. Thank you, Chairman Chaffetz and Ranking Member 
Tierney. Thanks for the opportunity to discuss the potential 
impacts of PD 62 upon the safety and security of our 
development programs and personnel in Afghanistan today.
    Over the past 19 years I have worked side-by-side with 
thousands of American, Afghan, and international public 
servants in Afghanistan, and these dedicated people risk their 
lives for the greater good, and their efforts have improved the 
lives of millions.
    The safety and security of both USAID staff and 
implementing personnel who work with USAID in Afghanistan are 
the highest priority of our agency and for me personally. Many 
people working with USAID in Afghanistan have sacrificed to 
support U.S. national security and to help to bring stability 
to the people of Afghanistan, and I have personally lost many 
friends. We must not forget that these gains come at a great 
cost.
    For this reason, since the passage of PD 62, the United 
States Government, and our agency in particular, has devoted 
significant energy to working with our partners on this 
transition required under Afghan law.
    USAID's development assistance to Afghanistan continues to 
remain a critical component in supporting our core national 
security objectives and our efforts are a critical component of 
the whole of government's civil military effort to advance 
these objectives. I also believe that our programs there are 
delivering meaningful results. It is really critical to keep in 
mind the situation that Afghanistan faced a decade ago. I first 
served in Afghanistan nearly four years during the civil war, 
when the country was literally dismantling every vestige of a 
functioning state that it had once had.
    But since 2002 we have supported Afghanistan's impressive 
development progress in vital areas, despite operating under 
some of the world's toughest conditions. This includes enormous 
progress in education, health care, and economic growth.
    Over the last 18 months, USAID has been adjusting our 
programming and our business model in Afghanistan to ensure 
that our portfolio reflects both the most effective and cost-
effective priorities.
    Under PD 62, responsibility for security services in 
Afghanistan for civilian development programs and projects 
transferred to the APPF as of March 20th, 2012.
    USAID has made a concerted effort with its partners to 
reduce overall reliance on PSCs and the need for armed guards 
in the last 18 months. Many, in fact most, of our partners do 
not use armed guards and have reduced their need for these 
services through community engagement and other tested 
approaches. As of March 1st, 2012, only 32 of 91 USAID projects 
required protection by PSCs, and of the 59 remaining projects, 
which represent 75 percent of our funding, they do not require 
armed security and, therefore, will not utilize APPF for 
guards.
    USAID has worked intensively with those partners who do 
require APPF with the NATO training mission in Afghanistan to 
manage this transaction without sacrificing security and to 
ensure that our critical efforts to stabilize Afghanistan 
continue. The transition model is a two-part process. First, 
partners contract with the APPF for services and their PSC 
guards convert to APPF guards; same guards, different uniforms. 
Second, the partner may choose to contract with a risk 
management company to provide security, advice, and consulting.
    In recent months, particularly after the September report 
that Mr. Trent has discussed, the APPF has significantly 
improved its capabilities and many of the necessary milestones 
for the APPF transition have been reached. Of the 32 USAID 
projects that have indicated that they will contract with the 
APPF, as of this week, 23 have successfully contracted and the 
remaining 9 projects are at various levels of negotiation. The 
APPF is already operational in several key sites and interim 
licenses granted by the Ministry of Interior have provided 
additional time for remaining programs to find a solution to 
their security requirements. Enormous credit must be given to 
NATO team, who worked tirelessly with the Afghan government and 
USAID and our partners.
    In addition to addressing security concerns, USAID has also 
been carefully monitoring the costs associated with this 
transition. We have conducted an assessment of security costs 
for 15 of the 23 projects that have converted from PSCs to APPF 
and RMC contracts. This initial assessment indicates that 
overall average costs based on a side-by-side comparison, 
including all costs associated with security for those 
projects, is 16 percent higher under the APPF and RMC model. As 
the process of transition to APPF proceeds, we will continue to 
monitor costs and seek opportunities to reduce overall expenses 
without sacrificing security.
    We are committed to a continued joint effort working 
closely with the NATO mission, Congress, the Afghan government, 
our Inspectors General, both internal and SIGAR, and 
international partners to sustain and improve on the 
development investments made during the past decade.
    Thanks for the opportunity to discuss this critical issue, 
and I look forward to your questions and advice.
    [Prepared statement of Mr. Thier follows:]
    [GRAPHIC] [TIFF OMITTED] 74755.003
    
    [GRAPHIC] [TIFF OMITTED] 74755.004
    
    [GRAPHIC] [TIFF OMITTED] 74755.005
    
    [GRAPHIC] [TIFF OMITTED] 74755.006
    
    Mr. Chaffetz. Thank you both. I will now recognize myself 
for five minutes.
    I would ask unanimous consent to insert into the record a 
written statement from the Professional Services Council. They 
have 350-plus members and I would like to insert that into the 
record. Without objection, so ordered.
    Mr. Thier, to simplify this, to read through this letter 
from USAID that came back from Mr. Yamashita, who is the 
Mission Director there for USAID, there isn't going to be an 
increased safety concern, it is not going to cost more money, 
you are not going to have projects pulling out. Is that an 
oversimplification? That is in essence what they are saying, is 
pretty much don't worry about it, nothing is going to change.
    Mr. Thier. Let me say that we are concerned, as we have 
been since day one and, in fact, before PD 62, about all of 
these issues because they are constantly evolving. What the 
mission response and my testimony represents is the best 
information that we have as of today, because it has been a 
very rapidly evolving situation. We were, indeed, six months 
ago very concerned about the potential that some of our 
important development programs may shut down as a result of 
this transition not succeeding. What we have seen, in fact, is 
that of the 32 projects that say that they require security, 23 
of them have successfully contracted.
    Mr. Chaffetz. I understand that. The question is, is it 
going to cost more money?
    Mr. Thier. I think there are three issues. One is whether 
we are now concerned that projects are going to shut down on 
the immediate time frame, and my response to that is that our 
current indications as of today are that none of our projects 
are going to shut down.
    Mr. Chaffetz. Okay, so none are going to terminate.
    Mr. Thier. Right.
    Mr. Chaffetz. Nobody is going to leave. The risk that Mr. 
Trent shows up there, which you look at the worst case 
scenario, that is what they are supposed to do, is highlight 
the worst case scenario. So you are saying it is going to be 
zero and the Inspector is telling us that there could be up to 
$899 million worth of projects that are abandoned.
    Mr. Thier. I certainly can't say that it is going to be 
zero. What I know is that of the projects that we were 
concerned about, none of them are now indicating a likelihood 
of shutting down in the near term. Now, I certainly can't say 
that that won't be the case in the future, but we----
    Mr. Chaffetz. That is what Mr. Yamashita said. He said that 
none of them today are saying--said already been analyzing and 
preparing the transition for years and not one partner has 
stated that the organization would withdraw from Afghanistan 
because of the transition to the APPF.
    Mr. Thier. And that is exactly right. As of today, not a 
single one of our partners is planning to shut down----
    Mr. Chaffetz. Safety is an obviously huge concern. Since 
2003, USAID partners and personnel, there have been 1,000 
people that have either been killed or injured; roughly just 
over a third of those people have been killed. One of the 
biggest concerns is safety. You don't see any disruption in the 
safety of what these people are doing? Because, as you rightly 
point out, these people are putting their lives on the line in 
the most difficult of circumstances. You don't see any decrease 
in the safety of these people that are out there working for 
us?
    Mr. Thier Thus far we do not have indications. And this is 
obviously from our partners who are going through this process 
and making these contracts. We do not have any indication that 
there is any decrease or increase in security. And there are 
really two critical facts here: one, that our reliance on armed 
guards has dramatically decreased in the last 18 months, in 
part because we wanted to decrease our need or necessity for 
the APPF and PSCs for both cost reasons and security reasons 
leading up to this transition.
    Of those remaining who still feel the need for these 
services, they have gone forward. They are the ones who are 
responsible for the safety and security of their employees, and 
I talk to these people very day. They would not do this unless 
they were confident, as of today, that the safety and security 
of their employees was going to be okay under this model.
    Now, that may change, but at the moment they are all saying 
we are willing to make this transition because we feel 
comfortable with the way things have worked out.
    Mr. Chaffetz. And the cost? You don't anticipate this is 
going to have an increase in cost?
    Mr. Thier. At the moment, we are trying to look at this 
very intensively, and we ordered this side-by-side comparison 
of 15 projects, and what our implementing partners have said, 
based on their current contracts and their plans, that we see a 
16 percent cost increase.
    Now, I can't guarantee that some projects won't be more; 
others won't be less. We are also continuing to try to get some 
of our projects off of this entirely, which is, frankly, a much 
greater degree of cost savings than the incremental cost of the 
transition. But our analysis, which is looking at the actual 
contracts that have been signed and what our partners say they 
need today to secure their sites has a roughly 16 percent 
increase over 15 out of 23 contracts that have been signed.
    Mr. Chaffetz. This would be the 20 percent profit margin 
that the President is wanting to put in who knows what bank 
account?
    Mr. Thier. Well, it is split between several contracts. And 
whether the increase is coming from the risk management company 
side of the house or the APPF side of the house, I would have 
to let you know; I don't have that breakdown.
    Mr. Chaffetz. Mr. Trent, I obviously want to give you time 
to respond to this, but I will come back to you. But in the 
essence of time, let me recognize the Ranking Member for five 
minutes.
    Mr. Tierney. Thank you.
    So this question is for both of you. Take it in whichever 
order you want. My understanding is for those remaining 
projects that require security, the deal is that now they are 
going to have APPF forces there, who I don't know that we have 
a great deal of confidence in their abilities on that; there 
has always been trouble with the training of the security 
forces of Afghanistan.
    So they are going to come in, and then for those that are 
still having trouble deciding how they are going to operate in 
this system, we are going to be able to have management risk 
companies, who are essentially going to be the same people that 
used to be contracting for the job to now layer on and oversee 
them. Then we are going to pay them on a cost-plus basis and 
add on the 20 percent profit.
    So if I work this calculation all the way out, is the ISAF 
forces, NATO and the United States and others, contribute money 
to Afghanistan, Afghanistan uses all of that money to try to 
build a security force, they then take the funded security 
force and assign it to these projects, which are paid for by 
the United States and other countries' money for the 
development of that; charge them for the security by the people 
who are paid for by these people on a per person basis on cost-
plus; and then manage them with people that used to be there 
without further management or whatever, one less layer, and pay 
for them and then add a 20 percent profit to it. Is that about 
right, Mr. Trent?
    Mr. Trent. Congressman, we have paid a large amount of 
money through MLI to buy weapons and various equipment. Your 
characterization, I think, has certainly a consideration. I 
think that is not--I can't say it is an unfair way to look at 
it. I would be interested in AID's response to that.
    Mr. Tierney. So would I.
    Mr. Thier?
    Mr. Thier. Thank you. So let me just clarify one thing 
about I think the way this is functioning. The guards who were 
working for the private security contractors on March 19th 
changed their uniforms and go to work for the APPF. So this is 
not a----
    Mr. Tierney. Without any further training.
    Mr. Thier.--not a separate guard force. And in most cases, 
I think in all cases thus far, the same guards who they were 
paying for for their private security contractors have now 
become APPF guards. So literally a change of uniform on that 
day. So the same people who they relied on and paid and trained 
to fulfill that role are the same people who are guarding them 
on March 21st, but wearing the APPF uniform.
    At the same time a number of private security contractors, 
and perhaps other companies, have signed up to become risk 
management consultants.
    Mr. Tierney. These are the same people that used to have 
what now are the APPF people when they had the old uniforms. 
These are the people that managed them----
    Mr. Thier. Exactly. The old model was essentially some 
expatriate managers with Afghan guards, and that has now been 
split into two things: the Afghan guards now work for the APPF 
and the expatriates, if they are hired, work for these risk 
management companies, advising the firm on security.
    So what was previously one contract has now become two 
different contracts, one for the Afghan guards, one for the 
expatriate guards. And that is voluntary. The implementing 
partners don't have to sign up with the APPF, but if they want 
those services they do. They don't have to sign up with the 
risk management company, but if they want those services they 
do.
    So that is the basic model of how this is meant to 
function.
    It is true that the international community has supported 
the standing up of a guard force to make this transition. It is 
our goal with the APPF, as with many of the other Afghan 
entities, to wean them off of----
    Mr. Tierney. Let me just focus us back. So, so far we have 
taken one entity for security, made it into two. It is already 
funded by the United States and others on that basis. So you 
have just now broken it into two and you are now paying them on 
a cost per person basis; you break it down for the gun, for the 
uniform, whatever expenses are there, right?
    Mr. Thier. I would have to look at the contract to see how 
it is actually worded in terms of the costs, so I am sorry I 
don't have that level of specificity.
    Mr. Tierney. But there is going to be a 20 percent profit 
margin allowed on those contracts, right?
    Mr. Thier. My understanding of the 20 percent is that it is 
not a profit in the--this is a state-owned enterprise. It is 
not a profit in the sense that this is something that is going 
to be used as profit to be distributed to individuals.
    Mr. Tierney. You say that. Given the history of corruption 
and ineptitude in this country, you think that adding 
additional layers and opportunities and another 20 percent is 
not an opportunity for further graft and corruption and driving 
a wedge between people in that country and their government?
    Mr. Thier. What is critical in this regard is that this 
entity, like all of the other Afghan entities that we are 
supporting, needs to have very rigorous accounting and 
oversight mechanisms to ensure that that doesn't happen.
    Mr. Tierney. Which brings me to the next problem. You 
fairly well admit that you don't have great vision into any of 
these contracts, particularly when it comes to security. Is 
that going to change? Are you telling us that now you are going 
to start looking at these security contracts and tracking the 
money?
    Mr. Thier. Our people review every contract. I am just 
saying that I specifically don't know the mechanism that you 
are asking about, about whether it is costed out by the 
individual or in a different way. But certainly our contracting 
officers are required to review these contracts and have 
approved every single one.
    Mr. Tierney. I want to come back and revisit this, but I 
know my time is up.
    Mr. Chaffetz. Well, I just want to follow up on that line 
of questioning here. It is my understanding that USAID issued a 
blanket waiver for sole source subcontracts between U.S. 
companies and the APPF. How does that further your ability to 
look into the money that is going out?
    I would also say that SIGAR has issued a table here. I 
don't know if you had a chance to look at Table 1, which 
basically outlines things, for instance, such as martyr 
contribution, pension payments. They even have a line item of 
profit, 20 percent of above total. So if you could look at 
that, that is on page 4 of what they issued to you.
    Where do you take exception with what they put out there?
    Mr. Thier. Maybe somebody can hand me the----
    Mr. Chaffetz. I will give you a moment to highlight that.
    Let me allow Mr. Trent to explain this Table 1, because if 
you are summarily dismissing the report in its entirety, they 
are pretty detailed and specific about food stipend and 
training and martyr contribution, hazard pay, to be determined 
by the customer, what the AK-47 rifle costs. Where would USAID 
find fault in this table?
    Go ahead, Mr. Trent, if you could explain. I want to make 
sure Mr. Thier has an chance to catch up to it.
    Mr. Trent. This is the APPF fee schedule off of the APPF 
website that was published, that we used to calculate our 
estimation of increased cost. All of these items, I think there 
are 14 various categories from basic salary to medicine, 
etcetera, can be lumped into what is referred to in the 
industry as a burden rate.
    We calculated a burden rate for current PSC operations 
under current AID implementing partners' contracts, from which 
we pulled a number of invoices for the year 2011. We determined 
the burden rate. We took that basic salary, average salary rate 
and we punched it into the APPF fee schedule, which is the 
table that is under discussion here. And that is how we arrived 
at our estimation that costs were going to increase between 25 
and 46 percent.
    I have no information that costs are other than what are 
published on the APPF website.
    Mr. Chaffetz. Mr. Thier?
    Mr. Thier. Thanks. So as to these costs, I don't have 
disagreement, per se, with----
    Mr. Chaffetz. But the administrator, the person on the 
ground, Mr. Yamashita, he summarily dismissed it, said it was 
inaccurate.
    Mr. Thier. Well, I think what he was concerned about was 
the conclusion of the estimation of cost increases that were 
used in this report versus our own work, because, as I said, we 
actually looked at 15 different contracts side-by-side to 
capture every single aspect of the security costs that would be 
incurred, and we came up with a far lower figure. And in 
talking to our implementing partners, we did not come to the 
same conclusion about the need to triple the number of 
expatriates. So I don't think he was disagreeing with the 
table; I think he was just disagreeing with the conclusion 
about the estimated cost increases when you compare apples to 
apples.
    Mr. Chaffetz. That is not exactly what he said. He said he 
disagreed with the report in its entirety, which would lead me 
to believe he disagrees with this table.
    But, Mr. Trent, do you care to respond to that?
    Mr. Trent. I would like to say that the--and this goes a 
bit back to a prior question, but the increased costs that we 
foresee are not--security costs do not hinge on a signed 
contract, and having contracts now signed or even the initial 
lay-down of contracts side-by-side. The true cost of security 
is going to hinge on APPF's ability to deliver security 
services as we move forward passed this contract signing phase. 
That is where we have serious concerns over APPF's capacity.
    The September 11th assessment was damning, if you will, on 
APPF, and as I understand, I have heard that there has been 
significant progress made since then. We are concerned that the 
December 9 month assessment has not been completed or 
published, which I think would have given certainly SIGAR a 
better insight as to what progress had been made between 
September and December. We are now at the 12 month assessment 
point, and we look forward to seeing the documentation on 
increases of APPF capacity between September and the next 
assessment that comes out, if and when that is finalized and 
published.
    So I think it is important to understand that expatriate 
costs that we estimate here are not, we did not imagine that 
the RMCs and the IPs were going to go out on March 20th and 
hire additional expat staff. As APPF capacity is either built 
or isn't built to meet the needs of the implementing partners' 
adequate security, we have the estimations from OSAC and PSC, 
as well as a number of implementing partners, they will hire 
more expats to fill the security gaps that the APPF cannot 
fill, if they are not able to develop the capacity; and that is 
where we see the increase in expat costs coming in the next 
year.
    Mr. Chaffetz. Mr. Thier?
    Mr. Thier. No, I just wanted to respond because I very, 
very strongly agree with Mr. Trent and just want to make clear 
that, first of all, we do not know what is going to happen in 
months from now, and I don't want you to have----
    Mr. Chaffetz. Okay, wait, wait, wait. Let's examine that 
comment because what the Inspector General is saying, they are 
foreshadowing what might happen in the future, and you 
summarily dismissed it; no, absolutely none of that is going to 
happen. No increased costs; there is not going to be increased 
safety costs; nobody is going to leave the country. Don't worry 
about it. You guys are flat out wrong.
    You are very nice gentlemen, you are very nice to Mr. Trent 
here, but don't sit here and tell me that you agree with him 
when the person on the ground said we totally disagree with you 
and everything that you wrote.
    Mr. Thier. Because I think we are talking about very 
different things, and this, I think, is a critical point to 
make. We are analyzing the situation, a rapidly evolving 
situation on the ground as it exists today. We are talking to 
our partners every day. Literally, I had to change my testimony 
because a new contract was signed overnight. So the situation 
is evolving.
    What I can tell you is what we know right now.
    Mr. Chaffetz. But isn't what the Special Inspector here 
doing is looking into the future and giving a warning shot, 
saying, look, beware? Isn't that fair? That is why I am just 
stunned that you would just summarily dismiss all of this. But 
you are saying we don't know what is going to happen.
    Mr. Thier. We don't. We can't know what is going to happen. 
I don't think any of us can say that we know what is going to 
happen. We have very elaborate contingency plans that try to 
think through all of these issues. I think that what I am 
trying to clarify here is that we don't know whether costs will 
go up; we don't know whether costs will go down.
    Mr. Chaffetz. But you just----
    Mr. Thier. We don't know whether the need for guards will 
go up or whether the need for guards will go down. What we are 
seeing----
    Mr. Chaffetz. So then why is the Inspector General wrong?
    Mr. Thier. I think that all--he is not wrong. What we 
found----
    Mr. Chaffetz. That is not what was written.
    Mr. Thier. All we found is that the conclusions in this 
report we do not feel are supported by the data that we 
currently have in hand, and that is the best that we can do, is 
to look at what we have now and make a determination about what 
we think is happening.
    It is really critical because I think what we all have to 
understand here is that six months ago, when we saw this 
report, we all had very grave concerns about what was going on, 
and we are working literally on a day-to-day and hour-to-hour 
basis to make this transition as successful as possible and to 
reduce the costs not only for these contracts, but over all 
that we incur for security in Afghanistan so we can spend more 
of the taxpayers' money on the things that we are trying to 
accomplish there.
    Mr. Chaffetz. Okay, I am sorry. I have gone way over my 
time.
    I recognize the gentleman from Massachusetts.
    Mr. Tierney. Thank you.
    You know, we have real issues with a lot of things that are 
happening over there in terms of insight into contracts, and 
particularly subcontracts and the whole contracting process. In 
the trucking contracts there was no insight at all to the 
subcontracts; they had no idea who were the drivers, no idea 
who was providing security. No oversight on that.
    On the oil delivery, the Department of Defense and 
Department of State couldn't even tell us who the company was. 
They knew the name of the corporation. They had no idea who the 
principals were or where they were organized. No insight into 
that contract. The Defense Logistics Agency and the food 
contract now arguing over almost $1 billion or $2 billion of 
costs because they drew up what appears to be a questionable 
contract and their lack of oversight in coming to terms even 
over a multi-year period on that.
    This is a concern here. You have very little insight into 
these contracts and now somebody comes along and says this is 
what we foresee could happen. It seems to me you plan for the 
worst. You hope for the best, but you plan for the worst. I 
think Mr. Trent has given you the worst case scenario of what 
might happen here. You are acknowledging that you don't know, 
it might happen. So are you planning for what Mr. Trent has 
said may well happen, or are you just hoping for the best and 
not planning for the worst?
    Mr. Thier. No. We are planning for the worst. We have----
    Mr. Tierney. How?
    Mr. Thier.--with our implementing partners, detailed 
contingency plans about what happens if, what happens. We did 
this all the way through this transition process and we 
continue to put those in place.
    Mr. Tierney. Well, what if all 32 remaining companies that 
need security end up needing the APPF, find out that that is 
not really totally up to speed, end up having to hire risk 
companies on top of that and then paying the 20 percent on 
that? What is the cost increase when all that happens?
    Mr. Thier. We don't know the answer to that question. 
Literally on a project by project basis we require contingency 
plans to think through all of these eventualities. Some of 
those projects may choose to increase their RMCs; some of them 
may choose to operate in a different fashion.
    Mr. Tierney. But as you do that, at some point you have 
that information and you aggregate it, and you turn around and 
you say this is the worst case scenario by our best analysis. I 
suggest that that is not a bad plan right now, to go and do 
that.
    Mr. Trent, when you talked to people and you got your 
projections, I assume you went and talked to some of Mr. 
Thier's partners, the people that he deals with on the ground, 
right?
    Mr. Trent. That is correct, sir.
    Mr. Tierney. It would be the same people, Mr. Thier, that 
you talk to.
    Mr. Thier. Absolutely.
    Mr. Tierney. So, Mr. Trent, you got one story and, Mr. 
Thier, you got another? Because Mr. Trent is saying that when 
he talked to them they saw some issues, and you are saying that 
you had a nice talk with them and they got everything planned 
out and everything is okay.
    So, Mr. Trent, tell me a little bit about how your 
conversation with those people went.
    Mr. Trent. Well, Congressman, we met with six of AID's 
implementing partners. One of them indicated to us very clearly 
that they would be withdrawing if security services could to be 
provided. Let me, if I may, say Dr. Yamashita's response to us, 
there are two tipping points here, the first being March 20th 
and contracts to be signed and the risk of reconstruction 
projects, disruption or termination on the 21st and people are 
walking away from jobs.
    I think that Dr. Yamashita's letter to us, one, exhibits 
some of the frustration that is ongoing in this process by all 
people involved and, two, I think it is focused more on March 
20th and that everything is going to be all right on March 
20th. And from what I understand, there are a number of 
contingency plans in place with existing guards with USAID on 
March 20th. There is a flurry of contracts, more being signed 
every day.
    But the implementing partners, OSAC, PSC, have indicated to 
us that it is the ability of the APPF to deliver the security 
that is ultimately going to be the tipping point on the risk 
that development of projects face, and that the IP, 
implementing partners, face. So I think there is some 
explanation for the tone and tenor of the AID response to SIGAR 
in respect of focusing on the 20th and all the efforts that 
were underway to sign contracts so that everything was fine on 
the 21st, everything kept going on the 21st.
    But the bigger issue here, from our perspective, from 
SIGAR's perspective, is the capacity of the APPF to function, 
and we are concerned about that in light of the general 
ministerial capacity in Afghanistan, and that we were trying to 
stand up a 25,000 man organization here in a relatively one, 
two year period, and we find that there are just numerous 
issues involved with that that are going to have real risk 
impact on developmental projects as we go forward.
    Mr. Tierney. Mr. Chairman, just as an aside, I might 
suggest that would be a great hearing for us to have. We have 
had hearings in the past on capacity of the security in 
Afghanistan, but this specific aspect of maybe getting in an 
international crisis group or some other third party analysis 
of that and our own folks and see where we are at on that, 
because I agree with you, this is going to be a huge 
determinative what happens going forward.
    Let me just get back, if I can, Mr. Thier, to the 20 
percent issue. For some reason it is sticking in my craw that 
we particularly fund the standing up of these security folks 
and then we pay for a per person basis. And even though it is 
not a supposedly profit-oriented group, I assume the ones 
making the profit are going to be the so-called management risk 
people; they are going to make a pretty good profit. But then 
why are we paying 20 percent on top of that? And how do we 
explain that to the taxpayers? We just keep circling our money 
back and at some point somebody is taking it out, but it ain't 
us.
    Mr. Thier. To put it simply, my understanding of the 20 
percent is to make the APPF self-sufficient, it is not to 
distribute profit to any individual that is not part of the 
charter; it is to make the organization able to carry on its 
business operations in the future.
    Mr. Tierney. What is the per person cost for if not that?
    It is broken down to how many different things, Mr. Trent, 
twenty something?
    Mr. Trent. Fifteen items.
    Mr. Tierney. Fifteen items. And they are paying for each 
single thing down there to make themselves sufficient. So why 
the 20 percent on top of that?
    Mr. Thier. Again, my best understanding of it is that what 
they are trying to do is to make this a self-sufficient entity. 
Part of what this APPF is designed to do, frankly, is to 
protect what is hopefully going to be a growing private sector 
in Afghanistan as well, so they were looking at the standing up 
of this new entity as something that would be around for a 
number of years and would need to be sustaining so that they 
could provide those security services as they continued to come 
online. Again, it was not to provide profit to any individual.
    Mr. Tierney. I don't buy it, but I hear your explanation; I 
thank you for it. So when you talk about some of these 
implementing partners saying that they are no longer going to 
need security, what are they doing differently that allows them 
to negate that cost?
    Mr. Thier. Several things have been done. Some projects 
that required significant amounts of private security have gone 
away. For instance, we are doing much less in terms of things 
like road building, because we feel we have built enough roads 
and the roads that are built need to be maintained. So that has 
diminished the need.
    Some projects have gone to more of a community engagement 
approach, and that is combined with the fact that we have tried 
to cut out subcontracting levels, something that you raised 
before, and often contract directly with the Afghan 
implementing partners, who the for-profit companies were 
subcontracting with. And by cutting out that layer and having 
more Afghans doing the direct implementation and having a 
greater degree of community engagement, that has also required 
a lesser amount of guards.
    Overall, in the last 18 months, there has been a dramatic 
overall reduction in our need for security, and given how these 
costs have risen over the last few years, that savings is 
enormous, because that is money that is now going directly to 
projects instead of to the security to protect them.
    Mr. Tierney. What is AID's plan to get the remaining 32 
onto that notion or that idea that they won't need security 
either? In other words, putting it all down into the local 
people's capacity to build their own roads, take care of their 
own water treatment facilities, do whatever other projects you 
have, and then being so invested maybe they won't find their 
neighbors coming in and trashing them when they are working on 
them, or at least they will protect against that.
    Mr. Thier. I think in some areas it is going to remain 
necessary to have some of those projects with that sort of 
protection, both because the expatriate managers of programs in 
Kabul and other urban centers will continue to require that 
level of surety. In some cases it is equipment that needs to be 
protected.
    So there will continue to be some small, I think, but 
diminishing demand for those services. We also continue to work 
in extremely dangerous locations side-by-side with the 
military, and particularly in those locations there is often a 
need for security and, frankly----
    Mr. Tierney. What is the military for?
    Mr. Thier. Well, our military is there to perform a 
different mission, and we don't want them performing the 
mission of protecting our AID programs, so they can do the job 
that they were sent to Afghanistan to perform.
    Mr. Chaffetz. There was a 90-day extension granted by the 
Afghan government. Why was that?
    Mr. Thier. As we were all working madly to reach the March 
20th deadline successfully, it was evident that all of the 
projects would not have contracts with either the APPF or the 
RMCs in time, so we negotiated with the Ministry of Interior to 
grant licenses anywhere from 30 to 60 to 90 days for those 
companies that had entered into the negotiation or contracting 
process to ensure that there were no disruptions in that 
process, and they granted those licenses just days before the 
transition, and that has opened up the space for the remaining 
companies to enter into those contracts without having any 
disruption to the security that they are provided.
    Mr. Chaffetz. Mr. Trent, do you care to add anything to 
that?
    Mr. Trent. I would like to add one thing to Congressman 
Tierney's comment on the profit.
    Mr. Chaffetz. Sure.
    Mr. Trent. And certainly SIGAR doesn't have any opinion on 
profit amounts; 20 percent, 5 percent, 8 percent, 100 percent, 
we don't have a position on that. But I would point out that in 
the APPF schedule of fees there is an administrative and 
overhead cost which is 65 percent of base salary of an Afghan 
guard. One would think might serve to make the APPF a stand 
alone agency with those administrative costs. And then we have 
profit on top of that. But that is just to point out; I make no 
judgment on that.
    I would also like to mention that we are conducting, this 
alert letter originated out of a large private security 
contractor audit of AID implementing partners, private security 
contracts, which is still ongoing. But during that audit we 
looked at 35 of the largest AID projects conducted in 
Afghanistan between 2009 and 2011, and those 35 projects 
accounted for 70 percent of all funds disbursed by USAID during 
that time period; and of those 35 projects, 29 of them all had 
security services, most through PSCs and one through their own 
internal security. So during that time frame SIGAR's 
observation was that all the large USAID projects are 
associated, or were during that three-year time frame, 
associated with security up until December of this year.
    Mr. Chaffetz. I recognize the gentleman from Massachusetts.
    Mr. Tierney. Mr. Trent, let me just ask you this. When this 
report was written, and now after this hearing, what ideally 
would be the result that you would hope would come from this?
    Mr. Trent. Well, the alert letter was sent just to 
communicate to AID our concerns over what we see as a clear 
possibility for increased costs. We would hope that AID would 
take those considerations as they move forward and at some 
point here security costs and overhead charges, if security can 
be termed to be part of the overall overhead for a project or 
contract, at some point we would want all implementing agencies 
to be considering the perceived benefit from projects against 
the overhead of what it costs to administer and implement the 
project; and with security costs going up, we hope that AID, as 
well as other implementing partners, will be factoring that in 
to their decisions.
    When we go to conduct an audit on a particular program, and 
I am being somewhat hypothetical here, and we see overhead 
charges at 70 percent of the cost, we make no comment on 
whether that is appropriate or not, but what we would like to 
see is a reasoned determination from the outset of that project 
that the risks and the realization that the overhead exceeds 
the money going into the project, that there was a policy 
decision made knowingly, objectively made to carry out the 
project notwithstanding the security costs or the overhead 
costs. From an audit perspective, we would like to see that.
    So that is all we are asking AID to do here, is to consider 
those costs and plan for them.
    Mr. Tierney. Mr. Thier, can we accommodate that?
    Mr. Thier. Absolutely. I mean, as I think you know, the 
first time we met, when I was a private citizen, I have been 
writing about and concerned about for years rule of law in 
Afghanistan and the costs of our reconstruction effort, and one 
of the pleasures of having this opportunity to serve in the 
government has been to try and bring these practices to bear on 
what we are doing. I think that we have made some great gains 
in the accountability of our program in Afghanistan in the last 
18 months, and we will continue to do that.
    Let me also be clear. We welcome the SIGAR's role. We 
welcome our IG's role. We have worked with them very 
effectively over the last year and a half, and we will continue 
to do so.
    Mr. Tierney. Well, thank you. What I really want to know, 
and I hope what this Committee wants to know, is are you going 
to make the kind of analysis that Mr. Trent just described, and 
give us a feeling of whether or not you have considered all 
those things and what the benefit is particularly when the 
costs outweigh, the management costs and the overhead outweigh 
the project costs itself, so that this Committee can then look 
to you to find out why we are proceeding with a particular 
project if that is the case. So if you would do that for us.
    If you would also project out those 32 projects that are 
going on in the worst case scenario for us, just in case. Give 
us that reasonably soon so we have an idea on that. And, 
lastly--and you can do those things?
    Mr. Thier. Absolutely.
    Mr. Tierney. Thank you. And the last thing is why has the 
assessment or the progress of the APPF not been released?
    Mr. Thier. I am afraid I can't speak to that. The December 
report, I have never seen that report and I can't say why it 
has not been released.
    Mr. Tierney. It must concern you?
    Mr. Thier. I understand that it is the U.S. Government, the 
Afghan government, and ISAF that jointly conduct that, and I 
honestly have no idea what is in that report or why----
    Mr. Tierney. But it should weigh heavily on you because 
that is such a large part of your analysis going forward, I 
would think. Have you made any requests for it or asked to see 
it?
    Mr. Thier. I have not personally. What I would add is that, 
as Mr. Trent and I both acknowledged, the situation has evolved 
so substantially in the past few months that I don't know 
whether the conclusions of that report would still be relevant, 
but it would certainly be interesting to see.
    Mr. Tierney. Thank you, Mr. Chairman. I hope that we would 
press for it as well and move on from there.
    Thank you both gentlemen.
    Mr. Chaffetz. I just want to give each of you an 
opportunity. Is there anything that you would like to add as we 
conclude here? We will start with Mr. Thier and then Mr. Trent.
    Mr. Thier. Thank you.
    Mr. Chaffetz. Mr. Trent?
    Mr. Trent. I would just point out that the next assessment, 
Congressman Tierney, is due out this month, the 12-month 
assessment, and I think we are all looking forward to seeing 
that one, and we certainly hope that that is finalized and 
published here in the next month or two.
    Mr. Chaffetz. I want to thank both of you for your 
commitment to this Country and the work that you do. It is 
difficult.
    I need to tell you that in this particular situation I do, 
again, find it stunning, the tone of Mr. Yamashita's genera 
comments. I think that I am concerned when there is such a 
disparity between the two entities. I think everybody is 
probably trying to achieve the same goal, but personally I am 
offended by the direction that Afghanistan is going.
    When we talk about same guards, different uniforms, and 
then we are adding on profit and overhead, that is their words, 
not my words, profit and overhead, we are going to spend more 
for exactly the same thing in order to pad somebody's bank 
account. I hope we don't wake up one day and just find all this 
money sitting over in Dubai or something like that, which I am 
afraid is really what we are ultimately doing.
    I don't think we have visibility in what has happened in 
the past. I don't think we have visibility in what is moving 
forward in the future. In fact, I think this nation-building 
exercise is a huge debacle. I feel for the people who are 
pouring their hearts and souls and lives into trying to help 
what is happening here in Afghanistan, but we need more 
exposure and oversight.
    I don't expect somebody with a pencil and a pad of paper 
standing next to each person, but we are moving, in my 
estimation, in the wrong direction. We pay for everything. The 
American taxpayers have poured out their pocketbooks time and 
time and time again, and for the Afghan government to come in 
and say, well, now we need a profit, that is a deep concern.
    Mr. Tierney. Mr. Chairman, might I just jointly ask before 
any of those contracts get signed or we get committed to them 
with a 20 percent profit, can we get from your folks an 
explanation, a heads up that it is going to happen and a full 
explanation of why they think it is necessary to put that 
amount in there, and then have a conversation about that? I 
find it just incredibly disturbing that that is going on and I 
would like to think that we can get out in front of this.
    Mr. Chaffetz. And to add on to those comments, my concern 
is that USAID has just issued unilateral waivers. They can go 
sign these contracts and, I guess maybe that is the recognition 
that there is no other option. The Afghan government is saying 
you have no choice, you have to do this. I think we are being 
pushed around and I don't think the State Department is doing 
enough to stand up for what we are doing. We are paying for 
everything; we should be able to provide the security that is 
needed there.
    Mr. Thier, go ahead.
    Mr. Thier. So just to answer the waiver question, the 
purpose of a sole source waiver, if you have no other source, 
and in this case the sovereign Afghan government has required 
this, so you are exactly correct, Mr. Chairman, the only reason 
for that waiver, it does not diminish any kind of oversight or 
anything like that, it just says that there is not a 
competition because this sole source is in fact required.
    And just to respond, Representative Tierney, just to be 
clear, there have been 23 contracts signed already, and those 
are in operation.
    Mr. Tierney. Shame on us. Shame on us, because there is an 
option: You tell Mr. Karzai that everything stops unless he 
stops this sort of thing, I don't want to use a word that will 
get taken out of context, but when you put it out there that 
you can't do this unless you pay us another 20 percent on top 
of all the other costs or whatever, enough is enough.
    I have watched his act for a long time and I know he is a 
man trying to do a job and things of that nature, but there is 
enough questionability going on about the nature of 
transactions in that country and who is making the profit and 
where the money is going, not being able to be traced or 
whatever, that somebody in our chain should have stood up and 
said it may be a sole source, but there is always one last 
option, we just don't do it.
    Just like you won't put the APPF out there; we won't put 
our people at risk if those are the terms. And instead we 
rolled over again. So there are remaining contracts. Maybe we 
ought to think about watching them a little bit closer.
    Mr. Chaffetz. Can USAID provide us an explanation, at least 
try to extract from the Afghan government why there is a 65 
percent overhead on the cost of the personnel plus the 20 
percent profit? I mean, this is just taken from their website. 
So I think it does demand an explanation and you are in the 
best position to get that explanation.
    Mr. Thier. Absolutely. Your concern about the 20 percent is 
loud and clear, and I will make sure that we get a more 
comprehensive explanation of exactly what those funds are 
intended for.
    Mr. Chaffetz. And I guess I would ask that SIGAR watch that 
closely. We don't want to just see them change the name, 
suddenly you see overhead go to 85 percent and suddenly they 
get rid of that word profit. I think they are probably being as 
honest as they can here. I think they are saying, yes, this is 
the Dubai account and we will go ahead and just transfer that 
right into the Karzai family account. So please keep your eye 
on that; it is sickening, this whole thing.
    With that, this Committee stands adjourned.
    [Whereupon, at 9:33 a.m., the subcommittee was adjourned.]
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