[Senate Hearing 112-333]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 112-333

                   TRANSFORMING WARTIME CONTRACTING:
                   RECOMMENDATIONS OF THE COMMISSION
                         ON WARTIME CONTRACTING

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

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               ----------                              

                           SEPTEMBER 21, 2011

                               ----------                              

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

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
















                                                        S. Hrg. 112-333

                   TRANSFORMING WARTIME CONTRACTING:
                   RECOMMENDATIONS OF THE COMMISSION
                         ON WARTIME CONTRACTING

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

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 21, 2011

                               __________

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

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








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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware           SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  JERRY MORAN, Kansas

                  Michael L. Alexander, Staff Director
                     Troy H. Cribb, Senior Counsel
               Carly A. Steier, Professional Staff Member
               Nicholas A. Rossi, Minority Staff Director
      J. Kathryn French, Minority Director of Governmental Affairs
           Clyde E. Hicks, Minority Professional Staff Member
                  Trina Driessnack Tyrer, Chief Clerk
                 Patricia R. Hogan, Publications Clerk
                    Laura W. Kilbride, Hearing Clerk
















                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Lieberman............................................     1
    Senator Collins..............................................     2
    Senator Tester...............................................    16
    Senator Coburn...............................................    19
    Senator Levin................................................    22
Prepared statements:
    Senator Lieberman............................................    49
    Senator Collins..............................................    52

                               WITNESSES
                     Wednesday, September 21, 2011

Hon. Claire McCaskill, a U.S. Senator from the State of Missouri.     4
Hon. Jim Webb, a U.S. Senator from the State of Virginia.........     6
Hon. Christopher Shays, Co-Chair, accompanied by Hon. Clark Kent 
  Ervin, Hon. Robert J. Henke, Katherine Schinasi, Charles 
  Tiefer, and Hon. Dov S. Zakheim, Commissioners, Commission on 
  Wartime Contracting in Iraq and Afghanistan....................     8
Hon. Patrick F. Kennedy, Under Secretary for Management, U.S. 
  Department of State............................................    33
Richard T. Ginman, Director, Defense Procurement and Acquisition 
  Policy, U.S. Department of Defense.............................    35

                     Alphabetical List of Witnesses

Ginman, Richard T.:
    Testimony....................................................    35
    Prepared statement...........................................    90
Kennedy, Hon. Patrick F.:
    Testimony....................................................    33
    Prepared statement...........................................    71
McCaskill, Hon. Claire:
    Testimony....................................................     4
    Prepared statement...........................................    54
Shays, Hon. Christopher:
    Testimony....................................................     8
    Joint prepared statement.....................................    63
Webb, Hon. Jim:
    Testimony....................................................     6
    Prepared statement...........................................    57

                                APPENDIX

Professional Services Council, prepared statement................   116
Responses to post-hearing questions for the Record from:
    Mr. Shays....................................................   123
    Mr. Kennedy..................................................   145
    Mr. Ginman...................................................   166
``Transforming Wartime Contracting: Controlling costs, reducing 
  risks,'' Commission on Wartime Contracting in Iraq and 
  Afghanistan, Final Report to Congress, August 2011.............   183

 
                   TRANSFORMING WARTIME CONTRACTING:
                   RECOMMENDATIONS OF THE COMMISSION
                         ON WARTIME CONTRACTING

                              ----------                              


                     WEDNESDAY, SEPTEMBER 21, 2011

                                     U.S. Senate,  
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:30 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Joseph I. 
Lieberman, Chairman of the Committee, presiding.
    Present: Senators Lieberman, Levin, Carper, McCaskill, 
Tester, Collins, and Coburn.

            OPENING STATEMENT OF CHAIRMAN LIEBERMAN

    Chairman Lieberman. Good afternoon. The hearing will come 
to order.
    Let me start by welcoming the members of the Commission on 
Wartime Contracting (CWC) in Iraq and Afghanistan and, of 
course, our colleagues, Senator McCaskill and Senator Webb.
    I am going to put my whole statement in the record \1\ and 
just draw briefly from it in deference to Senator Collins, who 
has an Appropriations meeting she has to go to, and to our two 
colleagues.
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Lieberman appears in the 
Appendix on page 49.
---------------------------------------------------------------------------
    The Commission on Wartime Contracting was created by 
legislation sponsored by Senator Claire McCaskill and Senator 
Jim Webb to investigate our reconstruction efforts in Iraq and 
Afghanistan. Last month, the Commission issued its final--and I 
would say to me very disturbing--report because it says that at 
least $31 billion, and maybe as much as $60 billion, have been 
squandered in waste, fraud, and abuse in Iraq and Afghanistan 
over the past 10 years. And those are obviously $31 to $60 
billion taxpayer dollars.
    I supported the wars in Iraq and Afghanistan. I still do. I 
support the aggressive rebuilding efforts in both of those 
nations, and I still do. And, of course, I believe that the 
ultimate waste of money and of the service and sacrifice made 
by our men and women in uniform would be to walk away and let 
Iraq and Afghanistan fall back into the hands of dictators and/
or Islamist fanatics.
    But that is not only an excuse, but even more reason why I 
am so upset by the findings of the Commission, which are 
basically how sloppy and irresponsible so much of the spending 
was. Some of the examples particularly drove up my blood 
pressure, and I did not have medication nearby so it was 
particularly harmful.
    U.S. tax payers paid $300 million to build a power plant in 
Kabul, Afghanistan, that would supply the city with electricity 
around the clock, and the whole idea here was--build it, they 
will come, spur economic development. But the Afghan Government 
could not afford the fuel to run the plant and instead 
contracted to buy electricity from Uzbekistan at a fraction of 
the price, and the power plant built with 300 million American 
dollars is now just an expensive backup generator.
    Another one that I thought was particularly outrageous was 
that $40 million of our money went to build a prison in Diyala 
Province in Iraq that the Iraqis said they did not want and 
ultimately refused to take possession of. The project was not 
only never completed; it was abandoned with $1.2 million worth 
of materials left at the site. So the Commission report tells 
us.
    Much of the waste identified by the Commission stems from a 
lack of competition, which, of course, should be the 
cornerstone of government contracting.
    I will say finally that perhaps my greatest frustration 
reading the Commission's report is a general one, which is that 
the underlying problems it identifies are not problems of first 
instance for us. In various ways we have seen these kinds of 
problems for years. And, in fact, at different times Congress 
has enacted reforms legislatively that were suppose to address 
these problems. And yet here comes this Commission report 
showing that billions of dollars nonetheless were wasted.
    So my response to the report is to thank the Commissioners 
who we will hear from next for their extraordinary work, and 
also to see if we can together find a way not--because we are 
too experienced, unfortunately--to believe we can stop all 
waste and fraud forever, but we can sure do a better job than 
we are doing now, and I hope together we can find some ways 
based on this report to help make that happen.
    Senator Collins.

              OPENING STATEMENT OF SENATOR COLLINS

    Senator Collins. Thank you, Mr. Chairman.
    Let me join the Chairman in thanking the Commission members 
for their report and the two authors of the legislation that 
established the Commission. Along with Senator McCaskill and 
Senator Webb, I testified at the very first hearing of the 
Commission on Wartime Contracting. At that time I noted that 
there are four categories of problems that lead to contingency 
contracting failures: First, unclear and evolving contract 
requirements; second, poor management, including an inadequate 
number of skilled contracting personnel; third, an unstable 
security environment; and, fourth, a lack of commitment by the 
host government officials to the reconstruction of their own 
country.
    Unfortunately, the Commission has documented all of these 
problems and more in our Nation's wartime contracting efforts. 
It is especially troubling that our operations in Iraq and 
Afghanistan have been plagued by such a high level of waste, 
fraud, and abuse.
    Some of the examples are almost too astonishing to believe. 
For example, a July 2011 report by the Special Inspector 
General found that a Department of Defense (DOD) contractor was 
charging $900 for a control switch that was worth a mere $7. In 
some cases, the inspector general (IG) found contractors 
overbilling the government with markups ranging from 2,300 
percent to more than 12,000 percent. Now, I think we all 
understand that when you are contracting in this environment, 
there is going to be some kind of premium, but this was absurd.
    One solution to this problem is the establishment of a 
professional acquisition cadre. That is why I authored an 
amendment to the fiscal year 2009 defense authorization bill to 
create a contingency contracting corps. This year, I have 
introduced two bills designed to further strengthen the 
government's acquisition workforce: The Federal Acquisition 
Institute Act and the Federal Acquisition Workforce Improvement 
Act.
    I want to emphasize a point that was raised by one of the 
Commissioners at a recent briefing about the report. Congress 
should either enhance and improve the acquisition workforce to 
handle these types of massive contingency operations, or we 
should rethink whether or not we want to run these massive 
operations. We simply cannot justify doing major contracting 
without the necessary supporting workforce, as the findings of 
the Commission's report highlight today.
    This is a point that I think often gets lost in the 
discussion of contingency contracting. The billions spent for 
development and big infrastructure contracting were 
``invested'' in order to support counterinsurgency efforts by 
winning hearts and minds of the population and by establishing 
security. But with so many disappointing results, Congress 
should ask: Are we fulfilling our obligations to the American 
taxpayers who are footing the bill for these projects?
    And should we really be surprised at the problems arising 
from attempts to run major development programs and embark on 
large infrastructure construction while we are in the middle of 
a war zone?
    The past 10 years have taught us that we need to spend more 
time focusing on these broader questions before we get into 
another contingency operation if we hope to avoid repeating the 
mistakes of the past.
    As I stated at the very first Commission hearing, ``How 
well we execute wartime contracting helps to determine how well 
we build the peace.'' In my view, we can--and must--do better.
    Again, I want to thank the Chairman for convening this 
hearing and apologize to our witnesses that I do have to leave 
shortly for an Appropriations markup. Thank you.
    Chairman Lieberman. Thanks, Senator Collins. We understand 
very well.
    Thanks to Senator McCaskill and Senator Webb for being 
here. It actually was the problems with wartime contracting 
which were part of the reason why we created an ad hoc 
Subcommittee on Contracting Oversight of this Committee to 
oversee Federal contracting and why I asked Senator McCaskill 
to be the Chair of it, and she has done a great job. Senator 
Collins was Ranking Member on it for a while, followed by 
Senator Brown, and now Senator Portman, but you have remained 
right there at the helm with great effect for the Committee and 
for the country. So I thank you for that, and I look forward to 
your testimony and then Senator Webb's.

TESTIMONY OF HON. CLAIRE MCCASKILL,\1\ A U.S. SENATOR FROM THE 
                       STATE OF MISSOURI

    Senator McCaskill. Thank you very much, Mr. Chairman. I 
want to thank both you and the Ranking Member for all the work 
you have done to improve contracting practices. You have been 
at this for much longer than either Senator Webb or I have been 
in the Senate, and I want to acknowledge your work; 
particularly Senator Collins deserves a great deal of 
recognition for all of her work in terms of acquisition 
personnel.
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator McCaskill appears in the 
Appendix on page 54.
---------------------------------------------------------------------------
    It is so easy for us just to gloss over as we try to make 
the Federal Government smaller. It is so easy for us just to 
say, well, everything needs to be smaller. Well, no, it does 
not. There are a few areas that cannot be smaller. Senator 
Coburn and I talked this morning about the importance of fully 
funding the Government Accountability Office (GAO), our eyes 
and ears in terms of waste and fraud throughout government, and 
clearly the acquisition personnel, the atrophying of that 
workforce has been a major contributor to the problems that we 
are seeing.
    More than 4 years ago, Senator Webb and I began to advocate 
for the creation of the Wartime Contracting Commission. At the 
time I was inspired by Missouri's own Harry Truman, who, as a 
Senator, headed a committee that investigated and uncovered 
millions of dollars of war profiteering, fraud, and wasteful 
spending in World War II. Senator Webb and I agreed that what 
we needed was a new investigatory body to honor the Truman 
Committee to protect our tax dollars and bring better 
accountability to the way we do business while at war.
    We use the cliche saying, ``They would spin in their 
grave,'' or ``They would turn over in their grave.'' Harry 
Truman has been spinning for some time now, and he would be 
astounded at what this Commission found. It is shocking that 
the Commission has, in fact, validated in many ways our worst 
concerns about the way contracting was ongoing in contingency. 
It is disgusting to think that nearly a third of the billions 
and billions we spent on contracting was wasted or used for 
fraud. Frankly, I really believe that estimate is very 
conservative. And it does not even begin to include the money 
wasted on projects that cannot be sustained, very similar to 
the Kabul power plant that you referenced in your opening 
statement, Mr. Chairman.
    I would like to take the opportunity to add just one more 
anecdote that confirms how serious the problem is.
    Shortly after I came to the Senate, I took a trip to Kuwait 
and Iraq on contracting oversight. I asked not to see what most 
Senators saw when they went to theater, but I just wanted to 
focus on the way that we were overseeing contracts. I 
particularly wanted to hone in on the logistical support 
contract (LOGCAP), that had been the subject already of a lot 
of negative headlines about the way we had done business. It 
was a massive cost-plus contract, non-competitive, that was 
supposed to provide all of the logistical support for our men 
and women that were serving us in Iraq.
    I sat in a small room in a building on the outskirts of 
Baghdad. While many people in the room had lots of rank and 
were military, one woman, who was a civilian, clearly, was the 
knowledgeable one about the LOGCAP contract. It was an awkward 
set of questions and answers because clearly I was asking very 
tough questions. I could not for the life of me understand how 
this thing had gotten so out of control
    The moment I will never forget as long as I live is when I 
began to feel--when you are pounding a witness on the stand as 
a prosecutor, sometimes you need to let up. Sometimes I did 
not. But, I knew I needed to give this woman a break because 
all these men and women were sitting in the room, and she was 
really being called on the carpet for the way that this 
contract had been overseen. So she had a bar graph and the 
requisite PowerPoint that is required in every military 
briefing. There was a bar graph that showed the expenditures on 
the LOGCAP contract, and it had started out at a number I 
cannot recall now, but in the billions, and the next year it 
had dropped $2 or $3 billion, and then it had kind of leveled 
out. So I am trying to throw her a bone.
    And I say, ``You have left out of your presentation how you 
did get the costs down the second year.'' As God is my witness, 
she looked at me across the table, and she said, ``I have no 
idea. It was a fluke.'' At that moment I knew that this was 
something that had gone terrible bad in terms of contracting 
oversight.
    The Commission's report and recommendations go to the heart 
of how we got into this mess, how we got to a place in Iraq 
where we were spending billions without a clue as to where it 
was going. I applaud the Commission for their thorough, 
comprehensive, and bipartisan review and for the tremendous 
contribution that they have made to our understanding of these 
problems.
    We must know why we are contracting, who we contract with, 
and what we are paying for a particular service or function. It 
is not complicated. Believe it or not, those three simple tests 
were not met in most instances of contracting in Iraq. It is 
shameful that, despite the great work of the Commission and the 
community of auditors and inspectors general who have reviewed 
these contracts, that we do not know--and may never know--these 
simple things about the contracts that have been awarded in 
Iraq and Afghanistan.
    The Commission has offered a strong road map to improve 
accountability. I am encouraged to find that the Commission has 
recommended that the government increase its suspension and 
debarment, require consent of foreign contractors to the 
jurisdiction of the United States of America, and to improve 
contractor performance data, which are all issues on which we 
have held hearings and introduced legislation.
    I do believe the issue of sustainability is crucial at this 
point. While we know that the strategy against 
counterinsurgency involves something beyond conventional 
warfare, I do not think that we have quite figured out, as an 
important culture of leadership in our military, as we lead 
forces in terms of counterinsurgency, that contracting 
oversight has to be part of the equation, including 
sustainability. We cannot build things for countries that they 
cannot afford to operate. We cannot build things for countries 
in a security environment that they are just going to be blown 
up after we have used countless billions of dollars of 
America's hard-earned taxpayer money.
    Because the Commission's recommendations will require 
fundamental changes to the way government operates, I am 
planning to introduce comprehensive legislation this year. I am 
working closely with Senator Webb on this legislation and look 
forward to working with the Members of this Committee as well.
    As one of the generals said to me when I was in Iraq: ``You 
know, so much of what we are seeing on this trip in terms of 
mistakes were also made in Bosnia. And, by the way, we did a 
`Lessons Learned' after Bosnia, except there is one problem: We 
did not learn them.''
    They forgot to learn the lesson. If the Commission's report 
becomes one more report sitting on someone's bookshelf, then we 
have failed as a Congress and we have failed our military and 
the people of this great Nation.
    This is our chance to tell the American people that the 
government can spend their money wisely, hold people 
accountable who are entrusted with contracting in 
contingencies, and make sure that the men and women in the 
military and civilian agencies get what they need to do their 
job. We cannot waste billions through fraud, abuse, and 
mismanagement. We cannot fail to plan and then outsource gaps 
in war planning to be ``done on the cheap.'' We cannot repeat 
these mistakes again.
    Thank you so much for the opportunity to testify today. I 
do want to commend my colleague Senator Webb. This would not 
have gotten through the Senate, frankly, without the 
cooperation of the Chairman and the Ranking Member and the hard 
work of Senator Webb. I think we have something really good 
here if we do not take our eye off the ball. Thank you, Mr. 
Chairman.
    Chairman Lieberman. Thank you, Senator McCaskill, for that 
excellent testimony. I was struck by your reference to 
President Truman, wherever he may be today. I know you are 
keeping that spirit alive. It struck me that if we could go and 
interview him about this Commission report and then release the 
transcript, we would have to delete several expletives.
    Senator McCaskill. In fact, I am really need to say for 
Harry Truman, ``This makes me goddamned mad.'' [Laughter.]
    Chairman Lieberman. I knew you would not let me down. 
Senator Webb, thanks for being here.

TESTIMONY OF HON. JIM WEBB,\1\ A U.S. SENATOR FROM THE STATE OF 
                            VIRGINIA

    Senator Webb. Thank you, Mr. Chairman and Senator Collins. 
And special thanks to Senator Collins for her continuous 
involvement with this Commission as it went through the 
hearings process, and other Members of the Committee.
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Webb appears in the Appendix 
on page 57.
---------------------------------------------------------------------------
    The purpose of this hearing is to allow the Commission 
members to testify before you and to allow you to have an 
interchange with them, so I would like to first say I have a 
longer written statement, which I would ask be entered into the 
record, and I would just like to summarize some of my comments 
from that at this time.
    Chairman Lieberman. Without objection.
    Senator Webb. I would like to express my thanks to the 
Commission members, particularly the Co-Chairs Michael Thibault 
and Former Congressman Chris Shays. A number of their fellow 
Commissioners and professional staff are here today. They did 
an exemplary job.
    We talk in the Senate and in the Congress about 
presidential commissions, and sometimes with a great deal of 
skepticism, but I think this Commission demonstrates the way 
that these commissions should work. It was bipartisan, it was 
independent, it was high energy. It was composed of highly 
qualified people who were brought in for a specific period of 
time, and it is going to be sunsetted in a very short period of 
time, having brought these observations and recommendations 
before the Senate.
    When I came to the Senate in 2007, one of the eye-openers 
for me as a member of the Senate Foreign Relations Committee 
was a hearing in which the Department of State was testifying 
about $32 billion in funding for programs for Iraq 
reconstruction projects. I asked the government witness to 
provide the committee a list of the contracts that had been 
let, the amount of the contracts, a description of what the 
contracts were supposed to do, and what the results were. They 
could not provide us that list. We went back and forth for 
months, and they were not able to provide us that kind of 
information.
    As someone who spent 5 years in the Pentagon--one as a 
Marine and four as a defense executive when I was on the 
Defense Resources Board for 4 years--it was very clear to me 
that something was fundamentally wrong with the way that 
contracts for infrastructure reconstruction, wartime support, 
and security programs were being put into place in Iraq and 
Afghanistan after September 11, 2001.
    Most of the companies who undertook these contracts were 
good companies, and I think this Commission was very careful to 
mention that in its report. And they were doing a great deal of 
good work. But there were also a series of major structural, 
procedural, and leadership deficiencies in terms of the way 
that the wartime contracting processes were supposed to be 
undertaken. You could look at the dynamics of what was going 
on--particularly in Iraq at that time--and know it was not out 
of the question to say that even then billions of dollars were 
being exposed to waste, fraud, and abuse for a wide variety of 
reasons.
    After many discussions with Senator McCaskill, who has 
great technical experience that she brought with her to the 
Senate, and who had expressed similar concerns, as you just 
heard, we introduced legislation that led to the establishment 
of this Commission. We had to give on some areas that we 
believed in strongly, such as retroactive accountability for 
some of the abuses that had taken place. We did not get that 
provision. We were not able to empower the Commission with 
subpoena authority. But following close consultation with 
members of both parties, we were successful in having this 
legislation enacted that put the Commission into place, and we 
achieved a consensus that the Commission would be independent, 
bipartisan, energetic, and that it would come to us with the 
types of recommendations that might prevent the recurrence of 
these systemic problems and abuses in the future.
    I commend the people on this Commission for the intensive 
effort that they have put into satisfying this statutory 
mandate. They went to extraordinary lengths here in the United 
States, as well as in Iraq and Afghanistan--25 public hearings 
with full transparency. Today's final report was preceded by 
two interim reports and five special reports, and I wanted to 
come here and express my appreciation personally for all the 
work that they have put into this effort.
    Thank you very much, Mr. Chairman.
    Chairman Lieberman. Thank you very much, Senator Webb, for 
taking the time to be here and for your excellent remarks. We 
thank both of you for being here.
    I think we will move on right now to the members of the 
Commission, so I would call the members of the Commission to 
the witness table at this time.
    I gather that, unfortunately, Michael Thibault, Co-Chair of 
the Commission, cannot be here. He is, as you all know, former 
Deputy Director of the Defense Contract Audit Agency and worked 
very hard on the report. I am delighted that Mr. Thibault's Co-
Chair is here today, my dear friend and former colleague from 
Connecticut in the House of Representatives, Chris Shays, who 
served during his time as a senior member of the House 
Oversight and Government Reform, Financial Services, and 
Homeland Security Committees, and had a particular interest in 
this kind of matter, which is to say protecting taxpayer 
dollars.
    We also have with us Clark Ervin, Robert Henke, Katherine 
Schinasi, Charles Tiefer, and Dov Zakheim, who is no stranger 
to us because of his time as Comptroller in the Department of 
Defense.
    Ms. Schinasi, I gather you have been voted the 
spokesperson.
    Ms. Schinasi. Yes, that is correct.
    Chairman Lieberman. We thank you, and thank you all for the 
extraordinary work you have done here, and I join my 
colleagues, the creators of the Commission, Senators McCaskill 
and Webb, in thanking you for your hard work and really an 
excellent report that gives us a road map forward. It is all 
yours.

 TESTIMONY OF HON. CHRISTOPHER SHAYS,\1\ CO-CHAIR, ACCOMPANIED 
   BY HON. CLARK KENT ERVIN, HON. ROBERT J. HENKE, KATHERINE 
      SCHINASI, CHARLES TIEFER, AND HON. DOV S. ZAKHEIM, 
 COMMISSIONERS, COMMISSION ON WARTIME CONTRACTING IN IRAQ AND 
                          AFGHANISTAN

    Ms. Schinasi. Thank you, Chairman Lieberman and Members of 
the Committee, for inviting us today, to give us an opportunity 
to talk about the work that we have done. As you mentioned, I 
am Katherine Schinasi, a member of the Commission, and I am 
presenting this statement on behalf of the Commission's Co-
Chairs, Christopher Shays, and my fellow Commissioners Clark 
Kent Ervin, Robert Henke, Charles Tiefer, and Dov Zakheim, who 
are here today; and Grant Green, who unfortunately could not be 
with us.
---------------------------------------------------------------------------
    \1\ The joint prepared statement of the Commission on Wartime 
Contracting in Iraq and Afghanistan appears in the Appendix on page 63.
---------------------------------------------------------------------------
    If I may, I would like to summarize my statement and submit 
the full statement for the record, as well as a copy of our 
final Commission report.\1\
---------------------------------------------------------------------------
    \1\ The Final Report of the Commission on Wartime Contracting 
appears in the Appendix on page 183.
---------------------------------------------------------------------------
    Chairman Lieberman. Without objection, thank you.
    Ms. Schinasi. Thank you.
    It is fitting that this Committee should be the first to 
hold a hearing on our final report as Senate rules give you the 
unique authority to inquire into ``the efficiency, economy, and 
effectiveness of all agencies and departments of the 
government,'' including the organization of Congress and the 
Executive Branch. The solutions to contingency contracting 
problems that we have reported require such a coordinated 
whole-of-government approach.
    We also believe the need for change is urgent, and let me 
give you several reasons why.
    First, reforms can still save money in Iraq and 
Afghanistan, avoid unintended consequences, and improve the 
outcomes there because ironically, even as the U.S. draws down 
its troops in Iraq, the State Department is poised to hire 
thousands of new contractors there.
    Second, new contingencies, in whatever form they take, will 
occur. One has only to remember how quickly U.S. involvement in 
Libya arose to recognize that the odds are in favor of some 
type of future operations. And the agencies have acknowledged 
that they cannot mount and sustain large operations without 
contract support.
    Third, although the U.S. Government has officially 
considered contractors to be part of the ``total force'' 
available for contingency operations for at least the last 20 
years, the Federal Government went into Afghanistan and Iraq 
unprepared to manage and oversee the thousands of contracts and 
contractors that they relied upon there. Even though some 
improvements have been made by the agencies involved, a decade 
later the government remains unable to answer that it is 
getting value for the contract dollars spent and unable to 
provide fully effective interagency planning, coordination, 
management, and oversight of contingency contracting.
    The wasted dollars are significant. As you pointed out in 
your opening statement, the Commission estimates that at least 
$31 billion and possibly as much as $60 billion of the $206 
billion to be spent on contracts and grants in Iraq and 
Afghanistan have been wasted, and many billions more will 
likely turn into waste if the host governments cannot or will 
not sustain U.S.-funded programs and projects. We believe that 
failure to enact powerful reforms now will simply ensure that 
new cycles of waste and fraud will accompany the response to 
the next contingency. And we also believe that these reforms 
could have wider benefits.
    In our work on Iraq and Afghanistan, we found problems 
similar to those in peacetime contracting environments and in 
other contingencies. This Committee, in particular, will 
recognize many of the problems we discovered are similar to 
those that were contained in your 2006 report on Hurricane 
Katrina, and some of those are poor planning, limited or no 
competition, weak management of performance, and insufficient 
recovery of overbillings and unsupported costs.
    The wartime environment brings additional complications 
which we address in our recommendations, for example, limited 
legal jurisdiction over foreign contractors and limited 
deployability of Federal-civilian oversight personnel into 
theater.
    If I had to give you just one bottom line, it would be that 
the wasteful contract outcomes in Iraq and Afghanistan 
demonstrate that our government has not recognized that its 
dependence on private contractors, especially for services, is 
important enough to effectively plan for and execute those 
acquisitions.
    The Commission has concluded that the problems, however, 
are multi-faceted and need to be attached on many levels. The 
first is holding contractors accountable. Federal statutes and 
regulations provide ways to protect the government against bad 
contractors and impose accountability on them, including 
suspension and debarment from obtaining future contracts, as 
well as civil and criminal penalties for misconduct. 
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 
inadequate business systems create extra work and deny the 
government of insight and knowledge on costs that we are being 
charged for the work done. Fraud may go unprosecuted, 
recommendations for suspension and debarment go unimplemented, 
and past performance reviews often go unrecorded.
    One important check on contractor overcharges is the 
Defense Contract Audit Agency (DCAA). Currently, DCAA has a 
backlog of nearly $600 billion, which by some accounts could 
reach $1 trillion by 2015 if not addressed. The DCAA has 
reported a 5:1 return on the investment--that is, for every $1 
invested in DCAA, the government recovers $5--and we would say 
that is a pretty important investment to keep in mind when we 
are thinking about how to fix these problems.
    The government has also been remiss in promoting 
competition. Although exigent circumstances may require sole-
source or limited competition awards in early phases of a 
conflict, a decade into an operation the multi-billion-dollar 
tasks orders that are being written with no break-out or 
recompetition of the base contract just defies belief.
    Our report contains recommendations to bolster competition, 
improve recording and use of past performance data, expand U.S. 
civil jurisdiction as part of contract awards, require official 
approval of significant subcontracting overseas.
    The second level we would attack is holding the government 
itself more accountable both for the decision to use a 
contractor in the first place and for the subsequent results.
    Even when the government has sufficient policies in place, 
effective practices, which range from planning and requirements 
definition to providing adequate oversight of performance and 
coordinating interagency activities, are lacking. The 
Departments of Defense and State, and the United States Agency 
for International Development (USAID), the three principal 
agencies involved in Iraq and Afghanistan operations, have all 
made improvements. But much work remains to be done.
    We have recommended developing, for example, deployable 
acquisition cadres, elevating the position of agency senior 
acquisition officers, and creating a new contingency 
contracting directorate at the Pentagon's Joint Staff, where 
the broad range of contracting activities is currently treated 
as a subset of logistics. Contracting has gotten to be much 
more than just a subset of logistics.
    Considering this Committee's broad and interdepartmental 
mandate, I would call special attention to two recommendations 
embodying a whole-of-government approach that will improve 
efficiency and effectiveness in contracting.
    The first is to establish a dual-hatted position for an 
official to serve both in the Office of Management and Budget 
(OMB) and participate in National Security Council (NSC) 
deliberations. Such a position would promote better visibility, 
coordination, budget guidance, and strategic direction for 
contingency contracting. Currently, national security decisions 
are not informed by resource implications generally, and that 
is particularly troubling and distortive in this context 
because contractors are considered to be a free resource.
    The second recommendation of an interagency nature is to 
create a permanent IG with a small but deployable and 
expandable staff that can provide interdepartmental oversight 
from the outset of a contingency. The Special IGs have done 
some important work, but they have been hampered by their 
limited jurisdictions and their costly startups.
    Finally, our Commission closes its doors in just 9 days. 
Our organization disappears, but the problems it has chronicled 
will not. Action, and in some cases appropriations, will be 
required to implement these reforms. Sustained attention will 
be essential to ensure that compliance extends to 
institutionalizing reforms and changing organizational 
cultures. That is really the gist of it--institutionalizing 
these reforms and changing the cultures. That is why our final 
recommendation includes periodic reporting to the Congress on 
the pace and the results of reform initiatives.
    In closing, I believe that the Commission's work has 
demonstrated that contracting reform is an essential, not a 
luxury good.
    Whatever form it takes, there will be a next contingency, 
and contractors will take part. Planning now and putting the 
necessary structures in place will greatly increase the 
likelihood of having better options and making better choices.
    That concludes our formal statement. My colleagues and I 
would be happy to take your questions.
    Chairman Lieberman. Thanks very much for that excellent 
beginning. We will do 7-minute rounds of questioning.
    I wanted to ask you whether the contracting process in your 
view improved over the years of our involvement in Afghanistan 
and Iraq. In other words, based on some of the things that are 
implicit in your report, but certainly in other IG reports and 
our own observations, you could say, I suppose, or argue that 
some of the early waste resulted from basically the lack of 
planning and the rush to do it, and also the rapidly shifting 
governance structure during reconstruction. But I wondered, in 
your investigation did you find any dividing lines between 
different stages of the wars and reconstruction? Obviously, I 
am looking to see whether there was improvement--we talked 
about lessons learned from Bosnia. Did we learn any lessons in 
Afghanistan that we applied in Iraq, or in Iraq that we applied 
as Afghanistan went on longer?
    I do not have a particular choice of Commission members, so 
I will leave it to you all to decide who feels best able to 
answer each questions.
    Mr. Shays. Let me just jump in for this first one to thank 
you, Mr. Chairman and the Members, for allowing the full 
Commission to attend because each of us is more than qualified 
to answer any of your questions. I think the simple answer is 
yes, there was a noticeable improvement. But contracting became 
the default option, and we just did too much too quickly. And 
when you have an emergency supplemental, it is not part of the 
regular budget. It is almost like a free thing to draw money 
on. So we just drew too fast, and then we did not change. After 
the first year, you have a time where you say you cannot keep 
doing it the way you were doing it, and we kept doing it the 
way we were doing it.
    Chairman Lieberman. And if you had to give a reason why--
why did we keep doing it the way we were doing it, even though 
people right there must have known it was not really working as 
well?
    Mr. Shays. It is an easy option to just keep relying on 
contractors, and when you have a contractor who is performing, 
even if they are very expensive, you just want to keep going 
the way you are going.
    Chairman Lieberman. Because they are doing the job?
    Mr. Shays. They are doing their job, but at an 
extraordinarily cost.
    Chairman Lieberman. Very high.
    Mr. Shays. Just quickly, having 15 people maintain 
electricity on a base when only three are being used and they 
end up having so much free time that they decide to build 
themselves a clubhouse, they are working 12-hour days and only 
three are working, and we did that for years.
    Chairman Lieberman. And nobody blew the whistle. I mean, it 
was pretty obvious that was happening.
    Let me pick up on the phrase you used because you warn 
about the use of contractors as the default option in Iraq and 
Afghanistan because, I presume, the government felt it lacked 
the capability in people they had working for them to perform 
many of these jobs.
    Use of private security contractors and use of contractors 
to oversee other contractors are two examples of what you 
referred to as the ``default option,'' and I agree. What are 
some of the other responsibility categories or functional 
categories that, in your opinion, have too often been placed in 
the hands of contractors in the work that you did? Ms. 
Schinasi.
    Ms. Schinasi. I would look next at training, frankly.
    Chairman Lieberman. Training.
    Ms. Schinasi. Yes, because that is a function we almost 
totally outsourced to private companies.
    Chairman Lieberman. Mr. Zakheim.
    Mr. Zakheim. I would add, Senator, if you look at USAID in 
particular, that is an agency that years ago did its own work, 
frankly. It has become a contract management agency, and Rajiv 
Shah, the Director, admits it and is trying to change it. But 
over the last decade, they have essentially farmed out 
everything, including sometimes managing the contracts.
    Chairman Lieberman. Yes, that is right. Hire contractors 
and then hire more contractors to watch the other contractors.
    We talked about this this morning on a bill we did a markup 
of on the Department of Homeland Security, and, of course, this 
is not only in the war zones that this happens, although the 
financial implications in the war zones was so high.
    Now, I am going to ask you, because you had some hands-on 
experience in the Department of Defense, what can we do to stop 
this? I presume what you are saying is you think we are 
overusing private contractors to fulfill government functions.
    Mr. Zakheim. I think we are all saying that, yes, sir.
    Chairman Lieberman. So how do we draw the line? When do we 
decide that something really should be done by a full-time 
Federal employee?
    Mr. Zakheim. Well, the standard answer is if it is 
``inherently governmental,'' that is to say, it is something 
that the government should be doing. What we write in our 
report--and we all felt very strongly about this--is that is 
not really the right measure in a war zone, and the reason is 
it may be that there are some tasks like, say, involving 
private security that in theory a contractor could do, but in 
practice maybe it involves security issues or contractors that 
might fire too quickly if they feel they are being attacked, or 
are susceptible to bribery or corruption. We have a photograph 
in our report of an invoice that an Afghan insurgent group 
actually handed to a subcontractor, essentially saying if you 
want protection, here is the number to call.
    So there are going to be circumstances where the theory of 
inherently governmental does not fit, and so we felt that the 
measure should be risk. What are we risking here? And there 
will be cases where it clearly is not in the interest of the 
government to have a private entity taking on risks.
    Chairman Lieberman. So what are the risks? In other words, 
how do you define risk in this case?
    Mr. Zakheim. Well, you could define risk, for example, if 
it is a very serious combat zone and you run the risk that 
maybe the contractor will be attacked or, alternatively, will 
attack first because they think they are being attacked.
    Chairman Lieberman. Right. So a final question because my 
time is running out. You have been inside. This seems like 
maybe a question that a Senator should not be asking, but I am 
interested in your answer. Why are we using so many private 
contractors to fulfill governmental responsibilities? Not only 
here in the area that you covered but we recently heard 
testimony about the number of people working for the Department 
of Homeland Security under contract. It is just about as many 
as the regular employees of the Department. It is really 
stunning.
    Mr. Zakheim. Well, one of the reasons, frankly, is--and we 
allude to that in some of our reports--training. Our civilians 
just are not trained. You can get a degree and then go into 
government and never have to take another course again. Well, 
if you want to keep up with things, you hire somebody else to 
do it for you because you cannot do it yourself. So that is one 
reason.
    Another reason is that we cut back--it was not so much that 
we had too many contractors in some circumstances. We had 
nobody to manage and oversee them, and that was because in the 
1990s we cut back very seriously on just those kinds of people.
    So it varies with the circumstances. In some cases we had 
just people doing jobs that the government should have been 
doing. In other cases it was we did not have the government 
people to oversee those doing the jobs.
    Mr. Shays. Senator, could I just make sure that we are 
clear?
    Chairman Lieberman. Yes, Congressman.
    Mr. Shays. Literally half of the personnel in theater are 
contractors, and there is a tremendous imbalance with the 
number of civil servants that are there. And we did not really 
address that the way we might have liked to have. But you have 
defense contractors and civil servants down here, and we seemed 
to have to pay the civil servants a lot of money to want to go 
into theater. And I just want to make sure that we are also 
clear that when we talk about inherently governmental, if it 
clearly is inherently governmental, the government should do 
it. But when we say it is not inherently governmental, the 
government still maybe should be doing it.
    Chairman Lieberman. Got you. My time is up. Obviously, we 
will come back--I am sure my colleagues will--and ask you if 
the contractors are cheaper, which is one of the arguments that 
is made for contracting as well.
    As is the custom of our Committee, Senators are to be 
called in order of appearance: Senators McCaskill, Tester, 
Coburn, Levin, and Carper. Senator McCaskill.
    Senator McCaskill. Well, I do not know where to start. 
There are so many things I would like to talk about with all of 
you.
    First of all, let me once again say thank you. I am not 
sure that America understands the kind of expertise that I have 
sitting in front of me, and all of you brought to this work 
unique backgrounds that made the combination of your efforts so 
powerful. And I will tell you, I will not rest as long as I am 
here until we get this work done. So I do not want you to think 
that the time you have spent and the effort you have made--and 
I will tell you, I am proud that you are shutting down in 9 
days, because one of the arguments against the legislation 
was--in fact, I think Dr. Coburn has made this argument a few 
times--that we start these kinds of things and they never end. 
So I think you have done great work--I get that. [Laughter.]
    I get that, Dr. Coburn. We have not stopped as many of them 
as we should, but I am very proud of the work the Commission 
has done.
    I want to talk about something that I mentioned and you 
mentioned in your report, but I think it is something we need 
to flesh out for this Committee, and that is, contractors being 
subject to the jurisdiction of the United States of America. A 
heart-breaking incident in Iraq that, I am sure you all are 
aware of where the negligence of one of our contractors, killed 
one of our soldiers, and in trying to find justice for that 
family, the contractor avoided the jurisdiction of the United 
States. And the most insulting thing about it was that company 
then got another contract with our government. After they had 
used the fact that they were not subject to the jurisdiction of 
our country as a way to avoid justice for this man's family, we 
then decided we should sign up again with them.
    By the way, they are now accused of also doing business 
with Iran, so there are also some sanctions that need to be put 
in place as it relates to that.
    But one of you please talk about the importance of anybody 
who wants to do business with the United States, and what are 
the arguments on the other side, and why has the military been 
so reluctant to embrace this requirement.
    Mr. Ervin. May I start that, Senator?
    Mr. Shays. Go for it.
    Mr. Ervin. As you know, one of the huge issues that we have 
dealt with during the course of the Commission in particular is 
the lack of visibility with regard to subcontractors, and this 
lack of being subjected to the U.S. jurisdiction is 
particularly acute for subcontractors. And it is our 
recommendation that as a condition for being awarded the 
subcontract by the prime contractors, that subcontractors in 
particular subject themselves by virtue of the contract to U.S. 
jurisdiction.
    You asked for the contrary argument, and, quite frankly, I 
cannot think of one. This is American taxpayer money, and, 
therefore, the American taxpayer has a right to demand this 
level of accountability.
    Mr. Tiefer. Senator, if I can expand on that answer--and I 
do want to mention, the bill that you mentioned, which has been 
nicknamed ``the Rocky Baragona bill''----
    Senator McCaskill. Right.
    Mr. Tiefer [continuing]. Shined a light into what is a 
complicated area to figure out how to deal with, so it was 
helpful to us.
    Let me mention two examples. One is Tamimi Global Company, 
the other is First Kuwaiti Trading and Contracting, and what 
our hearings found and our missions was complete 
irresponsibility, that is, lack of responsibility by foreign 
contractors, and especially subcontractors, as Commissioner 
Ervin said.
    Tamimi came before a hearing of ours. We asked them for 
records, and they basically laughed in our face. They said: Go 
away. We are not going to give you any records. We were not 
required to give them to DCAA. We are not required to give them 
to you on a subject called ``tainted subcontracts.''
    First Kuwaiti, which owed the government $124 million, 
according to the State Department IG, is not paying. But it is 
continuing to get contracts from them.
    The argument that was put on the other side is that if you 
require foreign contractors to submit to U.S. jurisdiction, 
some will not want to compete for U.S. contracts, and you will, 
therefore, lose competition. I leave it to yourself to estimate 
if that is a likely prospect.
    Senator McCaskill. Well, at a minimum, should we be 
thinking about legislation that says to the U.S. Government, if 
someone has done business with us and owes us money and they 
are a foreign contractor, then that should equal suspension and 
debarment?
    Mr. Tiefer. Commissioner Shays is something of a pioneer in 
strengthening the suspension and debarment tool, and that would 
be a good use of it, yes.
    Senator McCaskill. Thank you so much, Congressman Shays, 
for taking this assignment. A lot of people were vying for your 
talents at the moment you decided to step up and help us here, 
and I am really so glad you did. Tell me why you think--it has 
been beyond frustrating to me--that not only are these guys not 
doing the work under a contract, they are then getting 
performance bonuses instead of suspension or debarment?
    Mr. Shays. Well, the real expert is right here in the 
Commission. The one area we backed off a little bit was 
automatic suspensions. We do think that in the end there are 
other factors that need to come in play. But it is very clear 
that contractors do not think they pay a penalty, and one way 
they do not think they pay a penalty is that they are not going 
to get replaced because the process takes so long, so they are 
going to still be around for a year, and it is one of the 
reasons that we recommend that there should be a special cadre 
of government people--now I am talking civil servants--who can 
come in and guard an embassy, can guard a facility, do 
something that contractors were doing, get them out right away 
and just bring in government people to replace them. I think 
that would do wonders, and that is one of our recommendations.
    Senator McCaskill. So it almost goes under the category we 
can screw up because they are stuck with us and they cannot 
really do anything because we are in a contingency and they 
cannot leave this function bare and they have no back-up.
    Mr. Shays. You got it.
    Ms. Schinasi. Exactly.
    Senator McCaskill. And so if we could convince the 
military--we have redundancies of systems in almost everything 
in national security, but we have no redundancy systems in 
contracting. And I think you have hit the nail on the head, 
that this has not been a priority for the military, and we 
would never think of not having a redundancy in some of the 
core military functions that relate to the mission, and 
contracting has become one of those.
    Thank you very much, Mr. Chairman.
    Chairman Lieberman. Thank you, Senator McCaskill. Senator 
Tester.

              OPENING STATEMENT OF SENATOR TESTER

    Senator Tester. Thank you, Mr. Chairman, and I want to 
thank Senator McCaskill and Senator Webb for testifying before. 
This is a critical issue. I have not decided whether I need 
more blood pressure medicine or a bottle of brown liquor to 
take care of this problem.
    Mr. Shays. Both.
    Senator Tester. Yes, you are probably right.
    Mr. Shays. Not at the same time, though.
    Senator Tester. The issue of private contracting, I cannot 
help to think, did not come out of the whole privatization of 
government from a decade or so ago, and we can see where that 
has got us.
    It is unfortunate Senator Webb is not still here. Being a 
student of history, I wanted to ask him about when wars started 
to be fought for profit. I do not know that it has been an 
occurrence throughout our history, but maybe it has. But I will 
say one thing. It is long past the time where we need to start 
to bring accountability and change the way contractors do 
business for this country.
    I can tell you this: In the private sector, if I have a 
contractor that owes me money, he is not getting another 
contract. I mean, that is just the way it is. And I cannot 
believe--and I do not know what happened to the system that 
would allow justification for somebody to tell you that you are 
not getting any information and that is the way it is, and that 
we are still doing business with that person. It is incredible.
    I believe it was you outcome, Ms. Schinasi, that talked 
about an emergency supplemental being looked at as free money. 
I mean, how does this happen? These are government/taxpayer 
dollars, borrowed or otherwise in this particular case. How do 
we get to a point where people within the government, military 
or otherwise, look at any dollars as free? Can you give me any 
insight into that?
    Ms. Schinasi. The lack of discipline in the supplemental 
allowed a lot of what Senator McCaskill was just talking about 
to occur, and that is, we do not need to have any discipline in 
our requirements process because we can always get more money.
    The corollary to that is the contractors were also 
considered to be a free resource, so we never had to factor 
into our planning----
    Senator Tester. And were they considered a free resource 
because they were off budget or what?
    Ms. Schinasi. They were off budget, and the government 
itself is constrained by what is called full-time equivalents 
(FTEs), so the number of government employees is capped. So you 
can keep putting missions on. In many cases these were new 
missions that the agencies were taking on. They did not have 
anybody to do it, so let us just go hire a contractor. And, by 
the way, we do not have to count that anywhere, either the 
money we spend or the people that we hire.
    Senator Tester. I think it was Senator McCaskill who said 
one-third of the money that was spent was wasted. Is that for 
the whole war effort?
    Mr. Shays. The figure is between $30 and $60 billion. The 
argument we would make, many of us, is that it is closer to $60 
billion. But even if it was $30 billion, we are talking out of 
$206 billion.
    Senator Tester. So retroactive accountability, you did not 
have the ability to look back. But yet I heard Ms. Schinasi or 
one of you say that things got better, to the Chairman's 
question, as time moved forward. Do you think if we looked back 
the waste was even higher than what it is over the period that 
you looked at?
    Mr. Zakheim. I would not say that, Senator. I think there 
was an improvement, there is no doubt, one of the reasons being 
when I was in the Department--and it was at the beginning of 
the Iraq war--we let contracts that are called 
``undefinitized.'' That is a fancy word meaning you do not have 
the specifics. And, of course, we improved on that with time.
    But in other areas we did not, and the fundamental problem 
is what my co-chairman just talked about. We did not have the 
people to go out there, partly because they did not want to go 
out there. I can tell horror stories about that one.
    And so you had a situation where it was contractors by 
default. If you do not have your civil servants ready to go to 
the theater--and you cannot force them to go. Military people 
go. Foreign Service people go. Civil servants--some do, some do 
not.
    I will give you an example of that. We were out in 
Afghanistan, and we were talking to people from the Agriculture 
Department. It turned out that the Agriculture Department could 
not fill its allotment of people to go to Afghanistan. And we 
are not talking about thousands. We are talking about dozens. 
They still could not fill the allotment. And those who went 
came from the Foreign Agricultural Service, most of whom had 
never seen a farm in their life. So that is an example.
    Senator Tester. Great. OK.
    Ms. Schinasi, in your testimony you talked about the fact 
that the waste and fraud--waste, in particular--may even be 
higher if the host governments cannot--were you able to do any 
projections on that? Quite frankly, when I was in Afghanistan, 
they did not look like they were rolling in dough. And so when 
that turns around and the troops can pull out, I do not 
anticipate these projects will go forward. Did you guys do any 
projections on how much money that might be?
    Ms. Schinasi. We do not have comprehensive numbers on that. 
I can tell you that the Special IG for Afghanistan 
Reconstruction came before us and said the entire $11 billion 
that we are spending on the Afghan National Police Program is 
at risk. That is just one program and one number. But that is 
clearly--we issued a special report on sustainability because 
we were so concerned not only that projects had already been 
started that could not be sustained, but that we were thinking 
about starting new projects that could not be sustained.
    Mr. Shays. Senator, could I make a point?
    Senator Tester. Yes, go ahead.
    Mr. Shays. We started out--and Robert Henke was making this 
point to us, and it really got us focused on this. He said, 
``Well, it is clear we have got to oversee contractors better, 
and we are not doing a proper job.''
    Senator Tester. Right.
    Mr. Shays. And then we began, ``Well, if we cannot oversee 
contractors better, then maybe we should not be trying to do 
too many contracts.''
    Senator Tester. Right.
    Mr. Shays. And it even got to the point, as we have been 
working on this, that we think we are trying to just do too 
much. We are just trying to do too much.
    Senator Tester. Right.
    Mr. Shays. The gross domestic product of Afghanistan was 
hovering around $1 billion. We have about $24 billion in the 
economy now. We have totally distorted the marketplace.
    Senator Tester. Yes.
    Mr. Shays. And one little quick point. We were doing a 
wonderful agricultural program that is the culture and the 
people. And then we had to spend money by the end of the budget 
year, and we came in with $300 million to try to redo this 
program.
    Senator Tester. What do we do about this? I mean, you guys 
have some recommendations about holding contractors 
accountable, about making sure government promotes competition. 
But when we are putting people involved in agriculture--and 
that is something that I am involved in--that do not know jack 
about agriculture and expect to teach people who need to learn 
about agriculture to support themselves, and they have no way, 
no chance of being able to communicate any kind of information 
because they do not have it in their head to start out with. 
Who makes the calls on that? Is this the head of the State 
Department? Is this the head of our military? Not to quote 
Harry Truman, but where does the buck stop on all this stuff? I 
mean, we can de-fund it all. I am not sure that is the right 
method to use. But maybe it is.
    Mr. Shays. Well, let me just quickly say we recommend some 
key positions. To have the National Security Council decide to 
do things and not consider cost, that is why we want a dual-
hatted position, someone at OMB there. We recommend--and, to 
Senator Levin, this is obviously very controversial, but we 
think there needs to be a J10. We think we have so many 
contractors part of the military effort, and there is really no 
coordination at the Joint Chiefs of Staff to deal with that 
issue.
    Senator Tester. I mean, isn't it incumbent upon the Joint 
Chiefs to be able to consider costs when they are doing their 
job? Now, I understand it is the protection of the country, but 
the head of the Department of Agriculture could say, ``It is my 
job to make sure we have food security so I am going to spend 
every dollar I have got.''
    Ms. Schinasi. We would say yes.
    Senator Tester. Yes, I understand that, but isn't it 
incumbent on the people who are there not to have a cop sitting 
in a room making sure that they are following the rules?
    Mr. Zakheim. Well, we recommend that somebody at the 
Assistant Secretary level in all of the key agencies, including 
USAID, which would be the place which, together with the 
Agriculture Department, would worry about the kinds of programs 
you were talking about, somebody specifically in charge of 
contingency contracting issues. If you do not get the 
leadership at the top----
    Senator Tester. That is exactly right.
    Mr. Zakheim [continuing]. That is not going to follow.
    Senator Tester. I just want to thank you guys for all your 
work. I very much appreciate it. And I am with Senator 
McCaskill, and probably everybody who sits at this table. We 
have a big problem. We have to deal with it. We are talking 
about cutting programs that people actually need to pay for 
this kind of garbage.
    Thank you very much.
    Chairman Lieberman. Hear, hear. Thanks, Senator Tester. 
Senator Coburn.

              OPENING STATEMENT OF SENATOR COBURN

    Senator Coburn. Gosh, for the first time in my life, I am 
going to be calm compared to the previous questioner. 
[Laughter.]
    Chairman Lieberman. Oh, no, you are just beginning, Senator 
Coburn.
    Senator Coburn. First of all, I would like to offer my 
sincere thanks for your efforts. I have been on commissions, 
and oftentimes the amount of effort that goes into that is not 
fully appreciated and the amount of time that is spent. So I 
offer you my thanks for it.
    I have a couple of questions. Are we going to have a second 
round, Mr. Chairman?
    Chairman Lieberman. If you would like.
    Senator Coburn. I want to talk about a couple of things. I 
am a big fan of IGs. I think generally they do a super job. In 
Afghanistan it has been a disaster. And I am worried about one 
of your recommendations, and that is to have this new IG, 
simply because in lots of other areas where we have the Special 
IG for Iraq, we actual got some good data out of there. A lot 
of what you know we learned through Stuart Bowen and a lot of 
his efforts. But I am worried about creating another one when 
we are not managing in Afghanistan the ones we have. And so it 
is fraught with some difficulty because we are not holding 
somebody to accountability and we have not. Our last IG, in my 
opinion, was incompetent there--not the one that took General 
Arnold Fields place, but General Fields' actions did not 
measure up at all at any level of a standard of that. So I 
worry about that.
    I would like for you to really comment on why you made that 
recommendation and how that contrasts with holding the 
institutions that we have, Special IG for Afghanistan, Special 
IG for Iraq, and what was done. Then I am going to share with 
you my observations, having been three times to Afghanistan and 
what I saw change, especially in the last 2 years, especially 
since Rajiv Shah came on.
    Ms. Schinasi. Right.
    Senator Coburn. Because there is a big difference with 
effective management. So would you comment on that 
recommendation?
    Mr. Ervin. May I start with that, Senator? I was the 
Inspector General at the State Department at the beginning of 
the Bush Administration, as you may know, and I was the first 
Inspector General at the Department of Homeland Security, so I 
was among the Commissioners who most focused on that 
recommendation. And I am speaking for myself, I think I speak 
for the Commission when I say I agree with what you say about 
the Special Inspector General for Iraq Reconstruction (SIGIR). 
I think Stuart Bowen, with whom I served in the Bush 
Administration and beforehand in Texas State government, has 
done an exemplary job and has set the bar very high for the 
kind of accountability that we should all demand with regard to 
these war theaters.
    I also agree with you that, to put it charitably, the 
Special Inspector General for Afghanistan Reconstruction 
(SIGAR), by way of contrast, has been slow off the mark. There 
is no question about it. But it seems to me the contrast 
between the two proves our point, namely, knowing that we are 
going to be involved, whether we like it or not or whether we 
admit it or not, in contingencies going forward, that we have 
at the inception of contingencies someone who is adequately 
trained, adequately staffed, and we are talking about, as you 
know, an expandable office that would not have a huge staff 
permanently but, rather, would be able to scale up and scale 
down as circumstances require.
    Of course, under our recommendation, both SIGIR and SIGAR 
would go away, so it is not as if there would be a third 
Inspector General. It is just there would be a standing one 
that would work in concert with the statutory Inspectors 
General and with GAO.
    And I guess the final thing I would say about it is this 
recommendation is not intended to in any way denigrate from the 
work of the statutory Inspectors General. But as you know, they 
are each limited in that they are limited to the jurisdiction 
of the agency, and the Special IGs, while they have agency-wide 
jurisdiction, are limited temporally and with regard to a 
subject matter.
    Senator Coburn. All right. Thank you. One of my 
observations when you go into theater as a Member of Congress 
is you get the brief, and all the different groups are there. 
My first trip there, about 80 percent of them could not answer 
the questions, the people sitting at the table--I am talking 
about people who were responsible for the areas. And that 
changed a little bit the second time. But the third time I went 
back, that guy actually knew what he was talking about and knew 
what they were doing, and they were deployed. And they happened 
to be Oklahoma National Guard guys because they were farmers 
from Oklahoma that are part of the Guard that actually are 
farmers. There just was not enough of them, and they were not 
there long enough--continuity in what we do is important as 
well.
    But I specifically want to compliment the head of the 
USAID, and the point I would make is something that we ought to 
be demanding because the problems you are describing did not 
just happen over there. It happens every day here. We know it. 
You talk about contracting problems. My friend the Chairman 
here knows we have big contracting problems on military 
projects that have nothing to do with our efforts in 
Afghanistan or Iraq. But the difference is the Administrator of 
USAID demands metrics now, and it is known going in: If you 
cannot give me metrics, we are not going to continue the 
program.
    So one thing that I did not see in your recommendation was 
in the contracting to actually have a metric requirement of 
performance on everything we contract for, then that would have 
presumed that you know what you are buying. So if you cannot 
establish and have a metric for it, you do not know what you 
are buying, you ought not be buying it.
    And so I would like your comments on that because I see a 
big difference. I have been a big critic of USAID for 6 years, 
and I want to tell you, I am in love with the Director because 
what I see him doing is effective management that makes U.S. 
taxpayer dollars go further and much more effective.
    Mr. Shays. Senator, when we met with him privately, it was 
one of the most impressive meetings. When he came and testified 
before us, after OMB decides what he can say and what some of 
his staff decide what he can say publicly, it is not as 
helpful. And one of the things that would be wonderful is to 
have the candidness that he presented to us in meetings that 
you may have with him, if we in government just were a little 
more candid. It is not the fault of anyone in government now 
that contracting is bad. It goes way back. And people are 
trying to improve it, but we just need to be honest with each 
other and admit that we have a long ways to go.
    Mr. Zakheim. Let me deal with the metrics issue, Senator. 
What Rajiv Shah is getting right is not metrics. I mean, DOD 
will throw zillions of metrics at you. I used to. The issue is 
the right metrics. And Shah understands and his people 
understand that there are metrics and metrics.
    So it is not a matter of saying we need metrics. Everybody 
who is on a contract will throw metrics at you. it is 
understanding what are the right ones. And what it is doing is 
fundamentally changing the culture of the place.
    Senator Coburn. I can give you a lot of contracts in 
Afghanistan that had no metrics on them.
    Mr. Zakheim. That is even worse, of course. But he is 
changing the culture so that they think the right way about 
these things. And one of the things that one of our colleagues, 
Grant Green, who could not manage to get here today, has 
constantly emphasized is we have to change the culture, whether 
it is in DOD, the commanders in the field, USAID, State 
Department, what have you, about the way they think about 
contracting.
    Senator Coburn. All right. I am out of time. Thank you.
    Chairman Lieberman. Thanks, Senator Coburn. Senator Levin.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Thank you very much, Mr. Chairman. Let me 
thank, first of all, Senators McCaskill and Webb for their 
efforts to bring this Commission into existence. Their 
leadership on this is critically important. Senator McCaskill 
came to this body determined that she was going to focus on 
oversight. She has done exactly that. It has been invaluable to 
us. Your work is very important. I commend you on it, your 
willingness to serve.
    One of the things you point out is the overreliance on 
private security contractors in Iraq and Afghanistan. That is 
not a new point. That is a point which has been very 
dramatically present for some time.
    Last September, the Senate Armed Services Committee 
released a report based on a year-long investigation of the 
role and the oversight of private security contractors in 
Afghanistan, and we concluded that the proliferation of private 
security personnel in Afghanistan is inconsistent with our 
strategy; that Afghan warlords and strongmen acting as force 
providers to private security contractors have acted against 
U.S. interests and against Afghan interests; that widespread 
failures to adequately vet, train, and supervise armed security 
personnel pose grave risks to U.S. and coalition troops, as 
well as to Afghan civilians.
    Now, I assume that the Commission is familiar with that 
report. First of all, I am wondering whether you agree with the 
conclusion of that report; but, second, before I ask you 
questions about what legislation you are recommending following 
your report, I am interested as to your reaction to what 
legislation we have recently adopted, what recommendations we 
have recently made to see where that falls short; and then I am 
going to ask you about what additional legislation, if any.
    But, first of all, are you familiar with those 
recommendations? If so, do you agree with those recommendations 
that I have just read?
    Mr. Tiefer. Senator, I am familiar with that report. The 
Commission is familiar with the report. I want to say our own 
report, in fact, passed the ball along, and further 
investigations have been going more and more deeply into it. We 
noted that our private security in Afghanistan appears to be a 
major source of payoffs to the Taliban. Our report has the 
first official statement that it is the second largest source 
of money for the Taliban.
    Senator Levin. After drugs.
    Mr. Tiefer. After drugs, that is right.
    Senator Levin. That is similar to our finding. But here is 
what followed our report. The Department of Defense established 
a number of task forces, directed that remedial action be 
taken, and so the question is: Have those task forces been 
effective? Are they operative? General David Petraeus himself 
told me about the importance of this issue to him. Now, he is 
kind of the most recent father of our counterinsurgency 
strategy, and I just am wondering: Are you familiar with those 
task forces? Are they effective? Are they operative?
    Mr. Tiefer. Well, one of them, according to public sources, 
came up with the figure of $360 million being paid to the 
Taliban, so they are at least grappling with the issue.
    Senator Levin. Did you have a chance to interview those 
folks?
    Mr. Tiefer. I interviewed a group of analysts who sort of 
worked for them or with them, and there is one useful thing 
that is being done, although it is not considered to be enough 
to get control of the problem. There is a type of vetting using 
intelligence information which is at least going to keep the 
bad guys from being direct contractors to us. But that is 
obviously only a portion of the problem.
    Senator Levin. All right. Mr. Zakheim.
    Mr. Zakheim. We were briefed in Afghanistan about this. 
Some of it we cannot discuss here. I was with Co-Chairman Shays 
out there, and I think they are clearly getting their arms 
around the problem. Getting your arms around the problem is not 
necessarily solving it, and a lot of this is still clearly 
going on, and it is going to take some work because, again, a 
lot of it has to do with what you heard earlier: Visibility 
into subcontracts.
    Senator Levin. I agree with that--very much, as a matter of 
fact.
    In the fiscal year 2008 defense authorization bill act, we 
had a section called Section 862, and what this required was 
governmentwide regulations to be issued on the selection, 
training, equipping, and conduct of contractor personnel 
performing private security functions in Iraq and Afghanistan. 
So that was in the fiscal year 2008 authorization bill, and I 
am wondering whether you can tell us whether the Federal 
agencies have complied with the requirements of Section 862.
    Mr. Shays. I cannot. Mr. Henke.
    Mr. Henke. They have issued the guidance and the 
instructions, and it has been out for public comment. The 
issue, though, as you are well aware, is that there is a big 
difference between what the policy says and what is being 
executed nine levels below in the field.
    Also, notably, I believe that Section 862 makes it up to 
the chief of mission in the State Department in the country 
whether they are following those regulations, and because of a 
technicality in the law, I believe that the State Department 
would have a different view as to whether that applies to them.
    Senator Levin. Can you give us a recommendation or have you 
given us a recommendation on that section as to any need to 
strengthen it? Is that one of your recommendations?
    Mr. Henke. It is not specifically in the report. We can 
certainly discuss that with you and your staff.
    Senator Levin. Do you still have enough days left to do 
that?
    Mr. Henke. Yes.
    Senator Levin. That would be helpful for you to do that.
    Mr. Henke. Senator, one of the things from the defense 
authorization bill, you required a new definition of the term 
``inherently governmental,'' and 2 weeks ago, OMB published 
their new definition. Long story short, it lists now for the 
first time the security function under an illustrative list of 
what functions are determined to be inherently governmental.
    Senator Levin. That is long overdue. I think I have time 
maybe for one more question before my time is up. We had a 
provision in the 2007 defense authorization bill, which became 
an act, which required the Department of Defense to assign a 
senior executive to lead program management and contingency 
contracting efforts during military operations to identify ``a 
deployable cadre of experts with the appropriate tools and 
authority'' to staff the efforts to take specific steps to 
plan, train, and prepare for such contingency contracting. And 
I am wondering whether or not the Department of Defense has 
implemented the requirements of that section.
    Mr. Shays. You have some of us here. I do not know.
    Ms. Schinasi. I would just say we found the lack of program 
management to be a continuing problem.
    Mr. Zakheim. The way the Department has done it is it has 
some individuals who have responsibility for this in general in 
policymaking in the Office of the Secretary of Defense.
    Senator Levin. Yes, but----
    Mr. Zakheim. That is very different.
    Senator Levin. They had to designate specific people 
under----
    Mr. Zakheim. We did not find somebody who was so 
designated, which is why we made the recommendation that you 
need somebody, and it has to be somebody at the Assistant 
Secretary level. We think it has to be somebody Senate-
confirmed.
    Senator Levin. All right. Did you happen to ask the 
Department of Defense why they have not complied with Section 
2333 of the 2007 act? Did that question get asked, do you know?
    Mr. Henke. They have taken a number of steps. We believe in 
totality they are not enough.
    Senator Levin. Well, we will ask it. That is for sure. 
Thank you.
    Thank you, Mr. Chairman.
    Chairman Lieberman. Thank you. Thanks, Senator Levin.
    Senator Carper has gone. Let us do a second round of 6 
minutes, just to encourage us to know it is the second round.
    At the end of my first round of questions, I raised the 
question of if contractors are cheaper because presumably that 
is one reason why contractors are called on to do these jobs. 
In fact, the Commission in its final report asked the question 
and offers the following answer: ``It depends. And because it 
depends on a whole range of factors, many of them under direct 
government control, consideration of cost cannot be the driving 
factor in determining whether to contract or what to 
contract.''
    Mr. Shays. Senator, they are cheaper if you use them 
efficiently.
    Chairman Lieberman. Yes.
    Mr. Shays. They are cheaper if you use three when you only 
need three. They are not cheaper when you hire 15 to do the 
work of three. They are cheaper when you do not have a 
contingency and, therefore, you do not need civil servants to 
be on the payroll. So they can be much cheaper, and it is one 
reason why we use them. And they can provide outstanding work.
    Chairman Lieberman. Right.
    Mr. Shays. You just have to make sure you use them when you 
need them and you do not use too many of them; and then when 
you do not need them, you no longer have them.
    Chairman Lieberman. So the key here, to say the obvious is 
how you manage them.
    Mr. Zakheim. It is more than that, Senator.
    Chairman Lieberman. Do you want to take issue with the 
Chairman?
    Mr. Zakheim. Not in the least. [Laughter.]
    I never did, so I will not now.
    Mr. Shays. I eat the crumbs off his table.
    Mr. Zakheim. All right. No, what I was going to say was 
point out that, in addition to that, there is another factor, 
and it is one we talked about earlier. One of the reasons that 
they are cheaper is we use local nationals. Obviously, a local 
national is going to be cheaper.
    Chairman Lieberman. Right.
    Mr. Zakheim. But then that is where so much of the 
corruption problems come in, plus very often we have found--and 
we reported on this--that these people are exploited. This is 
the abuse side of the equation. We have talked about waste, we 
have talked about fraud. This is the abuse side. So it is both 
what my esteemed co-chairman said----
    Chairman Lieberman. You mean exploited by us?
    Mr. Zakheim. Exploited by their own contractors, by the 
people who hire them. And so those guys will be paid next to 
nothing, and, of course, contractors are cheaper. So it is both 
the circumstances of the environment in which they work, which 
is what my co-chairman talked about, and the nature of the 
contracts themselves and the people who are doing them.
    Chairman Lieberman. So part of this, Congressman, if I 
understand what you are saying, is really how these people are 
managed. I know it is making a complicated matter simple, but 
part of what you are saying is they can be cheaper if they are 
well managed.
    Mr. Shays. Absolutely. And what is really important is that 
we have experienced people who know how to oversee contractors 
even when we are not using them so that when we then need to 
use them, we know how to use them well.
    Chairman Lieberman. So let me get to that. I mentioned in 
my opening statement about how some of this is deja vu all over 
again and how do we stop it. You probably know this. In 2007, 
this Committee reported a contracting reform bill. One of its 
provisions, which ended up being passed into law in 2008 as 
part of the Armed Services Committee bill, the National Defense 
Authorization Act, required the Administrator for the General 
Services Administration to establish a Contingency Contracting 
Corps whose members would be acquisition professionals from 
across the government who would be ready to deploy in a 
contingency, such as Iraq or Afghanistan, or a major disaster 
such as Hurricane Katrina.
    It is an interesting history here, which is that this 
Contingency Contracting Corps nominally has been stood up, but 
they have only got nine volunteers there now. And now you have 
come along--and I welcome it, of course--in your Recommendation 
2 and said that the agency head should develop deployable 
cadres for acquisition management and contractor oversight.
    So talk to me a little about this because this is one of 
the great lessons of Hurricane Katrina and why we have been 
doing so much better in responding to natural disasters since 
then--although, we admit, Hurricane Katrina was catastrophic, 
but we have had some pretty serious ones--because the Federal 
Emergency Management Agency particularly and the Department of 
Homeland Security generally have developed contingency plans, 
both people and plans.
    So how do we do this with regard to this particular matter? 
Because these are contingencies, as compared to the ongoing 
contracting, let us say, in the Department of Homeland 
Security.
    Ms. Schinasi. Right. We explored this issue in one of our 
hearings because our thought was this sounds like a good 
solution to some of the problems that we were identifying, and 
the Executive Branch witness came back and said, ``Well, it 
really is not appropriate for an overseas contingency, and this 
really is not going to answer the question. And we had the 
State Department's Office of the Coordinator of Stabilization 
and Reconstruction representative there, which was also to be a 
deployable civilian-based cadre that could actually go over and 
do the work, not just the acquisition workforce to supervise, 
but to do the work. The other agencies involved are not forced 
to put anyone up, and do not.
    Chairman Lieberman. Mr. Henke, did you want to add to that?
    Mr. Henke. Yes, sir, if I might. We had a great example of 
that issue. The fundamental principle is if you are going to 
have contractors carrying out parts of your foreign policy 
where it is appropriate, you had better have vigorous 
government oversight. An example: The military establishes a 
Joint Contracting Command in Iraq and Afghanistan. That is a 
good step forward. It is about 400 people with a brigadier 
general in charge of it. General Petraeus comes in and realizes 
he wants more contracting oversight, so he goes back to the 
services and says, ``Army, Navy, Air Force, send me more 
contracting officers.'' They say, ``We are tapped out. We do 
not have enough. We have deployed them six times, and we cannot 
break the force.'' So one, they failed on getting more military 
volunteers, or not enough.
    Two, they ask for civilian volunteers. They cannot find 
enough. They wound up staffing up the Contracting Command with 
contractors to provide oversight of the contracting. Just 
crazy.
    Chairman Lieberman. It is crazy and unacceptable. So I am 
just going to continue finally on this line of questioning. So 
let us go forward 2, 3, 4 years. Just as all of us want, we 
have wound down our involvement in Iraq and Afghanistan. Maybe 
there is a continuing mutual defense strategic framework 
agreement with both, but we do not have too many people there. 
And then some other contingency, some other crisis occurs, and 
we are required to deploy troops and all that they need to 
support them.
    So what do we want in place at that time to make sure in 
that new contingency, wherever it is, we do not make the same 
horrific mistakes and waste of money as we have repeatedly in 
previous contingencies.
    Mr. Ervin. May I start that, Mr. Chairman?
    Chairman Lieberman. Yes, sir.
    Mr. Ervin. This whole issue of having a deployable cadre of 
acquisition professionals is important, no question about it, 
but it is only part of the equation. My colleague, Ms. 
Schinasi, began to mention this, and we have said it 
explicitly, but equally important, it is critical that the 
government have a choice, and that means that there needs to be 
at least a small and expandable organic capacity on the part of 
these three agencies to perform missions themselves so the next 
time there is a contingency the government has a choice between 
going with contractors and going in-house, and the 
determination can be made whether it is more effective to do it 
either way, whether it is cheaper to do it either way.
    As we said at the inception, right now the government does 
not have an option. Contractors are the default option because 
they are the only option.
    Chairman Lieberman. Is this something we need to legislate 
on, to mandate? Or is this something that you are going to talk 
to the Executive Branch about putting into effect?
    Mr. Shays. You need both. But first, in the Quadrennial 
Review, they have to not pay lip service to contingency 
contracting. It was hardly mentioned. The greater expenditure 
is not on things anymore. It is on services. And we have to get 
people to wake up to that. You need a J10. So in the military, 
they treat contracting seriously. You need to key management 
people, the assistant directors, deputies, to be in all the 
different departments thinking about contingency. You need to 
have a cadre of people who can oversee contractors, and you 
need a cadre of people that can go in to do the work of 
contractors.
    If you do those things and have real competition, we will 
not have the same problems that we have had.
    Chairman Lieberman. My time is up. I hear you that we 
should be working on a legislative package to implement what 
you are about, and I can assure you that Senator McCaskill and 
her Subcommittee, when you go out of business in 7 or 9 days, 
will try to take up the oversight of what you have started.
    Senator McCaskill, you are next and then Senator Coburn.
    Senator McCaskill. Thank you, Mr. Chairman. I think also 
the place we have to keep this is up, I do not think we can 
underestimate this--and I think most of the Commission members 
will agree with me--is the culture of contracting.
    Mr. Shays. All of us do.
    Senator McCaskill. I honestly believe that at the War 
College, contracting has to be one of the core competencies. I 
honestly believe that our flag officers--it is anecdotal, but 
this is true. It actually happened. A general said to me on one 
of my contracting oversight trips, ``I wanted three kinds of 
ice cream in the mess hall yesterday, and I did not care what 
it cost.'' They see their mission as a military mission, and 
contracting is not something that the military leaders have 
seen as part of their mission. Probably when most of them were 
trained and they envisioned what they would be doing later in 
their careers, they did not realize to what extent the military 
would be relying on contracting.
    And so I think we have to spend some time questioning in 
the Armed Services Committee--Senator Webb, Senator Collins, 
Senator Lieberman, Senator Levin, and myself, are all members 
of the Armed Services Committee. And if we do not continue to 
pound the leadership of the military about contracting, we are 
going to expect more of the same.
    Let me ask you a couple of things. First let me ask you, it 
seems to me on this corps of--by the way, to follow up on your 
question, OMB is supposed to be standing up this Contingency 
Corps--that is what our legislation directs--and they have 
fallen down in terms of doing that. But I am wondering about 
is: Should we be looking at the Guard and Reserve in this 
regard? Here we talk about we need citizens that can be 
deployed when necessary. We have a lot of men and women who are 
serving in our Reserves and serving in our National Guard that 
have core competencies as it relates to contracting and 
oversight. Should we not be trying to work with the Guard and 
Reserve to try to identify certain units of the Guard and 
Reserve that recruit, retain, and maintain a level of 
competency in terms of being deployable during contingencies as 
members of the Guard and Reserve? Because these are folks, I 
mean, some of them may work as accountants in their jobs that 
they serve in as civilians. It is a civilian corps that can 
wear the uniform and have that kind of stick in a contingency 
that maybe would bring more respect to this kind of work. Any 
thoughts on that?
    Ms. Schinasi. Some of the success stories that we heard in 
theater of interagency collaboration on projects and how things 
worked really well together often had a Guard or Reserve member 
as part of that, and it was because of the domestic experience, 
if you will, which they brought, that made the project 
successful. But it was almost by happenstance. There was no 
planning for it. There was no identification, as you said, of 
what are the skills that we need from our National Guard to 
bring into the agricultural project in Afghanistan. But where 
that did happen, we heard many examples of successful projects 
on a small level.
    Mr. Zakheim. It is also important that the same approach--
and you cannot use the Guard in the same way--is taking place 
at the State Department and USAID, and we heard about USAID.
    Senator McCaskill. Right.
    Mr. Zakheim. But, as you see, the State Department is going 
to be taking over a lot of the contracting, and what we cannot 
afford to let happen is for DOD to clean up its act, as it 
were, but the other agencies do not.
    One of the concerns that I personally have and we have 
discussed is, and this goes to Chairman Lieberman's question as 
well: You have to get those people to go out there. It is not 
enough to rely on volunteers. If you are going to rely on 
volunteers, you are going to always have a problem.
    Senator McCaskill. Right. Let me switch, because what you 
brought up relates to this, and that is sustainability. As we 
transition back to the State Department from the Defense 
Department, we have really created some precedents in these 
contingencies that are unprecedented in our military history, 
and one of them is this notion that we now have the military 
with a reconstruction fund. That has never happened before in 
the history of America, and for the first time this year in the 
defense budget, there is an Afghanistan reconstruction fund. I 
am not talking about Commander's Emergency Response Program 
(CERP) funds. It is like CERP has morphed into the military is 
going to build things, and that is where this whole 
sustainability piece comes in. If the military is making the 
decision about when to build things, I believe that is why 
power plants like Kabul happen. I need specific recommendations 
that we could put in legislation. What should the requirements 
be around sustainability? What kind of processes should we 
force in place they are claiming now they are doing 
sustainability analysis. I do not know if you all found any 
evidence of that. We have looked and can find no evidence of 
real analysis on sustainability. And if the military says they 
have it somewhere, they can get it to my office anytime they 
would like. But I do not believe sustainability analysis is 
going on in earnest in most of these decisions that are being 
made.
    Mr. Shays. Totally agree.
    Senator McCaskill. I really need guidance on: Should we be 
passing it off to the military in these contingencies to build 
things, ever, and then pass it back to USAID? And don't we lose 
some of the oversight and sustainability as we do those kinds 
of things? And how do we get at this issue that 
counterinsurgency means we build health centers, we build power 
plants, we build highways, even if the security and the 
sustainability around those issues are completely unlikely to 
ever have to be able to occur?
    Ms. Schinasi. Senator McCaskill, we deal with that in our 
report in two ways.
    The first is to talk about pushing development, traditional 
development projects and the USAID on a counterinsurgency 
timeline. It just has not worked. So I think your concerns are 
appropriate in terms of who is it that should be doing projects 
and what is their mind-set in terms of a time frame for that.
    The second is we have made recommendations--although we do 
not have metrics about sustainability--in one of our special 
reports that is contained in the back of this report that says 
cancel the projects if you cannot demonstrate that they are 
going to be sustainable. And, again, you would have to come up 
with Senator Coburn's metrics about how are you going to do 
that. But if you cannot demonstrate that, cancel them.
    Senator McCaskill. Should we put something in the law that 
says you cannot go forward with a project until there is some 
kind of written documentation about a sustainability analysis? 
This is going to drive these guys crazy because, of course, 
they are saying, well, the whole beauty of the 
counterinsurgency is how quickly we can move. I mean, I watched 
the CERP thing. I started asking questions about CERP in 2007, 
and I have watched every year how it has gotten bigger. We 
started out with breaking windows and storefronts, and that is 
the first year. Well, we are going to fix the broken windows. 
Well, the next year, well, we are going to add a wing on a 
hospital. The next year, we are building highways. Now we have 
a $400 million fund.
    Mr. Shays. One of the challenges is nobody wants to take 
ownership.
    Senator McCaskill. Right.
    Mr. Shays. And that is one of the reasons why we think we 
need to see that structure in place in the military, USAID, and 
the State Department, as well.
    Mr. Zakheim. There is an element at USAID that we discussed 
with Rajiv Shah that is really underrepresented, and it is a 
small office called Office of Transition Initiatives. Actually, 
it is fascinating. The entire office has, I think, only six 
government personnel. Everybody else is an individual 
consultant, contractor, or whatever they want to call them. 
Those are the only people that are really geared to the kinds 
of things you are talking about. This is my personal view. I 
think what they ought to do is create something akin to Special 
Operations Forces--that is to say, you have a career path. You 
can go all the way to the top. You will get your budget money. 
You will not compete with the dominant culture, which is long-
term development, but you will have people who now have a 
prospect of moving up the ladder and, therefore, will stay.
    What we found in Afghanistan was really remarkable. Young 
people, actually young women, were going out into these danger 
zones, but then we are told, well, you will do this for 3 
years, but then you cannot come into USAID because your 
contract is up. So the people who really knew what was going on 
were the people who were going to leave. That is weird.
    Senator McCaskill. That is very weird. Thank you, Mr. 
Chairman.
    Chairman Lieberman. Thank you. Senator Coburn.
    Senator Coburn. Thank you. I think Commissioner Zakheim 
mentioned culture changes. Well, the Senator from Missouri and 
myself have demanded a culture change in DCAA. And I do not 
know if we have received it, and I do not know if you have done 
any more follow-up hearings on it. But we had a change in the 
top. But what we found was no true audit experience in DCAA. In 
other words, they did not have any formally trained auditors. 
It was a culture that you rose within the agency, but you never 
had any outside training, you never had any outside experience 
in terms of auditing, in terms of what you have recommended.
    Any other things that you would recommend for DCAA? And 
where are they now? And what kind of job are they doing in 
terms of what your observations were in your study?
    Mr. Shays. Well, it is too bad my co-chairman is not here 
because he would love to speak on this issue. The one thing 
that we did mention is if you have a $600 million backlog of 
bills paid but not audited, think of the records that people 
have to keep, and we pay them to keep those records. We pay 
tens of millions of dollars for people to keep records that we 
then are going to audit 6 or 7 years later. So one thing is 
they need more people. They need, as Senator McCaskill points 
out and you point out, well-trained people. They clearly need 
more people to get at this backlog.
    Senator Coburn. All right. One other question, and then I 
will end, Mr. Chairman. I was on Louis Berger Group's rear end 
for the incompetency, 3 or 4 years ago. Did you find out why 
somebody can get fined $70 million and still continue to 
contract?
    Mr. Shays. Go for it, Mr. Tiefer.
    Mr. Tiefer. Yes, we looked into that a little.
    Senator Coburn. Can you give a plausible, common-sense 
explanation so that the average American can understand when 
somebody has actually cheated us and been fined that we would 
continue to use that contractor when they have demonstrated 
that they are not competent, one, and two is that they actually 
overbilled us?
    Mr. Tiefer. Well, I would say the answer in a few words is 
very good criminal defense lawyers for the company, that is how 
they are able to do it. Louis Berger's criminal defense lawyers 
worked out with USAID that they promised that they would be 
good and they would have a monitor who would look them over and 
make sure they were improving, and in return USAID would agree 
that they would not get one day of suspension.
    You might say, why would USAID make this deal? They love 
what they call their development partners. They love them too 
much to let go of them. They did not want merely to do without 
Berger for a day. They did not want to do without contracting 
new contracts with Berger for one day. And so a crucial 
opportunity to send the signal was flubbed.
    We had hearings where we questioned USAID. I think two 
different hearings we raised this issue, and they stood by it, 
and the technique that was worked out with those criminal 
defense lawyers, the type of plea agreement that was done 
unfortunately looks like it is going to be a model for the 
future.
    Senator Coburn. So why would we as the Congress not hold 
whoever made that decision at USAID accountable for the 
American people?
    Mr. Shays. I think at the very least you want to call them 
in for a hearing and question them quite extensively. That is 
how you would hold them accountable.
    Mr. Zakheim. By the way, the former Finance Minister of 
Afghanistan, who still advises the president and is in charge 
of a variety of things there, goes absolutely ballistic when 
you mention Louis Berger, precisely for that reason. So it not 
only is a matter of cheating American taxpayers, it is a matter 
of undermining our credibility with the government we have to 
work with over there.
    Senator Coburn. Did you see any other examples similar to 
that with other contractors that we could learn from, or who 
should have been disbarred or at least suspended that were not?
    Mr. Zakheim. That was the extreme example because they----
    Senator Coburn. That is the five-star.
    Mr. Zakheim. Louis Berger is the biggest defrauder in the 
contingency area. Nobody got up to the numbers for criminal 
fraud that they did.
    Having said that, what we found is that there is great 
difficulty bringing suspension and debarment cases against 
companies for what happens in Afghanistan because it is hard to 
get witnesses together, people rotate out. There are people 
from other countries who are part of the allied effort who you 
cannot possibly get a hold of and so forth. And so what we did 
is we put some recommendations for making it possible just in 
contingencies to have it easier to do suspensions and 
debarments.
    The need for this was shown even more recently than our 
report, the test case to see whether you could do a successful 
suspension and debarment through the normal full-scale hearing 
in the United States. The Wardak Risk Group ended up virtually 
in a win by the company. So you do have to make it easier to do 
these proceedings, or they will not happen.
    Senator Coburn. So that would be a recommendation that we 
should be doing.
    Mr. Zakheim. Yes, it is. It is one of the written 
recommendations in the report.
    Senator Coburn. All right. Thank you, Mr. Chairman.
    Chairman Lieberman. Thank you, Senator Coburn.
    Thanks very much to the Commission members. Congressman 
Shays, do you have a final word?
    Mr. Shays. If you would allow me to thank personally 
Senator McCaskill and Senator Webb on behalf of the full 
Committee, and Senator Collins, and to you, Senator Lieberman, 
because you have shown tremendous interest through the course 
of our nearly 2\1/2\-plus years. I would say that all of us 
would tell you it was a privilege to have this opportunity, and 
we really appreciate your interest. It is nice to be on this 
side and be on the friendly side of you, Senator McCaskill. 
[Laughter.]
    Chairman Lieberman. That is very gracious of you. Thank 
you, Congressman Shays. Thank you for your service. I recall 
that at the beginning Senator McCaskill said that your services 
were being sought by many, and she was very glad that you 
agreed to take on this co-chairmanship. Knowing that the 
Commission expires in a week or so, I just hope you can find 
some way to continue to keep busy and perhaps stay involved in 
public service. [Laughter.]
    Mr. Shays. Thank you, Senator.
    Chairman Lieberman. I thank all the members of the 
Commission very much for your public service.
    We will call now on the representatives of the Defense 
Department and the State Department.
    The witnesses are Hon. Patrick Kennedy, Under Secretary for 
Management at the Department of State, and Richard Ginman, the 
Director for Defense Procurement and Acquisition Policy at the 
Department of Defense.
    Thanks to both of you for being here and listening to the 
testimony. Obviously, we are interested in your reaction to the 
Commission's report and what your respective departments intend 
to do about it. Obviously, if you disagree with any parts of 
it, we would welcome that as well. Thank you for your public 
service, too.
    Mr. Kennedy, I guess we will begin with you.

 TESTIMONY OF HON. PATRICK F. KENNEDY,\1\ UNDER SECRETARY FOR 
              MANAGEMENT, U.S. DEPARTMENT OF STATE

    Mr. Kennedy. Thank you very much, Mr. Chairman and Senator 
McCaskill. I have a longer statement that I would ask be made 
part of the record, and I will synopsize it to leave more time 
for questions.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Kennedy appears in the Appendix 
on page 71.
---------------------------------------------------------------------------
    Chairman Lieberman. Without objection.
    Mr. Kennedy. Thank you for inviting me today to discuss the 
Commission on Wartime Contracting's final report and the steps 
the State Department has taken, and continues to take, to 
improve contingency contracting.
    The State Department has been working with the Commission 
since 2008, gaining valuable insight. Our ongoing dialogue has 
been very beneficial in improving our contracting functions. We 
fully agree that contracting is a critical function that must 
have full Department support.
    State has increased oversight and made numerous 
improvements to our contracting program. We mandated up-front 
planning for contract administration and major programs. We 
increased the number of contracting officer representatives 
assigned in the field in Iraq and Afghanistan. On major 
acquisitions, the State Department has increased the 
competition and the number of awardees. The State Department 
has actively engaged with the Office of Federal Procurement 
Policy on preparing the policy letter on inherently 
governmental performance. The State Department is working with 
the Department's Inspector General to strengthen the suspension 
and debarment process, and State and USAID place considerable 
emphasis on sustainability as part of the planning and 
execution of all our programs and projects. My written 
testimony provides details on these improvements in the context 
of the CWC's recommendations, so I will only highlight these 
few.
    The State Department appreciates the Commission's list of 
risk factors when deciding whether to contract in contingency 
situations. We consider these factors when evaluating whether 
to use contractor support. In Iraq and Afghanistan, we 
primarily contract to provide life support, security services, 
and aviation support, which allows us to carry out our core 
diplomatic and consular missions. We do not believe that these 
support contracts have resulted in a loss of our organic 
capability.
    The State Department has a long history of using contract 
guards for protection of our facilities and personnel overseas. 
Private security contractors are also critical to our 
capability to carry out U.S. foreign policy under dangerous and 
uncertain security conditions. Maintaining this capability is 
particularly important when the Department is expanding its 
mission in locations that are emerging from periods of intense 
conflict, as in Iraq and Afghanistan.
    We have sought to reduce risks through robust oversight of 
our security. Contractors are overseen and contractually 
managed by direct hire State Department personnel. We have 
instituted cultural training and behavioral standards, and when 
private security contractors have acted inappropriately or not 
performed as required, we have taken serious corrective action.
    The Baghdad and Kabul guard forces, like other guards, 
serve as our first line of defense for facilities and staff, 
but they differ from our typical guards in other locations in 
the world. They have higher recruiting, screening, and training 
requirements; a higher percentage of American and third-country 
national personnel; and possess specialized weapons and 
equipment to counter the extreme threats in those countries.
    The recent terrorist attacks in Kabul illustrate the 
critical need for a robust security program, including properly 
equipped and trained contract security personnel who are 
operationally overseen by direct hire members of State's 
Diplomatic Security Service and act in concert with host nation 
security forces. During the Kabul embassy attack, the embassy's 
security elements acted swiftly to protect embassy staff and 
Afghan visitors, moved them to safe locations, assumed 
defensive positions, and took defensive actions as directed by 
the Chief of Mission.
    Increased oversight of security contractors is an area 
where CWC's recommendations have been particularly helpful. We 
have instituted operational measures and direct oversight of 
security contractors by the Bureau of Diplomatic Security (DS). 
Their actions for management oversight and operational control 
of security contractors include, among others: DS special 
agents at each post in Iraq and Afghanistan serving as managers 
for the Static Guard and Personal Protective Security programs; 
DS special agents at each post serve as contracting officer's 
representatives for the direct management and oversight of the 
Worldwide Protective Services contract; video recording and 
tracking systems in vehicles enhance oversight and contractor 
accountability; and all radio transmissions are recorded in 
Iraq.
    State experiences, obviously, as you well know, Senators, 
continuous contingency requirements around the world, and our 
U.S. Government contracting staff is experienced with these 
situations. The Commission recommends a deployable cadre of 
acquisition professionals so that the U.S. Government will not 
rely on contractors for acquisition management oversight. The 
State Department does not use contractors for these functions. 
Only U.S. Government staff provide contracting management and 
oversight. We use contractor staff only for administrative 
support in those areas. When contingency contracting is needed, 
the State Department deploys experienced contracting personnel 
from Washington or our regional offices and surges other 
resources to specific contingency operations.
    Through internal funding mechanisms, a 1-percent fee that 
we charge ourselves on each contract, the Department is able to 
draw upon its own resources, and we have hired 102 additional 
staff over the past several years. State centralizes 
procurement operations in the Office of Acquisitions Management 
in Washington and its subordinate regional procurement offices 
around the world, staffed by government employees. We have 
found this to be an effective model in contingency operations 
not only in Iraq and Afghanistan but also in Haiti after the 
earthquake and Japan after the earthquake and tsunami.
    The State Department does not see a separate contingency 
contracting cadre as efficient as it would not avail itself of 
the experience we already have on hand and have developed. The 
Assistant Secretary of Administration has a professional 
acquisition staff that can handle up to $9 billion in 
contracting a year. The Department continues to take steps to 
improve and elevate the status of its contracting program.
    In 2010, Secretary Hillary Clinton issued the Quadrennial 
Diplomacy and Development Review (QDDR), which promotes 
American civilian power to advance our national interests and 
be a better partner with DOD. The QDDR calls for a new bureau 
to deal with conflict prevention and stabilization, which will 
assess needs for contingency resources.
    One of the QDDR's key outcomes is working smarter to 
deliver resources better, including managing contracting to 
achieve our mission more efficiently and effectively. As we 
have begun to implement the QDDR, we have created a Contracting 
Officer Representative Award, and a first awardee has already 
been selected.
    In April, we provided guidance on critical work elements to 
be included in performance appraisals for both contracting 
officer representatives and government technical monitors. And, 
in addition, we require that for every service contract with 
expenditures exceeding $25 million a year, the Assistant 
Secretary of the relevant bureau certify that appropriate 
resources have been identified to manage the contract.
    State will continue to improve our contracting oversight 
and management because we know that there is more to be done. 
We believe our current organizational structure is the most 
effective way to do that, and we currently have a senior 
officer whose nomination is pending before the U.S. Senate to 
be the Assistant Secretary of State for Administration, and we 
look forward to her quick confirmation.
    Thank you again for inviting me to discuss this report, 
Senators, and I look forward to your questions. Thank you, Mr. 
Chairman.
    Chairman Lieberman. Thank you, Mr. Kennedy. That was very 
interesting testimony. I look forward to the questioning.
    Mr. Ginman, thanks for being here. Please proceed.

     TESTIMONY OF RICHARD T. GINMAN,\1\ DIRECTOR, DEFENSE 
 PROCUREMENT AND ACQUISITION POLICY, U.S. DEPARTMENT OF DEFENSE

    Mr. Ginman. Chairman Lieberman and Senator McCaskill, good 
afternoon. I welcome this opportunity to report to you on the 
Department's assessment of the Commission on Wartime 
Contracting final report. I commend the Commission on the work 
it has done to identify problems in wartime contracting and in 
recommending solutions to those problems. I have read all of 
the Commission's reports and believe they have identified many 
real and important problems.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Ginman appears in the Appendix on 
page 90.
---------------------------------------------------------------------------
    Like the Commission, the Department is dedicated to solving 
the issues behind each of the DOD-specific recommendations in 
its final report, and we agree in principle with the issues 
they raise. In today's opening statement, I will provide you an 
overview of the Department's preliminary reaction to the 11 
DOD-specific recommendations. There are nine that we embrace.
    First, using risk factors in deciding whether to contract 
in contingencies, which is their Recommendation 1;
    Developing deployable cadres for acquisition management and 
contract oversight, their Recommendation 2;
    Phasing out the use of private security contractors for 
certain functions and improving interagency coordination and 
guidance for using security contractors in contingency 
operations, their Recommendations 3 and 4;
    Taking actions to mitigate the threat of additional waste 
from unsustainability, their Recommendation 5;
    Setting and meeting annual increases in competition goals 
for contingency contracts, their Recommendation 10;
    Improving contractor performance data and use, 11;
    Strengthening enforcement tools, 12;
    And, finally, providing the adequate staffing and resources 
and establishing procedures to protect their interests, 13.
    While we agree with the concern raised with two other DOD-
specific recommendations, we envision a different approach to 
addressing the challenge. The Commission raises a concern with 
institutionalizing acquisition as a core function. This is 
embodied in the Commission's two recommendations to elevate the 
positions and expand authority to civilian officials, and to 
elevate the positions and expand authority of the military 
officials at the Joint Staff combatant commanders in the 
military services. Respectively, they are Recommendations 6 and 
7.
    From DOD's perspective, for true cultural change we need 
all of the leaders in planning for and management of 
contractors, both on and off the battlefield, to be 
knowledgeable. We do not believe consolidation in a single 
organization is the answer.
    I would like to highlight a few of the DOD-specific 
recommendations, in particular the Commission's Recommendation 
2, to develop a deployable cadre for acquisition management and 
contracting oversight. We support this recommendation to grow a 
trained, experienced, and deployable workforce, and the 
Department is taking steps to implement it. The Under Secretary 
of Defense for Acquisition, Technology, and Logistics is 
working with both the military services and the defense 
agencies to support these enduring requirements for contingency 
operations. Thanks to Congress, the Department has 10 new 
additional general and flag officer billets. The Department has 
filled nine of those. These military leaders will ensure 
continued attention to the need for a deployable acquisition 
personnel.
    Further, the Army established the Expeditionary Contracting 
Command following a recommendation in 2007 from what has been 
called the ``Gansler Commission,'' and that organization is led 
today by Brigadier General Joe Bass.
    Finally, the Department has some concerns with details 
within the 11 DOD-specific recommendations. The Department 
raised its concerns with the Commission when these same 
recommendations appeared in the second interim report. In these 
areas, we have a professional difference of opinion on the best 
way to proceed. While we support Recommendation 12 to 
strengthen enforcement tools, we do not believe this should 
include publishing a suspension and debarment official's 
rationale to not suspend or debar in the government-wide past 
performance database. In the second interim report, the 
Commission included such a recommendation. I believe that it is 
inappropriate to include information when the suspension and 
debarment found no grounds to either suspend or debar. I do 
believe that if it was based on poor performance, that should 
be adequately defined and supported within the past performance 
databases.
    I might add the Department has increased the use of 
suspension and debarments. Army suspension and debarment 
actions have increased 52 percent from 342 in 2007 to 519 so 
far in 2011. We have consistently advocated the policy that 
debarring and suspending officials need discretion to treat 
each case on its own merits.
    As further evidence of the commitment to strengthen 
enforcement tools, the Department has strongly supported two 
Senate bills in this area: One would expand the government's 
access to records in an overseas environment, and the other 
provides authority for DOD to avoid a contract or a subcontract 
if its funds directly or indirectly support the enemy.
    In closing, we are still in the process of fully assessing 
all of the recommendations, particularly those that did not 
appear in a previous report. Recommendation 5 to take actions 
to mitigate the threat of additional waste from 
unsustainability does fall in this category. We believe this to 
be a significant recommendation since it is very forward 
looking.
    We agree with the Commission that any fraud or waste is 
unacceptable and are analyzing the proposed way forward to 
address that challenge. The Department is determined to 
identify, correct, and prevent contracting efforts not in 
consonance with U.S. objectives in both Iraq and Afghanistan 
and that are wasteful of U.S. taxpayer dollars. These areas 
were a specific concern to the Commission, and we will continue 
to carry the torch to ensure improvements in the way forward 
for addressing contracting challenges in Iraq and Afghanistan.
    This concludes my remarks, and I would ask that my longer 
statement be entered in the record.
    Chairman Lieberman. Without objection, and I thank you, Mr. 
Ginman.
    We will do a 7-minute round of questions.
    Just so I am clear myself, do I understand that the way you 
look at the report, 11 of the recommendations are related to 
DOD and you accept 9 of them?
    Mr. Ginman. Well, we accept all 11 and believe that two--6 
and 7--that go expressly to elevating the positions, both the 
civilian positions and the military positions, we believe there 
is an alternative approach. From my perspective, I think 
military leaders in J2, J3, J1, J4, J7, all of whom are engaged 
in employing contractors on the battlefield, need to be 
knowledgeable and experienced, and creating a J10 organization 
that allows it to be deflected so it is not part of their 
responsibility I do not think is appropriate.
    I think Mr. Zakheim mentioned a cultural change, and I know 
that Senator McCaskill mentioned the training, particularly at 
the senior level. I would say that we need training not only at 
the senior level at the National Defense University; we need it 
at the junior officer level, the mid-grade level, and the 
senior level. Since contractors are going to be a presence in 
our future conflicts, we need all of the people that are 
engaged in that to be knowledgeable, understand it, and do it. 
So it is not that we do not----
    Chairman Lieberman. I agree.
    Mr. Kennedy, let me ask you if you would apply the same 
metric to the report. Do you accept all the recommendations 
related to the State Department?
    Mr. Kennedy. We accept the predicate that there never 
should be a case when a dollar of taxpayer money should not be 
appropriately managed. We believe that the predicates they have 
outlined addressed to the State Department should be met. We 
believe, however, sir, that we are meeting some of those 
already. The volumetric difference between the size of the 
State Department and how it deploys in contingency operations 
versus the size of the Department of Defense means that we 
would implement the predicate of the Commission's 
recommendations, but might do it in a better and more efficient 
way given our own size and our own thrust.
    Chairman Lieberman. Let me ask you a short question that 
could probably lead to long answers, but try to limit them, if 
you can.
    Looking back at the areas covered by the Commission, 
contracting in Iraq and Afghanistan, would you say that we used 
contractors too much or the right amount? Mr. Ginman, do you 
want to start?
    Mr. Ginman. I think that is a very difficult question to 
answer. The Chairman of the Joint Chiefs, 2 years ago, raised a 
concern that we were, in fact, overrelying on contractors.
    He kicked off a study to look at expressly where we were 
overreliant on contractors and had gone too far. When that was 
finished, Secretary Robert Gates, in January 2011, issued a 
letter to the services, to the chairman, and asked some very 
specific questions. The services are continuing to look at 
that, and we have not had feedback or reports from the services 
on whether they believe that they have overrelied or not.
    Chairman Lieberman. So was there a conclusion to the 
question that the chairman originally asked?
    Mr. Ginman. When they did it, they had high dependence in 
logistics and building partnerships, in corporate management 
and support, and in the net-centric area.
    Chairman Lieberman. Too high?
    Mr. Ginman. They described it as ``high dependence.'' The 
chairman has basically asked the services to now take a look at 
what we found and make a determination where you think you are 
and what you need to do.
    Chairman Lieberman. Mr. Kennedy, what about the State 
Department as you look back?
    Mr. Kennedy. As we look back, Mr. Chairman, in direct 
answer to your question, I believe that the Secretary in her 
Quadrennial Diplomacy and Development Review has identified 
that, when we do police training, rule-of-law training, which 
we have done extensively in Iraq and Afghanistan, we need to 
partner with other U.S. Government agencies and deploy more 
U.S. Government subject matter experts who are from within the 
various elements of the U.S. Government. So I think on that 
aspect we would--and we are, right now in both Iraq and 
Afghanistan, recasting our efforts to use more U.S. Government 
experts there. But in security, aviation, and life support, we 
believe the balance is correct.
    One codicil: I think we have learned a lesson that we have 
to deploy more contracting officer's representatives, U.S. 
Government employees, for oversight of those contracts in the 
field.
    Chairman Lieberman. Right. So you would say in that one 
area probably too much reliance on contractors, in the others 
probably not.
    Mr. Kennedy. Not, sir.
    Chairman Lieberman. Helpful answers.
    The Commission has said in its report that it believes 
future waste resulting from the inability of the Iraqis and 
Afghanis to sustain projects will be as big as the waste that 
the Commission attributes to poor planning and oversight--in 
other words, the high numbers, $30 to $60 billion.
    I wanted to ask you for your reaction to that prediction 
and, really more to the point, your reaction to the 
Commission's assertion, and that it ``sees no indication that 
the Defense Department, the State Department, and USAID are 
making adequate plans to ensure that host nations will be able 
to operate and maintain U.S.-funded projects on their own.'' So 
that is a worry. That may not be U.S. taxpayer dollars 
operating them, but obviously it is U.S. taxpayer dollars that 
made the investment.
    Mr. Kennedy. Senator, that is an exactly broad but 
absolutely correct question. I believe that my colleagues in 
USAID and my colleagues in the State Department who do law 
enforcement and rule-of-law training are engaged with their 
respective partners in Afghanistan and Iraq. It is a question 
that was raised earlier. The gross national product of 
Afghanistan is not very large. It is a country with extreme 
potential. But until we build up a base there, until we build 
up their economic capabilities, it is a question about whether 
or not they can sustain them. However, unless we give them the 
roads, the hospitals, the schools that they can then grow their 
economy, we would be in a perpetual negative loop.
    And so I think we are doing what we can. I think our 
partners are doing what they can. Should they do more? Will we 
try to get them to do more? Absolutely, sir.
    Chairman Lieberman. Mr. Ginman, how would you answer that?
    Mr. Ginman. It is clearly an important question. I would 
say that we documented in the fall of 2010, a requirement for 
all of our construction contracts to go through at 16 different 
no-go definitions, one of which is expressly to look at 
sustainability and whether the project can be sustained for the 
long haul. I know that Senator McCaskill asked earlier, could 
people provide documentation.
    Chairman Lieberman. Right.
    Mr. Ginman. Since October 2010, where we are, in fact, 
looking at sustainability and the corps has asked that, my 
presumption will be that the files will document that we, in 
fact, looked at sustainability.
    Chairman Lieberman. That is a great transition. Time is up 
on my side. Senator McCaskill.
    Senator McCaskill. Thank you. Let me follow up with that.
    Can you identify for me who would have made the decision to 
build the power plant in Kabul?
    Mr. Ginman. I am sorry. I do not know the answer to that.
    Senator McCaskill. Would you see if you could get that for 
my office?
    Mr. Ginman. We will do that.

                  INFORMATION SUBMITTED FOR THE RECORD

    The Department's understanding is that a decision was made 
in 2007 by the Administration, per the request of the 
Government of the Islamic Republic of Afghanistan (GIROA), to 
proceed with the power plant in Kabul, which was implemented by 
the U.S. Agency for International Development.

    Senator McCaskill. And we are going to hold a hearing on 
Afghanistan in Armed Services tomorrow, and my line of 
questioning--I hate to show my hand because that means there 
will be 14 people working tonight somewhere harder than they 
should. But I need to know who made this decision and what were 
they thinking. How do you build a $300 million facility without 
checking to see if the country can afford to operate it and if 
there is an alternative that is cheaper?
    And, by the way, I am using this as an example, but if 
somebody says that example is not fair, I got five or six other 
ones that immediately come to mind that could also be used as 
examples. And I am trying to figure out why the reality of the 
situation is not matching up. And this notion that you are 
going to do better about when our money is going to the bad 
guys, I do not know how you are going to do that in 
Afghanistan. And if you know how you are going to do that, you 
need to let the folks over there know because I do not think 
they know how to do that.
    Mr. Ginman. It was either Senator Levin or Senator 
Lieberman who asked a question earlier about the task force. 
The task force that was especially set up to do that is Task 
Force 2010, led by Brigadier General Ross Ridge. One of the 
commissioners mentioned the $360 million number. That was 
expressly out of Task Force 2010 where they have looked at $30 
billion worth of contracts and they have looked at $1.5 billion 
in actual cash transactions flowing through the financial 
system in Afghanistan. That is where we are attempting to do 
it.
    They are also the organization that is helping us with 
vetting contractors beforehand so that we can make better 
choices with to whom we are awarding the contracts. It is a 
challenge.
    Senator McCaskill. Especially when we are trying to keep 
our contractors from getting killed, because we are paying off 
the bad guys to provide some level of security for the projects 
that are ongoing. Once again it seems to me that is something 
we should calculate in the sustainability question. If we 
cannot build it without paying the bad guys to keep our 
contractors from getting shot, then why are we building it?
    Mr. Ginman. One of the other 16 elements is to look at are 
we in a safe environment and can we protect where it is at.
    Senator McCaskill. I am sure, Mr. Kennedy, you might have 
expected this, but, obviously, as a former auditor, nothing is 
more frustrating than when somebody you are auditing tells you, 
``Well, you cannot have a record because part of what you may 
want is relevant to you, but part of it may not be part of your 
auditing jurisdiction. It is another auditor that has 
jurisdiction over that. So, therefore, we are not going to give 
it to you.'' And, of course, I am referencing your letter to 
Stuart Bowen, SIGIR, that was this summer, saying that you 
thought because they were asking for documents that dealt with 
something outside the reconstruction area, since this was 
security contracts, that somehow it overlapped with the 
diplomatic function and, therefore, you did not think you could 
give those documents.
    Would it be helpful if I asked for the same documents and 
then gave them to Stuart Bowen?
    Mr. Kennedy. We always try to be responsive, Senator, to 
the Congress, but if I could take a couple of seconds to 
explain that.
    We receive oversight in our activities around the world by 
the Government Accountability Office, who you yourself 
described in your opening statement as ``the eyes and ears'' of 
this Committee. We also have the State Department's Inspector 
General who looks at all the activities of the State Department 
and has a special office forward-deployed in the region for 
oversight of our activities in Iraq and Afghanistan, as does 
the Government Accountability Office have office and bed space 
in both locations.
    Ever since Mr. Bowen's office was established, they have 
been auditing the reconstruction efforts in Iraq and 
Afghanistan, and we have cooperated with him and provided him 
information that he has asked for. He recently asked to inspect 
the security platform that the State Department provides for 
U.S. Government civilian employees and the same security 
platform that we provide around the world for U.S. Government 
employees. And we said to him, as I said in the letter, that 
this is an activity that is part of the jurisdiction of the 
Government Accountability Office or the State Department's 
Inspector General. This is not inherently part of the 
reconstruction activities.
    We are cooperating fully with Stuart Bowen, and I 
personally have met with Stuart Bowen and made sure that he has 
gotten everything he needs to inspect his reconstruction 
mandate. But when he moves to inspect other activities of the 
State Department that are the province of someone else, it does 
raise a question about jurisdiction.
    Senator McCaskill. And I get that. I understand the point 
you are making. It is just you have to understand when you tell 
an auditor they cannot look at something, that is the 
proverbial red cape when you do that. And so we will go down 
this road and figure out what is the information that has been 
requested and who needs to ask for it.
    Maybe this is a good time to say perhaps it would be better 
to have a Special IG with broad and complete jurisdiction over 
all activities for contingencies that would touch--yes, there 
is an Inspector General at the State Department, and they have 
done some great work. GAO does some great work. But this 
Congress also decided we also needed reconstruction auditing, 
which, of course, I think was obvious and remains obvious.
    In fact I have gotten pushback on this subject from your IG 
and from some of the other IGs that we should not have a 
Special IG for contingencies. What is your view? Do you think 
it would be good to have a standing Inspector General with 
expertise that would look at everything in a contingency, 
including reconstruction, since reconstruction is part of the 
military mission?
    Mr. Kennedy. Well, I cannot address the military mission, 
but let me address any activity that is carried on by the State 
Department, and I believe that it is more appropriate and best 
use of the taxpayer's dollar to have that done by entities that 
are extant, that work with the State Department every day, who 
know our mission, who know how to read our books, and who can 
act quickly. And I believe that, therefore, no, a Special IG is 
not necessary. I believe that the competence and the expertise, 
for example, of the International Division of the Government 
Accountability Office and of the State Department's Inspector 
General, or the Inspector General of the Agency for 
International Development when you are in the foreign 
assistance arena, are much more appropriate, much more 
targeted, much more knowledgeable than, as the Commission said 
a small cadre of people who would somehow expand--they never do 
explain where these other auditors are coming from.
    Therefore, I have no idea to be able to answer your 
question in a more full sense, Senator. Where are these 
auditors coming from? What is their expertise in international 
affairs or in auditing in these overseas activities when you 
have the International Division of the Government 
Accountability Office, backed up by their full range of 
expertise and the full range of either the Inspector General of 
the State Department or the Inspector General of the Agency for 
International Development? It seems one too many.
    Senator McCaskill. Well, I do not think there is ever too 
many auditors, and I do not think it is one too many because, I 
mean, I am not sure that we need the Special IG, but I do know 
this: That the notion that we do not complement and/or augment 
IGs when we are talking about the kind of money we are spending 
in contingencies, particularly as it relates to security and 
reconstruction and logistics, that what has happened in this--
and if you have dug down like this Commission did, if you have 
spent the time at this that I have you know that there is so 
much--I mean, figuring out who is it that decided to build that 
power plant that wasted $300 million of taxpayer money? Was 
USAID in the room? Did the military make that call? It is hard 
for me to believe the USAID was not in the room.
    So we have these cross-jurisdictions here that require 
somebody to be able to come in that is looking at the big 
picture. And I guess, I do not think anybody else has asked for 
the documents that SIGIR asked for. No one else is doing this 
investigation. This is not duplicative. And I think that we 
have to look at how we get the documents to SIGIR that they 
have requested. I do not think that they are making requests 
that are unreasonable or unfair because security is part of 
reconstruction. You just heard me ask Mr. Ginman that security, 
as it relates to the ability to do reconstruction, is one of 
the sustainability tests.
    Mr. Kennedy. But that is not, Senator, what Mr. Bowen was 
asking for from the State Department. He was asking for the 
documents related to the contracts where the State Department 
protects its own people or protects other civilian employees. 
He was not asking for documents related to contractors' 
security. He was asking for the----
    Senator McCaskill. Is there a security reason that you do 
not want this out?
    Mr. Kennedy. No.
    Senator McCaskill. OK.
    Mr. Kennedy. We will be glad to send it up to your staff--
there is a long list of reports that our Inspector General has 
done on State Department activities in Iraq, including on 
security, as well as the Government Accountability Office. So 
it is a matter that has been widely looked at. And I am not 
attempting to hide anything. To be blunt, I have the Government 
Accountability Office looking at my work, and I welcome that. I 
have the State Department's Inspector General looking at my 
work, and I welcome that. But there is a limitation of how much 
time I can pull people off the line, so to speak, to answer 
questions from still another Inspector General. And why not the 
Inspector General of the Agriculture Department, whose people I 
protect, or the Inspector General from the Department of 
Commerce, whose people I protect?
    Senator McCaskill. I guess the answer to your question is 
that I do not think you get to make that call. I do not think 
that is your job. I think the job is for you to respond to 
requests that are legally made. If this is not a legally made 
request, then you do not have to respond to it. I respect that. 
And we will get to the bottom of it and hopefully work together 
and figure out if this is a legally made request.
    But if Congress devises this oversight and they are there 
and they legally have the ability to look at you, then you do 
not get to say no just because you have too many. I think that 
is the bottom line. But if this is not a legally made request, 
if they do not have jurisdiction, I will be the first to take 
your side of it, and then I will probably ask you for the 
documents.
    Mr. Kennedy. And I will be glad to come up, Senator, and 
meet with you at any time to discuss why I believe it is 
outside their jurisdiction.
    Senator McCaskill. We will definitely follow up with you. 
We will definitely follow up with your staff, and thank you 
both very much.
    Mr. Kennedy. I am always at your disposal.
    Senator McCaskill. Well, I do not know about that. You do 
not want to take too many people off the line now. [Laughter.]
    Thank you very much.
    Mr. Kennedy. I will find the time for you, Senator.
    Chairman Lieberman. Thank you. This may not have been a 
grand bargain, but it was a grand discussion and a grand 
debate, and I thank you for it.
    I have just a few more questions, and then we will let you 
go. One is very recent and direct, Under Secretary Kennedy, 
which is that obviously we know our embassy in Kabul was 
attacked recently. I am curious whether that has led to any re-
evaluation of the role of private security at the embassy, or 
do you feel that they performed, from what you know now--I know 
it was recent--adequately in that situation?
    Mr. Kennedy. Mr. Chairman, we have looked into this 
extensively. We have been in contact with the State 
Department's regional security officer, the Diplomatic Security 
Service senior representative on the ground, as well as with 
the Ambassador. The contract security personnel operating under 
the direction of the Diplomatic Security U.S. Government 
officials operated superbly. When the attack began, they moved 
personnel into safe locations, they took up defensive 
positions, and they were prepared to engage in any appropriate 
defensive act should the insurgents have moved on the compound. 
Instead, the insurgents did stay off in the upper floors of 
another building and fired upon us, and from time to time, 
under regional security officer direction, we did return fire 
on specific targets.
    We think that is the right way to go, Senator. We think 
there must be a balance between contract security personnel and 
then strong oversight by Diplomatic Security Federal special 
agents overseeing them.
    I have a cadre of 1,800 Diplomatic Security special agents 
for the entire world, all our activities in the United States 
to combat passport and visa fraud, protection of distinguished 
foreign visitors, and then 285-some diplomatic and consular 
operations around the world, many of which you visited. I do 
not have a government cadre. We even ran some numbers of 
looking at other government agencies from whom we could borrow 
personnel. If I had to replace all my security contractors in 
Iraq and Afghanistan with U.S. Government employees, I do not 
think there would be anyone left to administer Federal law 
enforcement.
    Chairman Lieberman. I hear you. One, I am glad that your 
review of the performance of the private security guards when 
the embassy in Kabul was attacked has led to a positive result. 
That is encouraging.
    Two, my own experience with the security at the embassies 
that I visit as I travel around, particularly in Afghanistan 
and Iraq, is really quite high.
    Mr. Kennedy, you said something in your testimony that was 
really intriguing to me, and I want to just ask you to flesh it 
out a little bit, which is this 1-percent fee, if I understand 
it correctly, charged on all contracting services to fund 
contract management. Are you charging the contractors? Are you 
sort of taking it off the top of what they otherwise would be 
paid? How does that work?
    Mr. Kennedy. If I could, Senator, when I came back to the 
State Department in 2007 from being on loan as the Deputy 
Director of Management at the Office of the Director of 
National Intelligence, I sat down and met with my colleagues 
and saw that there had been significant growth in the State 
Department's demand for contracting services. But because of 
budgetary and other constraints, the level of professionals in 
our Office of Acquisitions had not grown concomitantly, and I 
saw that was a train wreck we were heading for.
    I consulted my lawyers, my own expertise of 30 or more 
years with the government, with the Office of Management and 
Budget, and with our oversight committees. We have an authority 
in the State Department called ``the Working Capital Fund.'' 
This is a fee-for-service authority, somewhat akin to the 
Industrial Fund that the Department of Defense uses for some 
activities. I then said in order to make sure that I can issue, 
analyze, execute, and administer contracts appropriately, I am 
going to charge the ordering office--the Bureau of Diplomatic 
Security, the Bureau of Consular Affairs--a 1-percent fee for 
every contract that they put forward to the Office of 
Acquisitions. And then I moved all the people in Acquisitions 
under the Working Capital Fund.
    Now, as their workload grows or decreases, they have the 
resources that parallel the volume of their work, which is why 
I believe, in sort of a further answer to one of your earlier 
questions, that we do not need a Contingency Contracting Cops 
because I, in effect, have created that already within the 
State Department. Should our workload grow, I have the 
resources to bring in additional personnel.
    Chairman Lieberman. Just to make it clear. Is that money 
coming from money that would otherwise be paid to the 
contractors? Or is it coming from funds appropriated to those 
particular offices?
    Mr. Kennedy. Funds appropriated to those particular 
offices, sir. That way the contract, there is no chance of the 
contractor influencing it. This money is paid in when you ask 
for a contract to be worked on long before the contract is ever 
issued.
    Chairman Lieberman. And I presume that the offices or 
agencies you are taxing are not appealing?
    Mr. Kennedy. No, sir. This has been in effect for over 3 
years now, and they are actually very pleased with this, for 
two reasons: First, there is not a long and pending queue of 
acquisitions to be done because of the growth of demand and the 
lack of supply of my professional contracting colleagues; and, 
second, this creates a partnership where the Bureau of 
Administration's Office of Acquisitions has the personnel in 
Washington to do contract administration in partnership with 
the contracting bureau's overseas representatives. So it makes 
for efficiency and effectiveness. I do not have a single 
protest. In fact, it is much welcomed.
    Chairman Lieberman. Mr. Ginman, so talk to me a bit about--
because you accepted Recommendation 2, you said, about 
developing a deployable cadre of contract management experts. 
Does such a thing exist now in the Defense Department?
    Mr. Ginman. I will step back to the 2006 time frame when 
Army Secretary Peter Geren asked Dr. Jacques Gansler to form a 
committee and look at it. Their recommendation was, 
particularly for the Army, that there needed to be a deployable 
cadre. The Army stood up in 2009 the Army Acquisition Command, 
and one of those organizations was called the Expeditionary 
Contracting Command.
    Chairman Lieberman. This was civilian?
    Mr. Ginman. The Expeditionary Contracting Command has both 
military and civilian personnel, and it is principally 
military. It was first headed by Brigadier General Camille 
Nichols, now headed by Brigadier General Joe Bass. The Army has 
grown from, I want to say, in 2007 from about 250 military 
contracting officers, they have more than doubled that number. 
Today, it is roughly 550 military contracting officers. I can 
get the exact numbers.

                  INFORMATION SUBMITTED FOR THE RECORD

    In 2007, there were 240 authorized Army military 
contracting officers (known as career field 51C); in 2012, 
there are 583, which is a 143 percent increase of deployable 
personnel. These active-duty 51C military officer positions are 
located within the Army Expeditionary Contracting Command.

    Chairman Lieberman. Are they a mix of active Guard and 
Reserve?
    Mr. Ginman. They are active. They are a mix of officer and 
enlisted. There are currently six brigades that are developed. 
There is a seventh that is now being staffed and manned that 
will principally support the Africa Command mission. Somebody 
mentioned Haiti earlier. When Haiti took place, the 
Expeditionary Contracting Command literally within 24 hours had 
one of their deployed units in the theater to be able to do the 
contracting.
    The Air Force, frankly, has provided the vast majority of 
our military contracting officers in Iraq and Afghanistan, so 
the Army's increase is welcome by the Air Force. It allows them 
to step back the number of people they need to provide.
    Chairman Lieberman. How about the Navy and the Marines?
    Mr. Ginman. Well, the Navy, by and large, since they deploy 
from a ship's perspective, does not have a major contingency 
force. They do have the Seabees, and each of the Seabee units 
has a contracting capability within it.
    The Marine Corps 4 years ago completely revamped the way it 
thought through military contracting officers, revamped their 
training program, put it into a 16-week program, 8 weeks for an 
enlisted and then a rotational experience, and then another 8 
weeks later the officers go through for 16 weeks. It is very 
focused to, in fact, get the level that they need so that they 
can support each of the deployable units.
    The Marine Corps now in Afghanistan gives operational 
control of their contracting organization over to the Joint 
Contracting Command that is in theater.
    Chairman Lieberman. So to rephrase the question I asked the 
Commission members when they were here, we are winding down in 
Iraq and Afghanistan. We will negotiate with the stand-up 
governments of both countries the extent to which we have 
troops continuing there. Say it is 2015, 2016; another overseas 
contingency operation arises. Are you confident that the 
Department of Defense and the Department of State will be more 
prepared to oversee private contracting in that contingency 
than we had at the beginning of Iraq and Afghanistan?
    Mr. Ginman. I am comfortable that we will. We spent 2 years 
looking at--we used, I want to say, October 2008 as the 
baseline for the actual level we had in Iraq and Afghanistan 
and went through a major effort from what they call adaptive 
planning on the personnel side to say where we are with people. 
That effort is working through the Joint Staff, the J1, the 
personnel crowd, to ensure that we have the resources 
established there.
    The question as we go forward certainly in the budget style 
where we are in is what is the level of risk we are going to 
go? It is on the table in a discussion. I do think from a 
cultural perspective that the senior military leadership, non-
contracting officers now understand the importance of the 
overall management of contractors on the battlefield. I think 
the Chairman of the Joint Chiefs has embraced it, the Joint 
Staff has embraced it. General Kathleen Gainey, who just left 
her J4, certainly understood it. The Director of the Joint 
Staff issued a letter 4 or 5 months ago assigning very specific 
responsibilities to each of the Joint Staffs and what their 
responsibilities were.
    So I think as we go forward and in the development that we 
have done in what we call operational contract support and the 
documentation, we have made significant strides over the last 2 
or 3 years, and we are continuing to make that. So I think if I 
fast-forward another 3 or 4 years, will we be much better 
prepared? Yes, we will.
    Chairman Lieberman. Good. Would you consider implementing 
in the Department of Defense this 1-percent fee or something 
like it that the Secretary talked about?
    Mr. Ginman. We have activities today that are Working 
Capital Fund. There are contracting offices that, in fact, 
charge a fee. I headed, when I was on active duty, the 
contracting office at the Naval Sea Systems Command. We were 
mission funded, so we were given the number of people that was 
needed.
    My personal philosophy would be if your principal person 
who was going to provide you money is the organization that you 
are part of, you should be mission funded. In fact, if I take 
the Defense Information Systems Agency, where they are getting 
requirements from a great many other agencies and they are 
coming in, then they do exactly what the State Department is 
doing. And as the money comes from the Army, Navy, or Air 
Force, there is a fee charged. Some are as low as a half a 
percent. I think I have seen fees up to 1.5 percent. They are 
different. But, by and large, I would expect most organizations 
to be mission funded. In those organizations where you have a 
broad breadth of people bringing money to you, for them to then 
mission fund that level, not knowing for sure, I think to Mr. 
Kennedy's point, it becomes fungible and you can flex up and 
down. That is an important capability to have.
    Chairman Lieberman. Fine. Ready in 2016 for a contingency?
    Mr. Kennedy. Mr. Chairman, I believe so. As I mentioned 
earlier, in the last 3 years we have hired 102 additional 
contracting personnel, both professionals and support 
professionals, to engage in our activities. I think we can flex 
up because of our fee-for-service.
    I could note that when we had the earthquake in Haiti in 
2010, our Regional Support Center for Latin America, which is 
based in Fort Lauderdale, Florida, supported them immediately. 
I had already had a contracting officer in Benghazi when the 
U.S. first staffed up during the conflict in Libya. And right 
now, or at least recently, there was another officer who 
especially was more focused on real estate activities, to bring 
the right real estate under contract already on the ground in 
Tripoli.
    Chairman Lieberman. Well done.
    Mr. Kennedy. So we believe that we are prepared, Mr. 
Chairman.
    Chairman Lieberman. Good. I thank you both for your 
testimony. I thank you for your positive reaction to the 
Commission's report. To the best that we are able, we are going 
to try to continue to monitor this because it is so important.
    Senator McCaskill's ad hoc Subcommittee on Contracting 
Oversight will take the lead for our Committee both in 
oversight and in bringing forward a legislative package based 
on the Commission's report. And, of course, I am sure that the 
Foreign Relations Committee and the Armed Services Committee 
will, too. But we will do it because we have broad 
jurisdictional responsibility across the entire government, and 
this problem of oversight and management of contracting 
obviously is not limited to the Departments of State and 
Defense in wartime, although the numbers there, of course, are 
very large.
    I thank you both for your continuing public service. I 
appreciate it a lot. It has been a good hearing. I think we 
have learned a lot, and I think we have a sense of mission 
about what we can do with you to make sure we do not repeat 
mistakes that we have made in the past.
    The record of the hearing will be held open for 15 days for 
any additional questions or statements.
    With that, I thank you again and adjourn the hearing.
    [Whereupon, at 5:05 p.m., the Committee was adjourned.]





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