[Senate Hearing 112-298]
[From the U.S. Government Publishing Office]
S. Hrg. 112-298
THE FINAL REPORT OF THE COMMISSION ON WARTIME CONTRACTING IN IRAQ AND
AFGHANISTAN
=======================================================================
HEARING
before the
SUBCOMMITTEE ON READINESS AND MANAGEMENT SUPPORT
of the
COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
----------
OCTOBER 19, 2011
----------
Printed for the use of the Committee on Armed Services
S. Hrg. 112-298
THE FINAL REPORT OF THE COMMISSION ON WARTIME CONTRACTING IN IRAQ AND
AFGHANISTAN
=======================================================================
HEARING
before the
SUBCOMMITTEE ON READINESS AND MANAGEMENT SUPPORT
of the
COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
OCTOBER 19, 2011
__________
Printed for the use of the Committee on Armed Services
Available via the World Wide Web: http://www.fdsys.gov/
__________
U.S. GOVERNMENT PRINTING OFFICE
72-564 PDF WASHINGTON : 2012
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COMMITTEE ON ARMED SERVICES
CARL LEVIN, Michigan, Chairman
JOSEPH I. LIEBERMAN, Connecticut JOHN McCAIN, Arizona
JACK REED, Rhode Island JAMES M. INHOFE, Oklahoma
DANIEL K. AKAKA, Hawaii JEFF SESSIONS, Alabama
E. BENJAMIN NELSON, Nebraska SAXBY CHAMBLISS, Georgia
JIM WEBB, Virginia ROGER F. WICKER, Mississippi
CLAIRE McCASKILL, Missouri SCOTT P. BROWN, Massachusetts
MARK UDALL, Colorado ROB PORTMAN, Ohio
KAY R. HAGAN, North Carolina KELLY AYOTTE, New Hampshire
MARK BEGICH, Alaska SUSAN M. COLLINS, Maine
JOE MANCHIN III, West Virginia LINDSEY GRAHAM, South Carolina
JEANNE SHAHEEN, New Hampshire JOHN CORNYN, Texas
KIRSTEN E. GILLIBRAND, New York DAVID VITTER, Louisiana
RICHARD BLUMENTHAL, Connecticut
Richard D. DeBobes, Staff Director
David M. Morriss, Minority Staff Director
______
Subcommittee on Readiness and Management Support
CLAIRE McCASKILL, Missouri, Chairman
DANIEL K. AKAKA, Hawaii KELLY AYOTTE, New Hampshire
E. BENJAMIN NELSON, Nebraska JAMES M. INHOFE, Oklahoma
JIM WEBB, Virginia SAXBY CHAMBLISS, Georgia
MARK UDALL, Colorado ROB PORTMAN, Ohio
MARK BEGICH, Alaska SUSAN M. COLLINS, Maine
JOE MANCHIN III, West Virginia LINDSEY GRAHAM, South Carolina
JEANNE SHAHEEN, New Hampshire JOHN CORNYN, Texas
(ii)
C O N T E N T S
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CHRONOLOGICAL LIST OF WITNESSES
The Final Report of the Commission on Wartime Contracting in Iraq and
Afghanistan
october 19, 2011
Page
Bash, Lt. Gen. Brooks L., USAF, Director for Logistics, J4, Joint
Staff.......................................................... 6
Kendall, Hon. Frank, Principal Deputy Under Secretary of Defense
for Acquisition, Technology, and Logistics..................... 16
Zakheim, Hon. Dov S., Commissioner, Commission on Wartime
Contracting in Iraq and Afghanistan............................ 20
Annex: The report titled: ``Transforming Wartime Contracting''... 77
(iii)
THE FINAL REPORT OF THE COMMISSION ON WARTIME CONTRACTING IN IRAQ AND
AFGHANISTAN
----------
WEDNESDAY, OCTOBER 19, 2011
U.S. Senate,
Subcommittee on Readiness and
Management Support,
Committee on Armed Services,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:35 p.m., in
room SR-232A, Russell Senate Office Building, Senator Claire
McCaskill (chairman of the subcommittee) presiding.
Committee members present: Senators McCaskill, Manchin, and
Ayotte.
Other committee member present: Senator Blumenthal.
Committee staff member present: Leah C. Brewer, nominations
and hearings clerk.
Majority staff members present: Peter K. Levine, general
counsel; and William G.P. Monahan, counsel.
Minority staff member present: Pablo E. Carrillo, minority
investigative counsel.
Staff assistants present: Jennifer R. Knowles, Brian F.
Sebold, and Breon N. Wells.
Committee members' assistants present: Joanne McLaughlin,
assistant to Senator Manchin; Brad Bowman, assistant to Senator
Ayotte; and Dave Hanke, assistant to Senator Cornyn.
Other committee member assistant present: Ethan Saxon,
assistant to Senator Blumenthal.
OPENING STATEMENT OF SENATOR CLAIRE McCASKILL, CHAIRMAN
Senator McCaskill. This hearing will come to order. Thank
you all for being here.
It is a special treat because we have the opportunity in
one hearing to have representatives of the Department of
Defense (DOD) and members of the very hard-working Commission
on War Contracting (CWC) that spent countless hours, dozens of
trips abroad, compiling an amazing report and record,
documenting, I think, the most significant issue facing
military readiness. That is how we handle contracting in
contingencies.
It is obviously something I have spent a great deal of time
on since I arrived in the Senate. It is something that I think
we simply cannot afford not to get fixed. I think it is very
unrealistic that we will ever get to a point that we will not
be relying heavily on contractors in any future contingency.
So, this is a core competency that we have really been behind
the curve on.
I will give a brief opening statement and then give my
ranking member, Senator Ayotte, a chance to make comments.
Thank you, Senator Blumenthal, for being here. I think it
is great that you are attending.
Then we will hear from the witnesses and have an
opportunity to answer questions.
The subcommittee today meets to consider the final report
of the CWC in Iraq and Afghanistan. The commission was
established pursuant to section 841 of the National Defense
Authorization Act (NDAA) for Fiscal Year 2008, a provision
which originated as a Webb-McCaskill amendment that was offered
and passed on the Senate floor.
More than 4 years ago, when Senator Webb and I began to
advocate for the creation of this commission, I was inspired by
my State'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.
Since that time, I have taken trips to Iraq and
Afghanistan, where I have seen with my own eyes the lack of
planning, inadequate oversight, and sheer waste in our
contingency contracting operations. I can tell a number of
anecdotal stories about my visits to both Iraq and Afghanistan
on contracting oversight trips. But I particularly remember the
time when I asked a general in Kuwait, where a lot of the
contracting work was done, ``how did this happen? How did this
get so out of control?''
This was near the end of my trip, when I had spent time in
Baghdad looking at the Logistics Civics Augmentation Program
(LOGCAP) contract and other contracts. This general was very
candid with me. He said, ``I wanted three kinds of ice cream in
the mess hall yesterday, and I didn't care what it cost.''
I think we owe the taxpayers better than that. I think even
though that is anecdotal, the CWC's report shows that it was,
in fact, factually correct. That there were literally billions
and billions and billions--and I could keep saying this,
getting all the way to $60 billion--that potentially went up in
smoke through waste, fraud, and abuse.
The CWC has been tireless in its examination of the flaws
in our wartime contracting policies and practices. Over the
last 3-plus years, the CWC has held 25 hearings, traveled to
Iraq and Afghanistan at least 15 times, and interviewed
hundreds of military and civilian Federal employees, contractor
employees, and contracting experts.
In many ways, the CWC has validated our worst fears about
the way we were contracting in Iraq and Afghanistan. The CWC
found that agencies over-rely on contractors for contingency
operations and that inadequate planning and lack of oversight
for such contracting have led to an exceptional level of waste,
fraud, and abuse. It is beyond distressing to think of how many
billions of dollars that we spent on contracting has been lost.
The CWC's report and recommendations go to the heart of how
we got into this mess, how we can avoid repeating a situation
where we are spending billions of dollars, and what we needed
an understanding and control over where the money is going.
The CWC's final report makes 15 recommendations, which fall
into 4 broad categories: recommendations for reducing the
Government's over reliance on contractors, recommendations for
organizational changes to provide greater focus on contingency
contracting, recommendations for additional staffing and
resources needed to improve oversight and management of these
contracts, and recommendations for changes in contracting
policies, including policies relative to past performance data,
suspension and debarment procedures, access to contractor
records, competition requirements, and jurisdiction over
foreign contractors.
I applaud the CWC for their thorough, comprehensive, and
bipartisan review and for the tremendous contribution they have
made to our understanding of the problems we face in
contingency contracting.
If the CWC's report becomes one more report sitting on the
bookshelf, this effort will have been a failure. Congress and
DOD will have missed a critical opportunity to serve our
military and the people of this great Nation.
That is why I am currently working with Senator Webb and
others on comprehensive legislation addressing the problems
identified by the CWC, which we plan to introduce later this
year. By providing senior DOD and CWC witnesses an opportunity
to discuss the steps that DOD has taken to implement the CWC's
recommendations, the extent to which these steps meet the
intent of the recommendations, and the basis for any
disagreement on the recommendations, today's hearing should
serve as an important milestone in the development of that
legislation.
I look forward to the testimony of our witnesses, and I
will now turn the microphone over to Senator Ayotte.
STATEMENT OF SENATOR KELLY AYOTTE
Senator Ayotte. Thank you very much, Madam Chairman. I want
to thank you so much for holding this hearing and for your deep
interest in this very important issue.
I welcome all of our witnesses today, and I particularly
want to thank Mr. Zakheim.
Thank you, Ms. Schinasi, as well as the other members of
the CWC for their important work, their tireless efforts. This
is a final report that I think not only members of this
committee, but every Member of Congress should read. So I
really appreciate your work, and certainly appreciate General
Bash and Secretary Kendall being here today to talk about this
report.
The CWC is an independent, bipartisan commission, as the
chairwoman mentioned, created by Congress in 2008, and this
final report represents the culmination of tremendous work that
has consisted of extensive research, hearings, meetings, and
the work of professional staff stationed full-time in Baghdad
and Kabul. I congratulate the CWC on this report.
I believe getting contingency contracting right is
particularly important for two primary reasons. First, ensuring
mission success in supporting our warfighters in Afghanistan
and Iraq demand no less, that we get this right. Sufficient
oversight of contracting may be decisive in determining the
outcome in Afghanistan and Iraq.
As General Petraeus said in his September 2010
counterinsurgency contracting guidance, ``The scale of our
contracting efforts in Afghanistan represents both an
opportunity and a danger. With proper oversight, contracting
can spur economic development and support the Afghan
Government's and International Security Assistance Force's
(ISAF) campaign objectives.
``If, however, we spend large quantities of international
contracting funds quickly and with insufficient oversight, it
is likely that some of those funds will unintentionally fuel
corruption, finance insurgent organizations, strengthen
criminal patronage networks, and undermine our efforts in
Afghanistan.''
I could not agree more. It is often said that contingency
contracting is the most powerful nonkinetic weapon on the
battlefield, especially in a counterinsurgency campaign. We
must not haphazardly, obliviously, or hastily contract. Doing
so can result in taxpayers' money ending up in the hands of our
enemies.
It is unacceptable for one dollar of ours and our
taxpayers' dollars to end up in the hands of our enemies, and
that is why this is so important. That is why Senator Brown and
I introduced legislation earlier this year called ``No
Contracting with the Enemy.'' We need to make sure that it is
easier for U.S. contracting officials to get out of contracts
with contractors who funnel taxpayers' resources to the enemies
of the United States.
Contracting in Kandahar in a war should not be treated the
same as contracting in Fort Hood, TX, in peacetime. I am
pleased that key provisions of our No Contracting with the
Enemy legislation were included in the NDAA passed by the
Senate Armed Services Committee.
I would also note that this legislation hasn't been brought
to the floor yet, and I am very hopeful and was encouraged by
the majority leader's statement 2 days ago that he was going to
bring forward the NDAA to the floor. I think this is just one
provision that is so important to getting that defense
authorization passed.
The success of our contracting must be viewed through the
metric of how well it supports our campaign objectives and the
mission outcome. Contracting must be thoroughly integrated into
all intelligence planning and operations. Contingency
contracting must not be viewed as a separate logistical
activity.
As General Petraeus said, contingency contracting is
fundamentally ``commanders' business.'' While General Petraeus
probably had ISAF commanders in mind, I would include the
leadership at DOD, Department of State (DOS), and the U.S.
Agency for International Development (USAID) in that statement
as well.
Our DOD witnesses, as well as their counterparts at DOS and
at USAID, I am sure will agree that oversight of contingency
contracting is a major, not a peripheral, part of their
responsibilities.
The second reason contingency contracting, and it certainly
doesn't come secondary to the first reason I talked about, is
because we are at war, and we are in a time of fiscal
austerity. We can't afford to waste a single dollar as we seek
to give our troops the resources that they need. Every dollar
wasted or spent inefficiently diverts resources away from our
mission and from protecting our country.
As ranking member of this subcommittee and also as the
spouse of a veteran, I am not going to sit by idly, and I know
that the chairwoman isn't either, and allow this to continue to
happen. For these reasons, I believe we must engage in a
serious and ongoing discussion to understand the current
challenges and the best way to address them.
However, let me be clear. I don't want to sit around and
admire the problem. The commission has concluded that between
$31 billion and $60 billion of taxpayers' funds have been lost
to contract waste and fraud in Iraq and Afghanistan. It is
outrageous.
If this is accurate--and, I think, given the thorough work
that was done by this commission, it is very accurate--we need
to implement the appropriate reforms without delay with a real
sense of urgency.
In order to help catalyze these efforts and to build on the
excellent work of the commission, yesterday I was proud to join
Senator McCaskill and Senator Webb in sending a letter to the
Comptroller General asking the Government Accountability Office
(GAO) to assess the actions of DOD, DOS, and USAID, in response
to the findings and recommendations of the CWC. We need to
clearly understand what these departments are doing to
implement the CWC's recommendations right now, and I am looking
forward to hearing from our witnesses on that issue today.
When there are areas of disagreement with the CWC's
recommendations, perhaps related to the right to appeal and the
establishment of a Joint Staff J10 element, I want to hear from
DOD, DOS, and USAID why they disagree and why they don't
believe that those recommendations should be implemented. I
think the onus is on DOD and certainly DOS to tell us why
shouldn't we implement them.
I think today's hearing will be an important part of the
effort to ensure that we are conducting proper oversight of
contingency contracting for the troops. The taxpayers, everyone
deserves nothing less.
Before I conclude, allow me to make a brief and related
comment regarding Iraq. Over the weekend, there were reports
suggesting that all U.S. troops would leave Iraq by the end of
the year. While Iraq is a sovereign country and immunity for
our troops is absolutely essential, and I certainly agree with
the administration on that, I believe such a hasty departure
may endanger a successful outcome in Iraq that has been made
possible with the ultimate sacrifice of over 4,400 Americans.
In addition, the precipitous withdrawal of almost all U.S.
troops by the end of the year will almost certainly invite a
new and dangerous round of problems related to contracting.
DOS's transition into Iraq as U.S. troops almost completely
withdraw simply cannot independently acquire and oversee the
scale and nature of contracted services that will be required.
That is a real issue and concern I think needs to be addressed
right away.
While DOS intends to rely on DOD for help, the pace and
extent of the administration's plan to withdraw the military
and transition the DOS into Iraq will expose the United States
to risks that taxpayers' dollars in support of the DOS's
diplomatic mission in Iraq will be lost due to the same
concerns--waste, fraud, and abuse--and perhaps, critically,
that much of the progress that our service men and women
achieved to help stabilize and rebuild Iraq could be
endangered.
I am very troubled by this, and I am hopeful that we will
also address this issue today. I am going to continue to press
for answers on this.
I also look forward to a discussion during today's hearing
related to DOD's investment in building facilities in support
of the military mission that the host governments will simply
not be able to sustain.
I look forward to hearing from all of our witnesses on
these important issues. Again, I thank you so much, Madam
Chairman, for holding this important hearing, and I thank the
witnesses for being here.
Senator McCaskill. Thank you, Senator.
We will begin our testimony with Lieutenant General Brooks
Bash. I think the lieutenant part of that, General, just
happened within a few months from today. So congratulations on
another well-deserved promotion.
Lieutenant General Brooks Bash is the Director for
Logistics, Joint Staff (J4), at the Pentagon. As the J4, he is
responsible for integrating logistics, planning, and execution
in support of joint operations to drive joint force readiness,
maximize the joint force commander's freedom of action, and
advising the Chairman of the Joint Chiefs of Staff on logistics
matters.
A proud graduate of the U.S. Air Force Academy, welcome
Lieutenant General Bash, and we look forward to your testimony.
STATEMENT OF LT. GEN. BROOKS L. BASH, USAF, DIRECTOR FOR
LOGISTICS, J4, JOINT STAFF
General Bash. Thank you, Madam Chairman.
First, let me personally thank you for your leadership on
this commission and the efforts this commission has had because
I think the perspective it has brought has been very valuable
to the military, from my review.
Ranking Member Ayotte and distinguished members of the
subcommittee, I am pleased to appear before you today to
testify on DOD's progress in enhancing our ability to plan for
and execute operational contract support (OCS) in contingency
operations.
As the J4, I advise the Chairman of the Joint Chiefs on the
entire spectrum of logistics, to include strategic and
operational planning and doctrines related to OCS. My staff and
I work closely with the Office of the Secretary of Defense
(OSD), the Services, and defense agencies to refine the
policies, doctrine, tools, and processes needed to effectively
plan for OCS.
I am pleased to report DOD has made significant progress to
improve the operational planning needed to effectively use
contracted support as a part of DOD's total force. I am
confident that our ongoing efforts will ensure that we meet the
warfighters' current and future needs, while judiciously
managing DOD's resources and balancing risk.
As Mr. Kendall and I noted in our written statement, DOD
uses contract support to operations to provide a number of
important capabilities, from fuel delivery to food service. We
have come to leverage contracting as an important force
multiplier to overcome fiscal, political, and cultural
realities. Contracting today is an important and necessary
capability for our forces.
Due to the ascendancy of contracting as an integral part of
military operations, the Joint Staff has led a variety of
efforts to institutionalize this critical capability to ensure
that when we go to war in the future, we are better prepared to
execute effectively and efficiently, and most importantly, to
provide the best possible support to the warfighter at a
reasonable cost. I am absolutely committed to this course set
by Admiral Mullen and affirmed by General Dempsey to ensure we
get this right quickly.
Institutionalization of OCS is a major effort that is well
underway and represents a major cultural shift in how we plan
for and execute military operations. We began this deliberate
effort in 2007, and we have made progress. We are committed to
continuing to strengthen OCS strategic guidance, doctrine,
policies, processes, and resources as expeditiously as
possible.
Much has been done to improve OCS, and our work will
continue. The underlying theme for future planning and
supporting processes involves closer links of contracts,
contractors, and operational effects to more rapidly and
decisively achieve the Joint Force Commander's intent.
We have significantly increased our focus on planning for
OCS to not only deliver supplies and services to the
warfighters in a responsible and cost-effective manner, but to
leverage the economic benefits of DOD's spending to achieve
national strategic and operational objectives.
In closing, I would like to emphasize a few critical points
with respect to DOD's increased use of contracted support.
First, I am convinced of the military advantage that this
capability brings when planned and used properly.
Our military's contracting capabilities enable us to
maintain a scalable, responsive, and cost-effective All-
Volunteer Force, while maintaining combat capabilities. In the
past decade, we have recognized that contracting delivers
important support to our troops, while advancing operational
objectives such as those required in the counterinsurgency
strategy or stability operations.
Our contracting professionals, logisticians, forward-
operating base mayors, and commanders in the field are
performing superbly in a challenging, dangerous environment
with limited resources and complex supporting policies and
processes.
The bottom line is that contracting is an important,
integral part of our military capability, and our efforts are
squarely focused on how best to accomplish the mission. I know
we share this objective with Mr. Kendall and the entire OSD
staff.
I would like to thank you and your staff for your insights,
observations, and close working relationship, all dedicated to
helping DOD improve wartime contracting. I believe that our
goals are absolutely the same as yours. We are in lockstep to
see that warfighters' needs are met, balancing operational
necessity with careful stewardship of our resources.
Again, thank you for the opportunity to appear before you
and I look forward to your questions.
[The joint prepared statement of Mr. Kendall and General
Bash follows:]
Joint Prepared Statement by Frank Kendall and
Lt. Gen. Brooks L. Bash, USAF
Chairman McCaskill, Ranking Member Ayotte, and distinguished
members of the subcommittee, it is our pleasure to appear before you
today to testify on the Department of Defense's (DOD) continuing
efforts to enhance our ability to execute contracting in the wartime
environment and to discuss the recent release of the Commission on
Wartime Contracting's (CWC) Final Report entitled, ``Transforming
Wartime Contracting: Controlling Costs, Reducing Risks.'' DOD has
worked diligently to have a strong, cooperative relationship with CWC
and together we succeeded in building that relationship over the CWC's
3-year life. Their reports have identified many real and important
areas in which we can improve. We would also like to thank the
Subcommittee for their interest in wartime contracting. We welcome the
opportunity to report to you on our efforts to provide the best
possible support to our warfighters in Iraq and Afghanistan as well as
to institutionalize concepts and processes that will enhance
Operational Contract Support (OCS) in future contingency operations.
our legacy
The Nation has always relied upon contractors to support military
operations, but not to the extent necessary in the conflicts in Iraq
and Afghanistan. During the Revolutionary War, the Continental Army
relied on contractors to provide basically the same things our forces
require today, such as supplies, services, construction, clothing, and
weapons. Over time, advances in warfare and technology have expanded
the functions and responsibilities of contractors in military
operations. For example, the first ``aviation'' support to U.S. forces,
the Balloon Corps of the Civil War, was fully contracted. Contractor
support enabled fleet readiness in the Pacific during World War II.
During the Cold War, force structure was determined by the size of the
enemy and the demands primarily associated with a global war against
another superpower in accordance with the National Security Strategy.
The United States maintained a large standing military force and, at
times, a draft to support these personnel requirements. This military
force was concentrated in combatant functions; we took some risk in
functions associated with support. For example, we never bought all the
transport aircraft required in planned operations, but relied on the
Civil Reserve Air Fleet to make up the shortfall. Many installations in
Germany were guarded by Civilian Support Group personnel and not U.S.
military personnel. This longstanding history of contractor support is
central to understanding our current reliance on contractors in
contingency operations.
After the Cold War ended, strategic planning called for
preparations against two nearly simultaneous regional conflicts.
Planning envisioned high-intensity but short duration conflicts like
the first Gulf War. Because anticipated wars were envisioned to be
shorter, the associated force requirements were smaller. Importantly,
we had transitioned to an all volunteer, fully professional Armed Force
after the conflict in Vietnam. The smaller-sized force again
concentrated U.S. military personnel in key combat competencies. The
experience of Operation Desert Storm seemed to confirm this view of
future conflicts--short, violent, and limited. As a result, our forces
remained structured such that when longer duration operations have
occurred, our all volunteer military has had little choice but to use
contractors as combat enablers, or force multipliers. In the three
largest contingency operations we have been involved in over the last
15 years--the Balkans, Iraq, and Afghanistan--contractors have
comprised approximately half of the Department's total force in
theater.
At the onset of the initial combat operations in Iraq, expectations
were that this would be a short conflict requiring fewer forces and
finishing within months. Again, our force and support structure was
built on the short duration model for any contingency. The prolonged
conflict required the continuous employment of large combat forces, and
the United States determined that we would conduct stability and
reconstruction operations in parallel with the ongoing combat
operations. The President set forth this national policy decision on
December 7, 2005, in National Security Presidential Directive 44,
Management of Interagency Efforts Concerning Reconstruction and
Stabilization. By the very nature of the mandate to engage in stability
operations, the United States is engaged in infrastructure and
reconstruction projects that require contractor support.
Because the actual operations in both Iraq and Afghanistan did not
meet the basic assumption of a short conflict, but ultimately
transitioned into long-term operations, we were unprepared to manage
the resulting number of contracts and contractors. Specifically, we had
acquisition resource shortfalls (insufficient deployable contracting
officers, untrained and untested contracting officer's representatives,
and inadequate requirements generation capability), lack of post or
camp management, and inadequate policy and doctrine to manage the total
force in a protracted engagement.
the requirement for contractor support
Our military services use contractors to provide essential services
and this does not change during contingency operations. Indeed, with
the continuing budgetary pressures, and the realities of military and
civilian force structure limitations, we will continue to outsource
those services which are not inherently governmental and where it does
not make sense to build organic force structure at a greater long-term
cost.
The Congressional Budget Office issued a report, ``Logistics
Support for Deployed Military Forces,'' in October 2005 which included
an analysis of the cost of having military units replace contractors.
The study concluded that, over the long term, using military units
would cost 90 percent more than using contractors and would have high
upfront costs associated with equipping the new units. The Gansler
Commission reached a similar conclusion. Using contractors to perform
non-combat activities augments the total force and can free up
uniformed personnel for combat missions. Contractors can be hired
quickly in most instances where there are shortfalls in force
structure, such as logistics and other support areas; they also can be
deployed quickly when necessary and then easily terminated when no
longer required.
As a result of both the limitations on an All-Volunteer Force and
the economics of the alternative of using military personnel, the
Department must institutionalize the ability to manage contractors on
the battlefield effectively. As then-Under Secretary of Defense Carter
testified in his hearing on March 28, 2011, to the Commission on
Wartime Contracting, `` . . . having contingency contracting be part of
the war plan and being an essential part of leadership training are
both indispensable in today's environment. We're simply not going to go
to war without contractors. We have to build that into what we call
readiness, what we call training, what we call leadership, and what we
call war planning.'' With the help of this subcommittee and numerous
other oversight organizations, significant strides have been made in
improving contingency contracting and contractor oversight and
management.
Contractors Supporting U.S. Central Command Operations
DOD currently has approximately 175,045 contractors in the U.S.
Central Command (CENTCOM) area of responsibility (AOR). (See Table 1.)
Table 1. DOD Contractor Personnel in the U.S. Central Command Area of Responsibility
(as of the fourth quarter of 2011)
----------------------------------------------------------------------------------------------------------------
Local/Host
Total U.S. Citizens Third Country Country
Contractors Nationals Nationals
----------------------------------------------------------------------------------------------------------------
Afghanistan Only................................ 101,789 23,190 27,912 50,687
Iraq Only....................................... 52,637 16,054 29,213 7,370
Other CENTCOM Locations......................... 20,619 5,684 14,727 208
CENTCOM AOR..................................... 175,045 44,928 71,852 58,265
----------------------------------------------------------------------------------------------------------------
These contractors provide a range of support, including base
support, security, translation, logistics, construction,
transportation, and training. In addition to the support they provide
to the military, we have leveraged our contractors to further our
policy objectives. Using contractors who are local nationals helps
develop the local economy and workforce, which contributes to stability
and effective counterinsurgency operations. Congress assisted the
Department in this area by incorporating section 886 into the National
Defense Authorization Act for Fiscal Year 2008, ``Acquisitions in
Support of Operations in Iraq or Afghanistan,'' as well as section 801
of the National Defense Authorization Act for Fiscal Year 2010,
``Temporary Authority to Acquire Products and Services Produced in
Countries Along a Major Route of Supply to Afghanistan.'' Both sections
are critical to gaining local support for the presence of U.S. forces
and maximizing employment in these countries to diminish the pool of
the unemployed, who are more easily drawn into the insurgency.
wartime contracting commission recommendations
As a result of the Department's close coordination with the
Commission on Wartime Contracting, we are largely in agreement with the
recommendations in their final report, as we were with their two
interim reports, and are well on the way toward implementing most of
them. The final report included 15 strategic recommendations, of which
11 were DOD-specific recommendations and 4 were directed at Congress.
The Department of Defense agrees in principle with all 11 of the DOD-
specific recommendations. Of these, we would like to highlight a few
today.
We support the Commission's recommendation to grow a trained,
experienced, and deployable cadre. This is the Commission's
recommendation #2, and the Department is taking steps to implement it.
The U.S. Army's Expeditionary Contracting Command, which stood up in
2008, serves as our deployable cadre. Thanks to Congress, the
Department has 10 new acquisition General and Flag Officer billets, and
1 of them heads this deployable cadre.
We support recommendation #11 to ``improve contractor performance-
data recording and use'' and have worked with the Office of Federal
Procurement Policy (OFPP) on FAR and DFARS changes to improve reporting
of contract performance data. In doing so, we have sought to preserve
the ability for contractors to appeal adverse findings in a manner that
does not impede timely reporting.
We also support recommendation #12 to ``strengthen enforcement
tools.'' The Department has increased the use of these enforcement
tools--from fiscal year 2007 to 2011, the number of Army debarments has
increased 89 percent (from 94 debarments to 178)--but we rely on the
discretion of Debarring and Suspension Officials to treat each case on
its own facts and circumstances. In analyzing the Commission
recommendation to strengthen enforcement tools, we need to preserve the
discretion of our officials to determine on a case-by-case basis what
makes the best sense. We also thank Congress for two legislative
provisions that were included in both the House and Senate versions of
the defense authorization bill which will assist us in this area and
would be very beneficial. One would expand the government's access to
contractor records; the other would provide the authority to void any
DOD contracts if contract payments, directly or indirectly, support the
enemy.
While we support them in principle, we are still in the process of
fully assessing a few recommendations that did not previously appear in
a major Commission report. Recommendation #5, to ``take actions to
mitigate the threat of additional waste from unsustainability,'' falls
in that category. We agree with the Commission that sustainability is a
major concern and have already taken a number of steps to address this
concern. We are still evaluating what additional steps may be needed to
address the sustainability issues identified in the final report.
While we support them in principle, we have concerns about a few
recommendations, including Recommendation #7 which recommends creating
a J10 Directorate for contingency contracting. The Department believes
that creating a separate directorate for contingency contracting on the
Joint Staff, and similar directorates on the service staffs, may tend
to confuse rather than streamline responsibilities. We are exploring
alternative ways of ensuring that the Commission's intent, to ensure
that contingency contracting receives the attention it deserves on the
Joint Staff and in the military Services, is met.
recent accomplishments
In 2006, Congress directed the appointment of Program Managers at
the Department and Service levels to focus the Operational Contract
Support efforts (section 854 of the NDAA for Fiscal Year 2007; 10
U.S.C. 2333). The Under Secretary of Defense for Acquisition,
Technology, and Logistics and the Service Acquisition Executives have
made those appointments and their responsibilities were further
clarified in the charter of the OCS Functional Capabilities Integration
Board (FCIB). In March 2009, we published DOD Directive 3020.49,
establishing policy and assigning responsibility for OCS program
management. As part of our continuing effort to implement section 862
of the NDAA for Fiscal Year 2008 and section 832 of the NDAA for Fiscal
Year 2009, this year we published a Federal Regulation on private
security contractors (PSCs), which applies to all U.S. Government PSCs
in combat operations and other significant military operations, and
published the associated DOD Instruction. We continue to make required
FAR and DFARs changes to insure PSC requirements are included in
contract instruments. In a related effort, DOD personnel were actively
engaged with the OFPP and with our colleagues in other agencies on
preparing both the draft and final Policy Letter to better define
inherently governmental performance.
In 2008, the Chairman of the Joint Chiefs of Staff directed the
establishment of a task force to analyze DOD's level of contractor
dependency and provide recommendations to adapt the Department to the
reality of how we operate in three areas: first, contractor-provided
training (Task Force I); second, the extent of reliance on contracted
support in support of operations in Iraq and Afghanistan (Task Force
II); and third, the need to improve the planning and training for
contracted support (Task Force III). These efforts laid the foundation
for the systemic changes required to ensure that planning for
contracted support is accomplished; awareness of the roles and
responsibilities of commanders, staff, and personnel with regard to
contracted support is clear; and the underlying processes and tools
needed to provide timely and precise contracted support and oversight
are in place.
Tangible evidence of our commitment to continuous progress in
oversight of contingency contracting is found in the many
accomplishments the Department has already made across the DOTMLP
(Doctrine, Organization, Training, Materiel, Leadership, and Personnel)
spectrum. Congress, and particularly this Committee, has been an
essential partner in this effort. We would like to highlight some of
these accomplishments.
Doctrine
On October 17, 2008, the Joint Staff J-4 published Joint
Publication 4-10, Operational Contract Support, to include doctrine for
planning, conducting, and assessing operational contract support
integration and contractor management functions in support of joint
operations. This doctrine provides a common frame of reference across
the military for OCS as a way of accomplishing military tasks. OCS
includes multiple stakeholders, including the commands that are now
incorporating contracted support into their logistics support plans,
the units that develop requirements documents to augment their organic
capabilities, the resource management and finance personnel that
allocate and disburse funds, contracting officers that award contracts
and their representatives that oversee those contracts, and the
contractors that perform the contract. This document, in light of
lessons learned, is in the process of being updated. The Joint
Requirements Oversight Council has approved the Operational Contract
Support Integrated Capabilities Document and formally tracks progress
of OCS integration into all relevant supporting documents.
Organization
The Department is improving its organizational structure to ensure
it best supports OCS and contingency contracting. In 2006, Congress
directed the appointment of Program Managers at the Department and
Service levels to focus the Operational Contract Support efforts
(section 854 of the NDAA for Fiscal Year 2007; 10 U.S.C. 2333). The
Under Secretary of Defense for Acquisition, Technology and Logistics
and the Service Acquisition Executives have made those appointments and
their responsibilities were further clarified in the charter of the OCS
FCIB. On March 29, 2010, the Under Secretary of Defense for
Acquisition, Technology and Logistics established the OCS Functional
Capability Integration Board to provide strategic leadership to the
multiple stakeholders engaged in OCS, synchronize program management,
analyze and implement the recommendations of various Commissions, and
address the mandates of Congress. The key members include DOD and
Service Program Managers for OCS, in accordance with 10 U.S.C. 2333.
In the CENTCOM Area of Responsibility, the Joint Contracting
Command-Iraq/Afghanistan reorganized, moving from being a U.S. Forces-
Iraq subordinate command to a joint functional command directly
reporting to HQ CENTCOM in May 2010. This was done to comply with joint
doctrine and emphasize the need for better contract support integration
and contractor management across the CENTCOM area of responsibility.
The Army reorganized its contingency contracting forces to improve
planning, training, equipping, and execution of OCS, in response to a
recommendation from the ``Gansler Commission,'' an independent body
established by the Secretary of the Army in 2007. The Army Contracting
Command now comprises a Mission Installation Contracting Command and an
Expeditionary Contracting Command, as well as six active Contracting
Support Brigades (CSBs) who serve as a deployable cadre of acquisition
personnel. The CSBs are geographically aligned in order to provide
responsive operational contracting support to the Army Service
Component Commands and provide the Army with greater flexibility to
place contracting teams into areas to support Joint Force operations;
these efforts are in alignment with CWC's recommendation #2.
In order to leverage the power of the Army Contracting Command
enterprise in supporting global operations, the Army has established a
``reach-back'' contracting capability to support forward operations.
Having this reach-back capability reduces our in-theater footprint and
the number of individuals in harm's way. We support the Senate bill
that would strengthen this reach-back resource by providing the ability
to use the overseas increased micro-purchase threshold and the
simplified acquisition threshold in the same manner and to the same
extent as if the contract were to be awarded and performed outside the
United States, which will help expedite urgently needed requirements
and reduce manning in theater.
The current manning of the Army contracting workforce, especially
the expeditionary capability, is out of balance with the demands placed
on it. The imbalance is evident in the findings of more than 3,700
audits and reports (Inspector General, Army Audit Agency, Government
Accountability Office, and the report by the Commission on Wartime
Contracting). As a result the Army is taking steps to ensure the size,
mix and quality of the Army's contracting workforce is sufficient to
effectively and efficiently manage the expenditure of taxpayer dollars,
with the Secretary of the Army directing an increase of 315 military
authorizations for contracting in fiscal year 2013. The Secretary of
the Army has also directed an annual reevaluation of the proposed
contracting growth structure which will be synchronized with the Total
Army Analysis and Planning, Programming, Budgeting, and Execution
process.
Training
The Department has increased its training portfolio to properly
prepare personnel for the reality of OCS and contingency contracting on
the battlefield. The training addresses a range of audiences, from
commanders to acquisition professionals to subject-matter experts
performing oversight. OSD and the Joint Staff have collaborated to
produce three online OCS training courses for commanders and their
staffs. The Defense Acquisition University (DAU) offers seven
contingency contracting courses for the acquisition community,
including our contingency contracting officer course, CON234, as well
as the newly developed advanced contingency contracting course, CON334.
The Army has added and improved multiple acquisition training courses
including instruction in 16 officer and noncommissioned officer
courses; incorporated contracting operations and planning into the
Battle Command Training Program and Combat Training Center training;
and included OCS scenarios to exercise oversight personnel during
Mission Readiness Exercises prior to deployments. OCS is taught at the
National Defense University, Army War College, and the Army Command and
General Staff College. It is a Chairman, Joint Chiefs of Staff Special
Area of Emphasis.
The OCS education and training portfolio will continue to receive
Departmental attention. OSD and the Joint Staff have developed online
training courses for commanders, field-grade officers, and military
planners that are available today. The Joint Staff is currently leading
a study to assess OCS education requirements and develop a vision and
strategy to implement at all appropriate levels of professional
development. The Joint Staff is also leading an effort to develop OCS
Universal Joint Tasks that will feed military exercises and training.
To further improve OCS training, the Joint Staff (J-4), in
conjunction with the National Defense University, is sponsoring a study
to analyze the current state of OCS education and training programs and
propose an institutional OCS Education and Training Program that will
provide practical training and education content tailored to the
recipient's role and responsibility in OCS. Due in August 2012, this
study will determine the requirement for OCS education and training at
the strategic, operational, and tactical levels and develop
methodologies that will expand the awareness of OCS across the national
security enterprise.
Materiel
At the practical level, two handbooks help our acquisition
community do its job more effectively and efficiently.
Our Defense Contingency Contracting Handbook was developed to fill
a gap: while deployed CCOs performing in a joint environment had
Service-specific guidance, they lacked consolidated, joint guidance.
The joint handbook was developed by CCOs for CCOs, as well as for
auditors, the Inspector General, and lawyers. From the start, the
handbook has contained tools, templates, forms, training guides and
material, and checklists. We continue to refine these, as well as add
features, for each annual update to the handbook. The third edition
expanded the website capabilities and added over 100 new resources and
additional material based on special interest items occurring in
theater today. Over 10,000 second edition handbooks were distributed
and over 15,000 third edition handbooks were published due to increase
in demand. The handbook and DVD information are now also available on
the Defense Procurement and Acquisition Policy Web site, which enables
us to update content in real-time, if we find needed improvements from
lessons learned or specific gaps in training.
Building on a successful joint handbook for CCOs, we created a
joint handbook for CORs. The Defense Contingency COR Handbook
supplements official training and policy and serves as a handy pocket
guide that provides CORs, who are supporting contingency operations,
with basic tools and knowledge. This 346-page handbook and accompanying
CD provides checklists, how-to guides, form procedures, and examples.
This handbook provides the basic knowledge and tools needed by CORs to
effectively support contingency operations and is designed specifically
to address the realities faced by CORs in operations outside the
continental United States. The information in the handbook is extracted
from numerous sources within the Defense acquisition community. Over
13,000 handbooks were distributed in only 6 months. High demand
required a reprint of another 9,000 books that will be distributed over
the next 10 months.
This unified guide strengthens the ability of CORs to provide
needed contract surveillance. Another tool we are currently deploying
is the DOD COR Tool (CORT), a web-based management capability for the
appointment and management of CORs. It provides an automated means to
access important data on CORs, including the COR name, career field,
certification level, and other contact information; the COR's
supervisor contact information; and the Contracting Officer's contact
information. Beyond contact information, it identifies all training
completed by the COR. The DOD CORT automates key parts of the process--
it enables an electronic nomination, approval, and termination process
of candidate CORs, and it provides the capability to record key process
documents online, such as status reports, trip reports, correspondence.
DOD contracting personnel are provided with a web-based portal for all
relevant COR actions. The CORT is being deployed within DOD and full
deployment will occur by the end of fiscal year 2012.
Leadership
The ``Gansler Commission'' report on Army Expeditionary Contracting
voiced a concern about the lack of military leadership in the
contracting profession. Congress provided legislation in the National
Defense Authorization Act for Fiscal Year 2009 to add 10 military
General or Flag Officer billets for acquisition positions--5 for the
Army and 5 for joint positions. Having additional senior military
leaders in contracting positions will be a great help to our
contracting workforce, specifically by enhancing the stature of our
contracting officers, and we thank Congress for authorizing these
positions. Throughout the Services, our current military leadership
levels in contracting positions demonstrate great progress. The Army
has four new general officers in contracting positions (where 4 years
ago they had none), the Navy has three flag officers serving in
contracting joint billets, and the Air Force has two general officers
in contracting positions.
Further examples exist across the Department of senior leaders
recognizing the importance of OCS and taking significant steps to
enhance our performance in this area. Beginning in 2010, then-Chairman
of the Joint Chiefs of Staff, Admiral Mike Mullen, dedicated
substantial resources to enhance the Department's ability to
effectively plan for contracted support in contingencies. At the same
time, the then-ISAF Commander, General David Petreaus, published
substantial guidance highlighting the significance of contracting in
support of counterinsurgency (COIN) operations in Afghanistan. This
guidance will influence the revision of joint doctrine for OCS and how
we operate in future operations. The Chief of the Staff of the Army
also ordered COR readiness requirements that had an immediate impact on
the number and qualifications of CORs in theater. As recently as
October 6, 2011, the Secretary of the Army directed his Department to
grow its expeditionary contracting workforce to an end strength of
1,450 personnel by the end of fiscal year 2017. These are but a few
examples of DOD leaders taking actions that demonstrate the
Department's recognition of the importance of institutionalizing OCS.
Personnel
People are the key to our success, and the Department is directly
addressing personnel issues impacting operations in Iraq and
Afghanistan. We are creating and filling 9,000 new acquisition
workforce positions, strengthening the contracting workforce, and
contributing to revitalizing the DCMA and DCAA. DOD has been increasing
the capacity of the acquisition workforce since 2009 as part of a
deliberate DOD-wide initiative to rebuild the acquisition workforce. On
April 6, 2009, the Secretary of Defense gave direction to grow and in-
source the acquisition workforce. The Army contracting civilian
workforce is on track to grow by over 1,600 new positions by fiscal
year 2015. This growth has been facilitated by section 852 of the 2008
National Defense Authorization Act, which provided short-term funding
to hire acquisition personnel while permanent positions are resourced.
Section 852 has been utilized to hire 352 Army civilian contracting
interns to date, with hundreds more planned over the next 3 years.
Section 852 provided critical funds to help reconstitute the
acquisition workforce as well as many other initiatives and we thank
Congress for its foresight in providing these funds.
We use both deployed military and civilian personnel to fulfill
contract management functions, increasingly focusing on civilians to
enable the military to focus on operations. On 28 December 2010, the
Under Secretary of Defense for Acquisition, Technology and Logistics
called for civilian volunteers from the acquisition workforce. In
follow up, the Director of Defense Procurement and Acquisition Policy
issued a memorandum on February 2, 2011, calling for volunteers to
serve as Contingency Contracting Officers (CCOs) with the DOD Civilian
Expeditionary Workforce. In his memo, the Director wrote, ``Our
experiences in Iraq and Afghanistan continue to reinforce the value of
civilian employee volunteers in contingency operations.'' In addition
to being offered post differential pay, danger pay, and overtime along
with salary, volunteers are also guaranteed the right to return to
their permanent positions after deployment. We currently have 85
civilians supporting the CENTCOM-Joint Theater Support Contracting
Command efforts in Iraq and Afghanistan, which is a significant
increase over year's past.
Contractor Audit Oversight
In addition to changes in the DOTMLP approach to OCS, the
Department has become increasingly vigilant on contract audit
oversight. Since 2003, five audit organizations have recovered $10.1
billion. These organizations are the Defense Contract Audit Agency
(DCAA), DOD Inspector General, Special Inspector General for Iraq
Reconstruction (SIGIR), Army Audit Agency (AAA), and Air Force Audit
Agency. From October 2009 to August 31, 2011, Defense Contract
Management Agency (DCMA) quality assurance inspections identified
12,916 nonconforming defects and have issued 1,457 Corrective Action
Reports. Throughout, the contracting officer, DCMA, and the contracting
officer's representative (COR) perform contract management. We are
pleased to note that we are fully staffed in-theater for contracting
officers to meet CENTCOM's documented manning requirement.
DOD also insures that allegations of fraud and corruption are fully
investigated. The U.S. Army Criminal Investigation Command has forward
deployed Special Agents in Afghanistan and works closely and shares
information with other law enforcement agencies in the region. Since
the start of fiscal year 2008, there have been 140 major procurement
fraud investigations involving operations in Afghanistan. In July 2010,
Task Force 2010 was established by U.S. Forces Afghanistan (USFOR-A) to
address issues of corruption which were undermining counterinsurgency
efforts. The task force consists of individuals from all the uniformed
services and includes civilian representatives from various
contracting, auditing and criminal investigative agencies (DCAA, AAA,
U.S. Army Criminal Investigation Command, and Defense Criminal
Investigation Command DCIS). The team also includes forensic
accountants who assist the task force in tracing money through the
Afghan domestic and international financial networks. Both Task Force
2010 and Task Force Spotlight (which was responsible for coordinating
ISAF's management of private security companies) were organized under
Combined Joint Interagency Task Force-Shafafiyat to provide unity of
effort with the international community. This interagency task force,
which includes other U.S. agencies and both U.S. and Afghan law
enforcement officials, leads ISAF's anti-corruption efforts.
DCMA Oversight
DCMA provides management to support contracts such as the LOGCAP,
Air Force Civil Augmentation Program (AFCAP), and theater-support
contracts. Government Quality Assurance (QA) oversight is critical to
the military mission and contract administration success. In
recognition of this, the DCMA QA program includes independent
examinations and reviews of contractor services, processes, and
products in accordance with requirements outlined in the contract. A
strong quality surveillance program requires boots-on-the-ground
interaction with contractor personnel, military units, and base camp
mayor cells on a continuous basis. The DCMA's QA surveillance program
is administered by experienced Quality Assurance Representatives
(QARs), unit-provided CORs, and Subject Matter Experts (SMEs) to
provide appropriate oversight coverage.
Further, for most contracts it administers, DCMA appoints CORs to
evaluate specific contract areas and verifies that CORs have completed
the required DOD-mandated training. DCMA also conducts COR training on
those duties specific to the contract on which they are assigned, DCMA
operations, and provides on-the-job training with a DCMA QAR.
Oversight of Reconstruction Funding
We are aware of the Commission's and Congress' concerns on
oversight of reconstruction projects including the Commander's
Emergency Response Program (CERP) and the Afghanistan Infrastructure
Fund (AIF). The Department, working with Congress, increased internal
requirements for oversight and approval of CERP projects. We notify the
congressional defense committees of any CERP project with a total
anticipated cost of $5 million or more at least 15 days before funds
are obligated and provide a listing of all CERP projects on a quarterly
basis. All CERP project managers are required to coordinate projected
projects with Afghan agencies and local officials, as well as with the
nearest Provincial Reconstruction Team, to ensure there is no
duplication of efforts by DOD, USAID, State, and nongovernmental
organizations in the area.
To address concerns that CERP was being used for larger projects
than originally intended, and that U.S. agencies engaged in
reconstruction activities were not fully coordinated, Congress created
a new mechanism, the Afghanistan Infrastructure Program (AIP). AIP
projects can be funded by the Department of Defense, through the AIF,
or by the Department of State, using its existing authorities. These
projects are developed by the interagency Infrastructure Working Group
in Afghanistan and then nominated by the Commander, U.S. Forces-
Afghanistan and the U.S. Ambassador in Afghanistan to the Secretary of
Defense and the Secretary of State for approval. The Secretary of
Defense--not fewer than 15 days prior to making transfers to or from
the fund or obligations from the AIF--will notify the appropriate
congressional committees.
In addition to these steps, the Deputy Secretary of Defense
established the Afghanistan Resources Oversight Council (AROC) on
August 3, 2011, to oversee the use of CERP, AIF, and the Afghanistan
Security Forces Fund within the Department of Defense at a senior
level. The AROC has met on two occasions, initially plans on meeting on
a monthly basis, and will begin quarterly meetings in calendar year
2012. The ASFF and CERP/AIF have working groups that meet on a weekly
basis to oversee ongoing planning, execution, and oversight of
Afghanistan reconstruction resources.
closing
Chairman McCaskill, before closing, we want to reiterate our
appreciation for the Wartime Commission's work. Ultimately the aim of
the collective effort of all of the initiatives outlined above is to
meet the warfighters' current and future needs while judiciously
managing DOD resources and balancing risk. Much has been accomplished,
but of course challenges remain. We are not complacent and acknowledge
we still have more work to do. We appreciate the work of the Commission
on Wartime Contracting and this subcommittee in maintaining a focus on
this critical area. We look forward to answering your questions.
Senator McCaskill. Thank you.
Now we will welcome--I have to get back to your bio. I
remember West Point.
Mr. Kendall. That is a good start, Madam Chairman.
Senator McCaskill. Here we go. It was a good start, wasn't
it? It was a great start. Some of our very best leaders in this
country started there.
Frank Kendall is the Acting Under Secretary of Defense for
Acquisition, Technology, and Logistics (AT&L). He has more than
35 years of experience in engineering, management, defense
acquisition, and national security affairs in private industry,
Government, and the military.
Thank you, Secretary Kendall, for being here.
STATEMENT OF HON. FRANK KENDALL, PRINCIPAL DEPUTY UNDER
SECRETARY OF DEFENSE FOR ACQUISITION, TECHNOLOGY, AND LOGISTICS
Mr. Kendall. Thank you, Chairman McCaskill.
Chairman McCaskill, Ranking Member Ayotte, and
distinguished members of the Senate Armed Services Committee
Subcommittee on Readiness and Management Support, I am Frank
Kendall, Acting Under Secretary of Defense for AT&L.
I am honored to be here today and appreciate the
opportunity to discuss DOD's continuing efforts to enhance our
ability to execute contracting in a wartime environment and
discuss with you the recently released CWC final report.
DOD has been working closely with the CWC since its
inception in 2008, and we appreciate and welcome its efforts to
assist DOD in eliminating waste, fraud, and abuse in wartime
contracting.
Chairman McCaskill, I would like to request that my written
testimony for General Bash and I be admitted to the record,
please.
Senator McCaskill. Without objection.
Mr. Kendall. In that testimony, Lieutenant General Brooks
Bash and I lay out the history of contingency contracting and
discuss how DOD has responded to the unique challenges brought
on by the unprecedented large-scale reliance on contractors in
Iraq and Afghanistan over the past decade. We cover the size of
contractor support to U.S. Central Command (CENTCOM) and the
efforts DOD has undertaken to improve our ability to manage
contractors.
This includes oversight mechanisms that had to be created
from nothing or increased in capacity and capability to
effectively manage contractors on the battlefield, the
development of new doctrine and organizations, the
establishment of training programs, the development of tools to
assist contract administrators, the growth in senior leaders
and professionals, and the steps being taken to ensure we
neither over-rely on contractors nor are caught unprepared
should the need to use contractors so extensively reoccur after
we complete our operations in Iraq and Afghanistan.
Rather than summarize all the material now that is in our
written submission, I would like to quickly address the
specific topics noted in the letter that I received from you,
Chairman McCaskill and Ranking Member Ayotte.
First, with regard to the CWC's final report, DOD was
previously aware of all but four of the recommendations from
previous reports. Together, these reports contained 82
recommendations--35 from the first interim report, 32 in the
second interim report, and 15 in the final report. Upon the
issuance of the first interim report, DOD stood up a task force
in July 2009 to analyze the recommendations and to act on them.
In March 2010, the Under Secretary of Defense for AT&L
created a permanent board to provide strategic leadership to
the multiple stakeholders working to institutionalize OCS and
to track those accepted recommendations to completion. As a
result of these steps, a great majority of the CWC's final
recommendations have already been acted upon.
For the new strategic recommendations, DOD is currently
completing its analysis. In broad terms, however, we agree in
principle with the overarching precepts driving the CWC's final
report recommendations.
There are four commission recommendations not under DOD
purview. They are numbers 8, 9, 14, and 15. Although these
recommendations are directed at Congress and not DOD, I believe
that recommendation 14 regarding funding for contingency
contracting is essential. Without continued support or the
funding from Congress, we run the risk of losing ground on
oversight of contingency contracting for the future.
As for the 11 DOD-specific recommendations, we embrace all
of them in principle and are in the process of implementing
most of them already.
Recommendation 1 on using risk factors in deciding whether
to contract in contingencies. This is a new recommendation so
we are in the process of analyzing its full requirements. But
we agree on the importance of risk-based assessments, and DOD
has already taken some steps in this direction. In theater, the
Commander of the ISAF Joint Command issued a recent memorandum
addressing risk as part of the go/no-go decision process for
undertaking projects.
Recommendation 2, developing deployable cadres for
acquisition management and contractor oversight, we have
implemented this, most notably through the Army's Expeditionary
Contracting Command, and continue to grow our capability in
this area.
Recommendation 3, phasing out the use of private security
contractors (PSC) for certain functions. DOD's use of PSCs does
fully comply with applicable laws and regulations that define
inherently governmental functions and the governance of these
contractors. In Afghanistan, however, we are implementing the
recommendation. A plan is in development to transition selected
PSC contracts to an Afghan public protection force. As the
capability and size of this force mature, certain security
functions will transition from DOD-contracted PSCs.
Recommendation 4, improving interagency coordination and
guidance for using security contractors in contingency
operations. We have implemented the needed framework, pursuant
to section 862 of the 2008 NDAA. In July 2009, we published a
Federal regulation for all U.S. Government PSCs working combat
operations. We updated this in August of this year to
incorporate changes made in section 832 of the 2009 NDAA.
Recommendation 5, taking actions to mitigate the threat of
additional waste from unsustainability. We are in the process
of implementing this, and we agree that there is more work to
be done here. The Commander of the ISAF Joint Command's
memorandum includes sustainability as part of the go/no-go
decision criteria for all projects.
Recommendation 10, setting and meeting annual increases in
competition goals for contingency contracts. We have
implemented this for Stateside contracts, and we are in the
process of implementing it and deciding whether reporting
systems can readily support this for contingency contracts as
well. As an aside, currently approximately 90 percent of our
contracting overseas is already competed.
Recommendation 11, improving contractor performance data
and use. We are in the process of implementing this
recommendation. DOD strongly agrees that the data in the past
performance database needs substantial improvement so that
contracting officers who are required to consult this data
before making contract awards can have content that is
accurate, complete, and reliable.
Recommendation 12, strengthening enforcement tools. We are
in the process of implementing this recommendation and with
congressional help. Two provisions that Senator Ayotte
mentioned earlier that are included in the House Defense
Authorization Bills would assist us in the area of enforcement
tools. Both are related to the No Contracting with the Enemy
Act that she and Senator Brown introduced. One provision would
expand the Government's access to contractor records, and the
other provides the authority to void any DOD contracts if funds
directly or indirectly support the enemy. Both of these actions
were undertaken at the request of Task Force 2010, our anti-
corruption task force in Afghanistan.
Recommendation 13, providing adequate staffing and
resources in establishing procedures to protect the
Government's interest. We have already implemented several
improvements in this area. We have strengthened our ability to
withhold payments to contractors with inadequate business
systems as a means to protect U.S. Government interests.
While we agree in principle with CWC on the need for
accountability and leadership intention on contingent
contracting, we do have concerns with regard to recommendations
6 and 7. Recommendation 6 elevates the positions and expands
the authority of civilian officials responsible for contingency
contracting, and recommendation 7 does the same for military
officials.
The CWC would elevate one office in the AT&L Office, my
office, and OSD, to focus on contingency contracting. In my
view, a division of labor is necessary and appropriate.
Each of several DOD organizations brings unique subject
matter expertise and oversight of contingency contracting. This
ties back to the resources and expertise of the acquisition
system as a whole.
Within my organization, we need the functional expertise of
both program support under our Assistant Secretary of Defense
for Logistics and Materiel Readiness, and the Contingency
Contracting Office under our Director for Defense Procurement
and Acquisition Policy.
Similarly, I am concerned that creating a J10, as General
Bash mentioned, would tend to confuse rather than streamline
accountability for contingency contracting in the Joint Staff.
DOD has come a long way in the area of operational
contracting support, in large part as a result of enabling
legislation from Congress. Section 854 of the 2007 NDAA
required us to establish joint policies on requirements
definition, contingency program management, and contingency
contracting, and we have done so.
Section 862 of the 2008 NDAA and section 832 of the NDAA
for Fiscal Year 2009 required us to issue comprehensive
regulations managing PSCs, which we have done. We embrace the
recommendation of the Gansler commission, including its central
insight that we needed to increase the scale and scope of
military leadership in acquisition workforce.
We have also taken advantage of insights from dedicated
internal task forces such as Task Force Shafafiyat, Task Force
2010, and Task Force Spotlight to identify and combat attempts
to divert U.S. contractor funds to our enemies through fraud
and corruption.
I would also like to recognize the valuable efforts of
several key DOD personnel who have been working on this problem
for several years. This would include Gary Motsek, the Deputy
Assistant Secretary of Defense for Program Support, and Dick
Ginman, who is here with me today, the Director of Defense
Procurement Acquisition Policy.
In your letter, you asked about legislation that might be
needed to implement the CWC's recommendations. DOD believes
that the essence of the CWC's recommendations can be
implemented under existing authorities. However, we will get
back to the committee if we find any additional authority is
required.
I would also like to thank you for your support of the two
other legislative proposals that you are now considering, one
in contracting with the enemy, as we have already discussed,
and the other in access to contractor records. This legislation
will go a long way to fighting corruption and tracking bad
actors, which is yet another challenge we face in contingency
contracting.
I want to close on a note of thanks to the CWC for all the
hard work and dedication they put into this effort to assist
DOD. DOD joins them in our desire to eliminate waste, fraud,
and abuse whenever and wherever it occurs.
I would also like the committee to note the hard work and
dedication that DOD has put into the effort to create an
effective contingency contracting capacity that simply did not
exist at the time we entered Iraq and wasn't even considered as
something we might need. Over the last several years, as that
need became apparent in both the Bush and Obama
administrations, an enormous amount of work has been done to
correct the situation.
Dedicated professionals in and out of uniform have made
great progress, but we all know there is more to be done. We
look forward to working with Congress as we continue this
important effort to protect taxpayers' interests and the
resources that they provide to us.
Thank you, Madam Chairman.
Senator McCaskill. Thank you, Secretary Kendall.
The next witness is Dov Zakheim, and he has an amazing
resume. He was the Under Secretary of Defense (Comptroller) for
a number of years. It wasn't that long ago that you were in one
of those chairs, and you were the one that was getting the
questions that were uncomfortable to answer.
You do have a long history of service to our country in a
variety of different capacities relating to defense operations.
I know the amount of time the CWC took, and it was good of you
to take time out of your professional schedule to make time for
this work.
I think you were a great contributor to the effort, and we
look forward to your testimony.
STATEMENT OF HON. DOV S. ZAKHEIM, COMMISSIONER, COMMISSION ON
WARTIME CONTRACTING IN IRAQ AND AFGHANISTAN
Mr. Zakheim. Thank you very much, Madam Chairman and
Ranking Member Ayotte.
With me is Katherine Schinasi, who has served for 31 years
with the GAO and most recently is Managing Director for
Acquisition and Sourcing Management at GAO and worked on DOD
and DOS issues and has recently been a senior adviser to the
Conference Board, a nonprofit research organization.
I also want to thank you, Madam Chairman, for calling us--I
think I speak for all of us at the table--for saying we are a
special treat. I never heard that when I was Comptroller.
[Laughter.]
Katherine and I are speaking today in our capacity as
private citizens. We can assure you that nothing in our
testimony conflicts with the solid and bipartisan consensus
that developed among the eight members of the CWC.
We have provided copies of our report, ``Transforming
Wartime Contracting,'' to the subcommittee, and we respectfully
request that the report and our statement be included in the
official record of this hearing.
Senator McCaskill. They will be included in the record.
Mr. Zakheim. Thank you.
We unanimously conclude that the need for change, change in
laws, policies, practices, and organizational culture, is
urgent. It is urgent for five reasons.
The first is that although our policy for more than 20
years considered contractors to be part of what is called the
total force for contingency operations, the Federal Government
went into Afghanistan and Iraq unprepared to manage and oversee
the thousands of contracts and contractors that were being used
there.
Now there is no question that some improvements have been
made. But after a decade of war, the Government remains unable
to ensure that taxpayers and warfighters are getting good value
for the contract dollars that have been spent. The Government
also remains unable to provide fully effective interagency
planning, coordination, management, and oversight of
contingency contracts.
Second reason, reforms can still save money in Afghanistan
and Iraq, even today. They can avoid unintended consequences
and improve outcomes there. Just as an example--and you
mentioned this--as the United States draws down its troops in
Iraq, DOS is poised to hire thousands of new contractors for
security and other functions. Reforms would make a huge
difference in that regard.
Third, as you both mentioned, the dollars wasted are
significant, and so I won't repeat again the $31 billion to $60
billion out of the $206 billion spent. If we do not sustain the
U.S.-funded projects properly, we are going to see more waste
still, and again, it will be in the billions.
Fourth, we know that new contingencies, whatever form they
may take, will occur, whether it is Libya or something else. We
are going to keep having those. Meanwhile, the Federal agencies
have acknowledged that they simply cannot mount and sustain
large operations without contract support. So this is something
that is going to be with us for quite some time.
Finally, failure to enact powerful reforms will guarantee
that new cycles of waste and fraud will accompany the response
to the next contingency. In the current period of budget
constraints, the opportunity cost of wasted funds is
exceptionally high.
Now these observations, of course, are general and apply
Government-wide. But they apply with special force to DOD
because the preponderance of contracting activity and spending
has resided with DOD.
Now DOD's Director of Defense Procurement and Acquisition
Policy, Admiral Ginman, told the Senate Homeland Security and
Governmental Affairs Committee last month that DOD--and I am
quoting here--``agrees in principle''--and you heard it again
from Secretary Kendall--``agrees in principle with the 11 DOD-
focused recommendations in the final report of the commission''
and that DOD defense doctrine ``now includes operational
contract support.''
Admiral Ginman also said that DOD is making progress on
matters such as developing deployable acquisition cadres, and
you heard that as well from Secretary Kendall. This does appear
to be a first step toward meeting the intent of section 854 of
the NDAA for Fiscal Year 2007, which calls for creation of
exactly that kind of a contingency contracting corps.
Now we welcome signs of progress at DOD. It is what we all
want. Rising demands to restrain and redirect Federal spending
are going to force DOD and other Federal entities to be more
disciplined in the use of taxpayers' dollars, and that includes
dollars spent on contracting.
But, unfortunately, the CWC has concluded that the U.S.
military and other Federal agencies are still not fully
prepared to plan and manage large-scale use of contracting
contingency operations. The issue is less one of policy and
more one of implementation. Policies are easy to make.
Implementation is really what counts.
We are not alone in our concern. GAO has had defense
contract management on its high-risk list since 1992. So this
is going on for 20 years. In this year's update, GAO called
attention to problems observed in Iraq and Afghanistan with
planning for the use of contractors, vetting security
contractor personnel, and training nonacquisition personnel to
manage security contracts.
In light of GAO's report, it is difficult to state that the
Government has fulfilled the provisions of section 862 of the
NDAA for Fiscal Year 2008, which calls for Government-wide
regulation of PSCs. If that was happening, GAO wouldn't say
what it is saying.
We appreciate that DOD, supported and in many cases led by
this subcommittee and others in Congress, is taking steps to
improve its use of contractors. Policy memos, DOD instructions,
flag officer appointments, speeches, and other signs of change
have been encouraging, and so have the creation of Task Force
Shafafiyat to combat corruption in Afghanistan and its
subordinate task forces, both of which were mentioned, 2010 and
Spotlight. Fiscal year 2010 focuses on corruption in
contracting, Spotlight on security contractors.
But the hard reality is that changing values, doctrine,
expectations, practices, and other aspects of organizational
culture in a vast and complex enterprise is really like herding
icebergs, if you don't want to say herding stray cats. It is a
slow process requiring heroic exertions, sustained attention,
and unrelenting leadership.
Inertia and other institutional barriers to change are a
common problem for reform everywhere. That is why one of the
recommendations in our final report is that Congress require
regular independent reports on agencies' progress and on the
barriers to progress.
Without regular reporting to and attention by Congress to
contracting reform, the risk is great that leadership exertions
and lessons learned will fade, leaving us still unprepared for
the next contingency and doomed to new cycles of waste and
improved remedial reactions. That would be a terrible mistake.
Contracting has provided vital and, for the most part,
highly effective support for U.S. contingency operations. But
we rely on contractors too heavily, manage them too loosely,
and simply pay them too much.
The wasteful contract outcomes in Iraq and Afghanistan
demonstrate that Federal agencies still do not see the heavy
reliance on contractors as important enough to warrant thorough
planning for and effective execution of the goods and services
acquisitions that contingency requires.
The CWC has concluded that the problems are multifaceted
and need to be attacked on several levels. The first is to hold
contractors accountable. Federal statutes and regulations
provide ways to protect the Government against bad contractors
and to impose accountability on them, including suspension and
debarment from obtaining future contracts, as well as civil and
criminal penalties for misconduct.
Unfortunately, and this goes again to implementation, we
found that these mechanisms are not often vigorously applied
and enforced, and incentives to constrain waste are often not
in place. Compelling cases for charging fraud may go
unprosecuted because other, possibly more headline-grabbing
cases are given priority.
Recommendations for suspension and debarment go
unimplemented, with no documentation for the decision. Data
that would be important for past performance reviews often go
unrecorded. Staffing shortages have led to a Defense Contract
Audit Agency (DCAA) backlog of nearly $600 billion, delaying
recovery of possible overpayments and actually causing problems
for the contractors themselves.
The Government has also been remiss in promoting one of the
most effective of all disciplines--competition. A decade into
an operation, multibillion-dollar--into the operation, sorry--
multibillion-dollar task forces are still being written--task
orders are still being written with no breakout or
recompetition of the base contract. That is changing, but not
quickly enough.
We recommend better application of existing tools to ensure
accountability and to strengthening those tools. 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, and provide
incentives for contractors to take active steps against human
trafficking by subcontractors and labor brokers. Our report
indicates that implementing many of these recommendations will,
indeed, require legislation.
The second level is holding the Government itself more
accountable for the decision to use contractors and for the
subsequent results of those decisions. Part of the problem is
resources, and we have to be careful not to repeat the mistake
of the 1990s.
We can't allow budget constraints to permit a further
downsizing of our acquisition and contracting workforce. On the
contrary, we must augment that force, especially if planned
military end strength reductions move forward and there is even
greater pressure to rely on contractors.
Even when the Government has sufficient policies in place,
effective practices, ranging from planning and requirements
definition to providing adequate oversight of performance and
coordinating interagency activities, are simply lacking. We
recommended steps that would improve the Government's handling
of contingency contracting, and they include developing
deployable acquisition cadres, and there has been a start
there; legislation to elevate the positions of the agencies'
senior acquisition officers--and we will be happy to discuss
this in detail with you--and to create a J10 contingency
contracting directorate at the Joint Staff, where the broad
range of contracting activities is treated as a subset of
logistics. We just don't like the word ``subset.''
Another critical recommendation is that agencies pay much
more attention to the matter of sustainability before
committing taxpayers' dollars to projects and programs intended
to support military, political, or development objectives in
contingency zones.
Our recommendation includes agency evaluations of
sustainability and rejecting or canceling projects that have no
credible prospect of survival without U.S. funding. In other
words, weighing sustainability as part of an overall
calculation simply may not be enough.
We support the recent policy guidance from the Office of
Management and Budget (OMB) regarding the inherently
governmental functions, which incorporates a risk-sensitive
approach to determining which functions could or should be
reserved for Government performance. As our report explains,
the inherently governmental test is a necessary, but not
sufficient, condition for making decisions to hire contractors
in a contingency environment.
We note that OMB's action takes the Government considerably
closer toward meeting the intent of section 832 of the NDAA for
Fiscal Year 2009.
Considering this subcommittee's broad mandate, we would
also call special attention to two recommendations embodying a
whole-of-government approach that will improve efficiency and
effectiveness in contracting. Both recommendations would, in
fact, require legislation in order to be implemented.
The first is to establish a top-level, dual-hatted position
for an official who would serve both as a Senate-confirmed
Deputy Director of OMB and on the National Security Council
staff as Deputy Assistant to the President. Such a dual-hatted
position would promote better visibility, coordination, budget
guidance, and strategic direction for contingency contracting.
Now the White House would be centrally involved.
The second is to create a permanent inspector general
organization for use during contingencies and for providing
standards and training between contingencies. The work of the
Special Inspector General for Iraq Reconstruction (SIGIR) and
the Special Inspector General for Afghanistan Reconstruction
(SIGAR) have shown the drawbacks of creating organizations
limited in functional authority, geographic location, and time.
SIGIR and SIGAR have done great work, but they are going
away. A permanent contingency IG with a small, but deployable
and expandable staff, trained in the special circumstances of
contingency operations, can provide interdepartmental oversight
from the outset of a contingency.
As we have already indicated, sustained attention during
and after the reform process will be essential to ensure that
compliance extends to institutionalizing reforms and changing
organizational cultures. That is why our recommendations
include a requirement for periodic independent progress reports
to Congress on the pace and results of reform initiatives.
I know I am being repetitive here, but I think we both felt
that it is important on this one to be repetitive. Without such
a requirement, agencies can all too easily succumb to
complacency, forget the lessons learned in Iraq and
Afghanistan, and blandly reassure Congress that they, I quote,
``agree with the substance of reform recommendations and are
already addressing them,'' even if nothing comes of the effort.
The Government would be foolish to ignore the lessons of
the last 10 years and refuse to prepare for better use of
contracting. But once the wars in Afghanistan and Iraq recede
into the past, it is going to be all too easy to put off taking
action.
Your subcommittee in particular is in a good position to
prevent such a tragic sin of omission. Members of Congress will
also be obliged to make hard choices about the Federal budget,
including funds for DOD.
The Army and Marine Corps have already announced plans to
reduce force strength by tens of thousands, and budget debates
to come will likely require further cuts in defense. In that
context, we would reemphasize recommendation 14 from our final
report to Congress. It says, and I am quoting here, ``Congress
should provide or reallocate resources for contingency
contracting reform to cure or mitigate the numerous defects
described by the commission.''
As DOD officials and senior commanders make cuts in budgets
and resources, they are going to be inclined to preserve as
much combat capability as possible in the years ahead by
concentrating personnel cuts among support functions. We
understand that. It is a natural reaction.
But we advise against reducing the size of the acquisition,
contracting, and oversight workforce. Sustaining and improving
that workforce is essential. Cutting it would be a false
economy. DOD should instead seek offsetting savings through
better planning and requirements definition, increased use of
competition for contracts, more effective management and
oversight, and better coordination of procurement and
contracting functions.
We urge the members of the subcommittee to take care that
economy drives are conducted with a balanced view of all
requirements for contingency operations, not just those that
involve combat units. If maintaining a balance of essential
capabilities leads to a more careful review of the scope and
extent of operations, such an outcome would surely be a
constructive development.
This concludes my statement, and we appreciate this
opportunity to speak with you. We will be happy to answer any
questions you may have.
[The joint prepared statement of Mr. Zakheim and Ms.
Schinasi follows:]
Joint Prepared Statement by Hon. Dov S. Zakheim and
Hon. Katherine V. Schinasi
Chairman McCaskill, Ranking Member Ayotte, and members of the
subcommittee, good morning. Thank you for inviting us to testify.
I am Dov Zakheim. With me is Katherine Schinasi. We had the honor
to serve as members of the Commission on Wartime Contracting in Iraq
and Afghanistan until its statutory sunset on September 30, 2011.
My prior government service includes 3 years as Under Secretary of
Defense (Comptroller) and Chief Financial Officer from 2001 to 2004 and
as the Department of Defense Civilian Coordinator for Afghanistan
Reconstruction from 2002-2004. I am currently a Senior Advisor to the
Center for Strategic and International Studies and Senior Fellow at
CNA, a federally funded research and development center. Ms. Schinasi
has served 31 years with the Government Accountability Office, most
recently as Managing Director for acquisition and sourcing management.
Her portfolio included work on issues affecting the Departments of
Defense and State. More recently she has been a Senior Advisor to The
Conference Board) a non-profit research organization.
As noted) the Commission on Wartime Contracting no longer exists)
so we are speaking today in our capacity as private citizens. We can
assure you) however) that nothing in our testimony conflicts with the
solid consensus that developed among the eight members of the
Commission.
In the often-rancorous atmosphere that permeates Washington these
days) the Commission's consensus deserves notice. The Commission was
designed to have a balanced, bipartisan membership-four Democratic and
four Republican appointees. But we went beyond that and functioned as a
non-partisan body. Our work sessions, travels, and public hearings
featured lively discussions and debates) but were never marred by
dissension along partisan lines. Our reports have no dissenting or
alternative views. We are unanimous in our findings and our
recommendations, especially so in the final report that we submitted to
Congress on August 31, 2011.
We have provided copies of our report, Transforming Wartime
Contracting: Controlling Costs, Reducing Risks, to the subcommittee. We
respectfully request that the report, as well as our statement, be
included the official record of this hearing.
We unanimously conclude that the need for change--change laws,
policies, practices, and organizational culture--is five reasons.
1. First, although U.S. policy has for more than 20 years
considered contractors to be part of the ``total force'' for
contingency operations, the Federal Government went into Afghanistan
and Iraq unprepared to manage and oversee the thousands of contracts
and contractors used there. Some improvements have been made, but after
a decade of war, the government remains unable to ensure that taxpayers
and warfighters are getting good value for contract dollars spent. The
government also remains unable to provide fully effective interagency
planning, coordination, management, and oversight of contingency
contracting.
2. Second, reforms can still save money in Iraq and Afghanistan,
avoid unintended consequences, and improve outcomes there. For example,
as the United States draws down its troops in Iraq, the State
Department is poised to hire thousands of new contractors for security
and other functions.
3. Third, the dollars wasted and at risk are significant. The
Commission estimates that at least $31 billion, and possibly as much as
$60 billion, of the $206 billion spent on contracts and grants in Iraq
and Afghanistan has been lost to waste and fraud. We have also warned
that many more billions--possibly exceeding the billions that have
already been lost--may turn into waste if the government cannot or will
not sustain U.S.-funded programs and projects.
4. Fourth, new contingencies, whatever form they take, will occur.
This year's rapid emergence of civil war in Libya and of U.S.
operational involvement shows that it would be imprudent to assume that
we are done with contingency operations, or that they will give us
ample warning to prepare. Meanwhile, Federal agencies have acknowledged
that they cannot mount and sustain large operations without contract
support.
5. Finally, failure to enact powerful reforms will guarantee that
new cycles of waste and fraud will accompany the response to the next
contingency. In the current period of budget constraints, the
opportunity cost of wasted funds is exceptionally high.
Our work in Iraq and Afghanistan found problems similar to those in
peacetime contracting environments, including poor planning, limited or
no competition, weak management of performance, and insufficient
recovery of over-billings or unsupported costs.
The wartime environment brings additional complications, which we
address in our recommendations. The dollar volumes swell: more than
$206 billion has been spent on contingency contracts and grants in Iraq
and Afghanistan since fiscal year 2002. Urgency and hostile threats
bear on contracting decisions] execution, and oversight. The overseas
place of performance entails limited legal jurisdiction over foreign
contractors, supporting documentation foreign available at all, and
limited deployability of Federal-civilian oversight personnel to
theater.
These general observations apply with special force to the
Department of Defense (DOD). While the Department of State, the U.S.
Agency for International Development, and other Federal agencies have
been heavily involved with contractors and grantees in Iraq and
Afghanistan, the preponderance of contracting activity and spending has
resided with DOD.
DOD's Director of Defense Procurement and Acquisition Policy, told
the Senate Homeland Security Committee last month that DOD ``agrees in
principle'' with the 11 DOD-focused recommendations in the Commission's
final report, that Defense doctrine ``now includes operational contract
support.'' He also stated that the Department is making progress on
matters such as developing deployable acquisition cadres,\1\ which
would appear to be a first step toward meeting the intent of section
854 of the National Defense Authorization Act (NDAA) for Fiscal Year
2007, which calls for the creation of a contingency contracting corps.
---------------------------------------------------------------------------
\1\ Written statement of Richard T. Ginman for Senate HSGAC
hearing, ``Transforming Wartime Contracting: Recommendations of the
Commission on Wartime Contracting,'' September 21, 2011, pp. 2, 3, 9.
---------------------------------------------------------------------------
We welcome signs of progress at DOD. Progress is vital, for we face
a world beset by emerging geopolitical threats and what seem to be
increasingly destructive natural disasters as populations grow and
urbanization intensifies. In addition, rising demands to restrain and
redirect Federal spending will force DOD and other Federal entities to
be more disciplined their use of taxpayer dollars. That use includes
dollars spent on contracting.
As an officer's essay in Army Logistician observed, ``In the
future, the Army will find it difficult, if not impossible) to fight
without external support. In essence) wartime host-nation support and
contingency contracting have become operational necessities.'' \2\
---------------------------------------------------------------------------
\2\ Major Anthony H. Kral, ``Need for External Support: Don't Try
Fighting Without It!'' Army Logistician, January-February 1993, p. 31.
---------------------------------------------------------------------------
Unfortunately, that recognition of reality was published in 1993.
The Commission has concluded, nearly 20 years later, that the U.S.
military and other Federal agencies are still not fully prepared to
plan and manage large-scale use of contracting in contingency
operations.
A striking reminder of that fact is that just last fall, General
David Petraeus felt obliged to issue a memo to the allied forces
operating in Afghanistan explaining that ``Contracting has to be
`Commander's business' '' and must not be treated as a peripheral
matter.\3\
---------------------------------------------------------------------------
\3\ General David H. Petraeus, commander, NATO International
Security Assistance Force (Afghanistan), memo, ``COMISAF's
Counterinsurgency (COIN) Contracting Guidance,'' September 8, 2010, p.
1.
---------------------------------------------------------------------------
We are not alone in our concern. The Government Accountability
Office (GAO) has had Defense contract management on its ``High-Risk
List'' since 1992. In this year's update, GAO called attention to
problems observed in Iraq and Afghanistan with planning for use of
contractors, vetting security contractor personnel, and training non-
acquisition personnel to manage security contracts.\4\ In light of the
GAO's report it is difficult to state that the government has fulfilled
the provisions of section 862 of the NDAA for Fiscal Year 2008, which
calls for government-wide regulation of private security contractors.
---------------------------------------------------------------------------
\4\ GAO Report 11-278, ``High-Risk Series, An Update,'' February
2011.
---------------------------------------------------------------------------
In addition, former Under Secretary of Defense Dr. Jacques Gansler,
who chaired the Army Commission on Acquisition and Program Management
in Expeditionary Operations, raised related concerns before our
Commission last year, saying ``Contracting should be a core capability
of the Army, but it currently is treated as an operational and
institutional side issue.'' He added, ``DOD has an extremely dedicated
corps of contracting people. The problem is they are understaffed,
overworked, under-trained, under-supported, and, I would argue, most
importantly, under-valued.'' \5\
---------------------------------------------------------------------------
\5\ Written statement of Dr. Jacques S. Gansler for Commission
hearing, ``Urgent Reform Required: Army Expeditionary Contracting,''
September 16, 2010,, p. 3.
---------------------------------------------------------------------------
We appreciate that the Defense Department--supported and in many
cases led by this subcommittee and others in Congress--is taking steps
to improve its use of contractors. Policy memos, DOD Instructions,
flag-officer appointments, speeches and other signs of change have been
encouraging. So have been the creation of Task Force Shafafiyat to
combat corruption in Afghanistan, and its subordinate task forces, 2010
and Spotlight, the former focusing on corruption in contracting and the
latter on security contractors.
The hard reality, however, is that changing values, doctrine,
expectations, practices, and other aspects of organizational culture in
a vast and complex enterprise is like herding ice bergs-a slow process
requiring heroic exertions, sustained attention, and unrelenting
leadership. As the Defense Business Board reported to the Secretary in
January.
The stovepipe structure of the Department and turf protection
behavior make it difficult for cultural and institutional
change. . . . Cultural resistance within the Department
overwhelming and real.\6\
---------------------------------------------------------------------------
\6\ Defense Business Board Report to the Secretary of Defense,
``Task Group on A Culture of Savings: Implementing Behavior Change in
DOD,'' Report Fiscal Year 2011--01 January 2011, p.2.
Inertia and other institutional barriers to change are a common
problem for reform everywhere. That is why one of the recommendations
in our final report is that Congress require regular, independent
reports on agencies' progress and on the barriers to progress.
Without regular reporting to and attention by Congress to
contracting reform, the risk is great that leadership exertions and
lessons learned will fade, leaving us still unprepared for the next
contingency and doomed to new cycles of waste and improvised remedial
reactions.
That would be a grave mistake. Contracting has provided vital and
for the most part highly effective support for U.S. contingency
operations. But we rely on contractors too heavily, manage them too
loosely, and pay them too much. The wasteful contract outcomes in Iraq
and Afghanistan demonstrate that Federal agencies still do not see the
heavy reliance on contractors as important enough to warrant thorough
planning for and effective execution of the goods-and-services
acquisitions that contingencies require.
The Commission has concluded that the problems are multi-faceted
and need to attacked on several levels.
The first is to hold contractors accountable. Federal statutes and
regulations provide ways the government against bad contractors and to
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. Incentives to constrain waste are
often not in place.
The Commission's research has shown, for example, that some
contractors have been billing the government for years using inadequate
business systems that create extra work for Federal oversight personnel
and auditors. Compelling cases for charging fraud may go unprosecuted
because other, possibly more headline-grabbing, cases are given
priority. Recommendations for suspension and debarment go unimplemented
with no documentation for the decision. Data that would be important
for past-performance reviews often go unrecorded. Staffing shortages
have led to a Defense Contract Audit Agency backlog of nearly $600
billion, delaying recovery of possible overpayments.
The government has also been remiss in promoting one of the most
effective of all disciplines: competition. It is perfectly reasonable
to say that exigent circumstances may require sole-source or limited-
competition awards in the early phases of a contingency operation. It
is not at all reasonable that a decade into an operation, multi-
billion-dollar tasks orders are still being written with no break-out
or recompetition of the base contract.
We recommend better application of existing tools to ensure
accountability] and strengthening those tools. 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, and provide incentives for contractors to take
active steps against human trafficking by subcontractors and labor
brokers. Our report indicates that implementing many of these
recommendations will require legislation.
These and other recommendations will go a long way toward reducing
waste, fraud, and abuse among contractors.
The second level is holding the government itself more accountable
for the decision to use contractors and for the subsequent results of
those decisions. Part of the problem is resources. Both the Active
military and the Federal acquisition workforce were downsized during
the ``peace dividend'' days of the 1990s. This reaction to the end of a
55-year Cold War was understandable. But it ensured that if a large and
prolonged contingency should develop] the military's reliance on
contractors would greatly increase] even as its ability to manage and
oversee them had atrophied.
We must be careful not of 1990s. We cannot allow budget constrains
to permit a further downsizing of our acquisition and contracting
workforce. On the contrary, we must augment that force, especially
planned military end-strength reductions move forward, and there is
even greater pressure to rely on contractors.
Even when the government has sufficient policies in place,
effective practices, ranging from planning and requirements definition,
to providing adequate oversight of performance and coordinating
interagency activities, are lacking. The principal agencies involved in
contingency operations--Defense, State, and USAID--have all made
improvements in these and other areas. But opportunities for
improvement exist and much work remains to be done.
We have recommended steps that would improve the government's
handling of contingency contracting. They include developing deployable
acquisition cadres, and legislation to elevate the positions of
agencies' senior acquisition officers, and to create a ``J10''
contingency-contracting directorate at the Pentagon's Joint Staff,
where the broad range of contracting activities currently is treated as
a subset of logistics.
Another critical recommendation is that agencies pay much more
attention to the matter of sustainability before committing taxpayer
dollars to projects and programs intended to support military,
political, or development objectives in contingency zones. Our
recommendation includes agency evaluations of sustainability and
rejecting or canceling projects that have no credible prospect of
survival without funding.
We support the recent policy guidance from the Office of Management
and Budget (OMB) regarding inherently governmental which incorporates a
risk-sensitive approach to determining functions could or should be
reserved for government performance. As our report explains, the
inherently governmental test is a necessary, but not a sufficient
condition, for making decisions to hire contractors in a contingency
environment. We note that OMB's action takes the government
considerably closer toward meeting the intent of section 832 of the
NDAA for Fiscal Year 2009.
Considering this subcommittee's broad mandate, we would also call
special attention to two recommendations embodying a whole-of-
government approach that will improve efficiency and effectiveness in
contracting. Both recommendations would require legislation in order to
be implemented.
The first is to establish a top-level dual-hatted position for an
official who would serve both as a Senate-confirmed Deputy Director of
OMB, and on the National Security Council staff as Deputy Assistant to
the President. Such a dual-hatted position would promote better
visibility, coordination, budget guidance, and strategic direction for
contingency contracting.
The second is to create a permanent inspector general organization
for use during contingencies and for providing standards and training
between contingencies. work of the special inspectors general for Iraq
and Afghanistan have shown drawbacks of creating organizations limited
in functional authority, geographic location, and time. SIGIR and SIGAR
have performed valuable service the country, but they will go away,
leaving the need to reinvent them with attendant delays in deploying
Inspector General (IG) staff when the next contingency emerges. A
permanent contingency IG with a small but deployable and expandable
staff trained in the special circumstances of contingency operations
can provide interdepartmental oversight from the outset of a
contingency.
More details on these recommendations, both of which will require
legislative actions, as well as other recommendations appear in our
final report, Transforming Wartime Contracting.
In compliance with its authorizing statute, our Commission has
closed its doors. But the problems it has diagnosed remain alive and
malignant. Corrective action, in some cases requiring financial
investments, are essential on both the government and the contractor
side of the equation to reform contingency contracting and prevent or
reduce new outbreaks of waste, fraud, and abuse.
As we have already indicated, sustained attention during and after
the reform process will be essential to ensure that compliance extends
to institutionalizing reforms and changing organizational cultures.
That is why our recommendations include a requirement for periodic,
independent progress reports to Congress on the pace and results of
reform initiatives. Without such a requirement, agencies can all too
easily succumb to complacency, forget the lessons learned in Iraq and
Afghanistan, and blandly reassure Congress that they ``agree with the
substance'' of reform recommendations and are already addressing them--
even if nothing comes of the effort.
Contracting reform is a necessity, not a luxury good, because
whatever form a future contingency may take, there will be a future
contingency.
Perhaps we can avoid hostilities related to unfriendly regimes in
east Asia, the Horn of Africa, the Mediterranean, the Balkans, and
Latin America. Perhaps we will not be called upon to mount vast
humanitarian interventions overseas. Even if we are lucky enough to
avoid those contingencies, we will remain vulnerable to catastrophic
floods, earthquakes, storms, fires, and mass casualty terror attacks
here at home. The responses to such disasters will most likely require
contractor support as well as DOD involvement, as occurred with
Hurricane Katrina.
The government would be foolish to ignore the lessons of the last
10 years and refuse to prepare for better use of contracting. But once
the wars in Iraq and Afghanistan recede into the past, it will be all
too easy to put off taking action. Your subcommittee is in a good
position to prevent such a tragic sin of omission.
Members of Congress will also be obliged to make hard choices about
the Federal budget, including funds for DOD. The Army and the Marine
Corps have already announced plans to reduce force strengths by tens of
thousands, and budget debates to come will likely require further cuts
Defense.
In that context, we would re-emphasize Recommendation 14 from our
final report to Congress. It says,
Congress should provide or reallocate resources for
contingency contracting reform to cure or mitigate the numerous
defects described by the Commission.
As DOD officials and senior commanders make cuts in budgets and
resources, they will be inclined to preserve as much combat capability
as possible in the years ahead by concentrating personnel cuts among
support functions.
We advise against reducing the size of the acquisition, contracting
and oversight workforce. Sustaining and improving that workforce is
essential. Cutting it would be a false economy. Defense should instead
seek offsetting savings through better planning and requirements
definition, increased use of competition for contracts, more effective
management and oversight, and better coordination of procurement and
contracting functions.
We urge the members of this subcommittee to take care that economy
drives are conducted with a balanced view of all requirements for
contingency operations, not just those that involve combat units. If
maintaining a balance of essential capabilities leads to a more careful
review of the scope and extent of operations, such an outcome would
surely be a constructive development.
This concludes our formal statement. We appreciate this opportunity
to speak with you, and will be happy to answer any questions you may
have.
[The report titled ``Transforming Wartime Contracting''
follows:]
[See annex at the end of this hearing record.]
Senator McCaskill. Ms. Schinasi, do you have a statement
also?
Ms. Schinasi. No.
Senator McCaskill. Oh, you do not? Okay. That is why he
told everyone how long you had toiled at GAO.
Mr. Zakheim. Yes, I didn't think it was fair not to give
her an intro.
Senator McCaskill. I agree. David Walker used to tease me
because my apartment overlooks the GAO building, and he used to
say, ``You just wanted to keep an eye on us at all times. Just
in case something hit you in the night, you wanted to be able
to write it down and send it across the street.''
So thank you for all your work there. I know you spent
decades toiling in very difficult areas of work.
Let us start with one of my favorites because one thing
about our military is that there is such a ``can-do'' attitude
in our military, and that is almost always a great thing, that
if we decide to do something, by gosh, we are going to do it
and we are going to make it work.
We have seen that attitude sometimes get in the way of
being able to pull the plug when we should pull the plug, when
all the signs are indicating that maybe this investment of
money isn't going to turn out the way we hoped and maybe we
need to cut our losses now. This relates to the issue that the
CWC talked about, and that is sustainability.
It is a huge problem, and all we have to do is look at the
landscape in Iraq that is littered with our taxpayers' dollars
that have been blown up, destroyed, not operable, dozens and
dozens of buildings and infrastructure that we built that
simply could not be sustained, either because of the security
environment or because of resources.
I am particularly worried about sustainability in
Afghanistan because it appears to me that there is a real
disconnect between what we are building for Afghanistan and
what Afghanistan can afford. It does no good for us to spend
this money if after we have spent it, whatever it is, whether
it is a power plant or whether it is a highway, if it is going
to be destroyed and/or not used because they don't have the
resources.
We now have 16,000 Commander's Emergency Response Program
(CERP) projects. I am going to try to avoid the State money
here now, okay? We have had 16,000 CERP projects totaling over
$2 billion that I am not aware that I have ever been able to
look at or view or that there even are sustainability analysis.
We now have brand spanking new $400 million Afghanistan
infrastructure fund (AIF), which is whole new territory for us.
Now we have actually formed a fund where we are going to build
stuff in Afghanistan, as opposed to this being something that
has traditionally been done by DOS or USAID.
The commission recommended that you examine completed and
current projects for risk of sustainment failure, to cancel or
redesign programs and projects that have no credible prospect
of being sustained.
I need to know from the DOD witnesses, do you agree or
disagree with these recommendations? If you agree, what
specific steps have been taken to perform this recommended
analysis?
Mr. Kendall. Senator McCaskill, we agree with your concern.
We have not done as much, I think, in the past as we should
about sustainability of our projects. So it is definitely a
criteria now for projects going forward.
We are increasing the oversight of all the infrastructure
projects that we are doing. I am not sure if you are aware of
all this, but for the CERP projects, anything above $5 million
now is approved at the Deputy Secretary's level in DOD. It has
been done that way for some time now.
Between $5 million and $1 million is approved at the
CENTCOM level, the CENTCOM Commander. So there is very intense
scrutiny of these projects as they come through.
For that and the AIF that you mentioned, the $400 million
fund, both are being overseen by a new council that has been
commissioned just a couple of months ago by Secretary Lynn. It
is the Afghanistan Resources Oversight Council, which I am a
co-chair of, together with the Under Secretary for Financial
Management and the Under Secretary for Policy. So we are
looking at those projects very closely as well.
In May, I think we sent the list over to Congress of the
AIF projects, $400 million, about a dozen fairly large
projects. CERP projects above the threshold the Deputy
Secretary approves are also notified to Congress before they
are implemented. So the level of oversight is definitely going
up on these projects, and we are looking at them very
carefully.
Within Afghanistan, they are coordinated very closely
between DOS and DOD. Both departments are involved. The
commander on the scene, General Allen, together with the
ambassador, review these projects when they come up. Those are
the ones that are done under the AIF primarily.
You mentioned the statistics on CERP. I don't know the
total program statistics. In 2010, I believe there were about
3,500 projects. Of those, about 80 percent were battle damage
repair, repairing things that we had damaged in the course of
combat somehow that were unintended consequences of combat.
About another 10 percent were payments of condolence
payments to people whose relatives had been killed, presumably.
Then the other 10 percent were for other urgent humanitarian-
type responses to things.
The point of the CERP is to deal with relatively urgent
requirements. It did grow to some extent, and it has been used
for some other things. The AIF fund, however, is for larger-
scale projects.
So, going forward, we are certainly looking at
sustainability. It is one of the 16 criteria on the go/no-go
checklist that is done for every project. The degree to which
we can go back and look at projects that we have already
approved or that are already completed, we are taking a look at
that now. I think some work there certainly would be justified,
but we have to go take a look at that and see what kind of a
burden that would be on us.
Did you want to add anything, Brooks?
General Bash. Thank you.
Senator, I, too, absolutely agree. Sustainability is
critically important. General Allen, in fact, just promulgated
a letter last month reiterating what General Petraeus said in
the relationship between construction and counterinsurgency
(COIN), and the importance thereof. The go/no-go letter, which
was promulgated as an operation order in October 2010, since
that time, there has been very specific criteria. I will take a
moment to talk about the details of that.
They have to go through project sustainability--water,
power, maintenance--so, going forward, that those are
available. The scope of the project is absolutely minimum
military requirements are needed for every project.
There is contractor vetting so that they have the capacity
and the capability to actually do the project. End-user
participation--is this really what you want to use when we turn
it over to you? Capacity evaluation of subcontractors as well
and the verification thereof.
The Afghan First policy, to ensure that there is a linkage
to the COIN operation; design criteria, austere using Afghan
standards; durability, in accordance with Afghan practices and
capabilities.
Examples of that--using sinks, trough sinks instead of
mounted sinks; using concrete floors instead of linoleum;
building lagoons for wastewater instead of expensive plants;
deep wells instead of putting in water systems; fans instead of
air conditioners. All those things are being done and have been
done, especially since this operation order was promulgated
over a year ago.
Senator McCaskill. Do either of you have a comment on this?
Ms. Schinasi. I would like to address this, Senator
McCaskill. I think, given the projects that the United States
has undertaken and the programs in Afghanistan, there are
clearly some that will not be sustainable.
So, my question would be, back to something that
Commissioner Zakheim said in our testimony, what is the proof
that the process is working? So, I would want to know what has
been canceled.
Senator McCaskill. Right.
Ms. Schinasi. There should have been projects that are
canceled. It is not just the building codes, which I think are
critically important, and I am glad to see that happening, but
projects and programs overall. You would expect to see DOD's
process result in cancellation of some of those projects.
Senator McCaskill. Have there been any projects that have
been canceled after they have been approved because of
sustainability questions? Are you all aware of any?
Mr. Kendall. We would have to get that information for the
record. I am sure there are projects that were never approved
because of that kind of concern. But as to whether ones that
were approved have then subsequently been canceled or not, I am
not sure. But we could get that information for you for the
record.
[The information referred to follows:]
The Department of Defense (DOD) recognizes the importance of
sustainment for the Commander's Emergency Response Program (CERP) and
Afghanistan Infrastructure Fund (AIF) projects, as was addressed in the
Department of Defense Appropriations Act, 2011 (division A of Public
Law 112-10, and consistent with the purposes of section 1217 of the Ike
Skelton National Defense Authorization Act (NDAA) for Fiscal Year 2011
(Public Law 111-383). These acts specifically required the Department
to submit to Congress a plan for sustainment of CERP projects more than
$5 million to include any agreement with the Government of Afghanistan,
a department or agency of the U.S. Government other than DOD, or a
third-party contributor to finance the sustainment of activities and
maintenance of any equipment or facilities to be provided through the
proposed project. The NDAA also requires that all proposed AIF projects
address sustainability and include a plan for sustainment in their
notification to Congress, prior to obligation of funds for each
project.
In addition, the U.S. Forces-Afghanistan (USFOR-A) Money As a
Weapon System guidance, updated in February 2011, requires a
Sustainment Memorandum of Agreement (MOA) for all CERP projects $50,000
or greater incurring operating or sustainment costs--such as
construction projects and large equipment purchases. The signed MOA is
between the United States (with joint secretariat coordination between
J9 and U.S. Department of State representatives in the International
Security Assistance Force) and the appropriate ministry or agency that
will be responsible for the sustainment of the facility. The intent of
these agreements is to educate the Government of Afghanistan
representative on the project itself and ensure there is an
understanding of the project's out-year operating and sustainment
costs. Should the appropriate Afghan ministry or agency be unwilling to
fund the operating costs or maintain the investment, the United States
will not fund or proceed with the project.
All CERP project managers are required to coordinate proposed
projects with Afghan agencies and local officials, as well as with the
nearest Provincial Reconstruction Team, to ensure there is no unwanted
duplication of efforts by DOD, U.S. Agency for International
Development, Department of State, and nongovernmental organizations in
the area.
In addition to CERP and AIF, the Afghanistan Security Forces Fund
(ASFF) has a significant role in Afghanistan in developing, training,
and equipping the Afghanistan security forces. Senate Report 111-295
(S. 3800) requested the Secretary of Defense to establish an ASFF
Executive Council to oversee the planning, contracting, and execution
of the ASFF.
On August 3, 2011, the Deputy Secretary of Defense established the
Afghanistan Resources Oversight Council (AROC). The Council was
initially assigned the responsibility to oversee only the ASFF. This
authority was later expanded to include CERP, AIF, and other DOD-funded
programs in Afghanistan (such as the Afghanistan Reintegration
Program). The membership includes co-chairs, the Under Secretary of
Defense for Acquisition, Technology and Logistics; the Under Secretary
of Defense for Policy; and the Under Secretary of Defense
(Comptroller), as well as senior representatives from the U.S. Central
Command (CENTCOM), the Joint Staff, and the Army (Financial Management
and Comptroller). The AROC will provide a venue to oversee the overall
execution of the resources.
Further, the U.S. Army Corps of Engineers uses 16 Go/No-Go criteria
for construction projects which take into consideration not only
sustainability, but capacity building, operations and maintenance,
master plan coordination, and quality assurance management, to name a
few.
For Contingency Military Construction (MILCON) projects, funds are
line-item authorized (name, location, and cost) by Congress and are
scrutinized to ensure their validity upon completion. There are
authorities to reprogram MILCON funds from cancelled or descoped
projects, but there is no flexibility to change a specific project's
scope, cost, or location once approved. Continuous project review and
approval occurs at the USFOR-A Service Component, CENTCOM, and Joint
Staff/OSD levels prior to submission and throughout the Congressional
approval period. USFOR-A and USACE further validate projects prior to
award and again prior to the start of construction. These projects have
been reviewed over the last 2 years to ensure our investments support
operational requirements. These reviews resulted in cancellation of a
number of projects and identification of emerging projects to support
changes in the overall Afghanistan strategy or changes in force levels:
44 projects ($500 million) cancelled from the original
137 projects ($2.3 billion) in the fiscal year 2010 program
submitted in December 2008 to Office of the Secretary of
Defense (OSD).
24 projects ($300 million) cancelled from the original
fiscal year 2011 program (58 projects, $1 billion) submitted by
CENTCOM to OSD in October 2009.
USFOR-A has just completed another review of the entire MILCON
program; of $4.64 billion in MILCON projects approved, $576 million in
MILCON projects are being recommended for cancellation and $205 million
for descoping. This was based on evaluating projects against three
criteria: (1) projects essential to retrograde; (2) projects supporting
enduring strategic basing; and (3) projects in support of surge
operations.
For Afghanistan National Security Forces (ANSF) construction
projects, Congress authorized funds and authorities that allow CSTC-A
the flexibility to change, cancel, and relocate construction projects.
As with the MILCON program, CSTC-A operational requirements drive their
ANSF construction program. ANSF projects are screened against the Go/
No-Go criteria as well. There were no projects cancelled as a result of
the screenings, but many were modified to meet the criteria. In-
progress projects were reviewed and appropriate changes were made as
required and allowable. This year, 4 ANP projects were relocated due to
physical requirements and approximately 50 ANP projects across Paktika,
Helmand, Ghazni, Kunduz, Zabul, and Farah Provinces were put on hold
until security conditions improve.
CSTC-A Engineers continue to revise ANSF facilities construction
standards. The CSTC-A focuses on making current and future ANSF
facilities sustainable, affordable, and durable. These standards ensure
facilities meet Afghan requirements, can be sustained, and are cost
effective. Examples include washrooms built with trough sinks vice
pedestal sinks, use of ceiling fans vice heating ventilation and air
conditioning systems, and dining facilities equipped with propane and/
or wood stoves vice electric stoves. A primary challenge for CSTC-A is
stewardship and sustainment--ensuring Afghans are capable of managing
facilities once security has fully transitioned. They have enhanced
this capability by establishing:
Advisory groups for ministerial development in the
Ministry of Defense (in support of the Afghan National Army)
and the Ministry of Interior (in support of the Afghan National
Police).
Advisors with Afghan Facilities Departments to handle
daily issues and assist with implementing Ministerial strategic
initiatives.
Embedded Infrastructure Training Advisory Group (ITAG)
teams to transition to Afghan-led facility maintenance. ITAG
protects our investment in ANSF infrastructure.
Finally and most recently, USFOR-A is accounting for the reduction
of U.S. forces in newly transferred areas. When future transfers occur
in two of the Regional Commands, projects regarding housing, waste
management, wastewater treatment, and dining facility projects (six
projects, $29 million) will be cancelled. The message is that we will
continue to assess projects at U.S. forces reposture from Afghanistan,
ensuring we make only the investment required to support operations.
Senator McCaskill. I think that would be really important
because I think that would show the kind of attention to this
issue that it deserves. It is one thing to set up a process to
get the go or no-go, but for these big projects, the go or no-
go is being made very far from the realities on the ground.
I guarantee you, if I took some of the gos and took it to
some of the folks that are on the ground in that area, they
would say, ``Are you kidding? Really? This isn't going to be
sustained. These folks can't sustain this project.''
The biggest example, which is not you all, but is this
power plant in Kabul. Hundreds and hundreds of millions of
dollars, and it is big--sitting there, maybe it will be used as
a peak-time generator, but they can't afford it. They just
can't afford it. That was all our money.
Somebody in this process should have said, ``Whoa, time
out. We need to stop this right now.'' Instead, of course, we
went ahead and completed it. Now it is a great exhibit A of
exactly the problems I am talking about.
Mr. Zakheim. May I add to what Katherine Schinasi said?
Senator McCaskill. Sure.
Mr. Zakheim. I was there and funded CERP early on in 2001,
2002, 2003, 2004. In those days, CERP was $50,000, $100,000
projects. It was really meant to be programs that the local
commander felt would be useful for keeping people off the
streets and fixing some things. It was not meant to be a
massive infrastructure development project. That was for USAID
to do if they were going to do it.
We have some problems--we mentioned this in our report--
with probably the biggest sustainability question of all, which
is the Afghan National Security Forces (ANSF).
Senator McCaskill. Right.
Mr. Zakheim. We have spent about $11 billion recently on
the ANSF, when the entire gross domestic product (GDP) of
Afghanistan is $16 billion. So let us say we go down--I think
General Caldwell wants to go down to about $6 billion. That is
still a chunk of change. For a government that can only take in
about $2 billion, you have to wonder how this adds up.
Now then you add on top of that project, why is DOD into $5
million projects? Why is it doing that? So it is not just
enough simply to say, ``Well, we are monitoring it.'' You have
to ask the basic question: why are they doing it?
Then another question is, I buy the fact that this is now a
criterion. I don't question that. But it is one of 16. So if
the other 15 go one way, and sustainability goes the other way,
which way do you think they are going to go?
Senator McCaskill. Right.
Yes, Secretary Kendall?
Mr. Kendall. If I could just respond to that?
They are go/no-go criteria, every one of them, and they all
have to be a go for a project to go ahead.
Senator McCaskill. So if sustainability is a no-go, it
doesn't go?
Mr. Kendall. That is right.
Senator McCaskill. Regardless of the others?
Mr. Kendall. That is correct.
Senator McCaskill. Okay. That is great.
Senator Ayotte?
Senator Ayotte. Thank you, Madam Chairman.
I just wanted to confirm, first of all, with General Bash
and Secretary Kendall that you and I spoke before this meeting.
We met, and I asked you about the provisions from Senator Brown
and I's legislation on No Contracting with the Enemy that got
included in the NDAA. Do you think those are important, and
will they be helpful?
Mr. Kendall. Yes, we do support those, Senator Ayotte.
Senator Ayotte. Thank you, I appreciate that.
I then wanted to ask about in particular this issue, for
Mr. Zakheim and Ms. Schinasi, about where we are going in Iraq.
Because in connection with the effort to transition operations
in Iraq from DOD to DOS, the DOS will need to hire what I have
heard potentially thousands of contractors to provide for--some
of the things are medical, basic support, security, because we
are only, if I take the latest announcement to be the case,
only a very minimal amount of military security.
Basically, what I am hearing for numbers, of the 16,000 to
17,000 personnel that may ultimately make up the DOS's presence
in Iraq, about 14,000 of them could be contractors. So I would
like to hear from both of you, what concerns do you have about
that happening? The degree to which DOS will rely on
contractors in Iraq, what concerns you think that arises?
Because I also see a very significant discussion here with
DOD, but will there be any type of transition from lessons we
are learning here and we are talking about today on adequate
oversight in contracting, over to DOS? How will that all--I
just would like to get your observations on it, and then, of
course, if General Bash and Secretary Kendall have any
observations?
I would just hate to see us do this and then pour millions,
billions--I don't know what the number will be--in taxpayers'
dollars back in there and have all these lessons just fly out
the window.
Mr. Zakheim. I do have tremendous concerns. I have more
concerns, unfortunately, than I have answers. Clearly, if DOS
until now has had trouble managing its contracts--and there is
no question that it has had some--I don't know how it is going
to manage all of this.
One thing that concerns me and that can be dealt with, it
is my understanding that DOS believes that when the Government
has now stated that risk should be accounted for in considering
contracting and that that security is an inherently
governmental problem, that that does not apply to DOS simply
because DOS says, ``We are not into the business of fighting,
and therefore, whatever we are doing is not inherently
governmental.''
Now, clearly, if you have a whole bunch of contractors out
there with guns who will be doing all sorts of things, to me--
to my simple mind, that is something that involves security,
and that is inherently governmental. So I think it is very
important that DOS adopt the same risk kind of approach that
DOD appears to be adopting, which is, don't send them out there
if it is a high-risk project because then you are going to have
a bunch of contractors either being shot at or shooting at
Iraqis.
That is just not going to be a very good thing. That is a
disaster waiting to happen. So that is one possible thing that
maybe even could be legislated. I don't know.
The other is simply to get more oversight. If DOS has to
beg, borrow, and steal people from other agencies, well, why
not? That is doable. Part of the problem is that,
unfortunately, many of our civil servants, certainly outside
DOD, are just not willing to deploy.
It is all voluntary. So, we have a problem there, too. When
I was in Government, I often felt that there were two and a
half agencies fighting this war. DOD was fighting this war. DOS
was fighting this war. You added up all the others, and there
was another half agency, all combined.
Our country is at war. Every civil servant who has
something to contribute out there ought to be told: ``you are
going.'' That could be something that could help DOS as well.
Senator Ayotte. Thank you. Please, Ms. Schinasi.
Ms. Schinasi. To just add something, DOS, in responding to
recommendations in our interim report, made the case that they
felt that their model for contracting and overseeing
contractors was sufficient. They knew how to operate in an
international environment. They contracted all the time. They
knew what they were doing, and so they pushed back on a number
of our recommendations.
We would argue that we have seen enough poor outcomes from
DOS contracting that we were not in agreement with their
assessment of that. What you have seen, which brings me to the
point of is the problem being addressed, and we have written--
the CWC put out two special reports on this. The issue has been
on the table for over a year. It doesn't seem to be much closer
to resolution.
DOS has not moved to solve the problem. DOD has offered the
use of the LOGCAP contract for some of the operations, but DOS
has not trained up its contracting officials sufficiently to be
able to make good use of that LOGCAP contract.
I think what you will see is a diminishment of what DOS
says is required for its operations in Iraq. As you probably
know, they have cut down on the number of locations where they
said they would be able to operate. That is possibly going to
go down and down and down, to the point where they can actually
match what their resources are to a requirement set.
I don't think that has been done yet. So I share
Commissioner Zakheim's concern that we are going to be ready to
do this when the time comes.
Senator Ayotte. Thank you.
I certainly want to hear from General Bash and Secretary
Kendall about this. But before I do that, I just want to have
one follow-up to what you said, Ms. Schinasi, which is I am new
to this place. I am a new Senator.
Have we done the same type of analysis that you just did,
which was phenomenal, and it is going to be very helpful in
guiding policy decisions--and obviously, DOD is here before us,
taking this very seriously--with State?
Ms. Schinasi. The analysis of whether or not----
Senator Ayotte. Right. The contracting analysis that we are
doing here.
Mr. Zakheim. Oh, yes. State is part of this report.
Senator Ayotte. Okay.
Mr. Zakheim. Because this is an Armed Services
Subcommittee, we focused on DOD. But let me make it clear, our
report addresses DOS and USAID. We had testimony from senior
officials in both agencies.
Senator Ayotte. But one of the concerns I have is just from
what Ms. Schinasi just said, that we didn't get the full
response from DOS that you got from DOD.
Mr. Zakheim. I think that is accurate.
Senator Ayotte. That seems to me--then how can we have a
full picture of DOS? Now, I know DOS is mentioned in this
report, that you have talked to those officials, USAID. But is
there more work that we need to do on that end?
Ms. Schinasi. Yes.
Mr. Zakheim. Yes.
Senator Ayotte. Okay. Thank you. I appreciate it.
Mr. Zakheim. In fact, I would say a lot more work.
Senator Ayotte. Okay. I am sorry. Secretary Kendall and
General Bash?
Mr. Kendall. I could go on for hours about the transition
in Iraq because I am the senior DOD official who has been
working that problem with DOS. My counterpart has been Under
Secretary Pat Kennedy at DOS, who is their Under Secretary for
Management.
I have made three trips to Iraq as part of examining
progress and getting ready for the transition. There is a lot
of risk in the transition, and I will let DOS address that. But
I can talk directly to the contracting concerns.
DOD is basically providing the contracting support to DOS
for all of its essential functions. We are transferring
thousands of pieces of equipment to DOS. We have worked hand-
in-glove with them on the sites that have already now nominally
been transitioned to their initial control.
They are keeping 11 sites, roughly, I think, 5 of those
that we will still be operating under the chief of mission
status for operation--for security cooperation in Iraq. We are
providing the LOGCAP IV contract support to them. That was
awarded recently. There was a protest, which was not
successful. That is in place.
There are contracts in place for security. There are
contracts in place for fuel delivery and other supply delivery.
Defense Logistics Agency (DLA) is supporting DOS.
The plan is that we would essentially, through our
organizations, particularly the Army Contracting Command,
administer these contracts, from the State-side perspective at
least, through 2012. At that point, DOS would, hopefully, be
ready to transition over to direct administration themselves.
If they are not, we are prepared to continue that support.
Now, most of the oversight in-country would be provided by
DOS people, and they need to train their people up to do that.
That is in progress.
I started on this a year ago, roughly. At that point in
time, we were nowhere, in terms of getting ready for this
transition. But I think today we are in decent shape. We are
ready to transition to DOS. The contracts are in place that
they need.
I am sure there will be problems. There have to be with a
transition. DOS has never done anything this big, even though
they have a reasonable amount of experience with smaller scale.
A lot of the projects I think that the commission looked at
were USAID projects and infrastructure projects and so on. That
doesn't apply here. This is essentially base operations.
The 17,000, or 16,000 figure that you mentioned is
approximately correct. They are mostly contractors. A good
fraction of them are PSCs who will mostly be doing static
security. They will be providing protection on the bases
because we will not be there. The military will not be there.
There will be a small Marine Corps contingent for the
embassy and some other locations, but generally, security will
be provided by PSCs, mostly static security. There will be some
security also for people when they go outside and do whatever
they have to do outside of the bases.
The Iraqi security forces are also supposed to be providing
security for our people who are there as part of the mission.
But that is not immediate, direct security of the facilities.
That will be provided through PSCs primarily.
There is risk in this. But I can tell you that from the
contracting perspective, I think we are in pretty good shape to
make the transition.
Senator Ayotte. Thank you very much.
I have to say, for our people, I can understand why they
wouldn't--might not want to go now, even some of the civilian
personnel, if that is what we are going to rely on for
security.
Senator McCaskill. Senator Manchin?
Senator Manchin. Thank you, Madam Chairman.
I am sorry if you said something before I came, and I
missed it. I am so sorry and apologize for that. But a couple
things I would like to ask is, and anybody here, I think,
probably the lieutenant general or Secretary--can you give me
the dollar amount of our DOD annual budget spent on contracting
in dollars?
So if our budget is, what--DOD budget is $700----
Mr. Kendall. The base budget, $554 billion----
Senator Manchin. $554----
Mr. Kendall.--this year, to give you a round number. But we
add to Overseas Contingency Operations (OCO) Fund--the
supplemental funding for the OCO, it is over another $100
billion. I think we contracted out, number for 2009 that I
happen to know pretty well, is $412 billion. That is out of a
grand total of over $700 billion.
That is for a combination of services contracting and
products. It is roughly 50/50 within that number, services that
are provided of one kind or another, maintenance, facility
support, and so on and actual products.
Senator Manchin. So it is fair to say that it is 50 percent
or more, right?
Mr. Kendall. Yes.
Senator Manchin. Of our budget is spent on contracting?
Mr. Kendall. Yes.
Senator Manchin. If we look at that in numbers of people,
what numbers of people--I saw here in the breakdown of the
charge, you had Afghanistan, 101,000, almost 102,000
contractors.
Mr. Kendall. I have the numbers for Afghanistan and Iraq.
Senator Manchin. In the total DOD program, what would be
the number of contractors working today, compared to the number
of military?
Mr. Kendall. We are collecting that data. We owe a report
to Congress, which is late, on how many contractor
individuals----
Senator Manchin. A quick, rough estimate?
Mr. Kendall. I really hesitate to give you a number. It is
a large number. You can do the math, but it is----
Senator Manchin. Is it more--do we have more contractors
working than we do have military personnel?
Mr. Kendall. It is comparable.
Senator Manchin. So it is based on----
Mr. Kendall. The reason I can't give you an exact number is
that many of the things we contract for, we don't contract for
people. We contract for things or specific services.
Senator Manchin. Sure. I am talking about just people.
Mr. Kendall. Yes.
Senator Manchin. I am talking about personnel.
Mr. Kendall. I would have to take that for the record to
try to get you a number that would break it out in a reasonable
way.
[The information referred to follows:]
The Department of Defense (DOD) reported 622,722 contractor full-
time equivalents (CFTEs) as part of the fiscal year 2010 inventory for
contract services required by section 2330a of title 10, U.S.C. CFTEs
should not be construed as a personnel level or headcount. The number
of military as of the end of fiscal year 2010 is 1,430,985. On December
29, 2011, the Office of the Secretary of Defense provided guidance to
DOD components for submitting the Inventory of Contracts for Services
for fiscal year 2011. This guidance supports implementation of section
2330a of title 10, U.S.C., which requires DOD to compile the
inventories, to include CFTEs, and report results to Congress annually.
DOD will transmit the fiscal year 2011 inventory report to Congress by
June 30, 2012.
Mr. Kendall. If we buy an aircraft, there are a number of
contractors that we are paying for that are working on the
aircraft.
Senator Manchin. I understand that.
Mr. Kendall. But we didn't pay for people. We paid for the
aircraft. In many cases, we buy services. We buy a certain
level of service, and how the contractor happens to staff that
is up to the contractor.
Senator Manchin. Probably it is a fair evaluation. If the
money is about 50/50, then personnel would be about probably in
that neighborhood.
Mr. Kendall. If half of those services is essentially more
buying people, so you could do the math from that with an
average price. We can give you an estimate, but it is going to
be a rough estimate.
Senator Manchin. Is it accurate to say that we are the
largest employer in Afghanistan? That is accurate?
Mr. Kendall. I think that is definitely, yes, I think so.
Senator Manchin. Because of basically their economy----
Mr. Kendall. The figures that were mentioned, because of
the amount of money we are putting into the country, yes.
Senator Manchin. But we are their largest--are we their
largest employer in that country?
Mr. Kendall. I would say that is probably true. Some of
those are foreign nationals that are brought in.
Senator Manchin. DOD, if you can give me what your
definition of nation building is?
Mr. Kendall. I will have to defer that question. That is--
--
Senator Manchin. Who to?
Mr. Kendall. Probably the Under Secretary for Policy or
possibly the Joint Staff.
Senator Manchin. General, can you answer that one?
General Bash. We know that the President, in his National
Policy Decision Memo of 2005, directed DOD to undertake
stability and reconstruction, which is what we are doing.
Senator Manchin. That was done when, sir?
General Bash. 2005, sir.
Senator Manchin. So you were at that time directed in
Afghanistan to take that action?
General Bash. That was the policy decision at that time by
the President for the military to undertake stability and
reconstruction as a mission set.
Senator Manchin. It has continued today, to this day?
General Bash. That is correct.
Senator Manchin. So then it would be defined as nation
building?
General Bash. Nation building----
Senator Manchin. If you are the largest employer and you
are spending more than anybody has ever spent in that country,
you would have to be doing something that you would call--
define as nation building because you are the only one building
anything.
We, the U.S. Government and the taxpayers, are we the only
ones truly that are building or investing?
General Bash. From my perspective, we don't talk in
terminology of nation building. What we talk about is
counterinsurgency, which is what General Allen is focused on.
Senator Manchin. Oh, I know how you all--I know what you
are trying--I know that. I am trying--I am being as respectful
as I possibly can, sir. But, truly, in the eyes of an average
American, that would be trying to build another nation, and we
can make determinations at the expense of our own.
So the thing I would ask you about, I understand that the
General Services Administration has identified an awful lot of
rare earth mineral resources, if you will. Now I am
understanding, to date, the only success or the only country
that has been successful or making a successful attempt at
mining, let us say copper, is China. Does China have--what type
of an investment does China have in Afghanistan that you know
of, militarily or monetarily, or personnel-wise?
Mr. Kendall. I am not aware of the answer to that question.
I am sorry, Senator Manchin.
General Bash. We would have to take that for the record,
Senator.
[The information referred to follows:]
Mr. Kendall. China's involvement in Afghanistan has focused
primarily on investments in resource-related industries, development
aid for infrastructure and reconstruction projects, and vocational
training for Afghan officials and public servants. The exact number of
Chinese personnel in Afghanistan is undetermined, but most accounts
suggest hundreds of Chinese technicians and construction workers are
either working on China-supported development projects or supporting
China's $3.5 billion investment in Afghanistan's Anya Copper Mine, the
single largest foreign direct investment in the country.
China's state-owned Metallurgical Corporation of China
(MCC) and the Jiangxi Copper Company in late 2007 won a joint
bid to develop the Anya Copper Mine, reportedly one of the
largest undeveloped copper fields in the world. MCC is still
conducting survey work and hopes to begin mining operations
within the next few years.
China has provided more than $200 million to
Afghanistan for reconstruction and development grants since
2002, including $75 million in aid that Beijing pledged to
provide over 5 years beginning in 2010. By comparison, U.S.,
North Atlantic Treaty Organization, and other coalition
reconstruction and development programs have provided over $13
billion over the same timeframe.
According to the Chinese Government, Chinese firms
were engaged in more than 30 infrastructure projects in 2008--
including roads, dams, hospitals, and other projects--in
addition to survey and exploration work related to the Aynak
Copper Mine. By comparison, in 2011 U.S. Forces Afghanistan was
engaged in 23,607 total projects, of which 36 were greater than
$1 million, 186 were transportation projects, 168 were water
and sanitation projects, and 145 were health care projects.
In August, the China National Petroleum Corporation
won three oil blocks in Afghanistan's first oilfield auction,
offering to pay 15 percent royalty on the blocks and 30 percent
corporate tax and to build a refinery for Afghan use.
Although China has offered strong rhetorical support for Afghan
security sector reform, the scale and scope of China's military and
security assistance to Afghanistan have been limited. China has
provided at least $2 million--and possibly up to $8 million--in
materiel, equipment, and training aid to Afghan forces since 2006, but
Beijing does not appear to be pursuing a large-scale, long-term
commitment to Afghan military capacity building, nor has it announced
plans to deploy military forces to the country. By comparison, since
2007, the United States has contributed $36.6 billion to development of
the Afghan National Security Force, with another $3.2 billion from NATO
and coalition partners. China may consider reassessing its security-
related engagement with Afghanistan after the drawdown of U.S. forces,
but it almost certainly prefers to use the capacity-building efforts of
others rather than provide substantive assistance of its own.
A Chinese official and Afghanistan's ambassador to
China reportedly signed an agreement on military cooperation in
January 2010. Although we have no details on the agreement,
reporting suggests provisions included scholarships and
training opportunities for Afghan officers in China.
During a March 2010 meeting with his Afghan
counterpart, China's Minister of National Defense, General
Liang Guanglie, said that military cooperation between the two
countries in military supply and personnel training had
developed smoothly, likely a reference to earlier reported
Chinese efforts to provide logistics training in China for some
Afghan troops.
According to an uncorroborated foreign media report,
China provided funding to the Afghan National Police to support
the deployment of the 1,500 Afghan police personnel currently
providing security for the Anya Copper Mine. The funds may have
been provided by the Chinese firms that purchased a controlling
stake in the mine in late 2007.
General Bash. As the Joint Staff's Director for Logistics, this
information falls outside my responsibilities and area of expertise.
However, my staff solicited the following information from other
subject matter experts in the Joint Staff:
China's involvement in Afghanistan has focused primarily on
investments in resource-related industries, development aid for
infrastructure and reconstruction projects, and vocational training for
Afghan officials and public servants. The exact number of Chinese
personnel in Afghanistan is undetermined, but most accounts suggest
hundreds of Chinese technicians and construction workers are either
working on China-supported development projects or supporting China's
$3.5 billion investment in Afghanistan's Aynak Copper Mine, the single
largest foreign direct investment in the country.
China's state-owned MCC and the Jiangxi Copper Company
in late 2007 won a joint bid to develop the Aynak Copper Mine,
reportedly one of the largest undeveloped copper fields in the
world. MCC is still conducting survey work and hopes to begin
mining operations within the next few years.
China has provided more than $200 million to
Afghanistan in financial for reconstruction and development
grants since 2002, including $75 million in aid that Beijing
pledged to provide over 5 years beginning in 2010. By
comparison, U.S., North Atlantic Treaty Organization (NATO),
and other coalition reconstruction and development programs
have provided over $13 billion over the same timeframe.
According to the Chinese Government, Chinese firms
were engaged in more than 30 infrastructure projects in 2008--
including roads, dams, hospitals, and other projects--in
addition to survey and exploration work related to the Aynak
Copper Mine. By comparison, in 2011 U.S. Forces Afghanistan was
engaged in 23,607 total projects, of which 36 were greater than
$1 million, 186 were transportation projects, 168 were water
and sanitation projects, and 145 were health care projects.
In August, the China National Petroleum Corporation
won three oil blocks in Afghanistan's first oilfield auction,
offering to pay 15 percent royalty on the blocks and 30 percent
corporate tax and to build a refinery for Afghan use.
Although China has offered strong rhetorical support for Afghan
security sector reform, the scale and scope of China's military and
security assistance to Afghanistan have been limited. China has
provided at least $2 million--and possibly up to $8 million--in
materiel, equipment, and training aid to Afghan forces since 2006, but
Beijing does not appear to be pursuing a large-scale, long-term
commitment to Afghan military capacity building, nor has it announced
plans to deploy military forces to the country. By comparison, since
2007, the United States has contributed $36.6 billion to development of
the Afghan National Security Force, with another $3.2 billion from NATO
and coalition partners. China may consider reassessing its security-
related engagement with Afghanistan after the drawdown of U.S. forces,
but it almost certainly prefers to use the capacity-building efforts of
others rather than provide substantive assistance of its own.
A Chinese official and Afghanistan's ambassador to
China reportedly signed an agreement on military cooperation in
January 2010. Although we have no details on the agreement,
reporting suggests provisions included scholarships and
training opportunities for Afghan officers in China.
During a March 2010 meeting with his Afghan
counterpart, China's Minister of National Defense, General
Liang Guanglie, said that military cooperation between the two
countries in military supply and personnel training had
developed smoothly, likely a reference to earlier reported
Chinese efforts to provide logistics training in China for some
Afghan troops.
According to an uncorroborated foreign media report,
China provided funding to the Afghan National Police to support
the deployment of the 1,500 Afghan police personnel currently
providing security for the Aynak Copper Mine. The funds may
have been provided by the Chinese firms that purchased a
controlling stake in the mine in late 2007.
Senator Manchin. Let me ask you, how many times have you
been to Afghanistan?
Mr. Kendall. I have only been to Afghanistan one time.
Senator Manchin. How about you, sir?
General Bash. Senator, I have been there dozens of times,
and I will be going----
Senator Manchin. Have you seen many Chinese military there?
General Bash. Never.
Senator Manchin. Have you seen many Chinese in the way of
investment, infrastructure?
General Bash. Not in the missions I was on.
Senator Manchin. But they are intending to extract at least
that one resource. Am I correct?
General Bash. I am unaware of their activities.
Mr. Kendall. I am aware of press reports that Chinese are
interested in mining in Afghanistan.
Mr. Zakheim. You are right on. By the way, you are right. I
mean, stabilization and reconstruction is a euphemism for
nation-building, or state-building. It is really more
accurately state-building. So they are nation-building.
Senator Manchin. Right. But I am understanding now we
have--it has been in 2005 that decision was made, and it has
been ongoing ever since?
Mr. Zakheim. That is right.
Senator Manchin. You can imagine the consternation a lot of
us have here with what is going on in our country.
Mr. Zakheim. We are pouring almost as much into Afghanistan
as Afghanistan generates in its own GDP.
Senator Manchin. Let me ask this question, and this is
something that I have been there twice and talked to a lot of
troops, and a lot of people from West Virginia are the troops.
Without naming names, invariably I have been told that they
intended to cycle out so they could get a better job working as
a contractor for our Government.
Do any of you confirm that? Do you have a percentage of the
people working in contracting that basically were former
military? Can you get me that, if you don't have it? But would
you say it would be quite high?
General Bash. Senator, I wouldn't have that off the top of
my head. I would tell you, though, that what we are getting at
here is retention of the forces, which is really at an all-time
high right now. So the decision to leave the military because
of that opportunity is not overwhelming.
Senator Manchin. Secretary Kendall?
Mr. Kendall. I think earlier on, in the Iraq conflict in
particular, there was some indication in the press that people
were leaving and then coming back as contractors.
For contract people, people that administer contracts, we
generally hire people out of school initially. There is a
veterans preference in civil service hiring, and I don't know
that we keep track of the prior service of people necessarily,
but I can try to get that for you for the record.
[The information referred to follows:]
Thirty-eight percent of our civilians in the acquisition workforce
on contracting positions have military experience.
Senator Manchin. This would be a military question,
Lieutenant General. Do you believe that we could utilize our
National Guard much more effectively and cost efficiently?
General Bash. Senator, I think today we are absolutely
using our National Guard very effectively. With my background
from Air Mobility Command (AMC), for example, we are deploying
them at a deployment rate that is maxing their capability out.
So from that perspective and the other military forces, we
really couldn't be using them any more in a majority of their
mission areas.
Senator Manchin. No, what I'm asking is, could we build off
of the National Guard premise that we have right now with the
expertise they do have, be able to do a lot of the contracting
work that we are hiring at a higher wage rate or cost, and do
it more effectively and efficiently through our Guard than what
we can through contracting?
You all haven't taken a position on that, or do you have a
comment? Because my time is running out, and I appreciate it.
Mr. Kendall. We have been increasing the size of the
contracting workforce in Government. We have added a few
thousand positions, actually, in the last 2 or 3 years, mostly
under the Defense Acquisition Workforce Development Fund. A lot
of those people are entry-level people who have come out of
school. Some of them, I am sure, are coming from the military.
We also increased the number of military people that are
doing contracting for us as part of our force structure. I
visited a unit in--it was in Iraq, actually--which had asked to
have military people included in their organization as part of
their organization to do contracting. We were talking earlier
about institutionalizing contracting. So they clearly saw the
need at that level to have that kind of capability, and
presumably, those people would be military.
Senator Manchin. I am so sorry, Madam Secretary. Just very
quickly. I know.
Senator McCaskill. It is Senator Blumenthal, not me.
Senator Manchin. I know. Very quickly, ma'am. I am sorry.
I think just to make the point, if you could, if I could
even talk with you all later, if you can get back to me at a
later time, does DOD look at our National Guard, with the
expertise they have been able, the support they have been
giving, to basically be more effective and efficient, growing
it than the cost that we are spending for private contractors I
think is where I am going. We can talk about that.
[The information referred to follows:]
As part of Total Force planning, the Department considers all
sources, including the National Guard, in planning to meet current and
future operational needs. The Department's ``sourcing'' of functions
and work between military and civilian personnel, as well as contract
support, is consistent with mission requirements, funding availability,
readiness and management needs, and applicable laws. Consistent with
these considerations and the Department's military strategy,
recommendations for sizing the force will be based on mission
requirements and informed by our combatant commanders' needs to meet
their missions and maintain a necessary state of operational readiness
while minimizing and mitigating any risks.
The use of Active, Reserve or, in certain cases, National Guard
personnel can be a consideration in making staffing decisions. However,
support functions are generally designated for civilian or contract
performance unless one or more of the following criteria are
applicable: military-unique knowledge and skills are required for
performance of the duties; military incumbency is required by law,
executive order, treaty, or international agreements; military
performance is required for command and control, risk mitigation, or
esprit de corps; and/or military staffing is needed to provide for
overseas and sea-to-shore rotation, ensure career development, maintain
operational readiness and training requirements, or to meet
contingencies or wartime assignments. In making staffing decisions,
commanders must be mindful of using military personnel to perform tasks
that limit their availability to perform the operational mission.
Senator Manchin. Thank you. I am sorry, ma'am.
Senator McCaskill. No, it is fine. Thank you. We are glad
you are here, Senator Manchin.
Senator Blumenthal.
Senator Blumenthal. Thank you, Madam Chairman.
Thank you for those questions, Senator Manchin, very well
taken.
I want to thank our chairwoman for the great work she has
done and is doing on this issue. She has been a real champion.
I don't need to tell anyone in this room or in this building or
in the United States Senate that she has been at the forefront
of eliminating waste and fraud in Government contracting, but
also trying to make all of our policies more effective.
I have a wide array of questions which I will not ask here,
but hope perhaps either to submit in writing or follow up on.
But I do want to concentrate on one area that is mentioned in
your report--the issue of human trafficking by Federal
contractors, which has been of grave concern to me and some of
my colleagues on the Senate Judiciary Committee.
I have a number of measures that have been reported out of
the Senate Judiciary Committee to address human trafficking by
contractors on our military bases in Afghanistan and Iraq not
only because it is immoral, but also because it is dangerous to
our troops. So this is an issue of security, not just morality.
I noted in the report, and I am quoting, ``tragic evidence
of the recurrent problem of trafficking in persons by labor
brokers or subcontractors of contingency contractors.'' Could I
ask you to elaborate on that finding because it is a fairly
succinct and concise one?
Again, you can do it either outside of this room or in
another setting if you wish or expand on any of your remarks
here.
Mr. Zakheim. I have been asked to go first.
It takes place in lots of different ways. What the brokers
tend to do is get these people over to, say, Afghanistan or
Iraq, but mostly Afghanistan, and they take their passports
away. Once they do that, these people are prisoners.
They promise them wages at one level and pay them
subsistence wages, if that. They coop them up in dormitories,
and they can't get out. Quite frankly, the CWC just scratched
the surface of this, to be honest. There is a lot more in that
iceberg. We just saw the tip of it.
But part of the way that we can get our arms around it--and
we did report this--is to have visibility into what the
subcontractors are up to. We deal with the primes, and we say
the primes are responsible for dealing with their subs.
Now if you are working in Peoria, or in Darien, CT, or
wherever, that is fine. It is not fine in Afghanistan. It just
won't work.
So, we need to ensure that our oversight agencies have
complete visibility not just into the dollars, but into the
practices of these subs. We are being taken to the cleaners in
all sorts of ways. It is not the primes that are paying off the
insurgents. It is the subs that are paying off the insurgents.
So it is just another aspect of the same problem. That is
one, I think, that will require legislation.
Senator Blumenthal. I noted in a footnote in the report
that the two witnesses from DOD in the hearing on July 26,
2010--being Ed Harrington, the Deputy Assistant Secretary of
the Army for AT&L, and Patrick J. Fitzgerald, Director of
DCAA--were asked, and again, I am quoting, ``If any companies
have been suspended or debarred for''--and I am inserting
here--``human trafficking in particular?''
They took that question for the record. They said they
would get back to you. Did you get any additional information
from them?
Ms. Schinasi. I am not aware that we did, Senator.
Senator Blumenthal. I wonder if I could ask General or
anyone else who is here on behalf of DOD--Mr. Secretary--if you
could answer those questions for us because DOD did commit to
responding to them and evidently has not done so.
Mr. Kendall. We will take that for the record, make sure
you get it. I just checked, and we don't have that information
with us.
[The information referred to follows:]
The Suspension and Debarment Officials were queried recently about
any human trafficking cases from the agencies. There were no
suspensions or debarments related to cases of human trafficking by the
Navy, Air Force, or the Defense Logistics Agency. The Army had two
cases where the issue was raised in the past 3 years. The first was not
substantiated, so no suspension or debarment action was taken. The
second was a contractor accused of harboring an illegal alien and
extracting cheap labor under threat of exposure. In this case, both the
principal and the entity were debarred. This case was stateside; and
not in the contingency environment.
Senator Blumenthal. I appreciate it.
Mr. Kendall. Sir, if I may make a comment or two about
human trafficking, what we are doing about it?
We recognize this is a serious problem. It is a violation
of criminal law. It is inhumane. There are any number of things
wrong with it. It is a violation of basic human rights and
human dignity.
We have put in place--there are, obviously, criminal
statutes that can be enforced. We are putting and we have put
into all of our contracts clauses that would prohibit it, and
it is a basis potentially for debarment. We will check on the
statistics to see if there are any cases where we have done
that.
We have also taken steps to notify the workers of what
their rights are, so they know that they can do something about
ill treatment if it occurs. I have a brochure here that we just
put out, which we are putting out in seven languages, which all
workers will get to make sure that they are aware of their
rights. There is a smaller card version of this as well.
So we have taken some strong measures to address this
problem.
Mr. Zakheim. Can I just add to that?
Senator Blumenthal. Please do.
Mr. Zakheim. I think what DOD has done, given what it is
now able to do, is absolutely on the mark. But think about it.
You are some poor Filipino. You don't have your passport. You
don't really know the country. You don't really know who to
turn, and somebody gives you a pamphlet. What are you going to
do?
So, unless we legislate accountability for subcontractors--
right now, we don't really have that. So you can't expect DOD
to do more than it is doing. They are doing what they can do.
But unless we go further, this problem is not going to go away.
Senator Blumenthal. That actually was going to be my own
observations in probably less articulate form. That a
brochure--and I don't doubt the good intentions and the
determination of DOD to address this problem. So that is really
why I would welcome the opportunity to work with you in
providing that additional authority, if it is desirable and
necessary.
Because this problem--and you know it much, much better
than I--affects not only human rights, but also security on the
bases, in facilities, in a whole vast array of ways.
Mr. Kendall. Senator Blumenthal, if I may, just because
there are other steps we are taking. We do flow those
requirements down to subcontractors. This is an area that gets
audited in our larger contracts repeatedly to ensure that the
kinds of deplorable conditions we have heard about in the press
and other places actually are not--do not occur, that these
abuses don't occur.
The LOGCAP, for example, is reviewed by the Defense
Contract Management Agency (DCMA) monthly for this. I am sorry,
bimonthly, and other contacts are audited monthly for this. So
we are paying close attention to this, and we are trying to
flow it down to subcontractors.
Senator Blumenthal. Lastly, to switch subjects, and again,
I am going to be questioning in shorthand because I don't want
to keep everyone here for too long, and I apologize that I was
absent.
My thought is, given the escalating scale of the
contracting that will take place in Iraq and likely in
Afghanistan, and I know a number of you have alluded to it
while I was out of the room, that there should be some
preparation in terms of a more effective and cohesive
comprehensive structure for almost another commission begun
right now, given the problems that we can see on the horizon. I
think you've commented generally on it in the past, but does
that kind of thought make any sense?
By the way, I know that Senator McCaskill has been working
in this area and has a legislative proposal that begins or more
than beginning, but addresses this issue. But if I could elicit
your comments on it?
Mr. Kendall. Let me just talk about some of the things we
are doing to institutionalize this capability, which I think is
one of the central concerns of the commission.
Secretary Gates put out a letter last January tasking
various Under Secretaries and largely the Chairman of the Joint
Chiefs to take a number of steps to institutionalize this. We
put out a DOD directive, which is at OMB right now for review
before it goes final. There will be a rule that will go out for
public comment that updates the DOD directive that governs
this. It was dated 2005.
The Joint Staff has a joint publication that covers the
doctrine of this area that it has been published, I believe. To
give you a sense of how this has infiltrated through our
system, this is a letter that General Allen just put out, and
it is a several-page letter directing all of his commanders in
terms of their responsibilities as far as contracting is
concerned.
A key sentence in here is that contracting has to be
commanders' business. It is part of the force. When half the
people you deploy are contractors, they have to be managed as
part of the force. I have some training aids with me here. I
have the contingency handbook, contracting handbook, the third
edition, okay, we have been working on. This is for contracting
officer representatives, the people that supervise day-to-day.
There is one here about contracting as a weapon. So DOD, I
think, has it. We have the fact that when we do an operation
like this and we put contractors out there in equal numbers
roughly to the soldiers we put on the ground, we have to manage
them just as effectively.
Because they are there under contract and not under the
Uniformed Code of Military Justice necessarily, although they
may be under that in some circumstances, we have to do that
very aggressively and carefully. So I think we have it, and we
are meeting the very fundamental, I think, recommendations of
the commission, which is to institutionalize this capability.
I share their concerns that when we get out of Iraq and
Afghanistan that we might lose this, just it might atrophy
because we are not using it. So one of the things that I know
the Chairman of the Joint Chiefs is trying to do is ensure that
this gets into standard operational plans.
It is an annex where you do address contracting, just like
you address logistics or communications or another military
area. When we do exercises at any level, that we take into
account the need for contractors to support the operation that
we are exercising for.
Brooks, do you want to add to that?
General Bash. Senator, if I may, I can answer this question
really in the context of the recommendation of whether it ought
to be a J10 or not. This gets to the institutionalization. This
is at the end of the day, as Mr. Zakheim says, it is really
what happens on the ground.
Since I have been in this position, there has been a sea
change is my observation of what we have done. Insofar as
meeting the intent, I think we are either there or well on our
way. Based on my review, I would say that, currently, there is
no compelling reason to add organizational structure such as
J10. I say that, in my judgment, for four primary reasons.
One, leadership, as just alluded to here, all the way from
the Secretary of Defense to General Petraeus, to General Allen,
to subordinate commanders, we are having significant attention
on this problem. The Secretary of Defense has promulgated the
strategic planning guidance. It now is--operational contracting
support is in all of our plans by direction, the plans, policy,
and resources.
The second reason is organization. So this gets to the J10
recommendation squarely. First of all, in my position as a
three-star, I report directly to the Chairman, and I am
responsible for OCS. There are four general officer
equivalents, including me, within that organization.
OCS is now designated as a joint capability area. There are
only 37 joint capability areas in all of our military. So it is
fairly significant that that has occurred.
The division of OCS that works for me is on par, it is on
par with maintenance, health, supply, and engineering--all
major joint capability areas.
Doctrine is the third primary reason. So when we
institutionalize, we have to make sure it is codified and
people follow the rules that they are supposed to. Joint Pub 4-
10, which has been published now for several years, is
undergoing another revision based on the lessons learned in
Iraq and Afghanistan. In all, there are 41 authoritative
directions with instructions, manuals, and joint publications.
Furthermore, OCS is now part of our joint task list. Now
our joint task list in the military, of which there is 1,164 of
them, today we have identified 372 of those that have OCS
equities. So they will be adjusted accordingly.
But more importantly, there is now we have identified 51
specific joint tasks that will be included in the joint task
list. Now what does that mean? That means now the military,
once they are codified in that position, will have to man,
equip, train, exercise, and report to each of those tasks
because that will be 51 direct OCS ones out of the 1,100 plus
total.
The third area is planning, as it was mentioned. Madam
Chairman, I think this is one of your big concerns. OCS
heretofore, back when Iraq started, there was no planning for
it. We just did not foresee that this would be an important
capability.
Today, it is required in all plans. We have a new annex,
which you are aware of, which is Annex W. Every plan that
requires an Annex W has one today, and indeed, we have now
adjusted the Annex W criteria to make it five-fold larger, and
all those plans are going through the cycle of improving them
down to the point of processing maps for planning manuals and
all that for the operators.
The last thing I would say, and this is at the end of the
day--and Mr. Zakheim makes this point, I think, very well--what
happens on the ground? Does it get implemented?
I will give you two vignettes from my personal experience
just in the past year and a half. One of my previous jobs as
the Operations Director at AMC, when the Haiti earthquake
occurred, we deployed a contingency response group that had a
contractor representative embedded that went to that airport,
and that airport went from a capability of about 20 flights per
day to over 150 flights a day. That was primarily because that
contracting representative was able to quickly leverage the
local economy to get to that scale of operation.
The second vignette I would give you is in my most recent
assignment as the Deputy Commander for JTF-519. I was deployed
to Japan to support Operation Tomodachi. I can tell you that
when I arrived there that the J4, the logistics expert, at that
point had done two things in this vein. One, he immediately
started a contracting board, if you would, to make sure that
the contracting actions were commensurate with what the
commander wanted.
The second thing they did is it was integrated in the joint
effects board to make sure that the contracting actions did not
waylay some of the efforts that we had. Now why is that
important? It has bubbled all the way down to operational level
and to very important humanitarian relief efforts.
So, that is evidence that this is actually getting to that
point. We have a long ways to go, but I am confident that we
are actually getting there.
Senator Blumenthal. My time has expired, but I really want
to thank--oh, I am sorry?
Ms. Schinasi. Could we just, yes, have a couple minutes on
this? Because this is clearly one of the issues that DOD and
the CWC disagree on.
Senator Blumenthal. I am not in charge.
Senator McCaskill. Sure. Go ahead.
Ms. Schinasi. Okay. Right. So we will both have something
to say. I don't--maybe different things, but----
Senator Blumenthal. Well, I welcome it.
Ms. Schinasi. I am just going to give you another way to
look at it, and that is in DOD in particular, the positions
that general officers and admirals have really tell you what
they think is important. When we look at contracting,
contracting has always been a subset of acquisition. Logistics
is a subset of acquisition.
What we are talking about is elevating this beyond even the
acquisition function, right? We have been talking mostly about
management this morning. Management is very important, but it
is really that decision to use contractors that begins the
whole need for the management structure to be in place, and
that decision to use contractors is really a policy issue. So
we are talking about policy.
It is also a force structure issue. So we are talking about
personnel and readiness. What we have seen, many good things
happening in DOD. But if you are not willing to commit the
positions of leadership, then you really are not saying that
this is important to you. So that would be one thing.
There are 51 general officers on the Joint Staff. We
believe that one is not too many to put with the focus on
contingency contracting. So I will stop there because we are
short on time.
Mr. Zakheim. Let me add to that, if I may? First of all,
while DOD is doing what it can do now, we go back to the
question of what happens when the contingency ends?
What you need is an advocate. If you don't have a senior
advocate, what then happens is that people simply don't pay
attention. Now think about it. We have been at this for 10
years and what we are hearing is we still have a ways to go.
How many more years do we need to have a ways to go? It
tells you something about leadership and policy. If you have a
senior leader who is an advocate for these issues--and by the
way, when I was first in the building in the 1980s, I think we
had a J1 to a J6. Okay, now we have a J8 and so on. When the
Joint Staff wants to add Js, they figure out a way.
I only heard today when I was in DOD that the Joint Staff
was going to add more people. So if they can add people and
they can add departments, what their message is, why is there a
J8? Because, quite rightly, the Joint Staff has to be a major
player in programs and budgets.
When I was Comptroller, I barely did anything without
consulting with my J8 counterpart, for good reason. This is the
same message. If contingencies management, oversight, planning
are really, really important--and, oh, by the way, the
Quadrennial Defense Review had barely a line, barely a line,
about contingency contracting, I guarantee you, if there was a
three-star J10, it would have been more than a line.
Senator Blumenthal. Thank you very much.
I want to thank all of the witnesses for your very
excellent and forthright answers and for all the work the
commission has done.
Mr. Secretary and General Bash, thank you for your service
to our Nation. Thank you, particularly, General Bash, for your
lifetime of service in our military, and please convey my
thanks as well to the brave men and women working with you.
Thank you.
Senator McCaskill. I have so many places that I would like
to go right now. Let me, since we are on this, the Joint Staff,
and Mr. Zakheim is persuasive about the number of officers at
Joint Staff and whether or not we need someone. Maybe we would
get less resistance to this if we talked about a senior leader
at the Joint Staff that is in charge of contracting, not
contingency contracting.
Because as Senator Manchin pointed out, I wish we had that
at Homeland Security because they can't even come close to
telling me how many contractors they have. They are closer now
than they were when I got here in 2007. But when I asked that
question in 2007, they acted like I was speaking a foreign
language.
By the way, over there, it is contractor, contractor,
employee, contractor, contractor, contractor, employee,
employee, contractor, contractor, contractor--all doing the
same function at vastly different levels of pay. I would be
willing to bet we have that in DOD.
So, I honestly think that if we are going to be honest with
the American people about how DOD relies on contracting, then
it is time--and believe me, I am very proud of the progress
that has been made. I don't want you to leave this hearing
without your knowing I recognize the progress that has been
made.
I know how bad it was in 2007. I was in a room in a
briefing on LOGCAP that was shocking to me, that the only
person in the room that knew anything to the questions I was
asking was a woman civilian. Not any of the officers in the
room had any idea about the details and the granular nature of
what LOGCAP was costing us and why.
That is why we have monogrammed hand towels. That is why we
had cost-plus and noncompetitive in a way that was wildly
abusive of the American taxpayers, to say nothing of the risks
that we put our men and women in because of sloppy contracting
on logistics contracts.
So I really hope you leave this hearing, and I will take it
upon myself to go to leadership and press as it relates to the
CWC that the way it doesn't atrophy, the way we don't have a
lessons learned that weren't learned is by not having that
senior leadership that is--their whole portfolio is to have
eyes and ears on contracting, no matter where it occurs. I
think that is very important.
Let me quickly move to some areas of irritation about past
performance and suspension and debarment. I sense a little
pushback on maybe not so much past performance, but certainly
on suspension and debarment in terms of the commission's
recommendations.
I am disappointed that we have a lack of past performance
information going into the databases. This is a good example of
where we set up the structures, and because they never have
that continued attention and because it is not part of the
mission, that it doesn't happen.
What the commission said was, in fact, that you are failing
to input timely and complete contractor performance
information. They want to--the 821 of the 2012 NDAA is going to
require DOD to develop a strategy for ensuring that timely and
accurate information on contractor performance gets included.
Is this a good thing, and do you think a streamlined--and
with some kind of verification, that before a contract is
entered into, that they have, in fact, tried to verify that
contractor performance in the database on both ends, putting it
in and then using it once it is in?
Mr. Kendall. I think the short answer is yes. We have been
working for some time to improve the quality of our CPAR
information. There hasn't been an enforcement mechanism to get
the data put in or to ensure that it has been accurate. So it
has not been consistently good.
We recognize this is a problem across our contracting,
probably as much so in other areas as it is in contingency
contracting. So we are taking steps to improve it.
It is partly information systems. It is partly enforcement
mechanisms. It is partly management attention. So, in general,
we agree with the direction in which you are heading.
The only place that we would quibble a little bit with the
recommendations of the CWC in this regard is the right of a
contractor to appeal an adverse rating. We think there should
be some opportunity. The rating can be posted, but there should
be some opportunity for due process for contractors. So if they
feel they have been unfairly rated, they have at least a chance
to go to a higher authority and get that reexamined.
Other than that, though, we are in general agreement on
this.
Ms. Schinasi. Senator McCaskill?
Senator McCaskill. Yes?
Ms. Schinasi. Point of clarification. What we recommended
was that the appeal process not hold things up, not that there
not ever be an appeal process. So I just want to put that in
the record.
Mr. Kendall. We are okay with that.
Senator McCaskill. Yes, I think if we could agree on that,
that the appeal process would not--it could be noted there was
an appeal, but it couldn't change the fact that the data is
going in. So it is there in case there is somebody else
thinking about contracting with that particular contractor.
Suspension and debarment. This one is frustrating because I
think the CWC has recommended a streamlined procedure for
suspension and debarment in a wartime environment. I think that
DOD has pushed back, saying that it should remain a fairly
rigorous administrative procedure. Contracting officers can use
past performance databases in a flexible way to avoid awarding
contingency contracts to contractors where there has been
evidence to suggest unreliable performance. Why would we want
to have--informally debar contractors on a de facto basis,
rather than documenting the decision through a streamlined
process? What are we afraid of here?
Mr. Kendall. I am not sure about part of that. If we do
debar or suspend someone, that is public information. We are
not doing that under the table.
Senator McCaskill. No, no. I am talking about you all
pushed back and said we don't want to streamline the suspension
and debarment process in theater because we think a rigorous
administrative process is necessary.
So, what you kind of said is we can kind of do it
informally if there is bad information there. I am having a
hard time reconciling those positions.
Mr. Kendall. A couple of things about that. One is that
suspension and debarment are done to protect the Government's
interest, to make sure that we are protected. Debarment in
particular is fairly serious systemic violations or a violation
of law which is significant because it debars a contractor for
up to a 3-year period.
We have increased to about 50 percent the numbers of times
of which we are doing this sort of an action. So we have
increased enforcement in that regard.
There are a number of other remedies we have as well. We
can recover funds. I have some statistics here of how much--
several million dollars have been recovered by our audit
agencies, and there are a variety of reasons why there would be
an error in payments that would cause us to recover.
So we are taking action. There is criminal action in some
cases, if that is called for, as well as suspension and
debarment and administrative action. So, in general, we would
agree that enforcement should be stronger. We do want some
discretion for this so that people who are higher contracting
authorities can examine a case carefully before they take that
kind of an action because it is a fairly severe action to take.
Senator McCaskill. Well, it is. On the other hand, I have
sat in a lot of these hearing rooms and heard tales of horror
about contracting malfeasance. By the way, that contractor got
another contract after the malfeasance.
So, if we are going to err, I think we should err on the
side of making sure that we are weeding out the bad actors that
are ripping us off, as opposed to erring on the side of
avoiding unfairness. Because I have not heard--not that I am
sure there are some cases where there has been some unfairness,
and that is why we have to have a process.
Maybe we could have a streamlined process in contingencies
that would lead to suspension and debarment, where there could
be something that takes longer to get it reinstated perhaps
inside the 3-year period. But I am pushing this envelope
because what I have seen is a reluctance to go there
culturally. That it was just easier not to because, frankly,
the process is so hard, it is a little bit like leasing
temporary buildings rather than military construction (MILCON).
A lot of folks were leasing temporary buildings because it
is a lot harder to get something through MILCON. I think this
is the same kind of situation, that we have built up such a
rigorous process for debarment, it is just easier for folks on
the ground to say, ``Well, I don't want to go debarment. That
is too much paperwork.''
Mr. Kendall. I don't have any information that would
suggest that that is the case, but I don't have any information
suggesting it is not either. So I would like to take that one
as something that I would look into and perhaps get back to
you.
[The information referred to follows:]
The Army has processed 544 suspension and debarment actions out of
Southwest Asia since 2005, and there are 254 currently open as of
August 2011. The referred actions have resulted in suspensions,
proposed debarments, debarments, administrative compliance agreements
and show cause letters. The Army's Procurement Fraud Branch reviews all
relevant documentation regarding alleged misconduct and does not
support the statement that was made that there is ``too much
paperwork'' involved in debarment actions.
Senator McCaskill. Yes, if you could drill down on this
whole issue because I want to push on trying to get suspensions
and debarments, something that can happen and can happen fairly
quickly when there is egregious activity on a contractor's
part, particularly in contingencies.
Senator Ayotte.
Mr. Kendall. One area before--if I could, where we would
want to have that authority and exercise it is the area that
the new law will cover, where money is falling to our enemies
through a contractor and where we can void a contract at least
and maybe take stronger action beyond that.
Senator McCaskill. I think that is obviously something we
all agree on, but monogrammed towels are almost as bad. I mean,
they are not. I am being sarcastic. That will be clipped
somehow and used against me. [Laughter.]
Let me clarify that was me being a smart aleck, and I
shouldn't have. But there just was so many problems. The faulty
wiring of showers is as bad. That is a much better example
where our men and women were subjected to life-threatening
dangers because of corners being cut in the name of profit.
Mr. Kendall. Understand.
Senator Ayotte. Thank you very much.
So just to follow up, Secretary Kendall, when you say the
ability to cut off contracting more quickly as in the
provisions that are included in the NDAA, is that something
that we should be putting together on a broader basis?
For example, what is in the authorization right now doesn't
apply across all of DOD. It applies to our operations in
Afghanistan and I believe Iraq as well, but it doesn't apply to
all of DOD. So isn't this capability we need universally across
DOD?
It also raises a question with me based on what I heard
before with DOS. Why wouldn't DOS also need that authority? If
they get wind that we are dealing with a bad actor, we need to
act immediately. So I just pose that question.
Mr. Kendall. Presumably in a contingency environment I
would think DOS would need that, but I have to defer to them to
answer the question. I would have to take a look and think more
carefully about any unintended consequences and existing
remedies for expanding that beyond areas where there is a
contingency operation going on.
There are a lot of remedies in place in those areas
already, and they may be adequate. I am enough of a lawyer not
to offer an opinion about something----
Senator Ayotte. I think that is the problem, though.
Mr. Kendall.--that I haven't looked at carefully.
Senator Ayotte. The reason that we passed this stuff is
because it was getting overly lawyered, and we needed to give
you the authority. Just we got a bad actor, we have to cut it
off.
So, it just seems to me that this isn't going to be the
last conflict. This is authority that I don't want you to have
to come back to Congress for. So, when we run into the next bad
actor and we are dealing with the--I am a lawyer myself--all
the great arguments that can be made. So I would just
appreciate an answer on that if you could give it some more
thought.
Mr. Kendall. Yes, off the cuff, I am inclined to agree with
you. But I would like to take a look at it with our attorneys.
[The information referred to follows:]
The need for the authority the Department of Defense (DOD) sought
and received in section 841 of the National Defense Authorization Act
for Fiscal Year 2012 was a part of a comprehensive approach established
by the Chairman of the Joint Chiefs of Staff and the U.S. Central
Command (CENTCOM) to resolve serious issues of corruption revealed by
the June 2010 report by Warlord, Inc., ``Extortion and Corruption Along
the U.S. Supply Chain in Afghanistan.'' In the wake of this new
revelation and the Integrity Watch Afghanistan's (non-profit watchdog
group) statement regarding significant increases in corruption since
2006, U.S. Forces-Afghanistan established Task Force 2010. Task Force
2010 was charged with ensuring U.S. and coalition dollars spent through
contracting do not flow to the enemy.
Section 841 provides the Commander of U.S. Central Command
(CDRUSCENTCOM) without power of redelegation, the authority to identify
the enemy in a contingency operation. Upon the CDRUSCENTCOM
notification of such identification in writing, the head of a
contracting activity has the authority to restrict the award of
contracts, to terminate, or to void in whole, or in part, any DOD
contracts, grants, or cooperative agreements. DOD implemented section
841 via Class Deviation 2012-O0005, dated January 26, 2012 (attached).
Federal Acquisition Regulation Subpart 49 and Defense Supplement
provide adequate suspension and debarment authority. We will
investigate simplifying current regulations in support of contingency
operations.
Senator Ayotte. Thank you very much.
I have one follow-up based on the discussion that we were
talking about before with what is happening in Iraq. You
described it, Secretary Kendall, as DOS has never done anything
like this before.
Mr. Kendall. Not on this scale.
Senator Ayotte. Right.
Mr. Kendall. Not with this many, large number of people or
contractors.
Senator Ayotte. I am deeply concerned about how this is
going about. So put that aside for a minute. If we are going
forward in this regard, how are we going to best leverage this
military-to-civilian transition, and how can DOD, I know that
you have talked about that to some extent, leverage their
reliance on contractors, this experience, to help DOS actually
put in place the minimum amount of acquisition capability it
needs to support its diplomatic mission in Iraq and to keep
people secure?
How is this going to work with the two of you together? Are
you going to give them people? Are we going to get people from
other agencies? How is this going to work?
Mr. Kendall. I could get you a longer answer for the
record.
[The information referred to follows:]
The Department of Defense (DOD) has provided Department of State
(DOS) all the necessary equipment, supplies, and contracting support
requested for DOS to successfully perform its diplomatic mission. In
addition to more than 2,300 items of military equipment and 52,000
items of non-military equipment that was transferred, sold, or loaned
to DOS, DOD is contracting for base life support and core logistics
services under the Army's Logistic Civil Augmentation Program (LOGCAP),
equipment maintenance, food, fuel, and security. DOD contracting
actions are performed on a reimbursable basis under the Economy Act.
DOS, without assistance from DOD, is contracting for medical, site
security, facilities operations, and maintenance services. The Defense
Contract Management Agency and the Defense Contract Audit Agency
provide administrative contract support and oversight of DOD
administered contracts. DOS provides trained Contracting Officers
Representatives that are required to meet DOD standards for all
activities supported by DOD. DOD and DOS established a Senior Executive
Steering Group (SESG) focused on coordinating and synchronizing the
management and oversight of DOD support to DOS until DOS can develop
its own contract oversight and management capabilities. The SESG is co-
chaired at the Deputy Assistant Secretary level.
Mr. Kendall. But we have been working, I think it is an
absolutely fantastic example of interagency cooperation,
frankly. I think it is partly due to the fact that our military
has put so much into Iraq and tried to achieve success there
that we want to make sure that DOS is prepared as possible to
take over and continue that part of the mission.
But we have, in terms of providing equipment, partly excess
equipment, partly under the Economy Act where they reimburse
us, thousands of pieces of equipment, and we have helped them
with the planning as they have tried to decide what they need
and how they are going to use it.
I mentioned the health contracting and pretty much all the
support functions that they are going to need, analyzing their
needs for things like materiel handling for aircraft because
they are going to operate a small transport air arm. We have
looked across the board. I think they have benefited enormously
from the military's experience and the commitment we made to
try to help them make this a success.
I hope that we have done so in a way that will make this
transition smooth, and I think we have. We really, really want
to see them succeed in their mission.
Senator Ayotte. Just to get to Mr. Zakheim's fundamental,
but very important question, which he raised in answering my
initial questions about Iraq. How is DOS going to deal with
this risk question, which seems to be the fundamental important
question? Because there is still a lot of militant activity
there that----
Mr. Kendall. Yes, I think that is a question--I think you
have to ask DOS that question. I don't want to speak for them,
but I think they believe that with U.S. forces withdrawn, with
the current security environment that is there, that they can
manage the situations they will have.
They will have physical security contractors on each of
their sites, significant number of them. They will have sense
and warn sensors to alert them to any incoming improvised
rocket munitions and so on, so they can take cover. They will
have physical protection. They are putting overhead protection
over all their living spaces where people will have their
quarters, as well as some of the common spaces.
They believe that that will be adequate. Beyond that, I
think I would have to defer to DOS to answer the question.
Senator Ayotte. I just want to ask the basic question.
Isn't it riskier to have contractors undertake this kind of
security than our military?
Mr. Kendall. It is a mission that contractors----
Senator Ayotte. You are talking about rocket launchers
and----
Mr. Kendall.--are performing the static security mission in
a lot of sites today. They are doing it for DOS, and they are
doing it for us. So the difference will be that U.S. forces
will not be there to react if they are needed. That is a
significant difference.
Ms. Schinasi. Senator?
General Bash. I would just add that as previously
mentioned, we have been working with DOS on a biweekly basis
for the past year and a half. Most of the contracts, a lot of
them like LOGCAP IV that was mentioned and some of the DLA
fuels contracts, have transitioned to DOS. So it is not like
they are starting new contracts. A lot of them are moving over.
DCMA has 52 people dedicated to help DOS with oversight on
all of those contracts. As was mentioned, the equipment, the
detail has gone down to, at this point, 2,326 items. All the
way to Caiman mine-resistant ambush protected vehicles, which
are top of the line, to provide them security to some of the
warning systems that were previously mentioned.
DOD has also taken action to train a lot of the DOS
contract representatives to our DOD standards. So, we continue
to work with them, but I think the key point that Mr. Kendall
made was based on today's security environment, is the
transition occurring? If that environment were to change to the
worse, obviously, then there will be obviously more risk.
Ms. Schinasi. Senator Ayotte, if I could just add two
things?
Senator Ayotte. Sure.
Ms. Schinasi. One, I believe that DOS could not do this
without the contract support that DOD is providing. But the
question, I think, more basically for the U.S. Government is,
is this the position we want to be going forward, right?
That is something--we are in the position we are because
nobody thought about this ahead of time. So there really is no
option but to carry on the way we are carrying on now. But the
more basic question, as I said, is, is that the way you want to
be, to have the U.S. Government operate going forward?
The second thing I would add, on your issue of risk, it is
not clear yet that the civilian PSCs do not come under the
military justice system, and it is still not clear what system
they come under for anything that would happen. Hopefully not,
but that anything would happen.
Senator Ayotte. So there are still questions surrounding
accountability and liability?
Mr. Zakheim. Yes.
Senator Ayotte. That is significant?
Mr. Zakheim. I would only say this. When you are talking
about the kinds of systems you just heard that are going to be
transferred to contractors, how can you say there is no risk or
even minimal risk? I would call it significant risk.
Senator Ayotte. I have to agree. I think there is huge risk
with this strategy and what we are going to try to undertake in
Iraq. I appreciate all of your being here today and your
important work that you are doing, that you have done in this
commission, and we are going to continue to rely and seek your
advice as we try to implement the recommendations of the report
going forward.
I would thank you, General Bash, for the important work
that you are doing and for your leadership, and Secretary
Kendall as well. This has been a terrific panel.
I would just add that I remain deeply concerned that we are
going to ask these civilians to undertake what is a military
function, and that to the detriment of the security of our DOS
personnel that will be there and others.
So thank you very much.
Senator Blumenthal. Madam Chairman, may I ask just a couple
questions?
Senator McCaskill. Yes, sure.
Senator Blumenthal. Very quickly, Senator Ayotte has asked
a series of questions that are very much on our minds and that
a number of us have expressed privately, if not publicly. I,
too, am a lawyer, by the way, and I have told a lot of
witnesses don't give your opinions, just give the facts, right?
But we need your opinions, and we need your perspectives on
these very critical issues because you are involved in
providing critical support and training to a group that will be
at risk. There is no question in my mind, as you and members of
the panel have stated, that there are serious risks to these
individuals and to the United States, insofar as they are our
agents. Not just legally, but morally, they are our agents in
the same way--not exactly, but in the same way a member of the
U.S. military would be.
So, the jurisdiction of this committee may not be exactly,
just as you are not directly responsible, but you will be
involved in supervising and training and providing the support,
as is appropriate. I would hope that we can continue to ask
questions and rely on your opinions, as well as your factual
knowledge on this issue.
So, again, I thank you. It is not a question, but it is an
invitation in the future for additional comment.
Thank you, Madam Chairman.
Senator McCaskill. Thank you, Senator Blumenthal.
I have a number of other questions that get into some
details on PSCs, get into some details on additional staffing
and resources, get into some additional questions on IGs and
GAO and some of those issues. I am going to give those all to
you for the record.
To the extent that we will copy you all the questions also,
if there are any comments that you would like to make, most of
these are about the implementation of the recommendations. I
think what has been so valuable about today is the fact that
you are both here.
This is fairly unusual. I want to particularly commend
General Bash and Secretary Kendall because there have been
times that people in your jobs have refused to appear on panels
with witnesses that are not members of DOD or the Active
military. The fact that you are here in this way, making
yourself accountable to members of this commission that have
done, I think, yeoman's work in trying to help us improve an
area that is vitally important to our military, to our national
security, and to the taxpayers of this Nation. I appreciate it.
Bear with me in terms of the number of questions I have. It
is probably much easier than me staying here another hour and a
half. Although I would be tempted, but I actually have another
general I am supposed to meet with at 5 p.m., and I have to go
upstairs and make sure I have all my really hard questions
ready for him at 5 p.m. [Laughter.]
So, we will adjourn the hearing at this point in time, and
know that this will not be the last of the hearings we will
have on this.
One of the places I want to drill down, just so you can
begin to prepare, is this issue of prime versus subcontractors.
I think it is a lack of transparency. I know that if Harry
Truman were sitting here, he would want to know who was making
all the money.
Clearly, it is not the third country nationals that are
living in dormitories. They are not making the money. Many of
them are working, as you all know, for pennies compared to what
they would work for on a contract if they were Stateside.
So, where is this money being made, and how necessary are
these primes? How much are we paying the middle men? Do we need
that many middle men? Can we not get the expertise that we can
start being more task specific and compete these contracts for
the tasks, rather than having these overarching contracts that
have a tendency to get renewed without the kind of oversight
that I think most of us would want?
So we will save that for another day. It may be in this
hearing. It may be in the Contracting Oversight Committee. But
I do think that is an area that we haven't really drilled down
enough in yet, and I would be anxious to get any comments from
you all. I will pose those questions as part of the questions
for the records for this hearing about how much do we know
about primes versus subs in terms of where the profit is
actually landing?
Thank you all very much for being here today. Thank you so
much to Senator Ayotte. She is a terrific, terrific addition to
the Senate----
Senator Ayotte. Thank you.
Senator McCaskill.--in terms of oversight on contracting,
and I am glad to have some company. [Laughter.]
It is terrific. Senator Blumenthal, it is terrific to have
you here. You stayed, and you actually appeared interested in
all of these little arcane details, which is also terrific.
[Laughter.]
So thank you all very much. This hearing is adjourned.
[Questions for the record with answers supplied follow:]
Questions Submitted by Senator Claire McCaskill
contingency contracting cadre
1. Senator McCaskill. Secretary Kendall and Lieutenant General
Bash, the Commission on Wartime Contracting (CWC) recommends the
establishment of a contingency contracting cadre and increased staffing
and resources for all aspects of contingency contracting. In response
to questions from Senator Levin, the CWC has indicated that these
recommendations would best be accomplished through legislation.
However, this committee has already enacted legislation requiring the
Department of Defense (DOD) to identify a ``deployable cadre of
experts, with the appropriate tools and authority'' to carry out
contingency contracting (section 854 of the National Defense
Authorization Act (NDAA) for Fiscal Year 2007); and an acquisition
workforce development fund to provide significantly increased resources
for DOD contracting (section 852 of the NDAA for Fiscal Year 2008).
Does DOD believe that it has already implemented the CWC's
recommendations to develop a contingency contracting cadre and increase
the staffing and resources available for contingency contracting?
Mr. Kendall. Yes, we believe that we have implemented and will
continue to improve upon our contingency contracting cadre as well as
staffing and resources for contingency contracting. Section 854 of the
John Warner NDAA for Fiscal Year 2007 required the Department to
``develop joint policies for requirements definition, contingency
program management, and contingency contracting during combat
operations and post-conflict operations.'' On October 17, 2008, the
Joint Staff, J4, published Joint Publication 4-10, ``Operational
Contract Support (OCS),'' to include doctrine for planning, conducting,
and assessing OCS integration and contractor management functions in
support of joint operations. An update to this doctrine is currently
underway. The Department's Joint Contingency Acquisition Support Office
(JCASO) has the responsibility to perform program management of OCS
policy and doctrine as well as operational synchronization of theater-
related contracting support planning efforts.
In addition, we have a contingency contracting cadre. Specifically,
the Army's Expeditionary Contracting Command (ECC) headquarters reached
Full-Operational Capability on October 8, 2009. The ECC has six active
Contracting Support Brigades (CSBs). These CSBs are geographically
aligned in order to provide responsive operational contracting support
to the Army Service Component Commands (ASCCs) and provide the Army
with greater flexibility to place contracting teams into areas to
support Joint Force operations. This organizational alignment has
proven effective in assisting the ASCCs in developing and synchronizing
contracting support integration plans. The ECC is scheduled to stand up
a seventh CSB in support of the U.S. African Command. In addition to
training and equipping contingency contracting officers, the ECC has
engaged the brigades deploying to Afghanistan and Iraq to provide
onsite training on Contracting Officer's Representative (COR)
responsibilities in a contingency operation, field ordering officer
training, and Commander's Emergency Response Program (CERP) project
office training.
DOD has been increasing the capacity of the acquisition workforce
since 2009 as part of a deliberate DOD-wide initiative to rebuild the
acquisition workforce. On April 6, 2009, the Secretary of Defense gave
direction to grow and in-source the acquisition workforce. By fiscal
year 2015, the Army contracting civilian workforce is on track to grow
by more than 1,600 new positions. This growth has been facilitated by
section 852 of the NDAA for Fiscal Year 2008, which provided funding to
hire acquisition personnel while permanent positions are resourced.
Section 852 has been utilized to hire 352 Army civilian contracting
interns to date, with hundreds more planned over the next 3 years.
Section 852 provided critical funds to help reconstitute the
acquisition workforce.
General Bash. Section 854 of the NDAA for Fiscal Year 2007 and
section 852 of the NDAA for Fiscal Year 2009 provide the framework to
develop a contingency contracting cadre and increased staffing and
resources for all aspects of contingency contracting. DOD has charted a
course and developed a strategy to meet the intent of the respective
NDAA language. That said, development of the level of expertise needed
to perform effective contingency contracting doesn't happen
immediately. It requires recruitment, training, doctrine, and policy to
fully integrate contingency contracting into our operational construct.
We are making progress. DOD created and is in the process of filling
9,000 new acquisition workforce positions, thus strengthening the
contracting workforce and contributing to rebuilding the Defense
Contract Management and Defense Contract Audit Agencies. DOD has
created 10 new general officer billets, 3 of which have been used to
deploy senior leaders into theater. The Army ECC has been established
and provided Contract Support Battalions in recent contingency
operations. The Chief of Staff of the Army recently ordered his Service
to grow the contingency contracting workforce by an additional 315
people by 2014. Finally, the Department has created the JCASO within
the Defense Logistics Agency to provide an OCS capability to enable
combatant commands' and/or Joint Task Forces' ability to conduct
contract support integration and contractor management.
insufficient staffing in auditing agencies
2. Senator McCaskill. Secretary Kendall, a recent report by the
Government Accountability Office found that Inspectors General, on
average, save taxpayers approximately $18 for every dollar invested.
Combined potential savings by Inspectors General was reported as
approximately $43 billion. The Defense Contract Audit Agency (DCAA)
reported a return of over $5 for every dollar invested with over $2.9
billion in savings. Yet these auditors and investigators are
chronically understaffed and underfunded.
A recent report by Army officials found that DCAA staff would
require a workforce exceeding 6,250 personnel by 2015 to accomplish its
mission. This is over 1,000 more personnel than DCAA has now, even with
the 500 additional auditors hired in the past 2 years. Without this
staff, the backlog of unaudited actions, currently over $558 billion
according to the CWC, is projected to exceed $1 trillion. This will
cost DOD and our Government dearly. Where will DOD most need to
concentrate its resources to effectively conduct oversight?
Mr. Kendall. The DCAA is working closely with Department leadership
to provide additional resources to the audit agency. DCAA has added
nearly 700 people in the last 3 years. At the end of fiscal year 2011,
DCAA had about 4,900 staff on-board. This equates to more than a 16-
percent increase in DCAA staffing over a 3-year period.
The agency has made significant strides in recruiting, training,
and keeping its audit staff (attrition is at the lowest level in
several years). DCAA just completed a major training initiative that
they believe will improve quality and enhance productivity. As an
example, DCAA believes elapsed days for proposal reviews has reached a
plateau and are trending downward. More risk-based procedures are
increasing the net saving found from DCAA audits and finding a higher
percentage of questionable transactions in the costs audited as shown
in the two attached charts.
3. Senator McCaskill. Secretary Kendall, does DOD have a sufficient
number of investigators?
Mr. Kendall. The Defense Criminal Investigative Service (DCIS),
which serves as the criminal investigative arm of the DOD Office of
Inspector General, possesses resources required to effectively
investigate significant allegations of fraud, waste, and abuse
impacting DOD programs and operations. Noteworthy is the fact that DCIS
is but one of several DOD investigative agencies tasked with
investigating fraud that impacts DOD. This being the case, criminal
allegations involving a particular Military Service branch and/or
allegations involving potential administrative violations are often
referred to other investigative agencies such as the Department of
Justice.
Each year, senior DCIS leaders re-assess organizational priorities
to ensure resources are devoted to critical investigations. Although
DCIS is currently staffed to provide vital investigative services,
additional resources would further enhance the organization's ability
to identify and pursue more financial fraud schemes that deprive DOD of
critically needed funds that would otherwise be utilized to finance
national defense initiatives.
4. Senator McCaskill. Secretary Kendall, is there a sufficient
number of quality assurance personnel at the Defense Contract
Management Agency (DCMA)?
Mr. Kendall. Quality Assurance (QA) manning in DCMA is not optimal,
but it is acceptable. Through planned growth enabled by the Defense
Acquisition Workforce Development Fund, DCMA has plans to continue
growing its QA workforce along with other critical skills in the
Agency. As always, DCMA mitigates any manning shortfall through risk-
based strategies, ensuring that the highest QA risk are addressed. In
addition, process improvement efforts aimed at increased efficiency are
continuous.
5. Senator McCaskill. Secretary Kendall, is there a sufficient
number of contracting officers and CORs?
Mr. Kendall. For current operations in Iraq and Afghanistan,
manning for contracting officers is at 100 percent. The DCMA is
sufficiently staffed with administrative contracting officers to
effectively execute the current workload. However, there are shortfalls
in the number of CORs provided by the requiring activities and
appointed by DCMA. Nonetheless, the appointed CORs have been able to
accomplish 85 percent of the required audits in Afghanistan and 92
percent of the required audits in Iraq. Identified shortfalls in CORs
are aggressively worked between DCMA and the requiring activity
responsible for providing the staffing.
government oversight of subcontractors
6. Senator McCaskill. Secretary Kendall, in its final Report to
Congress, the CWC found numerous instances where the Government failed
to exercise sufficient oversight over subcontractors. The CWC also
raised concern about the Government's visibility into the extent to
which contractors had subcontracted work through multiple tiers on DOD
contracts. The CWC found that the Government has failed to exercise
sufficient authority to:
review or hold contractors accountable for examining
subcontractor records;
develop a consistent approach to vetting contractors
and subcontractors; or
utilize suspension and debarment authority over
subcontractors.
The CWC highlighted instances where Afghan subcontractors were
believed to have passed payments to insurgents or warlords and cases
where third-country nationals employed by subcontractors under
representations of certain working conditions and pay were rerouted and
potentially exploited. The CWC recommended that the Government:
Require smaller and more competitive subcontract
requirements for large support contracts;
Address the risks of trafficking in persons by
subcontractors in contingencies by requiring reforms to prime
contract awards and performance evaluations; and
Increase use of tools to protect the Government's
interests, including strengthening the ability for suspension
and debarment actions in contingencies.
Mr. Kendall. DOD agrees with the CWC that better oversight of both
prime and subcontractor performance in contingency theater is
necessary. The Department takes the oversight of these contracts very
seriously. Multiple DOD agencies have engaged in aggressive reviews and
oversight, uncovering instances of fraud, waste, and abuse--as well as
recommending corrective actions--and recovering more than $4 billion.
The Department has taken significant steps to address deficiencies
identified by the entire audit community in many areas, specifically by
increasing the number of qualified and skilled CORs in the contingency
area of operations and increasing the contract administration performed
by the DCMA. Many of these actions are continuing to be refined and
improved. Several U.S. Central Command (CENTCOM) programs have been
recently initiated to combat corruption and fraud by all contractors
through employing procedures to identify questionable vendor conduct;
training, mentoring, and assisting local national vendors on how to be
responsible business partners with the United States; and vetting non-
U.S. prime and subcontractors before awarding contracts to ensure the
contractors do not have a history of fraud or are otherwise not
eligible for contract.
The Department is working to ensure taxpayer dollars do not empower
the wrong people or undermine the U.S. Government and international
community efforts in Afghanistan. To this end, the Chairman of the
Joint Chiefs of Staff created Task Force 2010 to help commanders in
Afghanistan better understand those persons and entities with which the
U.S. Government contracts. With tools from the intelligence, law
enforcement, auditing, and forensic communities at their disposal,
commanders can gain visibility into any linkages with criminal networks
or insurgents, and then deny these persons and entities the opportunity
to benefit further from contracting funds. Anti-corruption efforts can
only be successfully accomplished through the synchronized actions of
the larger interagency and international community, so Task Force 2010
is organized under Combined Joint Interagency Task Force Shafafiyat to
provide unity of effort.
In less than a year since standing up, Task Force 2010 assessed
more than 990 U.S., international, and Afghan companies; analyzed more
than 19,000 bank transactions; and reviewed more than 1,950 contracts,
contract modifications, and cooperative agreements valued cumulatively
at $30.7 billion. Of the contract vehicles reviewed, 11 percent are
believed to have had connections to or been influenced by power-
brokers, criminal networks, or insurgents (some minor, some
significant). DOD focus on these transparency task forces enabled us to
provide recommendations to commanders and contracting activities so
they could terminate the contract or take action to mitigate fiscal and
force protection risk.
The recently passed NDAA for Fiscal Year 2012 includes new
authorities that will help us protect the government's interest and
strengthen our ability to take appropriate suspension and debarment
actions in contingency contracting:
Section 841 titled: ``Prohibition on contracting with
the enemy in the United States Central Command Theater of
Operations,'' providing contracting officers the authority to
restrict the award, terminate for default, or void in whole or
in part of any DOD contracts, grants, or cooperative agreements
upon a written determination by the Head of Contracting
Activity that funds through DOD contract, grant, or cooperative
agreement directly or indirectly support the enemy. It also
mandates DOD include a clause in each contract, grant, and
cooperative agreement awarded on or after the date of
enactment.
Section 842 titled: ``Additional access to contractor
and subcontractor records in the CENTCOM theater of
operations,'' providing contracting officers the authority to
examine any records of the contractor or subcontractor to
ensure that funds through the DOD contract, grant, or
cooperative agreement are not subject to extortion or
corruption and do not support the enemy, directly or
indirectly.
The Department and all in-theater commanders and their supporting
contracting organizations have developed and actively promulgated a no-
nonsense, zero-tolerance policy concerning trafficking in persons.
There is a program office within the office of the Under Secretary for
Personnel and Readiness known as the Combating Trafficking in Persons
(CTIP) Office that has overall responsibility for the DOD trafficking
in persons (TIP) program. The acquisition community is also very
actively involved in implementing several initiatives to combat this
abhorrent practice, including creating contract clauses that must be
included in every prime and subcontract awarded in Iraq and Afghanistan
and following up on that and ensuring implementation of the language
with an examination checklist to be used by those who oversee contract
activities (such as CORs and quality assurance representatives (QAR)).
For example:
Communicating CTIP Policy to Contractors. DOD mandates
compliance with CTIPs in contract clauses. It increases
awareness of this requirement through a brochure. During
contract management, the Government uses checklists to ensure
compliance with these mandates.
FAR 22.17: Overarching Federal policy that applies to
all acquisitions. Prescribes policy for implementing 22 U.S.C.
7104 ("Prevention of trafficking"). Requires Government
contracts to prohibit contractors, contractor employees,
subcontractors, and subcontractor employees from engaging in
trafficking in persons during the period of performance of the
contract; implemented by Federal Acquisition Regulation Clause
52.222-50.
DFARS PGI 222.17: Provides guidance for DOD
Contracting Officers with references to related DOD Policies
and Training. Requires Quality Assurance Surveillance Plans
cover how CORs will monitor contractor TIP compliance.
C-JTSCC Clause 952.222-0001: Provides detailed
requirements that protect contractor/subcontractor employees in
Iraq and Afghanistan from exploitation and abuse. This includes
guidance related to holding of passports, use of recruiting
firms, adequate living conditions, and checks of life support
areas and compliance with local laws on transit, exit, and
entry. This clause is required in all contracts executing in
Iraq and Afghanistan.
The large Logistics Civil Augmentation Program contracts are
audited every 2 months for compliance with CTIP requirements; other
contracts are audited monthly. Defense Procurement and Acquisition
Policy has created a brochure on this topic and shipped printed copies
to Iraq and Afghanistan as well as posted it on the CENTCOM contracting
Web page. To ensure that potentially affected employees are made aware
of this program and of their right to be free of abusive treatment,
this pocket-sized reference card has been translated into seven
languages (the ones most frequently found among third country national
employees) for distribution in those areas of operation. In short, we
are actively and diligently making sure such practices are not found in
any of our contracting activities. We will be relentless in referring
any suspected incident to the proper legal authorities and will
actively and promptly take all appropriate actions against any firms or
individuals found to be engaged in such practices.
does dod agree with the cwc's recommendations?
7. Senator McCaskill. Secretary Kendall, has DOD taken any steps to
implement changes addressing the CWC's findings regarding insufficient
oversight of subcontractors? If so, please identify what steps DOD has
taken, what actions have been implemented, and what actions remain to
be implemented.
Mr. Kendall. DOD takes the oversight of contracts in contingency
operations very seriously. Multiple DOD agencies have engaged in
aggressive reviews and oversight, uncovering numerous instances of
fraud, waste, and abuse. DOD has taken significant steps over the years
to address the number deficiencies identified by the audit community in
many areas, specifically by increasing the number and skill of CORs and
the coverage of contract administration functions performed by the
DCMA. The DCMA has filled 90 percent of its COR positions for
Afghanistan and 100 percent for Iraq. The DCMA has also requested
CENTCOM increase the manning authorization of contract oversight
personnel by 80 personnel to support increased responsibilities in
Afghanistan. The following is a summary of recent significant
improvements to subcontractor oversight initiated by DOD that will help
ensure our taxpayers' dollars are being spent wisely and managed
appropriately in contingency theater:
Placing additional instructions in the Defense Federal
Acquisition Regulation Supplement (DFARS) and CENTCOM
acquisition instruction, directing both prime contractors and
all subcontractors at all tiers, in compliance with Federal and
DOD Trafficking in Persons requirements.
CENTCOM has implemented a vendor vetting policy in
their acquisition instruction for all non-U.S. vendors and
their subcontractors operating in Iraq and Afghanistan. Under
this policy, non-U.S. vendors are required to certify that they
and their subcontractors are not associated with the enemy of
U.S. or coalition forces.
CENTCOM has implemented additional host nation
contractor and subcontracting requirements where all
subcontract agreements with host nation firms must be approved
in advance by the contracting officer.
Section 842 of the NDAA for Fiscal Year 2012, titled:
``Prohibition on contracting with the enemy in the CENTCOM
theater of operations,'' provides contracting officers the
authority to restrict the award, terminate for default, or void
in whole or in part of any DOD contract, grant, or cooperative
agreement upon a written determination by the Head of
Contracting Agency that funds through DOD contract, grant, or
cooperative agreement directly or indirectly support the enemy.
It also mandates that DOD include a clause in contracts,
grants, and cooperative agreements awarded on or after the date
of this act enactment by modification.
8. Senator McCaskill. Secretary Kendall, what steps has DOD taken
to ensure that prime contractors are holding their subcontractors
responsible?
Mr. Kendall. The following is a summary of other significant
improvements to subcontractor oversight initiated by DOD which will
help ensure that prime contractors are holding their subcontractors
responsible in contingency theater:
Placing additional instructions in the DFARS and
CENTCOM acquisition instruction, directing both prime
contractors and all subcontractors at all tiers, compliance
with Federal and DOD Trafficking in Persons requirements.
CENTCOM has implemented a vendor vetting policy in
their acquisition instruction for all non-U.S. vendors and
their subcontractors operating in Iraq and Afghanistan. Under
this policy, non-U.S. vendors are required to certify that they
and their subcontractors are not associated with the enemy of
the U.S. or coalition forces.
CENTCOM has implemented additional host nation
contractor and subcontracting requirements where all
subcontract agreements with host nation firms must be approved
in advance by the contracting officer.
Section 842 of the NDAA for Fiscal Year 2012, titled:
``Prohibition on contracting with the enemy in the CENTCOM
theater of operations,'' provides contracting officers the
authority to restrict the award, terminate for default, or void
in whole or in part of any DOD contract, grant, or cooperative
agreement upon a written determination by the HCA that funds
through DOD contract, grant, or cooperative agreement directly
or indirectly support the enemy. It also mandates DOD include a
clause in contracts, grants, and cooperative agreements awarded
on or after the date of this act enactment by modification.
Additionally, DOD identified a number of key COR responsibilities
in its December 2010 COR handbook to improve prime contractor
supervision of subcontractors. CORs are key to ensuring satisfactory
subcontractor performance by observing the prime contractor's
subcontract surveillance processes and reporting inadequate
surveillance to the contracting officer who will report to the prime
contractor. If in the course of observing the performance of the prime
contractor, it is determined that the subcontractor has violated key
terms of the contract, U.S. law, regulation, or policy, the COR can
recommend to the contracting officer that the prime take corrective
action or terminate the subcontract. Additionally, CORs monitor
complaints from subcontractors and make recommendations to the
contracting officer that the prime take appropriate action when
necessary. DOD has also taken steps to standardize COR qualification
requirements. Though contract oversight and surveillance is a shared
responsibility of both the contracting and requiring activities, the
contracting officer ultimately will ensure appropriate contractor
oversight and quality assurance is applied to all contracts.
Contracting officers are required to appoint certified CORs in writing
before contract performance begins, and requiring activities are
required to ensure that appropriate training and tracking of COR
personnel is accomplished. Contracting officers will notify requiring
activities of COR requirements in sufficient time to ensure
appropriately trained CORs are present for duty before contract
performance begins. Requiring activities will address the COR's
performance of the designated functions in the annual performance
appraisal.
9. Senator McCaskill. Secretary Kendall, how is DOD tracking
subcontractors and auditing their costs?
Mr. Kendall. One of the key duties of a COR is to ensure
satisfactory subcontractor performance by observing the prime
contractor's subcontract surveillance processes and reporting
inadequate surveillance to the contracting officer. If, in the course
of observing the performance of the prime contractor, it is determined
that the subcontractor has violated the terms of the contract, U.S.
law, regulation, or policy, the COR can recommend to the contracting
officer that the prime contractor take corrective action or terminate
the subcontract. DCAA audits DOD contracts and provides accounting and
financial advisory services regarding contracts and subcontracts to DOD
components responsible for procurement and contract administration.
These services are provided in connection with the negotiation and
administration of contracts and subcontracts. DCAA performs these
functions at the request of the contracting activity and the DCMA.
10. Senator McCaskill. Secretary Kendall, I have long been
concerned about a truly heartbreaking incident in Iraq where the
negligence of one of our foreign contractors killed one of our
soldiers. When the soldier's family sued, the contractor was able to
avoid responsibility by successfully asserting that the U.S. courts
lacked jurisdiction. The company was then awarded another DOD contract.
Several years ago, I introduced a bill--the Lieutenant Colonel Dominic
`Rocky' Baragona Justice for American Heroes Harmed by Contractors
Act--which would require contractors to consent to jurisdiction in the
U.S. courts as a condition for doing business with us. The CWC has
endorsed this approach, recommending that we ``make consent to U.S.
civil jurisdiction a condition of contract award.'' Why should we
continue to do business with contractors who avoid legal responsibility
for their actions in carrying out a contract?
Mr. Kendall. DOD does not condone doing business with companies
that are not accountable for their actions and only awards contracts to
contractors that are determined to be responsible and can fulfill their
contractual obligations. Criminal, civil, contractual, and
administrative actions are taken to protect DOD interests and to deter
future occurrences.
The policy in the Federal Acquisition Regulation subpart 9.4 states
that ``agencies shall solicit offers from, award contracts to, and
consent to subcontracts with responsible contractors only.'' Regardless
of any particular law that would subject contractors to U.S.
jurisdiction, the U.S. Government still has the ability to take action
against a contractor that is determined not to be responsible.
foreign contractors
11. Senator McCaskill. Secretary Kendall, in general, should
foreign contractors be subject to the same liabilities as U.S.
contractors when performing work for the U.S. Government and funded by
U.S. taxpayers, in cases where the contractor negligently kills or
maims a U.S. citizen during performance of a contract? If not, in what
cases should foreign contractors not be subject to the same
liabilities?
Mr. Kendall. All contractors, including foreign contractors, that
perform under U.S. Government contracts should be held legally
accountable for wrongdoing in connection with their performance that
results in injuries to U.S. military, civilian, and Government
contractor personnel. The manner and forums liability may be imposed on
a foreign contractor performing under a U.S. Government contract
overseas generally is governed by applicable U.S., host country, and
third country national laws.
recommendation for a new assistant secretary for contingency
contracting
12. Senator McCaskill. Secretary Kendall, the CWC recommended a
series of organizational changes designed to heighten the
responsibility for contracting in contingencies, including the
establishment of a new Assistant Secretary for Contingency Contracting.
During the hearing, Commissioner Schinasi stated that contracting
within DOD is treated as a subset of acquisition, but that the decision
to contract involves a policy decision that justified elevating
contracting to a higher level of management. Do you agree that the
decision of whether to contract involves a policy decision?
Mr. Kendall. The decision to utilize contract support in
contingency operations is based on projected mission requirements and
informed by our Combatant Commanders' needs to maintain necessary
operational readiness while minimizing and mitigating any risks to the
mission. Decisions on sourcing workload to either military personnel,
Government civilians, or contract support must follow workforce mix and
risk guidance in DOD Instruction 1100.22, ``Policy and Procedures for
Determining Workforce Mix,'' and, when appropriate, cost considerations
in accordance with Directive Type Memorandum 09-007, ``Estimating and
Comparing the Full Costs of Civilian and Military Manpower and Contract
Support.'' As appropriate, applicable DOD policies are being updated to
ensure consistency with the recently issued Office of Federal
Procurement Policy Letter 11-01, ``Performance of Inherently
Governmental and Critical Functions.'' Workforce mix decisions require
collaboration between defense officials throughout the Department and
entail decisions on a number of issues, including: readiness and
management needs, acceptable operational risk, capacity and
capabilities of potentially deployable civilian labor, inherently
governmental nature of the workload, and cost of performance.
13. Senator McCaskill. Secretary Kendall, can you explain why DOD
opposes the CWC's recommendation to establish a new assistant secretary
position in your office with responsibility for contingency
contracting?
Mr. Kendall. The Office of the Under Secretary of Defense for
Acquisition, Technology and Logistics (OUSD(AT&L)) has met the intent
of this recommendation by establishing the Office of the Deputy
Assistant Secretary of Defense for Program Support (ODASD(PS)). This
career Senior Executive Service-level position is aligned under the
Assistant Secretary of Defense for Logistics and Materiel Readiness
(ASD(L&MR)). Within OUSD(AT&L), oversight and contingency contracting
responsibilities are shared between the Office for Defense Procurement
and Acquisition Policy (DPAP) and ODASD(PS). These organizations
provide unique subject matter expertise and oversight of contingency
contracting. In addition, contingency contracting responsibilities are
aligned across other OSD organizations (Policy, Comptroller, and
Personnel and Readiness) and the Joint Staff. Together, these
organizations are fully engaged with the Contingency Contracting Office
under DPAP and ODASD(PS). The Department believes oversight of
contingency contracting is best achieved by leveraging resources of the
entire DOD organization.
under secretary of defense for policy's role in contracting
14. Senator McCaskill. Secretary Kendall, in a January 2011
memorandum, Secretary Gates directed the Under Secretary of Defense for
Policy (USD(P)), along with your office, and several other offices,
including the Chairman of the Joint Chiefs of Staff, to inventory,
review, coordinate, and provide guidance on a list of factors to
determine the appropriate level of contractor dependence by the
military. Why shouldn't the USD(P) be given a greater role and
responsibility for planning how and whether to use contractors for
certain functions in contingencies?
Mr. Kendall. The January 2011 Secretary of Defense Memorandum,
``Strategic and Operational Planning for OCS and Workforce Mix,''
appropriately delegates responsibilities to the Military Departments,
the Chairman of the Joint Chiefs of Staff, the Under Secretary of
Defense for Acquisition, Technology, and Logistics, the Under Secretary
of Defense for Policy, and the Under Secretary of Defense for Personnel
and Readiness. The purpose of the memorandum is to focus attention on
OCS as an emergent capability that can mitigate risks at the strategic
and operational levels. The memorandum already authorizes the Under
Secretary of Defense for Policy to recommend capabilities that may need
to be brought back within the Active or Reserve organic military force
inventory, or to be provided by the Civilian Expeditionary Workforce,
evaluating the questions of how to and whether to use contractors.
private security contractors
15. Senator McCaskill. Lieutenant General Bash, the CWC found that
the extensive use of private security contractors (PSC) in Afghanistan
raises concerns about potential civilian casualties, vulnerability to
extortion by warlords and insurgents, and ``alienation of the local
population that could undermine U.S. and allied political initiatives
and increase sympathy for the Taliban.'' The CWC recommends that the
use of private security contractors for convoy security in Afghanistan
be ``phased out or at least sharply restricted'' and that the use of
such contractors for static security for bases be selectively phased
out in the most at-risk positions, regions, and contexts. Do you agree
with the CWC's assessment that the use of PSCs leave us vulnerable to
civilian casualties, alienation of the local population, and extortion
by local warlords and insurgents?
General Bash. The proper and effective use of PSCs in time and
place can eliminate or minimize the risk of civilian casualties,
alienation of the local population, and extortion. Our commanders
perform risk assessments to determine whether conditions and the
environment warrant the use of PSCs. The CWC correctly stated private
security contractors can be used in situations where it would be
unsuitable to use military forces to provide what is essentially
civilian protection rather than conduct combat functions. In general,
there are circumstances when the use of PSCs is more appropriate than
the use of organic military forces for protection. That said, U.S.
Forces Afghanistan is working closely with the Government of the
Islamic Republic of Afghanistan to transition from use of PSCs to
reliance on the Afghan Public Protection Force. We completely support
this effort and the mutual desire to phase out the use of PSCs in
Afghanistan when appropriate and when the operational environment
permits.
16. Senator McCaskill. Lieutenant General Bash, do you agree with
the CWC's view that U.S. military, Afghanistan National Army (ANA)
units, and new Afghanistan government-sanctioned security providers
provide a superior alternative to the use of PSCs in such
circumstances?
General Bash. With proper training, oversight, and leadership,
Afghan military and Afghan Government-sanctioned security providers
have the ability to perform PSC functions in support of our operational
requirements. Whether these security providers constitute a superior
alternative is dependent upon the level of training, reliability of
personnel, skill, and knowledge of Afghan military commanders or
government sanctioned providers, as well as the characteristics of the
security service being provided.
17. Senator McCaskill. Lieutenant General Bash, has DOD conducted a
comprehensive risk assessment and examined the availability of
alternatives to the use of PSCs in high-risk situations?
General Bash. Joint doctrine provides commanders with risk
considerations for private security contractors as well as other types
of contractor support. The commander's risk assessment is an essential
element in the military planning process. Operationally, this
assessment is dependent on the mission, time available, friendly and
enemy situation, the environment, and resources available. The
commander and staff consider these factors to develop multiple courses
of action to maximize the probability of success while minimizing the
risk. These planning and risk reduction efforts extend beyond high risk
missions, to include the use of local nationals as contracted employees
and contractor vetting.
______
Questions Submitted by Senator Richard Blumenthal
human trafficking
18. Senator Blumenthal. Secretary Kendall, please provide the
information that the CWC requested at its hearing on July 26, 2010, on
the remedies DOD has used to combat human trafficking. In reading over
the transcript of that CWC hearing, Commissioner Schinasi specifically
asked the witnesses from DOD: ``if any companies have been suspended or
debarred for [human trafficking], in particular?'' The witnesses, Ed
Harrington, Deputy Assistant Secretary of the Army for Acquisition,
Technology, and Logistics (AT&L), and Patrick J. Fitzgerald, Director
of DCAA, both took that question for the record. At today's hearing,
both Commissioner Zakheim and Commissioner Schinasi stated that this
information was not provided to the CWC.
Mr. Kendall. The suspension and debarment officials were queried
recently about any human trafficking cases from the agencies. There
were no suspensions or debarments related to cases of human trafficking
by the Navy, Air Force, or Defense Logistics Agency. The Army had two
cases where the issue was raised in the past 3 years. The first was not
substantiated, so no suspension or debarment action was taken. The
second was a contractor accused of harboring an illegal alien and
extracting cheap labor under threat of exposure. In this case, both the
principal and the entity were debarred. This case was Stateside and not
in the contingency environment.
19. Senator Blumenthal. Secretary Kendall, to assess your ongoing
efforts to combat human trafficking, please provide the following
information concerning human trafficking violations for fiscal year
2011:
A report of each instance contained in the Defense Incident-
Based Reporting System (DIBRS) for human trafficking/commercial
sex acts (UCMJ Code 134-S3 NIBRS Code 50A) and for human
trafficking/involuntary servitude (UCMJ Code 1340S4 NIBRS Code
50B).
A report of all known trafficking in persons cases provided
by the Secretaries of the Military Departments and the
information on all known indictments and convictions on all
known trafficking in persons cases provided from commanders of
the combatant commands as required by DOD Instruction 2200.01,
issued September 15, 2010.
Mr. Kendall. The DIBRS was queried for Human Trafficking/Commercial
Sex Acts ``134-S3'' and for Human Trafficking/Involuntary Servitude
``134-S4.'' We did not find any incidents in the database that had
either of the two offense codes as the reported offense.
In January 2011, these two offense codes were incorporated into
DIBRS, meaning that for this inquiry, 2011 data is partial. Also, some
of the other offense codes reported might be related to human
trafficking, such as sexual assault, rape, and extortion. There was one
hit in the DIBRS database for the offense ``Prostitution Offense
(Purchasing Prostitution)'' from the Marine Corps Military Police in
May 2011.
20. Senator Blumenthal. Secretary Kendall, it is my understanding
that upon receipt of information that involves trafficking in persons
by a contractor, the Under Secretary of AT&L works to ensure that the
appropriate contracting officer implements a remedy. Please provide all
known instances of such a remedy occurring during contingency
operations in Iraq and Afghanistan, including the date of the
occurrence, name of the company identified, the nature of the
trafficking in persons incident, and the response by DOD.
Mr. Kendall. The Department has not collected any substantiated,
documented instances of trafficking in persons by a contractor. Prior
to February 2011, detailed data on incidents that could potentially be
``trafficking in persons'' was not collected. Activities that are often
indicators, such as substandard housing issues, were dealt with during
routine COR inspections and resolved. The Department is now, however,
collecting indicative data.
DCMA Afghanistan recently changed the way they do CTIP surveillance
audits to enable greater focus as a specific area of oversight. Prior
to February 2011, all service audit checklists had two CTIP
surveillance validation questions embedded within the checklist. In
February 2011, this procedure was changed to incorporate a more robust
stand-alone CTIP surveillance checklist that is conducted by CORs as
well as DCMA QARs and Government Trafficking in Persons Representatives
as a separate audit. Logistics Civics Augmentation Program contracts
are audited every 2 months and other contracts on a monthly basis.
Additionally, the Defense Incident Base Reporting System (DIBRS) was
updated with defense offense codes for trafficking in persons and
received the first input in May 2011.
Potential issues are identified, documented and investigated. When
conducting CTIP audits, the COR's responsibilities include but are not
limited to inspecting living conditions, treatment of employees, and
passport abuse. For example, a contractor was written up for not
providing the 50 square foot minimum per employee living area. But the
government rescinded it, because the government was found to be at
fault for denying the contractor's repeated requests for more space.
The more frequent monitoring has, for the most part, identified
potential issues for attention and remediation, before they reach a
reportable level.
21. Senator Blumenthal. Secretary Kendall, you stated that DOD
requires a provision in its contracts that specifically prohibits human
trafficking by Federal contractors. Please provide an assessment of
what percentage of contracts in Iraq and Afghanistan that currently
contain this clause.
Mr. Kendall. The U.S. Central Command Joint Theater Support
Contracting Command (C-JTSCC) conducted an assessment of all active C-
JTSCC contracts in Iraq and Afghanistan to determine the percentage of
contracts that contain Federal Acquisition Regulation Clause 52.222-50,
``Combating Trafficking in Persons,'' as required in all solicitations
and contracts. Of 7,997 active contracts, 99.11 percent included the
required clause. There were 71 contracts found to be noncompliant.
Action was taken to immediately modify 37 contracts being performed
in Afghanistan and add the required clause. The 34 contracts performed
in Iraq found to be noncompliant have periods of performance ending
December 31, 2011, or sooner. C-JTSCC is in the process of terminating
all services in Iraq. No action will be taken to modify these contracts
as they will expire on or before December 31, 2011. The contracts for
performance in Iraq that will remain active past December 31, 2011, are
compliant.
----------------------------------------------------------------------------------------------------------------
Percent Percent
# Contracts # Noncompliant Noncompliant # Compliant Compliant
----------------------------------------------------------------------------------------------------------------
Afghanistan..................... 5,423 37 0.68 5,386 99.32
Iraq............................ 2,574 34 1.32 2,540 98.68
-------------------------------------------------------------------------------
Total......................... 7,997 84 .89 7,926 99.11
----------------------------------------------------------------------------------------------------------------
22. Senator Blumenthal. Secretary Kendall, what is the
justification for contracts not containing the clause with the
prohibition on human trafficking?
Mr. Kendall. There may be some contracts that predate the Federal
Acquisition Regulation (FAR) Clause 52.222-50, ``Combating Trafficking
in Persons.'' A recent review of contracts in the C-JTSCC found that
99.11 percent of contracts contain the clause. Immediate action was
taken to modify the other contracts to add the required clause.
New contracts written in the Standard Procurement System (SPS) will
contain the clause with the prohibition on human trafficking. SPS was
updated in January/February 2010 to automatically require and insert
the clause when contracting officers and contract specialists use SPS
to prepare contracts.
An update to the DFARS Procedures, Guidance, and Information
published in the Federal Register on November 18, 2011, instructs
contracting officers to ensure that the clause at FAR 52.222-50,
``Combating Trafficking in Persons,'' or its alternate, is included in
every solicitation or contract, as prescribed in FAR 22.1705, and to
not use system overrides or other administrative methods to avoid its
inclusion.
______
Questions Submitted by Senator James M. Inhofe
achieving tactical objectives versus sustained effects
23. Senator Inhofe. Secretary Kendall and Lieutenant General Bash,
this report is a strong indictment of the current interagency system
and I applaud the CWC's important work. However, by focusing on
sustainability of the projects, the report counts as waste those
projects that achieved their immediate tactical effect. For example, I
am a strong supporter of the CERP. The report cites over $6 billion
spent on CERP during the war. CERP is designed to achieve an immediate
tactical effect for a commander. The success of this tactic is embodied
in the military's use of money as a weapons system where it plays a
critical role in a successful counterinsurgency strategy. I think
there's an expectation that not all these projects are going to end up
being a success. Instead, we trust our commanders in brigades,
regiments, and battalions to decide what they need and where.
Commanders have repeatedly testified in front of the Senate Armed
Services Committee about the criticality of these funds:
Hiring security guards for markets in Baghdad during
the surge;
Putting young men to work rebuilding dilapidated
streets scarred by roadside bombs; and
Providing roofs over the heads of Afghan school
children as they attend their first classes ever.
How did the CWC account for the tactical effectiveness of some of
this money?
Mr. Kendall. I do not have insight into how the CWC accounted for
the tactical effectiveness of the money. In general, while I agree with
the validity of the vast majority of the issues identified by the
commission, I feel they gave too little credit to the significant
progress made since 2005 in addressing a number of these issues.
General Bash. The CWC report does not directly account for the
tactical effectiveness resulting from the use of CERP funds but
references on the Special Inspector General for Afghanistan
Reconstruction (SIGAR) Audit Report 11-7, ``Commander's Emergency
Response Program in Laghman Province Provided Some Benefits, but
Oversight Weaknesses and Sustainment Concerns Led to Questionable
Outcomes and Potential Waste,'' January 27, 2011, for many of its
findings. In response to the draft version of this report, USFOR-A
indicated that SIGAR highlighted some valid concerns involved with
oversight of CERP projects. It also indicated that the SIGAR report,
and consequently the CWC, identified projects begun before the
command's current CERP policies were instituted. Commander USFOR-A
issued Commander of International Security Assistance Force
Counterinsurgency (COIN) Contracting Guidance in September 2010 that
directed units to develop operational criteria for awarding contrac ts
that focus on how the contracts will enhance coalition effectiveness in
Afghanistan. USFOR-A also indicated that 90 percent of the identified
$49.2 million obligated for `at risk' projects or projects with
questionable outcomes involved road improvements which were at risk due
to sustainability issues. USFOR-A considers these roads as critical
projects that improve freedom of movement for both military and
civilian uses and increased commerce. In addition, these road projects
were requested by the GIRoA and vetted at brigade and sometimes
division level.
personnel cuts and increased contracting in future wars
24. Senator Inhofe. Secretary Kendall and Lieutenant General Bash,
in their joint opening statement, Mr. Zakheim and Ms. Schinasi wrote
the following comments:
``Contracting has provided vital and for the most part
highly effective support for U.S. contingency operations. But
we rely on contractors too heavily, manage them too loosely,
and pay them too much.''
``Both the Active Military and the Federal acquisition
workforce were downsized during the ``peace dividend'' days of
the 1990s . . . it ensured that if a large and prolonged
contingency should develop, the military's reliance on
contractors would greatly increase, even as its ability to
manage and oversee them had atrophied.''
``We must be careful not to repeat the mistake of the
1990s. We cannot allow budget constraints to permit a further
downsizing of our acquisition and contracting workforce. On the
contrary, we must augment that force, especially if planned
military end strength reductions move forward, and there is
even greater pressure to rely on contractors.''
``As an officer's essay in Army Logistician observed,
`In the future, the Army will find it difficult, if not
impossible, to fight without external support. In essence,
wartime host-nation support and contingency contracting have
become operational necessities.'''
I agree we cut our forces too much after the Cold War ended and not
just the acquisition and contracting force, but the total force. That
is what has increased the dependence on contractors because our
military no longer has the personnel to execute many of the missions
now done by our contractors. I do not think we should further cut our
military but more cuts appear to be on the horizon and they will affect
the entire military. I have concerns about taking additional end
strength out of our combat forces to increase our acquisition and
contracting forces and its associated management and oversight
organizations.
Do you support cutting Active Duty combat force end strength in
order to grow the acquisition and contracting forces as well as
additional Office of Management and Budget and Inspector General staff?
If not, where do we get those authorized billets?
Mr. Kendall. Decisions regarding the composition of DOD military
end strength ultimately belong to the President and Secretary of
Defense. The decision is informed by our National Security Strategy and
National Military Strategy and the resources appropriated and
authorized by Congress. Within the approved force structure, we are
committed to providing our military and civilians with the essential
skills to plan for, utilize, and account for those who provide the
Department with contracted support.
General Bash. Decisions regarding the composition of DOD military
end strength ultimately belongs to the President and the Secretary of
Defense. The decision is informed by our National Security Strategy and
National Military Strategy and the resources appropriated and
authorized by Congress. Within the approved force structure, we are
committed to providing our military and civilians with the essential
skills to plan for, use, and account for those who provide the DOD with
contracted support.
25. Senator Inhofe. Secretary Kendall and Lieutenant General Bash,
would increasing the end strength or at least maintaining current end
strength mitigate an increasing requirement for and reliance on
contractors?
Mr. Kendall. Decisions regarding the composition of DOD military
end strength ultimately belongs to the President and Secretary of
Defense. The decision is informed by our National Security Strategy and
National Military Strategy and the resources appropriated and
authorized by Congress. Within the approved force structure, we are
committed to providing our military and civilians with the essential
skills to plan for, utilize, and account for those who provide the DOD
with contracted support.
General Bash. There is an appropriate role for contractors as a
legitimate and necessary means to quickly expand or contract the force
with needed capabilities. Reliance on contracted support is not in and
of itself a negative concept. Indeed, the ability to contract for
support gives the DOD greater flexibility and agility in scaling our
force packages, and reduces costs over the long term. What is important
to recognize is that reliance on contracted support must be balanced by
appropriate policies, doctrine, planning, contracting resources,
oversight personnel, and processes to ensure cost-effective use of this
critical enabling capability. The Joint Staff is committed to
institutionalizing OCS to ensure effective execution in future
contingency operations.
26. Senator Inhofe. Secretary Kendall and Lieutenant General Bash,
how do we minimize the size of our tail (support personnel) compared to
the size of our teeth, or combat forces, while simultaneously
increasing (as you correctly stated) our reliance on contractors?
Mr. Kendall. DOD seeks to balance the size of its organic support
capability with reliance on contractors. In order to mitigate the risks
associated with the Department's reliance on contractors, we must
ensure appropriate policies, doctrine, planning, contracting resources,
oversight personnel, and processes are in place to guarantee cost-
effective use of this enabling capability. As we adjust force
structure, we will ensure the resources applied to OCS in recent years
are maintained to maximize effective and efficient execution in future
operations.
General Bash. Minimizing the size of our support tail and
increasing reliance on contractors are not mutually exclusive goals. In
fact, leveraging contractor support to rapidly scale required
capabilities can provide a smaller military with greatly needed
flexibility and agility at reduced long-term costs. In order to
mitigate the risks associated with DOD's reliance on contractors, we
must ensure appropriate policies, doctrine, planning, contracting
resources, oversight personnel, and processes are in place to ensure
cost-effective use of this critical enabling capability. As we adjust
force structure we will ensure the resources applied to OCS in recent
years are maintained to maximize effective and efficient execution in
future operations.
______
ANNEX
[The report titled: ``Transforming Wartime Contracting''
follows:]
[Whereupon, at 4:42 p.m., the subcommittee adjourned.]