    [Senate Hearing 112-659]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 112-659

     THE COMPREHENSIVE CONTINGENCY CONTRACTING REFORM ACT OF 2012 (S. 2139)

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

                                    HEARING

                                   before the

                  AD HOC SUBCOMMITTEE ON CONTRACTING OVERSIGHT

                                     of the

                                  COMMITTEE ON
                             HOMELAND SECURITY AND
                              GOVERNMENTAL AFFAIRS
                              UNITED STATES SENATE

                          ONE HUNDRED TWELFTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 APRIL 17, 2012

                                   __________

                       Available via http://www.fdsys.gov

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

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    20402-0001

            COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

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

                      Michael L. Alexander, Staff Director
          Nicholas A. Rossi, Minority Staff Director and Chief Counsel
                      Trina Driessnack Tyrer, Chief Clerk
                Joyce Ward, Publications Clerk and GPO Detailee

                  AD HOC SUBCOMMITTEE ON CONTRACTING OVERSIGHT

                           CLAIRE McCASKILL, Chairman
    THOMAS R. CARPER, Delaware           ROB PORTMAN, Ohio
    MARK L. PRYOR, Arkansas              SUSAN M. COLLINS, Maine
    JON TESTER, Montana                  JOHN McCAIN, Arizona
    MARK BEGICH, Alaska                  JERRY MORAN, Kansas
                         Margaret Daum, Staff Director
                    Brian Callanan, Minority Staff Director
                           Kelsey Stroud, Chief Clerk

                                C O N T E N T S

                                     ------
    Opening statement:
                                                                       Page
        Senator McCaskill............................................     3
        Senator Portman..............................................     5

                                   WITNESSES
                            Tuesday, April 17, 2012

    Hon. Jim Webb, a United States Senator from the State of Virginia     2
    Patrick F. Kennedy, Under Secretary for Management, U.S.
      Department of State............................................     8
    Richard T. Ginman, Director, Defense Procurement and Acquisition
      Policy, U.S. Department of Defense.............................    10
    Angelique M. Crumbly, Acting Assistant to the Administrator,
      Bureau for Management, U.S. Agency for International
      Development....................................................    11
    Lynne M. Halbrooks, Acting Inspector General, U.S. Department of
      Defense........................................................    28
    Harold W. Geisel, Deputy Inspector General, U.S. Department of
      State..........................................................    30
    Michael Carroll, Acting Inspector General, U.S. Agency for
      International Development......................................    31

                         Alphabetical List of Witnesses

    Carroll, Michael:
        Testimony....................................................    31
        Prepared statement...........................................   114
    Crumbly, Angelique M.:
        Testimony....................................................    11
        Prepared statement...........................................    81
    Geisel, Harold W.:
        Testimony....................................................    30
        Prepared statement...........................................   108
    Ginman, Richard T:
        Testimony....................................................    10
        Prepared statement...........................................    56
    Halbrooks, Lynne M.:
        Testimony....................................................    28
        Prepared statement...........................................    98
    Kennedy, Patrick F.:
        Testimony....................................................     8
        Prepared statement...........................................    44
    Webb, Hon. Jim:
        Testimony....................................................     2
        Prepared statement...........................................    39

                                    APPENDIX

    Background Memo..................................................   130
    Statements submitted for the Record:
        Center for American Progress Action Fund.....................   149
        Katherine V. Schinasi, Former Commissioner, The Commission on
          Wartime Contracting in Iraq and Afghanistan................   152
        Charles Tiefer, Professor of Governmental Contracting at the
          University of Baltimore Law School.........................   157

     THE COMPREHENSIVE CONTINGENCY CONTRACTING REFORM ACT OF 2012 (S. 2139)

                                  ----------

                            TUESDAY, APRIL 17, 2012

                                       U.S. Senate,
              Ad Hoc Subcommittee on Contracting Oversight,
                        of the Committee on Homeland Security
                                      and Governmental Affairs,
                                                        Washington, DC.
        The Subcommittee met, pursuant to notice, at 10:32 a.m., in
    Room 342, Dirksen Senate Office Building, Hon. Claire
    McCaskill, Chairman of the Subcommittee, presiding.
        Present: Senators McCaskill and Portman.
        Senator McCaskill. I want to welcome everyone to this
    hearing this morning.
        I know that Senator Portman will be arriving shortly. I did
    not want to keep our first witness waiting.
        My colleague, Senator Jim Webb, is here to give testimony
    about our subject today. As a brief introductory remark, I am
    not going to go into who he is and why he is here because I
    think most people know who he is. But I do want to say just
    about why he is here.
        When I came to the Senate in 2007, Senator Webb and I
    quickly found that we had a place we wanted to work on, and
    that was contracting and contingencies. His background in the
    military was a great asset to us as we put together the War
    Contracting Commission legislation, and he and I worked on it
    together and succeeded back in the day. Before Senator Warner
    had retired, Senator Warner, as the Ranking Member of the Armed
    Services Committee was a tough sell. I mean, people need to
    remember the context that this legislation was brought forward
    in. It was when President Bush was still President, and I think
    there was a fear that this Contracting Commission was a
    political exercise. And, of course, it was far from that. It
    was something that was really needed to take a hard look at
    what had gone wrong with contracting and contingencies and to
    build a body of work that could change the culture around
    contracting and contingencies for the long haul.
        I want to thank him for his friendship and his hard work on
    this issue and look forward to his comments today as we look at
    legislation trying to implement the recommendations of the
    Commission that we worked hard to create together.
        Senator Webb.

    TESTIMONY OF HON. JIM WEBB,\1\ A UNITED STATES SENATOR FROM THE
                           STATE OF VIRGINIA

        Senator Webb. Thank you very much, Madam Chairman and
    Ranking Member Portman and other Members of the Subcommittee. I
    know you have two full panels. I will be brief here. I would
    ask that the full written testimony that I have would be
    included at the end of my brief oral remarks.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Senator Webb appears in the appendix
    on page 39.
    ---------------------------------------------------------------------------
        Senator McCaskill. Without objection.
        Senator Webb. Thank you. I am here to basically express the
    strongest support possible for the movement of this legislation
    that you, Madam Chairman, and I have worked on in different
    capacities for now, I guess, 5 years. At a time when the Senate
    is continually bogged down in symbolic votes rather than issues
    of governance, I am very proud of what we have been able to do
    on this issue since 2007. I would say it has been one of the
    great pleasures of being in the Senate, to have been able to
    get this legislation into place, the first round of it with the
    Wartime Contracting Commission and hopefully with this
    recommendation that will be implementing some of the findings
    of that Wartime Contracting Commission.
        As the Chairman mentioned, she brought a strong background
    in auditing to the Senate. I spent 5 years in the Pentagon in
    different capacities, including 4 years on the Defense
    Resources Board. One of my eye openers coming to the Senate was
    sitting on the Foreign Relations Committee in 2007 when we had
    a hearing on Iraq reconstruction programs with the State
    Department and they mentioned in their testimony that they had
    $32 billion in Iraq reconstruction programs that had been
    appropriated and were in some form of being put into play. And
    I asked, in a way that I would normally have asked if I were in
    the Pentagon years before, to see the contracts and the amount
    and who the contractor was and what the state of implementation
    was on these different contracts and they could not tell us. We
    worked with them for months and they could not tell us where
    $32 billion had been spent in a specific way where we could
    evaluate the results.
        That was one of the motivations that caused me to start
    working as avidly as I did, along with Chairman McCaskill, to
    see if we could not have the management structures in place,
    catch up with the realities of what had happened in the post-9/
    11 environment of military commitments overseas. This is a
    particular problem in the State Department and the United
    States Agency for International Development (USAID). I do not
    think they had anticipated these sorts of programs before the
    situation that existed once September 11, 2001 occurred.
        We were very lucky, as Chairman McCaskill mentioned, to
    have the support of Senator John Warner when we were advancing
    this legislation through the Senate. He was my senior Senator,
    was a Republican. I had worked with him when I was a young
    Marine, my last year in the Marine Corps, when he was Secretary
    of the Navy. I had followed him as Secretary of the Navy. And
    he, by stepping forward and demonstrating that this was an
    issue with wide concern and from people like himself who had
    spent time in management positions in the Pentagon, really
    helped us push this over the threshold and into reality.
        We had a bipartisan Wartime Contracting Commission. I think
    they did a really fine job. I personally will say I am very
    disappointed that a lot of the findings have been sealed up for
    20 years. But the overall recommendations, I think, are
    something that we will be able to work on in terms of
    implementing legislation that get into management, policies,
    and how we bring rigor to the process.
        And I would like to emphasize here, as I did in our press
    conference earlier, that I believe, and I want to acknowledge
    that the great majority of the contractors who participated in
    this process since September 11, 2001, are not only reputable,
    but they have really done a very fine job in an environment
    that a lot of people had not anticipated. So this is not a
    piece of legislation nor was it a major goal of this process
    simply to bash wartime contractors. We cannot get along without
    them. This has been an effort to put the right kind of
    structure into place so that we can have efficiently run, well
    managed, and effective wartime contracting and operational
    contingencies now and in the future.
        So I was very pleased to have worked in detail on this
    legislation as it was developed. It has my strongest support
    and I thank Senator McCaskill for her untiring efforts here in
    order to bring good governance into this body.
        Thank you, Madam Chairman.

                 OPENING STATEMENT OF SENATOR MCCASKILL

        Senator McCaskill. Thank you, Senator Webb.
        I will make a brief opening statement and then turn it over
    to my colleague, Senator Portman, for a brief opening
    statement, and then we will ask our first panel of witnesses to
    come to the table.
        On August 31, 2011, the Commission on Wartime Contracting
    (CWC) in Iraq and Afghanistan presented its final report to
    Congress. On February 29, 2012, Senator Webb and I introduced
    S. 2139, the Comprehensive Contingency Contracting Reform Act
    of 2012. This legislation is based on the findings and
    recommendations of the Commission.
        This morning, I have the honor of hearing the distinguished
    representatives of the Defense Department (DOD), State
    Department, USAID, and respective agencies' Inspectors General
    (IG) present their views on this important legislation. Based
    on their contributions and what we have heard from many of the
    stakeholders with whom I and the Subcommittee staff have met
    with over the last few months, and on the input of other
    Senators, we will revise the legislation and introduce a new
    version for consideration by the Homeland Security and
    Government Affairs Committee (HSGAC). This legislation will
    increase accountability for wartime contracting and transform
    the way the Federal Government awards, manages, and oversees
    wartime contracts. It will help ensure that the waste, fraud,
    abuse, and mismanagement that we saw in Iraq and Afghanistan
    will never happen again.
        I want to make a few points about today's hearing. First,
    we are here today to seek input from the Executive Branch
    agencies and Inspectors General because we want to get this
    right. The Subcommittee has previously met with contractors and
    other stakeholders regarding this legislation. However, major
    portions of this bill deal with accountability and
    responsibility for the government, and that is by design.
    Therefore, I encourage you to share any suggestions you have to
    improve this legislation.
        Second, this legislation builds on existing structures and
    rules to solve the problems identified by the Commission. S.
    2139 requires each agency responsible for wartime contracting
    to establish clear lines of authority and responsibility for
    all aspects of contingency contracting. It requires the
    Department of Defense, the State Department, and USAID to
    improve their training and planning for contract support and
    contingencies. The legislation reduces reliance on
    noncompetitive contracting practices and restricts
    subcontracting practices that have resulted in a lack of
    transparency and visibility.
        The legislation requires agencies to conduct risk analyses
    before relying on private security contractors (PSC) and to
    terminate unsustainable reconstruction and development
    projects. It also strengthens tools to combat human
    trafficking. This approach is pragmatic and will reduce the
    potential for waste, fraud, and abuse in future wars.
        Many of the witnesses today have already testified numerous
    times before this Subcommittee about lessons learned in Iraq
    and Afghanistan. I commend the Departments, particularly the
    Defense Department, for recognizing that they have shortcomings
    in implementing changes. However, the Commission concluded in
    its final report that, quote, ``meaningful progress will be
    limited as long as agencies resist major reforms that would
    elevate the importance of contracting.'' I want to put you all
    on notice today that such resistance is no longer acceptable.
        Today and in the weeks and months to come, we have an
    opportunity to make a real change in the way government spends
    money during wartime. It is not too late to prevent further
    waste in Afghanistan, and it is not too late to prevent the
    problems in Iraq and Afghanistan from occurring in the next
    war, whenever and wherever that may be.
        Everyone knows that contracting in a wartime environment is
    not going to go away. It will be here with our Nation in the
    future. It is imperative that we no longer make excuses,
    rationalizations, or hide behind existing structures to defend
    the gross inadequacies that our government has displayed during
    contracting processes in Iraq and Afghanistan. We must fix
    these problems now while the memory is fresh, while the memory
    of these failures are fresh, and before the harsh lessons of
    Iraq and Afghanistan are forgotten.
        I remember on my first trip to Iraq on contracting
    oversight, I remember being accompanied by a general, a high-
    ranking general in the Army, and I remember the conversation
    where it was said, ``You know, we did a lessons learned after
    Bosnia. I just do not know what happened to it.'' I want to
    make sure that those same sentences are not uttered during the
    next contingency as we face contracting in the most difficult
    environment that contracting occurs, and that is when our men
    and women are putting their lives on the line for our security
    and our freedom.
        I thank the witnesses for being here today and I look
    forward to their testimony.
        Senator Portman.

                  OPENING STATEMENT OF SENATOR PORTMAN

        Senator Portman. Thank you, Madam Chair. I appreciate your
    comments and I am pleased that our witnesses are experts who
    can give us some input, as you say, and it was good to hear
    from our colleague from Virginia, Senator Webb.
        It is an incredibly important hearing and it is an
    opportunity to examine the lessons we have learned from wartime
    contracting, from our experience over the last decade, 10 years
    in Afghanistan, 9 years in Iraq. And it is a chance to hear
    from witnesses on some of these reforms that are necessary to
    improve the stewardship of our taxpayer dollars in some very
    challenging environments.
        This past August, as was noted, the Bipartisan Wartime
    Contracting Commission issued their final report on its
    investigation of our government's use of contractors in Iraq
    and Afghanistan. In my view, the Commission came to a very
    troubling bottom-line conclusion. It was estimated by the
    Commission that out of the $206 billion we spent on service
    contracts in Iraq and Afghanistan, which includes everything
    from building military installations to training election
    workers, between $31 billion and $60 billion was lost to what
    they termed to be avoidable waste. So out of $206 billion spent
    on service contracts, between $31 and $60 billion lost to
    avoidable waste.
        It is a difficult environment. Winston Churchill once
    famously said, ``The only thing certain in war is that it is
    full of disappointments and also full of mistakes,'' and it is
    true. It is a tough environment. But when it comes to wartime
    contracting, we certainly have a responsibility to look back
    and understand what reforms are necessary to avoid making more
    costly mistakes.
        And this is not just a retrospective exercise, of course,
    because contractors are still very much engaged, particularly
    in Afghanistan, where the United States still has, as we count
    them, over 100,000 private contractors. Even in Iraq today,
    after the last U.S. troops returned home in December, the
    Departments of Defense and State maintain roughly 30,000
    private contractors. At this time of serious fiscal challenges
    and trillion dollar deficits, we must do all we can to avoid
    waste and to get the best possible value out of the taxpayers'
    dollar.
        The Wartime Contracting Commission along with a long series
    of Inspector General reports identified some of the issues we
    should be focused on. The challenges range from improving the
    use of reliable price information, which we will talk about
    today, to ensure that the government is getting a fair deal, to
    tightening restrictions on the use of non-competitive
    contracts, to strengthening oversight of subcontractors, who
    are too often insulated from direct accountability.
        In addition, looking ahead, one of my principal concerns is
    that of sustainability, and by that I mean how do we ensure
    that our work, reconstruction, development work, and so on,
    will last and be carried on by the Afghan and Iraqi government
    and the people of those countries. The issue is critically
    important because it is about making sure that our good
    investments do not go bad. That means we have to consider not
    only, for example, how many additional schools and health
    clinics we can construct, but who is going to sustain them. Do
    they have the medical professionals and the teachers to be able
    to sustain them and keep them going? On this issue, the Wartime
    Contracting Commission was not very optimistic, and I will look
    forward to hearing from our panel on what steps are needed to
    reduce this risk of future waste or, again, lack of
    sustainability.
        Of course, beyond ensuring that wartime contracting is
    fiscally sound, we have also got to ensure it is performed
    consistently with our deeply held values as Americans. On that
    score, it was concerning to see the Commission's report on what
    they called the tragic evidence of the recurrent problem of
    trafficking in persons (TIP) by labor brokers or subcontractors
    of contingency contractors. The report said that existing
    prohibitions on such trafficking have failed to suppress it.
    Labor brokers or subcontractors have an incentive to lure
    third-party nationals into coming to work for U.S. contractors,
    only to be mistreated or exploited.
        One of the Commission members, Dov Zakheim, a former Reagan
    and Bush Administration defense official, testified before the
    Armed Services Committee here in the Senate that these findings
    were, in his view, just the tip of the iceberg. And both DOD
    and State Department IGs have told us that we lack sufficient
    monitoring to have clear visibility into labor practices by
    contractors and subcontractors.
        As many of you know, that is why we introduced legislation
    recently. Senator Blumenthal and I are the original sponsors,
    but it is bipartisan legislation. We have been joined by
    Senator McCaskill, the Chair here this morning, as well as
    Senator Rubio, Senator Lieberman, Senator Collins, Senator
    Franken, and it is intended to strengthen the existing
    protections against human trafficking directly in connection
    with overseas government contracts.
        Broadly defined, human contracting means forced labor and
    other coercive labor practices that contribute to trafficking.
    It includes recruiting workers to leave their home countries
    based on fraudulent promises, confiscating passports to limit
    the ability of workers to return home, charging workers
    recruitment fees that consume more than a month's salary, and
    many other forms of abuse that were mentioned in the
    Commission's report.
        We should be clear that the overwhelming majority of U.S.
    contractors and subcontractors are law abiding and reputable
    and they are doing a good job in a difficult situation. They
    have made it a priority to ensure that abusive labor practices
    play no role in this challenging work they are doing in Iraq
    and Afghanistan.
        Our proposal is designed to ensure that the best practices
    adopted by those contractors become standard practice for all
    contractors, and they include requiring contractors to have a
    compliance plan in place and reporting and monitoring
    requirements to ensure that credible evidence immediately
    triggers an investigation and giving contracting officers more
    tools to hold violators accountable. I am hopeful we can work
    to make these commonsense and bipartisan reforms the law of the
    land.
        We have invested heavily to achieve the goal of building up
    civil institutions, functioning economies, and stable
    constitutional governments in both Afghanistan and Iraq, and
    our military men and women have done everything they have been
    asked to do and more in Iraq and Afghanistan. They perform with
    extraordinary skill and bravery under the toughest of
    circumstances. Getting this overseas contracting right,
    especially in the area of reconstruction and development, is
    critical to consolidating the hard-won gains that they have
    achieved.
        Madam Chair, again, thanks for holding this hearing. I look
    forward to hearing from our witnesses today.
        Senator McCaskill. Thank you, Senator Portman.
        If our first panel of witnesses would come forward, and
    while you are doing that, I will introduce you.
        Richard Ginman assumed the position of Director of Defense
    Procurement and Acquisition Policy (DPAP) in June 2011. Mr.
    Ginman retired as a Rear Admiral from the U.S. Navy after 30
    years of service in 2000. Prior to assuming his current
    position, he served as Principal Deputy to the Director from
    2008 until 2010, and Deputy Director, Contingency Contracting
    and Acquisition Policy, from 2010 until assuming the position
    as Director.
        Patrick Kennedy has served as Under Secretary for
    Management for the United States Department of State since
    2007. He has been with the Department of State for 39 years and
    has held positions including Director of the Office of
    Management Policy, Rightsizing and Innovation, Assistant
    Secretary for Administration, U.S. Representative to the U.N.
    for Management and Reform, Chief of Staff of the Coalition
    Provisional Authority in Iraq, and Deputy Director of National
    Intelligence for Management.
        Angelique Crumbly is the Acting Assistant to the
    Administrator for the Bureau of Management for the United
    States Agency for International Development. She is a member of
    the Senior Executive Service (SES) with more than 20 years of
    Federal service and has held several key positions at USAID,
    including Senior Deputy Assistant Administrator in the Bureau
    for Management and Director of the Office of Management,
    Policy, Budget, and Performance.
        It is the custom of the Subcommittee to swear in all
    witnesses that appear before us, so if you do not mind, I would
    ask you to stand.
        Do you swear that the testimony you will give before this
    Subcommittee will be the truth, the whole truth, and nothing
    but the truth, so help you, God?
        Mr. Kennedy. I do.
        Mr. Ginman. I do.
        Ms. Crumbly. I do.
        Senator McCaskill. Let the record reflect that all the
    witnesses have answered in the affirmative. Please be seated.
        We will be using a timing system today. We would ask that
    your oral testimony be no more than 5 minutes. Your written
    testimony will be printed in the record in its entirety.
        I am told that we have committed a protocol gaffe, Mr.
    Kennedy. That under the hierarchy of Under Secretaries versus
    Directors and Assistant Administrators that you should be first
    in the pecking order at this hearing, so we will call on you
    first for your testimony concerning your input into this
    legislation from the perspective of the Department of State.

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

        Mr. Kennedy. Madam Chairman, I certainly defer to the Chair
    and you may please call upon the witnesses in whatever order
    you wish.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Kennedy appears in the appendix
    on page 44.
    ---------------------------------------------------------------------------
        Senator McCaskill. It is fine. You can go ahead, Secretary
    Kennedy.
        Mr. Kennedy. Thank you. Chairman McCaskill, Ranking Member
    Portman, thank you for inviting me to discuss the Comprehensive
    Contingency Contracting Reform Act of 2012. We share your
    desire to strengthen contingency contracting. Our review of the
    bill continues and we very much welcome, Madam Chairman, your
    request that we work with you. We have met with your staff once
    and we very much appreciate your invitation. We look forward to
    continuing to do so.
        This legislation builds on the important work of the
    Commission on Wartime Contracting, an independent, bipartisan
    panel that you, Chairman McCaskill, created with Senator Webb.
    The Department worked continuously with the Commission from its
    formation in 2008 until its sunset, gaining valuable insight.
    We have taken many steps to improve our contingency contracting
    based on the work of the CWC and other oversight entities and
    our own lessons learned. We are now engaged with the Government
    Accountability Office on its review of the Iraq transition,
    contingency contracting, and the CWC's final report. We have
    learned much from the Iraq transition, working closely with
    DOD, USAID, and interagency partners.
        On April 3, Secretary Clinton, addressing cadets at the
    Virginia Military Institute, described the Iraq transition as
    the largest military to civilian transition since the Marshall
    Plan. We are now taking the lessons learned in Iraq and
    applying them to contracting planning and execution in
    Afghanistan.
        State's centralization of acquisitions for goods and
    services in our Acquisitions Management Office, which together
    with its two regional procurement support offices handle over
    98 percent of our contracted dollars. This centralization of
    acquisitions obviates the need for the extensive additional
    policy guidance and oversight in a dispersed acquisition
    organization. We have hired 103 additional acquisition
    management staff since 2008 using our working capital funds, 1
    percent fee on all procurements. This has enabled us to devote
    37 contracting officers and support personnel to Iraq and
    Afghanistan, and we have trained and deployed more contracting
    officer representatives, with 1,080 certified contracting
    officer representatives (CORs) in 2011 and 1,200 total
    projected by the end of this year.
        To elevate accountability for contracting as called for in
    the Secretary's Quadrennial Diplomacy and Development Review,
    the requesting bureau must now ensure that adequate resources
    are identified early in planning. The cognizant Assistant
    Secretary must certify that planning and oversight is adequate
    for every service contract valued at an annual expenditure of
    over $25 million and also verify annually that oversight
    continues to be sufficient.
        We have also increased accountability by mandating that
    contract oversight work elements include in performance
    appraisals of technical personnel with contract management
    responsibilities. All CORs and government technical monitors
    (GTMs) must now complete a 40-hour training course, which we
    updated to be more interactive, skills based, and adult
    learning focused. A separate class session has been tailored
    for diplomatic security CORs who deal with local guards and
    other security programs overseas. All Department CORs
    supporting DOD-issued contracts for our Iraq mission take
    additional DOD training in the contingency environment and any
    other specialty training related to that specific contract.
    This ensures that State personnel managing DOD contingency
    contracts meet the DOD standard.
        To improve our suspension and debarment efforts, we have
    issued detailed procedures and provided training to grants
    officers and contracting officers. Suspension activities
    increased from no suspension in 2009 to five each in 2010 and
    2011 and 19 actions halfway into fiscal year (FY) 2012.
    Debarment activity increased from no debarments in 2009 to six
    issued thus far halfway through 2012. This increase is due to
    more active coordination between the Department and our Office
    of Inspector General (OIG) investigators, stronger referral
    activity, and improved processes and focus within the
    suspension and debarment office (SDO).
        Contingency contracts now require special vigilance against
    trafficking in persons, and initiatives have been undertaken at
    State to address TIP contracting issues. Contracting officers
    and CORs are trained as our front line in preventing contractor
    TIP and worker abuses. Contracting officers tailor specific
    oversight requirements on local, service, and contract type.
    Contracting officers travel overseas to monitor performance at
    the site and enforce TIP programs. In some locations, we have
    hired a direct hire program manager or a contracting officer
    representative lives onsite with construction and security
    staff at their housing areas. New solicitation language
    regarding recruitment includes recruitment plans, and
    submission of agreements has been developed to prevent
    maltreatment of workers. We continue to strive for zero
    tolerance of trafficking in all our contracts.
        The Department has taken a significant number of positive
    steps to improve our contracting function. As the CWC
    recommended, we have strengthened contract administration in
    conflict affected States through hiring and training adequate
    Federal personnel to provide strong governmental oversight of
    contractors.
        The bill you have introduced, S. 2139, has many positive
    elements and we look forward to working with you on contingency
    contracting.
        Thank you very much, and I look forward to your questions.
        Senator McCaskill. Thank you very much.
        I apologize for mispronouncing your name. Mr. Ginman, we
    will take your testimony now. Thank you.

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

        Mr. Ginman. I have learned to respond to almost any
    pronunciation.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Ginman appears in the appendix on
    page 56.
    ---------------------------------------------------------------------------
        Senator McCaskill. I know the feeling. [Laughter.]
        Mr. Ginman. Chairman McCaskill, Ranking Member Portman, I
    welcome this opportunity to discuss the proposed Comprehensive
    Contingency Contracting Reform Act of 2012, the impact the
    legislation would have on the Department of Defense.
        I have addressed the Department's position on each of the
    provisions in the proposed bill in my written testimony, so I
    am not going to repeat that now.
        Senator McCaskill, you and Senator Webb also cosponsored
    the legislation that created the Commission on Wartime
    Contracting, and I would like to thank both of you for your
    leadership on this important topic. The Commission's efforts
    spanned 3 years, and their August 2011 final report
    recommendations are the basis for many of the provisions of
    this bill.
        The Department maintains a scorecard to manage our progress
    against all of the Commission's recommendations. The Government
    Accountability Office is currently evaluating the Department's
    implementation of the Commission's recommendations and we have
    been actively providing information on our progress to them.
        The Department has been and continues to be focused on
    improving operational contract support. It has been a journey
    and we believe we are making good progress. The bill we are
    here to discuss today is another positive step in that journey.
        The Department of Defense concurs with many of the
    provisions of the bill, but we do have some concerns and we
    would like to work with the Subcommittee to resolve those.
        We are committed to enhancing contingency contracting and
    is in favor of legislative efforts to augment the ongoing
    Departmental initiatives to oversee contingency operations. We
    are especially appreciative of the 2012 National Defense
    Authorization Act (NDAA) coverage of no contracting with the
    enemy, access to subcontractor records in an overseas
    contingency operation (OCO), and the increased authorities
    provided to the reachback cell that supports the joint theater
    support contracting command.
        In closing, I wish to reiterate the Department's
    appreciation for your continued commitment to improving
    operational contracting. Like you, the Department is focused on
    meeting the warfighters' current and future needs while
    judiciously managing DOD's resources and balancing risk. Much
    has been accomplished, but, of course, challenges remain.
        Thank you for the opportunity to provide you the
    Department's reactions to this bill. I ask my written testimony
    be submitted for the record and I welcome your questions.
        Senator McCaskill. Thank you, Mr. Ginman. Ms. Crumbly.

     TESTIMONY OF ANGELIQUE M. CRUMBLY,\1\ ACTING ASSISTANT TO THE
         ADMINISTRATOR, BUREAU FOR MANAGEMENT, U.S. AGENCY FOR
                       INTERNATIONAL DEVELOPMENT

        Ms. Crumbly. Chairman McCaskill, Ranking Member Portman,
    thank you for the opportunity to discuss the potential impact
    of the Comprehensive Contingency Contracting Reform Act on the
    U.S. Agency for International Development. I will briefly
    summarize my remarks and ask that my full statement be entered
    into the record.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Ms. Crumbly appears in the appendix
    on page 81.
    ---------------------------------------------------------------------------
        Madam Chairman, Senator Portman, as you know, more than
    9,000 men and women of the USAID work to provide effective
    economic development and humanitarian assistance in support of
    U.S. foreign policy goals. How we improve our contracting
    practices, including in contingencies, directly impacts the
    success and sustainability of our mission. Accountability to
    Congress and the U.S. taxpayer for the funds we use is a duty
    and it is a duty that we take very seriously.
        In November 2011, when USAID Administrator Rajiv Shah asked
    me to lead the Bureau for Management, he did so because he knew
    that I was a career civil servant with more than 20 years of
    experience making things work at the Agency. Throughout my
    career, I focused on making our business practices more
    efficient and effective with the overall goal of enhancing
    performance while reducing unnecessary cost, so I understand
    the motivation behind this legislation very well. It addresses
    many of the management challenges highlighted in the report of
    the Commission on Wartime Contracting that you, Senator
    McCaskill, created along with Senator Webb. It also addresses
    some of the most important issues in our current engagements in
    Afghanistan and Iraq and those we could contend with in future
    contingencies.
        USAID has already begun to implement the lessons learned
    from Iraq and Afghanistan. Over the past 2 years, Administrator
    Shah has instituted one of the most comprehensive reform
    packages I have seen in my time with the agency. Our USAID
    Forward Reforms, as we have named them, are designed to ensure
    that we provide a more effective business model and deliver
    more sustainable and results driven development programs.
        Implementation and procurement reform is a key element of
    USAID Forward, and I want to note that this reform agenda is
    complementary to many of the recommendations of the CWC, so
    USAID has already made great strides in enhancing the oversight
    and accountability for our acquisition and assistance
    portfolio.
        For example, we are increasing transparency. We have been
    working actively with our Department of State colleagues to
    make foreign assistance data available to the American public.
    As a result, anyone can view USAID spending, including overseas
    contingency operations, online at foreignassistance.gov.
        We have been actively engaged in strengthening our
    oversight. In February 2011, we stood up a Compliance Division
    within the Bureau  for Management's  Office  of Acquisition
    and Assistance (M/OAA) to serve as the central repository for
    any and all referrals of administrative actions, including
    suspension and debarment. In just one year, the Division has
    issued 102 administrative actions and recovered nearly $1
    million in taxpayer funds, compared to eight such actions
    between 2003 and 2007.
        We are promoting enhanced competition. In 2010, we
    established a Board for Acquisition and Assistance Reform
    (BAAR). In its first year alone, the Board's recommendations
    resulted in a 31 percent increase in prime awardees, from 29 to
    38. This is significant because it means we are broadening our
    partner base and reducing dependence on any single
    organization.
        USAID has instituted several cost saving measures and our
    acquisition savings plan has yielded approximately $171 million
    in cost savings or cost avoidance since 2010.
        While we have had some difficult challenges in Iraq and
    Afghanistan, we have also achieved some significant successes.
    As Administrator Shah noted before the CWC, in Afghanistan, we
    have put more than 2.5 million girls back in school, helped
    rebuild the Afghan civil service, aided farmers in growing
    legitimate crops, and assisted in dramatically improving health
    care, particularly among women. In Iraq, we have made
    significant contributions toward diversifying the economy and
    promoting women's participation in the market.
        With regard to your legislation, my written statement
    details comments and concerns that we have on specific
    provisions of the bill and I am happy to address any particular
    section that you wish. But I would like to take this
    opportunity to compliment you and your staff for your
    leadership on this issue and your willingness to engage in a
    dialogue because we all share the same goal, enhanced
    accountability in overseas contingency operations.
        Again, thank you for the opportunity to be here today and
    for your support of USAID. I look forward to our discussion.
        Senator McCaskill. Thank you.
        I am going to really try to make an effort today to take
    off my typical hat in this Subcommittee, where I am kind of
    tough on folks and try to point out inadequacies and make a
    point by using the power of almost a cross examination, and I
    am going to really try--because I really do want this to be
    about how we can get this legislation in a place that it is not
    going to be just something that is ignored or that is checking
    a box that we are completing the work of the Wartime
    Contracting Commission. I really want this legislation to be a
    framework that is workable for your agencies.
        And so I want to underline my sincerity about getting your
    input, and whether it is today in the give-and-take of this
    hearing or whether it is by members of your staff sitting down
    and slogging through the difficult process of going through
    phrases and going through sections of the bill and double-
    checking. What I do not want to have happen is for us to get
    this legislation passed, in its entirety or partially, and then
    have a hearing several years down the line and realize that
    nobody paid much attention to it.
        So this is your opportunity, and with that will come the
    danger that I hope I or somebody who will sit in this chair
    will not let you off the hook or your agencies off the hook in
    a few years when you say that legislation just was not
    workable. I do not want those words to ever come out of the
    mouth of you or your successors in yours jobs as it relates to
    improving contracting.
        So with that, let me get started on what is one of my--I
    have several overarching concerns about this, but in the
    interest of time, I am going to hone in on some of my, quote-
    unquote, ``favorites,'' and I mean that sarcastically.
        Let me start with debarment and suspension. I think the Air
    Force has provided such a good role model for everyone as it
    relates to suspension and debarment. I was interested to hear
    in your testimony, Ms. Crumbly, about how you all have really
    stepped it up in terms of looking at performance on contracts
    and whether or not a suspension or debarment is something that
    should be considered.
        Just to give you some big numbers, according to the Defense
    Department, over a 5-year period, we had--let me get the exact
    numbers, because I want to make sure I get it right--in 2011,
    the Defense Department found that over a 10-year period, the
    Department had awarded $255 million to contractors who were
    convicted of criminal fraud, and $574 billion to contractors
    involved in civil fraud cases that resulted in a settlement or
    judgment against the contractor, many of whom were never
    suspended or debarred. In 2011, the General Accounting Office
    (GAO) reported that the State Department had only had six
    suspension or debarment cases with over $33 billion in
    outstanding contracts. Now, look at Air Force. Air Force had
    367 suspension or debarment actions in a single year last year.
    The State has had six in 5 years.
        The Air Force suspension and debarment officer is
    independent from the acquisition chain. So somebody who is
    involved in acquiring stuff is not involved in determining
    whether or not there should be a suspension or a debarment. The
    State Department SDO does not have those attributes. The State
    Department's suspension and debarment officer has other duties
    involved especially also in acquisition.
        Why do you not speak to that, Secretary Kennedy, about any
    resistance or reluctance you might have to separating out the
    suspension and debarment officer from any duties particularly
    related to acquisition. It is kind of hard to be in charge of
    buying something or buying services and then turning around
    later and say, I really screwed up and gave it to a bad guy. It
    seems to me that separating that duty makes so much
    commonsense, and I am curious as to your input on that.
        Mr. Kennedy. Senator, I fully agree with you, but I believe
    that is the process that we have in place at the State
    Department now. We have a head of contracting activity, a
    senior career Senior Executive Service civil servant, who is
    responsible for all of our contracting activities. It is her
    responsibility to buy and it is her warranted contracting
    subordinates who do all our buying.
        We have a separate Senior Executive Service career civil
    servant who we call our Procurement Executive. He has no
    responsibilities to actually buy anything. He sets the policies
    and the practices of the State Department but does not engage
    in buying. He is in charge of the suspension and the debarment
    activity.
        So we fully agree with you, Senator. We believe that it is
    absolutely correct to split the duty of buying from, in effect,
    the duty of oversight with due respect to our Inspector
    General, who also has the larger oversight framework. And so it
    is our Procurement Executive who is the debarment official and
    who, thanks to his good work, we have increased the number of
    suspension and debarments significantly, as I outline in my
    testimony. So we agree with you, Senator.
        Senator McCaskill. So in our briefing, we were told that
    Corey Rindner is in the Office of Procurement Executive (OPE),
    an office that also assists State in contracting for supplies
    and services. That is incorrect?
        Mr. Kennedy. He writes the policies, ma'am. He does not buy
    anything. He is a warranted contracting officer, yes, but he
    does not procure any goods or services for the State
    Department. We have hired--and it was actually my predecessor
    who hired him--someone with wide and deep experience in
    contracting, because who would better know how to set policies
    and to discover when you should suspend or debar someone if you
    do not have that background. But he does not engage in
    procurement activities.
        Senator McCaskill. Would it make sense for you to have
    somebody full-time just on suspension and debarment? With the
    amount of money that is being contracted by State, would it not
    be better to have someone whose full responsibility was just
    suspension and debarment?
        Mr. Kennedy. He has staff assisting him, and that staff is
    a professional staff, and so we believe that we have
    constructed a pyramid in the Procurement Executive of
    professionals who know how to write the regulations so that we
    can hold contractors responsible, and then implement a full-
    fledged suspension and debarment program should it become
    necessary for us to take that action. So we believe that we are
    complying with both the letter and the spirit of what you put
    forward because we agree with you. It is our responsibility to
    ensure that every single taxpayer dollar is administered and
    used to the best interest of the national security of the
    United States.
        Senator McCaskill. OK. I am hoping that we can get you to
    have somebody that is at the top of the organization of
    suspension and debarment. I do not know whether you need
    assistance under him, but who has just that responsibility,
    because we think it is that important in terms of setting the
    tone. But we can talk about that going forward.
        Another one of my big problems is sustainability in terms
    of projects, and I have a--we tried to do our greatest hits
    list here for this hearing and this is examples of waste,
    fraud, and abuse on projects in Iraq and Afghanistan. I think
    if I asked all of you to guess three or four of the projects
    that would make this list, I am hopeful that you would know
    what they were without me reminding you, because it is not
    good. And I think that the notion that we have actually done a
    full-bore sustainability analysis is just not borne out by the
    results of many of these projects and I think it is very
    important that this legislation include something that requires
    a certification on sustainability.
        I know under the Foreign Assistance Act, USAID is required
    to have a certification. That is because AID traditionally has
    been the one doing these projects, and as we know, it is a
    whole new world out there with Afghanistan Infrastructure Fund
    (AIF) and with, what I call the Commander's Emergency Response
    Program (CERP) and Son of CERP and, the way CERP has morphed
    into something far beyond what was explained to me when I first
    arrived in the Senate.
        In a report by the International Security Assistance Force
    (ISAF), which I previously discussed, there is no persuasive
    evidence that the commander's emergency response program has
    fostered improved interdependent relationships between the host
    government and the population, arguably the key indicator of
    counterinsurgency success. This legislation would impose a much
    more rigorous review of these projects, and I have circled
    several of them.
        I have a USAID project in Afghanistan which is the power
    plant, $300 million power plant. Clearly whatever certification
    was required, it was flawed, because that is not sustainable.
    I've got the Khost and Gardez Road in Afghanistan. I have the
    water treatment plant that the State Department did in Iraq, it
    was almost $277 million that we know the Special Inspector
    General for Iraq Reconstruction (SIGIR) found was operating at
    only 20 percent of capacity because of the failure of the Iraqi
    folks to knowing how to operate or maintain it. I have the
    Fallujah water waste treatment system, which was a State
    Department-Defense Department joint project.
        Is there any argument or push-back from any of you on the
    sustainability front that this has been a failure and that even
    going--as we speak, we are building things in Afghanistan that
    will not and cannot be sustained?
        Mr. Ginman. So clearly, at least from the Defense
    Department perspective, we have not always covered ourselves in
    glory on this area, and you have listed those examples.
        In August, we did create the Afghanistan Resource Oversight
    Council (AROC). I think we are in our fourth or fifth meeting
    of that. It has been chaired by Alan Estevez, the Assistant
    Secretary of Defense for the Logistics and Material Readiness
    (L&MR) and basically filling in just as the principal deputy.
    Mike McCord is the principal Deputy and the CFO. And by Jim
    Miller, who, in his current acting role, has continued to be
    the Chair. And sustainability has clearly been on the topic and
    the agenda in each of those meetings for what we can do or not
    do.
        I think when Mr. Kendall testified before the Senate before
    with General Bash, they expressly talked about what we had
    attempted to do, to go in, particularly in the Corps of
    Engineers when we were evaluating projects, to ensuring the
    sustainability. It was an issue that was discussed and
    addressed.
        And I know as the CERP projects currently come through and
    are reviewed at the OSD level, over $1 million, we are asking
    the question up front, what is the sustainability.
        So have we done it well in the past? No, Senator. Are we
    attempting to do a significantly better job as we go forward?
    Yes. Do I think we have put the structures in place to ensure
    that we can do a better job? I think we have done that, as
    well.
        Senator McCaskill. I guess my biggest problem with this is
    that I know and understand that our military is the best in the
    world, because there is nothing--there is no mission they
    cannot accomplish if we set our minds to it and put the power
    of the resources of this country behind it.
        And it feels like, to me, that in some room somewhere there
    is not an acknowledgement that we are using fairy dust to
    really justify what this country can do when we leave and what
    they are capable of doing when we leave. Now, I am not even
    talking about the security forces. I am not even talking about
    creating an army for a country that has never had a centralized
    army. I am not even talking about creating police forces that
    are capable of sustaining the rule of law after we leave. I am
    just talking about who is going to pay to fix the roads. I am
    just talking about who is going to operate power plants. I am
    just talking about who is actually going to have the technical
    expertise on these water projects.
        It is just hard for me to imagine, with the gross domestic
    product (GDP) of this country, once you take out the huge
    influx of American dollars, they do not have any money. I mean,
    is somebody being brutally honest about going forward with
    these reconstruction projects as it relates to the reality of
    what this country is once we are gone?
        Mr. Ginman. So again, from the ARPC perspective, I mean,
    those three individuals are consciously looking at what are the
    current projects that are there, what do we think the long-term
    tail is. CSTC-A/NTM-A, the people who are, in fact, overseeing
    the training of the military forces and the ability to do it,
    are participants in that discussion. I mean, from my
    standpoint, I think we have the right people together to, in
    fact, attempt to address that question and can we, in fact,
    afford it, and then how is it going to be paid for in the
    future.
        Senator McCaskill. We are building highways for a country
    that does not even have a highway department. I mean, they do
    not even have any revenue to support their highways. They have
    no--there is no fuel tax. There is no tax out there that would
    sustain a highway, and it is just--I just think that this
    certification included in this--what about the others in terms
    of sustainability, and then I will turn it over to Senator
    Portman. Is there anything that you want to add on the
    sustainability? And, Ms. Crumbly, how did this power plant get
    built? I mean, who decided a dual-fuel $300 million power plant
    was a good idea in Tarakhil? I know that is not what it is
    typically called. I do not know if I am pronouncing it right.
        Ms. Crumbly. I call it Kabul power plant.
        Senator McCaskill. Yes. I always say it is in Kabul
    somewhere, so----
        Ms. Crumbly. Exactly. In essence, it was an interagency
    decision to move forward with the power plant. And I do want to
    note that the power plant is working in terms of performing at
    peak or surge capacity. I know we were talking----
        Senator McCaskill. Yikes. Three-hundred million dollars
    for--that is one expensive generator in an emergency.
        Ms. Crumbly. No, I understand, and we have turned it over
    to what they call DABS or the Afghan utility portion of the
    government. So we are looking at how that can be sustainable in
    the long term. So it is meeting some needs in the country.
        You noted that the Foreign Assistance Act requires that we
    focus on sustainable development, and we do that in USAID
    programs. It is a key factor for consideration whenever we are
    developing program or projects.
        I would say that we have had some work to do and we have
    taken seriously the CWC recommendations and, in essence, we
    have put together a sustainability policy in Afghanistan. And
    actually, I was talking with the Deputy Director of our Office
    of Acquisition--I am sorry, Afghan and Pakistan Affairs, and he
    noted that when he was out in Afghanistan recently, they are
    implementing the sustainability policy at the provincial
    reconstruction team level. So we are taking it seriously. We
    are, indeed, putting policies into place and we are looking at
    the longer-term sustainability in Afghanistan.
        Senator McCaskill. Anything from State, Secretary?
        Mr. Kennedy. I would agree that there, clearly, are issues.
    We have tried to do a lot in very difficult environments, and
    obviously we have not succeeded completely. I think my two
    colleagues have addressed that.
        The major State Department activity in this regard is our
    police program. We are working very carefully with both the
    government of Iraq and the government of Afghanistan to ensure
    that we are providing them the kind of training that they need
    and the kind of training that will have a long-term positive
    impact in their police programs. We have a senior State
    Department officer who is assigned in both Iraq and Afghanistan
    as the coordinator for foreign assistance to make sure that we
    are focusing on sustainability.
        Senator McCaskill. OK.
        Mr. Kennedy. But it is just as the Admiral said. There is a
    lot that we can do better and I believe we have learned our
    lessons.
        Senator McCaskill. OK.
        Mr. Kennedy. And we welcome the dialogue, as you suggest,
    on how we can ensure that sustainability is institutionalized
    and carried forward.
        Senator McCaskill. Let me know if there is anything about
    the sustainability portions of this legislation that you think
    are not sustainable.
        Secretary Portman--Senator Portman. [Laughter.]
        Senator Portman. I have had a lot of titles. I cannot keep
    a job. But it has never been Secretary yet. [Laughter.]
        First of all, thanks for getting into the sustainability
    issue. I did not get to hear the entire dialogue, but I think
    that is a critical part of what needs to be done, as we talked
    about in the opening remarks. I know you also talked about
    enforcement, suspension, debarment, and other ways to have
    enforcement play a more credible role.
        I want to talk a little about database of pricing
    information, which is something that is in Senator McCaskill's
    bill and it has also been talked about by the Wartime
    Contracting Commission, and a number of the IG reports have
    talked about it, as well. It is basically how do you get a fair
    price, and competition, I think, is the best way. But another
    way, of course, is to ensure that we have a database of pricing
    information that is transparent, that is accessible, and that
    is one that the agencies and departments can rely on.
        One dramatic example is a report that came out of the
    Special Inspector General's office in July last year which
    found that one Department of Defense contractor was charging
    $900 for a control switch that was worth $7. In some cases, the
    IG found contractors overloading the government with markups
    ranging from 2,300 percent to 12,000 percent. So we have,
    again, had plenty of examples of this brought forward by IG
    reports and by the Commission itself. And again, enhanced
    competition is a powerful tool, but I would like to hear from
    our witnesses about the feasibility of a more systemic way to
    approach this issue, tracking pricing information to ensure
    that contracting agencies are getting a good value.
        Mr. Ginman, if we could start with you, that would be
    great. I understand DOD has established a pilot program under
    the Director of Defense Pricing, and the notion here is to
    create a more transparent and accessible, again, accurate
    database on prices. Can you talk about the status of that
    program and whether you think it is working? Is it producing
    savings?
        Mr. Ginman. Certainly. So I will start out that the
    Department agrees unequivocally that competition is the best
    way to get good pricing. The pricing database, or the pricing
    effort pilot that is under the Director of Defense Pricing is
    born from, frequently, we do not have good competition, and it
    is an effort to--what is it we need to do to be able to put
    into the hands of contracting officers when they are
    negotiating with companies the information they need.
        So examples I would give, the Director, from his former
    life he speaks, he frequently, when he would negotiate missile
    buys with the Army, Navy, and Air Force, he would be the one
    person at the table that, in fact, understood what the entire
    Department was doing because the Army, Navy, and Air Force did
    not speak with each other well and understand. So the thought
    process behind the information that we are gathering is to put
    in one place, so when a Navy contracting officer is doing a
    missile buy or buying a ship, whatever, for that particular
    company, they can turn to this database and find what was the
    last negotiation that was done, what were the overhead rates
    that were there. They can turn to the Defense Contract
    Management Agency (DCMA) again in one place from an overhead
    rate structure.
        It is interesting when I know that an overhead rate for a
    company is 20 percent this year, 21 percent the next year, 22
    percent the following year. What I really want to know is, so
    tell me how they executed to that rate, so that if, in fact,
    not a 20, 21, or 22, what they actually executed was 18, 19,
    and 20, I would like the contracting officer to understand when
    they are negotiating the contract that, in fact, they under-
    executed what their rate is that they are bidding, so that you
    are putting the contracting officer on at least fair footing
    with equal knowledge that is there.
        We have created, it is called the Contractor Business
    Analysis Repository (CBAR), and I apologize that I cannot do
    the acronym, but it is a database where we will put up all of
    the business clearances that are done. We will put up all of
    the pricing information, all of the rate information that is
    available to us so that when you are negotiating with any of
    the major defense contractors, you will be able to go to this
    one place and see what has everybody else done before you. What
    did they actually negotiate? What were their examples?
        I would say, from the way the legislation is written, and
    asking in ways that it be changed, that we are a little leery
    that the way it is read is that this is, tell us pricing
    information. So if I am buying, port-a-potties, what was the
    price we paid for port-a-potties? I do not think that is what
    you are intending. So that what we are attempting to do is when
    we do not have the forces of competition behind us, what we
    will have is the ability to provide the contracting officers
    with tools. We are going to make it available--we have agreed
    that we will make it available to the Office of Federal
    Procurement Policy (OFPP) and to any other agency that is
    dealing with those that has the appropriate need to be able to
    see this information.
        We believe--let me step back. When I started doing this as
    a Lieutenant JG in 1973, we expected contracting officers to be
    skilled pricers. Probably in the--about 1990 coming forward, as
    we downsized within the Department, we more or less gave away
    the pricing capability within the contracting community. So
    while today we have pockets of people in various commands, we
    do not have a strong skill set.
        So one of the other parts of the pilot project that is
    there is creating in DCMA groups of people that are experts in
    pricing and knowledgeable of the specific major companies so
    that when the different contracting officers are negotiating,
    they can turn to this group of experts to help.
        We have also, not part of the legislation, but we have also
    reintroduced what we call mid-level training courses to get the
    1102 community to again regain the skills that are necessary to
    be able to adequately price contracts. It is not----
        Senator Portman. Admiral, let me interrupt you just for a
    second. We have a vote in 5 minutes and have to run over there.
    Although the Chair and I are very fast, we are going to have to
    take off here in a minute.
        If you could get back to us in writing with how you think
    the pilot is working, it sounds like you have three or four
    good ideas that are agency-wide that have potential, but tell
    us how you actually think it is working, that would be helpful.
        And then to the other panelists, any thoughts, obviously,
    on this issue of the pricing database and how to be sure that
    we are getting a fair price, as was talked about by the
    Commission.
        And then, second, on the trafficking bill with regard to
    the provisions in the McCaskill bill, if you could get back to
    us in writing, just give us any comments you have.
        And again, I apologize. I am going to run to the floor to
    vote. I appreciate you being here today and I thank the Chair
    for holding the hearing.
        Senator McCaskill. And what I will do is I will ask you all
    to hold. I will run over, vote quickly, and come right back. I
    just have a little bit more for this panel and then we have the
    remaining panel of the IGs. I will be right back. [Recess.]
        I would like to look at subcontracting as an area that I
    would like your input on. There has been--and especially, I
    would like you to speak before you all leave the stand about
    whether or not you think any of the limitations we have put in
    here on suspension and debarment or on limitations on
    subcontracting, if you think they are workable in a
    contingency. Do they cause you pause, especially if you
    consider the waivers that we--the provisions that we have in
    there, the 6-month lead time before any of these requirements
    would go into effect, the noncompetitive requirements that we
    have in here.
        Let me start with that. Do any of those cause you all
    problems as it relates to contracting in wartime?
        Mr. Ginman. So, Senator, the one tier, I think is a
    problem, and I think what the Commission on Wartime Contracting
    was really trying to get to was why were we unable to break out
    work that was under the Logistics Civil Augmentation Program
    (LOGCAP) expressly and to go through that, and I think that is
    a good question. But then the translation of that to one tier,
    from our perspective, in any scenario, wartime or not, is just
    simply unworkable. I mean, I cannot imagine a situation with
    almost anything we do that I could get to a single tier of
    subcontracts in doing it. So we think there are ways that can
    be rewritten that will get to what I believe the Commission was
    really trying to get to and the objective that would help, and
    we are happy to work with the staff to come up with those
    words.
        Senator McCaskill. Well, as you know, we had a Tamimi
    problem in the LOGCAP contract where we have kickbacks with
    KBR, and that is one of those large duration wartime contracts
    that is kind of the poster child for contracting gone badly.
    The Khost Trucking contract, with the multiple layers of
    subcontracts, really had a security risk associated with it as
    it related to where the money was going. And clearly, we
    figured out that some of the money was going to the bad guys.
        So what we are looking for here is we do not want to get
    away from the efficiencies that subcontracting might provide,
    but we have to really get to a much more transparent situation.
        Mr. Ginman. So expressly with Tamimi, and in my opening
    oral statement, the legislation that the NDA gave us in 2012
    that grants this as an overseas environment for access to
    subcontractor records, where they refused to provide records,
    that legislation should open the door for us to be able to go
    and demand those records and get them. Task Force 2010, which
    is really the group that is trying to follow the money and get
    there, they really wanted that legislation and we very much
    appreciate the Senate's help in providing that legislation to
    us. So I am hopeful that we will not face Tamimi again, at
    least from a standpoint of not being able to get the records,
    that legislation has now given us the authority to go get it.
        Senator McCaskill. And what about the recompeting contracts
    more frequently?
        Mr. Ginman. Well, I think the Department's position writ
    large is we prefer shorter length periods of contract. But in
    all instances, it depends. What is the scenario I am in? What
    is the frequency with which we want to turn over contracts? I
    mean, the express example I gave in my written testimony was as
    we were pulling out of Iraq and we were looking at recompeting
    some task orders, the Combatant Commander came in and said, I
    mean, I can focus us on getting out of Iraq or I can focus on
    transitioning contractors. I would much prefer to focus on
    getting us out of Iraq. Could you please just leave the
    contractors in place? So we did that.
        Senator McCaskill. Would that not be a waiver situation
    under this?
        Mr. Ginman. I think----
        Senator McCaskill. Is that not envisioned with the waiver?
    I would think that would be just custom tailored for a waiver
    situation, when you would document that there was an either/or
    here and that moving people out was more important than
    recompeting at that particular juncture.
        Mr. Ginman. Yes. I mean, we have basically said for all our
    contracts, particularly in those where the technology moves
    quickly, we do not want contracts that exceed 3 years. I mean,
    that has been the Department's position. If we are in sole
    source contracts, we would like to find ways to get the
    competition. But if I am in a scenario where I cannot get the
    competition, I am going to have a lot of waivers. I mean, if I
    really am in a situation of sole source, it is going to be sole
    source for an extended period of time, then you would see a lot
    of waivers to go do that.
        I mean, the waiver provision certain provides the out, but
    I think that length of term of a contract is truly dependent.
    Tell me where I am. Tell me what the opportunities are. Tell me
    the technology of what I am buying. And then tell me how well I
    can price it.
        The other issue we have with long contracts is it is
    difficult to price effectively for a long period of time at a
    fixed price. So we look for shorter contracts.
        Senator McCaskill. You just know----
        Mr. Ginman. Yes.
        Senator McCaskill [continuing]. That if a contract is more
    than 3 or 4 years old, that someone is on the bad end of it.
        Mr. Ginman. Yes.
        Senator McCaskill. Now, in some instances, it may be the
    contractor. Unfortunately, not often enough. I mean, I should
    not say that. I do not want the contractor to be on the bad end
    of it. I am focused on saving the government money, so I think
    that the more frequent recompetes--and I know that there is a
    culture that kind of weighs against recompeting because it is a
    pain to compete. This is not like an exercise that everyone
    looks forward to, either the ones bidding or the ones running
    the competition.
        And clearly, I mean, the notion that KBR was a noncompete
    came from Bosnia. Everyone then turned to Halliburton KBR
    because they had done it in Bosnia. And it was, like, everybody
    is sitting around, who can do it? Well, we know they can. They
    were in Bosnia and they got it noncompete and made a huge
    amount of profit off that contract, much more than they needed
    to make had we been more aggressive about overseeing it.
        Mr. Kennedy. Senator, if I may----
        Senator McCaskill. Yes.
        Mr. Kennedy. We are in favor, absolutely, of full and open
    competition, and all the points that you made are absolutely
    correct. But if I could just posit one scenario. The State
    Department has put out, in effect, competitively bid, a number
    of master contracts and then we issue recompetitively bid task
    orders once we have qualified a group of companies. We would
    want to make sure that nothing in the exact legislation could
    be interpreted to mean that we would have to back away from
    that activity. We go out. We note something either on food
    service or security service or whatever, go to a number of
    major companies, competitively bid, then award and put them on
    the master list, and then we award them task orders.
        We would not want this limitation to say, well, since that
    contract is, in effect, over 2 years old, you cannot then issue
    a task order that is valid for more than 1 year. That would set
    us back, because we are trying, as you have put forward almost
    in the preamble of your legislation, to make sure that we have
    planned. And so one of the steps that we are taking to plan for
    the future is to have master contracts in place, competitively
    bid, that then we can utilize them, having obtained the best
    price, and issue task orders.
        Senator McCaskill. I am curious, how long do you envision
    the master contracts being in place?
        Mr. Kennedy. Five years, ma'am. And then we issue task
    orders that would run the duration.
        Senator McCaskill. And was the security contract a master
    contract at the embassy in Kabul?
        Mr. Kennedy. No. That is one of the steps we have taken
    since then, to put this into place.
        Senator McCaskill. OK. So there was not a master contract
    with subs----
        Mr. Kennedy. No. Those were individually bid.
        Senator McCaskill. OK.
        Mr. Kennedy. So we want competition. We want to do the
    best. But we want to make sure that our planning that has led
    to a contract in place would e available to us given a fluid
    situation.
        Senator McCaskill. OK. Ms. Crumbly, could you speak--in
    response to a report by the Senate Foreign Relations Committee,
    your administrator wrote, in Afghanistan, quote, ``now includes
    a subcontractor clause in new awards that permits USAID to
    restrict the number of subcontract tiers and requires the prime
    contractor to perform a certain percentage of the work.'' Have
    these changes been implemented?
        Ms. Crumbly. Yes, they have.
        Senator McCaskill. And so they are in every contract now in
    Afghanistan?
        Ms. Crumbly. That is correct and the limitations are to a
    two-tier subs, so----
        Senator McCaskill. Two tier?
        Ms. Crumbly. Two tiers, exactly. We found that is what
    works operationally best in Afghanistan----
        Senator McCaskill. And have you found any problem with
    having the two-tier requirement? Is there anything that you
    think that, in terms of value of competency, that you have
    sacrificed for a two-tier limitation?
        Ms. Crumbly. I would say not as yet, but we need time to
    see the implementation----
        Senator McCaskill. How long has this been in place?
        Ms. Crumbly. I want to say within the last 6 months? Mm-
    hmm, 6 months.
        Senator McCaskill. Kudos, and I would be very anxious to
    see if you hit any bumps----
        Ms. Crumbly. OK.
        Senator McCaskill [continuing]. Because that seems
    reasonable to me----
        Ms. Crumbly. Mm-hmm.
        Senator McCaskill [continuing]. That you can restrict the
    number of tiers and requires the prime to do something other
    than taking a cutoff the top.
        Ms. Crumbly. Right.
        Senator McCaskill. We have a lot of those around, too many
    prime contractors that just take a cutoff the top. That just
    means that they are managing the contract because we are not in
    a position to manage it ourselves. I would like to see those
    kinds of contracts go away.
        Let me now turn to a broad-based question. What is not in
    this legislation that you think should be? Should we go further
    in any places? Have we adequately addressed training? I worry
    that we have not gone far enough on training. Obviously, we
    hollowed out the acquisition force in the 1990s and paid a dear
    price. Think of the money that we lost because we had nobody
    minding the store in contracting. It is just mind boggling.
        I mean, this is what is so hard about funding our
    government, because what sounds good in the short run, in a
    budget cycle, we do not have a tendency to think in decade-long
    implications. And I think that we have to be very careful as we
    go toward a much leaner government, which we must do, and
    toward a Defense Department where DOD does not get everything
    it asks for, in fact, is looked upon to find savings many
    places.
        I think I know the concerns. Your staffs have visited with
    us. We know where your concerns are. Is there any place that
    you would like to see us go further than we have or to clarify
    something that is in the legislation that you do not think is
    clear? And if you do not have anything for the record today, I
    certainly will take it in a followup after the hearing.
        Mr. Ginman. Well, so things that particularly concern me is
    in the area of past performance, not giving--when the
    Commission made this recommendation, we objected to it then and
    it is in the legislation--not giving contractors an opportunity
    to rebut negative past performance. We use the past performance
    for other contractors to make decisions when they award going
    forward. Anything that is negative requires the contracting
    officer in that competition to go out and ask industry, explain
    to me this negative past performance. So I can do it one time
    up front or I can have 10 people afterwards do it. So from my
    standpoint, not giving the contractors an opportunity, if there
    is negative past performance, to rebut it is only setting us up
    downstream where a contracting officer fails to do what they
    are supposed to do and go ask. It becomes a protest risk and we
    would do much better to give them an opportunity up front, and
    particularly if for whatever reason it was an unfair statement.
    Letting one level above the contracting officer to have the
    authority to say, all right, I have looked at what the
    contractor said, looked at what the contracting officer said,
    this is what I think the final answer should be, it just makes
    sense to us.
        Senator McCaskill. Secretary Kennedy.
        Mr. Kennedy. I think that there are two issues that I think
    I would like to see in the bill and one that I have some doubts
    and will communicate that to your staff.
        But on the two that I would like to see, at times, lowest
    price is not the best value for the American taxpayer. And so
    we have had some legislative exceptions from time to time
    allowing us to award contracts on the basis of best value,
    because the best value over time actually does result in a
    lower price than just the first bid and that. And so that is
    something we would be interested in discussing with you and
    your staff.
        The second is that the ability to use direct hiring
    authority, to hire 1102s, to hire professional contracting
    officers, that authority legislatively expires on the 30th of
    September. As we are trying, as you rightly say, to regrow the
    contracting community, anything that would enable us to bring
    in a new generation and get them trained up as fast as we can
    is of very great interest to us.
        The one issue that we will be discussing with your staff
    that we are concerned about is in the section on security
    contracting, there is a statement that the Combatant Commander
    in the theater has the final say on all security activities.
    That is of great concern to us because that substitutes the
    judgment of the Combatant Commander for that of the Secretary
    of State in determining what is the best way to ensure that the
    diplomatic and consular and assistance programs are protected
    as opposed to the Combatant Commander, who is focused on
    protecting the troops and engaged in force projection rather
    than force protection. And so that is the remaining large item
    of concern.
        Senator McCaskill. OK. So you have a sincere fear that the
    Combatant Commander would perhaps view the protection of the
    State Department's personnel as not mission specific enough in
    terms of his decision--his or her decisionmaking power?
        Mr. Kennedy. That is correct.
        Senator McCaskill. OK.
        Mr. Kennedy. And the charge of the Secretary of State in
    what is usually known as the Inman legislation, the Omnibus
    Diplomatic Security Act----
        Senator McCaskill. Right.
        Mr. Kennedy [continuing]. That vests the responsibility for
    protecting of civilian employees overseas in the Secretary of
    State.
        Senator McCaskill. And I want to followup on a previous
    statement you made. It is my understanding that the State
    Department's worldwide protective services umbrella contract is
    10 years, not 5 years.
        Mr. Kennedy. There is a base contract and then we award
    these task orders for no more than 5 years.
        Senator McCaskill. OK, but the umbrella contract that they
    can be awarded under is not 5 years, it is actually 10 years,
    correct?
        Mr. Kennedy. Yes. Right, but the task orders are 5 years.
        Senator McCaskill. That seems like a long time.
        Mr. Kennedy. Because the pricing, as my colleague, and as
    you both referred to, you want to make sure that the price is
    always best. The price is determined in the task orders that
    are awarded, and so that is where we ensure that the quality is
    still there and the price is in the best interest of the
    government. And so you have the master. You have qualified the
    firms to compete for the task order.
        Senator McCaskill. Well, and this is getting a little far
    afield and I will not go too far in the weeds on this, but I
    would love to spend more time, your staff with the staff of the
    Subcommittee, working on this, because I, frankly, I am not
    sure that we should ever not have private security forces at
    embassies in a contingency. I mean, I think there is a strong
    argument that can be made, if we are in a country where we are
    fighting a war, that the security of that embassy should be by
    our military and not by Third World nationals that are being
    hired by a subcontractor under a 10-year umbrella contract. I
    mean, obviously, we had bad things happen in Kabul, as was a
    subject of a different hearing here. And I am not saying that
    is a fault of the contracting that went on, but I just think
    that if we are in a contingency, I think that the people of
    that embassy could be best protected by American military.
        Mr. Kennedy. We would certainly, and we benefit greatly now
    and over time with cooperation from our military colleagues.
    But we also know that the U.S. military is exceedingly
    stretched. And when I first served in Iraq in 2003, the U.S.
    military was protecting the civilian contingent. But over the
    course of time, as the demands on the U.S. military increased,
    they could not and did not have the resources to protect us.
        I have less than 2,000 diplomatic security special agents
    and officers for the entire world, 285 embassies and
    consulates, plus their responsibilities for security protection
    of foreign dignitaries in the United States. And so I am caught
    in a bind here. I am required to ensure that we can continue
    diplomatic and consular operations, not only in war zones or
    zones of conflict, but also everywhere else in the world, and
    the ability to do that is constrained by my internal resources
    and the resources that the DOD is able to put at my disposal.
    And the compromise there is to do, I think, the better job that
    we are now doing with more training and these master contracts
    that will have a better quality control so that we avoid the
    problem that you alluded to in Kabul 2 years ago.
        But I would note, just as an aside, the U.S. Embassy has
    been attacked twice in the last 6 months and it is that same
    security personnel who have done heroically in defending the
    U.S. Embassy against both the attacks, both the one this past
    Sunday and the one several months ago.
        Senator McCaskill. But that is a new contractor.
        Mr. Kennedy. No, it is the same one.
        Senator McCaskill. I thought EODT was terminated.
        Mr. Kennedy. EOD has been terminated, but EOD never
    started. The previous contractor that was involved with a small
    unit of specific people, those individuals were replaced, the
    upper level management replaced. The company is still there and
    will be there until the new contractor arrives.
        Senator McCaskill. I did not realize that. So Armor is
    still there under the British contract.
        Mr. Kennedy. Yes, ma'am.
        Senator McCaskill. OK. And, Ms. Crumbly.
        Ms. Crumbly. I would like to support the points raised by
    my fellow panel members, but I also want to note, as Under
    Secretary Kennedy mentioned, he has a working capital fund that
    is able to supply a steady stream of resources to support his
    acquisition assistance workforce. We, too, are requesting that
    authority. So if there is a way to go further and have support
    for that working capital fund authority for USAID so we have
    that steady stream, I think that is important for us.
        One other thing I did want to correct, in terms of the
    subcontracting, while we are at the two tier, we do have the
    flexibility or an approval process where the Assistant
    Administrator for the Bureau would approve it if you go beyond
    those three. So we do still want some flexibility on
    subcontracting, so I did want to note that, as well.
        Senator McCaskill. Yes, and I think we have--every place
    that we have said, this should be the rule, we put in waivers.
    And so what we are looking for is a change in what is the
    primary conduct of contracting and contingencies. And,
    obviously, because it is a contingency and stuff happens, there
    are going to be times that waivers will be necessary. But at
    least if waivers are necessary, that means you are going to get
    documentation, which is one of the challenges we have had in
    this area.
        Well, I want to thank all three of you. I know that in some
    ways I have been a broken record on this subject for 5 years,
    but I have a tendency--I am going to try to be kind to the
    institution that I am lucky to serve in. Sometimes this place
    has the attention span of a kindergarten class, and I have
    noted that things like this, once they move off the front
    pages, have a tendency to fall through the cracks. And so I
    have really tried to stay on this and want to get this across
    the finish line in terms of getting these changes into law and
    monitoring the continued progress as we cleanup contracting and
    contingencies.
        One thing I would let you know, Mr. Ginman, is that I did
    have an amendment to pull all the AIF funds out of Afghanistan
    and have them to into the United States Highway Trust Fund.
    People did not think I was serious. I was serious, and the
    reason I am serious is the projects that are now on the board
    for AIF, which is the morphing of CERP into infrastructure by
    the Defense Department as opposed to AID, that has
    traditionally done all this work, is that the projects we have
    ongoing now are not going to be completed until 2014.
        So if we are adding additional resources for the next
    fiscal year, that means we are starting new projects. And I
    have not yet gotten from the Defense Department what they are
    envisioning what these new projects would be. And what I am
    envisioning is if we are starting new infrastructure projects
    in Afghanistan as we are trying to pull out of Afghanistan,
    then we may end up with that reality that I think is very hard
    for Americans to understand, that our military would, by and
    large, be gone from Afghanistan, but we would have a full force
    of contractors that we would be paying on the ground for years
    to come on projects that we really would struggle to provide
    the security necessary for completion under that scenario.
        So I continue to wait to find out what this new $400
    million that has been requested is supposed to be building in
    Afghanistan over the next 2, 3, 4, 5, 6 years, and hope you can
    spread the word over there that I am drumming my fingers
    waiting for that information.
        Mr. Ginman. Yes, ma'am.
        Senator McCaskill. OK. Thank you all very much for being
    here. [Pause.]
        I will introduce these witnesses. The first witness is
    Lynne Halbrooks. She became Acting Inspector General for the
    Department of Defense in December 2011. She joined the
    Department of Justice as an Assistant U.S. Attorney in 1991 and
    has served as General Counsel for the Special Inspector General
    for Iraq Reconstruction, and General Counsel for the DOD
    Inspector General. Prior to her appointment as Acting Inspector
    General, she served as the principal Deputy Inspector General.
        Harold Geisel has served as the Deputy Inspector General
    for the State Department since June 2008. He has more than 25
    years of experience with the State Department and previously
    served as Acting Inspector General in 1994.
        Michael G. Carroll has served as Deputy Inspector General
    for the U.S. Agency for International Development, USAID, since
    February 2006. Mr. Carroll is a member of the Senior Executive
    Service with more than 26 years of government service. Prior to
    his appointment, Mr. Carroll served as the Director of
    Administration for the Bureau of Industry and Security in the
    Department of Commerce.
        It is the custom of this Subcommittee to swear all
    witnesses that appear before us. If you do not mind, I would
    ask you to stand.
        Do you swear that the testimony you will give before this
    Subcommittee will be the truth, the whole truth, and nothing
    but the truth, so help you, God?
        Ms. Halbrooks. I do.
        Mr. Geisel. I do.
        Mr. Carroll. I do.
        Senator McCaskill. We will ask you to try to hold your
    testimony to 5 minutes. I must say that the attention you will
    get today is much less than your colleague Brian Miller will
    get this week, but that is probably a good thing. I am not sure
    that we will have any injuries of TV cameramen trying to follow
    you down the hallway. If you are going to talk about Las Vegas,
    warn me ahead of time because--and I joke about this, but I
    must say, every once in a while, something happens in the world
    of Inspectors General that highlights your work. And for most
    of the time, your work is done in the shadows. No one pays a
    whole lot of attention. Unfortunately, sometimes the agencies
    do not pay a whole lot of attention.
        It is very important to me that we get this legislation
    right from your perspective because you are the front line. And
    while there may be a hit every once in a while that gets the
    bright glare of camera, you toil away most of the time in
    relative obscurity. Most Americans have no idea what Inspectors
    General are and they do not realize the work you do. They do
    not understand the capacity you have to look after your
    interests. And they certainly do not get to watch those small
    but important battles that you wage every day with people who
    lead your agencies toward a goal of more accountability,
    transparency, and saving the taxpayers money.
        So as I always try to say to Inspectors General that I am
    honored to deal with in these hearings, thank you for your many
    years of service in this area. You are great examples of public
    servants that are painted with a broad brush, overpaid,
    underworked, too many of you. There are not enough of you and
    you will never hear me say that you are underworked or
    overpaid. So thank you, and we will begin with you, Ms.
    Halbrooks.

     TESTIMONY OF LYNNE M. HALBROOKS,\1\ ACTING INSPECTOR GENERAL,
                       U.S. DEPARTMENT OF DEFENSE

        Ms. Halbrooks. Thank you, Chairman McCaskill, and thank you
    for your appreciation for the IG community's work. That means a
    lot to us. Thank you today for inviting me to express our views
    on the Comprehensive Contingency Contracting Reform Act of
    2012.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Ms. Halbrooks appears in the appendix
    on page 98.
    ---------------------------------------------------------------------------
        As the Acting Inspector General at the Department of
    Defense, oversight of contingency operation remains my No. 1
    priority. I am committed to continually refining and improving
    our oversight approach.
        Last week, I was in Afghanistan and had the opportunity to
    observe firsthand how the oversight organizations currently
    plan, coordinate, and deconflict audits and assessments. At the
    most recent Shura oversight meeting that I attended, IG staff
    from Defense, State, USAID, the Special Inspector General for
    Afghanistan Reconstruction (SIGAR), the GAO, and local command
    IGs discussed critical oversight challenges and exchanged
    information in a productive and collaborative manner.
        I also met with senior commanders there to determine how
    the DOD IG can continue to provide the best independent and
    objective oversight of contingency operations in Afghanistan.
    The senior commanders understand the need for transparency and
    oversight, and the men and women serving deserve to know that
    every dollar spent for their health, safety, and security is
    spent efficiently and effectively. I believe that the
    organizations that do oversight and the commands are working
    well together to make this happen.
        To make this effort even more effective, we at DOD IG have
    a special Deputy Inspector General for Southwest Asia (SWA) who
    functions as the authoritative source to plan, coordinate,
    deconflict, and facilitate effective oversight. He also serves
    as Chairperson of the Southwest Asia Joint Planning Group,
    which is the principal Federal interagency forum to promote
    coordination and cooperation for comprehensive oversight. This
    group meets at least quarterly, and is comprised of
    representatives from over 25 DOD and Federal oversight
    agencies, functional components, and command IGs.
        We as an oversight community have developed considerable
    experience in conducting timely and relevant audits,
    inspections, and investigations of overseas contingency
    operations. At DOD IG, we have the capacity to deploy anywhere
    in the world and are prepared to respond effectively, of
    course, in coordination with other Federal agencies and
    internal DOD oversight offices, to address future contingency
    operations overseas.
        With this background, I would now like to discuss the
    Comprehensive Contingency Contracting Reform Act of 2012.
    Overall, I support the legislation and, in general, support the
    provisions of Section 103 of the bill, which calls for a lead
    IG in overseas contingency operations.
        Based on the strong working relationship that has evolved
    between the Department of Defense, State, and USAID IGs, I do
    not believe there is a need, as the bill is currently written,
    for the Chair of the Council of Inspectors General on Integrity
    and Efficiency (CIGIE) to designate a lead IG in a contingency.
    Given that the bill defines a contingency operation as, quote,
    ``a military operation outside the United States and its
    Territories and possessions,'' I believe the legislation should
    recognize the Department of Defense Inspector General as the
    lead IG. Alternatively, a determination of the lead IG could be
    made based on the amount of funding appropriated to the
    respective agencies.
        Congress mandated in Section 842 of the National Defense
    Authorization Act of fiscal year 2008 that the DOD IG, in
    conjunction with multiple Federal IGs and DOD oversight
    agencies, issue an annual comprehensive oversight plan for
    Southwest Asia. I recommend the Subcommittee consider similar
    requirements to develop a joint oversight plan under the
    direction of the lead IG that would include a focus on
    strategic issues and contingency operations oversight.
        I would also like to work with the Subcommittee further to
    refine the reporting requirements in the proposed legislation.
    While compilation of data on obligations and disbursements is
    primarily a management function, an IG can add value by
    independently analyzing this data. Therefore, we believe a
    requirement to compile the data should be assigned to each
    Department and the IGs should review the quality of that data
    as part of their oversight plan and use it to inform their
    work. We believe that a semi-annual or even annual reporting
    requirement would provide Congress with meaningful data and
    necessary transparency.
        Finally, the provision in the bill authorizing the lead IG
    to employ annuitants and other personnel on a temporary basis
    will definitely enhance our ability to move the right people in
    country quickly to establish an immediate overseas presence.
    However, I believe the special hiring authorities would be most
    effective if they are not time limited.
        With the few changes that I have outlined above, plus a
    funding mechanism to resource the hiring of additional staff,
    the proposed legislation would be an efficient, effective way
    to ensure independent and comprehensive oversight of future
    overseas contingency operations.
        Thank you for your support of the community. I appreciate
    the opportunity to testify today and express our views and look
    forward to answering any questions you might have.
        Senator McCaskill. Thank you. Mr. Geisel.

      TESTIMONY OF HAROLD W. GEISEL,\1\ DEPUTY INSPECTOR GENERAL,
                        U.S. DEPARTMENT OF STATE

        Mr. Geisel. Thank you, Chairman McCaskill, for the
    opportunity to discuss our views on strengthening oversight of
    government contracts during contingency operations. I ask that
    my full testimony be made part of the record.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Geisel appears in the appendix on
    page 108.
    ---------------------------------------------------------------------------
        We commend the Subcommittee for its leadership and tenacity
    in developing this critical legislation. Madam Chairman, we
    believe that S. 2139 is a positive effort to ensure that
    statutory IGs have the tools needed to provide efficient and
    effective oversight in the most challenging overseas
    environments.
        The effect of the bill's provisions on OIG would be broad,
    positive, and certainly manageable. OIG agrees with and
    supports Sections 101 and 103 in the bill with three suggested
    revisions. First, we recommend a small but important revision
    to Section 101. We suggest an automatic percentage-based
    funding mechanism be included in the operations budget for IG
    oversight. IGs will need immediate additional funds to offset
    the unforseen and unbudgeted costs of doing business in a
    contingency environment. A model for these mechanisms can be
    found in the American Recovery and Reinvestment Act, where
    funding for all of the involved IGs was provided to oversee the
    Act's significant new appropriations.
        Second, Section 103 of the bill would mandate that the
    Chair of the Council of Inspectors General on Integrity and
    Efficiency designate a lead IG for the contingency operation
    and resolve conflicts of jurisdiction between the participating
    IGs. We suggest that at the onset of a contingency operation,
    the relevant IGs would first determine which agency is expected
    to have the largest share of the operation's funding and that
    agency's IG would become the lead IG. It would then follow that
    the agency with the next highest level of funding would become
    the operation's associate IG.
        In recent years, the statutory OIGs worked well together to
    oversee contingency operations. For example, conflicts on
    jurisdiction and work deconfliction have been resolved
    efficiently by both the Southwest Asia Joint Planning Group and
    the International Contract Corruption Task Force for work in
    Iraq, Pakistan, and Afghanistan. These groups, which are
    comprised of all IGs working in these countries, meet quarterly
    and have been a success. This approach would save time and
    simplify the process during the hectic period at the onset of
    the contingency operation.
        Last, we support the provision for semi-annual IG
    reporting. We do suggest one adjustment, that this reporting be
    scheduled to coincide with the IG's semi-annual reporting
    cycle. However, the quarterly reporting provision in Section
    103 would mandate that IGs provide detailed financial data,
    specific obligations and expenditures, a project-by-project,
    program-by-program accounting of incurred costs, foreign
    investment revenues, seized or frozen asset information, agency
    operating costs, and detailed contract and grant financial
    information. All of this data resides in the Department or
    agencies, not in OIGs. We suggest the participating Departments
    provide a periodic stream of data to Congress and to the
    participating statutory IGs. We can use this information on a
    semi-annual basis to better plan and prioritize our oversight
    work.
        Finally, our recent successes in OIG are a result of the
    increased confidence in our work and the resulting
    congressional funding increases appropriated since 2009. These
    increases have enabled our OIG to increase audit inspection
    reports by more than 56 percent. Similarly, suspension and
    debarment actions based on our referrals have increased
    dramatically, from zero in 2008 to 17 in 2011. And today, we
    are operating in five overseas offices, from Cairo to Kabul. So
    when Congress provides the necessary funding, we deliver good
    results.
        That said, when you set out to rebuild an organization,
    take it to new regions, and modernize its approaches, it is not
    always about the money. That is why we appreciate your efforts
    to provide the new hiring authorities and the legal framework
    adjustments that support more effective law enforcement.
        Thank you, Chairman McCaskill, for this opportunity, and I
    am prepared to answer your questions.
        Senator McCaskill. Thank you very much. Mr. Carroll.

     TESTIMONY OF MICHAEL G. CARROLL,\1\ ACTING INSPECTOR GENERAL,
               U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT

        Mr. Carroll. Chairman McCaskill, thank you very much, and
    Senator Portman and distinguished Members of the Subcommittee.
    Thank you for inviting me here today.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Carroll appears in the appendix
    on page 114.
    ---------------------------------------------------------------------------
        You may recall my impassioned plea the last time I
    testified before you in November 2010 on behalf of the
    statutory IGs. I said then that you had what you needed right
    here and nothing in the last 18 months has changed my mind on
    that. So this is truly, I think, a step in the right direction,
    the legislation not only on behalf of the agencies for
    performance and accountability, but also giving us the
    resources and authorities we need to do our job in a
    contingency operation. So I really appreciate this opportunity
    today.
        I would also like to thank you for the inclusive nature of
    the deliberative process, working with your professional staff
    on both sides. They have been really open to our suggestions
    and I would like to think that is reflected in the bill, that
    there are not a lot of major changes that we think need to be
    made. I think it is well down the road to be where it needs to
    be. We just have a couple of issues that we just want to nail
    down, if I could.
        As it relates to Section 103, I agree with my colleagues
    that based on the way you have defined a contingency operation,
    it is clear that DOD IG--it is clear to me that DOD IG would be
    the lead IG in this particular case, and then whether it is AID
    IG or State IG on an associate IG basis. So we do not see a
    need for CIGIE. If, somehow, that came to pass that CIGIE was
    part of this equation, then we would hope that there would be
    some committee that the three of us participated in that would
    be able to inform the CIGIE committee on whatever needed to be
    done. But we do not think there is a need for CIGIE, a role for
    CIGIE in this process.
        On the funding and the authorities, as you know, we are a
    foreign service organization and our auditors and investigators
    are stationed around the world. We just want to make sure that
    the authorities for rehired annuitants and dual compensation
    waivers not only address Title V employees, but address Title
    XXII employees, as well, retired Foreign Service Officers, so
    we could then reach back to our cadre of retired auditors and
    investigators to be able to do the job.
        There is one aspect not in the legislation that I would
    like to propose, and I know you asked that question to the
    previous group of witnesses, and that is based on our
    experience in Pakistan, we have had great success with a
    national hotline on the Kerry-Lugar implementation, and I can
    share the stats we have and the successes we have had with you
    and your staff and I would like to possibly work with you to
    include something like that. I have talked to my colleagues. In
    principle, they agree. We could work through the jurisdictional
    issues and that sort of thing with no problems. But I think it
    would enhance the oversight of whatever the programs are in a
    contingency situation.
        Related to the agency and the agency's oversight, on
    suspension and debarment, as it currently is written, there is
    an automatic trigger for suspension and debarment if there is
    an indictment and I would say that we should talk about that. I
    think there are times when an agency has demonstrated already
    that they have addressed the issues that we brought up in our
    investigations, even though they admit there may be an
    indictment on a criminal or civil referral. So I would ask that
    you just consider the possibility of that being a case-by-case
    basis rather than an automatic trigger.
        And I think from an agency point of view--I am not here to
    advocate on behalf of the agency, but I do endorse what Ms.
    Crumbly said. I think the agency has made huge strides since
    our audit of 2009 that was borne out of a bit of frustration on
    our part about how the agency was proceeding with our
    referrals. So I think the AED case in Pakistan is a great
    example of the agency stepping up and being able to make the
    hard decisions, even when it impacts potential program
    implementation.
        On TIP, which is very important to Senator Portman, I just
    wanted to let you know that, recently, we have met with the
    agency personnel responsible for trafficking in persons. We are
    attempting to, with our colleagues at State and DOD, to come up
    with a training package for our auditors and investigators
    because this is not in our sweet spot. We are contract
    procurement fraud investigators and auditors, and so this is
    different than what we normally do. So we want to create a
    training package that we could implement at the Federal Law
    Enforcement Training Center (FLETC) and at CIGIE, the IG
    Academy at CIGIE, that would train our auditors and
    investigators.
        And I can also let you know that both for sustainability
    and TIP, they are standard audit provisions and audit
    objectives in each one of our audits, regardless of whether it
    is in Iraq, Afghanistan, Pakistan, Haiti, wherever. Those are
    two audit objectives we are always going to have in our audits.
        So with that, I appreciate the opportunity again and look
    forward to answering any questions that you might have.
        Senator McCaskill. So it looks like that all three of you
    agree that in contingency, the three of you should work
    together with DOD as lead.
        Mr. Carroll. Yes.
        Senator McCaskill. And there is no reason to do the CIGIE
    decision and all that, that both State and AID acknowledge that
    if it is contingency, then in reality, the vast majority of the
    resources that are going to be brought to bear are going to be
    coming out of the Defense Department. Therefore, in any kind of
    decision as to risk and work, it is all yours, Lynne.
        Ms. Halbrooks. Yes, ma'am. [Laughter.]
        We are ready to step up and assume that responsibility. I
    think that the last few years have taught us all as an
    oversight community a tremendous amount about how to work well
    together, and I think we would be able to respond quickly and
    effectively.
        Senator McCaskill. And let me just say, I think I should
    point out for the record that none of you are the official
    full-time appointed and confirmed IGs. I guess you are, Mr.
    Carroll.
        Mr. Carroll. No, I am not. I am acting right now----
        Senator McCaskill. No, you are not, either.
        Mr. Carroll [continuing]. And my authority is running out--
    --
        Senator McCaskill. Yes. That is right. So we do not have
    SIGAR. We do not have DOD. We do not have State. And we do not
    have AID in terms of an appointed and confirmed Inspector
    General. And let me say, in case anyone is--let me disabuse
    anyone of the notion that I am not willing to criticize the
    White House. I find it appalling that these people have not
    been appointed. There is a long list of qualified people to
    hold these jobs, and I am sure that some of you are on those
    lists, if not all three of you. And I do not understand why
    this is taking so long. I mean, if you look at the world of
    Inspector Generals and the money that is being spent, how these
    positions can go vacant for this period of time is beyond me,
    and I am hoping that the White House gets busy and starts
    announcing the appointment of some Inspectors General.
        Let me ask about suspension and debarment. As you know--I
    mean, what this legislation is trying to do is move a boulder,
    that there has been cultural reluctance on suspension and
    debarment. There has been cultural reluctance to not give
    performance bonuses in government as it relates to contracting
    and there has been a cultural predisposition to not suspend or
    debar, with the exception of the Air Force. I do not know what
    they are drinking at the Air Force, but I like it that they are
    aggressive about suspension and debarment.
        So we are trying to encourage aggressiveness. Now,
    obviously, this is controversial, because several people have
    said they do not like the automatic suspension or debarment
    upon criminal indictment. Should we not, at a minimum, require
    an assumption that there would be a debarment that would
    trigger a requirement to document why not?
        Mr. Carroll. Yes.
        Mr. Geisel. Yes.
        Senator McCaskill. Ms. Halbrooks.
        Ms. Halbrooks. Yes. I think memorializing the
    decisionmaking would be fine, yes.
        Senator McCaskill. I do not know, and I am not saying that
    we would change the legislation at this juncture as it related
    to that, but there clearly have been bad actors where there has
    not even been a ripple. It seems to me that a criminal
    indictment of a contractor should be an event that requires
    some folks in that agency to take a hard look, do some
    scrubbing, and figure out what the problem is, and if the
    problem is an isolated bad employee, that be documented
    thoroughly with some kind of formalized process. Do you
    envision you all being engaged in that process? Would it make
    sense to have a justification for non-suspension or debarment
    in light of criminal or civil fraud, that be forwarded to the
    Inspectors General?
        Ms. Halbrooks. I would want some time to consider that
    option in a little more detail, but it would definitely sort of
    change the culture of the suspension and debarment programs,
    which typically are not about punishment. They are about making
    business decisions and making sure the Department is working
    with responsible contractors.
        I can say that I think in the case of a criminal
    conviction, at least from the point of view of our IG agents,
    the Defense Criminal Investigative Service, we do play a role
    in that we are the referring entity often for a potential
    suspension and debarment and we do not just wait until there is
    a criminal conviction. One of the remedies in our tool kit is
    to make a referral to the suspension and debarment authority.
        I do not think that we need to play a role in management of
    that program. We should oversee it. We issued a report in July
    2011 on the Service agencies and the Defense Logistics Agency
    (DLA); and DLA was actually fairly aggressive in the sample
    that we looked at in terms of taking the contracting officers'
    recommendations and proceeding. So I think that we have a role.
    I do not think it is oversight of the specific decisions that
    the SDO authority makes, but I do think that as a referring
    agency, we can help to ensure that the Departments are
    promoting the suspension and debarment program and training the
    contracting officials properly in the process and how to make
    those referrals, absolutely.
        Senator McCaskill. What about limiting the amount of time
    for contractors to respond to past performance reviews? Do any
    of you believe that makes sense? Do you have any problems with
    that? That also has received some attention from folks, that
    they think that allowing contractors to respond to past
    performance reviews before they are submitted to the
    government's database, lowering that from 30 days to 14 days is
    unreasonable. Do you all have any view on that particular
    provision?
        Ms. Halbrooks. I do not have any view today, but we could
    certainly look at that in more detail and provide you our
    opinion.

                           INFORMATION FOR THE RECORD

        We believe that 14 days should be a reasonable amount of
    time for the contractor to review and comment on the
    performance reviews that are done by the government contracting
    officer representative and should not place an undue burden on
    the contractor.

        Mr. Geisel. I would like to look, as well, and give you
    something in writing, but I would point out that you have used
    a word repeatedly which I think is very useful, and--well, two
    words which mean the same, actually, and that is waivers and
    documentation. And that is really what we are looking for, yes.
    A good law will always have provisions for what are we going to
    do now, this is different, but it has to be documented. So many
    people are much more inclined to do the right thing if they
    have to sign their name to a piece of paper.
        Senator McCaskill. Right. And besides that, it provides an
    audit trail, right?
        Mr. Geisel. Right. I like----
        Senator McCaskill. I remember. I liked it when we found
    documentation. This is a good day for an auditor.
        Mr. Geisel. I like----
        Senator McCaskill. When there is no documentation, it is a
    problem.
        Mr. Geisel. I like saying that to the former Auditor
    General of Missouri.
        Senator McCaskill. There you go.
        What about you, Mr. Carroll, on past performance problems
    and whether or not the contractor should be given time to
    respond before it goes into a database?
        Mr. Carroll. I think that they should. What the agency does
    with that information is up to them. I would think 14 days, 30
    days, there is really not a material difference there and I do
    not think it would have a material impact on an agency, or on a
    contractor or an agency, so I think giving them the benefit of
    the doubt, giving them the extra 16 days, whatever it would be,
    I do not see a downside to that.
        Senator McCaskill. OK. For the State Department, the State
    Department continues to say that it does not need the
    structural or organizational changes envisioned by this
    legislation. They have also said that they can meet any demands
    that arise in a contingency by relying on the working capital
    fund. Do you believe that they are correct, that they do not
    need any organizational or structural changes, from your
    position as the Inspector General for the Department?
        Mr. Carroll. I definitely feel that they need tweaking. One
    point that came out here that I would like to speak to them
    more about is, for example, whether they need a separate
    suspension and debarment official. What they have now, I agree
    with what Under Secretary Kennedy said, that the current person
    who is in charge of suspension and debarment does not have a
    role in the acquisition except in the most general way. But I
    think anything we can do to encourage the Department to focus
    on suspension and debarment is good, and we have seen progress.
    I think I would give the Department the benefit of the doubt,
    but I would hold them accountable.
        Senator McCaskill. OK. You all mentioned this in your
    statements, and I assume that all of you think that it would be
    a good idea to have a percentage-based funding requirement for
    Inspector Generals in contingencies, just as we did for the
    American Recovery and Reinvestment Act (ARRA), that we would
    set aside sufficient resources to keep track of the money as we
    appropriate the money.
        Mr. Geisel. Madam Chairman, I would point out that when I
    came to OIG on June 2, 2008, and since that time, thanks to
    what I assume is the good work we have done, Congress has
    doubled our resources. And as a result, we have been able to do
    a much better job. And the best way to ensure that we do not
    have what happened in Iraq, where there was a big delay until
    we got the resources, to have an automatic mechanism, I think
    serves everyone well. And it enables us to buildup, but it also
    forces us to go down again when the----
        Senator McCaskill. Right. That is what I like about it,
    because it does not build the agency beyond the capacity that
    is needed permanently. It does it as it relates to the
    contingency, and it also allows you to really buildup a body of
    expertise in this area, which has always been the argument for
    SIGAR and SIGIR. I mean, I went around and around with some of
    you about this in the past, that having that body of expertise,
    having a special Inspector General for contingencies. But if
    you did that, some of the people you hire in connection with
    that are just by the nature of the agencies going to stay on
    and would be there with some kind of history as it relates to
    contingency contracting going forward. So I do think it makes
    sense.
        And we all know that for every dime we spend on auditors,
    we get back a dollar----
        Mr. Geisel. More.
        Senator McCaskill. Or more. I just use dime and dollar
    because it is safe and I am conservative because you have to be
    able to back it up, right? So that is why I think it is very
    important that we do not--as we cut the size of government and
    spend less money in government, we have to make sure that we
    maintain a robust oversight function in these agencies because,
    frankly, it would be very hard for us to do our work without
    you all. I do not think people realize that you are so many
    times the communication that provides the oversight that
    Congress performs.
        Is there anything else that we have not addressed in the
    legislation that you all want to speak to before we close the
    hearing?
        Mr. Carroll. If I could just go back to suspension and
    debarment for a second, the IG by its very nature just loves
    independence. I think that is what makes us so effective. And
    so we do endorse--I know we are at odds with the agency on
    this, but we think that the S and D official should, in fact,
    be very independent of the political decisionmaking process in
    the agency.
        Senator McCaskill. Yes. I mean, with all due respect to
    Secretary Kennedy, even if the person in charge of SDO at State
    is not buying anything, they are helping write the policies
    that are telling them how to buy it. So if those policies
    failed and allowed some bad actors to be included in
    contracting, I think it is harder sometimes to hold that mirror
    up. So I am going to continue to push for that independence in
    the Suspension and Debarment Office that I think that is
    dictated by the legislation and that makes sense in terms of
    functions of an SDO official.
        Anybody else? Yes, Ms. Halbrooks.
        Ms. Halbrooks. I just wanted to add that while I agree with
    Acting Inspector General Geisel that funding is a critical
    element to ensure that we get started in oversight quickly on a
    contingency operation, I think that the parameters of the
    legislation that require coordination and coordinated planning
    and reporting by a lead IG will be effective, as well. As that
    funding takes a while to gear up, the DOD IG, because of our
    size, has the agility to immediately plug a trained group of
    auditors into a contingency. So while the funding is critical,
    the language in the legislation that I think in some ways
    documents the coordination and collaboration and the lessons
    learned in the past contingency operations oversight will go a
    long way to ensuring that there is no gap in oversight when one
    begins.
        Senator McCaskill. Yes, Mr. Geisel.
        Mr. Geisel. I, of course, agree with my colleague from DOD.
    I would also point out that one other very important part of
    the legislation should be our ability to use Title V and Title
    XXII annuitants because they have just what you were talking
    about, that very necessary experience. And if we can get them
    quickly when we need them, it will be a great help to getting
    the right people who can do the job.
        Senator McCaskill. OK. And I think Mr. Carroll mentioned
    that previously, that we needed to be able to get at that
    workforce, which makes sense.
        Well, I want to thank all three of you for your great work
    and for being here today. I am continuing to work on this
    legislation. If anything else you think we need to be working
    on as we tweak it and adjust it and get it into final form that
    hopefully we can get at least part of it enacted in the defense
    authorization bill this year--that is our goal--so we continue
    to improve it. I think we have some great input from you today.
    I think it is very clear that we can make a change in terms of
    how we provide for the lead Inspector General in contingencies
    and I think that will work out very well.
        So thank you very much for that, and onward. If you have
    good reports coming, do not forget to let us know. Thank you.
        Mr. Geisel. Thank you.
        Senator McCaskill. The Subcommittee is adjourned.
        [Whereupon, at 12:44 p.m., the Subcommittee was adjourned.]

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