[Senate Hearing 114-630]
[From the U.S. Government Publishing Office]
S. Hrg. 114-630
OVERSIGHT OF TASK FORCE FOR BUSINESS
AND STABILITY OPERATIONS PROJECTS IN
AFGHANISTAN
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON READINESS AND
MANAGEMENT SUPPORT
OF THE
COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
JANUARY 20, 2016
__________
Printed for the use of the Committee on Armed Services
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COMMITTEE ON ARMED SERVICES
JOHN McCAIN, Arizona, Chairman JACK REED, Rhode Island
JAMES M. INHOFE, Oklahoma BILL NELSON, Florida
JEFF SESSIONS, Alabama CLAIRE McCASKILL, Missouri
ROGER F. WICKER, Mississippi JOE MANCHIN III, West Virginia
KELLY AYOTTE, New Hampshire JEANNE SHAHEEN, New Hampshire
DEB FISCHER, Nebraska KIRSTEN E. GILLIBRAND, New York
TOM COTTON, Arkansas RICHARD BLUMENTHAL, Connecticut
MIKE ROUNDS, South Dakota JOE DONNELLY, Indiana
JONI ERNST, Iowa MAZIE K. HIRONO, Hawaii
THOM TILLIS, North Carolina TIM KAINE, Virginia
DAN SULLIVAN, Alaska ANGUS S. KING, JR., Maine
MIKE LEE, Utah MARTIN HEINRICH, New Mexico
LINDSEY GRAHAM, South Carolina
TED CRUZ, Texas
Christian D. Brose, Staff Director
Elizabeth L. King, Minority Staff, Director
_________________________________________________________________
Subcommittee on Readiness and Management Support
KELLY AYOTTE, New Hampshire, TIM KAINE, Virginia
Chairman
JAMES M. INHOFE, Oklahoma CLAIRE McCASKILL, Missouri
DEB FISCHER, Nebraska JEANNE SHAHEEN, New Hampshire
MIKE ROUNDS, South Dakota MAZIE K. HIRONO, Hawaii
JONI ERNST, Iowa MARTIN HEINRICH, New Mexico
MIKE LEE, Utah
(ii)
C O N T E N T S
_________________________________________________________________
january 20, 2016
Page
Oversight of Task Force for Business and Stability Operations 1
Projects in Afghanistan.
McKeon, Honorable Brian P., Principal Deputy Under Secretary of 98
Defense for Policy.
Sopko, John F., Special Inspector General for Afghanistan 107
Reconstruction.
Questions for the Record......................................... 180
APPENDIX A....................................................... 187
APPENDIX B....................................................... 219
APPENDIX C....................................................... 220
APPENDIX D....................................................... 234
APPENDIX E....................................................... 434
APPENDIX F....................................................... 439
APPENDIX G....................................................... 448
(iii)
OVERSIGHT OF TASK FORCE FOR BUSINESS AND STABILITY OPERATIONS PROJECTS
IN AFGHANISTAN
----------
WEDNESDAY, JANUARY 20, 2016
U.S. Senate,
Subcommittee on Readiness
and Management Support,
Committee on Armed Services,
Washington, DC.
The subcommittee met, pursuant to notice, at 3:03 p.m. in
Room SR-232A, Russell Senate Office Building, Senator Kelly
Ayotte (chairwoman of the subcommittee) presiding.
Committee members present: Senators Ayotte, Rounds, Ernst,
Kaine, McCaskill, Shaheen, and Heinrich.
OPENING STATEMENT OF SENATOR KELLY AYOTTE, CHAIRWOMAN
Senator Ayotte. Welcome, everyone. I appreciate both of our
witnesses being here today for this important hearing to
receive testimony on the oversight of the Task Force for
Business and Stability Operations in Afghanistan [TFBSO]. This
is a hearing of the Subcommittee on Readiness and Management
Support.
I want to thank, first of all, my ranking member, Senator
Kaine, for joining me in leading this subcommittee and for his
hard work every day on behalf of our servicemembers and their
families. I look forward to the work we will do together this
year.
We begin this subcommittee's first hearing of the year to
receive testimony on the Task Force for Business and Stability
Operations, TFBSO, projects in Afghanistan. We are joined this
afternoon by Secretary Brian McKeon, the Principal Deputy Under
Secretary of Defense for Policy, as well as Mr. John F. Sopko,
the Special Inspector General for Afghanistan Reconstruction
[SIGAR].
I want to thank each of you for your willingness to testify
today and for your dedicated service to our country.
TFBSO was a Department of Defense [DOD] task force created
to address economic revitalization efforts in Iraq. Then in
early 2010, TFBSO began operations in Afghanistan.
The goals of TFBSO in Afghanistan were to reduce violence,
enhance stability, and support economic normalcy for
Afghanistan. The task force sought to, one, restore productive
economic capacity; two, stimulate economic growth; and three,
serve as a catalyst for international investment in
Afghanistan.
In order to support these goals, according to SIGAR, more
than $820 million was appropriated since fiscal year 2009 for
TFBSO programs and operations in Afghanistan. Of that $820
million, about $759 million was obligated, and $638 million was
disbursed for the task force's operations and activities in
Afghanistan.
The real purpose of today's hearing is to determine,
foremost, whether these resources were spent wisely and
properly, and whether measurable results were achieved from the
hundreds of millions of dollars that were spent on task force
TFBSO.
SIGAR has published a number of reports and inquiries on
this task force. I am going to briefly touch on them.
First, in July 2014, SIGAR released an inspection report
about a cold and dry storage facility, which cost TFBSO nearly
$3 million for this facility to store local produce, provide a
location for sorting and packaging produce, and serve as a
transit point for trucks. According to SIGAR's report in July
2014, it has never been used and is not being maintained.
In April 2015, SIGAR released the first report about TFBSO
and U.S. Agency for International Development [USAID]
extractive projects. This report identified a lack of a clear
and cohesive development strategy by TFBSO and that TFBSO had
not improved interagency coordination, subsequent to issues
that were identified by the Government Accountability Office
[GAO] as a weakness in 2011, when it evaluated this issue.
In October 2015, SIGAR released a special projects report
about TFBSO's compressed natural gas filling station project,
which TFBSO paid $43 million in direct and overhead costs to
construct, according to a number originally provided by the DOD
to the SIGAR and was not subsequently disputed until we
received Mr. McKeon's testimony recently.
A somewhat similar facility in Pakistan, according to
SIGAR, would cost only between $200,000 and $500,000 to build.
In November 2015, SIGAR sent an inquiry to DOD questioning
the expenditure of $150 million, nearly 20 percent of its total
budget, for villas and associated armed security. SIGAR found
that TFBSO could have saved tens of millions of taxpayer
dollars, if TFBSO members had lived at existing DOD facilities,
bases existing in Afghanistan.
Then most recently in January 2016, SIGAR released an audit
report on TFBSO's and USAID's efforts to assist Afghanistan's
oil, gas, and mineral industries. The report found eight of the
11 TFBSO extractive projects, worth $175 million of the total
$215 million disbursed, either had little to no or partial
project achievement. Further, not a single project was
transitioned to the Department of State [State] or USAID when
the TFBSO task force ceased operations in Afghanistan.
The totality of these reports, and some of the conclusions
reached in a RAND report that was actually commissioned by
TFBSO itself, raise very serious questions about how the money
that was appropriated by Congress for TFBSO and its work in
Afghanistan was spent, and whether this money was wasted.
SIGAR concluded that TFBSO generally has not delivered on
its stated goals. According to SIGAR, they have received more
complaints of waste, fraud, and abuse relating to TFBSO
activities than for any other organization operating in
Afghanistan.
These questions have been exacerbated by the failure of the
Department of Defense to respond to SIGAR's legitimate
questions.
TFBSO ended its programs in Afghanistan in December 2014,
and the task force ceased operations in March 2015.
One of the most troubling aspects of this task force and
DOD's oversight is that, on multiple occasions, SIGAR asked DOD
to answer questions about this task force, including about the
compressed natural gas station as early as May 2015, at that
point, two months after the task force ceased. Yet, DOD
repeatedly failed to provide documents, claiming the department
no longer processed the personnel expertise to address these
questions.
These assertions were made repeatedly despite the fact that
members of TFBSO were still working for DOD, and the former
acting director of TFBSO worked in the Office of Secretary of
Defense [OSD] beginning in June. In fact, a hard drive of over
100 GB of documents was just recently made available to SIGAR
only last week.
In Secretary McKeon's testimony today, DOD disputes SIGAR's
numbers on what the compressed natural gas [CNG] station cost.
According to SIGAR, DOD actually gave this number to a company
called Vestige, the $43 million figure, that was contracted by
DOD, which in turn provided this information to SIGAR.
It is notable that when the draft report was issued by
SIGAR on the compressed natural gas station in September, DOD
did not dispute the $43 million figure then, and did not
dispute it at the time the final report was issued in October.
We have only recently received the dispute of what the number
is.
Most importantly to this, putting aside the dispute on how
much the compressed natural gas station actually cost, there
are many other important questions that need to be addressed
today. First of all, what happened to the money, all of it?
Second, regardless of cost for this compressed natural gas
station, was there ever even a feasibility study conducted
before money was invested on this project and other projects in
Afghanistan?
There are other troubling issues raised. Why did we spend
$150 million on villas and security for no more than five to
ten TFBSO staff a majority of the time when they could have
stayed on base? Why did we spend $55 million to facilitate an
oil lender process that resulted in a Chinese company winning a
contract that some have said--and, in fact, this Congress has
even noted--could be used to exploit an estimated $1 trillion
worth of Afghanistan mineral resources? What did DOD spend and
should DOD have spent money to develop carpet, jewelry, and ice
cream businesses in Afghanistan? Why is it that after operating
for years and spending millions of dollars that most of TFBSO's
extractive projects failed to fully meet project objectives?
Finally, why were any of TFBSO's projects not transferred to
State or USAID, so that we have continuity after having spent
hundreds of millions of taxpayer dollars?
Every dollar the Pentagon wastes is a dollar that we do not
have to restore military readiness and provide our troops with
what they need to protect themselves and our country. At a time
of growing threats and constrained defense budgets, when we
have issues like this raised and where we have serious
questions about how taxpayer dollars have been spent, this is a
very important inquiry for this committee and for the Senate
because of our shared concern that we use every dollar to
support our men and women in uniform in what they need to do to
defend this station.
So today, I will be asking these questions and many more. I
look forward to this hearing, and I thank both of you for being
here.
With that, I would now like to call on the ranking member,
Senator Kaine, for his opening remarks.
STATEMENT OF SENATOR TIM KAINE
Senator Kaine. I want to thank you, Madam Chair, and my
colleagues, the witnesses, and all who are here.
This was a hearing that got its momentum following the
release of a SIGAR Office of Special Projects report that was
issued in October. The report had an attention-grabbing title,
``DOD's Compressed Natural Gas Filling Station in Afghanistan:
An Ill-Conceived $43 Million Project.'' I read and reviewed the
report, and there are a number of issues that are raised by the
report.
TFBSO ceased existing at the end of 2014, so it is no
longer a project in its own way, but there are a number of
lessons here that we need to dig into do make sure: A) that we
understand the situation; and B) if there were mistakes, we
need to correct them going forward, issues that interest me.
First, in doing economic development or reconstruction
work, is the DOD the best agency to do it, or should we rely
upon agencies of the United States Government that do it as
their normal, everyday work, like USAID, for example. I think
that is a very important question for Congress.
Second, to the extent that DOD does work on economic
reconstruction or other projects, has money been wasted? Can it
be used better? That is a traditional oversight role that this
subcommittee and the larger committee needs to take very
seriously.
Third, what is the relationship between the Department of
Defense and the Inspector General's [IG] office? Is it a
cooperative one? Does the DOD provide the information that it
is supposed to? We are all human beings. We can understand
there might be some natural tension in the relationship of an
agency to an IG, but the public looks at us as all part of the
same family, and we are all supposed to be working together.
The role of the IG is a critical one. Congress would not
pass statutes empowering IGs if we did not think they were
important. One of the issues raised by this report is whether
the DOD has been cooperative with the IG or not. That is a very
important question.
There are also some questions about the IG. The report with
the attention-grabbing headline about the ill-conceived $43
million expenditure was issued by one division of SIGAR, the
Office of Special Projects. There have been other reports
issued earlier in April and subsequently in December from the
SIGAR's Audit Division suggesting that the cost of this filling
station was not $43 million but $5 million.
So if the SIGAR that is charged with providing the facts
that we need to exercise oversight is producing different
answers depending upon which division of SIGAR is speaking,
that is a question as well. What is the reason for that? Is
there communication between the different divisions of SIGAR?
Do the different divisions of SIGAR, Special Projects and Audit
Division, use different accounting standards?
I think when the $43 million report came out, a lot of us
were outraged. Many took to the floor, put out information
about this as a classic example of government waste. It was
generally not put out at the same time that SIGAR had
previously and subsequently reached a different calculation
about the cost of this gas station.
Now, I am not in the business. I do not know whether $5
million is an effective figure and $43 million is not. The fact
that the IG is putting out material with two different numbers
is something that I definitely want to dig into today and
understand.
If there is a need for us to clarify that the government
accounting standards should be used uniformly regardless of
which division is looking at a problem, I hope that is
something that we will explore as well.
So this is a big hearing because it is about what is the
right role for DOD in reconstruction. Has DOD wasted money in
this now defunct project? Should there be lessons learned going
forward for other projects? Does the DOD fairly cooperate and
communicate with the IG, which we expect them to do as Members
of the Senate. Why would the IG be producing reports with
different numbers about this?
Those are the questions that I am interested in exploring
today and in the future.
Madam Chair, I would like to just ask for a few items to be
put into the record, with consent, first the TFBSO activities
reports to Congress beginning in 2011 through 2014; second, a
letter to Chairman McCain and Ranking Member Reed from the
former Minister of Mines and Petroleum of Afghanistan; third, a
letter to SASC from Jim Bullion, who is a former director of
the TFBSO; fourth, a letter to the Readiness Subcommittee from
Paul Brinkley, a former Deputy Under Secretary of Defense and
director of the TFBSO; and finally, a letter to SIGAR from Paul
Brinkley's counsel. I would just like to make those part of the
record, without objection.
Senator Ayotte. Without objection.
[The information referred to follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Kaine. Thank you, Madam Chair.
Senator Ayotte. Thank you.
First, we are going to receive testimony from the Principal
Deputy Under Secretary for Defense Policy, Secretary Brian
McKeon.
STATEMENT OF HONORABLE BRIAN P. McKEON, PRINCIPAL DEPUTY UNDER
SECRETARY OF DEFENSE FOR POLICY
Mr. McKeon. Thank you very much, Senator Ayotte, Senator
Kaine, members of the committee. You have my longer statement
for the record. Let me focus on a few key elements, including
the genesis and purpose of the Task Force for Business and
Stability Operations, and the oversight of the task force.
Ultimately, time will tell whether the task force succeeded
in its objectives. Independent assessments tell us that it had
mixed results with some successes and some failures.
The origins of the task force are rooted in the chaos of
Iraq before President George Bush ordered the military surge
early in 2007. It was created in June 2006 by then-Deputy
Secretary Gordon England. He charged the task force with
transforming military contracting in Iraq so that the task
force could generate stability through economic development and
job creation.
In March 2010, Secretary Bob Gates directed the task force
to expand its efforts to support Operation Enduring Freedom. In
my statement for the record, I provide a detailed timeline of
the task force's authority to operate in Afghanistan, including
planning to transition the task force's projects to other
government agencies and the Government of Afghanistan.
Consistent with the direction from Congress and the
Secretary of Defense and plans to draw down U.S. force levels
in Afghanistan, the task force ceased its operations at the end
of 2014. I requested authority for an additional three-month
administrative sunset period, during which a small number of
the task force employees engaged in closeout activities, as
well as responded to SIGAR's request for information.
I was not serving in the Department for most of the period
during which the task force operated, but I have spoken to many
former senior U.S. officials involved in Afghanistan policy,
including Generals Stanley McChrystal, David Petraeus, and John
Allen, and Ambassadors Karl Eikenberry and Ryan Crocker, to
understand the history and rationale for the task force. These
conversations make clear there was a strong demand signal from
the field, strong support in the Pentagon, and strong support
in the Government of Afghanistan for the work of the task
force, the objective of which was to assist that government to
generate economic activity in support of the military campaign
plan.
You asked me to address DOD's oversight of TFBSO
activities. Let me make two broad points. There are a lot more
in my statement for the record.
First, the task force did not have independent contracting
or procurement authority. All task force contracting and
disbursement of funds and other support functions were handled
either by U.S. Army Central in Kuwait, by DOD headquarters
elements, or by other U.S. Government entities.
Second, the reporting chain of the task force to the Under
Secretary for Policy only commenced in August 2011. Prior to
that time, the task force reported directly either to the
Secretary or the Deputy Secretary. I have spoken to all of my
predecessors in OSD Policy, who have reported they had regular
meetings with task force leadership.
In April 2014, as the task force was winding down, Michael
Lumpkin, then performing the duties of the Under Secretary for
Policy, asked the Department Inspector General to perform an
overarching audit of the task force's operations, financial
actions, and contracts. The IG declined to do so due to limited
resources and the need to focus its efforts on ``projects with
the greatest potential return on investment.''
After my arrival in DOD of August 2014 until the final
administrative closeout in March of 2015, I met every few weeks
with the acting director. My primary focus was on ensuring the
orderly shutdown of the task force and responsible preservation
of the records. In the fall of 2014, I requested a financial
audit of the task force, which was completed last April.
My written statement examines in some detail OSD's policy
engagement with SIGAR over the last two years. Let me comment
on the issue of SIGAR's access to the task force records.
First, at all times, SIGAR had unfettered access to TFBSO
records, consistent with the Inspector General Act of 1978.
Second, SIGAR now possesses a hard drive containing the
unclassified records of the task force. The provision of the
hard drive followed a meeting that I initiated with SIGAR, and
followed an exchange of letters between myself and Mr. Sopko
setting forth the conditions of our doing so.
With regard to the CNG station project that has been
mentioned, I would offer two observations and point you to my
statement for the record for more detail.
First, SIGAR has issued two reports conducted by its Office
of Audits on U.S. Government support for the extractives
industry in Afghanistan, one issued last April and one issued
last week, both of which review the CNG project in some detail.
Notably, in the most recent report, one of the projects that
SIGAR concluded had generally met project objectives is the CNG
station project.
Second, in preparing this report on the CNG station
project, SIGAR relied on information provided by an economic
impact assessment [EIA] prepared by a consulting firm that was
hired by TFBSO. That assessment stated that the task force
spent $43 million to fund the station, of which $12.3 million
were direct costs and $30 million were overhead costs. We
believe the methodology used by the EIA is flawed, and that the
project costs are far lower.
The consulting firm that conducted the assessment has also
reviewed its work, and we have seen a copy of their memo to the
committee staff indicating that total costs of the station are
likely well under $10 million.
With that, let me break down the costs of the station, as
we understand them.
First, the cost for the entire station project was $5.1
million. Of this amount, the gas station itself cost $2.9
million. This is consistent with the amount reported by SIGAR
in its April 2015 audit report.
Second, the data that the EIA team reviewed suggests that
approximately $7.3 million was spent on subject matter experts,
or SMEs. These experts were also involved in a broader effort
to advise the Afghan Government to develop a natural gas
industry. The figure of $7.3 million appears to be an average
of all labor costs across the energy sector work by the task
force divided by the number of projects. We believe the
assumption that the labor costs were equal across all projects
is likely flawed.
Third, we cannot validate the figure of $30 million in
overhead costs as being directly attributable to the CNG
station. As with the labor costs, this appears to encompass the
entire amount spent to support all natural gas or energy
projects, which is a flawed method of accounting.
I would note that in the most recent SIGAR audit on the
extractives industry, when analyzing the costs of projects, it
also appears to apply similar methodology to the one I just
described.
Reports that we commissioned to assess the task force work
as well as SIGAR's work tell us that the task force had a mixed
record of success. As was highlighted by both Senator Ayotte
and Senator Kaine, the most recent audit on the extractives
industry portrayed a mixed record of the various projects in
the energy sector by the task force, some meeting their
objectives, some not, some partially meeting their objectives.
The overarching question of how we promote economic
development during a contingency operation, the point which
Senator Kaine emphasized, remains a challenge for all of us in
the U.S. Government. I personally am skeptical that the
Department of Defense is a natural home for that mission. As a
government, we need to consider and develop a functioning
mechanism so that we are prepared for future contingencies, and
I commend the committee for engaging in that discussion.
Thank you for listening.
[The prepared statement of Mr. McKeon follows:]
Prepared Statement by Brian McKeon
Chairwoman Ayotte, Ranking Member Kaine, and Members of the
Subcommittee, thank you for convening this hearing, which gives us a
chance to review two important national security challenges that have
confronted our government in the last decade: how to use non-military
tools in concert with a military campaign, and how to strengthen our
financial management and accountability in conflict zones.
My testimony will address several subjects - the history of the
Task Force for Business and Stability Operations, including the
decision to close it down, OSD Policy's engagements with the Special
Inspector General for Afghanistan Reconstruction regarding the work of
the Task Force, the specifics of the Compressed Natural Gas Station
project, and finally, lessons learned.
I was not serving in the Department of Defense for most of the
period of the operation of the Task Force. To prepare for this hearing,
I have reviewed many reports, including reports by SIGAR, some of the
records of the Task Force, and spoken to many former senior U.S.
officials, civilian and military, involved in Afghanistan policy during
the operation of the Task Force in Afghanistan, including Generals
McChrystal, Petreaus, and Allen, and Ambassadors Eikenberry and
Crocker.
These conversations make clear that there was a strong demand
signal from the field, strong support in the Pentagon, and strong
support in the government of Afghanistan, for the work of the Task
Force, the objective of which was to assist the government of
Afghanistan to generate economic activity in support of the military
campaign plan. Many of the commanding generals in Afghanistan had seen
the work of the Task Force in Iraq, and welcomed its contributions in
Afghanistan.
The Task Force was, in a sense, expeditionary, operating not under
Chief of Mission authority but under authority of the military
commander. This unique status gave them a certain freedom to move
around the country and engage more directly with Afghans than employees
of the U.S. Embassy.
During the course of its operation in Afghanistan, the Task Force
obligated close to $800 million and disbursed over $600 million, which
was roughly evenly divided between projects and support costs. These
support costs are undoubtedly higher in Afghanistan due to the security
requirements of operating in a war zone. The Task Force's work in
Afghanistan was focused on a few major lines of effort, particularly
efforts to assist Afghanistan benefit from its mineral resources and
fossil fuels.
Time will tell whether the Task Force succeeded in its objectives.
Independent assessments tell us that it had mixed results, with some
successes and some failures. We welcome continued oversight of the Task
Force to help us understand lessons that can be applied to any future
contingency operation.
i. history of the task force for business and stability operations
The origins of the Task Force for Business and Stability Operations
(TFBSO) are rooted in the chaos of Iraq in 2006, before President Bush
ordered the military surge early in 2007.
On June 22, 2006, Deputy Secretary of Defense Gordon England issued
a memo entitled ``Accelerating Reconstruction and Stability Operations
in Iraq.'' The memo stated that the formation of a government in Iraq
had created a ``short window to accelerate stabilization and
reconstruction operations.'' Toward that end, Deputy Secretary England
appointed Paul Brinkley, then Deputy Under Secretary of Defense for
Business Transformation, to head a Task Force to Support Improved DOD
Contracting and Stability Operations in Iraq. As the name implied, it
was charged with adapting and unifying military contracting in Iraq
such that the Task Force could become an engine for stability through
economic development and job creation. The mandate of the Task Force
was also to look forward to examine possible changes to acquisition law
and practice to address future contingency operations, as well as to
accelerate the definition of contingency operations doctrine in the
business mission area. In short, the Task Force was born from the
concept that economic development and job creation were necessary
conditions for building a stable and secure Iraq.
On March 11, 2009, Secretary Gates issued a memo indicating that he
had asked Mr. Brinkley to continue the Task Force's economic
revitalization efforts in Iraq for ``an appropriate transitional period
into the new Presidential Administration'' and shifted the chain of
command to have Mr. Brinkley report directly to him.
A year later, on March 25, 2010, Secretary Gates issued a new
memorandum, directing that Mr. Brinkley extend the efforts of the Task
Force to support Operation ENDURING FREEDOM, and directing that it
focus on ``development of economic opportunities including private
investment, industrial development, banking and financial system
development, agricultural diversification and revitalization, and
energy development.''
Later that same year, some uncertainty about the status of the Task
Force arose when the Office of General Counsel cast doubt on the legal
authority of the Department of Defense to conduct economic development
activities in a foreign country, as they appeared to be inconsistent
with the Department's authorities. Many activities of the Task Force
were suspended.
Congress clarified the situation in the FY 2011 National Defense
Authorization Act, providing statutory authority for activities of the
Task Force in Afghanistan. The NDAA provided, however, that this
authority would expire on September 30, 2011, and directed a plan to
transition the activities of the Task Force to the Department of State
and the Agency for International Development.
The sunset provision caused an impression within the Department
that the Task Force would continue only through Fiscal 2011, and
contributed to a decision by Mr. Brinkley and other senior staff at the
Task Force to depart in the summer of 2011. Consequently, Senators
Levin and McCain, then the Chairman and Ranking Member of this
Committee, wrote to Secretary Gates on April 19, 2011, stating that the
NDAA provision should not be read as requiring the shutdown of the Task
Force. Citing congressional testimony in support for the Task Force by
then-Chairman of the Joint Chiefs Michael Mullen and by General David
Petraeus, the two senators urged the Department to keep the Task Force
in operation so that it could ``continue to serve as an important
strategic tool for General Petraeus' counterinsurgency campaign in
Afghanistan.''
On August 10, 2011, Secretary Panetta issued a new memo,
underscoring that the activities of the Task Force remained ``critical
to the current mission in Afghanistan.'' The memo altered the reporting
chain, and required the Director of TFBSO to report directly to the
Under Secretary of Defense for Policy. The Task Force was further
directed to emphasize areas of indigenous industries, mineral
development, and energy development.
Consistent with the transition recommendation provided to Congress
on May 1, 2012, indicating the agreement of the State Department,
USAID, and DOD that Task Force operations should continue through 2014,
Secretary Panetta issued a memorandum on October 18, 2012, reiterating
TFBSO's mission and the expectation that it would continue through
2014, stating that, ``TFBSO will focus on developing economic
opportunities, including mining sector development, private sector
investment, and industrial development.''
In the FY 2014 NDAA, Congress made a parallel amendment to law,
authorizing the Task Force through calendar 2014. The Senate report on
the legislation said that the TFBSO ``has contributed to the stability
of Afghanistan's economy, particularly the development of its mining
sector.''
Consistent with this statutory provision, policy guidance, and
plans to drawdown U.S. force levels in Afghanistan, the Task Force
ceased operations in Afghanistan in December 2014. The Task Force
requested authority for an additional three-month administrative sunset
period, during which a small number of Task Force employees engaged in
close-out activities, as well as responded to information requests by
SIGAR.
ii. shutting down the task force--records management, audits, and
lessons learned
You asked me to address DOD's oversight of TFBSO activities. Let me
start by making two broad points before I detail specific oversight
that occurred.
First, I wish to emphasize that TFBSO did not have independent
contracting authority. All Task Force contracting and disbursement of
funds and other support functions were handled by U.S. Army Central
(ARCENT), by a DOD headquarters element, or by other U.S. government
contracting offices.
Second, I can only speak to the period of oversight by the Office
of the Under Secretary for Policy, which commenced in August 2011. I
have spoken to all of my predecessors, all of whom reported that they
had regular meetings with Task Force leadership and that the Deputy
Assistant Secretary of Defense for Afghanistan and Pakistan also
engaged closely on all activities. This level of oversight and
engagement is similar to that is provided by OSD Policy to the two
defense agencies and one field activity that report to the Under
Secretary. I have no insight into the oversight during the period that
the Task Force reported directly to the Secretary or Deputy Secretary.
In 2014, the Task Force focused its efforts on bringing projects to
completion or getting them to a point where the Afghan government or
another U.S. entity might be able to continue the Task Force's work.
From the Office of the Under Secretary of Defense for Policy's
perspective, the emphasis during that period was on ensuring an orderly
and responsible shutdown, including an effort to gather lessons
learned.
In February 2014, with the departure of the Task Force Director,
the Deputy Director was appointed Acting Director. He commissioned two
studies: the RAND Corporation was hired to conduct a study of lessons
learned, while Vestige Consulting, LLC was hired to conduct an Economic
Impact Assessment of Task Force work. This latter project was completed
December 29, 2014. The RAND study was completed last fall and published
last week, January 12, 2016. We have provided both of these studies to
the Committee.
On April 7, 2014, Assistant Secretary of Defense (Special
Operations & Low Intensity Conflict) Michael Lumpkin, then Performing
the Duties of the Under Secretary of Defense for Policy, asked the DOD
Inspector General (IG) to perform an overarching audit of the Task
Force's operations, financial actions, and contracts to ``help to
ensure DOD captures lessons learned and closes the TFBSO books
efficiently.'' On August 26, 2014, the DOD IG replied that it could not
undertake the requested audit based on limited resources and the need
to focus its efforts ``on projects with the greatest potential return
on investment.''
Under Secretary Wormuth and I assumed our current positions in OSD
Policy in the summer of 2014. Ms. Wormuth began her service as Under
Secretary in late June, and I assumed the role of her Principal Deputy
in mid-August. I oversaw the closure of the Task Force.
After my arrival in August, until the final administrative closeout
in March 2015, I met every few weeks with the Acting Director of the
Task Force. My primary focus in these meetings was on ensuring the
orderly shutdown of the Task Force and the responsible preservation of
the records. In the fall of 2014, I requested that the Washington
Headquarters Services (WHS), which provided administrative and
financial support services for the Task Force, undertake a financial
audit of the Task Force. WHS engaged the firm of Williams Adley for
this purpose. It began work in early January 2015, and provided a final
report on April 30, 2015.
iii. osd policy engagement with sigar in 2014 and 2015 regarding tfbso
In 2014, the Task Force provided SIGAR with several tranches of
documents and content, in response to specific queries, on the Task
Force's extractives industry programs.
In late November 2014, a media account in a defense trade
publication reported that Mr. Sopko intended to conduct an in-depth
review of the TFBSO, which he asserted had been an ``abysmal failure''
and that, as far as he could determine, had ``accomplished nothing.''
On December 9, 2014, I phoned Mr. Sopko, and explained that following
the administrative sunset period, the Department would not be in a
position to retain TFBSO personnel for the purpose of responding to
SIGAR requests.
The SIGAR sent a letter to me the following day, requesting the
preservation of Task Force records to enable ongoing SIGAR work. As
noted, records preservation was already a focus of shutdown efforts.
On January 15, 2015, the TFBSO staff provided information requested
by SIGAR the previous December regarding travel and spending by Task
Force employees and contractors, information on the program working
with indigenous jewelry makers, the Economic Impact Assessment contract
and draft deliverable, and copies of other consulting contracts. On
January 29, 2015, SIGAR requested significant additional information on
all Task Force work, including a list of all Task Force employees and
their titles from 2010 to the present. All of the requested information
was provided on March 3, 2015. During this period, SIGAR staff
continued to interview a number of TFBSO staff, including the Acting
Director.
On March 30, 2015, I sent a letter to SIGAR with information
regarding TFBSO records preservation, the location of the records, and
points of contact following the March 31, 2015, closedown. On March 31,
2015, the sunset period was concluded and all records had been provided
to WHS Executive Archives. At that point, the Task Force ceased to
exist.
SIGAR's release of CERP data
On May 18, 2015, we discovered that a media organization had
published nearly 18,000 records on projects DOD implemented in
Afghanistan under the Commander's Emergency Response Program (CERP) on
its website. The data, which the media organization received pursuant
to a Freedom of Information Request (FOIA) submitted to SIGAR, included
names and, in some cases, contact information for U.S. military
personnel and civilians and Afghan civilians who received CERP funding.
OSD expressed concern to SIGAR about the release of this
information, and the security implications for our personnel and our
Afghan partners. SIGAR's Chief of Staff conceded by email that the
release was a breach of policy saying, ``The SIGAR FOIA clerk who
handled this request did not follow SIGAR's procedures for processing
FOIA requests. She is no longer with the agency. I am consulting with
SIGAR's Office of General Counsel about this issue, but any future FOIA
requests for data will be held until we can resolve how to handle the
data.'' SIGAR requested DOD assistance to review the data, as SIGAR
contended that it was too big a project for them to handle in way that
fully addressed DOD concerns. The Department also asked the media
organization to remove the data from its website.
Engagement regarding the compressed natural gas station
Also on May 18, 2015, DOD received a letter from SIGAR requesting
additional information on the compressed natural gas (CNG) station
project that is the subject of this hearing. The Task Force had already
provided extensive information about the CNG station in response to a
SIGAR audit that commenced in the summer of 2014 that examined all U.
S. Government efforts, including the Task Force's, in the extractives
sector. That audit report, released in April 2015, explains the purpose
of the CNG station, and notes that $5.1 million was expended on the
construction and tender of the station, conversion of four existing
Ministry of Interior diesel generators, and provision of and training
for the installation and maintenance of CNG engine conversion kits.
On June 17, 2015, DOD's reply indicated that with the closure of
TFBSO, OSD no longer possessed the personnel expertise to address the
questions about the gas project or to assess properly the information
in the Executive Archive. DOD also indicated it was fully prepared to
arrange for access to TFBSO information, and suggested that our staffs
meet to work out the modalities of SIGAR's access to the information
requested.
On June 30, 2015, our staffs met. DOD made clear that SIGAR would
have unrestricted access to the TFBSO records in a reading room managed
by WHS. If SIGAR wanted to obtain copies of any documents, the
documents would first need to be reviewed by DOD attorneys to protect
information that may be withheld from release under FOIA. DOD believed
this step was necessary following the unwarranted release of the CERP
data, which I outlined above. No limitation was placed SIGAR's access
to unredacted documents. SIGAR never responded to this offer.
On September 24, 2015, SIGAR sent us the draft version of its
report on the CNG filling station. DOD was troubled by SIGAR's apparent
decision not to undertake due diligence in reviewing the records, so
our October 9, 2015, reply indicated both our continued willingness to
provide access to the documents and to any DOD personnel that SIGAR
wished to interview.
On October 22, 2015, SIGAR's report on the CNG station was
published.
Access to TFBSO records
I wish to underscore that at no time has SIGAR been denied access
to any available records of TFBSO.
The Department believes that providing SIGAR unfettered access to
review unredacted TFBSO archived materials via a reading room, as
outlined previously, satisfies the objective of providing access while
mitigating the risk of inappropriate release of FOIA-exempt
information. Such an arrangement is fully consistent with the statutory
requirement for Inspector General ``access'' under the Inspector
General Act (5 USC App. Sec. 6). Further, this approach has been used
with other SIGAR staff as part of a separate SIGAR Afghan war lessons
learned project, without any objections from SIGAR.
On December 15, 2015, pursuant to my suggestion, Mr. Sopko and I
met in his offices in Crystal City to discuss SIGAR's access to TFBSO
records. Following an exchange of letters, and receipt of certain
assurances from SIGAR, DOD agreed to provide a copy of the hard drive
of TFBSO's unclassified records. That hard drive and a list of TFBSO
personnel that we have determined still work within DOD was delivered
to SIGAR last week.
iv. the compressed natural gas (cng) filling station
SIGAR's report on the Compressed Natural Gas filling station
asserts that the project cost the United States Government $43 million,
and was ill-conceived.
A report to Congress on FY2011 Task Force activities (transmitted
on December 16, 2011) explained the purpose of the project: ``As a
pilot project, the TFBSO funded the construction of a CNG complex in
Sheberghan City, including the compression station, pipeline extension
from the current gas grid, desulphurization and dehydration systems,
engine conversion kits, and installation and maintenance training for
station operators. The TFBSO is also coordinating with the taxi
association in Sheberghan for the first opportunity to convert their
fleet of cars to dual-use (CNG/gasoline) engines.'' That report
indicated that construction of the station and its associated refining
and conversion facilities cost $2.9 million.
A SIGAR report on extractive industries in Afghanistan, issued in
April 2015, described the project in a similar fashion:
Because Afghanistan's electric power plants and transport fleet
rely on expensive diesel imports, TFBSO leadership decided that
taking steps to develop a domestic fuel market would be
critical to Afghanistan's economy and energy security. As a
proof of concept to demonstrate that Afghanistan's automotive
fleet could transition from a reliance on foreign diesel and
instead use cheaper, locally-produced natural gas, TFBSO funded
the construction of a compressed natural gas complex in
Sheberghan City, including a compression station, pipeline
extension from the current natural gas grid, desulphurization
and dehydration systems, engine conversion kits, and
installation and maintenance training for station operators.
Additionally, TFBSO coordinated with the taxi association in
Sheberghan to convert its fleet of approximately 150 cars to
dual-use-compressed natural gas/petroleum-engines. TFBSO also
converted two diesel generators operated by the Afghan
Ministries of Interior and Defense to run on compressed natural
gas. \1\
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\1\ SIGAR Audit Report 15-55, ``Afghanistan's Mineral, Oil, and Gas
Industries: Unless U.S. Agencies Act Soon to Sustain Investments Made,
$488 Million in Funding is at Risk,'' April 2015, page 27.
The CNG station was part of a larger effort to create a viable
energy market within Afghanistan. The SIGAR Extractives report notes
that TFBSO was working with the Afghan authorities to refurbish an
existing pipeline running between natural gas fields in Sheberghan and
a power plant near Mazar-e-Sharif. TFBSO also planned to build an
entirely new pipeline alongside this older pipeline. In parallel, USAID
was investing funds to rehabilitate and develop natural gas wells in
Sheberghan, and construction of a nearby natural gas processing plant.
The Task Force's focus on the natural gas sector was consistent with
guidance from the Secretary of Defense, and with the overall effort to
assist in the development of Afghanistan's natural resources.
The CNG project was detailed in the annual TFBSO activities reports
to Congress and referenced in several quarterly SIGAR reports. In its
July 30, 2012, quarterly report to Congress, SIGAR noted as follows:
This quarter, the compressed natural gas station (CNG) in
Sheberghan was handed over to the Ministry of Mines. It began
commercial operation in May. Construction of the station had
been funded by [TFBSO]. Because CNG is 50% cheaper than
gasoline, as well as cleaner, the TFBSO said the CNG station
should reduce fuel imports and provide greater security. \2\
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\2\ SIGAR quarterly report to Congress, July 30, 2012, page 123.
In preparing its report on the CNG station project issued last
October, SIGAR relied on information provided by the Economic Impact
Assessment (EIA) prepared by a consulting firm engaged by TFBSO. That
EIA report stated that the Task Force spent $43 million to fund the CNG
station, of which there were $12.3 million in direct costs and $30
million in overhead costs.
We believe the methodology used by EIA, and relied on by SIGAR, is
flawed, and that the costs of the station are far lower. I believe the
consulting firm has also reviewed its work and engaged the Committee
staff, and we have received a copy of their memo to one of your staff
that indicates that the total costs of the station are likely ``well
under $10 million.''
CNG Station Cost Breakdown
In preparation for this hearing, DOD has examined records to
ascertain the costs of the CNG station.
Let me breakdown the costs of the CNG station as we understand them
today.
First, the costs for the entire station project were $5.1 million.
As noted previously, the costs for the station portion of the project
were $2.9 million. The $5.1 million covered the costs of the fueling
station, two dispensers, one CNG trailer filling point, a car
conversion center, an administrative office building, gas compression
and processing equipment, and the conversion of two generators to power
Ministry of Interior bases. This is consistent with the amount reported
by SIGAR in its April 2015 audit report.
Second, the data provided to the EIA team suggests that
approximately $7.3 million was spent on subject matter experts (SMEs)
working to support the technical, legal, financial, policy and
governance requirements for a natural gas consuming industry. The SME
work supported the gas station project as well as a broader effort to
help the Afghan government develop a natural gas industry. The SMEs
supported the Afghan government as they went through the process of
setting a price for natural gas, creating a framework for licensing a
station, creating safety standards, and creating a legal framework for
distributing natural gas to individual consumers for the first time.
The figure of $7.3 million is based on an average of all labor costs by
the SMEs across the entire energy sector, divided by the number of
projects. The assumption that the labor costs were equal across all
projects is likely flawed. The consulting firm estimates that the more
accurate allocation of the SME costs to the CNG station project is two
to four percent of the total labor costs of $36.4 million.
DOD cannot validate the figure of $30 million in overhead costs set
forth in the SIGAR report as directly attributable to the CNG station
project. This appears to represent an effort to capture the amount
shared across all natural gas or energy projects. This is a flawed
method to determine overhead costs for a given project. The preferred
method is to use actual cost data attributed to the specific project,
because each project has unique support requirements. The support costs
data available to us do not provide the necessary fidelity to determine
overhead costs in support of the CNG project.
The SIGAR report also compares the cost of this station to a
comparable station in neighboring Pakistan. We believe that there are
several reasons this station was more expensive than a station in
Pakistan.
First, this station was the prototype for all of Afghanistan. In
2012, Pakistan had one of the most established and largest CNG
distribution networks, with 2.9 million CNG vehicles and 3,330
refueling stations. \3\ With a large and established market, along with
the ability to source locally or import construction materials by sea
and rail, building new CNG stations is substantially less expensive in
Pakistan.
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\3\ Data from the International Association for Natural Gas
Vehicles.
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Second, this station had several additional components not included
in a basic filling station. It had the ability to fill trailers for use
by future stations, to convert cars, and to refine the sour gas coming
into the station. \4\ The ability to fill trailers was critical to the
business model being established as it eliminated the need for direct
pipeline access. DOD understands that the Afghan government continues
to plan for a future station in Mazar-e-Sharif, and that these trailers
will assist in that effort.
---------------------------------------------------------------------------
\4\ As SIGAR notes in the April 2015 extractive industries audit,
``Sour gas is natural gas that contains measurable amounts of hydrogen
sulfide. It is colorless, flammable, poisonous to humans and animals,
and, unlike sweet natural gas, it is extremely corrosive and requires
refining before use'', page 27.
---------------------------------------------------------------------------
Third, the costs of construction in Afghanistan are much higher
than in neighboring countries due to the lack of existing production
and manufacturing capacity related to construction in general and for
extractive industries specifically, the land-locked nature of the
country, and the costs of security in a war zone.
SIGAR noted that that the cost of converting cars would be
prohibitive to the average Afghan. To be sure, the average Afghan does
not own a vehicle. As the Fiscal Year 2011 report to Congress
highlighted, a primary focus of this project was those who do own
vehicles, primarily taxi drivers. In addition, it was expected that the
government would seek to convert its vehicle fleets. For taxi drivers,
conversion would reduce monthly fuel consumption costs by 50 percent.
DOD understands that, in many neighboring nations, conversion costs are
paid upfront by station owners, who then charge vehicle owners more for
gas until the conversion cost is paid for, generally within a year, due
to the price differential. In this case, the Task Force committed to
paying for conversion of 120 vehicles to ensure the targeted community
of vehicle owners would be able to demonstrate the value of conversion.
Last, SIGAR's report questioned whether the station is still
operating. My staff contacted the operator of the CNG station by email
on November 15, 2015. The operator indicated that the station was
working normally, that 230 cars had been converted, and that every day
approximately 160 cars obtain fuel from the station.
v. lessons learned
You asked me to address the lessons learned and how these lessons
will inform DOD activities going forward.
At the Task Force's request, Vestige Consulting, LLC provided an
Economic Impact Assessment (EIA) for TFBSO work done in Afghanistan.
DOD also commissioned reports by CSIS in 2010 and RAND in 2015. In
addition, GAO, the Special Inspector General for Iraq Reconstruction
(SIGIR), and SIGAR have all conducted reviews of TFBSO activity. The
two reports from SIGIR (2008 and 2009) highlighted the difficult
environment in which the Task Force was operating, suggested some
process improvements, and clarified the resources and activities of
Task Force work in Iraq. I commend all of these reports to the
Committee.
The CSIS lessons learned report endorsed the value of the Task
Force and its approach in Iraq, stating that, ``The Task Force needs to
retain its essential attributes of entrepreneurial leadership, a broad
mandate that enables flexibility in approach and operations, and
responsiveness to military commanders in theater . . . .The Task Force
has demonstrated value to DOD field commanders and to Iraqis. It serves
a useful and key role as part of economic operations in conflict zones,
and it helps fill the gap between initial stabilization and longer-term
economic development.'' \5\
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\5\ CSIS, ``Final Report on Lessons Learned: Department of Defense
Task Force for Business and Stability Operations,'' June 2010, page 5.
---------------------------------------------------------------------------
One important point made by CSIS was that it was difficult to
measure the real value and merit of specific Task Force projects,
saying, ``CSIS concludes that many of the activities the Task Force
pursued were worthwhile, with the caveat that for a specific activity,
it is difficult to ascertain whether the value the Task Force generated
or received - economic or otherwise - exceeded the money spent. Some
results achieved by the Task Force can be reasonably quantified, though
calculation of a return on investment or similar metric is often not
possible and perhaps not meaningful.'' \6\
---------------------------------------------------------------------------
\6\ Ibid, page 29.
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The report also recommends developing a more sustainable approach
to economic operations in combat zones, ``There is a substantial gap in
U.S. government capability with regard to economic operations. That gap
in capability is caused in part by resource shortfalls but also by
significant and unresolved policy differences . . . Further action to
address these challenges is needed . . . '' \7\ The report then
provides more detailed findings, including recommending ``an effort to
analyze and develop longer-term options for organization both for DOD
civilian support for expeditionary operations and for DOD economic
operations in conflict environments.'' \8\
---------------------------------------------------------------------------
\7\ Ibid, page 5.
\8\ Ibid, page 51.
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The RAND lessons learned report's review of TFBSO project
implementation concludes ``TFBSO's record is very mixed overall.
Stakeholders who discussed these projects and other sources pointed to
numerous instances of both success and failure. Respondents who
discussed the business accelerator, the carpet program, Ariana
Airlines, and, to some extent, the Amu Darya tender often commented
that the programs were helpful. In several of these cases, project
successes grew out of early failures, but it was possible to see
learning and improvement. Respondents saw other projects, such as the
Sheberghan Gas Pipeline and the Khas Kunar chromite crusher, as more
problematic. In general, TFBSO had problems implementing large,
complicated infrastructure investments. In the cases in which TFBSO
interventions were more in the vein of advising, matchmaking, and
closing small gaps in value chains, the implementation seems to have
been smoother.'' \9\
---------------------------------------------------------------------------
\9\ RAND, ``Task Force for Business and Stability Operations:
Lessons from Afghanistan,'' January 12, 2016, page 82.
---------------------------------------------------------------------------
RAND offered the overarching recommendation that, ``Economic
development is likely to remain a key component of U.S. contingency
operations. Regardless of today's perceived effectiveness of the Task
Force in Afghanistan, or Iraq, it is likely that these future economic
development efforts will contain private sector-focused elements akin
to those employed by TFBSO. The U.S. policy community should plan for
future organizational solutions to these same challenges.'' \10\
---------------------------------------------------------------------------
\10\ Ibid, pages xviii-xix.
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The just released second SIGAR Audit on extractives also
highlighted TFBSO's mixed record, saying, ``TFBSO's 11 projects
achieved mixed results, with 3 of those projects showing little to no
achievement of their project objectives, 5 partially met project
objectives, and the final 3 generally met project objectives.'' \11\
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\11\ SIGAR 16-11 Audit Report, ``Afghanistan's Oil, Gas, and
Minerals Industries: $488 Million in U.S. Efforts Show Limited Progress
Overall, and Challenges Prevent Further Investment and Growth,''
January 2016, page i.
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In closing, the overarching question of how we promote economic
development during a contingency operation remains a challenge for all
of us in the U.S. government, both in the legislative and executive
branches. I am skeptical that the Department of Defense is the natural
home for that mission. We have struggled with this challenge over the
last decade or more, and as a government we need to develop a
functioning mechanism so that we are prepared for future contingencies.
I commend the Committee for engaging in this discussion.
Senator Ayotte. Thank you. I would now like to call on Mr.
Sopko. Mr. Sopko is the Special Inspector General for
Afghanistan Reconstruction.
STATEMENT OF JOHN F. SOPKO, SPECIAL INSPECTOR GENERAL FOR
AFGHANISTAN RECONSTRUCTION
Mr. Sopko. Thank you very much, Chair Ayotte, Ranking
Member Kaine, and other members of the subcommittee. Thank you
for inviting me to testify today about our ongoing work related
to the Task Force for Business and Stability Operations, or
TFBSO.
TFBSO, as has been stated, was an $800 million experiment
in which DOD attempted to attract private sector investment to
Afghanistan to stimulate the economy and create jobs.
Unfortunately, what might have seemed like a good idea on paper
seems to have turned out rather differently in reality.
SIGAR's review of the construction of the compressed
natural gas filling station in Sheberghan, Afghanistan,
highlights many of the problems we have found in other TFBSO
programs dealing with planning, management, coordination, and
oversight.
I would like to address two issues right now in my oral
statement. My written statement covers a lot more issues.
The first issue is this question about the cost of the CNG
station. It is important to note that the $43 million number is
not a SIGAR number. That number came from the Department of
Defense. Although Mr. McKeon's testimony glosses over this and
makes it sound like the number came from their consultant
Vestige or SIGAR, the truth is that number came from the
Department of Defense.
SIGAR had an obligation to report that number when we found
it. It was the best evidence we had at the time. It would have
been irresponsible for SIGAR not to report it.
In addition, yesterday, the Department of Defense made
available to us for the first time the DOD Comptroller who
reviewed that $43 million number for Under Secretary McKeon.
That comptroller told our staff that he confirmed, first of
all, the $12 million of direct costs, but he also said that
while his ``gut feeling'' was that the overhead charge was
wrong and was probably less than $30 million, due to the poor
records maintained by TFBSO, the $43 million number with the
$30 million overhead was the best number available.
I would remind all of the members, our requirement is to
report the best number available. We do not make numbers up. We
do not call people in Afghanistan to get their opinion or send
an email to someone in Afghanistan to get their opinion on what
the number is. We tend to rely on the Department of Defense
when we ask for records about DOD expenditures.
Remember, we asked the Department of Defense to comment on
that number and explain that number as far back as May 18,
2015. Again, along with the rest of our draft report that we
sent to Under Secretary McKeon on September 24, we again
repeated our request to please explain that number, explain
that overhead, because we ourselves realized it was a very
extraordinarily high number.
We never got an answer. You never got an answer. The
American taxpayer never got an answer, until last night when
apparently DOD discovered that the number was in error.
Now, if DOD now repudiates that number and says it was
actually $10 million or $7 million or $5 million or some other
number, we are glad they finally decided to look at their own
records and take a second look. I have to say, Senators, I wish
they had done so earlier, but I guess it is better late than
never.
In the end, whether it is $43 million or $20 million or $10
million, it is still a lot more than should have been spent in
Afghanistan, and DOD to date still has no real explanation for
the expenditure and what benefit the U.S. taxpayer got from
that expenditure.
It is very clear at this point that DOD never did a cost-
benefit analysis before they spent whatever the amount is in
Afghanistan.
Right now, essentially, this is a giveaway that apparently
benefits 150 taxi drivers in Sheberghan. That is all the U.S.
taxpayer got out of it.
The second issue I want to address--and, Senator Kaine, I
am glad you raised it--is the mistaken notion that special
reports issued by SIGAR for some reason do not follow
professional standards. That is simply incorrect.
All SIGAR reports are fact-based. All SIGAR reports note
the sources. All SIGAR reports comply with relevant,
professional standards, including CIGIE, which is the Council
of Inspectors General on Integrity and Efficiency Silver Book
standards.
Senator Kaine, you pointed out that we have used different
numbers in different reports. I am certain your staff has read
the reports and has told you that the reports where we use the
$5 million number was because we were comparing TFBSO programs
and AID programs, and we did not have overhead numbers for
those reports. So in fairness to TFBSO, in fairness to AID, we
did not want to compare apples and oranges. So we used just
direct costs to make the comparison.
With the special projects report, which was a discrete
report that was based upon work that our auditors and
investigators uncovered, we had seen this tremendously high
expenditure of overhead, we had the overhead cost numbers. We
had them from the DOD contractor. I must say, it is surprising
now that it turns out DOD spent $2 million for that contract
report and apparently DOD is now saying that they wasted the $2
million because they did not know how to figure overhead costs.
Now only late last Thursday, my office received from DOD a
hard drive containing what DOD claims to be all of TFBSO's
unclassified records. My staff has spent the weekend doing a
preliminary review. What does that review show us? It again
corroborates the $43 million number.
The records show that TFBSO managers, including senior
managers of TFBSO, reviewed the draft economic impact statement
numerous times, even corrected numbers, because the initial
draft was $50 million. They backed out $10 million that had
been erroneously put in, and TFBSO accepted the overhead
charges.
Now, mysteriously last night, the numbers are wrong.
In addition, we have not been able to find in our
preliminary review any cost-benefit analyses done by TFBSO.
However, I will say this and caution you, the data provided
is substantially inadequate. There is obviously a lot of data
missing in this hard drive that we got, so much so that we have
forensic accountants now reviewing it to determine if the data
has been manipulated. We are also concerned that we are missing
emails, major email files.
We are also concerned that this is supposed to be all of
the records of TFBSO and it only amounts to 100 GB of data.
That seems extraordinary for an organization that lasted for 5
years and employed up to 80 people. As one younger staffer in
my office has said, 100 gigabytes of data is what I have on my
iPhone. We are surprised by the assurances from DOD that these
are all the records of TFBSO.
Finally, I want to raise one last issue, which is again a
larger issue beyond how much money a gas station costs in
Afghanistan. That is the issue that, since December 2014, the
Department of Defense has been telling us, because of
legislation Congress passed, they have no authority, no money,
and no bodies to explain this important program to an Inspector
General who is required by statute to investigate allegations
of fraud, waste, and abuse.
Now I worked for Sam Nunn for approximately 15 years,
worked for John Dingell for other years. In my 20-some years
working in Congress, I have never heard of that excuse. My
deputy worked for 38 years for GAO. He has looked at many
closed programs. He has never heard that excuse.
As a matter of fact, USAID and State Department and other
elements of DOD have been reporting to us on a regular basis on
closed programs. Only TFBSO has this institutional amnesia.
I close by saying if that institutional amnesia continues,
it will be bad for oversight, bad for criminal investigations
that we are conducting, and bad for the U.S. taxpayer.
Thank you very much, Senators.
[The prepared statement of Mr. Sopko follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Senator Ayotte. Thank you, Mr. Sopko.
I want to start with a basic question, Secretary McKeon.
That is, there was roughly $638 million disbursed over the life
of the TFBSO task force. Can the DOD account for how each of
those dollars was spent? As I look at the big picture here, and
a lot of the questions that have been raised on recordkeeping,
can you fully account to the taxpayers as to how each of those
$638 million was spent?
Mr. McKeon. Senator Ayotte, we can give you a list of the
contracts, and I believe we can tell you how all the money was
disbursed broadly by sector. In answering the question about
the CNG station, it points to an inadequacy in the way they
kept the books in the task force in terms of allocating the
support costs to specific projects. They did not do it on a
project-by-project basis, which gives us the challenge of
coming up with the right number for the CNG station.
It is my understanding, based on what I have been told and
what I have seen in reviewing some of the records, that we know
where all the money went. The money was contracted or disbursed
through other parts of the Department, either U.S. Army Central
in Kuwait or other DOD entities, such as the Washington
Headquarters Services, or contracts that went through the
Department of the Interior, for example. So I think we have all
the paper that shows----
Senator Ayotte. Let me just ask you a basic question, then.
If we can account for each of these dollars--but I have serious
questions given even this dispute listening to this that we
can--was it worth it? What did we get for the taxpayers? That
is the fundamental question. What can we say in terms of
deliverables for the mission that is anything sustainable that
we get to accomplish the purpose of economic development in
Afghanistan?
Mr. McKeon. That is the big question, Senator, and it is
the right one. As I said in my statement, I think it is a mixed
record. I also think it is a little early to say.
So, for example, some of the work the task force did and
USAID has done in advising the Ministry of Mines and Petroleum
on governance, competitive tenders, administration of the
ministry, that kind of thing, the jury is still out on that.
There are number of tenders that I am told are still in a
decision making process within the government. The Ghani
government is looking closely at and reviewing a number of
decisions by the Karzai government.
As I think even the task force's most recent audit on the
extractives industry says, it is ultimately up to the
Government of Afghanistan to carry the ball forward.
Senator Ayotte. Right. So did we keep metrics or anything
like that for this task force?
Mr. McKeon. I have not seen, in all the materials I have
reviewed, specific metrics.
Senator Ayotte. Is Mr. Sopko right when he said, using the
gas station as an example, that there was no feasibility study?
Mr. McKeon. I cannot dispute that, Senator. We have not
found in our search of the records what we would understand to
be a feasibility study.
Senator Ayotte. So there are a number of other issues, one
that I wanted to ask about as well, and I am going to give Mr.
Sopko an opportunity to comment on the questions that I have
raised, but there was a letter that was written about $150
million that was spent on villas and security for TFBSO staff.
That is 20 percent, roughly, of the money appropriated by
Congress.
Why could they have not stayed on base? Why was that
decision made? Why is it justifiable for 20 percent of the
money allocated for economic development for that purpose?
Mr. McKeon. Senator, we owe SIGAR an answer to that letter.
We are still digging into the questions that he asked about the
housing in Kabul and Herat and a couple other places.
What I understand was the reason for this was, first, the
task force was unique insofar it was not under the Chief of
Mission authority. They were somewhat entrepreneurial and took
a little risk.
I think part of the reason for the housing was housing for
staff coming from Washington in and out. I do not think a lot
of people lived there permanently. They were also used as
offices, and they were used to show international businesses
and executives that they could come to Afghanistan to do
business.
Senator Ayotte. So did we get any deliverable contracts of
international businesses there because we spent $150 million on
villas versus having them stay on base?
Mr. McKeon. Senator, I cannot tie a specific visit of an
executive in one of these houses to a later investment. I would
not make that claim.
The other thing I would say is the task force had their own
private security to help them with security movements. They
were not relying on the United States military for movements
within the country, by and large. There is a document that we
have seen in the records that----
Senator Ayotte. Could they not have? I mean, they were a
DOD task force. Could they not have asked the DOD and allocated
some of the cost to support that?
Mr. McKeon. I have not asked that question of Central
Command [CENTCOM], whether that would have been feasible at the
time. I have seen one document where they signed an Memorandum
of Understanding [MOU] between U.S. Forces Afghanistan [USFOR-
A] and the task force as a contingency, essentially, for the
task force to go on base or to be supported by the military. It
was signed by a one or two star general who wrote a note to the
commander and said he had a little misgivings about this
because he was not sure if they were going to be able to
support it completely.
Senator Ayotte. Well, it just seems to me as a DOD task
force, $150 million, this is very important question.
Obviously, I think we as a committee would like to know why
those decisions were made and what were the justifications, and
what return on investments we think we got from taking 20
percent of the appropriations to do that.
I also wanted to follow up on the issue of the $55 million
that was spent to facilitate an oil lender process that
resulted, essentially, in the Chinese company winning a
contract for extractives in Afghanistan. Do you think that was
a wise use of taxpayer dollars?
Mr. McKeon. Senator, what I know about that is the task
force assisted the Afghan Ministry of Mines to offer a tender
in accordance with general international principles, and the
Chinese company competed and won. I cannot tell you whether it
was completely transparent and followed all the rules that we
would expect in such a tender.
Senator Ayotte. Stepping back for a second, my time is
expiring and I know a number of others have questions, and I
am, certainly, going to want another round of questions, but I
am just trying to think how I tell the people of New Hampshire
that we spent $55 million to facilitate an oil tender process
so that we could pave the way for the Chinese to get a contract
in Afghanistan, where apparently what is at issue is their
ability to exploit an estimated $1 trillion worth of
Afghanistan mineral resources.
I am laying it out there. Just in your opinion, do you
think that was a wise use of our resources?
Mr. McKeon. Senator, it is my opinion, the foundational
work, as I said, of advising the Ministry of Mines may pay off
in the future. There are a lot of ifs. It will require some
significant advances in security, significant advances in the
rule of law, and significant embedding, essentially, of a
culture of openness and transparency in business practices.
So I am not going to tell you that we are happy about the
Chinese Government winning that tender. I do not think we tried
to skew the results toward a non-Chinese firm. I do not know
great detail about who else bid on the contract. We will go
back and try to look at that.
As I understood it, the task force was going in to try to
advise them about how to do an international tender the way
that international businessmen would expect. That was the
objective.
Senator Ayotte. Mr. Sopko, did you want to add on that?
Mr. Sopko. Yes, Madam Chairman. If I could just add one
thing about the Ministry of Mines--and I think, Senator Kaine,
this is also important to you, because I know you got a letter
from a former minister. There has been a lot of analysis of
that one tender, but there has been even more analysis done by
Afghans themselves that during the time that tender was done--
remember, this is the Karzai regime--the Ministry of Mines was
the most corrupt ministry in a very corrupt government. It was
so corrupt that USAID pulled back any direct assistance because
they did a study on that, and it is a public study provided to
all government agencies about how corrupt and incompetent that
ministry was under the leadership of Minister Wahidullah
Shahrani.
Now what is important about this, and some of you know I am
a former prosecutor, but I also was an attorney and partner for
Akin Gump, representing a lot of Fortune 100 firms. One thing
you know when you deal with corporate America, American
businesses know their customers, they know where they are going
to be selling the products, and they know what the bottom line
is. If you look at TFBSO and apply just reason and common
sense, what we are talking about is here the Department of
Defense still does not know who their clients were and what the
bottom-line cost was for all of this.
So I would caution, before we have this pie in the sky that
this is all going to come to fruition, we understand what we
are dealing with. I think that is the big picture question
about TFBSO. They did not know where they were working.
Senator Ayotte. Thank you.
Senator Kaine?
Senator Kaine. Thank you, Madam Chair.
I, basically, have three lines of questioning, but the
testimony has knocked off the first one. I wanted to ask DOD
about the efficacy of DOD doing these kinds of reconstruction
projects.
Secretary McKeon, I gather from your testimony that, in
analyzing this, you think they should be placed somewhere other
than DOD. I strongly believe that. I am a member of the Senate
Foreign Relations Committee. I am ranking on the committee that
oversees USAID. Whether it is USAID or another agency that does
economic development as their daily work--we would not ask
USAID to do military operations, for sure. I appreciate your
concession that activities of this kind are probably best done
somewhere else in government. So I am not going to beat that
one. I think we have established that.
I have then one line of questioning for SIGAR, and one
other one for DOD.
So on SIGAR, just looking at the record, I have the April
2015 audit report, Audit Report 1555. There is a discussion on
page six of the compressed natural gas station. There is a
listing of its cost, distributed funds, $5.051 million.
By my read of this, I see no caveat that does not include
overhead or this is an incomplete number. Maybe that is
somewhere else in the report, but I do not see a caveat or
qualification with respect to that.
I will get to my question in a second, and I would love to
hear if there is a caveat there.
I see, after that, an April 2015 report saying the cost is
$5.051 million, and the October 2015 special projects report
with the title, ``DOD's Compressed Natural Gas Filling Station
in Afghanistan: An Ill-Conceived $43 Million Project.''
Then I am looking at the January Audit Report 1611,
basically saying TFBSO spent at least $39.4 million, $5.1
million toward a compressed natural gas infrastructure
development, and $33.8 million for other activities. I do not
see a caveat on that $5.1 million number, that it does not
include overhead costs, although in the next paragraph, there
is a reference to the special projects report and the $42.7
million number.
So the questions that I have are basically these, and you
testified to this, and I want to make sure I understand this.
Does SIGAR's special projects unit use the government
accounting standards? You mentioned the standards that are
unique to IGs. Are these done according to Generally Accepted
Government Auditing Standards [GAGAS], the special project
department's work?
Mr. Sopko. By definition, GAGAS, which is the Generally
Accepted Government Auditing Standards, only apply to audits.
This is not an audit. SIGAR, like 11 other inspectors general,
have other reports than audits. They use different terms.
Senator Kaine. Okay, this is very helpful.
Mr. Sopko. Of those 11 other IGs--and actually, the GAO
issues reports that are not GAGAS. Now we follow the general
overarching policies of GAGAS in all of our reports, and that
is that you have to be factual, you have to be independent, you
have to be free of any conflicts of interest, and you have to
support all the statements you make.
In some areas, and it is very interesting, even in GAGAS
for audits, you are not required to do indexing and
referencing, but we do indexing and referencing for even our
special project reports.
Senator Kaine. Do you believe the audit reports of April
and January from your agency were performed in accordance with
GAGAS?
Mr. Sopko. Yes.
Senator Kaine. Because they are audits?
Mr. Sopko. Yes, they are audits. By definition, they have
to. They take longer because of----
Senator Kaine. They take longer. Are they more elaborate?
Mr. Sopko. Well, yes, the whole audit process, and that is
one of the reasons why we created special projects and why
other IGs have created it. For an audit, usually, and the way
we work, we get together with the GAO, State, AID, the
Department of Defense IGs, and do an audit plan based upon what
the big issues are out there.
When we do an audit, there is a set policy of sitting down,
having an entrance conference, and do planning. Audits usually
take up to a year to get out.
When I took this job four years ago, I met with the staff
of this committee and the staff of many other committees,
including the Foreign Relations Committee----
Senator Kaine. Just really quickly, because I am going to
be out of time. I just want to put on the record that there is
a little bit of a challenge for those of us who are exercising
an oversight function if the auditing division of SIGAR issues
reports that are consistent with GAGAS standards with one
number and they are consistent, and the special projects
division uses a different set of standards--I am not saying
they are inappropriate; I gather that they are the standards
that are used by IGs--that come up with a different number.
That kind of leaves us in a jump ball as to which we believe
and how we harmonize those.
Some I am just going to put on the record that that may be
a point for some additional conversation, because I, certainly,
find it confusing to see that $5 million number in two audits,
and the $43 million number on the headline of the report. So
that is something that we want to dig into.
I want to come back to DOD with a minute and 20 seconds.
Mr. Sopko's testimony was not too complimentary about this
``we will turn over the records at the 11th hour.'' I mean, I
find that pretty disappointing, because while I certainly get
the natural human tension between an agency and Inspector
General--I have been in this business for a while--we are all
on the same team. This is all of our taxpayer dollars. We have
to be accountable for them.
So, Secretary McKeon, you spoke first, then you heard his
testimony. How do you respond to the notion that it was only
when we had this hearing and it was going to happen finally
that DOD said, okay, here are all the records that you ought to
take a look at?
Mr. McKeon. Sure. Senator, I would point you to my written
statement for more detail on this, but let me try to talk
through the story as quickly as I can.
Last year around this time from January to March, the task
force responded to voluminous requests for information from
SIGAR and turned over about five discs of CD-ROMs of material,
including a list of the former staff of the task force for the
last several years.
When we got the request for information in the spring, we
made available to SIGAR the task force records that were set
aside in a reading room at the Washington Headquarters
Services. They had full access to those records, which is what
the IG Act requires, which is access to records. What we said
to them is that if you want to copy any of these documents and
take them back to your office, we need to review them for
Freedom of Information Act [FOIA] releasability.
The reason we did that, sir, is, in a prior case, working
closely with SIGAR, our Afghanistan and Pakistan Office had
given over 18,000 records from the Commander's Emergency
Response Program [CERP]. Those records were then released to
media organizations subject to a FOIA request submitted to
SIGAR. There were names of soldiers and Afghan partners in that
dataset that was put on the Internet. It is still on the
Internet. We have asked this media organization to take it down
because of our security concerns for our soldiers and their
Afghan partners. They have refused to do so. So that is why we
did not simply hand over the records.
Secondly, we did not have task force employees. In the
normal case, our Office of Afghanistan and Pakistan works very
closely with SIGAR. They come in and say, ``We want to examine
this program. Can you give us your records on these issues?''
We never hand over full hard drives and computer drives in the
way that we have here. It is a dialogue. ``Tell us what you
need and we will provide it to you.''
So there were two reasons that we set aside this reading
room for SIGAR to access. There were no restrictions on what
they could read, absolutely none. They could read the full
records unredacted.
The question was, could they come back, take those records
back to their office. After I met with Mr. Sopko in December,
and we exchanged letters expressing our concern about the issue
of the release of the information, and we came to a meeting of
the minds on that, we agreed to turn over the hard drive, which
SIGAR now has.
Senator Kaine. Thank you, Madam Chair.
Thank you to the witnesses.
Senator Ayotte. Senator Rounds?
Senator Rounds. Thank you, Madam Chair.
Mr. Sopko, I am just curious, maybe just in terms of the
top lines that we have been looking at, a lot of discussion has
been occurring based upon the CNG station. It would appear that
this is just part of the overall number of projects. You did a
pretty good job of laying out a series of projects down the
line that this particular operation was responsible for.
We started out by saying that there was about $822 million
that was appropriated, and we have approximately $638 million
that was disbursed. The delta between the two, was it simply a
matter that the other money was not released? Where is that,
the delta between the $822 million that was appropriated and
the $638 million that was actually spent, or that we can find
disbursements for?
Mr. Sopko. Senator, I do not have a good answer on that. I
will ask one of my auditors, who probably knows.
What he is saying is that the numbers could have been
obligated, but not yet disbursed. That is delta we are talking
about.
Mr. McKeon. Senator, my understanding is this is not
atypical for assistance programs, that an amount is allocated
and put on the contract, but then over the course of the
contract, they decide they do not need to spend as much of it.
So the actual disbursements are lower. I do not know whether
the ratio here is typical in an aid setting, but having that
kind of delta is not atypical.
Senator Rounds. The reason why I ask is I just want make
sure we had an understanding of where we are beginning from, in
terms of what the TFBSO was actually responsible for
disbursing. That appears to be $638 million. A fair statement?
The big picture, that is what we are talking about?
Mr. McKeon. I think we have a slightly different number,
but we are in the ballpark, yes, sir.
Senator Rounds. Okay. Of the $638 million, there seems to
be a question of how we would appropriate or at least allocate
the resources for overhead, travel, and so forth, and whether
it was appropriately laid out project-by-project.
I will direct this to Mr. McKeon. Is there a broad
understanding between both you and Mr. Sopko's office that
there is an understandable appropriation or at least allocation
among the different projects for overhead?
Mr. McKeon. Senator, I do not know that we have had that
discussion.
Senator Rounds. You have not quite gotten to that point?
Mr. McKeon. I am happy the engage in----
Mr. Sopko. I think that probably both of our staffs feel
that it is very difficult to find out how they did allocate.
Mr. McKeon. Senator Rounds, I think we can say that the
spending was roughly evenly divided between project spending
and overhead and security. Security costs are quite high
because it is in a warzone. I talked about this at length with
General Petraeus, and he sort of walked me through why it was
so expensive.
Mr. Sopko. Senator, if I can just add, the comptroller who
helped Mr. McKeon take a look at it actually contacted one of
our staff and gave some data. In that data, it looks like the
overhead costs actually exceeded the amount of the actual
programs. I cannot confirm that yet. That was just something he
shared with our staff recently.
Senator Rounds. Mr. McKeon, did TFBSO personnel actually
attend a designer and tradeshow event in Europe in support of
the TFBSO's Afghanistan carpet initiative?
Mr. McKeon. I do not know the precise answer to your
question about the show, Senator. I know it is listed in our
activities reports, the task force activities reports to
Congress. There was support for the indigenous carpeting
industry in Afghanistan. They thought it was one of the high-
end industries that could be advanced through regional and
international markets.
Senator Rounds. Could you then perhaps, just for the
record, provide a summary of where the TFBSO personnel traveled
in Europe in support of the carpet initiative, how long they
stayed, and the total costs of those trips?
Mr. McKeon, I just want to add, is it true that the TFBSO
actually imported a large number of Italian goats via air
shipment from Italy to Afghanistan?
Mr. McKeon. I have not heard that, Senator. We will have to
check.
Senator Rounds. Okay, will you provide that for the record
for us as well, please?
Mr. McKeon. Yes.
Senator Rounds. Thank you.
I was going to ask whether or not the goat initiative was a
success or failure, but apparently you are not in a position to
find that out.
Mr. McKeon. I am pretty sure if it happened, it happened
before my time.
Senator Rounds. My time has expired. Just looking at this
project, I have one question for Mr. Sopko. That is, if you are
not already looking at the entire $638 million in
disbursements, do you have the capability to look through and
to gain access to lay out where these disbursements were at? Do
you have the capabilities to find the individuals who were
working for us who are within the Armed Forces or contractors
responsible to the Armed Forces? Do you have the legal
capabilities right now to follow this through with your
existing powers, sir?
Mr. Sopko. In part. We can only find all of that and answer
those questions if we have the total, full cooperation of the
Department of Defense, because we need to find these
individuals, and we need access to all the records. That is the
only way we can do it.
Now, we lack subpoena authority to get testimonial
subpoena. I think there was legislation pending, but that would
be very helpful. I am probably not allowed to pontificate on
pending legislation, but I think you can see right now, if we
had had subpoena authority to actually bring some of these
people in, we may have gotten to the bottom of this a lot
earlier than now.
Right now, we have to basically beg people to talk to us
who are nongovernment employees. We were trying to get Mr.
Brinkley. He is an excellent witness, but we kept contacting
him, and he kept blowing us off. It was not until we put his
name in the report explaining why we were quoting his book but
not him that all of a sudden he contacted us. Then, I must say,
he submitted to an interview, which was very helpful.
If I had subpoena authority, like most prosecutors do, I
could have dropped paper on him and gotten him in here for an
interview, so that would have been helpful.
Senator Rounds. Mr. McKeon, I just want to give you an
opportunity to respond. Based upon the discussion that we have
had here today, it would seem as though you are in a position
to where we are going to be looking back at you for additional
answers in the future. Can you make a commitment to this
committee to provide as much information as possible or that
you have available to you, and that that information would also
be made available to Mr. Sopko on a timely basis?
Mr. McKeon. Yes, Senator. To the extent we can help find
additional records, if Mr. Sopko thinks there are shortcomings,
we will do that. I believe the records that we turned over are
the unclassified records. There may be other records elsewhere
in the Department not owned by the task force relative to this
work.
Senator Rounds. By that, would you be suggesting that in a
classified setting, you would have it additional information
that you would share with this committee?
Mr. McKeon. No. I do not have additional information. For
example, as I said, the contracting was done by other elements,
not by the task force. There may be records in those components
that are not on the hard drive that we gave Mr. Sopko.
Senator Rounds. Meaning the Department of the Interior?
Mr. McKeon. Department of the Interior or U.S. Army Central
or Washington Headquarters Services.
Senator Rounds. One last question. Do you have the ability
to follow through with the Department of the Interior, Mr.
Sopko?
Mr. Sopko. Yes, sir. We will pursue wherever we can, where
the records are. I think we are probably going to do either a
complete financial audit--we have been asked by some Senators
to do that--or we will do an entire programmatic audit of
TFBSO.
Senator Rounds. Thank you, sir.
My time is expired. Thank you, Madam Chair.
Senator Ayotte. Thank you. I would just say that we would
appreciate that audit. I think it would be very important for
us to have a financial audit, so that we can ensure that each
of the dollars that were disbursed, how they were spent, we can
account to taxpayers for that.
I would like to call on Senator Shaheen.
Senator Shaheen. Thank you, Madam Chair.
Thank you both for being here.
I found the history of the task force very instructive,
Secretary McKeon, because one of the things that you point out
is, in March 2009, Secretary Gates issued a memo indicating he
had asked Mr. Brinkley to continue the task force efforts. Then
there was a new memorandum in 2010 directing Mr. Brinkley to
continue the efforts. I think it was in 2009 that the chain of
command was shifted so that he reported directly to Secretary
Gates.
What I particularly found instructive was looking at the
role that this committee played, which I confess I did not
remember with respect to continuing the organization in the
2011 National Defense Authorization Act, where we initially
said that the authority should expire in September 2011 and
because of concerns by General Petraeus and the Chairman of the
Joint Chiefs, Mike Mullen, they came back and asked Chairman
Carl Levin and Senator John McCain to change the provision and
not require the shutdown of the task force.
So clearly, there were a lot of hands in why we got to the
place that we got on the TFBSO.
I wonder if, Mr. Sopko, you can suggest the kinds of
questions that this committee should have asked or what kind of
information we should have been looking for, as this issue of
whether we should continue what they were doing came up before
this committee.
Mr. Sopko. I would be happy to provide that to you. I think
right now I will go back to the point I made to Senator Kaine
based upon my experience dealing with companies, corporations.
Corporate America understands whom they are selling to. They
understand their market.
Again, this may have been the problem. We are asking the
Department of Defense to start thinking like corporate America.
I represented clients who knew how many pickles were being used
on any particular day in a city, when I worked for Akin Gump.
DOD does not think in those terms.
I remember having a nice conversation with a three star
general who said, ``Look, we are good at blowing things up. We
are not really good at building things.'' Now, they will do it,
and they may do it, if the State Department and AID are not
there and are not sitting at the table. Like on many of these
provincial reconstruction teams, we knew there were seats for
State and AID, and we actually reported on it, but State and
AID for financial reasons, they did not have the bodies, they
are not there. So DOD is then forced to take up the slack.
I think, Senator, it is great that you are sitting on both
committees because you realize--and you, too, I am sorry,
Senator Shaheen--it is going to be a whole-of-government
approach the next time we do this. If we just plus-up DOD and
do not plus-up State and AID, then who is going to be left
doing this kind of work?
I agree with Secretary McKeon, but I cannot speak from a
GAGAS point of view or audit point of view. We have not done
the report yet. That is a serious question that needs to be
asked: Is this the proper role for DOD?
Senator Shaheen. Well, I would, certainly, agree with
Secretary McKeon and with Senator Kaine. I think that this is
not the proper role for DOD. I appreciate the challenges that
we were facing in Afghanistan, but it seems to me that one of
the things that we do need to look at is what the role for DOD
is, and what the role for the Department of State is, and how
diplomacy figures in to what we are doing as we are facing
conflicts in places like Afghanistan.
We had a hearing before the Armed Services Committee today
where we heard comments from the people who were speaking about
the need for military action sometimes to get to diplomacy, but
they were not making the connection that we needed to do
economic development through DOD in order to get diplomacy.
So I do think it raises serious questions.
I guess I would ask you, Mr. Sopko, are there other
takeaways from your analysis of the TFBSO that you would urge
us as a committee to look at?
Mr. Sopko. Senator, I think it is important to look at
lessons learned. Now, the TFBSO hired CSIS, the Center for
Strategic and International Studies, to do lessons learned on
Iraq. What we found out is that issued a pretty good report,
but it does not seem like anybody ever read it and followed up
on it.
The RAND Corporation has been hired, and I give credit to
TFBSO, and I think maybe Under Secretary McKeon was involved
with that. RAND is a reputable organization. They came in and
developed some lessons learned.
The problem with the RAND report is they even admit in the
beginning they did not consider the cost-benefit analysis, so
they are leaving that to us to do.
So I think lessons learned is so important. You may want to
require every agency that participated that is under your
jurisdiction in Afghanistan, ask them if they are doing real
lessons learned.
Now, we are trying to do that, because we are required to
do it. Actually, General Allen said we are the only agency in
the government that has this broad ability, because we are not
housed in any government agency. We can do an across-the-board,
whole-of-government approach. So we are doing that. Each
particular agency can also help.
Clearly, not only lessons observed, but you have to apply
them. I do not think this was done in this case at all.
Senator Shaheen. Just a final comment because you raised
the question of being able to subpoena people to come before
SIGAR. I would point out that, as you said, I was one of the
people who introduced that legislation in August 2012 that
would have allowed subpoena power for SIGAR. I think it is
something that we actually ought to consider again. I do not
know if either of you would like to comment on whether that is
helpful.
Secretary McKeon, I think we have already heard Mr. Sopko's
view of that. Do you have thoughts about whether that is
legislation that should be in existence that might help deal
with some of these questions before we get to this point?
Mr. McKeon. Senator Shaheen, the power of the IGs is a
little bit outside my lane in OSD policy. What I have said and
committed to is any former task force employees who work in the
department, we will obviously make them available, and any
former employees that we can help try to find, we will do that.
Whether he needs subpoena power or the IGs need subpoena power,
that is not really for me to say.
If I could comment on your other statement about lessons
learned, first, quickly, I suspect the Army Corps of Engineers
would take exception to the unnamed general that said the Army
does not know how to build things.
I think one thing to think about, as you think about this
issue, is the task force was a startup, and they brought in a
lot of business folks from outside the Department and were
outside of Chief of Mission authority. There is a law in the
Foreign Service Act of 1980 that says everybody is under the
Chief of Mission except Voice of America correspondents and
people under combatant commander authority.
It is unusual for civilians, unless they work directly for
the combatant command [COCOM], to be under COCOM authority and
not Chief of Mission. So you already had this very unusual
animal of the task force being under COCOM authority. The other
parts of the Department and other agencies--and now I am just
speaking impressionistically--some of the antibodies in
government and human nature come out. They look at who are
these people, and why are they in our swim lanes? I think it is
quite clear that there were challenges in cooperation across
interagency at least in the beginning, and then it was mandated
that the State Department concur on projects, and I think it
got a little bit better.
There is an opportunity cost any time you stand something
up and you bring in people from outside the department who are
not really of the department.
Now Mr. Brinkley would say that is what made us different.
We were entrepreneurial. We did not follow the normal
government rules. We were able to do things quickly. Those are
some of the comments I heard from General Petraeus and General
Allen.
So it is a trade-off. If you want to do it that way, you
are breaking a little china in the normal governmental systems,
and the other side of the ledger is institutionalizing them in
normal government entities.
So I do not have a clear answer for you. Obviously, I have
a bias that this is not a DOD function, but that is something
you need to think about.
Senator Shaheen. Well, my time is up, but I would just say
I think we would all be okay with breaking a little china if
they were efficient and effective in doing it. The challenge
here is that there are real questions about how effective and
efficient they were.
Thank you, Madam Chair.
Senator Ayotte. Senator McCaskill?
Senator McCaskill. This is like deja vu all over again,
over and over and over and over again.
We had an ugly morphing of CERP to this task force to the
Afghanistan Infrastructure Fund [AIF], no proof that the
metrics worked on any of it in terms of fighting
counterinsurgency. There has never been any data presented that
the walking-around money in CERP helped. There has never been
any data presented that the ridiculous fuel station in
Afghanistan helped anything. It was dual fuel and totally
impractical and not sustainable. There has never been any data
that the highway that we had to spend more on security to build
than actually it cost to build it did any good.
So the idea that we are worried about Yellow Book standards
today, give me a break. We have almost $1 billion--no metrics,
no cost-benefit analysis, no sustainability analysis, a program
that is dumb on its face.
The average person in Afghanistan, their annual income is
$690. It costs $800 to convert a car to natural gas. Did
anybody in the room sit there and say, is there anybody in
Afghanistan that can afford this? The 120 cars we did, we paid
for.
Now what I want to know, Secretary McKeon, is who made this
decision? Was it Brinkley? Was it Petraeus? Who decided it was
a brilliant idea when the people of a country makes $690 a year
that we are going to spend--I do not care if it was $2.9
million or $200 million. Who made the brilliant decision that
this was a good idea to put a natural gas station in
Afghanistan?
Mr. McKeon. Senator McCaskill, the project started in 2011.
Mr. Brinkley left in June 2011. I am not sure if it was in the
first half or second half that this decision was made to start
it. I think it was under Mr. Brinkley, but I will have to get
that----
Senator McCaskill. I want to know, because I want to talk
to that person and find out what they were on that day, because
that is bizarre.
Do you not agree that sounds improbable on its face that we
are going to get a good result out of that?
Mr. McKeon. Senator, there is a long excerpt that I would
point you to in the SIGAR report about what the theory of the
case was and how this was a proof of concept. It is in the
SIGAR audit report of April 2015. That is what we have is
evidence of what the plan and what the thinking was behind it.
Senator McCaskill. Okay.
When SIGAR asked questions about this, you said in a letter
that DOD lacked personnel expertise to address the questions. I
am quoting from your letter.
Is it true that Dr. Joseph Catalino, a former acting
director of TFBSO, was actually working in your office at the
time?
Mr. McKeon. He was not working in my office at the time. He
was employed after that letter was written.
Senator McCaskill. Okay. When he was, did you offer him up,
since now you had personnel that obviously knew an awful lot
about it because he was the director of the program?
Mr. McKeon. Senator, he started as the director in 2014. He
was interviewed at length by SIGAR before the task force shut
down. He was interviewed again earlier this month. So he has
been available to the task force.
Senator McCaskill. You know, the point I am trying to make,
Secretary, is the program has been shut down for five months
and all of a sudden nobody is home, nobody knows nothing. We
have nobody here to help you. We have no personnel to help you,
because nobody is here. It has been shut down for five months.
Do you think you would be frustrated if you were trying to
get to the bottom of what occurred and why the money was spent
and how it was spent?
Mr. McKeon. Senator, it was a unique task force, as we
discussed. It is far from the core competency of the Department
of Defense. We do not have investment bankers and energy sector
advisers working in OSD Policy or even in Acquisition,
Technology, and Logistics [AT&L].
So what we thought and understood was SIGAR was set up for
success. We provided a lot of information in the first quarter
of 2015. We made the records available. They had a list of all
the former employees. We let the task force people go, and we
brought back Mr. Catalino to perform a different function. He
has been advising me and helping me respond to these queries
that the committee has given us, and the SIGAR questions. This
expertise does not normally reside in OSD Policy, ma'am.
Senator McCaskill. Well, there is a lot of expertise that
normally does not reside in the Department of Defense. It does
not mean that they did not start building highways and they did
not start building a lot of other things in both Iraq and
Afghanistan that never were good investments of taxpayer money
because of sustainability and security issues.
So let us talk about security. If you are spending close to
$800 million and 20 percent of the money has to be spent on
security in order to convince businesses to come do business in
Afghanistan, once again, common sense, do you see a problem
with that scenario? You do not want them to be military because
you do not maybe want the businesses to know that they are
going to have to spend multiples of millions just to be secure
in this country, if they want to come in and do business? Do
you see the fallacy in the logic there that you have one
company making $50 million. You have 24/7--I mean, I wish our
embassies had the security these villas had.
We have a whistleblower who says they sat empty except for
the security personnel most of the time. I mean, it was amazing
the security they had in place, besides the queen-size bed,
flat-screen TVs in each room 27 inches or larger, a DVD player
in each room, a mini refrigerator in each room, and an investor
villa that had even upgraded furnishings.
We are talking about $51 million for secured accommodations
24 hours a day, 7 days a week by armed guards and a closed-
circuit television [CCTV] monitoring system where you can view
the entire perimeter and surrounding area. They paid another
person $40 million to provide transportation and personal
protection from terrorists or criminal attacks.
I mean, look at the money we are spending supposedly
keeping the people safe that we are trying to get there to come
open businesses.
This is not exactly a traditional Chamber of Commerce move.
If you have to spend that much money on security, do you think
most businesses are going to go, ``We cannot afford to open a
business here, especially if the average Afghan makes $690 a
year?''
Mr. McKeon. Senator McCaskill, I am not a businessman. You
make a lot of valid points. Investing in a warzone and
conducting activities is dangerous and high cost. What I said
at the outset is I think there was an understandable imperative
and desire on the part of the commanding generals to get
something going, recognizing that it was high cost.
Whether it has succeeded, the jury is out, but it is a
pretty mixed picture. I agree with a lot of what you have said.
The costs sound quite exorbitant. We are digging into this
villas question.
Senator McCaskill. I apologize for being so short but you
have no idea how many hearings like this I have sat in and gone
through project after project not well thought out. These all
began before we passed the contracting bill where you have to
show sustainability, and you have to show some other measures.
I will tell you that not cooperating and pulling the Band-
Aid off as quickly as possible just makes it worse. The
argument that has been put forth in the press that somehow the
figures in this are not correct, I mean, frankly, all you did
was fan the flames that somehow it was not $43 million when you
cannot even say where the $30 million went.
This is a terrible waste of taxpayer money when we have so
many other uses for it.
Mr. Sopko, I wish we could get you testimonial subpoena
power. A bunch of us are trying for both you and the IGs. We
are running into roadblocks, but we are going to keep trying,
and thank you for your work.
Senator Ayotte. Thank you, Senator McCaskill.
I fully support what Senator McCaskill and Senator Shaheen
have said, that our IGs deserve subpoena authority and full
access to records, which they are not getting right now.
Important legislation is being blocked by the Department of
Justice, of all people.
Anyway, I would like to call on Senator Heinrich.
Senator Heinrich. Thank you, Madam Chair.
I want to get back to this issue of core competency. At
this point, it seems very clear to all of us that this was not
a natural place or function for DOD. I want to pick at a little
bit why this occurred in the first place. I am trying to
remember back.
What years, for starters, Secretary, did this task force
exist? From what fiscal years?
Mr. McKeon. It was created in June 2006 by Deputy Secretary
England to operate initially in Iraq. Then Secretary Gates in
2010 directed them to operate in support of Operation Enduring
Freedom, which technically would have put them in places other
than Afghanistan. Mr. Brinkley's book details exploratory
efforts in Pakistan.
Senator Heinrich. That is consistent with my memory. In
2009, I was a new Member of Congress in the House and trying to
understand why we would fund some of these things through DOD
as opposed to through USAID and other State and other more
appropriate places.
If my memory serves me right, there was, to some degree, an
attitude that things that could get appropriated through DOD
would never ever get appropriated if they were sought through
USAID or State. Do you have an opinion as to whether or not
some of these things landed in DOD's lap because it seemed at
the time easier to put them in the budget there and actually
get appropriations, as opposed to where the core competencies
would have existed to execute more appropriately?
Mr. McKeon. Senator Heinrich, at the time, I was working at
the Senate Foreign Relations Committee for then-Senator Biden.
So that was the conventional wisdom, that the Department of
Defense could more easily get the funds from Congress, and
there was some skepticism about State and AID's ability to
operate, particularly in a warzone. There was even a case in
the second term of President Bush where there was a lot of
criticism of the police and security forces training program in
Iraq, and I cannot remember exactly how it got done, but
essentially Secretary of State Condoleezza Rice pushed over a
lot of the authority for that kind of training to the
Department of Defense. So that was what was sort of in the
atmosphere at the time.
Senator Heinrich. That is actually quite helpful. I am in
no way justifying the sort of lack of analysis or execution
that may have gone into this CNG project or any other projects.
I do think we need to learn some lessons in terms of when you
sort of play those games, what the potential ramifications are,
because, obviously, this simply has not worked.
Mr. Sopko, do you have any opinion on that matter
whatsoever? Or is that outside the scope of what you look at,
at SIGAR?
Mr. Sopko. As to how this came about, in our analysis we
basically identify, and I think we reported in some of our
audits, similar to what the Under Secretary said. There was a
view that State or AID could not move fast enough and was not
quite attuned to it.
Now, again, State and AID, and particularly AID, they have
implementing partners who have the same flexibility in movement
that TFBSO did. We were a bit surprised when we interviewed Mr.
Brinkley that Mr. Brinkley had never known that. He had never
talked to an implementing partner.
So there seemed to have been a parallel track, and they
were not well coordinated.
Senator Heinrich. Clearly.
Mr. Sopko. One of our audits said that. They did not
coordinate very well.
It did cause a lot of resentment. When we say we heard so
many complaints, many of the complaints came from people inside
our own Embassy about how this program was being run.
So there were warning bells about this program from the
beginning.
Senator Heinrich. Would you ever think it would be
appropriate to have an agency or task force that could pay
contractors who do not keep project-by-project financial
numbers?
Mr. Sopko. I would never do that, particularly in
Afghanistan. You are just basically asking to lose all your
money.
That is the big problem now. We do not really know how much
money of this was stolen. I mean, I can understand why the
Minister of Mines loved this program and sent that letter. I
saw a copy of it. Of course he did. I mean, his predecessor
disappeared to Germany with $35 million in cash, as reported in
the press.
Senator Heinrich. As a standard matter, should access to
those kinds of records be contractually obligated for any
contract?
Mr. Sopko. Absolutely. The interesting thing is, USAID did
an analysis of the ministry it is dealing with and withheld
money because they did not trust it. TFBSO, no problem, let us
just give them the money.
I think that is a good analysis of how USAID is used to
this. They deal with this all the time. They work in some very
difficult places. They understand the terrain and who they are
dealing with.
The TFBSO team was just short of a scattershot approach. I
know one of the members started talking about the things with
the goats and everything else. It sounded like they just got
together and said, ``Hey, this sounds like a great idea and we
have an unlimited budget, let us just do it and see if it
works.''
That is why no one can really say with any credibility that
the programs were effective.
Senator Heinrich. Thank you, Madam Chair.
Senator Ayotte. Thank you.
I am actually going to call on the ranking member, Senator
Kaine, first, and then I am going to go to my questions.
Senator Kaine. Thank you, Madam Chair.
She knows I just have one question while she has multiple.
My question, actually, Mr. Sopko, I want to give you a
chance to respond to some of what Secretary McKeon said in
response to one of my questions. Your testimony had a litany of
kind of instances where it was difficult for SIGAR to get the
records that you needed to basically offer the oversight that
you want to. I find that troubling. I think it is not a capital
offense, but at least it is a cardinal offense to not cooperate
with an IG that Congress has put in place to give us
information that we need to exercise oversight.
Since you testified after he testified, I asked him to
respond, and he kind of went through a response. One of the
elements of his response was the concern that kind of came up
in this relationship over material that had been delivered from
the DOD to SIGAR that was, I guess, mistakenly released via a
FOIA that led to the identities of U.S. personnel and some
contractors being disclosed in ways that could jeopardize them.
He said that, and I did not give you a chance to respond,
so I wanted to just see if you had any response.
Mr. Sopko. Yes, I do. I mean, I think the claim that DOD
has made that the individual names were covered under the
Privacy Act is in error. The names that were in that CERP
data--remember, we did not put it up on the Web. Somebody filed
a FOIA, and we responded to the FOIA. Our staff normally as
just a courtesy will take names out, if we are asked. We did
release some names.
The point is that names of soldiers, names of civilian
employees, are not covered or barred from being released. We
have actual DOD regs that talk about the Department of Defense
privacy program dated 2007, which says civilian records can be
revealed that include the names, titles, et cetera. I can give
you a copy of that. So they are not covered.
The other thing is the Privacy Act does not really protect
names. It protects records about the names. The name itself you
can reveal. I am happy to put into the record, if you want to,
dozens of press releases from the Office of Secretary of
Defense where they not only name the soldiers serving in Iraq,
they name their wives, they name their kids, and they give
their addresses.
So we find this as a red herring. It is not Privacy Act
material.
Now what I also find is a red herring is this access was
restricted only for TFBSO. No other element of the Department
of Defense restricted our access to records, and we deal with
classified information all the time. Nobody had this concern.
Only for TFBSO was there some concern, and they put in these
restrictions that basically violate the IG Act.
Remember, I am supposed to be independent. I cannot let the
Department apply FOIA exemptions to my request for documents,
and that is what Mr. McKeon was suggesting. ``All'' means all
under the IG Act.
Senator Kaine. Let me just follow up. You indicated that it
is your normal practice, and I think you used the word
courtesy, when releasing information pursuant to FOIA of this
kind, to take the names out, but in this case that did not
happen.
Mr. Sopko. There was a mistake because it was a multiple
filing and you had to dig down. We accepted that the person did
not understand. We do that just as a courtesy, if we are asked
to do it.
Senator Kaine. Is that a courtesy that you do because you
are aware that there could be security sensitivities to names?
Mr. Sopko. If there is specific security sensitivity, we
will definitely do that. We do not release--we follow that.
This was a case where you had a name of so-and-so was a
CERP official or did something three or four or five years ago
at some Provinual Reconstruction Team [PRT]. I doubt there was
any security implication from that.
Senator Kaine. There is a statement in Secretary McKeon's
written testimony, not in his verbal testimony, I went back and
checked, that as result of the release of these names via the
FOIA, somebody at SIGAR was removed from a position for doing
that. Is that accurate or not?
Mr. Sopko. She was not removed. She left. She got a job
somewhere else. We are a temporary agency. A lot of our people
move on. No, nobody was fired or anything.
Mr. McKeon. I did not mean to imply that she was fired. I
do not know.
May I respond, briefly, Senator?
Senator Kaine. Yes, please.
Mr. McKeon. So my colleague from the Office of General
Counsel has handed me a statute--which I will read to you, and
which I assume came from this committee--title 10 U.S. Code
section 130b, which gives the Secretary the authority
notwithstanding the Freedom of Information Act to withhold from
disclosure to the public personally identifying information
regarding any member of the Armed Forces assigned to an
overseas unit or routinely deployable unit.
Putting aside the legal debate about this provision or what
Mr. Sopko just said about the Privacy Act, as a generic matter,
we do not like to release names of personnel who are downrange
our Afghan partners who are getting money from us on CERP. Mr.
Sopko is no doubt right that we have press releases that praise
soldiers in this place or that, but that is our decision. That
is the Department's decision. It is not SIGAR's decision to
release those names.
That is what animated our concern. You can go on the Web
site of this media organization today--I did it last weekend--
and still find these names of Afghan partners and soldiers. The
information is still there.
Senator Kaine. What about Mr. Sopko's position that the
restricted nature of their access to these documents is highly
unusual within the IG's interaction with DOD departments?
Mr. McKeon. I am happy to address that, sir.
Section 6 of the Inspector General Act of 1978, which is
one of the authorities that SIGAR has, says that the Department
shall provide access to records. Those are the words of the
statute. We provided full access to the records in this reading
room. We never said you cannot go see this record or that
record. He had full access to the records.
The issue, as I highlighted, was whether he could take the
full records and whether we would review them for releasability
under FOIA.
This is now water under the bridge, in a sense, because we
have now come to a meeting of the minds on this issue. He has
the hard drive. It is in his control. He has agreed that it is
not the policy of SIGAR to release names.
So with that assurance and some other conditions that are
set forth in the letters, he has these materials.
Senator Kaine. Thank you. I do not have any other
questions.
Senator Ayotte. Thank you, Senator Kaine.
I wanted to ask, as I looked at sort of the course of
information here, one of the things that troubled me was that
SIGAR either provided draft reports to DOD for comment or
requested TFBSO information in March 2015, May 2015, June 2015,
October 2015, and, of course, this month again. In each
instance, the OSD or you, Secretary McKeon, responded by saying
that the task force was shut down and that you could not answer
questions about TFBSO because the task force was shut down.
Now this task force shut down in March 2015. You yourself
are who this task force reported to nine months prior to its
shutting down. As I understand it, as soon as June 2015, Dr.
Catalino, who had a significant role in the task force, was
actually working at DOD, I think in OSD itself. Yet the
repeated answer to SIGAR's question was, ``Listen, we cannot
answer your questions, because the task force is shut down.''
So to follow up on what Senator McCaskill asked, I mean, if
that is the case, how are we ever going to have oversight on
any task force? Can you explain to me why that was the answer
each time?
The other issue is that, as I understand it, there were
also military personnel who had assisted in the task force and
had roles in the task force that were still serving that could
have been made available as well. Yet, the answer was the same
each time. Why would we answer in such a way, instead of just
trying to get to the bottom of answering their questions?
Mr. McKeon. Senator, if I could go back to about a year ago
this time during the administrative shut down period from
January to March, this task force and Mr. Catalino responded to
fairly voluminous information requests from SIGAR, and I know
Mr. Catalino was interviewed.
So after the task force staff dispersed and were gone from
the roles of the Department, we thought we had set up SIGAR for
a way to successfully do its review. We provided access to the
record. We already provided this information on several discs.
We provided a list of the former employees of the task force
from 2010 to 2014.
Senator Ayotte. Can I ask you a question? When you provide
a list of the employees on the task force, did you include in
that list current members who were serving in the military?
Mr. McKeon. Ma'am, I have not seen the list. I looked at
the letter that was written from Mr. Catalino to SIGAR, setting
forth what it was we provided. I have not seen the list of
personnel, so I cannot tell you what level of detail about
their assignments are.
Senator Ayotte. I will, certainly, want to come back to
that. I think, Mr. Sopko, you had a comment on this issue? I
mean, obviously, with your history and experience in doing
these types of investigations, this struck you as unusual, as I
understand it?
Mr. Sopko. Extremely unusual. As I said, my deputy was in
GAO for nearly 40 years, and I did this for almost 20 years on
the Hill, and I never heard of an organization--it would be
like Harry Truman in 1945 saying, ``I cannot answer any
questions about dropping the bomb. The war is over. We have
shut down.'' This organization was not a dining facility [DFAC]
out in Omaha. This was an organization that reported to the
Secretary of Defense. It was the premier organization on
developing the economy in Afghanistan by the Department of
Defense. It was an organization that reported to my good
colleague here for seven months. Then all of a sudden, it is
like, poof, amnesia.
It is not just access to individuals. They have a
responsibility to answer some of the questions. It is not our
responsibility to track down--and again, I have no subpoena
authority. Once they retire or once they leave the military--
like Mr. Catalino. We interviewed him when he was working for
TFBSO. He then left. Ironically, he was recruited in May and
June by Mr. McKeon's Deputy Chief Operating Officer [COO], who
in that June 30 meeting where his Deputy COO had just hired
back Mr. Catalino, he makes a statement in front of everybody,
including multiple staff members, that I know of no one in the
Department who can answer any of your questions.
Senator Ayotte. So you were told no one in the Department,
in this meeting, can answer your questions, yet at the time,
they recruited or already hired----
Mr. Sopko. They had already hired. We interviewed Mr.
Catalino, and he told us he had been hired ten days before that
meeting by the Deputy Chief Operating Officer, Mr. Steve
Schleien.
Now I have no idea. Maybe Mr. Catalino is mistaken. It is
very easy to pull out his hiring documents. We know he knows
Mr. Schleien. I do not know why Mr. Schleien then makes a
pronouncement to us at this June 30 meeting, after he hires
back Catalino, that I do not know anybody in the department who
can answer your questions.
Now that is what I am saying is an enigma. I have never
faced this before in my dealings with the Department of
Defense, both as a congressional staffer as well as a private
attorney. I have never heard of this before.
Senator Ayotte. The reason I wanted to ask whether when you
provided a list of employees, whether you provided the names
also of currently serving members of our military is because we
have someone in the audience that I want to thank who is here,
who has given me, I think, permission to recognize him, and
that is Colonel John C. Hope, who is here with his wife.
Colonel Hope actually was assigned to the TFBSO task force
and served as Director of Operations of TFBSO from August 2014
until March 2015.
Mr. Sopko, I want to ask you, is this someone who you spoke
to in this investigation?
Mr. Sopko. We normally do not say whom we have spoken to,
but in this case, since I believe Colonel Hope has already
mentioned that he has given his permission, yes, he has been
very helpful to us and we are dealing with him and have
followed up on some of his allegations.
Mr. McKeon. Senator, can I respond briefly to what Mr.
Sopko just said about the June 30 meeting?
Senator Ayotte. Yes.
Mr. McKeon. I do not know what was said. I was not at the
meeting. We are not trying to hide Mr. Catalino. We have made
him available and will make him available again. If Mr.
Schleien made a mistake about the fact that Mr. Catalino had
already started, that is on us. We are accountable for that.
The irony is that if he was not in the Department, as Mr.
Sopko has said, he would be free to decline to talk to SIGAR,
because of the lack of subpoena power for testimonial purposes.
So he is available to SIGAR, as are other former employees
who are in the department.
Senator Ayotte. So I want to raise the issue of Colonel
Hope's service, which we are grateful for, because I think it
is very important, as I look at the role that he played on this
task force. When he was assigned to this task force, he started
to raise issues immediately of deep concern. There is a long
list of things he raised, about the lack of operation and
financial oversight, about the lack of metrics or analysis to
measure success, that essentially the oversight was lacking, no
accounting of cost expenditures or money transfers, and serious
questions about excessive travel, both from security and
financial standpoints. I mean, this is a laundry list, that
TFBSO had no property book or no property book officer over the
lifetime of its existence.
He claims, and I have to say I am very troubled as I see
this whole course of record, that not only him but the entire
Afghanistan military team was subjected to and continues to be
subjected to retribution and retaliation after their return
from the task force and after he, in particular, raised issues
about this task force.
As I understand it, when the list of employees was given to
SIGAR, people like Colonel Hope were not listed on that list,
and they obviously would have knowledge as current serving
members of our military that were involved in important roles
in this task force. That raised a flag for him that caused him
to not only bring information to the attention of SIGAR but
also, as result of him raising this, he had to file a
retribution complaint with the Inspector General's Office of
the department.
He was given a review that was different than four other
reviews he had received from very, very respected and senior
members of our military. Really from you, Secretary McKeon, is
one that any member of our military would view as a career-
ender.
As result, not only was this review one where it should
have been issued in March and then was not issued until
December, in violation of existing DOD policy, but essentially
he raised all these issues about TFBSO and now, again, as
someone who I would describe as doing the right thing as a
whistleblower and who has really nothing to gain, and at this
point, obviously, I am concerned about being the subject of
retribution, is now in a position where this has been harmful
to his military career.
So I guess my question to you, Secretary McKeon, is, as
Colonel Hope's senior rater, what was it in his role, why was
his evaluation so late, why were his concerns not taken
seriously? As I understand it, he sent to you an after-action
report by email in 2015. In fact, he told me that he sent it
actually in I believe March 2015, and he never received a
response from you by email.
So I guess what worries me is I hear this course of conduct
where SIGAR asks a series of questions and they are told, well,
the task force ended and no one can answer your questions right
now. We had questions as a committee. I pushed to have this
hearing. We did not get the new numbers on the gas station even
though you had the draft report in September, and you had the
final report in October, you had a follow-up written letter in
December on this issue, we did not get the numbers until the
night before.
I have to ask, what is going on here? This worries me. Can
you address Colonel Hope? Can you address that we should not be
concerned that somehow this is being covered up, because all
this course of conduct raises this flag that very much concerns
me as to why this is not being played out in a way that we
would normally see this type of investigation, the questions
being answered and answered not without having to call a
hearing on it but immediately?
Mr. McKeon. Senator Ayotte, let me first address the issue
of Colonel Hope. He was the Director of Operations in the Kabul
office starting I believe in September 2014 until the end of
the task force operation. He asked me probably about a year ago
at this time to be a senior rater because I was the next person
above Mr. Catalino. He emailed me and asked me to do that and
asked to come see me so I could put a face with the name, and I
did meet with him last January.
His Officer Evaluation Report [OER] did not come to me
until September. I cannot account for the delay.
Senator Ayotte. What does OER stand for?
Mr. McKeon. I am sorry, ma'am. Officer evaluation report.
His OER came to me in September, and I filled it out. Let
me look at the dates that I have here. It was signed by Mr.
Catalino on the 2nd of September. I signed it on the 11th of
September.
At that time, I am a little embarrassed to say this, when I
filled out the form, in filling out one part of the form, I did
not completely fill it out. The computer program that the Army
has for its personnel allowed me to hit the signature box even
though I had not completed the form. You know, with a lot of
merchants or government Web sites, if you go through and you do
not fill out the key one, it will not let you sign it and hit
submit. This one did.
That is on me. It is my fault. I am not blaming the Army
system. That is what happened.
When it was called to our attention that it had not been
completed, it was completed in mid-November, on November 19 by
Mr. Catalino, and I signed it also the same day. Then the
system pushed it to Colonel Hope.
That is my understanding of how it works, based on an Army
colonel who works in our front office.
Our records show that Colonel Hope signed it on 15
December.
I read the after-action report only in the last month or
so. If Colonel Hope emailed it to me last March--I will go back
and look at my records--I do not remember seeing it at that
time or reading it at that time.
As to what the report says, it says some of the things you
said about the lack of a property book and property
accountability, and Colonel Hope recites how he and his
colleagues sought to remedy that. I do not recall that the
report says some of the other things you said about travel
abuse.
I would unequivocally deny that the rating he received had
anything to do with that report. As to the rating received, I
do not feel it is my place to discuss that in this open
hearing.
As to the other issue raised, Senator, about trying to
answer SIGAR's questions, I think I tried to answer it earlier,
but I will do it again, which is, I know it may sound odd that
we did not have the expertise to dig through these records and
understand them, but other than Mr. Catalino, we really had no
one who had familiarity with these records. He was not steeped
in the energy project. It was started before his time as deputy
director. I talked to him about it, about his knowledge about
it. It was not deep.
We have spent a lot of time in the last couple months by
grabbing staff from other projects to try to help sort through
these records. The comptroller that Mr. Sopko referred to
earlier is not in Mr. McCord's part of the organization. He is
the comptroller for the Defense Security Cooperation Agency who
reports to the Under Secretary for Policy.
I asked him to take a few days to sift through these
records and see if he could make sense of the CNG project as
somebody who understands DOD financial practices. The
statements I make in my written testimony are derived directly
from what he told me.
So we have conveyed that, and we made him available to
SIGAR to do explain his analysis.
So what I am trying to say, ma'am, is, as I said before,
because of the unique nature of this task force and because we
shut it down and chose not to keep legacy employees around, it
has been a challenge for us to go back and try to reconstruct
these records. We are doing that now in response to your
requests and response to SIGAR's requests. I am trying to see
if we can find a former employee of the task force to come work
on a temporary basis to assist us.
So we will work in good faith to try to respond to these
requests, but they had 150, 200 employees, a lot from the
business sector. They are all gone. To try to recreate what
happened five and six years ago is going to be a very hard
challenge for us.
We welcome the audit that you and other Senators have asked
for. As I said, Mr. Lumpkin, when he was performing the duties
of the Under Secretary in April 2014, asked the DOD IG to
perform a full audit. I requested a financial audit at the end
of 2014, which Washington Headquarters Services paid for. I
think we have provided that to you, but if we have not, we
will.
So we are an open book on these records. SIGAR has them. If
there are other records that he thinks that are out there that
we have not provided, we will look. We are not trying to hide
anything. I think it is very useful to find out what happened,
but it is going to be hard for us to recreate some of this
history with all the task force employees gone except for a
handful of people who might still be in the Department.
Senator Ayotte. Just so I can finish up this circle on
Colonel Hope, because I am very appreciative of his service, I
want to ask, Mr. Sopko, do you know generally when Colonel Hope
started speaking at least to SIGAR about his concerns about
TFBSO?
Mr. Sopko. Offhand, I do not. I would have to check with
the staff.
Senator Ayotte. Can you get that for me, for the record?
Mr. Sopko. Absolutely.
Senator Ayotte. I would appreciate it.
Secretary McKeon. Senator, if I can say one more thing
about Colonel Hope. I did not witness his work firsthand. I
read his report. It is my understanding he did perform a
critical function in Kabul. When I saw him here today before
you arrived, I apologized to him for the delay in the OER. So I
do apologize publicly for the delay. I deny and believe to my
core there was no retaliation.
Senator Ayotte. Well, I think the concern is also when
Colonel John C. Hope was rated by General Odierno, who many of
us know has a distinguished record of service, he called him a
top 1 percent officer and one of the top 20 of the 100 colonels
he had served with in his 40-plus years in the Army. So I just
want to make sure that that is in the record, because having
certainly had the opportunity to know General Odierno, we know
he is one of the finest generals to serve our Nation.
So this issue does raise a flag for me, and I want to make
sure that every member of our military or our civilian
workforce understands that they can fully come forward with any
issue that they have or concern about not only how taxpayer
dollars are spent but also how the business of the government
is conducted in a way that they know that they will not face
any potential for retribution.
I want to follow up on a couple specific issues to make
sure that this committee, as we get information about the
activities of TFBSO, in follow-up not only to Senator Rounds'
questions, in addition to the goats and the carpet, I would
like to make sure that we get travel records of where people
traveled for the carpet industry, the purchase and shipment of
the goats. Also I would like to have the same type of
information about the jewelry manufacturing initiative. We have
been given information that TFBSO traveled to India and other
locations as part of that. I do not know if you have
information on that today.
I would like to understand that on the jewelry initiative,
and also the ice cream initiative.
Apparently, TFBSO had a Herat ice cream project run out of
the villa in Herat, Afghanistan. A former TFBSO employee says
this initiative was one of the primary reasons that they had a
villa or safe house established in Herat. So I would like to
understand, as we get the answer on the villa issue, the
information about the ice cream initiative, the jewelry
initiative, the goat initiative, and the carpeting initiative.
One of the issues that, as I heard you talking, Secretary
McKeon, about the challenges of not having the employees, when
we had the wind-down of the task force, did it not occur to
anyone at that point that the Congress would want to have a
full accounting of how the taxpayer dollars were spent, and
whether we actually got any return on the investment?
Secretary McKeon. It did, Senator. That is why Mr. Lumpkin
asked for the Inspector General to conduct an audit. That is
why I asked for the financial audit. That is why we contracted
the RAND Corporation to help us with the lessons learned
examination.
Senator Ayotte. That RAND report by its own admission is
not an audit and does not fully account for how dollars were
spent and also a cost-benefit analysis of those dollars.
Secretary McKeon. That is correct. It is a general,
impressionistic review based on interviews of whether projects
were meritorious and succeeded. We do not have an audit ability
in OSD Policy. We asked the IG to do it. He declined based on
resources and wanting to work on current projects rather than
backward-looking. I only know that from his letter. This is the
former IG, Mr. Jon Rymer. He has now left the Department. I
spoke to him briefly.
That is why I asked for the financial audit, which WHS
contracted for, which I believe you have.
We support if SIGAR wants to undertake a full audit at your
request or the committee's request. We have no objection to
that.
Senator Ayotte. I would like to request that audit. I think
the members of the committee would like to see that. Obviously,
we would hope that you would fully cooperate in getting
whatever information is needed so that the SIGAR could conduct
a full audit, so that we could account for not only the
initiatives that we talked about today but we are able to
account for each of the dollars that were expended and how they
were expended in this task force.
I do have to ask though on the gas station issue, why it
took so long for DOD--I mean, when there was draft report in
September, when there was the final report in October, where
there were issues raised even in December in a follow-up letter
about the villas that again reiterated the $43 million number
for the gas station, in each of those instances, DOD did not
challenge the number. I am just curious why it took basically
the night before this hearing, or day before this hearing, for
that to come forward and for you to then challenge the number.
I am not disputing whether the number is right or wrong in
that. I am just trying to understand what took so long.
Secretary McKeon. As I said, Senator, we have been
borrowing staff from other functions to try to answer the
inquiries over the last few months on this issue and trying to
drill down on the data and the records. I cannot remember when
the comptroller from the Defense Security Cooperation Agency
came up with his analysis.
We knew you were planning this hearing, so I think it was
before yesterday. We, certainly, had some of this information
and were preparing to provide it to the committee.
Senator Ayotte. Do you agree it would have at least been
helpful to say to SIGAR we think there is a huge problem with
this number and we are going to have a financial analysis done
on it?
Mr. Sopko. Senator, if I can interject to maybe help Mr.
McKeon, we spoke to that comptroller. As I told you, we just
got his name. We have been asking Mr. McKeon for his name and
contact information since December. He actually told us that he
started his review on November 17 and finished it on November
20. Like yourself, he finished it on November 20, it would have
been useful if we had gotten a copy of it before last night. We
still do not have a copy of his final report. We have just
interviewed him.
Senator Ayotte. Again, as I understand your testimony, Mr.
Sopko, even that individual cannot fully answer the question
about the number because of the lack of recordkeeping.
Mr. Sopko. You are absolutely correct, Senator. He
basically said that the analysis underlying the overhead number
is probably incorrect, but due to poor recordkeeping, there is
no way to get a better number. Again, I reiterate that under
GAGAS, under CIGIE standards, we are required to get the best
number. So, therefore, he basically makes our case that the
number we gave--which came from DOD, again--it was the best
number.
His gut feeling, he indicated, it is probably less, but he
stated that there is no fidelity in the overhead numbers. It
would be impossible to arrive at a more accurate estimate of
the total overhead costs for CNG.
I think this is critical not because of the number. The gas
station number is really not that important. This goes back to
the underlying problems that I think the Senators have pointed
out, and that there is poor planning, poor management, and poor
coordination at TFBSO. They cannot even get their overhead
numbers right. No wonder we do not know how much money was
spent on goats or if the goats were even eaten or not. We do
not know. This is so poorly managed.
That is a problem that was identified by the General
Accounting Office years ago when they first did their first
audit. We have been identifying that since then.
Senator Ayotte. That brings me to my final question, which
is, there was the 2011 GAO report based on what happened with
TFBSO in Iraq before the decision was made to transition to
Afghanistan. It strikes me that as you look at what is in the
GAO recommendations, the lessons learned from Iraq, none were
taken into account as this transitioned to Afghanistan. In
fact, I do not think that Mr. Brinkley could account for costs
or feasibility. In fact, projects seem to have been approved
without knowing what they would cost.
As you look at the GAO report, about how you should
establish project criteria, metrics, monitoring, these were all
lessons taken from Iraq and also from the CSIS report, similar
lessons, all that information, it does not appear to me,
Secretary McKeon, that any of that was considered or addressed
based on the lessons we learned in Iraq as this task force
undertook its activities in Afghanistan.
Would you disagree with me on that?
Secretary McKeon. I was not there at the time, Senator.
Based on the record I have seen, I am not sure I can disagree.
What I would say is that Mr. Brinkley left in the summer of
2011 and a lot of senior people left with him. There was a gap
before there was a new director hired. In 2012, there was an
acting director. I think they probably had to reinvent the
wheel a little bit.
When they first went into Afghanistan, it is my
understanding they asked McKinsey & Company to do an analysis
of what sectors might be productive in terms of economic
generation. They focused on a few set issues, including
particularly the extractives industries, minerals and fossil
fuels.
We have not found this review or study. In my experience
with McKinsey, it is a ten-page slide deck, so I am not sure it
is going to answer many questions anyway. I am told that the
McKinsey work helped to direct and guide the focus of the task
force.
I think in terms of mineral resources that Afghanistan has,
as I said earlier, there are a lot of ifs here, if you had
security, if you had strong companies, if you had an open and
noncorrupt government, there is a lot of potential there for
Afghanistan to benefit from its natural resources. There are a
lot of countries in the world who have as many natural
resources as Afghanistan, and they have not managed them well,
corrupt governments have not shared prosperity with all. So it
is a pretty big challenge even in the absence of a war.
So whatever useful work was done by the task force and
USAID to lay the foundation for the Government of Afghanistan,
I am not sure we are going to see a payoff anytime soon from
that, if, indeed, there ever is a payoff.
Senator Ayotte. Yes, I think that is one of the problems
when we look at $800 million of taxpayer dollars, and we cannot
show any metrics or deliverables. I think that is where my
constituents, certainly, become upset about how we are spending
their dollars.
I would just end with how can we make sure that this does
not happen again? I think we heard today that DOD is not the
best place for this type of work. Unfortunately, as we look at
what we do going forward, how do we make sure that this does
not happen again?
How do we make sure that you have what you need, Mr. Sopko,
to properly conduct oversight and to make sure that the
Inspector General's Office has the teeth that it needs to get
us information that we need to ensure that we are doing our job
on oversight for the taxpayers of this country?
Mr. Sopko. Senator, I think you can make certain this does
not happen again by having hearings like this. Oversight is
important. Congressional oversight, and I am a little biased,
having spent 25 years doing it for Sam Nunn, Carl Levin, and
John Dingell, among others, and Warren Rudman from your State.
You need oversight.
Senator Ayotte. You have worked for really good people.
Mr. Sopko. I learned from the best. It is important. It has
to be done. I can tell you, I am usually not shy in expressing
my concerns about issues.
One of the reasons why I am not shy is I realize, and I
learned from those Senators, that you sometimes have to
publicize an event to reach over the heads of the people who
are trying to protect their bosses from hearing bad news.
I say, Senators, you have already done quite a bit. By
announcing this hearing, for the first time, we have access to
records. We have a list of names. We have, for the first time
in years, Mr. McKeon's shop actually looking at some of those
numbers. I think you have a success already.
Now there are many more miles to go on this, but that is
the importance of congressional oversight. Your hearing itself
has started the ball rolling in the right direction. I think
with Secretary McKeon and myself working together on this, we
can help give you more answers to these questions.
Secretary McKeon. Senator, may I respond? I think I said it
a few times, but I have to rebut what Mr. Sopko just said. He
had access to records and he had the names of employees all of
last year.
The point I would make in response to your question is that
we welcome oversight from the IG or from SIGAR. It is
unfortunate that some of this oversight of the task force work
did not come earlier so we could have had course corrections.
We are now doing retrospective history, which is still useful
in its own right, but it is going to be a challenge, I wish to
underscore, for us, without the people who were there, to
recreate what happened, but we will do our best to respond.
Senator Ayotte. I appreciate that.
I want to thank both of you for testifying today. I would
just say that we had the lessons learned from the CSIS report
and the GAO report from 2011. We just have to stop repeating
these lessons over and over again.
It is my hope, and I think the point that Senator McCaskill
made today, that this is not the first instance where we have
seen big issues with how taxpayer dollars have been spent and
wasted. So we need to take the work that has been done, take it
to heart, and actually apply the lessons from it, and I hope
that we will.
This committee still does expect to be able to account to
the people of this country for how this money was spent, so I
hope that every effort will be made to do that. I would like to
insert a letter and its attachments from Mr. Sopko for the
record.
See APPENDIX A.
Thank you.
[Whereupon, at 5:12 p.m., the hearing was adjourned.]
[Questions for the record with answers supplied follow:]
Questions Submitted by Senator Kelly Ayotte
department of inspector general
1. Senator Ayotte. Secretary McKeon: During the hearing you stated
that in, ``April of 2014, as the Task Force was winding down, Michael
Lumpkin, then performing the duties of the Under Secretary for Policy
asked the department Inspector General to perform an overarching audit
of the Task Force's operations, financial actions and contracts. The IG
declined to do so, due to limited resources and the need to focus its
efforts on quote `projects with the greatest potential return on
investment.' ''
Please provide a copy of the DOD Inspector General's response,
declining to conduct this audit.
Secretary McKeon. Please find enclosed the request by Assistant
Secretary of Defense (Special Operations & Low Intensity Conflict)
Michael Lumpkin, then Performing the Duties of the Under Secretary of
Defense for Policy, as well as the DOD Inspector General's response.
See APPENDIX B.
financial audit
2. Senator Ayotte. Secretary McKeon: You stated that, ``In the fall
of 2014 I requested a financial audit of the Task Force, which was
completed last April.''
Are you referring to the April 30, 2015, report by Williams Adley
entitled, ``Agreed-Upon Procedures Report for the Task Force for
Business and Stability Operations in Afghanistan?''
Secretary McKeon. Yes. In the fall of 2014, I requested that the
Washington Headquarters Services (WHS), which provided administrative
and financial support services for the Task Force, undertake a closeout
audit of the Task Force. WHS developed a statement of work, solicited
contract support, and awarded a contract (GS-23F-8184H) to conduct an
independent audit of the TFBSO operations. The audit focus was to
validate and fully support forensic documentation of TFBSO's operation
from inception to closure. WHS awarded this contract to the firm of
Williams Adley, a small business, for this purpose of determining if
the TFBSO office complied with applicable National Defense
Authorization Acts and DOD fiscal guidelines. It began work in early
January 2015, and provided a final report on April 30, 2015. The final
report was entitled ``Agreed-Upon Procedures Report for the Task Force
for Business and Stability Operations in Afghanistan.'' The agreed-upon
procedures were developed to support WHS's management objective of
determining whether TFBSO transactions were in compliance with
Authorization Acts and fiscal guidance. These procedures where
arranged, and agreed to, between Williams Adley (the contractor) and
WHS (the client) The audit results concluded that while there were
transactional discrepancies there were no identifiable material
weaknesses, deficiencies, or reportable conditions of the procedures
and/or practices that guided TFBSO's financial operations.
See APPENDIX C for the report.
3. Senator Ayotte. That report says the following: ``Because the
procedures did not constitute an audit conducted in accordance with
generally accepted auditing standards, we do not express an opinion on
the TFBSO's financial information, nor do we express any form of
assurance on (1) the TFBSO's or WHS's overall compliance with laws,
federal regulations or DOD policies and procedures, or (2) the overall
effectiveness with which the TFBSO carried out its mission. Had we
performed additional procedures or conducted an audit in accordance
with generally accepted auditing standards, other matters might have
come to our attention that would have been reported to you.''
If this is what you were referring to, in light of the statement
above which is contained in the report, why do you consider this an
audit? Why did DOD's Washington Headquarters Services (WHS) not have
the contractor perform a financial audit as you stated in your
testimony?
Secretary McKeon. As stated previously, Mr. Lumpkin had requested
that the Department's Inspector General (DOD IG) conduct an overarching
audit of TFBSO operations, financial actions, and contracts in order to
help to ensure DOD captured lessons learned and closed the TFBSO books
efficiently. As a result of DOD IG denial to conduct such a review, I
asked WHS leadership to fulfil the intent of this request by
contracting for an independent audit of TFBSO operations. The statement
of work which guided the audit was focused on verifying the compliance
of the TFBSO activities (to include financial transaction) with
established authorities. As TFBSO was one of the organizational
elements within the overall WHS financial statement, they did not have
a separate financial statement. A full financial audit can only be
completed on the total WHS financial statement. WHS has recently
completed an independent financial examination on the Schedule of
Budgetary Activities. This examination resulted in corrective action
plans that will improve control activities and supporting documentation
for all organizational entities within the WHS financial statement.
dod suitability
4. Senator Ayotte. Secretary McKeon: In your oral testimony, you
said, ``I am personally skeptical of the Department of Defense as a
natural home for [economic development during a contingency operation].
As a government, we need to consider, and figure, and develop a
functioning mechanism so that we're prepared for future
contingencies.''
How have your observations of TFBSO made you skeptical that DOD
should be involved in these kinds of economic development activities
during a contingency?
Secretary McKeon. When the Task Force was created in 2006, it was
charged with transforming military contracting in Iraq so that the Task
Force could generate stability through economic development and job
creation. TFBSO was specifically designed to be expeditionary,
operating not under Chief of Mission authority but under authority of
the military commander. This status gave it certain freedom to move
around the country and engage more directly with Afghans than employees
of the U.S. Embassy. Although there was a rationale for how the Task
Force was structured and operated, the Task Force was ultimately a
multi-year experiment in how to generate economic growth in Iraq and
later in Afghanistan. Economic development overseas is not a core DOD
competency, and as such, it does not appear that the Department of
Defense was the natural home for the Task Force's mission. For this
reason, the Department is not contemplating assuming this mission again
and we are instead focused on capturing lessons learned.
response to sigar
5. Senator Ayotte. Secretary McKeon: You testified that, ``There
may be other records elsewhere in the department not owned by the task
force relative to this work.'' You also said that TFBSO ``contracting
was done by other elements, not by the task force. There may be records
in those components that are not in the hard drive that we gave Mr.
Sopko.''
Has the DOD provided SIGAR all of the TFBSO-related documents and
hard drives, both unclassified and classified, that DOD has in its
possession?
Secretary McKeon. On January 14, 2016, OSD Policy provided to SIGAR
a copy of the unclassified records that SIGAR requested. These records
have been archived at the Washington Headquarters Services Executive
Archives. On March 8, 2016, SIGAR requested any classified information
on TFBSO that was retained by the Executive Archives. On March 14,
2016, OSD Policy delivered to SIGAR the TFBSO records from DOD's Secret
Internet Protocol Router Network that are stored at the Executive
Archives.
6. Senator Ayotte. Which TFBSO-related questions posed to DOD by
SIGAR has DOD not yet answered?
Secretary McKeon. On February 19, 2016, the Department of Defense
received a notification that SIGAR is initiating a comprehensive
performance audit of TFBSO's programs and activities in Afghanistan.
The notification requested that the Department notify the appropriate
officials of this work, which we did. On March 17, 2016, SIGAR
conducted the entrance conference with OSD Policy. The Department will
work with SIGAR as SIGAR notifies us of subsequent steps. To our
knowledge, as of March 29, the Department of Defense had answered all
other TFBSO-related questions and inquiries that we received from
SIGAR.
tfbso contracts
7. Senator Ayotte. Secretary McKeon: In your oral testimony, you
said that DOD ``can give you a list of the [TFBSO] contracts. I believe
we can tell you how all the money was disbursed broadly by sector.''
Please provide a list of all TFBSO contracts and all available
details on how all $638 million was disbursed. For all contracts,
please provide the purpose of the contract, who received the contract,
how much was disbursed for the contract, and whether DOD has evidence
that a feasibility study was conducted. Please include the total costs
of the ``gem program,'' ``carpet program,'' and ``cashmere goat
program.''
Secretary McKeon. I am enclosing the spreadsheet with the list of
contracts that I referenced during the January 20, 2016, hearing. The
spreadsheet provides a detailed account of all contract obligations.
The project names are listed, but not the purpose of each contract. The
enclosed Economic Impact Assessment provides more detailed information
on each project.
See APPENDIX D for the report.
accounting for costs
8. Senator Ayotte. Secretary McKeon: In your oral testimony you
testified that TFBSO did not account for costs ``on a project-by-
project basis.''
How is it acceptable or possible that DOD cannot provide cost
information on a ``project-by-project basis'' for TFBSO projects? If
you can't provide this information, how can TFBSO or DOD assess the
performance of a project or ensure the money was not stolen? Has this
problem been fixed for all present DOD task forces? If not, what steps
are you taking to rectify this unacceptable situation? When do you
expect this shortcoming to be remedied?
Secretary McKeon. As was common practice, TFBSO did not directly
attribute overhead costs to individual programs or projects. As such,
we are unable to list all TFBSO projects in which the overhead costs
exceeded the direct costs of the program. The preferred method is to
use actual cost data attributed to the specific project, because each
project has unique support requirements. In the case of the CNG
project, the support costs data available to us do not provide the
necessary fidelity to determine overhead costs in support of the CNG
project itself.
In fiscal year (FY) 2015, each of the Military Departments began an
audit of its FY 2015 General Fund Schedule of Budgetary Activity in
December of 2014. These initial audits are already proving invaluable
by testing our systems, process controls, and our audit infrastructures
while also highlighting key dependencies between organizations that
could represent financial reporting weaknesses. Over the next two
years, we will continue to expand the scope of audits until full audit
readiness is achieved.
Senior leadership remains fully engaged and is taking a risk-based
approach to achieving audit readiness and proceeding into full
financial statement audits in FY 2018, as required by the NDAA for FY
2010 and subsequent years. To accelerate progress in the high-risk
areas, the Office of the Under Secretary of Defense (Comptroller)
developed critical path milestones along with target dates for
completion. Progress in these areas is being carefully tracked and
monitored by both the Under Secretary of Defense (Comptroller)/Chief
Financial Officer and the Deputy Chief Management Officer.
9. Senator Ayotte. For each TFBSO project, provide the written
performance metrics that were established for that project and whether
each of those performance metrics were met. For which TFBSO projects is
there no evidence that there were written performance metrics?
Secretary McKeon. TFBSO maintained metrics for all projects across
each focus areas (Energy, Minerals, Indigenous, and Investment). Each
metric report per focus area was updated at least monthly. Enclosed are
the final close-out metric reports for each sector.
Documents retained in Committee files.
cng filling station
10. Senator Ayotte. Secretary McKeon: In your oral testimony, you
said that you could not dispute that there was not a feasibility study
conducted for the CNG filling station project.
Please confirm whether TFBSO conducted a feasibility study for the
CNG filling station project. If one was performed, please provide a
copy of the feasibility study. Who made the decision to proceed with
the CNG filling station project?
Secretary McKeon. Although the Economic Impact Assessment (EIA)
cited in SIGAR's report on the CNG filling station references a cost-
benefit analysis (CBA) of the CNG station covering the years 2011 to
2018, we were unable to find such a CBA in the TFBSO archive. A CBA is
a feasibility study that is typically performed prior to project
initiation to determine if the project has a positive return on
investment. According to the EIA, the total discounted value of
benefits for this project were estimated to be $1.2 million while the
total discounted value of costs was estimated to be $32.5 million
between 2011 and 2018. If this recitation of the data is correct, it
suggests that the costs exceeded the benefits of pursuing the CNG
station.
A technical feasibility study that focused on the type of gas
(e.g., CNG, diesel) and whether the Afghanistan's existing wells and
infrastructure were sufficient to provide natural gas to the CNG
station was produced. I have enclosed this technical feasibility study.
The project began in fiscal year 2011, but I have no further insights
into who made the decision to proceed with the CNG station project.
See APPENDIX E.
11. Senator Ayotte. Secretary McKeon: In your testimony, you
mentioned that you asked the Defense Security Cooperation Agency
comptroller to review records related to the cost of the CNG filling
station.
Please provide the comptroller's cost analysis of the CNG filling
station, including all related work papers and records used to produce
the cost analysis.
Secretary McKeon. I have enclosed the two slides that the Defense
Security Cooperation Agency (DSCA) comptroller compiled after reviewing
the records for the CNG filling station. I am also enclosing the
records that were sent to the DSCA comptroller.
Documents retained in Committee files.
accommodations ``villas''
12. Senator Ayotte. When do you expect DOD to provide SIGAR a
response to its November 25, 2015, letter related to the TFBSO
`villas'?
Secretary McKeon. The Department of Defense provided an interim
replied to SIGAR's November 25, 2015, letter on December 4, 2015. On
February 5, 2016, the Department provided a final response to the
November 25 letter with a commitment to continue looking into a couple
matters related to TFBSO's private security and housing expenditures.
13. Senator Ayotte. Secretary McKeon: In response to my questions
about TFBSO living in `villas', as well as their private security, you
cited a memorandum of understanding (MOU) between USFOR-A and TFBSO
which apparently discussed the possibility of TFBSO living on base or
being supported by the military.
Please provide a copy of that MOU.
Secretary McKeon. I have enclosed a copy of the memorandum of
understanding (MOU) between USFOR-A and TFBSO.
See APPENDIX F.
14. Senator Ayotte. Provide any documentation related to the
`villas' and the decision to use them instead of staying on base,
including any cost-benefit analysis used as a basis for this decision.
Secretary McKeon. I have enclosed the documentation on private
housing and security expenditures that was provided to SIGAR in
conjunction with our reply dated February 5, 2016.
Documents retained in Committee files.
china national petroleum corporation
15. Senator Ayotte. Secretary McKeon: During the hearing, I raised
the issue of the Chinese National Petroleum Corporation--International
(CNPC-I) winning the oil tender process that TFBSO spent $55 million to
facilitate.
Please provide details regarding this TFBSO project. Was a
feasibility study conducted? Did that study anticipate a country like
China winning the contract? Did TFBSO, DOD, or the U.S. government make
any effort to encourage Afghanistan to award the contract to a company
from the U.S. or other member of ISAF?
Secretary McKeon. TFBSO engaged many U.S.-based mining companies
regarding Afghanistan opportunities. The majority of large U.S. mining
companies were not interested in exploration projects in Afghanistan.
One exception was Chevron, which engaged in discussion on the
Turkmenistan, Afghanistan, Pakistan, India (TAPI) pipeline. TFBSO's
interest in Afghanistan's mining industry was to Train, Advise, and
Assist the Afghan ministry to develop the capability to let mineral
contracts. TFBSO facilitated the processes used by the Afghans in this
industry. The Afghans received bids from various companies, many state-
owned, such as CNPC-I. Given that China has significant economic and
political interests in the region, it was not surprising there would be
bidders from China and other countries. As TFBSO was in an advise and
assist role, the task force was not in a position to ask the Afghan
ministry to reject the CNPC-I bid.
tfbso program costs
16. Senator Ayotte. Please provide a list of all TFBSO projects in
which the overhead costs exceeded the direct costs of the program.
Secretary McKeon. As was common practice, TFBSO did not directly
attribute overhead costs to individual programs or projects. As such,
we are unable to list retroactively all TFBSO projects in which the
overhead costs exceeded the direct costs of the program.
17. Senator Ayotte. Please provide a list of all foreign travel of
TFBSO personnel outside Afghanistan or the United States. Include the
date of the trip, the number of individuals who traveled, where they
went, the purpose of the trip, and the total cost of the trip. Please
include suspected trips to Europe for the carpet project and India for
the jewelry project.
Secretary McKeon. I understand that SIGAR was examining allegations
of travel fraud, waste, and abuse of 15 TFBSO employees. Enclosed are
the records provided to SIGAR in January 2015 from its data call.
We have been unable to find a list of all the foreign travel of
TFBSO personnel outside Afghanistan or the United States. TFBSO's
mission to facilitate investment in Afghanistan required personnel to
travel to investor conferences, trade shows, or other events attended
by potential investors. These meetings occurred in various locations
with specific focus areas (e.g., gemstones, carpets, investment).
Documents retained in Committee files.
18. Senator Ayotte. Did TFBSO import goats from Italy to
Afghanistan? Please provide details, including activities and costs.
Was a feasibility study conducted for this project? Who approved this
project? How were they transported to Afghanistan? How much was spent
to bring the goats to Afghanistan? What were the results of bringing
the goats to Afghanistan?
Secretary McKeon. Afghanistan is the third largest producer of
cashmere in the world and there are varying degrees of cashmere
quality. A large percentage of Afghan-produced raw cashmere is
illegally sold to China where it may or not be treated before it is
harvested for clothing manufacturing and sold around the world. TFBSO
engaged goat farmers and developed an Afghan cashmere coop. The intent
was to improve the quality of Afghan cashmere as well as the value
chain of the commodity in the market. TFBSO partnered with Colorado
State University through a $2.3 million grant to develop a cashmere
certification lab and goat farm. The grant funded testing equipment and
the purchase and shipment of nine bucks from Italy to breed with the
Afghan goats at the farm. The certification farm ensured international
standards were met related to cashmere production and distribution.
TFBSO also helped Afghanistan pass a law banning the export of raw
cashmere. The cashmere lab and goat farm was tendered off to an Afghan
cashmere producer and continues to operate today. The cashmere lab and
farm preliminary financials are enclosed.
See APPENDIX G.
19. Senator Ayotte. Does DOD have classified information related to
TFBSO? If so, why hasn't that information been provided to SIGAR?
Secretary McKeon. On January 14, 2016, OSD Policy provided to SIGAR
a copy of the unclassified records that SIGAR requested. These records
had been archived at the Washington Headquarters Services Executive
Archives. On March 8, 2016, SIGAR requested any classified information
on TFBSO that was retained by the Executive Archives. On March 14,
2016, OSD Policy delivered to SIGAR the TFBSO records from DOD's Secret
Internet Protocol Router Network that are stored at the Executive
Archives.
lessons learned
20. Senator Ayotte. I appreciate that TFBSO sponsored a RAND study
of the task force. However, the fact that many concerns from the 2010
CSIS report and the 2011 GAO report were not addressed increases my
concern that DOD will likely make the same mistakes again if a
concerted effort is not made to garner and codify lessons learned.
What are DOD's specific lessons learned from TFBSO and how are
those lessons being codified within DOD, in coordination with other
relevant agencies, to avoid similar mistakes in the future? What office
or agency is responsible for maintaining those lessons learned for
future application? Please provide a detailed answer. If DOD expects
other agencies to take certain steps, please detail what DOD has done
to request certain actions from other agencies and how those agencies
have responded.
Secretary McKeon. The Department sent to Congress transition
reports for fiscal years 2012, 2013, and 2014, as well as a final
closeout plan in May 2015. Prior to its disestablishment, TFBSO worked
with interagency partners and the Government of Afghanistan to
determine, where possible, an appropriate entity to assume
responsibilities for TFBSO programs. No U.S. government agencies were
in a position to assume responsibility for legacy TFBSO programs.
As I expressed during the January 20 hearing, I am personally
skeptical that the Department of Defense is the natural home for the
Task Force's mission of generating economic development overseas
because it does not appear to be a core DOD competency. The Department
is not currently planning for another undertaking of this nature.
Instead, the Department will focus on its responsibility to be prepared
to conduct stability operations activities through all phases of
conflict and across a range of military operations, including in combat
and non-combat environments, pursuant to DOD Directive 3000.05.
tfbso personnel
21. Senator Ayotte. When DOD provided the list of TFBSO employees
to SIGAR, did that list include military servicemembers assigned to the
task force? If not, why not? Do DOD cost estimates of TFBSO include the
costs associated with military servicemembers assigned to TFBSO? How
many military servicemembers worked for TFBSO during its tenure in
Afghanistan?
Secretary McKeon. The list of former TFBSO employees that the
Department provided to SIGAR on January 14, 2016, did include some
military servicemembers who were previously assigned to the task force.
There may be other former employees who are still currently employed by
the Department of Defense and we are not aware of their employment
status. The Department does not maintain records regarding the current
employment of former TFBSO employees, but OSD Policy has created our
own list based on our own due diligence.
22. Senator Ayotte. What was the specific date when former TFBSO
Director Joseph Catalino was hired by the Department of Defense to work
in the Office of the Undersecretary of Defense for Policy after he
departed TFBSO?
Secretary McKeon. Mr. Joseph Catalino resumed employment with the
Department of Defense on June 29, 2015.
support for warfighters
23. Senator Ayotte. Some have suggested that one of the
justifications for a DOD task force like TFBSO is that it filled a
niche supporting military commanders that the State Department and
USAID did not. Yet, the January RAND report, sponsored by TFBSO,
concluded that, `` . . . integrating TFBSO operations into tactical and
strategic military operations remained a challenge through the
organization's life in Afghanistan.'' The report found that, ``there
was a significant gap with the U.S. military on types of activities
that TFBSO should be engaged in . . . '' The RAND report also concluded
that, ``A prevailing view among the military respondents was that TFBSO
was a tool that should have benefited the military effort, but that it
`stayed out on an island' rather than becoming a team player.''
What is your assessment of those RAND findings in a report
sponsored by TFBSO?
Secretary McKeon. The findings of the RAND report are similar to
questions and concerns I expressed during the January 20 hearing. New
organizations often have difficulty integrating into established
agencies or operations, and RAND's findings suggest that TFBSO, despite
being a DOD entity, may have experienced problems integrating into
military operations and considerations.
24. Senator Ayotte. Were any TFBSO projects in Afghanistan
transitioned to USAID or any other U.S. government entity? If not, why
not? Is there any evidence that TFBSO made an effort to transition
their projects to other agencies?
Secretary McKeon. USAID did not assume any former TFBSO projects.
TFBSO worked to transition projects to USAID, the Afghan government, or
other entities. Each project was tracked through a formal metric
process, including a transition plan. As early as January 2012, TFBSO
participated in an interagency steering committee, and continued to
engage the Department of State and USAID through the end of 2014.
Ultimately, the Department of State and USAID declined to assume any
TFBSO projects.
25. Senator Ayotte. In 2013 the Special Inspector General for
Afghanistan Reconstruction (SIGAR) issued a report saying the
Afghanistan Government has levied nearly a billion dollars in business
taxes on contractors supporting U.S. efforts in Afghanistan despite
agreements exempting them from such.
Have you followed up on the Inspector General's initial report as
requested?
Mr. Sopko. SIGAR contacted the Department of Defense, Department of
State, and the U.S. Agency for International Development 60 days after
issuing its May 2013 business taxes audit report, \1\ and regularly
thereafter, to determine the implementation status of its
recommendations. In August 2014, SIGAR closed all remaining report
recommendations as implemented.
---------------------------------------------------------------------------
\1\ SIGAR Audit 13-8, Taxes: Afghan Government Has Levied Nearly a
Billion Dollars in Business Taxes on Contractors Supporting U.S.
Government Efforts in Afghanistan, 5/14/2016.
26. Senator Ayotte. Can you report back on the current situation
regarding business taxes on contractors supporting U.S. efforts in
Afghanistan?
Mr. Sopko. The United States and the Afghan government signed the
Bilateral Security Agreement (BSA) on September 30, 2014. The BSA
defines requirements for U.S. defense contractors for taxation,
registration, and entry and exit. The U.S. military also operates an
International Agreements Branch to help ensure that U.S. defense
contractors comply with Afghan government law and regulations. Since
SIGAR issued its audit report in May 2013, private sector companies
supporting U.S. government efforts in Afghanistan have reported to
SIGAR that the Afghan government continues to levy taxes and associated
penalties from which they should be exempt. SIGAR has on-going criminal
investigative work in this area.
27. Senator Ayotte. What is DOD doing to address the issues raised
in the 2013 SIGAR report (SIGAR audit 13-8)?
Secretary McKeon. Of the $921 million in tax assessments that SIGAR
asserts were improperly levied against US contractors, $93 million was
identified by SIGAR as levied on DOD contractors. By comparison, in a
January 2015 report to Congress, DOD noted that following an extensive
data call by the Office of the Undersecretary of Defense for
Acquisition, Logistics and Technology, DOD contractors reported being
levied $83 million in taxes in 2013, of which they paid $7 million in
taxes to the Afghan government. Almost all of the remaining $921
million in reportedly illegitimate assessments that SIGAR identified
was, according to SIGAR, levied against State Department contractors,
but State strongly questioned the basis for SIGAR's claim.
In the 2013 audit, SIGAR made three recommendations for DOD, all of
which were implemented in 2013:
Develop procedures to help contractors obtain appropriate
documentation of tax exempt status with the Afghan Government;
Issue guidance and training to contracting officer on how
to properly identify taxes in contracts and invoices; and
Ensure through guidance and training that contractors are
reimbursed only for eligible tax payments.
DOD is preparing a required report for Congress describing efforts
to address taxation of DOD contractors by the Afghan government that
will be submitted upon completion of intra-Department coordination.
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