[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]


GLOBAL HEALTH SUPPLY CHAIN MANAGEMENT: LESSONS LEARNED AND WAYS FORWARD

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

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON AFRICA, GLOBAL HEALTH,
                        GLOBAL HUMAN RIGHTS, AND
                      INTERNATIONAL ORGANIZATIONS

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 17, 2018

                               __________

                           Serial No. 115-138

                               __________

        Printed for the use of the Committee on Foreign Affairs
        
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                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         BRAD SHERMAN, California
DANA ROHRABACHER, California         GREGORY W. MEEKS, New York
STEVE CHABOT, Ohio                   ALBIO SIRES, New Jersey
JOE WILSON, South Carolina           GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
TED POE, Texas                       KAREN BASS, California
DARRELL E. ISSA, California          WILLIAM R. KEATING, Massachusetts
TOM MARINO, Pennsylvania             DAVID N. CICILLINE, Rhode Island
MO BROOKS, Alabama                   AMI BERA, California
PAUL COOK, California                LOIS FRANKEL, Florida
SCOTT PERRY, Pennsylvania            TULSI GABBARD, Hawaii
RON DeSANTIS, Florida                JOAQUIN CASTRO, Texas
MARK MEADOWS, North Carolina         ROBIN L. KELLY, Illinois
TED S. YOHO, Florida                 BRENDAN F. BOYLE, Pennsylvania
ADAM KINZINGER, Illinois             DINA TITUS, Nevada
LEE M. ZELDIN, New York              NORMA J. TORRES, California
DANIEL M. DONOVAN, Jr., New York     BRADLEY SCOTT SCHNEIDER, Illinois
F. JAMES SENSENBRENNER, Jr.,         THOMAS R. SUOZZI, New York
    Wisconsin                        ADRIANO ESPAILLAT, New York
ANN WAGNER, Missouri                 TED LIEU, California
BRIAN J. MAST, Florida
FRANCIS ROONEY, Florida
BRIAN K. FITZPATRICK, Pennsylvania
THOMAS A. GARRETT, Jr., Virginia
JOHN R. CURTIS, Utah

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director
                                 ------                                

    Subcommittee on Africa, Global Health, Global Human Rights, and 
                      International Organizations

               CHRISTOPHER H. SMITH, New Jersey, Chairman
MARK MEADOWS, North Carolina         KAREN BASS, California
DANIEL M. DONOVAN, Jr., New York     AMI BERA, California
F. JAMES SENSENBRENNER, Jr.,         JOAQUIN CASTRO, Texas
    Wisconsin                        THOMAS R. SUOZZI, New York
THOMAS A. GARRETT, Jr., Virginia
                             
                             
                             C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

The Honorable Deborah L. Birx, M.D., U.S. Global AIDS 
  Coordinator, U.S. Special Representative for Global Health 
  Diplomacy, U.S. Department of State............................     3
Ms. Irene Koek, Senior Deputy Assistant Administrator, Global 
  Health Bureau, U.S. Agency for International Development.......    16

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

The Honorable Deborah L. Birx, M.D.: Prepared statement..........    11
Ms. Irene Koek: Prepared statement...............................    18

                                APPENDIX

Hearing notice...................................................    48
Hearing minutes..................................................    49
Material submitted for the record by the Honorable Christopher H. 
  Smith, a Representative in Congress from the State of New 
  Jersey, and chairman, Subcommittee on Africa, Global Health, 
  Global Human Rights, and International Organizations:
  Timeline of Recommendations for Nevirapine (NVP)-containing HIV 
    treatment regimens...........................................    50
  Nevirapine Explainer May 2018..................................    52
  Written statement by Chemonics International...................    60
Written responses from the Honorable Deborah L. Birx, M.D., and 
  Ms. Irene Koek to questions submitted for the record by the 
  Honorable Edward R. Royce, a Representative in Congress from 
  the State of California, and chairman, Committee on Foreign 
  Affairs, the Honorable Thomas A. Garrett, Jr., a Representative 
  in Congress from the Commonwealth of Virginia, and the 
  Honorable Christopher H. Smith.................................    68

 
                       GLOBAL HEALTH SUPPLY CHAIN
                      MANAGEMENT: LESSONS LEARNED
                            AND WAYS FORWARD

                              ----------                              


                         THURSDAY, MAY 17, 2018

                       House of Representatives,

                 Subcommittee on Africa, Global Health,

         Global Human Rights, and International Organizations,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The subcommittee met, pursuant to notice, at 1:00 p.m., in 
room 2172 Rayburn House Office Building, Hon. Christopher H. 
Smith (chairman of the subcommittee) presiding.
    Mr. Smith. The hearing will come to order, and good 
afternoon.
    I want to thank you all for being here, especially our two 
very distinguished witnesses.
    There will be a couple of breaks. Unfortunately, we have 
some votes coming up very shortly, but we will stay at it 
because this is an extremely important issue, and I want to 
thank you for the work that you have done.
    By holding today's hearing, this subcommittee is fulfilling 
a very important obligation to the American taxpayers to 
conduct vigorous oversight of our global health programs in 
order to ensure that U.S. taxpayer dollars are being used 
properly and efficiently to deliver the aid to rightful 
beneficiaries. It also, we hope, will help better the lives of 
those beneficiaries in the developing world who receive 
lifesaving medications thanks to the generosity of the American 
people.
    Specifically, we will address serious concerns regarding 
the United States Agency for International Development's 
contractor selection process and performance by the supply 
chain management company Chemonics International, which was 
awarded the agency's largest ever monetary contract, a contract 
with a ceiling of $9.5 billion over 5 years. Congressional 
interest in this was triggered by reports last year that 
Chemonics had failed repeatedly to deliver essential health 
commodities in a timely manner to African and other countries 
where they are desperately needed, most critically, 
antiretrovirals to treat HIV/AIDS patients. At its lowest 
point, only 7 percent of deliveries were made on time and in 
full. The purpose of this hearing is to determine where USAID 
went wrong in the selection and transition process of this 
contractor and what could be done to preclude such a failure in 
the future.
    In January 2014, USAID issued a request for proposals for a 
supply chain management contractor that would consolidate 
procurement and delivery of health commodities to Africa and 
elsewhere as well as provide health systems strengthening in 
conjunction with the President's Emergency Plan for AIDS 
Relief, or PEPFAR. Two companies responded to the request, the 
first being the then-existing contractor, Partnerships for 
Supply Chain Management, and the second being Chemonics. In 
April 2015, USAID awarded the contract to Chemonics, in large 
part because Chemonics displayed greater data visibility, or 
they purportedly did, and IT capability. As might be expected, 
the incumbent losing bidder filed a complaint against USAID 
with the U.S. Government Accountability Office and, upon losing 
that, lodged an appeal with the U.S. Court of Federal Claims. 
In both instances, the differential standard of review was 
applied and, thus, USAID's decision was upheld.
    Following the final decision, the Partnership began this 
process to transition services to Chemonics. While tensions 
between the two companies were evident throughout the 
transition process, performance levels remained steady until 
after Chemonics fully took over the operations. At the end of 
2016, under Chemonics' leadership, on-time deliveries dropped 
from 84 percent to 67 percent. They continued to free fall 
throughout 2016, down to 31 percent, and then, reaching an all-
time low of 7 percent in the first quarter of 2017.
    During this time, some countries reported stockouts of some 
of these lifesaving commodities. This absolutely is 
unacceptable, and this unacceptable delivery record resulted in 
part from poor data quality, weak inventory management and 
distribution practices, and poor planning.
    However, while hindsight is 20/20, one can question what 
justified some of the assumptions USAID made when it selected 
Chemonics. For example, USAID has graded Chemonics' data 
visibility as ``excellent,'' placing great reliance on 
Chemonics' promises regarding an IT system. No demonstration of 
a functioning IT system was ever requested by USAID during the 
selection process, however, nor in any in-person presentation 
during which the technical evaluation committee could have 
asked questions.
    Indeed, no such demonstration could have taken place since 
Chemonics had not even completed building the IT system that 
was specifically required in the request for the proposals. The 
system would not be fully functional until June 2017, nearly a 
year and a half after Chemonics began operations.
    While USAID did require a corrective action plan for 
Chemonics and implemented some corrective measures on the 
company, including freezing promotions and raises until 
performance reached an acceptable level, it is the spur of 
congressional oversight, including visits in the field, which 
has forced the issue and brings us to where we are today, 
demanding answers and seeking viable solutions.
    Our oversight continues to raise questions, and not only 
with respect to the implementing partner, but also how PEPFAR 
and USAID are coordinating their activities. We need to know 
how it is that each year PEPFAR engages partner nations in 
developing country operation plans designed to meet particular 
needs of each nation while guaranteeing that annual taxpayer 
investments are maximally focused and traceable for impact.
    Yet, USAID is still paying for the drug Nevirapine to give 
to HIV patients in Africa. Nevirapine is an outdated drug with 
serious side effects that was supposed to have been retired 
long ago. This is an issue, hopefully, our witnesses can speak 
to and give us some insight into it.
    I would also ask that our witnesses not only do a 
postmortem of what went wrong, speak to the mistakes that were 
made, but also provide solutions and a way forward, because I 
know both of you are completely committed to this. And we are 
very grateful that you took the time to be here with us.
    Okay. I would like to now begin with our introduction of 
the witnesses, beginning with Ambassador Deborah Birx, who is a 
coordinator for the United States Government activities around 
HIV/AIDS and U.S. Special Representative for Global Health 
Diplomacy. Over her 30-year career, she has focused on HIV/AIDS 
immunology, vaccine research, and global health. Ambassador 
Birx oversees the implementation of the U.S. President's 
Emergency Plan for AIDS Relief and all U.S. Government 
engagement with the Global Fund to Fight AIDS, tuberculosis, 
and malaria. In her role as U.S. Special Representative for 
Global Health Diplomacy, she works to align the U.S. 
Government's diplomacy in foreign assistance programs that 
address global health challenges and move forward in achieving 
those goals, eliminating AIDS and preventable child and 
maternal deaths, and combating infectious disease threats.
    This committee has worked very closely with the Ambassador 
for years, and I laud her tremendous contributions to these 
lifesaving interventions during her whole career, but 
especially, as I have gotten to know her, in the work here.
    Then we will hear from Irene Koek, who is a Senior Deputy 
Assistant Administrator in USAID's Global Health Bureau. 
Previously, she was the Senior Infectious Disease Advisor for 
the Global Health Bureau and the Global Health Security Agenda, 
led at USAID. From 2010 to 2014, she was Director of the Health 
Office in USAID in Indonesia, where she served as Health 
Attache and PEPFAR Coordinator. During her 32-year career with 
USAID, Ms. Koek has also worked as a Health Advisor to the 
Policy Program Coordination Bureau and as Chief of the 
Infectious Disease Division in the Global Health Bureau, helped 
start the President's Malaria Initiative, and served as chair 
of the Stop TB Coordinating Board. Ms. Koek has a master's of 
arts degree from George Washington University.
    Madam Ambassador, if you could give your testimony?

 STATEMENT OF THE HONORABLE DEBORAH L. BIRX, M.D., U.S. GLOBAL 
AIDS COORDINATOR, U.S. SPECIAL REPRESENTATIVE FOR GLOBAL HEALTH 
              DIPLOMACY, U.S. DEPARTMENT OF STATE

    Ambassador Birx. Thank you. Thank you, Chairman Smith, and 
recognizing Ranking Member Bass and other distinguished members 
of the subcommittee. I am really deeply honored to be here 
before this subcommittee of the House Foreign Affairs 
Committee, mostly because of the amazing visionary support this 
committee has provided to PEPFAR since its inception.
    Today, more than 14 million men, women, and children are 
alive, and we have transformed the global HIV/AIDS pandemic 
because of the compassionate commitments of members of this 
subcommittee and the full committee, and also, the bipartisan, 
bicameral support of your congressional colleagues. Under the 
leadership of President Bush, President Obama, and President 
Trump, and, of course, the generosity of the American people, 
we have made amazing progress.
    All Americans should be immensely proud of PEPFAR's 
achievements because they are their achievements. PEPFAR 
achievements have been made possible really for two very 
specific reasons. First, through our collective unrelenting 
focus on outcomes and impacts and using data to improve all 
aspects of HIV prevention and treatment services. And secondly, 
through our absolute commitment of using the best of each U.S. 
Government agency to achieve more each year through increased 
efficiencies and effectiveness.
    This month marks the 15th anniversary of PEPFAR's 
establishment. With strong bipartisan leadership, the U.S. 
Government is not only saving lives, but we are accelerating 
our global impact and changing the very course of this 
pandemic.
    A principal factor in our success is that we harvest the 
latest science and data to direct resources where the HIV/AIDS 
pandemic is the largest, where the need is greatest, and then, 
to ensure that the resources that are placed there are used as 
effectively as possible for the greatest impact of U.S. 
taxpayer dollars invested. Each quarter, we look rigorously at 
our outcomes and costs in order to continuously improve our 
work. This commitment to transparency and accountability and 
impact is why PEPFAR is often cited as one of the most 
effective and efficient U.S. foreign assistance programs in 
history.
    PEPFAR has invested billions toward building and supporting 
national health systems, including over $3 billion in the last 
9 years for a strong, reliable, and secure supply chain. A 
high-performing supply chain is the lifeblood of our work. We 
must ensure that the right commodities reach the right people 
in the right places at the right time. This requires effective 
and efficient commodity forecasting, procurement, and delivery, 
including tracking every product all the way down to the site 
level where it is provided to the patient.
    PEPFAR has not only invested billions in strengthening 
supply chain, but also continues to provide ongoing technical 
assistance to governments and non-governmental supply chains, 
building infrastructure, and funding hundreds of full-time U.S. 
Government personnel in-country and within governments. We are 
driven every day to bring the best medicines, the best 
diagnostics, and the best monitoring to every client we serve.
    After all this work that we have done together to bring the 
best, we are totally dependent on the last step. The supply 
chain must deliver, and deliver optimally every day everywhere.
    Mr. Smith. Ambassador Birx----
    Ambassador Birx. Yes?
    Mr. Smith. If you wouldn't mind, there is a vote being 
called right now.
    Ambassador Birx. It is a perfect stopping point.
    Mr. Smith. So, it seems rude as can be, and I apologize for 
it, but we will take a brief recess for the vote. My 
understanding is that several members will be coming back, 
including the ranking member.
    Your opening was outstanding and you are only halfway 
through it, but maybe some of that could be reiterated again 
for the members when they do arrive because it is important.
    Ambassador Birx. Perfect.
    Mr. Smith. So, we stand in brief recess pending the vote.
    [Recess.]
    Mr. Smith. The subcommittee will resume its sitting.
    Again, please accept my apologies for that extraordinarily 
long delay. You are very patient, and I thank you for that 
patience.
    We have been joined by both the ranking member, Karen Bass, 
but also our distinguished chairman, Ed Royce. So, the chairman 
is recognized.
    Mr. Royce. I thank the chairman.
    And I also thank Ambassador Birx and Deputy Administrator 
of the USAID, Irene Koek. Thank you very much for being with us 
today.
    I would just mention how essential to our U.S. interests, 
how critical to our interests your work is. I think it is also 
essential to the well-being of people around this planet and 
certainly every American. Because if you think through the 
consequences, that effort helps us combat deadly infectious 
diseases certainly. We think about Ebola and pandemic flu and 
the effort necessary to take those down in the early stages, 
and at the same time these invisible enemies respect no 
boundaries, obviously. They threaten not only people around 
this globe, they threaten our economic growth, our prosperity.
    So, it advances global efforts to certainly eradicate polio 
and eradicate other debilitating diseases, and it promotes 
maternal and child health. It advances, as I said, U.S. 
economic interests, certainly our security interests. I think 
it also helps grow stable societies.
    I did want to go on the record here and say something about 
those efforts, efforts that buy us an awful lot of goodwill, 
and efforts, frankly, that have saved the lives of millions of 
men and women and children, and do so each and every year.
    The overwhelming majority of U.S. global health 
commodities, including for medicines and other products, are 
delivered through USAID-managed procurement and supply 
management contract, or PSM, and they deliver commodities in 56 
countries. They provide related technical assistance to 40 
countries. In January 2016, USAID combined two prior PSM 
contracts into one with a 5-year, $9.5 billion ceiling. This is 
the largest contract that USAID ever managed. Last fall, this 
committee began receiving reports of stockouts, and that is why 
we hold the hearing today with our oversight efforts. Those 
stockouts were ifesaving ARV drugs and bed nets that were meant 
to be delivered under the megacontract.
    So, I would just like to commend Chairman Smith here for 
his leadership and, also, Karen Bass, the ranking member of 
this committee, because, in response, the investigation that 
was launched by our committee included a review of thousands of 
pages of contract agreements and guidelines and various orders 
and notifications. They conducted dozens of interviews with 
USAID, with CDC, with current and past supply chain managers, 
and local implementing partners. Staff traveled to Uganda, I 
know, and to Ethiopia. I know the members here traveled 
extensively on this.
    Wherever significant disruptions were reported, they met 
with USAID mission staff and local implementers, and even 
inspected warehouses and identified the challenged. Through 
this investigation, we have found that at the lowest point the 
on-time, in-full delivery rates for lifesaving HIV/AIDS 
medicines was a very shocking number. It was 7 percent, 
reportedly, while industry standards is around 70 percent. 
Delays were caused by mishaps at many stages of the process, 
from the contract-awarding process to the transition between 
the contractors, to delays in the implementation of new, 
supposedly highly regarded IT systems, to the performance of 
the contractor, and the oversight of USAID and the Office of 
the Global AIDS Coordinator.
    While delivery rates have improved and reports of stockouts 
have ceased, concerns about what went wrong and why remain. 
That is, again, the focus here. So, we continue our oversight 
of USAID and the Office of Global AIDS Coordinator to identify 
lessons learned and to ensure that these mistakes are not 
repeated. We recognize that Administrator Green and Ambassador 
Birx inherited this contract from the previous administration, 
and I applaud them for their dedication and rigorous work 
toward righting the situation here.
    In global health programs, no amount of mismanagement or 
waste can be tolerated because lives are literally on the line. 
So, we have got to get it right.
    I want to thank again Chairman Smith and Karen Bass for 
their efforts to get it right. And I thank you, too, for your 
efforts in this regard.
    With that, I would like to yield back, Mr. Chairman.
    Mr. Smith. Thank you very much, Mr. Chairman, and thank you 
for your ongoing work on this important--I mean, oversight is a 
very important part of our work.
    Mr. Royce. Thank you.
    Mr. Smith. And you certainly have done an outstanding job. 
So, thank you.
    Mr. Royce. Thank you.
    Mr. Smith. I would like to now yield to our distinguished 
ranking member, Ms. Bass.
    Ms. Bass. Well, thank you, Mr. Chair and Mr. Chair, for 
your leadership on this issue and for holding today's hearing.
    This is one of those cases where we get to see how U.S. 
Government programs are working abroad. From what we have here 
in Congress, there have clearly been some challenges. I look 
forward to hearing from the witnesses how these challenges have 
been addressed. In August 2017, news reporting revealed that 
$9.5 billion in the global health supply chain, funded by 
USAID, was failing to deliver an acceptable percentage of its 
shipments on time and in full. Not long after that article, 
Members of Congress started to get calls from various groups 
reporting that antiretroviral medications were not available. 
Imagine our disbelief when people were reporting low levels of 
medication or complete stockouts, when we here in Congress knew 
that the money was available.
    While Chemonics International, the project implementer, has 
acknowledged that there were challenges and described steps the 
company has taken to improve performance, it is important to 
reflect on the fact that the project coordinates a global 
health supply chain for commodities such as HIV tests and 
treatments. And I understand that there has been some 
rectification of the situation, but I guess, for me and what I 
really would like to understand, how a company as big as that, 
that has been in the business as long as this, got into this 
problem in the first place. I do think that it takes a lot of 
courage for someone to take that first step, if you potentially 
have HIV, to get tested. But imagine hearing that the test or 
the medications are not available.
    The same holds true for malaria drugs. So, this supply 
chain supports the U.S. Government's largest and most important 
global health initiatives, including the PEPFAR, the 
President's Malaria Initiative, and population and reproductive 
health programs. I am very concerned that, after 15 years into 
PEPFAR, we are having to have a hearing to address low 
performance and other problems with the supply chain project 
that coordinates lifesaving commodities.
    Needless to say, this raises serious concerns here in 
Congress. Our role, of course, is oversight, and it is to see 
how that money is being spent and to ensure that the contractor 
is performing adequate, but, more importantly, PEPFAR, the 
President's Malaria Initiative, and other U.S.-led global 
health programs save millions of lives. What we want to do here 
is understand what happened in order to make sure that it 
doesn't ever happen again.
    In addition to mentioning that--I know that there has been 
some rectification of this--I want to understand just in the 
contracting process, if I am a company and I don't deliver, am 
I still getting paid? I would like to understand that. If so, 
what kind of accounting, what kind of records? How does this 
happen that the company actually doesn't raise alarm to say, 
``We are having difficulty. Such a small percentage of what we 
are supposed to deliver is being delivered. We are not getting 
paid. We need the money.'' It would be deeply disturbing to 
think that we are not delivering the product, but we are still 
getting paid.
    I yield back.
    Mr. Smith. Thank you, Ranking Member Bass.
    Mr. Garrett?
    Mr. Garrett. Thank you, Mr. Chairman.
    As a precursor to the comments of the distinguished panel, 
I would submit that mismanagement and waste in global health 
programs transcends even that which was very astutely and 
accurately pointed out by my colleague and chairman of the full 
committee, Congressman Royce. He said, global health programs 
matter so much because mismanagement and waste actually costs 
human lives. And he is absolutely correct. However, the other 
thing that mismanagement and waste does is create a paradigm 
wherein those people in this body, which under Article I of the 
United States Constitution are responsible for creating 
budgets, it makes it really hard for us to tell the taxpayers 
that we are doing our job well.
    And I have not a long history because I have only been here 
for 16 months, but a pretty daggone outspoken history of 
advocating on behalf of foreign aid and expenditures. So, I 
support foreign aid and expenditures, but I can't support 
waste, which is why this hearing is so important.
    And Congresswoman Bass said, accurately--and I again 
commend her because one of the neat things about Foreign 
Affairs is we actually get to be bipartisan here--that our role 
is oversight. Absolutely true, but our role is oversight and 
the responsible stewardship and allocation of tax dollars taken 
from working Americans.
    Now am I advocating against these efforts? Absolutely not. 
In fact, while I could think of many things to say about, for 
example, the George W. Bush administration, some good and some 
bad, during my small amount of time on the African continent, I 
heard a lot of glowing reviews by virtue of this nation's 
investment in Africa, in humanitarian aid, and specifically in 
HIV and AIDS. And these are good things because what they do is 
they create a vision of the world that is different from that 
which they see from Hollywood, which is philanderers, car 
chases, and drug-related shootouts, right?
    So, we can do good, but the oversight element is so 
important because the fiscal conservatives want to cut where 
they can. And I understand that. If I can't say we are being 
good stewards of these funds, how can I justify the continued 
expenditure? And because I genuinely believe, not only as a 
Member of Congress, but as someone who wore the uniform of the 
United States military, that if we can create a view by the 
individuals in the emerging world particularly of the United 
States as a benevolent partner, as opposed to a dictatorial 
hegemonic power, then better things will happen and more lives 
will be saved.
    So, I commend the subcommittee chairman, my colleagues Ms. 
Bass and Mr. Royce, on their absolutely spot-on words. I would 
just take it a step further and say we have a responsibility to 
be good stewards. In order for us to be able to sell, if you 
will, the idea that foreign aid matters and works, we have got 
to get this right.
    Thank you, and I would yield back.
    Mr. Smith. Thank you very much.
    Ambassador Birx, if you wouldn't mind starting from the 
top? Because we really want to hear what you have got to say.
    Ambassador Birx. Thank you. Thank you, Chairman Smith.
    It is a privilege to be here with Ranking Member Bass. We 
spent some time together in Malawi and Kenya and really had an 
extraordinary trip.
    And I really want to recognize Chairman Royce for the 
support that he has given to PEPFAR.
    I also want to recognize the staff because the dialog that 
we constantly have with your staff has made the program 
stronger.
    In answering, and just to note, I was also active duty 
military for 29 years. I appreciate deeply your comments 
because that is what this is about. This is about the 
translation of the generosity and the commitment of the 
American people to envision a better world for everyone. And to 
be part of that has been a true privilege.
    Today, more than 14 million men, women, and children are 
alive and their lives have been transformed because of HIV/AIDS 
response from the U.S. Government, really because of the 
compassion and commitment of the American people and the people 
of this subcommittee, the main committee, and the bipartisan, 
bicameral support that we have had for the 15 years of PEPFAR.
    We have also had administration support from President Bush 
to President Trump, and President Obama in between, really 
continuous support across the aisle for this important program. 
Why? Because we have been focused on impact and results and 
transparency and accountability to really ensure that every 
dollar that the U.S. taxpayer entrusts with us is spent 
effectively and efficiently.
    PEPFAR's accomplishments have been possible for two 
fundamental reasons. One, we are unrelenting in our data 
analysis and ensuring that we understand what is happening at 
the sites where the clients are being served. Secondly, an 
absolute commitment to utilize the whole of government 
approach, utilizing the best of each U.S. Government agency to 
achieve more each year through more effectiveness and 
efficiency.
    Today, and, indeed, in a couple of hours across in Dirksen, 
we recognize the 15th anniversary of the PEPFAR establishment 
by Congress, from the State of the Union of President Bush in 
January. This bipartisan leadership is not only saving lives, 
but now we are changing the very course of this pandemic.
    A principal factor in our success is we are harnessing the 
latest data and the latest science, and directing those 
resources where the HIV epidemic is the largest, the need is 
greatest. And then, ensuring those resources are effectively 
and efficiently spent, so that we have the maximum impact for 
each dollar investment.
    We look at this data carefully every quarter, looking at 
outcomes and costs, and in order to continuously improve our 
work. This commitment to transparency and accountability and 
impact is why PEPFAR is cited as one of the most effective and 
efficient U.S. foreign assistance programs in history, but, 
importantly, is also transforming lives around the world, as 
you have witnessed in Africa.
    PEPFAR has invested billions into the health systems, 
including over $3 billion to a strong, reliable, and secure 
supply chain. As Representative Bass just mentioned, how is 
this happening 15 years in with these large investments? A 
high-performing supply chain is the lifeblood of our work. We 
must ensure that the right commodities reach the right people 
in the right places at the right time. This requires efficient 
and effective commodity forecasting, procurement, and delivery, 
and tracking every product down to the site where the client 
needs the medications or the diagnosis.
    PEPFAR has not only invested billions in strengthening this 
supply chain, but continues to provide technical assistance to 
governments and non-governmental supply chains, building 
infrastructure, funding hundreds of full-time U.S. Government 
personnel in-country and within government. We are driven every 
day to bring the best medicines and the best diagnostics and 
the best monitoring to every client we serve. All of this work 
to bring the best is totally dependent on the last step, 
ensuring that the supply chain is functional at every aspect 
down to the clients we serve.
    So, I have been deeply concerned about the recent supply 
chain challenges that bring us here today. Some of the issues 
have been fixed and markedly improved. Others still need to be 
urgently addressed, and some of them have been urgently 
addressed just in the last week, including the Nevirapine 
issue.
    Everyone who is involved in the supply chain at all levels 
must feel the same sense of accountability to get our 
successful drugs and medications to the levels that they need 
to be everywhere along the chain. We need it to successfully 
and sustainably deliver these essential lifesaving treatments 
and commodities for mothers, fathers, sisters, brothers, sons, 
and daughters that we have all been privileged to serve for the 
last 15 years, because they deserve nothing more than our best 
and we can and must do better.
    That is why I have strengthened the State Department's 
oversight of all PEPFAR-supported commodities. This includes 
monthly antiretroviral risk reporting, increased oversight of 
the Emergency Commodity Fund's use and expenditures, approval 
over all procurements of any legacy ARVs that are no longer 
considered first-line, and, critically, sharing the 
commodities-related data between PEPFAR, USAID, and the Global 
Fund.
    Late deliveries have consequences. No one wants to be down 
to their last test kit when a pregnant mother walks through the 
door and needs to be tested. So, every clinic, every district 
hospital, and every community site begins to slow down services 
when they have a concern about the arrival of commodities and 
drugs. People are turned away and services are not delivered 
when people are concerned about commodity stocks.
    Together we are closer than ever to controlling this 
pandemic and decreasing the future cost because of effective 
and focused programming. What once seemed impossible is now 
possible, controlling and ultimately ending the AIDS epidemic 
as a public health threat for all of us around the globe. But 
this will only happen if we constantly hold ourselves 
accountable to not only do more, but to do it better. We all 
need to be at our best every day, and everyone who is a part of 
PEPFAR needs to be at their best. And every contract needs to 
deliver its best every day.
    Chairman Smith, Ranking Member Bass, and the other 
distinguished members of this subcommittee, thank you for this 
opportunity to hear from each of you today. Thank you for your 
continued support, your staff's support. And we are at once 
profoundly grateful for the work that you have done to ensure 
that PEPFAR is successful every day.
    I look forward to your questions.
    [The prepared statement of Ambassador Birx follows:]
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    Mr. Smith. Thank you very much.
    And, Ms. Koek?

     STATEMENT OF MS. IRENE KOEK, SENIOR DEPUTY ASSISTANT 
     ADMINISTRATOR, GLOBAL HEALTH BUREAU, U.S. AGENCY FOR 
                   INTERNATIONAL DEVELOPMENT

    Ms. Koek. Thank you very much. Thank you, Chairman Smith, 
Ranking Member Bass, distinguished members of this committee. 
And I would also like to thank Chairman Royce for joining us 
here today.
    And I want to thank you very much for the very strong 
support and leadership you provided to the work the U.S. 
Government does in global health. I would also like to thank 
you for the oversight and the oversight role that this 
committee plays, and again, echo Ambassador Birx's thanks not 
only to you, but also to the staff for the engagement over 
these last many months. We very much appreciate that.
    I do appreciate this opportunity to discuss USAID's work in 
supply chain management and commodity procurement, to talk 
about the procurement process we use, provide an update on the 
performance of the contract, and share our plans for the path 
forward.
    For decades, USAID has been a world leader in providing 
essential lifesaving commodities for public health programs. We 
manage global health commodity procurement and delivery on 
behalf of the interagency PEPFAR and the U.S. President's 
Malaria Initiative, or PMI, and many of USAID's global health 
programs. For example, this work has helped keep the 14 million 
patients on antiretroviral therapy that Ambassador Birx 
mentioned and delivers malaria prevention, treatment, and 
controlled commodities that benefit over half a billion people 
across Africa. The success of the U.S. Government's global 
health programs has depended on our investments to ensure the 
availability of health products in the countries where we work.
    Previously, USAID's procurement and supply chain operations 
were managed under two large contracts, one for HIV and one for 
other health programs, including PMI. In 2012, we began the 
process to design a follow-on program seeking to incorporate 
lessons we had learned from the predecessor projects, increase 
efficiencies, and continue to identify cost savings. We 
solicited input from headquarters and field staff, from the 
Office of the Global AIDS Coordinator, from PMI, from the 
Centers for Disease Control and Prevention, and other partners. 
We commissioned an independent expert review of existing supply 
chain models to ensure we applied state-of-the-art and 
commercial sector supply chain best practices.
    Because of the heavy management burden in the field and to 
prevent or minimize duplication of systems, we made the 
decision to consolidate procurement and supply chain function 
into one large award, rather than two. We recognized that any 
transition of this size carried risks. We took steps to 
mitigate the risk of supply interruptions and stockouts by 
increasing inventories and ensuring overlap between the prior 
contracts and the new contracts, all in order to ensure that 
patient access to commodities would continue smoothly.
    Based on the extensive evaluation of the proposals by a 
review panel which include USAID and Office of the Global AIDS 
Coordinator's staff, USAID awarded the contract in April 2015 
to a 12-member consortium led by Chemonics International. This 
consortium includes world leaders in supply chain, including 
IBM and Kuehne & Nagel. Work began in January 2016 after a 
protest to the GAO and claim to the Court of Federal Claims 
were decided in USAID's favor.
    The contract faced management challenges in the initial 
months and had poor performance in its on-time delivery. USAID 
staff identified these performance issues very early in the 
process. In Washington and in the field, we have worked to 
minimize the impact of late deliveries, including assisting in 
the redistribution of commodities between facilities to prevent 
stockouts.
    We have also held the contractor accountable. In response 
to USAID's demands for improvements in April 2017, Chemonics 
developed and implemented an action plan to address its 
deficiencies. As a result, we have, indeed, seen significant 
improvement in their overall on-time delivery and performance.
    The most recent data show that on-time delivery increased 
from 31 percent to 73 percent over the past 6 months. On-time 
and full delivery also improved from 32 percent to 67 percent 
over that same period. The backlog of undelivered orders is now 
under 5 percent of total shipments in industry standard.
    While these improvements have been sustained, even as order 
volume has increased, progress must continue. Performance has 
not yet met the target for on-time delivery, and USAID 
continues to provide a high level of oversight and scrutiny 
over this contract to hold Chemonics accountable.
    We have started to aggressively apply lessons learned from 
this experience to the design of USAID's next supply chain 
programs. Building on USAID's broader procurement reform 
efforts, we are identifying ways to be innovative in our design 
of procurement and management of awards and effectively manage 
risk. We will actively engage industry leaders, interagency 
partners, and the field throughout this process. We will also 
build in the opportunities for public comment, sharing the 
design process, and closely consult with this committee and our 
other oversight committees.
    USAID's highest priority is to ensure that patients can 
access critical health products that prevent and treat life-
threatening disease and that there is no interruption in 
treatment. We take our obligation to ensure good stewardship of 
taxpayer resources very seriously.
    Thank you for your attention to this very important issue, 
and I look forward to answering your questions.
    [The prepared statement of Ms. Koek follows:]
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                              ----------                              

    Mr. Smith. Thank you.
    First of all, let me thank both of you; your integrity is 
so high and your commitment so deep. I have been here long 
enough to know that, when something goes awry, as it does like 
this, that there is--coverup might be too strong of a word--but 
there is an effort to shift blame, never come fully forward 
with the facts and documentation. But you have done precisely 
the opposite.
    I know, Ambassador Birx--I have had numerous conversations 
about this--and it is all about making sure. And you are so 
data-driven, but you are equally, if not more so, 
compassionate, and you want to ensure that the person who needs 
that ARV, or whatever the drug or the intervention might be, 
gets it on time, so he or she do not become sicker or even 
worse.
    Now have there been consequences where anyone, as far as we 
know, has potentially lost their lives or was the stock that 
was there sufficiently available that it didn't get down to the 
very last one, and then, they are on zero? That would be my 
first question.
    Again, I can't say enough. You have looked to fully expose, 
explain, explore, and now, aggressively remedy a situation 
that, for the victims of HIV/AIDS and other diseases over which 
you have jurisdiction, would be deleteriously affected, if not 
lead to their death. So, that would be the first question.
    The second, I would ask, when USAID issued the request for 
proposals in January 2014, USAID convened a technical 
evaluation committee to evaluate bids. Was OGAC part of that or 
not?
    And let me also ask, with regard to the Country Operational 
Plan, the COP process, can you explain that to the committee, 
how it relates to the distribution of ARVs and the effort of 
USAID and Chemonics to engage in health system strengthening?
    If you could get to the issue of Nevirapine and explain 
that fully, as to what are the side effects, what are the 
problems associated with it, what are USAID and PEPFAR doing to 
move to other drugs like DTG? Maybe you could explain that and 
give us some good insights into that.
    Let me finally ask--and I do have others, but I will go to 
my colleagues--when Chemonics did not complete the first phase 
of its IT system ARTMIS until August 2016, with the final phase 
not being completed until the end of June 2017, this is despite 
the fact that the new system was promised in the contract. So, 
they represented, obviously, that they had that capacity when 
they didn't. I am wondering why it was not caught that there 
was a lack of an IT system when the awarding of the bid 
occurred. Again, you might talk about the corrective actions 
that are being taken now to ensure that never happens again.
    My understanding is that some of the top team, if not all 
of it, of Chemonics have been fired. If you could speak to the 
accountability side of all of this, both on Chemonics as well 
as on the government side? Because, obviously, accountability, 
holding people to account when they do something that has such 
a potentially catastrophic consequence--I liked what you said--
late delivery has consequences. And so, it ought to have 
consequences, so that those who, either through incompetence or 
whatever, don't do it again.
    Just a thought, and maybe there is nothing to do this, but 
I am hoping there was no revolving door involved with Chemonics 
getting it or any of that. If you could give us some insights 
into the technical team that did the awarding? Was that 
completely above board and they just missed it or could there 
have been something more nefarious?
    Ms. Koek. Right. Perhaps I can start, and then, ask 
Ambassador Birx to fill in, particularly on the drug and some 
of the other issues.
    And thank you very much, Chairman Smith, for your questions 
and, again, for your very close attention to this hugely 
important issue. I really, really do appreciate that.
    So, your first question regarding whether there have been 
instances of people not having the drug or losing their lives, 
this is an issue that is of great concern. As I mentioned, we 
knew there would be disruption, regardless of who won the 
contract. So, we took steps, as I mentioned, to build in buffer 
stock and to make sure we had additional overlap. This is also 
something we have been looking at very, very closely and 
working with our field staff and asking them to work with their 
country counterparts to monitor and make sure that doesn't 
happen.
    We are aware of two cases where delays in deliveries did 
have programmatic impact. One was with a bed net campaign in 
Nigeria where the nets were delayed in arrival. So, it delayed 
the start of the bed net campaign for some weeks, as I 
understand it. And then, also, in Ukraine, where the delays of 
the shipment of ARVs did delay onset of treatment by a couple 
of weeks for some patients. And those are the two instances 
that we are aware of.
    It is something we continue to investigate and ask our 
field staff to regularly let us know of any issues. Stockouts 
do happen in the countries we work, right, and that is part of 
where the technical assistance that we do tries to make sure 
that the country systems are working to manage supplies, make 
sure that that last-mile facility does have the medicines they 
need to deliver. So, that is something we constantly look at. 
But those are the two instances.
    With regard to the technical evaluation panel--and I 
believe and I hope this is something we have shared, but I can 
certainly share it again--the panel did include a 
representative from the Office of the Global AIDS Coordinator. 
It was something that was set up some years ago. As you said, 
it was a long, very long, long process. But it also included 
across-the-board expertise not only in supply chain, but people 
with HIV experience and maternal and child health and family 
planning and malaria experience. We really tried to make sure 
that the panel reflected the full range of expertise, as well 
as on IT systems and on logistics systems, and everything that 
we were asking for in the solicitation. I was not part of that 
panel. So, I can't speak to any further details. But we can 
certainly share with you additional information on that.
    On that, let me just jump to one of your later questions. 
We took extraordinarily--we always take very careful 
precautions to make sure that the procurement and the review of 
those proposals is done according to the rules, according to 
the Federal Acquisition Regulations, and is tightly controlled. 
With this one, because it was so large and so competitive, we 
made sure that there were no issues whatsoever with the 
process. It was very, very tightly controlled, tight oversight 
by USAID. The panel was completely sequestered for the many 
months. No one was aware of who was on the panel because that 
is part of the rules; you are not supposed to know who is 
sitting on the panel. But they took very, very careful steps to 
make sure there was full protection and no conflict of interest 
with the members of the panel and the decisions that were made. 
And that was also part of the overall review process, both 
within USAID----
    Mr. Smith. Just on that point, if I could? The IT 
assessment, who did that?
    Ms. Koek. So, as I understand it, there was a member on the 
panel who was an expert on IT systems, as I understand, or the 
expertise existed on the panel. What we asked for in the RFP 
was to show us what your approach to putting in an IT system. 
One of the criteria--it was not necessarily the first criteria, 
but it was among those criteria--what the proposal was, 
Chemonics did have components of that system in place already. 
What hadn't happened yet was the knitting all those pieces 
together, and that needed to happen once the contract was 
awarded, as they can make sure it was being responsive to the 
procurement and supply delivery, which was what the system was 
meant to do.
    So, the startup of that system was a few months late in 
starting, and that was one of the issues we raised with 
Chemonics in April 2017. It is now up and running, and we 
continue to adapt it, which was one of the other things we 
asked for, is a system that could be flexible and adaptive to 
whatever we needed it to do or whatever the system needed it to 
do. And that is certainly what has been underway.
    The proposal or the RFP--and we can share those criteria 
with you, if you would like; I don't have them all in front of 
me at the moment--did ask to propose their approach to putting 
the system in place. It was won on that basis, that Chemonics 
proposal was reviewed.
    Let me talk briefly about systems strengthening. I think 
Ambassador Birx mentioned this. They are trying to build 
logistics and product delivery systems in the country where 
work has been a critical function of our work in supply chain 
since the very, very beginning days of our procurement/supply 
chain.
    Typically, it has been about, you know, it is a relatively 
smaller portion of the overall money we put into procurement 
and supply chains. It is roughly about 15 percent of the total 
funding. It has had impact. I mean, we work through country 
systems, and our intent is to build the capacity of the systems 
within the country we work to procure and deliver supplies 
themselves. The PSM project's role is to bring commodities to 
the central warehouse. And then, what we want is the country 
system to take it from that warehouse to make sure it gets to 
all the facilities and that there are not stockouts. So, the 
technical assistance and the work we do is meant to improve 
those systems.
    There has been tremendous progress in that, and it is 
country by country. There is wide variability from one country 
to another of this year's. A good example is Zambia, where we 
started working in Zambia in the late 1980s, where it was a 
very poor system, you know, product shipped out whether or not 
it was needed, or paying not a whole lot of attention to 
whether there were stockouts. But, over the years, have helped 
the Zambians build a system that has a network of warehouses, 
that is using technology to make sure product is getting where 
it needs to go and is a high-functioning system. So, it does 
make changes, and this is a system that started with just a few 
products, but, then, was able to take on all of the product of 
PEPFAR as well as PMI over the years. So, there certainly is 
progress there.
    Let me maybe turn to Ambassador Birx for the questions on 
Nevirapine and TLD, and I can add on the supply chain after she 
answers that.
    Ambassador Birx. Great. Thank you.
    So, just a couple of comments. I was not at OGAC when the 
technical review committee was meeting. I know CDC. I was at 
CDC at the time. And so, we had awareness that USAID was 
letting out an RFP for a combined agreement, and that was the 
depth of our awareness.
    When I came to OGAC, I found out about the award through 
the public system when it was announced publicly. But I think 
that there were procurement concerns, and I guess other 
concerns. So, we were not aware of the award until it was 
announced publicly.
    That said, I think this whole issue of supply chain--and 
thank you for the hearing because it has really asked us to 
step back, to really say, like Congresswoman Bass said, why 15 
years in are we talking about glitches in the system, not just 
glitches at the central warehouse, where Chemonics is 
responsible? And the perception that the commodities are not 
there when they are supposed to be sends a ripple effect down 
through the system. People will adjust, so that they don't have 
stockouts. They will adjust to giving clients a 2-weeks' 
supply. They will adjust to giving them a 1-month supply.
    There is good communication between the system. And so, 
whenever there is a concern that something will be late, people 
adjust, so that clients don't actually miss out on their 
medication. And so, a lot of those adjustments have been 
happening.
    We will find out that clients that are supposed to get a 3-
months' supply are only getting a 2-month supply. That requires 
them to come back, then, multiple times. Those are the issues 
that often emerge in the transmission from the warehouse to the 
site.
    So, we really need to look at these $3 billion that we have 
invested just since 2009 and say, are we investing correctly 
with technical assistance to really create a system that has 
the resilience to meet the demands of the future? Because with 
that level of investment over this amount of time, we would 
have a different expectation. When you look at the laboratory 
systems and how far they have come, when you look at task 
shifting within the health cadres and how we have trained 
nurses to do what doctors have done and community health 
workers to do what nurses have done, when we see all the 
progress we have made in other areas to allow 14 million people 
to be on treatment, when you talk to the Global Fund, when you 
talk to the field, the one comment that continues to come up is 
the integrity of the supply chain. So, there is an issue there 
that persists, despite a significant investment.
    And so, we are looking at all aspects of this. Maybe our 
conceptual framework about how to support a supply chain may be 
old school, and maybe we have to look at this differently. We 
are working with USAID on each of those issues.
    At the same time, we have been trying to streamline what we 
ask for. So, as we move to viral load, to save money, we have 
taken out CD4 counts because they are no longer needed. So, 
that simplifies the supply chain of who needs what when. We are 
also trying to simplify to a single first-line and a common 
second-line, so that countries can move supplies, as described, 
between warehouses and between sites, because the clients are 
on the same thing.
    I think, most importantly, if you go to pepfar.gov today, 
you will see our results down to the site level and the targets 
at the site level, as you described about the country 
operational plans. And so, any supplier should be able to look 
at that and know precisely what the needs are at that site over 
the next 12 months to create forecasting, procurement, and 
delivery. And so, this is now publicly available, open to 
everyone, including the people on the ground, so that they can 
assure that they have access to the same data that we have.
    I think the Nevirapine issue is a real illustration how 
Administrator Green and Chief of Staff Bill Steiger and Irene 
have worked with this. When we found out just 3 months ago that 
we were still utilizing Nevirapine-based products, what does 
that mean? That means that was a product that was created in 
the mid-2000s. Often, children were put on this combination, 
Nevirapine-based product.
    The interesting piece of it, we were asking the question, 
why aren't young adults virally suppressed? We have been 
putting these surveys in the field at the community level. We 
have found, whereas adults over 25 were about 90 percent 
virally suppressed, if you were between 15 and 24, your viral 
suppression was around 60 to 70 percent. We couldn't understand 
it.
    If some of those clients had been on Nevirapine since 
childhood and kept on a Nevirapine-based product, we know they 
are more likely to have drug resistance. And so, the team at 
USAID and the team at OGAC have been working very hard to 
actually cancel orders. Now you would say, how does this 
happen? Well, countries request, ministries of health request, 
partners are requesting these drugs, but this awareness has 
really increased our awareness and allowed us to find this 
legacy ordering. They have already been able to cancel orders 
with no cost, so that we can move to a more effective regimen 
for adolescents and young adults.
    I think we should be very proud that, out of this hearing 
and out of the COP development process, and this change to this 
new drug that you mentioned, the TLD drug that is based on DTG, 
dolutegravir, that has really brought out all of the issues 
about what drugs we are utilizing. And the Global Fund very 
much relies on the U.S. Government to really, because we have 
the boots on the ground, to work with governments and 
communities to ensure that the best drugs are being ordered.
    And so now, we have really in the last just 3 months, what 
often would have taken us a year to fix, we are now fixing it 
in a matter of weeks. I think this level of oversight 
translates down to our more constant awareness of what is 
occurring, and we have put in a lot of checks and balances at 
the State Department to ensure that we are aware of all the 
aspects of the functioning of the supply chain.
    But we still have substantial work to do between the 
warehouse and the clinic. Because we have spent, if you 
remember, you all have done so much work with us and FDA to 
ensure that a new drug, a branded drug that is highly effective 
in the United States or Europe is immediately worked on 
licensure agreements to take them to generics and to get 
waivered through their expedited FDA approval process. That has 
allowed us to move the best drugs to the countries immediately, 
so that they can take advantage of all of our scientific 
advances.
    That movement and that rapidness has allowed us to really 
look at our procurement processes and really find where we are 
still having these gaps. And then, we really need at each one 
of these gaps, as described, to have a solution where we 
quarterly monitor our improvement. We want to take the same 
thing that we have taken to the clinic on ensuring that clients 
are doing well by looking at their viral load suppression, to 
have that same level of data out of the supply chain, so we can 
really monitor stocks as they move to the clinics where they 
are needed.
    That will allow us to decrease expirees and, also, to 
ensure that there is agreement between what partners report on 
people on treatment and what drugs are being utilized at the 
site. So, it is a double-check to ensure that there is validity 
and validation of all aspects of the program.
    Mr. Smith. Ranking Member Bass?
    Ms. Bass. Thank you very much. Thank you for your 
testimony.
    So, I still would like to understand the process. 
Chemonics, I was looking on their Web site while you were 
speaking. There is not a ton of information there. It is not 
clear to me if it is an NGO or a for-profit, who runs it, who 
owns it. None of that is clear. Maybe you have the answers.
    And then, in the contracting process, you give a contract 
out. It sounded like, Dr. Birx, it sounded like USAID does an 
awful lot of the work, from what you were describing. And so, I 
thought that is what the contractor did, a lot of what you were 
describing. How do these contracts work? Is it cost 
reimbursement? They deliver; you pay? This is a $9 billion 
contract, right? It was $3 billion since 1997. That is a heck 
of a lot of money.
    Ms. Koek. Thank you very much, Representative Bass.
    So, the $9 billion is a ceiling for over the 8 years of the 
contract. We haven't given that money to Chemonics as yet, but 
it is a ceiling for a contract.
    I will have to confirm of whether it is a--what is the type 
of contract?--whether it is a for-profit or----
    Ms. Bass. For-profit or not-for-profit.
    Ms. Koek. I believe Chemonics is a for-profit, but I don't 
know. We don't award contracts based on what the institution is 
per se. We award contracts based on how their proposals meet 
the criteria, which does, indeed, include past performance as 
an important component of that.
    Ms. Bass. Well, it is also important if it is a for-profit. 
Because if it is a for-profit, they are going to look, 
obviously----
    Ms. Koek. Yes.
    Ms. Bass [continuing]. At what their bottom line is. And 
so, how do they make money?
    Ms. Koek. Absolutely.
    Ms. Bass. How do they earn a profit off of taxpayer dollars 
delivering services that they don't provide?
    Ms. Koek. Well, the issues with Chemonics' performance was 
about the on-time delivery. They did, indeed, deliver the 
product. They just did it late and not on time, and not on time 
with a fairly narrow window.
    Ms. Bass. And so, what is late?
    Ms. Koek. Late is, the way we describe or define on-time 
delivery is within a 21-day period. So, 2 weeks before a date 
and 1 week after is when we expect the product to be delivered. 
I would note that that is a narrower window than the 
predecessor contracts had, which was much longer. So, we are 
holding them to a higher level of accountability than 
previously.
    Ms. Bass. Some medications----
    Ms. Koek. I'm sorry?
    Ms. Bass [continuing]. It is difficult to be interrupted in 
your therapy by late----
    Ms. Koek. Well, when you do a procurement, when countries 
do procurement orders, you plan for when the drugs need to be 
there. So, the date for procurement shouldn't be the day you 
are about to stock out, right? You need to have enough timing 
and plan, as Ambassador Birx was talking about, through the 
system to make sure product can get through the system to where 
it is. So, this is product going to a central warehouse.
    Ms. Bass. So, when did you find out--and I don't mean you 
personally, of course--that they were having a problem?
    Ms. Koek. Our staff identified the problem fairly early on. 
It was probably in August 2016 that they identified there were 
some issues.
    Ms. Bass. And how long had the problem been going on?
    Ms. Koek. Well, that was at about the time that Chemonics 
started. That was when Chemonics first started doing the 
purchase and did their first purchase and started the delivery 
process. We had had an overlap between the two contracts for a 
number of months, and it was very early on that our staff 
identified that problem. And they raised it and there were some 
attempts to fix it, and they continued to escalate the issue 
all the way through until we sent a formal letter to the head 
of Chemonics in April 2017.
    Ms. Bass. So, your staff identified it?
    Ms. Koek. That is correct.
    Ms. Bass. As opposed to the contractor saying, ``I'm having 
problems finishing my contract.''?
    Ms. Koek. There was a lot of discussion back and forth. I 
can't speak to exactly what those discussions were. I believe 
the contractor did identify that there were also issues and did 
try to address it. I would have to come back to you on exactly 
what those discussions were and what those issues were.
    Ms. Bass. And so, what penalty did they receive for being 
late?
    Ms. Koek. There were a number of corrective actions. As per 
a question Chairman Smith asked, they implemented an action 
plan and they replaced all of their, most of their senior 
staff. So, many of those senior staff were removed and replaced 
by others.
    Ms. Bass. And that is a correction plan. My question is----
    Ms. Koek. It was part of a correction plan. In addition, as 
part of our process, we do ratings of the contractors we have. 
They received a negative rating, which affects any other 
business they are likely to get from the Federal Government, 
because you look at those as part of your past performance. So, 
that would certainly affect----
    Ms. Bass. But their contract is not stopped?
    Ms. Koek. Their contract is not stopped, right, because 
they did continue to deliver the product. They were just not 
meeting the on-time delivery metric.
    Ms. Bass. And so, when they are late, is there a financial 
penalty that they pay for being late?
    Ms. Koek. There is not a financial penalty that I am aware 
of in the contract, but I would have to confirm that. But they 
did deliver the product. They did purchase and deliver the 
product. They did not meet the on-time delivery metric.
    We also put a moratorium on any raises on the contract 
staff and refused to allow them to make any raises. And as part 
of our corrective action plan that they proposed, and we 
accepted and they completed, there were a number of other 
things. They accelerated the MIS system that we talked about a 
few minutes ago, and they made some changes and simplified and 
straightened out their systems and their management system.
    Ms. Bass. And I believe that you said that now they are 
about at 60 percent, did you say?
    Ms. Koek. They are overall 73 percent on-time delivery, 
yes.
    Ms. Bass. So, 20-plus-percent is still late?
    Ms. Koek. Well, the target is 80 percent.
    Ms. Bass. Oh, the target is not 100 percent?
    Ms. Koek. No, it is not 100 percent because there are 
always things, and I think industry standards are much lower 
than that. But our target is 80 percent on-time delivery within 
that 21-day window.
    Ms. Bass. I ask you these questions because I am just 
really trying to understand what processes we use. And I think, 
like my colleague Mr. Garrett was mentioning, this is a 
tremendous amount of money. In the normal course of doing 
business, I mean, it is one thing to be late if you are 
delivering shoes; it is another thing to be late if you are 
delivering lifesaving medication where you can't have 
interruptions. I know you said that the countries account for--
it is not like they run out completely, but I don't know that. 
And I would ask if you do, because if you are 21 days late, 
some of the countries have 30-, 40-, 50-day supplies? I would 
just question that in some of the places.
    Ms. Koek. No, and it is something we are very concerned 
about and constantly monitor to make sure there are not issues 
with stockouts because that is the most critical piece here, is 
making sure patients have access to the drugs when they need 
them, whether that be for malaria, for HIV/AIDS, et cetera, 
that there is no interruption in treatment. So, our teams on 
the ground, which is a combination both of the contractor teams 
as well as our U.S. Government staff, work very closely to make 
sure that orders are put in place in a time to make sure there 
is no interruption. So, those are all part of a fairly complex 
process to make sure you are doing the orders on time and that, 
when the orders do come in, they meet that and you can send the 
supplies down, all the way down to the facilities, because they 
have to go through the systems in-country.
    Ms. Bass. So, there was a challenge to this contract?
    Ms. Koek. That is correct.
    Ms. Bass. And why was there a challenge? I mean, I read 
that there was one. It went to court and it didn't hold, but I 
didn't understand why there was a challenge.
    Ms. Koek. So, it is not uncommon when there is another 
bidder to challenge the decision. The losing bidder would do 
so. So, the losing bidder did challenge it through the General 
Accountability Office, which reviewed the challenge and 
reviewed the challenge against all of the documentation that we 
made about our decision, and concurred with our decision and 
found in favor of USAID. Then, they raised a claim with the 
Court of Federal Claims, who also found in favor of USAID and 
dismissed the challenge.
    Ms. Bass. So, a slightly different subject, recently, there 
have been tariffs that were imposed on products from China, and 
there is 1300 products that are on that list. Some of those 
products are rapid diagnostic tests for malaria, vaccines, and 
other critical compounds. Does that impact any of what--you 
know, since part of this contract was malaria drugs as well, 
correct?
    Ms. Koek. Yes, malaria drugs are certainly part of the 
contract, yes. I don't have any information on that. I would 
have to get back to you. We could investigate and get back to 
you on that question.
    Ms. Bass. Okay. One of the big things I really would like 
for you to get back to me on is the question as to whether or 
not this is a for-profit company, whether the company is still 
paid by being late, which is an interesting thing, I think. In 
a lot of businesses you don't just continue getting paid if you 
don't fulfill your objectives, even if you are--the product 
eventually gets there; it is just late. It doesn't sound like 
there is any financial penalty at all. And how do companies 
that are for-profit make a profit in this way? Do you know what 
I mean? Those are taxpayer dollars. So, if I sell less or 
cheaper or inferior products, I increase my bottom line. How do 
you work with for-profit companies in this space?
    Ms. Koek. I would be happy to share some information about 
that, both about Chemonics and the structure of the contract 
and those issues. We will share that with you after. I don't 
have that information with me now, but I would certainly be 
happy to do so.
    Ms. Bass. And just in closing, Mr. Chair, again, I raise 
these questions because I think that they are questions that 
are bigger than just this contract. It is about how USAID does 
business, period. When my colleague over there is concerned 
about waste, it depends on how you look at waste. And so, 
anyway, I ask these questions because I just question how we do 
business sometimes.
    Thank you.
    Mr. Smith. Mr. Garrett?
    Mr. Garrett. Thank you, Mr. Chairman.
    And thanks to Ranking Member Bass. I think there is a 
little synergy here.
    I want to preface my questions and comments with this 
caveat, and that is that I am not targeting you ladies, 
although it may sound like it. But there is some frustration 
here.
    It is over a $9 billion contract. I would just like to 
break that down for folks in my district. That is 9 million 
times $1,000. And the waste is mind-numbing.
    Ms. Koek, you have indicated that, in August 2016, your 
staff identified the problem, is that correct?
    Ms. Koek. Yes, sir, or started to identify, yes.
    Mr. Garrett. Okay, but the on-time, in-full delivery in 
August 2016, based on the data that we have received, is 
probably somewhere in the 50 percent range, and that was near 
the beginning of this contract, correct?
    Ms. Koek. In August 2016, our staff started to identify 
some issues, because a lot of these issues were about the 
management and how the contractor was working to manage the 
processes.
    Mr. Garrett. Is it correct, though, that the on-time and 
full delivery around August 2016, based on the data you have 
provided to this committee today, would have been in the 
ballpark of 50 percent plus or minus 10?
    Ms. Koek. I don't----
    Mr. Garrett. But that sounds about right, based on the data 
that is in front of me. Okay. And so, it is also correct, then, 
that the trend of on-time and full delivery continued downward 
from that point, let's say roughly 50 percent, to a low for an 
entire quarter of a year of 7 percent in the January-through-
March quarter of 2017, is that correct?
    Ms. Koek. That is correct.
    Mr. Garrett. Okay. So, you identified the problem in 
August, and then, January through March, the problem had 
exponentially increased? Accurately depicted?
    So, then, you indicated that you sent a letter to Chemonics 
in April 2017. Okay. With all due respect--and again, you are 
not the target here--but what took us so long?
    Ms. Koek. Thank you, sir. Let me describe a little bit of 
the process. So, in August 2016, that was when Chemonics first 
placed their first order. At the time, our staff identified 
that there were likely to be some issues. They hadn't yet made 
those deliveries at that time. Because there is a long lead 
time for many of the products we do, you don't necessarily send 
an order and have the order delivered the following week. There 
is typically several months in between the lead time between 
the order and the delivery.
    Mr. Garrett. But the contract initiated in July 2016, and 
we identified weaknesses and the delay in on-time and full 
delivery in August 2016, a month later, which continued 
precipitously downward through the first quarter of 2017. And 
then, in April, we sent a letter. Is that accurate? Again, I'm 
not after you. I want to understand what happened.
    Ms. Koek. No, I appreciate that, sir. So, Chemonics began 
the ordering/delivery in August 2016.
    Mr. Garrett. And we immediately identified a shortcoming in 
Chemonics' performance as related to that 80 percent goal of 
on-time and full delivery? Immediately?
    Ms. Koek. We identified there were some issues within their 
management system.
    Mr. Garrett. I'm not trying to be short with you.
    Ms. Koek. No, sir.
    Mr. Garrett. But this is sort of yes-or-no stuff.
    Ms. Koek. Yes. We identified issues with it. They had not 
yet delivered any product at that moment in time. So, we 
continued to escalate the issues within Chemonics. Our staff 
identified the problem. They did some reorganization. It didn't 
fix the problems. Indeed, as you noted, the lowest point was 7 
percent in that first quarter of 2017.
    Mr. Garrett. And that was for an entire quarter. Again, I 
am not trying to interrupt you, but it wasn't 7 percent for a 
day; it was 7 percent over a 3-month period.
    Ms. Koek. That is correct. That is correct. Exactly, our 
reaction was similar to yours; we were very, very concerned. 
So, continued to escalate the problem.
    Mr. Garrett. So, help me help you here, because I think we 
want to get the same thing. And let me just digress for a 
moment. So many times in government--and I have worked in local 
government, I have worked in state government, I have worked in 
Federal Government--and you guys, to your credit, at one point 
I heard something to this end a little bit. It is, well, it is 
a funding problem. Well, if you are at 7 percent, then I 
suppose you could increase your expenditures by 14.2-fold and 
get to the aspirational 100 percent.
    But when you are $21 trillion in debt, right--and I support 
this program. Earlier, Dr. Birx, you suggested that PEPFAR 
works, and I would submit that we know PEPFAR works. There are 
14 million living, breathing, walking pieces of evidence that 
PEPFAR works; 2.2 million children born without HIV that attest 
to the fact that PEPFAR works. But how do I tell my colleagues 
that this is a good expenditure when we are at 7 percent for a 
quarter?
    I am just getting warmed up though. So, I am here to 
support the program, but how can I support a program that 
throws proverbially bad money after good?
    All right. So, we identified, within a month of beginning 
the contract with Chemonics, a shortcoming in the OTIF, the on-
time and full delivery. Then, in April, we sent a letter. Okay. 
Now we are going to move forward.
    Chemonics' on-time and full delivery was 31 percent, 
October to December 2016; dropped to 7 percent January to March 
2016. We have seen an upward increase. You have addressed this 
problem. I am satisfied with your comments to that end.
    Congresswoman Bass asked this question, and I am going to 
be redundant here. I think I know the answer. Chemonics has 
been paid. One party to this contract has upheld their side of 
the bargain, am I correct? That would be us paying them the 
portion of the $9-some-odd billion in the contract. Chemonics 
has been paid, correct?
    Ms. Koek. Yes, sir. They haven't been paid 9.----
    Mr. Garrett. No, I understand, because the contract is over 
a number of years.
    Ms. Koek. Yes.
    Mr. Garrett. But they have been paid. And was their pay 
docked? Was it prorated based on their failure to achieve on-
time and full delivery?
    Ms. Koek. I would have to get back to you on that. The bulk 
of the cost of this contract is, indeed, the commodities 
themselves, so the purchase of the commodities. That is where 
the bulk of the----
    Mr. Garrett. But, to Congresswoman Bass' point, and I wish 
she were still here, there is some overage because they have to 
make some money. I have no problem with dealing with for-profit 
entities whatsoever, but they shouldn't be bilking the 
taxpayers, right? They should make cost-plus-$1, so that they 
can support the individuals who make the organization run.
    And the reason we work with for-profit entities is because 
there is incentivization of efficiencies. And we should choose, 
because I am going to get to the RFP process in a second, the 
people who can give us what we need at the best cost, right? 
That is what competition and free markets are about.
    But I would wager--and I do want to know. I have staff 
here. A lot of times in these committees I watch my peers say, 
``Could you get back to me on `X'?'' If you don't get back to 
us on this--and again, not a threat; I love you guys--if you 
don't get back to us on this, we are going to get back to you.
    Because I want to know. Can we see a list? You said 
individuals from Chemonics have been fired. I would love to 
have a list by full name of the individuals at Chemonics who 
were fired as a result of the failure to meet the requirements 
of this contract by Chemonics. Can you please produce for us 
who got canned and when directly related to this failure? And I 
know you can't today. If you can, I would be shocked and 
impressed. Can I get one of those? Can our office get one of 
those?
    Ms. Koek. We would certainly be happy to share the names of 
the people who were removed from the project and moved off the 
project.
    Mr. Garrett. I don't care who was moved off the project. I 
want to know who got shown the door. I mean, what happens all 
too often is you waste government money and you get moved to 
another department, right? So, if you can get that for us, I 
would be very grateful.
    And I would like to make that part of the record, per the 
chairman's suggestion.
    In the filing of the RFP, has there been any OIG review of 
USAID and PEPFAR decisionmaking and decisionmakers as it 
relates to preexisting relationships with individuals at 
Chemonics? Any OIG review of the process of awarding of this 
contract, this $9-plus-billion contract?
    Ms. Koek. There is currently an OIG review on the 
performance of the contract, I believe. I can share with you 
exactly what the questions are. There is also another OIG 
review that is looking at what happens at country level and how 
product is protected, and how do we manage the risks of theft 
at country level.
    Mr. Garrett. Well, I understand the country-level theft 
thing for absolute. I mean, we want to help the nations, for 
example, of Afghanistan, and we send a dollar over there, and 
50 cents trickles down and 50 cents is pilfered. We still have 
a duty, I think, to try to help, but we need to reduce and 
minimize that pilfering.
    Has anyone ever reviewed whether there were any preexisting 
relationships between staff and leadership at Chemonics and the 
U.S. Government staff, USAID and PEPFAR, prior to the awarding 
of this contract, whether there was any nepotism, any sort of 
preexisting friendships, et cetera?
    Ms. Koek. So, there has not been an OIG review. However, at 
the beginning, when one signs on to be part of this procurement 
panel to review the proposals, et cetera, you are required to 
sign a conflict-of-interest statement that shows that you have 
no conflict of interest for any of the proposed bidders or 
anyone listed on the proposals. And that is part of what is, 
indeed, reviewed as part of the oversight of that process.
    Mr. Garrett. Can you provide to us a list of the 
decisionmakers who would have been responsible for the RFP 
process as it related to the $9-plus billion awarded to 
Chemonics by name? Can we know who those people, who those 
decisionmakers were?
    Ms. Koek. We have certainly shared the information about 
the membership on the committees with Chairman Royce. We would 
be happy to share that again with you.
    Mr. Garrett. Thank you very much.
    And this is really the $64,000 question, if you will pardon 
me using such paltry small sums. Do we have any idea the impact 
in human lives of a sub-500--and I just do that averaging it 
over the length of this contract so far--of a sub-500 OTF, on-
time and full delivery? Do we know how many people aren't 
alive? I understand that they try to give you 3 months out, but 
when you are at 7 percent, 3 months out mathematically, there 
are people who are going without this treatment. Do we have any 
quantifiable sort of data on human lives?
    Ms. Koek. Well, as I mentioned earlier, this is something 
we have been paying very close attention to and looking for and 
trying to identify where there may have been issues as a result 
of the late deliveries.
    Mr. Garrett. Completely, with all due respect, the answer, 
then, would be no?
    Ms. Koek. We don't have that data. As I mentioned, there 
are two places where there was programmatic impact as a result 
of the late deliveries.
    Mr. Garrett. So, I am going to walk this dog two more steps 
farther down the trail here. So, we don't know the loss of 
life. Do we have any way of knowing the number of people who 
might have been infected by virtue of the failures in delivery?
    Ms. Koek. No, sir.
    Mr. Garrett. And do we have any way of knowing the number 
of children who might--because PEPFAR has done good work--do we 
have any way of knowing the number of children who might have 
been born infected with HIV by virtue of the failure of 
Chemonics to uphold their end, which would allow for on-time 
delivery?
    Ms. Koek. As I mentioned, there were these two instances, 
in Ukraine and in Nigeria, where people were delayed putting on 
treatment in Ukraine and a bed net campaign was delayed in 
Nigeria. And that's the only programmatic instance we know of. 
We have continued to look to see where there have been other 
programmatic issues or where there may be that kind of impact 
that you are talking about. That is exactly what we want to do 
everything we can to avoid, and work very closely with our 
contacts, our partners on the ground to make sure there were 
not the stockouts, there was not the kind of impact that you 
are describing.
    Mr. Garrett. So, in closing, and at the risk of redundancy, 
I would request, humbly before the committee and on the record, 
that you produce for our office a list of individuals from 
Chemonics who were released--that is, terminated, not moved 
from one department to another--as a result of the failure of 
Chemonics to uphold their contract with the citizens and 
taxpayers of the United States and the citizens of the world to 
whom we made a commitment. I would like a list of who got 
fired. I would also like a list of decisionmakers as it relates 
to the awarding of the RFP inside of the apparatus wherein that 
decision was made as soon as possible. I am very curious as to 
any quantifiable numbers on the loss of life, the infection 
rate, and the number of children who might have been born HIV-
positive as a result of these failures. And I would also like 
to see, in sort of a simplified version, the plan of action 
moving forward as it relates to how we avoid this in the 
future, something, even a one-pager. What are we doing with 
specificity?
    And I want to sincerely apologize to you because I am not 
after you, but I am after this. This isn't right. We have a 
good program that is working that helps America save lives and 
save American lives down the road, as I see it, by virtue of 
building goodwill in the global community. What it looks like 
here is that the taxpayers have been defrauded.
    Ms. Koek. If I could just mention a couple of things, and 
certainly about the path forward, but also just to be clearer. 
They did, indeed, buy and deliver the commodities. There was 
not fraud.
    Mr. Garrett. I totally understand that. You are absolutely 
correct.
    Ms. Koek. Right.
    Mr. Garrett. It was never timely ever. It is still not 
timely by our goals at 80 percent. Let's say that the profit 
margin is 10 percent. Ten percent of $9-X billion is still a 
thousand thousand thousand dollars over the course of the 
entire contract. I know it is not that yet. It may only be 100 
million. Where I live that is a lot of money.
    Tragically, we could do this all day with a million 
different programs. But if somebody in this building--thanks to 
Congresswoman Bass, thanks to Chairman Smith--doesn't start 
shining lights on this, it is a death by a thousand cuts.
    Again, it becomes hard for me as a fiscal sort of watchdog 
to justify to my peers why foreign aid matters, and, by gosh, 
it does. So, we need to do this right, or else we are going to 
stop doing it. And then, that is dead human beings.
    Again, I am not trying to lecture you. You guys are doing 
good work.
    Please, please get us this data. I think there are some 
next steps that can be taken without cameras rolling.
    Again, thank you for, 1984, a lifetime of service. Thank 
you as well, Dr. Birx. Again, please in no way, shape, or form 
mistake my tone as attacking you. You are defending something 
that is entirely defensible, entirely good, but we have got to 
get it right. We have a duty to get it right.
    Thank you, Mr. Chairman.
    Mr. Smith. Thank you. Thank you, Mr. Garrett, and I want to 
thank you for your leadership.
    You know, Mr. Garrett is a former prosecutor, and he does 
ask very incisive questions. I do appreciate that. He is a real 
asset to this committee.
    Let me just ask some final questions. And if Mr. Garrett 
has any further questions, I would be happy to yield to him 
again.
    Before Chemonics was awarded the contract in 2014, were 
there reports from the field regarding past poor performance, 
such as from Ethiopia?
    Next, if you could, in the continuum of what would be a 
high-performing supply chain, where were the glitches on this 
one? We know it is delivery. I believe that UPS was one of the 
losers in terms of the request to be part of that consortium. 
Who actually does the delivery? Is that where the glitch was? 
Where was the glitch? I know the IT problem is very real, was. 
Hopefully, it is ``was.''
    Let me ask, thirdly, do you have the authority to penalize 
a nonperforming entity? And if not, if you could get back to us 
as to whether or not you think that would be advisable?
    I have many instances in my district over the years where 
we have had poor performance on the part of a low-bid 
contractor, or any bid contractor. One of them was years ago 
with an outpatient clinic that I worked for 10 years to get for 
the Veteran's Affairs Administration. The low bid got it rather 
than best value, which I thought was unfortunate. But, frankly, 
they were a year late, and then, a year and a half late. An 
outpatient clinic means veterans don't get the care they need. 
So, I petitioned the VA to use their authority to impose a 
daily fine in order to get that job done. All of a sudden, 
there were workers all over that site and they got it done very 
quickly, but it wasn't until sort of Damocles, a serious 
threat--and that wasn't just offered as a possibility; it was 
imposed--that they got the job done. Would that authority be 
helpful to you?
    How many other Chemonics contracts are there? And can you 
perhaps provide us some insight as to the percentage vis-a-vis 
others in that same realm? Has or will Chemonics' deficiency in 
delivery--on-time delivery--affect the future of any awards? 
When a team looks at a new project, and Chemonics comes 
forward, short of disbarment--you know, past is prologue 
sometimes, too often--will that become a factor in whether or 
not they get a new award?
    Ms. Koek. Great. Thank you very much, sir.
    I don't have the information, past performance information 
in front of me. I would be happy to share that and take a look 
at that information. We will get that to you.
    In terms of the glitches, the glitches were things that we 
had identified, and certainly was in what was proposed in terms 
of the management structures were not working as we expected. 
So, among the things we asked them to address, and they 
proposed to address as part of the action plan, included 
accelerating the MIS system, as we have discussed; 
restructuring the supply chain operations. And this is also 
removing staff off, as we have also discussed. Changing the 
project leadership and transitioning to a regional warehouse 
distribution system, and a number of other things. So, there 
were glitches in things that were not moving through the system 
as they needed to, and the information and the requests were 
not moving through the system as they needed to and being 
processed in a timely manner.
    There were also issues with making the estimates of when 
something would be delivered, and that was also a piece that 
they did improve and make sure that the estimates that they 
were making really did reflect what was a much more likely 
outcome, which is hugely important.
    Penalizing poor performance, we would be happy to share 
this there and how the contract is structured in response to--
--
    Mr. Smith. Again, if that authority does not exist, it is 
something we would, with your concurrence and working in a way 
that is likely to lead to the best outcome. It does work in 
other government agencies. I know it for a fact. It might work 
here.
    Ms. Koek. Yes. Well, I will have to get back to you about 
that. That is not information I have. And I also will have to 
get back to you on how many contracts Chemonics has. I don't 
know. I will say they have been very responsive to the action 
plan and have improved their system, which we are encouraged 
by. But, as we have noted, they are not where they need to be 
as yet.
    The poor performance, as I mentioned earlier, in this, you 
know, the database. For every contract, you have give reports 
on a regular basis about what is the performance of the 
contract. It is something that everybody across the Federal 
Government uses when you are choosing based on past 
performance. So, it is an extraordinarily influential piece of 
information.
    As I mentioned, Chemonics did get a minimal rating early 
on, and we will continue to have that documented as they----
    Mr. Smith. Now has that affected any contract since this 
all came about?
    Ms. Koek. There is no way I could answer that because I 
don't know what decisions other have made.
    Mr. Smith. But in terms of were there contracts to 
Chemonics after all of this became known?
    Ms. Koek. I don't have that information, either.
    Mr. Smith. Could you provide that? It will be interesting 
and insightful to know whether or not that minimal rating was 
taken into consideration or just bypassed.
    Ms. Koek. I mean, it is certainly something, as we looked 
at, the past performance, that would be something that would 
absolutely have an impact in your ranking or your assessment of 
a bidder, as to whether they have had that kind of a rating.
    Mr. Smith. Again, in another agency--this was the 
Department of Defense--I had a big fight with a contractor that 
was providing security services at Earle, which is a naval base 
in my district. It is an ammunition depot. We discovered that 
the poorly performing contractor for base security, not the 
Navy, but the others, was just doing a very poor job. And I 
knew it when a whistleblower came to me and said, ``I kept 
noticing one of the people they had hired, and I kept saying I 
know you. I couldn't figure out where.'' He was a former Jersey 
City police officer. ``And then, in the middle-of-the-night 
kind of thing, I said, I arrested him once.''
    Here he is, had not been vetted the way he should have 
been. I brought it to the IG; I brought it to the Navy. It 
took, basically, seemingly forever to get that fixed. This is 
base security. And then, they finally, only because I just kept 
pushing, decided--they didn't disbar--but they made it very 
strong because this was truly they didn't do the training that 
was required.
    So, I think agencywide, governmentwide, we do have a 
problem everywhere. I have had a lot of experience in my own 
district where this has happened.
    Again, if Chemonics got a number of contracts after this, 
my hope would be that this would have been taken into very 
serious consideration when juxtaposed with another person or 
group that was trying to get that contract, because failure to 
deliver on time is very important.
    If you could get back on the authorities and all of those?
    Ms. Koek. I would be happy to get back to you on some of 
those other questions, absolutely.
    Mr. Smith. Thank you.
    Madam Ambassador?
    Ambassador Birx. Just a quick comment. At the same time 
with the Chemonics issue--and I heard about the industrial 
standard of 80 percent--at the same time, we are asking 
countries to have 90 percent of their population aware of their 
HIV status. So, the world has changed to a much more rigorous, 
much more accountable, much more transparency in our frame. I 
think all of our systems need to get to that same place. If we 
can expect that 90 percent of children know their status, 90 
percent of teenagers, and 90 percent of adults, we need to 
expect that we are all moving with that same level.
    Is it hard to work for PEPFAR? I think it is very hard to 
work for PEPFAR. The demands, the fact that it is absolutely 
lifesaving, and it is a difference between a mother being 
diagnosed and put on treatment that day or not. And I think, 
yes, our standards are probably the highest in the world 
because of the issues of us trying to stop an epidemic.
    So, I think part of this is we continue to move at a very 
aggressive pace. I think everyone at PEPFAR needs to continue 
to move at that aggressive pace. I think, over the last three 
to 6 months, we have seen a real adjustment in the speed of 
work with the supply chain, with the countries, and with these 
elements in this interagency way.
    Mr. Smith. I know you, Ambassador, have to leave to go to 
the Senate side.
    I do want to thank you again for your patience with that 
long interruption.
    Your information and your leadership has been 
extraordinary.
    We will follow up with this work together going forward. 
Obviously, it is all about helping victims.
    The hearing is adjourned.
    [Whereupon, at 3:39 p.m., the subcommittee was adjourned.]

                                   

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