[Congressional Record Volume 143, Number 154 (Thursday, November 6, 1997)]
[Senate]
[Pages S11899-S11900]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           DOD PAYMENT POLICY

  Mr. GRASSLEY. Mr. President, I want to speak on a subject that I 
speak on often on the floor of the Senate, the Department of Defense's 
illegal progress payment policy. Since early this year, I have spoken 
on this subject many times. Most recently I spoke about the 
Department's commitment to bring the policy into compliance with law.
  This commitment was made by the man who is now the Deputy Secretary 
of Defense, Mr. John Hamre. This commitment was made on July 22. I 
spoke about this 2 weeks ago, that he had a meeting with the leadership 
of the Armed Services Committee. At that meeting there was an agreement 
among all of us that certain accounting procedures would be brought 
into accordance with the law. Mr. Hamre gave us his word. He promised 
to bring the policy into compliance with the law on October 1 of this 
year. October 1 has come and gone and the illegal policy is still in 
operation. The Department of Defense is not complying with the law of 
the land.
  Recent news reports suggest that Mr. Hamre is a man of deep spiritual 
beliefs. I know him to be that way. The roots of his faith go back to 
his Lutheran upbringing in the small South Dakota town of Willow Lake. 
His father was the town's church council president. His grandfather was 
the pastor. John himself went to Harvard Divinity School to prepare for 
the ministry.
  So, Mr. President, it seems to me his faith runs deep, and I respect 
that. I remind John about some Scripture. The Bible teaches us to: 
always ``do as you promised.'' I will read a passage from Joshua 23:14: 
``You know with all your heart and soul that not one of all the good 
promises the Lord your God gave you has failed. Every promise has been 
fulfilled; not one has failed.''
  The Bible teaches us that God kept His word, and He expects the same 
from each of us. I hope that Mr. Hamre will keep his word that was made 
on July 22.
  Now, I know it is not always possible to keep promises because 
sometimes things happen in the interim that bring about a change of 
events that might cause some change of the original stance. Sometimes 
there are unforeseen events that stand in the way. But there has to be 
an honest effort.
  Mr. President, I'm trying hard to understand why the October 1 
deadline is being ignored. There are three letters that helped explain 
Mr. Hamre's behavior.
  First, there is a letter from the Armed Services Committee, signed by 
the chairman, Senator Thurmond, and the ranking minority member, 
Senator Levin. It is addressed to Secretary Cohen, and dated September 
26, 1997.
  Second, we have a letter from the inspector general, Ms. Eleanor 
Hill, to Mr. Hamre, dated September 30, 1997.
  Third, there is Mr. Hamre's letter back to the Armed Services 
Committee, dated October 1, 1997.
  I ask unanimous consent to have these letters printed in the Record 
so my colleagues have the benefit of the entire text.
  There being no objection, the letters were ordered to be printed in 
the Record, as follows:

                                                      U.S. Senate,


                                  Committee on Armed Services,

                               Washington, DC, September 26, 1997.
     Hon. William S. Cohen,
     Secretary of Defense, The Pentagon, Washington, DC
       Dear Secretary Cohen: Two months ago the Department 
     proposed a change to the Defense Federal Acquisition 
     Supplement (DFARS) to change its procedures for progress 
     payments under complex contracts using money from more than 
     one appropriation. Although there is no evidence that the 
     existing progress payment system has ever resulted in a 
     violation of the Antideficiency Act, we understand that the 
     Department does not believe that current procedures are 
     capable of meeting all applicable legal requirements.
       The Council or Defense Industry Associations (CODSIA) has 
     indicated to us that the Department is considering the 
     possibility of implementing these new procedures effective 
     October 1, 1997--prior to final action on proposed DFARS 
     change. CODSIA estimates the changes to contractor accounting 
     and billing systems required by these new procedures could 
     cost the industry in excess of $1.3 billion a year. 
     Additional costs would be incurred by the taxpayers in 
     connection with the requirement for the Department to 
     manually process progress payment requests.
       We ask that you review the proposed changes, consider all 
     public comments, and weigh the costs and benefits to the 
     taxpayers and the Department of Defense before these new 
     procedures are implemented by the Department. We would also 
     appreciate if you would let us know of any legislative 
     changes that may be needed to assist you in addressing this 
     issue in a rational and cost-effective manner.
       Thank you for your attention to this matter.
           Sincerely,
     Carl Levin,
       Ranking Minority Member.
     Strom Thurmond,
       Chairman.
                                  ____

                                            Department of Defense,


                                            Inspector General,

                                Arlington, VA, September 30, 1997.
     Memorandum for Under Secretary of Defense (Comptroller)

     Subject: Progress Payment Distribution

       We do not concur with the recommendation that the Deputy 
     Secretary of Defense approve an open ended deferral in 
     implementing revised progress payment distribution practices.
       Recently we were advised by the Office of the Director, 
     Defense Procurement, that an interim rule specifying the role 
     of contracting officers in the new procedures could not be 
     issued for at least 60 days. Likewise, we do not believe that 
     the Defense Finance and Accounting Service is ready to 
     proceed with the originally planned October 1, 1997 
     implementation. A deferral of the implementation date is 
     therefore necessary, which is dismaying in light of the 
     several years that the Department has had to address this 
     problem.
       At a minimum, we believe that the Deputy Secretary should 
     establish a revised implementation date no later than January 
     1, 1998. Any reviews of cost implications or other relevant 
     factors should be executable well before that date.
                                                     Eleanor Hill,
     Inspector General.
                                  ____



                              The Deputy Secretary of Defense,

                                  Washington, DC, October 1, 1997.
     Hon. Strom Thurmond,
     Chairman, Committee on Armed Services, U.S. Senate, 
         Washington, DC.
       Dear Mr. Chairman: This letter is in response to your 
     September 26, 1997, letter to Secretary Cohen regarding 
     changes in the manner in which the Department distributes 
     progress payments. Consistent with your request, the 
     Department will review the proposed changes, consider all 
     public comments, and weigh the costs and benefits to the 
     taxpayers and the Department of Defense before these new 
     procedures are implemented. If the analysis indicates that 
     legislative changes are needed to address this issue in a 
     more rational and cost effective manner, such changes will be 
     proposed.
       Additionally, the Department has initiated a change to the 
     Defense Federal Acquisition Regulation Supplement (DFARS) to 
     require that contractors provide the breakout of the progress 
     payment. The DFARS change cannot be effected until January 
     1998 because of the time required to complete statutory 
     administrative actions. Additional time is needed in order to 
     submit the proposed rule and its cost-benefit analysis to the 
     Congress, GAO, and OMB and for the required 60-day 
     congressional waiting period to elapse.
       As a result of your request, and the need for additional 
     time to comply with statutory and administrative 
     requirements, I am delaying implementation of the planned 
     policy changes regarding the distribution of progress 
     payments. Those changes, which were scheduled to be 
     implemented on October 1, 1997, are being delayed until 
     January 1998, pending further review and evaluation of the 
     proposed changes.
       A copy of this letter has been provided to Senator 
     Grassley.
           Sincerely,
                                                    John J. Hamre.

  Mr. GRASSLEY. The Armed Services Committee's letter was obviously 
written in response to complaints from the defense industry. Industry 
claims that the new policy would cost an extra $1.3 billion a year to 
implement. The committee is concerned about that estimate. So the 
committee asked Mr. Hamre to weigh these factors: ``We ask that you 
review the proposed changes, consider all public comments, and weigh 
the costs and benefits to the taxpayers and the Department of Defense 
before these new procedures are implemented. * * *''
  The committee is telling Deputy Secretary Hamre to do more homework 
before executing the new policy. This letter gave Mr. Hamre the 
authority he needed to delay beyond the October 1 deadline that was 
agreed to after our July 22 meeting among Armed Services Committee 
members. Mr. Hamre parrots the committee's language in his

[[Page S11900]]

response: ``Consistent with your request, the Department will review 
the proposed changes, consider all public comments, and weigh the costs 
and benefits to the taxpayers and the Department of Defense before 
these new procedures are implemented.''
  Mr. President, if I may paraphrase the letter, it says the committee 
requests a delay, and Mr. Hamre is just complying. I am happy to report 
that some of the delay may, in fact, be necessary.
  Mr. Hamre provides an important piece of new information in the 
second paragraph of his letter. He says that the Defense Federal 
Acquisition Regulation Supplement--and we call that DFARS for short--
cannot be issued until January 1998 due to ``statutory administrative 
actions.'' The DFARS is a key element in the new policy. But the DFARS 
cannot meet the timetable prescribed under the July 22 agreement that 
I've referred to.
  There are some new procedures under current law. These are spelled 
out in Public Law 106-121, the Contract With America Advancement Act of 
1996.
  Unfortunately, no one who put the July agreement together knew 
anything about the new rules. So if Mr. Hamre says that he needs more 
time to get the DFARS ready, I can buy that and admit that extra time 
is needed.
  But the final paragraph of his letter gives me heartburn. It makes me 
nervous. I quote from the final sentence: The new policy, ``which were 
scheduled to be implemented on October 1, 1997,'' is ``being delayed 
until January 1998, pending further review and evaluation of the 
proposed changes.''
  Now, that wording bothers me for several reasons. It could be a big 
loophole to ask for more time so that effectively there is no 
implementation of the agreement because January 1998 is not as specific 
as January 1, 1998, and January 1998 ``pending further review'' opens 
the door for yet more delay. It suggests that January 1998 may not be, 
in fact, a deadline. It may be passed by, depending on the outcome of 
the new review. The wording to me is very ambiguous.
  The inspector general's letter--remember, the inspector general is to 
keep all these people over at the Defense Department honest and keep 
them abiding by the law--the IG's letter that I referred to and have 
printed in the Record suggests that Mr. Hamre really wanted an open-
ended deferral. That is where the game playing may be going on. He may 
have wanted an indefinite delay. Luckily, the IG put her foot down and 
said no, that was not possible, that would not be abiding by the 
agreement, that would not be abiding by the law.
  This is what she said:

       At a minimum, we believe that Mr. Hamre should establish a 
     revised implementation date no later than January 1, 1998.

  The inspector general wants an unconditional deadline of January 1, 
1998--``with no pending further review'' language.
  Mr. President, I can understand why the Department of Defense needs 
more time to jump through new regulatory hoops. But why does the policy 
itself need further review? More study is the oldest bureaucratic trick 
in the book--always delay, delay, delay, never make a decision, never 
make the changes that you don't want to make.
  As far as this policy is concerned, this policy has been studied to 
death. The inspector general and the Pentagon bureaucrats have been 
wrestling with it since 1991. Isn't it about time to get to the bottom 
line? There have been countless papers, countless meetings, countless 
letters, and countless agreements, including the one of July 22. I was 
a party to that, and I don't want to be hoodwinked by my colleagues. I 
don't want to be hoodwinked by Mr. Hamre, who was there at that meeting 
and said he would get this job done.
  Every possible issue has been addressed. Every point and counterpoint 
has been weighed and reweighed. There is nothing else to weigh. It gets 
down to the bottom line, Mr. President, that the law of the land is the 
law of the land and the law that the current policy violates. In other 
words, what we are trying to get straightened around is section 1301 of 
title 31 of the U.S. Code, and this was enacted on March 3, 1809--this 
law that says that you can't spend money without the approval of the 
Congress of the United States, and it's a felony to do it. It has to be 
abided by or the power of the purse of the Congress means zilch.
  So, Mr. President, that was in 1809, 200 years ago. It's a law that 
has withstood the test of time, and it seems that DOD needs to get on 
the stick and obey the law once and for all. But, most importantly, as 
far as this Senator is personally concerned, at that July 22 meeting 
there was an agreement, and I expect people who want you to believe 
they are honest to keep their word.
  I yield the floor.
  Mr. BUMPERS addressed the Chair.
  The PRESIDING OFFICER. The Senator from Arkansas is recognized.

                          ____________________