[Senate Hearing 112-298]
[From the U.S. Government Printing Office]








                                                        S. Hrg. 112-298

 THE FINAL REPORT OF THE COMMISSION ON WARTIME CONTRACTING IN IRAQ AND 
                              AFGHANISTAN

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

                                HEARING

                               before the

            SUBCOMMITTEE ON READINESS AND MANAGEMENT SUPPORT

                                 of the

                      COMMITTEE ON ARMED SERVICES
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               ----------                              

                            OCTOBER 19, 2011

                               ----------                              

         Printed for the use of the Committee on Armed Services







                                                        S. Hrg. 112-298

 THE FINAL REPORT OF THE COMMISSION ON WARTIME CONTRACTING IN IRAQ AND 
                              AFGHANISTAN

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

                                HEARING

                               before the

            SUBCOMMITTEE ON READINESS AND MANAGEMENT SUPPORT

                                 of the

                      COMMITTEE ON ARMED SERVICES
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 19, 2011

                               __________

         Printed for the use of the Committee on Armed Services













        Available via the World Wide Web: http://www.fdsys.gov/

                               __________


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                      COMMITTEE ON ARMED SERVICES

                     CARL LEVIN, Michigan, Chairman

JOSEPH I. LIEBERMAN, Connecticut     JOHN McCAIN, Arizona
JACK REED, Rhode Island              JAMES M. INHOFE, Oklahoma
DANIEL K. AKAKA, Hawaii              JEFF SESSIONS, Alabama
E. BENJAMIN NELSON, Nebraska         SAXBY CHAMBLISS, Georgia
JIM WEBB, Virginia                   ROGER F. WICKER, Mississippi
CLAIRE McCASKILL, Missouri           SCOTT P. BROWN, Massachusetts
MARK UDALL, Colorado                 ROB PORTMAN, Ohio
KAY R. HAGAN, North Carolina         KELLY AYOTTE, New Hampshire
MARK BEGICH, Alaska                  SUSAN M. COLLINS, Maine
JOE MANCHIN III, West Virginia       LINDSEY GRAHAM, South Carolina
JEANNE SHAHEEN, New Hampshire        JOHN CORNYN, Texas
KIRSTEN E. GILLIBRAND, New York      DAVID VITTER, Louisiana
RICHARD BLUMENTHAL, Connecticut

                   Richard D. DeBobes, Staff Director

               David M. Morriss, Minority Staff Director

                                 ______

            Subcommittee on Readiness and Management Support

                  CLAIRE McCASKILL, Missouri, Chairman

DANIEL K. AKAKA, Hawaii              KELLY AYOTTE, New Hampshire
E. BENJAMIN NELSON, Nebraska         JAMES M. INHOFE, Oklahoma
JIM WEBB, Virginia                   SAXBY CHAMBLISS, Georgia
MARK UDALL, Colorado                 ROB PORTMAN, Ohio
MARK BEGICH, Alaska                  SUSAN M. COLLINS, Maine
JOE MANCHIN III, West Virginia       LINDSEY GRAHAM, South Carolina
JEANNE SHAHEEN, New Hampshire        JOHN CORNYN, Texas

                                  (ii)










                            C O N T E N T S

                              ----------                              

                    CHRONOLOGICAL LIST OF WITNESSES
 The Final Report of the Commission on Wartime Contracting in Iraq and 
                              Afghanistan
                            october 19, 2011

                                                                   Page

Bash, Lt. Gen. Brooks L., USAF, Director for Logistics, J4, Joint 
  Staff..........................................................     6
Kendall, Hon. Frank, Principal Deputy Under Secretary of Defense 
  for Acquisition, Technology, and Logistics.....................    16
Zakheim, Hon. Dov S., Commissioner, Commission on Wartime 
  Contracting in Iraq and Afghanistan............................    20
Annex: The report titled: ``Transforming Wartime Contracting''...    77

                                 (iii)

 
 THE FINAL REPORT OF THE COMMISSION ON WARTIME CONTRACTING IN IRAQ AND 
                              AFGHANISTAN

                              ----------                              


                      WEDNESDAY, OCTOBER 19, 2011

                           U.S. Senate,    
              Subcommittee on Readiness and
                                Management Support,
                               Committee on Armed Services,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:35 p.m., in 
room SR-232A, Russell Senate Office Building, Senator Claire 
McCaskill (chairman of the subcommittee) presiding.
    Committee members present: Senators McCaskill, Manchin, and 
Ayotte.
    Other committee member present: Senator Blumenthal.
    Committee staff member present: Leah C. Brewer, nominations 
and hearings clerk.
    Majority staff members present: Peter K. Levine, general 
counsel; and William G.P. Monahan, counsel.
    Minority staff member present: Pablo E. Carrillo, minority 
investigative counsel.
    Staff assistants present: Jennifer R. Knowles, Brian F. 
Sebold, and Breon N. Wells.
    Committee members' assistants present: Joanne McLaughlin, 
assistant to Senator Manchin; Brad Bowman, assistant to Senator 
Ayotte; and Dave Hanke, assistant to Senator Cornyn.
    Other committee member assistant present: Ethan Saxon, 
assistant to Senator Blumenthal.

    OPENING STATEMENT OF SENATOR CLAIRE McCASKILL, CHAIRMAN

    Senator McCaskill. This hearing will come to order. Thank 
you all for being here.
    It is a special treat because we have the opportunity in 
one hearing to have representatives of the Department of 
Defense (DOD) and members of the very hard-working Commission 
on War Contracting (CWC) that spent countless hours, dozens of 
trips abroad, compiling an amazing report and record, 
documenting, I think, the most significant issue facing 
military readiness. That is how we handle contracting in 
contingencies.
    It is obviously something I have spent a great deal of time 
on since I arrived in the Senate. It is something that I think 
we simply cannot afford not to get fixed. I think it is very 
unrealistic that we will ever get to a point that we will not 
be relying heavily on contractors in any future contingency. 
So, this is a core competency that we have really been behind 
the curve on.
    I will give a brief opening statement and then give my 
ranking member, Senator Ayotte, a chance to make comments.
    Thank you, Senator Blumenthal, for being here. I think it 
is great that you are attending.
    Then we will hear from the witnesses and have an 
opportunity to answer questions.
    The subcommittee today meets to consider the final report 
of the CWC in Iraq and Afghanistan. The commission was 
established pursuant to section 841 of the National Defense 
Authorization Act (NDAA) for Fiscal Year 2008, a provision 
which originated as a Webb-McCaskill amendment that was offered 
and passed on the Senate floor.
    More than 4 years ago, when Senator Webb and I began to 
advocate for the creation of this commission, I was inspired by 
my State's own Harry Truman, who, as a Senator, headed a 
committee that investigated and uncovered millions of dollars 
of war profiteering, fraud, and wasteful spending in World War 
II.
    Senator Webb and I agreed that what we needed was a new 
investigatory body to honor the Truman committee, to protect 
our tax dollars, and bring better accountability to the way we 
do business while at war.
    Since that time, I have taken trips to Iraq and 
Afghanistan, where I have seen with my own eyes the lack of 
planning, inadequate oversight, and sheer waste in our 
contingency contracting operations. I can tell a number of 
anecdotal stories about my visits to both Iraq and Afghanistan 
on contracting oversight trips. But I particularly remember the 
time when I asked a general in Kuwait, where a lot of the 
contracting work was done, ``how did this happen? How did this 
get so out of control?''
    This was near the end of my trip, when I had spent time in 
Baghdad looking at the Logistics Civics Augmentation Program 
(LOGCAP) contract and other contracts. This general was very 
candid with me. He said, ``I wanted three kinds of ice cream in 
the mess hall yesterday, and I didn't care what it cost.''
    I think we owe the taxpayers better than that. I think even 
though that is anecdotal, the CWC's report shows that it was, 
in fact, factually correct. That there were literally billions 
and billions and billions--and I could keep saying this, 
getting all the way to $60 billion--that potentially went up in 
smoke through waste, fraud, and abuse.
    The CWC has been tireless in its examination of the flaws 
in our wartime contracting policies and practices. Over the 
last 3-plus years, the CWC has held 25 hearings, traveled to 
Iraq and Afghanistan at least 15 times, and interviewed 
hundreds of military and civilian Federal employees, contractor 
employees, and contracting experts.
    In many ways, the CWC has validated our worst fears about 
the way we were contracting in Iraq and Afghanistan. The CWC 
found that agencies over-rely on contractors for contingency 
operations and that inadequate planning and lack of oversight 
for such contracting have led to an exceptional level of waste, 
fraud, and abuse. It is beyond distressing to think of how many 
billions of dollars that we spent on contracting has been lost.
    The CWC's report and recommendations go to the heart of how 
we got into this mess, how we can avoid repeating a situation 
where we are spending billions of dollars, and what we needed 
an understanding and control over where the money is going.
    The CWC's final report makes 15 recommendations, which fall 
into 4 broad categories: recommendations for reducing the 
Government's over reliance on contractors, recommendations for 
organizational changes to provide greater focus on contingency 
contracting, recommendations for additional staffing and 
resources needed to improve oversight and management of these 
contracts, and recommendations for changes in contracting 
policies, including policies relative to past performance data, 
suspension and debarment procedures, access to contractor 
records, competition requirements, and jurisdiction over 
foreign contractors.
    I applaud the CWC for their thorough, comprehensive, and 
bipartisan review and for the tremendous contribution they have 
made to our understanding of the problems we face in 
contingency contracting.
    If the CWC's report becomes one more report sitting on the 
bookshelf, this effort will have been a failure. Congress and 
DOD will have missed a critical opportunity to serve our 
military and the people of this great Nation.
    That is why I am currently working with Senator Webb and 
others on comprehensive legislation addressing the problems 
identified by the CWC, which we plan to introduce later this 
year. By providing senior DOD and CWC witnesses an opportunity 
to discuss the steps that DOD has taken to implement the CWC's 
recommendations, the extent to which these steps meet the 
intent of the recommendations, and the basis for any 
disagreement on the recommendations, today's hearing should 
serve as an important milestone in the development of that 
legislation.
    I look forward to the testimony of our witnesses, and I 
will now turn the microphone over to Senator Ayotte.

               STATEMENT OF SENATOR KELLY AYOTTE

    Senator Ayotte. Thank you very much, Madam Chairman. I want 
to thank you so much for holding this hearing and for your deep 
interest in this very important issue.
    I welcome all of our witnesses today, and I particularly 
want to thank Mr. Zakheim.
    Thank you, Ms. Schinasi, as well as the other members of 
the CWC for their important work, their tireless efforts. This 
is a final report that I think not only members of this 
committee, but every Member of Congress should read. So I 
really appreciate your work, and certainly appreciate General 
Bash and Secretary Kendall being here today to talk about this 
report.
    The CWC is an independent, bipartisan commission, as the 
chairwoman mentioned, created by Congress in 2008, and this 
final report represents the culmination of tremendous work that 
has consisted of extensive research, hearings, meetings, and 
the work of professional staff stationed full-time in Baghdad 
and Kabul. I congratulate the CWC on this report.
    I believe getting contingency contracting right is 
particularly important for two primary reasons. First, ensuring 
mission success in supporting our warfighters in Afghanistan 
and Iraq demand no less, that we get this right. Sufficient 
oversight of contracting may be decisive in determining the 
outcome in Afghanistan and Iraq.
    As General Petraeus said in his September 2010 
counterinsurgency contracting guidance, ``The scale of our 
contracting efforts in Afghanistan represents both an 
opportunity and a danger. With proper oversight, contracting 
can spur economic development and support the Afghan 
Government's and International Security Assistance Force's 
(ISAF) campaign objectives.
    ``If, however, we spend large quantities of international 
contracting funds quickly and with insufficient oversight, it 
is likely that some of those funds will unintentionally fuel 
corruption, finance insurgent organizations, strengthen 
criminal patronage networks, and undermine our efforts in 
Afghanistan.''
    I could not agree more. It is often said that contingency 
contracting is the most powerful nonkinetic weapon on the 
battlefield, especially in a counterinsurgency campaign. We 
must not haphazardly, obliviously, or hastily contract. Doing 
so can result in taxpayers' money ending up in the hands of our 
enemies.
    It is unacceptable for one dollar of ours and our 
taxpayers' dollars to end up in the hands of our enemies, and 
that is why this is so important. That is why Senator Brown and 
I introduced legislation earlier this year called ``No 
Contracting with the Enemy.'' We need to make sure that it is 
easier for U.S. contracting officials to get out of contracts 
with contractors who funnel taxpayers' resources to the enemies 
of the United States.
    Contracting in Kandahar in a war should not be treated the 
same as contracting in Fort Hood, TX, in peacetime. I am 
pleased that key provisions of our No Contracting with the 
Enemy legislation were included in the NDAA passed by the 
Senate Armed Services Committee.
    I would also note that this legislation hasn't been brought 
to the floor yet, and I am very hopeful and was encouraged by 
the majority leader's statement 2 days ago that he was going to 
bring forward the NDAA to the floor. I think this is just one 
provision that is so important to getting that defense 
authorization passed.
    The success of our contracting must be viewed through the 
metric of how well it supports our campaign objectives and the 
mission outcome. Contracting must be thoroughly integrated into 
all intelligence planning and operations. Contingency 
contracting must not be viewed as a separate logistical 
activity.
    As General Petraeus said, contingency contracting is 
fundamentally ``commanders' business.'' While General Petraeus 
probably had ISAF commanders in mind, I would include the 
leadership at DOD, Department of State (DOS), and the U.S. 
Agency for International Development (USAID) in that statement 
as well.
    Our DOD witnesses, as well as their counterparts at DOS and 
at USAID, I am sure will agree that oversight of contingency 
contracting is a major, not a peripheral, part of their 
responsibilities.
    The second reason contingency contracting, and it certainly 
doesn't come secondary to the first reason I talked about, is 
because we are at war, and we are in a time of fiscal 
austerity. We can't afford to waste a single dollar as we seek 
to give our troops the resources that they need. Every dollar 
wasted or spent inefficiently diverts resources away from our 
mission and from protecting our country.
    As ranking member of this subcommittee and also as the 
spouse of a veteran, I am not going to sit by idly, and I know 
that the chairwoman isn't either, and allow this to continue to 
happen. For these reasons, I believe we must engage in a 
serious and ongoing discussion to understand the current 
challenges and the best way to address them.
    However, let me be clear. I don't want to sit around and 
admire the problem. The commission has concluded that between 
$31 billion and $60 billion of taxpayers' funds have been lost 
to contract waste and fraud in Iraq and Afghanistan. It is 
outrageous.
    If this is accurate--and, I think, given the thorough work 
that was done by this commission, it is very accurate--we need 
to implement the appropriate reforms without delay with a real 
sense of urgency.
    In order to help catalyze these efforts and to build on the 
excellent work of the commission, yesterday I was proud to join 
Senator McCaskill and Senator Webb in sending a letter to the 
Comptroller General asking the Government Accountability Office 
(GAO) to assess the actions of DOD, DOS, and USAID, in response 
to the findings and recommendations of the CWC. We need to 
clearly understand what these departments are doing to 
implement the CWC's recommendations right now, and I am looking 
forward to hearing from our witnesses on that issue today.
    When there are areas of disagreement with the CWC's 
recommendations, perhaps related to the right to appeal and the 
establishment of a Joint Staff J10 element, I want to hear from 
DOD, DOS, and USAID why they disagree and why they don't 
believe that those recommendations should be implemented. I 
think the onus is on DOD and certainly DOS to tell us why 
shouldn't we implement them.
    I think today's hearing will be an important part of the 
effort to ensure that we are conducting proper oversight of 
contingency contracting for the troops. The taxpayers, everyone 
deserves nothing less.
    Before I conclude, allow me to make a brief and related 
comment regarding Iraq. Over the weekend, there were reports 
suggesting that all U.S. troops would leave Iraq by the end of 
the year. While Iraq is a sovereign country and immunity for 
our troops is absolutely essential, and I certainly agree with 
the administration on that, I believe such a hasty departure 
may endanger a successful outcome in Iraq that has been made 
possible with the ultimate sacrifice of over 4,400 Americans.
    In addition, the precipitous withdrawal of almost all U.S. 
troops by the end of the year will almost certainly invite a 
new and dangerous round of problems related to contracting. 
DOS's transition into Iraq as U.S. troops almost completely 
withdraw simply cannot independently acquire and oversee the 
scale and nature of contracted services that will be required. 
That is a real issue and concern I think needs to be addressed 
right away.
    While DOS intends to rely on DOD for help, the pace and 
extent of the administration's plan to withdraw the military 
and transition the DOS into Iraq will expose the United States 
to risks that taxpayers' dollars in support of the DOS's 
diplomatic mission in Iraq will be lost due to the same 
concerns--waste, fraud, and abuse--and perhaps, critically, 
that much of the progress that our service men and women 
achieved to help stabilize and rebuild Iraq could be 
endangered.
    I am very troubled by this, and I am hopeful that we will 
also address this issue today. I am going to continue to press 
for answers on this.
    I also look forward to a discussion during today's hearing 
related to DOD's investment in building facilities in support 
of the military mission that the host governments will simply 
not be able to sustain.
    I look forward to hearing from all of our witnesses on 
these important issues. Again, I thank you so much, Madam 
Chairman, for holding this important hearing, and I thank the 
witnesses for being here.
    Senator McCaskill. Thank you, Senator.
    We will begin our testimony with Lieutenant General Brooks 
Bash. I think the lieutenant part of that, General, just 
happened within a few months from today. So congratulations on 
another well-deserved promotion.
    Lieutenant General Brooks Bash is the Director for 
Logistics, Joint Staff (J4), at the Pentagon. As the J4, he is 
responsible for integrating logistics, planning, and execution 
in support of joint operations to drive joint force readiness, 
maximize the joint force commander's freedom of action, and 
advising the Chairman of the Joint Chiefs of Staff on logistics 
matters.
    A proud graduate of the U.S. Air Force Academy, welcome 
Lieutenant General Bash, and we look forward to your testimony.

   STATEMENT OF LT. GEN. BROOKS L. BASH, USAF, DIRECTOR FOR 
                   LOGISTICS, J4, JOINT STAFF

    General Bash. Thank you, Madam Chairman.
    First, let me personally thank you for your leadership on 
this commission and the efforts this commission has had because 
I think the perspective it has brought has been very valuable 
to the military, from my review.
    Ranking Member Ayotte and distinguished members of the 
subcommittee, I am pleased to appear before you today to 
testify on DOD's progress in enhancing our ability to plan for 
and execute operational contract support (OCS) in contingency 
operations.
    As the J4, I advise the Chairman of the Joint Chiefs on the 
entire spectrum of logistics, to include strategic and 
operational planning and doctrines related to OCS. My staff and 
I work closely with the Office of the Secretary of Defense 
(OSD), the Services, and defense agencies to refine the 
policies, doctrine, tools, and processes needed to effectively 
plan for OCS.
    I am pleased to report DOD has made significant progress to 
improve the operational planning needed to effectively use 
contracted support as a part of DOD's total force. I am 
confident that our ongoing efforts will ensure that we meet the 
warfighters' current and future needs, while judiciously 
managing DOD's resources and balancing risk.
    As Mr. Kendall and I noted in our written statement, DOD 
uses contract support to operations to provide a number of 
important capabilities, from fuel delivery to food service. We 
have come to leverage contracting as an important force 
multiplier to overcome fiscal, political, and cultural 
realities. Contracting today is an important and necessary 
capability for our forces.
    Due to the ascendancy of contracting as an integral part of 
military operations, the Joint Staff has led a variety of 
efforts to institutionalize this critical capability to ensure 
that when we go to war in the future, we are better prepared to 
execute effectively and efficiently, and most importantly, to 
provide the best possible support to the warfighter at a 
reasonable cost. I am absolutely committed to this course set 
by Admiral Mullen and affirmed by General Dempsey to ensure we 
get this right quickly.
    Institutionalization of OCS is a major effort that is well 
underway and represents a major cultural shift in how we plan 
for and execute military operations. We began this deliberate 
effort in 2007, and we have made progress. We are committed to 
continuing to strengthen OCS strategic guidance, doctrine, 
policies, processes, and resources as expeditiously as 
possible.
    Much has been done to improve OCS, and our work will 
continue. The underlying theme for future planning and 
supporting processes involves closer links of contracts, 
contractors, and operational effects to more rapidly and 
decisively achieve the Joint Force Commander's intent.
    We have significantly increased our focus on planning for 
OCS to not only deliver supplies and services to the 
warfighters in a responsible and cost-effective manner, but to 
leverage the economic benefits of DOD's spending to achieve 
national strategic and operational objectives.
    In closing, I would like to emphasize a few critical points 
with respect to DOD's increased use of contracted support. 
First, I am convinced of the military advantage that this 
capability brings when planned and used properly.
    Our military's contracting capabilities enable us to 
maintain a scalable, responsive, and cost-effective All-
Volunteer Force, while maintaining combat capabilities. In the 
past decade, we have recognized that contracting delivers 
important support to our troops, while advancing operational 
objectives such as those required in the counterinsurgency 
strategy or stability operations.
    Our contracting professionals, logisticians, forward-
operating base mayors, and commanders in the field are 
performing superbly in a challenging, dangerous environment 
with limited resources and complex supporting policies and 
processes.
    The bottom line is that contracting is an important, 
integral part of our military capability, and our efforts are 
squarely focused on how best to accomplish the mission. I know 
we share this objective with Mr. Kendall and the entire OSD 
staff.
    I would like to thank you and your staff for your insights, 
observations, and close working relationship, all dedicated to 
helping DOD improve wartime contracting. I believe that our 
goals are absolutely the same as yours. We are in lockstep to 
see that warfighters' needs are met, balancing operational 
necessity with careful stewardship of our resources.
    Again, thank you for the opportunity to appear before you 
and I look forward to your questions.
    [The joint prepared statement of Mr. Kendall and General 
Bash follows:]
             Joint Prepared Statement by Frank Kendall and 
                     Lt. Gen. Brooks L. Bash, USAF
    Chairman McCaskill, Ranking Member Ayotte, and distinguished 
members of the subcommittee, it is our pleasure to appear before you 
today to testify on the Department of Defense's (DOD) continuing 
efforts to enhance our ability to execute contracting in the wartime 
environment and to discuss the recent release of the Commission on 
Wartime Contracting's (CWC) Final Report entitled, ``Transforming 
Wartime Contracting: Controlling Costs, Reducing Risks.'' DOD has 
worked diligently to have a strong, cooperative relationship with CWC 
and together we succeeded in building that relationship over the CWC's 
3-year life. Their reports have identified many real and important 
areas in which we can improve. We would also like to thank the 
Subcommittee for their interest in wartime contracting. We welcome the 
opportunity to report to you on our efforts to provide the best 
possible support to our warfighters in Iraq and Afghanistan as well as 
to institutionalize concepts and processes that will enhance 
Operational Contract Support (OCS) in future contingency operations.
                               our legacy
    The Nation has always relied upon contractors to support military 
operations, but not to the extent necessary in the conflicts in Iraq 
and Afghanistan. During the Revolutionary War, the Continental Army 
relied on contractors to provide basically the same things our forces 
require today, such as supplies, services, construction, clothing, and 
weapons. Over time, advances in warfare and technology have expanded 
the functions and responsibilities of contractors in military 
operations. For example, the first ``aviation'' support to U.S. forces, 
the Balloon Corps of the Civil War, was fully contracted. Contractor 
support enabled fleet readiness in the Pacific during World War II. 
During the Cold War, force structure was determined by the size of the 
enemy and the demands primarily associated with a global war against 
another superpower in accordance with the National Security Strategy. 
The United States maintained a large standing military force and, at 
times, a draft to support these personnel requirements. This military 
force was concentrated in combatant functions; we took some risk in 
functions associated with support. For example, we never bought all the 
transport aircraft required in planned operations, but relied on the 
Civil Reserve Air Fleet to make up the shortfall. Many installations in 
Germany were guarded by Civilian Support Group personnel and not U.S. 
military personnel. This longstanding history of contractor support is 
central to understanding our current reliance on contractors in 
contingency operations.
    After the Cold War ended, strategic planning called for 
preparations against two nearly simultaneous regional conflicts. 
Planning envisioned high-intensity but short duration conflicts like 
the first Gulf War. Because anticipated wars were envisioned to be 
shorter, the associated force requirements were smaller. Importantly, 
we had transitioned to an all volunteer, fully professional Armed Force 
after the conflict in Vietnam. The smaller-sized force again 
concentrated U.S. military personnel in key combat competencies. The 
experience of Operation Desert Storm seemed to confirm this view of 
future conflicts--short, violent, and limited. As a result, our forces 
remained structured such that when longer duration operations have 
occurred, our all volunteer military has had little choice but to use 
contractors as combat enablers, or force multipliers. In the three 
largest contingency operations we have been involved in over the last 
15 years--the Balkans, Iraq, and Afghanistan--contractors have 
comprised approximately half of the Department's total force in 
theater.
    At the onset of the initial combat operations in Iraq, expectations 
were that this would be a short conflict requiring fewer forces and 
finishing within months. Again, our force and support structure was 
built on the short duration model for any contingency. The prolonged 
conflict required the continuous employment of large combat forces, and 
the United States determined that we would conduct stability and 
reconstruction operations in parallel with the ongoing combat 
operations. The President set forth this national policy decision on 
December 7, 2005, in National Security Presidential Directive 44, 
Management of Interagency Efforts Concerning Reconstruction and 
Stabilization. By the very nature of the mandate to engage in stability 
operations, the United States is engaged in infrastructure and 
reconstruction projects that require contractor support.
    Because the actual operations in both Iraq and Afghanistan did not 
meet the basic assumption of a short conflict, but ultimately 
transitioned into long-term operations, we were unprepared to manage 
the resulting number of contracts and contractors. Specifically, we had 
acquisition resource shortfalls (insufficient deployable contracting 
officers, untrained and untested contracting officer's representatives, 
and inadequate requirements generation capability), lack of post or 
camp management, and inadequate policy and doctrine to manage the total 
force in a protracted engagement.
                 the requirement for contractor support
    Our military services use contractors to provide essential services 
and this does not change during contingency operations. Indeed, with 
the continuing budgetary pressures, and the realities of military and 
civilian force structure limitations, we will continue to outsource 
those services which are not inherently governmental and where it does 
not make sense to build organic force structure at a greater long-term 
cost.
    The Congressional Budget Office issued a report, ``Logistics 
Support for Deployed Military Forces,'' in October 2005 which included 
an analysis of the cost of having military units replace contractors. 
The study concluded that, over the long term, using military units 
would cost 90 percent more than using contractors and would have high 
upfront costs associated with equipping the new units. The Gansler 
Commission reached a similar conclusion. Using contractors to perform 
non-combat activities augments the total force and can free up 
uniformed personnel for combat missions. Contractors can be hired 
quickly in most instances where there are shortfalls in force 
structure, such as logistics and other support areas; they also can be 
deployed quickly when necessary and then easily terminated when no 
longer required.
    As a result of both the limitations on an All-Volunteer Force and 
the economics of the alternative of using military personnel, the 
Department must institutionalize the ability to manage contractors on 
the battlefield effectively. As then-Under Secretary of Defense Carter 
testified in his hearing on March 28, 2011, to the Commission on 
Wartime Contracting, `` . . . having contingency contracting be part of 
the war plan and being an essential part of leadership training are 
both indispensable in today's environment. We're simply not going to go 
to war without contractors. We have to build that into what we call 
readiness, what we call training, what we call leadership, and what we 
call war planning.'' With the help of this subcommittee and numerous 
other oversight organizations, significant strides have been made in 
improving contingency contracting and contractor oversight and 
management.
Contractors Supporting U.S. Central Command Operations
    DOD currently has approximately 175,045 contractors in the U.S. 
Central Command (CENTCOM) area of responsibility (AOR). (See Table 1.)

              Table 1. DOD Contractor Personnel in the U.S. Central Command Area of Responsibility
                                       (as of the fourth quarter of 2011)
----------------------------------------------------------------------------------------------------------------
                                                                                                    Local/Host
                                                       Total       U.S. Citizens   Third Country      Country
                                                    Contractors                      Nationals       Nationals
----------------------------------------------------------------------------------------------------------------
Afghanistan Only................................         101,789          23,190          27,912          50,687
Iraq Only.......................................          52,637          16,054          29,213           7,370
Other CENTCOM Locations.........................          20,619           5,684          14,727             208
CENTCOM AOR.....................................         175,045          44,928          71,852          58,265
----------------------------------------------------------------------------------------------------------------

    These contractors provide a range of support, including base 
support, security, translation, logistics, construction, 
transportation, and training. In addition to the support they provide 
to the military, we have leveraged our contractors to further our 
policy objectives. Using contractors who are local nationals helps 
develop the local economy and workforce, which contributes to stability 
and effective counterinsurgency operations. Congress assisted the 
Department in this area by incorporating section 886 into the National 
Defense Authorization Act for Fiscal Year 2008, ``Acquisitions in 
Support of Operations in Iraq or Afghanistan,'' as well as section 801 
of the National Defense Authorization Act for Fiscal Year 2010, 
``Temporary Authority to Acquire Products and Services Produced in 
Countries Along a Major Route of Supply to Afghanistan.'' Both sections 
are critical to gaining local support for the presence of U.S. forces 
and maximizing employment in these countries to diminish the pool of 
the unemployed, who are more easily drawn into the insurgency.
             wartime contracting commission recommendations
    As a result of the Department's close coordination with the 
Commission on Wartime Contracting, we are largely in agreement with the 
recommendations in their final report, as we were with their two 
interim reports, and are well on the way toward implementing most of 
them. The final report included 15 strategic recommendations, of which 
11 were DOD-specific recommendations and 4 were directed at Congress. 
The Department of Defense agrees in principle with all 11 of the DOD-
specific recommendations. Of these, we would like to highlight a few 
today.
    We support the Commission's recommendation to grow a trained, 
experienced, and deployable cadre. This is the Commission's 
recommendation #2, and the Department is taking steps to implement it. 
The U.S. Army's Expeditionary Contracting Command, which stood up in 
2008, serves as our deployable cadre. Thanks to Congress, the 
Department has 10 new acquisition General and Flag Officer billets, and 
1 of them heads this deployable cadre.
    We support recommendation #11 to ``improve contractor performance-
data recording and use'' and have worked with the Office of Federal 
Procurement Policy (OFPP) on FAR and DFARS changes to improve reporting 
of contract performance data. In doing so, we have sought to preserve 
the ability for contractors to appeal adverse findings in a manner that 
does not impede timely reporting.
    We also support recommendation #12 to ``strengthen enforcement 
tools.'' The Department has increased the use of these enforcement 
tools--from fiscal year 2007 to 2011, the number of Army debarments has 
increased 89 percent (from 94 debarments to 178)--but we rely on the 
discretion of Debarring and Suspension Officials to treat each case on 
its own facts and circumstances. In analyzing the Commission 
recommendation to strengthen enforcement tools, we need to preserve the 
discretion of our officials to determine on a case-by-case basis what 
makes the best sense. We also thank Congress for two legislative 
provisions that were included in both the House and Senate versions of 
the defense authorization bill which will assist us in this area and 
would be very beneficial. One would expand the government's access to 
contractor records; the other would provide the authority to void any 
DOD contracts if contract payments, directly or indirectly, support the 
enemy.
    While we support them in principle, we are still in the process of 
fully assessing a few recommendations that did not previously appear in 
a major Commission report. Recommendation #5, to ``take actions to 
mitigate the threat of additional waste from unsustainability,'' falls 
in that category. We agree with the Commission that sustainability is a 
major concern and have already taken a number of steps to address this 
concern. We are still evaluating what additional steps may be needed to 
address the sustainability issues identified in the final report.
    While we support them in principle, we have concerns about a few 
recommendations, including Recommendation #7 which recommends creating 
a J10 Directorate for contingency contracting. The Department believes 
that creating a separate directorate for contingency contracting on the 
Joint Staff, and similar directorates on the service staffs, may tend 
to confuse rather than streamline responsibilities. We are exploring 
alternative ways of ensuring that the Commission's intent, to ensure 
that contingency contracting receives the attention it deserves on the 
Joint Staff and in the military Services, is met.
                         recent accomplishments
    In 2006, Congress directed the appointment of Program Managers at 
the Department and Service levels to focus the Operational Contract 
Support efforts (section 854 of the NDAA for Fiscal Year 2007; 10 
U.S.C. 2333). The Under Secretary of Defense for Acquisition, 
Technology, and Logistics and the Service Acquisition Executives have 
made those appointments and their responsibilities were further 
clarified in the charter of the OCS Functional Capabilities Integration 
Board (FCIB). In March 2009, we published DOD Directive 3020.49, 
establishing policy and assigning responsibility for OCS program 
management. As part of our continuing effort to implement section 862 
of the NDAA for Fiscal Year 2008 and section 832 of the NDAA for Fiscal 
Year 2009, this year we published a Federal Regulation on private 
security contractors (PSCs), which applies to all U.S. Government PSCs 
in combat operations and other significant military operations, and 
published the associated DOD Instruction. We continue to make required 
FAR and DFARs changes to insure PSC requirements are included in 
contract instruments. In a related effort, DOD personnel were actively 
engaged with the OFPP and with our colleagues in other agencies on 
preparing both the draft and final Policy Letter to better define 
inherently governmental performance.
    In 2008, the Chairman of the Joint Chiefs of Staff directed the 
establishment of a task force to analyze DOD's level of contractor 
dependency and provide recommendations to adapt the Department to the 
reality of how we operate in three areas: first, contractor-provided 
training (Task Force I); second, the extent of reliance on contracted 
support in support of operations in Iraq and Afghanistan (Task Force 
II); and third, the need to improve the planning and training for 
contracted support (Task Force III). These efforts laid the foundation 
for the systemic changes required to ensure that planning for 
contracted support is accomplished; awareness of the roles and 
responsibilities of commanders, staff, and personnel with regard to 
contracted support is clear; and the underlying processes and tools 
needed to provide timely and precise contracted support and oversight 
are in place.
    Tangible evidence of our commitment to continuous progress in 
oversight of contingency contracting is found in the many 
accomplishments the Department has already made across the DOTMLP 
(Doctrine, Organization, Training, Materiel, Leadership, and Personnel) 
spectrum. Congress, and particularly this Committee, has been an 
essential partner in this effort. We would like to highlight some of 
these accomplishments.
Doctrine
    On October 17, 2008, the Joint Staff J-4 published Joint 
Publication 4-10, Operational Contract Support, to include doctrine for 
planning, conducting, and assessing operational contract support 
integration and contractor management functions in support of joint 
operations. This doctrine provides a common frame of reference across 
the military for OCS as a way of accomplishing military tasks. OCS 
includes multiple stakeholders, including the commands that are now 
incorporating contracted support into their logistics support plans, 
the units that develop requirements documents to augment their organic 
capabilities, the resource management and finance personnel that 
allocate and disburse funds, contracting officers that award contracts 
and their representatives that oversee those contracts, and the 
contractors that perform the contract. This document, in light of 
lessons learned, is in the process of being updated. The Joint 
Requirements Oversight Council has approved the Operational Contract 
Support Integrated Capabilities Document and formally tracks progress 
of OCS integration into all relevant supporting documents.
Organization
    The Department is improving its organizational structure to ensure 
it best supports OCS and contingency contracting. In 2006, Congress 
directed the appointment of Program Managers at the Department and 
Service levels to focus the Operational Contract Support efforts 
(section 854 of the NDAA for Fiscal Year 2007; 10 U.S.C. 2333). The 
Under Secretary of Defense for Acquisition, Technology and Logistics 
and the Service Acquisition Executives have made those appointments and 
their responsibilities were further clarified in the charter of the OCS 
FCIB. On March 29, 2010, the Under Secretary of Defense for 
Acquisition, Technology and Logistics established the OCS Functional 
Capability Integration Board to provide strategic leadership to the 
multiple stakeholders engaged in OCS, synchronize program management, 
analyze and implement the recommendations of various Commissions, and 
address the mandates of Congress. The key members include DOD and 
Service Program Managers for OCS, in accordance with 10 U.S.C. 2333.
    In the CENTCOM Area of Responsibility, the Joint Contracting 
Command-Iraq/Afghanistan reorganized, moving from being a U.S. Forces-
Iraq subordinate command to a joint functional command directly 
reporting to HQ CENTCOM in May 2010. This was done to comply with joint 
doctrine and emphasize the need for better contract support integration 
and contractor management across the CENTCOM area of responsibility.
    The Army reorganized its contingency contracting forces to improve 
planning, training, equipping, and execution of OCS, in response to a 
recommendation from the ``Gansler Commission,'' an independent body 
established by the Secretary of the Army in 2007. The Army Contracting 
Command now comprises a Mission Installation Contracting Command and an 
Expeditionary Contracting Command, as well as six active Contracting 
Support Brigades (CSBs) who serve as a deployable cadre of acquisition 
personnel. The CSBs are geographically aligned in order to provide 
responsive operational contracting support to the Army Service 
Component Commands and provide the Army with greater flexibility to 
place contracting teams into areas to support Joint Force operations; 
these efforts are in alignment with CWC's recommendation #2.
    In order to leverage the power of the Army Contracting Command 
enterprise in supporting global operations, the Army has established a 
``reach-back'' contracting capability to support forward operations. 
Having this reach-back capability reduces our in-theater footprint and 
the number of individuals in harm's way. We support the Senate bill 
that would strengthen this reach-back resource by providing the ability 
to use the overseas increased micro-purchase threshold and the 
simplified acquisition threshold in the same manner and to the same 
extent as if the contract were to be awarded and performed outside the 
United States, which will help expedite urgently needed requirements 
and reduce manning in theater.
    The current manning of the Army contracting workforce, especially 
the expeditionary capability, is out of balance with the demands placed 
on it. The imbalance is evident in the findings of more than 3,700 
audits and reports (Inspector General, Army Audit Agency, Government 
Accountability Office, and the report by the Commission on Wartime 
Contracting). As a result the Army is taking steps to ensure the size, 
mix and quality of the Army's contracting workforce is sufficient to 
effectively and efficiently manage the expenditure of taxpayer dollars, 
with the Secretary of the Army directing an increase of 315 military 
authorizations for contracting in fiscal year 2013. The Secretary of 
the Army has also directed an annual reevaluation of the proposed 
contracting growth structure which will be synchronized with the Total 
Army Analysis and Planning, Programming, Budgeting, and Execution 
process.
Training
    The Department has increased its training portfolio to properly 
prepare personnel for the reality of OCS and contingency contracting on 
the battlefield. The training addresses a range of audiences, from 
commanders to acquisition professionals to subject-matter experts 
performing oversight. OSD and the Joint Staff have collaborated to 
produce three online OCS training courses for commanders and their 
staffs. The Defense Acquisition University (DAU) offers seven 
contingency contracting courses for the acquisition community, 
including our contingency contracting officer course, CON234, as well 
as the newly developed advanced contingency contracting course, CON334. 
The Army has added and improved multiple acquisition training courses 
including instruction in 16 officer and noncommissioned officer 
courses; incorporated contracting operations and planning into the 
Battle Command Training Program and Combat Training Center training; 
and included OCS scenarios to exercise oversight personnel during 
Mission Readiness Exercises prior to deployments. OCS is taught at the 
National Defense University, Army War College, and the Army Command and 
General Staff College. It is a Chairman, Joint Chiefs of Staff Special 
Area of Emphasis.
    The OCS education and training portfolio will continue to receive 
Departmental attention. OSD and the Joint Staff have developed online 
training courses for commanders, field-grade officers, and military 
planners that are available today. The Joint Staff is currently leading 
a study to assess OCS education requirements and develop a vision and 
strategy to implement at all appropriate levels of professional 
development. The Joint Staff is also leading an effort to develop OCS 
Universal Joint Tasks that will feed military exercises and training.
    To further improve OCS training, the Joint Staff (J-4), in 
conjunction with the National Defense University, is sponsoring a study 
to analyze the current state of OCS education and training programs and 
propose an institutional OCS Education and Training Program that will 
provide practical training and education content tailored to the 
recipient's role and responsibility in OCS. Due in August 2012, this 
study will determine the requirement for OCS education and training at 
the strategic, operational, and tactical levels and develop 
methodologies that will expand the awareness of OCS across the national 
security enterprise.
Materiel
    At the practical level, two handbooks help our acquisition 
community do its job more effectively and efficiently.
    Our Defense Contingency Contracting Handbook was developed to fill 
a gap: while deployed CCOs performing in a joint environment had 
Service-specific guidance, they lacked consolidated, joint guidance. 
The joint handbook was developed by CCOs for CCOs, as well as for 
auditors, the Inspector General, and lawyers. From the start, the 
handbook has contained tools, templates, forms, training guides and 
material, and checklists. We continue to refine these, as well as add 
features, for each annual update to the handbook. The third edition 
expanded the website capabilities and added over 100 new resources and 
additional material based on special interest items occurring in 
theater today. Over 10,000 second edition handbooks were distributed 
and over 15,000 third edition handbooks were published due to increase 
in demand. The handbook and DVD information are now also available on 
the Defense Procurement and Acquisition Policy Web site, which enables 
us to update content in real-time, if we find needed improvements from 
lessons learned or specific gaps in training.
    Building on a successful joint handbook for CCOs, we created a 
joint handbook for CORs. The Defense Contingency COR Handbook 
supplements official training and policy and serves as a handy pocket 
guide that provides CORs, who are supporting contingency operations, 
with basic tools and knowledge. This 346-page handbook and accompanying 
CD provides checklists, how-to guides, form procedures, and examples. 
This handbook provides the basic knowledge and tools needed by CORs to 
effectively support contingency operations and is designed specifically 
to address the realities faced by CORs in operations outside the 
continental United States. The information in the handbook is extracted 
from numerous sources within the Defense acquisition community. Over 
13,000 handbooks were distributed in only 6 months. High demand 
required a reprint of another 9,000 books that will be distributed over 
the next 10 months.
    This unified guide strengthens the ability of CORs to provide 
needed contract surveillance. Another tool we are currently deploying 
is the DOD COR Tool (CORT), a web-based management capability for the 
appointment and management of CORs. It provides an automated means to 
access important data on CORs, including the COR name, career field, 
certification level, and other contact information; the COR's 
supervisor contact information; and the Contracting Officer's contact 
information. Beyond contact information, it identifies all training 
completed by the COR. The DOD CORT automates key parts of the process--
it enables an electronic nomination, approval, and termination process 
of candidate CORs, and it provides the capability to record key process 
documents online, such as status reports, trip reports, correspondence. 
DOD contracting personnel are provided with a web-based portal for all 
relevant COR actions. The CORT is being deployed within DOD and full 
deployment will occur by the end of fiscal year 2012.
Leadership
    The ``Gansler Commission'' report on Army Expeditionary Contracting 
voiced a concern about the lack of military leadership in the 
contracting profession. Congress provided legislation in the National 
Defense Authorization Act for Fiscal Year 2009 to add 10 military 
General or Flag Officer billets for acquisition positions--5 for the 
Army and 5 for joint positions. Having additional senior military 
leaders in contracting positions will be a great help to our 
contracting workforce, specifically by enhancing the stature of our 
contracting officers, and we thank Congress for authorizing these 
positions. Throughout the Services, our current military leadership 
levels in contracting positions demonstrate great progress. The Army 
has four new general officers in contracting positions (where 4 years 
ago they had none), the Navy has three flag officers serving in 
contracting joint billets, and the Air Force has two general officers 
in contracting positions.
    Further examples exist across the Department of senior leaders 
recognizing the importance of OCS and taking significant steps to 
enhance our performance in this area. Beginning in 2010, then-Chairman 
of the Joint Chiefs of Staff, Admiral Mike Mullen, dedicated 
substantial resources to enhance the Department's ability to 
effectively plan for contracted support in contingencies. At the same 
time, the then-ISAF Commander, General David Petreaus, published 
substantial guidance highlighting the significance of contracting in 
support of counterinsurgency (COIN) operations in Afghanistan. This 
guidance will influence the revision of joint doctrine for OCS and how 
we operate in future operations. The Chief of the Staff of the Army 
also ordered COR readiness requirements that had an immediate impact on 
the number and qualifications of CORs in theater. As recently as 
October 6, 2011, the Secretary of the Army directed his Department to 
grow its expeditionary contracting workforce to an end strength of 
1,450 personnel by the end of fiscal year 2017. These are but a few 
examples of DOD leaders taking actions that demonstrate the 
Department's recognition of the importance of institutionalizing OCS.
Personnel
    People are the key to our success, and the Department is directly 
addressing personnel issues impacting operations in Iraq and 
Afghanistan. We are creating and filling 9,000 new acquisition 
workforce positions, strengthening the contracting workforce, and 
contributing to revitalizing the DCMA and DCAA. DOD has been increasing 
the capacity of the acquisition workforce since 2009 as part of a 
deliberate DOD-wide initiative to rebuild the acquisition workforce. On 
April 6, 2009, the Secretary of Defense gave direction to grow and in-
source the acquisition workforce. The Army contracting civilian 
workforce is on track to grow by over 1,600 new positions by fiscal 
year 2015. This growth has been facilitated by section 852 of the 2008 
National Defense Authorization Act, which provided short-term funding 
to hire acquisition personnel while permanent positions are resourced. 
Section 852 has been utilized to hire 352 Army civilian contracting 
interns to date, with hundreds more planned over the next 3 years. 
Section 852 provided critical funds to help reconstitute the 
acquisition workforce as well as many other initiatives and we thank 
Congress for its foresight in providing these funds.
    We use both deployed military and civilian personnel to fulfill 
contract management functions, increasingly focusing on civilians to 
enable the military to focus on operations. On 28 December 2010, the 
Under Secretary of Defense for Acquisition, Technology and Logistics 
called for civilian volunteers from the acquisition workforce. In 
follow up, the Director of Defense Procurement and Acquisition Policy 
issued a memorandum on February 2, 2011, calling for volunteers to 
serve as Contingency Contracting Officers (CCOs) with the DOD Civilian 
Expeditionary Workforce. In his memo, the Director wrote, ``Our 
experiences in Iraq and Afghanistan continue to reinforce the value of 
civilian employee volunteers in contingency operations.'' In addition 
to being offered post differential pay, danger pay, and overtime along 
with salary, volunteers are also guaranteed the right to return to 
their permanent positions after deployment. We currently have 85 
civilians supporting the CENTCOM-Joint Theater Support Contracting 
Command efforts in Iraq and Afghanistan, which is a significant 
increase over year's past.
Contractor Audit Oversight
    In addition to changes in the DOTMLP approach to OCS, the 
Department has become increasingly vigilant on contract audit 
oversight. Since 2003, five audit organizations have recovered $10.1 
billion. These organizations are the Defense Contract Audit Agency 
(DCAA), DOD Inspector General, Special Inspector General for Iraq 
Reconstruction (SIGIR), Army Audit Agency (AAA), and Air Force Audit 
Agency. From October 2009 to August 31, 2011, Defense Contract 
Management Agency (DCMA) quality assurance inspections identified 
12,916 nonconforming defects and have issued 1,457 Corrective Action 
Reports. Throughout, the contracting officer, DCMA, and the contracting 
officer's representative (COR) perform contract management. We are 
pleased to note that we are fully staffed in-theater for contracting 
officers to meet CENTCOM's documented manning requirement.
    DOD also insures that allegations of fraud and corruption are fully 
investigated. The U.S. Army Criminal Investigation Command has forward 
deployed Special Agents in Afghanistan and works closely and shares 
information with other law enforcement agencies in the region. Since 
the start of fiscal year 2008, there have been 140 major procurement 
fraud investigations involving operations in Afghanistan. In July 2010, 
Task Force 2010 was established by U.S. Forces Afghanistan (USFOR-A) to 
address issues of corruption which were undermining counterinsurgency 
efforts. The task force consists of individuals from all the uniformed 
services and includes civilian representatives from various 
contracting, auditing and criminal investigative agencies (DCAA, AAA, 
U.S. Army Criminal Investigation Command, and Defense Criminal 
Investigation Command DCIS). The team also includes forensic 
accountants who assist the task force in tracing money through the 
Afghan domestic and international financial networks. Both Task Force 
2010 and Task Force Spotlight (which was responsible for coordinating 
ISAF's management of private security companies) were organized under 
Combined Joint Interagency Task Force-Shafafiyat to provide unity of 
effort with the international community. This interagency task force, 
which includes other U.S. agencies and both U.S. and Afghan law 
enforcement officials, leads ISAF's anti-corruption efforts.
DCMA Oversight
    DCMA provides management to support contracts such as the LOGCAP, 
Air Force Civil Augmentation Program (AFCAP), and theater-support 
contracts. Government Quality Assurance (QA) oversight is critical to 
the military mission and contract administration success. In 
recognition of this, the DCMA QA program includes independent 
examinations and reviews of contractor services, processes, and 
products in accordance with requirements outlined in the contract. A 
strong quality surveillance program requires boots-on-the-ground 
interaction with contractor personnel, military units, and base camp 
mayor cells on a continuous basis. The DCMA's QA surveillance program 
is administered by experienced Quality Assurance Representatives 
(QARs), unit-provided CORs, and Subject Matter Experts (SMEs) to 
provide appropriate oversight coverage.
    Further, for most contracts it administers, DCMA appoints CORs to 
evaluate specific contract areas and verifies that CORs have completed 
the required DOD-mandated training. DCMA also conducts COR training on 
those duties specific to the contract on which they are assigned, DCMA 
operations, and provides on-the-job training with a DCMA QAR.
Oversight of Reconstruction Funding
    We are aware of the Commission's and Congress' concerns on 
oversight of reconstruction projects including the Commander's 
Emergency Response Program (CERP) and the Afghanistan Infrastructure 
Fund (AIF). The Department, working with Congress, increased internal 
requirements for oversight and approval of CERP projects. We notify the 
congressional defense committees of any CERP project with a total 
anticipated cost of $5 million or more at least 15 days before funds 
are obligated and provide a listing of all CERP projects on a quarterly 
basis. All CERP project managers are required to coordinate projected 
projects with Afghan agencies and local officials, as well as with the 
nearest Provincial Reconstruction Team, to ensure there is no 
duplication of efforts by DOD, USAID, State, and nongovernmental 
organizations in the area.
    To address concerns that CERP was being used for larger projects 
than originally intended, and that U.S. agencies engaged in 
reconstruction activities were not fully coordinated, Congress created 
a new mechanism, the Afghanistan Infrastructure Program (AIP). AIP 
projects can be funded by the Department of Defense, through the AIF, 
or by the Department of State, using its existing authorities. These 
projects are developed by the interagency Infrastructure Working Group 
in Afghanistan and then nominated by the Commander, U.S. Forces-
Afghanistan and the U.S. Ambassador in Afghanistan to the Secretary of 
Defense and the Secretary of State for approval. The Secretary of 
Defense--not fewer than 15 days prior to making transfers to or from 
the fund or obligations from the AIF--will notify the appropriate 
congressional committees.
    In addition to these steps, the Deputy Secretary of Defense 
established the Afghanistan Resources Oversight Council (AROC) on 
August 3, 2011, to oversee the use of CERP, AIF, and the Afghanistan 
Security Forces Fund within the Department of Defense at a senior 
level. The AROC has met on two occasions, initially plans on meeting on 
a monthly basis, and will begin quarterly meetings in calendar year 
2012. The ASFF and CERP/AIF have working groups that meet on a weekly 
basis to oversee ongoing planning, execution, and oversight of 
Afghanistan reconstruction resources.
                                closing
    Chairman McCaskill, before closing, we want to reiterate our 
appreciation for the Wartime Commission's work. Ultimately the aim of 
the collective effort of all of the initiatives outlined above is to 
meet the warfighters' current and future needs while judiciously 
managing DOD resources and balancing risk. Much has been accomplished, 
but of course challenges remain. We are not complacent and acknowledge 
we still have more work to do. We appreciate the work of the Commission 
on Wartime Contracting and this subcommittee in maintaining a focus on 
this critical area. We look forward to answering your questions.

    Senator McCaskill. Thank you.
    Now we will welcome--I have to get back to your bio. I 
remember West Point.
    Mr. Kendall. That is a good start, Madam Chairman.
    Senator McCaskill. Here we go. It was a good start, wasn't 
it? It was a great start. Some of our very best leaders in this 
country started there.
    Frank Kendall is the Acting Under Secretary of Defense for 
Acquisition, Technology, and Logistics (AT&L). He has more than 
35 years of experience in engineering, management, defense 
acquisition, and national security affairs in private industry, 
Government, and the military.
    Thank you, Secretary Kendall, for being here.

    STATEMENT OF HON. FRANK KENDALL, PRINCIPAL DEPUTY UNDER 
SECRETARY OF DEFENSE FOR ACQUISITION, TECHNOLOGY, AND LOGISTICS

    Mr. Kendall. Thank you, Chairman McCaskill.
    Chairman McCaskill, Ranking Member Ayotte, and 
distinguished members of the Senate Armed Services Committee 
Subcommittee on Readiness and Management Support, I am Frank 
Kendall, Acting Under Secretary of Defense for AT&L.
    I am honored to be here today and appreciate the 
opportunity to discuss DOD's continuing efforts to enhance our 
ability to execute contracting in a wartime environment and 
discuss with you the recently released CWC final report.
    DOD has been working closely with the CWC since its 
inception in 2008, and we appreciate and welcome its efforts to 
assist DOD in eliminating waste, fraud, and abuse in wartime 
contracting.
    Chairman McCaskill, I would like to request that my written 
testimony for General Bash and I be admitted to the record, 
please.
    Senator McCaskill. Without objection.
    Mr. Kendall. In that testimony, Lieutenant General Brooks 
Bash and I lay out the history of contingency contracting and 
discuss how DOD has responded to the unique challenges brought 
on by the unprecedented large-scale reliance on contractors in 
Iraq and Afghanistan over the past decade. We cover the size of 
contractor support to U.S. Central Command (CENTCOM) and the 
efforts DOD has undertaken to improve our ability to manage 
contractors.
    This includes oversight mechanisms that had to be created 
from nothing or increased in capacity and capability to 
effectively manage contractors on the battlefield, the 
development of new doctrine and organizations, the 
establishment of training programs, the development of tools to 
assist contract administrators, the growth in senior leaders 
and professionals, and the steps being taken to ensure we 
neither over-rely on contractors nor are caught unprepared 
should the need to use contractors so extensively reoccur after 
we complete our operations in Iraq and Afghanistan.
    Rather than summarize all the material now that is in our 
written submission, I would like to quickly address the 
specific topics noted in the letter that I received from you, 
Chairman McCaskill and Ranking Member Ayotte.
    First, with regard to the CWC's final report, DOD was 
previously aware of all but four of the recommendations from 
previous reports. Together, these reports contained 82 
recommendations--35 from the first interim report, 32 in the 
second interim report, and 15 in the final report. Upon the 
issuance of the first interim report, DOD stood up a task force 
in July 2009 to analyze the recommendations and to act on them.
    In March 2010, the Under Secretary of Defense for AT&L 
created a permanent board to provide strategic leadership to 
the multiple stakeholders working to institutionalize OCS and 
to track those accepted recommendations to completion. As a 
result of these steps, a great majority of the CWC's final 
recommendations have already been acted upon.
    For the new strategic recommendations, DOD is currently 
completing its analysis. In broad terms, however, we agree in 
principle with the overarching precepts driving the CWC's final 
report recommendations.
    There are four commission recommendations not under DOD 
purview. They are numbers 8, 9, 14, and 15. Although these 
recommendations are directed at Congress and not DOD, I believe 
that recommendation 14 regarding funding for contingency 
contracting is essential. Without continued support or the 
funding from Congress, we run the risk of losing ground on 
oversight of contingency contracting for the future.
    As for the 11 DOD-specific recommendations, we embrace all 
of them in principle and are in the process of implementing 
most of them already.
    Recommendation 1 on using risk factors in deciding whether 
to contract in contingencies. This is a new recommendation so 
we are in the process of analyzing its full requirements. But 
we agree on the importance of risk-based assessments, and DOD 
has already taken some steps in this direction. In theater, the 
Commander of the ISAF Joint Command issued a recent memorandum 
addressing risk as part of the go/no-go decision process for 
undertaking projects.
    Recommendation 2, developing deployable cadres for 
acquisition management and contractor oversight, we have 
implemented this, most notably through the Army's Expeditionary 
Contracting Command, and continue to grow our capability in 
this area.
    Recommendation 3, phasing out the use of private security 
contractors (PSC) for certain functions. DOD's use of PSCs does 
fully comply with applicable laws and regulations that define 
inherently governmental functions and the governance of these 
contractors. In Afghanistan, however, we are implementing the 
recommendation. A plan is in development to transition selected 
PSC contracts to an Afghan public protection force. As the 
capability and size of this force mature, certain security 
functions will transition from DOD-contracted PSCs.
    Recommendation 4, improving interagency coordination and 
guidance for using security contractors in contingency 
operations. We have implemented the needed framework, pursuant 
to section 862 of the 2008 NDAA. In July 2009, we published a 
Federal regulation for all U.S. Government PSCs working combat 
operations. We updated this in August of this year to 
incorporate changes made in section 832 of the 2009 NDAA.
    Recommendation 5, taking actions to mitigate the threat of 
additional waste from unsustainability. We are in the process 
of implementing this, and we agree that there is more work to 
be done here. The Commander of the ISAF Joint Command's 
memorandum includes sustainability as part of the go/no-go 
decision criteria for all projects.
    Recommendation 10, setting and meeting annual increases in 
competition goals for contingency contracts. We have 
implemented this for Stateside contracts, and we are in the 
process of implementing it and deciding whether reporting 
systems can readily support this for contingency contracts as 
well. As an aside, currently approximately 90 percent of our 
contracting overseas is already competed.
    Recommendation 11, improving contractor performance data 
and use. We are in the process of implementing this 
recommendation. DOD strongly agrees that the data in the past 
performance database needs substantial improvement so that 
contracting officers who are required to consult this data 
before making contract awards can have content that is 
accurate, complete, and reliable.
    Recommendation 12, strengthening enforcement tools. We are 
in the process of implementing this recommendation and with 
congressional help. Two provisions that Senator Ayotte 
mentioned earlier that are included in the House Defense 
Authorization Bills would assist us in the area of enforcement 
tools. Both are related to the No Contracting with the Enemy 
Act that she and Senator Brown introduced. One provision would 
expand the Government's access to contractor records, and the 
other provides the authority to void any DOD contracts if funds 
directly or indirectly support the enemy. Both of these actions 
were undertaken at the request of Task Force 2010, our anti-
corruption task force in Afghanistan.
    Recommendation 13, providing adequate staffing and 
resources in establishing procedures to protect the 
Government's interest. We have already implemented several 
improvements in this area. We have strengthened our ability to 
withhold payments to contractors with inadequate business 
systems as a means to protect U.S. Government interests.
    While we agree in principle with CWC on the need for 
accountability and leadership intention on contingent 
contracting, we do have concerns with regard to recommendations 
6 and 7. Recommendation 6 elevates the positions and expands 
the authority of civilian officials responsible for contingency 
contracting, and recommendation 7 does the same for military 
officials.
    The CWC would elevate one office in the AT&L Office, my 
office, and OSD, to focus on contingency contracting. In my 
view, a division of labor is necessary and appropriate.
    Each of several DOD organizations brings unique subject 
matter expertise and oversight of contingency contracting. This 
ties back to the resources and expertise of the acquisition 
system as a whole.
    Within my organization, we need the functional expertise of 
both program support under our Assistant Secretary of Defense 
for Logistics and Materiel Readiness, and the Contingency 
Contracting Office under our Director for Defense Procurement 
and Acquisition Policy.
    Similarly, I am concerned that creating a J10, as General 
Bash mentioned, would tend to confuse rather than streamline 
accountability for contingency contracting in the Joint Staff.
    DOD has come a long way in the area of operational 
contracting support, in large part as a result of enabling 
legislation from Congress. Section 854 of the 2007 NDAA 
required us to establish joint policies on requirements 
definition, contingency program management, and contingency 
contracting, and we have done so.
    Section 862 of the 2008 NDAA and section 832 of the NDAA 
for Fiscal Year 2009 required us to issue comprehensive 
regulations managing PSCs, which we have done. We embrace the 
recommendation of the Gansler commission, including its central 
insight that we needed to increase the scale and scope of 
military leadership in acquisition workforce.
    We have also taken advantage of insights from dedicated 
internal task forces such as Task Force Shafafiyat, Task Force 
2010, and Task Force Spotlight to identify and combat attempts 
to divert U.S. contractor funds to our enemies through fraud 
and corruption.
    I would also like to recognize the valuable efforts of 
several key DOD personnel who have been working on this problem 
for several years. This would include Gary Motsek, the Deputy 
Assistant Secretary of Defense for Program Support, and Dick 
Ginman, who is here with me today, the Director of Defense 
Procurement Acquisition Policy.
    In your letter, you asked about legislation that might be 
needed to implement the CWC's recommendations. DOD believes 
that the essence of the CWC's recommendations can be 
implemented under existing authorities. However, we will get 
back to the committee if we find any additional authority is 
required.
    I would also like to thank you for your support of the two 
other legislative proposals that you are now considering, one 
in contracting with the enemy, as we have already discussed, 
and the other in access to contractor records. This legislation 
will go a long way to fighting corruption and tracking bad 
actors, which is yet another challenge we face in contingency 
contracting.
    I want to close on a note of thanks to the CWC for all the 
hard work and dedication they put into this effort to assist 
DOD. DOD joins them in our desire to eliminate waste, fraud, 
and abuse whenever and wherever it occurs.
    I would also like the committee to note the hard work and 
dedication that DOD has put into the effort to create an 
effective contingency contracting capacity that simply did not 
exist at the time we entered Iraq and wasn't even considered as 
something we might need. Over the last several years, as that 
need became apparent in both the Bush and Obama 
administrations, an enormous amount of work has been done to 
correct the situation.
    Dedicated professionals in and out of uniform have made 
great progress, but we all know there is more to be done. We 
look forward to working with Congress as we continue this 
important effort to protect taxpayers' interests and the 
resources that they provide to us.
    Thank you, Madam Chairman.
    Senator McCaskill. Thank you, Secretary Kendall.
    The next witness is Dov Zakheim, and he has an amazing 
resume. He was the Under Secretary of Defense (Comptroller) for 
a number of years. It wasn't that long ago that you were in one 
of those chairs, and you were the one that was getting the 
questions that were uncomfortable to answer.
    You do have a long history of service to our country in a 
variety of different capacities relating to defense operations. 
I know the amount of time the CWC took, and it was good of you 
to take time out of your professional schedule to make time for 
this work.
    I think you were a great contributor to the effort, and we 
look forward to your testimony.

 STATEMENT OF HON. DOV S. ZAKHEIM, COMMISSIONER, COMMISSION ON 
          WARTIME CONTRACTING IN IRAQ AND AFGHANISTAN

    Mr. Zakheim. Thank you very much, Madam Chairman and 
Ranking Member Ayotte.
    With me is Katherine Schinasi, who has served for 31 years 
with the GAO and most recently is Managing Director for 
Acquisition and Sourcing Management at GAO and worked on DOD 
and DOS issues and has recently been a senior adviser to the 
Conference Board, a nonprofit research organization.
    I also want to thank you, Madam Chairman, for calling us--I 
think I speak for all of us at the table--for saying we are a 
special treat. I never heard that when I was Comptroller. 
[Laughter.]
    Katherine and I are speaking today in our capacity as 
private citizens. We can assure you that nothing in our 
testimony conflicts with the solid and bipartisan consensus 
that developed among the eight members of the CWC.
    We have provided copies of our report, ``Transforming 
Wartime Contracting,'' to the subcommittee, and we respectfully 
request that the report and our statement be included in the 
official record of this hearing.
    Senator McCaskill. They will be included in the record.
    Mr. Zakheim. Thank you.
    We unanimously conclude that the need for change, change in 
laws, policies, practices, and organizational culture, is 
urgent. It is urgent for five reasons.
    The first is that although our policy for more than 20 
years considered contractors to be part of what is called the 
total force for contingency operations, the Federal Government 
went into Afghanistan and Iraq unprepared to manage and oversee 
the thousands of contracts and contractors that were being used 
there.
    Now there is no question that some improvements have been 
made. But after a decade of war, the Government remains unable 
to ensure that taxpayers and warfighters are getting good value 
for the contract dollars that have been spent. The Government 
also remains unable to provide fully effective interagency 
planning, coordination, management, and oversight of 
contingency contracts.
    Second reason, reforms can still save money in Afghanistan 
and Iraq, even today. They can avoid unintended consequences 
and improve outcomes there. Just as an example--and you 
mentioned this--as the United States draws down its troops in 
Iraq, DOS is poised to hire thousands of new contractors for 
security and other functions. Reforms would make a huge 
difference in that regard.
    Third, as you both mentioned, the dollars wasted are 
significant, and so I won't repeat again the $31 billion to $60 
billion out of the $206 billion spent. If we do not sustain the 
U.S.-funded projects properly, we are going to see more waste 
still, and again, it will be in the billions.
    Fourth, we know that new contingencies, whatever form they 
may take, will occur, whether it is Libya or something else. We 
are going to keep having those. Meanwhile, the Federal agencies 
have acknowledged that they simply cannot mount and sustain 
large operations without contract support. So this is something 
that is going to be with us for quite some time.
    Finally, failure to enact powerful reforms will guarantee 
that new cycles of waste and fraud will accompany the response 
to the next contingency. In the current period of budget 
constraints, the opportunity cost of wasted funds is 
exceptionally high.
    Now these observations, of course, are general and apply 
Government-wide. But they apply with special force to DOD 
because the preponderance of contracting activity and spending 
has resided with DOD.
    Now DOD's Director of Defense Procurement and Acquisition 
Policy, Admiral Ginman, told the Senate Homeland Security and 
Governmental Affairs Committee last month that DOD--and I am 
quoting here--``agrees in principle''--and you heard it again 
from Secretary Kendall--``agrees in principle with the 11 DOD-
focused recommendations in the final report of the commission'' 
and that DOD defense doctrine ``now includes operational 
contract support.''
    Admiral Ginman also said that DOD is making progress on 
matters such as developing deployable acquisition cadres, and 
you heard that as well from Secretary Kendall. This does appear 
to be a first step toward meeting the intent of section 854 of 
the NDAA for Fiscal Year 2007, which calls for creation of 
exactly that kind of a contingency contracting corps.
    Now we welcome signs of progress at DOD. It is what we all 
want. Rising demands to restrain and redirect Federal spending 
are going to force DOD and other Federal entities to be more 
disciplined in the use of taxpayers' dollars, and that includes 
dollars spent on contracting.
    But, unfortunately, the CWC has concluded that the U.S. 
military and other Federal agencies are still not fully 
prepared to plan and manage large-scale use of contracting 
contingency operations. The issue is less one of policy and 
more one of implementation. Policies are easy to make. 
Implementation is really what counts.
    We are not alone in our concern. GAO has had defense 
contract management on its high-risk list since 1992. So this 
is going on for 20 years. In this year's update, GAO called 
attention to problems observed in Iraq and Afghanistan with 
planning for the use of contractors, vetting security 
contractor personnel, and training nonacquisition personnel to 
manage security contracts.
    In light of GAO's report, it is difficult to state that the 
Government has fulfilled the provisions of section 862 of the 
NDAA for Fiscal Year 2008, which calls for Government-wide 
regulation of PSCs. If that was happening, GAO wouldn't say 
what it is saying.
    We appreciate that DOD, supported and in many cases led by 
this subcommittee and others in Congress, is taking steps to 
improve its use of contractors. Policy memos, DOD instructions, 
flag officer appointments, speeches, and other signs of change 
have been encouraging, and so have the creation of Task Force 
Shafafiyat to combat corruption in Afghanistan and its 
subordinate task forces, both of which were mentioned, 2010 and 
Spotlight. Fiscal year 2010 focuses on corruption in 
contracting, Spotlight on security contractors.
    But the hard reality is that changing values, doctrine, 
expectations, practices, and other aspects of organizational 
culture in a vast and complex enterprise is really like herding 
icebergs, if you don't want to say herding stray cats. It is a 
slow process requiring heroic exertions, sustained attention, 
and unrelenting leadership.
    Inertia and other institutional barriers to change are a 
common problem for reform everywhere. That is why one of the 
recommendations in our final report is that Congress require 
regular independent reports on agencies' progress and on the 
barriers to progress.
    Without regular reporting to and attention by Congress to 
contracting reform, the risk is great that leadership exertions 
and lessons learned will fade, leaving us still unprepared for 
the next contingency and doomed to new cycles of waste and 
improved remedial reactions. That would be a terrible mistake.
    Contracting has provided vital and, for the most part, 
highly effective support for U.S. contingency operations. But 
we rely on contractors too heavily, manage them too loosely, 
and simply pay them too much.
    The wasteful contract outcomes in Iraq and Afghanistan 
demonstrate that Federal agencies still do not see the heavy 
reliance on contractors as important enough to warrant thorough 
planning for and effective execution of the goods and services 
acquisitions that contingency requires.
    The CWC has concluded that the problems are multifaceted 
and need to be attacked on several levels. The first is to hold 
contractors accountable. Federal statutes and regulations 
provide ways to protect the Government against bad contractors 
and to impose accountability on them, including suspension and 
debarment from obtaining future contracts, as well as civil and 
criminal penalties for misconduct.
    Unfortunately, and this goes again to implementation, we 
found that these mechanisms are not often vigorously applied 
and enforced, and incentives to constrain waste are often not 
in place. Compelling cases for charging fraud may go 
unprosecuted because other, possibly more headline-grabbing 
cases are given priority.
    Recommendations for suspension and debarment go 
unimplemented, with no documentation for the decision. Data 
that would be important for past performance reviews often go 
unrecorded. Staffing shortages have led to a Defense Contract 
Audit Agency (DCAA) backlog of nearly $600 billion, delaying 
recovery of possible overpayments and actually causing problems 
for the contractors themselves.
    The Government has also been remiss in promoting one of the 
most effective of all disciplines--competition. A decade into 
an operation, multibillion-dollar--into the operation, sorry--
multibillion-dollar task forces are still being written--task 
orders are still being written with no breakout or 
recompetition of the base contract. That is changing, but not 
quickly enough.
    We recommend better application of existing tools to ensure 
accountability and to strengthening those tools. Our report 
contains recommendations to bolster competition, improve 
recording and use of past performance data, expand U.S. civil 
jurisdiction as part of contract awards, require official 
approval of significant subcontracting overseas, and provide 
incentives for contractors to take active steps against human 
trafficking by subcontractors and labor brokers. Our report 
indicates that implementing many of these recommendations will, 
indeed, require legislation.
    The second level is holding the Government itself more 
accountable for the decision to use contractors and for the 
subsequent results of those decisions. Part of the problem is 
resources, and we have to be careful not to repeat the mistake 
of the 1990s.
    We can't allow budget constraints to permit a further 
downsizing of our acquisition and contracting workforce. On the 
contrary, we must augment that force, especially if planned 
military end strength reductions move forward and there is even 
greater pressure to rely on contractors.
    Even when the Government has sufficient policies in place, 
effective practices, ranging from planning and requirements 
definition to providing adequate oversight of performance and 
coordinating interagency activities, are simply lacking. We 
recommended steps that would improve the Government's handling 
of contingency contracting, and they include developing 
deployable acquisition cadres, and there has been a start 
there; legislation to elevate the positions of the agencies' 
senior acquisition officers--and we will be happy to discuss 
this in detail with you--and to create a J10 contingency 
contracting directorate at the Joint Staff, where the broad 
range of contracting activities is treated as a subset of 
logistics. We just don't like the word ``subset.''
    Another critical recommendation is that agencies pay much 
more attention to the matter of sustainability before 
committing taxpayers' dollars to projects and programs intended 
to support military, political, or development objectives in 
contingency zones.
    Our recommendation includes agency evaluations of 
sustainability and rejecting or canceling projects that have no 
credible prospect of survival without U.S. funding. In other 
words, weighing sustainability as part of an overall 
calculation simply may not be enough.
    We support the recent policy guidance from the Office of 
Management and Budget (OMB) regarding the inherently 
governmental functions, which incorporates a risk-sensitive 
approach to determining which functions could or should be 
reserved for Government performance. As our report explains, 
the inherently governmental test is a necessary, but not 
sufficient, condition for making decisions to hire contractors 
in a contingency environment.
    We note that OMB's action takes the Government considerably 
closer toward meeting the intent of section 832 of the NDAA for 
Fiscal Year 2009.
    Considering this subcommittee's broad mandate, we would 
also call special attention to two recommendations embodying a 
whole-of-government approach that will improve efficiency and 
effectiveness in contracting. Both recommendations would, in 
fact, require legislation in order to be implemented.
    The first is to establish a top-level, dual-hatted position 
for an official who would serve both as a Senate-confirmed 
Deputy Director of OMB and on the National Security Council 
staff as Deputy Assistant to the President. Such a dual-hatted 
position would promote better visibility, coordination, budget 
guidance, and strategic direction for contingency contracting. 
Now the White House would be centrally involved.
    The second is to create a permanent inspector general 
organization for use during contingencies and for providing 
standards and training between contingencies. The work of the 
Special Inspector General for Iraq Reconstruction (SIGIR) and 
the Special Inspector General for Afghanistan Reconstruction 
(SIGAR) have shown the drawbacks of creating organizations 
limited in functional authority, geographic location, and time.
    SIGIR and SIGAR have done great work, but they are going 
away. A permanent contingency IG with a small, but deployable 
and expandable staff, trained in the special circumstances of 
contingency operations, can provide interdepartmental oversight 
from the outset of a contingency.
    As we have already indicated, sustained attention during 
and after the reform process will be essential to ensure that 
compliance extends to institutionalizing reforms and changing 
organizational cultures. That is why our recommendations 
include a requirement for periodic independent progress reports 
to Congress on the pace and results of reform initiatives.
    I know I am being repetitive here, but I think we both felt 
that it is important on this one to be repetitive. Without such 
a requirement, agencies can all too easily succumb to 
complacency, forget the lessons learned in Iraq and 
Afghanistan, and blandly reassure Congress that they, I quote, 
``agree with the substance of reform recommendations and are 
already addressing them,'' even if nothing comes of the effort.
    The Government would be foolish to ignore the lessons of 
the last 10 years and refuse to prepare for better use of 
contracting. But once the wars in Afghanistan and Iraq recede 
into the past, it is going to be all too easy to put off taking 
action.
    Your subcommittee in particular is in a good position to 
prevent such a tragic sin of omission. Members of Congress will 
also be obliged to make hard choices about the Federal budget, 
including funds for DOD.
    The Army and Marine Corps have already announced plans to 
reduce force strength by tens of thousands, and budget debates 
to come will likely require further cuts in defense. In that 
context, we would reemphasize recommendation 14 from our final 
report to Congress. It says, and I am quoting here, ``Congress 
should provide or reallocate resources for contingency 
contracting reform to cure or mitigate the numerous defects 
described by the commission.''
    As DOD officials and senior commanders make cuts in budgets 
and resources, they are going to be inclined to preserve as 
much combat capability as possible in the years ahead by 
concentrating personnel cuts among support functions. We 
understand that. It is a natural reaction.
    But we advise against reducing the size of the acquisition, 
contracting, and oversight workforce. Sustaining and improving 
that workforce is essential. Cutting it would be a false 
economy. DOD should instead seek offsetting savings through 
better planning and requirements definition, increased use of 
competition for contracts, more effective management and 
oversight, and better coordination of procurement and 
contracting functions.
    We urge the members of the subcommittee to take care that 
economy drives are conducted with a balanced view of all 
requirements for contingency operations, not just those that 
involve combat units. If maintaining a balance of essential 
capabilities leads to a more careful review of the scope and 
extent of operations, such an outcome would surely be a 
constructive development.
    This concludes my statement, and we appreciate this 
opportunity to speak with you. We will be happy to answer any 
questions you may have.
    [The joint prepared statement of Mr. Zakheim and Ms. 
Schinasi follows:]
          Joint Prepared Statement by Hon. Dov S. Zakheim and 
                       Hon. Katherine V. Schinasi
    Chairman McCaskill, Ranking Member Ayotte, and members of the 
subcommittee, good morning. Thank you for inviting us to testify.
    I am Dov Zakheim. With me is Katherine Schinasi. We had the honor 
to serve as members of the Commission on Wartime Contracting in Iraq 
and Afghanistan until its statutory sunset on September 30, 2011.
    My prior government service includes 3 years as Under Secretary of 
Defense (Comptroller) and Chief Financial Officer from 2001 to 2004 and 
as the Department of Defense Civilian Coordinator for Afghanistan 
Reconstruction from 2002-2004. I am currently a Senior Advisor to the 
Center for Strategic and International Studies and Senior Fellow at 
CNA, a federally funded research and development center. Ms. Schinasi 
has served 31 years with the Government Accountability Office, most 
recently as Managing Director for acquisition and sourcing management. 
Her portfolio included work on issues affecting the Departments of 
Defense and State. More recently she has been a Senior Advisor to The 
Conference Board) a non-profit research organization.
    As noted) the Commission on Wartime Contracting no longer exists) 
so we are speaking today in our capacity as private citizens. We can 
assure you) however) that nothing in our testimony conflicts with the 
solid consensus that developed among the eight members of the 
Commission.
    In the often-rancorous atmosphere that permeates Washington these 
days) the Commission's consensus deserves notice. The Commission was 
designed to have a balanced, bipartisan membership-four Democratic and 
four Republican appointees. But we went beyond that and functioned as a 
non-partisan body. Our work sessions, travels, and public hearings 
featured lively discussions and debates) but were never marred by 
dissension along partisan lines. Our reports have no dissenting or 
alternative views. We are unanimous in our findings and our 
recommendations, especially so in the final report that we submitted to 
Congress on August 31, 2011.
    We have provided copies of our report, Transforming Wartime 
Contracting: Controlling Costs, Reducing Risks, to the subcommittee. We 
respectfully request that the report, as well as our statement, be 
included the official record of this hearing.
    We unanimously conclude that the need for change--change laws, 
policies, practices, and organizational culture--is five reasons.

    1.  First, although U.S. policy has for more than 20 years 
considered contractors to be part of the ``total force'' for 
contingency operations, the Federal Government went into Afghanistan 
and Iraq unprepared to manage and oversee the thousands of contracts 
and contractors used there. Some improvements have been made, but after 
a decade of war, the government remains unable to ensure that taxpayers 
and warfighters are getting good value for contract dollars spent. The 
government also remains unable to provide fully effective interagency 
planning, coordination, management, and oversight of contingency 
contracting.
    2.  Second, reforms can still save money in Iraq and Afghanistan, 
avoid unintended consequences, and improve outcomes there. For example, 
as the United States draws down its troops in Iraq, the State 
Department is poised to hire thousands of new contractors for security 
and other functions.
    3.  Third, the dollars wasted and at risk are significant. The 
Commission estimates that at least $31 billion, and possibly as much as 
$60 billion, of the $206 billion spent on contracts and grants in Iraq 
and Afghanistan has been lost to waste and fraud. We have also warned 
that many more billions--possibly exceeding the billions that have 
already been lost--may turn into waste if the government cannot or will 
not sustain U.S.-funded programs and projects.
    4.  Fourth, new contingencies, whatever form they take, will occur. 
This year's rapid emergence of civil war in Libya and of U.S. 
operational involvement shows that it would be imprudent to assume that 
we are done with contingency operations, or that they will give us 
ample warning to prepare. Meanwhile, Federal agencies have acknowledged 
that they cannot mount and sustain large operations without contract 
support.
    5.  Finally, failure to enact powerful reforms will guarantee that 
new cycles of waste and fraud will accompany the response to the next 
contingency. In the current period of budget constraints, the 
opportunity cost of wasted funds is exceptionally high.

    Our work in Iraq and Afghanistan found problems similar to those in 
peacetime contracting environments, including poor planning, limited or 
no competition, weak management of performance, and insufficient 
recovery of over-billings or unsupported costs.
    The wartime environment brings additional complications, which we 
address in our recommendations. The dollar volumes swell: more than 
$206 billion has been spent on contingency contracts and grants in Iraq 
and Afghanistan since fiscal year 2002. Urgency and hostile threats 
bear on contracting decisions] execution, and oversight. The overseas 
place of performance entails limited legal jurisdiction over foreign 
contractors, supporting documentation foreign available at all, and 
limited deployability of Federal-civilian oversight personnel to 
theater.
    These general observations apply with special force to the 
Department of Defense (DOD). While the Department of State, the U.S. 
Agency for International Development, and other Federal agencies have 
been heavily involved with contractors and grantees in Iraq and 
Afghanistan, the preponderance of contracting activity and spending has 
resided with DOD.
    DOD's Director of Defense Procurement and Acquisition Policy, told 
the Senate Homeland Security Committee last month that DOD ``agrees in 
principle'' with the 11 DOD-focused recommendations in the Commission's 
final report, that Defense doctrine ``now includes operational contract 
support.'' He also stated that the Department is making progress on 
matters such as developing deployable acquisition cadres,\1\ which 
would appear to be a first step toward meeting the intent of section 
854 of the National Defense Authorization Act (NDAA) for Fiscal Year 
2007, which calls for the creation of a contingency contracting corps.
---------------------------------------------------------------------------
    \1\ Written statement of Richard T. Ginman for Senate HSGAC 
hearing, ``Transforming Wartime Contracting: Recommendations of the 
Commission on Wartime Contracting,'' September 21, 2011, pp. 2, 3, 9.
---------------------------------------------------------------------------
    We welcome signs of progress at DOD. Progress is vital, for we face 
a world beset by emerging geopolitical threats and what seem to be 
increasingly destructive natural disasters as populations grow and 
urbanization intensifies. In addition, rising demands to restrain and 
redirect Federal spending will force DOD and other Federal entities to 
be more disciplined their use of taxpayer dollars. That use includes 
dollars spent on contracting.
    As an officer's essay in Army Logistician observed, ``In the 
future, the Army will find it difficult, if not impossible) to fight 
without external support. In essence) wartime host-nation support and 
contingency contracting have become operational necessities.'' \2\
---------------------------------------------------------------------------
    \2\ Major Anthony H. Kral, ``Need for External Support: Don't Try 
Fighting Without It!'' Army Logistician, January-February 1993, p. 31.
---------------------------------------------------------------------------
    Unfortunately, that recognition of reality was published in 1993. 
The Commission has concluded, nearly 20 years later, that the U.S. 
military and other Federal agencies are still not fully prepared to 
plan and manage large-scale use of contracting in contingency 
operations.
    A striking reminder of that fact is that just last fall, General 
David Petraeus felt obliged to issue a memo to the allied forces 
operating in Afghanistan explaining that ``Contracting has to be 
`Commander's business' '' and must not be treated as a peripheral 
matter.\3\
---------------------------------------------------------------------------
    \3\ General David H. Petraeus, commander, NATO International 
Security Assistance Force (Afghanistan), memo, ``COMISAF's 
Counterinsurgency (COIN) Contracting Guidance,'' September 8, 2010, p. 
1.
---------------------------------------------------------------------------
    We are not alone in our concern. The Government Accountability 
Office (GAO) has had Defense contract management on its ``High-Risk 
List'' since 1992. In this year's update, GAO called attention to 
problems observed in Iraq and Afghanistan with planning for use of 
contractors, vetting security contractor personnel, and training non-
acquisition personnel to manage security contracts.\4\ In light of the 
GAO's report it is difficult to state that the government has fulfilled 
the provisions of section 862 of the NDAA for Fiscal Year 2008, which 
calls for government-wide regulation of private security contractors.
---------------------------------------------------------------------------
    \4\ GAO Report 11-278, ``High-Risk Series, An Update,'' February 
2011.
---------------------------------------------------------------------------
    In addition, former Under Secretary of Defense Dr. Jacques Gansler, 
who chaired the Army Commission on Acquisition and Program Management 
in Expeditionary Operations, raised related concerns before our 
Commission last year, saying ``Contracting should be a core capability 
of the Army, but it currently is treated as an operational and 
institutional side issue.'' He added, ``DOD has an extremely dedicated 
corps of contracting people. The problem is they are understaffed, 
overworked, under-trained, under-supported, and, I would argue, most 
importantly, under-valued.'' \5\
---------------------------------------------------------------------------
    \5\ Written statement of Dr. Jacques S. Gansler for Commission 
hearing, ``Urgent Reform Required: Army Expeditionary Contracting,'' 
September 16, 2010,, p. 3.
---------------------------------------------------------------------------
    We appreciate that the Defense Department--supported and in many 
cases led by this subcommittee and others in Congress--is taking steps 
to improve its use of contractors. Policy memos, DOD Instructions, 
flag-officer appointments, speeches and other signs of change have been 
encouraging. So have been the creation of Task Force Shafafiyat to 
combat corruption in Afghanistan, and its subordinate task forces, 2010 
and Spotlight, the former focusing on corruption in contracting and the 
latter on security contractors.
    The hard reality, however, is that changing values, doctrine, 
expectations, practices, and other aspects of organizational culture in 
a vast and complex enterprise is like herding ice bergs-a slow process 
requiring heroic exertions, sustained attention, and unrelenting 
leadership. As the Defense Business Board reported to the Secretary in 
January.

          The stovepipe structure of the Department and turf protection 
        behavior make it difficult for cultural and institutional 
        change. . . . Cultural resistance within the Department 
        overwhelming and real.\6\
---------------------------------------------------------------------------
    \6\ Defense Business Board Report to the Secretary of Defense, 
``Task Group on A Culture of Savings: Implementing Behavior Change in 
DOD,'' Report Fiscal Year 2011--01 January 2011, p.2.

    Inertia and other institutional barriers to change are a common 
problem for reform everywhere. That is why one of the recommendations 
in our final report is that Congress require regular, independent 
reports on agencies' progress and on the barriers to progress.
    Without regular reporting to and attention by Congress to 
contracting reform, the risk is great that leadership exertions and 
lessons learned will fade, leaving us still unprepared for the next 
contingency and doomed to new cycles of waste and improvised remedial 
reactions.
    That would be a grave mistake. Contracting has provided vital and 
for the most part highly effective support for U.S. contingency 
operations. But we rely on contractors too heavily, manage them too 
loosely, and pay them too much. The wasteful contract outcomes in Iraq 
and Afghanistan demonstrate that Federal agencies still do not see the 
heavy reliance on contractors as important enough to warrant thorough 
planning for and effective execution of the goods-and-services 
acquisitions that contingencies require.
    The Commission has concluded that the problems are multi-faceted 
and need to attacked on several levels.
    The first is to hold contractors accountable. Federal statutes and 
regulations provide ways the government against bad contractors and to 
impose accountability on them, including suspension and debarment from 
obtaining future contracts, as well as civil and criminal penalties for 
misconduct. Unfortunately, we found that these mechanisms are often not 
vigorously applied and enforced. Incentives to constrain waste are 
often not in place.
    The Commission's research has shown, for example, that some 
contractors have been billing the government for years using inadequate 
business systems that create extra work for Federal oversight personnel 
and auditors. Compelling cases for charging fraud may go unprosecuted 
because other, possibly more headline-grabbing, cases are given 
priority. Recommendations for suspension and debarment go unimplemented 
with no documentation for the decision. Data that would be important 
for past-performance reviews often go unrecorded. Staffing shortages 
have led to a Defense Contract Audit Agency backlog of nearly $600 
billion, delaying recovery of possible overpayments.
    The government has also been remiss in promoting one of the most 
effective of all disciplines: competition. It is perfectly reasonable 
to say that exigent circumstances may require sole-source or limited-
competition awards in the early phases of a contingency operation. It 
is not at all reasonable that a decade into an operation, multi-
billion-dollar tasks orders are still being written with no break-out 
or recompetition of the base contract.
    We recommend better application of existing tools to ensure 
accountability] and strengthening those tools. Our report contains 
recommendations to bolster competition] improve recording and use of 
past-performance data] expand U.S. civil jurisdiction as part of 
contract awards, require official approval of significant 
subcontracting overseas, and provide incentives for contractors to take 
active steps against human trafficking by subcontractors and labor 
brokers. Our report indicates that implementing many of these 
recommendations will require legislation.
    These and other recommendations will go a long way toward reducing 
waste, fraud, and abuse among contractors.
    The second level is holding the government itself more accountable 
for the decision to use contractors and for the subsequent results of 
those decisions. Part of the problem is resources. Both the Active 
military and the Federal acquisition workforce were downsized during 
the ``peace dividend'' days of the 1990s. This reaction to the end of a 
55-year Cold War was understandable. But it ensured that if a large and 
prolonged contingency should develop] the military's reliance on 
contractors would greatly increase] even as its ability to manage and 
oversee them had atrophied.
    We must be careful not of 1990s. We cannot allow budget constrains 
to permit a further downsizing of our acquisition and contracting 
workforce. On the contrary, we must augment that force, especially 
planned military end-strength reductions move forward, and there is 
even greater pressure to rely on contractors.
    Even when the government has sufficient policies in place, 
effective practices, ranging from planning and requirements definition, 
to providing adequate oversight of performance and coordinating 
interagency activities, are lacking. The principal agencies involved in 
contingency operations--Defense, State, and USAID--have all made 
improvements in these and other areas. But opportunities for 
improvement exist and much work remains to be done.
    We have recommended steps that would improve the government's 
handling of contingency contracting. They include developing deployable 
acquisition cadres, and legislation to elevate the positions of 
agencies' senior acquisition officers, and to create a ``J10'' 
contingency-contracting directorate at the Pentagon's Joint Staff, 
where the broad range of contracting activities currently is treated as 
a subset of logistics.
    Another critical recommendation is that agencies pay much more 
attention to the matter of sustainability before committing taxpayer 
dollars to projects and programs intended to support military, 
political, or development objectives in contingency zones. Our 
recommendation includes agency evaluations of sustainability and 
rejecting or canceling projects that have no credible prospect of 
survival without funding.
    We support the recent policy guidance from the Office of Management 
and Budget (OMB) regarding inherently governmental which incorporates a 
risk-sensitive approach to determining functions could or should be 
reserved for government performance. As our report explains, the 
inherently governmental test is a necessary, but not a sufficient 
condition, for making decisions to hire contractors in a contingency 
environment. We note that OMB's action takes the government 
considerably closer toward meeting the intent of section 832 of the 
NDAA for Fiscal Year 2009.
    Considering this subcommittee's broad mandate, we would also call 
special attention to two recommendations embodying a whole-of-
government approach that will improve efficiency and effectiveness in 
contracting. Both recommendations would require legislation in order to 
be implemented.
    The first is to establish a top-level dual-hatted position for an 
official who would serve both as a Senate-confirmed Deputy Director of 
OMB, and on the National Security Council staff as Deputy Assistant to 
the President. Such a dual-hatted position would promote better 
visibility, coordination, budget guidance, and strategic direction for 
contingency contracting.
    The second is to create a permanent inspector general organization 
for use during contingencies and for providing standards and training 
between contingencies. work of the special inspectors general for Iraq 
and Afghanistan have shown drawbacks of creating organizations limited 
in functional authority, geographic location, and time. SIGIR and SIGAR 
have performed valuable service the country, but they will go away, 
leaving the need to reinvent them with attendant delays in deploying 
Inspector General (IG) staff when the next contingency emerges. A 
permanent contingency IG with a small but deployable and expandable 
staff trained in the special circumstances of contingency operations 
can provide interdepartmental oversight from the outset of a 
contingency.
    More details on these recommendations, both of which will require 
legislative actions, as well as other recommendations appear in our 
final report, Transforming Wartime Contracting.
    In compliance with its authorizing statute, our Commission has 
closed its doors. But the problems it has diagnosed remain alive and 
malignant. Corrective action, in some cases requiring financial 
investments, are essential on both the government and the contractor 
side of the equation to reform contingency contracting and prevent or 
reduce new outbreaks of waste, fraud, and abuse.
    As we have already indicated, sustained attention during and after 
the reform process will be essential to ensure that compliance extends 
to institutionalizing reforms and changing organizational cultures. 
That is why our recommendations include a requirement for periodic, 
independent progress reports to Congress on the pace and results of 
reform initiatives. Without such a requirement, agencies can all too 
easily succumb to complacency, forget the lessons learned in Iraq and 
Afghanistan, and blandly reassure Congress that they ``agree with the 
substance'' of reform recommendations and are already addressing them--
even if nothing comes of the effort.
    Contracting reform is a necessity, not a luxury good, because 
whatever form a future contingency may take, there will be a future 
contingency.
    Perhaps we can avoid hostilities related to unfriendly regimes in 
east Asia, the Horn of Africa, the Mediterranean, the Balkans, and 
Latin America. Perhaps we will not be called upon to mount vast 
humanitarian interventions overseas. Even if we are lucky enough to 
avoid those contingencies, we will remain vulnerable to catastrophic 
floods, earthquakes, storms, fires, and mass casualty terror attacks 
here at home. The responses to such disasters will most likely require 
contractor support as well as DOD involvement, as occurred with 
Hurricane Katrina.
    The government would be foolish to ignore the lessons of the last 
10 years and refuse to prepare for better use of contracting. But once 
the wars in Iraq and Afghanistan recede into the past, it will be all 
too easy to put off taking action. Your subcommittee is in a good 
position to prevent such a tragic sin of omission.
    Members of Congress will also be obliged to make hard choices about 
the Federal budget, including funds for DOD. The Army and the Marine 
Corps have already announced plans to reduce force strengths by tens of 
thousands, and budget debates to come will likely require further cuts 
Defense.
    In that context, we would re-emphasize Recommendation 14 from our 
final report to Congress. It says,

          Congress should provide or reallocate resources for 
        contingency contracting reform to cure or mitigate the numerous 
        defects described by the Commission.

    As DOD officials and senior commanders make cuts in budgets and 
resources, they will be inclined to preserve as much combat capability 
as possible in the years ahead by concentrating personnel cuts among 
support functions.
    We advise against reducing the size of the acquisition, contracting 
and oversight workforce. Sustaining and improving that workforce is 
essential. Cutting it would be a false economy. Defense should instead 
seek offsetting savings through better planning and requirements 
definition, increased use of competition for contracts, more effective 
management and oversight, and better coordination of procurement and 
contracting functions.
    We urge the members of this subcommittee to take care that economy 
drives are conducted with a balanced view of all requirements for 
contingency operations, not just those that involve combat units. If 
maintaining a balance of essential capabilities leads to a more careful 
review of the scope and extent of operations, such an outcome would 
surely be a constructive development.
    This concludes our formal statement. We appreciate this opportunity 
to speak with you, and will be happy to answer any questions you may 
have.

    [The report titled ``Transforming Wartime Contracting'' 
follows:]

     [See annex at the end of this hearing record.]

    Senator McCaskill. Ms. Schinasi, do you have a statement 
also?
    Ms. Schinasi. No.
    Senator McCaskill. Oh, you do not? Okay. That is why he 
told everyone how long you had toiled at GAO.
    Mr. Zakheim. Yes, I didn't think it was fair not to give 
her an intro.
    Senator McCaskill. I agree. David Walker used to tease me 
because my apartment overlooks the GAO building, and he used to 
say, ``You just wanted to keep an eye on us at all times. Just 
in case something hit you in the night, you wanted to be able 
to write it down and send it across the street.''
    So thank you for all your work there. I know you spent 
decades toiling in very difficult areas of work.
    Let us start with one of my favorites because one thing 
about our military is that there is such a ``can-do'' attitude 
in our military, and that is almost always a great thing, that 
if we decide to do something, by gosh, we are going to do it 
and we are going to make it work.
    We have seen that attitude sometimes get in the way of 
being able to pull the plug when we should pull the plug, when 
all the signs are indicating that maybe this investment of 
money isn't going to turn out the way we hoped and maybe we 
need to cut our losses now. This relates to the issue that the 
CWC talked about, and that is sustainability.
    It is a huge problem, and all we have to do is look at the 
landscape in Iraq that is littered with our taxpayers' dollars 
that have been blown up, destroyed, not operable, dozens and 
dozens of buildings and infrastructure that we built that 
simply could not be sustained, either because of the security 
environment or because of resources.
    I am particularly worried about sustainability in 
Afghanistan because it appears to me that there is a real 
disconnect between what we are building for Afghanistan and 
what Afghanistan can afford. It does no good for us to spend 
this money if after we have spent it, whatever it is, whether 
it is a power plant or whether it is a highway, if it is going 
to be destroyed and/or not used because they don't have the 
resources.
    We now have 16,000 Commander's Emergency Response Program 
(CERP) projects. I am going to try to avoid the State money 
here now, okay? We have had 16,000 CERP projects totaling over 
$2 billion that I am not aware that I have ever been able to 
look at or view or that there even are sustainability analysis.
    We now have brand spanking new $400 million Afghanistan 
infrastructure fund (AIF), which is whole new territory for us. 
Now we have actually formed a fund where we are going to build 
stuff in Afghanistan, as opposed to this being something that 
has traditionally been done by DOS or USAID.
    The commission recommended that you examine completed and 
current projects for risk of sustainment failure, to cancel or 
redesign programs and projects that have no credible prospect 
of being sustained.
    I need to know from the DOD witnesses, do you agree or 
disagree with these recommendations? If you agree, what 
specific steps have been taken to perform this recommended 
analysis?
    Mr. Kendall. Senator McCaskill, we agree with your concern. 
We have not done as much, I think, in the past as we should 
about sustainability of our projects. So it is definitely a 
criteria now for projects going forward.
    We are increasing the oversight of all the infrastructure 
projects that we are doing. I am not sure if you are aware of 
all this, but for the CERP projects, anything above $5 million 
now is approved at the Deputy Secretary's level in DOD. It has 
been done that way for some time now.
    Between $5 million and $1 million is approved at the 
CENTCOM level, the CENTCOM Commander. So there is very intense 
scrutiny of these projects as they come through.
    For that and the AIF that you mentioned, the $400 million 
fund, both are being overseen by a new council that has been 
commissioned just a couple of months ago by Secretary Lynn. It 
is the Afghanistan Resources Oversight Council, which I am a 
co-chair of, together with the Under Secretary for Financial 
Management and the Under Secretary for Policy. So we are 
looking at those projects very closely as well.
    In May, I think we sent the list over to Congress of the 
AIF projects, $400 million, about a dozen fairly large 
projects. CERP projects above the threshold the Deputy 
Secretary approves are also notified to Congress before they 
are implemented. So the level of oversight is definitely going 
up on these projects, and we are looking at them very 
carefully.
    Within Afghanistan, they are coordinated very closely 
between DOS and DOD. Both departments are involved. The 
commander on the scene, General Allen, together with the 
ambassador, review these projects when they come up. Those are 
the ones that are done under the AIF primarily.
    You mentioned the statistics on CERP. I don't know the 
total program statistics. In 2010, I believe there were about 
3,500 projects. Of those, about 80 percent were battle damage 
repair, repairing things that we had damaged in the course of 
combat somehow that were unintended consequences of combat.
    About another 10 percent were payments of condolence 
payments to people whose relatives had been killed, presumably. 
Then the other 10 percent were for other urgent humanitarian-
type responses to things.
    The point of the CERP is to deal with relatively urgent 
requirements. It did grow to some extent, and it has been used 
for some other things. The AIF fund, however, is for larger-
scale projects.
    So, going forward, we are certainly looking at 
sustainability. It is one of the 16 criteria on the go/no-go 
checklist that is done for every project. The degree to which 
we can go back and look at projects that we have already 
approved or that are already completed, we are taking a look at 
that now. I think some work there certainly would be justified, 
but we have to go take a look at that and see what kind of a 
burden that would be on us.
    Did you want to add anything, Brooks?
    General Bash. Thank you.
    Senator, I, too, absolutely agree. Sustainability is 
critically important. General Allen, in fact, just promulgated 
a letter last month reiterating what General Petraeus said in 
the relationship between construction and counterinsurgency 
(COIN), and the importance thereof. The go/no-go letter, which 
was promulgated as an operation order in October 2010, since 
that time, there has been very specific criteria. I will take a 
moment to talk about the details of that.
    They have to go through project sustainability--water, 
power, maintenance--so, going forward, that those are 
available. The scope of the project is absolutely minimum 
military requirements are needed for every project.
    There is contractor vetting so that they have the capacity 
and the capability to actually do the project. End-user 
participation--is this really what you want to use when we turn 
it over to you? Capacity evaluation of subcontractors as well 
and the verification thereof.
    The Afghan First policy, to ensure that there is a linkage 
to the COIN operation; design criteria, austere using Afghan 
standards; durability, in accordance with Afghan practices and 
capabilities.
    Examples of that--using sinks, trough sinks instead of 
mounted sinks; using concrete floors instead of linoleum; 
building lagoons for wastewater instead of expensive plants; 
deep wells instead of putting in water systems; fans instead of 
air conditioners. All those things are being done and have been 
done, especially since this operation order was promulgated 
over a year ago.
    Senator McCaskill. Do either of you have a comment on this?
    Ms. Schinasi. I would like to address this, Senator 
McCaskill. I think, given the projects that the United States 
has undertaken and the programs in Afghanistan, there are 
clearly some that will not be sustainable.
    So, my question would be, back to something that 
Commissioner Zakheim said in our testimony, what is the proof 
that the process is working? So, I would want to know what has 
been canceled.
    Senator McCaskill. Right.
    Ms. Schinasi. There should have been projects that are 
canceled. It is not just the building codes, which I think are 
critically important, and I am glad to see that happening, but 
projects and programs overall. You would expect to see DOD's 
process result in cancellation of some of those projects.
    Senator McCaskill. Have there been any projects that have 
been canceled after they have been approved because of 
sustainability questions? Are you all aware of any?
    Mr. Kendall. We would have to get that information for the 
record. I am sure there are projects that were never approved 
because of that kind of concern. But as to whether ones that 
were approved have then subsequently been canceled or not, I am 
not sure. But we could get that information for you for the 
record.
    [The information referred to follows:]

    The Department of Defense (DOD) recognizes the importance of 
sustainment for the Commander's Emergency Response Program (CERP) and 
Afghanistan Infrastructure Fund (AIF) projects, as was addressed in the 
Department of Defense Appropriations Act, 2011 (division A of Public 
Law 112-10, and consistent with the purposes of section 1217 of the Ike 
Skelton National Defense Authorization Act (NDAA) for Fiscal Year 2011 
(Public Law 111-383). These acts specifically required the Department 
to submit to Congress a plan for sustainment of CERP projects more than 
$5 million to include any agreement with the Government of Afghanistan, 
a department or agency of the U.S. Government other than DOD, or a 
third-party contributor to finance the sustainment of activities and 
maintenance of any equipment or facilities to be provided through the 
proposed project. The NDAA also requires that all proposed AIF projects 
address sustainability and include a plan for sustainment in their 
notification to Congress, prior to obligation of funds for each 
project.
    In addition, the U.S. Forces-Afghanistan (USFOR-A) Money As a 
Weapon System guidance, updated in February 2011, requires a 
Sustainment Memorandum of Agreement (MOA) for all CERP projects $50,000 
or greater incurring operating or sustainment costs--such as 
construction projects and large equipment purchases. The signed MOA is 
between the United States (with joint secretariat coordination between 
J9 and U.S. Department of State representatives in the International 
Security Assistance Force) and the appropriate ministry or agency that 
will be responsible for the sustainment of the facility. The intent of 
these agreements is to educate the Government of Afghanistan 
representative on the project itself and ensure there is an 
understanding of the project's out-year operating and sustainment 
costs. Should the appropriate Afghan ministry or agency be unwilling to 
fund the operating costs or maintain the investment, the United States 
will not fund or proceed with the project.
    All CERP project managers are required to coordinate proposed 
projects with Afghan agencies and local officials, as well as with the 
nearest Provincial Reconstruction Team, to ensure there is no unwanted 
duplication of efforts by DOD, U.S. Agency for International 
Development, Department of State, and nongovernmental organizations in 
the area.
    In addition to CERP and AIF, the Afghanistan Security Forces Fund 
(ASFF) has a significant role in Afghanistan in developing, training, 
and equipping the Afghanistan security forces. Senate Report 111-295 
(S. 3800) requested the Secretary of Defense to establish an ASFF 
Executive Council to oversee the planning, contracting, and execution 
of the ASFF.
    On August 3, 2011, the Deputy Secretary of Defense established the 
Afghanistan Resources Oversight Council (AROC). The Council was 
initially assigned the responsibility to oversee only the ASFF. This 
authority was later expanded to include CERP, AIF, and other DOD-funded 
programs in Afghanistan (such as the Afghanistan Reintegration 
Program). The membership includes co-chairs, the Under Secretary of 
Defense for Acquisition, Technology and Logistics; the Under Secretary 
of Defense for Policy; and the Under Secretary of Defense 
(Comptroller), as well as senior representatives from the U.S. Central 
Command (CENTCOM), the Joint Staff, and the Army (Financial Management 
and Comptroller). The AROC will provide a venue to oversee the overall 
execution of the resources.
    Further, the U.S. Army Corps of Engineers uses 16 Go/No-Go criteria 
for construction projects which take into consideration not only 
sustainability, but capacity building, operations and maintenance, 
master plan coordination, and quality assurance management, to name a 
few.
    For Contingency Military Construction (MILCON) projects, funds are 
line-item authorized (name, location, and cost) by Congress and are 
scrutinized to ensure their validity upon completion. There are 
authorities to reprogram MILCON funds from cancelled or descoped 
projects, but there is no flexibility to change a specific project's 
scope, cost, or location once approved. Continuous project review and 
approval occurs at the USFOR-A Service Component, CENTCOM, and Joint 
Staff/OSD levels prior to submission and throughout the Congressional 
approval period. USFOR-A and USACE further validate projects prior to 
award and again prior to the start of construction. These projects have 
been reviewed over the last 2 years to ensure our investments support 
operational requirements. These reviews resulted in cancellation of a 
number of projects and identification of emerging projects to support 
changes in the overall Afghanistan strategy or changes in force levels:

         44 projects ($500 million) cancelled from the original 
        137 projects ($2.3 billion) in the fiscal year 2010 program 
        submitted in December 2008 to Office of the Secretary of 
        Defense (OSD).
         24 projects ($300 million) cancelled from the original 
        fiscal year 2011 program (58 projects, $1 billion) submitted by 
        CENTCOM to OSD in October 2009.

    USFOR-A has just completed another review of the entire MILCON 
program; of $4.64 billion in MILCON projects approved, $576 million in 
MILCON projects are being recommended for cancellation and $205 million 
for descoping. This was based on evaluating projects against three 
criteria: (1) projects essential to retrograde; (2) projects supporting 
enduring strategic basing; and (3) projects in support of surge 
operations.
    For Afghanistan National Security Forces (ANSF) construction 
projects, Congress authorized funds and authorities that allow CSTC-A 
the flexibility to change, cancel, and relocate construction projects. 
As with the MILCON program, CSTC-A operational requirements drive their 
ANSF construction program. ANSF projects are screened against the Go/
No-Go criteria as well. There were no projects cancelled as a result of 
the screenings, but many were modified to meet the criteria. In-
progress projects were reviewed and appropriate changes were made as 
required and allowable. This year, 4 ANP projects were relocated due to 
physical requirements and approximately 50 ANP projects across Paktika, 
Helmand, Ghazni, Kunduz, Zabul, and Farah Provinces were put on hold 
until security conditions improve.
    CSTC-A Engineers continue to revise ANSF facilities construction 
standards. The CSTC-A focuses on making current and future ANSF 
facilities sustainable, affordable, and durable. These standards ensure 
facilities meet Afghan requirements, can be sustained, and are cost 
effective. Examples include washrooms built with trough sinks vice 
pedestal sinks, use of ceiling fans vice heating ventilation and air 
conditioning systems, and dining facilities equipped with propane and/
or wood stoves vice electric stoves. A primary challenge for CSTC-A is 
stewardship and sustainment--ensuring Afghans are capable of managing 
facilities once security has fully transitioned. They have enhanced 
this capability by establishing:

         Advisory groups for ministerial development in the 
        Ministry of Defense (in support of the Afghan National Army) 
        and the Ministry of Interior (in support of the Afghan National 
        Police).
         Advisors with Afghan Facilities Departments to handle 
        daily issues and assist with implementing Ministerial strategic 
        initiatives.
         Embedded Infrastructure Training Advisory Group (ITAG) 
        teams to transition to Afghan-led facility maintenance. ITAG 
        protects our investment in ANSF infrastructure.

    Finally and most recently, USFOR-A is accounting for the reduction 
of U.S. forces in newly transferred areas. When future transfers occur 
in two of the Regional Commands, projects regarding housing, waste 
management, wastewater treatment, and dining facility projects (six 
projects, $29 million) will be cancelled. The message is that we will 
continue to assess projects at U.S. forces reposture from Afghanistan, 
ensuring we make only the investment required to support operations.

    Senator McCaskill. I think that would be really important 
because I think that would show the kind of attention to this 
issue that it deserves. It is one thing to set up a process to 
get the go or no-go, but for these big projects, the go or no-
go is being made very far from the realities on the ground.
    I guarantee you, if I took some of the gos and took it to 
some of the folks that are on the ground in that area, they 
would say, ``Are you kidding? Really? This isn't going to be 
sustained. These folks can't sustain this project.''
    The biggest example, which is not you all, but is this 
power plant in Kabul. Hundreds and hundreds of millions of 
dollars, and it is big--sitting there, maybe it will be used as 
a peak-time generator, but they can't afford it. They just 
can't afford it. That was all our money.
    Somebody in this process should have said, ``Whoa, time 
out. We need to stop this right now.'' Instead, of course, we 
went ahead and completed it. Now it is a great exhibit A of 
exactly the problems I am talking about.
    Mr. Zakheim. May I add to what Katherine Schinasi said?
    Senator McCaskill. Sure.
    Mr. Zakheim. I was there and funded CERP early on in 2001, 
2002, 2003, 2004. In those days, CERP was $50,000, $100,000 
projects. It was really meant to be programs that the local 
commander felt would be useful for keeping people off the 
streets and fixing some things. It was not meant to be a 
massive infrastructure development project. That was for USAID 
to do if they were going to do it.
    We have some problems--we mentioned this in our report--
with probably the biggest sustainability question of all, which 
is the Afghan National Security Forces (ANSF).
    Senator McCaskill. Right.
    Mr. Zakheim. We have spent about $11 billion recently on 
the ANSF, when the entire gross domestic product (GDP) of 
Afghanistan is $16 billion. So let us say we go down--I think 
General Caldwell wants to go down to about $6 billion. That is 
still a chunk of change. For a government that can only take in 
about $2 billion, you have to wonder how this adds up.
    Now then you add on top of that project, why is DOD into $5 
million projects? Why is it doing that? So it is not just 
enough simply to say, ``Well, we are monitoring it.'' You have 
to ask the basic question: why are they doing it?
    Then another question is, I buy the fact that this is now a 
criterion. I don't question that. But it is one of 16. So if 
the other 15 go one way, and sustainability goes the other way, 
which way do you think they are going to go?
    Senator McCaskill. Right.
    Yes, Secretary Kendall?
    Mr. Kendall. If I could just respond to that?
    They are go/no-go criteria, every one of them, and they all 
have to be a go for a project to go ahead.
    Senator McCaskill. So if sustainability is a no-go, it 
doesn't go?
    Mr. Kendall. That is right.
    Senator McCaskill. Regardless of the others?
    Mr. Kendall. That is correct.
    Senator McCaskill. Okay. That is great.
    Senator Ayotte?
    Senator Ayotte. Thank you, Madam Chairman.
    I just wanted to confirm, first of all, with General Bash 
and Secretary Kendall that you and I spoke before this meeting. 
We met, and I asked you about the provisions from Senator Brown 
and I's legislation on No Contracting with the Enemy that got 
included in the NDAA. Do you think those are important, and 
will they be helpful?
    Mr. Kendall. Yes, we do support those, Senator Ayotte.
    Senator Ayotte. Thank you, I appreciate that.
    I then wanted to ask about in particular this issue, for 
Mr. Zakheim and Ms. Schinasi, about where we are going in Iraq. 
Because in connection with the effort to transition operations 
in Iraq from DOD to DOS, the DOS will need to hire what I have 
heard potentially thousands of contractors to provide for--some 
of the things are medical, basic support, security, because we 
are only, if I take the latest announcement to be the case, 
only a very minimal amount of military security.
    Basically, what I am hearing for numbers, of the 16,000 to 
17,000 personnel that may ultimately make up the DOS's presence 
in Iraq, about 14,000 of them could be contractors. So I would 
like to hear from both of you, what concerns do you have about 
that happening? The degree to which DOS will rely on 
contractors in Iraq, what concerns you think that arises?
    Because I also see a very significant discussion here with 
DOD, but will there be any type of transition from lessons we 
are learning here and we are talking about today on adequate 
oversight in contracting, over to DOS? How will that all--I 
just would like to get your observations on it, and then, of 
course, if General Bash and Secretary Kendall have any 
observations?
    I would just hate to see us do this and then pour millions, 
billions--I don't know what the number will be--in taxpayers' 
dollars back in there and have all these lessons just fly out 
the window.
    Mr. Zakheim. I do have tremendous concerns. I have more 
concerns, unfortunately, than I have answers. Clearly, if DOS 
until now has had trouble managing its contracts--and there is 
no question that it has had some--I don't know how it is going 
to manage all of this.
    One thing that concerns me and that can be dealt with, it 
is my understanding that DOS believes that when the Government 
has now stated that risk should be accounted for in considering 
contracting and that that security is an inherently 
governmental problem, that that does not apply to DOS simply 
because DOS says, ``We are not into the business of fighting, 
and therefore, whatever we are doing is not inherently 
governmental.''
    Now, clearly, if you have a whole bunch of contractors out 
there with guns who will be doing all sorts of things, to me--
to my simple mind, that is something that involves security, 
and that is inherently governmental. So I think it is very 
important that DOS adopt the same risk kind of approach that 
DOD appears to be adopting, which is, don't send them out there 
if it is a high-risk project because then you are going to have 
a bunch of contractors either being shot at or shooting at 
Iraqis.
    That is just not going to be a very good thing. That is a 
disaster waiting to happen. So that is one possible thing that 
maybe even could be legislated. I don't know.
    The other is simply to get more oversight. If DOS has to 
beg, borrow, and steal people from other agencies, well, why 
not? That is doable. Part of the problem is that, 
unfortunately, many of our civil servants, certainly outside 
DOD, are just not willing to deploy.
    It is all voluntary. So, we have a problem there, too. When 
I was in Government, I often felt that there were two and a 
half agencies fighting this war. DOD was fighting this war. DOS 
was fighting this war. You added up all the others, and there 
was another half agency, all combined.
    Our country is at war. Every civil servant who has 
something to contribute out there ought to be told: ``you are 
going.'' That could be something that could help DOS as well.
    Senator Ayotte. Thank you. Please, Ms. Schinasi.
    Ms. Schinasi. To just add something, DOS, in responding to 
recommendations in our interim report, made the case that they 
felt that their model for contracting and overseeing 
contractors was sufficient. They knew how to operate in an 
international environment. They contracted all the time. They 
knew what they were doing, and so they pushed back on a number 
of our recommendations.
    We would argue that we have seen enough poor outcomes from 
DOS contracting that we were not in agreement with their 
assessment of that. What you have seen, which brings me to the 
point of is the problem being addressed, and we have written--
the CWC put out two special reports on this. The issue has been 
on the table for over a year. It doesn't seem to be much closer 
to resolution.
    DOS has not moved to solve the problem. DOD has offered the 
use of the LOGCAP contract for some of the operations, but DOS 
has not trained up its contracting officials sufficiently to be 
able to make good use of that LOGCAP contract.
    I think what you will see is a diminishment of what DOS 
says is required for its operations in Iraq. As you probably 
know, they have cut down on the number of locations where they 
said they would be able to operate. That is possibly going to 
go down and down and down, to the point where they can actually 
match what their resources are to a requirement set.
    I don't think that has been done yet. So I share 
Commissioner Zakheim's concern that we are going to be ready to 
do this when the time comes.
    Senator Ayotte. Thank you.
    I certainly want to hear from General Bash and Secretary 
Kendall about this. But before I do that, I just want to have 
one follow-up to what you said, Ms. Schinasi, which is I am new 
to this place. I am a new Senator.
    Have we done the same type of analysis that you just did, 
which was phenomenal, and it is going to be very helpful in 
guiding policy decisions--and obviously, DOD is here before us, 
taking this very seriously--with State?
    Ms. Schinasi. The analysis of whether or not----
    Senator Ayotte. Right. The contracting analysis that we are 
doing here.
    Mr. Zakheim. Oh, yes. State is part of this report.
    Senator Ayotte. Okay.
    Mr. Zakheim. Because this is an Armed Services 
Subcommittee, we focused on DOD. But let me make it clear, our 
report addresses DOS and USAID. We had testimony from senior 
officials in both agencies.
    Senator Ayotte. But one of the concerns I have is just from 
what Ms. Schinasi just said, that we didn't get the full 
response from DOS that you got from DOD.
    Mr. Zakheim. I think that is accurate.
    Senator Ayotte. That seems to me--then how can we have a 
full picture of DOS? Now, I know DOS is mentioned in this 
report, that you have talked to those officials, USAID. But is 
there more work that we need to do on that end?
    Ms. Schinasi. Yes.
    Mr. Zakheim. Yes.
    Senator Ayotte. Okay. Thank you. I appreciate it.
    Mr. Zakheim. In fact, I would say a lot more work.
    Senator Ayotte. Okay. I am sorry. Secretary Kendall and 
General Bash?
    Mr. Kendall. I could go on for hours about the transition 
in Iraq because I am the senior DOD official who has been 
working that problem with DOS. My counterpart has been Under 
Secretary Pat Kennedy at DOS, who is their Under Secretary for 
Management.
    I have made three trips to Iraq as part of examining 
progress and getting ready for the transition. There is a lot 
of risk in the transition, and I will let DOS address that. But 
I can talk directly to the contracting concerns.
    DOD is basically providing the contracting support to DOS 
for all of its essential functions. We are transferring 
thousands of pieces of equipment to DOS. We have worked hand-
in-glove with them on the sites that have already now nominally 
been transitioned to their initial control.
    They are keeping 11 sites, roughly, I think, 5 of those 
that we will still be operating under the chief of mission 
status for operation--for security cooperation in Iraq. We are 
providing the LOGCAP IV contract support to them. That was 
awarded recently. There was a protest, which was not 
successful. That is in place.
    There are contracts in place for security. There are 
contracts in place for fuel delivery and other supply delivery. 
Defense Logistics Agency (DLA) is supporting DOS.
    The plan is that we would essentially, through our 
organizations, particularly the Army Contracting Command, 
administer these contracts, from the State-side perspective at 
least, through 2012. At that point, DOS would, hopefully, be 
ready to transition over to direct administration themselves. 
If they are not, we are prepared to continue that support.
    Now, most of the oversight in-country would be provided by 
DOS people, and they need to train their people up to do that. 
That is in progress.
    I started on this a year ago, roughly. At that point in 
time, we were nowhere, in terms of getting ready for this 
transition. But I think today we are in decent shape. We are 
ready to transition to DOS. The contracts are in place that 
they need.
    I am sure there will be problems. There have to be with a 
transition. DOS has never done anything this big, even though 
they have a reasonable amount of experience with smaller scale.
    A lot of the projects I think that the commission looked at 
were USAID projects and infrastructure projects and so on. That 
doesn't apply here. This is essentially base operations.
    The 17,000, or 16,000 figure that you mentioned is 
approximately correct. They are mostly contractors. A good 
fraction of them are PSCs who will mostly be doing static 
security. They will be providing protection on the bases 
because we will not be there. The military will not be there.
    There will be a small Marine Corps contingent for the 
embassy and some other locations, but generally, security will 
be provided by PSCs, mostly static security. There will be some 
security also for people when they go outside and do whatever 
they have to do outside of the bases.
    The Iraqi security forces are also supposed to be providing 
security for our people who are there as part of the mission. 
But that is not immediate, direct security of the facilities. 
That will be provided through PSCs primarily.
    There is risk in this. But I can tell you that from the 
contracting perspective, I think we are in pretty good shape to 
make the transition.
    Senator Ayotte. Thank you very much.
    I have to say, for our people, I can understand why they 
wouldn't--might not want to go now, even some of the civilian 
personnel, if that is what we are going to rely on for 
security.
    Senator McCaskill. Senator Manchin?
    Senator Manchin. Thank you, Madam Chairman.
    I am sorry if you said something before I came, and I 
missed it. I am so sorry and apologize for that. But a couple 
things I would like to ask is, and anybody here, I think, 
probably the lieutenant general or Secretary--can you give me 
the dollar amount of our DOD annual budget spent on contracting 
in dollars?
    So if our budget is, what--DOD budget is $700----
    Mr. Kendall. The base budget, $554 billion----
    Senator Manchin. $554----
    Mr. Kendall.--this year, to give you a round number. But we 
add to Overseas Contingency Operations (OCO) Fund--the 
supplemental funding for the OCO, it is over another $100 
billion. I think we contracted out, number for 2009 that I 
happen to know pretty well, is $412 billion. That is out of a 
grand total of over $700 billion.
    That is for a combination of services contracting and 
products. It is roughly 50/50 within that number, services that 
are provided of one kind or another, maintenance, facility 
support, and so on and actual products.
    Senator Manchin. So it is fair to say that it is 50 percent 
or more, right?
    Mr. Kendall. Yes.
    Senator Manchin. Of our budget is spent on contracting?
    Mr. Kendall. Yes.
    Senator Manchin. If we look at that in numbers of people, 
what numbers of people--I saw here in the breakdown of the 
charge, you had Afghanistan, 101,000, almost 102,000 
contractors.
    Mr. Kendall. I have the numbers for Afghanistan and Iraq.
    Senator Manchin. In the total DOD program, what would be 
the number of contractors working today, compared to the number 
of military?
    Mr. Kendall. We are collecting that data. We owe a report 
to Congress, which is late, on how many contractor 
individuals----
    Senator Manchin. A quick, rough estimate?
    Mr. Kendall. I really hesitate to give you a number. It is 
a large number. You can do the math, but it is----
    Senator Manchin. Is it more--do we have more contractors 
working than we do have military personnel?
    Mr. Kendall. It is comparable.
    Senator Manchin. So it is based on----
    Mr. Kendall. The reason I can't give you an exact number is 
that many of the things we contract for, we don't contract for 
people. We contract for things or specific services.
    Senator Manchin. Sure. I am talking about just people.
    Mr. Kendall. Yes.
    Senator Manchin. I am talking about personnel.
    Mr. Kendall. I would have to take that for the record to 
try to get you a number that would break it out in a reasonable 
way.
    [The information referred to follows:]

    The Department of Defense (DOD) reported 622,722 contractor full-
time equivalents (CFTEs) as part of the fiscal year 2010 inventory for 
contract services required by section 2330a of title 10, U.S.C. CFTEs 
should not be construed as a personnel level or headcount. The number 
of military as of the end of fiscal year 2010 is 1,430,985. On December 
29, 2011, the Office of the Secretary of Defense provided guidance to 
DOD components for submitting the Inventory of Contracts for Services 
for fiscal year 2011. This guidance supports implementation of section 
2330a of title 10, U.S.C., which requires DOD to compile the 
inventories, to include CFTEs, and report results to Congress annually. 
DOD will transmit the fiscal year 2011 inventory report to Congress by 
June 30, 2012.

    Mr. Kendall. If we buy an aircraft, there are a number of 
contractors that we are paying for that are working on the 
aircraft.
    Senator Manchin. I understand that.
    Mr. Kendall. But we didn't pay for people. We paid for the 
aircraft. In many cases, we buy services. We buy a certain 
level of service, and how the contractor happens to staff that 
is up to the contractor.
    Senator Manchin. Probably it is a fair evaluation. If the 
money is about 50/50, then personnel would be about probably in 
that neighborhood.
    Mr. Kendall. If half of those services is essentially more 
buying people, so you could do the math from that with an 
average price. We can give you an estimate, but it is going to 
be a rough estimate.
    Senator Manchin. Is it accurate to say that we are the 
largest employer in Afghanistan? That is accurate?
    Mr. Kendall. I think that is definitely, yes, I think so.
    Senator Manchin. Because of basically their economy----
    Mr. Kendall. The figures that were mentioned, because of 
the amount of money we are putting into the country, yes.
    Senator Manchin. But we are their largest--are we their 
largest employer in that country?
    Mr. Kendall. I would say that is probably true. Some of 
those are foreign nationals that are brought in.
    Senator Manchin. DOD, if you can give me what your 
definition of nation building is?
    Mr. Kendall. I will have to defer that question. That is--
--
    Senator Manchin. Who to?
    Mr. Kendall. Probably the Under Secretary for Policy or 
possibly the Joint Staff.
    Senator Manchin. General, can you answer that one?
    General Bash. We know that the President, in his National 
Policy Decision Memo of 2005, directed DOD to undertake 
stability and reconstruction, which is what we are doing.
    Senator Manchin. That was done when, sir?
    General Bash. 2005, sir.
    Senator Manchin. So you were at that time directed in 
Afghanistan to take that action?
    General Bash. That was the policy decision at that time by 
the President for the military to undertake stability and 
reconstruction as a mission set.
    Senator Manchin. It has continued today, to this day?
    General Bash. That is correct.
    Senator Manchin. So then it would be defined as nation 
building?
    General Bash. Nation building----
    Senator Manchin. If you are the largest employer and you 
are spending more than anybody has ever spent in that country, 
you would have to be doing something that you would call--
define as nation building because you are the only one building 
anything.
    We, the U.S. Government and the taxpayers, are we the only 
ones truly that are building or investing?
    General Bash. From my perspective, we don't talk in 
terminology of nation building. What we talk about is 
counterinsurgency, which is what General Allen is focused on.
    Senator Manchin. Oh, I know how you all--I know what you 
are trying--I know that. I am trying--I am being as respectful 
as I possibly can, sir. But, truly, in the eyes of an average 
American, that would be trying to build another nation, and we 
can make determinations at the expense of our own.
    So the thing I would ask you about, I understand that the 
General Services Administration has identified an awful lot of 
rare earth mineral resources, if you will. Now I am 
understanding, to date, the only success or the only country 
that has been successful or making a successful attempt at 
mining, let us say copper, is China. Does China have--what type 
of an investment does China have in Afghanistan that you know 
of, militarily or monetarily, or personnel-wise?
    Mr. Kendall. I am not aware of the answer to that question. 
I am sorry, Senator Manchin.
    General Bash. We would have to take that for the record, 
Senator.
    [The information referred to follows:]

    Mr. Kendall. China's involvement in Afghanistan has focused 
primarily on investments in resource-related industries, development 
aid for infrastructure and reconstruction projects, and vocational 
training for Afghan officials and public servants. The exact number of 
Chinese personnel in Afghanistan is undetermined, but most accounts 
suggest hundreds of Chinese technicians and construction workers are 
either working on China-supported development projects or supporting 
China's $3.5 billion investment in Afghanistan's Anya Copper Mine, the 
single largest foreign direct investment in the country.

         China's state-owned Metallurgical Corporation of China 
        (MCC) and the Jiangxi Copper Company in late 2007 won a joint 
        bid to develop the Anya Copper Mine, reportedly one of the 
        largest undeveloped copper fields in the world. MCC is still 
        conducting survey work and hopes to begin mining operations 
        within the next few years.
         China has provided more than $200 million to 
        Afghanistan for reconstruction and development grants since 
        2002, including $75 million in aid that Beijing pledged to 
        provide over 5 years beginning in 2010. By comparison, U.S., 
        North Atlantic Treaty Organization, and other coalition 
        reconstruction and development programs have provided over $13 
        billion over the same timeframe.
         According to the Chinese Government, Chinese firms 
        were engaged in more than 30 infrastructure projects in 2008--
        including roads, dams, hospitals, and other projects--in 
        addition to survey and exploration work related to the Aynak 
        Copper Mine. By comparison, in 2011 U.S. Forces Afghanistan was 
        engaged in 23,607 total projects, of which 36 were greater than 
        $1 million, 186 were transportation projects, 168 were water 
        and sanitation projects, and 145 were health care projects.
         In August, the China National Petroleum Corporation 
        won three oil blocks in Afghanistan's first oilfield auction, 
        offering to pay 15 percent royalty on the blocks and 30 percent 
        corporate tax and to build a refinery for Afghan use.

    Although China has offered strong rhetorical support for Afghan 
security sector reform, the scale and scope of China's military and 
security assistance to Afghanistan have been limited. China has 
provided at least $2 million--and possibly up to $8 million--in 
materiel, equipment, and training aid to Afghan forces since 2006, but 
Beijing does not appear to be pursuing a large-scale, long-term 
commitment to Afghan military capacity building, nor has it announced 
plans to deploy military forces to the country. By comparison, since 
2007, the United States has contributed $36.6 billion to development of 
the Afghan National Security Force, with another $3.2 billion from NATO 
and coalition partners. China may consider reassessing its security-
related engagement with Afghanistan after the drawdown of U.S. forces, 
but it almost certainly prefers to use the capacity-building efforts of 
others rather than provide substantive assistance of its own.

         A Chinese official and Afghanistan's ambassador to 
        China reportedly signed an agreement on military cooperation in 
        January 2010. Although we have no details on the agreement, 
        reporting suggests provisions included scholarships and 
        training opportunities for Afghan officers in China.
         During a March 2010 meeting with his Afghan 
        counterpart, China's Minister of National Defense, General 
        Liang Guanglie, said that military cooperation between the two 
        countries in military supply and personnel training had 
        developed smoothly, likely a reference to earlier reported 
        Chinese efforts to provide logistics training in China for some 
        Afghan troops.
         According to an uncorroborated foreign media report, 
        China provided funding to the Afghan National Police to support 
        the deployment of the 1,500 Afghan police personnel currently 
        providing security for the Anya Copper Mine. The funds may have 
        been provided by the Chinese firms that purchased a controlling 
        stake in the mine in late 2007.

    General Bash. As the Joint Staff's Director for Logistics, this 
information falls outside my responsibilities and area of expertise. 
However, my staff solicited the following information from other 
subject matter experts in the Joint Staff:
    China's involvement in Afghanistan has focused primarily on 
investments in resource-related industries, development aid for 
infrastructure and reconstruction projects, and vocational training for 
Afghan officials and public servants. The exact number of Chinese 
personnel in Afghanistan is undetermined, but most accounts suggest 
hundreds of Chinese technicians and construction workers are either 
working on China-supported development projects or supporting China's 
$3.5 billion investment in Afghanistan's Aynak Copper Mine, the single 
largest foreign direct investment in the country.

         China's state-owned MCC and the Jiangxi Copper Company 
        in late 2007 won a joint bid to develop the Aynak Copper Mine, 
        reportedly one of the largest undeveloped copper fields in the 
        world. MCC is still conducting survey work and hopes to begin 
        mining operations within the next few years.
         China has provided more than $200 million to 
        Afghanistan in financial for reconstruction and development 
        grants since 2002, including $75 million in aid that Beijing 
        pledged to provide over 5 years beginning in 2010. By 
        comparison, U.S., North Atlantic Treaty Organization (NATO), 
        and other coalition reconstruction and development programs 
        have provided over $13 billion over the same timeframe.
         According to the Chinese Government, Chinese firms 
        were engaged in more than 30 infrastructure projects in 2008--
        including roads, dams, hospitals, and other projects--in 
        addition to survey and exploration work related to the Aynak 
        Copper Mine. By comparison, in 2011 U.S. Forces Afghanistan was 
        engaged in 23,607 total projects, of which 36 were greater than 
        $1 million, 186 were transportation projects, 168 were water 
        and sanitation projects, and 145 were health care projects.
         In August, the China National Petroleum Corporation 
        won three oil blocks in Afghanistan's first oilfield auction, 
        offering to pay 15 percent royalty on the blocks and 30 percent 
        corporate tax and to build a refinery for Afghan use.

    Although China has offered strong rhetorical support for Afghan 
security sector reform, the scale and scope of China's military and 
security assistance to Afghanistan have been limited. China has 
provided at least $2 million--and possibly up to $8 million--in 
materiel, equipment, and training aid to Afghan forces since 2006, but 
Beijing does not appear to be pursuing a large-scale, long-term 
commitment to Afghan military capacity building, nor has it announced 
plans to deploy military forces to the country. By comparison, since 
2007, the United States has contributed $36.6 billion to development of 
the Afghan National Security Force, with another $3.2 billion from NATO 
and coalition partners. China may consider reassessing its security-
related engagement with Afghanistan after the drawdown of U.S. forces, 
but it almost certainly prefers to use the capacity-building efforts of 
others rather than provide substantive assistance of its own.

         A Chinese official and Afghanistan's ambassador to 
        China reportedly signed an agreement on military cooperation in 
        January 2010. Although we have no details on the agreement, 
        reporting suggests provisions included scholarships and 
        training opportunities for Afghan officers in China.
         During a March 2010 meeting with his Afghan 
        counterpart, China's Minister of National Defense, General 
        Liang Guanglie, said that military cooperation between the two 
        countries in military supply and personnel training had 
        developed smoothly, likely a reference to earlier reported 
        Chinese efforts to provide logistics training in China for some 
        Afghan troops.
         According to an uncorroborated foreign media report, 
        China provided funding to the Afghan National Police to support 
        the deployment of the 1,500 Afghan police personnel currently 
        providing security for the Aynak Copper Mine. The funds may 
        have been provided by the Chinese firms that purchased a 
        controlling stake in the mine in late 2007.

    Senator Manchin. Let me ask you, how many times have you 
been to Afghanistan?
    Mr. Kendall. I have only been to Afghanistan one time.
    Senator Manchin. How about you, sir?
    General Bash. Senator, I have been there dozens of times, 
and I will be going----
    Senator Manchin. Have you seen many Chinese military there?
    General Bash. Never.
    Senator Manchin. Have you seen many Chinese in the way of 
investment, infrastructure?
    General Bash. Not in the missions I was on.
    Senator Manchin. But they are intending to extract at least 
that one resource. Am I correct?
    General Bash. I am unaware of their activities.
    Mr. Kendall. I am aware of press reports that Chinese are 
interested in mining in Afghanistan.
    Mr. Zakheim. You are right on. By the way, you are right. I 
mean, stabilization and reconstruction is a euphemism for 
nation-building, or state-building. It is really more 
accurately state-building. So they are nation-building.
    Senator Manchin. Right. But I am understanding now we 
have--it has been in 2005 that decision was made, and it has 
been ongoing ever since?
    Mr. Zakheim. That is right.
    Senator Manchin. You can imagine the consternation a lot of 
us have here with what is going on in our country.
    Mr. Zakheim. We are pouring almost as much into Afghanistan 
as Afghanistan generates in its own GDP.
    Senator Manchin. Let me ask this question, and this is 
something that I have been there twice and talked to a lot of 
troops, and a lot of people from West Virginia are the troops. 
Without naming names, invariably I have been told that they 
intended to cycle out so they could get a better job working as 
a contractor for our Government.
    Do any of you confirm that? Do you have a percentage of the 
people working in contracting that basically were former 
military? Can you get me that, if you don't have it? But would 
you say it would be quite high?
    General Bash. Senator, I wouldn't have that off the top of 
my head. I would tell you, though, that what we are getting at 
here is retention of the forces, which is really at an all-time 
high right now. So the decision to leave the military because 
of that opportunity is not overwhelming.
    Senator Manchin. Secretary Kendall?
    Mr. Kendall. I think earlier on, in the Iraq conflict in 
particular, there was some indication in the press that people 
were leaving and then coming back as contractors.
    For contract people, people that administer contracts, we 
generally hire people out of school initially. There is a 
veterans preference in civil service hiring, and I don't know 
that we keep track of the prior service of people necessarily, 
but I can try to get that for you for the record.
    [The information referred to follows:]

    Thirty-eight percent of our civilians in the acquisition workforce 
on contracting positions have military experience.

    Senator Manchin. This would be a military question, 
Lieutenant General. Do you believe that we could utilize our 
National Guard much more effectively and cost efficiently?
    General Bash. Senator, I think today we are absolutely 
using our National Guard very effectively. With my background 
from Air Mobility Command (AMC), for example, we are deploying 
them at a deployment rate that is maxing their capability out. 
So from that perspective and the other military forces, we 
really couldn't be using them any more in a majority of their 
mission areas.
    Senator Manchin. No, what I'm asking is, could we build off 
of the National Guard premise that we have right now with the 
expertise they do have, be able to do a lot of the contracting 
work that we are hiring at a higher wage rate or cost, and do 
it more effectively and efficiently through our Guard than what 
we can through contracting?
    You all haven't taken a position on that, or do you have a 
comment? Because my time is running out, and I appreciate it.
    Mr. Kendall. We have been increasing the size of the 
contracting workforce in Government. We have added a few 
thousand positions, actually, in the last 2 or 3 years, mostly 
under the Defense Acquisition Workforce Development Fund. A lot 
of those people are entry-level people who have come out of 
school. Some of them, I am sure, are coming from the military.
    We also increased the number of military people that are 
doing contracting for us as part of our force structure. I 
visited a unit in--it was in Iraq, actually--which had asked to 
have military people included in their organization as part of 
their organization to do contracting. We were talking earlier 
about institutionalizing contracting. So they clearly saw the 
need at that level to have that kind of capability, and 
presumably, those people would be military.
    Senator Manchin. I am so sorry, Madam Secretary. Just very 
quickly. I know.
    Senator McCaskill. It is Senator Blumenthal, not me.
    Senator Manchin. I know. Very quickly, ma'am. I am sorry.
    I think just to make the point, if you could, if I could 
even talk with you all later, if you can get back to me at a 
later time, does DOD look at our National Guard, with the 
expertise they have been able, the support they have been 
giving, to basically be more effective and efficient, growing 
it than the cost that we are spending for private contractors I 
think is where I am going. We can talk about that.
    [The information referred to follows:]

    As part of Total Force planning, the Department considers all 
sources, including the National Guard, in planning to meet current and 
future operational needs. The Department's ``sourcing'' of functions 
and work between military and civilian personnel, as well as contract 
support, is consistent with mission requirements, funding availability, 
readiness and management needs, and applicable laws. Consistent with 
these considerations and the Department's military strategy, 
recommendations for sizing the force will be based on mission 
requirements and informed by our combatant commanders' needs to meet 
their missions and maintain a necessary state of operational readiness 
while minimizing and mitigating any risks.
    The use of Active, Reserve or, in certain cases, National Guard 
personnel can be a consideration in making staffing decisions. However, 
support functions are generally designated for civilian or contract 
performance unless one or more of the following criteria are 
applicable: military-unique knowledge and skills are required for 
performance of the duties; military incumbency is required by law, 
executive order, treaty, or international agreements; military 
performance is required for command and control, risk mitigation, or 
esprit de corps; and/or military staffing is needed to provide for 
overseas and sea-to-shore rotation, ensure career development, maintain 
operational readiness and training requirements, or to meet 
contingencies or wartime assignments. In making staffing decisions, 
commanders must be mindful of using military personnel to perform tasks 
that limit their availability to perform the operational mission.

    Senator Manchin. Thank you. I am sorry, ma'am.
    Senator McCaskill. No, it is fine. Thank you. We are glad 
you are here, Senator Manchin.
    Senator Blumenthal.
    Senator Blumenthal. Thank you, Madam Chairman.
    Thank you for those questions, Senator Manchin, very well 
taken.
    I want to thank our chairwoman for the great work she has 
done and is doing on this issue. She has been a real champion. 
I don't need to tell anyone in this room or in this building or 
in the United States Senate that she has been at the forefront 
of eliminating waste and fraud in Government contracting, but 
also trying to make all of our policies more effective.
    I have a wide array of questions which I will not ask here, 
but hope perhaps either to submit in writing or follow up on. 
But I do want to concentrate on one area that is mentioned in 
your report--the issue of human trafficking by Federal 
contractors, which has been of grave concern to me and some of 
my colleagues on the Senate Judiciary Committee.
    I have a number of measures that have been reported out of 
the Senate Judiciary Committee to address human trafficking by 
contractors on our military bases in Afghanistan and Iraq not 
only because it is immoral, but also because it is dangerous to 
our troops. So this is an issue of security, not just morality.
    I noted in the report, and I am quoting, ``tragic evidence 
of the recurrent problem of trafficking in persons by labor 
brokers or subcontractors of contingency contractors.'' Could I 
ask you to elaborate on that finding because it is a fairly 
succinct and concise one?
    Again, you can do it either outside of this room or in 
another setting if you wish or expand on any of your remarks 
here.
    Mr. Zakheim. I have been asked to go first.
    It takes place in lots of different ways. What the brokers 
tend to do is get these people over to, say, Afghanistan or 
Iraq, but mostly Afghanistan, and they take their passports 
away. Once they do that, these people are prisoners.
    They promise them wages at one level and pay them 
subsistence wages, if that. They coop them up in dormitories, 
and they can't get out. Quite frankly, the CWC just scratched 
the surface of this, to be honest. There is a lot more in that 
iceberg. We just saw the tip of it.
    But part of the way that we can get our arms around it--and 
we did report this--is to have visibility into what the 
subcontractors are up to. We deal with the primes, and we say 
the primes are responsible for dealing with their subs.
    Now if you are working in Peoria, or in Darien, CT, or 
wherever, that is fine. It is not fine in Afghanistan. It just 
won't work.
    So, we need to ensure that our oversight agencies have 
complete visibility not just into the dollars, but into the 
practices of these subs. We are being taken to the cleaners in 
all sorts of ways. It is not the primes that are paying off the 
insurgents. It is the subs that are paying off the insurgents.
    So it is just another aspect of the same problem. That is 
one, I think, that will require legislation.
    Senator Blumenthal. I noted in a footnote in the report 
that the two witnesses from DOD in the hearing on July 26, 
2010--being Ed Harrington, the Deputy Assistant Secretary of 
the Army for AT&L, and Patrick J. Fitzgerald, Director of 
DCAA--were asked, and again, I am quoting, ``If any companies 
have been suspended or debarred for''--and I am inserting 
here--``human trafficking in particular?''
    They took that question for the record. They said they 
would get back to you. Did you get any additional information 
from them?
    Ms. Schinasi. I am not aware that we did, Senator.
    Senator Blumenthal. I wonder if I could ask General or 
anyone else who is here on behalf of DOD--Mr. Secretary--if you 
could answer those questions for us because DOD did commit to 
responding to them and evidently has not done so.
    Mr. Kendall. We will take that for the record, make sure 
you get it. I just checked, and we don't have that information 
with us.
    [The information referred to follows:]

    The Suspension and Debarment Officials were queried recently about 
any human trafficking cases from the agencies. There were no 
suspensions or debarments related to cases of human trafficking by the 
Navy, Air Force, or the Defense Logistics Agency. The Army had two 
cases where the issue was raised in the past 3 years. The first was not 
substantiated, so no suspension or debarment action was taken. The 
second was a contractor accused of harboring an illegal alien and 
extracting cheap labor under threat of exposure. In this case, both the 
principal and the entity were debarred. This case was stateside; and 
not in the contingency environment.

    Senator Blumenthal. I appreciate it.
    Mr. Kendall. Sir, if I may make a comment or two about 
human trafficking, what we are doing about it?
    We recognize this is a serious problem. It is a violation 
of criminal law. It is inhumane. There are any number of things 
wrong with it. It is a violation of basic human rights and 
human dignity.
    We have put in place--there are, obviously, criminal 
statutes that can be enforced. We are putting and we have put 
into all of our contracts clauses that would prohibit it, and 
it is a basis potentially for debarment. We will check on the 
statistics to see if there are any cases where we have done 
that.
    We have also taken steps to notify the workers of what 
their rights are, so they know that they can do something about 
ill treatment if it occurs. I have a brochure here that we just 
put out, which we are putting out in seven languages, which all 
workers will get to make sure that they are aware of their 
rights. There is a smaller card version of this as well.
    So we have taken some strong measures to address this 
problem.
    Mr. Zakheim. Can I just add to that?
    Senator Blumenthal. Please do.
    Mr. Zakheim. I think what DOD has done, given what it is 
now able to do, is absolutely on the mark. But think about it. 
You are some poor Filipino. You don't have your passport. You 
don't really know the country. You don't really know who to 
turn, and somebody gives you a pamphlet. What are you going to 
do?
    So, unless we legislate accountability for subcontractors--
right now, we don't really have that. So you can't expect DOD 
to do more than it is doing. They are doing what they can do. 
But unless we go further, this problem is not going to go away.
    Senator Blumenthal. That actually was going to be my own 
observations in probably less articulate form. That a 
brochure--and I don't doubt the good intentions and the 
determination of DOD to address this problem. So that is really 
why I would welcome the opportunity to work with you in 
providing that additional authority, if it is desirable and 
necessary.
    Because this problem--and you know it much, much better 
than I--affects not only human rights, but also security on the 
bases, in facilities, in a whole vast array of ways.
    Mr. Kendall. Senator Blumenthal, if I may, just because 
there are other steps we are taking. We do flow those 
requirements down to subcontractors. This is an area that gets 
audited in our larger contracts repeatedly to ensure that the 
kinds of deplorable conditions we have heard about in the press 
and other places actually are not--do not occur, that these 
abuses don't occur.
    The LOGCAP, for example, is reviewed by the Defense 
Contract Management Agency (DCMA) monthly for this. I am sorry, 
bimonthly, and other contacts are audited monthly for this. So 
we are paying close attention to this, and we are trying to 
flow it down to subcontractors.
    Senator Blumenthal. Lastly, to switch subjects, and again, 
I am going to be questioning in shorthand because I don't want 
to keep everyone here for too long, and I apologize that I was 
absent.
    My thought is, given the escalating scale of the 
contracting that will take place in Iraq and likely in 
Afghanistan, and I know a number of you have alluded to it 
while I was out of the room, that there should be some 
preparation in terms of a more effective and cohesive 
comprehensive structure for almost another commission begun 
right now, given the problems that we can see on the horizon. I 
think you've commented generally on it in the past, but does 
that kind of thought make any sense?
    By the way, I know that Senator McCaskill has been working 
in this area and has a legislative proposal that begins or more 
than beginning, but addresses this issue. But if I could elicit 
your comments on it?
    Mr. Kendall. Let me just talk about some of the things we 
are doing to institutionalize this capability, which I think is 
one of the central concerns of the commission.
    Secretary Gates put out a letter last January tasking 
various Under Secretaries and largely the Chairman of the Joint 
Chiefs to take a number of steps to institutionalize this. We 
put out a DOD directive, which is at OMB right now for review 
before it goes final. There will be a rule that will go out for 
public comment that updates the DOD directive that governs 
this. It was dated 2005.
    The Joint Staff has a joint publication that covers the 
doctrine of this area that it has been published, I believe. To 
give you a sense of how this has infiltrated through our 
system, this is a letter that General Allen just put out, and 
it is a several-page letter directing all of his commanders in 
terms of their responsibilities as far as contracting is 
concerned.
    A key sentence in here is that contracting has to be 
commanders' business. It is part of the force. When half the 
people you deploy are contractors, they have to be managed as 
part of the force. I have some training aids with me here. I 
have the contingency handbook, contracting handbook, the third 
edition, okay, we have been working on. This is for contracting 
officer representatives, the people that supervise day-to-day.
    There is one here about contracting as a weapon. So DOD, I 
think, has it. We have the fact that when we do an operation 
like this and we put contractors out there in equal numbers 
roughly to the soldiers we put on the ground, we have to manage 
them just as effectively.
    Because they are there under contract and not under the 
Uniformed Code of Military Justice necessarily, although they 
may be under that in some circumstances, we have to do that 
very aggressively and carefully. So I think we have it, and we 
are meeting the very fundamental, I think, recommendations of 
the commission, which is to institutionalize this capability.
    I share their concerns that when we get out of Iraq and 
Afghanistan that we might lose this, just it might atrophy 
because we are not using it. So one of the things that I know 
the Chairman of the Joint Chiefs is trying to do is ensure that 
this gets into standard operational plans.
    It is an annex where you do address contracting, just like 
you address logistics or communications or another military 
area. When we do exercises at any level, that we take into 
account the need for contractors to support the operation that 
we are exercising for.
    Brooks, do you want to add to that?
    General Bash. Senator, if I may, I can answer this question 
really in the context of the recommendation of whether it ought 
to be a J10 or not. This gets to the institutionalization. This 
is at the end of the day, as Mr. Zakheim says, it is really 
what happens on the ground.
    Since I have been in this position, there has been a sea 
change is my observation of what we have done. Insofar as 
meeting the intent, I think we are either there or well on our 
way. Based on my review, I would say that, currently, there is 
no compelling reason to add organizational structure such as 
J10. I say that, in my judgment, for four primary reasons.
    One, leadership, as just alluded to here, all the way from 
the Secretary of Defense to General Petraeus, to General Allen, 
to subordinate commanders, we are having significant attention 
on this problem. The Secretary of Defense has promulgated the 
strategic planning guidance. It now is--operational contracting 
support is in all of our plans by direction, the plans, policy, 
and resources.
    The second reason is organization. So this gets to the J10 
recommendation squarely. First of all, in my position as a 
three-star, I report directly to the Chairman, and I am 
responsible for OCS. There are four general officer 
equivalents, including me, within that organization.
    OCS is now designated as a joint capability area. There are 
only 37 joint capability areas in all of our military. So it is 
fairly significant that that has occurred.
    The division of OCS that works for me is on par, it is on 
par with maintenance, health, supply, and engineering--all 
major joint capability areas.
    Doctrine is the third primary reason. So when we 
institutionalize, we have to make sure it is codified and 
people follow the rules that they are supposed to. Joint Pub 4-
10, which has been published now for several years, is 
undergoing another revision based on the lessons learned in 
Iraq and Afghanistan. In all, there are 41 authoritative 
directions with instructions, manuals, and joint publications.
    Furthermore, OCS is now part of our joint task list. Now 
our joint task list in the military, of which there is 1,164 of 
them, today we have identified 372 of those that have OCS 
equities. So they will be adjusted accordingly.
    But more importantly, there is now we have identified 51 
specific joint tasks that will be included in the joint task 
list. Now what does that mean? That means now the military, 
once they are codified in that position, will have to man, 
equip, train, exercise, and report to each of those tasks 
because that will be 51 direct OCS ones out of the 1,100 plus 
total.
    The third area is planning, as it was mentioned. Madam 
Chairman, I think this is one of your big concerns. OCS 
heretofore, back when Iraq started, there was no planning for 
it. We just did not foresee that this would be an important 
capability.
    Today, it is required in all plans. We have a new annex, 
which you are aware of, which is Annex W. Every plan that 
requires an Annex W has one today, and indeed, we have now 
adjusted the Annex W criteria to make it five-fold larger, and 
all those plans are going through the cycle of improving them 
down to the point of processing maps for planning manuals and 
all that for the operators.
    The last thing I would say, and this is at the end of the 
day--and Mr. Zakheim makes this point, I think, very well--what 
happens on the ground? Does it get implemented?
    I will give you two vignettes from my personal experience 
just in the past year and a half. One of my previous jobs as 
the Operations Director at AMC, when the Haiti earthquake 
occurred, we deployed a contingency response group that had a 
contractor representative embedded that went to that airport, 
and that airport went from a capability of about 20 flights per 
day to over 150 flights a day. That was primarily because that 
contracting representative was able to quickly leverage the 
local economy to get to that scale of operation.
    The second vignette I would give you is in my most recent 
assignment as the Deputy Commander for JTF-519. I was deployed 
to Japan to support Operation Tomodachi. I can tell you that 
when I arrived there that the J4, the logistics expert, at that 
point had done two things in this vein. One, he immediately 
started a contracting board, if you would, to make sure that 
the contracting actions were commensurate with what the 
commander wanted.
    The second thing they did is it was integrated in the joint 
effects board to make sure that the contracting actions did not 
waylay some of the efforts that we had. Now why is that 
important? It has bubbled all the way down to operational level 
and to very important humanitarian relief efforts.
    So, that is evidence that this is actually getting to that 
point. We have a long ways to go, but I am confident that we 
are actually getting there.
    Senator Blumenthal. My time has expired, but I really want 
to thank--oh, I am sorry?
    Ms. Schinasi. Could we just, yes, have a couple minutes on 
this? Because this is clearly one of the issues that DOD and 
the CWC disagree on.
    Senator Blumenthal. I am not in charge.
    Senator McCaskill. Sure. Go ahead.
    Ms. Schinasi. Okay. Right. So we will both have something 
to say. I don't--maybe different things, but----
    Senator Blumenthal. Well, I welcome it.
    Ms. Schinasi. I am just going to give you another way to 
look at it, and that is in DOD in particular, the positions 
that general officers and admirals have really tell you what 
they think is important. When we look at contracting, 
contracting has always been a subset of acquisition. Logistics 
is a subset of acquisition.
    What we are talking about is elevating this beyond even the 
acquisition function, right? We have been talking mostly about 
management this morning. Management is very important, but it 
is really that decision to use contractors that begins the 
whole need for the management structure to be in place, and 
that decision to use contractors is really a policy issue. So 
we are talking about policy.
    It is also a force structure issue. So we are talking about 
personnel and readiness. What we have seen, many good things 
happening in DOD. But if you are not willing to commit the 
positions of leadership, then you really are not saying that 
this is important to you. So that would be one thing.
    There are 51 general officers on the Joint Staff. We 
believe that one is not too many to put with the focus on 
contingency contracting. So I will stop there because we are 
short on time.
    Mr. Zakheim. Let me add to that, if I may? First of all, 
while DOD is doing what it can do now, we go back to the 
question of what happens when the contingency ends?
    What you need is an advocate. If you don't have a senior 
advocate, what then happens is that people simply don't pay 
attention. Now think about it. We have been at this for 10 
years and what we are hearing is we still have a ways to go.
    How many more years do we need to have a ways to go? It 
tells you something about leadership and policy. If you have a 
senior leader who is an advocate for these issues--and by the 
way, when I was first in the building in the 1980s, I think we 
had a J1 to a J6. Okay, now we have a J8 and so on. When the 
Joint Staff wants to add Js, they figure out a way.
    I only heard today when I was in DOD that the Joint Staff 
was going to add more people. So if they can add people and 
they can add departments, what their message is, why is there a 
J8? Because, quite rightly, the Joint Staff has to be a major 
player in programs and budgets.
    When I was Comptroller, I barely did anything without 
consulting with my J8 counterpart, for good reason. This is the 
same message. If contingencies management, oversight, planning 
are really, really important--and, oh, by the way, the 
Quadrennial Defense Review had barely a line, barely a line, 
about contingency contracting, I guarantee you, if there was a 
three-star J10, it would have been more than a line.
    Senator Blumenthal. Thank you very much.
    I want to thank all of the witnesses for your very 
excellent and forthright answers and for all the work the 
commission has done.
    Mr. Secretary and General Bash, thank you for your service 
to our Nation. Thank you, particularly, General Bash, for your 
lifetime of service in our military, and please convey my 
thanks as well to the brave men and women working with you.
    Thank you.
    Senator McCaskill. I have so many places that I would like 
to go right now. Let me, since we are on this, the Joint Staff, 
and Mr. Zakheim is persuasive about the number of officers at 
Joint Staff and whether or not we need someone. Maybe we would 
get less resistance to this if we talked about a senior leader 
at the Joint Staff that is in charge of contracting, not 
contingency contracting.
    Because as Senator Manchin pointed out, I wish we had that 
at Homeland Security because they can't even come close to 
telling me how many contractors they have. They are closer now 
than they were when I got here in 2007. But when I asked that 
question in 2007, they acted like I was speaking a foreign 
language.
    By the way, over there, it is contractor, contractor, 
employee, contractor, contractor, contractor, employee, 
employee, contractor, contractor, contractor--all doing the 
same function at vastly different levels of pay. I would be 
willing to bet we have that in DOD.
    So, I honestly think that if we are going to be honest with 
the American people about how DOD relies on contracting, then 
it is time--and believe me, I am very proud of the progress 
that has been made. I don't want you to leave this hearing 
without your knowing I recognize the progress that has been 
made.
    I know how bad it was in 2007. I was in a room in a 
briefing on LOGCAP that was shocking to me, that the only 
person in the room that knew anything to the questions I was 
asking was a woman civilian. Not any of the officers in the 
room had any idea about the details and the granular nature of 
what LOGCAP was costing us and why.
    That is why we have monogrammed hand towels. That is why we 
had cost-plus and noncompetitive in a way that was wildly 
abusive of the American taxpayers, to say nothing of the risks 
that we put our men and women in because of sloppy contracting 
on logistics contracts.
    So I really hope you leave this hearing, and I will take it 
upon myself to go to leadership and press as it relates to the 
CWC that the way it doesn't atrophy, the way we don't have a 
lessons learned that weren't learned is by not having that 
senior leadership that is--their whole portfolio is to have 
eyes and ears on contracting, no matter where it occurs. I 
think that is very important.
    Let me quickly move to some areas of irritation about past 
performance and suspension and debarment. I sense a little 
pushback on maybe not so much past performance, but certainly 
on suspension and debarment in terms of the commission's 
recommendations.
    I am disappointed that we have a lack of past performance 
information going into the databases. This is a good example of 
where we set up the structures, and because they never have 
that continued attention and because it is not part of the 
mission, that it doesn't happen.
    What the commission said was, in fact, that you are failing 
to input timely and complete contractor performance 
information. They want to--the 821 of the 2012 NDAA is going to 
require DOD to develop a strategy for ensuring that timely and 
accurate information on contractor performance gets included.
    Is this a good thing, and do you think a streamlined--and 
with some kind of verification, that before a contract is 
entered into, that they have, in fact, tried to verify that 
contractor performance in the database on both ends, putting it 
in and then using it once it is in?
    Mr. Kendall. I think the short answer is yes. We have been 
working for some time to improve the quality of our CPAR 
information. There hasn't been an enforcement mechanism to get 
the data put in or to ensure that it has been accurate. So it 
has not been consistently good.
    We recognize this is a problem across our contracting, 
probably as much so in other areas as it is in contingency 
contracting. So we are taking steps to improve it.
    It is partly information systems. It is partly enforcement 
mechanisms. It is partly management attention. So, in general, 
we agree with the direction in which you are heading.
    The only place that we would quibble a little bit with the 
recommendations of the CWC in this regard is the right of a 
contractor to appeal an adverse rating. We think there should 
be some opportunity. The rating can be posted, but there should 
be some opportunity for due process for contractors. So if they 
feel they have been unfairly rated, they have at least a chance 
to go to a higher authority and get that reexamined.
    Other than that, though, we are in general agreement on 
this.
    Ms. Schinasi. Senator McCaskill?
    Senator McCaskill. Yes?
    Ms. Schinasi. Point of clarification. What we recommended 
was that the appeal process not hold things up, not that there 
not ever be an appeal process. So I just want to put that in 
the record.
    Mr. Kendall. We are okay with that.
    Senator McCaskill. Yes, I think if we could agree on that, 
that the appeal process would not--it could be noted there was 
an appeal, but it couldn't change the fact that the data is 
going in. So it is there in case there is somebody else 
thinking about contracting with that particular contractor.
    Suspension and debarment. This one is frustrating because I 
think the CWC has recommended a streamlined procedure for 
suspension and debarment in a wartime environment. I think that 
DOD has pushed back, saying that it should remain a fairly 
rigorous administrative procedure. Contracting officers can use 
past performance databases in a flexible way to avoid awarding 
contingency contracts to contractors where there has been 
evidence to suggest unreliable performance. Why would we want 
to have--informally debar contractors on a de facto basis, 
rather than documenting the decision through a streamlined 
process? What are we afraid of here?
    Mr. Kendall. I am not sure about part of that. If we do 
debar or suspend someone, that is public information. We are 
not doing that under the table.
    Senator McCaskill. No, no. I am talking about you all 
pushed back and said we don't want to streamline the suspension 
and debarment process in theater because we think a rigorous 
administrative process is necessary.
    So, what you kind of said is we can kind of do it 
informally if there is bad information there. I am having a 
hard time reconciling those positions.
    Mr. Kendall. A couple of things about that. One is that 
suspension and debarment are done to protect the Government's 
interest, to make sure that we are protected. Debarment in 
particular is fairly serious systemic violations or a violation 
of law which is significant because it debars a contractor for 
up to a 3-year period.
    We have increased to about 50 percent the numbers of times 
of which we are doing this sort of an action. So we have 
increased enforcement in that regard.
    There are a number of other remedies we have as well. We 
can recover funds. I have some statistics here of how much--
several million dollars have been recovered by our audit 
agencies, and there are a variety of reasons why there would be 
an error in payments that would cause us to recover.
    So we are taking action. There is criminal action in some 
cases, if that is called for, as well as suspension and 
debarment and administrative action. So, in general, we would 
agree that enforcement should be stronger. We do want some 
discretion for this so that people who are higher contracting 
authorities can examine a case carefully before they take that 
kind of an action because it is a fairly severe action to take.
    Senator McCaskill. Well, it is. On the other hand, I have 
sat in a lot of these hearing rooms and heard tales of horror 
about contracting malfeasance. By the way, that contractor got 
another contract after the malfeasance.
    So, if we are going to err, I think we should err on the 
side of making sure that we are weeding out the bad actors that 
are ripping us off, as opposed to erring on the side of 
avoiding unfairness. Because I have not heard--not that I am 
sure there are some cases where there has been some unfairness, 
and that is why we have to have a process.
    Maybe we could have a streamlined process in contingencies 
that would lead to suspension and debarment, where there could 
be something that takes longer to get it reinstated perhaps 
inside the 3-year period. But I am pushing this envelope 
because what I have seen is a reluctance to go there 
culturally. That it was just easier not to because, frankly, 
the process is so hard, it is a little bit like leasing 
temporary buildings rather than military construction (MILCON).
    A lot of folks were leasing temporary buildings because it 
is a lot harder to get something through MILCON. I think this 
is the same kind of situation, that we have built up such a 
rigorous process for debarment, it is just easier for folks on 
the ground to say, ``Well, I don't want to go debarment. That 
is too much paperwork.''
    Mr. Kendall. I don't have any information that would 
suggest that that is the case, but I don't have any information 
suggesting it is not either. So I would like to take that one 
as something that I would look into and perhaps get back to 
you.
    [The information referred to follows:]

    The Army has processed 544 suspension and debarment actions out of 
Southwest Asia since 2005, and there are 254 currently open as of 
August 2011. The referred actions have resulted in suspensions, 
proposed debarments, debarments, administrative compliance agreements 
and show cause letters. The Army's Procurement Fraud Branch reviews all 
relevant documentation regarding alleged misconduct and does not 
support the statement that was made that there is ``too much 
paperwork'' involved in debarment actions.

    Senator McCaskill. Yes, if you could drill down on this 
whole issue because I want to push on trying to get suspensions 
and debarments, something that can happen and can happen fairly 
quickly when there is egregious activity on a contractor's 
part, particularly in contingencies.
    Senator Ayotte.
    Mr. Kendall. One area before--if I could, where we would 
want to have that authority and exercise it is the area that 
the new law will cover, where money is falling to our enemies 
through a contractor and where we can void a contract at least 
and maybe take stronger action beyond that.
    Senator McCaskill. I think that is obviously something we 
all agree on, but monogrammed towels are almost as bad. I mean, 
they are not. I am being sarcastic. That will be clipped 
somehow and used against me. [Laughter.]
    Let me clarify that was me being a smart aleck, and I 
shouldn't have. But there just was so many problems. The faulty 
wiring of showers is as bad. That is a much better example 
where our men and women were subjected to life-threatening 
dangers because of corners being cut in the name of profit.
    Mr. Kendall. Understand.
    Senator Ayotte. Thank you very much.
    So just to follow up, Secretary Kendall, when you say the 
ability to cut off contracting more quickly as in the 
provisions that are included in the NDAA, is that something 
that we should be putting together on a broader basis?
    For example, what is in the authorization right now doesn't 
apply across all of DOD. It applies to our operations in 
Afghanistan and I believe Iraq as well, but it doesn't apply to 
all of DOD. So isn't this capability we need universally across 
DOD?
    It also raises a question with me based on what I heard 
before with DOS. Why wouldn't DOS also need that authority? If 
they get wind that we are dealing with a bad actor, we need to 
act immediately. So I just pose that question.
    Mr. Kendall. Presumably in a contingency environment I 
would think DOS would need that, but I have to defer to them to 
answer the question. I would have to take a look and think more 
carefully about any unintended consequences and existing 
remedies for expanding that beyond areas where there is a 
contingency operation going on.
    There are a lot of remedies in place in those areas 
already, and they may be adequate. I am enough of a lawyer not 
to offer an opinion about something----
    Senator Ayotte. I think that is the problem, though.
    Mr. Kendall.--that I haven't looked at carefully.
    Senator Ayotte. The reason that we passed this stuff is 
because it was getting overly lawyered, and we needed to give 
you the authority. Just we got a bad actor, we have to cut it 
off.
    So, it just seems to me that this isn't going to be the 
last conflict. This is authority that I don't want you to have 
to come back to Congress for. So, when we run into the next bad 
actor and we are dealing with the--I am a lawyer myself--all 
the great arguments that can be made. So I would just 
appreciate an answer on that if you could give it some more 
thought.
    Mr. Kendall. Yes, off the cuff, I am inclined to agree with 
you. But I would like to take a look at it with our attorneys.
    [The information referred to follows:]

    The need for the authority the Department of Defense (DOD) sought 
and received in section 841 of the National Defense Authorization Act 
for Fiscal Year 2012 was a part of a comprehensive approach established 
by the Chairman of the Joint Chiefs of Staff and the U.S. Central 
Command (CENTCOM) to resolve serious issues of corruption revealed by 
the June 2010 report by Warlord, Inc., ``Extortion and Corruption Along 
the U.S. Supply Chain in Afghanistan.'' In the wake of this new 
revelation and the Integrity Watch Afghanistan's (non-profit watchdog 
group) statement regarding significant increases in corruption since 
2006, U.S. Forces-Afghanistan established Task Force 2010. Task Force 
2010 was charged with ensuring U.S. and coalition dollars spent through 
contracting do not flow to the enemy.
    Section 841 provides the Commander of U.S. Central Command 
(CDRUSCENTCOM) without power of redelegation, the authority to identify 
the enemy in a contingency operation. Upon the CDRUSCENTCOM 
notification of such identification in writing, the head of a 
contracting activity has the authority to restrict the award of 
contracts, to terminate, or to void in whole, or in part, any DOD 
contracts, grants, or cooperative agreements. DOD implemented section 
841 via Class Deviation 2012-O0005, dated January 26, 2012 (attached).
    Federal Acquisition Regulation Subpart 49 and Defense Supplement 
provide adequate suspension and debarment authority. We will 
investigate simplifying current regulations in support of contingency 
operations.
      
    
    

    Senator Ayotte. Thank you very much.
    I have one follow-up based on the discussion that we were 
talking about before with what is happening in Iraq. You 
described it, Secretary Kendall, as DOS has never done anything 
like this before.
    Mr. Kendall. Not on this scale.
    Senator Ayotte. Right.
    Mr. Kendall. Not with this many, large number of people or 
contractors.
    Senator Ayotte. I am deeply concerned about how this is 
going about. So put that aside for a minute. If we are going 
forward in this regard, how are we going to best leverage this 
military-to-civilian transition, and how can DOD, I know that 
you have talked about that to some extent, leverage their 
reliance on contractors, this experience, to help DOS actually 
put in place the minimum amount of acquisition capability it 
needs to support its diplomatic mission in Iraq and to keep 
people secure?
    How is this going to work with the two of you together? Are 
you going to give them people? Are we going to get people from 
other agencies? How is this going to work?
    Mr. Kendall. I could get you a longer answer for the 
record.
    [The information referred to follows:]

    The Department of Defense (DOD) has provided Department of State 
(DOS) all the necessary equipment, supplies, and contracting support 
requested for DOS to successfully perform its diplomatic mission. In 
addition to more than 2,300 items of military equipment and 52,000 
items of non-military equipment that was transferred, sold, or loaned 
to DOS, DOD is contracting for base life support and core logistics 
services under the Army's Logistic Civil Augmentation Program (LOGCAP), 
equipment maintenance, food, fuel, and security. DOD contracting 
actions are performed on a reimbursable basis under the Economy Act. 
DOS, without assistance from DOD, is contracting for medical, site 
security, facilities operations, and maintenance services. The Defense 
Contract Management Agency and the Defense Contract Audit Agency 
provide administrative contract support and oversight of DOD 
administered contracts. DOS provides trained Contracting Officers 
Representatives that are required to meet DOD standards for all 
activities supported by DOD. DOD and DOS established a Senior Executive 
Steering Group (SESG) focused on coordinating and synchronizing the 
management and oversight of DOD support to DOS until DOS can develop 
its own contract oversight and management capabilities. The SESG is co-
chaired at the Deputy Assistant Secretary level.

    Mr. Kendall. But we have been working, I think it is an 
absolutely fantastic example of interagency cooperation, 
frankly. I think it is partly due to the fact that our military 
has put so much into Iraq and tried to achieve success there 
that we want to make sure that DOS is prepared as possible to 
take over and continue that part of the mission.
    But we have, in terms of providing equipment, partly excess 
equipment, partly under the Economy Act where they reimburse 
us, thousands of pieces of equipment, and we have helped them 
with the planning as they have tried to decide what they need 
and how they are going to use it.
    I mentioned the health contracting and pretty much all the 
support functions that they are going to need, analyzing their 
needs for things like materiel handling for aircraft because 
they are going to operate a small transport air arm. We have 
looked across the board. I think they have benefited enormously 
from the military's experience and the commitment we made to 
try to help them make this a success.
    I hope that we have done so in a way that will make this 
transition smooth, and I think we have. We really, really want 
to see them succeed in their mission.
    Senator Ayotte. Just to get to Mr. Zakheim's fundamental, 
but very important question, which he raised in answering my 
initial questions about Iraq. How is DOS going to deal with 
this risk question, which seems to be the fundamental important 
question? Because there is still a lot of militant activity 
there that----
    Mr. Kendall. Yes, I think that is a question--I think you 
have to ask DOS that question. I don't want to speak for them, 
but I think they believe that with U.S. forces withdrawn, with 
the current security environment that is there, that they can 
manage the situations they will have.
    They will have physical security contractors on each of 
their sites, significant number of them. They will have sense 
and warn sensors to alert them to any incoming improvised 
rocket munitions and so on, so they can take cover. They will 
have physical protection. They are putting overhead protection 
over all their living spaces where people will have their 
quarters, as well as some of the common spaces.
    They believe that that will be adequate. Beyond that, I 
think I would have to defer to DOS to answer the question.
    Senator Ayotte. I just want to ask the basic question. 
Isn't it riskier to have contractors undertake this kind of 
security than our military?
    Mr. Kendall. It is a mission that contractors----
    Senator Ayotte. You are talking about rocket launchers 
and----
    Mr. Kendall.--are performing the static security mission in 
a lot of sites today. They are doing it for DOS, and they are 
doing it for us. So the difference will be that U.S. forces 
will not be there to react if they are needed. That is a 
significant difference.
    Ms. Schinasi. Senator?
    General Bash. I would just add that as previously 
mentioned, we have been working with DOS on a biweekly basis 
for the past year and a half. Most of the contracts, a lot of 
them like LOGCAP IV that was mentioned and some of the DLA 
fuels contracts, have transitioned to DOS. So it is not like 
they are starting new contracts. A lot of them are moving over.
    DCMA has 52 people dedicated to help DOS with oversight on 
all of those contracts. As was mentioned, the equipment, the 
detail has gone down to, at this point, 2,326 items. All the 
way to Caiman mine-resistant ambush protected vehicles, which 
are top of the line, to provide them security to some of the 
warning systems that were previously mentioned.
    DOD has also taken action to train a lot of the DOS 
contract representatives to our DOD standards. So, we continue 
to work with them, but I think the key point that Mr. Kendall 
made was based on today's security environment, is the 
transition occurring? If that environment were to change to the 
worse, obviously, then there will be obviously more risk.
    Ms. Schinasi. Senator Ayotte, if I could just add two 
things?
    Senator Ayotte. Sure.
    Ms. Schinasi. One, I believe that DOS could not do this 
without the contract support that DOD is providing. But the 
question, I think, more basically for the U.S. Government is, 
is this the position we want to be going forward, right?
    That is something--we are in the position we are because 
nobody thought about this ahead of time. So there really is no 
option but to carry on the way we are carrying on now. But the 
more basic question, as I said, is, is that the way you want to 
be, to have the U.S. Government operate going forward?
    The second thing I would add, on your issue of risk, it is 
not clear yet that the civilian PSCs do not come under the 
military justice system, and it is still not clear what system 
they come under for anything that would happen. Hopefully not, 
but that anything would happen.
    Senator Ayotte. So there are still questions surrounding 
accountability and liability?
    Mr. Zakheim. Yes.
    Senator Ayotte. That is significant?
    Mr. Zakheim. I would only say this. When you are talking 
about the kinds of systems you just heard that are going to be 
transferred to contractors, how can you say there is no risk or 
even minimal risk? I would call it significant risk.
    Senator Ayotte. I have to agree. I think there is huge risk 
with this strategy and what we are going to try to undertake in 
Iraq. I appreciate all of your being here today and your 
important work that you are doing, that you have done in this 
commission, and we are going to continue to rely and seek your 
advice as we try to implement the recommendations of the report 
going forward.
    I would thank you, General Bash, for the important work 
that you are doing and for your leadership, and Secretary 
Kendall as well. This has been a terrific panel.
    I would just add that I remain deeply concerned that we are 
going to ask these civilians to undertake what is a military 
function, and that to the detriment of the security of our DOS 
personnel that will be there and others.
    So thank you very much.
    Senator Blumenthal. Madam Chairman, may I ask just a couple 
questions?
    Senator McCaskill. Yes, sure.
    Senator Blumenthal. Very quickly, Senator Ayotte has asked 
a series of questions that are very much on our minds and that 
a number of us have expressed privately, if not publicly. I, 
too, am a lawyer, by the way, and I have told a lot of 
witnesses don't give your opinions, just give the facts, right?
    But we need your opinions, and we need your perspectives on 
these very critical issues because you are involved in 
providing critical support and training to a group that will be 
at risk. There is no question in my mind, as you and members of 
the panel have stated, that there are serious risks to these 
individuals and to the United States, insofar as they are our 
agents. Not just legally, but morally, they are our agents in 
the same way--not exactly, but in the same way a member of the 
U.S. military would be.
    So, the jurisdiction of this committee may not be exactly, 
just as you are not directly responsible, but you will be 
involved in supervising and training and providing the support, 
as is appropriate. I would hope that we can continue to ask 
questions and rely on your opinions, as well as your factual 
knowledge on this issue.
    So, again, I thank you. It is not a question, but it is an 
invitation in the future for additional comment.
    Thank you, Madam Chairman.
    Senator McCaskill. Thank you, Senator Blumenthal.
    I have a number of other questions that get into some 
details on PSCs, get into some details on additional staffing 
and resources, get into some additional questions on IGs and 
GAO and some of those issues. I am going to give those all to 
you for the record.
    To the extent that we will copy you all the questions also, 
if there are any comments that you would like to make, most of 
these are about the implementation of the recommendations. I 
think what has been so valuable about today is the fact that 
you are both here.
    This is fairly unusual. I want to particularly commend 
General Bash and Secretary Kendall because there have been 
times that people in your jobs have refused to appear on panels 
with witnesses that are not members of DOD or the Active 
military. The fact that you are here in this way, making 
yourself accountable to members of this commission that have 
done, I think, yeoman's work in trying to help us improve an 
area that is vitally important to our military, to our national 
security, and to the taxpayers of this Nation. I appreciate it.
    Bear with me in terms of the number of questions I have. It 
is probably much easier than me staying here another hour and a 
half. Although I would be tempted, but I actually have another 
general I am supposed to meet with at 5 p.m., and I have to go 
upstairs and make sure I have all my really hard questions 
ready for him at 5 p.m. [Laughter.]
    So, we will adjourn the hearing at this point in time, and 
know that this will not be the last of the hearings we will 
have on this.
    One of the places I want to drill down, just so you can 
begin to prepare, is this issue of prime versus subcontractors. 
I think it is a lack of transparency. I know that if Harry 
Truman were sitting here, he would want to know who was making 
all the money.
    Clearly, it is not the third country nationals that are 
living in dormitories. They are not making the money. Many of 
them are working, as you all know, for pennies compared to what 
they would work for on a contract if they were Stateside.
    So, where is this money being made, and how necessary are 
these primes? How much are we paying the middle men? Do we need 
that many middle men? Can we not get the expertise that we can 
start being more task specific and compete these contracts for 
the tasks, rather than having these overarching contracts that 
have a tendency to get renewed without the kind of oversight 
that I think most of us would want?
    So we will save that for another day. It may be in this 
hearing. It may be in the Contracting Oversight Committee. But 
I do think that is an area that we haven't really drilled down 
enough in yet, and I would be anxious to get any comments from 
you all. I will pose those questions as part of the questions 
for the records for this hearing about how much do we know 
about primes versus subs in terms of where the profit is 
actually landing?
    Thank you all very much for being here today. Thank you so 
much to Senator Ayotte. She is a terrific, terrific addition to 
the Senate----
    Senator Ayotte. Thank you.
    Senator McCaskill.--in terms of oversight on contracting, 
and I am glad to have some company. [Laughter.]
    It is terrific. Senator Blumenthal, it is terrific to have 
you here. You stayed, and you actually appeared interested in 
all of these little arcane details, which is also terrific. 
[Laughter.]
    So thank you all very much. This hearing is adjourned.
    [Questions for the record with answers supplied follow:]
            Questions Submitted by Senator Claire McCaskill
                     contingency contracting cadre
    1. Senator McCaskill. Secretary Kendall and Lieutenant General 
Bash, the Commission on Wartime Contracting (CWC) recommends the 
establishment of a contingency contracting cadre and increased staffing 
and resources for all aspects of contingency contracting. In response 
to questions from Senator Levin, the CWC has indicated that these 
recommendations would best be accomplished through legislation. 
However, this committee has already enacted legislation requiring the 
Department of Defense (DOD) to identify a ``deployable cadre of 
experts, with the appropriate tools and authority'' to carry out 
contingency contracting (section 854 of the National Defense 
Authorization Act (NDAA) for Fiscal Year 2007); and an acquisition 
workforce development fund to provide significantly increased resources 
for DOD contracting (section 852 of the NDAA for Fiscal Year 2008). 
Does DOD believe that it has already implemented the CWC's 
recommendations to develop a contingency contracting cadre and increase 
the staffing and resources available for contingency contracting?
    Mr. Kendall. Yes, we believe that we have implemented and will 
continue to improve upon our contingency contracting cadre as well as 
staffing and resources for contingency contracting. Section 854 of the 
John Warner NDAA for Fiscal Year 2007 required the Department to 
``develop joint policies for requirements definition, contingency 
program management, and contingency contracting during combat 
operations and post-conflict operations.'' On October 17, 2008, the 
Joint Staff, J4, published Joint Publication 4-10, ``Operational 
Contract Support (OCS),'' to include doctrine for planning, conducting, 
and assessing OCS integration and contractor management functions in 
support of joint operations. An update to this doctrine is currently 
underway. The Department's Joint Contingency Acquisition Support Office 
(JCASO) has the responsibility to perform program management of OCS 
policy and doctrine as well as operational synchronization of theater-
related contracting support planning efforts.
    In addition, we have a contingency contracting cadre. Specifically, 
the Army's Expeditionary Contracting Command (ECC) headquarters reached 
Full-Operational Capability on October 8, 2009. The ECC has six active 
Contracting Support Brigades (CSBs). These CSBs are geographically 
aligned in order to provide responsive operational contracting support 
to the Army Service Component Commands (ASCCs) and provide the Army 
with greater flexibility to place contracting teams into areas to 
support Joint Force operations. This organizational alignment has 
proven effective in assisting the ASCCs in developing and synchronizing 
contracting support integration plans. The ECC is scheduled to stand up 
a seventh CSB in support of the U.S. African Command. In addition to 
training and equipping contingency contracting officers, the ECC has 
engaged the brigades deploying to Afghanistan and Iraq to provide 
onsite training on Contracting Officer's Representative (COR) 
responsibilities in a contingency operation, field ordering officer 
training, and Commander's Emergency Response Program (CERP) project 
office training.
    DOD has been increasing the capacity of the acquisition workforce 
since 2009 as part of a deliberate DOD-wide initiative to rebuild the 
acquisition workforce. On April 6, 2009, the Secretary of Defense gave 
direction to grow and in-source the acquisition workforce. By fiscal 
year 2015, the Army contracting civilian workforce is on track to grow 
by more than 1,600 new positions. This growth has been facilitated by 
section 852 of the NDAA for Fiscal Year 2008, which provided funding to 
hire acquisition personnel while permanent positions are resourced. 
Section 852 has been utilized to hire 352 Army civilian contracting 
interns to date, with hundreds more planned over the next 3 years. 
Section 852 provided critical funds to help reconstitute the 
acquisition workforce.
    General Bash. Section 854 of the NDAA for Fiscal Year 2007 and 
section 852 of the NDAA for Fiscal Year 2009 provide the framework to 
develop a contingency contracting cadre and increased staffing and 
resources for all aspects of contingency contracting. DOD has charted a 
course and developed a strategy to meet the intent of the respective 
NDAA language. That said, development of the level of expertise needed 
to perform effective contingency contracting doesn't happen 
immediately. It requires recruitment, training, doctrine, and policy to 
fully integrate contingency contracting into our operational construct. 
We are making progress. DOD created and is in the process of filling 
9,000 new acquisition workforce positions, thus strengthening the 
contracting workforce and contributing to rebuilding the Defense 
Contract Management and Defense Contract Audit Agencies. DOD has 
created 10 new general officer billets, 3 of which have been used to 
deploy senior leaders into theater. The Army ECC has been established 
and provided Contract Support Battalions in recent contingency 
operations. The Chief of Staff of the Army recently ordered his Service 
to grow the contingency contracting workforce by an additional 315 
people by 2014. Finally, the Department has created the JCASO within 
the Defense Logistics Agency to provide an OCS capability to enable 
combatant commands' and/or Joint Task Forces' ability to conduct 
contract support integration and contractor management.

               insufficient staffing in auditing agencies
    2. Senator McCaskill. Secretary Kendall, a recent report by the 
Government Accountability Office found that Inspectors General, on 
average, save taxpayers approximately $18 for every dollar invested. 
Combined potential savings by Inspectors General was reported as 
approximately $43 billion. The Defense Contract Audit Agency (DCAA) 
reported a return of over $5 for every dollar invested with over $2.9 
billion in savings. Yet these auditors and investigators are 
chronically understaffed and underfunded.
    A recent report by Army officials found that DCAA staff would 
require a workforce exceeding 6,250 personnel by 2015 to accomplish its 
mission. This is over 1,000 more personnel than DCAA has now, even with 
the 500 additional auditors hired in the past 2 years. Without this 
staff, the backlog of unaudited actions, currently over $558 billion 
according to the CWC, is projected to exceed $1 trillion. This will 
cost DOD and our Government dearly. Where will DOD most need to 
concentrate its resources to effectively conduct oversight?
    Mr. Kendall. The DCAA is working closely with Department leadership 
to provide additional resources to the audit agency. DCAA has added 
nearly 700 people in the last 3 years. At the end of fiscal year 2011, 
DCAA had about 4,900 staff on-board. This equates to more than a 16-
percent increase in DCAA staffing over a 3-year period.
    The agency has made significant strides in recruiting, training, 
and keeping its audit staff (attrition is at the lowest level in 
several years). DCAA just completed a major training initiative that 
they believe will improve quality and enhance productivity. As an 
example, DCAA believes elapsed days for proposal reviews has reached a 
plateau and are trending downward. More risk-based procedures are 
increasing the net saving found from DCAA audits and finding a higher 
percentage of questionable transactions in the costs audited as shown 
in the two attached charts.
       
    
    
      
    3. Senator McCaskill. Secretary Kendall, does DOD have a sufficient 
number of investigators?
    Mr. Kendall. The Defense Criminal Investigative Service (DCIS), 
which serves as the criminal investigative arm of the DOD Office of 
Inspector General, possesses resources required to effectively 
investigate significant allegations of fraud, waste, and abuse 
impacting DOD programs and operations. Noteworthy is the fact that DCIS 
is but one of several DOD investigative agencies tasked with 
investigating fraud that impacts DOD. This being the case, criminal 
allegations involving a particular Military Service branch and/or 
allegations involving potential administrative violations are often 
referred to other investigative agencies such as the Department of 
Justice.
    Each year, senior DCIS leaders re-assess organizational priorities 
to ensure resources are devoted to critical investigations. Although 
DCIS is currently staffed to provide vital investigative services, 
additional resources would further enhance the organization's ability 
to identify and pursue more financial fraud schemes that deprive DOD of 
critically needed funds that would otherwise be utilized to finance 
national defense initiatives.

    4. Senator McCaskill. Secretary Kendall, is there a sufficient 
number of quality assurance personnel at the Defense Contract 
Management Agency (DCMA)?
    Mr. Kendall. Quality Assurance (QA) manning in DCMA is not optimal, 
but it is acceptable. Through planned growth enabled by the Defense 
Acquisition Workforce Development Fund, DCMA has plans to continue 
growing its QA workforce along with other critical skills in the 
Agency. As always, DCMA mitigates any manning shortfall through risk-
based strategies, ensuring that the highest QA risk are addressed. In 
addition, process improvement efforts aimed at increased efficiency are 
continuous.

    5. Senator McCaskill. Secretary Kendall, is there a sufficient 
number of contracting officers and CORs?
    Mr. Kendall. For current operations in Iraq and Afghanistan, 
manning for contracting officers is at 100 percent. The DCMA is 
sufficiently staffed with administrative contracting officers to 
effectively execute the current workload. However, there are shortfalls 
in the number of CORs provided by the requiring activities and 
appointed by DCMA. Nonetheless, the appointed CORs have been able to 
accomplish 85 percent of the required audits in Afghanistan and 92 
percent of the required audits in Iraq. Identified shortfalls in CORs 
are aggressively worked between DCMA and the requiring activity 
responsible for providing the staffing.

                 government oversight of subcontractors
    6. Senator McCaskill. Secretary Kendall, in its final Report to 
Congress, the CWC found numerous instances where the Government failed 
to exercise sufficient oversight over subcontractors. The CWC also 
raised concern about the Government's visibility into the extent to 
which contractors had subcontracted work through multiple tiers on DOD 
contracts. The CWC found that the Government has failed to exercise 
sufficient authority to:

         review or hold contractors accountable for examining 
        subcontractor records;
         develop a consistent approach to vetting contractors 
        and subcontractors; or
         utilize suspension and debarment authority over 
        subcontractors.

    The CWC highlighted instances where Afghan subcontractors were 
believed to have passed payments to insurgents or warlords and cases 
where third-country nationals employed by subcontractors under 
representations of certain working conditions and pay were rerouted and 
potentially exploited. The CWC recommended that the Government:

         Require smaller and more competitive subcontract 
        requirements for large support contracts;
         Address the risks of trafficking in persons by 
        subcontractors in contingencies by requiring reforms to prime 
        contract awards and performance evaluations; and
         Increase use of tools to protect the Government's 
        interests, including strengthening the ability for suspension 
        and debarment actions in contingencies.

    Mr. Kendall. DOD agrees with the CWC that better oversight of both 
prime and subcontractor performance in contingency theater is 
necessary. The Department takes the oversight of these contracts very 
seriously. Multiple DOD agencies have engaged in aggressive reviews and 
oversight, uncovering instances of fraud, waste, and abuse--as well as 
recommending corrective actions--and recovering more than $4 billion. 
The Department has taken significant steps to address deficiencies 
identified by the entire audit community in many areas, specifically by 
increasing the number of qualified and skilled CORs in the contingency 
area of operations and increasing the contract administration performed 
by the DCMA. Many of these actions are continuing to be refined and 
improved. Several U.S. Central Command (CENTCOM) programs have been 
recently initiated to combat corruption and fraud by all contractors 
through employing procedures to identify questionable vendor conduct; 
training, mentoring, and assisting local national vendors on how to be 
responsible business partners with the United States; and vetting non-
U.S. prime and subcontractors before awarding contracts to ensure the 
contractors do not have a history of fraud or are otherwise not 
eligible for contract.
    The Department is working to ensure taxpayer dollars do not empower 
the wrong people or undermine the U.S. Government and international 
community efforts in Afghanistan. To this end, the Chairman of the 
Joint Chiefs of Staff created Task Force 2010 to help commanders in 
Afghanistan better understand those persons and entities with which the 
U.S. Government contracts. With tools from the intelligence, law 
enforcement, auditing, and forensic communities at their disposal, 
commanders can gain visibility into any linkages with criminal networks 
or insurgents, and then deny these persons and entities the opportunity 
to benefit further from contracting funds. Anti-corruption efforts can 
only be successfully accomplished through the synchronized actions of 
the larger interagency and international community, so Task Force 2010 
is organized under Combined Joint Interagency Task Force Shafafiyat to 
provide unity of effort.
    In less than a year since standing up, Task Force 2010 assessed 
more than 990 U.S., international, and Afghan companies; analyzed more 
than 19,000 bank transactions; and reviewed more than 1,950 contracts, 
contract modifications, and cooperative agreements valued cumulatively 
at $30.7 billion. Of the contract vehicles reviewed, 11 percent are 
believed to have had connections to or been influenced by power-
brokers, criminal networks, or insurgents (some minor, some 
significant). DOD focus on these transparency task forces enabled us to 
provide recommendations to commanders and contracting activities so 
they could terminate the contract or take action to mitigate fiscal and 
force protection risk.
    The recently passed NDAA for Fiscal Year 2012 includes new 
authorities that will help us protect the government's interest and 
strengthen our ability to take appropriate suspension and debarment 
actions in contingency contracting:

         Section 841 titled: ``Prohibition on contracting with 
        the enemy in the United States Central Command Theater of 
        Operations,'' providing contracting officers the authority to 
        restrict the award, terminate for default, or void in whole or 
        in part of any DOD contracts, grants, or cooperative agreements 
        upon a written determination by the Head of Contracting 
        Activity that funds through DOD contract, grant, or cooperative 
        agreement directly or indirectly support the enemy. It also 
        mandates DOD include a clause in each contract, grant, and 
        cooperative agreement awarded on or after the date of 
        enactment.
         Section 842 titled: ``Additional access to contractor 
        and subcontractor records in the CENTCOM theater of 
        operations,'' providing contracting officers the authority to 
        examine any records of the contractor or subcontractor to 
        ensure that funds through the DOD contract, grant, or 
        cooperative agreement are not subject to extortion or 
        corruption and do not support the enemy, directly or 
        indirectly.

    The Department and all in-theater commanders and their supporting 
contracting organizations have developed and actively promulgated a no-
nonsense, zero-tolerance policy concerning trafficking in persons. 
There is a program office within the office of the Under Secretary for 
Personnel and Readiness known as the Combating Trafficking in Persons 
(CTIP) Office that has overall responsibility for the DOD trafficking 
in persons (TIP) program. The acquisition community is also very 
actively involved in implementing several initiatives to combat this 
abhorrent practice, including creating contract clauses that must be 
included in every prime and subcontract awarded in Iraq and Afghanistan 
and following up on that and ensuring implementation of the language 
with an examination checklist to be used by those who oversee contract 
activities (such as CORs and quality assurance representatives (QAR)). 
For example:

         Communicating CTIP Policy to Contractors. DOD mandates 
        compliance with CTIPs in contract clauses. It increases 
        awareness of this requirement through a brochure. During 
        contract management, the Government uses checklists to ensure 
        compliance with these mandates.
         FAR 22.17: Overarching Federal policy that applies to 
        all acquisitions. Prescribes policy for implementing 22 U.S.C. 
        7104 ("Prevention of trafficking"). Requires Government 
        contracts to prohibit contractors, contractor employees, 
        subcontractors, and subcontractor employees from engaging in 
        trafficking in persons during the period of performance of the 
        contract; implemented by Federal Acquisition Regulation Clause 
        52.222-50.
         DFARS PGI 222.17: Provides guidance for DOD 
        Contracting Officers with references to related DOD Policies 
        and Training. Requires Quality Assurance Surveillance Plans 
        cover how CORs will monitor contractor TIP compliance.
         C-JTSCC Clause 952.222-0001: Provides detailed 
        requirements that protect contractor/subcontractor employees in 
        Iraq and Afghanistan from exploitation and abuse. This includes 
        guidance related to holding of passports, use of recruiting 
        firms, adequate living conditions, and checks of life support 
        areas and compliance with local laws on transit, exit, and 
        entry. This clause is required in all contracts executing in 
        Iraq and Afghanistan.

    The large Logistics Civil Augmentation Program contracts are 
audited every 2 months for compliance with CTIP requirements; other 
contracts are audited monthly. Defense Procurement and Acquisition 
Policy has created a brochure on this topic and shipped printed copies 
to Iraq and Afghanistan as well as posted it on the CENTCOM contracting 
Web page. To ensure that potentially affected employees are made aware 
of this program and of their right to be free of abusive treatment, 
this pocket-sized reference card has been translated into seven 
languages (the ones most frequently found among third country national 
employees) for distribution in those areas of operation. In short, we 
are actively and diligently making sure such practices are not found in 
any of our contracting activities. We will be relentless in referring 
any suspected incident to the proper legal authorities and will 
actively and promptly take all appropriate actions against any firms or 
individuals found to be engaged in such practices.

             does dod agree with the cwc's recommendations?
    7. Senator McCaskill. Secretary Kendall, has DOD taken any steps to 
implement changes addressing the CWC's findings regarding insufficient 
oversight of subcontractors? If so, please identify what steps DOD has 
taken, what actions have been implemented, and what actions remain to 
be implemented.
    Mr. Kendall. DOD takes the oversight of contracts in contingency 
operations very seriously. Multiple DOD agencies have engaged in 
aggressive reviews and oversight, uncovering numerous instances of 
fraud, waste, and abuse. DOD has taken significant steps over the years 
to address the number deficiencies identified by the audit community in 
many areas, specifically by increasing the number and skill of CORs and 
the coverage of contract administration functions performed by the 
DCMA. The DCMA has filled 90 percent of its COR positions for 
Afghanistan and 100 percent for Iraq. The DCMA has also requested 
CENTCOM increase the manning authorization of contract oversight 
personnel by 80 personnel to support increased responsibilities in 
Afghanistan. The following is a summary of recent significant 
improvements to subcontractor oversight initiated by DOD that will help 
ensure our taxpayers' dollars are being spent wisely and managed 
appropriately in contingency theater:

         Placing additional instructions in the Defense Federal 
        Acquisition Regulation Supplement (DFARS) and CENTCOM 
        acquisition instruction, directing both prime contractors and 
        all subcontractors at all tiers, in compliance with Federal and 
        DOD Trafficking in Persons requirements.
         CENTCOM has implemented a vendor vetting policy in 
        their acquisition instruction for all non-U.S. vendors and 
        their subcontractors operating in Iraq and Afghanistan. Under 
        this policy, non-U.S. vendors are required to certify that they 
        and their subcontractors are not associated with the enemy of 
        U.S. or coalition forces.
         CENTCOM has implemented additional host nation 
        contractor and subcontracting requirements where all 
        subcontract agreements with host nation firms must be approved 
        in advance by the contracting officer.
         Section 842 of the NDAA for Fiscal Year 2012, titled: 
        ``Prohibition on contracting with the enemy in the CENTCOM 
        theater of operations,'' provides contracting officers the 
        authority to restrict the award, terminate for default, or void 
        in whole or in part of any DOD contract, grant, or cooperative 
        agreement upon a written determination by the Head of 
        Contracting Agency that funds through DOD contract, grant, or 
        cooperative agreement directly or indirectly support the enemy. 
        It also mandates that DOD include a clause in contracts, 
        grants, and cooperative agreements awarded on or after the date 
        of this act enactment by modification.

    8. Senator McCaskill. Secretary Kendall, what steps has DOD taken 
to ensure that prime contractors are holding their subcontractors 
responsible?
    Mr. Kendall. The following is a summary of other significant 
improvements to subcontractor oversight initiated by DOD which will 
help ensure that prime contractors are holding their subcontractors 
responsible in contingency theater:

         Placing additional instructions in the DFARS and 
        CENTCOM acquisition instruction, directing both prime 
        contractors and all subcontractors at all tiers, compliance 
        with Federal and DOD Trafficking in Persons requirements.
         CENTCOM has implemented a vendor vetting policy in 
        their acquisition instruction for all non-U.S. vendors and 
        their subcontractors operating in Iraq and Afghanistan. Under 
        this policy, non-U.S. vendors are required to certify that they 
        and their subcontractors are not associated with the enemy of 
        the U.S. or coalition forces.
         CENTCOM has implemented additional host nation 
        contractor and subcontracting requirements where all 
        subcontract agreements with host nation firms must be approved 
        in advance by the contracting officer.
         Section 842 of the NDAA for Fiscal Year 2012, titled: 
        ``Prohibition on contracting with the enemy in the CENTCOM 
        theater of operations,'' provides contracting officers the 
        authority to restrict the award, terminate for default, or void 
        in whole or in part of any DOD contract, grant, or cooperative 
        agreement upon a written determination by the HCA that funds 
        through DOD contract, grant, or cooperative agreement directly 
        or indirectly support the enemy. It also mandates DOD include a 
        clause in contracts, grants, and cooperative agreements awarded 
        on or after the date of this act enactment by modification.

    Additionally, DOD identified a number of key COR responsibilities 
in its December 2010 COR handbook to improve prime contractor 
supervision of subcontractors. CORs are key to ensuring satisfactory 
subcontractor performance by observing the prime contractor's 
subcontract surveillance processes and reporting inadequate 
surveillance to the contracting officer who will report to the prime 
contractor. If in the course of observing the performance of the prime 
contractor, it is determined that the subcontractor has violated key 
terms of the contract, U.S. law, regulation, or policy, the COR can 
recommend to the contracting officer that the prime take corrective 
action or terminate the subcontract. Additionally, CORs monitor 
complaints from subcontractors and make recommendations to the 
contracting officer that the prime take appropriate action when 
necessary. DOD has also taken steps to standardize COR qualification 
requirements. Though contract oversight and surveillance is a shared 
responsibility of both the contracting and requiring activities, the 
contracting officer ultimately will ensure appropriate contractor 
oversight and quality assurance is applied to all contracts. 
Contracting officers are required to appoint certified CORs in writing 
before contract performance begins, and requiring activities are 
required to ensure that appropriate training and tracking of COR 
personnel is accomplished. Contracting officers will notify requiring 
activities of COR requirements in sufficient time to ensure 
appropriately trained CORs are present for duty before contract 
performance begins. Requiring activities will address the COR's 
performance of the designated functions in the annual performance 
appraisal.

    9. Senator McCaskill. Secretary Kendall, how is DOD tracking 
subcontractors and auditing their costs?
    Mr. Kendall. One of the key duties of a COR is to ensure 
satisfactory subcontractor performance by observing the prime 
contractor's subcontract surveillance processes and reporting 
inadequate surveillance to the contracting officer. If, in the course 
of observing the performance of the prime contractor, it is determined 
that the subcontractor has violated the terms of the contract, U.S. 
law, regulation, or policy, the COR can recommend to the contracting 
officer that the prime contractor take corrective action or terminate 
the subcontract. DCAA audits DOD contracts and provides accounting and 
financial advisory services regarding contracts and subcontracts to DOD 
components responsible for procurement and contract administration. 
These services are provided in connection with the negotiation and 
administration of contracts and subcontracts. DCAA performs these 
functions at the request of the contracting activity and the DCMA.

    10. Senator McCaskill. Secretary Kendall, I have long been 
concerned about a truly heartbreaking incident in Iraq where the 
negligence of one of our foreign contractors killed one of our 
soldiers. When the soldier's family sued, the contractor was able to 
avoid responsibility by successfully asserting that the U.S. courts 
lacked jurisdiction. The company was then awarded another DOD contract. 
Several years ago, I introduced a bill--the Lieutenant Colonel Dominic 
`Rocky' Baragona Justice for American Heroes Harmed by Contractors 
Act--which would require contractors to consent to jurisdiction in the 
U.S. courts as a condition for doing business with us. The CWC has 
endorsed this approach, recommending that we ``make consent to U.S. 
civil jurisdiction a condition of contract award.'' Why should we 
continue to do business with contractors who avoid legal responsibility 
for their actions in carrying out a contract?
    Mr. Kendall. DOD does not condone doing business with companies 
that are not accountable for their actions and only awards contracts to 
contractors that are determined to be responsible and can fulfill their 
contractual obligations. Criminal, civil, contractual, and 
administrative actions are taken to protect DOD interests and to deter 
future occurrences.
    The policy in the Federal Acquisition Regulation subpart 9.4 states 
that ``agencies shall solicit offers from, award contracts to, and 
consent to subcontracts with responsible contractors only.'' Regardless 
of any particular law that would subject contractors to U.S. 
jurisdiction, the U.S. Government still has the ability to take action 
against a contractor that is determined not to be responsible.

                          foreign contractors
    11. Senator McCaskill. Secretary Kendall, in general, should 
foreign contractors be subject to the same liabilities as U.S. 
contractors when performing work for the U.S. Government and funded by 
U.S. taxpayers, in cases where the contractor negligently kills or 
maims a U.S. citizen during performance of a contract? If not, in what 
cases should foreign contractors not be subject to the same 
liabilities?
    Mr. Kendall. All contractors, including foreign contractors, that 
perform under U.S. Government contracts should be held legally 
accountable for wrongdoing in connection with their performance that 
results in injuries to U.S. military, civilian, and Government 
contractor personnel. The manner and forums liability may be imposed on 
a foreign contractor performing under a U.S. Government contract 
overseas generally is governed by applicable U.S., host country, and 
third country national laws.

     recommendation for a new assistant secretary for contingency 
                              contracting
    12. Senator McCaskill. Secretary Kendall, the CWC recommended a 
series of organizational changes designed to heighten the 
responsibility for contracting in contingencies, including the 
establishment of a new Assistant Secretary for Contingency Contracting. 
During the hearing, Commissioner Schinasi stated that contracting 
within DOD is treated as a subset of acquisition, but that the decision 
to contract involves a policy decision that justified elevating 
contracting to a higher level of management. Do you agree that the 
decision of whether to contract involves a policy decision?
    Mr. Kendall. The decision to utilize contract support in 
contingency operations is based on projected mission requirements and 
informed by our Combatant Commanders' needs to maintain necessary 
operational readiness while minimizing and mitigating any risks to the 
mission. Decisions on sourcing workload to either military personnel, 
Government civilians, or contract support must follow workforce mix and 
risk guidance in DOD Instruction 1100.22, ``Policy and Procedures for 
Determining Workforce Mix,'' and, when appropriate, cost considerations 
in accordance with Directive Type Memorandum 09-007, ``Estimating and 
Comparing the Full Costs of Civilian and Military Manpower and Contract 
Support.'' As appropriate, applicable DOD policies are being updated to 
ensure consistency with the recently issued Office of Federal 
Procurement Policy Letter 11-01, ``Performance of Inherently 
Governmental and Critical Functions.'' Workforce mix decisions require 
collaboration between defense officials throughout the Department and 
entail decisions on a number of issues, including: readiness and 
management needs, acceptable operational risk, capacity and 
capabilities of potentially deployable civilian labor, inherently 
governmental nature of the workload, and cost of performance.

    13. Senator McCaskill. Secretary Kendall, can you explain why DOD 
opposes the CWC's recommendation to establish a new assistant secretary 
position in your office with responsibility for contingency 
contracting?
    Mr. Kendall. The Office of the Under Secretary of Defense for 
Acquisition, Technology and Logistics (OUSD(AT&L)) has met the intent 
of this recommendation by establishing the Office of the Deputy 
Assistant Secretary of Defense for Program Support (ODASD(PS)). This 
career Senior Executive Service-level position is aligned under the 
Assistant Secretary of Defense for Logistics and Materiel Readiness 
(ASD(L&MR)). Within OUSD(AT&L), oversight and contingency contracting 
responsibilities are shared between the Office for Defense Procurement 
and Acquisition Policy (DPAP) and ODASD(PS). These organizations 
provide unique subject matter expertise and oversight of contingency 
contracting. In addition, contingency contracting responsibilities are 
aligned across other OSD organizations (Policy, Comptroller, and 
Personnel and Readiness) and the Joint Staff. Together, these 
organizations are fully engaged with the Contingency Contracting Office 
under DPAP and ODASD(PS). The Department believes oversight of 
contingency contracting is best achieved by leveraging resources of the 
entire DOD organization.

      under secretary of defense for policy's role in contracting
    14. Senator McCaskill. Secretary Kendall, in a January 2011 
memorandum, Secretary Gates directed the Under Secretary of Defense for 
Policy (USD(P)), along with your office, and several other offices, 
including the Chairman of the Joint Chiefs of Staff, to inventory, 
review, coordinate, and provide guidance on a list of factors to 
determine the appropriate level of contractor dependence by the 
military. Why shouldn't the USD(P) be given a greater role and 
responsibility for planning how and whether to use contractors for 
certain functions in contingencies?
    Mr. Kendall. The January 2011 Secretary of Defense Memorandum, 
``Strategic and Operational Planning for OCS and Workforce Mix,'' 
appropriately delegates responsibilities to the Military Departments, 
the Chairman of the Joint Chiefs of Staff, the Under Secretary of 
Defense for Acquisition, Technology, and Logistics, the Under Secretary 
of Defense for Policy, and the Under Secretary of Defense for Personnel 
and Readiness. The purpose of the memorandum is to focus attention on 
OCS as an emergent capability that can mitigate risks at the strategic 
and operational levels. The memorandum already authorizes the Under 
Secretary of Defense for Policy to recommend capabilities that may need 
to be brought back within the Active or Reserve organic military force 
inventory, or to be provided by the Civilian Expeditionary Workforce, 
evaluating the questions of how to and whether to use contractors.

                      private security contractors
    15. Senator McCaskill. Lieutenant General Bash, the CWC found that 
the extensive use of private security contractors (PSC) in Afghanistan 
raises concerns about potential civilian casualties, vulnerability to 
extortion by warlords and insurgents, and ``alienation of the local 
population that could undermine U.S. and allied political initiatives 
and increase sympathy for the Taliban.'' The CWC recommends that the 
use of private security contractors for convoy security in Afghanistan 
be ``phased out or at least sharply restricted'' and that the use of 
such contractors for static security for bases be selectively phased 
out in the most at-risk positions, regions, and contexts. Do you agree 
with the CWC's assessment that the use of PSCs leave us vulnerable to 
civilian casualties, alienation of the local population, and extortion 
by local warlords and insurgents?
    General Bash. The proper and effective use of PSCs in time and 
place can eliminate or minimize the risk of civilian casualties, 
alienation of the local population, and extortion. Our commanders 
perform risk assessments to determine whether conditions and the 
environment warrant the use of PSCs. The CWC correctly stated private 
security contractors can be used in situations where it would be 
unsuitable to use military forces to provide what is essentially 
civilian protection rather than conduct combat functions. In general, 
there are circumstances when the use of PSCs is more appropriate than 
the use of organic military forces for protection. That said, U.S. 
Forces Afghanistan is working closely with the Government of the 
Islamic Republic of Afghanistan to transition from use of PSCs to 
reliance on the Afghan Public Protection Force. We completely support 
this effort and the mutual desire to phase out the use of PSCs in 
Afghanistan when appropriate and when the operational environment 
permits.

    16. Senator McCaskill. Lieutenant General Bash, do you agree with 
the CWC's view that U.S. military, Afghanistan National Army (ANA) 
units, and new Afghanistan government-sanctioned security providers 
provide a superior alternative to the use of PSCs in such 
circumstances?
    General Bash. With proper training, oversight, and leadership, 
Afghan military and Afghan Government-sanctioned security providers 
have the ability to perform PSC functions in support of our operational 
requirements. Whether these security providers constitute a superior 
alternative is dependent upon the level of training, reliability of 
personnel, skill, and knowledge of Afghan military commanders or 
government sanctioned providers, as well as the characteristics of the 
security service being provided.

    17. Senator McCaskill. Lieutenant General Bash, has DOD conducted a 
comprehensive risk assessment and examined the availability of 
alternatives to the use of PSCs in high-risk situations?
    General Bash. Joint doctrine provides commanders with risk 
considerations for private security contractors as well as other types 
of contractor support. The commander's risk assessment is an essential 
element in the military planning process. Operationally, this 
assessment is dependent on the mission, time available, friendly and 
enemy situation, the environment, and resources available. The 
commander and staff consider these factors to develop multiple courses 
of action to maximize the probability of success while minimizing the 
risk. These planning and risk reduction efforts extend beyond high risk 
missions, to include the use of local nationals as contracted employees 
and contractor vetting.
                                 ______
                                 
           Questions Submitted by Senator Richard Blumenthal
                           human trafficking
    18. Senator Blumenthal. Secretary Kendall, please provide the 
information that the CWC requested at its hearing on July 26, 2010, on 
the remedies DOD has used to combat human trafficking. In reading over 
the transcript of that CWC hearing, Commissioner Schinasi specifically 
asked the witnesses from DOD: ``if any companies have been suspended or 
debarred for [human trafficking], in particular?'' The witnesses, Ed 
Harrington, Deputy Assistant Secretary of the Army for Acquisition, 
Technology, and Logistics (AT&L), and Patrick J. Fitzgerald, Director 
of DCAA, both took that question for the record. At today's hearing, 
both Commissioner Zakheim and Commissioner Schinasi stated that this 
information was not provided to the CWC.
    Mr. Kendall. The suspension and debarment officials were queried 
recently about any human trafficking cases from the agencies. There 
were no suspensions or debarments related to cases of human trafficking 
by the Navy, Air Force, or Defense Logistics Agency. The Army had two 
cases where the issue was raised in the past 3 years. The first was not 
substantiated, so no suspension or debarment action was taken. The 
second was a contractor accused of harboring an illegal alien and 
extracting cheap labor under threat of exposure. In this case, both the 
principal and the entity were debarred. This case was Stateside and not 
in the contingency environment.

    19. Senator Blumenthal. Secretary Kendall, to assess your ongoing 
efforts to combat human trafficking, please provide the following 
information concerning human trafficking violations for fiscal year 
2011:

          A report of each instance contained in the Defense Incident-
        Based Reporting System (DIBRS) for human trafficking/commercial 
        sex acts (UCMJ Code 134-S3 NIBRS Code 50A) and for human 
        trafficking/involuntary servitude (UCMJ Code 1340S4 NIBRS Code 
        50B).
          A report of all known trafficking in persons cases provided 
        by the Secretaries of the Military Departments and the 
        information on all known indictments and convictions on all 
        known trafficking in persons cases provided from commanders of 
        the combatant commands as required by DOD Instruction 2200.01, 
        issued September 15, 2010.

    Mr. Kendall. The DIBRS was queried for Human Trafficking/Commercial 
Sex Acts ``134-S3'' and for Human Trafficking/Involuntary Servitude 
``134-S4.'' We did not find any incidents in the database that had 
either of the two offense codes as the reported offense.
    In January 2011, these two offense codes were incorporated into 
DIBRS, meaning that for this inquiry, 2011 data is partial. Also, some 
of the other offense codes reported might be related to human 
trafficking, such as sexual assault, rape, and extortion. There was one 
hit in the DIBRS database for the offense ``Prostitution Offense 
(Purchasing Prostitution)'' from the Marine Corps Military Police in 
May 2011.

    20. Senator Blumenthal. Secretary Kendall, it is my understanding 
that upon receipt of information that involves trafficking in persons 
by a contractor, the Under Secretary of AT&L works to ensure that the 
appropriate contracting officer implements a remedy. Please provide all 
known instances of such a remedy occurring during contingency 
operations in Iraq and Afghanistan, including the date of the 
occurrence, name of the company identified, the nature of the 
trafficking in persons incident, and the response by DOD.
    Mr. Kendall. The Department has not collected any substantiated, 
documented instances of trafficking in persons by a contractor. Prior 
to February 2011, detailed data on incidents that could potentially be 
``trafficking in persons'' was not collected. Activities that are often 
indicators, such as substandard housing issues, were dealt with during 
routine COR inspections and resolved. The Department is now, however, 
collecting indicative data.
    DCMA Afghanistan recently changed the way they do CTIP surveillance 
audits to enable greater focus as a specific area of oversight. Prior 
to February 2011, all service audit checklists had two CTIP 
surveillance validation questions embedded within the checklist. In 
February 2011, this procedure was changed to incorporate a more robust 
stand-alone CTIP surveillance checklist that is conducted by CORs as 
well as DCMA QARs and Government Trafficking in Persons Representatives 
as a separate audit. Logistics Civics Augmentation Program contracts 
are audited every 2 months and other contracts on a monthly basis. 
Additionally, the Defense Incident Base Reporting System (DIBRS) was 
updated with defense offense codes for trafficking in persons and 
received the first input in May 2011.
    Potential issues are identified, documented and investigated. When 
conducting CTIP audits, the COR's responsibilities include but are not 
limited to inspecting living conditions, treatment of employees, and 
passport abuse. For example, a contractor was written up for not 
providing the 50 square foot minimum per employee living area. But the 
government rescinded it, because the government was found to be at 
fault for denying the contractor's repeated requests for more space. 
The more frequent monitoring has, for the most part, identified 
potential issues for attention and remediation, before they reach a 
reportable level.

    21. Senator Blumenthal. Secretary Kendall, you stated that DOD 
requires a provision in its contracts that specifically prohibits human 
trafficking by Federal contractors. Please provide an assessment of 
what percentage of contracts in Iraq and Afghanistan that currently 
contain this clause.
    Mr. Kendall. The U.S. Central Command Joint Theater Support 
Contracting Command (C-JTSCC) conducted an assessment of all active C-
JTSCC contracts in Iraq and Afghanistan to determine the percentage of 
contracts that contain Federal Acquisition Regulation Clause 52.222-50, 
``Combating Trafficking in Persons,'' as required in all solicitations 
and contracts. Of 7,997 active contracts, 99.11 percent included the 
required clause. There were 71 contracts found to be noncompliant.
    Action was taken to immediately modify 37 contracts being performed 
in Afghanistan and add the required clause. The 34 contracts performed 
in Iraq found to be noncompliant have periods of performance ending 
December 31, 2011, or sooner. C-JTSCC is in the process of terminating 
all services in Iraq. No action will be taken to modify these contracts 
as they will expire on or before December 31, 2011. The contracts for 
performance in Iraq that will remain active past December 31, 2011, are 
compliant.

----------------------------------------------------------------------------------------------------------------
                                                                      Percent                         Percent
                                    # Contracts   # Noncompliant   Noncompliant     # Compliant      Compliant
----------------------------------------------------------------------------------------------------------------
Afghanistan.....................           5,423              37            0.68           5,386           99.32
Iraq............................           2,574              34            1.32           2,540           98.68
                                 -------------------------------------------------------------------------------
  Total.........................           7,997              84             .89           7,926           99.11
----------------------------------------------------------------------------------------------------------------


    22. Senator Blumenthal. Secretary Kendall, what is the 
justification for contracts not containing the clause with the 
prohibition on human trafficking?
    Mr. Kendall. There may be some contracts that predate the Federal 
Acquisition Regulation (FAR) Clause 52.222-50, ``Combating Trafficking 
in Persons.'' A recent review of contracts in the C-JTSCC found that 
99.11 percent of contracts contain the clause. Immediate action was 
taken to modify the other contracts to add the required clause.
    New contracts written in the Standard Procurement System (SPS) will 
contain the clause with the prohibition on human trafficking. SPS was 
updated in January/February 2010 to automatically require and insert 
the clause when contracting officers and contract specialists use SPS 
to prepare contracts.
    An update to the DFARS Procedures, Guidance, and Information 
published in the Federal Register on November 18, 2011, instructs 
contracting officers to ensure that the clause at FAR 52.222-50, 
``Combating Trafficking in Persons,'' or its alternate, is included in 
every solicitation or contract, as prescribed in FAR 22.1705, and to 
not use system overrides or other administrative methods to avoid its 
inclusion.
                                 ______
                                 
             Questions Submitted by Senator James M. Inhofe
         achieving tactical objectives versus sustained effects
    23. Senator Inhofe. Secretary Kendall and Lieutenant General Bash, 
this report is a strong indictment of the current interagency system 
and I applaud the CWC's important work. However, by focusing on 
sustainability of the projects, the report counts as waste those 
projects that achieved their immediate tactical effect. For example, I 
am a strong supporter of the CERP. The report cites over $6 billion 
spent on CERP during the war. CERP is designed to achieve an immediate 
tactical effect for a commander. The success of this tactic is embodied 
in the military's use of money as a weapons system where it plays a 
critical role in a successful counterinsurgency strategy. I think 
there's an expectation that not all these projects are going to end up 
being a success. Instead, we trust our commanders in brigades, 
regiments, and battalions to decide what they need and where.
    Commanders have repeatedly testified in front of the Senate Armed 
Services Committee about the criticality of these funds:

         Hiring security guards for markets in Baghdad during 
        the surge;
         Putting young men to work rebuilding dilapidated 
        streets scarred by roadside bombs; and
         Providing roofs over the heads of Afghan school 
        children as they attend their first classes ever.

    How did the CWC account for the tactical effectiveness of some of 
this money?
    Mr. Kendall. I do not have insight into how the CWC accounted for 
the tactical effectiveness of the money. In general, while I agree with 
the validity of the vast majority of the issues identified by the 
commission, I feel they gave too little credit to the significant 
progress made since 2005 in addressing a number of these issues.
    General Bash. The CWC report does not directly account for the 
tactical effectiveness resulting from the use of CERP funds but 
references on the Special Inspector General for Afghanistan 
Reconstruction (SIGAR) Audit Report 11-7, ``Commander's Emergency 
Response Program in Laghman Province Provided Some Benefits, but 
Oversight Weaknesses and Sustainment Concerns Led to Questionable 
Outcomes and Potential Waste,'' January 27, 2011, for many of its 
findings. In response to the draft version of this report, USFOR-A 
indicated that SIGAR highlighted some valid concerns involved with 
oversight of CERP projects. It also indicated that the SIGAR report, 
and consequently the CWC, identified projects begun before the 
command's current CERP policies were instituted. Commander USFOR-A 
issued Commander of International Security Assistance Force 
Counterinsurgency (COIN) Contracting Guidance in September 2010 that 
directed units to develop operational criteria for awarding contrac ts 
that focus on how the contracts will enhance coalition effectiveness in 
Afghanistan. USFOR-A also indicated that 90 percent of the identified 
$49.2 million obligated for `at risk' projects or projects with 
questionable outcomes involved road improvements which were at risk due 
to sustainability issues. USFOR-A considers these roads as critical 
projects that improve freedom of movement for both military and 
civilian uses and increased commerce. In addition, these road projects 
were requested by the GIRoA and vetted at brigade and sometimes 
division level.

        personnel cuts and increased contracting in future wars
    24. Senator Inhofe. Secretary Kendall and Lieutenant General Bash, 
in their joint opening statement, Mr. Zakheim and Ms. Schinasi wrote 
the following comments:

         ``Contracting has provided vital and for the most part 
        highly effective support for U.S. contingency operations. But 
        we rely on contractors too heavily, manage them too loosely, 
        and pay them too much.''
         ``Both the Active Military and the Federal acquisition 
        workforce were downsized during the ``peace dividend'' days of 
        the 1990s . . . it ensured that if a large and prolonged 
        contingency should develop, the military's reliance on 
        contractors would greatly increase, even as its ability to 
        manage and oversee them had atrophied.''
         ``We must be careful not to repeat the mistake of the 
        1990s. We cannot allow budget constraints to permit a further 
        downsizing of our acquisition and contracting workforce. On the 
        contrary, we must augment that force, especially if planned 
        military end strength reductions move forward, and there is 
        even greater pressure to rely on contractors.''
         ``As an officer's essay in Army Logistician observed, 
        `In the future, the Army will find it difficult, if not 
        impossible, to fight without external support. In essence, 
        wartime host-nation support and contingency contracting have 
        become operational necessities.'''

    I agree we cut our forces too much after the Cold War ended and not 
just the acquisition and contracting force, but the total force. That 
is what has increased the dependence on contractors because our 
military no longer has the personnel to execute many of the missions 
now done by our contractors. I do not think we should further cut our 
military but more cuts appear to be on the horizon and they will affect 
the entire military. I have concerns about taking additional end 
strength out of our combat forces to increase our acquisition and 
contracting forces and its associated management and oversight 
organizations.
    Do you support cutting Active Duty combat force end strength in 
order to grow the acquisition and contracting forces as well as 
additional Office of Management and Budget and Inspector General staff? 
If not, where do we get those authorized billets?
    Mr. Kendall. Decisions regarding the composition of DOD military 
end strength ultimately belong to the President and Secretary of 
Defense. The decision is informed by our National Security Strategy and 
National Military Strategy and the resources appropriated and 
authorized by Congress. Within the approved force structure, we are 
committed to providing our military and civilians with the essential 
skills to plan for, utilize, and account for those who provide the 
Department with contracted support.
    General Bash. Decisions regarding the composition of DOD military 
end strength ultimately belongs to the President and the Secretary of 
Defense. The decision is informed by our National Security Strategy and 
National Military Strategy and the resources appropriated and 
authorized by Congress. Within the approved force structure, we are 
committed to providing our military and civilians with the essential 
skills to plan for, use, and account for those who provide the DOD with 
contracted support.

    25. Senator Inhofe. Secretary Kendall and Lieutenant General Bash, 
would increasing the end strength or at least maintaining current end 
strength mitigate an increasing requirement for and reliance on 
contractors?
    Mr. Kendall. Decisions regarding the composition of DOD military 
end strength ultimately belongs to the President and Secretary of 
Defense. The decision is informed by our National Security Strategy and 
National Military Strategy and the resources appropriated and 
authorized by Congress. Within the approved force structure, we are 
committed to providing our military and civilians with the essential 
skills to plan for, utilize, and account for those who provide the DOD 
with contracted support.
    General Bash. There is an appropriate role for contractors as a 
legitimate and necessary means to quickly expand or contract the force 
with needed capabilities. Reliance on contracted support is not in and 
of itself a negative concept. Indeed, the ability to contract for 
support gives the DOD greater flexibility and agility in scaling our 
force packages, and reduces costs over the long term. What is important 
to recognize is that reliance on contracted support must be balanced by 
appropriate policies, doctrine, planning, contracting resources, 
oversight personnel, and processes to ensure cost-effective use of this 
critical enabling capability. The Joint Staff is committed to 
institutionalizing OCS to ensure effective execution in future 
contingency operations.

    26. Senator Inhofe. Secretary Kendall and Lieutenant General Bash, 
how do we minimize the size of our tail (support personnel) compared to 
the size of our teeth, or combat forces, while simultaneously 
increasing (as you correctly stated) our reliance on contractors?
    Mr. Kendall. DOD seeks to balance the size of its organic support 
capability with reliance on contractors. In order to mitigate the risks 
associated with the Department's reliance on contractors, we must 
ensure appropriate policies, doctrine, planning, contracting resources, 
oversight personnel, and processes are in place to guarantee cost-
effective use of this enabling capability. As we adjust force 
structure, we will ensure the resources applied to OCS in recent years 
are maintained to maximize effective and efficient execution in future 
operations.
    General Bash. Minimizing the size of our support tail and 
increasing reliance on contractors are not mutually exclusive goals. In 
fact, leveraging contractor support to rapidly scale required 
capabilities can provide a smaller military with greatly needed 
flexibility and agility at reduced long-term costs. In order to 
mitigate the risks associated with DOD's reliance on contractors, we 
must ensure appropriate policies, doctrine, planning, contracting 
resources, oversight personnel, and processes are in place to ensure 
cost-effective use of this critical enabling capability. As we adjust 
force structure we will ensure the resources applied to OCS in recent 
years are maintained to maximize effective and efficient execution in 
future operations.
                                 ______
                                 

                             ANNEX

    [The report titled: ``Transforming Wartime Contracting'' 
follows:]





    [Whereupon, at 4:42 p.m., the subcommittee adjourned.]