[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/ __________ U.S. GOVERNMENT PRINTING OFFICE 72-564 PDF WASHINGTON : 2012 ----------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC 20402-0001 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.]