have a freeze, a very forceful m%aku)%w @ @ @ @ @ @ in addition to be able to support the withdrawals. as you do decide to move down the footprint, the army doesn't necessarily have the resources available to be able to shut down the building, shut down the

camps, shut down the housing unit and move them to other locations. generally, that is something that kbr -- >> change order. there was another thing we ran into concern. i mentioned things at the top level. they also, they flew me out to a forward operating base being closed down by the marines in the sunni triangle. and do we get the picture. we saw a picture from the bottom of the top that senior and junior government officials were concerned about and are seeking to guard against what they called the shell game, that kbr will move its employees between bases rather than demobilize them out of theater. because that is the real goal, not to have them, you closed they say, they go to to the next bay city where they can be passed. you close the base b. and the move to a basic see that they are waiting to be passed. that doesn't reduce the footprint, and yet it seems that the system that they can get at,

the internal control systems are inadequate, they say they can't get it reducing the actual numbers of kbr. so, here's what i want to ask. we also got -- oh, one of the things i want to ask was when i say that the internal control systems are not strong enough, did you hear april stephenson described this morning that she said your internal control systems for labor are not adequate and they recently gave you a statement of conditions and conditions, are you the mother with that, yes? >> does, i am. >> i asked if she considered that kind of a criticism of your system. it came out of baghdad. did you take it as a criticism? >> what we take it as is a misunderstanding at first. there is a large transition of

people coming into theater. the systems that are in place, the processes and the expectations are quite different. so what we have, when we got the initial statement of conditions and recommendations, it said that kbr does not take into consideration the existing staffing when it creates an administrative change letter, or aco estimate. we disagreed with that, and what i cast our team to do was to get the people from our estimating department to work with the auditor and how they accomplish and how they do utilize that enteral control process. >> well, i'm glad you're familiar with the so car and your precision and brevity of your answers is admirable. you are not stalling. i appreciate that. when i read them particularly concerned about is that goes over and over, proposing the duplicate fee, paid key twice, paid fee twice, that their

understanding is that these change orders, which you describe what you are still coming in, coming in for project safe in order to electricians come in and fix all the electrical problems caused originally by your detective work and housing. not you personally. those were change orders. and i use a change orders, would you call acl's, change letters, that as they are very concerned to put it mildly. that is why the issue does. that you take tea, both off the original contract and if there is a acl even if the old labor issues, you take it off the old contract and then another time off the acl. am i correct that is what they are concerned about? >> that is what they are concerned about. and i am concerned that is what they believe is happening. we do have internal controls in place. we have worked the process of administrative change letter estimating with the government very rigorously over the past five years. as we do that, one of the first things we do look at is the

availability of existing personnel, if they are there then there is a no cost change. no additional fee, no additional anything. however, if there is additional resources that are required, then those are the resources that we are going to have to bring into theater to be able to do those things. my expectation is that by the auditors and by my estimating team in iraq, sitting down to go through and demonstrate how they take that into consideration, we can put this concern of the auditor to rest. >> in the meantime, the drawdown is going to be attempted, and attempt to bring the numbers down. let me show you two pieces of paper we put together. one, still in the packet, is each color chart. this color chart put together by our logistic team leader, steve, objectivity and dedication.

and he has tried to put the data together quickly since we came back from iraq, and some of this is preliminary. but what it shows is the two lines at the bottom should add up to the one at the top. one shows the two lines at the bottom, one is the downward decline in non-kbr life. that is the green dotted line. that has a fast slope down. and then there is the blue dotted line. that is the almost level, slightly downhill. we estimated six-point 2%. of kbr labor. and so the cuts in labor are not coming from kbr. the reductions in labor are coming disproportionately from the other contractors. is it possible, you dummy what you're understanding is? is that different from your understanding? >> part of the drawdown is what kbr is a result of discussions with kevin larkin and others we went through and performed a personnel reduction plan to reduce the number of personnel

in theater. at the same time, while the drawdown of iraq is happening to the requirement for us to abort not necessarily happening at the same time. so we still have the same footprint that we still have to provide the same support for -- >> i am reminded my time is running out. the last piece of paper i have there is your par, it is called, and kbr lancashire and it has a phrase called bases without spaces. that you still are seeing the faces, personnel you have to don't have assigned slots. it seemed like you still have a loose pool of labor there waiting for work. you are not reducing like the other contractors. instead, you are keeping this pool of unassigned labor. and it seems to me that is very contrary to general odierno's hopes for our footprint. do you want to respond?

go ahead. >> i am not aware of that particular piece of information. i will find out about it and in the 10 day period hopefully i will have an opportunity to provide a response for you on that. >> thank you. my time is up. >> let me just ask, will be a lot of answers where you are not aware? are you the person who should be answering these questions or is there someone else who should be at this desk? >> if we are talking about business systems, i will be able to answer a majority of the questions. and respect to a specific operational action that was taken by ivo and his team in theater, i may be aware of it but i would hate to misquote the record. >> i would like to go after a line of questioning that frankly mystifies me. and if i could just start with an understanding so we can share the same understanding. briefly, you are each publicly traded companies? >> yes, sir. >> you each comply with a

overseen by the sec and other agencies and you filed financial statements and can case in every thing else that goes along with that, right? >> yes. you each have an extra auditor, right? >> yes, sir. >> can you say the name of that auditor firm? >> for fluor is ernst and young. >> deloitte. >> kpmg. >> okay. so you have these different audit firms. now, they provide you, i assume, each of you has an unqualified clean opinion on your financial statements, is that correct? >> yes, sir. >> yes. >> what would the reaction be to your company's value much lesser company's reputation if you were to lose that opinion, to have either a qualified opinion or an adverse opinion former extra auditor's? which basically would say your books aren't worthwhile. what would be the general sense of reaction to that? briefly, in order. >> i will answer for dyncorp i

think you would be significant. >> i think would represent a lack of confidence in our financial systems. >> i agree with that. >> i would agree with that, commissioner. >> so you each have a clean opinion if you were to lose that opinion, it would be probably one of your cfo's worst days, right? making light of a very serious thing i guess. but here's what i don't quite connect. if the standards are public companies here, government accounting here, then i can understand why it is so difficult to climb this mountain to get greens instead of reds and yellows. but the piece i am trying to put together in my mind is if you're externally audit it, clean opinion, compliant, i would imagine. so you are doing all that, but at the same time we can produce -- these are the same systems that run your financial statements that run billing and

estimating and your financial accounting systems. what am i missing? do you have a good opinion, but at the same time you've got systems that are not passing mustard. what am i not getting? >> i will take that first and then give the other witnesses a chance to respond. for our systems here, it was discussed earlier today, we have three systems that just in june were assessed as inadequate. so this is a real-time issue for us. and to your analogy i think it is a good one. i think it is not only a cfos potential worst nightmare. is also a ceo's worst nightmare and we take very seriously. there were 19 findings across those three systems, roughly neck and findings. and somebody earlier said this is not rocket science, and i agree. and i believe that all of those issues are correctable and fixable, and as commissioner tivo has described, we have approval or at least agreement from dcaa on two of our three

systems and are corrective actions. the third is our compensation system and i believe there are five questions that dcaa comeback with. and that when i looked at them i think there'll easily ansell, crick fixable. the issue that i see is, and this came up this morning as well. there is some subjectivity in the approach to show or demonstrate compliance to a regulation. and within that subjectivity, people can have a different opinion of what it takes to be compliant. these rankings represent what the auditors who came to see us and evaluate our systems at the appointed time determined to be findings, and inadequacies that needed to be addressed. as we sit here today, that is the current status of our system. but i do believe those 19 findings are all addressable. >> good. thank you. mr. walter. >> we also take this very seriously. i was hired by the company in

2003 based on the experience that i had in helping companies with these types of issues. when we came in, we have taken a very, very serious look at a very focused effort on identifying the issues raised by the auditors as they come in. and if we need to implement a corrective action, we will implement the corrective action. there are some cases -- >> you say if we need to? >> there are some questions we may not agree with the auditors position as to whether an item is a significant deficiency or not. and those we work correctly with the auditor and we do have monthly meetings that we have had for the past couple of years to discuss the specific issues being raised, and if the corrective action plan is required, what are the steps we're taking, how are we progressing against those steps. >> roughly, how much of the time do you take issue with the findings as opposed to just shrugging and fixing? >> i would say probably about

half the time the issues we look at, we agree with. and we will make the change is. >> in the case where you disagree with the auditor, what happens? it just stays status quo, stays yellow or red until when? >> with the items that are disagreeing with where we do disagree with the auditor, those do remain status quo, but there are just a very small handful of those particular items. the other issue is when the auditor does raise a question, and they identify what the issue is half the time it is simply getting people together to really understand what the reality is into contingency side, where the people are working in the battlefield as opposed to what an auditor may expect with a company that has a sophisticated manufacturing system where they have blueprints and manufacturing production schedules, which we do not have an iraqi.

>> okay. mr. methot? >> from fluor's respect, i would agree with the first two witnesses comments. in general. of the three systems use either of fluor that are either inadequater@@@@@f, question.

mr. ballhaus, and your statement, i was struck by the statement accused in some cases we may not have concurred with dcaa's findings that we revise our procedures or processes as recommended by dcaa. >> that is correct. >> what is your philosophy there? >> i believe of the 19 findings and it may not have these number try but there may be two or three that we did not agree with. that said, we decided to follow the recommendation. and i do want to comment, that the findings in our systems have nothing to do with the billion lines of software code. it is literally policies, procedures and training, those kinds of things. and we look at it and we said look, we don't agree. we may not agree this is absolutely necessary but in the subjectivity around compliance we will follow their lead and the recommendation because we want those systems bring. >> we will give it to you. we will do it, right?

>> i think that to me, is a strong statement. it is a clear statement of intent, and you are spending your time it seems fixing rather than disagreeing professionally. and if i read all of your testimony here about the three systems, it seems like you are waiting to hear back from dcaa to get a different grade. you have responded in three of three cases, and that to me that is a leaning forward position witting to hear back. >> just to be fair to dcaa because they have responded to the corrective action plans, the next that would be for them to come in and assess the adequacy of the controls we put in place and that is something that we will be ray for in the september timeframe and welcome in. >> thank you. >> the logical follow-up to that is mr. walter, if dyncorp finds this doable, why doesn't kbr find distillable? why does kbr have to go from 2003 until 2009 with dcaa's

determination that you haven't met the adequacy's of these systems? why it is so simple for mr. ballhaus and it is so complicated for you? >> well kaw i wish i knew the complete answer to that, but i can't say that kbr does share the same attitude. >> i don't see the action supporting that statement. >> not in the result on the table, ma'am, but we have -- >> where is it then if it is not in the results on the table? >> is in the meetings that we do hold with the dcaa. for example, in our accounting system the auditors have identified that we don't have a policies and procedures with respect to an allowable cost prohibitive by that we don't have procedures with respect to updating our cost of having standards. we update our cost accounting standards, disclosure statements annually. we do have a policy and procedure in place that we provided to the auditors several years ago. the same for the unallowable cost. get, the audit reports have not had the complete follow-through as we have gone through. part of what i hold the monthly

bees is to try to push this particular requirement to try to get the answers to these items so that we can get down to, you know, be able to make that yellow and green. >> not only has yellow not become green but on the purchasing system, the yellow has become red. and yet you are saying that you are doing everything you can to meet these terms and conditions of having inadequate business system. how does the purchasing system go from yellow to red? >> the purchasing system went from yellow to red for ms. stephenson comments because of the billion dollars of unsupported costs on the task order 159, flash report that came out of it both estimating as well as purchasing. in it, we had kept dcaa informed of the subcontracts that we were competing. we had recomputed every single contract in the iraq theater for that particular task order. as the dcaa came up with questions, for our team and in the form of stations and

conditions and recommendations they identify that they had concerned with where we didn't always go with a low bidder on sub contracts. and on those where we didn't did, or we didn't go with the low bidder, we provided the dcaa with occupations that we sat down with the government and we show them what our recommendations were, and the government came to us and said that, if you swap out the competitors here there's going to be some additional cost to the government that you need to take into consideration. so therefore, the incumbent is actually a lower cost. we provided that documentation. we provided the procurement files to the dcaa for those particular subcontracts. we also have some subcontracts where dcaa saw that we had bidders that were higher than a subcontract where we had exercisable options, and the recommendation was made that we needed to go in and negotiate a lower price on the exercisable option, even though that was a valid computed subcontracts maxa basically you think dcaa is

wrong and you're going to do what you want, despite what dcaa says. >> no, ma'am. >> or are you going to convince dcma to go with you as opposed to dcaa? is that what happens, you do a lot lobbing with dcma to make this yellow code red to green? >> no. what we do we've had a lot of challenges in the past because of pork and mitigation. when it came to task order 159, we set up a subcontracting plan to identify which subcontracts we would recompute. we kept dcaa apprised of that. dcaa would not review it because under their guidelines, until they had a complete package, they would not be able to audit that package for fear of an ipt or a conflict of insurance. we kept them in fort. we kept providing the documentation. at the time the task order was executed, we issued those of subcontracts and we have to continue performance. the question is, on those subcontracts that are existing and we are performing on, the

question is is there adequate price competition on those, did kbr's procurement team in theater who made the decision and worked with the government do the right thing. so it is not a question of us trying to tell dcaa that we are trying to lobby with someone else. it is the contingency environment that we are working in. i can't withhold those subcontracts and say i am not going to award the contract and not provide the support to the soldier for the food service or for the firefighting, which is what those contracts were. so we are trying to work through it, but it is the events of the day and the fact that you can't date you can't stop something. . .

>> back in 2004 we've talked about the utility or the nonutility of withholds from contractors this morning. back in 2004 there was a recommendation by a contracting officer for a 15 percent withhold of kbr. you were at kbr at that time because you were there in 2003. >> yes, ma'am. >> and kbr objected to that withhold. >> yes, we did. >> i would say you mightily objected to the withhold, and you sought a waiver of the withhold. the law requires a withhold if you don't have a definitized contract, and you wanted a wafer of the -- waiver, is that right? that is right. >> we wanted a waiver of the

withhold, yes, ma'am. >> yes. and so it ended up going up to deidre lee in order to get that withhold, right? >> i believe that's who it went to. >> right. so we're looking at the role of contracting in a contingency environment, and i want to ask you because i'm trying to got at whether contractors in a contingency environment have us over a barrel to some extent because of our concerns about the protections of the soldiers. so it's important for me to know whether anybody at kbr essentially argued up the contracting chain of command that if you were subject to the 15 percent withhold and you didn't get the award fee that you were looking for, that the needs of the troops might not be met. was that the reason you were supportive of a waiver and against the withhold, that you thought it would have a consequence to the soldiers in the field? >> we've had many discussions about that because there's been

a lot of publicity about allegations associated with that particular time that came out years later. i do know that i was at rock island, and we were having a teaming conference when that particular issue came up. i was not in support of that because we had already had significant investment of our own working capital -- >> you were not in support of what? >> of the 15 president with-- percent withhold for two reasons. the second item was the fact that the reason for the delay in defintizing the task orders which is what caused -- >> right. >> -- the issue was the fact that from the end of 2002 through the beginning of 2003 there were a significant number of task orders that were issued to support the escalation of the war. at the same time, the task order was issued for task order 59 which was the largest one, we had an estimate in place, we had

provided that to the government, and that was basically to provide food service for the troops in a very rapid manner. >> i just want to know whether you argued that the 15 percent withhold would affect the needs of the troops. >> i cannot recall making that argument, ma'am, no. >> my time's up. >> you know, i don't want to drop this because this is a key point. the key point is that the withholds don't happen because there is either a direct or implied view that if the withhold happens, the service doesn't get provided to the troops. i would have thought you would have said let me state unequivocally whatever happens we're going to make sure we provide the service, and we would not under any circumstance withhold that service. are you prepared to say that or not? >> that, that would be my view, sir, yes. >> i don't understand your view. what is your view?

is that the view of your company? you're not here with your view, you're here as the company. and if you're not the right person to sit here, we need someone else. can you speak for your company? >> yes, i can speak for my company. >> okay. then i'd like an answer for the question. >> we will not let the service to the soldier go down. >> and the next question then is have you ever implied directly or implied to the government that if they withheld money, the service would not be provided? >> i have not, and i am not aware of any statement that was made such as that. >> by your company. >> by my company. >> okay, thank you. >> yeah. you mentioned that you've had monthly meetings with dcaa, mr. walter. >> i have monthly meetings on systems, and i invite dcaa, yes, sir. >> okay. how, when did those meetings start? >> the initial meeting was associated with our procurement system, and that one began in 2004. >> 2004. okay. >> yes.

>> now i'm looking at this chart here, and i see that dcaa has had, felt that your estimating systems have been inadequate in part since 2005. september 2005. we are now in august of 2009. by my simple reckoning and by what you just said, you have had 47 meetings with dcaa, and you couldn't work it out whereas mr. ballhouse says he goes out of his way to work it out. were you guys stone walling? >> no, sir. >> why can't you work it out with 47 meetings? >> with respect to our estimating system, the initial issue that was raised dealt with the ability to update proposals for actual costs that were incurred after a task order began. we worked very closely with dcaa, we worked very closely

with the army to figure out as the progress is progressing. you're incurring actual costs. as you incur actual costs under the truth in negotiations act we have to be able to identify all of our cost or pricing data which includes actual costs that we're including. as we were performing under task order 59, we were incurl costs. -- incurring costs. as we submitted a proposal to the government, that proposal was then audited. time has passed, i now have more actual costs that i have to go back and put into my cost estimate. it's a vicious cycle that we were stuck in. under task order 89, the following one -- >> wait a minute. you say you're a vicious cycle, and you were stuck in it because you, obviously, refused and now after 47 meetings to turn around and say, well, okay, we'll solve this. i mean, that's the only vicious cycle. otherwise mr. ballhouse could say he's in a vicious cycle.

why is your cycle any more vicious than anybody else's? >> when it comes to the@@@@@@@ billing, okay? that's december '06. so now we're not talking about 47 meetings, we're talking about roughly, i don't know, 30-some-odd meetings, okay? why haven't you sorted that one out? >> okay.

for, for the record with the procurement system that's the one that started out in 2004, and it was not a monthly meeting. for the estimating, the accounting and the billing system those started at the end of 2007. >> oh, so for quite some time you didn't really reach out to dcaa at all is what you're telling me. >> no, sir. i personally believe that we were trying to work out with dcaa. we had proposed many different ways to accomplish it. but based on the environment that we're working in, the -- >> the environment? what do you mean? this isn't 2003. i was in the government in 2003 and in 2004. >> yes, sir. >> and i can tell you the environment now is not what it was in 2003 and 2004, and you know it. >> it is -- >> so talk to me about -- >> it is a different environment, but it is not at all a stateside environment. >> no, it's not a safe environment. it's not the environment of this particular committee room, but you're not going to tell me it's as unsafe now as it was in 2003

and that, therefore, you cannot deal with an environment where these other two companies seem perfectly able to deal with the environment. why is your environment so different? >> okay. what we're working with is -- and i believe that we do have open and honest dialogue with the auditors in theater, okay? we're not trying to say we're not going to accept your changes. we try to address the changes as they're presented. sometimes we do get stuck behind the power curve, and right now our estimating system is deficient in the eyes of the dcaa because of the purchasing system review. >> okay. well, what about the billing and accounting systems? >> the accounting system we have basically two items that are, that we're trying to work through with the dcaa. the one deals with the description that we put into a field in our automated system that's associated with a journal voucher.

so if we have a journal entry that goes into the accounting system, our accountants used to just put in a phrase that said transfer cost. we have gone in, and we have provided updated descriptions, we have provided training so that our guys -- >> okay, i've got only 2:20. can you give me the answers to those questions for the record, please, what the differences are and what's holding you up from, you know, accommodating dcaa on these two areas? my final question is this, you've just made a statement that you couldn't withhold anything from a sub because, after all, you're relying on those subs. my question is haven't you looked for other subs? is there only one sub in the world for one particular cast? there are people dying to be subs last time i checked. so if somebody isn't performing, i mean, after all, you are responsible for your sures. i don't know if you give them a

liability of limitation or what. you are responsible as the prime, and if your sub isn't performing, you can't come back to the government and say, well, sub's not performing. you just terminate for default and get yourself another sub, in effect. now, to what extent have you ever done that? have you fired a single sub? if so, how many subs have you fired? >> we have fired some subs, i would have to get the exact number for you, but significant numbers especially in the '02-'03 time frame. >> i'm much more interested in recently. you've talked about '03, give me the last two years. >> recompete task order 159. we recompeted every single subaccurate that was out there -- subcontract that was out there. with a new vendor with a lower price, those are the ones we attempted to replace. there were some that were identified with additional costs for the government to incur, so

there has been a significant change in the, the both the makeup of the subcontractors that do work for kbr. these subcontractors are normally on about a six-month contract with a six-month option, and if they're not performing, we will recompete that particular subcontract. >> and you've done that. >> yes, sir, we have done that. >> thank you. >> thank you. most of my questions are going to be kbr, and that being so probably all of them in this 8-minute round. i want to preface that by saying i'm not anticert, i think that's true for all of us, and i'm not anti-kbr. in fact, there were three comments that i particularly supported and two of those comments were kbr ones. one was that contractors ought to be involved at the inception of contingency conflicts.

i think i strongly agree with that, we've talked about that internally, and the second one is that the government needs to speak with one voice so it's clear to you contractors what you can and can't do. that leads to mind first question to kbr, and we've talked about this a little bit, i think we understand the inception of the war in iraq and afghanistan, but as is clear we're now in 2009, and these problems largely persist with regard to kbr. in fact, in certain instances they've actually gotten worse. so my question, i was struck by your boast, really, in your statement that on page 2 our systems are regularly reviewed and approved by the government. what you really mean by that, isn't it, is that your systems are regularly reviewed and approved by dcma, by dcaa, and doesn't that go to what you said earlier, that the fact that government doesn't speak with one voice in this instance allows kbr, to be candid, to

play dcma off against dca and to tout yourself as you've done in your statement by saying that the government has reviewed and approved your systems? >> it is not my intense to play one agency off of the other, sir. what we do is when we have a system and a system approval per the current confines of the regulations, they state that the administrative contracting officer determine cans the adequacy -- determines the adequacy of that system. we're playing by the rules and doing our best to try to satisfy the dcaa auditors with the examples that they present to us and with our corrective actions that we've butt in place -- put in place that we are complying with the framework guidelines. >> yeah. well, i appreciate that answer because i think by that answer and by your statement here you really have underscored for us what really is the fundamental problem, or at least a fundamental problem, probably the fundamental problem that ought to be corrected by this commission that you could say in

your statement and now defend that your systems are regularly reviewed and approved by the government notwithstanding what we've heard from dcaa, i think, says a lot. let me ask some specific questions. one is this: there was a tiger team review, we understand from ms. stevenson's testimony, of various subcontracting practices that kbr was involved in early on. and i guess a threshold question is what is kbr's -- and i'm going to ask this of the other contractors if i have a chance to -- what is kbr's philosophy about making the results of your internal reviews, whatever you call them internal reviews, managementreviews, whatever, available to the government when we're talking about evidence of fraud that your team has uncovered or substantiated? >> one i would like to make a statement on very clearly is that of the individuals who have been identified as committing fraud for kbr, those are

management reviews that were completed by kbr where through the voluntary disclosure program and through our ethics program we went to department of justice to make sure that they understood all the information we had, the results of our investigations. with regards to the tiger team that you're talking about, we have provided dcaa with access to the members of the tiger team. as aye mentioned -- i mentioned in my statement as this thing took off, there was a lot of things that were happening in the 2002-2003 time frame, and the documentation was lacking. in great part because we could not get enough trained procurement professionals in theater. >> okay. since my time's limited you're saying that you've made the tiger team available, the personnel available to dcaa to talk to, is that what you saidsome. >> yes, sir. >> and have you provided the results, the actual documentation that the tiger team arrived at? >> what i have explained to the dcaa is the tiger team's role was to insure that the

procurement files were current, accurate, and complete. so the tiger team provided the procurement files that we provided were the work product of that tiger team. there is a question about a memo that was cited in "the wall street journal" that we cannot track down. i don't know what that is, i have not been able to provide that memo or anything about that memo to the dcaa. but we have provided the time sheets, the individuals, the invoices from outside consultants that we were using to help us get that period of time caught up. >> so your testimony is that any and all documentation produced by the tiger team to kbr management has, in fact, been provided to the dcaa to the best of your knowledge? >> to the best of my knowledge. >> all right. could we just really clarify? because this is a point under oath. and i'm only saying that because i want you to be very sure that if this team put together

documents that was available to management that was not shared with dcaa, then your question would be incorrect. so i want to have you -- and i'm asking it a second time because we're going to check it out, and you will not be in doubt of our interests in this. >> uh-huh. >> so i'd like you to just stop a second and think is there any documentation that was provided to you that you did not share with dcaa that was related to any of the activities of the tiger team? >> before you answer that -- >> no, i don't -- >> no, let him answer it. >> go ahead. i want to add one more part to the question. >> okay. >> and the one more part to the question, you know, i'm having déjà vu as i'm listening to this discussion because i was directly involved in that debate. and the reason the tiger team was set up is because kbr decided to do that and had

issues to address. but also the reason it was set up was to defer certain government decisions, and they requested that dca hold off on doing some work that dca wanted to do themselves. i was directly involved in communicating with our staff there. and so we agreed. and the debate began shortly thereafter because the agreement was all work product would be provided, and that's the proper verbage, that anyone there provided, and then there was this long, drawn-out debate about, well, and it finally ended up, well, it was just conversation, so we'll give you access to the people. that's kind of where it's at. but i'll restate the question. is there in the language of the land which is is there any other work product that has not been provided to the government? >> okay. i was very involved in the tiger team. i'm also very involved in the

dcaa audit of 2003 and 2004 where this has come up a number of times. the purpose of the tiger team was to send experienced procurement officials in on a short-term basis so that they could update the procurement files. that information has been provide today the dcaa. i am not aware of any special reports that the tiger team put together, and i was very involved in it, okay? so i'm not aware of any reports that we have not provided to dcaa. the only issue of contention is a document, some sort of an internal memo that was specified during a "wall street journal" article that i have searched high and low within our firms through the executives to try to obtain a copy of, and i cannot provide something that i don't have. >> okay. the only other thing i'd say -- that's a clear answer -- is i would consider work product memoranda as whether that or

notes or reports, status reports and the like. and what i've heard is there's no other work product that you're aware of. >> not that i'm aware of, sir. >> i'm going to ask the question again. i'm going to ask have you provided any and all information to dcaa or any other government, excuse me, dcaa that was presented to you, anyone in the company, to the board, to the ceo that was not provided -- let me state it, i'm going to state it, i'm going to restate it. is any and all information that the tiger group did that was presented to management either memorandums, e-mails, special reports as you named it or any other document been provided to dcaa? do they have all of the documents that any of the management team has received? >> based on the exceptional

detail of your scope, i request that i be able to check to make sure that i have answered that. i do not believe that we have provided every e-mail that says tiger team, but i do believe that we have provided@@@@rr$a"r in theater?

>> with regards to management reviews that we do for evaluating journal vouchers, evaluating time sheets, we do share those results with the dcaa. we were initially hesitant to do that in great part because i wasn't satisfy with the the quality of the reviews we were doing, but for about the past year and a half or so we have been providing those reviews. the only documents that we do not provide to dcaa are internal audit reports. >> mr. ballhouse, what's dyncorp's position on this? >> yeah, well, relative to internal audit reports we do give dcaa access to our reports. i don't believe we give them copies of the work product, but we do allow them to look at those and have access to them. >> mr. methot? >> we generally provide listings of all of our internal audits and all of our management

assessments performed during the year as part of control reviews, and so we generally do provide those. but in some cases we don't -- in most cases we do not provide the actual work product themselves. >> let me just ask two final questions, and then i'll continue this in the second round. the promise of log cap 4 and the transition from 3 to 4, was that the government, the taxpayer, the american people would realize some savings because of the greater competition that would be induced by that. and there have been a number of examples already to suggest that that hasn't happened, it may not happen going forward all of which is very troubling to us, as you might imagine. and in particular back to you, mr. walter, we understand that kbr made it very difficult, extremely difficult for those kbr employees who wished to do so to be employed by your successor, by dyncorp, to do so. and that the first kbr employees who advised that they were going to or had accepted positions with dyncorp were summarily

fired in order to leave kuwait in 48 hours. and this included a number of employees with many years of service to kbr. is our understanding correct? >> there are certain visa issues that are associated with working in iraq. to be there on a work visa, you have to be an employee of kbr. unfortunately, due to the visa processes and legal issues associated with being in the country under a sponsor, we had to demobilize those employees that were going to work for fluor to dyncorp. >> so you're saying to us in those instances where you fired people, it is because they had visa issues and not because they advised you they intended to work for dyncorp? >> once the employee makes the decision to work for dyncorp, i have to find out how i'm going to get the work done that that employee was doing. once they tell us that they're going to work for dyncorp, it was our practice to terminate

the employees at that date so that, you know, they could go work for dyncorp, do whatever they needed to do. our team did make recommendations to the government crew on the transition about the issues associated with visas and the importance of getting all of those things lined up. >> let me ask one final question. i.t. systems and deletion of files. it's our understanding that during the course of transition again, from log cap 3 to log cap 4 that kbr removed hard copies of extensive maintenance data on vehicles. did that, in fact, happen? did you delete the electronic files, and if so, why did you do that? and if you did that after i hear your explanation for it, i presume that there's a backup of that and would like to know whether you'd make the backup available. >> unfortunately, that's an operational issue. thisthis is the first time i've

heard that statement coming up, and i've been involved in many briefings on the transition. i will have to talk to the transition team for kuwait to get you that answer, sir. >> all right. so this particular issue you're completely unaware of? >> i've heard of many different challenges, but i've never heard of that type of an issue, sir. >> thank you. i'm done. >> just a quick one to mr. ballhouse, are you aware of the issue? >> no, sir, i'm not. >> okay. >> my question is sort of a follow on to what commissioner irvin said --er vin said, and i'd like mr. ballhaus to respond in a more general way. but when contractors turn over, it's common for the incoming contractor, of course, to hire a lot of personnel from the outgoing, the existing contractor. i assume that both in your estimating and labor systems

you'd include assumptions about how many of those folks that you would plan to hire. in preparing your cost proposals and after a ward of the -- award of the transition plan, what extent did you assume that you would hire the outgoing contractor's work force? and what obstacles, if any, did you encounter in kuwait, and how did it affect the assumptions in your cost and labor-estimating systems? >> yeah. let me answer it this way. in our proposal for the kuwait task orders, we had a certain assumption and plan for mix of personnel and specifically i mean mix of expats versus local nationals that was a different

mix, that was utilized by the incumbent. and that was our plan, and that's what our proposal was based on. as we got awarded the contract and worked with the customer on the specifics of the transition plan, there was a compression of the transition. and what that compression forced to happen was rather than allow for the time to shift the mix so that the labor cost savings could be achieved because with a lower mix of ex-pat to total population it's a lower cost, because of the compressioned transition, we were forced to take on a larger percentage of the incumbent work force than we had planned. with a longer transition, we were planning on more time for recruiting so that we could change the mix of the work force as the customer directed a shorter transition, we were forced to keep the same mix, and so the question around why wasn't there a cost savings, that's one of the reasons why there wasn't a cost savings yet, because we weren't able yet to shift the mix, but we will over

time. .. >> we had proposed. as we adjusted the estimates for the true scope on the program, that number went up also. i wanted to just clarify on those additional points in addition to the mix issue. i apologize for going off track. >> that's fine.

the other one, i would like to reinforce what commission said what he comment about the files and destruction of any records. and just clarify that little so we get an accurate respond back. i think it's our sense that i.t. systems should prevent and have systems that prevent the files and provide back up. in the course of that particular one, it was reported that kbr did in fact remove hard copies of expensive maintenance data and they also deleted the electronic files for such records. there was another incident not related to that, related to an airfield transition that existing project files were also

not in coming to the new contractor which caused some delay. so the question is, you know, how is it that an i.t. system would allow the files containing government data and does the back up of deleted files. if so, are you prepared to turn those over? i know you're going to provide that for the record. but i'm very interested in that. the last for this round that i have, kind of a softball. and i'd like responses from any or all of you. in your testimony, and you made reference in your oral presentation also, it would be helpful with the commission would identify means that will allow the government to speak with a single voice to

instructing contractors. i would like to hear how you would propose, and how you would propose that did done to simplify your life. >> to simplify our life, the single voice. however the government developed it, would work for us. as i said in my testimony i do take guidance and direction from acos in the theater, i take direction from contracting officers, i get input from dcaa, and we do our best. as i try to answer the questions for one individual to satisfy their interpretation of how something should be done. i often times go awry. within the environment, it's not just the bullets flying, et cetera, it's also a very significant transition impact.

most of the government individuals are there for 180 days. that's generally half a year. that causing me with significant challenges. as they are there, they get up to speed with the environment. then they have their ticket home and as i'm going along in a path, i'm not in the same channel. i would like to see longer terms for individuals in theater, our individuals are generally there for a one-year contract. generally they are there for about 18 months. that constant turnover as well as the different voices causes us great concern. however the government decided to do it, we're a contractor, we'll find our way to work within that confine. >> i think a single voice would be helpful. i think for me as i just reflect on the challenges that we're trying to work through,

timeliness and urgency, would be the characteristic that i would like to see shifted and changed most. i think most systems can work or fail and it depends on the people that are in them and their attitude and their mindset. i think based on what we heard this morning, there is an opportunity to improve the system and one voice might help that. at the same time we do a lot of work within the existing system. and i think across the board between government and contractors, timely response, things would work better. i think standards in terms of timeline of response and business systems is something that i think would have a lot of value. >> thank you. >> i believe that clearly a single voice in the government would be a great improvement.

in my mind, the issues that we've had in the past clearly fall between a subjective evaluation process that leads to differences of opinions, differences of opinions between the contractor and the contract or -- and between the two government agencies. clearly one single voice would get rid of that kind of situation and lead to more limely determinations of adequacy and reduce the confusion that exists today. >> thank you. >> speaking with one voice doesn't mean that it would >> thank you. >> peek speaking with one voice doesn't mean it would necessarily be dcma's position, it might be dcaa's