now i did not have any full-time job or in a paid job after i was married. i spent about 25 years raising my six children and politics was my hobby. a lot of which was done on the telephone, by mail, a lot of it was pre internet, pretax machine. [laughter] and when iran for congress iran in districts where i never had to be done overnight. and i guess i am a workaholic. but it was fun in my husband was extremely supportive. he enjoyed when i was doing and it all kind of fit into gathered. one i would go on for some meaning whoever was the oldest one in the household was the one in charge. [laughter]

but, of course, a full-time job is very difficult in that and back before you came on it used to be that you're average of middle-class blue-collar guy could make enough to support a full-time homemaker in that same city in america that is slipping away from us with jobs going overseas sites you find out what you are most interested in and went to can develop as your particular space in the conservative side. but i was a marriage and family are certainly worth the top of the list remains and everything else had to blend in underneath it. >> kelsey budd, it seems to be overarching issue today is health care so i was >> i was just wondering if you could give us your thoughts and feelings about it? >> the health care bill is every bit as bad as the one we beat

when hillary clinton was promoting her health care plan. it is a government takeover of the tremendous health care industry. it is complete paying for abortion on demand, anytime, anyplace. we have recently learned about these counseling sessions they are going to get to the old people. and basically they are sessions, why don't you hurry up and die, take a painkiller because you are costing us too much money. and anybody who thinks that health care is going to cost less if the government runs it must believe in the tooth fairy. it isn't going to happen. and the idea of letting the government run all of our health care industry, is simply unacceptable. and i think we would be better

off if we defeated the whole thing that is proposed, and then if there is some particular remedies that we can work on we can try that. but everything obama is promoting on the health care industry is bad. gets government control, which is what he wants. you know, he never had a real job before he got in politics. he was a community organizer. and this is a process of making people believe that they live in an unjust and discriminatory society, and they should organize to protest and demand to take money away from the taxpayers. and one of the big problems we face is that now about half of the people do not pay income tax. so his plan is to take money away from the taxpayers and give it to the non-taxpayers. and i think we had to call him on every turn.

and i am hopeful that we can defeat the health care bill. [applause] >> hi. my name is i go to amherst college. i just want to know what you think about the resurrection of the equal rights amendment, that they are talking about resurrecting that? and for those of us who were not around, change it elaborate on what you did that defeated the first equal rights amendment act. >> i didn't quite get the last part of your question. >> can you please elaborate on how it is that you defeated the equal rights amendment. >> well, the equal rights amendment was debated for 10 years in this country, had completely fair representation at the hearings. that was the only place where we had a 50/50 chance to get our

message out. and it was defeated at the american people do it. and for example, illinois was the frontline, and it was voted on every year for 10 years and defeated. and the attempt to resurrect it is, i think, principally a fundraiser for the feminist movement. they tell a lot of women who don't know any history that sending $25 will put you in the constitution. of course, they don't tell them that men are not in the constitution, so why should women be in the constitution? that isn't the way our constitution is written. you can't believe how many times i went to testify, and my opponent is saying that they need the equal rights amendment because we want to get rid of all men are created equal. i am sure you smart young people now that's not in the

constitution. that is in the declaration of independence. and unfortunately we are not trying to amend the declaration of independence. [laughter] >> if in the past we would have had same-sex marriage 25 years ago, we -- i testified in 41 state legislative hearings. there is no benefit to it. there was only one case where somebody came in and said well, our state has a state law that discriminates against women that era will remedy. their state had a law that said that wise could not make homemade wine without their husband's consent. [laughter] >> for this we need a constitutional amendment? you've got to be kidding. it would have no effect, when they went on television, they would say, they would make women think they weren't paid enough. but of course the employment laws were already neutral.

so it would do nothing in employment. so they were never able to say in any of the hearings this will give you a raise or help you in employment. however, the classic discriminatory law is the draft registration law, which says that male citizens of age 18 must register. and i had sons and daughters about that age when era was alive. and my daughters thought this was the craziest thing they ever heard. you're going to put us in the constitution and the first thing is we have to sign-up for the draft like your brothers? it was at unsalable proposition. we were just coming out of the vietnam war, and of course young people are fortunate to live in a post-reagan era where you don't have the draft hanging over your head. and so there were all kind of bad things, and there were no benefits. and they are trying every crooked idea to bring it back,

but you need to let your legislators know there is no benefit. it won't do any good for women, and it just does a lot of bad things. thank you. >> thank you. >> my name is katie walker and i'm what the american likely. i wanted to get your thoughts on the role of the pro-life movement within today's larger conservative movement and the fight against feminism seen at the pro-life movement is very essential. and one of the things that my -- my contribution to the movement. you see, we had the fiscal conservatives who, the 27 million of us who voted for barry goldwater in the 1960s. and that was not enough to elect a president. and when i got into the equal rights amendment fight in the 1970s, i brought in the social conservatives, a lot of whom had

never been in politics before. they came in to help us defeat the equal rights amendment, and they came in because abortion was rapidly becoming a national issue, at the fault of the supreme court in roe v. wade. and i taught them -- i told them where the state capital was. many of them didn't know where the state capital was. got them on a bus and got them there to help us, and then i also taught how all the different religious denominations to work together on these issues, the issues they cared about. defeating the equal rights amendment and stopping abortion. and then it was when ronald reagan came along in 1980, he wasn't elected to does everybody agreed with everything. he was elected because he put together a coalition of the people who saw in him the solution to what they cared

about. and the pro-life movement is absolutely essential to the conservative movement. absolutely essential. we cannot win without them. and so the rhinos who, republicans in name only, are very mistaken in trying to get rid of the social conservatives. because we need the pro-lifers, and we are very proud that the republican national platform adopted a national convention, every time since roe v. wade has taken a strong pro-life position. and i believe always will. [applause] >> hi. i am catherine with the clare booth luce policy institute that we can all agree how important it is to have role models especially for young people these days. i wanted to hear your opinion on who in congress or who in the public sphere we should be

looking to as leaders for the future. >> well, i am not ready to pick the candidate for president. but my opinion is that anybody who thinks he might be a candidate should travel the country and meet with small groups. that is what ronald reagan did. he wasn't all that conservative when he started out. but listening to the people, he redefined his conservative view. and that is so essential. we can't wait until the primaries in iowa and 2012 to find out who these leaders are. ito, in the last time around, john mccain, who comes from arizona, went up to iowa where they do meet with little groups. that is the primary system up there, and then he said it was quoted in "the new york times" as saying i didn't know immigration was such a big

issue. now we can't afford to wait until the primaries in iowa and new hampshire and south carolina in 2012. encourage everybody, and there are a lot of good people in congress. congressman steve king, congressman joe bockman, congressman tom price, just to name a few. and they are articulate defenders of the conservative position. and i urge them all to get out and travel the country. get out of washington and find out what the grassroots really want. go to some of these town meetings. [applause] >> i noticed that after this break in saint louis last week, that the senator from missouri, claire mccaskill, has announced at her in next town meeting she will not take any life

questions. she will only take a few written questions. >> hello. my name is dick helmsley. and i have a comment and a question. first of all, comment, the young lady who just preceded me is one of four daughters that i have. and i would just like to thank you as a parent for being the role model that you have been for people like my daughters to look up to and see it can be done. [applause] >> and a question i would like to put forth is, more if you would just perhaps, it on the most recent appointment to the supreme court. and the supreme court in general, it appears to me, or it

is my sense over the years, congress and the politicians are politicians, if you will. what the real direction downhill, as i see it, has been a large impact of the decisions of our supreme court and individual in this country setting out what their opinion is for the rest of the world, or the country i should say. >> well, it sounds like you have read my book. because that is the theme of it. and i traced most of the bad decisions by what i call supremacist judges because they do believe they are supreme over the other branches of government and the will of the american people, can be traced to the erlewine court. and the whole line of cases, the cases against religion, the

cases to let the illegal aliens in, the cases against property rights, the feminist cases and abortion cases, the cases citing international law. all of these streams of bad decisions, what we call activist decisions are stemmed from the war in court. because war the first one to write that whatever the supreme court says is the supreme law of the land. and you all to read the constitution. you know that is not true. the supreme law of the land is the constitution itself, and laws that are made in pursuant thereof and all the laws are supposed to be made by the legislative body. now, i do urge you to get a whole picture, to answer your question, by looking and reading that book. but i will also point out that

barack obama -- you know, the internet is so great to get things that might've been buried in history, but he gave an interview on a chicago radio station a couple of years ago in which he said that the earl warren court and go far enough. all it did was change some of the law. but they didn't address the economic issues. they didn't transfer the wealth from the non-taxpayers to the taxpayers. and his motive is to find people, judges with empathy. that means the ones who really want to move the money around, not just to decide the law. who cares what the law says. move the money around. and that's his purpose. and this is a very dangerous thing. and that's why with all of george bush's failures we can

thank him for toledo and robert, and we can be worried about who obama may appoint next and be ready for a fight. and i will also mention for your four daughters, you give them a copy of my book of the feminist fantasies there are about a hundred of my essays about feminism, because it is really important for them to know what feminism is and how destructive and anti-marriage it is. thank you. [applause] >> my name is delicately, and i have more of a comment than anything because i was part of this central virginia against the era, and that was a long time ago. but i just wanted to thank you and really how it was being on that committee that initiated me into the import of action and

doing something. and i would just commend to everybody, the a part of eagle forum and just read all her books. thank you. >> thank you. i appreciate that. [applause] >> well, yes, it is enjoyable. and it is more fun to win than lose. and we have had, we've had some some defeats, but we have had some very significant victories. which when you get active in eagle forum you will learn about our other victories. it wasn't just the era. we have had a lot of other very significant victories. >> my name is rachel leigh and i work for congressman, and i were just first like to say i have been a lifelong supporter of yours and admirer, you have inspired and sony ways and i credit you for the reason that i am here today just for your

gumption, you go out and your traditional values. as a woman, i really give you my sincerest gratitude. my question goes to your fight against era. i see today that grassroots efforts and i am sure we are all worried as i am about the future. i really would like to know how it was that you took on the nation and change everyone's mind about this equal rights amendment. how did you break through the thick walls of congress and gain immediate attention? how did you do it and how can we work alongside you and do the same for a lot of the problems that we have going on today? >> well kaw thank you for your kind words. there are a number of elements in that. i chose the battleground that we thought that battle on and the battleground that i chose to fight on was the legal rights that women will lose if this is

ever ratified. and so i showed how they would lose the right to be exempt from the draft. and if they are in the military as a volunteer, they would lose the right to be exempt from combat. the wife would lose the right to be supported by her husband and have her children supported by her husband. because these are discriminatory laws. that we would lose the right to legislate against same-sex marriage. that the era would transfer all laws about marriage, divorce, family law, child custody, everything to the federal level instead of the state-level. and so i forced the other side into kind of dividing up the phyllis schlafly report and coming into this hearing and saying the schlafly says so and so and it isn't so. but that was a wholly defensive

game is like a football team that never goes over the 50-yard line. and they were not able to show any affirmative case so i would say that was a main thing. also, we did, we had a committee in each state that was fighting it. we train them, how to make the argument. how to make them calmly and respectfully and truthfully, and not to say anything that was exaggerated. not to use other arguments like it was caused by the un or some other argument like that. just stick to the legal arguments. and the one place where we got fair treatment was in the hearings. because of your typical state legislators thinks if we are going to hear about a bill, we need to hear from both sides. of course, the media didn't think that way at all. the media were 99% against us.

and it was pretty funny. a lot of those filled donahue shows that i was on, and you will have to see -- i did a speech a couple years ago called doing the impossible and it has some clips from some of those shows and you will see how we handle it. and we just simply kept presenting the truth, and that was the other side couldn't, couldn't get a handle on it. of course, the most frequent question i get is how you stand it when they are so ugly to you and say such nasty things. well, i just said, not going to let those slobs ruin my day. [laughter] [applause] >> thank you very much. >> hi. i'm fran griffin, griffin communications, and i go way

back with bill as to when i was chairman and illinois and phyllis is very, very supportive to us. but that time, fellas, the hippies were the counterculture, and thus people wanted regular marriages and families. we were cultural, and everything kind of flipped in a way that hippies sort of won that battle because even some young people i know now considered so conservative, you know they want to limit their family to one child, and you know, they're kind of accepting, you know, homosexuals want to live together, these kind of things. how do we go about sort of, you know, influencing this mentality, especially this homosexual marriage movement which seems to be on a steamroller right now. not only that, opposing that, but also convincing our young people that children are a

blessing, and that every child that is born has something to contribute. there are so many scientists and people, number 10 or number 11 in their family who are not being born today. >> well, you have raised some very important points. i think that it is important for young people to understand that it isn't just the gays who are pushing for same-sex marriage. it is the feminist movement also. and the feminist movement is really anti-marriage, and you have an element of the libertarians that do not want the government to establish the rules for getting a marriage license. now, i believe we have to have the definition of marriage, that we have to have laws that say polygamy is a crime, bigamy is a crime, marrying a child is a

crime, marrying a sibling is a crime. and i would point out that the republican platform, since the very first one in 1856, said that we are opposed to those twin relics of barbarism, slavery and polygamy. and the aclu is openly supporting polygamy because it goes along with this idea that marriage is just a private matter. now marriage is not a private matter. the definition of marriage is society's way of dealing with these helpless little creatures who appear when men and women do what comes naturally. and somebody has to be responsible for taking care of them. and marriage should be the institution that is legally designated to take care of that child.

and then you've also brought in, you have a population control movement. that these are the people who think the earth is more precious than people. you can get rid of the people and just have, and just out of idle, the natural earth here. well, now no, people are good. and i'm quite sure that god will provide enough resources for whatever population this earth has. and so we need to identify the destructiveness of the feminist movement, and with the anti-marriage and anti-children propaganda is coming from. and it isn't just the gays. thank you. >> hi. elizabeth cordova with clare booth luce. i was just wondering if you could maybe share one or two of your favorite experiences from speaking on college campuses.

[laughter] >> well, most of the bad experiences were a number of years ago. it has really gotten more civilized in the last few years. but there were several where a bomb date was set was planted so we had to change the location at the last minute. there was one where they all lit up marijuana as protest when i started to talk. there was another one where -- when i started to speak they were very noisy and rockers and i shifted immediately to a q&a and that didn't calm them down. and the guy who invited me came up and said ich break date ich break and can end up front row lets get out of here. but i would say the most amazing was the university of wisconsin, and madison, which may be the most left wing college in the

country. and i apparently was the first conservative who had ever spoken there, in a lecture series. and the university was so apprehensive about my coming that they assign an armed guard to meet me at the plane and stay with me the entire time, to checking into the hotel under an alias, and you have 22 security people on duty the night i spoke. of course, nothing happened with all that security. but it is amazing. this is the united states of america, and now it's become more civilized in recent years. and so when they i felt recently at berkeley, it was not the students fault. [laughter] >> well, you have been a lovely, lovely audience. i think the clare booth luce institute for inviting me today, and i thank all of you wonderful

people for coming. and again, i am challenging the young people, go out there and be leaders, be active in the political process. maybe you will enjoy it as much as i have. thank you. [applause] >> we are taking you live now to a second day of hearings on wartime contracting oversight. this commission appointed by congress to look at contracting in iraq and afghanistan. today we will hear about a study on a $5 billion linguistics contract in iraq. jesting underway here live on c-span2. >> have significant inadequacies. today we're taking a case study

approach to gather information on a different topic. we will hear testimony about the army's intelligence and security command, or what is referred to and what we were for two as inscom. their contract for global linguistic services in iraq. the contract began in december 2007 and could run five years at an ultimate cost approaching $5 billion. this hearing will feature government and industry testimony about the structure, operation and oversight of this contract. which involve extensive subcontracting. therefore, the potential for significant added costs that may or may not reflect proportional added to. that will be a focus of this hearing. i want to stress this is not an accusatory or sitting. the prime contractor, global linguistic solutions, or gls, again, we may refer to them throughout the hearing as a gls. and subcontractors including l-3 services and northrop are providing vital support, or

critical support for u.s. operations in iraq by managing about 9000 translators and interpreters who are native speakers of arabic or kurdish. our war fighters diplomats reconstruction officials and others depend heavily on linguistic support to interact effectively with the iraqi government, military local officials and civilian population. said in a subway, wherever our military is is the very point of the platoon level go forward they have interpreters with the. this is a critical support contract. that has absolutely everything to do with the mission, as well as the safety of our war fighters. our hearing focuses on other issues, including our policies for determining that subcontracting arrangements are providing valued commensurate with costs and our method for providing effective monitoring of contractor performance. we have two panels of witnesses here today. the first comprises of federal officials involved with the

contract and its oversight. they are john isgrigg, deputy director of contracting at inscom, forrest evans, deputy program manager and contracting officer representative at inscom. and april stephenson, director of the defense contract audit agency. our second panel represent some of the companies working under the limbo stick services contractor. these witnesses are john houck from global linguistic solutions, the president, thomas miller general counsel, l-3, and gregory schmidt, vice president, northrop technical services. again, i want to reaffirm and state thank you all of you for attending. before we hear from the witnesses i want to offer some background to illustrate why the gls contract makes a good case study for some of the myriad of questions that congress has directed this commission to tackle. as noted, the gls contract is a five year contract of the

indefinite-quantity, indefinite delivery type that the government uses wind precise forecasts cannot be made of the scale or the timing of the needs. this is a cost type award the arrangement that is used throughout the theater whenever there is significant uncertainty about the scale or the timing of the needs. the contractor can recover supported costs plus an award fee determined by the government within a proposed range that is largely keyed to contractor performance. one of the aspects of the gls contract that we would will receive attention today as i said before is a cost impact of the subcontracting, impact. as i outlined, involved very heavy use of subcontractors. even though the gls does all of the recruiting, all of the vetting, all of the hiring, all of the training in the field of management of link was. said in the simplest terms, every linguist out there could, in theater in iraq wears a gls

badge and is managed and supervised by gls employees, regardless of who is doing their payroll. their indirect cost and fees plus the prime contractor was administrative costs and fees all become add-ons. so total cost of this contract. going to export us today and try to understand and that is what it is a great case study. in the year and a half since the gls contract took effect, these add-ons cost may account for a hundred million dollars or can i say may account because we are going to have testimony from the director of the defense contract audit agency. and we ask director stephenson to provide us her best estimate of the premium and a process that she went through presently i find it interesting comment director stephenson, that in your testimony you then, the natural fallout is okay if we spent 800 million so far and it approaches $5 billion, the natural consequence of any

question is how much might that be, that premium. and you provided your best estimate with the proper qualifiers of $556 million. but before i read yours, i did my own pencil, which shows my account and obsessive-compulsive behavior and i came up to 570. so i felt good on a quick assessment you have a much more precise. and we look forward to that. but anyway you look at it, the point i want to make is the difference between the hundred million and $175,000 that you presently put on your schedule, we have well over approaching $500 million more that are likely to be incurred in this process. we want to focus on that because one of the great things about this hearing is we are looking back only so far as lessons learned in the present contracting in the present, but the bulk of the dollars and maybe the opportunity and is five million-dollar program in this area, if it makes sense, is looking for. and that is why we are so keenly

interested in holding this hearing out and that is the importance of this hearing. there is surely nothing wrong with the prime contractor calling a subcontractor assistant for special skills, capabilities or support. do this all tie. in in most cases subcontractors are crucial team members who provide indictable contracts support. in most cases, they don't look and sound and walk like a prime contractor employee doing the same exact mission of a prime contractor employee. in the case of gls, there is a question whether the contract extensive outsourcing of administrative work represent business necessity or some other consideration. and we're going to explore the reasons and try to understand them better. other questions will also emerge and are of interest. l-3 services filed three big protest of the contract awarded to gls over an extended period up on the initial war a war to gls. and again, after the government

accountability office reaffirmed its decision in favor of gls. l-3 withdrew its protest after reaching agreement that it would be a gls subcontractor. l-3 in fact now accounts for more than 20% of the total contract value. so the predecessor contractor, multiple bid protest, now a critical in terms of the cost, subcontractor providing linguists. today we will explore the gls and the l-3 relationship, and any impact from the bid protest. and it is really critical that we listen to all the testimonies as we try to gather and understand this. this point is important to explore. gls identifies and hires 100% of the linguists. we need to understand as they assigned linguist to subcontractors how this process works. on the contractor management and oversight front, we will also

probe the question whether service users like inscom are taking full of vantage and maintaining effective coordination with dcma and the defense contract audit agency. transit is the defense contract management agency. would also ask out proper monitoring of contract or performance can be maintained in cases where as in this instance the army, across the board, is not only short of contracting officer representative and subject matter experts, but has minimal or not assigned to the gls contract who can speak arabic or kurdish. a critical part of obviously any part of interpreter in understanding the role. deification of these issues extend far beyond a linguist services contract, but they can be brought to a sharp focus in this case to get we can seek to identify whether what alternatives, a credible part of this hearing, alternatives are possible to reduce cost and as i said before, our objective today is to ask questions to discuss alternatives.

even if everyone involved in awarding construction, exiting, monitoring and auditing the gls contract is doing every task by the book, by the current regulations, by the current calculations. it seems clear, and based on testimony i think we'll hear it is not all buy the book. but it seems clear that this example raises some issue that should concern policymakers and taxpayers. again, we thank our witnesses for participating in what promises to be a very informative session. the hearing record will remain open for 10 business days to gather responses to any questions for the record. now we turn to our first panel. and what i would like to do is to ask all three of you, before i introduce you and set out the order, to stand, if you would, please. and i would like to swear human. and do you solemnly swear or affirm that the testimony you give before this commission is

the truth, the whole truth, and nothing but the truth? thank you. let the record show that. so i think -- i don't think that we are going to start in the testament that is being provided, inscom as a senior testimony. mr. isgrigg you're going to provide that testimony as the procurement organization, the organization responsible. we would ask you to go first, sir. mr. isgrigg. [inaudible] >> chairman thibault, members of the commission on wartime contracting, to my left is mr. forrest evans, deputy program manager and a senior contracting officer representative for the contract linguist program and i am john isgrigg, the deputy director for contracting for the united states army, intelligence and security command, or inscom. we appreciate the opportunity to appear before you to discuss the

inscom contract with global linguist solutions, or gls. it is also our privilege to be here represent inscom as well as the soldiers, sailors, airmen and marines who are supported by this contract. as requested, i will briefly discuss the history of inscom's involvement and our efforts and managing this contract. inscom contract for the majority of translator and interpreter services required by the department of defense. utilizing for different contract vehicles, the largest of these contract vehicles supports the contingency effort in iraq and other areas as required. this four-point $65 billion contract was awarded in 2007 as a single award and definitely contract to gls, a wholly owned joint venture of dyncorp international. inscom linguist services

contract history dates back to 1999 when inscom contracting officers awarded a $4.5 million, five year contract award to btg. a series of corporate acquisitions culminated with l-3 corporation purchasing the titan corporation in 2005. l-3 assigned management of his contract to its linguist operations and technical support division, known as fox d. in 2003, with the current contract nearing completion, inscom we completed the contract. however, a final award decision was delayed as a result of a series of protests brought my l-3 or lost he and other companies. three companies were in the competitive range for contract award. two of which were the incumbent, l-3, and gls the award under an alternate awarded.

it was ultimately upheld in 2008, early 2008 when the final watch the protest was withdrawn after lotsd reached an agreement. inscom had no objection to the subcontracting agreement as lotsd and performing under the previous contracting in a satisfactory manner. during 2008, linguist requirements escalated in conjunction with the military buildup in iraq. as a result, in august 2008, inscom entered into negotiations with gls to modify the contract level of effort in order to increase linguist requirements. about the same time, inscom now to gls had only provided approximately 80% of the contract requirement for linguist but were burning funds at a rate at 100 percent fill rate. this overburden signal a possible significant problem with gls is spending. inscom contacted dcaa in

september 2084 audit support. negotiations for increased requirements were contentious. inscom was inundated with revised proposals requiring analysis as well as numerous subcontracting request, realizing we are understaffed for a direct oversight strategy. inscom shifted strategy whereby cost would be controlled via contract negotiations leading incurred costs and the subcontracting cost recovery until after the dcaa audits were completed. this strategy shift allowed intel to focus on contract negotiations and active cost control measures and leave the dcaa as a passive anchor to cost strategy. in january 2009, following negotiations, inscom shifted back to active cost control. the inscom teammate 3 carats to iraq to observe gls operation and engage performers. there were significant monies were totally resulted in a partial termination of one task

owner for defaulter determination for default was later converted to a no, termination for convenience when an acceptable get well plan was debated by gls. in accordance with the get well plan sweeping changes were made to gls management, dyncorp, and they institute a dramatic changes in that effort to improve performance and test under cut cost. it has improved however gls cost pressures continue. in conclusion, thank you for this opportunity to appear before this commission, to address inscom's role with the gls contract. i look forward to answering any additional questions the commission may have and we would like to assure the commission that inscom remains committed to excellence in all of our contracting efforts. we shall remain vigilant in our efforts to improve the way we do business by continuing to collect and apply lessons learned and make adjustments along the way. these efforts will ensure

success for our war fighters while controlling costs to the united states government and the taxpayers. thank you. >> thank you, mr. isgrigg. i will have to be reminded to termite mike on a lot. thank you. it is something i forget to do. i appreciate one thing is that i forgot to tell witnesses that we would like to get a hold to about five minutes. you did that exactly on your own. i am very impressed and very appreciative. thank you. director stephenson, i would like to kind of say for the record, you know, you spent so much time up on the hill, and we appreciate it, but i don't know how you've managed in dcaa. so i appreciate your testimonial, look forward to your testimony, and maybe we can give you a break down the road. thank you, director. >> i do have a great staff, so they hold the fort down while i am not there. all right, chairman thibault. members of the commission, thank you for the opportunity to appear before you today. as always, i am pleased to be

here. as requested, i will describe the audit effort performance by dcaa on the wind was contract with emphasis on the costs and functions of subcontractors. and the business relationship of dyncorp international. a more detailed account is provided in the statements that i've request be sedated for the record. >> it will. >> the contract that is the subject of the hearing today was awarded in december 2007, as was previously described. it is being performed by dyncorp, global linguist solutions which i will hereafter referred to as gls. gls is located in fort worth, texas. after several reorganizations of gls in april 2009, it became its own segment reporting directly to the corporate home office of dyncorp international. gls uses dyncorp international business systems, which are all operated out of its fort worth location. of the current value of the contract of four-point

6 billion, just over 1 billion has been funded as of june, 2009. the contract provides for about 9000 linguist in iraq, kuwait and cutter. linguist for afghanistan are provided under a separate prime contract awarded to a contractor in ohio. during the conflict in 2002, inscom use an existing contract for linguist services as what was previously described. and as was previously described, there was a series of the protest, which led to march of 2008, when l-3 withdrew its one of probably about three protest in agreement with gls and did become a subcontractor of about 1 billion of the four-point 6 billion contract value. of the four-point 64, gls has been awarded 64% to 18 subcontractors. as of the date of this

testimony, the primary function of 12 of those 18 subcontractors totaling to point a billion is payment of payroll for the gls linguist. for example, the subcontractor she attica, and alaskan native corporation, pays the linguist with exception of local nationals in theatre based on payroll information that is provided by gls. the local nationals, providing gls a check and gls and then pays the local nationals in theatre in cash. these 12 subcontractors do not hire, manage, or interact with the linguist, other than to pay the amount stipulated by gls. of the 12 subcontractors, nine are small businesses, for a total value of 1.6 billion. the remaining six subcontractors for 136 million performed various functions, such as recruiting, medical care and logistical support.

of the 4.64 billion dollar contract, 860 million has been billed to the government as of june 30. of the 816 million, 81.8 million represents ad on cost of the subcontractors. we have categorized ad on cost to mean indirect costs to france, overhead, gna, along with profit under profit and he. the 8,120,000,000 has increased to 100 million when applying gls is gna and he percentages. the ad on cost for the total contract value of 4.64 were not available. however, in applying a percentage of the ad on cost built to date, of the 101 million to the total contract out of 816, one could conclude that about 12% of the 4.64, or 556 million, could represent the ad on cost for subcontracting the payroll

effort on this contract. gls used the same business systems as dyncorp international for all its function, including accounting, billing, purchasing. and as discussed at the hearing yesterday, three of dyncorp systems are inadequate. we have identified various issues related to the purchasing system and issued a flash report in june 2009 as an early alert of an issue that if left uncorrected, could result in an increased risk of overpayments to the government. that primary issue has to involve the adequate price competition of its subcontractors. for example, on gls no price analysis was performed when it became a subcontractor. and i realized i am coming up on my five minutes. i am wrapping up. as a gls felt it was needed to quickly execute the contract with l-3, in order to withdraw the bid protest, the parties agreed that l-3 would offer

comparable rates and benefits. again, l-3 represent about 22.5% of the contract. in closing, i would like to say that dcaa and inscom has had a very good relationship since inception of the warmth on this contract. inscom has been responsive to dcaa's audit findings, and the predecessor company, titan corporation, was the first company that was performing war related effort that had a withhold due to an inadequate system and that was partially due to dcaa's effort but also inscom's effort in being very supportive and trying to get the labor system deficiencies corrected. so i would like to give a lot of credit to inscom for the effort in which they have been, with dcaa. we have a very good working relationship and i anticipate that will continue into the future. i am pleased to take your questions. >> thank you, director stephenson, and it is refreshing i might say that, to hear after

yesterday's initial panel, that the government in this case is working so well and closely on such an abort and contractor so i table, thank you. we swapped the order around a little bit, a lot, to sort of reflect the way that we are based yesterday's commissioners and today's, and so we're going to start with commissioner grant green with his questions. we will take five minutes on the first round, and three on the second round, and we will see how it goes. commissioner green. >> thank you, commissioner thibault. let me pick up on a theme that commissioner thibault had in his opening statement, and director stephenson expanded on. and that is the contract with gls. this integrated team management approach, as we have all heard,

really requires that the gls retain a majority of the linguist management capabilities. as we have heard, they do all the recruiting, the hiring, the training, and essentially the management on the ground. the subcontractors are responsible for seemingly very little. as i believe the chart over here shows, and we have heard it in the testimony, that over a hundred million in the first 19 months of this contract are considered at on cost associated with this contract. i would like to hear first from you, director stephenson, specifically your concerns with the subcontracting arrangements used by gls, and then mr. is great, i would like your comments on the same question.

>> we are in the process of auditing the cost on this contract. and we are not in a position to conclude whether the costs are excessive, unallowable, etc. they do appear to be a legitimate cost per payroll preparation purposes. however, one would ask, is it the appropriate ad on level for payroll processing, or is there a more efficient way to process the payroll, and is the ad on cost as a having a chart and as i mentioned in the testimony is that an amount that we are comfortable for me public-policy perspective of paying for engaging subcontracts. but from an all ability perspective, and a cal ability perspective, those are still in process. but at this point it appears to

be for legitimate payroll obsessing purposes. but the efficiency is what may come into question. >> mr. isgrigg? >> yes, sir. with respect to concerns about subcontracting, first, please let me say that our privity as a contracting entity is with, while we don't try to help choose a company's business model, or tell them how many prime or how mixups they can and can't have, we do hold them to the terms of their contract with respect to whenever they subcontract. they must subcontract with respect to the terms and conditions of the contract that they have with the u.s. government and inscom. and with that, we have had significant cost concerns with cost pressures. when we would get a revised proposal, or an initial proposal on an increased level of effort.

we would see dramatic proposed cost increases that we would enter into these very contentious negotiations with gls in order to hold costs at parity with what was previously awarded under competitive conditions. >> okay. i will leave this question, because i know the other commissions will have follow on questions related to this. let me ask you one other, what i hope will be a brief question and answer. that inscom claims that they delegated aco function for gls contract to dcma over a year ago. could you tell me the status of that? >> yes, sir. at time of award, we include the delegation on the contract award document, but i did not follow up actively to ensure that dcma

had the mission. and i don't know whether they picked it up on time, but they are engaged now. >> thank you. >> thank you, commissioner green. >> thank you. with five minutes i will speak faster you had a lot of negative things in your written testimony to say about this contract. more so than you said in your or testimony. antony, you sound like a firefighter who sees a house blazing but you don't really have equipment to put the fire out. i mean, it sounds like you are somewhat overwhelmed in the management of this contract. in september 2008, you said you had concerns about overbilling. and then gls saw a dramatic increase in cost and when a contracting officer challenge the increase can't come easy go, gls inundated the contracting officer with requests to subcontract to various businesses, thereby increasing

proposed cost through the pass-through. it sounds like the way you write that is that you think it was almost on a part of gls. is a gls had an 80% kill rate, so you terminated a portion of the contract because you are also afraid of overbilling and they weren't meeting the conditions of the contract. you said your negotiations with gls workload extremely contentious. and at another point you say that gls employed immediate campaign to suggest that inscom was trying to reduce the linguist salary. you have a pretty hard-hitting written statement here. when you read gls's statement, basically sounds like this is a great contract. l-3 thinks it is terrific. so how do you rationalize or explain the differences between your perception of this contract and their perception of this contract? . . funding, i take it

very, very personal that if i award this contract and i awarded this contract under competitive conditions and then immediately we have cost concerns and cost pressures, i'm going to hold that vendor to what they proposed. they are the experts of their own business. they should be held accountable for their business practices,

and that's what i do. we had numerous discussions. every proposal, revised proposal, that i got was different, and it would require a completely new analysis in order to tell what the changes were. it was a moving target that frankly we didn't have the people or the staff to chase. and so it was very frustrating for me with respect to trying to hold them accountable for costs, but i couldn't keep up with the bogey. >> and it sounds like then at some point because you were -- you use the word inundated and flooded a couple of times, that you -- that the contracting officer said they couldn't manage the line by line costs so they decided to compete a portion of it and then let dcaa figure out all these costs in a way. it was giving up a way.

it was a clever way to do it and that competition brought down some of the costs but it was -- but you were literally, as you say, inundated. >> yes, ma'am. the active line by line negotiation strategy is the best way to do this, to manage these costs, but as we got overwhelmed, as i got overwhelmed, i knew that dcaa and inscom worked really well on the previous contract with the withholds and the form 1s. we recovered money from the previous contract. dcaa is experienced in audits. they know what they're doing. i'll let them stay in their lane. i'll let them have that being counter and i'll try to look forward and handle the upcoming costs. >> okay. you said in your statement -- i find this a very important sentence. you said the government does not have sufficient information to adequately determine a rationale for the subcontracting decision by gls.

shouldn't government know why gls chose this subcontracting route? >> gls would let me -- they would request the consent to subcontract and they would have a statement in their requests saying this is why they wanted to do it. but the level of subcontracting in a commodity market that is linguist-support, we're not building aircraft here. this isn't very technical and require a vast range of skills. this is a commodity market and, frankly, low cost producer wins in a commodity market. it was counterintuitive to me why they were making the decisions to subcontract so much of this work out and i don't have the information. to determine why. >> thank you. that is commissioner zakheim? >> thank you. first of all, i want to commend

inscom. i want to commend you and dcaa for working so well together and like our chairman, i'm stunned by the contrast between what we heard yesterday and what we heard today. and i want to ask you both of you, do you think there's a need for regulatory changes before you can apply what some people call the hammer of withholds? >> sir, from my perspective, i guess yes would be the answer in listening to yesterday's testimony that dcaa didn't have that latitude but from my perspective again at the operational level, it was very, very effective with l3. it became their mission in life

to get that revenue back into their coffers so to speak. >> so in practice, you didn't see any need -- nothing stopped you from getting that withhold? in practice? >> no, sir. >> and you'd agree with that? >> oh, absolutely, sir. >> okay. a couple of years back in '08, a year ago, congress passed a law that basically bans fees on fees. maybe one of somebody on the panel can explain to meóg÷ how , without having visibility into subcontractor costs how you can figure out fees on fees.

possibly comply with the law is if you open up your subcontractor books because there's lots of other issues, excessive pass-through charges, identification of subcontract effort. there's a slew of things that's in the legislation beginning last year. again, i don't understand how you can do that and comply with the law without having access to subcontractor books. can either one of you explain that to me. >> i don't have privity of the

information with the subcontractor. when dcaa does their incurred cost audits we can go in and ferret through that information and obtain that other than cost and pricing information after the audits, then it becomes government property and we can look at it. but that's after the fact. >> so in practice, any contractor can come up with a bid that is essentially in violation of the law and you won't know about it until after the audit; is that correct? >> i believe, yes, sir. >> i would say that if that proposal is put together properly by gls or whoever the prime contractor is, a responsibility is to provide the subcontract price analysis. >> do they do that? >> no, in this particular case, they did not. >> they did not? >> that's one of the issues we reported in june of 2009 is they did not have the "price analysis nor did they properly disclose to the government when a subcontractor was engaged with the effort. >> so the united states government has no way of knowing whether a bid is actually complying with the law?

is that what you're telling sunny >> i'm telling you the visibility as we saw it in this particular year, no. now the question that i do have that we're attempting to get resolved is whether this contract was awarded before that law was passed and is that law incorporated in the terms -- >> again, as we've all pointed out, we're looking to the future here. >> right. >> and so my concern is, not just about this particular contract but can this practice continue? and it seems to me what you're telling me is when somebody puts in a bid, we're not going to to know whether they're complying with the law whether we have some more light should i go on the subcontract -- >> if the contractor's purchasing system is operating as it should, we should have that visibility. because we should see who the subcontractor are. they should have to sign a consent to subcontract. we should have that visibility if the purchasing system is operating effectively. >> and if dcaa is not playing

initially -- in the initial part of the b & p, the bid and proposal, then who else would be in a position to figure that out? anybody? >> that would be the contracting shops, sir. that was my frustration with the revised proposals changing each time. i would have to take three or four, five, six days to break this gigantic proposal out, analyze the costs, find out where things are -- where the costs are and what the components are. go back say, this is not acceptable. this is not acceptable. i get a new proposal and it's completely different again. and so that was part of my frustration in ferreting out these costs. >> thank you. >> thank you commissioner zakheim. commissioner professor charles tiefer. >> thank you, mr. chairman. and chairman thibault, this is one of the wilderness of accounting and at least i am thankful to have you lead me

through this. i also want to say about madam director for dcaa, you've spent two days with us, long days, as chairman thibault says, and before that, weeks of data calls, briefings for us. you are a trusted ally to many on the hill. and so if sometime or other people on the hill hold a hearing and they don't value you or gao gets ahold of you, it's realized how much you have been helping contracting, wartime contracting. okay. now, let me ask you -- i want to see if i've got this characterized rightly. gls is supposed to get cost and pricing data on its subcontracts for you, and this is a way that would reveal that these subcontractors are -- i'm going

to be slightly exaggerating and call them do-nothing subcontractors that would show up in cost pricing that they would be paid much more than they are worth. and it didn't. and when you said it should, it nonconcurred with you, which is a rather strong statement by people who are so vulnerable to criticism themselves. and it sounds like what was going on, especially, when you looked at the fact the biggest subcontractor, l3, although it did a little work, was mostly making large amounts of money in add-ons and what's called overhead, which means the corporate headquarters are fattening their salaries, that this was a combination of a prime company, the prime contractor -- it was a combination of the subcontractors basically seeing the taxpayer as a cash cow and the prime contractor, gls

covering up for them. would you comment. >> i tell you if you look at the numbers and the functions that are being performed by the subcontractors, one does have to ask what is the value? is the value to pay payroll worth $100 million that we've paid in the last 19 months or so of this contract? is the payroll function enough to pay $556 million, if not more, over the life of this contract? that's the question that has to be asked. whether that was appropriate or not, i really have to defer to inscom on the functions of it but i think the numbers do jump out and you have to ask, is that an appropriate amount to pay for that function? >> clearly, mr. isgrigg, i see the small fish are getting taken over by the big fish, dyncorp swooped in. it seems to me -- but it's more to it than that.

it seems when trouble came up, which seems to have come up when the surge took place -- there was a greater need for linguists to help the surge and this company wasn't do doing its job, raking extra dough couldn't do to supply the surge. they blamed this on the fact that the linguists were getting too high a salary. and if i'm correct, i could be wrong, in your statement you said this was, quote, absolutely not true, which was a statement stronger than i've seen in two days. i still -- i want to load this question up with everything i can ask you. what was happening is you've been giving an award fee, 80% of an award fee to these people and in no time at all because how they folded under this surge, termination of default which is a -- a termination of default is a pretty -- this is the first time i've come across in all the

commission's work a major company in this war getting a termination for default. tell me if either of you knows of anything else of this size getting -- that's like court martial of desertion in the face of the enemy. am i characterizing where these people went from award fee down to that? >> sir, the award fee is tied to fill rate and is pretty mechanismic, and you get a certain percent of the fill rate of the because we never had 100% of any of these linguist contracts and so we structured it as such as to reward for fill rate up front, and that's why the 80% award fee was given because they had -- they met the criteria in the award fee to earn the 80%. however, with respect to 100%,

we had a unit in northern iraq who was in a very difficult position, and they were begging for linguists on one of our visits, mr. evans and i went over and they were begging for linguists, and that was enough for me to take action -- >> termination of action? >> yes. >> commissioner henke? >> he's asking if i want more time? >> all right. great. do you want to keep going, commissioner tiefer. >> i want to get to the point about the linguists. you made a strong statement -- am i understanding by the way there are reports on the ap, this is not a far out publication that we are having severe troubles in the field because we are losing linguists. they don't want to work because their salary has been cut by their contractors? or at least they were getting hazard pay and i guess now they're not getting any hazard

pay and as a result our military capability, it's a strong term, is being degraded, while the contractor says, oh, our financial problems -- we were paying the linguists too much, in fact we're losing precious, precious linguists and now we're going to afghanistan where the linguist problem is much greater. how many pastun-speaking american citizens do we have? >> not many, sir. >> do i have it right, they're blaming the lip gists and, in fact, they're hurting us? our military capability, by squeezing the linguists and making them quit? >> technically, which we renegotiated that large task order, the initial proposal came in at gls at the number that was in the report right in my testimony. when we got them back down into unit for unit cost, with about a 4 and change percent increase in cost year-over-year, that was

based on what was awarded when it was competed. they went and i don't know why gls said that we had cut their salaries but they had told m & fo, their linguists that they had cut their contract. we actually increased their contract, their contract cost, and gave them a unit per unit increase year-over-year 4.5%. they got 4.5% out of me >> let me get this straight. they went around -- gls went around telling the linguists that inscom cut their salaries and telling m & f that inscom cut their salaries and instead it was absolutely untrue. and as a result, we lost linguists, which we desperately needed. is that what you're saying? >> yes, sir. can i let mr. evans answer that. he's on the operational side. he can handle that. >> there were several official documents put out by gls headquarters that implied that

not actually said that the reason that the salary reductions were occurring was due to inscom having reduced the value of their contract. but i will say, sir, that to my knowledge no significant numbers of linguists left theater as a direct result of that. >> where are we going to go? >> yes, sir. >> commissioner gustitus -- >> can i ask just one quick question. does the requirement to pay this extra potential $550 million -- does that affect what the linguists are actually going to be paid? does that have to come out of the hide of the linguists' salaries to any extent? >> we don't know that, ma'am. when gls was awarded the contract, they had a linguist salary structure built into their proposal and i don't know whether they're paying their linguists according to what they had proposed or something else.

and that's -- i think that's where the disconnect is, but i don't know that for certain. i think perhaps they may be paying linguists more than they had actually proposed. and as a steward for government taxpayer money, i'm going to say take it on a profit. that's not the government's issue that you did not estimate linguist salaries correctly. >> commissioner zakheim, you got your hand on the button. >> yeah. so if they're paying them less, okay, but since you're working off a schedule, you don't know that they're paying them less either, right? >> that is correct, sir. >> so they could cut their salaries by half, still have that schedule, still charge the g & a and fee costs, still charge fee on fee and still hit us, as taxpayers, for a half a billion dollars and pay these guys actually half of what they thought they would pay them? is that correct?

>> short term, until dcaa audits catches up on them >> we'll have 3 minutes to put on the clock and i thank you for supporting -- >> this is fascinating. it really is a case study on a whole lot of levels. i want to get a couple things clear on my mind and maybe for the audience's mind. before this contract, there was a contract with a smallish company called btg. the first contract was lit in 1999 and it was a five-year contract and it was set to run through 2004, right? and the initial value was expected to be about $10 million, over time with requirements that grew to $600 million? how do you do that in an idiq -- just quickly, how do you do that? >> on the old contract, sir, we had to request justification and approval to increase the value of the contract to mitigating circumstances of -- >> operational need probably?

>> yes. >> so while this thing is going on, btg, and here you are at the end of the contract, all the options have been run and you put more than you thought in '04, then -- but you run off that contract from '04 to march of '08 when the new guys start performing? >> well, sir, it wasn't -- that original contract was extended several times. and then there was a bridge contract, and a bridge contract essentially is a new contract sole sourced back to the incumbent. >> right. >> that one was extended several times until we got to the new award >> all things you wouldn't want d.o.d. in a perfect scenario doing things during the war when you should be doing that. you go in the spring of '04, you go out for proposals and you get a protest from a company called

rem holdings and their their test you didn't put small business contract goals; is that right? >> we were bundling under the -- >> okay. so they had a small business bundling? >> yes, sir. it was a small business bundling. >> the time on here is so fascinating you went out december of '06 -- sorry, you awarded december '06. >> yes, sir. >> the surge starts in january '07 roughly. >> and during that -- from january '07 to march of '08, l-3, the incumbent, who's making money on the contract, protests, protests and protests, three times in a row. twice gao upheld the protest so there must have been some merit to it absolutely. >> yes. >> and the price went down fortunately for you; is that right? >> yes. >> you are required to have 35% small business participation in this contract; right? >> yes, sir.

>> the decision to have large business subcontracting for gls to go to large businesses, that's their decision. that's what you said you don't have insight into, right? >> yes, sir. >> if someone were to ask you why do you have to subcontract with small businesses, you're required to, they're required to? >> yes, sir. >> under the army small business program so that's really not the subject of the hearing today. the subject of the hearing is, where the contractor has the discretion to go to another business why did they do that? if i've got another minute. >> you have another minute and a half. >> it smacked me for a tuesday morning -- >> wednesday morning. >> see? >> yesterday, was -- >> touche. >> my memory was inadequate. >> it's day two. >> i agree with your views. [laughter] >> that's right. that's right. your testimony in particularly page 3 and page 7, particularly, the table on page 7 is fascinating.

and let me just summarize and ask you a question. gls aawarded $2.9 billion to 18 subs. if i'm looking at the math right, about $2.8 billion was just payment for linguists. it wasn't for like medical exams or testing -- >> it was the payroll function. it was to take what gls -- these people need to be paid and then they turn around and pay them. >> right. so $2.8 billion just to move payroll around. that's 18 subcontractors, but 12 subcontractors do not hire, manage or interact with the linguists other than to pay the amount stipulated by the prime contractor. >> that's correct. >> i don't get that. >> i haven't -- i have to be answer, i've seen a lot of prime contract, integrated contracts but i haven't seen just for payroll other than to have one subcontractor to do payroll or two. i haven't seen it to this great extent. >> to me, if i'm a linguists

forward deployed, i am -- i guess -- i'm an employee of l-3. i have a legal relationship with them, but gls tells l-3 pay bob his payroll and then -- what happens? who's moving the money to who? >> gls moves it to the subcontractor who then moves it to the linguists. in the instance of in-theater local nationals that are paid in cash, the subcontractor moves it back to gls to pay in cash. >> okay. one of the things that -- commissioner henke, thank you. commissioner zakheim, did you have -- >> very, very briefly. $1.6 billion of all this stuff is the small businesses. do you think that the reason that they're doing this is because they had to meet a 35%

small business goal and they really didn't want the small businesses to do anything but to satisfy the government, they basically gave them money to give to the translators and that's it? and maybe that says something -- again, that's outside of the scope of the hearing but maybe it says something about our small business goals and the way we do things by the book in a strange kind of way. could you comment. >> in a strange kind of way, i think, is a good way of putting it. it is a legitimate cost. it is a payroll function. payroll functions need to be done. do they need to be done by 12 different subcontractors with their own g & a and their own profit, their own fee? i think that's a good question to ask. >> dr. isgrigg, do you have anything to add to that? >> sir, it does not make to me in a commodity market for you -- for any company who wants to maximize profits by earning money doing the work to

subcontract anymore than what is required. >> thank you. commissioner ervin? >> thank you. i have a number of questions, but, of course, we have limited time so i'll try to be brief in them. the first question i think is just kind of an obvious elementary fundamental question and i would like each of your comments and your judgment on this. in your judgment, would dyncorp, gls given a subcontract to l-3 particularly one for $1 billion? that's a huge amount of money needless to say but for the protest? >> i'll answer first. l-3 was not part of their initial proposal. was not part of the proposal that was for the award that was upheld. through the gao protest, they did not become a subcontractor until after three protests. so on the surface you could say they were not part of their subcontracting plan. and so but for the protest, i think commonsense would say they wouldn't have been part of this program.

>> yes, sir, that's correct. i think it was -- this is my personal opinion. it was shrewd business practice on the part of l-3. they were going to keep the contract as long as possible to maximize the profits. that's what they do. that's good business. i think it's shrewd business practices on their part. i think they earned a piece of the award by leveraging gls. >> mr. evans? >> absolutely, sir. i concur with miss stephenson and dr. isgrigg's comments. but for the protest, l-3 wouldn't -- probably wouldn't be involved today. >> okay. on page 6 of mr. houck's testimony and, of course, we'll ask him when he gets here and i assume you all have a copy of it. there's a listing out of the functions that each -- that gls and all the subcontractors

allegedly perform in this contract, if you look at it -- according to this chart, the only unique contractors, that all of them provide, is what's called advisory management support which one could argue really is no support at all, really. and so given that, my question is, aside from the small business concerns, which commissioner zakheim raised and this protest issue, i think we've established pretty clearly here is that there's something very, very troubling indeed about this contract. and if you add to that the fact is you point out in your testimony, director stephenson, that there are three business systems on dyncorp's part which are at issue here, all of which are problematic, the huge amount of cost at issue, what can we do about this contract at this point? do we just have to live with it through the course of its four-year remaining life? is there any remedy available to the government and taxpayer?

>> sir, right now with respect to the inadequate business systems, i believe just last week or the week before last, dcaa has suspended payments until gls addresses their concerns. we support that. inscom supports dcaa in getting the information that they require to be able to certify their systems. i'm hoping that they will be able to certify them, but we'll see what dcaa has to say with respect to to that. >> thank you. >> from the cost perspective we certainly have taken immediate steps to adjust the billings. however, the much bigger question is, how long do we need to live with a contract that has significant add-ons where those add-ons do not represent any significant functions that could not be performed perhaps by the

prime or by one subcontractor i think is a very good question that should be asked. and i'm not sure how long the government needs to live with that situation. >> i'd like to add, sir. >> please. the recompetition has already begun for the contract portfolio. our afghanistan contract is going to burn the ceiling early because of the rampup of requirements and in january, i believe it was january this year we started the recompetition effort. i don't think it's any secret -- i can tell you right now it will be another 12 to 14 months before we can finish an award if there's no other protests. >> thank you. >> thank you. >> i think you, director stephenson, nailed it in terms of your comment just now, which is sort of the theme as i see coming out of this is how long do we have to live with these significant add-ons in this

contractual environment as an observation? in your statement, you outlined something that is of concern and that we were just talking about it but i want to provide clarity. my understanding is that your auditors, as they've reviewed the billings, the invoices, the vouchers -- we have this cost-saving controls that we're worried about because they add to a lot but inscom directed that certain ceilings be applied to certain of the costs and work that out. and you're reporting in here and following the contractor is not following no ceilings in other words you have the ceilings to limit cost and they're billing their regular rates which are substantially higher than what they agreed to do in the contract. and so you appropriately have come in and recommended to your customer that this doesn't make sense and we don't think we should pay them until it's sorted but underlying that is a greater concern, which is what

can we do to assure they're following contract terms because you put in cost controls and it seems -- it seems to me, whether it's inept or large, i agree to 12% but i'm going to bill 50%. that's pretty obvious but if a prime is saying, okay, i'm going to pay you and we spent a lot of time yesterday well, you start with the sub in that case but the prime has the responsibility. >> right. >> do you want to talk about that a little bit? >> i absolutely would. yes, the billings that we have been reviewing have determined that although there were ceiling rates put in -- we talked earlier about the cost containment, that was one of the areas of the cost containment was to put a ceiling rate in for the indirects and a ceiling rate for the profit and fee. we found for the indirects, the subcontractors on average -- each one is a little different, but on average collectively are billing at least double what that ceiling is.

>> so they put in cost controls. everybody is aware of them but the subcontractors have ignored them and you doing your job -- in this case, you aren't the first line of defense. >> the prime contractor -- >> is the first line of defense and if you weren't doing your job, we wouldn't even know about this. >> that's correct. >> your contract costs would be -- you're very concerned about contract cost, dr. isgrigg, your contract costs would be escalating even more. is that factually on target? >> yes, sir. >> thank you. i'd like to talk, dr. isgrigg -- we're going to give you some time at the end, april -- director stephenson. i would like you to talk a little bit about performance. and i'd like you to talk about difficult -- but i'd like you to be candid. you've been candid so far. let's talk about the incumbent that was there before and the current -- or the current incumbent and the predecessor

contractor. you talk about -- you said fill rate. adequate number of linguists to support the war fighters so they don't have to go out and can't talk to the enemy or talk to the villages. can you talk about that performance of past and present. >> yes, sir, back on the previous contract when l-3 had the contract, their fill rate -- i believe they were served one cure notice for fill rate. part of the issue was the growing war effort and the moving target with respect to them recruiting in a fast-enough manner. part of that was to vet it and clear these linguists in a timely manner in order for l-3 to get these guys on the ground as specified in the contract. their performance was acceptable with respect to fill rate, though -- >> acceptable meaning okay or

not stellar, not outstanding but acceptable to meet the mission? >> yes. >> okay. >> and the current fill rate, sir, again, there was that moving bogey of yet an increase, increase, increase. however, it seemed to me that there was an issue with a sense of urgency in filling these units and that's why the termination for default was levied back in march. >> right. and the present? >> right. >> how are they doing now? >> they are doing fine now because we descoped part of their requirements. >> between your management and your action that is they've taken that they'll probably share with us, you're a satisfied customer at this point? >> with respect to fill rate, yes, sir. >> well, see my point is, and where i'm coming in this, is this subcontracting -- over 22% by the prior contractor, a big part of what commissioner ervin brought out was for advisory

management services. what -- what are you advising on? are you advising all the problems you had with fill rates and your inability to sort of get the job done where the current contractor seems to me, that everything we're talking about is it's transport and there's one contractor and i share that. my last point is cost reductions. you're challenged with costs. have you seen substantive actions of programs -- you know, i you get briefings all the time by this company. the company i believe is trying to be as responsive as they can. they got a lot of problems and they're going to share their own but we talked a lot about cost reduction. and, sure, you've got a responsibility to manage it. sure, you've got what you call operations audits to provide opportunities. you talked about adding 12,000 hours in afghanistan. but we keep emphasizing the company has a responsibility also. how is gls doing in terms of coming in and saying, hey, i got

this new idea. a new process -- i got a cost type contract. i get paid a buck for everything. can you talk about that briefly. >> yes, sir. just real quickly. since the descope termination and the change in leadership, they're very aggressive in maintaining costs. i think you spoke with mr mr. balhause and the gls goes out and seeks ways to reduce costs. >> my way of paraphrasing that in speaking for you and correct me if i'm not is with significant management actions to include replacing the president of the company recently and mr. ballhaus' comments and i'm all over hope springs eternal. you see some things that you really like? >> yes, sir. >> about cost reductions so that

you who have very limited funds and a growing workload environment see some opportunity to control this? >> yes, sir. i think they need to be a little bit more aggressive to meet our expectations. >> good. >> but they're making an effort. >> good. okay. my time is up. commissioner green? >> a follow on, dr. isgrigg, to an earlier question. since contract administration has now been delegated and assumed by dcaa, as you indicated, what are they actually currently doing and what more should they be doing? >> yes, sir. they recently wanted to assist with the termination for default, descope, we wanted to manage that ourselves because we knew better the cost pressures and what our dollar target was, what our government position

going in was going to be and what we would settle for. and they are managing property, real property -- dcaa does an excellent job in manage real property. >> are you satisfied with what they're doing and the speed at which they've assumed these responsibilities? >> with respect to, sir, to my experience with dcma, the amount of value they create, i'm acceptable to that. to their level of effort right now. >> all right. let me switch gears for a moment. we've all heard about the shortage of cors associated with this contract. what has the army done, what has inscom done to get the needed number of subject matter experts

and corps assigned? and how this shortage affected the documenting of the performance of the the linguists? you got guys who can't speak the language and you've got a shortage of them, it seems to me that you can't accomplish that mission very well. >> mr. evans is on the operational side. >> sir, we continue to struggle with that. we recently this year increased -- we had a board existing for our deployed cors. we had a board that allowed us to deploy 25 to mobilize and deploy 35 and we increased that to 50. right now we had 50 cors in iraq

and two in afghanistan. we're obviously shifting focus now to afghanistan. we'll be increasing the numbers there to 5 before september. all of the cors we have deployed, they do monthly reports. they send them back to us. we incorporate their observations and discussions into the -- into the award fee determinations. >> do you see any increase in the language ability of those you're bringing on or those that are appointed as cors? >> sir, we don't have any, to my knowledge, as you said qualified in arabic or other and that's something we struggled with because of all sorts of options up to and hiring another vendor to provide linguists that we can use to check the skills and qualifications of the first

vendor's linguists. we haven't come up with an acceptable solution yet, sir. >> okay, thank you. >> commissioner gustitus? >> we want dyncorp to be aggressive in doing cost reduction and reducing their costs and part of it is because of this crazy quilt subcontracting system and all that. and we don't want it to be over the appropriate salaries of the linguists. i mean, they are doing some of the most dangerous, important work in this war. so how do we -- how do you stay satisfied that the cost reduction isn't at the expense of the linguists who merit the money? >> yes, ma'am. we had several discussions with gls with respect to making certain that the linguists are paid appropriately. that their hazardous and

post-differential uplifts are as proposed in the contract. what they had proposed was a certain level of uplifts for hazardous duty and such and when they've reduced that in an effort to reduce costs, i had to point out that when they reduced that cost, the government gets that money back because that's our money. and whenever they save money, we get it. it's ours. and so we had that dialog. if you don't bill for it -- if you're not incurring the cost, we keep it. it's the government's money. and so we've had several rounds of dialog -- >> you mean you're trying to appeal to the self-interest that they won't get the money that they take from the linguists? >> exactly. the government is going to keep it. it's our money. >> uh-huh. >> and so they should be paying the lip gists in accordance with

what they proposed at the time of award and what's in their proposal and if they deviate from that or they save money from that, the government keeps it. >> i don't know if that's completely satisfying to me. i am concerned about that pressure because of this extra $550 million. if they want to keep that at the expense of the salaries, the appropriate salaries for linguists, that would be very disturbing. i just want to get to this payroll function business. payroll function is somewhat meaningful and i want to be sure i understand this. what the subcontractors do. they don't collect the time cards, they don't determine the pay. they don't cut the checks. >> they do -- >> they pay the cash and they deliver the check when it's cut. >> right. they will, in essence, cut the check based on what gls gives them. they'll say, this is the amount that you need to pay the linguists. and they will pay that amount.

when it's the cash in theater, at least for the one subcontractor we looked into recently, they give a check back to gls for the local nationals to then pay in cash. >> okay. so all the payroll function is, is at the order of gls, pay this amount? >> correct. >> that's it. now, they're going to say well, they also check the records but -- >> there may be some of that but as far as -- >> it's not even that necessary? >> right. >> it's just you pay -- that's what the payroll function is. >> correct. >> okay. thank you. >> commissioner zakheim? >> so for that payroll function, we're talking about $4.5 billion? >> no. 550 -- >> $550 million. >> that's our rough estimate for that. to date that's been the -- >> yeah, okay. i'd like to ask you, dr. isgrigg -- you terminated

for default -- partially terminated for default. when you t for d, the company that's been terminated has to report that in their past performance statements whenever they make a future bid. this is a joint venture. does that mean that the parent companies don't have to report anything? >> what happened, sir, i did t for d. whenever gls came in with an acceptable get well plan, i changed the t for d to a t for c -- termination for convenience, which will not be -- they will not have to report that but in this case the parent company knows there would not have to report that. were that to stand for a t for d, i don't want to limit compensation for the next contract coming out and had i left that as a t for d, i would have essentially eliminated them for competition and competition is good. >> okay. now you mentioned in passing

that there might still be more protests coming for the next contract. do you anticipate another bridge? do you anticipate this thing happening again? and if it does happen again, which, you know, after all is said and done it seems to have worked for l-3, what can we do about it? i mean, is the government just totally over a barrel? >> well, sir, i would have -- that would be speculation on my part. >> i'm just asking you not will it happen but could it happen? >> oh, absolutely, yes, sir. this is a tough market. the linguist market is a bare knuckle market. >> so the same thing could happen again? >> yes, sir. >> you talked about your cors not being all that proficient in arabic, is that correct? so that's standard arabic as opposed to iraqi arabic which is quite different. so we really don't know what these translators are doing?

>> sir, it's very difficult to -- what we do -- what we do have is multiple linguists at almost every location. and at times when there are allegations that one particular linguist is not appropriately or as required, we use our in most cases our ci assets to used a trusted interpreter to investigate, if you will. but very rarely do we find that this is the case. >> well, there could be somebody not necessarily working for al-qaeda. i mean, i've been in lots of meetings where the linguist didn't simply do a good job. have we fired linguists? >> oh, absolutely, sir. most recently one in afghanistan. he was removed from an actual -- a relatively prestigious

position because he mistakenly started translating in dari and pashto. he was a formal situation and broke into dari and it caused confusion. it was bad in that particular case. >> thank you. >> commissioner tiefer? >> thank you, mr. chairman. mr. isgrigg, vertus capital owns one of these companies. is it gls? >> i don't know that for certain, sir. i think they are a venture capitalist who is funding gls, i believe, sir. >> and did dyncorp originally -- or until -- until the t for d, until you terminated for default, an extremely harsh measure -- i have to mention it, a plug for my book. i teach government contract law

at the university of baltimore law school cases in materials. this -- i can't find anything like this contract in here, okay out of 1,000 pages there's nothing like that in here. did they have this guy who was their president spider marks with his colorful background? he was kind of resigned or went away after t for d, termination for default. and he had been part of the planning for the 2003 invasion of iraq, yes? >> i don't know that, sir. >> well, in the event, this company, this acquired company, became a cash cow after that -- he had conveniently -- didn't they get a contract in kuwait, a kuwait-based contract? not an american-based contract out of the kuwait command which was not just -- might have been helpful in afghanistan or not but a great way to ride the invasion that he turned out to have been planning?

>> are you speaking of gls, sir, or dyncorp? >> the one that spider marks was on? >> no, sir. i don't think so. i think gls came in to existence -- they formed just for this linguist effort. >> why dyncorp bought it up -- i'm now using a very dubious publication called forbes and i'm going to ask you on wall street goes to a fair statement. this month forbes -- as the conflicts in iraq and afghanistan boomed, dyncorp process speaker. -- prospered. 53% of its revenue comes from the battlefields. 51% joint owned ventured secured a multiyear contract to supply 9,100 linguists to translate for

u.s. soldiers in iraq amid a worldwide recession, forbes says. that contract helped boost dyncorp's revenues by 45%. is that all consistent with your understanding? >> yes, sir. i was reading their press release on their latest earnings, i believe it was a month or so ago. they were talking about revenues were up significantly, however, margins were down so i took a little bit of solace in the fact that their margins were lower. >> oh, yeah. this is isn't profit but huge revenue in a time when revenues are shrinking, and meanwhile they are squeezing the linguists down and paying them less and ap says that the quality of the linguists in the field is suffering. you may not seeing them leaving the battlefield but the quality is suffering because the pay has gone down? >> sir, i want to say something about the quality. we haven't paid a lot of attention to quality in the past because our fill rates were -- we were taking whatever we could get. but we are focusing on quality now.

and that's part of the issue mr. evans was trying to speak to is how do we improve quality if we don't speak -- if we don't have anybody that speaks the language and can actually do any spot-checking. that's part of the trick box. >> one more question. >> one more question? >> one more question. >> go for it. >> was there a $25 million withhold related to this contract because of labor system deficiencies? does that ring a bell? >> on the gls contract? >> yeah. >> right now we are withholding payment on vouchers, on all vouchers right now because of the issue with the indirect cost from the subcontractors. and so right now we are not making payments. there have been vouchers rejected over the past few months for the amounts -- for costs being over the allowable amounts. so along with the issues we discussed yesterday, at other

dyncorp, that billing system is the same system that the gls contract is using and we are having some of the same billing issues. the $25 million sounds familiar but i'm not able to place exactly where that was. whether that was rejected vouchers or other costs but right now we do have a hold on the payment of all vouchers for gls until they adjust for the subcontract crisis. >> $25 million is the right scale even though it's not precisely correct. >> we believe the amount for the indirect cost is more in line on the $40 million on the adjustment but again, that's a rough order estimate. >> thank you, mr. chairman. >> so for clarity you believe this overcharging of subcontractors ceiling exceeding is going to go up best estimate. >> it might come in a little less or -- >> or might cocoa in a little more. thank you. commissioner henke. >> in march of '08, the third protest clears, l-3 pulls their protest you're moving along with

execution of the contract, right, mr. isgrigg. >> that was january '08. >> what is task order 1 briefly? >> that is the major effort for iraq. that was the first and largest task orders and it continues to be. >> during summer/fall 08 posture right to to gooisht a pric-- gl negotiated a price. >> it was 1.03 billion. >> and you were unable to handle all the data and do the analysis so you went to your other contract for afghanistan, got that contractor to come in and propose for this work. they come in with a different price which gives you a negotiating basis, right? >> yes, sir. >> you actually settled on -- of

the billion 030, the contractors gave up $254 million for that and you wound up with 776, is that about right? >> yes, sir. >> can you tell us how did that 776 come about? >> yes, sir. when the original proposal came in at the 1.03 billion, i started breaking the proposal apart trying to figure out why the cost was so high because it was stunning whenever you get a proposal like that, when we were expecting something in the 750 to 800 range based on current costs. >> right. >> so i started breaking it apart. i was in a pickle and i needed to manufacturing some leverage. >> smart. >> so i manufactured the leverage by getting a proposal from a competing company with a contract we have basically manufactured on an idiq with a single award because we had enough overlapping scope.

>> uh-huh >> the settlement amount is like i said is about 4.5% higher than what my objective really was, if it was completely in line with what was -- the costs that were awarded at the time of award competitively. so they were 4.5% higher than what was exceeded previously. -- competed previously. >> okay. it's not often that i get to say thanks for saving the government 254 million bucks just from keeping your hand on the till and doing a good job. so i hope that you were recognized and rewarded for doing that as shocking as it was to get something -- hundreds of millions of more expected you walked it back and you came within a reasonable estimate of doing the right number. one last question and then i'll wrap up, your statement says you -- gls -- after you resolved

the 776, gls -- you go to kuwait -- you call a media campaign. you use the words twice. where there was spending linguist salary cuts, the operators are going to be killed -- not killed, operators are going to be impacted by performance. do you mean there was a media campaign? what do you mean? >> mr. evans can speak to this because on the operational side he was getting the information in. >> yeah, uh-huh. >> and sir, i would actually -- i characterized it at the time as propaganda. >> okay. >> because it was -- yeah. it was termed as information operation because they were putting out information that was, again, from my limited view appeared to be written by a lawyer 'cause it didn't -- >> mr. chairman, i ask for 2 more minutes. >> absolutely. ..

>> do you know who else was involved in a walk around two or? >> no, sir, i don't know personally. >> with the joint venture, gls, what is the general role? >> i have not had any interaction with general mccaffrey. >> do you know what his role is? >> is on the board of directors, i believe. >> of the joint venture? >> yes, sir. >> thank you. >> commission urban.

>> thank you, checkered commissioner henke begin the second round where he began and i will do likewise. you all agreed that in all likelihood, but for the protest, gls would not have awarded the subcontract of a billion dollars to l-3. and going to this chart that i went to initially on page six, there are a number of things that l-3 does under the subcontract that gls does. l-3 does corporate training, personnel security administration, human resources administration, casualty assistance, etc. the only thing l-3, but to talk about l-3 dell, the only thing it does uniquely that gls doesn't do is advisory management support. we all agree that at best that's an ambiguous term. so what that means in effect event is that we the taxpayer paid a billion dollars to eliminate a competitor to gls for this contract, essentially. that's what we are talking about.

any comment on that? >> yes, sir. the possibility to pay that is there, but as i am trying to get across to the contractor, as they proposed, that's what they will build. that's their budget and if they can't make it under that. i don't care if they subcontract all the workout, but they are going to stick to the cost that the government deems reasonable at the time of award or something similar to that. that's how i'm going to have to manage this. this is the only way i have to manage this monster. >> my question with that is, to give us background, why didn't they subcontract with l-3 in the first place. they had experience in this by virtue of the work they were doing years ago in the balkans and afghanistan. >> i don't know that exactly off the top of my head, sir. i took over the contract during -- after the second protest. it was already in protest, and

kind of languishing. and i took it over in august of 2007. after a return from deployment. >> do you do have any comment about the? >> i did want to make equivocation and perhaps i misunderstood your comment. i am not sure that the billion dollars would have been avoided, had l-3 not been involved, or that just would have been spread to the other subcontractors. because there was a certain amount that gls was going to give to subcontractors. so it could possibly have been just that billion spread to other. >> sure. okay. this is a related question, and maybe an unfair one because we don't have a geo represented here. what was the basis for the gao protest? to many of you have a recollection as to what the rationale was? >> yes, sir. i believe it was an improper cost evaluation. >> final question.

i know this is not a small-business hearing, but we raised the issue once and i just want to raise it one more time. we have about, according to your testament, director stephenson, about $1.6 billion over the course of the life of the contract is attributed to small business contractors, and we understand that there's a regulation that says that you don't have to contract with small businesses if the work is performed entirely outside of the united states. now, i understand that 63 of the total, about a thousand, 7000, linguists are going to be performing stateside or are performing stateside, but obviously the overwhelming majority of them are performing in iraq, as you would expect to be the case. that being so, just a quick judgment as to whether under these circumstances we really had to contract with small businesses for this. >> sir, in order to meet the army's small business subcontracting goals, and comes

supports the goals and supports the army and the small-business. however, a clever contracting person could probably structure the next contract where you had your out of country requirements separate from your in country requirements so you would be able to follow the rules, the rags, code, but still minimize cost to the government. >> thank you. thank you, commissioner. just putting a cap on that. so you did not, because the army had targets for you, this 30 plus%, you did not explore whether it made sense to consider the regulation that was intentionally performed to do that. and i may say, and i continue to say it, of all subcontractors, we are only talking, i like is a 10 chance of one size and one

metallic whatever in the sense a linguist is a linguist is a linguist. and it seemed like everybody is doing advisory management and payroll, and that is the thrust here to the observation, thank you again. i would like to reiterate what commissioner henke said. $254 billion is a lot of money. thank you. and then there are $556 million, and the two mike ross over a little bit, but not that much may be, for this payroll, for this premium that we have talked about that initial and it was provided by director stephenson. so the billion dollars gets closer. $810 million if i add that together. and some of which has been realized through your actions. and i guess my interest here now, i was compelled early on when you said i did all this, one and a half people.

you know, who probably worked through some pretty long days and under a lot of pressure. how many people would you estimate that you need so that the one and a half times whatever you multiply or had to to really be effective and get things done so that you are not compelled to drag in a very confident afghan, they have a big mission to do there, contracted to play off against the iraqi contractor so you can do this bottom line negotiations because you don't have the staff to do the kind of price analysis and you would like to do. do you need five? do you need 10? can you give me a sense of how many individuals would make your life manageable? more manageable. >> yes, sir. from district with a contracting side, and mr. evans can speak untruths because the operational side, from the contracting side we need five, six more contracting professionals to handle --

>> you need five or six more. mr. evans, what do you need? >> it's roughly the same for me, sir. probably around five more people, because as it is now we have one primary ceo at the headquarters for each of our four linguist contracts. in any time anybody goes anywhere, it is a major event. because everybody else is trying to pick up the slack. >> so we, we meaning inscom need about 10 people. and all the challenges, this bottom line negotiations, this innovative way that thank you for doing that, 10 people. and we just mentioned, take those two pieces, there's an opportunity, you have another by coming up, right? >> just. >> new option here. new situation where for the want of 10 people, we've got schedules and charged up that are incredible. and so i say as we have said in many of our hearings, this comes down to staffing, staffing,

staffing. if you take back a message that this commission is interested in, with a dollar value, i don't know where you get the 10 people but it is in the army's best interest to get you those people you need to continue to do the kind of job you are doing. thank you. >> yes, sir. just point out that under the terms of the contract we paid a contractor for as many people as they need to do the work on the contract. the gna, but we don't have our days we don't play our own agencies enough to match what the contractor gets in terms of people working on contract. >> so where we are going to go now is, we agree that if anyone, because we kind of titan at the time for it on ourselves, if anyone up here has any one of the commissioners has a final question, we would like to hear it. and i will start, work my way down this way. commissioner henke? >> real quick. mr. isgrigg, i thought your testimony was great. if you read a lot of his testimony, not a lot of it is as

clear and compelling and interesting as forthright as yours was last to give you credit for that. i do want to make her go that you are here obviously in your address official capacity represents inscom, right? and you work up through the director, colonel, to the cg of inscom? so your testimony represent the views of the inscom in the army. >> yes, sir. , i deleted a. >> and who is the cg of inscom. >> lachman. >> lachman? >> yes, sir. >> charles, are you good? >> i would just ask ms. stephenson to elaborate more on the testimony. is it a bad sign that gls is non-concerning with the fact that you are saying you didn't get enough cost to pricing data? >> from our perspective absolutely. that is a fundamental of a purchasing system where you have major subcontracts. >> thank you. commissioner? >> i don't. >> commissioner?

>> just a quick question which is how do we prevent this happening again? you have said that you don't know if it can be prevented from happening again. are there one or two things either of you can tell us that would be recommendations to prevent this from happening again? >> the first part that i will address is subcontract land. i think it is integral that before sub contractors given a word that subcontract plan the appropriately priced so we can have an assessment of just how much add-on we are paying for all the subcontractors. that is something that we can use as a point in the negotiation process. the issue of the bid protest, that is an intro question that i think if someone could figure out they would have a real, they can go play the fodder that if they figure that one of the. >> and you believe, director stephenson, that of a subcontract plan, i am hearing you say that you would like and under and inscom saying, sure, you could provide the accounting analysis that will assist

inscom? >> absolutely. >> commissioner? >> quick question. given that there are option years to this contract, and the fee on the past last year, is it your view that as you pick up the option they now have to comply with the fee on the law? stack that is part of the pickle we're in sir. the beyond the law was passed after the contract was awarded and all this nice closet that you can use are not in this contract because they weren't written until later in 2008. unfortunately, to incorporate them would be a bilateral modification. so agreement -- >> but we're talking about picking up the options. >> we could negotiate that. >> isn't it a standard condition that the contract has to be valid under u.s. law? >> yes, sir. >> in which case, when you pick up the option, doesn't it have to be valid under u.s. law. >> yes, sir. >> in which case you don't have to renegotiate anything.

>> we could take that view, yes or. >> could i have an answer for the record from your lawyers on that one, please? >> yes, sir. , we'll take that for the record. >> thank you. great testimony to. >> take a. >> commissioner? >> just a quick one for me. a policy question. if we can establish as a matter of fact that this is in effect what has happened, shouldn't as a matter of policy a contractor he able to pay off a protesting competitor? what happened here is legal. what happens is is it should be legal. certainly not right, one could argue. >> yes, sir. , i don't know that. policy would be nice, but how do you -- structuring the policy is also difficult and takes time. i would like to think that hard-nosed contracting professionals can sort that out. they could make all the deals they want, but they're going to

perform under the cost as they had proposed. and that is holding the line on the cost is the most difficult thing to do because you have to weigh risk and performance are you have to weigh how it is going to affect the war fighter. and you have to have the leverage to enforce that. and it is very difficult, and it is a very complex issue. and at inscom we're very fortunate to have a commander, cg, who gets it and has it in the best interest of the taxpayer and the army g2 who gives us the great responsibility to contract for all these linguists. so we have to have a tough, professional contracting cadre in order to hold the line i think. >> thank you. >> is at the practice of this commission to give each person so you can drop in whatever you

want along with every thing else, able, to give you a few minutes where you can provide any summary comments, because we push you along because we push ourselves along. but we want to hear if you have anything if you believe we ought to hear again even. director stephenson, we will start with you. >> yeah, i have a few items if i could just address this for some. i believe it's part of the consent to subcontract. i think that is an area that should be exported little more as to whether the government has more authority to say no, we're not going to consent. this is 22 to 25% of this ever. it was not part of your original subcontract plan. we need to explore this more before you do that. i think that's an area that could be explored in the consent to subcontract i want to clear fight a comment i made earlier about the functions of the linguists. i was entering as to what the linguists do today. when l-3 became the subcontractor in march of 2008 they performed some additional functions into a change order to

that subcontract was processed in january of 2009 to make a payroll function. so there was a period of time where l-3 continue to perform the effort that they did as a prime contract. it was a short period of time but i did want to clarify that response. one other comment, there was some discussion about the proficiency of the linguists and whether the linguists really have the skill. i believe that there is a requirement of the prime contractor to test the linguists. and there is a certain amount of proficiency that they have to have in the testing of the linguists. we have had some issues in the past. the incumbent had some issues, and i believe that there are some issues and whether these numbers are indeed passing the test and whether these tests really do address the proficiency of the linguists. i think that is something that needs to be taken up with gls when it comes to the proficiency. that is a serious issue that we have heard multiple times in theater, that the soldiers do not always have the linguists that is able to be at the

proficient level that is necessary. those are my comments. naked. >> thank you. >> these very difficult look into this contract. it is very unique and its structure and the way it has been managed. i would like to thank dcaa for the baggers support. without dcaa they wouldn't have allowed us, they help us leverage, hold line on these costs and making sure that the government gets the best value for the money they put out. i would also like to say that gls is performing. they are providing linguists. there is room for improvement. we need to work on minimizing cost, as well as improving performance. so we are going to be working towards making those improvements in the future, and i would also like to thank the

inscom team because we have a group of hard-nosed contract professionals that i want to assure you we will be holding the line on costs. this is something that we are very passionate about, is getting the best value for the government. we also, both mr. evans and i are veterans. we understand what it's like to be downrange and not get what you need. we are going to support the war fighter and we will support the government. we will get the most bang for our buck. >> thank you. one of the good things about being understaffed, you will have to go and thank your great staff. and i have to take under that page if you would probably staff you would probably have to walk up and down the halls. we are trying to cover you hear. mr. evans, do you have any parting shots? >> no, sir, i have no further comments. naked. >> thank you to all of you. this has been a great, and

lighting enlightening. we will swap out name tags and bring our next panel, the industry panel. thank you again. [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] >> second day of hearings on wartime contracting oversight of the commission appointed by congress to look at contracting in iraq and afghanistan, taking a break here before their second and final panel of the day. we will have live coverage when they resumed. i want to remind you that other live coverage coming up on the c-span networks. president obama today awards the medal of freedom to 16 people, including physicist stephen hawking and archbishop tutu. also ted kennedy. live coverage from the white house this afternoon at 3:10 eastern on our companion network. and tonight three co-authors discuss their book on president obama's economic policies. the end of prosperity. it is the start of our book tv in prime time tonight at eight eastern. lots of members during the congressional recess holding town hall meetings. we are bringing a bunch of them

to you, including senator ben cardin last i. we also covered representative brady from texas. kevin brady from texas is holding a number of them. we will show that upcoming in our schedule on the c-span network. he joined us this morning on "washington journal" to talk about these meetings for a couple of minutes. we will show you that to you while the committee is in recess here. >> we have texas republican kevin brady who also hosted one of his own town hall meetings on monday and he can tell us a little bit more about it from the lawmakers perspective. are you there? >> host: just. >> at you for joining us that you hosted a town hall meeting on monday. >> host: we had about 12 town hall meetings and i think we've got about 36, 37 scheduled for the recess. >> host: what are you hearing. >> guest: they are worried about, they are worried about the medicare cost and how that would affect. they are worried where a

government run claim could lead, especially for elder isn't so great. in countries that have predominately government run plan, a small businesses are certain they will be taxed more and that they ultimately will end up pushing their employees into government run plans because they can't afford it. and people just have a lot of questions about how it would run. i mean, they look at sort of the web of bureaucracy. they worry about government getting in between, interfering with their most personal decisions. and i think those are over all fair questions. they are reading portions of the bill and depth. they have great questions, and they still don't understand why it was being rushed through congress. they just think, you know, lawmakers need to get this right because it deals with their lives. and i think those are pretty fair comment. >> host: what is the tone of the

debate and there? i don't know if you've seen some of the clips but there seems to be an amount of aggression and anger. >> guest: people are passionate about it because it is their lies. and we saw this several years ago during the social security reforms when president bush, to his credit, try to deal with that problem which was a major one. and we saw the same types of passion and frustration because you are dealing with things that really do affect people's lives. but ours, our district is 11 counties, and nine are predominately democratic and across the spectrum though people have, whichever party they are in, they have the same question and they have the same concern. at the end of the day, everyone wants health care improved. they're just not convinced that the plan they are seeing is the way to do it. >> host: what about the tone in your specific meetings? has unpleasant or has it been aggressive? guessed that it has been passionate.

it has been, you know, yeah, the town halls are full to overflowing. people get passionate even when they agree with me on the, the conservatives get passionate but that is what you would expect with a care. this is not a concept to people. this is life or death, and looking ahead on issues. so you would expect it. i think in hours, very civil, but very passionate. >> host: you in your seventh term faq served in congress for the past 14 years or so. how does this compare to other town hall meetings you have had over your career? has this issue, are they different from where they were? you mentioned the social security gasbag close to social security but much different than your traditional town hall. it can be very hard to get people to come out you know, on a saturday afternoon or wednesday evening to an event. they have busy lives. so in most times, you know, it

day attendance is pretty sparse. they are packed. they come loaded with information and questions. more people have read this bill or portions of it than have ever. that's a huge change from the past. but i think it is good. i think this whole debate is healthy. >> host: how many more events are you planning on having this month? >> guest: i think in health care, i guess we have another 20 page 24, 25 and we are getting a lot of invitations to do more, which will try to do if our schedule permits, but it's all health care all the time. >> host: we will leave it there. congressman, thank you for joining us. >> guest: thank you. >> and the coverage of this month of lots of those health care town halls, including representative brady, chuck grassley, senator from iowa, and gene taylor to name a few. we are back live now with the second day of hearings on wartime contracting oversight, just resuming coverage here on lifespan to.

>> now we have an opportunity to listen to industry. and i think it strikes a balance, and we do want to listen to you. you have statements that we're going to ask you to try to keep them to the five minute. we will put your entire statement on the record. it's going to be open for another 10 days. so if after we are done you want to say i want to get this on the record also, send it in. we will work with you to do that. our panel is john houck, general manager. i would write? people are writing a president and general manager. what is your title? president and general manager. i saw president on and now i've got general manager on another. those are your folks i think i did that one. so i am okay. and then we have northrop grumman with greg schmidt, and i

thank you, sir, representing an l-3, mr. miller, general counsel of l-3 communications services group. so thank you, gentlemen, for coming up and sharing with us. and i look forward to our discussions. and mr. howe, and then we will go in order with mr. miller and mr. schmidt, if that works fine. mr. howe, can you leave out? >> no swearing? >> thank you. you know, i appreciate that. >> the first time a witness ever asked to be sworn in. well done. >> can i get you three to stand, please? michael cherub would have really had a problem if i had missed this one. so i want to tell you thank you. rager write-in, please. do you solemnly swear or affirm that the testimony you give before this commission is the truth, the whole truth and nothing but the truth? thank you jonah, let the record show that they all answered in the affirmative. now, mr. houck, president and

general manager of global linguistilinguistilinguisti c solutions. >> thank you, mr. doodle. to chairman shays, members of the commission, on behalf of the 9700 employees of the global linguist solutions i want to thank you for this opportunity to contribute to the commission's goals and to participate. it is a very important process. tyco international formed global linguist solutions as a joint venture in december 2006 for the sole purpose of executing a u.s. army inscom contract to provide interpreters and translators in support of our operation iraqi freedom. the company has no other business interests to compete for the attention of our senior management. gls build a leadership team whose effort would be devoted to the success of the single critically important contract. from december 2006, when the contract was first awarded to gls until march 2008, went uninterrupted performance commenced, gls continue to

provide leadership and management staff, plan for transition, and recruit american arabic speakers throughout the united states which would our troops serving in harm's way would have adequate linguists with the right skills at the right place and at the right time. when the army gave us the notice to proceed in march 2008 we accelerate our efforts and execute a rapid transition to first ever on this linguist program in iraq. in unprecedented in scale and complexity for our services contract in a combat zone. when transition was completed, we focused on providing the ever higher numbers of interpreters and translators required by the war fighters to enable full linguist at capably for multi-capability in iraq and afghanistan to a year later gls of points with pride to the 9000 linguists erring on the ground in iraq and other gulf states and a fill rate of nearly 100% in all categories of contract

requirements. 2800 of the geo- linguist are natives who speak arabic and other native images and ilex were born in the middle east and africa. came to enjoy the freedoms and privileges of light in the united states as citizens or permanent residents, and volunteered to serve in iraq in a most difficult and dangerous line of work in supporting our troops. 6600 linguist are citizens of iraq or neighboring countries who risk their lives everyday to work with american and coalition forces. despite the dangers of serving in combat units and the explicit threats against linguist and their families, issued by the enemies of the american and iraqi peoples. these loyal dedicated linguists, and american and iraqi, are embedded in every unit throughout iraq, from platoon to four start at quarter and share the same harsh living conditions and risk to body and mind as of the soldiers, sailors, brains and airmen with whom they are serving. the price has been hi. in the first full year of gls tenure in iraq 12 linguist have been killed in action, and 52

seriously wounded. adding to the hundreds of other linguist who have suffered death and disability since the early stages of iraqi operation. across the united states, hundreds of new candidates apply every month hoping to get through gls is regulus screening and testing process and obtain the opportunity to support our forces in iraq. the men and women of teen gls are proud to be out of this endeavor. in a statement for record of gls submitted on five, august, to the commission i addressed the seven topics you included in your presentation. like our parent, dyncorp international, our standard profession which causes us to focus on the war fighter, the contract requirements and are linguist and staff to perform at the highest quality support on schedule and within budget and you always do the right thing. one now before, the men and women of the gls work side-by-side with our nations of men and women in uniform often under very difficult and

dangerous circumstances. they sincerely appreciate and are honored by the opportunity to provide this important service to our nation and perhaps most importantly they appreciate the special recognition provided by the commission to their service of those military civilians, many civilians serving in bad environs. at this point on it for too answering any questions you may have. >> thank you, mr. houck. mr. miller? >> i am the senior vice president -- i'm sorry. good point. i am the senior vice president and general counsel of the l-3 services group, which is an organization within l-3 communications corporation. we are proud to be a subcontractor on the contracting. and 410, l-3 perform the inscom world wide linguist support services, or wills contract him of the largest wartime linguist contract ever. by the end of wills, l-3 was providing over a dozen linguist in iraq supported by 200

employees in the u.s. and 190 employees in theater. l-3's unique contribution to tams began with transition period. at the time we supported and continue to support the thames program without any reservation for self-interest. l-3 is paramount transition work to ensure, one, the sport of the combatant commanders and their soldiers on the ground never wavered. too, that are linguist did not suffer a loss of support during the transition entry, the gls and the tims program succeeded. l-3's value added to the tims program is undeniable and arises in part of the reality that gls was not a police staff and operational coming at the time of the war. or the 90 day transition period, gls had to stand up a $600 million company effectively from scratch that could assume full program responsibilities with operations throughout the united states and iraq. to win the contract and meet this challenge, gls propose a

novel solution known as the integrated team management approach, or it may. each contractor exide half of its administrative staff to work at gls offices. in this way gls could possibly build a company in 90 days and be eligible for award of this contract. l-3 immediately assigned 92 of its highly experienced employees to perform functions for gls in the areas of linguist recruiting and processing, finance, human resources, information technology, logistics, operations, security and training. to fulfill its three objectives, however, l-3 support went far beyond supplying itma manpower. l-3 also provided substantial value added support in the areas of contracts in poterba, security and human resources directly helping gls overcome the numerous obstacles encountered by a start organization and a difficult and dangerous environment.

indeed, our support was so complete that we transferred l-3 proprietary, proprietary property that has been derived from our experience in performing the wills contract. the details of the support and is up for commitment to the tims program are set forth in my written testimony. l-3 came to be a tims subcontractor because inscom selected gls and december 2006 for the tims award even though it ovaries as to because for $180 million lower. during the debriefing we discover that our proposal had not been evaluated in accordance with the selection criteria, and with so much at stake we had loomed no choice in the input to that the government accountability office. in april 2007, and jell-o sustain our protest and ordered inscom to reevaluate or solicit revised proposals. twice thereafter inscom solicited revised proposals and each time the gls was selected for award. and each time l-3 discovered serious evaluation errors and protested again.

on march 12, 2008, during the last protest, gls and l-3 negotiate and entered into a subcontractor which was approved by inscom. at that point, l-3 withdrew its final protest. i would note that the comment has been made that this was not evaluated in terms of its price. well, it is a cost type contract, number one. but the critical thing to a number is we had labor rights is average for all of the linguist that did not vary across subcontractors and a prime contractor. we had capped indirect rate as a part of the agreement and we were required to provide uniform benefit for all linguist. so in terms of a price qualification, a cost qualification, there was not a risk issue for the government. now the rationale for subcontracting was pretty forward. sent its first proposal, gls had lowered its estimated cost by 676 million, gradually overcoming a substantial l-3 cost advantage. we also knew that inscom could

turn to its afghanistan contract and the overfill provisions that exist there to meet requirements in iraq if they needed to. for gls, by adding the income to its team, it greatly improved the prospects for successfully performing the contract. and the government benefited as well from negotiated solution because it reduced the largest risk in the contract. which was the 90 day transition period. as a corollary benefit, inscom also pushed its services for $667 million less if i'd waited than it would have originally paid. we are currently allocated 777 linguists for whom we manage documentation, contract documentation, compliance, travel, timekeeping, payroll, insurance and other benefits. but l-3 adds more value to its management of linguist recruited by gls. l-3's ability to perform a large-scale linguist services contracting in a contingency operation is rare. there are only three companies in the world with such expense and none other than l-3 has experience with a contract

scope, size, and the breadth of the wills contract which covers 21 different countries. the u.s. government often spend significant resources in sure that it has a second source for critical defense items to protect against the failure of a single source. large-scale support services are no different. i will submit respectfully that they are not commodity services. l-3's role on the thames contract ensures that the continued availability of a competitive second source. further, our expense and know-how remains immediately available to gls, the u.s. government and l-3 so long as we are a part of the tims program. for example, l-3 is currently disruption by promoting gls on all top secret clearance activity while there are special security office positions they can. we played an instrument and material role in the tims program. in conclusion, i sensually hope that these commas have added die to the commission's efforts.

we are proud of our service, to our nation, into the world. and i am prepared to answer any questions you might have. >> naked, mr. miller. mr. schmidt? >> good morning, chairman thibault and other established members of the commission. i am here today at your invitation to discuss the subcontractor relationship between northrop technical services and the prime contractor, global linguist solutions, or gls. supporting the armies, iraqi linguist programs. in addition i would like to take a moment and explain our obligations and commitments to gls under the subcontract awarded to us. to begin, i relate to provide a brief history of northrop linguist operations which cover a span of nearly 20 years, northrop has required requirements for dod since operation, desert shield and storm, including operations in somalia, haiti, bosnia and cozumel, to name a few.

prior to joining the gls team, we were a subcontractor to l-3 on the previous iraqi linguist contract. doing the gls team in late 2007, provided us the opportunity to retain a position on the program will be assessed future translational requirements in the iraqi theater in relationship to our long term corporate objectives. northrop paramount operating principle was 100% commitment to exceptional program performance. we had dcaa approved business systems that include estimating, planning and budgeting purchasing, and internal controls they also have a well-defined set of business management processes that are iso 9000 compliant and dcma and proved, where applicable. our race have been approved by dcma and are also subject to careful scrutiny by strong independent internal audit and

our internal audit organization. andy any issues raised by dcma, dcaa or our internal audit are immediately addressed and resolved. senior leadership is personally involved in the detailed biweekly and monthly reviews of all programs with particular emphasis on programs that exceed $5 million in annual revenue. furthermore, our program managers, including our iraqi program manager r&r to make management decisions that execute the program in compliance with all applicable policies, regulations and laws that govern contractor car program managers have the full support of the company's functional areas to include human resources ammann program control, finance, legal contracts and pricing. northrop grumman provides that a subcontractor support to gls under a fixed-price subcontract. under the terms of the subcontract, we provide management controls for time

reporting accountability and payroll for a varying workforce of approximately 1500 cat one iraqi national linguist. these responsibilities include maintaining pay records, timesheets, cash disbursement vouchers, and tracking data by individual linguists. for the terms of the subcontract, our business operations include the receipt and review of the gls certified payroll, the receipt and review of the actual timesheets and cast disbursement vouchers, and providing gls with the monthly status report to identify any discrepancies when the timesheets doctors or payrolls roster. by doing so, northrop grumman ensures timely payment within three business days of the linguist monthly payroll based upon receipt of the gls certified spreadsheet, as well as the integrity of the payroll by providing a monthly data integrity report to allow gls to

take action. the gls certified payroll and except as of funds sent via electronic funds transfer to gls's bank account also provides the basis of northrop grumman's billings. everything is a hundred% factual. because once we receive a timesheet and dodgers, we validate the data against the certified payroll. if there are any discrepancies, we provide information to gls in the monthly status report or our ability to report problems to gls is contingent upon gls providing us critical documents for analysis such as linguist agreements, timesheet in a timely manner. it is important to note that all iraqi national linguist who are assigned to northrop grumman are independent contractors. management and daily supervision of these linguist is the responsibility of gls is management team in accordance with the gls is integrated team management approach, or i tma. we are responsible as stated

breezy for managing timecard valuation, payroll processing and auditing of records to ensure accountability. in essence, gls itma is a concept of operations allowing for centralized resource allocation among the team members. furthermore, in accordance with the terms of the gls itma, northrop grumman does not have or has not had direct interface with the contracting officer's representative. gls in its role as a prime contractor has the responsibility for direct interfacing with inscom in country units and the course that it has been my pleasure to testify before you today. with regards to northrop grumman subcontract with gls and i'm prepared to answer any additional questions. thank you. >> the process will use is the same as previous in the order that we have previously worked on, so commissioner green, you are on the clock. >> thank you.

there have been a lot of discussion today, or certainly in this session about value-added. i am still somewhat confused about what each one of the subcontractors and does contractor are actually doing. i think both l-3 and northrop grumman laid out what they're responsible for, and what they are currently performing in the way of support. a question to both of you, mr. miller and mr. schmidt, are there any of the functions that you are performing under this contract that are further subcontracted? >> no, sir. >> no, sir. >> okay. mr. houck to you, for the other subcontractors, are there any functions, any functions that are subcontracted further

subcontracted? >> no, sir. >> okay. every one of these subcontractors is performing all of the functions that they have been responsible for performing? >> yes, sir. to the best of my knowledge that is correct. >> i would like page i asked for when we visited before, and we got some input, but i would like in detail what each of subcontractor is doing by way of administrator support, payroll, what have you, in detail. and then if there are any further subcontracted, second year subcontracts, i would like that also indicated. >> as i stated, there are no further subcontractors. there is no second, no, sir tier of subcontractors. the contractors who provide linguistic support, again, do not provide additional support via subcontractors to them.

as far as the functions that are performed by the subcontracts, i believe they have been detailed fairly well, gls does provide the recruiting support, all of the prescreening, testing, deployment support. we provide all the on site, on the ground management of the linguist. what i believe is not discussed in this morn's testimony was the risks inherent in the operation on the ground. the reason that gls selected the management approach that we have is to mitigate the risk to war fighter. if a subcontractor was to not pay their linguist, if they were to not manage the linguist robert lee and the linguist decided to leave the contract, that would have direct impact on the nation. and in fact, lives are at risk your. we face this every day. this is the reason we have adopted this unique somewhat unorthodox management approach.

is simple to mitigate the risk to the war fighter on the ground. >> okay. if you would know, if you could provide to me again, in detail, if you haven't already -- have it already, of all of the subcontractors, and specifically what functions they are performing over and above what gls -- >> i think in the interest of time, i would like to provide that. >> now, for the record, please. >> certainly willing to. >> go ahead. >> thank you. mr. houck, in light of all of the problems that were discussed during the previous panel, i frankly, i don't find her testimony very forthcoming on the full picture of this contract. so i am hoping that you'll respond to these questions will be -- >> i will try my best.

>> thank you. did anybody intercompany or somebody employed by gls talk to anyone or communicate in any way to the military in the theater or to the media about the fact, alleging that the government was imposing costs cut on linguist? >> certainly not to the media. i do believe that individuals that were employed by gls talk to military personnel to try to explain the situation that gls was faced with. we were in the position where we had to go from a proposal of a million dollars, to 755 likely that was the correct number. and frankly, the only place to cut that level of cost was in linguist compensation. there was prior testimony about a media campaign, that that was not the case at all. >> so nobody in your coffee talk to the media about the

possibility that linguist souders were going to be cut? >> the possibility of linguist salaries being cut, gets. the fact that it was due to undue pressure from inscom, gnomic. >> due to any pressure from inscom. >> i would not characterize it as pressure, no matte. >> how was it characterized? >> tough negotiations. as was offered this morning, we were faced with a newly competitive environment. we had to go from cost date the billion dollar proposal was developed on the actual cost that we are paying at that time. those costs were because when we first took over the contract from l-3, we took -- we adopted the levels that linguist were being paid. we did not want the linguist to lead the contract. we did not want to impact the mission. with regard to negotiations in december of 2007, we were provided the target numbers by inscom, and the only way to get

to those numbers was the linguist compensation reduction of. >> did you participate in the decision to issue the formal communications on gls letterhead to the military and the theater? >> yes, sir. and. >> can we have copies. >> yes, sir. and. >> and you deliver copies of a doctorate that relate to gls's statement that it was pressure from inscom under the contract. >> i think you will find those letters don't talk about that but yes, i would be happy to provide it. may also offer that there were widespread communication. we would communicate with all 10000 of our linguist at the time. we also communicated with the customer, with inscom and with military. they were aware with what we are doing. it was full, open disclosure at all times. >> you never thought about taking the money out of the 500 -- potential $550 million in overhead to your subcontractors? >> i don't know that that would have been allowable, ma'am.

>> my sense of this contract, by the way, is that in essence gls is basically leasing the linguist from the subcontracto subcontractors. you're doing all of the work in identifying them, train them, managing. user to poor but essentially you are doing all of that work. >> yes. spirit and the subcontractors are essentially paying them. and the essences seems to me, if you really cut through all of this, is that you need a lot of linguist. they had the linguist, and you need to lease them to be able to perform under your contract. are they gls employees or are they subcontractor employees? >> other than the 700 plus linguist that are working for l-3, or our other subcontractors, they would be gls employees. approximately 60% of the linguist that we provide art provided subcontractors and they are employees of the subcontractors.

>> i thought you just said that they were employees of gls, but for l-3's linguist. did i miss something? >> i am sure i missed though, ma'am. 50% of the linguist we provide are provided through the subcontractors, and they are employees of the subcontractors. the other 40% are gls employees. >> my time is up now it is not. i have 22nd. i want to ask l-3 and north are. how direct employees of your company perform functions under the gls contract? how many employees do you have? for l-3. not the linguist, but the administrative options. >> i don't know the current count right now and. >> give me a ballpark. >> i would rather not. i don't know the actual caltech i can find out. >> what are we talking about? 10, 100? >> it is much more competent than that. plus our finance department is still dealing with a close out of the years from the other contracts.

so there is, you know, to contract in play for l-3. that is why the numbers not something i have on the top of my head. it is a separate division from where i am located at, and i know we have contracted substantially but i just don't know what the number is. >> i'm not talking about the linguist. >> in the opposite of expanded. >> okay. all right. and how about you, mr. schmidt? >> we have approximately four to six personnel on the contract, in addition to the linguist. to our total support staff ranged between four and six on a monthly basis depends on the amount of work. >> so the amount of money you have been paid so far i think is to $.8 million. up through july 2009. so that would be to $.8 million for four to six people then, is that right? is that accurate map? >> ma'am, i guess i am a little confused on where you would be getting the exact number of --

>> it's the amount of money that is the overhead. it is not on that chart, but dcaa showed us. >> it is in the written testimony from dcaa at the back cable. >> of how much you have been paid for these functions under the gls, these administrative function under the gls contract. so it is to $.8 million regard as asking how many people you employ for that amount of money and you just said that was 46 people. the direct charge of personnel to the contractor, range between four and six personnel, in addition to that, we also have our indirect personnel which are described as our human resources legal and other support staff that are not direct. >> and you will apply that, give us that statement for the record. >> yes. >> actually, mr. miller, you have a distinguished career as a lawyer. and you mention another division or do you have any operational experience in this area? what we are talking about now.

>> defined -- >> affably. have you been to iraq? >> i have not. >> have you been in a line responsibility like these two other gentlemen? >> i have not had general manager or profit and loss responsibility tmax or you haven't had a responsibility pic so i am a little puzzled, why are you here? >> i am here because i get very involved at the business level in major matters. >> but you don't make business decisions, do you? >> the way our organization works, i report directly to our chief -- >> i understand the. >> and i'm involved in the business. >> and i understand that general counsel julie are, but you don't make it, do you? >> no. >> who do you report to? >> i report to the chief of staff of the l-3 services group as well as the president of the l-3 services. >> names? >> retired general, retired general carl bonnell is our

president, and i also report to steve post, who has general counsel of l-3 communications corporation. >> thank you. johmr. houck, this is page six f the testimony of doctor isgrigg. during the timeframe of the contracting officers to wait site visit, gls management embarked on an immediate campaign whereby quote linguist salary cuts and quote were blamed on inscom's having to reduce the value of gls contract. this is absolutely not true to get a piece that gls used this tactic to reduce linguist salaries, etc. is that statement true or untrue? what i just read to you. is a categorical statement that gls said something that wasn't true. categorized the statement for you. do you believe it is true or not? >> i apologize. can you read it again? >> during the timeframe, page six of the desolate cockpit during the timeframe of the

kuwait site visit gls management embarked on a media campaign, you talk about, whereby linguist salary cuts in quotes, were blamed on in under inscom's having to reduce the value of the gls contract. this was absolutely not true. characterize the statement for me, please. >> i believe that the statement that gls undertook a media campaign blamed the effort on inscom was until. not true. . .