statement of work, which eliminated the number of people that we have to have at each site throughout iraq, jbb being one, and the hours they had to be available. so, as a part of that, about was the first contributing factor that was there, the statement of work which told us this is what we want to do. this is what we want you to do and the capability we want on hand. ..

no, lien addition asked to set out and have a meeting to discuss that very issue in january. it's easy to look at it that way, but if you look at it from the commanders that, i do not know, nor did we know what future combat operations were going to occur or what capability may need to be there that we were not made aware of. and so, i don't second-guess them on that aspect. >> than that -- >> in the military for maintaining the capability we have there. so we think we did the right thing by stepping forward more

than one time, saying there is a problem. we need your attention and why they didn't -- what the military chose not to do that once again is i don't know the operational issues that went with it. so i don't point fingers there. tonight my time is expired, thank you. >> mrs. schinasi. >> thank you. i think a contingency environment we can all agree that the highest level efficiency is not always the only factor that needs to be taken into account for decision-making or even the deciding factor in many cases. and at some level, we all agree that it's important to be good stewards of the taxpayers money. but at some level, the interest of the participants made the verge in a private company, tbr or any other private company has to be concerned about its profitability if you can stay profitable, elastica dismissed.

and at some level these decisions have to do with maintaining profitability or being efficient. i note that in the response that kbr provided to the government leiby direction to start cutting down the workforce. one of the arguments that was made was that you are were busy working on lots of change orders. and i realize again is our part for the course in a contingency environment and also new awards. so my question to you is, is there an incentive for you or -- i will ask you. if you have a choice to be working on new words that bring in additional revenue or to be working on actions that would decrease the revenue to your company, is there any incentive for you to take the actions that would result in decreased revenues? >> madam commissioner, i looked

you and me almost 30 months for for kbr, no one in any leadership position has ever mentioned the bottom line to me. and i realize some of the actions that i have taken mayor and the personnel reductions is impacted in a bottom line. so i would just be upfront with you by saying that has never, ever been discussed by any of the bosses i've had, never have. and i don't make my decisions on what gets done based on not at all. i base my decisions on what is to be done on the priorities that the military alliance for me and say i want this first. i need this immediately or you tell me what the priority should be. can we do that? and we have a number of firms

that bring that to focus. at the site level, the joint planning board meets every week and where the mayor for that camp or that station sets down with us and the other military customers that make up that site and they prioritize the work. we provide the inputs about our ability to accomplish that. so what we do when we do is normally usually always direct hit by the mayors and by the client or customer. >> and you are working in a cost environment then, in which case the cost, the client determines what's needed and tasty whatever cost to deliver that? >> that is in the change letter that comes to us. and that is say process. i will take a few minutes if you

would like to know the process. >> no, i know the process. >> and if you understand the process, when we are issued to new work, then we have to prepare the estimate. that estimate is then reviewed with the government that says it's too high, it's too low, we disagree with the number of people you've got. we don't agree with the dollars and cents and sometimes we go back and redo those estimates to meet it. and as a result of that, once that done, that's accepted by the government. that's accepted by them. >> and i accept that you've not been told to look at the bottom line, but that doesn't challenge the underlying premise that a private company needs to maintain profitability? >> that's about me, man. i just don't worry about that. >> the attack several times about the need for properly issued documentation they need

to precede any action that you would take is the contract are. and i'd like to come back to a discussion that we've had with her previous ban on the performance evaluation board on the clss. and in that there were several times, both in looking at the performance of kbr under this contract, but also looking ahead to let the government asked you to pay attention to. there was quite a bit of emphasis on the need to step forward, display initiative, look for ways that you could bring to the government various ways to become more efficient and either avoid cost or save cost. is that a reasonable expectation for the government to have? and would you consider that to be a proper contract documentation? >> commissioner, the performance evaluation boards are held at every camp every month and they

are held with a board consisting of the camp mayor, the administrative contracting officer for that camp and representative of the troop units. and the particular one you were referencing, there were issues addressed that were read this morning that particularly caught to that a ceos at that camp's opinion on some of the financial cost management issues of the contract. and that goes on all the time. that goes on at every camp every month. a live discussion, a lot of opinions, a lot of facts and sometimes they operate. as was pointed out this morning, one of you all read off that one of the individuals felt that the

change order information was not been updated into the cost report. when in fact that's not done at the field level. that's not done in theater. that's done between kbr and rock island on a monthly basis. and so, there is a lag between when they give in acl at a set location and then at that location will see the definitive station of the change order and it actually hit the cost report. and that is a common occurrence for them to remark that they haven't seen in the cost report their own affairs hit the book yet because of the magnitude of the change orders, they are swept once a month. we average about 200 change orders again and they are swept once a month amanda cody's what

the pco at rock island. so i understood what you were talking about this morning. but for me, you are discussing issues that normally occur at the camp. >> i guess i'm not asking so much about the merits of this are the disagreement about this specific as to whether or not that sort of direction is what you would consider as you say in your statement, you know, proper contract documentation. is the expectation that is set in the evaluation. sufficient for you to act in a way that -- >> yes, ma'am. an idea what this every month. we analyze every one of the performance evaluation boards. we look at all the negative comments, all the positive comments, the trending of those comments, why those comments occur, what action do we need to do to respond to the direction or the comments being made.

so that's done. i would just like to add to the record here, this particular pdb was the only evaluation that clss has ever got good read if you look at the totality of clss last year and this year, they're all so -- they are a very good except one time. that specific average was the first time that that specific rates had been given. >> my time is expired. >> can i inject some things? >> would you yield your overdue time? there's just two things here. i expect you said one camp and they do every camp every month. and yet, particular pdb, they list 22 celebes, all the big

ones. >> clss has presence at 22. so it's not one camp. it doesn't say that. it's a consensus opinion. >> i don't know that specific case, mr. commissioner. what i will say is that the senior administrative contracting officer at a sub six is responsible for putting together the rating that dcma is -- >> 422 forward operating. >> okay, thanks. >> thank you, mr. chairman. you know, listening to the testimony today, reading the record, it appears to be the case that kbr does not dispute

the case that dcaa's the average utilization rate for labor across all sites in iraq was less than 11%, about 10% is the figure we've been using. whereas the guideline, the goal at the army calls for its 85% to 90%. and when kbr permitted ap scope that took effect in august of 2009, he it got up to mostly 16% utilization rate. so it doesn't sound like there's any dispute over the utilization rate was on the kbr's part, right? the issue in your mind, is whether it's proper and justifiable, right? >> to answer your question, there is very need to create out what the actual rate was. and you read the initial reports by dod ig. they specifically said kbr was

on reporting. but in general, sir, based on what has been presented, you know, we were last at 85%. mac. we did not meet the army standard. and if that was found, then that is what it is. >> you are were way less than 85%. i mean, you were somewhere between 11% and 16%. a special question was whether you dispute the facts and in the contact about the justification for it, sir. >> first, i have not seen that audit. we just saw what looked in the door, so the specific audience from january to july is when we have not -- >> you you have not seen until now? >> no, sir. >> have you seen a? >> are you talking about the audit that was released last friday night? >> know the january 2009 to july 2009. >> this was in the current dcaa

audit that was released friday, is that correct? >> will the gentleman yield? didn't you have an exit audit with them? did you not see a draft report? two gentlemen are under oath and i'm not trying to trick you, but it is a part days to have you given an opportunity. we are not given an opportunity? >> i do not know that, mr. shays. i do not know that. >> would you have someone before this hearing tell us if you were because the implication is your plan cited when you walk dan and i would he potentially very unfair. >> sir, i think we need to get back with you. >> i would like you to inspect one of the people behind you to find out if you were given an exit. and i want a part of the record today. >> that's fine.

can we find out? >> i want to point out in the underreported penne. gentleman, on page seven against the section contractor's reaction and it's in a different font so apparently it's cut and paste it and dropped in there. and your contractor's reaction is on page seven, all as page eight, on this page nine, all of page 10, all as page 11 and half of page 12. so you provided copious responses to the audit. >> sir, i just hadn't received the report. >> and the database date of this anglican up front dcaa to kbr, attention bob burton, it's november 14, 2009 and then there is a november 20, 2009 response to this from kbr and it was signed by -- todd bishop, your director of government compliance. so this is what i'm talking

about. so are you saying you've never seen this? neither of you have seen this? you're unaware? to the first time you've heard about this is now, today? >> sir, i had not seen the report. that doesn't mean that other members of the staff had and it was not brought to my attention. i don't know. i mean, i just haven't seen the analysis of that report. >> how about you, mr. horn waxed >> had not seen that audit report. >> before the gentleman justice, i would like you make sure that you are being clear. and if you want to consult your attorney you can. it would be stunning to me a few posada's leaders are saying that somehow this didn't rise to your attention given were talking about a 10% utilization. i want to make sure from each of you under your testimony whether or not you were told about the underutilization, both at the one maintenance facility and told about a what the dcaa was

doing. >> i know jbb. i was involved in the jbb dod ig audit. i knew about the audit, he knew about the exit priest, i knew about the fax. i knew about the data they are. >> mr. horn. >> yes, i'm aware of the joint balad percentage utilization rates. >> were talking about different things. i'm talking about what i just said, this november 14 letter, the audit from dcaa to kbr and your november 20 response to attendance in this november 14, 2009 audit we pointed out that on average across all sites in iraq the average contract labor utilization rate was less than 11%. are you saying he did or if you have heard of that before today?

>> no. i am aware of the issue. i have seen a the preliminary information on it. i have not had a chance to see the final report, which came out on friday, i understand came on friday. >> have you seen the november 14 audit, which is the audit in which this issue but 10% utilization from 2009, january january 2009 to july 2009, of less than 11%. have you seen that audit? >> yes, i assume that, yes. >> have you seen not mr. mr. laboa? >> i have seen the preliminary. >> you know, actually was going to try to help you a little bit. i thought that there was not any dispute on kbr's part as to what the labor utilization rate wherefore this.

mac. you agree that it was less than 11%? >> a response for mr. bishop is an accurate position of the company. >> okay now the only disagreement and as i understand it on kbr's part is now with the average western this period, but instead with the justification was for it. is that correct? >> that's correct. >> and nothing understand that come your justification for it is that because of the agencies of war that there needs to be a little bit of flexibility under 85%. is that right? basically? >> mr. commissioner, much of that type of maintenance work is on call be prepared work. and so, there were instances, particularly at the balad location, where we were required to have on-call teams consisting of specific makeups to prepare

combat vehicles if and when they were damaged so that they could quickly be put back onto the line. whether or not that occurred or not has not. on our requirements, which was to be prepared to do it if it occurred. now, state data for what happened shows up in some formats inside the army samatha stone because the same system asked you to input particular work items. not all of them, but particularly work items. >> thank you. i want to ask you now about this letter that you wrote, mr. horn just 15, 2010, two mr. world that we talked about earlier today. if i understand this letter correctly, you're complaining essentially in this letter to rock island that you're voluntarily, kbr is voluntarily

leaving some of the race positions unfilled and get your team criticized for it. that's essentially what you're saying? >> that is not the essence of the letter and i was not complaining whenever the letter. >> let's not use the were complaining. you are seeing an letter, expressing the view in the letter that chirping criticized for the fact that your voluntary leaving some authorized positions unfilled. is that an accurate care crustacean? >> still not accurate. >> with your characterization of it? >> esther commissioner, there are certain contracting officials within the theater who are evaluating our cost report and see inside elements of the cost report, in particular labor, that is underwriting the budget. and they are directing us in a change order letter to prepare an estimate and submitted to eliminate the underlying is a d.

scope here into the stands of the letter is a proper election and improper utilization of government direction for sub element cost code geared to descoped is eliminating an element of war, and a scope of work. there is labor, equipment and other direct costs tied to any scope. so there are elements that are incorrectly directing us. and so we have elevated that to the contracting officer's level and our position was that jury that determination. at the contracting officer to determine what is the correct application of the substrate and is providing that information back down to the ac though's we should not be given negative valuations, the performance evaluation because we are refusing to cement those estimates, which we believe are improper. that is the essence of the

letter. >> is kbr and possession of any documentation for an element of the united states government requesting or directing that kbr descope onto the contract? that turns descope. >> the term is used in the change order request, mr. commissioner. the term descope is used and we believe it's incorrectly applied. >> thank you. >> mr. tiefer. >> thank you, mr. chairman. we've gone back and forth over the clss, but what i want to know is to see if you have alternative figures. i know you're willing to say that your figure is under 85% and so forth. i'm going to remind you of the

dcaa's figures and mr. fitzgerald's testimony was that over 1.1 million hours have been charged to the government, yet only $116,000 for documented repair work. i know you may disagree with his definitions in the categories tiered he says that's than 11% and three months later the figure was a mere 16%. but figures would you substitute for those figures? or you simply have a verbal argument these things are formulated the runway. >> mr. commissioner, we believe it's an oranges and apples comparison. >> okay. no figures. i do note that although your response today does not have any figures about kbr numbers on the subject and your six page letter response had one set of employee

figures, which was that, and i'm quoting from page six of a letter, it's not one of the exhibit. if that's a problem, but they know. the quote is simply a 324 descope clss positions, 194 actual maintenance personnel not unfilled positions. so i think what you are saying is only a third of those were what he called faces without -- spaces without faces and two thirds of them were actual people. was that what you are trying to say, that only a third of them were bookkeeping entries that have gotten rid of the two thirds of them were real people? >> i'm not sure, mr. commissioner. i don't have that letter. >> i've read the letter. i've read that specific case they are. the statement is as it is correct. but when you do a descope, when

he do a descope all day function and in this case we were doing descope. you not only take away those people that are currently they are, but you must take away those positions that are not filled as a part of a descope. and so that's what that means, mr. tiefer. >> okay. i think that supports the auditors position and those are the only figures unemployed members that you provided on any point in this particular subject. then ask for another. the auditors make a comparison in mr. fitzgerald cd's statement that the comparison with e. that's where the dcaa asked you to make 190 -- in its october report, 193,000 -- excuse me,

$193 million of savings. the corresponding kbr plan makes only $27 million. i can give you the periods if you need them. i just want to let them after fitzgerald's statement. if that also is the correct impairment as far as the period of time. they wanted the boy and the auditors wanted 193 million. you would make 27 million. >> mr. commissioner, we don't have mr. fitzgerald statement tonight be glad to get the documents and meet with you either privately or at a later date to be determined to clarify that issue. i just don't have the context of the specifics of what he's talking about. >> you don't know -- >> i would definitely be glad -- >> page 14 of his statements and what he says is your figures in

your plan were kbr's will receive a reduction in labor costs. that's your plan of approximately $27 million in the same period, january 2010th through august 2010. you wouldn't know whether that's a skill which are going to save? >> i haven't met his perspective. i was still hung up on the clss and the 27 million didn't compute in this whole thing. for now i understand. this goes back to the original audit was done in august and that over the last year 2009, where they made the statement that there could be a cost savings of 193 million. that p