>> the decision to use the majority venture initially took place over a period of months. the -- in dialogue with isaf, the department of defense, the department of state, the afghan government, the decision was moved forward, essentially i would say the whole of u.s. government decision that this important program to deliver power to kandahar should move forward more expeditiously that has been understood earlier in the year. this includes multiple elements. :

>>usaid's decision to use the joint venture for -- >> it was the administrator's decision. >> i doubt that the -- i don't know that the decision -- >> would you ask your staff behind you to find out during the hearing and let us know? >> certainly. but the decision, let me be with clear, the decision to not use the joint venture -- >> right. >> -- and to use the sole source was the decision of our office. >> specifically, it was your decision. >> i certainly am the one who signed, ultimately, the agreement. >> you bottom lined the ajia to go forward. >> yes. >> to go forward, did you --

wait -- did you raise in the interagency discussions at the highest levels that the urgency of it would drive you to use an unacceptable contractor? did you mention that in the decision to use a sole-source contract to do something important, did you or did the administrator or did anyone raise to the national security system, we're going to have to do this using a contractor that we have big problems withsome. >> no, we didn't because as i explained to mr. ervin, by that point it was our clear understanding that black & veatch had dealt with the problems that had been identified by the sigar, and we were confident in their ability to perform. >> thank you. >> commissioner green, please. >> thank you. general dorko, can't let you off the hook today completely. we have heard, we've read in numerous sources, we heard most recently from general fields this morning about the lack of

master plans. you know, whether it's for energy or construction or many of the other things that are going on in country. would you talk to us about the impact of lack of master plans on any of the work that the corps is responsible for or participating in? >> sure, sir. master planning, obviously, is very important, especially on installations that are growing by leaps and bounds, and where more and more construction is being put in where there's already a lot of infrastructure. and so, i mean, master planning's really important so you're not doing things over, you're not moving roads when you want to put a water line in or tearing something up that was just paved. some rational approach with a longer-term vision on the life of a particular installation and how it's going to be built out is very important. it makes the buildout of that installation much more efficient

over time. and so in cases where installation -- and there's installation master planning efforts going on right now. i think us4a, i recall, has 73 master plans for different installations in the works with right now with more to come that will give us a stronger framework in which to integrate our construction. what that does when you build in an area where maybe master planning wasn't done to the degree it might have been, it just causes a lot more, i guess, a lot more day-to-day interface to find out what's going on. if you don't have a master plan or if you don't have the have-built drawings from what has already been put on the ground, it makes the construction of what you're going to do be all that more involved. it takes day-to-day coordination with the owners to make sure what you're doing isn't getting in the way of something they envisioned in the future. so master planning is absolutely critical to success on any given installation in the states or in the deployed theater. >> but do you feel comfortable

with the state of the master plans that you deal with in country? >> sir, i think you'd have to go installation by installation because i think they're probably all at different levels of maturity, and i know that it's something that us4a is working on very hard, to get master plans for all installations. >> let me go now to sustainability which we talked to in the earlier panel. you mentioned in your testimony, at least written testimony, that you have go/no go criteria regarding project sustainability. would you explain to us since there are so many projects that have come to light that don't seem to be sustainable, would you explain to us how that process works with the corps? >> sure, sir. i guess i'll approach it a couple different ways. in terms of sustainability, and that's facilities that, for example, are build bl by local

constructers that have materials that are readily available, that are sensitive to the culture of the area. obviously, if you build a building and put a western-style sink in a bathroom, that's probably not what's required over there. if you build a dining facility expecting to put boilers in that are going to be heated by gas in an area where natural gas is not going to come, that's not the best way to go about it because they naturally burn wood. we've standardized designs for certain facilities, the ones you see a lot of for the afghan security forces like dining facilities, barracks -- >> why did it take us so long to get to this point? many. >> in terms of standardizing, sir? i think it's probably a maturation of our footprint over there. i mean, you know, we have over the last few years with the record work lode we've experienced here in the states to meet the closure deadlines, we realized in order to do that that we couldn't design every

single building by it, and that we needed standard designs and it quickly got us to a buoyant where we were p adaptive building facilities. as we've grown our districts in afghanistan, where we grew our district initially in northern kabul, another one down in kandahar and established procedures, established our relationships with our customers for the afghan national security forces, the cstc-a, i just think with the rotation of people over time, it has taken time to get the proper processes in place to make that a reality on the ground. and i mentioned in my oral testimony about the operations order that was released by the commander of ijc that gives construction contracting guidelines for afghanistan. i think that's powerful. it creates, it gives a vision, an intent on the part of the commanders' part, it gives key principles to things like sustainability, and then it lays out 16 essentially no-go criteria to make sure everybody who is involved in this, all the

stakeholders, their interests are recognized and that simple things like picking the right site location, taking security into account, end user participation, the use of the building, the capacity of the building and then, naturally, what that building should look like in the end, all that -- >> do you, do you include local participation during the process, or is it just the initial sign-off? for a project? >> sir, we do local participation. i guess, if you're building an afghan -- >> i don't mean the builders, i'm talking about the user. the end user. >> yes, sir. >> who first tells you, i don't need sinks, you know? >> sir, i think the end user, the end user for a specific installation is probably a particular numbered unit that is going to occupy those barracks at a given time. that unit belongs to the ministry of defense, and in the end i think there's a dialogue to achieve standards that are going to provide buildings that

meet life/health safety codes and that functionally meet the mission that this organization is going to go in there. and i think that starts with cstc-a and the ministry of defense, but eventually on the ground when we're building this thing, there is interface with the local people that are going to occupy it eventually. >> thank you. colonel cassidy, in your testimony there's a statement in there, i believe, that afcee does not participate in the process in the host nation project selection. is that true? >> that's correct, sir. >> how do you guys then integrate the afghan government, local or national, into your projects? where is that done? >> sir, the projects are selected and prioritized by a joint program integration office in afghanistan, in kabul.

they'll go through, and they'll work the entire list of construction projects that are required, and then they disperse them out to either us or the corps to build the projects. when our local interaction with the, probably with the local government is somewhat limited because by the time we go in there, we are counting on -- and we're watching it -- that we're counting on the sites to be made available to us. so if there are people on the sites, then the controlling authority, whoever, whoever -- the landowner, the person or the unit responsible for security of the land is also responsible for providing the site. >> well, i'm not, i'm not so worried about the site. what i'm talking about is let's go to some of these cultural issues, for example. how do you know you're build being the right kind of barracks? >> we've struggled with some of the same issues that general dorko went through, but for the

barracks on a military post that we are going to use, there are criteria that are set out this. we use the same criteria that the army does. and as general dorko said, that's changed over time. >> okay, thank you. my time's up. >> thank you, commissioner. commissioner tiefer, please. >> when, when we discussed last week the going ahead with the kandahar power initiative and the pact that you desired to meet the timelines of genere yus -- general petraeus, there were issues at aid which had to be answered, dealt with by the military. item number three, and it's the second one that particularly interests me. one was the questioning about whether electric power was really going to be such a counterinsurgency tool. i'm only going to ask you about

the second one, i'm trying to put it in the context you'll remember. and the second one was that it would irritate the karzai government to take on the energy costs. now, we've already heard about this for other diesel plants, that since it costs up in kabul 22 cents -- i've said this before -- per kilowatt hour for diesel l and a fraction of that for alternative sources, i know in kandahar they can't get a transmission line in, but it still costs less to do things differently. what was done, what was the answer about how the irritation of the karzai government would be dealt with? was it by u.s. or donor subsidies for a couple of years even though it's not sustainable in the long run to do this by diesel? what? >> thank you. i think that the decision was

accompanied on our part by intensive thought about how do we make the power supply to southern afghanistan more sustainable. so while there was a move forward on putting additional diesel generation capacity in place this year in kandahar and that was being done by the department of defense spending their funds on diesel generators, we agreed to do several things. first, we wanted to upgrade the distribution network in kandahar so whatever power supply was coming in, it would be delivered, and it would be more efficient than the current. >> excuse me, could you get to what it is that removed the irritation of the karzai government? was it money being offered or not? >> no, sir. the second piece is that, um, we have agreed, and it's very much, um, our interest to look at the long-term, more sustainable power supply. and we are in discussions with

the afghan government about both the rehabilitation, further rehabilitation of the kajaki dam to deliver hydroelectric power as well as the extension of the northern network from central asia now as far as kabul and delivering that kabul, then, further to the southeast and east of the country. >> okay. let me go to a separate question although you've answered, in effect, that it's an unsustainable power plant, but other things will deal with that. which is similar to kabul which is not the main power -- kabul power plant's not the main power supply for kabul. it's backup. i want to ask you about louis berger. as you know, last month they pled guilty, excuse me, they had a plea agreement. they had a plea agreement to criminal charges that they were defrauding the u.s. government,

specifically defrauding aid by false, known-false overhead billings of aid. and their chief financial officer, salvatore pepe, and their controller also both pled guilty to the same charges. and according to press reports, aid made them -- i'm not criticizing you for doing it, i just want to make i've got it -- make sure i've got it right. i think you may have made the right decision. made them push out and buy out the chairman of the louis berger holding company who's also an owner of 27% of the company which had to be bought by the company. what is your reaction to the louis berger criminal events, so to speak? >> when i learn ored about the -- learned about the allegations against louis berger in august and the investigations

that had been going on for some time by the justice department, i was ro foundly disappointed -- profoundly disappointed and very concerned about the impact of not only the individual issues that louis berger had been investigated for, but also more broadly how that reflects on our ability to be good stewards of our assistance effort. i am, i believe that the settlement that was made with louis berger was a very positive step in that not only was usaid able to recover the funds that had been allegedly defrauded from it, but also collected something in the neighborhood of triple the damages back for the american taxpayer. in addition to that, and you noted some of these, there were some fairly severe approach to

dealing with louis berger in order to bring them back into compliance. >> right, right. those are on the record. i appreciate, specifically, your reaction. i want to ask something about the kandahar power initiative now. aid lumped together in that several different pieces which have been alluded to. the big two pieces are the diesel power plant in the kandahar industrial park and, also, the kajaki dam which is not in kandahar province but is in helmand province which is 100 miles away and which is not diesel-powered and to be built built -- that is ahead of us to be built -- but is already there as a hydroelectric project. my understanding is that the

work on the kajaki dam was not done by black & veatch, but by louis berger so that what you said earlier technically correct in that they were on the ground in kandahar, but over where the hydroelectric plant was being done in helmand province; black & veatch did not have prior experience with that facility. you could say the joint venture did, but they were quite clear of who did what. now, your own jna said, and i'm quoting it, the one you signed, quote: a number of individual contracts for the different components could potentially be issued to conduct the work needed. wouldn't it have been, and i'm not going to go further as to why you did do it or didn't do

it, but wouldn't it have been potentially, could -- when we talk about the different components that could potentially be issued, couldn't the kajaki dam component, the hydroelectric turbine component be separately, separately awarded. >> it may be beyond my technical competence to answer your last question. it is my understanding that the reason that these were grouped together was a question of timing. >> i'm not, i'm trying to figure out what else could you possibly have been talking about in your, in your jna when you said the different components could potentially be issued? you know the components, right? what else could you possibly be talking about than the hydroelectric plant on one side and the diesel plant 100 miles away on the other hand?

>> sorry. what i'm answering is i believe that these were all included at the same time because of our -- >> no, i'm not asking why you did it. i'm talking about your phrase, they could potentially be issued. i want to know what the different components were that could potentially be issued. isn't it obvious that when you consider that possibility, the different components were the hydroelectric dam on one side and the diesel plant on the other side? >> it may be that what you're referring to is the transmission line as the additional component that was not included as part of this contract. when we broke down the pieces that were necessary to deliver on the kandahar power initiative plan and looked at the timing of those, the transmission line was the piece that was left out of -- >> no, this isn't about what was left out. this is about what was put in. i can't, i'm going to be repeating for the fourth time what's in the jna. i bond orer if i'll have a second round.

i wonder or if you could check during the break or your people could check who other could possibly be the components. >> that would be helpful, thank you. >> okay. let me ask a quick question about the timeline. today in a story in the associated press that quotes a letter to symbion from william frege, then the agency's afghan directer, about the kandahar power initiative. quote: usa -- >> and this is a february 2010 letter. usaid tends to procure services and symbion is invited to submit a proposal. quote, unquote. hi colleague, commissioner -- my colleague, commissioner ervin, has already worked with you to get the timeline straight. in august you were on the verge of contracting this. after months of a preparatory

process with the joint venture. so where between february and when you started that months of process with the joint venture, at what point did you turn away from the promise of full and open competition between february and august? >> so we have never turned away from the promise of full and open competition. the plan has been to replace the existing joint venture with these three different iq -- >> i'm talking about what -- >> -- multil award holders. and the decision specifically in terms of those components that went into where we're going into the joint venture, those were accelerated due to the issues that i have outlined -- >> and at what point was the decision, do you mean you weren't talking with symbion about kandahar, or you were talking with symbion, but between february and august the decision was made as you say? >> the timeline of wanting to

put in place the newly-competed awards did not match with our need to contract the work for kandahar power this summer when that decision was being made. >> i can't, i'm sorry -- >> so we did not have -- >> request i'm sorry, but i really -- i'm sorry, but i really am trying many my best. was the statement made in february 2010 not about the kandahar plant? >> what i'm trying to explain is that we did not yet have the competitive mechanisms in place that are referenced this that letter -- in that letter in time for the decision to be made -- >> and when did you change your mind on having the competitive process be you said in february 2010 you'd have? how many months between february and august did you change on that? >> no one changed their mind. what changed was the timeline for our need to contract that work. >> with when did you change the

timeline? >> the timeline, the decision to move forward more rapidly with the kandahar power work was made roughly between june and august in a series of discussions that i already described to you. >> and so the between june and august that you came to the verge of contracting? >> exactly. and prior to that we had not anticipated that we would have to move forward with that work before the new competed mechanisms were in place. >> okay. thank you. thank you, commissioner. commissioner henke. please, sir. >> can i, unfortunately, i have to start with a minor us housekeeping announcement, but for mr. mcglynn, we asked for your testimony in advance in time to prepare for the hearing. we didn't receive it until saturday afternoon. would you commit to in the future us getting your written

statement on time? >> absolutely. >> yes, sir. >> mr. mcglynn, i want to talk about the prison project. we've talked before about the training command in afghanistan having hundreds, 800 projects on the books to work off. how many projects does inl have this afghanistan? construction projects, roughly? >> we have two significant ones which are, i understand, the focus today, the main renovation and the central train -- >> okay. so it's two. it's much smaller than the cstc-a element. >> if we spend roughly 20-25 million a year at construction now, that would be probably the upper -- >> right. right. your statement on page 2 says in december '08 you had to -- or the afghan central prison direct rate had to form an emergency response team to train corrections staff to retake

control of the prison. briefly, what does that mean, retake control of the prison? >> >> well, somewhat amazingly, the parts of the prison were, basically, under control of insurgents and criminals. >> okay. >> no-go areas, hostage taking, just a complete mess. the government of afghanistan decided to form a strong police/military intervention unit, and there was funding provided, as i recall, from both the u.s. military and ourselves. >> to go offensively retake itsome. >> correct. to actually go and fight their way back and clear out the insur jebts. >> and take the prison, got it. >> yes. >> so state inl lets a contract for a company, two afghan companies, because rat to design it andal what tan --al watt tan

to build it. your statement says, i like the polite dialogue in washington d.c. these accomplishments have not materialized without challenges and some delay, and the challenges and some delay was on the two projects you had in the war zone that, if i understand it, the owner of this company provided confidential bid proposal information to the owner offal watt tan. is that accurate can? >> i am not sure of the details of all of the allegations -- >> what's that? -- why's that? >> there's a continuing investigation upside way. >> is that an inaccurate statement? >> i don't think it is, but i can't confirm it. >> okay. and the owner provided, apparently, has bribed your corpses, your contracting officer or representative, the state guy who's supposed to

see -- >> that was the allegation, yes, sir. >> allegation 30,000 bribe to your cor or maybe you call him an icor, in country representative, your statement says i acted promptly to terminate -- does that mean that you fired that government employee? >> correct. >> was he a government employee? or was he a contractor? >> he would be considered to have some inherently government functions. >> a government employee, a full government employee, or is he a contractor? was he a contractor? >> he was a personal services contractor, if i am -- but i hate to, excuse me, mr. henke. i didn't mean to interrupt. >> go ahead. >> but just in certain issues they would full inherent government functions, but certainly not to approve a contract, but certainly to advise on them. >> right. >> bob, can i inject a clarification? >> sure.

>> my understanding, and i went to quite a brief, was that this individual was a whole lot more than a cor, he was the top engineering person responsible for everything from specifications to oversight to agreements to you name it. is that accurate? >> he certainly played a central role in -- >> he was, like, the chief engineer who was replaced by someone else who came in that had that title that briefed us. >> that, i think, is a good general characterization. >> yeah, and i do too. bob? >> okay, sir, so you've got two big projects in afghanistan. the one we're talking about, the prison, you had -- or afghan forces and military had to fight their way back in to get it. you let two contracts with afghan firms. why was it your, why was it inl's best judgment to put a contractor as the contracting oversight representative or the contracting officer's representative? why was it to put a contractor in charge of the contractors?

>> well, again, i think we would still have our other oversight mechanisms which are the contracting officer, and -- >> where's that person located? >> that person is in frankfurt. >> okay. >> and it is a structure that we've used -- >> that's in your rpso, right? >> correct. >> i met that individual in december at african command. has that person ever visited afghanistan? >> i do not know. >> with okay. would you find out just for the recordsome. >> be glad to. ..

>> they get out frequently. >> could you quantity? >> yes. >> you have visited pul-e-charkhi? >> i personally haven't visited, i've visited kabul frequently. >> what's the difference from pul-e-charkhi to kabul? >> about 15 to 20 miles. >> okay. the second -- first or third line of defense is the government employees in kabul? >> yes, they have additional staff, including senior corrections advisors. two very senior correction advisors that have run state programs in the u.s. >> are those corrections, or government employees or are they also private, personal services contractors? >> those would be pses? >> those are personal service contractors as well? >> yes.

>> okay. what's the status of the ig investigation into this? >> i do not know. i'd have to direct you to oig. >> okay. would you take that as a question for the record? >> sure. >> would it be fair to say with all of the structures and things in place which are obviously not what any of us would like looking with retrospect. would it be fair to say your oversight system didn't find this -- the ig found it or hotline to the ig found it? that none of this came to light because of states or inls or acquisitions overnight mechanisms? >> i think without a doubt the oig hotline was an important factor. maybe the key one. however, our people on the ground were already raising concerns not only about how the progress of the project was going, but also some other concerns. but no, i certainly wouldn't try

to. >> right. >> that's what the hotline is there for. that's why especially with corruption, it's so effective. >> thank you, sir. i'm out of time. >> thank you. >> i'm going to -- that's -- you are saving me some time on the second sequence from i'm going to put myself in her for a second. my understanding is mr. buford who is your contractor was asked that question, he said no he's never been there. we'll clear that one up. you can clarify it. it was your people telling me that. it's my understanding that the inl engineer that is the subject of this investigation was in fact an inl, one of your people; right? >> i have to double check the exact. >> the person that replaced them, one the things that you ask is exactly what bob asked. are you a career person? are you state department person?

yup. what's he? yup. so please verify that and, you know, one the questions that's in here, this is such an interesting and it's kind of like i know colonel cassidy is going to say you were kind of harsh there putting in the example. it's what we ran into. you know, afcee has done great work. i'm sure inl and some of our experiences are very solid, very solid. but in this case, going out there, it was -- it was pretty incredible and it was explained to me in our commission staff and the individual and other controls cut out the contract officers. you don't do anything unless you talk to me. cut out the financial people unless you don't do anything unless you talk to me. you had a contractor that was raising quality and some other

work. he wrote a letter, seize and assist, you don't deal and tell us anything about al watt ton, and basra. you had no financial management or financial control. you allowed one person who was the top engineer that said everybody else butt out. this was mine. all the decisions made by them. it's a classic example that you don't have more than one person on a contract that's making decisions and gathering performance data and the like, it's a prescription to failure. and i know that you are trying to recapture this program. but -- and so i think what bob asked for, and we'll clarify is this timeline was actually the company's. because also was explained is one the questions is why did it take you almost a year to get the stop work when the issues started to come up. because people were debating it.

they sent in rather than jump in and look people in the eye and say what the heck is going on? they started a project in february to ask the -- you know, sent two people in. something called ccc incorporated to go in and evaluate it. they took 60 or 90 days to come back and say what they said was right. which is fraught with risk. you know, it's really important in your statements that you outline the controls that are there and the like. but gosh, you know, it's also important to say everything doesn't work out the way we intend it to have it work out. catherine, or excuse me, commissioner schinasi. >> thank you. just to follow up on that, i found it a little disturbing actually that the processes that you lay out in your statement found so good, yet they have so obviously not been applied in this situation. my question is why is inl doing

correction in the -- doing construction in the first place? i'm not sure that's something that your background qualifies you. you wouldn't expect it to. do you care to venture a guess as to why you are doing construction instead of the obo or the colleagues to your left or right who are clearly more familiar and have more experience? >> i'd be glad to answer that. the -- we normally try to avoid doing construction. only because our funds and our programs are aimed at largely to building human capacity if you will, training and host country skills. we are usually asked to do these projects when they are of a certain nature, have to be done fast, or address a certain need. in this case, well, the switch from pul-e-charkhi to the central training center for the

police. that's one that had close links with the rest of the police program, and we had some resources that -- resources meaning i think people who knew the ground and we could quickly build those kinds of things. in general we try to avoid getting into heavy construction, also because it's expensive and our budget is not that big. >> i will base an observation on what you said, and mr. thier said earlier. when you want it bad, you'll get it bad. i think that has proven out in the number of examples we've been looking at today. earlier, i had an opportunity to look at a number of the construction projects in iraq that the u.s. attempted to undertake. what we found there was that many of the problematic outcomes were based on problems with the

requirements. either they weren't clearly defined or they were overly ambitious that we often had problems with poor sight selection that the executors went ahead knowing that you couldn't build on the piece of ground that you were trying to build on. there was a lack of locally suitable designed that we went in the u.s. and tried to build u.s. buildings for a different, entirely different culture and population. and that we didn't have very good quality assurance, and we didn't have sufficient oversight. and so general dorko, i'm going to take you at your word that you are a learning organization. but when i go through your statement, recognizing, of course, that afghanistan is not iraq, and there are different conditions that the u.s. has encountered there, that list that i just listed off, those topics that i just listed off with clearly the same as we've seen in your statement.

so, for example, you've said that the court executes projects based on requirements by our customers. you are the ones that know whether something can be done. what is your input into requirements that are developed by your customers and why haven't you taken a stronger role to tell somebody that is just not going to work the way you want it to? >> i guess you are right. i'll go back to the igc side that was put out in the fall. and you highlighted -- >> the fall of 2010. >> okay. >> if you point out that, you know, sight election. if -- sight selection. if you try to build why kinetics or security isn't going to allow. >> or the soil. the engineering piece is the soil will not. >> geotech does not allow, or it's going to require such a foundation for what you are

trying to build, you probably wouldn't want to do that. you think the guidance came out in the fall from igac goes a long way to rationalize the project and wrap arms around it. we are at fault for probably not raising our hands when we should have in the past. when requirements from defined, i go back to the basic principals. in construction we were trying to stay out of the way and not integrates with the operators on the ground. trying to build something and please the customer who says i want you to build this type of facility here in a year and go back and say sure. we can do that when we know the kinetics aren't right, the security situation won't necessarily allow that, or promising to deliver something in 12 months that we know is going to take 18 months is over promising. we need to make realistic promises to our customers, and we need to live up to the promises that we've made to the

customer. >> so i'm going to push on a couple of places here. sight preparation, you leave that. >> some of the geotechnical surveys and foundation for the building is part of the contract, and the contractor is required to do that. we are required to find quality insurance of their design. there have been some cases where collapsable soils were in a popular -- in a particular areas. that's something that we should have got and we should have provided more oversight. why don't you? >> i think we are providing more oversight now. >> why don't you take on the responsibility of doing that prep work? >> doing the prep work ourselves. >> uh-huh? >> doing the design ourselves. >> uh-huh. >> i guess we could but we think

there are capable design agencies out there. there are design build joint ventures or contractors who can come together and do that. providing the good quality facility but we owe our customer the appropriate insurance that ensures the designers have designed the capable facility that goes on the ground. >> also in your statement, you say design for the afghan national security forces were not suitable or compatible with local custodies or capacity which is different than the soil and technical. you are in an area to cool the building to choice of installing the complex system, hvak, and put simpler fans in that would be more maintainable, the repair

parts would be more maintainable. >> you've learned the lessons. >> you will. >> we have the responsibility for coming up. things. >> i guess maybe we are mixing metaphors here in a couple of ways. but the standard designs for the facility for barracks, we provide the standard designs to the contractor. now that design needs to be adopted to that particular sight. which as you pointed out, there are different soil conditions and other conditions on a construction sight that go into the design. just a sight adapting requires further engineering and further engineers that we need quality insurance and oversight of. i appreciate there were new guidelines put out in 2010. we've been at this construction in, you know, war zones for a lot more than the last six

months. why can't you get your critical positions filled? >> i think we're we're -- againi think we're getting better at it. the last couple of years has been historic in terms of the corps of engineers workload depending on how uncial -- how you normalize the dollars. the army's transformation and the demands in the states and demands in the theater were pretty substantial. i think probably a year and year and a half the workload in afghanistan added on to the workload in iraq at the time. had us working pretty hard. i think the way the situation is involved now as we got to the end of the construction, as construction is come down in afghanistan or in iraq. the pool of volunteers that we draw on to go over there is now more focused on afghanistan right now. with the increase workload that's coming, we're sending a team of 23 people over to help

just do the planning, the front end planning that you pointed out is so important over the next few months that the cstc-a is properly planned out. over the next 90 days we will grow 26 people. i think now we have the fire hose turned on. the organization is over there. we are able and have a much more robust pool of volunteers that we're now able to draw from because of the nature of the workload, how it's evolved both stateside and iraq and afghanistan. >> i address my question to you at the state department and air force at every agency that we've looked at, we've been at this a decade now. i'm glad that we are learning lessons. but we keep making the same mistakes over and over, and including getting enough people into this area to recognize part of the overall mission.

so that with, i'm done. >> could i just with your indulgence, mr. chairman, just interject the quick question as the follow on to the earlier line of questioning to you general about you understand that sight selection is bad in a particular case or particular project not sustainable, or particular project not consonant with local culture and you go ahead and do it and the customer finds out. isn't it a substantial or at least amount of founding, doesn't it come from customer fees? >> funding for -- we're a project funded organization. so the size of our organization, the amount of people that we put to a project comes from essentially supervisory and administrative fee that's charged. >> does that have any -- we were speculating to why youpoint might not point this out when it's clear these are going to be issues. does that have anything to do

with it? you don't want to take off what the customer will do doesn't make any sense? >> i think a lot of times sighted are selected based on best available knowledge at the time. >> that kinetic area. >> yeah, but you just said in your response to commissioner schinasi's comments there were times when you knew, or others knew, and nothing was said. why is that the case? i don't mean to put words in your mouth. >> i'm sorry. back to the comment. this is a war zone. we're trying to build. if you are trying to build say a security point that's on the border at a crossing point or whatever, to provide security or provide some form of security. >> we all know it's a war zone. let's talk the issue of soil. you know, whether the soil can sustain a building of a given weight has nothing to do with a war zone. that would be true stateside in peace time. it's been the case, apparently, there have been times when you

have known that the sights selected would not sustain the project, and nonetheless the project was built and millions of hours wasted. why don't you explain that early on in the process? >> i think it was the case. at least in the soil situations that i know it wasn't the case that the building wouldn't be built there. it was the case of the designer, the geotech evaluation and the design and the execution to ensure the right materials wasn't done to the standard that it should have been. and our quality assurance could have caught that. the building could have been built there if we had paid more attention to make sure the soil design was correct and we were watching construction execution as closely to make sure that other things were taken and done the way they should have been. >> thank you, general. >> okay. we're going to briefly go around again. i had two pictures put up here. mr. thier, the one on the left there, are you aware of what that is? >> i'm suring it's the ghazi boys school.

i have been there. i'm not certain that's the image. >> you assumed right. how about the image on the right? >> i'm afraid i don't know. no. >> that's right behind the ghazi boys school. that's the current school that's training the kids that are part of the ghazi boy school. for background. but the reason that i want to bring it up, this was a u.n. ops partnership contract which i know you know. and apparently it got off to a bad start because of failed contractor drawings, the people that they had doing the drawings. they are european firm that doesn't spend a lot of time in theater and they rely upon others. now we actually went out there. that was an interesting trip because it's the only time in afghanistan where i actually looked around and pentley as our

security detail was taking under around some traveled roads without anything other than low form buildings and the like. it's outside the wire. and do you have a -- does the usaid looking at that picture on the left have any hand in identification of the specifications and design or do you turn that over to your implementing partner? >> i'm -- i'm sure that we must. i don't really know exactly in the case of the ghazi school exactly where the specifications is from. i'm happy to get clarification of that. >> okay. i'm -- i would suggest that you don't hang too long on the sure you must. because it might be difficult. are you aware of what that nice

glassed in area there is. the three story glassed in area on the left is? >> i'm afraid i don't. >> it's an atrium. someone had an idea that they built the three story school and then they had a two story area right there. you know how schools here in the states will adjoin and corner and had a sidewalk between us that they thought it would be great if they had an atrium where they put in plants and displaces. it's just a big open area, about 1/3 of the area of this has you can see on the picture. three stories, open air. air conditioning now and heated it. but it's an atrium. my point to bringing this out is not only was it a very difficult contract with another case where the contractor bailed out and you had to replace them and do a lot of scrambling because there wasn't a lot of oversight. your usaid people like i said, it was a challenging car trip. but -- and so you had to get

another set of drawings and someone designed a facility and, for example, i was going to ask you, gosh, was it handicap accessible? someone decided it ought to be. the solution was when you walk in the school, maybe you've seen it. they have a walk way that's -- i don't know about as wide as this, a little wider than this table. and it goes from the third floor straight shot. might be a football field length down the whole length of the school to the bottom and it's concrete. polished and all of that. it's the emergency exit, ho handicap in and out. i wouldn't want to -- i have friends. everyone has friends that are wheelchair accessible type people. i couldn't push them up the hill. i could get them down. i guarantee if an american high school had that, it would be an incredible skateboard. it wouldn't be much for an

emergency exit. i say that because when you walk in there, it really looks wonderful. when i say that, i'm not being too facetious that there are a lot of schools to pick the state that i live in to die. that's a bad choice of words. but it would really be appreciative to have the opportunity to have a school like that. if you go into the facilities, the bathroom facilities, and the like there are kind of american standard great. and the reason that i put that up there, that's what they are trying to replace. if it needs replaced, great, super. but, you know, how much is enough? and the question is could that be a little gold plating? i tell you why view, sure. do you need an atrium and an outside the wire school? and you know what the answer was when i asked your people out there? you understand there's a few important people that have their kids there, that go there, it's

kind of like a prestigious school. so we really wanted to knock them dead with the school. really have a great facility. that's wrong. you know, that's why i bring the picture up as not -- to give you a chance to look at that and understand that that's a better standard that we have in america. go out there and get more pictures. challenge us. i'm not here to debate it as much to show it and i come down to the point of my question. in large projects, or complex projects, usaid is invaluable. this isn't a knock on the mission. throughout the world, your track record is great. but in complex or large construction projects like the dam and other things, my question to you, my point-blank question, are you out of your

league? should you have from your contract management and contract oversight an organization such as colonel cassidy or general dorko that do the large projects day to day effectively. is it possible that's you've been asked to do something outside of your capability? >> there's no question in my assessment, this is not a recent phenomenon, that the capacity of the usaid as many folks came to know the agency worldwide were hollowed out over a period of time. our ability to undertake large construction projects the size of our staff were all dramatically reduced. this is something that happened over the course of a few decades. i strongly believe it's in the interest of the american people and the government and the governments that we work with that usaid do have some of those capacities. i think that we've worked to build some of them in some of the areas that we work. i think that what is my concern when you think about our

capacity at the moment, one hand is large construction and do we have the capacity, the engineering, and so on to do the sorts of specifications reviews that you talk about? then, of course, the other hand is the oversight? and i think the oversight is something that we can, must, and are making greater progress on. we simply can't have a situation like we had in 2007, we had three contracting officers in afghanistan. today we have 11 and we've ordered the doubling of that number in this year. there's no question that if we are going to be doing this work, we need to enhance our oversight capacity. >> okay. all right. thank you. up to mr. green. commissioner green -- commissioner henke, i can't remember. >> i'll be brief. i wanted to start with the letter that commissioner tiefer, the article that he read to you

earlier. january 22nd article, it's about the symbion claim that they could have done the work on the kandahar plant. really the questions are couple fold. since symbion was doing the work presently in kabul, it's unclear to me why the sole source justification says there was no alternative. there could have been problems with symbion too. why was that alternative not pursued? >> symbion, it's my understanding, was the subcontractor for a time on the tarakhil project. that issue is currently the subject of a lawsuit. certainly at the time when this decision was being made, symbion was not under consideration as a

possible -- if you are asking whether they would have under consideration as a sole source, what we had instead was an existing agreement with black and veatch who i said before to our mind had significantly and substantially changed our performance. >>:

>> wouldn't you think in a document you'd list that under these circumstances when it was pretty clear that would be a rather controversial decision? >> i believe that from the sigar report and our work that it had become clear that they were a performing organization. i don't know that there was a requirement or a thought that that past history would have been represented here. but certainly we found it important to analyze their capacity to undertake it and did include that in our assessment. >> what is the present status of the full and open competition process? are you on track to do it -- it'll happen well into fiscal year 2011. what's the process now? when can we expect you to have procedures in place so that this kind of thing doesn't happen again? >> >> i will have to, if it's okay, get back to you on exactly what date we expect that process to be fully competed which, obviously, has several phases where we will put out the award and then it will be competed and then decided.

>> all right. please do -- >> i'm happy to get you that timeline -- >> but give me a notion, is it six months from now, is it six years from now? [laughter] >> i'm sure it's somewhere between that, but if you'll allow, i will get back to my staff -- >> is it closer to six months? >> it's certainly closer to six months. it's a very high priority for me. i think our reliance on a single sole-source contract that was completed in 2006 is not acceptable practice going forward. we all realize that, and it's a priority for us to put these new competed mechanisms in place. >> thank you. mr. mcglynn, just a couple of questions for you. like commissioner schinasi, i was interested in your testimony which was rather self-congratulatory, i thought. not performly self-congratulatory, but this sentence as a matter of policy -- on page 2 -- anytime the problem or even appearance of a possible problem is identified, i now act swiftly to involve the relevant law

enforcement oversight agencies. it's already been established that the problem with the prison, the undercovering of it was not done by your staff, but by the inspector general. you've said yes to that, right? >> i have. >> all right. in speaking of the ig's investigation, i'm just trying to establish the timeline here, how promptly action was taken after the inspector general's investigation was completed. you say here on the next page that after that investigation your office of procurement executives suspended those two afghan contractors, and the suspensions took place on august 26th of last year, august 26 ott 2010. -- of 2010. i'm trying to see how prompt the suspension was. >> i'm not sure of the exact date of the completion of the ig investigation. i know we were briefed on may 10th. >> may 10th? okay. >> yes. >> thank you. >> and when i say prompt, inl

took action may 13th with regard -- 11th with regard to the information we received and regarding the individual who appeared to be involved. >> okay. and can you get, you know, back to us with the exact timing of the oig investigation? >> certainly. >> and then, finally, you say further that you acted promptly to term that it the cor involved. when was that cor terminated? may 11th. >> that was when the cor was terminated as well as the suspension of the two contractors? >> no, i'm sorry, the cor was terminated on may 11th. the process for the, dealing with the contractors was a different timeline. i can give you some of the key dates there, if that's helpful. >> yes, please do. >> sure. the initial action to alert the companies there was of a problem was when a letter of concern was transmitted from our ro curement executive, i'm sorry, our

oversight body february 10th. >> february 10th of -- >> 2010. >> well, when was the oig investigation completed? >> again, i can't speak for them, but -- >> but you said you were briefed in may? >> may, yes, sir. >> and then you suspended the company in february of 2010. >> >> no, the company -- i'm sorry, i'm, perhaps, inadvertently confusing the individual and the companies. for the companies they were issued a show cause order in september. again, as i understand the process for when a company who is doing work to deal with inadequate performance, there is a specific contractual procedure under the, our federal regulations. and that was, that was the first action with the company. they were both terminated in --

i'm sorry, they were terminated in november for theal wattan company. >> i really strongly commend you to bring us back a chronology and try to remember what you said and correct it because you're going to need to correct it. i don't know who's spooning you paper, but i've got a chronology here and include cc inc. because it was a 90-day contract with two engineers in february. i'm sure that's what led to the may briefing. >> uh-huh. >> now, the ig may have hired the contractor, and if anyone needs any reminders, the two contractor employs are tim johns and bill campbell. you know, it's -- and you're correct that, in that what we're calling the cor, and i don't think there's a secret here, ken bro my's suspension letter was

august of 2010 was what i was told and that he then left, and he's now in malaysia. he quit and went to malaysia. so, i mean, you know, this is kind of an interesting story that people were sitting there exlaining this is what happened, this is what happened, and looking me in the eye that were firsthand experienced. so i'm hearing chronologies that don't make sense. if you'd send it to me, then i've got my notes and the people we've talked to, and maybe we could make sense out of it. >> sure. >> i would commend you not to be taking to the bank those paper notes that are floating up there. >> with those aren't paper notes, those are our records. again, we're happy to double check to mix sure they're accurate. >> if you would, please. are you good? >> yes, thank you very much. >> thank you, clark. we're at commissioner green. >> general dorko, your impression, is the schedule for the increase in afghan national security forces realistic from

your perspective in looking at the future construction requirements? building requirements? >> sir, i guess if you're asking me is it doable in the rough time frames they've asked us to do that in, i guess we'll know in the next couple months. i mentioned earlier about the 23 people we've sent over to do initial planning. it's a lot of work to get done in a short period of time, so so we're looking at all sorts of ways how do you accelerate construction to be able to do this much. we're looking at government-furnished experiences, k-span type structures, anything we can do to be able to do it faster to standard, and that's part and parcel why we saddleed up this 23-person team to plan this out and do the broad-based planning. so i guess right now i can't tell you for sure until we've done this analysis. >> 400 folks is a lot to build it.

>> yes, sir. >> if it gets to that. do any of your contractors ever recommend to you significant efficiencies that could be put in place? i mean, significant ones that would reduce the government's cost? >> well, sir, i guess they do. in the case of over in theater, i guess i'm not familiar enough with enough specific examples to be able to pull something out. we dialogue with our contractor all the time, we take a value engineering approach to what we design over there, and we're always looking for efficiencies and better effectiveness of what we're putting on the ground, so we certainly do take the contractor's input if there's a better way of of doing business. >> okay. you don't have any examples this concern. >> sir -- >> when i asked the contractor one time, the answer was, well, we're now washing the air-conditioning filters rather than replacing them which wasn't a lot of dough, but nevertheless.

usaid, mr. thier, how -- what dialogue has there been in light of president karzai's pronouncements on pscs, personal security companies, contractors, what dialogue has there been within aid, within country and with your implementing partners about how you're going to handle that if it, in fact, comes to fruition? >> there has been a very intense bive and i would say almost constant series of engagements with all of those parties since august figuring out thousand move forward with the -- how to move forward with the implementation of the decree, and we're working closely with the afghan government can to understand how we make that transition successful so that we continue to protect our implementing partners, we continue to deliver on critical

programs, but at the same time we do make the transition that the afghan government has, has demanded of us. >> have you had any of your implementing partners express concern or indicate that they may not remain in country if that occurs? >> our implementing partners have expressed concern about what would come next, and they've all made very clear both from a personal security perspective as well as from an insurance perspective that the arrangements that are going to be put into place need to satisfy both of those concerns, otherwise they won't be able to continue their efforts. >> and you're prepared to deal with those insurance changes if necessary? >> well, we certainly are going to work with the afghan government, our implementing partners, to work on that. we still don't know what the outcome of that process is in terms of the timelines, the standing up of the new after taliban public protection force. and so it's impossible for me to say today which implementers at

what time frame are going to be affected by this decision. >> okay. one last very quick question. we've beat the power plant to death, whether it's diesel or gas or natural gas or donkeys, but what arrangements have you made, what coordination has been done with the afghan government to take over the operation and maintenance of that specific facility once the u.s. money runs out? >> so we've done two things right now. we have a five-year-long contract to work with the afghans to increase capacity building so that they will be able to take over sole operation of the plant from a technical perspective. we've also worked with them to establish their daps which is the authority responsible for not only managing the plant itself, but also managing collections. they're dramatically increasing the amount of money that they are now collecting, payments for

electricity, and they are now paying the fuel costs out of that money. so -- >> all of the fuel costs? >> my understanding as of today is that the fuel costs for the tarakhil power plant are paid for exclusively by the afghan government from revenues they are generating. >> okay. thank you. my time is up. >> thank you, commissioner green. commissioner tiefer, please. >> general dorko, let me confirm the understanding that i have from, among other things, a day of discussion i took part in winchester with your transatlantic division. they told me that the cor has firmly and successfully saved large fraction of money on projects including power projects, including power projects in the war zones by doing fixed price on these, not cost plus, and full competition,

not sole source. and i notice that that happens to be true about exactly what we're talking about today, namely diesel power plants in this kandahar city. that the army corps is contracting for two 10-megawatt diesel power plants in kandahar city and awarded this -- after competition, firm, fixed price to iap just this past august for $51 million. before i go on, are we talking about the -- >> yes, sir. yes, sir. >> okay. i'm looking for an order of magnitude on what you say what the low bid tends to be by going the way you go rather than, shall i say, the high-priced way? my experts on the staff who have

actual job experience with project bidding in afghanistan tell me that on something that would cost, say, in this power generation area 275 million as a sole source cost plus when you're all done, you might save upwards of a third on if you went fixed price and fully competed. meaning on 275 million you might save upwards of $100 million. the low bids come in that way. what would you say about that? >> sir, i wouldn't begin to be able to figure out how to quantify what the difference is. i guess our experience that's evolved over time starting in iraq and going into afghanistan is that in iraq we initially had large contracts with large international firms that were cost-type contracts because of the nebulous requirements

because of the security situation, but as the security situation improved and we were better able to define requirements that we found in that environment and in the environment in afghanistan that you can, you can use fixed price-type contracts successfully. >> with okay. >> you know, allocating risk appropriately between the government and the executor. >> mr. thier, we're going to -- i want a couple, two things. you said during the -- for earlier testimony to me that the decision was made to mitt a transition line -- to omit a transition line across the valley. that was my understanding, and i think you said the same. from the package that became the kandahar power initiative. and you were going to check on what was meant by the components that could potentially be issued

their own p contracts. i understand that you had reasons not to do so and that it was unfeasible, i just want to know what was being talked about by components, and if transmission line that goes all the way from the dam 100 miles away in helmand across the valley to kandahar wasn't going to be built until down the line, and if you knew you were going to have to hook up diesel plants in kandahar by different, by different contractors because the army corp.' contractor was api. so you didn't have to have the same contractor in one place as in the other. were those the potential components to be put apart? >> thank you. because you had cited that, i just want to read the full sentence that's been -- >> and after reading it would you then say which components. >> absolutely. a number -- what you were

quoting was from the sole source. it first says the, this package of activities is interlinked and must be implemented simultaneously. >> that's in a different paragraph. i thought you were going to read the sentence. >> yep. i just wanted to introduce how we got to that sentence so that it's properly contextualized. a number of contracts could be issued to conduct the work needed to implement kpi, but the currency urgency, risk factors and management considerations make this option unfeasible, in other words -- >> and so what were the different components. >> there are six different components -- >> i know. but what were the ones that could potentially be awarded? i -- you don't do even of the six aparking lot. weren't they the power plant and the hydroelectric park? >> i imagine you could break down any of the components. the point was -- >> can you mean you have no idea? >> no that's -- >> let me just mention since you're going through other parts, let me point out to you,

you discuss components 1-4 related to kandahar city, and then you discuss components 5 and 6. one is the helmand project dam, the kajaki dam, and the other is the local distribution center system for that dam. aren't 1-4 one component and 5-6 another component? >> the, the six components could be separable, i'm sure, in different ways. >> and could 1-4 and 5-6 be separable? kajaki and kandaharsome. >> i'd have to go back and look. obviously, 2 is also -- >> your staff didn't tell you whether they could be? that was my question. i'm sorry, i've bored my colleagues, i'm afraid, by repeating this four times. now another two times. couldn't they potentially be separated? >> yes, i have said they could be with separable, the point is, however, the decision was made that they would not be advised

to be separable -- >> i got that point, one last -- >> so that we could be successful. >> thank you. i got that point. louis berger, you decided as part of the agreement you made with them that you wouldn't suspend or debar. and i'm asking you, i've asked you, they defrauded the u.s. government big time with known false billing. they put in doubt a system we have found throughout iraq and afghanistan when you have cost plus contracting. wouldn't you consider that as negative past performance if, say, they come along and they want to bid? i'm not saying you rule them out, i mean, when you evaluate their past performance which is often 0% of an award -- 0% of an award? >> yes, i believe it can and should be. >> thank you. >> thank you, commissioner. commissioner henke, please, bob.

>> mr. thier, i want to get at this issue of the, that my colleague, mr. green, raised about the karzai degree and private security contractors in afghanistan. if i understand right, your money partners are very dependent on private security to go out and do their job, is that accurate? >> absolutely. >> from what i've read in the press if the decree as originally written or amended multiple times, that could have had a dramatic impact on -- in other words, there may have been a mass exodus or implementing partners of aid dollars out of the country if they can't have security, private security, right? >> yes, that's correct. there are certain of the firms would not continue to operate in afghanistan without, without oper security -- proper security measures. >> they would just pack up and go. your mission would come, largely, to an end in afghanistan without that necessary security. >> um, it certainly effects some of our programs.

some are done through implementing partners who don't use private security contractors, and some are are through government entities that also doesn't use them. it would effect a not insubstantial portion, but not all of them there. >> these contracts whether they're u.s. third country or afghan locals, do they, in the course of their duties, do they significantly effect the life, liberty and property of private persons? >> i'm sorry, could you say that one more time? >> private security contractors that you engage that are very important to your mission, in the course of their job, performing their contract, do they, can they significantly effect the life, liberty and property of private persons? >> i'm afraid i'm not understanding what you mean, do they, are they there to protect the life and liberty -- >> no, is it fair to say that they in the course of their duties whether it's holstered or unholsterred, they significantly effect the life, liberty and property of private persons. you said you can't do without

them, and they're there to secure the life and liberty of those private persons -- >> of the people they're protecting. >> yeah. >> yeah. >> so they're, the contractors, are performing a function where they significantly effect the life, liberty and property of private persons, do the contractors, do private security contractors, does the course of their duties require the exercise of discretion in the applying their authority? >> you mean in engagements? >> no, just discretion. simple take it outside of d.c. do they have discretion of the performance of their duties? >> i mean, certainly, individually they are forced to make decision on a day-to-day basis about how to conduct themselves, yeah. >> right. would you say that it's, obviously, i hope it is, it's in our public interests to develop afghanistan? >> it's certainly in our public interest to stabilize afghanistan, yeah. >> right. and to do that we require

contractors, implementing partners, government agencies, others, and they require private security contractors, so my conclusion would be that their performance of duties is, also, private security contractors, that is, is also intimately related to the public interest. is that a fair conclusion? >> certainly as it stands now, although i do, again, want to confirm that we agree ultimately with the karzai government that phasing out of the use of private security contractors is in our mutual best interest, and we're working towards that. >> absolutely. in the 5-10 year horizon the idea is to have a sovereign government that can provide security. but the thing that i was quoting from requires the discretion and applying federal government authority or things that are intimately related to the public interest, i'm quoting from the definition of inherently governmental things. and can it's interesting that you said in all cases that, yes, those contractors are doing that very same thing. i think that's the, that's

really, for me, the nut of the issue, the bottom line is that we call it what we want, but they're doing a lot of things that government people in a better world would be doing. do you want to comment on that? >> again, specific to afghanistan, i fully believe that it's in the best interests of the united states and the afghan government that e we move to phasing out private security contractors for provision of security. >> right. does the presence of armed private groups in afghanistan support or undermine the legitimacy of the host government? the karzai government, excuse me? >> in the case of afghanistan, i believe it's done both. in some cases their behavior and presence has undermined that, and in other ways it's allowed us to undertake critical work we wouldn't have been able to to do otherwise. >> okay. that's a fair statement. general dorko, your written testimony is interesting on a number of pages. on page 3 you talk about the challenge to security is the root cause of a lot of our problems, you've adopted methods

to mitigate security risks, and here you say in accordance with general petraeus' guidelines, an assessment must be made to determine if project area is safe, and if it's not, you send combat engineers. to perform the construction function. can you just talk a little bit about the distinction there between where you can and cannot send people? >> yes, sir. this doing that assessment, i guess, if you're going to build a facility in an area and security, depending on what the facility is and what function it's going to perform, if it absolutely has to be there and security situation is such that a contractor going in would not be able to accomplish that, get materials there, be able to operate safely and securely on that site to do it, combat or uniformed engineer units -- >> right. >> -- and construction units of the army or cvs out of the

navy in concert with a military operation could coin, secure the area and do the construction if it were within the wherewithal of the unit's ability. >> and that's a change in assessment that we're going to look at an area and determine if it's too hot, therefore, we must send in soldiers who are combatants, right? is that -- >> sir, i don't know that that's necessarily a change in policy. i think that's just kind of a codification in what ijc put out in their guidelines. i think it's just a piece of -- it gathers in one document a piece of doctrine that gives a logical, step by step process in trying to determine when, where and how you're going to construct something, everything you ought to take into account to determine what method and means you're going to be able to use to go out and do it. >> so just a codification, write it down, let's think clearly about it. >> yes, sir. >> is it fair to say that for a long time we've been, and probably still are, sending noncombatants into combat zones?

>> sir, there are security issues throughout afghanistan as there were and continue to be in iraq. >> right. >> we have civilian u.s. army corps of engineers employees who volunteer to go and provide quality assurance oversight or engineering and design -- >> right. your civilians when they go, are they combatants or noncombatants? what's their status? army corps of civiliansesome. >> sir, i'd consider them noncombatants. >> okay. have we sent them into combat zones where it's unsafe? >> sir, they're on the ground in afghanistan now, and they have, sir, for years we've deployed our 10,000 corp. of engineers recently. >> how many civilians have you lost, government civilians? >> corps of engineers employees and not contractors for us in any way. >> right. >> sir, i don't think we've lost any. sir, i guess we've lost three. >> three.

and what, but they military? civilians? >> these are da civilians. >> lost three da civilians. have okay. thank you all for your testimony. i've got nothing further. do you have, general dorko, do you want to come back and dialogue? okay. >> okay, commissioner schinasi, please. >> thank you. i just have a quick question, maybe a follow up. i'm going to ask each of you, what do you know about the contractors, the companies, the other that your colleagues up there are using? so, general dorko, what do you know about the contractors that mr. mcglynn and mr. mass key employ? >> we put into other systems out there that documents contractor performance, so -- >> have you, so i'll just stop you on that. do you know what your rate of input is on that? do you know how much performance you're actually capturingsome. >> to quote you a percentage,

exactly, is there a backlog in terms of how much of every contract has been perform bed has been properly documented, no, i don't have that right now to give you. >> okay. and can you don't know anything about

>> do a lot together, for example, the police program which is reverting back to the department of defense. we've had extended conversations and interaction on how that would work, and indirectly, although we're not involved in the decision of what gets it, who would be able to do the work based on the conditions? >> i guess in your statement, you talk about pul-e-charkhi prison in particular, and you say the em baa say has identified eight avenue fan companies. do say get the information from your colleagues? do they share it once they get it? >> i don't know. > colonel cassidy?

>> we use the contracting rating system as we go through. our contracts with a prime contractors and the prime contractors work in theater get to know the contractors, not just the names because the names will change. the primes in theater get to know the subs and people with the subs and build a relationship with them for continued work. >> how does that information get to you? and how does it get to your colleagues? at the subcontractor level in particular. are you aware of the companies that your primes are subcontracting with? i guess that's. >> we are aware of them. and we will watch them now as you -- we are building resources -- we are tieing resources of the schedules as we go through. we get more information than we had in the past. as far as sharing that information, it's left up to the primes. we don't recommend primes and

subcontractors in theater. >> i know you don't have to recommend. but being aware of the performance of the subcontractors is something that wouldn't interfere with the performance of the prime in the contract. it would just be better knowledge for the u.s. government to have. >> yes, i agree. >> okay. mr. thier. >> i'm told it's something for the central system for past par, cpar, that is reviewed every time an award is going forward. >> i'm going to ask the question, you don't know the answer. but how is that going? what percentage of your contracts do you have someone actually putting the information in on the primes and the subs? >> okay. i will get back to you. >> i understand the system exists. it's not whether or not the system exists. it's whether it's being used. and our understanding is that it's not. for a variety of reasons.

the exigency of business, and other priorities, and really the information that we need, one the pieces to get around a lot of the problems that we've talked about today is making sure that, you know, that knowledge not just in the prime level but at the subcontractor level, the company's performance can be used for good or bad decisions on our part. thank you. >> thank you, commissioner. i'm really glad that you ran that threat out on the line of questioning. and i'd ask for general dorko and mr. mcglynn that you coordinate basra with each other. the reason that i've asked that, when you gave the stop work to basra and also to al-waton. i asked about basrat, are you aware of any other work that's done? they said not with inl.

they said any where else? they said the corps. i asked the question did you pick up the phone and call them? you know, because you have a real failed situation where some of their drawings are subject to -- they just pulled something off of the shelf and through it in. others they made significant mistakes. i'd ask you for the record to follow up general dorko because i'm, you know, you can't act upon what you don't know. and whether one you have basrat work, and whether you've-the opportunity to coordinate with inl. >> will do. >> all right. commissioner henke had a minutes worth of follow up or so. >> real quick, mr. chair. one the key questions that i have is for just you can be a hero it everyone in the room. i'm going to ask you two questions with two brief answers. are we nation building in afghanistan? i don't mean it as a tricky question.

i just want a yes or no if you can. >> i believe the answer to that is no. >> second question, are we transforming failed states into quasi democratic stable countries? >> i think that's more accurate depiction of the goal in afghanistan. >> the answer is yes. >> i don't know if we are doing it. it's certainly closer to our goals to stabilize the failed state in afghanistan. >> you edited in the book in 2009, you wrote the introduction chapter building bridges. we thought you were a construction expert. but in your book, you set up the same -- you set up the terms nation building and transforming failed states into stable quasi democratic societies to be the same thing. it seems we have a difficulty says nation building. >> i think that afghanistan is a nation. it's not our intention to build

the nation of afghanistan. we are attempting to assist them to build the institutions so that they can have a stable state going forward. >> what's the difference? >> i think the difference is i don't know exactly what you mean by nation building. i think that afghanistan is a nation. it's been a nation for hundreds of years. we're trying to help them to get back on their feet again. it was doing relatively well in the '50s and '60s, and then it faced 30 years of terrific and horrible turmoil that have made it unstable and that have cost us here personally at home gravely so our intention is to help them rebuild their institutions so they can be stable and prevent al qaeda from coming back into the country. i think that's our goal. >> thank you. we're strifing. let me before i thank you. as a way of summing up, you know, this was an opportunity for us to learn, for you to share, it's never as -- let me

put it this way, there was a different tenor in or fact finding than general fields coming up. because of the nature what you are trying to do versus what he was trying to do and what we're trying to do. i have to thank you for that. you are doing something, i got a guy that i council with i won't give his name, john pier or john p., one the things he tells me, i'm bringing problems, bringing problems, bringing problems, as he says. you got a mirror. are you looking in the mirror? y'all are looking in the mirror. but i'd engage you tonight to do that in the text of process improvement and the like. it's critical. the last thing, mr. thier, absolute respect meant because i've admired it the whole hearing, on your epitaph, you certainly deserve and they didn't pin me down because you

held strong the whole way, sir. i watched it to see if you were going to buckle. you didn't buckle. so i say that with a little bit of admiration. gentleman, thank you so much. what we're going to do because we have a drop dead date on time is disappoint probably our third panel. but we're going to end -- with my apologies, i'm the one not my peers who were supposed to manage the time. there was so much that you folks were sharing, i was reluctant to cut off or push through and have to push through that sharing. we're going to schedule another hearing with as many commissioners as we can on tape. we're going to put your testimony in the record now. but we're going to offer our apologies. we have to be out of the room by the 2:00 promise that we made. i just say thank you, please accept our apologies.

our staff will come back at your staff and try to work something to accommodate you. with that, this hearing is concluded, thank you, gentleman. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

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[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] >> a little bit later today we'll return live to capitol hill on the hearing of congressional oversight. members of the house

subcommittee will examine a measure that will require a up or down vote on congress on every major agency rule before it can be enforced live here on c-span2 at 4 p.m. >> tuesday president obama delivers the state of the union address to a joint session of congress. c-span's live coverage at 8 p.m. eastern with our preview program, followed by the president's speech at 9, then the republican response from house budget committee chairman paul ryan of wisconsin. plus your reaction on c-span, c-span radio, and online at c-span.org. use or web site for enhanced coverage to see tweets and add your own. you can also add your own comments to our facebook page while you watch our live streaming video and see reaction from members of congress following the president's address, live on c-span2. tonight republican fcc

commissioner meredith attwell baker on the comcast/nbc merger. the communicators on c-span2. er >> we'll here argument in case 09239, general dynamics versus u.s., and number two boeing company versus united states. mr. phillips. >> thank you. may i please the court.

the proposition that we are here challenges adopted and embraced by the federal circumstance cut that says the united states government can declare that contracting partners have operated in default and under those circumstances can reach into the government contractors pocket, withdraw at the time $1.35 billion of moneys that were spent by the united states by for services that were rendered without question to the contract, pursuant to the instructions of the united states government. when the contractor seeks to defend against the claim that it has engaged in default conduct, the government can assert, and in so doing, describe the contractor of the ability effectively to respond to the government's conclusion. under those circumstances, it seems to me that the statement in this decision in the united states versus reynolds, which is that the government is certainly

free to assert the state secrets privilege, when it does so, it has to assume certain responsibilities that come from it, at least in the circumstances where the united states is the moving party. >> mr. phillips, when the contractors -- when they failed to deliver the first aircraft at the time specified by the contract, their reason was that it's cost was far outrun the contract price. and so it sought to reformulate the contract. at that time, correct me if i'm wrong, i think at that time, the contractor said something at all about the superior knowledge and the government's obligation to share information that it hasn't shared. >> there was nothing specific with respect to that, justice ginsburg. the first time the contractors

identified the superior knowledge problem arose obviously when the government took the extraordinary step of issues a cure notice. up until that point, they are working for the final resolution of the project as you would hope any entities would to bring the contract to a happy resolution. >> you could express them to say if that was the impediment going forward on the contract to at least mention it. >> yes, i think you have to put it in context, justice ginsburg. there were efforts and requests being made to get access to a2 and b117 about the stealth technologies. and the court of claims held, eventually the information was forthcoming, but it was candidly too little and too late to let it proceed as planned.

i think -- i agree in a perfect world maybe you would have identified this. but in this situation, the parties are simply trying to come to some kind of a resolution that allowed both sides to be satisfied with the final disposition. >> why wasn't the need to share that technology a part of this contract? or condition to the contract? i've bone through -- i've gone through the contract. not all of it. enough of it. i haven't found anywhere in the contract that it requires the u.s. to share information with you. does that have anything to do with what due process would require? >> no, i think -- >> i'm going to pose a hypothetical. let's assume the contract required the sharing of state secrets. and the government then invokes it's privilege, is that a different case than this one in

terms of due process? wouldn't the latter -- wouldn't the former situation where it's been made a condition of the contract require different treatment than this situation where the government is just saying if you want to raise the defense that's not part of the contract, then you do what every other litigant with a privilege does who's privilege has been invoked again. you proceed with whatever evidence that you have. that's usually what happens with other privileges. >> right. we would have been perfectly con -- content to proceed with the evidence that we have. to ultimately be in a position to resolve it. i want to answer the more fundamental question, your honor, the basic point, the background principal of law, the superior knowledge of defense is the understanding when the parties enter into the defense.

that would have been true with the other cases where the federal case has acknowledged superior defense. it's an understood bases on which the parties enter into an agreement. that's the first answer. the second answer is that you are asking us to put into a contract something about information that we don't know anything about. we have some sense about the b-2 and the a-117. but we don't know anything about the other programs. >> wait a minute. where's the obligation of the government to tell you build it this way using the technology that we already have. your claim was you promised the information and structured the contract based on that premise? >> we have separate -- we have a series of distinct claims. the first claim is we never would have entered into the contract in the first place if the government had provided with us information based on the knowledge that the weight specifics that we were being

asked provide or supply were literally impossible to comply with based what the government already knew. if we had been told that much, given the warning, we wouldn't be in the situation. >> that's a factual dispute. i read someone there's a claim that they told you your weight estimates weren't right. >> i mean that maybe a factual dispute. i'd be happy to litigate that issue to get the that point where we are allowed to litigate any aspects of our defense. the bottom line here is to -- again to state the proposition as starkly as it is. this is the point where the federal circumstance cut, the government can assert a claim for $1.35 billion against us and tell us we cannot defend against this claim even though the reason why we were unable to comply with the contract is because of the fact that the government didn't provide us

information either at the outset or -- >> two questions i'd have first of all justice sotomayor, sorry. i did have her question. what that suggests in that case, it's not unfair to hold your client in this case and read two circuit court opinions here. this is the defense coming out long in the past that doesn't have much seven -- much substance to it. let me give you the other question. sometime in your argument, i'd like you to get to that. if we accept as a principal of law what was said in reynolds, criminal case, and apply it to government contracting, or sophisticated contractors are perfectly capable of negotiating their own contract. we are not just throwing a monkey wrench into the gears of government contracting, we are throwing the whole monkey. that's my second question. one this isn't the case that calls for it.

and two, the threat that the government contracting by changing from reynolds to here is overwhelming. now i'd like your views on both of those. >> right. well it seems to me clearly that this is the precise situation where reynolds is saying if you cannot bring forward a legitimate defense. part of the problem is we don't know precisely what information we didn't have and we're never entitled to do that. it's very difficult to say how strong is the defense under the circumstances. what we do know is that the court of federal claims judge looked very carefully and said we had made an impressive showing without regard to any of the confidential or privileged information in the defense in these circumstances. our position is we had a very valid defense. this is not pretextual to throw it in to force the government. it's a fairly contrived

approach. two, i don't see how it throws a monkey wrench into the situation, unless there's a monkey. the basic understanding here is the government is not entitled to force it's contractor down the ruinous course. if the government has information available to it, then it has to make that information -- it has to be forthcoming with the information with the contractor, either at the outset, which would have been the best of all circumstances, or as matters go along. >> the petitioner as a formal matter with the moving party. isn't that right? >> well, moving party, i think is not a self-defined concept, just alito. >> they were the plaintiffs. and the review scheme that you outlined was reviewed beforehand. why do we need to look at that? >> the review scheme says that

the 1986 in the case the federal circuit said the filing, the mire files of a complaint immediately vacates the contracting officers rule. our understanding at the time that we entered into the agreement if there was a problem with the way the contracting officer operated we would be allowed to file the claim and take the rule off of the table. under to circumstances, all we're asking for is to go back to the status quo in that information which means there's no contracting officer, there's no bases on which the government can make the claim of $1.35 billion. >> when you explain that, i thought that was not progress payment based on completed work. government says that money was advanced. you had not complied with what was necessary to comply with to get that $1.35 million and

distinguish the $1.35 million that you received as a progress payment. the next they said you had not fulfilled what you needed to do to get that. :

>> and that's obviously true because they terminate the contract a year before the airplanes were due. >> you are here seeking to emerge as a total winner. that is to get from this contract, including any proper. >> that's not true. all we are asking for are the remedies that are fully available if you were to convert this from a termination for default into a termination for convenience. under those circumstances, you know, the government has a wonderful mechanism there, protecting it against the kind of lost profits and damages that might otherwise be available in a situation where you have a traditional breach of contract. all we are asking for is the actual amount of money that we

expended that frankly the court of federal claims explicitly found and at this stage it's unchallenged although it might be -- these are all reasonable, allowable and fairly allocable costs to this particular contract. >> why should we do this as if it were a dispute between two private contracting parties? if we did that, perhaps one party would be the moving party with respect to some of the claims and the other party would be the party with respect to the remaining claims. >> justice alito, i think that is precisely how you ought to look at it. and we would be very comfortable with that because it's quite clear to me that except in the hypertechnical way that you articulate because of the way the contract plays out, the government is unquestionably the moving party, the party seeking relief to take one point -- >> i think it's questionable, mr. phillips, for this reason. you say that it's an implied

term of this contract that the government has a duty to share certain information. and you are seeking to enforce that implied term of the contract. so it seems to me as to that alleged a duty, you are the moving party. but this implied term of the contract. >> that's one way to articulated it he other way, which is much more consistent with the reality of what's going on here is that the government is making a claim for $1.35 billion, for which, on the basis that we did not act in a timely fashion. that's the only places that exist in this litigation is just the time of the action that we took. our answer to that claim is to say no, we -- we are not at fault for the delays because you did not provide us the information or you did not spare us the burden of having as go

down the path in the first place. >> but you going to say give us the payment for the additional money beyond the 1.35 that you have already given us. this additional money we have expended. >> that just goes to justice alito's question about is there some way to value a those claims separately. >> why shouldn't we? it seems to me, if indeed you say the government has come up with a defense that makes impossible to decide who is in the right here, why don't we just, you know, i think the usual course taken by courts would be to leave the parties with er. that matters can be litigated. that would mean you would keep your 1.35 million, but you wouldn't be entitled to sue for the additional amount, if you're that worried. you should've had more frequent

progress. why don't we just lead you where you are, both you and the government? >> to be sure economy we would be much more comfortable in the world you just articulated, justice scalia. >> 1.35 million. with interest. [laughter] >> that's starting to add up, your honor. and certainly we think that is the minimum that we should be entitled to. and maybe to some extent you say we're sort of thing a little greedy, but the reality is that the standard rule is that if you take a contract and you say you cannot make a determination, that the contractor has been guilty of default, then that contract should be, the basic contract law and also in this agreement, that you converted to a termination for convenience. then the question simply is what rights flow from having declared his determination speak be a termination? >> you mention 1.3, you get to keep the 1.3 million.

but there was another figure, 1.2 million that you get on top of that. that certainly wouldn't be leaving you. >> know. actually what the $1.2 million was, was additional amounts of money that were actually expended by the contractors that were reasonable and allowable by, according to the court of federal claims on this agreement. and it would be to standard operating procedure. you in the termination for convenience where the government says we decided we just don't want to add this. we don't want these airplanes anymore so let's call it all. the government has a right to do. and the question is what are the reasonable costs that are sort of re- allocated as a consequence of the. the court of federal claims -- >> the government didn't do that. you're making that up. you say the government claims you're into full. why should we force that down the government's throat when we

can no more say the government is wrong, that we can say you are wrong? >> it seems to me -- [talking over each other] >> the question it if you call the game of what flows from that, he seems to me that if you can say we will let the government call it a default, i suppose, or you could just as easily say, the position we would take, the government cannot call it a default because in order to get some kind of determination along those lines somebody has to make a judgment that is not an honest assessment of the facts of this case. so if you say it's not a default termination, then there's certain consequences that flow from converting it. and it automatically converts at that point to a termination for convenience. and in a termination for convenience situation you reallocate across precisely the way the court of federal claims has done this. >> we are not assuming. we agree with you on the rest.

we are not saying that it's not a default termination. we are saying we don't know. >> the question is -- >> we don't know. we don't know what it is. the government is titled to make that determination so we don't know who's in the right here. >> the problem of -- >> so why force the government to go to a termination for convenience of? >> i would think that the more proper way to proceed under the circumstances given a default determination carries a lot of collateral consequences that exposes you to subsequent problems and contracting contacts that creates possibility of department in future proceedings, but rather than allow a finding that no one can comfortably conclude is the right findings to stay in place and have those collateral consequences flow from it. the more of a broken way would be to say look, i can't make a determination in this case that's issued a determination 44. and so, therefore, under the contract of under the government

contracting principles it automatically converts over termination for convenience. once that happened to go down the road of evaluate those cost. the government has got arguments across those cars i'm sure and we can debate is now, although i recommend the court -- >> just give us a way, a reason to reach the result justice scalia is suggesting. because you are being greedy. admittedly. determination -- a termination for convenience carries its own automatic consequences, that appear unfair in light of the fact that the litigation of the full termination has been invoked because it is a risk to the united states. so is there a reason -- a reasonable way to do it, do not impose that unfairness on the

government? and it does not, then explain to me why it is unfair, given that you're too sophisticated contracting parties, to say you went through the contract knowing the government could invoke states, which it has. and so you bear the risk of that. you always knew the government might do this. >> well, i don't know what you want me to answer -- >> you could have contracted around it. >> so could the government at the reality is the background principle is united states versus little. and united states versus wilson as if someone is moving party, that is a party seeking from a different relief. that is the part that will bear the burden of -- >> can i ask you does that make any sense in this contract? because both parties have argued it as though the question of who is -- in the contract situation, the question of who is the moving party is very our for an

arbitrary, or fort hood is to give you think about it in a private setting, you have one contrast, one contractor who fails to perform or provide some efficient product, another who decides it's not going today. and the question of who the plaintiff is, is often just a matter of gratuity. who gets to the courthouse first, what the payment schedule has been like, whether someone is demanding their money back, or simply refusing to pay at all. so why in this contract situation is the question of who is a planet or who is the moving party? why does that make such a difference of? >> i think that the court in reynolds to the extent would have envisioned any the circumstances decades ago use the language moving party rather than plaintiff or defendant precisely for that reason. the thing the court had in mind was the party was seeking a permit relief -- >> you are thinking of a tort.

reynolds is a tort action. >> to be sure, that specific context, the courts when which is broader. >> but it can't possibly be the case, the question of what the payment schedule is. if i had page already and i find your product efficient, and i'm going to go to court and demand my money back. if i find your product efficient before i pay you, and you are going to go to court and say, you have to pay me. so why should that difference make a difference with respect to the constitutional question before us? >> because in the one situation i have $1.35 billion in my pocket, for services that were unquestionably rendered, and which in our judgment, satisfied our portion of the obligation under this contract. >> both parties have a claim here. once as you provided sufficient performance. the other says you are obligated to continue. the question of who has the

claimant, who is the affirmative defense, it can be structured in either way. >> i don't disagree with that. i think the bottom line though is what our principles of fundamental fairness to you to do in this? >> that's exactly my problem. because when i looked at reynolds, reynolds doesn't hold anything in your favor. it holds the opposite. it says to you in a criminal case we said it was unconscionable for the government, both prosecute and not to tell them the secret, okay? and this is such a has no application in a civil forum where the government is not the moving party. doesn't say anything about whether the government is the moving party. at exhibit a that it is not unconscionable tenses of the two opinions of the federal circuit. i mean, now, what you want me to read to get over that impressi

impression? >> well, i mean, the very fact that the court says and limited ruling to what the government is not a moving party, if the court -- >> it said the rationale is unconscionable. i don't even have to go that far. i can go to fundamentally unfair. all i want to know is what should i read to get over my unfortunate impression, which i got out the two opinions that i did read, that there was nothing unfair? what do you want me to read to get over that impression which i think if you want me to read something? >> you should clearly read the court of federal claims opinion that gave rise to this in the first place when the judge says we have made an impressive prima facie showing of a defense. and the federal circuits of you is we don't care. we're not going to let you go down that path, terry. and all we're saying is in a situation where we have made that kind of showing the default rule should be the government cannot reach -- >> before i get there, that

schilling was based on the courts review of quite a bit of already confidential information, direct? >> and a nonprivileged information. >> so it made this judgment on the basis of a great deal of information, and yet couldn't conclude that you are right as a matter of law, direct? >> it recognizes it terminated the discovery early. it terminated discovered very early, and there are a whole programs that we know nothing about. we know about the b-2 and the a 15. what we don't know of the other programs and there's nothing in this record on any of that, your honor. >> thank you, mr. phillips. >> general? >> thank you, mr. chief justice. may it please the court. two basic things may decide this case. the government is not invoking the power of the federal court,

only the plaintiffs are. it was mr. phillips climbed to 20 years ago walked into the federal court and asked that court to set aside the decision of the contracting officer to a ward of over $1 billion of damages to the government simply asked the court to dismiss the federal lawsuit. and second, reynolds makes clear the state secrets privilege will be used to bar a claim at most only when the party that is relying on secretive information is trying to use the federal court to alter the legal status quo. >> we've gotten to this point, mr. speaker. you say they are at all. you say they are at fault. under the state secrets doctrine we cannot resolve that question. why don't we call the whole thing off, nobody is at fault, that means it is terminated not for fall but for convenience, and in the? >> for several reasons. one is that is the affirmative use of the federal courts to alter the legal status quo that i think the principle of reynolds is -- >> only because you alter the

legal status quo. the legal status quo is there going along with the contract. you altered it by holding them in default. >> i disagree, mr. chief justice. i think the contract itself specifies that the contracting officer will decide whether or not there's a default termination, and once there is that, once the contracting officer so denies, then nato the unliquidated payments that have -- >> is it that the affirmative step the contracting officer is saying there is no fault? >> it is an affront to step under the terms of the contract but it is not a affirmative step under the federal court. >> he works for you. and he is the one changing the status quo. >> undoubtedly the case. those are the terms under the contract to which they agreed. our central proposition is that any world in which the federal court doesn't know as justice clear said, who is right and who's wrong on a particular

claim, they should get out of the business altogether. >> am i correct to interpret what you just said to mean that you think this case should be decided under the basic principle of reynolds, that the party who seeks the affirmative relief of seeks affirmatively from court is the party that bears the burden involving the location of the state secrets privilege? i am asking us to adopt a new test article on the contracts. >> i do think we need to go there. i think there are special arguments available in this case because it is a contract as justice breyer said was sophisticated parties who will decide who bears the burden of come into court and so on. but here i think the simple principle that any world in which the court doesn't know who is right and wrong, and that's the answer to the question that justice sotomayor asked to mr. phillips a moment ago about

what did the court of federal claims ultimately decide. they didn't decide there was a prima fascia case. we can't know one way or the other. and so -- >> can i -- you answered his questions very quickly. it's your position that if we determine you in the moving party users? >> no. i think -- >> is that what you answered to him is. he asked whether we apply rentals. he didn't say which part of reynolds. if we apply rental and we find with the moving party you lose? >> absolute not. i don't believe reynolds says if the government is the moving party is an automatic loss but i think that's a back argument that we've enhanced in a brief that i think there's no reason whatsoever -- >> let's talk about moving party. i don't know that moving party means the court first.

in the context of a contract dispute, i would say the moving party is the party was trying to use principles of law to change the contract. and that's the government. the government is blowing the whistle. the government which is saying you are in default, and under the law since you are in default, we can walk away. and, indeed, we can claim the money we have already paid you. that seems to be the moving party in the context of the contract. >> justice scalia, i think it's important to add to your definition using legal principles in a federal court. because that's i think what reynolds is talking about. there's not some abstract -- >> no one is talking about that because that was the fact situation in reynolds. but i'm saying the logic of the matter, the logic of the matter would likely contract situation

such as this are to be the party who was blowing the whistle, who is trying to use of the law. the one who is asserting that the law requires this resolve. and then we say we can't tell what the law requires this result or not. that seems to be ought to be that -- >> i don't believe what reynolds is getting out of what this subsequent decision is about. i think rather what all of these decisions say together is if you don't know one way or another, you should return, you should wind the clock back to the status quo before the lawsuit was filed. at the status quo anti-there was an undoubted right of the government to have $1.35 million. understand some of you suggested maybe we should just cut it even as they could to keep the 1.35 billion we get to keep -- will have to pay the 1.2 billion. i suggest there's no principled way to do that which is what i think mr. phillips answer --

>> it was the undoubted right of the lawsuit only after contracting officer was correct, that there had been ethical. if he was wrong about that he was not the right of the government. >> justice scalia, let me read to you the contract which they agree. if the contract is terminated under the default clause, the contractor shall on demand repay to the government the amount of unliquidated progress payments. and then what happened as a result of the demand letter that we set right after the termination for default was they came to us had in hand and said please don't take this money from us right now. our banks are going to complain and so on. and to enter into a deferment agreement which is paid -- >> i'm sorry. give the site. >> page 342. and it seems to me very odd notion of due process to say that somehow the fact that we agreed to their deferment creates some entitlement for

them to keep the $1.35 million. >> i have an additional question about due process. composed of the due process seems to me on what is reasonable, what's necessary in the case, what's unconscionable, that seems to me is just an extrapolation of what reynolds said. and i don't know why we don't have that the federal law of contracts. i don't know why we elevate this to due process analysis. >> i guess i would say two things. one is -- >> assuming that we apply reynolds, which is -- >> if you were to look to that background, law contract you would look not to reynolds but to tenant -- excuse me, which makes clear that at the time they signed a contract they were on notice that highly classified information that is the subject of litigation is something that generally can be litigated in federal court. and then if you wanted to think

about due process in the overlay of unconscionability or whatever, with respect to federal contracts, you would ordinarily assumed that the contract itself from highly sophisticated parties would work that out ahead of time. if they were concerned about the situation unfolding, they could have written into the contract that they should get certain information. and that if the government invoked the state secrets privilege it would automatically terminate the contracts default and convert it to default determination into a termination for convenience. >> what you do if you apply the reynolds to this case, and you could have put your contract, and i think that's almost a wash. >> i don't think it comes out a wash because i think the contract is undoubtedly clear that in order to challenge the decision of the contracting officer about a default determination, they have to come into federal court and invoke affirmatively, seek affirmative judicial relief from the federal

court to change the world. >> am i right that this contract did specify certain information that the government agreed to give the petitions because that is correct. >> mr. phillips says the reason they couldn't specify this information if they didn't know what it was. they did know it was secret information and big we need to know what to ask for. >> i have to say it is a very odd thing to bid on a highly multibillion-dollar contract under the assumption that they will get some technology that they haven't even specified your we are bidding for their research and development. they brought in lockheed which have built low technology, precisely for the reasons that they said they would have the technology. you see their dead, their offer. and i don't think anyone held a gun to the back and say -- >> they claim that you knew that

it was impossible to you what they contracted with you to do, at the weight of plane which they promised to come across. they say that you knew that because of other contract that you have had. and yet didn't tell them about it. >> justice scalia, let me say two things. first, they possibly -- >> we are never going to do it's true because you came in and blew the whistle and said state secrets privilege. >> two things. one is that impossibly claim was separately litigated for the federal claims along with 18 other claims others in defense to the 1.35 billion that we've been talking about. they've had massive opportunity to litigate almost all of the challenges with the one exception being the superior knowledge aspect of this case. and much it has taken place in a highly classified environmeenvironment. the trial has taken place speed are you saying it is not impossible to do at that weight

speakers i think additional way we thought was impossible and warned them of such. >> at the weight contracted for? >> at the weight contracted for we have warned them that it wasn't but later we relaxed that weight specification. so i'm not sure that is really present one way or the other. our central submission to you, justice scalia, if you're not sure as you say to me you don't know who is right and who's wrong, then the federal courts shouldn't be complicit in the process of deciding and picking winners and losers in that circumstance. >> are you ever the moving party in the court of claims? >> sure. i could imagine that we could be on a counterclcounterclaim, for example,. >> but that means someone else is moving party. they have raised the claim. >> that's correct spent if someone wants to get money from the federal government they have to go to court of claims? >> that's correct. >> this is a pretty convenient rule for you.

>> it's a pretty convenient rule, mr. chief justice, when they signed the contract. they knew the deal going in, which is if they wanted to challenge the decision of the contracting officer, they would have to coming. you could have structured it differently. you could have said that they would, that if they were termination for default, it would automatically change into a termination. >> you have the burden of proof on the issue of default. at was known, too, was in its? >> we have the burden of proof on the fall but not a superior knowledge. they are precise you. if you follow the rule they are asking the court to proceed counterfactual he and say that they are entitled to not just the 1.35, but the one point to five on top of that as if they have proved their superior knowledge claim. >> you read nothing between -- justice scalia was asking mr. phillips why can't we then

say let's all back off, everybody go home with what they have. but mr. phillips there's only two things. only default termination or termination for convenience. and nothing in between. do you agree that's the world we're dealing with, those two choices and nothing else? >> i do agree that's the way the contract is written. distinguish between those two and establishes between liquidator payments as to which government has no rights in event of a default termination and we're not seeking that. and unliquidated payments as to which the government has an absolute right at the moment the contracting officer decides it has been a default speed is i don't care how the contract is written. if we are going to say that there's been a broken play, that we are not going to try to apply the contract because we can't tell who is in the right and who is in the wrong. it's totally irrelevant what the contract says. just leave the parties where they are. >> i am saying lead the parties where they are, under the terms of the contract.

>> you -- >> justice scalia, i do think the court should be in the business of micromanaging any contractual situation with parties that can protect themselves ex ante, very easily. >> we can do it as a matter of law of contracts. and we look at the law contracts in reynolds talked about moving party, and i'm not sure that that phrase either has or had really definable content in our law. it seems to me it's a question of the burden of persuasion, the contractor has to proceed. it makes a certain chilling and the government has to go back and forth. and it's as simple as a person with the burden of persuasion invokes the privilege, then we have to ask whether this is fundamentally fair as a matter of idle law of contract. >> even if you follow that

reasoning and i don't think you should for reasons i'll explain, but they would still lose because they still bear the burden of persuasion on superior knowledge. the excuse that that issue indicates. i do think that would be the rule, that's an appropriate role, justice kennedy, because i think underlying reynolds is the central proposition that a court shouldn't be involved, should be picking winners and losers either way when state of knowledge is unknowable. >> just to make sure i understand your arguments. supposed state secrets have prevented you from being able to prove your defaults claim, that you were unable to make that showing her cause of state secrets. what would happen then? >> unable to make the showing in -- >> that's right, the secrets that you wanted to protect were actually the key to your proving that there was a default. >> in that circumstance again, i

think the case would be dismissed because they would be coming in and seeking a permanent judicial relief to avoid the contracting officer's decision and to get whatever damages they want. >> let me make sure i understand because that does sound like a tales you win, heads you win, whatever. you are saying that if a state secret prevented you from making your from in case, you should win that one, to? >> i think that that would be a general proposition is, if the federal court can't know one way or the other who is right and who's wrong, it shouldn't grant deferment of relief. and that -- >> to a moving party, and you are never the moving party. >> again, justice glick, that's the contract they signed. they could've cited different contract with different -- >> council, you -- .doc. >> did the contract contain the

word of moving party? >> it did say who had to come into federal court in order to challenge the decision of the contracting officer. and that is -- and puts the burden on them. >> that's what i don't understand. yes, the full provision is decided by the contracting officer, but by law you can't collect on that judgment once they file a complaint. so you can do anything into you get the court to affirm your default. you are asking for a legal declaration of being right, that they defaulted. you are the ones seeking -- >> justice sotomayor, this is a very important question and i think that's the question left by the breeze and it is one. the filing of their claim in the court of federal claims, they say they cater to contracting officer's decision. that's wrong under the statute,

and the contracting dispute acts says that a cause can be put into the contract to continue it in effect that require performance, even if they appeal the court of federal claims. and that provision exists in this very contract. >> i'm sorry. you're going to fast for me and i don't think -- >> i think it is in a footnote of our reply brief. it is 605 b. and a question is that that provision requires -- right now we have an absolute entitled to the $1.35 billion. that's what the contract says. that is what even the deferment agreement says that we've entered into. so we are not asking, justice sotomayor, for any affirmative judicial review at all. we want the court as it does state secret cases such as tenet, to stay out entirely to say deny an audience of this

case on the merits. if you do it mr. phillips says, or if you do what justice scalia suggested, the type of compromise option, that is affirmatively using the power of the federal court granting him relief on the claim that he has not proven. that is something i see zero precedent for. >> we are leaving you where you are. get out of here is what we're saying. >> justice scalia in -- >> we don't know what the answer is so go away. we lead you where you are. [laughter] >> we have no problem with a go away rule. and if you did and she returned to the status quo auntie, we would have at $1.35 billion. that's what the contract says. that is what their own filing in september 16, 1991 said before the court of federal claims when they call that $1.35 billion quote money presently due and owing. >> to contracting officers determination for default was valid. and we don't know that it was valid and we don't want to have

to inquire whether it was about it. so to say go away means everybody keeps the money he has. >> justice scalia, that seems to me that is affirmatively in the power of the court to set aside the contracting officer's decision which is what i think is forbidden by reynolds. it would be an odd will because it's basically a happenstance. if we had just simply insisted on her 1.35 billion at the moment that it was about to is in favor of 1991, we wouldn't even be having this conversation right now. the only reflect having it is because be seated to the own request to not take the $1.35 billion right away. >> you keep saying this sophisticated parties. but with a controversial term look like that would avoid this problem? >> i think would be very simple. you could say anything the government invokes the state secrets privilege, any termination for default automatically becomes a termination for convenience. >> you think your client would

ever agree to something like that? >> do i think the government would? i think they do, mr. chief justice, that underscores the problem with her argument because they are saying the contract precisely this way to eliminate termination for default and convert them all into a termination for convenience when the state secrets privilege is being invoked. and i agree with you. i think it would be a very unusual contract for the government to get into. that is what they are demanding a. >> how do the right the contract? your answer can be delivered they can ride is a way that you would never accept? so how do you contract around this problem? >> there's the possibility may demand extra money in exchange for greater risk. there may be some alternative dispute resolution mechanisms available. i don't know but i would -- >> this wouldn't be a problem because that's not a quart? >> it might depend on, you might have it within the military, the equivalent in the tenet versus -- you might have panels.

i'm not sure what the precise contractual arrangements would be. i do think that the need for this court to be involved is a lot lower than in the criminal context of reynolds because the government here is a repeat play with these contractors. they are not in the business as their deferment agreements i think underscores of trying to willy-nilly advance state secrets privilege to undermine and take their money away. indeed, i think the 2003 federal circuit decision there have only been a couple of instances at most in which i'm aware of in which the government has invoked a state secrets privilege in any sort of contracting action. and nothing like the superior knowledge think. and since 2009, the government has invoked the state secrets privilege a whopping two times. >> it is a big practical problem. let me ask -- that i was -- misimpression. go back to justice kennedy's question for a minute. i don't quite see if you discuss

it a little bit how you do this as a matter of constitutional law. because the due process clause is tied to fundamental and thursday and i think the answer has to be in this kind of circumstance secret or not, it depends. it depends on many things. so would you write this as a matter of constitutional law? shouldn't be written as a matter of federal contract? shouldn't it be written as an exposition of the superior knowledge doctrine, which seems totally open to it? o, lord shouldn't be written as a matter of discovery law, which is what the district judge who ended up thinking, court of claims judge, g., i don't really know. that's how i read it. how would you speak about this? >> justice breyer, i think that due process is an ill fitting concept in this contractual dispute. for a couple of reasons. notches into this -- the

sophisticated parties agreed ahead of time to different things. but the whole notion, the government is waging sovereign entity's only since 1855. they don't have any free stain rights to come in and claim fundamental fairness on contracts. i think that is implicit in the constitution itself, that they don't have that right. and so the question becomes is there some extra protection the court should give here, akin to the one in reynolds about criminal defendants, the government using state secrets information. and i think the answer to that is no, because the parties can work that out themselves ex ante. so answer to you is i think, to use the contract as the base and contractual interpretation is the basic rule for decision here. the contract itself specified and it was done under the shadow of reynolds and other the shadow of top. they specified they should have to be moving target don't have

to come in and challenge the decision of the contracting officer. >> and a whole lot of contracts you think the contracting parties could have put this down. we don't need of rules on the. the parties could have negotiated. that's not the way contract law works. >> i do think with respect to this, you know, thousands and thousands of page contract, i think a specific set of issues could've been worked out in advance and that it was worked out. they knew going in that they've bore the burden of walking into court paying their attorneys and everything else, to challenge the decision of the contracting officer. they also knew at that moment the government had an undoubted right to be liquidated. the contract at the time distinguished between liquidated progress payments as to which the government has no right, and unliquidated payments, as to which default determination automatically gave that to the government. the argument there advancing here is let's collapse those

too. let's keep the $1.35 billion, because the government hasn't given it to a. >> why is that unliquidated? >> because the contract specified to payments. one is the work that they had reviewed and understood, and the government said this is good work, we will pay you for a. and other work which are claims that they've made but they haven't nicely been approved by the government. i think mr. phillips, i do think that there's any sort of evidence, are certainly nothing the courts below found that says, that they had a right to be unliquidated. >> what's the other 1.25 billion? >> 1.2 billions that he is seeking on top of keeping 1.35 billion is as i understand it is cost, extra costs incurred under the contract above and beyond the $4.8 billion that was in the initial contracts.

>> general, do you have a citation to that footnote you refer to in the 605-b? i can't find it. >> its page 32, and it also refer the court to court of appeals appendix page 19567, which is a page of the contract itself that incorporates the provision, the -- and it says that it mandates performance and compliance with the contract, even when the contracting officer's decision, even when a decision is under appeal. so it is not the case whatsoever that verifying of this claim somehow vacated the contracting officer's decision. the only way that will happen is if this federal court reverses the federal circuit speedy's so your view is that the complaint did not say the obligation to pay you? that provision required them to

pay you? >> that's correct. >> the unliquidated. >> that's right. at that moment they had to pay. they knew that as they faxed in a bank letter and so on same please don't do that. they we entered into a deferment agreement but we have an absolute right to that money right now, regardless of speedy's we don't need an affirmative decision from this court in order to get that. we are asking the court to simply follow the hippocratic principle of doing no harm in a world in which the court can decide who is right and who's wrong. >> if if you're right about that, is it the governments absolute right, could you withhold it from the contracts, of these contractors? >> that's absolutely right. the federal goals and the contract disputes act provide as an offset so that we don't have to seek the 1.35 billion from the coffers as he colorfully called reaching into. we can just offset it against

future contracts and the federal courts would be out of the business altogether about that 1.35 billion. >> so you get the extra money without having to go to court because they have to go and challenge your offset? >> again, mr. chief justice, that's the contract they signed. >> thank you, general. mr. phillips, your three minutes remaining. >> thank you, mr. chief justice. justice kennedy, i think the answer to question is that this case can properly be decided on federal, law principles, and, indeed, i would ask the court to apply those contract principles in this context on page 209, they focus on what happens when the contracting officer take some actions. really that is the fonts and. the contractor shall have the right of appeal under the disputes called from any determination by the contracting officer. and by the general has been awful lot of talk about what you do when article iii context. the contracting dispute

specifically allows us to go to a port of contract appeals which is not an article for institution. i guarantee that the government will be making exactly the same argument if we taken that particular route. it seems to me the case out not to be decided on the basis of this kind of a technical assessment. the case ought to be decided on the basis of sort of where the rights are, what's the fundamental changes who's making the shift in one direction or the other. and if you do that, justice ginsburg, he specifically asked the question am asking for all or nothing? know. i think there's no question that you can come up with a printable basis to adopt precisely the principle that justice scalia put it out, which is to say we will stay our hand. we will not uphold the contracting officer's decision, and, therefore, we're not going to say who is at fault, were not going to go the extra mile and say it's a termination for convenience. the court conservative that. >> you are saying there is another way to? >> there's no question about it. all i was saying in response to justice scalia's question was --

>> what principle of law? >> on the principle love it if you don't have a contract for default and is the basis for -- and we're not going to anymore than that, we can decide who is right and who's wrong, and, therefore, we're not going to enforce the contracting officer decision, we're not going to do anything more than this. we will be the state is go anti, which is before the contracting officers declared it was a default under these circumstances. >> is the go away principle of our jurisprudence, right? [laughter] >> i ashley get that a lot. >> mr. phelps, i edited your own making constitutional claim? >> no. we certainly have a due process argument in there, but embedded in there as a are a number of references to federal, law principles as nonconstitutional basis on which to rule in our favor. i think the court ought to be informed in making its determination about how to interpret the contracting arrangements to the question of whether this is fundamentally

unfair and unconscionable, you probably do that as a metal dash as a matter of federal law principles. at the end of the day, this has been a fundamentally unfair and would ask the court to reverse. >> thank you, mr. phillips. general, the case is submitted. >> later today we'll go live to capitol hill for a hearing on congressional oversight of new executive branch regulations.

>> a look now at trade and the global economy from today's "washington journal." welcome to the program. >> guest: thank you. good to be with you. >> host: in terms of expanding trade for producers in the united states, how successfulw''

was last week's visit by president hu of china.-- tisiuest: we are very pleased with the visit, and the work that we did leading up to thatoc trip is part of an ongoing effort trip was part of an ongoing effort to make sure we have a balance in never trade relationship. we have a trade deficit with china, and we are working hard to increase exports. during the first 11 months of last year, we increase exports up to $82 billion, a 34% increase with china. as part of the talks leading up to the trip, we were able to work on issues that affect that the relationship. we were pleased with the visit, and we think we made some progress. host: in terms of overall praise for countries outside of the u.s., how much of that percentage was done with china? guest: it is a significant amount.

among the emerging markets, it is one of the countries that we are paying attention. china, brazil, india are becoming more important trading partners. nevertheless, mexico and canada, which are long time trading partners, are still second and third trading partners for us. host: we are talking with francisco sanchez. our topic is trade and the global economy. if you want to get involved in the conversation, give us a call. the numbers are at the bottom of your screen. we will also take your messages through e-mail and twitter. guest: i met with the ministry

of commerce, the foreign minister, their technology and innovation people. we talked about issues that affect our ability to export, the fact that american companies ability to compete in the market. some of those issues i mentioned earlier, they have indigenous innovation, an effort by china to increase innovation within their own country. that is a worthy goal of any country. we do not condemn that. but there are good policies and bad policies. we encouraged them to promote policies that do not prejudice foreign companies and are consistent with international trade principles. we made some progress in that area. host: what do you mean? guest: there was some discussion within the chinese

government to restrict the purchase by government entities, only products created for the innovation of those products were created within china. that would be very detrimental to american companies. host: our first call comes from maryland on our line for republicans. caller: thanks for taking my call. i could not stand the organizing for american people that were continuing to call the last few seconds, so i wanted to call in. this is regarding tariffs. when you look at labor costs here in america, the production costs in america of versus european countries, japan, we do have in fermenta regulations, labor laws, things of that -- we do have some regulations, labor

laws, things of that nature. some sources say that tariffs -- can they help americans get back to work? i will take my answer offline and thanks very much for c-span. guest: the caller is right in that emergency -- emerging markets such as india, china, and brazil, in many cases they do not have the same regulatory structures that we do. perhaps an advantage is created. we worked very hard to reduce trade barriers that can hurt american companies from competing in doing business with those countries. one side of the equation is trying to break down trade barriers in the countries that hurt american business. on the other hand, what we do here, we tried to create a level

playing field at home. countries that have companies that dumped products in our country, dumping product is selling it below what you would sell it in your own country, we have laws and ways to combat that. unfair subsidies is another way that we make sure we create a level playing field. i think reducing tariffs in general helps create the free flow. i am not sure that raising tariffs here is the best way to go. it is important that we create a level playing field both at home and abroad. host: and there are a guide and pamphlets put together. this one is called doing business in iraq and describes iraq as a market with strong long-term economic potential.

how are these kind of pamphlets or publications put together and what kind of a benefit is it for a country -- a company trying to do business with a particular country, in this case iraq to go through this particular guide? guest: we had a team of trade specialists that help put these guys together.

the international trade administration office, we do trade admissions, and we have a service where we will help companies set of all of their meetings abroad and give them basic market information like this guide. i took a trade mission to iraq in october with 14 u.s. companies, including boeing, general electric, some engineering firms, construction management firms. while there are still challenges in iraq, emerging opportunities, spending over $80 billion in infrastructure and products over the next few years. it a great opportunity for american companies. we provided those -- we provide them with thatback to the phoner

discussion on international trade and the u.s. economy. pennsylvania on our line for democrats. caller: good morning, gentlemen. how are you today? host: fine. caller: years ago you look at the american economy and products, and i always had issues with the quality of the things that we made in the united states. many things we make in the

united states are very good. but you can look at a rack of clothes and tell the ones that were made in the united states and the ones made in japan or china or other countries. they were better quality in terms of neatness. we have to go back to producing things that we can compete with those countries. if you look at something made in china or japan and something that is made in the united states, the quality would be even better than those things made overseas. host: we will leave it there. guest: i think america can compete with any country in the world. we are still the top manufacturers in the world. we make some of the finest airplanes, some of the finest machinery, medical devices. there are a lot of areas where we excel. one of the things that has given us a comparative advantage is

that we invest more money in research and development and innovation than any other country around the globe. this continues to give as a competitive edge. i am confident giving aid level playing field, we can compete with just about anybody. host: next caller. caller: if i were to get a small business administration loan, i would have no confidence that i could pay it back, because i would believe that i would get rid of by the chinese. by the chinese. host: if you got that low, what kind of product would you like to produce? what kind of product

would you like to produce? caller: i do not want to talk about it specifically, because i do not have a patent get. host: you are concerned that those in china will still your idea and undercut your business? caller: they may change it somewhat. i think the law is you can change it 40% and get a patent. so i think they would rip me off. there are legitimate tactics to >> caller: they they are.cc in my situation is ripping me off, and i won't be able to make any money. >> host: what's out there to protect, al? >> guest: al, is right. we have had concerns not just in china, but in a number of countries on intellectual property rights, and this is one the areas where the obama administration and the international trade administration in particular

along with the u.s. trade representatives work very, very hard to stengthen intellectual property rights protection. you mentioned what were some of our successes with the china visit. this is an issue that we have focused on with our counter parts in china. we need to continue to do that because there's still challenges in china on intellectual property rights. what i tell al is china is not the only market to focus on. there's a lot of other places, and if he's interesting in moving forward, we would be happy to work with him on an sba loan advice and looking at markets that might be a good fit for his products. >> host: chris on the line for republicans, you're on the "washington journal." >> caller: yes, i'm interested here in the united states, we have many regulations in bringing a product to market as

far as environmental and so on, how can we compete with other countries where the regulations are not as strict so they can import the same product only cheaper? how can we as the united states compete with that kind of situation? >> host: thanks for your call, chris. >> guest: great question. president obama recently spoke to regulations and the need to take a careful look at regulations and make sure that we're not keeping regulations on the book to hinder competitiveness. he's undertaking a project right now to look at regulations as they affect competitiveness, so the caller's question is not only right, but timely and the obama as mrgs is -- administration is taking steps 20 make sure that -- to make sure regulation doesn't hurt competitiveness or try to minimize its effectiven't. >> host: in the "wall street

journal" this morning, nelson cunningham had this pretrade opportunity. "in a few short weeks, obama reassociated the trade agreement and announced a any priority in the congress. it's a long-standing trade dispute with mexico and goes back to the clinton years and with this election of mr. daly, the president hired the man who can make his trade revival a reality. what now? our experience tells us the only way to push a trade agreement through congress one where the not only pro-trade gop rules is with strong and unyielding presidential leadership, a unified white house and staff and cabinet and a genuinely bipart sin approach.

are you finding this to be accepting and willing to work with the president as far as working on free trade agreements? >> guest: first, president obama from the first day her took office has been clear he recognizes free trade is an essential part of the global marketplace, and we need to work hard to open up markets, increase our exports, and to that end, he has been very supportive of moving free trade agreements that we have pending forward subject to dealing with certain issues that still are involved and various pending agreements. i think that it remains to be seen how open congress will be to moving forward on these free trade agreements. we as an administration will be bringing korea, the korean trade agreement to the congress very soon, and i'm optimistic that when we lay out the

opportunities to strengthen our economy, grow and create jobs, we will see the support we need to ratify the korea free trade agreement. >> host: in the country-span news program "news makers," david breyer talked about expanding trade with other countries. we'll see what he has to say and get your response. >> we need to open up new markets for goods and services around the world. we have three pending trade agreements right now with south korea, panama, and japan that have been languishing for four years because of the fact that under speaker pelosi she refused to bring them up. we are in the majority, and president obama is there and i'm pressed with the fact that president obama indicated a willingness to work on the agreement. we want all three brought up. the deals were completed before

-- the panama and korea -- columbia deal was done before the korea deal was done, and that will create jobs in the united states. >> host: your response, sir? >> guest: well, i agree with the congressman that we do need to get all these of pending trade agreements ratified. not all agreements are created equal, and president obama is committed 20 making -- to making sure when we bring a free trade agreement to congress, we take the best interest the american business, american workers, american farmers into indication. we as an administration are interested in ratifying all three agreements once we work out any pending issues we have with them. >> host: back to the phone, asaac on the line for democrats from new york. >> caller: good morning. how are you doing? >> host: just fine, sir.

>> caller: i have a couple points and i'll be brief. i think we need to be very careful when we deal with like the gentleman or the senator mentioned about the free trade agreements because it's effective and we have been deindustrializing o lot of our manufactures like the young lady mentioned has been offshore to india and china and other places because of regulations, and these free trade agreements are hurting our economy, and we have to be concerned with hu jintao before he came here to meet with obama and other members of congress. he mentioned the dollar would soon be eliminated as the world reserve currency. if those hold merit, then we could be in some trouble heading down, so i think those are issues that need to be addressed in the unemployment rate is still severely undercalculated

at 9.4% dos they don't -- they don't count individuals who are no longer unemployed and expired benefits. i think these issues need to be addressed if we want to even talk about moving towards a recovery. if not, we are giving people false hope. >> host: we'll leave it there. sir? >> guest: free trade agreements are but one tool to export. we have several trade agreements with countries around the world, and regimely, these have been affective tools for increasing exports by american businesses and american workers. if you take oil out of the equation, last year we had a trade surplus with the 17 countries in which we have free trade agreements. 44% of all of our trade with the world happens with these 17 countries, and yet these 17 countries represent only 10% of

total world gdp, so free trade agreements if they are negotiated properly can be a very affective tool to create exports and american jobs. >> host: one from twitter says free trade has a particular set of requirements as opposed to trade, what are the elements constitute free trade? >> guest: free trade is reducing or eliminating tariffs, for example. increasingly we have to be concerned with nontariff trade barriers so regulations in ways do little or certainly in some cases not at all public good, but create a barrier for trade, so we have to look at regulatory and standards, regulations and

standards swelt tariffs if we can harmonize regulations and standards, reduce tariffs, we can see more flow of goods and in particular more exports by american companies. >> host: we're talking about trade and the global economy with francisco sanchez and served with president obama in the 2008 campaign and has also been the chairman of the national hispanic leadership counsel as well as assistant secretary for aviation and international affairs at the u.s. department of transportation under president clinton. our next call comes from new jersey for republicans. go ahead. >> caller: good morning, mr. shan chez. thank you for c-span. sir, i only know what i read in the papers, and it's apparent to me that china is practices the

old-fashioned mercantilism, and we have been playing into their hands for a generation, and i note from the moderator's comment that you have particular interest in aviation. we see that ge is now helping china develop their domestic commercial airline industry, and suspect it clear that the pattern established in other industries will now be followed in commercial aviation where we teach china how to make commercial aircraft and the day they role out their first airline is the last day they buy a boeing aircraft, one of our major exporters. are you familiar with what was known as the american plan back in the day of abraham lincoln? >> host: we're going to leave it there. mr. sanchez? >> guest: he's right.

the chinese and their long term plans are looking to build an aviation industry. what i can tell you is this. boeing, by the way, is not only one of the biggest exporters, it is our biggest exporter, and one of the things that makes boeing a successful company is that it's con distantly innovating. the landscape of the aviation commercial business will change in five to six years. china will not be the only country trying to build up a commercial aviation plane sector. there will be other countries as well, and boeing is well-prepared for this competition. i am confident that our aviation and aerospace industry will be able to compete not only now, but well into the future because of the investments in innovation. having said that, we still need to work very hard as it relates to making sure we have a level playing field in china and other

emerging markets. >> host: dela in new york, new york on the line for democrats. >> caller: good morning. the problem with trade agreements is they dispore nationally favor over labor. transnational corporations were allowed to move any place they want to go, their finances, factories, technology, they can go any place they want to go, where they find cheap labor. you sign agreements and curve inflation. you allow this to happen. however, unions, which we have here in the united states, are not allowed into these countries. they are not allowed to organize. they are not allowed to form unions. they are not allow to petition for higher wages, allowed to eliminate child labor or environmental standards, and this is what created a middle class here in the united states, that we have the right to form

unions. that's what created our middle class, and if they do not have a middle class in the countries we trade with, they can't afford to buy goods from us. this is the problem with the trade agreements. >> host: we'll leave it there. >> guest: well, let me just say that the -- parredden me, the obama administration is committed to making sure we have enforceable provisions on environment and trade agreements, and in fact, that's what we have in the last couple free trade agreements that we have seen ratified and any negotiations that the obama administration takes will include labor, and environmental provisions. i should say that free trade agreements if done right can be beneficial for american workers and american business, and we need to engage countries on free trade agreements. south korea, which has been in

the news recently. they have free trade agreements with 17 other countries. they are negotiates free trade agreements with six others and the european union. if we are left behind and we do not negotiate or ratify the korea free trade agreement, we, as a nation, will be at a competitive disadvantage view a view all the other -- vees a view all the other countries who have trade agreements. many other countries are moving forward. if they are done right, they can be very beneficial to the american economy, business, and the american worker. >> host: john kerry and representative neil have a piece in the washington times talking about the united states and south korea reached an accord that improves our trade agreement. now, with this new accord in

hand, the obama administration needs to enter the full fray of congressional trade politics for the first time. it brings a strong hand to the table after more than a decade of division on trade, we have an opportunity for this congress to move forward a significant trade agreement that reflects the priorities and values of both parties and all americans. are you confident that you're going to be able to get this trade agreement through the congress? >> guest: i am confident because we have -- if we make the case which is creigh's currently our 7th largest trading partner. once we sign and ratify this agreement, you'll see an increase of over $10 billion in exports, merchandise exports, goods exports rather to korea. this will support 70,000 american jobs, so i believe that we can make the crass because it makes sense for the american economy, the american business,

and for the american worker. >> host: massachusetts, rob, on the line for independents. go ahead, rob. >> caller: hi, i wanted to make a comment on your relation between regulation and competitiveness. we can't base our regulations based on their competitiveness. if so, we have a country that has regulations that allow all the things that happened in wherever china or brazil or, you know, dumping in environmental waste and treating workers poorly and employee rights and all those kinds of things come up. if we want to be competitive, we have to get rid of the regulations that we have that they don't have, and i don't think we can live like that. second question i wanted to ask though was also on trade policy. we don't have an industrial or trade policy in this country, not an industrial policy which is essentially what the chinese have and why they are so competitive i believe. is that bordering on

mercantilism? is that a good thing or a bad thing? why don't we have an industrial policy? >> guest: first on regulation, i couldn't agree more with him that regulations are there for and in many cases for public health, for our economic well being so the competitiveness should not be the only filter under which we look at regulations. however, it is appropriate to see its impact on competitiveness, so this should be one of the filters with which we take a look at regulations, and this is what the obama administration is going to do. with regard to industrial policy, yes, i think an argument can be a very strong argument is made that china does very much manage its economy, and this does present certain challenges, and it is a debate in this

country where we seek to have a free market and free trade and let the market decide the flow of goods and services, and these are challenges that we struggle with and we're working with our trading partners around the world to set rules that are fair for everybody, and in some cases, we're having more success than others, but it is a fair question, and it's a challenging one that we all need to take a hard look at. >> host: next up is michael in sharon, pennsylvania on the line for departments. go ahead. >> caller: good morning. i was wondering with the give and take of any trade agreement, isn't it inevitable that we're going to end up with a global wage more in line with the second world country, and second thing in regards to the economy, if we as a country would have had ratified war tax in place

ten years ago say with our economy being in the -- would our economy be in the shape it's in now. appreciate your thought. thank you. >> guest: let me speak to the first question or comment. what we've seen is as emerging markets like china grow their economy, their wages tend to go up. you actually are seeing some companies consider moving back here or you're seeing more foreign direct investment looking at the u.s. as a place to do business, so i believe that as you have a strong growing economy, they tend to have upward pressure in labor costs. with regard to the second question, i am not an economist, and i'll probably defer that to brighter minds to talk about whether a war tax would have

helped our economy. >> host: dan kirk, a republican sends an e-mail from west virginia and writes trade indicates a trade of goods and of services. what i am seeing in the figures is more of buy instead. is there any country that the united states is running a trade surplus with? >> guest: yef, we have -- yes, we have trade surpluses with many countries. as i mentioned earlier the 17 countries that we have a free trade agreement with, we are overall running a trade surplus when you take oil out of the equation. we also are a net splier of services, and we have a surplus on services around the world. that doesn't mean we don't need to do better, and in particularly some cases, china, for example, still has a trade

deficit that is unacceptable. we are working hard to import promotion and create trade barriers to make that a more balanced commercial relationship. >> host: rob on the line for republicans in troy, new york. good morning. rob, are you there? rob? >> caller: can you hear me? >> host: go ahead, rob. >> caller: okay. yeah, i'm here. i've worked in the automotive business on and off since the 60s, and i've noticed that over the years more and more parts are made from china like your rotors, break drums, all that stuff is going to china and the corporations, of course, have buyers over there, and they get

prices.name and down for the corporations to make a profit. electrical parts are almost 80% made in mexico. what i haven't seen any of the politicians get nothing saying that they would or even the consumers to get a grass roots movement to going to say, hey, look, sears, advanced auto parts, western auto, hey, we spend our money with you to buy this stuff, why do you not give american manufactures a chance to make this stuff? >> host: rob in troy, new york. >> guest: well, there's no question that certain aspects of manufacturing have gone offshore . the areas where we continue to be competitive, aerospace, medical devices, machinery, all of these areas are areas where we continue to excel, and i

think the key for us will be to continue to be the country that invests more in innovation, more in research and development. if we do that, we will continue to be a leading exporter of manufactured goods. they may not always be the same goods. things will change, but it's very important, i believe, to continue to make that investment so that we can continue to have products that are made here, and there's no question that we cannot just be a service nation. we need to have a mix of manufacturing and services. >> host: nick on the line for independents calling from st. louis, missouri. good morning, nick. >> caller: yeah, just once i want country-span to have a representative against free trade instead of globalists. rob and your guest, i want to tell you i worked with ralph neighedder and ross perot taking

bush seniors nafta and i was there when they passed free trade china, permanent free trade china. that was ten years ago. since then, free trade proved to be a failure. our economy is in total shambles now. our industries have been destroyed. wii deindustrialized as a nation. free trade is a come mewist ideas that requires nations to have borders open to free flow of capital, labor, products, and services across all borders. when you do that, you destroy the nation states. we have to compromise our laws to accommodate free trade, and that free flow of labor means people from all over the world are free to flow into whatever nation they want to to the extent we'll no longer recognize ourselves as a nation because of what we have here will be owned by countries from all over the world. it's a total united states of america destroying mechanism.

it has failed for ten years and -- >> host: we're leaving it there. >> guest: well, let me say a couple things. exports in this country support over 10 million jobs, and if we look at the world, the united states is not an island to the world ology as more a -- and as more and more countries look to facilitate trade, we are left behind. there are countries where we sold a lot of agriculture goods, but they signed trade agreements with canada, and no long every buying from us. they buy from canada and the european union at least in that sectorment i think we have to find a way to create free trade agreements that are fair, that take into consideration worker rights and the environment, but we can't isolate ourselves from the world. >> host: we got some facts and

figures from the international trade administration regarding general trade. in the first 11 months of 2010, u.s. exports and services totaled $496.1 billion, an increase of 8.2% from the $458.6 billion of services exported in the same period in 2009. the united states has a surplus of $135.6 billion in services trade with the world up 12% from the same period in 2009. i wanted to ask you, you, sir, are going to be attending the asia-pacific cooperation meeting later on this week. where is it? who's going to be there? what are you talking about? >> guest: well, the u.s. is the host of the apec conference this year taking place in a number of cities. the small business component of

it, and there is that, will take place in big sky montana, and i'm very privileged to head the u.s. delegation to that particular meeting. let me tell you a little bit of why it's important. they have over 2 billion consumers, the 21 nations that make up apec representing the global income. it's an important part and an area that we are paying attention to to continue to have strong opportunities for american business and american workers to take part in that very important market. >> host: next up is wayne county, west virginia. joe on the line for democrats. you're on the "washington journal," joe. >> caller: thank you for c-span, and again i want to challenge c-span to do a program about mountain top removal miening that we're suffering from here.

my comments on fair trade. it should be fair trade, not free trade. the gentleman that called before me is absolutely right. we trade with a communist nation that we fought two wars with. you don't have the right to vote, go to church, form a union, there's no human rights enforcement, no environmental protection, and they talk about our corporate tax rate being so high. that may be true, but we have more deductions than any other country in the world. we just need to start taking care of america people. if you go to china, and you want to get into retail industry or if you want to have products manufactured for retail, you have to deal through wal-mart. we have to start taking care of america. we have to invest in america, and if it takes tariffs to the level playing field to get away from acts like nafta that

destroyed america, that's what we need to do. >> host: sorry, joe, to cut you off, but we're running out of time. do you want to address the concerns? >> guest: i couldn't agree more with the caller that trade agreements need to be fair, and the obama administration is committed to making sure we have labor and environment provisions in our trade agreements. again, we need to recognize that the united states is not -- cannot act in isolation from the rest of the world. we need to be at the able to make sure that we negotiate the best deals possible for the american worker and for american business. >> host: under secretary of commerce, francisco sanchez has been our guest. thank you for joining us. >> guest: thank you for having me.

>> in just under a half hour we'll go live to a hearing of congressional oversight of new executive brench regulations,

members the new house subcommittee have up or down votes on every new federal agency rules before they are enforced. live coverage starts at 4 p.m. eastern here on c-span2-rbgs. now a look at -- there's a theme during tomorrow's state of the union address from today's "washington journal." >> host: we're talking about job regulation with diana scott ross, employment policy of the hudson institute. welcome to the program. >> host: it's great to be with you, rob. >> host: we've been talking about ronald reagan and 30 years after. you bring up the connection between his statement on regulations and the statement that the current president, barak obama, just made. tell us about that.

>> guest: exactly. in february 1981, ronald reagan issued an executive order that the costs of regulations have to be lower than the ben fifths. the costs need to exceed the benefits, and this was one of the beginning of regulatory reform. jimmy carter moved in the direction of looking at cost benefits of regulation, and then reagan continued that with the executive order, and president clinton also had an executive order in 1993 when he came in. >> host: so taking a look at the executive order, it says general requirements in prom mull gaiting new regulations and proposals all agencies to the extent permitted by law should adhere to the following requirements. a, administration decisions

based on adequate information concerning the need for and consequences of proposed government action, and b, regulatory action shall not be undertaken unless the poarnl benefits who to society for the regulation outweigh the potential cost for society, and it goes on. draw a line between this executive order that president reagan put out and the recent executive order that president obama put out. is it basically the same thing, just repeated over and over? >> guest: exactly. what's really interesting is that president obama in the past two years should have been complying with the law already. he should have, and we haven't office of information and regulatory analysis, part of the management and budget, and this should already have been evaluating the costs and benefits of different regulations and all the executive branch agencies should have been complying with this.

president obama is suggesting that this is new that his administration have been breaking the law up to this point. in other words, they are already doing this. >> host: so what in your opinion moved the president, the current president obama, into making this declaration? was he concerned that he was, in fact, breaking the law? >> guest: no, i think we he wanted to show that he cares about jobs and knows regulations can stifle job regulation and wanted to show he cares. on the other hand, there's regulations and laws in the past two years that are now on the website, the regulatory information website that caused immense hardship to employers, make it very difficult for them to hire new workers. if you take one small example in the health care law. if you have 51 or more workers

in your firm, you have to pay a penalty of $2,000 per worker per year if you don't have the right health insurance. having a basic plan with catastrophic health insurance, your insured against traffic accidents or cancer. that's not enough. it has to be a qualified plan, otherwise you pay $2,000 per worker per year. if you have 48 workers, you say i'm not hiring more than 2. if you have 55, you are saying, well, how can i contract out work and get down to 50 so i don't have the pay the penalty. the way the computations go moving from 50 to 52 workers cost an employee r $44,000 a year. that's a big disincentive. you have the financial regulation law that set up 29 offices of minority and women inclusion, so financial firms. if you are a financial firm, you have to have fair inclusion of

women and minorities. right now under the law, if a minority or woman applies for a job and you don't take them and it's on the grounds of gender or race, you have broken the law, but this means you have to have inclusion even if no one applies. you could be breaking the law if no minority applied and they are not on your staff. >> host: we're talking to the directer of the center of employment policy of the hudson institute. if you want to be involved in the conversation, please call. we'll also take your twitter messages and your e-mails and show you those addresses as we continue the conversation. i wanted to read to you part of

a column that was wrote talking about obama buys into businesses regulations myth. now that obama is adopting the mind set of republicans who believe if business is regulated at all, it is regulated too much. they want to rid the country of regulations and bring into businessmen and experts to help them do and the president is calling online one. if the republicans had not gained criminal of the house of representatives, do you think that the president as this article said would be adopting the mind set of republicans or just continuing on the way he's been going? >> guest: i think if we didn't have the dramatic swing of republicans, president obama would have thought everybody liked his proposals and he would have continued on the same way.

the other factor is the high unemployment rate. unemployment has been above 9% for approximately the past 18 months, and this is just devastating for the president and the possibility of being reelected in 2012. jobs are the first things on all americans' minds, whether they could lose their jobs, their neighbors or family's jobs. these regulations discussed really interfere with job creation. if i could just mention one, construction of affirmative action. it's arn12-aao1 on www.raginto .gov. this requires affirmative action for women on minorities on site. if i apply to a construction site to build one of these

buildings built here in dc, they would have to consider me even though i am not suited to work construction. i don't have the muscles or physical strength. this is calling for affirmative action for women. you don't want unqualified women on construction sites. >> host: there's no mention of qualifications? clearly, you are not qualified. tell us if you have any other qualifications, but clearly you cannot work in construction, but there may be women who are qualified. >> guest: yes, but it's already illegal to discriminate. when we talk about affirmative action, we are talking about hiring people who are not necessarily qualified who would not have gotten the job in the first place. >> host: to the phones from illinois. edward on the line for independents. >> caller: good morning. >> host: go ahead, sir.

>> caller: i enjoy what you are saying and she's very good and knows what she's talking about, but what i want to express here is the united states labor department dropped charges that was made and complaints, they call it the ccp and wage department, that division was a flop and that's where the labor department duped us, and i want to go back to the department of action. what she said is true about that. a lot of women need to be taking care of families. on top of that, we have entitlement enacted and we have the executive order number 24 to deal with veterans. it's a shame the way that the labor department got rid of the union, destroyed the union. this country really has come in, brought other people in the country, set up jobs and what

have you, you know, with different kinds of minorities and that. these minorities are not minorities, the african-american, not these asians and all these other people coming in the country. they come in, i don't know what church is bringing them here, but they are taking over the markets concerning employment. >> host: you have gave us stuff to work with. >> guest: that's an excellent question and there's in antidiscrimination provisions in the law. people bring people in, and the labor department not only is enforcing current antidiscrimination laws with the office of federal contract compliance, and it's trying to go further. again, if you look at the website, look at the labor department, here they have a nondiscrimination and compensation data collection

tool. last year the congress, the senate did not pass the paycheck standards act which would have required all employers to turn over to the government their work, race, sex, and earnings, but here under a regulation, the labor department is trying to do it by themselves. they want a data collection tool that may be used to conduct establishment specific, contractor wide, and industry wide analysis. they want to collect this data in order to check that employers, not just federal government contractors, but industry wide are paying men, women, people of different races equally, so they are moving ahead on the front even though congress refused to pass the bill that would have required the data collection. >> host: next up is robert in kansas city, missouri on the line for democrats. you're on the "washington

journal," robert. >> caller: you know, the unions are a necessary evil because employers do not treat people like people. they treat them like a product, and we need these regulations to be treated fairly. now, one more regulation that i'd like to see if you ship your job overseas, you move with your family and your brothers and for sisters all leave the country with your jobs. that's only fair. thank you. >> guest: well, you know, if we had everything made in the united states, everything would be a lot more expensive, and sometimes shipping jobs overseas means that corporations can create more jobs here in the united states. imagine if everything you had to buy had to say made in america, and we can already buy things made in america, but many of them are more expensive. we're basically expanding

worker's paychecks by giving them a choice of buying products from abroad. toys made in china are less expensive so over christmas we can buy more fur our children, and we have the choices of buying products in america, but they are more expensive. we have more free trade. it encourages our companies to create jobs here, to export abroad. that's why it's important that the senate ratify not only the free trade agreement that president obama just signed with south korea, but the pending free trade agreements for columbia and panama that have been sitting there for over five years to allow our companies here to create jobs and export to that country. they can export to us, we need to export to them. 40% of americans work for companies that export. >> host: auburn, new york, david on the line for republicans. you're on the "washington journal" with dianne that.

>> caller: thank you, good morning. just a comment. the economy, it seems to me, the economy is regulated to maximize the revenue to the government, not to maximize the government to the citizens. being from new york and this enormous government in our state, and i believe it's nationwide. you cannot regulate and exploit that many people. there are not enough people actually worker to ever satisfy the needs of this regulatory government, so that's sort of my general statement, and i'll just leave it there. thank you. >> guest: well, i think that's very true. every regulation gives opportunity to the government to favor corruption. if you look at the waivers from the health care bill, there have been about 300 waivers issued to the health care bill to say that these companies don't have to

comply with the provision this year, and the question is, how do they go around choosing the companies that get the waivers? many unions, some insurance companies have waivers so they don't have to spend the stated amount on health care benefits in 2011 as is written in the law, and as you mentioned, every regulation has opportunities for this kind of picking. we saw with the financial regulation bill that the new consumer bureau l financial protection is going to be able to restructure companies and the question is how are they going to pick those companies? are they going to be better to their friends than their enemies? how are campaign contributions fitting into the picture? that's why we want to have a clear, open, and few regulations as possible. >> host: we're talking with diana, the directer of employment policy at the hudson institute, and if you want more

information about some of the information she's been sharing with us, you can go to www.reg info.gov. >> guest: there's a way to click on the agencies you're interested like the environmental protection agency that have hundreds and hundreds of potential regulations or the labor department, and you get a list of the regulations considered by that agency, a complete list of them, and it's really interesting, and if president obama were to read it, he would really understand how regulations are constricting job creations. >> host: back to the phones, danville, virginia, wilson on the line for independents. go ahead. >> caller: good morning. thanks for taking my call. with the regulations that they have today, i feel like that we have just about turned this

country into communism because everything has jobs going to china, and i feel like that the people of america, i have to do some work on my house. i went to get nails, and they were made in china. are you telling me we are so out of shape in this country, we can't even make a nail? the other small item that we need and that we use, are we sending jobs to china? i mean, are we going to be communists or what are we going to be? >> host: wilson, was there a regulation that said you had to use a speivel nail in this job? >> caller: well, the way i look at it is a fitted nail or whatever, you know, and i just don't see anything made in america anymore that i can use. >> host: wilson from virginia. >> guest: you're right. is a real problem.

the epa's regulation of carbon is going to drive more jobs offshore making the price of energy here in the united states more exceptive. when the president talks about innovation through solar panels and windmills and alternative energy, guess where the pams are made? they are made in china. we're preventing good, well-paying jobs here in the united states in our coal, oil exploration, gas exploration industries, and we're buying solar panels from china, and there's a company called everygreen in massachusetts that's just closed its solar power plant and shipping those jobs overseas. wee need clear and consistent regulation, but no regulation that doesn't involve necessarily shipping jobs abroad and e pa's regulation of carbon is going over what congress didn't do

last year. last year, they didn't pass the cap and trade energy tax bill because energy would have been more expensive, resulted in more jobs going abroad, but what is 9 environmental protection agency.name? it's doing the same thing by itself, and again, you can find it on re ginfo.gov. we need to be developing energy jobs here, not shipping the alternative energy products abroad. >> host: we're talking regulation and job creation with diana of the hudson institute. next, doris on the line for democrats. >> caller: thank you. i have two points. what country is this young lady from, and -- >> caller: i was born in england, i aim here when i was 9. i got my citizenship when i married my husband at 27.

i was honored to meets ronald reagan because i worked on the white house staff before i got my citizenship back in 1987, and i've been here, six children ever since. >> caller: my next point, we see, excuse me, hello -- >> host: ma'am, go ahead. >> caller: oh, okay. we see what happened with the ronald reagan presidency and why he's one of the worst presidents. we saw the rise of these right wing extreme conservative think tanks, and especially the federalist society -- >> host: doris, get the conversation back to regulation and job creation, okay? >> caller: she doesn't mention in the last tax cut package, the democrats put in that bill that the pentagon has to buy only american made solar panels so we

are trying to get back on track. they cannot buy solar panels that's been made in china. >> host: we're leaving it there, doris. thanks for the call. >> guest: if there are provisions in bills, it doesn't mean the rest of the country also has to have those provisions, and the pentagon might be limited to solar panels in the united states, but the rest of the country would be buying solar panels from china and windmills and other kind of products like that whereas we have good jobs here. for example, the interior department is not allowing drilling now in the gulf of mexico because of the bp oil spill, and that happened last april. it's january now. when are all those workers going to be able to get back to work? there's over 30 oil rigs idled in the gulf of mexico, and these are good jobs. we have tightened up on the

standard, and it's time to get that energy flowing back into the united states again. time to get those people back to work. >> host: last tuesday in the "wall street journal" the president had a section and talked a little bit about regulation and job creation. he says it's a review that will help bring order to regulations that have become a patchwork of overlapping rules, the result of tinkering by administrations and legislators of both parties in the past decades. in your opinion, does that clarify matters as far as regulations are concerned in your mind, or does that muddy the waters more than they were before he got into office? >> guest: i think what he's doing from the perspective he has, the emphasis he's putting on it is going to mean there's a closer look on regulation, but some of the major regulations

his agency is working on, he to himself has to say, look, epa, we don't want to regulate carbon until the unemployment rate is 3% points lower around 6% and not 9%. he needs to take an affirmative lead on this. he's talked about spending on infrastructure, how that's going to help to create jobs. again, this is something that the private sector can do in terms of building roads and bridges with tolls and he has to take basically an approach is not only is he seeing it, but he also means it. >> host: from new jersey on the line for independents, you're on the washington journal with diana. >> caller: good morning. i'm unemployed. age discrimination is the problem. do you know any law in the books that address that issue? also some jobs are using race, age, gender, looks, anything now

to put you out of work. do you know any laws on what can be done -- even though it's hard to prove, age discrimination is hard to prove, but what is out there that can help us find jobs? thank you. >> guest: well, the equal employment opportunity commission enforces laws that are against age discrimination and discrimination on the basis of race. if you feel you have been discriminated, you can act contact a lawyer and make a case and complain. there are definitely rules against age discrimination as well as race discrimination and sex discrimination. you might qualify on all three grounds. >> host: we are talking about the aging population in the united states and different aspects in imp my cations --

implications of the u.s. population. that's coming up later on in the program. back to the phones, from new york, ed, on the line for republicans, you're on the with the washington journal." >> caller: yeah, thanks, rob. i have one suggestion. name all state capitols and wushz dc as -- washington, d.c.. realize all the regulations are installed by the little institutions to stop the individuals from doing anything that would be very constructive. i'll give you an example. a little girl was selling lemonade in a lemonade stand, and the government came down and told her she had to have a $75 license to sell lemonade on the street corner. think about that. all the little strings that the government's are putting on

industry is why we do not have a viable industry in the country. thank you. >> host: probably why we don't have more lemonade stands. >> guest: right. well, social security true that the increase -- it's true the increase in leglation and rise of minimum wage adversely effected teens. the teen unemployment rate is 25%, and the minimum wage that rose in three segments to 7.25 an hour is once employers added social security, workers comp, unemployment insurance, they pay about $8 an hour. what we're saying to teens is if you have teens that areless than $8 an hour, you are not allowed to work. we're not going to let you enter into the workplace. again, as you mentioned, it stops individual initiative. it stops the first jobs -- my

first job was scooping ice cream. it means fast food stores are shipping in more premade patties so they don't have to have so many teens working there, and this is a real shame, and it carries through later on where people don't have that first job and that work ethic that they are taught. >> host: as we mentioned, you are the policy director for the center for employment policy at the hudson institute. before that, she was a chief economist of the united states department of labor from 2001 until 2002 serving as the chief of staff of the president's counsel of economic advisers under gorks w. bush. she's our guests as we talk about regulation and job creation. miami, florida, cliff, on the line for independents. go ahead. >> caller: thank you, c-span,

and the opportunity it gives me to ask the questions about the regulations and jobs. , what i would like to find out from the guest today is, yeah, i've seen that regulations have destroyed jobs, and my question is where would the recklations be before -- [inaudible] and if they were not followed, what are we? that is the first question. .. question. my second question is i would like to know where the institute funding is coming from to figure out whose views he is expressing -- she is expressing. guest: this is from a non-

partisan think tank. one person specializes we will hustle along and do the best that we can. when you see that red light appear that will be your signal

that you have the last five minutes. we will not call in the u.s. marshal. the need to wrap up. the five met rule also applies to members of the subcommittee. we will try to adhere to that as well. i want to give -- recognize mr. cohen for his opening statement. other opening statements will be made part of the record at the conclusion. is that agreeable with everybody? today marks the first year of the committee on commercial and administrative law. we were going to have mr. smith in the book is not here yet. he has provided our subcommittee with jurisdiction over a number of important matters that i hope our subcommittee will address during the 112th congress. it might be one of the most important matters -- strike that. let me put that another way. one of the most important

matters -- i've lost my place. hang on a minute. to fine-tune our regulatory process, hence the introductory oversight hearing on the reins act. many have alleged that the obama administration has cast a cloud of regulatory uncertainty over some parts of the economy. it is no secret that our economy is still soft, perhaps even dismal, unnecessary or unreasonable regulatory burdens would continue to drive business investments in my way of thinking abroad. examples of the need for improvement are prevalent in virtually every sector of government regulation. for instance, the department of health and human services implementation of president obama's health care reform. the financial aid, implementation of the national reform bill. the epa campaign against carbon.

the fda approached a herbicide and the federal communication commission drive to regulate the internet and allocate spectrum. i only mention these examples because they are widely recognized and the fact of the matter is that fine tuning is needed across the entire regulatory horizon. our current regulatory regime has deep historic roots. since the days of the new deal and especially during the 60's and 70's congress has delegated more and more of its legislative authority to the federal agencies. this has been done through broad and vaguely stated laws that allow congress to claim credit for addressing problems but leaving it to the various agencies to fill in the crucial details deregulations. the final risk of the wrong decision thus falls on the agencies and, of course, the economy and america's job creators. congress too often escapes but responsibility and accountability. the republican majority that came to congress in 1994

attempted to address this problem through the congressional review act. that act, you may recall them give the congress greater tools to disapprove agency regulations that harm the economy, destroy jobs or otherwise were counterproductive. over its history, however, the congressional review act has not fulfilled its potential. during the hundred and eight and hundred ninth congress is the subcommittee on commercial administrative law examined ways to improve the congressional review act and better assert congress's authority over legislative regulations. one of the leading and ideas for reform was to amend the act to preclude regulations from going into effect until congress actually approved them. that is precisely what the fda does for the biggest regulations federal agency issue, those imposing a hundred million dollars a more in costs on our economy. today more than ever we must

consider and enact reforms that vindicate congressional authority over laws. the reins act is front and center among those reforms. before reserving my time i would like to extend a warm welcome to our former colleague, congressman david mcintosh predicted to have you back on the hill as well as the other witnesses. mr. kaelin, i said this before they came in, but it's good to have all the members, republicans and democrats alike on the subcommittee. now i'm pleased to recognize distinguished him from tennessee, memphis, to be specific. mr. kaelin. >> thanks you, mr. chair. i appreciate that. tennessee was originally north carolina. in some ways we are colleagues beyond and here. i would like to first pay specific attention to the new members and others somehow. the ranking member of the committee, the distinguished, venerable, honorable, legendary

john conyers. >> nice to be with you. >> chairman smith and all the other members on the board serving with each of you as well. not legendary yet, but he is honorable and a few of those of the things. we will incorporate by reference. >> i did not realize that the chairman had come and. i did not mean to ignore you, lamar. mr. conyers as well. chairman, get to see you. >> high heels back. >> thank you. i would like to start offering my congratulations to mr. koppel who assumed the chairmanship of the committee. and i was chairman he was as nice as anybody to me. everybody was nice, but he was particularly nice and i was always appreciative. an outstanding ranking member. you were together nicely. i live four to seven with them. i am honored to be working as ranking member, although i'd rather be working as chairman. that's congress. today's hearing provides us with the opportunity to make the

merits of h.r. 10, the regulations from the executive in the yesterday act. it also gets a chance to discuss the appropriate role of their regulations in american life, a conversation i suspect he will continue after subcommittee. although they do not explicitly say proponents appeared to believe that almost all regulations are bad. all their arguments focus on the purported cost regulations would impose on society based on this premise we have heard rhetoric about job killing despite economic growth and impaired personal freedom. such arguments do not seem to fully appreciate the regulations can also benefit the economy but police and reckless private-sector behavior that can undermine the nation's economic well-being. came very close to in 2008, lack of regulations.

regulations facilitate economic activity by providing clarity for the applicable statutory language and leave unnecessary confusion or even litigation. regulation that also serves societal values and may outweigh economic growth. they help protect the health and safety of every day americans including our children, our neighbors, our colleagues, grandparents and ourselves. the fact is that federal regulations help insure the safety of the food we eat, the air we breathe, the water we drink, the products we buy, the medications are used, the cars we drive, the planes will fly in and the places we work. most americans take for granted the safety of these things because of the existence of federal regulations. the reins act friends to make it harder for such beneficial regulations to be implemented. under the act congress must

approve a major role, one having an economic impact of $100 million or more, passing a joint resolution of approval through both houses of congress. the president must then sign the joint resolution of approval before the rule can go into effect. at the most practical level i question whether the reins act would work. i've been in congress line yet to understand that the business force will not more often than not prevent us from getting true consideration and approval. even alternately enjoy the widespread support. as with the congressional review act underlying statutes that the reins act seeks to amend, this idea may seem better in the abstract than practice. a not ready to say the reins act is a good idea. i appreciate the attempt to concerts congressional control. there are separation of powers that i think been spoken to members of congress about recently. justice scalia lead that talk.

can certainly be constitutional objections. we will hear from witnesses. there is a role for us, the executives, and the judiciary. i look forward to our witness testimony, working with the chairman and our other colleagues on the subcommittee. i yield back the remainder of my time. >> at thank you, and i think you as well for your generous remarks at the opening. statements of all members will be made a part of the record without objection to rely and told that mr. smith and connors would like to make opening statements to be at recognize distinguished and a man from texas, the chairman of the full committee, mr. smith. >> thank you mr. chairman to be sticky for chairing this particular hearing which i thint important of the year. as you said, i also welcome our former colleague david mcintosh. david, i hope we get to talk more later on, but i appreciate your being here, too. the american people in november

voted for real change in washington. one change that they want is to stop the flood of regulation that cost jobs and smothers job creation. from washington and congress make them more accountable. the reins act makes the change a reality. unelected federal officials for too long have imposed huge cost and the economy and the american people through burdensome regulations. today these regulatory costs estimated to be a yearly -- nearly incomprehensible one and three quarter trillion dollars, roughly $16,000 per household. because of the officials who authorized these regulations are not elected they cannot be held accountable by the american people. the reins act range in the costly over reach of federal agencies that stifles job creation and slows economic growth. it restores the failure to impose regulations to those who are accountable to the voters, they're elected representatives in congress.

the obama administration has under consideration at least 183 regulations that each would impose cost of $100 million or more on the economy. when businesses have to spend these vast sums to comply with this massive regulation they have less money to invest to stay competitive in the global economy and to hire new employees. these costs get passed on to the american consumers. in effect these regulations amount to a stiff but unseen taxes on every american. last week in a new executive order president obama reiterated the existing authority of agencies call outdated rules from the books and consider impacts on jobs. this order sounded encouraging, but added little to the rules that already died the process of regulations. in the executive order distributive impacts and equity are specifically identified among the benefits to be

maximized. job creation is not. the executive order is specifically written not to include regulations issued to implement the administration's health care legislation. echoes of independent agencies trust to implement the french financial reform was sufficient. it will call the environmental protection agency's drive to exercise authority it was never granted. so the most burdensome and costly regulations are exempted. the executive order i hope not may have been all style and the substance. until it produces results it is just a string of empty words. we must watch what the administration does, not what it says. in 1994 congress passed the commission review at to reassert congress's authority over the relentless regulation of the federal government. the actors been used just one time to disapprove of regulation. the regulatory tide continues and rises even higher.

the rains -- reins act is needed to reduce the cost of the flood of regulation, free of businesses to create jobs and make the federal government more accountable. thank you, mr. chairman, and i yield back. mr. chairman, before i yield back entirely of would like to recognize a colleague sitting in the back of the room who has been absolutely instrumental in promoting, advancing, and writing this legislation that we are discussing today. >> i think the gentleman. the chair is pleased to recognize the distinguished cinnamon from michigan, mr. conyers. >> thank you. i join in welcoming our former colleague mr. mackintosh tackier. it is very important. and i ask unanimous consent that the author of the bill, rep davis come forward.

i think he should be able to make a couple comments about the bill. i would welcome his sitting at the table since there are only three people anyway. plenty of rumble. >> mr. conyers, we are pleased to have mr. davis come forward. i don't believe he would be eligible to comment, but we will be glad for him to come forward to the table if you like. >> you say he can't comment. he can't comment on his own bill? the judiciary committee, the keeper of the constitution. >> well, he was not called as a witness. that is why i made that statement. >> reins act. well, i have a few questions i

would like to ask him after the hearing then if i can. i will be looking forward to doing that. i have a statement that i will put in the record so that we can get to our witnesses, but the most important part of my statement is that i think we have a constitutional problem on our hands. our former colleague alluded to it himself in his statement. it is found are "to section one -- article two, section one. i refer all of the distinguished lawyers on this community. i am sure we will have enough

time to go into this. the second consideration i would like us to keep in mind as we go through this important hearing is that the reins act may not be tailored to the problems that it is supposed to address. we have got some big problems with whether this is feasible. the feasibility of this act -- well, let's put it like this. this would affect every law on the books. it is not perspective, but it would involve every lobby that is on the books currently. now, i don't want to suggest

that the congress is not up to its work, but do you know how much time that would take? to go through all of the loss to get them -- the regulations to the loss of kate by the house and the other bodies? it does not seem -- it does not seem very probable that that could happen. so when you consider the fact that we don't have the author of the bill testifying, and we are glad to see you, of course, but we also don't have the administration testified. why isn't somebody from the administration here?

i mean how can we be doing this -- i have been told by staff that we are going to try to report this bill next week sometime. chairman, i would like to, with all due respect, ask an opportunity to discuss with you the possibility of an additional hearing on this matter. >> well, if the chairman would deal, this is an oversight hearing, as we know. there will be a legislative hearing subsequently. >> okay. well, that is consoling. i am glad -- now, this is a great new process of order. redo the oversight hearing first and then we have a hearing on the bill. that makes a lot of sense.

why don't we have a hearing on the bill first? we are over setting the condition that has caused the bill to be created. is that right? >> this is the oversight hearing. the legislative hearing will be scheduled. >> okay. all right. now, well, i don't have that ask for another hearing. there is calling to be another hearing on the bill. i am glad to know that because i have got a witness or two in mind that i would like to have part take with all the other distinguished friends of us -- of hours that are here today. i think you very much, the chairman. >> thank you. >> i yield back the balance of

my time and ask my statement be included in the record. >> and all statements of the members of the subcommittee will be made a part of the record without objection. we are pleased to have our panel of three witnesses with us today. as has been mentioned previously, mr. mcintosh, good to have you on the hill. now practices in washington focusing on issues before congress and the executive branch. he is a graduate of the university of chicago school of law, a commodity graduate of yale university. professor jonathan adler teaches at the case western reserve school of law where he is the director of case western center for business law and regulation. a visiting professor at new york university school of law. professor also serves as senior adviser to the group. get to have each of you with this, and we will start with mr. mackintosh whom we recognize for five minutes.

>> it's a pleasure to be back here. >> turn on your mike. >> thank you. it is a pleasure to be back. i am learning the technology. thank you, mr. kaelin and conyers for your remarks. let me commend the community for taking up this question and the oversight hearing of the regulatory process in the urgency for looking at other ways of making it work better to reduce the cost of regulations. i want to commend representative davis for his work in introducing the reins act. when i was a member the speaker asked me to chair a subcommittee on oversight just on regulations the government reform committee. we looked at a lot of the different regulatory programs

and the overall cost on the economy. i have to say, as i was preparing for the testimony today after i receive the invitation i was startled that the magnitude of the cost of federal regulations. one and three-quarters trillion dollars cost imposed on the economy throughout 15,000 per household and in particular on jobs where for large businesses it cost $7,700 per employee to hire a new employee to follow the regulatory dictates of the various federal programs. for small businesses it is even more, over $10,000 per employee. as mr. cohen pointed out those are the costs. the need to look at the benefits of regulation when you are making policy decisions. congress does that as it passes laws. the agencies are required to do

that under longstanding executive orders. the problem that i see that has happened, and report on the congressional review act as a way of addressing that, that balancing act of the particular type of mandatory requirements that it said in a regulation versus the benefits this not come back to congress for review once legislation has been enacted and the regulatory agencies have been empowered to act. we passed in 1995 the congressional review act as one way to increase that formally, but as was pointed out earlier it has only been used one time, and it is difficult for the political configuration to work where typically you have got to have a resolution of disapproval go through both the house and senate and signed by the president. i think the only time it did work was when president

clinton's administration proposed a rule and congress acted and prevented a bill about that regulation. and so you saw the political baton being handed from one party to the other and willingness for congress and the president to act. the reins act strikes me as an excellent way of really strengthening that effort. it is not applied to all regulations. this carefully tailored to major regulations that have a significant and major impact on the economy. in many ways it addresses some of the constitutional questions that come up from time to time in the various regulatory programs. specifically whether congress has delegated too much authority to the regulatory agency and needed to retain some of that authority in the legislative branch in order to perform its article one dvds. and also as i . out in the

testimony there are some enhancements for presidential authority under article two. mr. conyers mentioned article to section one where you have a unified executive because the bill applies to both regular agencies and the executive branch and also the so-called independent agencies with the president would have some greater authority over as a result of the reins act. it is also carefully tailored to fit into what this committee is an expert at. that is thinking about the processes that should be used for federal regulation. it merely says congress is going to withhold part of its delegation and give itself an option to approve the final result before that has the force of law. it is in addition to the minister procedures act and carefully written to be narrowly tailored to fit into that procedural change.

the parties still have their rights under the administrative procedures act for other problems that may come up. so i commend the committee for taking this up. i urge congress to favorably consider the reins act and i will be glad to answer any questions when you need me to. >> thank you, mr. chairman. >> thank you, mr. chairman and members of the subcommittee for the invitation to testify today. i appreciate the opportunity to appear before the subcommittee to discuss measures that congress may take to enhance regulatory accountability. this is a tremendously important issue. federal regulation is accumulating at a rapid pace per decade. in 2009 alone federal agencies by last over 3500 new federal regulations. the growth of regulation is imposed to contain cost american consumers and businesses. according to estimates that have been mentioned several times already total cost of federal

regulation exceeds the trillion and the purchase $2 trillion per year. substantially more than americans pay each year in individual income tax. in so far as regulation is imposed they operate like a hidden tax. just like taxes regulations may be necessary, they may be important to address public gills or provide public benefit. these benefits may be important and it may be worthwhile to have these regulations, but it does not mean that they are free. regulations, like taxes, impose substantial costs and generate substantial benefits and makes it that much more important that there be political accountability for federal regulatory decisions. increasing the scope of federal regulation has been facilitated by the allegis said the practice delegating substantial amounts of legislative authority and policy discussion to administrative agencies. all administrative agency authority to issue regulations comes from congress to read such delegations may be expedient or even necessary at times, but it also has cost.

excessive delegations and undermined political accountability for regulatory decisions and allow regulatory agencies to adopt policies that do not align with congressional intent or public concerns. all too often federal regulatory agencies use the statutory authority to pursue policies that are unpopular or unwarranted and all too often congress is unable or unwilling to do something about. this is magnified by the fact that the agencies are often exercise in the authorities granted years if not decades ago. one example that has been discussed already today, the epa is currently implementing regulations to control greenhouse gases under the clean air act even though congress has never explicitly voted to support such regulation. ratted the epa is utilizing the authority enacted decades ago. the clean air act basic architecture was enacted in 1970 and it has not been significantly modified since 1990. the greenhouse gas regulation is warranted. this is a decision that should be made by congress, not an

executive agency acting alone. the reins act offers a promising mechanism for disciplining federal regulatory agencies and enhancing congressional accountability. it requires congressional approval before economically significant rules may take effect in charge that congress take responsibility for that handful of regulations, usually seven dozen per year and impose major cost and hopefully also provide a major economic benefit. adopting an expert at it alleges that the process much like that used for fast track trade authority interest transparency and prevents a congressional review process from unduly delaying these regulatory initiatives to be such an approach can enhance political accountability without sacrificing the benefits of agency expertise and specialization. requiring regulations to be approved by a joint resolution presented to the president also satisfies the constitutional requirement of by cameras and. the simple provision is similar to proposals made by then the

judge steven briar. he noted that a congressional authorization requirement is a constitutional way to replicate the function of a one house legislative veto requiring congressional approval with the option of new regulatory initiatives imposing on congress the degree of this possibility. the act provides a means of curbing excessive or unwarranted regulations but is not an optical regulatory measure supported by the public. agencies are generally discharging their obligations in a sensible manner. the reins act will have the affect. the public supports regulatory initiatives. the act will not stand in the way. it would enhance the legitimacy of the regulations approved by congress and make clear that such initiatives command the support of both the legislature and executive branches. above all else remains act provides a means of enhancing political accountability for regulatory decisions. thank you again but and i am open to questions. >> and the beat the red light

eliminated. i commend you for that. >> thank you. i appreciate the opportunity to testify. as is clear from my reinstatement i am not a fan of h. r. ten. it is presented as necessary and desirable to come back and out of control regulatory process, but the bill in my view is not tailored to the problem that is intended to solve. it is not well founded and we will have serious advert unintended consequences including fundamentally changing our constitutional structure of government. we have heard a lot this afternoon about the cost of regulation. everyone is setting one and three quarter trillion which is the high end of an extremely controversial estimate. very few have talked about the benefits. monetized form. as someone who does, and i was the former administrator during

the clinton the administration, i do cost-benefit analysis. beckham both sides of the equation. omb during both the obama administration and the bush administration filed reports to congress in which it monetized and quantified the cost and benefits and consistently over time demonetized benefits exceeded the cost. a substantial amount, consistently producing net benefits for our economy and society. we cut back the rules and we lose the benefits. second, not all rules, not even all major rules are like. h.r. ten in its infinite wisdom pigs and the migratory birds rule because without that rule, which is a major rule you cannot shoot the birds as they fly to and from canada. there are lots of other rules.

the industry, the regulated entities want and need rules that provide guidance, rules that provide predictability or 74 their operation. i had given my written statement. there are rules that give life to programs, programs like agricultural subsidies, small-business loan guarantees or medical reimbursement without the eligibility and accountability provision which, in the form of rules, major rules you don't have a program. even though congress has authorized it or modified it, no rules, no program. other major rules may be good because they reduce burdens. the osha rule, the infamous the notion that everybody scorns passed a rule on cranes and derricks which reduced burden. it minimize the cost. industry had asked osha for a negotiated rulemaking and supported the clarification. all of these rules would be cut

by the h.r. ten net. now, supporters say there won't be any effect. they will all go through. with respect our experience during the hundred 11th congress to at least with the senate suggests that it is not easy to be the drafters of h. r. ten changed hr3765, its predecessor from allowing ten hours of debate on the debatable issues to two hours of debate to be deep and still have a quorum call. the vote and if you have not debatable motions which easily could exceed 4-5 hours to read for the 65-95 rules major roles each year the senate is not going to find that time. has been unable with respect to find blocks of time to process nominations of administration officials or even judges. so the result is give rules, meritorious rules, import rules will not get through even though

months, in fact, years have been spent with enormous resources devoted to of sorting out the science and technical difficulties with public participation, with analyses of all sorts of aspects, with numerous checks dropped the agency, numerous checks draughty a ministration and subject to judicial review. what happens if the senate does not get to the? all of the time and effort and resources to go for naught. the same rule cannot be modified once it is final agency action without starting of rulemaking process over again. to say there is no affect is not to understand the administrative process. at a minimum h.r. ten introduces additional delay and uncertainty to an already lengthy and complicated process. finally for the reasons i set forth in my paper i believe there are serious constitutional issues that are raised that fundamentally challenging the

separation of powers, the principles our founding fathers incorporated in the constitution. i sketched out some of the articles. i here people referring to justice priors, the speech, since 1983 and his response there has been a lot of on the supreme court. and the test is really critical. i know that i have only five minutes. my light is red. i think you, mr. chairman, but i do hope that somebody will pursue this during the questions so that we can look at some of the existing law and practice in this field to protect you very much. >> witnesses for the testimony. we will now have members questioning the witnesses and we will apply the five minute rule to ourselves as well to read at recognize myself for five minutes. mr. mcintosh, in your view what current regulatory efforts most highlight the need for reform.

>> one, the regulation of carbon, and my memory was that we tried to present to the previous epa the full legislative history of the clean air act amendments that made it very clear that carbon was not to be regulated. there was a lot of back-and-forth, but ultimately the courts have forced their hand. but to me that says an example of where if congress had a procedure in place they could reassert that intent even when the courts are driving the agency in a direction that, perhaps, the agency itself was not initially intended to get down. a second one would be the net neutrality regulations, the fcc

has proposed. i think there will be a lot of litigation about the agency exceeding its statutory authority. i think if congress had a procedure in place where they could easily pass that bill i think you would see bipartisan support for a bill nullifying that regulation under the reins act procedure. i think that would save a lot of time and expense and uncertainty in the private sector as that litigation altman against ford. i think talking to my partners to specialize in the sec pact that it is very likely to be thrown out. once again, the example of how congress could effectively ensure there is economic progress that is made by paying attention to and having a part to play in that regulation. >> thank you, sir. professor adler, an improving upon the congressional review

act is not requiring congress to approve a lease some agency rules the next logical step and in taking that step what are the keys to assuring that the reins act or a similar reform remains constitutional under the rule of ins. microphone. >> side. i keep forgetting that. i do think it is the next logical step. a mechanism that forces congress to say yea or nay to a substantial regulatory proposals is the next logical step to ensure that there is political accountability for major regulatory decisions to be in terms of the constitutional question at think ins is very clear that all that is required is bicameral presented. supreme court has said explicitly time and again that it is at schematic of their work that all authority from the federal agency to adopt such regulation comes from congress and that agencies have no such

authority. so unlike mcmorris verses olson with enforcement authority, arguably in some contexts there is some residual and inherit executive authority or some authority that executive agencies may have. there is no inherent authority in any federal agency to issue regulatory type rules absent a congressional delegation. if congress wants to delegate less, if congress wants to put conditions on the exercise of delegating authority it certainly can't do it not only did judged by your note this in his 1984 lecture, larry tribe who was until very recently an official in the obama justice department likewise said that a requirement of the sort will be purely constitutional. the last point i would make very quickly, mr. chairman, is that we have seen this already in areas that are far more sensitive to regulation. in the trade context using the sort of process for fast-track

trade authority is arguably far more -- of far greater intrusion on executive authority than anything regarding domestic regulation. implicates the foreign affairs authority and i don't think many people would argue that fast-track trade authority. >> trying to beat the red light if i may. pardon me for cutting you off. professor, you indicate that executive orders already constrained agency discretion and promulgate too many rules, but those orders have not prevented a flood of regulation and can be withdrawn by the president, cannot? >> mr. chairman, executive order can be withdrawn by the president or his successor. 12866 has been in existence since 1993, september of 1993. while there may be as flawed in your term, rules that have been issued, as i said, omb has

documented during the bush and administration as well that the benefits exceed the cost consistently over time. i would just mention that mr. smith mentioned the recent last week, president obama reaffirmed the executive order in his own executive order and, in fact, the very first sentence says that in order to promote the public health, safety, and the environment while protecting economic growth innovation and job creation, the first sentence of his executive order. so i think the record should be clear. >> and my time has expired. recognize the distinguished and and for mr. -- tennessee, mr. kaelin. >> thank you, mr. chairman. i appreciated. let me ask you one question. as i understand it mr. davis introduced this in the 111th

and 112th congress. was it introduced to your knowledge before that? >> last year. >> in the hundred and 11th, but before that? mr. adler? >> i don't know the exact same language, but similar types of proposals have been proposed at various times. >> that required a positive approval by the congress? >> yes. >> when? 1984. >> let's come back to recent history. >> i don't know prior to the last congress when the last time such a proposal had been introduced. no then congressman dick smith for michigan has an article about legislation. >> when was that? >> i want to say it was 96 or 97. >> yeah. how about mr. mcintosh, do you know of anything? >> i'm not aware. >> basically during the bush years it was wonderful and nobody thought about this. executive authority was great and we did not need this.

it's only been since mr. obama was elected president that we need to do this. this seems to be the situation. for eight years it was wonderful with mr. bush. let me ask you this question. at think it was mr. adler. he said this will not present a problem. do you understand in the senate that they held up 50 or 60 judges? a blue slip, do you know what a blue slip? can you imagine the senators? that is the last don't ask don't tell. they still have that in the senate. how is that going to work? all of these regulations they do a blue slip. anita park. done. don't you think that is going to invite basically what i would think some nefarious type -- well, one senator can hold it up. mr. adler, is that right? one senator under the rules we know today can hold up rules and regulations? >> in the way that the rules are to be applied they can. was lives are a courtesy.

they are not applied to legislation to read my read of the bill would not allow a hold a joint resolutions because mr. adler, are you suggesting that we can write a bill over here that will restrict the change in sec rules? >> i think if the house and the senate both passed a bill that is signed into law by the president that codifies changes to the rules for both chambers as has been done for the closure commission, fast-track trade authority,. >> you understand that one senator can hold up the bill. >> if the rule -- if the rules allow, yes. i also know that there are probably about a dozen examples of the house and the senate passing legislation limiting the rules to prevent those polled by limiting the date and requiring them to occur. the two most prominent examples are with the closures commission and with fast-track trade authority. >> thank you, sir. let me ask you a question. you were here when we read the constitution. did you watch us read the constitution from the floor? >> actually, i did.

>> you did. and did you hear -- i don't know who read it. and sure it was somebody. article two, section one, something about all power being invested in the executive to carry out the laws. tell us a little bit about what that means? can they have the ability to execute our laws without rules? could they do it without having any rules to back. >> i think that is a serious problem. article -- section one of article tool, all executive power in the president, that power includes the power to take care that the laws be faithfully executed. that is a quote from the constitution. that means that when congress passes the law it is up to the president and the subsequent presidents and the subsequent president after that, whether they agree with that law or not to carry out the law. now, for over a century

administrative agencies have been implementing or carrying out the law by issuing regulations. that is how it does. and so for that reason i believe that an attempt by congress to strip the president of that authority with respect to major rules is tantamount to the act of congress on using chief justice rehnquist for morrison versus olson but of one branch self aggrandizing at the expense of another branch. again, we are using chief justice rehnquist's words. the act of congress which would impermissibly interfere with the president exercised if his constitutionally appointed function. these are serious questions. i would not be so presumptuous to say that i know how the supreme court would rule. if they want to invoke justice briar i would refer them

respectfully to justice scalia as well who has been among all the justices the guardian of the president's power. >> thank you. thank you, mr. chairman. i yield back the remainder of my time. >> he did not violate it too badly. the chair recognizes the gentleman from south carolina. >> thank you, mr. chairman. mr. chairman, i would like to make my own statement part of the record with your consent. i want to thank all three of our panelists. mr. mcintosh, i will start -- >> without objection. >> that you, mr. chairman. what in your judgment is the proper balance between the executive branch and the legislative branch it comes to rule making and enforcement? >> well, let me point out that the administrative procedure act also constrains how the executive branch writes its regulations, the processes it must use before they can have the force of law.

so there is a long tradition in our modern history of congress asserting constraints over how the president's and the executive branch can issue regulations. it is fully compatible with that for congress to say before this regulation that you are proposing, mr. president, or the agency, it has to come back to congress and said they're for congress to give its approval of the content of that regulation. i'd think it is fully within congress's power to do that. i would point out that for the century prior to the last century there were no regulatory authorities were bodies and the president was fully capable of exercising his duty under the constitution to take care that the laws were faithfully executed. so i think this act, perhaps, is -- it would be humorous to say that it goes as far as to

restrain the president's executive authority because it simply does not do that. there are ways that you can argue that in fact it enhances it as i mentioned earlier by the city the so-called independent agencies because his signature on the bill approving the regulation gives him control over those agencies and policies that they develop. >> mr. adler, i may have heard you incorrectly, and if i did i want to give you a chance to correct. i wrote down that you said 30500 regulations promulgated in the past. >> 2009. the exact number is 3503. of those i think -- a don't know the exact number, but several dozen or major. the 3500 number was all regulations. >> all right. i am just a prosecutor. forgive me for not knowing much about civil law. with a violation of the regulation be evidence of negligence in the civil suit?

>> that depends. >> on what? >> the nature of the regulation. there are instances in which that could be evidence. >> are there any criminal penalties connected with the violations of federal regulations? >> there often are criminal penalties associated. >> how can congress abdicated its responsibility for criminal enforcement to a non elected into the? >> well, i think you hit on the key issue here. congress for expedient has delegated loss of authority to administrative agencies to develop rules of conduct in a wide range of detailed and complex areas. i think what we overlooked is that it is ultimately congress that is responsible for that authority. especially when you have rules that are going to carry criminal sanctions or as in the case of

the reins act that are estimated to have a substantial effect on the economy which is a proxy for a meager policy decision that will affect a large part of the country. it is certainly reasonable to say that we should make sure that people who are the source of the legislative power in the first place, congress, where all legislative power is vested under article one of the constitution, is accountable for that decision and that members of the congress -- public know whether or not they are represented, believe that imposing that sort of rule is not a good idea. >> you do not challenge the constitutionality of congressional oversight, correct? you don't even challenged the wisdom of congressional oversight. >> i endorse it. >> when you mentioned that there are constitutional infirmities in the spill which as i read it is congress reclaiming its responsibility / authority for oversight, what do you mean by

constitutional infirmities? >> at think the reins act goes well beyond oversight. the chairman talked about in his opening statement fine-tuning the regulatory system. i think the reins act is a blunts and -- blunt instrument that goes well beyond oversight. what it says is that congress must affirmatively approved an action that is already delegated and on which a lot of work, effort, and resources have been spent in refining and developing and issuing a rule. >> but you would agree with me that congress can reclaim the delegation in the first placed. >> and that is through the congressional review act. it satisfies the bicameral and present part, and it says congress is saying you cannot do that. it is very different from saying before you do anything in this area you must come back, even though we have already delegated to you come and get our permission. >> what is the constitutional distinction between the two?

>> at think there is significant. >> i apologize, mr. chairman. >> i think there is -- icy significant difference between the two. that is why the congressional review act was originally crafted as it was to be a change of the law, not a filter before which implementation -- implementing a pre-existing law can go forward. >> sig you, mr. chairman. >> thank you, chairman. my ex prosecutor colleague asked why the congress does not enforce the laws. well, as mcintosh and davis and i know, we passed the laws. we overset the loss.

we do not enforce the laws. the federal agency called the department of justice enforces the loss. so that is my criminal-justice lesson for the day. now, this one and three quarter trillion annually that has been raised here, i would like to ask, how does that comport with the issues of the congressional budget office which has a different set of figures here to mack of indy said that major

regulations promulgated over the ten year time frame between 1998 and 2008 are estimated to cost between 51 and 60 billion. >> i would love to answer the question, but i know the red light will go off before i even get halfway there. the one and three-quarters comes from a study that was presented in the mid-90s. immediate raise all sorts of flags, both assumptions, methodology, etc. crs did a very careful analysis which i would commend to you that shows the different problems that exist. now, congress ordered omb to do the same thing, to do a real study. what omb did is to come up with a number which was a very large number, but much smaller than the numbers. congress in its wisdom said do

the cost and do the benefit. so as you talk about the 43-$55 billion in cost they found 128-$615 billion in benefits. if you used the highest in the the cost, the lowest end of the benefits you still have that benefits of $703 billion. >> let me ask you this. who was it that made this authoritative statement allegedly about over a trillion dollars? do you know? >> it originally came from a tom hopkins study. then and gentlemen whose name -- >> mr. adler, do you know? >> i don't know off the top of my head, but i would note that the omb numbers that have been referenced exclude non major rules which are over 90% of the

regulations that are finalized each year. compare those numbers with the other