while acknowledged, is not thought to be important enough to warned in a thorough planning and conservative contingency war planning demand. the commission concluded problems need to be attacked on several levels. the first is holding contractors accountable. federal statutes and regulations provide waste to protect the government against that contractors and impose accountability on them. unfortunately we found these mechanisms are not the grisly applied and enforced can consensus to constrain waste and not in place. research has shown some contractors have been billing the government for years using inadequate accounting systems that don't pass muster. recommendations for suspension debarment are not implemented with little implementation of the decision. past performance on our contractor performance is often unrecorded and less likely to be

used for the next contract award. staffing shortages have led to a defense contract audit agency backlog of nearly $600 billion delay in recovery of possible overpayment. the government has been remiss in promoting one of the most effective discipline, competition. we recommend better application of existing tools to ensure accountability and strengthening those schools. report contains recommendations to bolster competition, improved recording and use of past performance data, expanding u.s. civil jurisdiction as part of contract awards and requiring official approval significant subcontracting overseas. the second level is holding the government more accountable. for the decision to use contractors and subsequent results. taking a harder look at what

projects and programs to undertake contractors must also include thinking more carefully about whether to use contractors in foreign policy situations. our report recommends careful consideration of the risks created by contracting and phasing out the use of private security contractors for some functions. another part of the government's problem is resources. as this committee knows well both military force structure and federal acquisition work force were downsized during the 1990s. this ensures if they long contingency should develop the military would increase its reliance on contractors while at the same time its ability to manage and oversee those contractors had been significantly reduced. when the government has good

policies in place effective practices which are often different ranging from planning and requirements definition to providing adequate oversight of performance and coordinating interagency activities are lacking. we have recommended steps that would improve the government's handling of contingency contract in. they include developing deployable acquisition professionals elevating the positions of the importance of the agency's senior acquisition officers and the importance of acquisition as a core competency in creating a contingency contract in directorate at the pentagon's joint staff with a broad range of contract and activities is still treated as a minor subset of logistics. considering this committee's cross agency mandate i would also call attention to two

recommendations with a hole of government approach. the first is to establish a dual headed position for an official who would serve the office of management and budget and simultaneously on the national security council. such a position would promote better visibility, coordination, budget guidance and strategic direction. they would link foreign policy goals with budget resources. the second is to make use of contingencies. the special igs for iraq and afghanistan reconstruction have performed a valuable service but they will go way leaving the need to reinvent them and suffered delays in deploying staff when the next contingency does emerge. the work has shown the drawbacks of creating organizations that are limited in functional authority, geographic location

and time. a permanent contingency ig with a small but expendable staff trained in the unique circumstances of contingency operation can provide cross agency oversight from day one of the contingency. more details on these recommendations appear in our final 240 page contract. in compliance with authorizing statute our commission has closed its doors but the problems we have diagnosed remain very much alive. corrective action in some cases requiring limited financial investments are essential on the government and contractor's side of the occasion to reform contingency contract in. your sustained attention during and after the reform process will be essential to ensure that

reforms are institutionalized and ultimately cultures are changed. in summary, wartime contract thing reform is an essential, not a luxury good. whatever form it takes there will be a next contingency and the response to that contingency will certainly require contractor support. the government would be foolish to ignore the lessons of the past decade and refuse to prepare and refuse to prepare for better use of contract resources. once, wars in afghanistan and iraq fade into the past it will be all too easy to put off taking action. your committee is in a superb position to prevent exactly that from happening.

this concludes our formal statement. we very much appreciate this opportunity to be here with you in a dialogue and we will be happy to answer any questions you may have. >> with that i recognize myself for the first round of questions. commissioner schinowzi, there have been a number of suggestions out of the commission. obviously your colleague just mentioned the permanent ig to oversee contingencies. if we do not have the igs that are already authorized on a consistent basis are we seeing how much would be done or how much waste would be reduced or are we asking for yet another ig if that position remains unfilled we would be at least in as much trouble as far as if we have a new ig and that one has

no leader? are would like your thoughts on that. >> i am a supporter of the ig community. >> it wasn't an accident by call on you. >> this was also a unanimous recommendation. >> i under understand the recommendation for another ig but with your experience when you have a vacancy and a series -- the acting is gone for a while. what does that do to the effectiveness of an ideal organization? >> what you see in the example of the inspector general is a perfect example of that. it took a long time to set that organization up and took longer to staff it. it was difficult to find a leader. that leader left the organization and it is now without a leader. it is not as effective an organization as it needs to be.

what we are trying to do with this recommendation is avoid that happening in the future. >> that bait the same question. if there is no contingency going on at a given time -- i am supportive of the basic recommendation but if we don't think we have a contingency isn't it likely that position will stay open so instead of being shuffle ready they will be scrambling to regrow a hollowed out position at the very moment -- >> i appreciate that question. one of the things that surprised me was how our involve we have been in contingency. >> i would make the point we are always in contingency and once we have this position it will have something to do. let me go on to a couple more questions. commissioner shays. isn't it true from history that

the truman commission was put together to great extent because they wanted a friendly person looking after fdr's spending in the war and they hoped he would be kinder and gentler but because he was in early in the war and on going and held hundreds of hearings, traveled extensively with other members of a wartime standing committee of a senator that you had vigorous oversight. isn't the history of that that committees like ours or some committee needs to be charged from the beginning of the war with an ongoing oversight of conduct and expenditure of that war similar to truman? >> the answer is yes and this committee is a great example because you don't just look at dod but state and usaid. what happens when you start

looking at ways for waste, fraud and abuse you get really angry because what is happening is increasing action is taking place. the people who commit fraud are committing treason in my opinion. senator truman just got this stuff. >> because you haven't served on this side is more appropriate to ask you one of the problems your commission report has seen is we are about to go to a standing army of contract is similar to blackwater. how should we intercede in a policy decision that has been made that will cause a large amount of contractors to be there who are doing what on both sides we would call an inherently governmental task of

being qualified military supporters of the state department's agenda in iraq? >> a couple weeks ago omb publish the guidance letter and on the list for the first time they included security in a combat zone. we strongly think that is the right answer. that omb to risk-based approach. the challenge doing anything in the short term for the state department is it takes years to grow diplomatic security specialists. it would be difficult if not impossible for the state department to grow 5500 or 7,000. they are in a situation we describe that you use in your opening statement. they have no choice. they got there by default. they don't have the organic

capacity to be expeditionary in a combat zone for very long. state is facing a dynamic situation in iraq and they have no choice but to contract for the security they need. >> if i could add to that. it is my understanding that whether the state actually considers that it is limited, my understanding is it doesn't. it is only apply and to d o d which is a major issue. secondly, one possible way around the dilemma bob henke just laid out is to have better oversight. if you are stuck with contractors at least have people that oversee them and if you cannot get people from within the state department get them from other federal agencies.

i don't know there is a law that prevents that. there are ways of dealing with it if the government wanted to. the problem has been implementation. >> i ranking rose -- at recognize the ranking member. >> we as a country are better than what we are doing right now. sounds like if there was a will we would find a way. there has got to be a will. i can't hear you but i want this on the record. >> i couldn't agree more. i served in the executive branch twice at senior levels and that is exactly the case. when there is no will there are millions of reasons you can't do anything and when you want to do something it is amazing how

quickly it can get done. i fully agree with what you are saying. it comes down to the will of the executive branch to implement what this committee and congress are concerned about. >> the final report estimated $60 billion may have been lost in iraq. up to $0.30 of every dollar may have gone down the drain. when you were talking about trees in a few minutes ago i could see it upset you as it would upset all of us particularly when we are scrapping for dollars and we have this supercommittee dollars to figure out where to save money and for people to see money going down the tubes it has got to be aggravating.

it causes citizens to say they don't get it. they lose confidence in government. that is something we have been tackling or trying to address. what is the most important thing we can do to tackle this in contingency contract and? >> it sounds like this is so big we need to take it shunned by chunk and what is the first junk we take? >> could you ask other members as well? we are trying to do too much. we are trying to do too much. as a result we are not thinking of the project out well or overseeing them well and not even really evaluating do we really need it? do we need to do as much as we

are doing? >> since you are from my neighborhood the university of baltimore is within five minutes of my house. >> don't talk about the university of baltimore. >> it is a fine neighborhood. my interest in the commission was in chapter iii which is lack of competition and sirius waste and so forth. i would say the number one thing i personally think we could do better and we are not doing well enough would be so easy to set a level of competition and say the defense department must meet it. >> the 60 minute shows always -- a few companies like two or three that can do certain things

and provide certain types of security. if you found that to be true how does that affect competition? >> the answer is no. in afghanistan we have a contract that handles north and a contract that handles of and when new work comes in in connection with the big surge we have, without competition goes to one or the other. we don't compete even though there are two contractors in place who could do the work. >> if people see that we keep hearing companies will not -- cannot see the future, that they don't hire. if they know the competition game is rigged to before they get in the game then they figure

they won't get the job. >> i completely agree with what professor teefer said about competition among contractors but the missing piece we haven't talked about a lot is the importance of having an alternative to contractors. the reason there is no option but to use contractors whatever the state of competition is is that there's not sufficient organic capacity to perform these core missions to do logistics' and reconstruction and security so at the same time we promote more vigorous oversight and competition among contractors even in these tight budgetary times and especially because of these tight budgetary times grow organic capacity to have an alternative. >> you make a good point. when our was chairman of the coast guard subcommittee one thing we discovered in deep water was we did not have in the

coast guard the acquisitions people. when they put together a contract they put a contract together that was controlled by the contractors. they decided when performance was done and bonuses and everything. now we have to go backwards because we were buying boats that didn't float. we had to go backwards and get the coastguard to get the things they are needed and they are doing pretty good. you make a good point. i want to thank all of you. i have another hearing with fed chair ben bernanke. thank you for what you are doing and we will do everything in our power to bring light to what you have done. we really do appreciate it. >> i recognize myself for five minutes. thank you for the work you have done. i want to explore recommendation number 9 preventing a permanent office of inspector general for

operations. it seems to me to be a very negative consequence of what is happening at state, department of defense and usaid in that they are failing. on page 17 of your report united states is a engage in 56 centers abroad for other than normal peacetime purposes in 1962. this isn't brand new. united states has always been engaged in two or more overseas. the question it begs to me is you are recommending we create another ig. but they are failing. three of the five we are supposed to have in place have not been recommended by the president or confirmed by the senate so we have three openings out of five and yet you want a

sixth. >> i was the first inspector general in the department of homeland security, i am very focused on the inspector general community. i agree with the premise of your question and the chairman raised this issue. it troubles me we have vacancies that we have. i am especially troubled -- vacancies in the state department and impending retirement and cigar. having said that i urge the administration to fill those and senate to confirm whoever is elected by the administration but it is important our recommendation be implemented. even if there were and there should be even if there were confirmed inspectors general in those agencies it is important to have a special inspector general for the following reasons. each of them is limited

jurisdictionwise only to that agency. the special inspector general would have jurisdiction over the range of agencies and there would be the opportunity to insure the whole range of issues is fully vented. >> one question i hope the committee will explore is what is wrong at the department of defense. i want to read from page 162. this has to do with the defense contract audit agency which seems aptly named but says the current -- you mentioned this in your opening statement. the backlog stands at $558 billion having risen sharply from $406 billion in nine months. at current staffing levels the

backlog will exceed $1 trillion by 2016. try to tackle that one. >> when i was undersecretary of defense controller, dcaa does not have enough people. when i was there they had 4,000 and they added another thousand. it is nothing compared to the level of contracting that is going on and a number of contracts that are going on. these are very professional folks. most of them have cp as. many come in to government much of lawyers do. we don't have enough of them. this goes to the point that was made earlier by commissioner henke and my other colleagues and we believe this strongly. even in this time of cutting budgets and deficits there has to be spending to save money.

if we don't get these people in we will end up hurting the government and industry. the government because there might be money recovered and industry because they are not getting paid when they should get paid. >> i will change the word might to will. it is a proven fact that if you have these audits you are going to discover bills that were submitted that were either fraudulently submitted or mistakes and they were paid more than they should be paid. the outrage is all these companies have to keep these records on file for three or six or seven years and guess who pays for their having to do that? the government pays for their keeping the record. this $500 billion we are talking

about -- million -- is going to accelerate. >> to my colleagues what i would highlight is the g-80 released a report in september of 2011 documenting 58,000 contracts between fiscal 2003-2010 that might be reviewed and closed out but i agree with you that the numbers are staggering. i would call upon the white house to prioritize these igs and get nominated and get the senate to do their job. we have three of the five that are unfulfilled and that is just an excuse. >> now recognize mr. towns for five minutes. >> thank you very much. let me begin by saying my former colleague is doing well and i

thank the members of the commission for the outstanding work you are doing. people will say even though the recommendation of the igs made an terms of getting funded which would be around $21 million that would not happen. when i look and i read the extent of fraud and abuse and one stunning example, and inspector general found the united states government paid $900 million for a control switch that was only worth $7. in other cases contracts were found overbilling the government with mark ups ranging from 2,300% to 12,000% for goods and services. this is a course of action that cannot and must not continue.

and i hope that this congress led by this committee can accept the commission's recommendation and put measures in place that are necessary to show americans that the government can be better stewards of taxpayers'. how do we make the case with those folks that are saying here you go again, you want to spend additional resources and additional money, what do we say to them? >> we say you will save more than you spend. you mentioned it yourself. we are talking not just about $900 items but fraud with payment to protection rackets in afghanistan that some estimates put over $350 million. a report documents case after

case of projects in the millions. sometimes billions. if you weigh on the one hand a small amount of money you are talking about, the $21 million you mentioned against these huge amounts it is a no-brainer. >> commissioner teefer spent a lot of time on chapter 3 which deals with the inattention to contingency contract in leads to massive waste, fraud and abuse. our problem with mr. teefer was this was three times as thick if he put in everything he wanted to put in. we limit it to 40 cases but it could have been many more. you read at and you don't go through the argument you are presenting. >> if i could x that this is the perfect time