last negotiation that was done, what were the overhead rates that were there? they can return to dcma in place. it's interesting when an overhead rate is 20% this year, 1% next year, 22% the following year. what i want to know is tell me how they executed to that rate. if in fact 20, 21, 22, i'd like the contracting officers to understand, in fact they underexecuted what their ratings that they're bidding. so you're putting the contracting officer fair footing with equal knowledge that's there. that we've created the cbar, and i apologize i can't do the acronym, it's the database where we'll put up all the business clearances that are done, put ul up a the pricing information, all the rate information that's available to us, so that when you're negotiating with any of

the major defense contractors you'll be able to go to this one place and see what has everybody else done before you, what did they negotiate, what were their examples? i would say from the way the legislation is written and asking ways it be changed, we're leery the way it's read is that this is, tell us pricing information so if i'm buying port-a-pottys, what was the pride we paid? i don't think that's what you're intending. what we're attempting to do is when we don't have the foerlgss of competition behind us, what we will have is the ability to provide the contracting officers with tools. we've agreed that we'll make it available to ofpp and any other agency that's dealing with those, that has the appropriate need to be able to see this information. we believe -- let me step back. when i started doing this as a

lieutenant jg in 1973, we expected contracting officers to be skilled pricers. probably in the -- about 1990 coming forward, as we downsized within the department, we more or less gave away the pricing capability within the contracting community. so while today we have pockets of people and various commands, we do not have a strong skill set. one of the other parts of the pilot project that's there is creating in dcma groups of people that are experts in pricing and knowledgeable of the specific major companies so that when the different contracting officers are negotiating, they can turn to this group of experts to help. we've also -- not part of the legislation, but we've also reintroduced what we call mid-level training courses to get the 1102 community to again regain the skills that are necessary to be able to

adequately price contracts. >> let me interrupt you just for a second. we have a vote in five minutes, have to run over there. although we're very fast, we're going to have to take off here in a minute. if you could get back to us in writing with how you think the pilot is working, sounds like you got three or four good ideas that are agency-wide that have potential. but tell us how you actually think it's working, that would be helpful. then to the other panelist, any thoughts obviously on this issue of pricing database and how to be sure that we're getting a fair price, as was talked about by the commission. and then second, on the trafficking bill, and with regard to provisions in the mccaskill bill, in writing if you could give us any comments we have. i apologize, i'm going to run to the floor to vote. i appreciate you being here today, and i thank the chair for holding the hearing.

>> what i will do is ask you all to hold, vote quickly, and come right back. i have a little bit more for this panel and we have the remaining panel of igs. i'll be right back. >> look at subcontracting as an area that i'd like your input on. i'd especially like you to speak before you all leave, whether or not you think any of the limitations we've put in here on suspension and debarment or limitations on subcontracting, if you think they're workable in a contingency, do they cause you pause, especially if you consider the waivers that --

provisions that we have in there, the six-month lead time before any of these requirements would go into effect, the noncompetitive/competitive requirements we have in here? let me start with that. do any of those cause you all problems as it relates to contracting in war time? >> senator, the one tier i think is a problem. and i think what the commission on war time contracting was really trying to get to was why were we unable to break out work that was under law cap expressly and to go through that? i think that's a good question. the translation of that to one tier from our perspective in any scenario, war time or not, is just simply unworkable. i can't imagine a situation with almost anything we do that i could get to a single tier of subcontracts and doing it.

i mean, so we think there are ways that that can be rewritten that will get to what i believe the commission was really trying to get to and the objective that would help, and we're happy to work with staff to come up with those words. >> as you know, we had a tamimi problem in the contract where we have kickbacks with kbr and that's one of those large duration war time contracts that is kind of the poster child for contracting gone badly. and the host trucking contract with multiple layers of subcontracts really had a security risk associated with it as it related to where the money was going. clearly we figured out that some of the money was going to the bad guys. so what we're looking for here is we don't want to get away from the efficiencies that subcontracting might provide but we've got to really get to a much more transparent situation. >> so expressly with timini and in my opening oral statement,

the legislation at the nda gave us in 2012 that grants us an overseas environment for access to subcontractor records where they refuse to provide records, that legislation should open the door for us to be able to go and demand those records and get them. task force 2010, which is really the group that's trying to follow the money and get there, they really wanted that legislation and we very meche appreciate the senate's help in providing that to us. i'm hopeful we will not face tamimi again, that that legislation's now given us the authority to go get it. >> what about recompeting contracts more frequently? >> well, i think the department's position writ large is we prefer shorter length periods of contract. but in all instances, it depends. what's the scenario i'm in? what's the frequency with which we want to turn over contracts? the express example i gave is as we were pulling out of iraq and

we were looking at recompeting some task orders, the commander came in and said, i can focus on getting us out of iraq or i can focus on transitioning contractors, i'd much rather focus on getting us out of iraq, can you please leave the contractors in place? so we did that. >> wouldn't that be a waiver situation? isn't that envisioned with the waiver? i would think that would be custom-tailored for a waiver situation when you would endocument that there was an either/or here and moving people out was more important than recompeting at that particular juncture. >> so -- i think we've basically said, for all our contracts, particularly in those where the technology moves quickly, we don't want contracts that exceed three years. that's been the department's position. if we are in sole source contracts we'd like to find ways to get to competition. but if i'm in a scenario where i cannot get the competition, i'm going to have a lot of waivers. if i really am in a situation

sole source, it's going to be sole sears for an extended period of time, you're going to see a lot of waivers to do that. i'm in a waiver position, certainly provides the out. i think the lend of term of a contract is truly dependent, tell me where i am, tell me the technology of what i'm buying, tell me how well i can price it. the other issue we have with long contracts is it's difficult to price effectively for a long period of time in a fixed price so we look for shorter contracts. >> you just know if a contract is more than three or four years old, someone's on the bad end of it. some instances it may be the contractor. unfortunately not often enough. i shouldn't say that. i don't want the contractor to be on the bad end of it but i'm focused on saving the government money, so i think that the more frequent recompetes -- and i know there's a culture that kind of weighs against recompeting because it's a pain. d to compete. this is not like an exercise everyone looks forward to, either the ones bidding or the ones running the competition.

clearly, i mean, the notion kbr was a noncompete came from bosnia. they returned to halliburton kbr because they did it in bosnia. who can do it? we know they can, they were in bosnia, they got it noncompete and made a huge amount of profit off that contract, much more than they needed to make had we been more aggressive about overseeing -- >> senator, if i may, we're in favor absolutely of full and open competition. and all the points that you made are absolutely correct. if i could just posit one scenario. the state department has put out in effect competitively bid a number of master contracts and then we issue recompetitively bid task orders once we've qualified a group of companies. we would want to make sure that nothing in the exact legislation would be interpreted to mean that we would have to back away from that activity. go out, we note something either

food service or security service or whatever, go to a number of major companies, competitively bid, then award and put them on the master list, then we award them task orders. we would not want this limitation to say, since that contract is in effect over two years old, you cannot then issue a task order that's valid for more than one year. that would set us back. because we're trying, as you've put forward almost in the preamble of your legislation, to make sure that we have planned. so one of the steps we're taking to plan for the future is to have master contracts in place competitively bid that then we can utilize them, having obtained the best price and issued task orders. >> how long do you envision the master contracts being in place? >> five years, ma'am. then we issue task orders that could be -- that would run the dir raugs. >> was the security contract a

master contract the at embassy in kabul? >> no. no, that is -- that is one of the steps we've taken since then to put this into place. >> okay. so there wasn't a master contract -- >> no, those were individually bid. >> okay. >> beforehand. so we want competition, we want to do the best. but we want to make sure that our planning that has led to a contract in place would be available to us given a fluid situation. >> could you speak to your -- in a report, in response to a report by the senate foreign relations committee, your administrator wrote in afghanistan, "now includes a subcontractor clause that permits u.s. aid to restrict the number of subcontract ears and requires the subcontractor to perform a certain percentage of the work." have these changes been implemented? >> yes, they have. >> so they're in every contract now in afghanistan?

>> that is correct. and the limitations are to a two-year sub. two-tier subs. >> two tier? >> exactly. we found that's what works operationally best in afghanistan. >> have you found any problem with having the two-tier requirement? is there anything that you think in terms of value or competency that you've sacrificed for a two-tier limitation? >> i would say not as yet. >> how long has this been in place? >> i want to say in the last six months. >> kudos. i'd be very anxious to see if you hit any bumps. >> okay. >> that seems reasonable to me, that you can restrict the number of tiers and requires the prime to do something other than being -- taking a cut off the top. >> right. >> we've got a lot of the those around. too many prime contractors that just take a cut off the top. that just means that they're managing the contract because we are not in a position to manage it ourselves. i'd like to see those kinds of contracts go away.

let me now turn to broad-based questions. what is not in this legislation that you think should be? should we go further in any places? have we adequately addressed training? i worry that we haven't gone far enough on training. obviously we hollowed out the acquisition force in the '90s and paid a dear, dear price. think of the money that we lost because we had nobody finding the store in contracting. it is just mind-boggling. this is what's so hard about funding our government. because what sounds good in the short run, in a budget cycle, we don't have a tendency to think in decade-long implications. and i think that we've got to be very careful as we go towards a much leaner government, which we must do, and towards a defense department where d.o.d. doesn't get everything it asks for, in

fact is looked upon to find savings many places. what have we -- i think i know the concerns your staffs have visited with us, we know where your concerns are. is there any place that you would like to see us go further than we have or to clarify something that's in the legislation that you don't think is clear? if you don't have anything for the record today, i certainly will take it in a follow-up after the hearing. >> so -- things that particularly concern me is in the area of past performance. not giving -- when the commission made this recommendation, we objected to it then, and it's in the legislation. not giving contractors an opportunity to rebut negative past performance. we used the past performance for other contractors to make decisions when they award going forward. anything that is negative requires the contracting officer in that competition to go out and request industry, explain this negative past performance.

n day do it one time up front, or i can have ten people afterwards do it. from my standpoint not giving the contractors an opportunity, if there's negative past performance, to rebut it, is only setting us up downstream where a contracting officer fails to do what they're supposed to do and go ask, becomes a protest risk. we'd do much, much better to give them an opportunity up front. particularly for whatever reason it was an unfair statement, letting one level above the contracting officer have the authority to say, i've looked at what the contractor said, looked at what the contracting officer said, this is what i think the final answer should be, just makes sense to us. >> secretary kennedy? >> i think that there are two issues that i think i'd like to see in the bill, and one that i have some doubts and will communicate that to your staff. but on the two that i'd like to see is, at times lowest price is not the best value for the american taxpayer.

and so we have had some legislative exceptions from time to time allowing us to award contracts on the basis of best value, because the best value over time actually does result in a lower price than just the first bid. so that's something we'd be interested in discussing with you and your staff. the second is that the ability to use director hiring authority to hire 1102s, to hire professional contracting officers, that authority legislative expired on the 30th of september. as we're trying as you rightly say to regrow the contracting community, anything that would enable us to bring in a new generation and get them trained up as fast as they can is of very great interest to us. the issue we'll be discussing with your staff that we're concerned about is the section on security contracting. there's a statement that the

combatant commander in the theater has the final say on all security activities. that is of great concern to us because that substitutes the judgment of the combatant commander for that of the secretary of state in determining what is the best way to ensure that the diplomatic counselor and assistance programs are protected as opposed to the combatant commander who is focused on the -- on protecting the troops engaged in force projection, rather than force protection. and so that is the remaining large item of concern. >> okay. so you have a sincere fear that the combatant commander would perhaps view protection of the state department's personnel as not mission specific enough in terms of his decision, his or her decision-making power? >> that's correct. and the charge of the secretary of state in what is usually known as the inman legislation,

beyond the diplomatic security act, that vests the responsibility for protecting of civilian employees overseas in the secretary of state. >> i want to follow up on a previous statement you made. it's my understanding the state department's worldwide protective service umbrella contract is ten years, not five years. >> there's a base contract and then we award these task orders for no more than five years. >> okay. but the umbrella contract that they can be awarded under is not five years, it's actually ten years, correct? >> right. but the task orders are five years. >> that seems like a long time. >> because the pricing is, as my colleague and as you both referred to, you want to make sure that the price is always best. the price is determined in the task orders that are awarded. so that's where we ensure that the quality is still there and the price is in the best interests of the government. so you have the master and

you've qualified the firms to compete for the task order. >> well, and this is getting a little far afield and i won't go too far in the weeds on spend with the staff of the committee working on this. because i -- frankly, i'm not sure that we should ever not have private security forces at embassies in a contingency. i mean, i think there is a strong argument that can be made, if we are in a country where we are fighting a war, that the security of that embassy should be by our military. and not by third world nationals that are being hired by a subcontractor under a ten-year umbrella contract. obviously we had bad things happen in kabul, as was the subject of a different hearing here. and i'm not saying that that is a fault of the contracting that went on. but i just think if we're in a

contingency, i think that the people of that embassy could be best protected by an american military. >> we would certainly, and we benefit greatly now and over time with cooperation from our military colleagues. but we also know that the u.s. military is exceedingly stretched. and when i first served in iraq in 2003, the u.s. military was protecting the civilian contingent. but over the course of time, as the demands on the u.s. military increased, they could not and did not have the resources to protect us. i have less than 2,000 diplomatic security special agents and officers for the entire world. 285 embassies and consulates, plus their responsibilities for security protection of foreign dignitaries in the united states. so i am caught in a bind here. i am required to ensure that we

can continue diplomatic and consulate operations, not only in war zones, zones of conflict, but also everywhere else in the world and the ability to do that is constrained by my internal resources and the resources that the d.o.d. is able to put at my disposal. and the compromise there is to -- is to do i think the better job that we are now doing, with more training and these master contracts that will have a better quality control so that we avoid the problem that you alluded that in kabul two years ago. but i would note just as an aside the u.s. embassy has been attacked twice in the last six months and it is that same security personnel who have done heroically in defending the u.s. embassy against both the attacks, both the one this past sunday and the one several months ago. >> that's a new contract. >> it's the same one.

>> i thought eodt was terminated. >> eod has been terminated but eod never started. the previous contractor that was involved with a small unit of specific people, those individuals were replaced, the upper-level management, replaced. the company is still there and will be there until the new contractor arrives. >> i didn't realize that. so armor is still there under the bridge contract? >> yes, ma'am. >> okay. and miss crumbly? >> i'd like to support the points raised by my fellow panel members but i also want to note, as under secretary kennedy mentioned, he has a working capital fund that is able to supply a steady stream of resources to support his acquisition and assistance workforce. we too are requesting that for the so if there is a way to go further and have support for that working capital fund

authority for u.s. aid, so we have that steady stream, i think that's important for us. one other thing i did want to correct in terms of the subcontracting, while we are at the two tie w flexibility or an approval process where the assistant administrator for the bureau would approve it if you go beyond those three. so we do still want some flexibility on subcontracting, so i did want to note that as well. >> i think we have -- every place we have said this should be the rule, we put in waivers. so what we're looking for is a change in what is the primary conduct of contracting and contingencies. and obviously because it's a contingency and stuff happens, there's going to be times that waivers will be necessary, but at least if waivers are necessary, that means you're going to get documentation. which is one of the challenges we've had in this area. i want to thank all three of you. it is -- i know that in some ways i have been a broken record

on this superintendent for five years but i have a tendency -- i'm going to try to be kind to the institution that i'm lucky to serve in. sometimes this place has the attention span of a kindergarten class. and i have noted that things like this, once they move off the front pages, have a tendency to fall through the cracks. so i have really tried to stay on this and want to get this across the finish line in terms of getting these changes into law and monitoring the continued progress as we clean up contracting and contin jaebss. and one thing i would let you know, mr. ginman, is i did have an amendment to pull all the aif funds out of afghanistan and have them go into the united states highway trust fund. and people didn't think i was serious. i was serious. and the reason i'm serious is the projects that are now on the board for aif, which is the morphine into infrastructure by

the defense department, as opposed to a.i.d., which has traditionally done all this work, the projects we have ongoing now aren't going to be completed until 2014. if they're adding additional resources for the next fiscal year, that means we're starting new projects. i've not yet gotten from the defense department what they're envisioning these new projects would be. what i'm envisioning is if we're starting new infrastructure projects in afghanistan as we're trying to pull out of afghanistan, we may end up with that reality that i think is very hard for americans to understand, that our military would by and large be gone from afghanistan, but we'd have a full force of contractors that we'd be paying on the ground for years to come on projects that we really would struggle to provide the security necessary for completion under that scenario. i continue to wait to find out what this new $400 million that has been requested is supposed to be building in afghanistan over the next two, three, four, five, six years.

and hope you can spread the word over there that i'm drumming my fingers, waiting for this. >> yes. >> thank you all very much for being here. >> i'll introduce these

witnesses. lynn holbrookes, she became a acting inspector general for the department of defense in december 2011. she joined the department of justice as an assistant u.s. attorney in 1991 and has served as general counsel for the special inspector general for iraq reconstruction and general counsel for the d.o.d. inspector general. prior to her appointment as acting inspector general they served as principal deputy inspector general. harold giesel? am i saying that correctly? has served as the deputy inspector general for the state september since june 2008. he has more than 25 years of experience with the state department and previously served as acting inspector general in 1994. michael g. carroll has served as inspector general for the u.s. agency of international development since february of 2006. mr. carroll is a member of the senior executive service with more than 26 years of government service. prior to his appointment, mr. carroll served as the director of administration for the bureau of industry and security in the

department of commerce. it is the custom of the subcommittee to swear all witnesses who stand before us. do you swear the testimony you give before this committee will be the truth, the whole truth, and nothing but the truth, so help you, god? [ all: i do ] >> i must say that the attention you will get today is much less than your colleague brian miller will get this week but that's probably a good thing. i'm not sure that we'll have any injuries of tv cameramen trying to follow you down the hallway, and if you're going to talk about las vegas, warn me ahead of time because -- i joke about this, but i must say, every once in a while something happens in the world of inspectors general that highlights your work. and for most of the time, your work is done in the shadows. no