we understood that. we have worked for it. >> you are saying that you are actively withheld from planning details? is that a fair statement? >> i would not say it that way. i would say that if and when a discussion with some how began on logcap, it was expected that we excuse ourselves. our people were trained to do that. . .

>> mr. commissioner, he is right on target. we have had several dynamics. not the least of which is that the conditions of the camps, whether in the state, have constantly been evolving. you could say, well, go ahead and make a plan, but that concept does not work. for completely closing a camp, it takes massive amounts of transportation, packaging sorting, prepping for shipment, containers, it takes a huge level of effort to take a camp completely down.

so, when the army says it to plan for, hypothetically, 10 can going completely down, yes, you can plan to that. when you add five more to that, your whole level of effort is increased by 50%. as we go through this process, we have seen very regular occurrences of what is going to happen as the can change, and what level of effort is required for the camps to change. this is not unreasonable for this to happen. this is the way things are in a war zone. our frustration is that other government the elements have a wanted a completed plan way before this type of the decision information has been made availables toinalize.

>> i have a question for you. under-utilization or excess capacity, as a commander, you might want to have something in reserved -- in the reserve. how do you explain it to a layman the under-utilization in a camp? how do you justify having, say, a 5% years and 95% of waste? >> mr. commissioner, i think what is important here to understand is, and you may know that, we have a statement of work. in relation to the maintenance operation, a statement of a work which delineated the number of people that we have to have at each site throughout iraq, and

j.p. be being one, and the hours they had to be available. as a part of that, that is the first contributing factor that was there. this statement of work told us this is what we want to do. this is what we want you to do and the capability we want on hand. i think the other thing here is, that to make those adjustments, the military, or the customer in this case, has to come back to the contracting officer or back to himself and say, look, i do not need all of that capability. as you know, and as been said during the previous hearing, we did notify the government more than one time, as many as four times, that we were concerned about the utilization of our mechanics. about the fact that it was

extremely low, we were concerned about that. we asked to sit down and have a meeting to discuss that very issue in january. it is easy to look at it that way, but if you look at it from a is a commander's side, i do not know, nor do we know, what future operations are going to occur or what capability may need to be there that we are not made aware of. i do not second guess them on that aspect. >> of them? >> the military, for retaining the capability that we had there. we think we did the right thing by stepping forward more than one time and saying, there is a problem, we need your attention, and why the military chose not to do that, once again, i do not

know the operational issues, so i will not point fingers. >> i think in a contingency environment we can all agree that the highest level of efficiency is not always the only factor that needs to be taken into account for decision making. at some level, we all agree that it is important to be good stewards of the taxpayer's money. at some level, the interest of the participants may diverge, and a private company, kbr or any other private company has to be concerned about its profitability. if it cannot stay profitable, it will go out of business. at some level, these decisions have to do with maintaining profitability or being efficient. i note that in the response that kbr provided to the government

direction to start cutting down the work force, one of the arguments that was made was that you were busy working on lots of change orders. i realize, again, those are par for the chorus in a contingency environment. my question is, is there an incentive for you, if you have a choice, to be working on new works that bring in additional revenue, or to be working on actions that would decrease in the revenue for your company? is there any incentive for you to take actions that would result in it decreased revenue? >> madam commissioner, i will tell you that in the almost 30 months but i have worked for kbr, no one in any leadership position has ever mentioned in the bottom line to me.

i realize that some of the actions i have taken their in personnel reductions are in fact hitting the bottom line. i wouldn't just be up front with you by saying that that has never -- i would just be up front with you by saying that has never affected any of the decisions i have made. i do not make my decisions based on a bat at all. i base my decision on what is to be done on the priorities that the military outlined for me, and say, i want this first. i need this -- i need this immediately, or if you tell me what should be the priority. we have a number of forums about bringing that to focus. the joint training board meets every week.

the mayor for that camp for that station set down for us and other military customers that make up that site, they prioritize the work. we provide our input about our ability to accomplish that. what we do when we do is normally, usually, always directed by the mayors and by the client, the customer. >> and you are working in a cost environment, in which case the cost, the client determines what is needed and pays you whatever it cost to deliver that. >> about is in the the letter that comes to us. -- that is in the letter that comes to us. i will take a few minutes if you need to know the process. >> no, i know the process. >> we have to prepare the

estimate. the estimate is then reviewed by the government who is as if it is to side -- if it is too high or too low. sometimes we go back and redo those estimates to meet it once that is done, that is accepted by the government. >> i accept that you have not been told about the bottom line, but that does not eliminate the underlying premise. >> i do not worry about that. >> in your statement, you talked several times about your need for properly issued documentation that needs to precede any actions that you would take as a contractor. i would like to come back to a discussion that we had with our previous panel about the

performance evaluation board. there were several times, both in looking at the performance of kbr under this contract, but also looking ahead to what the government has asked you to pay attention to, there was quite a bit of emphasis on the need to step forward, display initiative, look for ways that you could bring the government various ways to become more efficient and either avoid costs board save costs. is that a reasonable expectation for the government to have, and would you consider that to be a proper contract documentation? >> commissioner, the performance evaluation boards are held at every camp every month. they are held with a board consisting of the camp mayor, the administrative contracting officer for that camp, and

representatives of the camasses -- of the camps. the particular one you are referencing, there were issues addressed that were read this morning that particularly got to that aco's at that camp's opinion of some of the financial issues. that goes on all the time. there is a lot of discussion, a lot of opinion, a lot of facts, and sometimes they are not right. with as was pointed out this morning, one of the individuals felt that the change order information was not being updated into the cost report, in fact that is not done it the

field level. that is done between kbr and rock island on a monthly basis. there is a lag between when they give acl at a site location, and when that day at that location will exceed the evidence of that change order and it will hit the cost report. that is a common occurrence for them to remark that they have not seen the cost report. their own efforts hit the book. because of the magnitude of the change orders, they are swept once a month. we average about 200 change orders per month. they are swept once a month, and they are negotiated with the pco at barack island. i understood what you were talking about -- at a iraq island -- at rock island.

>> years are not so concerned about the merits of this, but as to the direction of what you would consider proper contract documentation. is it sufficient for you to act? >> yes. i deal with this every month. we analyze every one of the performance evaluation boards. we look at all of the negative comments. we look at why those comments occurred, what action do we need to do to respond to the direction or the comments being made. that is done. i would just like to add to the record hearing -- record here,

this evaluation was the only one where clss ever got a good. last year and this year they are almost all very good except for one year. that average was the first time that that specific grade had been given. >> my time has expired. >> can i interject something? would you yield your overdue time? thank you. there are two things here. you said they do every camp every month, and yet on that particular one, they list 22 flb's, all of the big ones. that it does not sound like one camp to me. >> we have a presence at 22

camps. >> pick it is a consensus opinion, isn't it? >> i do not know that specific case, mr. commissioner. what i will say is that the senior administrating contracting officer is responsible for putting together the rating that dcma is going to get. >> ok, that is the point i want to make. it is not about isolated. thank you. >> listening to the testimony today, and reading the record, it appears to be the case that kbr does not distinguish the statement in dcaa's testimony in january 2009 about the average utilization of labor across all sites in iraq. it is less than 10%.

the guideline, the colt that the army calls for is 85% -- the goal that the army calls for is 85% to 95%. in august of 2009, you got it up to a 16% utilization rate. it does not sound like there is any dispute of what the utilization rate was on the kbr's part. the issue, in your mind, is whether it is proper and justifiable, right? >> to answer your question, there are varying degrees of what the actual rate was. if you read the initial report, they said they thought kbr was under reporting. there were issues with the actual competition. in general, based on what has been presented, we were less

than 85%. we did not meet the army's standard. if that is what was found, then that is what it is. >> you were way less than 85%. you were somewhere between 11% and 16%. the initial question is whether you dispute the facts, and then we can discuss at the justification. >> first, i have not seen that report. the specific report from january to july is one we have not -- >> you have not seen it? >> have you seen it? >> are you talking about the audit was -- the audit that was released friday night? >> know, i am talking about the one from january to august of 2009. did you not have an exit audit?

did you not see a draft report? you gentlemen are under oath, and i am not trying to trick give, but were you not given an opportunity? >> i do not know that. >> could you have someone, before this hearing, tell us if you were. the implication is that you were blindsided when you walk in. that would be, potentially, very unfair. >> i think we need to get back with you. >> no, no. i would like you to instruct one of the people behind you to find out if you were given an exit, and i want it to be part of the record today. >> can you go find out? >> ok'ing. craigslis-- ok.

>> i would like to point out that your contractor's reaction is on page seven, all of page eight, all of page nine, all of page 10, all of page 11, and half of page 12. you provided copious responses to the audit. >> the data of this that i am looking at from d c a a, is november 14th, 2009. then there is a november 20th, 2009 response to best from kbr. it was signed by a todd bishop, your director of government compliance. this is what i am talking about. are you saying that neither of you have ever seen this? this is the first time you have heard about this, now, today? >> certification, i have not seen the report. it does not mean -- sir, i have

not seen the report here it -- the report. it does not mean that other members -- i just have not seen the analysis of the report. >> i would like to make sure that you are being clear, and if you want to consult your attorneys, you can. it would be stunning to me if you both, as leaders, are saying somehow that this could not rise to your attention. i want to make sure that each of you, under your testimony, whether or not you were told about the underutilization, and told about dcaa was doing. were you told? >> i was involved in the jpb

deal. i knew about the audit. i knew about the exit brief. i knew about the facts and the data there. >> mr. horn. >> i am aware of the joint% utilization rates. >> i am talking about the november 14th letter, the audit from dcaa, and your response to it. in this audit is pointed out that, on average, across all sites in iraq, the average utilization rate was less than 11%. are you saying that you had never heard of that before today? >> i am aware of the issue, and i have seen the preliminary

information on it. i have not had a chance to see the final report that came out on a friday. >> have you seen in the november 14th audit, of which is the audit in which this issue of 10% utilization from january 2009 to july 2009, of less than 11%, have you seen that audit? >> yes. >> have you seen it? >> i have not seen in the final. i saw the preliminary. >> i was actually going to try to help you out a little bit, because i thought that there was not any dispute on kbr's part as to what the labor utilization rates were for that time. is there no dispute on that? do you agree that it was less than 11%? >> yes.

>> so the only disagreement, as i understand it, was what the justification was for that. is that correct? >> that is right. >> and as i understand it, you're a justification -- your justification is that because of the circumstances of war, there needs to be a little flexibility, basically. >> mr. commissioner, up much of that type of maintenance work is on-call, be prepared to work. there were instances where we were required to have on-call teams, consisting of a specific make dec -- make-ups, to prepare combat vehicles if they were damaged, to put them back on the line.

whether that occurred or not does not have a bearing on our requirement, which was to have people ready should it occur. the data for what happened shows up in some formats inside the army's system, because that system asks you to input particular work items, you do get data. >> thank you. i want to ask you about this letter that you wrote in january of 2010. if i understand it correctly, you are complaining to block island -- rock island, that you are voluntarily leaving some positions unfilled but being criticized for it. that is what you're saying. >> that is not the essence of

the letter. i was not complaining. >> you are expressing a view in a letter that you were being criticized for voluntarily leaving some positions unfilled. it was that an accurate characterization? >> still not accurate. >> what is your characterization? >> there are certain contacting officials within the theater who are evaluating our cost report and seeing some elements of because report, particularly labor, that is under running the budget. they are directing us in a change order letter to prepare an estimate and submit it to eliminate that under-run. the essence of the letter is that that is an improper direction. that would be eliminating an

element of work. there is at labor, material, equipment, and other direct costs tied to any scope of work. there are elements that they are incorrectly directing us about. our position was that during the determination to in time of the contract in officer to determine the application of this scope, and providing that information back, we should not be given negative evaluations because we are refusing to submit estimates that we believe are improper. that is the essence of the letter. >> is kbr in possession of any documentation from the united states government requesting that you do-scope under the

contract? do they use the term de-scope. >> they use that term in the letter, and we believed it is incorrectly applied. >> thank you. >> we have gone back and forth over the clff, but what i want to know is if you have alternative figures. i know you are willing to say that your figure is under 85% and so forth, but i want to remind you of the dcaa's figures. over 1.1 million hours had bennett charged to the

government, but only 115,000 hours were documented for repair work. you may disagree with definitions and categories, but it is less than 11%. three months later, the figure was a mere 16%. what figures would you substitute for those figures? are we simply having a verbal argument that these things are formulated the wrong way? >> we believe it is and oranges and apples comparison. >> ok. i do and note that though your response today does not have any figures about kbr on this subject, and your sixth page letter response to -- 6-page letter response had a one page of employee figures. "