the afghanistan transition transitioned into the in afghanistan contracts. -- contracts were awarded in july 7, 2009 for the physical transition of work from logcap 3 to 4 is now under way. iraq presents the most complex environment due to the planned a drawdown. -- plan that draw them -- plan the drawdown. we continue to work closely with the theater commanders to ensure the contractor work force is properly sized and our strategy for competing with requirements

is appropriate in that country. we awarded the first task order in iraq, february 26, 2010 to provide logistic support services, peter transportation, and postal operations to kbr. we are analyzing awards to determine our best course of action. we are drawing down logcap 3 in iraq. all contractors were directed to be drawn up by 5% per quarter. we are currently ahead of that goal. the army of general command is committed to excellence in all contract including these very complex and critical lo contractsgcap . we continue to make improvements to ensure mission success in the interest of the u.s. government in tax payer. it is my honor to lead the contract in team in these goals

thank you for inviting me to speak with you today. >> we will begin and i will go last. the chairmen will go first. we will take maybe eight minutes each and we will do a second round, as well >> thank you, gentlemen for coming up here and testifying in front of the commission. i want to get a couple things out of the way early. i am focused on the comments made by general pillsbury. the secretary and the army are absolutely to be commanded for addressing some of the short- term needs with what may be intermediate term solutions but nonetheless, the actions to address staffing and training on

the ground -- i want to get that on the record. the secretary has identified staffing as a priority and not an overnight solution and bringing in a qualified people. maybe we will talk more about that. out of those five general officers that were approved about a year ago, how many are on board? >> sir, dcc is headed by mr. parsons but the supporting commands are commanded by brigadier-general. two out of the five. >> it has been about a year. i will state that if the army chief of staff had a significant priority, absolute priority, and i realize this is a combat mission but this is 50% of the cost or more, i would recommend

that that gets some pressure. that is an observation. i am very interested in obtaining, the commission obtaining a copy of your ex order? >> absolutely, that was in november of 2009. >> i think the actions you record -- representing your statement -- i am on a tangent of the efficiency and economy because attack we are addressing a lot of the quality issues but i will be talking about what kind of accountability and management of the efficiency and economy. you mentioned property asset and equipment. one of the areas that have started to come up in the last 10 months of testimony is labor and equipment utilization, not

management of the property so much. defense contract management a bid -- agencies can look at efficiency and economy as well as accountability. moving things where they are supposed to be moved is critical but i would like to encourage, based on the input of this commission, that the subject of labor and equipment utilization really take a front seat. i would ask you for your consideration of that. in fact, for the record, i would ask you for your consideration and feedback in the 15-day time in your reaction for that. is that something that seems to make sense? >> sir, if the numbers are true and which i don't doubt they

are, they are very disturbing. certainly, we don't wish to have 90% of the contract means capability sitting idle. >> right, and there are other things. it may not be right but they have pointed to, in the last seven months or so, $193 million that they believe that could of been spent with better planning. i think that is a aaa priority. i will ask you what is going on. i am looking at the performance evaluation board that is critical with all contractors in terms of award fees.

we were given the most recent one but i am looking at the one i have had the opportunity to look at in detail which is september, 2009. i am looking at kbr and i am looking at cost control. efficiency and economy is sort of a singular focus for me. if you look at it, it is green, yellow, and red par. the titles are good, very good, and adequate and have it read on cost control. which is average. that is interesting because i know dca has drawn criticism. in here, average is the worst you can get rid of a pilot light that because -- i highlight that because it is at a level which

is minimally acceptable. i propose, and i will read a few of them to you, that your comments go beyond minimally successful to something below that. but that is the criteria. for example, under the area of cost control, kbr not capturing on financial reporting crossed data was not updated in a timely manner which is a big deal. they're not proactive in improving women's by improving manpower. cost management underruns are weak. labor underrun is not reflective of the actual amount. $70 million purse is $100 million and then you go on -- $17 million vs $100 million, and

then you go on. they have failed to capture descopes which is the multi- billion task order that is ongoing. the talk about their failure to properly follow its own management process. under variance analysis, that is an area where you provide feedback, they say it is reasonable and accurate. does the contractor provide sound analysis to justify sole source decisions on subcontracts. that is a huge cost driver, billions of dollars in total. it says the government did it does not have access to the contractor's information. it says they don't know.

does the contractor engaged in continuous re-baseline, bottom up review? basin yet to question number one, the answer would have to be no. and cost analysis of the contract, they have not made any attempt on their own initiative. i could go on and on because it is a good report. i'm lost a bid at why it is average. i am very concerned and i will build on mr. fitzgerald, and startd's comment. he said 60% go home in the last time. . that seems like all the sudden the work will go away and we have heard about a gradual attrition.

please, what is going on here? >> that is a monthly assessment that the defense contract management agency aco's performance kbr in the air on a monthly basis to get contractor feedback. all of that then flows into the by annual award fee process. some of what is in there very clearly is what the aco was reporting correct. kbr is not implementing aco changes incorporated into the base line. that is an issue and that is the proper way to address that. this is so that kbr understands that this will flow into a work of valuation and affect their profitability. that is what that process is

spre. i believe that was one on the corps logistics mission which is the same thing that mr. fitzgerald brought up with the audit report of the staffing of that logistics' mission. i think two of those kind of -- >> i know the chairman was going to allow you time at the end to wrap things up. if you have additional information, i would put in there. i would say that you outlined yourself the things that occurred in logcap4 additions, what will give this action? my sensitivity is if you do not have the kind of course keeping -- scorekeeping that you need to do your job, how will we get it?

i have used my time. >> general pillsbury, are you familiar with the dcaa audit report regarding kbr staffing from 2009? >> i have read that report. >> your statement says youramc is implementing its plan to draw down our contractors efficiently and effectively. this dcaa audit stated that if the kbr contractor would reduce its staffing levels to adequate that the government could save $193 million. another statement is reported now were there. we know that the k b r staffing levels have little correlation to the number of troops

supported for its capital levels were slightly higher 20 months after the military significantly reduced troop levels subsequent to the troops surge in 2007 in spite of the fact that several places closed or de-scoped. kbr staffing levels were up and increased until april, 2009. the audit report says that sayskbr staffing was to be reduced to what the auditors continued to be overstepping conditions the government could save $193 million. the point of the audit was january 1, 2010. general odierno has issued an order by contractors come down and staffing 5% per quarter. dcaa would tell you that that is

about 3000 more than kbr needs. i do not believe that the army or a amc has responded to the audit report. is that your understanding? >> mr. commissioner, the army material command is and will always be in support of the war fighter. if in fact the requirement -- >> my question is, as the army or army material command responded to this report? if someone wrote me a report that said it would say b100 $93 million, i would agree. has the army responded? >> i don't know if we respond exactly to it. i know we take -- are taking actions to drawdown. >> you don't know if you have responded to it.

mr. fitzgerald, has the army responded officially to this report? >> if you mean formally in writing, no. we have had conversations and they have expressed concern about certain aspects of the report but that have not responded formally. >> ok, they is army material command? >> yes, sir. >> since the army has not responded, would you do that here? >> the drawdown in iraq is off pace. given the dcaa audit and the fact o that thedierno said the drawdown has to be 5%, the actions that i believe are going on are prudent. i am not an auditor. i am an operational statistician for t.

the drawdown is very difficult to put your arms around. i would say to you that i will take his record and get back to you with a written response a writtenmc on what are actions are part. the situation on the ground is fluid, as you know. >> i appreciate that entirely but you are telling me that amc has a comprehensive plan to draw down contractors and this is bill contractor is kbr which is 15,000 direct tires, and 35,000 other people. i would think of an auditor told you that there is a chance to save $193 million that someone in the system would feel compelled to respond i am disappointed that the army has not. the logcap program manager

appear before the commission in november was asked interest on to the report. this is not new material. the point of the audit is that the settings are going, going, gone. if the army had acted then this would have been achieved. since there was no response, the decisions are effectively gone. my question is -- who is responsible for cost efficiency, for cost awareness of expense of contracts in theater? >> the army material command leadership is, as you well know. the contract oversight, we depend on our partners at dcma and dcaa. contract an officer representatives, we have06

deputy director for logcap. mr. loerhl and his team are providing that support. i believe we are on the path to gaining the efficiencies you're talking about. the $193 million, i will get back to you about what we're doing about that. >>mr loerhl, would you care to comment? >> yes, we have gone back and had verbal conversations with dcaa regarding that audit. we had some issues and some discussions with them regarding the audit and the points made in the audit. >> can you put a sharp point on it? >> at the time the audit was generated, there had been no basis on logcap closed yet.

they did not cite the point that at that time, none of the bases that were managed by logcap had been closed. at the same time those numbers were being generated, we are ramping up these other functions within logcap to deal with some other things there. in addition as you look at the logcap staffing, not all that staffing is there generated and supports this so it does not come down on the same time line as the drawdown. those were all conversations we had. we had kbr generate a drawdown plan which they provided to was back and the december timeframe. we provided that to dcaa in the january timeframe.

we brought kbr beckham to generate a more refined plan on february 23 of this year and invited dcaa to come in and listen to that session and i asked dcaa to go back and that is what mr. fitzgerald represented in his opening statement, to specifically what it and look at the assumptions, fax in the drawdown in the plant. >>. >> what is the time horizon on this plan? >> that was be -- that was to be drawn down to the 30,000 that we reference by the august, 2010 time frame. it was said to be drawn down by the december 11 deadline. >> why would it be that after the decisions are made to draw

down in iraq and the time is set early in 2009, the contractor gives you a plan in february 2010 to draw down by august of 2010. why is that viewed as acceptable? >> i want to make sure i understand your question. >> it seems to me that they contractor planning would have been consistent with the military planning which took place in the better part of one year or two years ago about the military plannin. >> the military planning is still going on very that have been continual changes as to what the final configuration with look-alike.

while the military as their plan, their plan is not down to the finite and continues to be refined. as the plan gets refined, we will be more refined as well as kbr. so there is a -- >> so there is a contingency with the military plan. >> very much so. >> i will go back to the performance evaluation report that mr. thibeau referenced earlier. i want to touch on another point. one of the things that has disturbed me a little bit is what constitutes actionable direction on the part of the government. we all know that contract as a rule-based -- is a rule-based process.

it says here you are not being proactive enough or taking the initiative. we are in a period where we know we're drawing down yet you need to do more to bring to the government's attention cost, savings, cost avoidance measures that you can take in partnering with the government. do you consider that to be appropriate direction that should result in contractors taking action along those lines? >> first of all, i would say yes, if you go into the award evaluation criteria, one area we have this program id and resolution. what we are looking for is that the contractor should be more proactive. if they have issues going on, we want them to bring that to the table. we don't want them to make those

decisions for us but i certainly want them to point them out to us and help us as our partner in this endeavor. >> what is the consequence if they do not do that? >> that is part of their award fee evaluation criteria were they don't necessarily raise up to that high level of excellence. i would expect an excellent contractor to do just that. >> have you with held award fees for that purpose? >> yes, if you go back and look at the award the evaluations, you'll find that kbr rarely get 100% in that category. >> close to 100%? >> i would have to get back on that to you. -- back to you on that. they are in the excellent range. >> i would appreciate if you can provide that information.

mr. fitzgerald, do you consider that to be actionable direction from the government? >> i think our position is that we believe all contractors performing reimbursable work funded with taxpayer dollars have the obligation to conduct that in the most effective and efficient way. the cost containment, cost- control bill to the award feet we think is appropriate. with the core logistic services support contract, there are clauses in the task order to talk to the contractor performing and optimize direct support maintenance and organizational and maintenance services. there are provisions in there talking about being pro-active. >> if the contractor says that they cannot act without appropriate contract documentation, you would consider, generally, that the

evaluation board in giving them the direction to take the initiative would be appropriate documentation or something they could act on? >> yes, ma'am. >> i want to ask you generally about government oversight into what the contractors operations are. general pillsbury, one thing we have seen is that kbr has addressed their head count in theater and act and the result of them being efficient or it could be because the basis of estimates was not appropriate to begin with, that it was high. what sort of insight do you have an to the contractors' proposals? >> the generation for contracts with in the peter, i am not

personally aware of. f on the ikbr side. we have 3609 contractors doing direct support for our life cycle management command within the right now, outside of kbr, work in weapons systems. the plan to draw down to 677 by december of 200011. 011. the services that kbr provides for the troops is dependent upon general odierno's drawdown plan. i cannot get any more specific than that. >> you raised the issue of requirements. is it fair or should we expect a contractor to be able to

perform in an efficient manner unless they understand what the requirements are? >> i would expect a contractor to perform responsibly at all times. given the political of the situation in iraq, there would be some consternation on their part on the total requirement. that is incumbent on us to be able to feed that to them for it at all times, i would expect a contractor to read -- to perform responsibly. >> against the definition of responsible can vary. i'm looking for a recognition that cost should be a part of performance, that actual cost is a part of performance. you talk about supporting war fighter and i understand that as the primary goal but if we can do it efficiently, that is more money for the war fighter. if