learning coming from congress to this commission is that the military is slow to value the work that you both do as dealing with the contractors. it is not generally the way to become a flag officer, to go through contract in. yet half of our military efforts are contractors. we think with the genser report and the previous secretary of the army, that they are beginning to value this, but you have a ways to go. what i am not sensing from you is i would think you would have said there was a breakdown in our oversight, because whether the contractor will voluntarily say we are at 5% utilization for a whole year, we are wasting 95%

of the dollars you are giving us, of like to think there is an oversight mechanism. and your people would be saying, we have a great way to save money, this is huge. why didn't that occur? then i will end my question. >where was your oversight of this? >> the oversight was there. there is a dedicated -- >> the oversight was not there. >> the resources to do the oversight was there. that was there. >> said this is where i will end, because i don't think you have a good answer. i would have liked you all, knowing this report was available, to say, huge screwup. we determined it occurred because of something, or that we some how stupidly thought we

could not come back to the contractor and tell them they needed to brief look at this contract we have given you. -- they needed to relook at this contract we have given you. did we write the contract so badly that we are stuck with a knack for -- stock with a 95% waste? >> we could have redone it. >> thank you. i appreciate it. the real challenge on how to use my remaining time. in one of my prior lives, my first life as a dcaa director, and i am not sure empathy was in my vocabulary. that is my issue, but as i listened -- and i am directing this to you, whether it is empathy, i dealt -- i know you don't want my empathy but you

have a herculean task. that has to be recognized. if this contractor was your only contractor, that would be one expectation, but it is your biggest one but if it is not your only one. i think that needs to be stated. mr. fitzgerald, i commend you also for -- it is in your statement somewhere, you said part of it. he went from two years ago 900 hours looking at efficiency in the economy, which means you were not doing it. then your predecessor pushed at up as a result may be of her first appearance at this hearing, to 3500. you pushed it up to about 12,000. knowing the difficulty in getting the right people to do the right jobs, that is significantly. obviously you are doing audits

of more than this contractor. i would like to keep it in the logistics' mode, but i don't mind you pushing into either of the two theaters. i don't want to read all the stuff i read before come up with the dollars and all that knowing there is a multitude of issues documented by the organizations. do you have a list like that? should we be having those other contractors up here? maybe you focused on them more recently, but i know based on prior briefings, you have done a lot of work in this area. do you have those kinds of risk concerns at the same level? >> mr. chairman, do i have this concern? yes, we are in the process of looking at other contractors. the work is still in progress.

there is much work to be done, but as of today we don't have the same findings that we had -- that we reported to you today. >> i understand once you have a finding and auditors have said they have to package this and put it in the right context of the report, but if it is the findings that get your attention. and the fact that you don't is pretty interesting. >> i have not been away -- not been made aware of findings. >> these and other contractors did not have the k start of the kbr did, and that is fair. i want to give a simple example that we brought up in a hearing. that is, in a trip by staff to

iraq that i did not attend, they found through wandering around, along with briefings, a cafeteria that looked great that had a major remodeling and down the road a couple of miles a brand new project that started. people said you were looking at old information. it was scheduled to be completed in the end of 2009, so it is very current. kbr has a pretty good track record for finishing projects on time. i make the observation because my understanding of that is is the importance of oversight, he mentioned them before, they have final approval and they approved the maintenance project. and $31 million request came in,

and they approved that. the point is, and they acknowledged it, they said we made a decision based on bad data. the reason i say that is -- i will make a statement and see if you agree. it seems that -- people make mistakes, they miss things. it seems to me in this discussion there are two primary cost control functions. one we have talked about, which you are talking about bringing in better people and train them. that is the government. it seems the other half is two organization signed the contract. i think a large part of our discussion as, don't they have an equal contract oversight to deliver goods and services in

the best way to their customer, the u.s. government? can you agree with that? >> absolutely. >> that is what this is all about. i will just make a couple quick observations. i want to go back to the 60% mr. fitzgerald has shared in one of his documents. in the last month we will cut 60%. that is really good and someone brought this up here, if the iraq government comes in and says let's stretch this support at because we are not ready. we are forced to do planning for august, it leaves me wanting. i address this to you -- i am impressed by your comments on the maintenance posture and i wrote some numbers down.

we will get together with staff to talk about that area, because we are trying to get good examples to ratchet up the process, where you say in critical mission -- something along those lines. i am impressed by that. what i am trying to say is my summary in this, i consider it logistics' a critical mission. it is not a critical mission where the region where some electronics that are at the point of the sphere -- where some electronics that are at the point of the sphere. to me, at that is the missing thing. do you have a comment on that? >> i breakdown logistics' very similarly to you do. we fix things and supply things

and services to our soldiers. we have got to do a better job of getting that same level of supply of services in a more efficient manner. >> thank you, and i have one suggestion. in a lot of ways you can only have so many people testify, but if the director was available, i don't want to infer a your staff left you holding half a bag in crap, -- half a bag in prep. but a critical step you could take is for yieou -- to bring them together. what the heck is going on with this? i with think you would say, fine, i have two things to manage. i just make that observation. >> thank you.

>> mr. henke. >> of like to ask a question about transition to logcap 4. there is a chart that displays the time line from acquisition strategy 2006 to award of the bls contract in iraq. the chart probably could be left by about two years because that is when the army recognize the desire to move from logcap 3 multiple vendors. my question is on the issue of transitioning in iraq. this is largely for general pillsbury. you transitioned in kuwait that is effectively complete, correct? the transition in afghanistan is ongoing, to say the least. you just awarded ctp part of the

contract in iraq under logcap 4. you are considering whether to -- is bls larger? is that right? >> it is actually about the same. >> ok, multibillion-dollar contract? >> once again, it depends on how long you go. even ctp is less when you look at the current year and perhaps go on to 2011, the 2.3 billion number had the capability to go beyond that. >> on bls effort, the request for proposals was put at in january. you are thinking about awarding in may of 2010 with a conclusion of the transition in february 2011, is that correct? >> i believe the transition is

february 2011 -- so we are not looking at anything -- i'm sorry, you are right. you are correct. >> my question is, i understand the army is, in the concert will centcom, this business case analysis, looking at whether it makes sense to transition tologcap 4 in iraq. one of the dominant factors might be that logcap 4 is generally cheaper than logcap3. is that true? >> yes. >> this analysis going on, general pillsbury, can you tell us what are the factors being considered as the army decides whether to shift this major effort in february 2011 to bls?

>> dcaa was recently received in amc headquarters. we are looking at from both a cost-benefit analysis and looking at operational. what impact operational it would this shift had? >> who did bca? they came up with a product that said we think this is what the analysis shows. they get in a twomc -- >> they actually gave it to general odierno. >> what is the basic thrust of the business case analysis? >> the basic thrust is that, as you said, going logcap 4 0 couple contractors would be more efficient, but operationally it may not work because of the transition at the same time we are doing the drawdown.

that is the struggle staff is working on to provide recommendations, as it goes forward to the building. >> who will make that decision on whether to transition or not? >> it will be made in concert with the department of the army staff. >> but who will decide? is that your decision? >> no, it is not. i believe is the [unintelligible] it is dr. o'neill. >> so he has to decide, take all these factors into consideration. if the decision is based on cost, one would hope the decision would be to transition, if there is less cost. what is the view of senior commanders in iraq regarding whether to transitioned logcap 4? >> the view is to not transition because of the turmoil it would

cost as we are doing this draw them. >> ok, can you quantify for us what the -- are there dollar savings in transitioning? >> i have not seen the business case, but i would assume so. can you comment on that? >> there are dollar savings to be a cheap and also a cost -- dollar savings to be achieved and also a cost. >> what is the cost to transition? do you know that now? >> do i knew the cost of transition? i know what the estimates are. >> what are they? >> i believe it was $72 million. >> what is the savings expected from transitioning? >> the bca utilized 9%

savings. the amount of savings achieved depends on what assumptions you make of that when we would actually get the transition -- about when we would actually get the transition completed. there are various scenarios. >> what is the latest date by which it would conclude transition? >> i will have to get that for you. i don't specifically recall what the latest date was. >> general pillsbury, it sounds like you to a andmc have a large task -- it sounds like you and amc have a large task. how do you put together costs with operational need of the supported commander? in your testimony you say you are in direct support.

could you walk us through in a couple of minutes the decision making process and the factors that senior commanders willweigh as this goes forward? >> the first and foremost mission is supporting the soldiers. anything we can do to help the soldier and maintain his safety and security, along with his quality of life, is paramount. we listened to general odierno over there. when they recommend something we have to have awfully strong case to overturn their recommendations. i think what i am hearing -- >> i think i am hearing the default decision would be what ever the savings are, listen to the operational commander. >> not necessarily, if it is hundreds of millions of dollars savings we would be open to

recommending approval of that, but like i said the staffer worked withbca. >> when will you have a decision and when will you have an army position come in? >> in the next couple of weeks. >> visit hundreds of millions of dollars in savings? -- is its hundreds of millions of dollars? >> no, it is not. in some cases it may cost us money. >> so that makes your decision a little bit different. what are the down sides of transitioning? s it thew theap out of contractors -- so what would be the down sides of transitioning? >> the contractor has to get

trained and get going, so is turmoil. >> thank you very much. >> thank you. i wanted to start by saying i was happy to hear you say it one of the things you should have done differently is to go back and question their requirements. i hope to see that as we go forward, supporting -- supporting that is something we all want to do, but there is oftentimes a difference between needs and wants. sometimes that delta is what we don't question enough. the operational -- i guess requirements forbls are different c those fortp contract -- are different for c 40tp contract -- difference for the

ctp contract? it had asked one year ago, do you expect you would have gotten a different answer in terms of the difficulties of transitioning? >> i would suspect we would have had a similar answer, but certainly not up against the timeline we were up against right now. and i would assume it would be different. >> so the problem is we have got into a place where there are no good options. and the chart we have up here talks about the fact that it has been four years since the acquisition strategy was approved, so we have obviously made mistakes. we came up with a new strategy that was supposed to be good for the fighter and tax. , , and somehow we will not be able to execute that strategy. -- good for the war fighter and the tax.

ta -- xpayer. can you talk about mistakes we have made that put us in this position where we seem to have no good options? >> yes, first of all i think we underestimated the complexity of doing these task order competitions, particularly with the change in law that made them all subject to protest. so when the strategy was crafted it was before -- you still had to do a fair opportunity competition with the ability to have them protested -- it change the complexity of having to execute those competitions, so we underestimated that. not only the protests themselves, but making sure that i have a robust enough acquisition process, clear processrfp, clear enough --

clearly enough rfp, even having to go back and bca audits, it was not anticipated as we originally crafted this strategy. that is one place we underestimated the complexity. >> let me interrupt, do you think you have solved that problem? >> i think we have tried to solve it in the way we modified the acquisition process, trying to lay at [unintelligible] and getting those matrix's in there and trying to simplify that process and make the acquisitions as simple as i can. but at the same time, getting a contract baseline that is competitively established that reflects the work that will be anticipated. in addition, been able to utilize that -- being able to

utilize that as work is added or subtracted. i think we have tried to solve that. i don't think i will ever solve the robustness that needs to be in there. we were also very successful in the ctp award process. we sat down with dcaa before we issue that rfp and laid out exactly what we wanted the three contractors to submit to us in their packages and proposals so we could get those audits turned on and executed as quickly as possible without dcaa having to say we don't have the information we need. i think that was particularly successful, but it still took herculean efforts to get those things accomplished in those times. that is one of the places we made mistakes.

>> general pillsbury, would you like to add to that? >> manar, the transition -- ma'am, i believe the strategy was to go to kuwait first. it was not in the shooting, if you will. after that proved to be successful, albeit protests aside, that is still very worrisome to myself and the commanders on the ground, to be able to put logcap 4 into afghanistan with relative ease. i applaud them for that. it indicates yes, it is a smart strategy. why we did that go fully into iraq, it was probably a mistake to not start this earlier.

>> i want to ask you about something you said earlier during the last round of questions. you said that we really cannot be planning because of uncertainty. you were talking about planning for contractors and cora contractor drawdown. my knowledge of the military side of planning is that we plan for everything and every uncertainty and every contingency. is it not a good assumption for us to make that that kind of attention to planning for the military side of our operations cannot be put over to the >> i apologize if i left you under the impression we don't do sequences of planning. obviously on the military side -- we have to do the same on the contractor's site. i believe the context of my statement was having to do with post-december 2011, if we are to

remain. literally, we are planning to be out by december 2011, but that being said, our planners do realize the flexibility is that are under contract right now that will allow us to continue the support if the decision is made for us to stay. >> so we would likely see -- we could see an extension of logcap 3? >> yes, but depending on how long we would have to stay, perhaps we would go back. >> i would assume that is an assumption under your business case analysis, that there may be some summaries -- may be some reason to look at a different time line than the one currently on the books? >> i bca goes to december 2011. >> so it does not look at

excursions? >> it does not. >> mr. kennedy, eutaw in your statement about additional resources you have put in the air. -- you talked in your statement about additional resources. you talk about doubling, but that is a measurable risk you think is involved. we had several contractors there. what is it that you are most worried about in terms of the government's ability to appropriately manage these contractors? are there a couple of things you would change to let -- to let you sleep better at night? >> one of the main reasons for increasing the resources we are spending their, we have 20 months to go. we need to get our work done in a very timely manner so we can get the information back to these officials so that they can

take action. we think that there is risk because of the changing requirements, how dynamic that environment is, that we need to be vigilant in looking at those areas and making sure that we get in there properly staffed and get the work done, so we can get the information back. because time is of the essence as we go through this drawdown. >> is the upholding of this recent form one see you submitted, is that an effective tool -- this recent form one you submitted. >> yes, hearing certainly. that was invery -- certainly. that was in agreement with the contract officer. >> thank you. >> thank you, mr. chairman. i want to start with