economy. host: next caller. caller: i have to disagree with you. guo green bay packers. [laughter] host: next call. caller: the reason we are in these mortgages is because of -- host: jacksonville, fla., independent line. caller: this is john. thank you. i saw the panel the other day on c-span regarding bush. i have not read the report.

i did not seeing the difference by which the servicers treated those having problems. in my particular situation, i got a loan. i am not in the category that most people say people who did not have the funds should not have gotten a loan. i have a long history of good earnings and have made economic contributions to this country. as a particular time, i lost funds, got another job, and a loss of that one.

i was behind one month. but i was making my payments at the end of the month. our system failed. , this particular major corporation that changed its name. their system failed. they refused after many emails and many tried to get them to fix their system. they refuse, modify the score went down, and i could not get the fda loan to do the business venture i was doing, which are the set up and was working with a major bank in our area.

host: what is your question? caller: why have you not spent a lot of time discussing the overlord of mentality in of the banking community in dealing with this? i will hang up now. guest: two responses. in the old days, a bank made a loan to a homeowner. there was a relationship there. when a homeowner got in distress, you could figure out how to work it out. ther securitized asiaation, relationship is broken, and someone is just serving the loans and the dynamics of loan distress is changed. that has been a real problem in dealing with those with problems

with their mortgages. we cannot figure out who owns the mortgage and who is responsible when cutting the deal. our job is to focus on because of the crisis not cleaning up after the crisis, which that falls under. host: jacksonville, fla., a republican line. caller: it all sounds really complicated. it seems to mean that the banks were not liable for held to holding on to the mortgage as you mentioned a moment ago. as soon as they're able to take the bad loans and get rid of it, that is when the wheels started falling off. it drives of the tax dollars, which is why the government did not do anything about it. if they did, they would not have

any tax money that they have now. they reverted back 30% of its. they still cannot live off of it. they are trying to offer of even more to get taxes to where they were. then the banks get bailed out by everybody. now they are trying to take their houses now. guest: they bundle these items and sell them off. congress created fannie mae in 1930's. securitization was meant to solve such problems if banks are making loans to homeowners and things go bad, that bank goes under. the idea was to spread the risk across the country and not

making individual community banks so invulnerable. it worked beautifully for 80 years. -- -- so vulverable. it worked beautifully for 80 years. so it can't be just the problem. host: the president spoke about trying to get the financial house in order. let's see what he had to say and then we will get reactions. >> we live and do business in the information age. the last major reorganization of the government happened in the age of black and white tv. there are 12 different agencies that deal with this. there are five once the deal with housing policies. then there is my favorite example. the interior example -- agency

is dealing with salmon in fresh water but another agency deals with them when they are in salt water. [unintelligible] [laughter] now -- [applause] we have made great strides in using technology and getting rid of waste. we have sold acres of federal the space that has not been use. ce that hasn't been used in years and we'll cut through red tape to get rid of more. but we need to think bigger. in the coming months, my administration will come up with a proposal to

guest: the greatest lesson is to think back to the creation of the homeland security. 100 now reports to congressional committees and subcommittees. that is not streamlined. but congress wants its thinkers in a lot of things. it is a tough battle, worth pursuing. in the end, having a more streamlined government will not solve our nation's problems. we need to take on these problems next. host: he is a commissioner with

the financial crisis enquiry commission. tell us about the form you are a part of. guest: it is a think tank dedicated to understand these many policy problems we face, budget deficits, financial crises, how to deal with health care reform. what to do with energy policy in the united states. education reform, making sure our kids get the education they deserve and can compete globally. host: democrat line. caller: i want to revisit this mantra that a good portion of the financial crisis was due to fannie mae and freddie mac giving loans to people who could not afford them, based on previous policy.

it is very irritating to me because people deserve to have a home, if they meet criteria for the mortgage. people could afford the sub- prime mortgage, when they were first issued. the problem came with the greeted in that the loan -- the interest rate would increase after a certain amount of time. it would increase by an amount that the home owner had no recognition of. you were not able to anticipate how it was going to be. the mortgage lender could not tell the homeowner how much that

increase would be. the increase was also tied to something obscure such as the libor market. that is one thing. the other thing is dead people who could qualify for standard fixed mortgages were also pushed into the sub-prime market. i understand that it was more profitable. one of my neighbors said that when she took out her mortgage, she was charged points for everything except for what the mortgage broker had on that day. host: did you make your point or

do you have a question? caller: i wanted to challenge this mantra of loans going to people who cannot afford them. guest: loans went to people who cannot afford them. some loans were done in bad faith on both sides. some took loans they had no intention of paying. others took loans and cannot understand what they were getting into. the most important thing is that neither sign cited is interested in a loan if they did not think they could have the house press go up, get a mortgage, and avoid the interest rate increase. host: the last call comes from maryland on the independent line. caller: you say you do not have a problem with the facts and

testimony compiled in the report. the conclusions drawn are different from what you would draw. . what is the basis of your descent? guest: we compiled of the evidence, and our job was more than just collecting the facts. it was telling us what happened. we parted ways fair. we agree with the basic facts. there were a number of factors important. we came down with 10 in a particular order that led to a financial crisis. it is a disagreement on the reading of the record. host: what have we learned to keep us from going down this road again? guest: we always think we have

solved this problem. in the end, all financial institutions lend a long period when things go bad the bank cannot find it >> sunday on washington journal, fred crawford on the situation in egypt and how the problems there could affect president obama's legislative agenda. then former homeland security secretary tom ridge. he will look at how egypt could complicate u.s. efforts to fight global terrorism. after that, john cage from the american federation of government employees discusses

how much federal employees or pay. plus, your e-mail and phone calls. washington journal, like sunday at 7:00 p.m. eastern -- 7:00 a.m. eastern on c-span. >> i need to say for the record, i have always been opposed to taxpayer dollars being used for political advocacy of any kind. >> oklahoma republican, tom cole, offers a bill to reduce federal spending and the deficit. followed the entire debate and the final vote on line with c- span's congressional chronicles with time lines and transcripts of every house and senate session. congressional chronicle at c- span.org/congress. >> this weekend on american history tv, explore the home of social reformer kent essex slave

frederick douglass. jerry jones tells of the diplomacy of president woodrow wilson. for the nixon foundation and the nixon library, a focus on daniel patrick moynihan. experience american history television on c-span3. see the complete schedule online at c-span.org/history. >> at&t assertion was met with skepticism at the supreme court last week. the case asked the court if at&t can invoke a personal privacy exemption under the freedom of information act to keep information from the government gathered in the investigation. the court ruled in favor of at&t. the court will render its decision some time before the

end of the term in june. this is 50 minutes. >> we'll hear argument first this morning in case 09-1279, federal communications commission v. at&t, inc. mr. yang. >> mr. chief justice, and may it please the court: the court of appeals has held that foia's statutory protection for personal privacy in exemption 7(c) extends beyond the privacy of individuals and protects the so- called personal privacy of corporations. that holding is inconsistent with the text of exemption 7(c), foia's broader context, and the statute's drafting history, and would lead to anomalous results. the word "personal," standing alone, refers to individual -- an individual human being. "privacy," standing alone, and even more so in the context of the phrase "invasion of

privacy," invokes purely individual concepts. and the sum of those terms -- that is, the statutory phrase used in foia, "personal privacy" -- is greater than the sum of its parts. it's long been well settled that corporations have no personal privacy. >> isn't it true that there are contexts in the law in which the word "personal" is used to refer to a corporation? for example, you could refer to personal jurisdiction over a corporation, couldn't you? >> there are -- the term "personal" is sometimes used as a term of art, and i think personal jurisdiction is one of those. it is the modern, shorter term of art for jurisdiction in personam and reflects a distinction drawn still in the law between cases brought in personam and cases brought in rem. that -- the evolution of that term in the law as a term of art does not reflect what the ordinary meaning of "personal"

is. it is just the same as the term "personal property," which also invokes long-established traditional distinctions between property that could be recovered in rem or in real actions versus property that might be recovered in actions in personam. so -- and, in fact, i think it -- it is important to note that there are -- although maybe there are some instances that -- i think there's one instance that at&t cites in its brief. nothing -- it never cited any use of the term "personal" to mean corporate or pertaining to a corporation. and when -- when you -- >> what about -- what about personal appearances? >> a personal appearance, i think that -- that supports our position as well. if you're making a personal appearance, it is not something that a corporation does. a corporation is a -- a legal

construct. it doesn't exist as a thing that can make an appearance. >> well, in ordinary speech, the term "personal" is not -- the term "person" is not used to refer to a corporation. that's legalese. but in -- but since the -- the administrative procedure act defines a person to include a corporation, why is it relevant here or dispositive here to look to the ordinary usage of term "personal" as opposed to the way it's -- it's used in the law? and in the law, it is sometimes used to refer to a corporation. >> well, i think that -- that point actually reinforces our position, because although "person" is used in certain legal contexts to refer to artificial persons and corporations and the like, "personal" is not. and "personal," as we explained in our brief, is not simply a grammatical alteration, an

inflection of the term "person." it has existed in its own right since the late 1300s and has developed meaning that is unique to the term "personal," which -- >> mr. yang, can we go back first to this. the request came in and, as i understand it, the commission said there are two exemptions: the one for trade secrets, commercial, financial confidential information; and then there was one with exemption 7 itself, but as to the employee. >> correct. there was an additional exemption, exemption 5, which protected internal government communications. >> how does the -- does the commission, unaided by at&t, go through the papers and decide what would be embarrassing for an at&t employee, as distinguished from the corporation?

>> how does it do that? >> yes. >> well, i -- i don't think the touchstone is necessarily embarrassment. what the government does, following this court's decision in reporters committee is tries to determine whether there is a personal privacy interest about individuals, and that is information that pertains to particular individuals. for instance, in this court's decision in dod v. flra the court explained, although an agency released the name of individuals, it could properly withhold the addresses, the home addresses, of those individuals, even though that might be publicly available in phone books, because individuals have at least some small personal privacy interest in that. so what the agency will do is try to identify information pertaining to individuals and then will conduct -- if there is certain information, will try to conduct a balancing to determine whether there is a public interest in disclosure, that is whether revealing this

would disclose information against the government. >> well, in that instance does the corporation have standing to raise that objection on the employee's behalf? >> well, i think the corporation to the -- in a reverse foia case, for instance, which what is we have here, where the corporation is alleging that the government's decisionmaking process is arbitrary and capricious, it has article iii standing to resist the disclosure of documents. if you're using standing kind of like a fourth amendment concept of standing, i don't think that -- >> well, as an administrative matter, can the corporation make a foia objection on behalf of its employees. >> it can make an objection on its own behalf, which is to say that the government has not properly gone through the decision-making process. >> that's the next -- that was going to be my next question: so the corporation can raise foia on its own behalf?

>> it's actually -- let me take a step back. foia actions are actions which seek to increase the amount of documents that the government has released pursuant to a foia request. we have also reverse foia actions, which are actions under the apa and here under the hobbs act's review provisions, that would give the court of appeals jurisdiction. when there's a reverse foia action, the claim is that the agency's final agency action is somehow arbitrary, capricious, and not -- or contrary to law. so in this case, the fcc has certain regulations which govern its processing of foia requests. and at&t's claim, as we understand it, is that the fcc did not comply with its regulations and, therefore, its decision was arbitrary capricious because its regulations required that it consider the personal privacy

interest of individuals. i should note that, with respect to exemption 6 or exemption 7(c) the government itself invokes personal privacy of individuals. that's what we do when we process foia requests, because individuals normally don't get any notice that there has been a foia request. the government simply processes it and asserts those rights, in the sense that they're rights, asserts those interests on behalf of corporations -- on behalf of individuals. going back to the text of the statute, the term "privacy" and particularly an invasion of privacy invokes concepts that back to warren and brandeis's right of privacy, their article which explained that or identified in the law certain human dignitary interests that they gave the label privacy. >> privacy certainly isn't as limited as you argue "person," "personal," is. corporations have private

property. they have private documents. the concept certainly applies in the corporate context as it does in the individual. >> i think the term "privacy," its ordinary meaning, not the only meaning but the ordinary and the commonly used meaning, does invoke individual concepts. when corporations or other entities are at issue, normally the more appropriate word would be "confidentiality" or "secrecy." those concepts -- >> you don't have confidential property or secret property. you have private property. >> well, true. but it's is not privacy. when we're talking about the right of privacy, those -- that word we think, again going back to warren and brandeis and up through the fifties and sixties when prosser was elaborating the law of torts in his groundbreaking article on privacy, those concepts applied only to individuals, and particularly when you combine the terms.

the restatement makes clear, and back to prosser it was clear, that corporations have no right of personal privacy. so when congress in 1974 was enacting exemption 7(c), there would have been no basis for it to conclude that the rights that it was conferring through the phrase "personal privacy" would confer rights not -beyond individuals, to corporations, and by necessarily implication, if at&t is correct, foreign governments, state governments, local governments. there's no predicate for those types of entities having personal privacy in the law. >> our cases assert, do they not, that the exceptions to foia should be narrowly construed? >> there are cases -- >> and we've said that on a number of cases. >> in certain contexts, this court has indicated that exceptions are to be narrowly construed. we think that, when read in context, those cases and other cases of this court explain that foia's exemptions are to be given meaningful reach, because what congress was trying to do in foia -- - and this is

somewhat against our interest in this case and we explain it more fully in our brief in millner, which is currently pending to the court -- what congress was trying to do in foia was to establish a general principle of disclosure, but in the exceptions it identified very important interests that warranted an exception from those general rules. and to narrowly construe the exceptions we think would distort rather than advance congressional purpose in enacting foia. >> suppose congress had used the phrase "privacy of a person," "privacy of any person." would you make the same argument? >> our argument would be a little different, particularly in the context of exemptions 6 and 7(c), where the phrase would be "an invasion of privacy of any person." we think, particularly when we're talking about invasions of privacy, even though a corporation might have a broader definitional meaning in context, congress in that case would still, we think, be referring to individuals.

but, of course, that's not this case. that would make it a little more difficult. we think we would probably still prevail on that reading. but -- >> what about the privacy act? the privacy act undoubtedly concerns individuals, human individuals -- >> correct. >> -- not artificial beings. but it uses the words "individual privacy." >> well, it actually uses both phrases. it uses, as we explain in our brief, the phrase "personal privacy" to explain that that's what the act was protecting. and then within the operative portions of the act, it uses "individual," but it does so for a very specific reason. congress was intending to protect a subset of individuals and it defined the term "individual" to mean u.s. citizens and lawful permanent residents. so not all individuals would be protected by the privacy act. now, congress did that, not because had it used the phrase "personal privacy" it would have been extending rights to corporations and foreign

governments, but because personal privacy would have been too broad in that it would have -- even though it would have been limited to individuals, it would have included a set of individuals that congress wanted to exclude, that is, everybody who is not a u.s. citizen or lawful permanent resident. >> can i ask you a question. i'm not sure i understood your response to justice scalia. if there is ambiguity, if a term can be given two meanings, and it's not clear -- and i know you're challenging the clarity question here -- i thought that congress's intent to have full disclosure would necessarily mean that where there's ambiguity as to the meaning of an exception then we should change the narrowest meaning. >> well, i think we disagree, and i think this is why. no legislation pursues its primary goal at all costs, and the foia exceptions that are at issue here protect very important values that congress deemed to warrant exceptions

from the rule. so if the court were to put a thumb on one scale of that balance that congress has tried to strike, after using all the normal tools of construction, we think that would distort rather than advance the intent -- >> i don't understand that. we're not putting a thumb on the scale. we're taking account of the fact that -- that congress has many objectives in any legislation and that the limitations are as important as the substantive end. nonetheless, when, having applied all of that, you end up with, gee, i don't know; it is ambiguous, you say even in that situation, we don't apply the rule that -- >> well, if you were to get -- after using all the normal tools that the court does and you're on -- >> that's what ambiguity means. it means -- >> that's usually a very rare instance, that you are exactly at equipoise. and we certainly aren't relying

on narrow construction in this case. >> okay. the government wants to abandon the principle that we've set forth in our cases -- >> well, we think -- >> -- that exceptions to foia are to be narrowly construed. the government does not support that. >> we do not embrace that principle. >> even though we did? >> well, we think that those cases -- there are two lines of this court's decisions. sometimes the court explains that exceptions are narrowly construed and sometimes the court explained that its decisions have given -- its decisions have given the exception practical reach in order to strike the appropriate balance that congress has tried to strike in foia. now, let me just say, our narrow construction to the extent the court would want to reaffirm it here -- we're not advancing that -- would only help the government's position. >> your argument is based on a case that will come before us. so -- but in this case it is to your interest to say, yes, that has been -that has been set

forth as precedent, that foia exceptions are to be narrowly construed. >> well, the government has broader interests beyond a single case and we think that, again, we're not embracing strict construction in this case. but again, that would only help the government's position if you were to disagree. >> well, i'm not going to help the government's position if the government doesn't want to be helped. i'm happy to leave you where you put yourself. >> and we accept that in this case, and we think that the language of the text, particularly when read in context in light of the statutory history, and particularly when you take a look at what's gone on since 1974 -- i mean, in the more than 35 years since, there has been uniform agreement that exemption 6 and 7(c) apply only to individuals. >> i suppose -- i suppose families have rights of personal privacy, don't they? >> well, in certain contexts family members, as this court

decided in favish, can have a right to personal privacy. but the court in favish recognized that that was a very, you know, significant departure from the prior understanding that the right of personal privacy in foia protects information about the individual, him or herself, and recognized that there is another strain of personal privacy which from longstanding traditions in terms of -- within our society, the court could draw on in saying that personal privacy should also protect, at least in the context of -- >> so in some contexts -- in some contexts, personal privacy does go beyond the individual? >> no, still it is individual. mean, those are individual members of the family. >> aggregations of individuals? >> well, no. i think an individual member of the family has a personal privacy interest by virtue of the relationship to the decedent in favish.

let me go back. just, i think i would be remiss if i didn't remark upon this court's decision -- >> excuse me. to go back to the chief's question, you do not deny that the individuals who form the corporation, the officers and the employees, are protected by the right of personal privacy and indeed you will -- you will edit any foia responses to protect those individuals, even though there are many of them, right? >> correct. if there were -- >> but as individuals, not as the corporation. >> as individuals, because the information pertains to them. now, going to the american express case, which we explained in our reply, i think that is fatal to the proposition that -- the proposition of at&t that there's a grammatical imperative that adjectives take the meaning of the related noun.

in american express, the court construed the truth in lending act, which includes the definition of "person" to include, for instance, corporations. it then went on to construe a term, "consumer," which concerns transactions primarily for personal, family, household, or at the time agricultural purposes. the court explained that a transaction, the transaction that was conducted for a corporation's business purposes, that it could not -- there was -- "it did not fall within any of the purposes specified" -- that was a quote -- in the definition of consumer. that is, it did not concern personal purposes. we think that's fatal. the court, in fact, said it was the only possible conclusion and that there was no other possible interpretation of the statutory phrase. after repeating the enumeration of those four factors three times and then on the very next page saying corporate -- a transaction for corporate business purposes could not be fit within that definition.

finally, i'd like to remark upon the anomalies that this court would set us forth upon if it were to decide that corporations have personal privacy. at least in the context of individuals, there's an established body of law and societal understanding of what a person, an individual, might have a personal privacy interest in. but if we expand personal to include corporations, foreign governments, state governments, local governments, defining what would be personal privacy of those institutions would require an extraordinary exercise, a simple policy judgment on the part of the agency first and then the court. and this court in favish was careful to explain that that type of decisionmaking would be improper and that appropriate guides to limit and make objective a court and agency's decisionmaking is required. congress provided no benchmarks, never addressed corporate, foreign governments, or any other non-human entity in

the context of personal privacy. and again, for 36 years there's been uniform agreement that personal privacy applies in this context only to corporations. if there are no further questions -- >> so if an individual has been -- individual human being has been investigated by the fbi and a foia request is made for records related to that investigation, would the name of the individual not be turned over? >> well, if someone is asking for an investigation of tony yang -- >> yes. >> our -- i don't -- i can't say definitively, but i think i can probably answer that, that even answering the question of whether there is a responsive record answers the question.

>> well, that's the point. so really your adversary is saying that the same harm that occurs to an individual -- putting aside the difficulty of defining privacy more broadly, but the same harm that occurs to an individual who is disclosed to have been the target of an investigation is an identical privacy right of a corporation; or a corporation has the same negative effects on the individual. so i think they would concede that privacy might need to be defined differently for corporations. they're simply saying this privacy interest is not. >> well, the key point is that we don't deny that corporations have some interest in confidentiality that exists out there. for instance, at&t has relied upon the common law of defamation where a corporation's business interests, business reputation, is implicated. but even --

>> they pled guilty already. so it is hard to imagine how much exponentially more damaging -- >> well, to be fair to at&t, there was a settlement agreement in which they did not admit any wrongdoing. >> but that presupposes some sort of investigation. so that's public knowledge. >> that is public knowledge. but i think the key point is that the corporate -- a corporation's interests in maintaining its business reputation has been not regarded as a personal privacy interest. it's true that they have interests and foia protects those interests, for instance, interests in confidential, commercial or financial information under exemption 4. so really we come back to the key point, which is when congress used the phrase "personal privacy" it would have had no reason in 1974, or even now, to think that term would have referred to corporations. the fact that corporations have other interests and other rights that might be legitimate

is kind of beside the point because those interests are not referred to in the law or otherwise as personal privacy interests. i'd like to reserve the balance of my time. >> thank you, mr. yang. >> thank you. >> mr. klineberg. >> thank you, mr. chief justice, and may it please the court: the question in this case is whether any organization, including not only business corporations like at&t, but also nonprofit organization and political associations, should be categorically excluded from protection under exemption 7(c), such that this exemption will now offer less protection for privacy interests than the constitution and the common law. this court has consistently held that the privacy protections under foia are

broader and the text supports that position. >> do you include in this the people, the persons that you say are shielded by this privacy exemption, as mr. yang said, foreign governments, state and local governments, those have all? those all fall under the apa definition of person. >> justice ginsburg, they do. and we would agree that as a matter of statutory construction, the concept of personal privacy does apply to those, those other categories of actors. now, whether once that privacy interest is balanced against the public's interest in disclosure -- that balance may well be different with respect to public or foreign entities. but -- but certainly they -- they have a right to personal privacy under the terms of the statute. >> can you give us an idea of -- the corporation has been shielded by exemption 4 for its confidential, financial

information, trade secrets; and its employees have been protected under exemption 7. what is it, what would be -- would fall within this privacy exception that would not be confidential business information or relate to employees of the corporation? >> justice ginsburg, we -- i could give you two categories or kinds of examples. one is, for example, a series of e-mails among corporate officers -- granted, whose own personal names and identifying information have been redacted -- but in those e-mails, they may engage in a frank exchange about the competence and intelligence of a would-be regulator of the corporation. or a -- disparaging comments

about -- >> excuse me. why does that related to their privacy? i don't understand that. why does that relate to the corporation's privacy interest? anything that would embarrass the corporation is -- is a privacy interest? >> well, justice scalia, the - the answer is simply that these were communications, conversations, that were occurring with an expectation of privacy by the individuals involved on behalf of their employer, and to the extent that they could be used to harm the reputation or the customer goodwill of -- of the company, they do indeed have a -- a personal privacy interest -- >> anything that hurts the -the -- the image or the goodwill of the company? >> your honor, everything that with -- that is intended to be private is certainly subject to the balancing that we're asking for under exemption 7(c), indeed that congress provided; that if it is -- it's an interest in personal privacy, then it is to be balanced to determine whether the disclosure of that document is unwarranted.

>> mr. klineberg, can you give me any example of -- your -- your brief talks a lot about the adjective "personal." but we're not talking just about the adjective "personal." we're talking about the phrase "personal privacy." "personal," yes, can indeed apply to corporations sometimes; but there are certain phrases where it certainly does not. for example, you talk about personal characteristics. that doesn't mean the characteristics of general motors. you talk about personal qualities. it doesn't mean the qualities of general motors. you talk about a point of personal privilege. it's not a privilege of a corporation. and i think personal privacy is the same thing. can you give me any examples in common usage where people would refer to the personal privacy of a -of a corporation? it's a very strange phrase to me. >> your honor, as justice alito asked my -- my colleague

earlier, the -- the whole concept of -- of "person" as including a corporation would surprise many people, the proverbial person on the street. >> yes. i'm not talking about that. i'll grant you that -- that "personal" could refer to a corporation, although the government distinguishes it by etymology and so forth. never mind that. i'm talking about personal privacy. do you have any examples from the new york times, from, you know, boswell, from anywhere, that anybody refers to the interests of a corporation as the "personal privacy" of general motors? i cannot imagine somebody using the phrase like that. >> your honor, we're -- we're not aware of that phrase being used certainly in any statutory context -- >> but you were about to give a second example of where, even though it hasn't, "personal privacy" hasn't been used.

but you said one example is the two officials who are saying unpleasant things about a regulator; and what was your other example? >> well, there's a -- there's a sub-example within that category which is the disparaging of an important customer, some unpleasant comments about an important customer of the corporation that could then be used quite -- quite clearly by a -- by a competitor to -- to harm the goodwill of the -- of the corporation with respect to that customer. but there is indeed another whole category of documents that goes beyond the -- the context of at&t's interest here; and the example is internal documents within, say, an environmental nonprofit organization talking about their political strategies for defeating an amendment to the clean air act. as an example, those political strategies that were shared internally by -- by members of the organization without any intent to -- to have them

become public would become subject to -- to automatic disclosures, categorical disclosure, were the government to prevail in this case. >> do you think it's -how does that work? if you have the president of the environmental organization says something about whatever it is, we can lobby this guy to get this change, is he able to protect that on the grounds of his personal privacy, even though the embarrassment would go to the -- the organization as a whole? >> mr. chief justice, i believe the answer is in most cases yes, that in -- that the identity of the -- the specific speaker and any identifying information corresponding to him or her would be protected. >> why is it such a big deal, then, to extend that to the organization as a whole, if the individual's privacy is already going to be protected? >> indeed, your honor, i think

that is -- that is our position, that -- that the personal privacy of the corporation is -- is affected by such disclosure. >> no. i mean you're -- you're already protected, at least to a significant extent, because the individual officers would be able to assert a privacy interest, to the extent at least that what you find embarrassing to -- to the corporation is also individually embarrassing to them. >> right. but the -- but the redactions that would occur would in all likelihood simply be redactions of their names and perhaps their titles, but their -- the substance of their comments would certainly be -- would be disclosed under the government's view. >> are there any examples that you have? that is, in the last 35 years have there been any instance where the justice department or some other law enforcement

agency compiled a file for law enforcement purposes, that in that file there were, for whatever reasons, a bunch of conversations about the organization's strategy, and it did not interfere to release it with -- with anybody's personal privacy, but it might interfere with that organization's strategy, so the organization, whatever it was, the nrdc or something, was very upset about it? did you find a single example or a thousand examples? or how many examples did you find of that happening? >> well, justice breyer, one of the -- one of the things that has puzzled us in this case is why -- why it has taken 35 years -- >> well, one reason might be that this has really never been a problem because all the legitimate -- or most of them, anyway -- that these organizations that have interests in privacy are actually taken care of by the other 17 exemptions here. >> another reason might be that personal -- nobody ever thought that personal privacy would cover this. >> this may be the first. that's why i want to know, is there -- one of the things you would have looked for is an example of a real problem of the kind you're talking about. i'm not saying you don't have

one. i would just like to know if you found any, and what they are, so i could read them. >> your honor, we haven't found anything specific to the -- in response to your question. but i -- i will say that one of the explanations for why this issue has become more important today than maybe it has been in the recent past, there really are three reasons. one is that exemption 4, which mr. yang discussed, has been increasingly narrowed by the courts of appeals to the point where they specifically say, and indeed the government concedes, that -- that the reputational concerns and the harm to customer goodwill is not the sort of harm that exemption 4 guards against. and so that has become increasingly clear among the courts of appeals, that the interests in confidentiality that we're talking about under exception 7(c) -- >> one possible reason you don't find them is because it is very rare that a law enforcement agency is going to try to subpoena the top strategy of the -- of the nrdc, confidential strategy.

there might not be too many such records. it -- another reason might be that they don't really care. another reason might be -- i don't know. but if you haven't found any examples, what we're back to -- or -- and maybe there are actual examples of that -- of what you said to justice ginsburg of the other instance, where the -- what was that first one? >> right. >> i'd like to know about the example. what was the first one again? >> well, the -- the first one was comments about a regulator -- >> they're worried about saying something mean about a regulator. okay. yeah, fine. are there examples of that? is this the first one and what's the empirical statement? >> your honor, it is a -- i cannot point you to specific examples. they're -they're sort of hard to -- hard to find in the -- in the sense that they are -- that they're not typically litigated, and they certainly haven't been litigated under -- under this -- under this exemption before. but -- but i think the other explanation for why this matters today in a way that it might not have mattered so much before, two -- two other reasons: one is that -- that increasingly, foia is being used by -by competitors and legal adversaries to obtain information, not about what the government is doing, not about what the government is up to, but about what evidence the

government might have gathered from private parties. >> is that a reason to change what was the understanding of exemption 7? one of the items that doesn't work in your favor was the attorney general's memorandum at the time of the 1974 amendments. >> well, actually, justice ginsburg, at the time of the 1974 amendments the only existing attorney general memorandum was that of attorney general clark, which read "personal privacy" -- >> i'm talking about the -- attorney general levi. >> right, and that -- that was issued subsequent to the amendments in 1974, and that was an -- an interpretive gloss on the recent amendments. >> yes, that's what i meant. >> right. and so at the time that congress enacted the amendments, both under the privacy act as well as exemption 7(c), the -- the only existing statement about what personal privacy might mean would be -- would have been attorney general clark's understanding that

personal privacy can in fact incorporate interests of corporations. >> but if attorney general levy's description, which was -- which was issued for the purpose of telling all the agencies of the federal government what this new statute meant -- and it had a lot of ambiguities in it -- if that was wrong about -about this subject, you would have thought somebody would have objected. i mean, did some members of congress who -- who had passed foia say, this is outrageous; what about the personal privacy of general motors? i'm not aware of any objections along those lines. >> well, your honor, the -- attorney general levy's memorandum did not go into a long discussion or description of the analysis. it simply said it does not appear or does not seem to apply to corporations. and it's absolutely true.

this is not -- this issue hasn't -- hasn't really been litigated and presented. but our position is that there's nothing in the plain language that would indicate that congress intended to categorically exclude corporations. it is certainly true that the legislative history at the time, as the government spends quite a bit of time exploring, does suggest that what was -- what was in most people's minds was protection of individual privacy. but there is no indication that they intended -- >> is it the burden of the government to show that they intended to exclude corporations, or is it your burden to show that this exception was meant to include corporations? i would think the latter is where the burden lies in this case. >> well, justice scalia, our -- our burden is to -- is to defend our view of the statute. >> well, but if you're asking the government to show that the

-- there was an intent to exclude corporations, i don't think that's their burden. i think it's your burden to show that this exemption was intended to include corporations. >> i agree, your honor, that we are -- our burden is to demonstrate to you why the words "personal privacy" in the statute apply to corporations. i think one of the background facts is that there is no indication that anyone thought that it was not to be included. but let me -- >> counsel, your central argument is that because "person" is defined to include corporation, "personal" in the same statute must include corporate. i tried to sit down and come up with other examples where the adjective was very different from the root noun. it turns out it is not hard at all. you have craft and crafty. totally different. crafty doesn't have much to do with craft. squirrel, squirrely. right?

i mean, pastor -- you have a pastor and pastoral. same root, totally different. so i don't understand -- i don't think there's much to the argument that because "person" means one thing, "personal" has to be the same relation. >> mr. chief justice, let me try to explain precisely what our proposed rule of construction is, because i think there's been some confusion and i -- and i think the government has -- has not properly characterized it, and certainly in their reply brief. we do not agree, we do not sign on to, the term "grammatical imperative," because our concern with that phrase is that it might suggest that the rule is to be applied regardless of the consequences, and that is not our you position. our position is that where the adjective means "of or relating to a term that congress has expressly defined," that definition should be applied, so long as it makes sense to do so in light of the text and structure of the statute as a whole. so in this case, your honor, "personal" does -- is defined -- when you open up the dictionary, the very first definition is "of or relating to a particular person." "person"

is, then, defined by congress as -- to include not only individuals, but -but corporations and other associations. so in this particular context, it makes perfect sense to look to -- >> mr. klineberg, you have read the brief of the project on government oversight where they give dozens and dozens of examples to show that, overwhelmingly, "personal" is used to describe an individual, not an artificial being. and it is the overwhelming use of personal. >> justice ginsburg, we do not dispute that personal is often, even many, many times, used to describe an individual and can only be understood in that context. indeed, the truth in lending act argument that the government made in its reply brief is a perfect example.

the word "personal" there is -- is mentioned alongside personal, family, and household. and indeed, even in that very same statutory definition of "consumer," the word is referred to as "a natural person." so in that context, it would be absurd or inappropriate to -- to borrow the concept of the definition of "person." all we're saying is when it is not absurd, when it is not -- does not do violence to the statute, under those circumstances, it makes perfect sense to borrow the definition that congress provided. >> what would be similar to medical files as such, under exemption 6, that uses the same phrase, "unwanted invasion on personal privacy"? so what would your reading do to exemption 6, and how would we create or even make sense of exemption 6? >> your honor, we don't believe

our reading does any -- any damage to this court's jurisprudence in exemption 6, and the -- the simple reason is that while the words "personal privacy" in exemption 6 do mean -- and we agree with the attorney general clark in this -- do mean that -- the same thing as it means in exemption 7(c), but because -- precisely for the reason you said, justice sotomayor -- the personnel, medical, and similar files limits the likely scope of that privacy interest to individual, natural -natural persons. and that's simply not because of the words "personal privacy," but because of the company that those words keep in that -- in that particular exemption. >> why? i mean, if you're saying that personal privacy has some overlap with individual privacy -- obviously, it has to if

you're going to give meaning to personal privacy -- don't we have to give meaning to "and similar files"? and so what would those be? >> well, your honor, as this court said in the washington post case, the understanding of similar files is defined by the two benchmarks that are expressly provided, right? personnel and medical. so the kinds of files are limited to the sorts of files in which individual information is likely to be contained. in that case, it was a passport file. again, our -- our argument is simply that it is that part of exemption 6 that does the limited work in terms of its scope. the words "personal privacy" mean the same thing in exemption 6 as -- as they do in exemption 7(c). the -- the other point that i certainly want to make clear is that our position is that personal privacy is only the first step

in the determination whether or not a particular document is disclosed, because if the government prevails, there will be no need even to articulate a public interest in the disclosure of potentially harmful documents. instead, they will be automatically available to any competitor or legal adversary. and all we are asking for and indeed all that congress provided for is that the privacy interests be weighed against the public interest in disclosure. and what the fcc did here was to categorically exclude corporations from the protections of exemption 7(c). and all we are saying is that those interests are legitimate and just need to be balanced. and what the government's obligations under these circumstances are is that they need to weigh the private interests in the documents against the articulated public

interest in disclosure. and that interest, of course, has to do with what the government is up to, what do these documents tell us about what the government is doing. and if, as the amici on the government's side suggests, there are lots of public value and public interest in the disclosure, then that balance is more likely to be weighed in favor of disclosure. all we are asking for, though, is that that balance take place. and what's happened here is that this, as i said, a categorical exclusion that simply is inconsistent with the terms that congress laid out in exemption 7(c). congress did not intend for foia to be a tool for an organization's adversaries to obtain access to harmful or embarrassing documents compiled for law enforcement purposes where such documents do nothing to open agency action to public

scrutiny. if the government has its way in this case, the result will be what this court decried in favish, which was that it would be the failure to protect the privacy of citizens against the uncontrolled release of information compiled through the power of the state. if there are no further questions, i urge that the third circuit be affirmed. >> thank you, counsel. mr. yang, you have six minutes left. >> thank you, mr. chief justice. at&t appears to have changed or at least modified its position somewhat from the position articulated at page 14 of its brief. there at&t says, "by expressly defining the noun 'person' to include corporations, congress necessarily defined the adjective form of that noun, personal, also to include corporations." now, at&t has given up on the grammatical imperative that guided exclusively the court of appeals decision in this case, there's nothing left. at&t can provide no example

where the term personal privacy has ever been used to refer to a corporation, much less a foreign government or state or local government in any context, whether it be foia, the law generally, or even in common usage. at&t can provide no example of any problems that have arisen in over 35 years of the government's consistent administration of this provision. in fact, all indications point in simply one direction. personal privacy applies only to individuals. the terms personal and the terms privacy do that alone. and together, personal privacy makes that clear. the legislative history, the decisions of this court pointing to the balance applying only to individuals, individual rights. all point in the same direction. we would ask that the third

>> thank you to the panel. it could in the you all to stand up with me. i will put you under oath.

do you solemnly swear or affirm that the testimony you will give in this hearing is the truth, the whole truth and nothing but the truth? thank you. please be seated. let the record so it does show that the witness's answer in the affirmative. it is good for me that we follow the order that we have. general, could you provide you army corps of engineers. i appreciate the opportunity to come before you to discuss the construction program of the challenges. our meetings here in washington help us improve and execute our mission better. mission accomplished and sits at

the top of our list of priorities. the corps of engineers -- the workload in afghanistan has went up substantially in the last few years. a surge in u.s. forces and efforts to build the afghan security forces. the corps has increased staffing in afghanistan from around to every 50 military and civilian 250 civilian and military personnel. we established a transatlantic division headquartersn winchester virginia in 2009 to provide focus and control for the whole unit. we have expanded use for reach

back to all eight divisions. challenges remain and i know we are here to talk about that today. security, corruption, providing oversight in a difficult environment, managing the workload, sustainability and site preparation. i think we have learned from the evolving environment that we have learned froour mistakes. i think that we did better in tigating the challenges. on the heels of our 2009 review, i see one specific mission being particularly critical and seminal for our move forward. this was issued by the commander on october 9, 2010.

the tin key principles -- of the 10 key principles are real drivers of action that come from the troops. these principles and guidelines moveless from an era of construction that was trying to the colict itself -- to de conflict itself. i think that these guidelines put us in a position to undertake projects that we can accomplish. this can be the root cause of other things that impact our ability to execute. the guidelines of hiring representatives and use of remote sensing elements to inspect and receive feedback are helping to reduce the security impact. corruption is another challenge and we are getting at that

through admistration and minimizing brokering contracts. we coordinate with task force 2010. we educate our contractors in adopting best practices and we implemented a tracking system. timely and quality oversight is critical. it is tied to having the necessary personnel on the ground. it is a big task. it is tough. we have a lge pool of expeise to draw from. we maximize the use of reach back. most significantly, this is a joint effort is all three services bringing together their

unique capabilities and business models seamlessly. site selection preparation has been an issue. we have gone a long way in solving that. i think we have given more attention to drainage planning and geological oversight. suitability and sustainability, i know we will talk about that. we are using designs that are more easily constructed and are easier to maintain. we have contracts in place for these facilits both in the north and south. we face a lot of other challenges, but i think we have come a long way in the pt year or so. i welcome this opportunity to talk to you so that we get better at what we are doing in theater.

i look forward to your questions. >> thank you, general. mr. mcglynn, please. >> this is the fifth engagement before this committee since 2008. we appreciate the strong working relationship and productive exchanges we have had. we have improved programs and will insure better practices. the bureau of narcotics affairs support rule of law and criminal justice programs to run the world. in afghanistan, our programs are important to defeating the insurgency. the key area for today's heari is renovation contracts. both program areas are crucial for the effective operation of the civilian justice program. we have significance endeavors

in both areas based on close coordination with the host government and they are aimed at building a stronger afghanistan capacity. i understand from commission staff the focus of your interest and the central training center for police training both in and durable -- to bull -- kabul. tradition in the past was overcrowded and inhune. prisoners controlled key portions of the prison until 2008. the government of afghanistan, supported by united states, retook control. to make it a more effective facility, we developed a renovation project with the

government of afghanistan in 2009. as part of using this, -- the project included renovation of the kitchen staff barracks and sells and these are now nearing completion. problems were identified as a result. staff reported serious problems considering the quality and pace of the work. there re indications of fraud. my dear terminated the services of the contracting office rep in y 201

we stopped work orders in november 2010. an afghan firm is currently assessing the progress and when he desns are reviewed, any solicitation for completion will be issued. -- a new solicitation for completion will be issued. this has been an important part of our overall police training program afghanistan. this has been a priority since 02. we have implemented a program with the department of defense and in close cooperation with the ministry of interior. the central training center is one of seral sites where we train afghan police in basic civilian police skills. this product has encountered some challenges.

in december, a building that was to be razed was declared a historic building. in december 2010, one of the subcontractors defaulted. projec completion has been delayed. let me say two words before concluding. we have several contract options. we have an integrated management contract oversight process. for the ctc project, it is supported by experts in washington. theyork closely with eight in- country contractors in

afghanistan. our model for the project is based on an individual contract with an individual firm. with that, let me just say that we -- you know that afghanistan is a dangerous place to work and we are committed to getting our objectives. thank you. >> thank you. colonel cassidy? >> good morning members of the commission. thank you for the opportunity to be here before you. we have evolved over the past years to provide engineering and vital services, enabling sustainable airforce and join the solutions. the chairman of the joint chiefs of staff asked us to create a

bridge for construction services. in january of 2004, we were asked to support the coalition in iraq. in april, 2006, we started working afghanistan. we have awarded over $6 million in construction for which price in the 1 billion is in afghanistan. we plan, execute and deliver construction services to the following customers. united states central command, therefore central, army central -- airforce central, army central. we compete within the idiqs. we subcontract orders.

there is a decision matrix tailored to the type of contract. the project management minimizing our civilian and military footprint, leveraging contractor expertise, we eliza -- utilize local nationals. the combination provides diversity. are in country military's

civilian and contract employees provide the daily construction oversight, the santonio provides technical, financial, administrative support along with continuity of the construction program. due to changing requirements or site conditions. none of our afghanistan -- as we drive begich strive to provide timely construction support, we welcome recommendations. we understand there is interest in several areas, and i look forward to answering your questions. >>lease proceed. >> i am the assistant t t

enmesh trader and director of the office of afghanistan and pakistan affairs at usaid. first of want to compliment you on the critical work of this commission. i began working in afghanistan in 1993 during the time when our country was ignoring the plight of afghanistan to our mutual peril. i spent many of the last 18 years working on that country, and i have written and testified extensively about the effort that the u.s. has undertaken in afghanistan spent -- since 2001. our mission has been and remain a centrato u.s. national security and our civilian assistance efforts are essential to their success. i have repeatedly raised concerns about the corrosive effects of corruption, ways, and failed expectations in our efforts there.

one of the reasons i took this job was to improve our perfmance and accountability. this has been a dramatic year for progress that u.s. aid. the ford initiative is applying the agenda for accountability and leadship of a global level. in the short time i have been at the agency thus far, we have initiated aggressive reforms in afghanistan and at the very heart of what this commission was mandated to address. accountability in the provision of development assistance is among our highest priorities in afghanistan. we have bricky initiatives into place this year. we have developed the accountable assistance for afghanistan initiative to eure that proper procedures are in place to help protect assistance

dollars from waste, fraud, or otherwise being diverted from their development purpose. we are utilizing mechanisms that provide the most visibility, limiting layers of subcontracting and dramatically increasing competition in bidding and award process. we are inventing all afghan companies and personnel working on usaid projects, enhancing projects controls on funds, performing additional project oversight in high-risk areas using multie monitong techniques, and utilizing the full arsenal of oddity mechanisms. one of the biggest problems has been the capacity to fulfill its oversight obligations to the full list. we are increasing our own capacity to undertake proper oversight and accountability. we have increased at an overall in afghanistan, with 60% of our

staff outside of kabul. we are serving three of the country in the district support teams and regional platforms and getting out more frequently to evaluate the performance of the programs they oversee. we have ordered a doubling in size of our contract and staff this year which has already tripled since 2007. to advance national security of said project objectives, we are stricken capacity to design and build and maintain roads, incrse electricity and design and construct clinics, hospital and schools. i cannot over emphasize the challenges involved in these efforts as international partners combat of vicious

insurgency and terrorist threat. security concerns on construction projects are paramount. in 2010, attks on civilian efforts rose sevenfold. managing the safety of u.s. international and afghan personnel as well as their associated costs is a central undertaking for us. geography, remote and mountainous terrain present huge challenges as that the relative lack of specialized expertise in afghanistan to undertake complex construction efforts. i want to take a moment to acknledge the immense pressures, pitical, security, family, that our staff and partner server under every day. i personally lost friends and colleagues every year of this long campaig there is no question that we as a nation and the agencies represented here before you can and must do better. it is important not to lose sight of the positive impact these programs are already making. our investment in schools,

clinics, roads, and electricity have dramatically expanded access for millions of ordinary afghans to education, health care, and the economy. nothing we do in afghanistan is easy, and the chaenges we face in construction have reflected that. but we and i have committed to asking better of our cells. we have already begun making the critic changes needed to improve our efforts and enhance our prospects for success. thank u. >> will have a round of questions now and proceed accordingly. this is the onset of an educational situation, without trying to criticize it, i am trying to understand or let you explain -- you have a very

large, organic organization in afghanistan where you do subcontracting back here, but you do a lot of it over there. the air force does most of it out of texas. you have a very robust quality assurance organization in country in afghanistan and news organizations to do your quality assurance to be sure that contractors are doing adequate quality assurance. i will star with colonel cassidy because you are the proverbial new kid on the block in the sense that the corps has been doing this a long time. you have filled the breach that was critically needed in the air force has stepped in and taken a different approach. can you talk about what led to that and why you are taking that

approach of using companies to provide adequate oversight? >> we are using the same methods used a side and anywhere around the world. we have a limited number of military engineers and civil servants that allows us to hire help title to -- to hire out title ii. we have about 100 titles ii contract employees in afghanistan at this point. they do quality assurance, making sure that are compliant with the quality control plan, and we have contrasting officer represented who make periodic site visits and resolve any differences that arise.

we have done it to minimize our footprint in country and by using our worldwide contracts, we go to revoke prime contractors, over 40 on the list. we have nine working in afghanistan at this point. we feel we have been fairly successful with that. we have had challenges on some projects but we are moving forward and is just a different model than the core uses. >> general, use a model where you do a good portion of it organically. is that because it is the tried and true corps model, or is there some other aspect? >> the corps of engineers is unique. we have two different business models. our business model meet our business requirements to do all

the work that we do in the u.s.. the civil works infrastructure and inland waterways, hydropor and all the other business lines on the water infrastructure side in the u.s.. that makes up of the corps of engineers. we are able to draw on all of that to reach back and destroyed nearly 1000 of those people forward b.j. deploy a nearly 1000 of those peoe forward. they complement each other. we are not in competition with one another. >> you are not in competition with each other, but many of your projects and many companies to work with are similar looking in the same companies. i know you know that this pictorial up here is camp phoenix.

the statements are very car about expectations, and then sometimes the outcomes do not end up with the same situation. we had the opportunity to b briefed by your senior officer from airforce center of excellence. if you look on my right, you are left, that is a big picture of barracks that have been boarded up. they were not completed, and if you look over here you see quarters where the military has put its people in and out of trying to scramble because those barracks are not done. -- your of reflects rejec officers said it does not represent the worked we do, but

it was our work on our watch. one company was not paying their suggs. i am just reading from a briefing charge that you have presented. the owner and his company fled the country with roughly $2 million in fees because the construction was not working. they did not know at they were doing. they took the $2 million and left town. in order to get the payment, it says a third tier subcontractor removed two of their 750 generators. so that they would get paid. you need generators to it the work done. you think of security, and they are high bolling of the generators out of one of the

camps. when we ask the question, in the model, we said why did you not know about all these problems? i thought maybe we would find out that the contractor was not doing a good job. in your model, he was doing a good job, but his contract was not sufficiently funded. he had been told by his customer to work in to other higher risks projects. he had done no quality assurance because his contract was a zero sum and he could only do it in other locations. so there was no quality oversight. the net effect of this is, it's incredible. it is worse than a comedy of errors because it is a case where they are not paying lower

tier subcontraors. there is discussions about the guy came in and was bragging about his offside billows that he had in other countries. i know the model works, but the real question is, and you said you have some problems, that is a big problem. >> camp phoenix is probably our worst case. it was one of our first projects in ahanistan and our focus was purely in iraq that point. we did not move enough resources to afghanistan to watch the project. one thing we did take, we did lessons leaed from iraq to the afghanistan. it is different lessons in afghanistan, different skills

for the people, different abilities. we had a lot more trouble in afghanistan with inadequate materials coming in. that would be stamped that they meet standards but they woul not meet standards. it was the perfect storm, everything coming together that caused a lot of problems there. a lot of the issues we had our customer changes and changes to the program as we went forward. we know we have problems at phoenix and we are working to fix those. >> i don't know if you have been here but there's a building next to it that has been inhabited, andet project save had come in there and written up pages and pages. i was talking to some of the people living there and they sometimes -- they say sometimes if you don't have the right

extensions it is like a sparkler. i was told have no other place to stay. there is is a michigan risk. you are breathing are exceptional. you did not try to pull any punches about the problem. we picked this randomly. any kind of commission that starts making the rounds on randomly picked, you start running into issues like this. sometimes it pales against the actual experience. at is our concern, that you take your lessons learned. i commend you for frankly acknowledging the issues, but it goes without saying there are

challenges that need addressed right now so the sobers don't have to live in facilities like that. -- so the soldiers don't have to live in facilities like that. >> thank you, my time is up. >> i want start with you. in your testimony and your written statement, you talked about accountability. i am glad you stressed that because that is the key word. accountability drives performance. the lack of accountability results in poor performance or no performance, and maximum accountability results in good performae. i am trying to square your quite commendable emphasis on accountability in your statement with what i think is the most important piece of paper in this

hearing but that our staff put together for us. there is a january 10, 2011 article titled usaid awards firm with checkered record a $266 million note it afghan electricity deal. i will just read the first paragraph. the u.s. government is counting on a contractor with the recd of cost overruns to handle a critical component of general david petraeus's plan to stabilize a volatile southern afghanistan and deliver more power to this region. a $266 million contract for the birthplace of the taliban, the heat of the fight right now, the southern provinces, against a backdrop of a id having complained about their performance oa contract to supply power in kabul, a contract that ballooned in

price to $300 million and was not just the cost overrun issue but also a timing issue. the other interesting piece of paper in our hearing book is the november 29 justification document that requested up the channels at a id approval for this no bid contract. it uses to intesting phrases. says that for various reasons, it is uniquely provisions to undertake this project, and then uses the phrase is uniquely qualified. it seems that what they really intended to say which uniquely positioned, because they later explained what uniquely qualified means to simply be that they were already on the ground. it already had existing staff. there was not an alternative to them.

my understanding is that the bulk of the work there was subcontracted out. against this backdrop, how can the american people take your claim that a id is taking accountability seriously if and no bid contract is awarded to a contractor with this record of poor performance? >> let me take you back into the decisionmaking process over the last year as far as the contract for kandahar power is concerned and then we can go to issues of bell performce. the decision that was made to provide electricity this summer to con a heart was a decision

that was discuss at the highest levels of our government as something that the new commander of our forces in afghanistan felt was absolutely paramount importance. it was a top agenda item for our military in their engagement. we have an operation to try to turn tendulkar -- kandahar. the idea of generating power to the citizens in a visible fashion was made a top priority. it then that overall priority, the specific priority was placed on delivering more electricity to kandahar. the decision was made that the competitively awarded joint venture agreement would be used for that work. itas an agreement tha was

already in place. they were already in place in kandahar. their behalf of the joint venture that would have been perfming in the electricity upgrades to provide additional power. we move forward to a contract that work under the existing agreements. that decision was made because that agreement was in place. at the same time, u.s. aid is working on replacing that single iqc thahad been awarded four years ago with held by multiple awardees. it would be broken down into multiple agreements for different thgs. there were be one for energy, one four road, and one for

vertical structures. the agency takes very seriously and that it does not believe for accountability purposes and for competitiveness that it makes sense to rely on a single award. >> let me stop you there. when did the process start of providing these alternate contrasting vehicles going forward? when did this process dark? >> i would have to get back to you on the exact date. i am not certain when it began. there was a commitment at the beginning of 2010 to initiate those procurements, it to replace the existing iqc. >> it was not until 2010 that we began putting in place alternate mechanisms? >> as far as i know, yes.

the know what percentage of the contract was subcontracted out? let me explain the decision. >> pleas be as brief as you can. >> i think it is very important to understand what happened next. we are going to go withhe existing competitive fully awarded agreement. in august, when this was lined up, it came to our attention for the first timehat there was discussionith the justice department. i am sure this is something we will return to. it became the decision of u.s. aid that ile these negotiations for ongoing with the justice department in a settlement agreement, it was neither appropriate to use that joint venture agreement to move forward on this work nor was it safe to do so because we did not

know what was going to happen at the outcome of that negotiating process. we were worried that the entire effort would be in peril. the decision we made to award a sole source contracts was merely taking the work out of the joint-venture and giving it to the same company that was going to conduct the work under the joint venture. it was awarded as a sole source instead of going back in august and read competing the entire venture. we felt that would simply take too long in order to achieve the effects that we felt from a naonal security perspective for impaired to. >> let me just probe further. i understand the urgency here. that is clear. what puzzles me is black and veitch had been the subject of cost overruns.

if the record shows clearly that they did not perform in a timely fashion with regard to the lan. >> there was a report on their performance and the second part of that, which is very important, is that when it was found that the project was being delayed, the power plant project was being delayed, there is a very serious effort at remediation including replacement of leadership, a l of additional oversight, and according to the audit, they dramatic turnaround performance on that project in the second year. we fell confident that clearly that had severe problems in the initial part, and that is well

documented. we felt that do to chge in leadership over the management both of the subcontractor and the entire joint venture, their performance had improved dramatically. it was our assessment that the performance improvement and their subsequent works in canada are -- in kandaharake it so that not only did they complet the work on time, but that they would do so effectively. >> final question. just give me a sense of when that turnaround in performance happened? >> i would have to refer back to the record. it was before my time. it is my understanding -- i think it was essentially in the beginning of 2009 that substantial remediation efforts

were undertaken to get the plant project back on track to improve the monitoring, oversight, and delivery of the program. >> this article says that in january of 2009, michael e. yates, the top official in afghanistan wrote a letter and expressed extreme dissatisfaction with the companies progress on the plant. in this letter, he scolded the company for failing to keep a id delays.d of construction del talked about many important deadlines missed, and usaid has lost confidence in the ability

of their ability to complete the work. i think the timing is important. i would like to know exactly what time fre you are talking about when used to say the performance increasso substantially that it justified the sole source award. >> i will add to that, we would like you to provide clarification to those questions for the record. i doubt seriously if we will have the time to totally pursue it here but i think everything the commissioner raises is absolutely on spot. >> you said in your statements that a decision was made to use the joint venture. who made the decision on that point, and you said it became the decision to not use the joint venture.

who made that decision? >> on the firs question, when you say the decision was made -- >> no, you said the decision was made. >> you are referring to the decision to use the joint venture. >> the decision to use the joint venture initially took place over months. in dialogue with the department of defense, the department state and e afghan government, the decision was move forward. essentially i would say it was e u.s. government decision that this important program to deliver power to conduct our should move forward more expeditiously than had been understood earlier in the year.

i believe it was in july that the decisions were made that often included funding. >> i am not clear on who made the decision to fund the venture. >> i took over responsibility for the office in august. the initial decision to use the joint venture -- >> it was the administrator's decision. >> but i don't know that the decision - >> can you find out durg a hearing and let us know? >> let me be clear. the decision to not use the joint venture and to use the sole source was the decision of our office.

>> specifically it was your decision? >> i ultimately signed the agreement. >> in the context of the interagency discussion to go forward with an important initiative to bring power to to kandahar, it did you raise the discussion that the urgency of it would drive you to use an unacceptable contractor? did you mentioned that in the decision to use a sole source contractor to do something important, did you or the administrator or did anyone raise to the national security system, we are going to have to do this using a contractor that we have big problems with? >> no, we didn't, because it was our clear understanding that they had dealt with the class problems that had been identified, and we were confident in their ability to perform.

>> i cannot let you off the hook today comptely. we have heard and read in numerous sources, we heard most cent from the general this morning about the lack of master plans, whether for ergy or construction or many of the other things that are going on in country. would you talk to us about the impact of lack of master plans on any of the work that the corps is responsible for of or participated in? >> master planning obviously is very important, especially on installations that are growing by leaps and bounds and where more and more construction is being put in where there is already a lot of infrastructure. master planning is really important so you are not doing things over, not moving roads

when you want to put a water line in or tearing something up that was just saved. it is very important. it makes the build out of that installation much more efficient over time. in cases where installations -- there are master planning efforts going on right now. there are 71 master plans for different installations in the works ght now, with more to come. it will give us a stronger framework to integrate our construction. when you build in an area where master planning was not don, it just causes a lot more day-to- day interface to find out what is going on. if you don't have a master plan , it makes the construction all that more involved.

it takes day-to-day coordination with the owners of the installation to make sure that you are not and doing something that was already put in place. master planning is absolutely critical. >> did you feel comfortable with the state of the master plan is that you deal with in country? >> you would have to go installation by installation. they are all at different levels of maturity. they are working very hard to get master plans for all installations in place. >> let me go now to a sustainability that we talked to india earlier panel. you mentioned in your written testimony that you have criteria regarding project sustainability. would you explain to us, since there are so many projects that have come to light that don't

seem tbe sustainable, would you explain to us how that process works wh the corps? >> i will approach it a couple of different ways. in terms of sustainability, facilities that are buildable by local constructors' that have materials ready available that are sensitive to the culture of the area. if you put the western style sink in a bathroom, that is not required over there. you would not put wohlers then it that are required to be heated by gas -- would not put the oilers in. we standardized designs for certain facilities, the ones that you see a lot of. >> why did it take so long to get to this point?

>> in terms of standardizing, it is the maturation of our footprint over there. the record workload we have experience here in the state's, to meet the deadlines, in order to do that we cannot design every single building by itself. we needed standard designs to a debt building facilities. our district in afghanistan and as we established our relationships with our customers, with the rotation of people over time, it has taken time to get the proper process is inlace to make that a reality on the ground. i mentioned about the operations order that was released by the commander that gives construction contract in

guidelines for afghanistan. it gives a vision and intent on the commanders part and give some pre -- some key principles on things like sustainability and lays out 16 criteria to make sure that everyone involved, their interests are recognized. simple things like picking the right site location, taking security into account, in user participation, and what the building should look like in the end. >> did include local participation during the process, or is it just the initial sign off for project? >> we do local participation -- >> i don't mean the builders, i am talking about the end user. who first tells you i don't need it sinks?

>> the end user for a specific installation is probably a number of unit that will occupy those barracks. the and it belongs to the ministry of defence. there is a dialogue to achieve standards that will provide buildings that meet life safety codes. on the ground when we are building this thing, the interface with the local people who are gointo occupy it. >> in your testimony tre is a statement in their that it does the participate in the process in that host nation project selection. is that true? how do you guys then integrate the afghan government into your

projects? where is that done? >> the projects are selected and prioritized by a joint program integration office in afghanistan. they go through and worked the entire list of construction projects that are required and they dispersed them out to either us or the court to build projects. our local interaction with the local government is mewhat limited because by the time we go in there, we are counting on the sides to be made available to us. if there are people on the sides, the controlling authority, the landowner is also responsible for providing the

site. >> i am not worried about the side. i am talking about some of the cultural issues, for example. how do you know you are building the right kind of barracks? we struggle with some of the same issues as the general went through. for the barracks on a military post that we are going to use, there are criteria that are set out there. we use the same criteria that the army does. that has changed over time. >> thank you, commissioner. when we discussed going ahead with the power initiive and the desire to me the time lines of general petraeus, there were issues at aid which had to be answered and dealt with by the

military. i remember three, and it is the second one that is particularly interesting. one was the questioning about whether electric power was going to be a counterinsurgency tool. the second one was that it would irritate the karzai government's to take on the engy costs. we have already heard about this for other diesel plants, that since it costs 22 cents per kilowatt hour for diesel and a fraction ofhat for alternative sources, i know in kandahar they cannot get a transmission line in, but it costs less to do things differently. what was done, what was the answer about how the irritation

of the karzai government would be dealt with? was it by donor subsidies for a couple of years? >> i think that the decision was accompanied on our part by intensive thought about how do we make the power supply to southern afghanistan more sustainable. while there was a move forward on putting additional diesel generation capacity in place this year in kandahar and that was being done by the department of defense spending their funds on diesel generators, we agreed to do several things.

>> could you get to what it is that would remove the irritation of the karzai government ?uestio >> it is in our interest to look at the long term more sustainable power supply. we are in disssions with the afghan government about both the further rehabilitation of the m to deliver hydroelectric power as well as the extension ofhe northern network which is largely bringing in cheaper power, as you noted before, from central asia. and then delivering it further to the south and east of the country. the kabul proper plan is not the main power supply for kabul, it is back up.

last month that pled guilty -- that a plea agreement -- they were defrauding by known false overhead billings of aid. the chief financial officer and the comptroller also both pled guilty to the same charges. according to press reports, aid made them pushed out and buy out the chairman of the holding company who was also -- it had

to be bought by the company. what is your reaction to the criminal events? >> when i learned about the allegations in august and the investigations that have been going on for some time by the justice department, i was profoundly disappointed and very concerned about the impact of not only the individual issues being investigated, but more broadly, how that reflects on our ability to be good stewards of our assistance effort. i believe that the settlement that was made was a very positive step in that not only was usaid able to recover the

funds that had been allegedly defrauded from it, but collected something in the neighborhood of triple damages back for the american taxpayer. there was a fairly severe approach of dealing with louis berger to bring them back into compliance. >> i appreciate your reaction. i want to ask something about the kandahar our initiative. aid lumped together in that several different pieces that have been allud to. the big pieces are in the diesel power plant in the connor our industrial park, and also the dam which is not in con anbar

province but in helmand province, which is 100 miles away and which is not diesel powered but is already there as a hydroelectric project. maya understanding is that the work on the dam was not done by black and veitch but by louis berger and what you said before was technically correct in that they were on the ground in, and are but they did not have prior experience with that facility. you could say the joint venture did, but they were quite clear on who did what. you said a number of individual contracts for the different components could potentially be

issued to conduct the work needed. wouldn't it have been, and i will not go further into why you did or did not do it, but wouldn't it have been potentially -- could we talk about the different components that could potentially be issued, couldn't the dam component, the hydroelectric turbines component, be separately awarded? >> it may be beyond my technical competence to answer your last question. it is my understanding that the reason these were grouped together was a question of timing. >> i am trying to figure out what else could you possibly have been talking about in your

jna when you said potential components could be issued separately. what else could have been talkg about? >> what i am answering is that i believe these were all included at the same time. >> i am not asking why you did. i am talking about your phrase they could potentially be issued. i want to know what the different components for that could potentially be issued. isn't obvious that when you consider that possibility, the different components were t hydroelectric dam on one side and the diesel plant on the other side? >> it may be that what you are referring to as a transmission line as the additional component that was not included as part of this contract. we looked at the timing of those.

the transmission line was the piece that was left out. >> this is about what was put in, not what was left out. i will repeat for the fourth time what is in the jna. i wonder if you could check during the break what other could possibly be the components. let me ask a question abo the time line. today in a story in the associated press there is a letter from the agency's ahan director about the con our power initiative. -- the kandahar power initiative. usaid intends to procure services through an open -- my

colleague has already worked with you to get the time line straight. in august, you were on the verge of contract and this, after months of a preparatory process with the joint venture. somewhere between february and when you started that process for the jointenre, at what point did you turn away from the promise of full and open competition between february and august? >> we never turned away from the promise of full and open competition. the plan was to replace the existing jnt venture. the decision specifically in terms of those components that went into the joint venture, those were accelerated the to

the issues that i have outlined. >> at what point was the decision made? you were talking with them but between february and august, the decision was made? >> the timeline of wanting to put in place t newly competed awards didot match with our need to contract the work for, dark power this summer when that decision was being made -- for condor are per. >> i am sorry, but i really am trying my best. was the statement made in 2010 not about the kandahar plant? >> we did not have the decision making mechanisms in place in time for the decision to be made.

>> and when did you change your mind on hg the competitive process he said in february 2010 you would have? >> no one changed their mind. what changed was the time line for our need to contract that work. >> when did you change the time line? >> the decision to move forward more rapidly was made roughly between june and august in a series of discussions that i've already described to you. >> and so it was between june and august? >> exactly. prior to that we had not anticipated we would have to move forward with that word before the new competed mechanisms were in place. >> thank you. i have to start with a minor housekeeng announcement.

we ask for your testimony in advance in time to prepare for the hearing and we did not receive it until saturday afternoon. would you commit to us that in the future we will get the written testimony on time? >> absolutely. >> i want to talk about the prison project. we talked about the training command in afghanistan having 800 projects on the books. how many projects does inl have in afghanistan? >> we have to significant ones, the main renovation and the central training. >> if we spend $25 million in construction a year, it would be

on the upper limit. >> this statement says in december 2008, the afghan central prison director had to form an emergency response team to train corrections staff to retake control of the prison. briefly, what does that mean? >> somewhat amazingly, the parts of the prison were basically under control of insurgents and criminals. it was a complete mess. the government of afghanistan decided to form a strong police, military intervention unit and there was funding provided from both the u.s. military and ourselves. >> to offensively we take it. >> to fight their way back and clear out the insurgents.

>> so there is a contract for two afghan companies to design and construct it. your statement says these accompshments of significant have not materialized without challenge and some delay. the delay was on the two projects you have in the war zone -- the owner of one company provided confidential bid proposal information to the owner. is that accurate? >> i am not sure the details of all the allegaons. there is a continuing investigation under way in the decision. >> is that an inaccurate

statement? >> i don't think it is, but i cannot confirm it. >> the ellerbe provided -- apparently has arrived in your contract officer representative who is supposed to oversee the contract. >> that was the allegation, yes, sir. -- barely has a right to your contract officer. -- apparently has brightened the year contract officer. have you fired that government employee gregoire >> he would be considered to have some government functions. >> was he a contractor or a government employee? >> he was a personal services contractor.

they would have full intergovernmental functions not to approve a contract but to it buys. >> can i inject clarification? mine understanding and i went to quite a length. this individual was more than the corps. he was responsible for everything from specifications to oversight to you name it. is that accurate? >> he played a central role. >> he was the chief engineer and was replaced by someone else who came in and have that title the ief says. >> i think it is a good general characterization. >> i do too. >> you have two big projects in afghanistan. the one we are talking about, afghan forces and miliry have to fight their way back in.

youad to contracts with afghan firms. -- two contracts with afghan firms. why wasn't the judgment to -- was it to put a contractor in charge of contractors? >> we would still have our other oversight mechanisms. which are the contracting officer. >> where is that person located? >> in frankfurt. >> that is in the rpso in frankfurt. >> i that that individual. has that person ever visited afghanistan? >> i do not know. >> would you find out, for the record? >> what other oversight mechanisms to you have? >>e have a senior director and

deputy director for all programs. >> where are they located >> they are in kabul. >> how often do they get out and do they get to go? >> they get out frequently. >> just quantify that for us. >> i would be glad to. >> i have visited myself several times. >> they are out quite a bit. sited and travel around quite frequently. >> what is the distance from kabul? >> 15 or 20 miles. >> your line of defense is there are employees in kabul. >> tre are two senior officers

who have run programs. quex are the government employees or they a personal services contract? >> that would pfc. >> personal services contractors. >> what is the status of the investigation? >> i do not know. i would have to direct you to oig. >> would you take that as a question -- would it be fair to say that with all the structures and things in place which an of us -- would it be fair to say that your oversight system did not find this, the ig found it. none of this came to light ecause of states or inl's or

oversight mechanisms. >> without a doubt. the oig hot line was a key factor. our people were raising concerns not only about how the progrhe t also some other concerns. >> that is with the hot line is there for. >> i am out of time. >> thank you. >> you are saving me time so i will put myself in here. mr. buford has said no, he has never been there. we will clear that up. you can verify but it was or people who were telling me that. it is my understanding that the inl engineer that is the subject of this investigation was in

fact one of your people. right? >> i would have to double check his exact -- >> the person who replaced him, one of the things you ask is what bob asked. are you a career person? please verify that. one of the questions that is in here, this is an interesting and i know the colonel will say you are kind of harsh but this is what we ran into. i'm sure some of our experiences are solid. in this case going out there it was incredible it was explained to mand commission staff, you have these other controls, cut out the contract officers are

you do not do anything unless you talk to me. cut out the financial people, do not do anything unless you talk to me. you had a contractor out there, pae, raising issues about quality and he wrote them a cease and desist letter. you cannot tell us anything about basarat. it is a controlled situation. you had no management or financial controls. you allowed one person who was the top engineer to say everyone else butt out. it is a classic example that if you do not have more than one person on a contract that is making decisions and gathering performance data and the like, it is a prescription to failure. i know you are trying to recapture, program bu --

recapture this program. what bob asked for is the time line with actually the companies. also was explained was one of the questions, why did it take you almost one year to get the stop work when the issues started to come up? people were debating it and they said rather than jump in and look people in the eye and say what the heck is going on, they started a project in february to send to people in. something called ccc, inc. to evaluate it and they took 60 or 90 days to say what they said was right and it was fraught with risk. it is important that you outline the controls that are there. it is important to say everything does not work out the way we intended.

commissioner? >> thank you. i would follow up on that. i found it disturbing that the processes you lay out in your statemt sound so good but they have not been applied in this situation. why is inl doing construction in the first place? i do not think this is something your background qualifies you for. do you care to enter guess as to why you are doing instruction instead of the obo or your colleagues to the left and right who are more familiar and have more experience? >> i would be glad to answer that. when normally try to avoid doing construction only because our funds in programs are not aimed -- are aimed at building human capacity. and skills.

we're usually asked to do these projects when they are of a certain nature and have to be done fast or address a certain need. the switch to the central training center for the police. that is when they had close links with the rest of the police program. we have some resources meeting and we had people meeting on the ound and we could build those kinds of things. in general, we try to avoid getting into heavy construction. also because it is expensive and our budget is not big relative to the others. >> one of the first lessons i learned in the acquisition world is when you wanted bad, you will get it bad. that has proven out in a number of examples where looking at. in an earlier life, i had the

opportunity to look at a number of the construction projects in iraq that the u.s. attempted to undertake. what we found there was many of the problematic outcomes were based on problems with the requirements. there were not defined or there were overly ambitious. -- they were not defined or thery were overly ambitious. there was a lack of locally suitable designs that we tried to build as buildings for an enrely different culture and population. we did not have sufficient oversight. i will take your word that you are learning organization. when i go through your statement, recognizing that

afghanistan is not iraq. there are different conditions that we encountered. that is listed, those topics are clearly the same as we have seen in your statement. you have said that the corps executes projects that are required by our customers. your the ones -- youre the ones who know what will be done. why haven't you taken a stronger role to tell someone that is not going to work the way you wanted to do? right.ess you're i will go back to the guidance that was put out in the fall. you highlighted -- >> fall 2010. >> yes. try to build a -- in a

situation where kinetics will not make sense. >> or the soil will not -- >> if the geotech is such that you will require such a foundation, you probably will not want to do that. the guidance cameut in the fall from ijc. i think we are at fault for not raising our hands when we should have won requirements are defined, going back to the basic prciples in construction. we were trying to stay out of the way of operations, we were not fully integrating with the operators on the ground and tried to please the customer firth and that what -- custor and i want to build this facility and go back and say we can do that when we know the

kinetics are not right. we promised and delivered something in 12 months that we know it will take 18 months, that is over-promising. we need to make realistic promises and live up to those promises we have made. -- made to the customer. >> i will push on a couple more places. site preparation, you leave that to the contractor to determine. >> there have beesome cases where the geotechnical services that have to be done and the design for the foundation for buildi is part of the contract and the contractor is required to do that. we are required to -- there have been some cases where collapsible soils or in an area and the design did not take into account there was collapsible soil. that was corrected letter on but that is something we should have caught and we should have provided more oversight.

>> why don't you? >> we are providing more oversight. >> why don't you take on the responsibility of doing that report? >> doing the prep work ourselves and doing the design ourselves. >> mm-hm. >> we could but there are cable design agencies out there, contractors who can do theth. they are -- he capable. we owe our customers that. >> in your statement, you said they wer not compatible with local customs and capacity, a different issue than the soil issue and the technical side prep issues. >> exactly. if you are in an area where to cool building, you have the

choice of installing a complex air moving system, an hvac system, if you design the building different, they would be more main tenable in the repair parts would bmore available andt would make sense to do that. >> you have learned those lessons. >> we have. >> you are continuing to contract out the responsibility for coming up with those things. >> i am mixing metaphors. the standard designs for a barracks, we provide that to the contractor. this needs to be adapted to that si. there are differing soil conditions on a construction site that go into the design. adapting a site requires further engineering and we need quality assurance and oversight of. >> i will pick out your statement.

the challenges in filling critical conditions -- positions. i appreciate there were new guidelines put out last fall in 2010. we have been at this construction in war zones for a lot more than six months. why can't you get critical positions filled? >> we're getting better at it. the last couple of years have beenistoric in terms of the corps of engineers workload, depending on how you normalize the dollars. with base realignment and closure, the ar's transformation has been a record workload in the states so demands in the states and the foard deployed theater were pretty substantial. probably a year or year-and-a- half ago, the workload in afghanistan added on to the workload in iraq at the time, had this working pretty hard. the with the situation has evolved, -- the way the

situion has evolved, the pool of volunteers that we drawn to go over is more focused on afghanistan right now. with the increased workload that is coming, we're sending a team to do the planning. it is important to make sure that this is planned out. over 90 days we will grow 90 people. we have a much more robust pool of volunteers that we're able to draw from. just the nature of the workload. >> my time is up. i addressed my question to you but i would say at the state department and the air force and usaid, we are

learning lessons but we keep making the same mistakes over and over, including getting enough people intohe area to recognize that contract is such an important part of our overall mission. i am done. >> with your indulgence, could i interject a quick question as a follow-on to the earlier line of questioning to you about you understand the site selection is bad for a project is not consonant with local culture but you do it and the customer finds out. substantial amount of funding come from customer phase? >> the size of our organization, the amount of people we put to a project comes from supervisory

and administrative fees. >> we were speculating as to why you might not point this out when it is clear that these are going to be issues. does that have anything to do with the fact that you do not want to tick off the customer by telling them what the customer wants to do does not make sense? >> i do not think so. sites are selected based on best available information. >> you said in your response to the comments that there were times when you knew that it would not make sense and nothing was id. why is that the case? >> back to the comment. this is a war zone. we're trying to -- if you are building a security point on the border at a crossing point, to provide security or provide security --

>> we know it is a war zone. let's take the issue of soil. whether the soil can sustain the building has nothing to do with the war zone. that would be true in peace time. it has been the case that there have been times when you have known that the site selected would not sustain the project. the project was billed nevertheless and millions of dollars wasted. why don't you explain thaearly on? >> it was the case that a building could not be built. the designer that did the evaluation and did the desig and execution of the construction to a short appropriate compaction was not done to the standard should have been. our quality assurance should have done that because the building could have been built there. if we had paid more attention to make sure that the soil design was correct and we were watching construction execution as closely as we should have to make sure compaction was done the way it should have. >> thank you.

>> i have two pictures. are you aware of what that is? >> that is the gazi boys' school. that is the current school training the kids that are part of the school. for background, the reason i want to bring this up is this was a un op partnership contract which i know you know. it got off to a bad start because of failed contract or drawings. the people that they had doing the drawings. they are a european firm that

does not spend a lot of time in theater and there rely on others. we went out there and that was an interesting trip. it is the only time in afghanistan where i looked around intently as we, our security detail was taking us out because we were traveling down some rugged roads without anything around except low formed buildings. does the usaid have any hand in identification of the specifications and design or do you turn it over to your partner? >> i am sure that we must. i do not really know exactly in the case of the gauzy -- gazi

school. oiu do not suggest yuo are too long on the you sure you must. are you aware of what that glassed in area? >> it is an atrium. they had a two-story area. they thought it would be great if they had an atrium were then put inlants. it is one-third of the area of this is you can see. three stories, open their air- conditioned and he did. it is an atrium. -- three stories open air air-

conditioned and heated. you had to do a lot of scrambling because there was not a lot of oversight. usaid -- it was a challenging car trip. you had to get another set of drawings. someone designed a facility. someone asked if it was handicap accessible. their solution was they got a walkway that is wide as this table. it goes from the third floor, maybe football field length to the bottom and it is concrete. polished and all that and that is the emergency exit. i have friends, everyone has

wheelchair bound france. if an american high school had that, it would be an incredible skateboard track but it would not be much for an emergency exit because people would be falling. i say that because when you walk in, it looks wonderful. there are a lot of schls that would die -- that is a bad choice of words -- they would be appreciative to have a school like that. the bathroom facilities and the like, they are american standard great. the reason i put that up is that is what they are replacing. it needs replaced, super. how much is enough? could that be a goal?

do you need an atrium in and outside the wire school? do know what the answer was? there are a few important people who have their kids there that go there and it is kind of fake prestigious school. we want to knock them dead with the school. to really have a great facility. that is wrong. that is why i bring the picture of. to give you a chance to look at that and understand that is a beer standard then we have in america. i would encourage you to get more pictures. i am not here to debate it as much as to show it. i come down to the point of my question. on large projects and complex projects, usaid is invaluable. this is not a knock on their

mission. their track record is great. in complex or large construction projects, my question is, are you out of your leg? should you beaving an organization such as colonel cassidy having -- doing that for you that do these large projects the to the very effectively? is it possible that you have been asked to do something that is outside your capability? >> there's no question in my assessment and this is not a recent phenomenon that the capacity of usaid as many folks came to know the agency worldwide were hollowed out. our ability to undertake large construction projects, the size of staff was dramatically reduced and that happened over the course of a few decades. i believe that it is in the

interests of the american people and the government that usaid have some capacities. we have work to build some of them in some of the areas that we work. i think that what is my concern when you tal about our capacity at the moment, one hand is large construction and do we have the capacity to do the sorts of specificions revws that you talk about. the other hand is the oversight. the oversight is something that we can, must, and are making greater progress on. we cannot have the situation like we had in 2007. we had three contracting officers in afghanistan. we have a live in today and we ordered a doubling of that number. there is no question that if we are going to do this work, we need to enhance our oversight capacity. >> thank you. commissioner?

>> i will be brief. i wanted to start with this letter, this article that was read earlier. bout the symbion claim they could have done the work on this kandahar plant. the questions are a couple of old. since there were doing the work presently, in kabul, it is unclear to me why the source of justification says there was no alternative. there could have been trouble with performance. since the bulk of the work was subcontracted, why was that alternative not pursued? >> symbion was the subcontractor on the project and

they left the site and that issue of their performance was subject to the lawsuit. at the time that this decision was made, symbian was not under consideration. if you are asking whether there were under consideration as a sole source, what we had was an existing agreement with [unintelligible] that had changed their performance. >> that leads to the second question. if that is the case, if that was the criteria for deciding to do the sole source award, i would have thought that would be reflected in the justification. there is no mention of tt. can you account for that? we have a key factor in the decision. y was that not mentioned in

the document? >> what was not mentioned was our belief in their capacity perform positively. >> there was no justification for that other than the conclusion they could do it. if there was this dramatic improvement, don't you think you would list that? under ese circumstances when it was clear it would be a controversial decision? >> i believe that from the report and our work that it had become clear they were performing. i do not know if there was a requirement or thought that the past history would be represented. we found it important to analyze their capacity to undertake it and include that in our assessment. >> what is the present status of the full and open competition process? are you on track to do it? it will happen in two fiscal year 2011. when can we expect you have procedures in place?

>> i will have to get back to you on what date we expect that process to be fully completed. we -- competed. ism six months or six years from now? >> i am sure it is somewhere between that. i will get back to my staff. >>s it oser to six years? >> it is closer to six months. our reliance on a single soul source contract that was completed in 2006 was not acceptable practice going forwar we realize that and it is a priority for us to put these new competed mechanisms in place. i was interested in your testimony which was rather self congratulatory, i thought.

not personally but, this sentence on page two. any time a problem is identified, we will involve the relevant law enforcement agencies. it is established that this problem at the prison was not the under -- the uncoveringas not done by the staff but by the inspector general. >speaking of the ig's investigation, we are trying to establish the time line. you say here that after that investigation your office suspended them and the suspensions took place on august 26 of last year. when did the oig completed suspension?

i am trying to see how prompt that was. >> we were brief oed on may 10. may 10. >> yes. >> inl took tion may 11 with regard to information received and regarding the individual who appeared to be involved. >> can you get this back to us with the time of the oig investigation? >> yes. >> you terminated the corps involved. >> m 11. the process for the dealing with the contractors was a different time line. i give you some of the key dates there. >> please do.

the initial action to alert the company that there was a problem was when a letter of concern was transmitted from our procurement executive -- the oversight body. very 10. >> february 10, 2010. >> one was the investigation completed? >> i cannot speak for them. we we briefed in may. it suspended the company in february 2010? >> the individual in the company, they were issued a show cause order in september. as i understand the process for when the company was doing work

to do with an adequate performance, there is a specific contractual procedure underur federal regulation. that was the first action. with the company. there were terminated in -- they were terminated in november and january 4 the other. >> i strongly commend you to bring us back a chronology and try to remember what you said and correct it. you will need to corrected. i have done a chronology here and it includes because it was a 90 day contract with two engineers in february. that is what led to the may briefing. if anyone needs reminders, tim

johnson and billampbell. you are correct. suspension;''s letter was in august and he left and is in malaysia. this is an interesting story that people were sitting there explaining this is what happed and look at me -- looking me in the eye. i am hearing chronology that does not make sense. if you send it to me, i have my notes and the people i talked to and maybe we can make sense out of it. i would commend you not to be taking to the bank those paper notes that are floating up ther >> we are happy to double check and make sure they are accurate. >>f you would.

>> thank you. commissioner green. >> your impression. is the schedule for the increased afghan national security forces realistic from your perspective i am looking at the requirements >. >> it is a lot of work to get done, so we are looking at ho government furnished materials, anything we can do to be able to do it faster to standard and

that is part and parcel why we seaddled up this team. i cannot tell you for sure. >> 400 folks is a lot to billet . if it gets to that. did any of your contractors recommend significant efficiencies that can be put in place? that would reduce the government's cost? >> they do. in the case of er in theater, we dialogue with our contractor all the time. we take a value engineering approach to what we design and we're looking for efficiencies and better effectiveness in what we are putting on the grod. we take the input if there is a better way of doing business. >> you do not have any examples.

>> when i asked the contractor, that answer was we are watching the air conditioner filters rather than replacing them. which was not a lot of dough. nevertheless. usaid. >> how -- what dialogue has there been in light of president karzai's pronouncement on security contractors? what dialogue has there been and handling that if that comes to fruition? >> the has been in intensive and almost constant series of engagements with all those parties since august, figuring out how to move forward with the implementation of the to transi.

>> have any of your partners indicated they may not remain in country of that occurs? >> partners have expressed concern about what they have all made very clear that the arrangements are going to be put into place need to satisfy both of those concerns, otherwise they will not be able to continue the efforts. those insurance changes of necessary? >> we're going to work with the

afghan government, our implementing partners to work on that. we still do not know what that outcome is in terms of the timeline is impossible to say ors will bemente affected. >> will be the power plant to death, whether it is diesel or gas or natural gas or donkeys. what arrangements have you made, what coordination has been done with the afghan gernment to take over its operation and maintenance of that specific fality once the u.s. money runs out? >> we have done two things right now. we have a five yearlong contract to work with the afghans to increase their capacity building so they will be able to take over operation of the plant

from a technical perspective. we have worked with them to establish their authority, responsible for managing the plant and selections. dramatically increasing the amount of money they're collecting payments for electricity on and they are paying the fuel costs out of that money. >> all of the fuel costs? >> smyth understanding is as of today, the fuel costs as it is being operated is being paied for by the afghan government. confirm the understanding i have from a day of discussion and to part in -- i took part in. the corps has saved a large

fraction on projects including power projects in the war zones by doing fed price on these, not cost plus and full competition, not sole source. that happens to be true about what we're talking about today, namely diesel power plants in kandahar city. the army corps is contracting for two 10 megawatt power plants and awarded this after competition, firm fixed price to $51 this past august for million. are we talking about -- i am looking for an order of

magnitude on what you saved, what the low bid tends to be by going the way you go rather than the high-priced way. my experts on e staff who have job experience with the project bidding for in afghanistan tell me on something that would cost in this power generation area, $275 million as a sole source cost plus when you are done, you might save one- third on if you went fixed-price and fully competed. on $275 million, you might save words of $100 million. the low bids come in that way. what would you say on that? >> i would begin to figure out

what the differences. when standing is in iraq, we had large contracts with large international firms that were cost-type projects because of the nebulous requirements and the security situation. we were able to define requirements that we found in that environment and the in ferment in afghanistan that you can use fixed-price type contracts successfully. in allocating risk between the government and the executors. >> a couple of things. you said during the earlier testimony that the decision was made to omit a transition line across the valley. that was my and standing and i

think you said the same. it became the kandahar power initiative. you were going to check on what was meant by the components that could potentially be issued. you have reasons not to do so. i am trying to understand what was being talked about by components. if the transmission line to kandahar was not going to be built and if you knew you were going to have to hook up diesel plants in kandahar by different contractors because the army apis's contract was with were those potential

components to be put apart? >> i want to read the sentence. >> would you say which components were a part? >> it says "this package of activities is interlinked and must be implemented simultaneously." >> i thought you were going to read the sentence. >> i want to introduce how we got to that sentence. "a numb of contracts could be issued to conduct the work needed to implement kpi, but the risk factors and management considerations make this option unfeasible. >> what was the different components? >> there were six different components. >> which could be awarded? you do not do each of the six. the power plant and hydro

electric plant. >> if you wanted to, you could break out any of the components. >> you have no idea? throughyou are going other parts, you discussed components winter four and five and six, one is the helmand province dam and the other is the local distribution center system. aren' one through four one component and five and six another component? >> the components could be separated in different ways. >> could one through four and five and six be separable? >> two is a junction. your staff did not tell you?

another two times. could they not potentially be separated? >> i said they could be separable. the decision was made they were could be so we could be successful in delivering the power this was intended to do. >> i got that point. louis berger decided that you would not suspend the bar. they defrauded the u.s. government big time with known false billing. they put in doubt a system we have found throughout iraq and afghanistan. wouldn't u consider that as negative past performance, if they come along and they want to bid, when you evaluate their

performance which is often 30% of n-word. >> i believe it can and should be. >> thank you. >> thank you. bob? >> i want to get at this issue that mr. green raised about private security contractors. you are dependent on private security to do their job. is that accurate? >> if the decree was amended, that could have had a dramatic impact. there may have been a massive exodus of implementing partners of $8 out of the country if they could not have private security, right? >> that is correct.

certain of the firms would not continue to operate in afghanistan without proper security measures. they would just pack up and go. the mission would come to an end without the necessary security. >> it affects some of our programs. some were done through ptners that do not use security partners and some are through government entities. it would affect not all are -- all of our mission. >> these contractors, whether they are u.s., third country for locals, do they significantly affect the life, will redeem, and operty of persons -- can they affect the life, liberty and property of private persons?

>> are they there to protect the life, liberty, it and property of persons? significantly affect the life, liberty, and property of private persons? >> of the people they're protecting? >> yes. >> they are performing a function where they significantly affect the life, liberty, and property of private persons? does the course of their duties require the exercise of discretion? >> in engagements? >> just discretion. simple to get outside of d.c. -- take it outside of d.c. >> they make decisions about how to conduct themselves.

>> would you say that it is in our public interest to develop afghanistan? it is in our public interest to stabilize afghanistan. >> to do that would require contractors implementin partners, government agencies and they require contractors. my conclusion would be their performance of duties is intimately related to the public interest. is that a fair conclusion? >> i want to confirm that we agree with the karzai government that is phasing out the use of private security contractors is in our best interest. >> the idea is to have a government that could provide security. does this require the exercise

of discretion and government authority or things that are related to the public interest? it is interesting that you said the contractors are doing that same thing. that isth the bottom line. they are doing things that people in a better world would be doing. >> i believe that it is in the best interest of the u.s. and the afghan government that we move to phasing out private security contractors for provision of security. >> does the presence of armed troops support or undermine the legitimacy of the host government? the karzai government? >> i believe it has done both. behavior and presence has undermined that and in others it has allowed us to undertake critical work.

>> your written statement is interesting. security is the challenge in the root cause of our problems. you have adopted methods to mitigate security risks. you say an assessment must be made to determine if the project area is safe and if it is not, you send combat engineers. to perform the construction function. can you talk about the distinction? between where you can and cannot send people? facility, build a securit depending on what the facility is and what function it will perform, if it has to be there the that -- and the security situation is such that a contractor gng in would not able to accomplish that, get

materials there, be able to operate safely and security on that side to do it, -- site to do it, engineer and construction units in concert with a military operation could go in and secure the area and do the construction if it were within the hr with all of the unit's ability if there werequipped unable to do it. >> that is a change of assessment. we will look at an area and determine if it is too hot, we must send in soldiers who are combatants. >> i do not know if that is a change in policy. that is a convocation in what was put out in guidelines. it gathers in one document a piece of doctrine that gives a logical step by step process in determining where and when you will construct something. it determines what method and

means you will use. >> is it fair to say we are sending non-combatants into combat zones? securitye are issues. we have u.s. army corps of engineers employees who volunteer to go and provide quality assurance oversight or engineering and design. >> what is their status? army corps civilians? >> i would consider them noncombatants. >> have we sent them into combat zones where it is unsafe? >> they are on the ground in afghanistan and we have deployed 10,000 core of engineers civilians. >> how many civilians have lost?

-- have you lost? >> not contractors. i do not think we have lost any. we have lost three. these are civilians. >> thank you for your testimony. >> thank you. i have a follow-up. what do you know about the contractors, the others that your colleagues aresing? >> within the -- >> have you -- do you know

what your rate of input is on that? how much performance your actual captioning -- capturing >> in terms of every contract that has been performed, it has been documented. i do not have that right now. >> and you do not know about the civilian agencies? you said you are in the d of the world. >> at this level, i cannot tell you right now. in theater, everybody exchanges information. there is a concern for corruption. the task force that is going on. i think that all agencies deal with that. >> have your people been using that? >> absolutely. >> how about taking information?

>> absolutely. 's the state department's acquisition bureau is the center of all our information in contracting for other agencies. they would have a complete picture of a coordination with the department of defense and a id. -- and aid we do a lot together and are often -- for example, we are reverting back to the department of defense. we had conversations on how not work. indirectly, we are not involved in the decision of who gets it or who would be able to do the work based on the conditions. >> youalk about a prison in particular and you say the embassy has identified the

company. do they get that information from your colleagues or with a share it once they get it? >> kernel cassidy? >> man, we use the federal rating system for contractors. contractors worked in theater all the time. they get to know the people that are with them and to build a relationship wh them. >> how does that information it to you? >> then how does it get to your colleagues? are you awaref the companies that use of contract with? >> we are aware of them and we watched them -- we are building

resources as we go through so that we get more information than we had in the past. as far as sharing that information back and forth, that is left up to the primes. we do not recommend subcontractors in theater. >> you do not have to recommend, but ing aware of the performance of the sub country -- contractors would not terfere with the performance. >> i agree. >> mr. -- that is reviewed when an award is going forward. >> i am going to ask you a question that you do not have the answer to. how is that going? what percentage of your contracts do you have someone

actually putting the information on the primes and the subs. i understand that it is not whether or not a system exists, is whethert is being used and i understand that it is not. for a variety of reasons. the information that we need to get around a lot of the problems we have talked about today is making sure tt the knowledge of these companies' performance could be a good decision on our part. >> thank you, commissioner. i am really glad that you ran that thread out on the line of questioning. i would ask for general dorko to -- the reason i ask that is because when you give the

information, i asked a question about the design engineer. are you aware of any work anywhere else that is done by company? i asked the question if you picked up the phone and called them -- call them? ey just pull something off the shelf d grow it in three others, the mick significant mistakes. i would ask you, for the record, to follow up. you cannot act on what to do not know. you have worked in afghanistan and i need to know if you had an opportunity to coordinate. >> commissioner hinky had a ball. >> one of the key questions i

have is that you can be a hero to everyone in the room, but are we nation-building in ghanistan? i do not mean it as a trick question. just a yes or no if you can. >> i believehe answer to that is no. >> are we transforming failed states into quasi democratic countries? >> i think that is me accurate. it is closer tour goal to stabilize a failed state in afghanistan. >> it is interesting because you entered a book in 2009 and it was the future of afghanistan and you wrote the introduction. we thought you were it a construction expert. -- you were a construction

expert. it seems we have a difficulty saying nation-building. >> i think that afghanistan is a nation. it is not our intention to build the nation unless the in san -- build the nation of afghanistan. >> what is the difference? >> i do not know what you mean by nation-building. i think that afghanistan is a nation and have been a nation for hundreds of years. we are trying to get them on their feet again. they did relatively well in the 1950's and 1960's and than 30 years of horrible tomorrow. our intention is to help them rebuild some of their institutions so that they can be stable and prevent al qaeda from coming back into their country.

i think that is our goal. >> thank you. >> before i thank you, this is an opportunity for us to learn in for you to share. it is never -- there was a fferent tenor in our fact- finding than there was with general fields coming up because of the nature of what he w trying to do verses what you were trying to do and what we are trying to do. i have to just thank you for that. you're doing something -- i have a guy that i council with. i will not give his name. he always tells me i am bringing problems. you guys are lookingn a mirror. i urge you to continue to do that in the text of process

improvement and the like because it is critical. the last thing, with absolute respect meant, because i have admid it the whole hearing, on your epitaph, you certainly deserve, "and they didn't pin me down." i watched to see if you would buckle. i say that with a little bit of admiration. gentlemen, thank you very much. what we are going to do because we have a drop dead date on time is disappoint probably our third panel, with my apologies. there was so much that you were sharing that i was reluctant to cut off or push throu and then have to push through that. so we are going to schedule another hearing with as many commissioners as we can obtain.

we are going to push your testimony in the record now, but we are going to offer our apologies because we have to b out of the room by two o'clock p.m. due to a promise that we made. i want to thank you and please except our apologies and we will work something to accommodate you. with that, this hearing is concluded. thank you, gentlemen. >> you learn something. >> yes. >> next on c-span the co- chairman of the president of the president's commission on the oil spill in the gulf. at 7:00 eastern it is "

washington journal. after that, north carolina patrick mchenry on the possible request from states to seek bankruptcy. >> today on c-span drove to the white house, minnesota gov., the likely 2012 presidential candidates spoke at an event in new hampshire. just over a year from now new hampshire will host the first in the nation primary. tune in to see spans road to the white house today at 6:30 at 9:30 p.m. eastern and pacific. this sunday we will spend an hour talking with former president bush about his life and new book. here is a portion of the interview. >> lot of the actions that harry truman took made my life easier

as president, and therefore, many of the decisions i made to executive order with the most controversial orders, such as listening to the phone calls or enhanced interrogation techniques became a lot of the land. after the 2004 and 2006 elections, i went to congress and said we need to ratify that which i had done in the constitution by executive order. so the congress, in spite of the fact, now enables the president to have certain tools. people said why did you not to sleep under executive order? in some cases a might be hard for a present to put out an executive order that authorized enhanced interrogation techniques, but if there were lots of the land passed by a

legislative body, might be easier for person to use that technique. >> see the entire interview at sunday night at 8:00. >> next the co-chairman of the president's commission on the bp oil spill in the gulf testifying in front of the house natural resources committee. the final report released earlier this month calls for sweeping changes in how the oil and gas industry operates in the regulators to monitor the industry. democrats have also introduced legislation that includes all of the commission's recommendations.

any oral opening statements at hearings are limited to the chairman and the ranking minority members. this will allow us to hear from our witnesses sooner and if other members have statements, they can be included in the hearing record on unanimous consent. unanimous consent all records opening statements be made part of the hearing record if they are submitted to the chief clerk by 5 p.m. today. hearing no objection so ordered. >> we have two witnesses today and i will make a formal introduction after our opening statements, but i am very pleased that they are here. they're spending all day on the hill. the first start was spent on the other side of the capitol and now we are here and i will welcome them formally in a moment it's been nine months since the explosion and oil spill in the gulf of mexico the resulted in the death of 11 men and the burning and sinking of

the deepwater horizon raid. since then, 5 million barrels of oil spilled into the gulf resulting in the economic displacement of tens of thousands of fishermen, workers and people connected to the offshore industry. the oil spill was a terrible tragedy and the effects are still being felt today. this committee proceeds with its oversight duties, we must be mindful of how we respond because that response could significantly impact american energy policy in the future the response to this event could be the difference between making offshore drilling the safest in the world or locking up our resources putting more americans out of work and from the relying on foreign countries for energy needs. it is because of these serious implications that i have stressed from day one the need to have all the facts and information surrounding the cause of the incident before there is a rush to judgment or

rush to legislate. when president obama announced he was personally appointed in the commission many in congress and around the country were deeply concerned with both the makeup and the mandate of the commission. there were concerns the president's commission didn't have enough experts and engineering with experience in the oil and gas industry and that it was comprised of individuals who had dedicated a significant portion of their career to opposing oil and gas drilling. while understanding these concerns, i kept and in keeping an open mind of the recommendation of the president's commission this is why this is the first scheduled committee hearing in this congress, and i am anxious to hear from the co-chairs. this report provides further insight whether it will be a factor in the congress discussions. however, even with the commission's report, we still

don't know precisely what caused the explosion or wife of low wall preventer field to work. there will be additional reports in the coast guard marine hearings in the chemical safety board hearings and hopefully they will provide answers to these lingering questions among others. through this on certainty what i do know for sure is that america needs american made energy. we need to keep and create american jobs and mitigate america's dependence on foreign energy that threatens potentially the national security. the oil spill was a terrible tragedy but it shouldn't be used as an excuse to further reduce america's access to the energy resources. some in congress view this bill as an opportunity to shut down offshore drilling. to me that is not a solution, that is giving up. this legislation aimed at this

was introduced last year and will predictably be proposed again in this congress. this, despite the strong support among american people for continued offshore energy production. republicans want to make offshore energy drilling of the safest in the world. we believe in the need to make smart, effective reforms that are centered on improving safety, putting people back to work, and allowing responsible drilling to move forward. the right response to this bill is to focus on making the ruling safe, not in possible. the importance of this committee's future work cannot be understated. gas prices are steadily rising. iran has assumed the presidency of opec and the rigs are leaving the goal for foreign countries like cuba, brazil and mexico taking american jobs with them.

this isn't speculation. it's happening. my colleagues from the gulf can attest to the economic pain felt by people and businesses do to this administration struggling moratorium. production in the gulf of mexico has already fallen by more than 200,000 barrels per day and is predicted by the energy information administration to fall by more than 500,000 barrels per day by 2012 to date every barrel we don't produce from the gulf means more lost revenue to the federal government, more lost jobs in additional transfer of american wealth to hostile nations. i believe in american ingenuity, and i know that we can get this right. the answer is to address what went wrong and make smart reforms and allowing drilling to resume. the stakes are too high to give up. our economic competitiveness, american jobs and national security our online.

with that i recommend is believed to recognize the distinguished member. >> i thank you very much and on behalf of the democratic members of the committee, please accept our sincere congratulations on your appointment as chairman. on this side of the ogle we look forward to a productive working relationship with you and the majority occasionally punctuated by knock down drag out fights over issues we care about deeply. while i applaud the chairman for holding this hearing today, i am also deeply saddened that this neighbor is necessary. industry and federal regulators assure the american public that a disaster like bp deepwater horizon spill could not happen. the event of last april and the subsequent investigations have

demonstrated that those assurances were worthless. the american people are left to come the economic and environmental costs and even families are left without their loved ones. is vital to the nation's energy future that we examine the causes of this tragedy with eyes, ss the lessons to be heard with open minds and commit ourselves to fundamental reform with firm resolve. in the testimony submitted for this hearing, the commission co-chairman, and we thank you both so much for your service to our country point out that, quote, the united states has the highest reported rate of fatalities for the and hours worked and offshore oil and gas drilling among the international peers. mr. chairman, that shocking statistic does not mean that bp

or transocean or halliburton operate on safely. it means the entire american offshore and oil and gas industry operates safely compared it to its international peers. the quote from the witnesses again, the central lessons to be drawn from the capacity is that no less than an overhaul of both current industry practices and government oversight is now required. mr. chairman, this is not a time for half measures or tinkering around the edges. this is a time for both reforms. the lives lost and the damage done as a result of this tragedy required nothing short of fundamental change in the way we conduct the business of offshore oil and gas development and production. i am proud that democrats in the house took a major step toward such an overhaul by passing the consolidated land, energy and

aquatic resources act in the last congress known as the clear fact included many recommendations contained in the report. while michael leaves on the republican side may not have liked all that was in that legislation, it is my hope that now that the commission has made many of the same recommendations that we can work together in a bipartisan effort to craft new legislation's. to that end, have joined with ranking members waxman and rahall, miller and johnson along with energy ranking member rush told and others to introduce new legislation combining the best elements of the act with recommendations from the commission. we welcome though review of that legislation by the commission and by our colleagues on both sides of the aisle. if we are shortsighted and

complacent, today's hearing will be an end. if we are visionary and engaged, today's hearing is only the beginning of having america have to the most productive oil and natural gas industry. that should be our goal, and that is the goal which i think every american should be aiming to achieve in any legislation we pass. in closing, again, offer my sincere gratitude to senator gramm, you come administrator reilly, and all of the commission members and staff for their hercules efforts and willingness to take on this investigation and the dedication to completing its in such a short period of time and such thoroughness. this committee and the american people are in your debt and i think you for your efforts and

the chairman for extending me those few extra seconds to beat >> thank the gentleman for his opening comments. ra too look forward to working with you and i want to welcome the witness is here today. i know that since this event happened and the appointment of the commission there was a lot of work done by both of you. the honorable bill riley is an administrator of the epa and of course on the hill people do remember florida senator bob graham and former governor if i'm not mistaken in the state of florida, so certainly there is an expertise. with that, i would remind you that under the committee's rules, you have five minutes for your oral testimony, however condor record and statement will appear in the record. over here we have these little boxes that have green lights, yellow lights, red lights.

when the red light comes on you know you're at five minutes. when the green light is on you were up to four minutes and have four and a half minutes. we will open up to questions to a committee that once to talk. with the bible first introduce mr. reilly. kuran. >> lynndie member markey, members of the committee, it is a privilege and honor for us to appear before you as it has been to serve on this commission particularly to me to serve with my distinguished friend and longtime friend and colleague bob graham. i will make a brief statement and ask that my testimony be included in the record. i want to begin by saying that with respect to oil and gas we need a resource. it's vital to the economy, in

itself, a way of life and a contributor to productivity, jobs, the gdp, and avoiding even more necessity to important international oil markets. this commission believes we can develop offshore oil and gas resources safely. we can do it in the deep water and i could signal that deep water is where it is. that is where the industry has been going and will be going in and even more significant way in the years to come up the country's confidence in offshore oil and gas development has been shattered to read the commission determined that the government and industry both were characterized by complacency. that has attracted a good deal

of attention and some criticism. i would just say very briefly that when you have, as i learned from tony heyward, the ceo of bp the week after it took office as the co-chairmen when you learn from him there is effectively no subsea containment technology capability, when you look at response plans to talk about protecting walruses in the gulf of mexico, when you see the inadequate technology that is in default since i oversaw 20 years before in prince william sound, and when you see that there has been 79 instances of loss of well control between 1996 and 2009 in the gulf and as was mentioned a fatality rate is five times that of the north sea and punishing and firemen and finally that you have present contractors which are deeply implicated in the bad decisions

that contributed to the high risk that we uncovered. you have to conclude both of the other was an order of complacency and so many leaders as i said i didn't think this is possible, we didn't think this could happen, but also contractors who have supplied faulty cement to a bp riggins or failed to detect gas rising in the drill pipe on the bp rig it is unconceivable given a wheel and gas doherty to let inconceivable to us this would be confined to one company which was my own promise starting out so we did conclude this is a systemic problem that has been characterized by an atmosphere of complacency. i want to signal one more thing and that is the history of the

budget of the government regulatory agency on which we are quite hard and critical of its effectiveness, capability, professionalism to carry out the assignment the law gives. the budget for the mms has gone down 20% since 1984 while offshore oil and gas production has tripled. so to address these issues we have three principal proposals. first is for a safety authority within the interior department and entirely walled off from political interference with a director appointed for a term which like the fbi director and adequately resource to and budgeted. we recommend the industry establishes safety institute, high-risk industries that have had catastrophes have learned from them, the chemical industry after responsible care, the nuclear industry after three mile island with the incident

from the nuclear power operations, those should be focused on best practices and bring up the game of everybody and allow the companies to have some means of ensuring that one company, one bad performer doesn't bring everybody down and cause all of the rigs to be shot down in the gulf as was the case last summer. i want to signal the dimensions of the issue if you get a map of the gulf mexico the united states has sovereign jurisdiction over far less than all of it. we now know mexico intends to go into deep water in two years, cuba, the next year or two and we need some kind of international understanding or treaty with respect to the standards that will apply to those activities. we also needed in the arctic where russia is intending to go into its arctic waters with bp and canada denmark is already begun and greenland last summer. we need the same kind of attention on the department to

ensure the arctic waters are given the kind of special protection that the desert. we make a number of recommendations particularly relevant to science and the science that is needed to pursue wheel and gas development in those very different waters with all of the high risks the special storm action falcon and the cold in tale. >> welcome those are some of the principal recommendations of wanted to cover, mr. chairman, and i would only say that they are relatively modest in my view in terms of both money, certainly in terms of bureaucracy and disruption to reorganize the department will not take much in the way of money to budget adequately the boemre. it's relatively small and the cost of the accident we just experienced and the overall revenue that the united states

received from offshore oil and gas development and loyalty. i think it's money that would be well invested and we look forward to your questions and recognize the commission. over to you. >> thank you. >> i appreciate very much your testimony. senator gramm, you are on. >> [inaudible] other members of the committee. i know many of you -- >> press the microphone, senator gramm. >> i know many of you are commencing your service in congress and let me extend my congratulations. you are beginning a journey which will have immense gratification and personal pleasure. i congratulate you and wish you well in your service. mr. chairman, our commission was established in may of last year.

we were given three responsibilities. first is to determine the cause of the deepwater horizon explosion second coming evaluate the response to that disaster and third, advise the nation about future energy exploration particularly in the offshore environment. january 11th we submitted our report called deep water, the future of -- the gulf disaster and the future of offshore drilling. we've been subject to some criticism. one was we've lacked independence in the course of our investigation we were able to make just about everybody mad at us. from time to time the industry was mad, the white house was mad, maybe this committee escapes that. we established the fact that we were looking at this from this perspective of the american

people's interest and none other. second, there was criticism that we were not confident to carry out this task. but the modest to try to defend or competency. i would submit the report, its findings and recommendations and you can evaluate whether you think that we had the skills both among the seven commissioners and an excellent staff led by mr. richard lazarus who gave tremendous support throughout this endeavor. i've like to make one general comment before i turn to the two areas i am going to particularly discuss, and that is that there is a difference in the offshore gulf from what we know which is the onshore oil and gas production. onshore oil and gas production is a combination of drilling on privately owned land and public

land. all of the drilling in the gulf of mexico is on publicly owned land which belongs to the people of the united states of america. the way to look at this is not just as a regulator, a government regulating private enterprise going about its private business. we also are in the role of a landlord. we have an obligation to protect this asset that belongs to all the people of america and to the table to continue to draw upon it for a variety of purposes. yes, energy, but all sorts of seafood and it is one of our major tourist areas just to mention three of the benefits that we derive from the gulf. so are we fulfilling our responsibility to be a prudent plan for? i am going to discuss the area

of response and containment and then the issue of where do we go from here in terms of restoration of the gulf. my good friend bill reilly has already mentioned that the response to this event was to say the least very disappointing although there were some respondents detective quickly, so heroically, the commission concluded that neither bp nor the federal government was prepared to conduct an effective response. there was a failure to plan in advance for such agent, failure to coordinate particularly between federal agencies and state and local officials. in addition neither the industry or the federal government at invested in their research to understand in a participatory way what we would be facing if

we had such an event as the macondo blowout. much of the technology we were able to bring to the problem was the same technology that had been used 20 years earlier in the exxon valdez, which is to say there was almost no technological wide stance taken as a result of the experience of exxon valdez. we have made a number of recommendations on the response and containment including at the department of interior in consultation with other agencies should develop a more rigorous set of requirements for industry response plans. ..