you are the star of stars and that had nothing but respect for you. can you name me any companies that have been debarred for bad service? >> i can name companies that of not gotten on a fall long contracts. every time there is a competition, the company has been a losing. it is not good to be an incumbent. >> it does not necessarily because there is bad service. someone else's bid on the price and so on. one of the problems that we have, you cannot say 10% and then come to look at the facts and realize that no one has the responsibility of being disbarred. >> you raise an important point

and i agree with you totally on the importance of past performance. >> and that was the emphasis. what you had given emphasis to service recommendations, i think it is an extreme -- i think your focus on it is extreme in my judgment. there has to be some past performance, and there needs to be the willingness on the part of the government to disbar someone when services have not been provided right and we do not see that. that is all that it was. can you tell me -- what we wrestle with, we had a the qdr and did not see any focus on the thing that you rightfully worked so hard on, and that a service contract in. allegis service contract -- and that is a service contracting.

>> many people do not recognize that 50% and sometimes more of the total force is contacted. they are not route -- recognizing the value of contracts it in a contingency environment. they are not training more reviewing the procedures. that is why was not in the qdr. >> this is going over some of our heads. the commission. half of our efforts are contractors. they are integrated in, they're not considered important. >> right. >> we are where you were but not some of us now. it is an issue of managing better -- if the department of defense does not get that they are hugely important to be part of the qdr, maybe it is not just

a management problem. maybe they are incapable of coming to grips with that. and therefore, and therefore may be if we cannot oversee them well, maybe we have too many of them and we are not overseeing them well. that is what we are wrestling with. isn't there some reason to that concept? what is the point of hiring more contractors if we are not overseeing them well? >> i agree with you, we have to manage them. this is not so much a problem of fraud as much as it is a problem of waste. >> is a huge waste. >> therefore we need to focus on the government management of the services. >> and if the government is not willing to recognize that they are so important to put them in the qdr, why you think they are capable of managing have of our personnel overseas when they are

not even in the qdr? >> that has to be changed, no question about that. but that is not the contractors fall, that is the government changed. congress can help that. -- that is not the contractors faults, that is the government's. congress can help that. >> maybe we should only hire the contractors that we can properly oversee that we do not have this extraordinary waste. >> and you would not get the work done. if they were just doing maintenance, food service, all of those things have to be done. otherwise you do not have a viable force. your choice is not cutting them and have, your choice is managing them better. >> and that choice is not being made. what caused the question? this will continue. it is important.

we have not seen that cultural change. my question to you is, what gets the cultural change? >> you do not put out a directive for a memo. it takes time and effort and particularly in all cases of real culture change is leadership with a vision, a strategy, a so that actions, and a set of metrics that you can measure. i think the way to do it is not to say we get rid of the contractors. but to manage the contractors and have the government work force recognize they have to bring people in. maybe bring in experienced service managers in from the industry for a while. >> my time has run out. that is what we are wrestling with. thank you very much. >> commissioner ervin.

>> thank you very much for being here. i appreciated as we all do. dr. gansler, i thought that your statement was thoughtful and incisive. i agreed with about 95% of it, and i thought it was incisive. i did have some bones to pick with you and that is what i intend to spend most of my time on this round. i wanted to get into the issue that mr. shays got into with you later, but in your oral summary, you were stronger and more emphatic on the need in your view for positive incentives for contractors than you were in the statement. i have to say you, i am troubled by that for two or three reasons. it seems to me that thousands of years of human history show and common sense shows that human beings need to things in order to act properly, they need

carrots and sticks, and as you well know, given your expertise in this area, there are incentives for good performance and contractors, all warranties. we're going to get stories about how that -- award fees. we're going to get stories about how that has been abused. you're familiar with that. and the way that you put it toward the end, it was almost a plea for positive incentives for contractors to do the right thing. it seems to me that the very fact that these contractors, and i do not mean to paint them with a broad brush. many of them are performing critical functions and many of risk their lives and lost their lives. therefore i am not reflexively against contractors. but for you to say in response to that is that there are six examples of one employee, labatt apple that the contractor does

not know about, there are many examples of that. isn't there enough that they are spending taxpayer money and that they are doing what they're doing in support the war effort colostrum mark -- the war effort? >> they still have the pressures of making a profit. the question is, how do they do that? is it through higher performance, as mr. shea said, or is it simply by doing something lackadaisical and wasting? we have to create the management oversight that assures that they focus on the things the we won. >> no one would disagree about the need for management oversight. there is no question that the government has a huge responsibility here that it is not exercising. but there have been egregious examples repeatedly in iraq and afghanistan of contractor irresponsibility. i do not understand your focus. the second thing you said is

what i intended to begin with. inherently governmental. contractors do have to pay attention to their stockholders, at least those that are public companies. the government does not. i could not agree with you more definettempt to inherently governmental was in eft. -- inept. i also agree with you that in those places where it cannot be asserted began be proved that contractors can perform a given function cheaper and just as effectively or more effectively than government, then contractors ought to perform that service. but all that begs the question here. what in your view should be inherently governmental? what functions should only

government perform for smart i am. as you the same question, mr. francis. >> i think clearly it is the management, the oversight, the decision making, the budgeting, the contracting. >> have you seen examples of that being performed by contractors? >> no, i can show you examples of contractors in support of that function. that is a big difference. the analysis to support the decision could be better done by a contractor with experience in that field. but the decision making should be and to my knowledge usually is -- i do not have the specific cases. there'll are going to be illegal actions, no question about that. if everyone behaved, we would not need jails. but we will have some abuses. >> contractors essentially carrying out management functions. i think we would all agree with that. in the other functions that should only be carried out by

government personnel? >> contrasting -- contracting, war fighting. >> what about supplemental? >> there are various forms of security. there are functions that and five in terms of economics and also functions, but that is one that you have to look at individual in terms of the case study. i do not want to comment on that generically. many of doing their jobs and it seems to work effectively. >> mr. francis, you did not raise this in your statement. but i assume that you have your own thoughts on this. are their functions that ought to be purview -- performed only by government?

>> i would agree with many of the things that dr. gansler mentioned, particularly i think about budgeting and those strategic decisions about what we are going to support. in the area of personal security contractors i think that has to be situational. i think the what has happened and what we have reported on is, sometimes blogging it's a way of with us. omb has made up -- sometimes volume gets away from us. when they gain in volume, then the government can lose control over that function. i think that is the hardest area. you may be able to make some good decisions in individual cases, but if it grows too much

in a contracted area, one could argue that the government has given away too much. >> on page 12 it your testimony, you raise a couple of examples. a congressional budget office report from 2005 and a gao report from march 2010 for the assertion of the clan that contractors can perform certain functions more cheaply than government. those are two examples. is that always the case, dr. gansler? >> those were independent studies. non-inherently governmental functions. we have even found when we found government people doing non-governmental functions today, even when the government wins a and sometimes they often do, there are huge cost savings as a result of the presence of competition.

i believe that is the american way. will we find on the competitions, over 30% cost savings and improve performance, particularly when it is monitored and followed up. >> i will get back to you if there is time to mr. prince's. that is a good way to the next question. the notion of competition, but in your statement, you seem jaundiced about composition -- competition. it could reduce the incentive to submit new ideas. it seems to me, you must be saying that the reason that that would discourage people from submitting new ideas and proposals is because you will have to compete and if you do not submitted, you might get it as the sole source of what you must be saying.

if that is what you're saying, if you can do it better and cheaper, then you get the award, and so i do not understand. >> for innovative new ideas that had been thought of by the government, that industry is suggesting. in the old days, they would say, we will give you a demonstration contract then we will compete it when we see whether it works or not. today, we have to worry about competition so thank you for your great new idea. we will put it out for competition and see if anyone wants to bid lower on it. that is a real discouragement for giving new ideas. that is all that i meant but what about one. >> i might ask dr. gansler, or make this statement. you talk in your own statement about critical need, a lot of room for demonstration contractors in a contingency

operations. i did not hear that as food for thought. commissioner green, please. >> thank you both for being here. dr. gansler, i concur with commissioner ervin. i agreed with the majority of what you laid out in your written statement. i would talk a little about something that co-chair tabled -- thibault mentioned in his opening statement. how does went to the posture statement. i see very few or no references in there by cedar leadership -- in their by senior leadership about service contracting. i like your feeling on whether it gives sufficient attention to this important subject.

and then i have a follow-on. , and that is what we found, and the report should come out this week, and i had some early charts on net. the main conclusion was that all the rules and practices and policies are all focused on bodying things, goods, and when i was under secretary, i paid for hundred case studies and they all came out to be on products. no case studies on services. the people are being trained on buying products. all the rules are written around that. certainly as mr. francis manchin, field commanders do not have education training about having all of these people doing service for them. that has to be part of the exercises, part of the rules, part of the practice and probably part of the culture as you point out. the emphasis has to shift.

the importance of services, one more than 50% of what they buy today our services. >> we all let knowledge the fact that there has been a lot of progress made. -- we all acknowledge the fact that there had been a lot of progress made. the commitment by the secretary of defense to grow the acquisition work force by 10,000 or so, the new general flight officer positions that have been created. also, some negatives. you mentioned one dau, and little emphasis on services as our principal and primary education facility for contracting. in a recent study did you did, that you headed, one of your

findings was senior leaders " still pays little attention to services contracting." i would reinforce that with a couple of quotes from your organization, mr. francis, june 24, cultural change emphasizing awareness of operational contractor support is needed, and in a recent gao study in april 2011, that the same dod leadership committed to this are needed to ensure that policies and consistency are put into practice. i contend that without senior leadership, and i mean that the most senior level, without senior leadership paying attention to this, we will not

change the culture and we will not institutionalize many of these recommendations that all of us are concerned with. i like your comment. >> culture change starts with the leadership and that is what you are suggesting and that is what all the literature says. that is the way to change a organization. the one observation i would make that i would want to amplify, when you're talking about hiring in house acquisition work force, i think they need to distinguish their between acquisition on functions that are inherently governmental and those that are not. truck driving is not an inherently governmental function. maintenance is not. you want to make sure that we are hiring the acquisition work force, it is for the inherently governmental function. >> what is your confidence level on a scale of 1 to 10 with 10 being great, that senior

leadership will get yet? >> i do not know, maybe 6.5? >> with the -- >> it is hard to overcome cultural. >> i understand that. >> i had to thoughts and secretary gates -- two thoughts on secretary gates' memo. are we coming to this point for the first time? that is a concern i think. one of the concerns about culture is that you how forces that's a the status quo is ok. part of that has to be that there has been money to enable people not to be too concerned about managing services. >> i agree with you. but as we look down the road and if we look at the budget that we

are all going to be facing in the federal government', and the pressure that currently exists with groups like us, when then goes away, and troops come home, is anyone going to give darn about this? to do what you have highlighted will be the driving function, when the supplementals disappear, when the budget declines. clearly people will have to pay more attention to what things cost and how well they are managed. if they accept that 50% is services, they will have to figure out how to address the management of services. >> but there is very little constituency for services. we have a real challenge ahead of us. not just change the culture at

the senior level, but to get operational folks to pay attention to this. this is the way we are going to war. we will go to war with contractors. it may not be 1-1 as it is today, but with a decrease in budgets, more and more, the old combat support that we were used to having done within the services is going away. by either downsize the mission which nobody wants to do, we salute, and say, yes, sir, three bags full, we can do it. that may be something that we need to look at it and literally by the bullet. you did in the commission that i ran, we were all surprised -- >> in the compassion -- commission that iran, we were all summarize that they did not

mention the role of contractors when there were more than 50% of the total force. that has to change. they have to realize how important it is to their overall function. that has to be part of the education process of part of the exercises. contractor should be taking part. >> my time is up. they have started, but it is maintaining that that i have concerns about. thank you very much. >> thank you, commissioner green. commissioner t. kirk, you are up. -- tiefer, you are up. >> i want to thank you for leading as the way. dr. gansler has been before us before. i remember when he was one of the very first of our early briefings, and we have a panel, an inspector general on our second panel, we also had our first hearing. at the time i had my doubts in

your reassured me that these would be grade, because they were, and you said, we can see what happens. that is what today is, the fulfillment of your prophecy. dr. gansler, one of your own classic issues has been the overuse of cost-type contracts where we could just as well at fixed price contracts and then we would have a broader range of companies come in and compete for them and maybe get lower prices because we would not have to depend on fancy accounting practices and contractors who function the way. you also mentioned today that there is danger that if we narrow our choice of companies too much, we could end up with monopolies. if i had an example, and i think that they do, one that is quite

important to us -- in logcap, we have a cost-type contractors at the top. at that time it was kbr. under them we have fixed-price or a fixed-rate subcontractors and my main example is a dining facility manager. they cannot do cost-tight contest. they cannot do the accounting. we have speculated that it would be possible to break out some of the activities like dining facilities come up that could themselves be competed, and instead have them be the cost- type contracts. to use the promise in that? >> no, because they need to be managed. one of the benefits that a

contractor provides is management of subcontractors. what i think is important factor comment and i certainly fully agree with it is the fact that one of the things we want to bring in to the services sector or a lot of commercial firms. those do not have the cost accounting. >> let me go on to mr. francis. i am drawing on your relatively current report, pretty recent, in true months needed in management of contractors supporting contract and others in a iraq and afghanistan. i think we have a problem similar to what was midget in previous questions, managing contractors. contractors closely supporting the management of contacting. 2300 contracts

worth $900 million, is that right, for the performance of the administrative functions for other contractors in iraq and afghanistan? >> maybe it was $990 million. yes, sir. >> these are contractors out there, not digging ditches or riding shotgun, they are just helping manage other contractors. >> that is correct. >> i see that you looked at what is a favorite example to this commission, the aegis company was manning the armed contractor oversight division, which supervises in afghanistan all the personal security contracts. there were also going to compete for some of those personal security contracts. i remember when commissioners thibault came back excited from one of his trips.

it was like an animal he said, i am not sure what species it is bled is nothing like what you see in the united states. [laughter] but to go on, your view that the gao, the contractor doing this, they had an organizational conflict of interest. >> as we reported, yes, they would clearly have been an organizational conflict of interest, because they were going to oversee and possibly bid on that contract. it was caught eventually and they did not get the oversight contract. i think they were making plenty of money providing the service itself. what is illustrative here is that these situations are going to occur and it is incumbent on

the government, which is what dr. gansler as mentioned, to be able to provide oversight and do those kind of tax so that the government can promote its own interests. -- protect its own interests is. contract officers have so much to do, these of the types of things they get messed in the situations. >> and it was preached to us that mitigation plans and other prophylactic steps can solve these problems. was there a sense that this problem could be solved by mitigation? >> in many cases there can, but this is a situation where i do not see how of mitigation plan could alleviate the the risk of someone overseeing a contract and then also being part of that contract. >> i am praying for extra time on the second panel so i will

yield back. >> i appreciate it. >> commissioner schinasi. >> thank you. you have both been at this for quite awhile. i agree with the concerns that you raise about focusing on hardware instead of services and the way that we quantify it. but i think you understood the problems. one of the problems brought to our attention recently is trying to get ready as in a contingent plan because there was not enough money to buy them. we're now paying a contractor for communications services and we are losing those radios so that we pay for them over and over. it is even worse than you pointed out. i do not share your confidence, and do not think, in getting change here. you both said it can be done, yes, it can. will it be done? i think we need to talk more

radically about how a change occurs. we talked about taking the money away. we saw the peace dividend. have we seen any change in the way that the military acquires and buys weapons? if anything, it is gone worse. in the last administration, we got a focus on the business side of government agencies with the mets -- the president's management agenda. this administration, the president came in calling out about contracting something that we should pay attention to. all the work that you have done, i am not sure what it is going to take. i like to think about it not so much is diminishing waste but maybe diminishing expense. and you have both raised the issue of local requirement setting processes. and the need to get people more attuned to the fact that it if they spend one money -- if they

spend money in one place, it is not available someplace else. how you incentivize commanders in the field that they cannot have everything that they think that they want? mr. francis. >> today the situation, obviously the commanders have war fighting on their mind. and that is the primary obligation. they do not necessarily have a good feel for what that could contracting process is and what it takes to set requirements and translate that into a statement of work. nor is there a good enough relationship between the commander and the contracting officer, since the contracting officer does know how to do that. our work in the past is found that once the contracts is in motion, then a preference, if

you will, for incumbency can take place. in this case, the commander is happy with the service and not so concerned with the cost. that is not what he or she has to worry about. i really do think that can bring pressure on the contracting officer just to get it done. the default position is to get it done the way it has been done. >> would you require them to stick to a budget? >> i would say so. that would be a reason to manage differently. that is what we have been talking about with the policies. as long as there is no downside consequences and pay our way out of it, i don't see encouragement to do something differently. >> dr. gansler. >> as he pointed out, the main thing the combatants commander is worried about is the urgent need for military operation. he has to work very closely with

the contracting officers on the local services that he asks for, and the combatant commander wants three meals a day. the contrasting officer has to know enough to s, do you means taken lobsters, or mre's. it would help a great deal for closer linkage there. it would also help us if we get the contracts capability in the funding for it for these local needs and services for the combatant commanders. if he had some of parties and, as special forces does, for example. they have that contract in the funding to do this devilish contracting -- they have the contracting and funding to do this. that combination would decide what you really need p.s.i.

would you like that have. >> the contracting authority, in the hands of the commander, there's no reason to say that he would face that. >> one of the requirements has to be priced. we're going to be writing our requirements in the future, because i agree with the statements made, we will be resource-constrained, and that has allowed us and some worry about how much things will cost. in the future we will have cost as a requirement. we have done that before in the past. one missile had only three requirements. it should hit the target, it works, and we can put that on the services. >> if you give me more examples like that, i would take your point. >> we have lost sight of it. we tried to build global hawk

and lost sight of it. we have to start paying attention to cost. >> commissioner, can i please? the only comment i would make its former reference. you're providing these examples, dr. gansler, and they are all platforms. but in your testimony, you say that this is about services in terms of the dollar and the volume of the contractor support. i just said that. >> you're absolutely right. we have not done it for services and i would argue that we should. >> i was just going to ask, does that require a change in the goldwater legislation? >> i do not believe so. the fact is that they have it. if that is the case, why couldn't all of them have it?

i do think that we have to say, what is an affordable price any reasonable price, not simply putting price is the only consideration. one of the things is scarce me now that is happening, a lot of the contracting is shifting to a low bid acceptable. i am sure that none of you drive a yugo. we do not do business that way. we do not do heart surgery on the basis of low bid. >> thank you. >> thank you, commissioner. you went into my third by them but i'm going to -- low-price typical. in your testimony in and year 2007 report, dr. gansler, you

mentioned the importance on following up on 90 cases of fraud. we had a witness -- and now was for 2007. we have a witness coming up from 2003 to 2007, that was your time frame. i understand that they will were not convicted. we have a witness coming up from the deputy inspector general for auditing from the dod-it. -- the dod-ig. is that the numbers at 398. i accept both of your numbers. are you concerned that the first five years, it was 90, and the last three years it has added 380, the simple map of both. that seems like a significant increase. observations? >> i do not have any insight

into what caused that. 90 is the number that the secretary of the army gave me when i did the commission. i do not know we have more checking on it. we might buy more possible cases. >> the point i wanted to make is that that would not fit your award recognition but it certainly would fit your point about having oversight enforcement. >> my reward and recognition were be those that did not need that. >> and it is interesting, all of the examples that come forward, it seems there's a disproportionate number -- people think it is the reader on military cases, will want to share with you that in that data, there were 11 articles 32 under the 398.

that means the military. the vast majority, then 97%, there may be a few government employees, but that is why there is a need for oversight. and i will make that observation. dr. gansler you talked about the importance of senior leadership with a strike could not agree with more. in my -- senior leadership, which i could not agree with more. i think the senior leadership at the pentagon as general officers, senior executive service individuals, and political appointees. when we get into a theater, the political appointees work from back here and so there are general officers and senior executor servants. does that fit your definition of senior leadership? are all scs's

volunteers. >> but does that fit your definition? >> certainly. the washington people set the policies. >> we all know that. we all know that. i just wanted to define it because i have a point in the second. you disagree with that, mr. francis? >> no. >> dr. gansler coming in your testimony which i share with you for senior leadership is a problem, and that is a lack of training, a lack of training and lack of management strategy. so we reward compliance over performance and stifle creativity and effectiveness. are we talking about this -- right to the point -- the lack of training and management strategies in general petreaus, general caldwell? is it ultimately the responsibility to turn this

around? >> i certainly think they would be major players in it. i think the secretary can do it. the undersecretaries can do it. >> in theater, and bring it up -- i could not agree with you more. but to me it is alarming, and i am glad that you said it, they like training in management strategy. >> i was shocked at 5 the >> to find that the five officers they had in one situation was at zero. >> lowest price technically acceptable. you try to find out what words, can they do the job, and the new rent the zero and both open double last thing you risk the envelope open and give it to the lowest price. are you familiar with afghan first? it is driving substantial

billions of dollars, these afghan firms with accounting services someone talked about, they ripped the envelope opened -- see you haven't you? is it working? >> it works from keeping them from being insurgents. but if you want them to do a good job, you have to have some quality, not just low bid. >> this is the importance of low -- best value. you have a particular view on how afghans first is working or is not working? >> we have not done in any work on the program. >> this is something we ran into last month on a trip. we make a point of going out of forward bases. we were briefed at an organization that owns several

four days. 14 days -- and at the end, i will ask you what your view is -- but 14 days had health and welfare expansionists. it was to make sure that the employees, afghan saving american lives supposedly there is an attack on the perimeter, and then about 200, they have afghan guards. they found within the living confine some one that they briefed us on, the security that theyn not fthat fob, found pressure plates, collect wires, batteries, and other devices that would make ied's. they found a full-blown marine corps colonel officer uniform

pressed. you could get access on that base. they're on the base, they were technically acceptable. their solution was three individuals left real quick and they were sure that the 160 cards were loyal. it was a taliban hotbed. they went to another base, the pace we are actually on, and they did a health and welfare, and they found four kilos of drugs. i said what is a kilo? they found about half of the employees with some form of recreational drugs with them. the company, i said you got rid of them right away, and they said no, the contract expires at the end of the may. we will take that into consideration then.

we're talking about the lowest price for american military troops lives. i know that you have concern about this. is that a aaa example of what is wrong with this? >> that is all wrong with not doing security on those people. the lowest price acceptable is probably the wrong thing to be using, period. you could also do securities on these hires as well, but you do not want to make that on the basis of noaa for mission on past performance of the company, of the record of the employees, the security that we would do in the u.s. company. why we do it on a u.s. company and not a foreign company? >> mr. francis? >> we have done some work in that area. one of the things that we found out is that screening

contractors particularly in afghanistan has not been guided by policy. he goes by what the local commander does. the policies have not been consistent. we have work underway looking at the betvetting. one of the issues with afghan first, is what is in the government's interest? i think that we understand, you're hitting an issue where there has to be a line between policy and the safety and security of our units. >> i am going to lead into the second round and take my time there. put about four minutes on my clock. and we will expire downhill from there. i would propose to you that in a war, where in iraq, we did not have iraqi guarding the perimeter.

we had third country nationals. in a war where they try to hire -- if you are hiring people in a hot bed area, locals and everyone certifies their anti- taliban, good luck. our proposed you that it would probably cost three times as much to do best by you third country national, where they have no loyalty of all to the taliban, and your risk is reduced. but when we were over there, we were told, we have to use afghan first because that is the big program and we're counting numbers of people. i propose you there have been too many examples of soldiers already, six examples where they have been shot by military or guards. i share that with you. dr. gansler, could contractors -- quality assurance, big

complex systems. should contractors inspect other contractors where their competitors with each other? >> the point about avoiding conflict of interest raised earlier is a very important one. if there are independent contractors that do not compete with the people that they're investigating, it makes sense. if they are not independent and they have conflicts of that sort -- you apotheosize the case and i agree with you. other contractors could do it. >> we have been briefed by the itt world. they do an exceptional job, of course enable our and could not get it done without us because they do not have the capability of building these complex communication systems. so they get good grades. but the good grades they get are from a firm called general

dynamics information technology, very active in bidding also. you give the specifics of hiring generals and things like that and i could not agree with you more. but we have to stop and say, if we are doing in $800 million cost-type contract, and the inspectors for that contract -- is that in the best interest? and this is near and dear to me. my history as an auditor, i shared data that i obtain that last friday. this is about properly staffing resources. dick there's a procurement organization, and then there is d.c. a the does the audit. -- dcaa that does the audit. there had been an increase for a couple of years. in 2009-2010, they had a string

of 397 auditors. it takes an auditor to take -- it takes an auditor three or four years to get affected. because of funding limitations and other justifications, they're targeting 21. this year there will have a net of 21. i share that because the next slide that they have presented is their backlog, over $400 billion. on audited. -- unaudited. contractors are faced with a six year backlog that increase their risk. if you find something in 2006, the first thing a good auditor says is how long this has been going on. the word i heard in a briefing was that the auditor strength does not come up, the workload will explode.

mr. francis, observations? >> we are actually looking at the contracts in iraq right now. the backlog is huge, and part of the issue is when the auditors go in, they find a lot of the things that should have been done and was not. they have to go back and reconstruct the cases, if you will. i also think that numbers are a bit of a problem for us. it is something that we take to come in sourcing, outsourcing, we start with the solution and then worked in word. but the example you gave earlier in the itt world, it really is illustrative. at the heart of the problem was the government not having the expertise to oversight the prime contractors. you have to find that expertise. now you're off to the races. you're getting into risky situation.

i think all of that creates additional workload for the audit community, but it goes back to how we set up and administer the contracts, because that is where we are creating -- >> total agreement. the secretary rightfully has a plan to increase 10,000 people? i do not have time to go into the march letter that is nebulous about all the approval levels, but my time is up. i do want to thank both dr. gansler and mr. francis. for me personally, this is the best they met that has been brought up. , simply because -- the best statement that has been brought up. , simply because you bring up the discussion. i am turning this over to commissioner shays. in the spirit of a limping out of here and into the sunlight, i

am getting an operation on my toe. my toe right now is pretty important to me. i thank you all for your service, and commissioner shays, i am confident -- you're right here. >> i am tempted to say something in front of you but i will not. >> thank you, mr. shays. dr. gansler, you made a comment at the end of the last round that you and i had to get a that i wanted to focus on. he said in passing that these scuttlebutt in the industry circles is that it is bad to be an incumbent because all likelihood is that an incumbent will lose when the contract is a read-competed. you said that as if it was ipso facto a bad thing. if they lose by being bested by someone who can provided at a cheaper price and, of course,

better quality, is that not a good thing? >> sure. the reason i made the observation is exactly the point that he was pointing out. right now we are giving it away to the low bidder, someone who is simply knowing how much it has cost in the past, low balling it in order to get the contract, not worrying about the quality and what i would argue is that when you are in incumbent common and you're not doing a good job, you do not deserve to follow on. but a great company doing an outstanding job and getting lower costs, i would tell you that they deserve the follow-on on a preferred basis. but performance and cost is what we should evaluate 32 often we have been moving to the low bed , technically acceptable, and not using prior performance at all. >> i now want to get to detail

about this contract types. -- i do not want to get into detail about this contract types. there are certain -- the idea that you buy an end to the engineer because he got off the back of a matchbox, that is all that matters? >> i completely agree. one of the issues that you're raising your statement is in your view and in -- and need to incentivize the civilian people in the war sundered that troubles me a little bit. we are in two wars now. if you include libya, we are in three. it seems to meet the we should not have to incentivize people who are paid by dot to go to the war zone. >> people do not like to be shot at. the military does get hazardous

duty military paper is the contractors to get extra pay. what we found in the commission was that the civilian volunteers were not getting major medical, long-term medical costs. there were not getting better life-insurance for acts of war, which most does not cover. and special compensation for going -- and for example, tax waivers that they were not getting. there things to encourage the top people to take these jobs and they were being discouraged by their room bosses to go, but they felt they were too important to leave. but i was surprised to find that when this was proposed, they did not want to do because of the great cost. >> given the exigencies of and we're not ratcheting down our commitments overseas, should we think about making

some kind of force those or overseas a condition of employment? >> i think we can do it by a volunteer. what we were not doing is planning for it. there is now efforts underway to try to have a contingency group, and certainly the concept of using the reserves for that function might be another way of doing it. >> a couple of the question since mr. thibault exceeded his time. one of the issues you raised, but dr. gansler, in your testimony, you called for recognizing a beneficial segment of but contractor, namely, non- traditional government contractors. >> commercial. some of these services are listed in the yellow pages --

truck driving, or even maintenance, commercial aircraft for military aircraft. thereare a lot of functions -- d service is an example. these are people who are not the usual defense suppliers because of things like accounting standards, intellectual property rights, export controls -- all of these barriers to commercial firms doing defense business. if those were removed, with to get companies that have experience and low-cost as a result of commercial competition. >> my final question is kind of an uber question. you lay out three no-brainer common sense recommendations, establishing a single playbook, requesting a modification with a

separate tracking element, and acquisition and contract authority to the geographic combatant commanders. in later testimony, you explain where the department of defense is. the shorthand way of summing up is some progress, but not enough. you raised at the end of one of the rounds, mr. francis, the question hanging over everything. that is why. you mentioned in passing that here we are eight years in iraq, 10 years going in a kingston. we still are trying to measure the number of contractors in both places. why are we where we are with regard to having these issues, both of you? >> i think one thing is services are not well understood. you cannot level them.

-- label them. the services of the housekeeping chores. that is not an accurate representation. but it is not something people worry about. if you look at the budgets for services, you are very hard pressed to find where the money is and to hold people accountable. i think we have been able to buy our way of it. we have not had to worry about it. if we did not do something right, there was money to do it over again. i worry about the point mr. greene brought up. when these operations to come down and things return to normal, i think the imperative is going to go away, and we are going to go back to situation normal. if you go back in time and look at how we budgeted for these activities in peace time, the same problems have existed in

peacetime. the have gotten worse in wartime. i think we will go back to the old way of doing business. >> same answer. people object to change. when the have a lot of money, they do not have to change. i think they will recognize the need to change. keeping track of how many people we have and what they are doing -- there is one category and we do thousands of different things in that category. some people drive trucks. some people do maintenance. we need to be able to know what they are doing and be able to track it. that is a change. >> thank you. i remind the commission members we had said this was such an important panel that we will allow members to go eight minutes instead of five. the cop can give mr. green eight minutes. he has the floor. >> thank you.

dr. gensler, you indicated a degree of satisfaction with the fact that the defense department has added 10 general flag officers to the force. but you also indicated disappointment, at least in the case of the army, that those were acquisition to general officers as opposed to contract in general officers. you made some reference to that in one of your responses to another question. the army has created an acquisition corporation -- corps. we have heard from a number of people that this is not enough and maybe we ought to look at a contract in branch, whether it is within that acquisition cporps -- corps or a separate bridge. >> we recommended there be more

professional as a nation of that, which is consistent with what he suggested. it is clear the general category of the acquisition is so broad that you can put somebody who has been a technician all his life and put him in charge of contracting. you have a learning process that has to go on. it would be better if you had someone who had that particular background. i think the professional edition of the acquisition senior people is something that starts with the packard commission. we found that the army, for example, has asked that the four-star generals who have never been in acquisition before -- we wrote rules that there has to be background in order to get into those positions. i think we have the same requirements for these new general officers, but it is going to take time. it is important that we start promoting people. if you are a young major trying

to go into a field for the army and need to know how to get promoted, you are not going to pick contract in. it is essential for them to get promoted into those positions. >> would you advocate a second branch for contracting? >> i think there are distinctive vintages to doing that. we recommend that to promotion boards. i might point out, by the way, that we are sending letters to the secretary saying you are violating the law. >> that is the way a lot of those letters get answered. >> you have been a participant, as we all know, and in many cases the chair of numerous studies, boards, and commissions. we certainly respect your

service and what you have to say, not only today, but in the past. as i recall in the gensler report, somebody said we were 21 of 22 of the recommendations. correct me if i am wrong. they had been adopted or addressed. i am sure different degrees of success. what process do you use, or have you used in ensuring that progress continues to be made? i ask that because we in the commission are going to face exactly the same problem. i am going to ask that same question to the next panel. we need to follow up on whatever recommendations we have.

i would welcome thoughts on that either of you have on what to do to ensure that our final report and previous reports do not, like so many, and up on the shelf -- end up on the shelf, gathering dust. >> this is something that i learned from the packard commission. but when i mentioned that to secretary -- to the secretary of the commission, he said he would do it. that is where your numbers come from. they did address each of them when we came back later to review it. i think you have to do something of that sort. >> i agree.

>> i think the gentleman. -- i thank the gentleman. >> going back to the report we talked about earlier, the protections in situations where you have contractors overseeing or managing other contractors -- we talked about organizational conflicts of interest. i want to talk about professional conflicts of interest. we did not make a recommendation yet. we still have to decide whether to. if he cannot answer some of this question, state it for the record. if the contractor is in effect sitting next to a federal employee in managing a contract, the same ethical requirements that apply to the federal employees should apply to the contractor. >> that is the general

preference. >> with respect to financial disclosure forms, my understanding is there is a difference between a senior federal contract manager employee, who has the same constraints that i do as a senior federal employee, or all of the members of congress have -- that is different. when i do a financial disclosure form, i sign it under express warning that the penalties of law apply, it effectively signing under penalty of perjury. i do not believe contract employees are put under that penalty, are they? >> that i would have to take for the record. there is a distinction between a personal services contractor, where the rules are somewhat different and the legal borders are. there may be a distinction between that and the regular

contractor. the other thing is that even if this contractor employees sitting next to me as a financial exposure form -- it is not made public like every member of congress. it is circulated internally. is that right? >> i am not sure. >> have you ever seen it public? >> i have not. >> have you ever heard of it public? >> i have not. >> i just make the observation that the way in which conflicts of interest is policed within executive service are members of congress, someone needs to check up and say, "you aren't a piece of land." they are not going to catch this among contractor managers.

i suppose it turns out that these are not public, contractor employee financial disclosure forms. are we missing a sicker we have four public employee -- are we missing a safety we have for public employees forms? >> it would be up to the government to look for those conflicts and come back to managing risk. i do not think we should rely on media to perform that function for us. >> would it be a supplement? if we are going to put the same restrictions on the employee sitting next to the -- the contractor sitting next to the federal employee, they would have to be the same restrictions, including how the disclosure form is looked at.

>> i would guess we have to look at what the other consequences are. if we had that kind of restriction or possibility publication, i do not know what that would do to the pull of contractors who would have available to us. we have to look at what is in the government interest. i do not have an easy answer. i think it is a complicated question. >> i will yield the balance of my time. >> you made reference earlier to the congress having a role in some of this. i was reminded of a former chairman of the house armed services committee who said we would not have an army larger than the marine corps. you could agree with that statement, but it was interpreted to mean the acquisition work force in the department, not everyone. that is what led to, as you

know, the dramatic cutbacks we saw. >> a 25% cut by law, by congress. >> with a lot of the problems today resulting from some of that. would you care to comment on how congress is complacent in the problems we are seeing today? we have talked about services. they have had lots of butter manages -- better management of services on the books for years now. it does not seem to have had the intended effect. other other things that come to mind? >> we could bring in other workers that have barriers to entry presented currently in export control laws and things of that sort. that is an area that warrants

looking at. we give speeches about the desirability of bringing commercial firms in, and then we pass laws prohibiting that, in effect. >> we did have the federal acquisition streamlining act, which addresses a lot of those problems. that was past 20 years ago. >> there are areas for congress can help. sometimes, we get unintended consequences. that is the fear. that is the reason i made the comment about the title of the report. we do not want to scare away contractors from doing defense work, especially the ones with high quality and low cost. >> since you brought up that title, i want to go on the record to say there are too many contractors in a number of areas. the army came before us and said it has a identified several thousand positions that were inherently governmental positions being filled by

contractors. maybe they get around to bringing those in-house, but maybe they would not be able to do that because of funding constraints. the other is to many because we are not managing properly. there are too many people doing too much we do not need being done. >> i agree with both of those. >> that is how we define the overreliance. let me ask you folks about trading. -- training. one thing we have read and heard in your statement is the lack of training for acquisition. i will not say the work force. i will say acquisition. we do have a separate set of incentives when we bring the private sector into a business deal. those are more business-based incentives. did you come across any

training? the city did not see a lot of it. but the d.c. training that would talk about a new business model that would talk about making sure you understand what is driving at contractor's behavior, and what is driving -- not just doing free awards, but an understanding of the business arrangements? >> there are two types of training in that regard. the one you are talking about is the people who are negotiating the contracts, writing the requirements, or managing the programs need to understand how industry works. then there is the problem of the other side, the combatant commanders, who get oversight in the field, who need to also understand. that was not even been introduced. both of those areas of training, i think, are important, when you recognize we have a mixed force.

>> a couple of points. one is navair's cost department has excellent insights on industry interests versus the government. training on that type of awareness is very important for people at the negotiating table. we did work years ago, looking at best practices for training. one of the differences we found in commercial industry versus government is they identified what is important. you cannot have 100 training initiatives. you might have 10. the important ones, you take to the front. you do not put them in the schoolhouse and make people access web sites. you take the training to where it needs to be done. about the comment mr. green made it -- there is an appeal to having a separate organization for contracting, but that and

make it something separate, something you do not bring into the negotiation. i can speak from experience in our own organization. we have had people work decisions and people were contracting. we have found it is hard to separate the two, and if you do, you lose some synergy there. >> you want cross-training for that reason. you want contacting people to understand program management, and vice versa. >> i am interested in the requirements sectors. they drive the cost for everything. >> they do not have any exposure. they do not have to worry about it. >> the training question also follows on what mr. kiefer was just talking about, the conflict of interest. you have a different set of incentives than the person sitting across the table, and you had better understand what those are. >> one lesson i got from a

senator at one point is, "do not tell me the theory. give me the case study." we wrote case studies on providing services that covered both sides of the story. that would be a good training tool. >> thank you. >> , me follow up to your comment on the question that i posed earlier on a second contract in branch. i do not know what the formula is. but what we need to get to -- i understand the synergy. but what we need to get to is a way that we incentivize these contract in people, that they see ahead of them promotion opportunities. whether that is a subset of the acquisition corporation -- corps, or whether that is

something separate, we need to figure out a way -- that is part of this whole equation, is not mckee is so attractive that an acquisition person always migrants to program management, because that is the sexy stuff, and they do not pay attention to the contracting. >> i kind of feel in a way, and i want to say this, that you are at the top of the pyramid, and we are eating the crumbs off your table. as a result, i tend to judge you a little harder than i would judge others. if you do not get what we are saying, we are in deep trouble. when you said that this report -- that we do not want to scare away contractors, i have to laugh. our likelihood of steering with a contract is one out of a

million. if you have a certain regulations are requirements, those things can. it is the view of the commission in our report -- if they have a lot of money, they do not have to change. we want them to change. we are concerned that we will hire a contractor. it comes out as a supplemental. if a few contractors get killed, nobody seems to care, because it is not on that list about how many soldiers we lost. they are expendable. that is a gross thing to say, but that is the way it is viewed.

i want to attribute to any other member of the commission that we have relied on contractors because that are like free. they are supplemental and not in the military budget. if they get killed, nobody writes about it. if we have a lot of money, they do not have to change. do you feel comfortable with the statement you made? >> i think the leadership must make the changes, even with money. that is a requirement they have. >> i am just making this point. we would like to think there is a bottomless pit of contractors, that if you cannot amend them well that maybe you should not be hiring them. you come back saying they are the cheapest and the provide essential functions.

they do. but we are getting into the nation-building side, where we hire contractors to do nation- building. is that essential for the military to accomplish the task? just to give you a sense of what we are wrestling with. >> i think the terminology matters. if the subcontractors are a difficult option or we have overreliance on contractors -- if that is imbalanced by the essential work they do and its importance to the mission -- and i would agree with you. last week, by coincidence, i talked to the department of defense person who publishes the weekly listing of people killed that week. they insisted that also lists the contractors. we have to be careful about how we word the report to not undervalued that half of the force, the contractors. yet we still need to manage them

better. >> it is an outrage if the government is going to hire contractors and not oversee them, given that are 50%. >> that is the government's fault, not the contractors' fault. >> that is true. dod is not audible -- auditable. we cannot shut them down. if they were in the private sector, they would go to jail, because if you cannot be audited to, you are breaking the law. in the private sector, if they cannot be audited, there is something wrong. the of the cannot be audited. we are not when to shut them down. we want to eliminate waste, fraud, and abuse. the challenge is what we can do to get this culture changed. one of them may be to say that contractors are not this

unlimited list that you can hire. especially when it is in the nation building side. let me ask you. you basically picked three out of 31 the you had some concern with. it is basically the same concern the department of defense has. i have had conversations that say past performance is not going to say what we are going to get. there is the whole issue of debarment. you focused on that. generally, they agree with the other recommendations. it is helpful, but not helpful. let me ask you specifically about one. that is recommendation eight. we want to establish a contingency contract for the staff. right now, you have service

contracting logistics. can you see dell you -- i will ask you this as well, mr. francis. can you see value in getting the military to recognize on behalf of our contractors that they should have a separate joint category, and that would be a j10? >> i do agree that we have to give visibility to that, particularly in the military. this is one way of doing it. my concern in general about organizational solutions is when we set something up support, does it in effect become separate? with that become a separate activity we then have to integrate into planning? when we go back to what we talked about at the beginning, we did not plan is on an

integrated basis. the test i would hold for this solution is will this get us there. i am not sure yet that a separate organization would do it. >> that gets to the question of how it gets defined and what the role is. it is just contract in, contrasted to concern about the mixed force and the benefits of it, and the benefits of trying to planet for the exercises, which would be very valuable, i could see some significantly positive benefits that could come from how this gets defined. if it ends up being the job of that person to be responsible for policy and contract thing, no. >> right now, contract and is handled by the j4, 50% of our manpower. you used governmental a lot.

that can mean whatever it -- whenever anyone wants it to mean. my question is there are some of us who think that we need to say what is appropriate for government to do, and what is not appropriate. inherently, governmental, you can do anything you want. would you agree with that comment or not? >> i do not know if i would go as far as to say legally you can do what you want. i do agree that the definition we are using is not always helpful. you have to act in the government's best interest. for example, we are talking about contractors overseeing contractors. you might say oversight is inherently governmental. but if you are doing construction in afghanistan and the oversight there, putting some money from the u.s. there puts them at risk. you may have to use somebody else. i think we have to think about

what is in the government's best interest. i think what does hurt us is we do not gauge those risks. we do not gauge things that put the government in a disadvantaged position in the long term. >> i agree with that statement. i think we do need to focus more on a definition of which functions do and do not fit as inherently governmental. a statement but then trying to sit down and define it, saying everything that's important, everything that's critical, or everything in support of the government is inherently governmental, that's wrong. now we have to be more specific in order to be able to define it. i think most of the functions i understand are being done the, the vast majority, there are some functions where contractors are filling in and doing things they shouldn't be doing. that's what you're trying to

address. but the vast majority of what those 200,000 people over there are doing are things that should be done by contractors. >> let me have you both end by making any comment you want before we get to our next panel. is there any comment you'd like to make before we close? >> i'll come back to the issue of cultural major and i don't think we get there by setting targets like insourcing, outsourcing and numbers. that's what i get concerned with, with the administration. i've seen those numbers put out there and then energy is lost. for cultural change, you need to sustain energy and i think we have to get at, what are the skill sets, what are the roles, how do we need to perform this function if we want to call it services acquisition in peacetime and in the future. how do you sustain and hold people accountable in the long-term? short-term doesn't work.

thank you. >> i made the same note, i was going to say numbers isn't the right answer. it worries me that we're going to have a bunch of people with no experience simply filling in the categories because we've got to hire 10,000 of them and i was scared by the fact that the air force though they were making 40% cost savings by bringing in people to do wrench turning. i made the observation to someone in the pentagon that maybe they'll have to sit out on the grass because there's no overhead associated with that assumption. it's just the industry side. we need to do honest comparisons -- of what things can best be done by contractors, there's no question about the oversight and management and all those things that have to be done by experienced, skilled government people, well trained and we've got to focus on that and we have to focus on the difference between services and buying products, which we clearly have

a cultural problem with and my summary statement is, i think you people have the opportunity to have a significant impact on that culture. i encourage you to do that in a very positive way, rather than simply as a threat that they might be subpoenaed and debarred. >> thank you. on behalf of all the commissioners, we appreciate your work. we're going to get right to the next panel. or do you want a five-minute break? we're going to have a five-minute break, or it could be a 10-minute break. we'll try to make it as close to five minutes as possible.

>> we have the honorable daniel r. blare, the office of the inspector general and the honorable her vert -- herbert richardson, special inspector general for afghan reconstruction. we welcome all three of you. you're sitting down, i should have warned you, we need to

have you stand to swear you in. raising your right hand do, you solemnly swear or affirm that the testimony you will give before this commission is the truth, the whole truth an nothing but the truth? note for the record, the witnesses responded in the affirmative. we'll start with you, mr. bowen, then whether blair and mr. richardson. thank you for your patience in waiting to testify. >> thank you, mr. chairman and commissioners for inviting me to testify on something that is the central part of what this commission was started to establish. implementing improvements in wartime supplies. this will be an enormous boon to how the united states carries out stabilization and reconstruction efforts in the future. the fact that those elements of contracting necessary

successful were not in place in 2003 led to significant waste as my statement points out. we estimate that waste to be upwards of $5 billion. $5 billion to $6 billion. calculated out other the life of the program, $1.7 million behr tai -- per day, just to jar your senses about what happened to taxpayer dollars in iraq. why did that happen? because as we've identified, there was not a risk-based approach to analyzing and undertaking the enormous reconstruction in iraq. this is the largest overseas rebuilding program in u.s. history. and there was, because of the amount of money poured into a system that wasn't ready to execute it, a rush to spend that led to the kind of waste that we've identified in over 350 audits and inspections. the missing piece at the

outset, of course, and was discussed by dr. gasler and has been addressed repeatedly by this commission, lack of personnel, contract personnel, capable of carrying out the rapid and significant work necessary to executing the stabilization and reconstruction operation in iraq. what are those pieces, though, that have to be corrected through the inch ka -- implementation of contracting form? i describe them as five. one, requirements. you have to adequately nail down what the contract needs, what is required thon eground in country, so that you can frame a specific outline for executing the project that is developing a good statement of work. that requires talking to the host country. that was not done well in iraq. two, you need the right vehicle. we used cost-plus contracts that were open checkbooks and

generated significant waste until they were terminated in 2005 and 2006 and removed to a more fixed price approach. three, the award process. too much use of no-bid or limited competition, certainly in erf one and it continued thereafter, more than we'd like. the focus on open competition is essential to protect taxpayers' interest. contract management. you needed people to do it, didn't have it. and oversight. you need a quality shurens program, quality assurance executed by the government at the visiting siting, ensuring a contractor has a quality control program overseeing their subcontractors. subcontractor -- subcontractors are inadequately covered by current law. the fact is, subcontractors repetedly failed in iraq and taxpayer dollars were wasted. we have suggested in our lesson learned contracting reports and

hard lessons and other reports several improvements that are echoed commonly in the commission's report at what risk. our overarching one is that the departments of defense and state should develop a set of contracting rules for use that all entities would use, not the situation we surntly have, where each department implements its own version of it, difficult for contractors to understand, difficult for contracting officers to manage, difficult for overseers to assess. second, strengthen the capacity to carry out reconstruction work, echoing the organic capacity recommendation of the commission. commission recommendation one, there needs to be more talented individuals doing contracting in the stabilization and reconstruction arena and that requires growing the capacity within the agencies. include contracting personnel in exercises, commission

recommendation six we agree with. avoid using sole source and limited competition, commission recommendations 15 and 19, agree with those as well. develop deployable systems that are usable in stabilization operations. commission recommendation two, and finally, create an integrated structure capable of managing this kind of operation. we don't have that today. the commigget widely recommends, in recommendation 19, that a special office be created to provide oversight. we concur with that. and with that, i will conclude my statement and look forward to your questions. thank you. >> thank you, mr. boe en. mr. blair. >> good morning, chairman and members of the commission. thank you for allowing us to address our work on challenges

in this area. effective contracting for goods and services is a key element to our success in southwest asia. many in the department have been working long and hard to improve contingency contracting. however we continue to find the same problems. simply stated, d.o.d. needs to get it right in the beginning and have effective oversight to ensure it gets what it pays for. in order to get it right in the beginning, we need to do four things consistently. assure contracts are fully defined and immediate needs. second, select the appropriate type of contract. third, properly complete these contracts, and fourth, determine fair and reasonable prices. however, too often we find these key steps are not consistently performed. d.o.d. also needs to have effective oversight of all these contracts to verify that the goods and services are actually delivered according to the contract terms. a detailed quality assurance

plan in the hands of a well qualified contracting officer representative is a powerful oversight tool. however we find too often that the department continues to struggle in this area. these recurring problems are why we developed this report, contingency contracting, a framework for reform. this report highlights some challenges d.o.d. must overcome and ways to improve contingency contracting. we are pleased to report that commanders and contracting officers in the field have started using it on a daily basis. since our last testimony before the commission in 2010, we offered 42 audit reports related to contingency reports in iraq. we are reviewing base closures and demobilization. in afghanistan, we focus on safety and protection of forces, training and equiping the afghan national army and police, and the department's

execution of over $14 billion designated for afghan security forces over the past two years. our recent audit of the prime vendor contracts shows what can happen when d.o.d. does not get it right in the beginning. contract improves significantly through change orders. d.o.d. recrenly extended this contract for an additional two years without competition. we found the department overpaid potentially $124 million for transportation costs and paid about $5,55 -- $55 million to airlift fruit and vegetables into afghanistan without including that cost. another audit highlighted what can happen when there's inadequate oversight. they allowed large quantities of reusable quilt to be exposed to elements and destroyed.

i'd like to direct your attention to the two large photographs i have here. the first one to my right shows the large number of boxes. these boxes over here are uncovered and some of them have collapsed. what has happened is the contents of the boxes were exposed to the elms in kuwait. the second picture over here shows what happens after this long-term exposure. this box contained unused boots that were designed to protect our war fighters from contamination. as you can see, the boots are no longer usable. we examined one box and found the accusation value of its contents was about $39,000. our investigations -- our investigators have over 230 ongoing investigations related to contingency operation. these investigations resulted in 12 indictments, 19 criminal informations, 34 convictions, monetary recoveries of over $42 million and restitution totaling more than $90 million. in addition, those convicted

were collectively sentenced to more than 50 years in prison an there were 21 debarments from future contracting activity. one of the most cig can challenges they must address is to ensure our recommendations are more broadly implemented to determine what improvements need to be made to properly establish the requirement, complete the contract, determine a fair and reasonable price and properly oversee the contract would be transformational. oversight of u.s. contingency operations continues to be a top priority of the d.o.d. office of the inspector general. we'll continue to identify and deter waste and abuse and make sure that men and women serving in theater are well equipped and well supported. the department and taxpayers cannot afford inefficient and costly contracting practices. i thank you for the opportunity to testify this morning an look forward to answering your questions. >> thank you, mr. blair.

mr. richardson. >> chairman schayes and members of the commission. -- shays an members of the commission. thank you for inviting me. let me begin by noting that under its mandate we have limited oversight of department of defense contingency contracts. this represents 13% of the $154 billion obligated from fiscal years 2002 to 2010. almost all can be found in three areas. first the afghan security forces fun. second, commanders and emergency response fund and thirdly the defense department drug interdiction and counterdrug program. sigars work has focused on those things paid for by the afghan fund and command fund. we examined 15 construction contracts paid through security forces fund totaling $363.9 million and 70 contracts paid through commanders emergency

response fund totaling $54.7 million. in addition, we looked at $11.4 billion planned expenditure of the combined security transition command bill of 884 facilities for the after began national security forces which we discussed in our last hearing with you. since the last testimony before the commission, we issued two additional reports on activities funded by the afghan security forces fund. one audit questions the capability of afghan ministry of the interior to account for and pay the afghan national police. as you know, this is a key issue as we approach transition to full afghan control. the other is an audit of infrastructure contract that discusses weakness in contractover sight, a key issue to prevent cost overruns and costly contract delays. we have two large infrastructure projects funded

through the afghan security forces fund and being implemented by the united states air force engineering center. we are also planning in coordination with others to examine two contracts with i.t.t. corporation. they provide operations and maintenance for afghan national security force facilities. as our work has shown, our audits continue to show challenges, inadequate oversight, lack of sustainability and lack of sufficient planning. to address these, we have made specific recommend -- recommendations to these and other agencies and monitored their implementation. in doing so, we ask for specific information about followup actions. to this en, we have made 35 recommendations to the department of defense during the years 2009 and 2010. the defense department has concurred with 28 of these recommendations and partially

concurred with the remaining seven. we have identified the actions taken by the defense department in about 35% of these recommendations. we have made 14 recommendations to the defense department in the current fiscal year and are awaiting a respond. let me add that a critical step in our audit process is to ensure we coordinate sigar's work with other i.g.'s, we'll coordinate with them to make sure we're not duplicating their efforts and as appropriate we'll discuss outcomes with commanders in theater to ebb sure that cost-saving measures are taken as far as possible. let me assure that sigar is moving forward with the department of state, department of defense, grants and cooperative agreements. examining billions of dollars of taxpayer money being spent on foreign soil is a complex and difficult assignment. we welcome the critical nature

of this mission and is deploying the skills and resources necessary to follow the money, generate a greater return for our taxpayers, build a critical investigative case assigned resulting in fines and prosecutions and ensure our objectives are being met. thank you for the tun to testify before you today and i'm prepared to answer any questions you may have. >> thank you, mr. richardson. i'm swapping my time, she'll go first. we'll start with you. >> thank you, chairman. thank you for being here this morning, gentlemen and thanks for the good work you and your staff have done in pursuit of learning and better ex-penture, more effective expenditure of taxpayer dollars. i'd like to start a little bit, maybe, with a question you're not given very often, that's what's going right? i think many of us would agree

that in a contingency, by the very nature of it, you can expect waste when you go into a contingency we don't know a lot about what we're going to face, not really good at setting requirements, we don't have all the people there at the beginning to help. but my question goes a little bit to the cultural issue we were dealing with the last panel and have you seen any recognition or -- on the part of the departments that you work with. let's start with the department of defense. that we really need to change the way we do business. not just with respect to waste, but with respect to cost. more generally. are with getting better at being more effective in the way we spend taxpayer dollars? i'll start with you, blair, if there are specific examples you have, i'd appreciate that. >> we do have a specific example in an audit we're releetsing this year -- this week regarding the u.s. army

corps of engineers. we issued a review of the asset transfer process and found that hundreds of projects were being unilaterally transferred and not being adequately sustained. as the commission addressed, as we've repeatedly said, significant waste can occur if projects we effectively built are not sustained by the iraqis. the audits we'll issue will find that the corps has dramatically improved its asset transfer process and has a system now functioning in iraq that will ensure that the remainder of its projects will be effectively transferred to iraqi control. there is a continuing challenge, though, regarding whether the iraqis will sustain them. >> mr. blair. >> one of the things that we noted in some of the work we did in iraq was related to the area of asset accountability. i know that's not the cost issue you asked about, but with

asset accountability, we found there was a good handle on some of the equipment, but one of the things that comes to mind in the whole idea of transforming a culture in d.o.d. and as was discussed a lot in the last panel, once a culture is in place, it's difficult to change. we're seeing some discussion now, more than before, no longer are seeing first and foremost, i've got the money, i want it on contract, i want it now. but i was at a program management review a couple of weeks ago with the chief, there was discussion about not getting the items immediately but also discussion about the idea that the funds that we once had are going to be more limited in the future than they were before. that's encouraging. that's encouraging to hear that discussion take place.

i'm not ready to say that i've seen positive change yet. i think that's going to take several years to put in place. >> how do you make sure that that discussion you heard is actually carried through and spreads? >> we do discuss this in our audit. we bring it up, how are you particularly going to focus on cost? when we do our audit work, we focus on whether the contract is the appropriate type and whether they're using contracting vehicle that puts the appropriate amount of risk on the contractor and the government so that there is a preference to the cost, or not the cost, a preference to to not time and materials, but a firm, fixed price. >> besides contract type, i know in many cases the auditors are discouraged from asking whether a need is is really a

need or a want. do you question whether or not a need is a need or a want? >> when you look at the contract and requirement determination, we want to see that link between the requirement and the mission requirement. the contract requirement and mission requirement. we haven't got into the detailed question that you're talking about, i think that's something we can include in some work going forward, the commanders, how do you distinguished the prioritization, haw do you distinguish what you need now versus what you want for later. >> it seems to me if we do pursue what you were talking about and commanders having more responsibility for the money they spend, the audit community could be an important supportive mechanism in that case as well. mr. richardson, my question for you would be lessons learned from iraq transferring to afghanistan, are there things you have seen or that you have discussed with your colleagues about cultural change that's

being incorporated by the military units themselves? >> the major lesson learned from iraq is the sustainment issue. in afghanistan, the issue is whether or not the facilities being built, the roads being built, the systems being put in place, the money being spent on the afghan national police and afghan national army are going to be worth it from the standpoint of the ability of the afghan government to sustain these operations. and what we're finding from a cultural standpoint is that while this is a very complex issue, things have been put in place based on the number of reck mebbed mendations we have made over time, the last couple of years, to try to shore up these avenues. >> i would just -- i think if my colleagues don't pursue that

sustainment question with you, i'll come back to it in my second round but i would say that's one of the lessons that has not been learned from iraq to afghanistan given what we've seen there. let me turn to another question, both for you, mr. boe en, and you, mr. richard soren work respect to the state department, we haven't talked a lot about state yet. you both make reference either in your statements or in reports about your -- the difficulty in getting information out of state department with respect to their programs. i guess, mr. richardson, you talk about a review you're doing of the states' transaction -- the state's transaction data in relation to afghanistan and mr. bowen you make reference to a similar request for information about numbers you haven't been able to get. is the state department a harder agency to deal with?

is this acceptable that we don't know what's going on with respect to the state department's operations? >> no, it's not acceptable that we don't know because it's essential that we get the information necessary to do our mission so the congress is informed about how the taxpayers' money is being used. it's a development that's devolved over the last nine months. we've written about it in our quarterly reports. it concerns a reinterpretation at the state department about who is actually involved in reconstruction activity and they have -- they said two quarters ago that only 10 individuals were involved at the embassy in reconstruction. which is not plausible. we tried to get more information about funding used to support the p.r.t.'s, for example, 14 still operating in the field, and we have been -- we're somewhat stymied. this was addressed at a hearing before that, in-house, in march and we did not see an

appreciable improvement this quarter regarding that matter. >> is that because your portfolio is limited to reconstruction? is that why who is involved in reconstruction? >> our portfolio covered all funding for iraq. it's very broadly defined, not just hard reconstruction but the iraq security force fund, the economic support fund, the iraq relief fund, the commanders response perhaps and the i.n.l. fund. that's what >> mr. richardson, do you care to comment? >> we are at the present time coordinating with the state department. but we are making progress. let me back up on the sustainment issue . like we have learned -- based on that is what my response was.

>> that helps. thank you. >> a thank you, mr. chairman. i want to thank all three of you for being here today. thank you for your service and that of your staff. to varying degrees, i found each of your statements profoundly disturbing. that is not a criticism of you or your staff. you accurately laid out the situation. you put it best mr. blair when you say we continue to find the same contract and problems. the department continues to struggle to get it right now in the beginning. and ensure it gets what it pays for. you had a number of very helpful examples. you gave an example of a percentage of cost contract. and the reaction to that is, of course that is a bad deal. that ought to be banned. notwithstanding, you gave an example of such contracts

continually being used. you talk about the need for full and open competition, and yet you gave an example where was insisted upon that there be a sole source contract. i found particularly interesting your example of the chain that you trace back -- kabul airport -- of a price survey, you trace it back five or six times and there actually was not a survey at the beginning. it was the house of sand that was built on here. so, at least to the question of why it, and to me, the real problem here is lack of accountability, lack of accountability on the part of contractors and a lack of accountability on the part of the government to oversee contractors. that is why i spent so much time talking to dr. chancellganr about suspension and debarment. there are plenty of incentives.

the vast amount of money available is incentive enough for the contractors to perform. where we seem to be lacking is on the accountability side. now, you mentioned the investigative work you do. but that deals only with fraud. can you talk a little bit about the need for accountability with regard for waste on the contractors' side and on the government side. start with you mr. blair. >> well, commissioner, your report talks about the idea of incentive as well as the idea, the . and stick. i think that is something we need to have a balance with. there has to be more accountability in the government to ensure we do all the steps cork. there has to be more accountability for the contractors through suspensions. these actions have to happen rapidly.

>> before i get a comment, let me ask another question. in this last example that i mentioned in the survey, a level that you have dealt with apparently as the executive director of the army contract and command and the action that was taken was that acc agreed to do a program management review, and they are going to pursue administrative action against the contract and officers. to me, this seems like a week read. let me ask a quick follow-up question. at what level do you generally deal with at dod? do you deal directly with the secretary of defense, the undersecretary, the deputy secretary of defense, undersecretaries, assistant secretaries, or is it at this level that you are dealing? >> we generally do at the level

you described. we do brief the deputy secretary. i briefed him on the result of some of our work. generally, we tried to address our recommendations to the lowest a corporate level to give that person the opportunity to affect the change. >> that appears from your own testimony not to be that effective. i am trying to gauge to what extent the issues we are here today to talk about. the issues the commission was created to address received top- level attention at the department of defense. i had carte blanche. i was the inspector general at the state department. i have carte blanche, access to the secretary of state, the undersecretary for management. does dod ig have that kind of access? >> we do have that kind of access. on our day-to-day audit work, we tend to work at the lower levels. >> right. the working on a day-to-day

level suggest you are not getting the kind of action that is needed here. i'll leave it. do you have comments? >> yes. to reduce waste in contingencies, you have to have systems and a plan on any place. specifically, well identified, agreed to contract think regulations, well trained personnel, and a recognition that he will not pursue large- scale rebuilding in an insecure and farming. all of these principles were violated in iraq. but the waste that occurred throughout, in periods of insecurity and greater security, stems chiefly from the lack of good quality assurance. that is, individuals that visit sites and ensure that contractors and some our purpose are doing what they're supposed to be doing. >> we agree with that. the question is why are not people accountable for not doing that all these many years in

iraq? debarment that10 we listed in are quarter report. we have 50 convictions of individuals that did violate the standards they were required. but ultimately, implementing lessons learned is the most crucial, long-term form of accountability. we have cut to achieve greater transparency and greater accountability in how the u.s. executes and uses taxpayer dollars. we do not have that now because the overall system has not been sufficiently amended to ensure reasonable insurance that the taxpayer dollars are well spent. >> mr. richards? >> let me speak to your issue of accountability. it is a problem in afghanistan. the issue at hand obviously is that we are in a war zone infested by insurgents, social

security plays a large part. getting people out of the sites to provide necessary oversight becomes critical. the number of qualified people on board to do the oversight is critical. the fact we have moved towards hiring afghan nationals to provide oversight of their own work is an issue. we are looking at that. the fact that we have individuals who have the title but not the skills, to provide the correct oversight is an issue. we are looking at that. we are encouraged by the idea that organizations are currently on the ground, the corps of engineers are taking a very aggressive approach to accountability and have laid out plans to try to increase the level of oversight and have taken the position that they will no longer and lead a construction project ongoing in theyh risk area where

cannot get oversight. it will shut it down or provide security to do it. we are encouraged by general petraeus's statement that the increase the number of departments. we ourselves have recently proposed 26 debarment on individuals on a five different companies. >> thank you very much. >> let me ask one other quick question up close on this. mr. richardson, i wanted to ask about your view of the recommendation in our report. you mentioned about having a special inspector general for contingency operations. bohen is on the record as supporting that. you objected to the notion. you said you generally object to adding extra layers of oversight and duplication and you think there are mechanisms are and a place that can handle

this. the council of inspectors general on integrity and efficiency. the reason we made that recommendation is that, as i am sure you know, the statutory inspector general for dod and state and a.i.d. have jurisdiction only with regard to their agencies. they are not cross just jurisdictional like sigar is. which leads to the second point -- you two are related to those contingencies and will be involved and future contingencies. we are in one right now. >> why don't we have this be part of that second round? >> ok >> mr. blair, what, if anything, happened to the responsible commander in these two cases? >> the commander on the ground? >> who ever the hell was responsible for this? >> i honestly do not know the

answer to that question. >> would you? i had to relieve their butts. this is inexcusable, even if it is only $39,000, which in the grand scheme of things ain'ts a lot of money. that is a commanders responsibility whether it is i nickel whein kuwait, afghanista. you of this and thought it was import enough that you have fancy charts made. which leads me to my concern. i mentioned it with the last panel. and i said that i would ask you guys the same question. what mechanisms and process and do you use it to follow up? and to quote some of your testimony, mr. blair, which has been acknowledged by commissioner irvin, you acknowledged the difficulty and

ensuring corrective action, recurring problems. so what to do? well, they did not fix it. we will go back in next year and give them probably the same report. mr. richardson, in the previous testimony by your predecessor general fields, he explained -- expressed considerable concern, you've addressed it today to some degree about the $11.40 million construction for afghan national security forces, which may go up to 400,000 if you believe all of these numbers. you made some recommendations to cstc-a to develop a long-range maintenance plan for these facilities and essentially their response was, well, we do not have any plans on the number and size and location of these

places. gee, long-term construction is hard. they agreed on the need for a long term operation and maintenance plan. and their solution was to ask for more resources, which is fine, but they probably will not get them. again, -- what do you guys do? because listen, we are going to go away. the two gentlemen on the end will go way or go to a different job. what do we do to follow up? >> you hold hearings, sir. you give the hammer back to the people that hold the hammer. that would be congress. we follow up. do we go back in? yes, we will. we make recommendations? yes. if nothing happens, do we discuss it? do we try to encourage hearings on the order to make changes?

that is a part of our mission to do that. but do we have the hammer? no, sir. >> we're not going to be here. >> your predecessor -- or your successor. >> to me, it just shows a lack of focus or a lack of interest from senior leadership. >> mr. green, one of the things we find consistently is that if we had defied a specific problem, the department will go and a correct that one specific problem. one of the things we see that they do not do very well is a generalized the problem to the entire population. and they do not try to get proactive and broaden that. and one of the things that we are going to start doing more of, you talked about -- we can go back and re-audit. what we are trying to do now is increase our level of outrage at

the higher levels in dod. i'm going to hold a roundtable discussions with senior leaders in procurements to talk with him about our recurring problems. because one of the things i want them to do is to start generalizing and to start looking at the broad universe of contracts that they have and to stop fixing the ones he andies d ies and twosies. hammer. have eththe we have the recommendation. >> the senior people have the hammer. if they care, they have the hammer. >> mr. bohen, comments? >> yes, we are carrying out three audits on exactly this issue, looking at recommendations and follow up. one will be issued in the next couple of days and finding that

u.s.a.i.d. has implemented almost all our recommendations. that is a good audit. our audits on the defense department and the state department will not be as positive. expect one out in july, and the other before october. we have an ongoing recommendation monetary process that looks at this every quarter and pushes for follow-up. so we have seen some response of one of our oversight agencies, and that is good, but to correct the institutional shortfalls that are there, i think ultimately, will require congressional action. >> thank you. >> thank the gentleman. >> thank you. your testimony has a very striking testimony -- your written testimony. "waste in iraq reconstruction

amounted to 10% of total spending, $5.1705032704 dollars. it struck me -- $5 or $6 billion. ." i wanted to know how can we build on this figure? do you think that it is a figure we can bill that as we look at the waist iste in both theatres. does it cover not just buildings but does it cover the iraqi police, the soft stuff? i will ask some questions about the afghan police. tell us about the scale of waste. >> as i point out in the statement, it is virtually impossible to accurately nail waste fiatal gure. it is subject to different

interpretations. in iraq, there was a multiple course changes. it was tantamount to 8 one year programs. through 350 audits we have been able to identify significant ways. this of examples, and we of estimated from that, always figure of 10%, which is between $5,000,000,000.-129503998 dollars. how that translates to afghanistan, i cannot tell. the real waste figure is probably higher, because of sustaining issues that the commission has talked about that i mentioned and my statement. the reality is that a number of significant suspension projects that we transfer to the iraqis have not been well maintained. we issued and evaluation of a water treatment, the single most expensive project the united states executed in iraq. $400 million being used at less

than 15% > that is waste. it's not working. can you yellow book that out to an exact number? no. i think it supports my observation that the factual waste is something that is higher than the $5 billion or $6 billoin. ion. >> mr. blair, i thank your team that briefed us about the study of the afghan national police and the continuing observations you are doing on both the police and the afghan national army . before i get into the details of that report, there was one, the most stunning sum up comment i

heard from the colonel -- did he say that it would be 8-10 years before we can turn over to the afghan security forces the accountability for their own logistics it? do i understand that? >> what he was relating to you was a discussion that he had had with members who were in theater at the time. he was relating their comment to you. so that is not our observation. it is not our estimate. >> i understand. >> that was a comment that was made from a colonel in the theater. >> this is the most sophisticated analysts there are on the subject. what is the problem? the logistical assistance of the afghan police, which i will not go into this point, but we build the physical facilities for them. is not that we don't have the buildings. what is the reason that it is projected that it could take many years before they can stand

up their own logistical system? >> in talking with the people who focus on the report, one of the things they relayed to me was that a big challenge was to get the logistics operations up and running. it has not been a primary emphasis on in afghanistan until recently. and so the development of a live justice system lagged behind the need to have more fighters - so the development of an logistics system legs behind the need to have more fighters. it started later. >> by logistics, we are talking about munitions, small arms, light machine guns, rocket-propelled grenades. this is not your average small town police force on a the united states giving out parking tickets. if i understand what your report said, without such a system, first of all, we will face

waste, fraud, and abuse , because what flows of the system happens to be valuable? >> yes. >> but secondly, will we be able to have operational forces? remember, the police are half of security forces in the hold and build effort we are making, they are the ones that is supposed to hold the area. we are going to send them into the taliban areas. how long with the ansf last without and operational logistics system of this kind? you tell me . >> i do not recall what his statement was. >> this isn't a closed book test. he said it would give us three days if they did not have the distance. i will leave it at that. but my point is, both waste fraud and abuse and they need

the support to operate in the field? am i right? >> that is correct. they need that operational support request ok. . >> ok. another aspect of it. a march, 2010 newsweek story which did a thorough survey of the police said "crooked afghan cops supply most of the ammunition used by the taliban in helmand. the bullets and rocket-propelled grenades sold other cops are cheaper and better quality than the ammunition at local markets." is there a danger that we will continue supplying the enemy if we do not have a functioning logistics system to do oversight? >> i am not aware of the director -- of us directly supplying the enemy at this point. i know there is an need to put a logistics force on a place and processes in place as soon as possible.

and a sustainable logistics process at that. >> ok. one quick question to sigar, you have an afghan national police study which i believe becomes final almost this very minute. will we be able to discuss that in the next round? >> certainly. >> thank you. >> my 8 minutes yield to the follow-up to mr. urban's question. i look for a brief answers. >> my question to you, mr. richardson, is used -- using up to support the notion of a special inspector general for future contingency programs. he said the reason was that he did not want to add another layer when he would be going away. whereas pcia is not relevant here. i did not understand your

opposition. >> my opposition is based on my car -- understanding of that position. my understanding of that position is that it would provide the continuity between existing iraq, afghan and whatever of that war zones, where everyoneine, would report to that particular component and provide some level of continuity between multiple war zones. in order to do that, that component would have to be staffed and funded. i see that as another layer and another cost to the taxpayers, when the issue is not continuity but collaboration. i felt collaboration could be achieved in the existing framework of the council inspectors general for efficiency and effectiveness, the way it was done when the request went in for them to look at the issue in katrina. the way it was done one requests

went in to say, let's look at -- >> mr. bohen, you support the notion. >> i think you've articulated it well. the office would have cross jurisdictional capacity. we do not know when these contingencies happen. they occur suddenly. one may be unfolding out in north africa. are the resources find a place for wreckage and -- execution of rapid oversight? no, they're not. the lesson learned from iraq, and not quite from afghanistan since oversight did not start until a couple of years ago, is that you have to have that oversight there from the beginning to ensure compliance with the regulatory requirements. more importantly, it promotes more efficient execution of the program and improves the likelihood of success and protection of national security. >> can i just get mr. blair's view? mr.i tend to agree with

richardson. that the implementation of another layer of bureaucracy or oversight rather than maximizing the cooperation between existing inspector generals, i am not convinced we need to go to that step yet. >> let me reclaim my time. we set up a special prosecutor because the inspectors general were not doing their job. >> i assume that -- i was on the government oversight committee when we did it. frankly, you did your job currently, maybe two briefly because it became too much of a force and to much of a contrast to the other inspectors general. frankly, you became a target. i cannot understand for the life of me why congress did not give mr. richardson, the sigar element, the same powers you had. you had broader reach, correct? >> i think he did get the same powers. he did not get the same funding.

that was the challenge. >> the challenge is that it to keep a little bit to get set up because he started, and we kind of just mr. fields on instant replay. there was a sense that some how, how come he was not producing what sigar was right away? it did to kill a little time to get started, correct? -- it did take you a little bit of time. >> we were shut down and then were told to start up again. that first year was a challenge. u.s.a.i.d. were fabulous. mr. blair, you are only dod. you are only a certain part. you cannot look at u.s.a.i.d. and state i need the same way, correct? >> ar mandate does give us authority. >> i said it incorrectly. you do have the ability. but the d.o.d. folks,

u.s.a.i.d., they have the tunnel. sometimes there is the need to go on a different direction. my own view is that a little competition does not hurt. what was so interesting when mr. bohen when into this effort, we said, how, and other inspectors general did not do what he was doing? and then they started to. there are two sides. you have been long time with inspectors general's offices? >> 16 years with the department of energy. >> thank you for that service. the question i would like to ask you. i may be incorrect, and we may need to redo this. i need you to define for me the whole concept of debarment. you are basically saying if you are the chairmen, when i asked mr. gansler to give me five cases, i did not want to trick him. but you have along list. are these recommended debarment or small or big companies?

>> actual departments, some were operating on large contracts. global business services. had many, many contracts when we caught him on a massive fraud. >> so the company was shut down? >> yes. it was debarred and the company went bankrupt. the dynamics, another one doing it mass of logistics work with pwc. allied armor, another one that was shut down because of the debarment. shut down because of their flagrant waly -- >> you would take issue with our comments on that department? >> your february 8 hearing was the most compelling argument for reform regarding the position of a better suspension and

debarment program. the colloquy that occurred during that two hours exposed significant weaknesses that have to be repaired. the interagency peace was not working. the army has done a decent job. has a stake and a.i.d.? no. -- has state and a.i.d? no. it did not provide much confidence. >> you would take issue with my describing there have not been many. your issue would be there have been, but there are weaknesses in this system. and that would be a better line for me to look at then saying it is just not happening and the. >> exactly right. yes, sir paired >> i would agree with what he just said. there have been some debarment, but i think that the department needs to increase the intention in that area. >> mr. richardson? >> i can only speak for afghanistan.

in afghanistan, i think we have only recently started down that road. we probably should have started two years ago. but since we started down that road, as i indicated, we debarred 26 individuals in five companies. >> let me clarify have they actually been debarred? >> no. we proposed it to d.o.d.. they have the final authority. >> have they accepted it? >> i am not sure. >> i do not want to mix your recommendations of versus what happened. so my time is expired. i will get the second round. >> we have four of five accepted. >> thank you for that. >> thank you, chairman. mr. blair, i would like to turn up -- to a couple of reports your office issued on the materials contracts on a southwest asia. when you did for the army and one for the air force.

a couple of findings caught my attention. i am happy you are looking at tnm the contracts. in your findings, for the air force, you talked about faulty construction work as a result that in fires in barracks. you talked about $24.3 million on a cost that we had to pay for that we did not agree to. i would put that on a the category of waste. for the army side, you talked about similar wasted money. but i think the issue that struck me is in the response from the agencies to your findings. and it sounds like they do not think there is a problem here. two questions that come to mind. one are these areas where we should not have contracts if the

agencies themselves and do not think it is important to manage them and get fair value for what we spend it? the number 2 below, am i reading this correctly that they really are not interested recovering the money? they do not believe the government should do that? >> the answer to your first question time and material contracts are the riskiest ones. a show of the oversight was not in place. to say we should not use contractors at all i think is a bit extreme. but to say that the department needs to step up, the level of oversight for those contracts is definitely the case. and that oversight has to be a proper. you cannot have the people i need united states providing oversight for t &m contracts in asia. that is not affected.

>> and the $30 million, that is not worth going after? >> that seems to be their position. we would disagree. it is a lot of money occurred >> i would agree with that, too. i think most people would agree as well. in another report that you did on training and equipping, let me follow up. what are you going to do about that? >> we are in the process of planning our next year's work. and identifying those reports we want to follow up on. we want to get a mixture of reports that we will do the follow-up that have ongoing activity going forward so that we can see that not only did we collect from the sins of the past but that we can correct things going for. so we are trying to get a mixture of the two. we are in the process of identifying which contracts we will follow up on. >> can you go after a budget that somebody has, the air force and army, and take the $30 million of what they have to spend on and the future? >> we do not have that authority. >> would you like to have that

authority? have to take that one for the record. >> you also have a report and and march of this year on an afghan -- afghan national police. there you talk about the need for more people to oversee this contract. this is arguably the most important contract we have in afghanistan and the department has not been willing to put people in place. i think in the report, you say that you did get a better response. -- from the vice chairman, i guess, who has said, yes we need to do it. we have seen as i did the past. requests have gone forward for more personnel and they are not forthcoming. it is only going to get harder to get these kinds of people i times of budgetary decreases. what we do about that?

>> i want to make sure we do not just focus on numbers. it is not just that there are not enough people, even to the point where the people there are not being used effectively. when they do not have the detail quality assurance plan at that they can use to really do a detailed evaluation of the contract's performance and when we reward incentive fees without doing the appropriate oversight to determined that the contractor actually earned those fees for performing above the minimum, those are the types of examples that give me the idea that it is not just a numbers game. it is the utilization of the contractors and the contract oversight that has to be both together. >> do you ever get the feeling you are writing the same report over and over and over? >> yes, ma'am, we do. >> i sympathize with that. mr. richardson, i want to take

on one of your reports looking at the commanders emergency response program for some of the same issues. you've talked about the fact that in this case, the u.s. forces afghanistan accepted your recommendations, but they said, we can except what you are recommending for us but really the intended recipients to not have the dollars to maintain the facilities or the skills to operate them. is this a case where we should not be spending that money on a the first place? >> it can be looked at to wait. ys. either we should not be spending the money or there should be increased a preparation. that becomes problematic because we continue to pour more money behind bad money. >> it sounds like we should not be doing it in the first place. >> that is a political decision. >> it sounds like we should not be doing it on a the first place. that is my time, thank you.

>> thank you. mr. irvin. >> as usual, i thought your statement was terrific. i agree with 99% of it. i thought a number of the comments he made were well set, like the comment that there was not one 8 year program but 8 one year programs. you said on page two of your statement that outsourcing management to contractors should be limited because it complicates lines of authority. i would have thought your position, like mine, would be that outsourcing management to contractors should never occur. i cannot conceive any circumstances under which that is a proper. can you explain? >> perhaps commissioner, you have a more exact analysis. i think we are in general agreement on this point. there may be particular at narrow circumstances hwwhere

outsourcing may be appropriate. however, our work supports the general principle and your reportingin your that contracts -- management contractors need to be done by government officials. for example, during the cpa, the government hired a-ecomm to oversee the 12 contractors. it was also bidding on other contracts in iraq. that problem was alluded to by the previous panel. it was present front and center. so we generally agree. >> i do. i think the principle articulator is exactly right, that contractors should not be overseeing contractor is in a larger management sense. we have not already, and it is a problem. the law needs to address that.

>> quickly, mr. richardson, m.r estimate ofe is an waste. he said he cannot have an exact figure. he said whatever the figure is, it will be higher because of the sustain an issue. but i do not see a sigar effort to ascertain the degree of waste to this point. have you done any work on a this regard? do you have anything to say about that at this point? >> we have a number of individual audits that have reflected waste over the entire scheme of the total budget process. it shows $5 million, 20 million, 50 million. the problem is not so much whether or not we gave cost overruns of $10 million on this project or could not by a generator for a power plan that cost us $10 million. the problem is sustainment. if we do not meet the requirements necessary to

sustain this operation, then we're talking billions of dollars on a waste. when we get to the point where mr. bohen is, six years into the process, then i will be able to give you a figure. >> i was struck by a your statement by your pointing out that there is no government program to review the fate of project after return them over to iraq when we leave at the end of this year. i was struck by that. can you elaborate? i presume that you tried to get -- bring that back to the attention of senior leadership in a state and a.i.d.. >> week urged that a coordinated effort for improved asset transfer -- we urged that a coordinated effort for improved asset transfer be implemented. the next level i am alluding to there is that, beyond just insuring their body and and that the proper transfer of assets is

what we did in our evaluation last fall. pullback two years later and find out what is going on with that -- go back to years later and find out what is going on with the project. >> so have these three agencies agreed to do that? >> no. i think there is a missing element within the agency community to do evaluations of work. the entire evaluation's area should be expanded. >> i'm done. >> with the kurdish project? >> it's good. >> i would be surprised if he did not find it being run well. >> operating at 85%. the kurds love it. it is a study on the the nature of the iraq reconstruction program. the kurdish project turned

out well. >> if i heard you correctly, to go back to this contingency, special i.g., you both may have characterized it as extra layers, detrimental, etc. i can understand, mr. blair, where you may be coming from because these guys make it in your rice bowl, and you may feel, i am doing that. go away. mr. richardson, d you feel that sigar operations are allaire and detrimental to the operation? if you do, i do not know why you are in business. >> i'm not saying siaggar is a layer. i am saying if you put a layer

above that, that creates a drain of additional resources. >> i do not think that is what we are thinking about. when and if you two guys go on a business, we need to have a plan and the next balloon goes up. that is all i am saying. i am not saying put somebody in over you guys. that ishat was implied, not the case. support it? >> no, no. it makes more sense, but at the same time, i would say that are we sending a signal that we intend, from here on out --? >> i've heard that argument. that is the same is saying, let's plan for any contingency

prepa. i don't buy that argument. >> that argument only does not count if he did not have a counsel for inspectors general on a place that could fulfil the role. >> mr. blair. commissioner irvin's comment about when he was ig at state, he had access to the secretary or deputy. if he failed there, i would carry his water to them. what if you have a dedicated time, 30 minutes a month with the deputy, where you could raise the two or three most important issues confronting you? would that be useful? >> mr. green, i do not mean to imply that we do not have access to the senior bishop in the department. i just wanted to clarify that most of our day-to-day work is done at lower levels.

a 30 minute dedicated time? i would enjoy that. i think that would be a good use of my time and their time. i oftentimes go with the inspector general to brief the deputy secretary. and participate as part of his recurring meetings. >> 30 minutes of time ain't a lot, even for the deputy. last question. pretty simple. we have talked throughout this hearing and the panel before about fall throughollow through. we all acknowledge that we are going away at some point. how do we as a commission maximize a follow-through on whatever recommendations, whatever findings that we may ultimately feel are worth pursuing? >> commissioner, first of all, recommendation to

get by and from the congress to implement into law ought that are targeted towards a statutory change. i might include that as a appendices certain statutory mn laws. help them do their job. give them a road map to statutory change, rather than a principal. second, i would take those proposed pieces of legislation and perhaps before you even published and vet them with the departments. sit down with a leadership that are familiar with the changes you are proposing and see if they can improve it through advice and interest. >> thank you. mr. blair? >> i tend to agree. the idea of establishing some

fall on recommendations with responsibility for somebody to actually assess the level of implementation of those recommendations is a very good way to make sure that there is some change. >> as a jack gansler said, he came back a year later and said, army, you are succeeding or failing in these areas. mr. richardson? >> you do would you have been telling us to do. you call the heads of the agencies here and put them at this table. you put out your recommendations, and you make them respond to them. get your 30 minutes right here at the table. and make them take actions for implementation on those recommendations. either that or develop a contingency plans to you have somebody over you. >> ok, thank you. mr.i'm going to say, richardson, i will give you a

warning. you talked to both sides of the answer. you think of a better answer when it is my turn. minutes, yielded back on the first round. >> mr. richardson, today my understanding is that you are releasing a new a path-breaking and much-awaited report on the afghan at national police payroll and workforce system. >> that is correct . >> let me ask you. your written testimony today "its personal -- > system provides little assurance that only anp personnel are paid. significant risks of fraud,

waste, and abuse of donor funds will continue." can you tell me, what are those "significant risk of fraud, waste, and abuse," and do they include things commented on the i nthn the past? awol police, absentee? what's the beef? >> the risk of that we are finding is that there is no centralized system. in place by the ministry of interior to identify the afghan national police on the rolls into are being paid. with of that type of system, they cannot specifically and they have not specifically been able to tell us where the money is actually going. what does that mean? it means you could have ghost employees. it means you can have awol

employees, individuals who are under multiple names collecting paychecks. there is no way to account for it. therein lies a very significant problem now and down the road. >> good. for's a good start discussion. let me take you to step further. your statement said that this was one of the "a key issue as we approach the handover." i think by that you are referring to the fact that in 2014, we hope to be able to hand over security throughout afghanistan to their security forces so that and 2015 we can substantially bring home our people. the figures -- i was in afghanistan with the chairman last month -- and the figures we heard a word that the previous goal of 134,000 police by

october was now being likely supplanted by a new goal of 170,000 police by 2012. or why is the problem that we do not know who is working among the police, among those who are paid, a key issue as we approach the handover? >> it is a somewhat obvious. if you do not know who you are paying and do not know who is there, how can the numbers be accurate? simple mathematics. the other question arises -- if we are paying those employees or are we paying employees to go awol with equipment and weapons and material and come back with nothing? what happened to the supplies they took with them? are they supplying insurgents? the question is evolving. so for them to say that we will have x number of thousands of

personnel on the ground. until we can specifically identify these individuals are there on the payroll and being paid and doing what we have cast them to do, then those numbers and for all practical purposes become somewhat fictitious. >> wow. let me come back to you, after the observation that there is an overlap between what the dod ig said earlier about a week logistical system for the police and what you are saying about the weak personnel system. as you said, when they go awol, they can take their weapons with them. that is where the beef is at the district level. they know what is coming in at the top. they do not know what is coming in at the bottom.

a year ago, when newsweek did its report on the afghan police, they said, "the fact is that no one is quite sure how many afghan police there really are. the americans are only now in the process of trying to create a database that will positively identify and track records. without such data, it is more than difficult to catch the coast troops who exist only as names on the payroll, not to mention possible taliban infiltrators." the database was held up a year ago as a secure to the problem. are there still problems with the database? why do we not have a working data plabase? >> i am not in a position to answer that. i do not think we have done any work to follow up on what was reported and "newsweek." >> fair enough. they need to do a news story on that.

i look forward to reading a copy. i was not allowed to see a copy of this report. i am eager to do so. beatenen, we've been around the head and shoulders about our recommendation that suspension-debarment be taken seriously. the leading case we looked at for where it is not being used was one that you are very familiar with. it was the louis berger conviction of two top people which your office worked hard on, its ceo, cfo, a billion dollar company. the idea fought us and said, they were right. there did not need to be one day of suspension or debarment -- a.i.d. fought us. are we off-base on this? >> no, you're not. as i said, your february 28

hearing fully substantiated that you are right on base. this is a critical area that needs to be strengthened across agencies. the reality is that that hearing exposed a.i.d. has done a miserable job. part of the problem that allowed berger to engage and false billings for so long was because of weak oversight in afghanistan. it is not for lack of people raising red flags. senator coburn repeatedly issued statements about his concerns regarding berger's conduct or lack of effective work. let me cut to the chase. when a company is convicted, they should be debarred. i am not aware of another circumstance were convicted

company was not debarred. it serves as a basis for debarment. don't know, other than to speculate that it was part of the plea agreement with the company, to avoid debarment. i think it underscores an interesting fact that companies fear debarment more than conviction. >> thank you. >> mr. richardson, based on your opposition to a special inspector general for contingencies, and given that sigar is a special inspector general for a contingency afghanistan, should we get rid of sigar? >> no, sir. >> ok. let me ask you, mr. bohen. let me ask all of you. do you have any closing comments

he would like to make? >> yes. first, thank you for having me to testify. as i said on and my statement, i think the commission pose a report this fall of crucial recommendations that should be implemented at law. our previous colloquy on that would be useful. change will come. lessons will be applied. departments getting followed up with a year later, that may not be enough. changing the law changes behavior. and i think, from a larger perspective, as you know, we still do not know who is a eallyi in charge, who's accountable. that is part of the continuing problem over these many years regarding iraq and afghanistan. we propose in ar statement a solution. somethg