that is what the artificial pancreas is. host: gene as type 1 diabetes. caller: thanks for having this discussion today. it boils down to personal responsibility. the man from kansas was absolutely correct. like himself, i have been insulin-dependent since 15, and i'm really in good shape. i am building a house, in fact, right out physical activity is something you have to do. the man from kansas and a couple of other colors are absolutely correct. big pharma in this country has fought against any type of health care reform, has made it very expensive. the cost of insulin has increased from about $32 a vial to over $50 a vial.

since the health care bill was passed in congress, it is impossible for me to believe that insulin production costs have increased over 100%, or route 100% -- or around 100%. something is going on, and i think it is called greed. i would like the commentators and addressed the issue of healthcare in this country -- if you are willing to provide it people like me with any type of reasonable health care coverage -- they are allowed to continue their criminal behavior. guest: you mentioned that pharmaceuticals opposing health- care reform. that is not the case. we want to make sure that everybody has access to affordable health insurance. we are very much supportive of that . your comment about greed, i just

don't agree with that. and a standby people have that perspective, but that is not -- i understand why people have that perspective, but that is not what our companies are about. the government needs to continue to support biotech and the pharmaceutical industry with the or types of regulatory policies and tax policies so that our companies can create products that improve the lives of people with type 1 diabetes. as i said, i have a daughter who has it, i know how you feel, i know the cost and the toll it takes on the family indic -- family and the kid. it is the biotech industry that is doing all the work to make sure that treatments improve over the course of our lifetime. host: back to the phones. thomas on the line for democrats. caller: i want to thank everybody who works for c-span

for breeding programs like this -- bring in programs like this to us. i am a diabetic and i have been talking to other diabetics, and they say i might be able to call off might insulin at night. if so, when? host: thomas, we are going to leave it there. guest: i cannot comment on any kind of medical care per se, but it is best to consult with your health care provider. every individual has a different experience with diabetes. treatment does need to be individualized. this is a tough disease to manage. it is a big burden, whether you have the disease or you have a family member with this disease. host: we will have to leave it there. dr. richard insel and scott whitaker, thank you for being on the program. we are going to go live to the

senate homeland security subcommittee hearing on afghanistan reconstruction contracts. this being chaired by senator claire mccaskill, democrat of missouri. [captioning performed by national captioning institute] >> there were decisions made that were made with a myopic look at the mission, not a realistic look at security and sustainability and competency in terms of available personnel to continue whatever money we were spending on reconstruction. i always point out that the contract is probably -- if you read the initial log kept contract, if you look at everything wrong with contrasting, that would be the poster child. people may not remember that the estimates for that contract for the first year were supposed to be under $1 billion. the first year that contract

cost us $20 billion. that is just one example. i'm going to try to focus today on reconstruction contracts. the sad thing about this hearing is i have been hopeful, back in 2007 that by this year we would have done a lot to overcome some of the problems in the construction contract in. this hearing does not make me feel good about the progress we have made. there has been some progress, but the american people cannot afford this anymore. in next year plus budget from the president has requested $17.3 billion for reconstruction contracts in afghanistan. that is a big number if the united states of america was humming along. that is a big number if our roads were not crumbling because we do not have the money to fix them. that is a big number if we are not looking at cutting many programs that are essential to

the health and welfare of this nation. but in light of the fact that we are facing the fiscal problems we are in this country, that is an enormous number. that is going to go into the country of afghanistan to build roads, to build public structures, whether they are schools or other public structures, and i think it has now become an urgent matter for this congress and to look seriously at whether or not that kind of reconstruction money is absolutely essential to our mission in afghanistan. i think if you look at the lessons that we have learned in the past in afghanistan and iraq that the government has been very slow to apply this lesson. and i'm not sure that the implementation of afghan first is not leading to the outcomes that would make any american

proud. i'm not sure that the government contractors have taken steps necessary to provide transparency and accountability that we have to demand in light of the incredible difficult decisions that we are faced with in terms of our fiscal picture in this country. this is the 10th year, and we have spent over $61 billion total already on reconstruction. the vast majority of this spending has been to contractors. defense department and usaid are primarily responsible for this. no one is totally responsible. there is no one that i can really find that wants to say i am responsible. in fact, i will be surprised if i do not hear testimony today from people who say i'm not really responsible. it is time that somebody is responsible for money that is spent on roads that will not

ever be sustained and for buildings and electrical power facilities that are built that no one there even knows how to use, much less access the power that supposedly we are going to provide. it is time for someone to step forward and say i am responsible, i'm the one planning these projects. i'm the one certifying sustainability. the department of defense is not even certifying sustainability, and we all know that the -- i remember at the beginning we talked about surp. here is what it was a posted a pair it was supposed to be walking-around money, used by various units on the ground in iraq. that are sergeants was on the ground in the community and he knows was -- and the window of

his store is broken. we need to be the sergeant to say to the storeowner i have the money to fix your window. that is the kind of thing that provides stability, wins the hearts and minds of the community. we have gone from burke in store windows -- broken store windows to hundreds of millions in construction projects. meanwhile, no one has taken ownership of what is the difference between the id in theties of a i department of defense responsibilities in large part responsible for the construction. sustainability will be the key issue we talked about today, and it will be something that i think is very important that we get our arms around. inadequate contrack and management practices -- once again, we will cover the ground.

contractors overseeing contractors, obviously transparency and overseeing personnel. are the course getting better training now? yes, they are. i congratulate general caldwell and others that have work and doing better, but we still are not where we need to be. i do not think anyone in this room will have an argument that it is not where it should be. we are getting a one-your turn right now.id when we embrace a constant turnover like we have theater, we are going to have bad things happen. we will have problems that are going to occur because the beginning of the project will not have any idea what the end of the project looks like and vice versa.

security challenges. that obviously remains a big problem. i think that we are going to have to try to dig through all of those problems today. i will tell you that if we do not get some strong, substantive answers, that every dime spent in afghanistan on reconstruction is being spent wisely and being spent with the kind of oversight that we would expect if we were building a highway down the road in the united states of america. i think it is time we focus on a mission where we are training security forces and working to provide stability against taliban and the kind of structure that we need to support going after al qaeda on the border of pakistan and afghanistan. perhaps it is time to shut down $17 billion worth of money going for reconstruction projects when our track record really stings when it comes to

reconstruction projects. i hope that you all will convince me that i have become cynical and angry and frustrated about the way we are spending money in theater. i am looking for good news, and i hope we hear some today. but i think it is time for a guest check because i have too many people in missouri saying why can we fix this road? then i look at the practice we are building in afghanistan and it is hard to explain to them why we cannot fix that road. because we cannot afford it, but yet we can throw money away in afghanistan on projects that are not sustainable. if anybody had spent time thinking about it in the first place, they would have realized that. that kind of accountability has to be present. i am pleased that we have a number of witnesses today that are going to testify to contracting in theater. let me say this is -- good, the

senator is here. i will give him time to get settled and we will continue to provide oversight in this arena. i think it is a place we need to draw the country's attention. we need to draw congress'' attention. we can certainly bring the department of defense, the department of state to these problems, and we need to begin to do one of two things. do it right or stop doing it. i will turn it over to senator portman for his opening statement. >> thank you. i appreciate you holding the hearing today. it is an incredibly important topic given the resources we are devoting to afghanistan. i was there a month or so ago and visited with our soldiers and marines and also with some of the federal government agencies on site and some of the contractors. i know the subcommittee under

your leadership has done some of the most diligent and searching oversight of reconstruction and development of the past several years. it is critical work, and i am pleased to join you as your ranking member. this comes on the heels of a major announcement last week concerning the u.s. mission in afghanistan. the president announced his intention -- his intention to withdraw the 30,000 so-called search troops with the first 10,000 coming out at the end of the year. i have noted some of my lack of clarity regarding strategic objectives in afghanistan. we are in a critical planning window with respect to the military and civilian mission in afghanistan. today we have 154,000 private contractors working for the defense and state department,

a.i.d. in afghanistan. the efficiency assumes new urgency as we near the surge drawdown and the planned 2014 transition to afghan-led security. it is a timely discussion given our fiscal problems and the fiscal crisis at our doorstep. over the past 9.5 years, our military servicemen and women have done everything they have been asked to do and more in afghanistan. they have performed remarkably well, and with bravery and extraordinary skill under tough conditions. given our reconstruction efforts, in afghanistan, which are incredibly important to the sustainability of this effort, we need to be sure that what we are doing is right, that we are consolidating some of the hard- earned gains that we have achieved. the counterinsurgency strategy that was outlined by president

obama has been to clear, hold, build, and ultimately transfer. as we reach the transfer stage, we have to leave behind a more functioning society and economy, , constitutional, stable government that is capable of withstanding the radical taliban and other elements. one of my questions, madam chair, is going to be questioning the sustainability of the efforts. congress has appropriated over $60 billion for relief and reconstruction in afghanistan. the great majority of which has been channeled through private contractors. we know from experience in bosnia in the 1990's and more recently in iraq that a reduction in troop levels as not mean a drop in contractor

activity. in some cases, it is a matter of increase. there has been increase reliance on contractors to fulfill the logistical roles once performed by the military in those instances. eventually, the contractor presence will also decrease as we move support of large-scale off-budget scanned it -- spending to more direct to the afghan government directly. this is why our reconstruction strategy must focus on insuring that afghans can sustain what we have helped build. how many additional schools and health, as we can construct, but also that there are teachers and health care officials to sustain those institutions. whether afghans have the resources and expertise to manage the long-term operation and maintenance of power plants. on a related note, as we encourage more contracting with local afghan firms under the

afghan first policy, we must consider seriously revamping the process for vetting contractors to ensure they do not pose security risks. reconstruction is a critical component of our counter insurgency strategy, and dollars must never be diverted to support terrorists or in certain elements. that is one of the concerns i have as we go through this afghan first policy. we should have no illusions that afghan will be made -- that afghanistan will be immediately capable of standing alone. according to a world bank estimates, as many -- as much as 97% of afghan gdp is spent on military and military presence. that will not disappear with the drawdown of troops. reconstruction efforts must be focused on empowering afghans

to regain control of their future. i look forward to the hearing today and specifically the discussion about reconstruction contracts, lessons we have learned, and ongoing problems. thank you. >> let me introduce, if we could have both of our witnesses -- is it mr. hakki? would you mind taking a seat? did i pronounce it correctly? >> hakki. >> that will be easy for me to remember. let me introduce the two witnesses. larry walker is the president of louis berger group, an international consulting company that holds large contract with usaid in afghanistan. he is responsible for providing strategic direction for the firm for the successful completion of its programs.

he oversees the development of strategic operating plans for each business unit and oversees the implementation of company- wide initiatives. thank you for being here, mr. walker. mr. hakki is currently the chief executive officer of contract international inc., which holds millions of dollars of contracts in afghanistan. he has been responsible for overseeing operations of the u.s. headquarters office. his responsibilities include oversight of u.s. material procurement, engineering and quality control, shipping logistics' and monitoring of administrative personnel. he has been in the construction business for nearly 30 years. i look forward to both of you coming to that. i'm glad you're both here today and i look forward to your testimony. it is the custom of the committee to swear in all witnesses that come before us.

please stand and raise your right hand. do you swear the testimony will be the truth, the whole truth, and nothing but the truth, so help you god? thank you both. mr. walker? >> chairman mccaskill, members of the subcommittee, i am larry walker, president of the louis berger group. i appreciate the opportunity to provide perspectives on the highway project and our observations concerning reconstruction projects in afghanistan. it is an international consulting firm of approximately 3000 employees around the world. we provide expertise including engineering, program and construction management, and economic development services. many projects are carried out in some of the most challenging regions of the world. obg first began working in afghanistan in the 1970's and was one of the first to enter afghanistan after the september

11 attacks. i worked mainly with restructuring of the afghanistan infrastructure. we have provided nearly 40 house jobs to afghanistan people and trained thousands more. we have constructed more than 90 schools. the improved road network has dramatically decreased transit times, which has spread economic development along the road corridors and provided access to education and health care. i have traveled them myself and i can say that the work has improved the quality of life in afghanistan. the coast highway is a critical commercial link. the road provides reliable transportation throughout the border province to kabul. i want to say a few words about the circumstances surrounding the reconstruction of the roads. as the picture shows, the

topographical in geological features of this area where the work has occurred are some of the most challenging we have faced in afghanistan. the degraded security environment has made this the most dangerous project the company has attempted. we suffered 21 killed, 51 wounded, and four missing. security as a percentage of the overall project cost is around 30%. to compare other parts of afghanistan, the security costs averaged 8% to 10%. the project has experienced one of the 47 direct attacks, 108 direct ied's, and 40 other mine explosions. the lack of existing infrastructure and technical capacity, the need for capacity building, and the defacto war zone all work against measuring

success, scopes schedule, and budget. for the afghan people, to protect the significant investment made by the tax pair in america and other donors -- before the contract existed, the louis berger group provided training for subcontractors and employees and we continue to do so. this has been at the heart of our work for more than 40 years. the ultimate sustainability of many projects in afghanistan will generate enough revenue to provide the workers and materials that will be needed in order to maintain and sustain projects we and other companies have completed. the security environment increases the importance of communication between the contractor and the government. we have worked hard to communicate with the contract in officers, technical staff, as well as u.s. military to address security related issues as they arise. the rich -- the group has helped

to improve the physical, social infrastructure of afghanistan. most recently to discuss the recommendations found with the recent report. we support several of the commission recommendations including integrating contracts to expand and improve the qualifications and experience level of acquisition personnel, expanding competition requirements, and requiring oversight of contingency contract. lbg applauds the efforts of the commission and the subcommittee to improve the manner in which the united states towards an overseas contracts in complex environments. and the focus on sustainability of our reconstruction programs. we strive to deliver quality construction in a timely fashion. the company and our employees do this work because we have seen the tangible improvements in the

lives of the afghan people that result from our work. thank you. >> thank you, mr. walker. mr. hakki? >> i'm sorry? ok. chairman mccaskill, ranking member portman, distinguished members of the subcommittee -- on behalf of contract international, -- on behalf of contrack international, i applaud the reconstruction efforts in afghanistan over the past nine years. we share your interest in examining how the government can bring greater efficiency, transparency, and accountability to the construction contracting process. we believe these goals can help everyone deliver projects on schedule within budget and that are sustainable. contrack has operated since

1985 as a privately owned corporation headquartered in mclean, virginia. i joined the company in 1994 as executive vice president and was appointed ceo in december of 2010. contrack operates out of egypt and afghanistan. would provide engineering procurement and prescription -- construction services as well as facilities operations and maintenance. our focus primarily is on military institutional -- military, institutional, and infrastructure projects throughout africa, the middle east, and central asia. over the past nine years, contrack has completed $1.5 billion worth of fast track design built projects in afghanistan for the u.s. army corps of engineers and the air force. and working as a prime contractor, we have constructed

brigades and usa coalition forces brigades, air fields, ammunition supply points, fuel storage and supply systems, forward-operating bases and other facilities. we are also awarded a contract to the permanent operation and maintenance services required to perform work on numerous ana rights and afghanistan. it is somewhat different than most contractors in that we self perform the majority of our work rather than acting purely as a construction manager. contrack has been a vital partner with the corps of engineers in accomplishing the mission statement to provide sustainable development projects for the afghan people that employ the populace and promote the future stability of afghanistan. in order to utilize the local

labor force, the majority of afghans must be trained in a skill. to accomplish this task order, contrack set up a training center to train and educate the afghans on a variety of construction trades. to date, we have graduated more than 3000 students, most of whom are still employed by contrack. as a prime contractor, we foster relationships with local firms so they can succeed. this requires ongoing training and guidance concerning u.s. technical and contractual requirements and obligations. under the challenges that we are still facing over there, we have contracting with foreign contractors. afghan and international contractors often received contracts which are more than they can handle. many of them are not familiar with u.s. contract requirements.

unfortunately, we share the perception and -- in the international community that there is an uneven playing field and that foreign contractors are not subject typically to the same standards as u.s. contractors. these include safety, ethics, bonding, requirements to establish workers protection in the interest of the u.s. government. we believe the corps of engineers has begun recognizing the risks in awarding projects to foreign firms based on low price only. for example, the government recently awarded a contract to 14 firms, all of which are american firms. future task holders will be competing among the 14 firms only.

we appreciate the difficulties faced by the government and commend the professional manner in which so many contrack personnel perform their work in a hostile region. however, the for interpretation of core field staff have treated challenges to the contractor and the government. for example, delays in resolving contract modifications due to government contracting officers and related personnel causes delays in payment to the contractors. similarly, high turnover of personnel in the field cause delays in the submission of the evaluations. quality at the job site is overseen by the qa representatives. they are experienced in other trades, but they lack sufficient training to understand and enforce technical requirements of the contract they are assigned to. lack of partnering between the contractor and the court is

another unfortunate result of the personnel turnover. contrack has participated in numerous partnering sessions with the corps. we believe these sessions have contributed the success of the projects in those regions. however, in nine years in afghanistan and after completing over 50 projects, we have had only one partnering session with the corps. the high turnover indicates the difficulty. this often causes delays to the project and cost overruns. sometimes the end users requirements are not always understood. for example, early part in projects -- the contractor and the facility and user would really help parties to achieve the end user design goals.

transportation and logistics. the high volume of cargo creates delays at the base entry patrol points. meanwhile, border politics can block or delay shipments of material at the project sites make matters even worse. working with the afghan ministries is a challenge. the afghans change procedure on a regular basis. require for tax exemption documentation, lack of stability, is further compounded by a staff that lacks cross training. new and constantly changing presidential decrees increase the risk environment. they can cause disruptions, delays, and safety problems. it will coordinated design must

meet the general guidelines by the corps and address the end- user needs. we were tasked to design and build main entry control points. we had designers on site to dig -- to agree on a design that satisfy everyone's requirements. this required a lengthy review process. all these efforts resulted in a successful project completed on time and on budget. i appreciate this opportunity to share our experience in afghanistan and would gladly answer any of your questions. >> thank you both very much. mr. walker, i want to talk a little bit about the road. i understand where the road is located and i understand the strategic planning that went into this particular road. but i am trying to figure out whether or not someone along the way should have pulled the plug.

let's talk about the initial price tag of the road. we are talking about now the highway, the highway that goes through rough territory, significant elevations, covered in snow in the winter, and frankly a very challenging highway project under the best of circumstances. clearly, very difficult under the circumstances, especially considering you are going through significant taliban real-estate. the initial price was $69 million. we are now up to $176 million for 64 miles of highway. what went wrong in terms of the initial price tag for this highway? why are we barrelling towards

three times as expensive as it originally was intended, and of that price tag, $43.5 million of that is security? what we are saying is, a third of the cost of building best are in fact security -- of building of this are in fact security. it no one had an idea that this was the case before it began? >> when we started with the project, the incidents of violence were not as high as they were as we got into the project. the original estimate of security cost as a percent of the contract was around 12% as i recall. the challenge was, as we got into it, probably a year into it, the attacks began -- the

attacks began to increase and the security began to deteriorate. at the time -- and we had worked on rose in afghanistan for many years -- at the time the project was initiated, there was no reason to assume that the security conditions would deteriorate the way they did, recognizing that the possibility always existed, in working over there -- and it is a very fluid, the volatile situation -- no one anticipated the level of attacks the project was going to sustain. >> who made the decision what the level of attacks would be? was that the military? it would not be hard to guess that this would be significantly different just by the fact of where it is located. everyone knows -- frankly, the reason they wanted the road in the word -- the reason they want

the roads in the first place was to clear out the hornet's nest of the taliban in the area. how was it misjudged by so much? >> i'm not sure it is a question of misjudgment. it might appear that way. the security in the country in general began to deteriorate. at the same time, when looking at security in afghanistan, it is not one single footprint. clearly the north and the west is a different security profile than the east and the south. when we began work on one road in the south, for example, working in the same types of conditions as other roads in that area -- as a matter of fact, another extension of the road, we did not have nearly the security situation that

developed later into the program. our historic experience was at certainly a serious level of security but not to the extent of what we are experiencing now. >> is a typical to have as many subcontractors as you have on the project? you would typically have 24 first-year -- first-tier subs, and more second-tier subs? >> of the 24 first-tier subs, they would typically be very small. >> give me an example. for 64 miles, you have 167 different subcontractors for 64 miles per what in the world are they for? >> you could have a small afghan subcontractor whose job would be clearing ditches of debris, and other afghan subcontractor who would build masonry walls on an approach to the bridge. you would have another

subcontractor who would work on the -- work with the primary first-tier construction firm. there are many small aspects of the construction project. one thing we wanted to encourage was the use of afghans as much as possible. >> how many of them are afghan companies? >> without looking at the list, i cannot say. i would guess it is the majority of them. >> we would love to get the exact number. >> we can get you that for the record. >> that would be very helpful. the money that was paid in security to folks, there is every indication that they are the bad guys. is this the reality, that america has to accept that in order for us to do things for the afghanistan people, that we have to pay the people that are killing us? >> i do not believe that is the case, certainly on this road. with the security firm that we have, providing security on the

firm, all of the local afghan security providers are placed into the military's biometric data system to check against the bad guy list. if someone were to turn up, the military would get back to us and say they have to be removed. >> mr. arafat? >> his information was put into the biometric database and there is no indication that he was a person of interest. as a matter of fact, a task force 2010 specifically told us that he was not on their list. >> he was fired? >> we were in consent to use him when the contract was withdrawn, so his employment was terminated. >> he was given $1 million a year? >> no, he did not provide

security as i understand it. his responsibility was to provide drivers and vehicles, which he did. the cost of those vehicles and drivers and fuel was $40 a day per vehicle. we compared that against similar charges for vehicles and that was consistent. the charge of those vehicles was, i believe, a little over $1 million. >> i have additional questions that i will ask in the next round, but i want to turn it over to senator portman. >> thank you, madam chair. i think the witnesses for being here today. -- i thank the witnesses for being here today. mr. walker, we should be forward looking, but there should be questions that should be asked. not so much with regard to the road, i have some questions about the falling on the chair's

questions, but with regard to some of the over billing practices and what kind of internal audits or other controls that had been put in place -- in november of last year, my understanding is that your firm receive the largest fine ever imposed on the contractor working in a war zone $18.7 million in criminal penalties and $15.6 million in civil penalties for overbilling. as part of that deferred prosecution agreement, your company admitted former executives submitted false, fictitious, and fraudulent overhead rates and correspondingly result in overpayment by the government in excess of $10 million. federal prosecutors charge that is in addition to that that -- what i want to ask today and give you a chance to respond to

is, what assurances can you give the committee that these kinds of abuses will not occur in the future with taxpayer dollars? have you improved in its internal audit controls? how often will you have reviews from outside accounting firms? >> in 2006 we noticed a problem in our overhead, and we initiated an internal review. in june of 2007 we initiated a refund to the u.s. government of $4.3 million. in august of 2007, the justice department let us know weaver under investigation and intervened with us at that point. -- let us know we were under investigation and intervened with us at that point. the result of the investigation -- let me take a half step back. we brought in an outside

accounting firm to do a forensic analysis of what was going on in the overhead structure and we share that completely with the department of justice. what was determined was cost that was associated with one overhead pool was in a properly moved to another overhead pool. that was u.s. government overseas work. that was wrong. that was absolutely wrong. in looking at that situation, recognizing that we had that problem, we worked with the department of justice to identify what the damages were to the united states government, and certainly welcome corp.. the individuals associated with that improper practice are no longer with the firm. we initiated a complete restructuring. i took over the presidency of

the firm to 0.5 years ago and initiated a complete restructuring of the controls, policies, and procedures of the company. i created a more robust compliance of ethics departments in the company. we put the entire company through training, the accounting department through many types of training. we put in place scores of new controls. we brought in yet another outside accounting firm to test those controls. it is one thing to have policies and procedures. it is another to make sure that they work. i brought in another independent accounting firm to test us to see how we're doing because we need to make sure that not only does the policy control on paper but it exists in the policy of the company. we have been in the process. we are under a monitor, and we share everything of course with that monitor, all the training programs, all the testing to

provide assurance that controls that are put in place protect the u.s. taxpayer. we have shared this from day one with justice department, with u.s. aid, many presentations, and we laid everything open and fair to make sure that everything was as transparent as we could possibly be in the situation. >> thank you. i am glad to have given you the opportunity to respond. obviously what this committee is concerned about is that -- is their ongoing efforts to have both internal and external reviews and through the monitor and other safeguards we want to be sure that, as i said earlier, this incredible expenditure of taxpayer funds is being properly spent given where we are in afghanistan and is all the more important. let's go to a specific project if we could that you discussed with the chair, and that is the 64-mile highway that has now

cost $121 million, final price tag expected to reach $2.8 million per mile, cost overruns as i look at this have now exceeded 100%. i do not know if that is accurate or not, but that is the way i read the numbers. in your testimony, you attributed this to the security environment and responded to questions about the security environment. i guess i would ask you a question in addition to the security issue. can you tell us what is the cost overrun excluding security costs? >> senator mccaskill, when you mentioned $69 million, let me clarify a little bit. that was our estimate of what we thought at the time it would cost to build that road. the construction cost. the bids that came in and the

firm that won the contract was the low bidder, $85 billion or $86 billion. that was the starting for us for construction of the road, not counting security or construction management. from our perspective, the construction starting point is about $85 billion, $86 billion. -- the total cost when you include security and management was about $27 million per the $85 million, $86 million at the start, the job will come in basically at that price. construction costs are not experiencing large overruns. the primary driver of these costs are security. it exceeded 30%. it has grown throughout the process. it grew to such a point that we are not in the security

business. we saw that the security costs continued to grow as a result of the security situation. so last year in one of the modifications to the contract -- without prodding by usaid, by our own volition, we told u.s. the id we would forgo profit on security moving forward -- which will usaid we would forgo profits on security with an forward. we are not interested in making a profit because of that type of a situation. so we voluntarily decided not to. >> my time is running out here. a chance for further questions in a moment, but if you could provide the subcommittee with the cost overrun data, that would be helpful. you said the primary driver of the costs are security related. what we would be interested in knowing is which of those costs are not secured a related,

understanding what you said about security and the fact that there is a change in the security environment in the country as a whole. if you could give us the data on cost overruns that are not security related -- if there are none, we want to hear that. if there are some, we want to hear what they are and why. because of the basis of the contract, being on a cost-plus basis, i assume there would be profit involved. we want to hear what those cost overruns are. thank you, sir. overview here. approximately how many different contracts does your company have in afghanistan, mr. walker? >> the largest one is iqc contractor that we hold. >> which is for all the highways?

all the roles? >-- all the roads? >> not all the roads. under the irp contract, task orders -- i believe we have done four roads, if i am not mistaken. >> are there other types of projects that your company is doing? >> we have small projects were a subcontractor to some other firms, non-infrastructure -- we also have had a couple of small projects, but i do not think we have had any current and we have had a handful of those. >> mr. hakki, you indicated most of the work you have done has been under the aegis of working with the army corps for the military as it relates to structures of the military police, the afghan national army, or the united states

military. >> correct. >> have you done any projects that would be considered civilian infrastructure projects? electrical plants, health centers? schools? anything of that nature? >> no, we have not. >> let's talk about oversight. i was shocked in your testimony that you said in nine years you have had one meeting with the corps of engineers. how often is -- >> i was talking about the partnering, not normal regular meetings. >> partnering, like planning meetings? >> partnering, planning meetings where we have top executives from both end users where they meet for a whole day or perhaps two days.

>> and sustainability? >> and sustainability prefer that we have had only one in afghanistan. but as far as regular meetings with clients, we have those regularly. >> i understand. what about oversight on your end? mr. walker, how often does -- >> they definitely come in. one of these restrictions, research and for being able to move in the country, i have done quite a number of personnel who want to get out more than they are allowed to do. they do come to -- they do come out to the road. they're forced to travel under very restrictive security restrictions such as movement in and wraps -- they do get out to the road. >> what about the contract

officers? do you all had very much contact with course? you're one of you? >> yes, we do. our projects are a lot different than louis berger project because of our projects are all inside the wire, inside the perimeter of the base, where most of the time the corps officers are there. s iso you think the corp doing better job of oversight and then four or five years ago? >> yes, over the last nine years we have definitely seen improvement in all aspects. including the government turn over that you have just mentioned. most of them are now on one-year rotations. we use to see people in 2003 on 60 days, 90-day rotations. now they're getting into one year. i think there is still room for improvement, that they can still increase that, but there is

definitely improvement. >> let's talk about bribes. i spent some time in afghanistan. i am hopeful that either one of you will test us here at not acknowledge that bribes have been an essential part of us doing business in afghanistan, regardless of what we are doing. what can you tell the committee about bribes in the bribes that have been paid at various places and levels, whether it is under the aegis of security or other services that are needed by local folks that are used to getting their piece of the pie? >> i can tell you, we do not have any part of that whatsoever. we have a very strict company policy against bribes, and we'd just do not participate in that.

on several locations, it costs us delays. we have had to suffer because we did not agree to play that game. but we really do not. >> mr. walker? >> we have seen no evidence of our security personnel providing bribes. the casualties that we're taking would indicate that that is not something that we sponsor or that our security provides. >> i assume as the security costs went way up, the casualties went down? the casualties have remained at the same level even though security was increased in dramatic fashion? >> we have had -- for example, two weeks ago, two of our security personnel were kidnapped and taken to a local village and they executed them. whether that happens two weeks ago or whether it might happen 30 days from now, we have to maintain a level of security. in ramping up the security, as

far as those unknowns, we don't know what we may have prevented by adding better security footprint. what we do with our security profile is to create a security bubble and make that as airtight as possible so that the work can occur. when you work on from that bubble, you still have and the filtration -- and infiltration to play at in the case of the two generals -- gentleman that were kidnapped, they were on their way home and were kidnapped and executed. we have to maintain the level to allow us to get our work done. around three to four weeks ago, you're probably aware of the attack that occurred north of the road in which 36 construction workers were killed. they were trying to use a lower level of security, as i understand it. the result was they could not withstand a serious assault.

so how much is our security footprints deterrent from a serious assault like that? i do not know if we can answer that question. >> you cannot prove what you can prevent. i do not think either one of you would say that bribing is not a serious issue in afghanistan, right? you're not going to tell me that? >> it is definitely a serious issue. it happens on a daily basis. we get threatened. we get calls to give the bride, and if we do not, we face the consequences. like i said, we have been forced to suck it up and delay delivery, delayed normal procedures with the government simply because we are not playing the game. we are refusing to succumb to that. >> right. do you think we should have built this road, mr. walker?

>> a couple of years ago i reported -- a reporter for "the wall street journal," asked about a highway we constructed that has been under attack. he said it is under such an attack, was it worth building it in the first place? i said to him that they are attacking it because it is important, and if it is important, is worth building. the question is not should we have built it or not build it, but is there a different way of building it that would get it done quicker or lower the casualty -- all with the security profile? again, when we started the road, we were at one level, and ended advanced -- and 8 advanced. . we build a road under the first contract we had, and we knew

that was going to be bad from day one. we got together with the embedded cellsie with them. we had it is high and around us and they did -- we had a battalion are around us and they did the work. we were surrounded by a battalion. there were no casualties. it was taliban territory it from day one that the u.s. came into -- >> so why did you do the same thing on this road? -- why didn't you do the same thing on this road? >> our experience working on roads in the area indicated that it was not like -- >> once you figured out it was, why didn't you go back to the drawing board and do what you had done in the previous incident? >> senator, i think that is a

great question, and my understanding with this hearing is getting to the lessons learned. going back to my opening statement, where i said we cannot just look at the metric of scope schedule budget, there comes a time when we probably should have stepped back and said, we have to change the scope, because we need to get the road and, but maybe there's a different way of getting it done. what ended up happening is we all went into a reactive mode. we had the security situation and had to increase the security of footprint to prevent that particular situation from happening again. from the lessons learned, we had to recognize how the security environment can change relatively quickly in the contingency environment like afghanistan. >> well, it is sad to me that we're just now talking about a lesson learned, because that lesson was learned many times in iraq, where the security environment changes and billions

of dollars worth of investment was blown to smithereens because the security environment changed . i guess what i would say is that it seems this is a long, long time that we have had lessons learned. it is so frustrating -- let me ask this last question, because my time is up. who is the person that you would see, mr. walker, that could have in this whole enterprise of building a highway, who is the person who should be held accountable for not changing the way i was being built in light of the security environment -- the way the highway was being built in light of the security environment changing, not within your company but within the government part of this, military or state department? who is the person who should set, "we have got to go back and do this differently"? >> i do not know if there is any one person, but it is important that we make sure that communication between the

military, the client, ourselves is always at its best. >> who can i blame? >> who can you blame? >> who can i blame for not changing it sooner. but can the american people look to to hold accountable for pouring tens upon tens upon millions of dollars into security not really sure where the money has ended up? who is it that i should ask to come in front of this committee to talk to about it? >> i am reasonably confident that we have maintained controls over the money that has gone to security. >> i should not have added that. i'm wanting to know who is the person -- if there isn't a person, that is the problem -- who is the person i should call to the committee, at your tax dollars that they saw getting out of control and said, "stop, we are putting way to much money into this project" -- who is

that person? >> i guess i would have to sit there is not one person that could be held to that standard. it is incumbent upon all of us to look if there is a different way -- >> if that happens with all of us, that means none of us, because we do not know who hold accountable and we have to figure that out. there has to be somebody in that organization who has primary responsibility and accountability for the projects at they are not sustained and end up costing way more that they should have cost and not achieving the objectives of the original project. thank you very much. senator portman. >> 3 questions. i would appreciate it if we could go through this quickly, because there is another panel right behind you that is already here with us. to mr. walker, giving you a chance to respond, you talked about the high weig -- highway

under discussion today, and the security situation and the cost overruns. let me give you a chance to respond to a report. at this comes from "the new york times" back in may. "despite the expense stretch of highway completed just six months ago, it is already falling apart and remains treacherous." number one, do you agree that parts of the high weight you have already constructed -- highway you have already constructed is deteriorating? if so, is here from paying for repairs to the road -- your firm paying for repairs to the road, or is it usaid and the taxpayer picking up the tab? >> i absolutely disagree with the reporter's assessment. the reporter was referring to one particular crack on the road. if you have the photograph that i included with the opening statement and had it with you, you can look at it later, on

the right-hand side of the photograph, you will see whether crack is. you'll also see a fall line that runs down the mountain -- a fault line that runs down the mountain. the crack was a result not of workmanship but of that fall ult. whether it is colorado, where i live, west regina, afghanistan, mountains move. -- west virginia, afghanistan, mountains move. i spoke to a geotechnical engineer who look at it, and it was a fault. >> will pay for the repair? >> in the case of a fault, it is maintenance repair. there is always an issue of equality. we had a contractor pay for that when it is their responsibility. but when a mountain moves, it is

not the responsibility of the contractor. it is a maintenance function. >> to both mr. walker and mr. hakki -- we're not going to leave you out totally here. after all, you have a degree from ohio university. >> i was hoping he would mention that. >> yeah, we are proud of that. let's talk about afghanistan first. as i said in my opening statement, this is a policy of a administration and i support it. buy afghan products, build afghan capacity. you address this a little bit in your opening statement with regard to the 3000 students you said graduated from a training course, and you say you have local firms engaged in retraining efforts. i would ask you both, how do we get afghans engaged in the sustainability i talked about in my opening statement? this road, the next time there

is a crack and you all are gone and we begin our withdrawal, who is going to fix it? can they afford it? do they have the technological capacity to do it? i would just like to hear from 1st, mr. hakki quickly, what are you doing exactly to ensure that there will be this ongoing support by retraining and developing this expertise, what are the challenges you see by this stated policy, the afghan first policy, and do you see any unintended consequences from that? i think mr. walker alluded to some of those earlier. if you could respond to that, mr. hakki. >> yes, senator portman. the afghan first program is not something we are very familiar with. that is limited to afghan companies. we know is there and has been fairly successful, but i really cannot comment on that, because we have not really participated

in that. that doesn't mean -- >> but the policy is to have contractors like you hire afghans. afghan companies, i believe, not us. >> the afghan first program is limited to afghan companies, if i am not mistaken. that doesn't mean we are excluding the afghans from our projects. like i said, we hire a lot of afghans in our projects, we train anthem -- >> but you do it just because it is a good idea and not because there is any direction in terms of the policy? >> correct. there is a clause in our contract that encourages engagement local labor and local companies, but it is not a requirement. we have taken that way over -- >> he would not have to do any hiring of afghan -- >> can actually speaking, at no -- contractually speaking, no.

>> that is interesting. >> the training center is that this is completely out of pocket. there was no government funding with the training center we developed. it was completely out of pocket, and we thought it was a great idea because it addresses senator mccaskill's concern with sustainability. the best way to sustain these projects after we leave afghanistan will be the training and education. the way we did is simple. we hired these students, believe it or not. we had to pay them like a daily allowance. we had to transport them and we had to give them, actually, like food while they are there. it is really peanuts. the costs were very little compared to the overall reconstruction process. in two-three weeks, we would graduate them with a simple -- maybe i can introduce this as part of the record is possible

-- if it is possible -- but it is a simple certificate that states that this individual has been trained for two-three weeks on a specific skill. it believes -- it really doesn't cost much, but it means the world to this individual, because it provides them security and a skill and a job he can use long after we leave. that is why it has been his successful, this whole program, for us. >> there must be some disconnect here between the work you have done, which sounds like successful in terms of moving toward not just using afghan subcontractors and labor, but also paying them for the future , and what my understanding was, which is that it shouldn't be something that is discretionary, but rather, part of a policy. we'll talk more with the

government panel about that. mr. walker, any thoughts? >> yes. under the was bircher auspices, we have a program where a 1500 kilometers of road are under active me to then sprayed with in developing capability of afghan firms and afghan employees -- under active maintenance. we have been developing a capability of afghan friends and afghan employees for years now. the deputy task force manager it is an afghan engineer. he can take that program over in another six months or maybe a year. the important point about that is that sustainability means funding. we have worked with the afghan government and the minister of public works and finance to establish a framework for road authority as well as a road find it. the minister of finance

indicated he feels it is very important in that roads can be funded, maintenance of roads can be found, through fuel taxes, something along those lines. this issue is not president karzai's desk on the decision of whether or not -- is now on president karzai's test on the decision on whether or not it goes to public works or presidential authority. having some foresight into will these roads be able to be maintained, i believe the answer is yes. the crack we talked about from the fault is being repaired by afghans under that task order, that maintenance task order. i think it is a real example of sustainable success in looking at sustainability and protecting the investment in the u.s. has made for roads. >> if i could have just one more quick question, and one important to get on the record. it has to do with it, in

essence, what the chair asked earlier about, multiple subcontractors and gao has raised concern about this, use of multiple tiers of subcontractors. they talk about concerns over management, bedding, cost-control. i will focus on what area, what kind of contract. it seems we are creating the long economic incentives with the multimillion-dollar contracts are structured as cost-plus contracts. in that case, subcontractors earn more when it is up contractors spend more. -- when the subcontractor is spent more. he will be earning more when they spend more, rather than creating incentives for efficiency. other than having subcontractors -- subcontractors

would profit from the waist at any level -- that waste at any level. do you think we ought to change it? should we use the contracts more widely, and why would that be feasible in these reconstruction efforts? what kind of projects with those work best on -- would those work best on? if you think we should not move to a fixed cost contracts, why not? >> 95% of our contracts are fixed-price. we have a little subcontractors on them, because we tend to perform the majority of the work. of the contracts and afghanistan, only one has been cost-plus. all the others had been fixed price, competitively bid, -- with very, -- >> fixed price for subcontracts -- >> fixed price for us.

>> is that true outside the compound? >> working outside the wire is extraordinarily difficult to do with fixed-price contracts. so many unknowns when you are dealing with my bill on either side of the road that you are working on. -- with minefields on either side of the road you are working on. we have tried to combine fixed price and cost-plus. we have created a contract modality or we have fixed unit prices so the only thing would be big quantities. an example would be that on at the road, it would cost $4.40 per cubic meter for excavation. that holds, and if it costs more than that, the unit price does not change. what changes are quantities. the quantities are monitored every day, every dump truck, to make sure that however many cubic meters are pulled out of a

particular sector or in fact accounted for. we tried as best we can add to balance aspects of at fixed prices as well as cost-plus. >> more opportunities at the subcontractor level? >> it is a smaller contract that is defined -- that is the key, if you can define with the work is -- then it is certainly possible. >> thank you. one final thing i want to say. just as we're concerned with the safety and security of our troops, for your employees and subcontractors, we wish them well. >> thank you. >> thank you. >> thank you both for being here. we appreciate it, and we will follow up with we get additional questions. i want to second senator while our job is to

oversee the money being spent, make no mistake, the people on these contracts are in as much danger as our military, and we wish them well, and certainly mourn the loss of those who work on reconstruction projects for our government as well as more and a loss of our soldiers whose life and limb in theater. we want to pass that led to both of you. thank you for being here. >> thank you, senator.

>> i will go ahead and introduce our next panel. our first witness is william solis, director of defense capabilities and management for u.s. gao, focusing on army, navy, air force, marine corps and logistics programs. he focuses on contract support, which it needs, force protection for ground forces, in desiccator supply, equipment -- in-theater supplies, equipment reset. i understand that scheduling this hearing was difficult for you and i want to thank you. david sedney has been deputy

assistant secretary of defense for afghanistan, pakistan and central asia since 2009. prior to joining the defense department, he was a career diplomat at the state department and held a position on the national security council. mr. sedney previously testified before the subcommittee on afghan national police training. kim denver is the newly planted deputy assistant secretary of the army for procurement, managing the procurement mission including development and dissemination of processes and contacting systems. he monitors actions for offices worldwide. as the functional carper rep for contacting, mr. denver oversees the recruitment and training of the army's contacting work force. he was previously director of contracting for the u.s. army corps of engineers. j alexander their has been the

assistant to the administrator and director of the office of afghanistan and pakistan affairs for the u.s. agency for international development since june 2010. prior to joining usaid, he was director of afghanistan and pakistan at the u.s. institute of peace. once again, is his custom of the committee, if you would stand so i can administer the oath. do you swear that the testimony you will get before the subcommittee will be the truth, the whole truth, and nothing but the truth so help you god? thank you all for being here. we begin with mr. solis. >> good morning. madame chair, ranking member portman, appreciate the opportunity to be here to discuss dod contract oversight and afghanistan and the vetting of non-u.s. vendors. collectively,dod and state have offered billions of dollars for

contractor-provided services and goods in afghanistan. given the magnitude of these obligations, the importance of contract oversight cannot be overstated. to this end, we have made numerous recommendations aimed at improving contract management and oversight. my statement today will focus on two areas. first, the extent that the dod contacting representatives are prepared to conduct their responsibilities in afghanistan and the non-u.s. vendors in afghanistan for ties to terrorists and criminal activities. with regard to contractors, representatives or course, they act as the ice and years of the contractor and served as a critical role in providing oversight. it to its credit, dod has taken action to better prepare chorus and oversight afghanistan, but are not fully prepare for the will to provide adequate oversight there.

dod has developed a new contingency focused for a training course, issued a new guidance, and developed the course of the vacation program. nonetheless, gaps in training and technical capabilities exist. for example, according to it dod personnel and afghanistan, training does not provide enough possibility -- specificity about contacting and afghanistan, such as the afghan vikr -- the afghan first program. also, whether the corps has relative technical expertise is not always considered prior to sending the individual to oversee a contract, even though it they have a significant role in determining whether products or services provided by the contractor fulfill the contract's technical requirements. according to officials, some court assigned to oversee construction contracts lack the necessary engineering or

construction experience, in some cases resulting in newly constructed buildings that were to be used by u.s. or afghan troops having to be repaired or rebuilt. according to corps and commanders and afghanistan, up for construction has resulted in a money being wasted, substandard facilities, and an increased risk. for example, contacting officials from eight regional contact center stated that construction of guard towers and an operating base was so poor it that they were on sick occupied we recently reported on the extent that do and state and aid processes in place for vetting non-u.s. actors in afghanistan for ties to terrorists and criminal activity. there were several gaps in the process. for example, vendors with

contracts below $100,000 are not routinely vented. in fiscal year 2010, a route 3/4 of those contracts with non-it u.s. vendors were below the $100,000 level. subcontractors are also not routinely evetted. centcom uses other risk factors to prioritize, such as taliban stronghold, that these factors have not been documented. while officials stated that the vetting style was created to vet vendors prior to the award, it is likely that there are a large number of new vendors that have not been vetted prior to the award and may not be in the future. also, in all this some army corps of engineer vendors. however, the vetting cell has not been staffed to accommodate this work load. it is not clear the existing

resources we have to vet this in a timely manner. to vet non-u.s. vendors and afghanistan, this may face similar limitations. according to officials, this was based on origin need to mitigate the risk -- this was based on the need to mitigate the risk. aid officials said they are considering changing the dollar threshold or vetting of other potential recipients based on risc. however, the available documentation does not include other risk factors. as of march 2011, the state had not developed a process to vet the firms in afghanistan. since 2008, state has required

terrorist risk assessment to be completed prior to request for obligation of funding. however, it does not use the same information that centcom or aid use in the vetting c ells. additionally, at the use of afghan mentors may increase under the afghan policy. it directed the joint staff to identify resources and changes in doctrine and policy necessary for improvement. we echo the call and believe that these changes should include examination of how dod manages an oversight of contractors. this concludes my statement and that will be happy to answer any questions. >> mr. sedney.

>> the office of that -- [inaudible] policy. i will begin by reiterating the u.s. objectives in afghanistan, to deny safe haven to al qaeda, to deny that todd heap on the ability to overthrow the -- afghan the -- to deny the taliban the ability to overthrow the afghan government. u.s. forces are continuing to degrade it the taliban to provide it space for afghan security forces and the government so they can assume the lead for afghan security by 2014. as you know, based on the success of our strategy, president obama recently announced that the united states would begin a deliberate, responsible drawdown of our surge forces. an additional drawdown of 10,000 troops will occur over the course of this year, the further drawdown over the remainder of the surge by the end of the summer of 2012. our strategy afghanistan is

working. momentum has shifted to the collision of the afghan security forces. together, we have degraded at the taliban's capability to achieve that security gains, especially in the heartland areas of helmont province and kandahar province. as we look ahead, the key to our success is the presence and capability of afghan national security forces. those forces are making progress in both size and capability. by the end of summer 2012, when the last of our surge forces are out, there will be more afghan and coalition forces in the fight then there are today. that is because we will have increased afghan security forces to 350,000 by october 2012. in addition to the 60,000 forces we will have, in addition to -- that is augmented by forces by a number of our partner allies and nato elsewhere. the security gains are enabling

key political initiatives to make progress. we have begun the transition process that will put afghans in the lead for security nationwide by 2014. we are beginning to seek reintegration and reconciliation process is gaining traction, and are discussing strategic partnership with afghans to solidify our commitment to regional stability. while progress is substantial and our strategy is on track, significant challenges remain. the taliban will make it strong and sometimes spectacular efforts, as they did the other day in kabul in the attack on the intercontinental hotel, to try and regain the momentum. however, just as that attack was defeated, those the times will also be countered. at the same time, we find that the enemy is increasingly facing an afghan population that, through experience and ability of self-governance, seeing those become clear to them, they are

becoming part of the transition process. afghan communities are providing useful lessons in security in governance, as well as potential model for other parts of the country. i want to emphasize how important the role of our coalition partners in afghanistan, 48 countries with over 47,000 troops. they have made significant contributions and sacrifices. chairman, senator poor man, i want to close by thanking you and your colleagues in the -- senator portman, i want to close by thanking you and your colleagues and the senate for your support of men and women in uniform. >> madam chairman, a senator portman, i thank you for the opportunity to put i -- to appear today. i will provide brief opening remarks and request that my full written statement be submitted for the record. the u.s. army has had boots on the ground in afghanistan for nearly a decade.

as we know from past military engagement, when our army deployed, at they to ban on civilian support from contractors. currently, more than 90,000 contractors are supporting troops in afghanistan. the ratio of just under one contractor for each soldier. the contract record is the largest oversight mission the united states has ever managed. we still face challenges, but the army has made significant process in approving contact management and oversight. i would like to share with you is what the army has done to change the contingency contacting environment, how we award and manage contracts, oversight, and the train the non-acquisition personnel receive before deployment and one at they are rife in theater. most of the contracts are awarded competitively, and injuring the best possible price for the u.s. government. -- ensure in the best possible price for the u.s. government. contract officers must be ensured that the u.s. government obtains the best value.

an important element is the use of past performance information. the availability of data has been especially problematic with host nation companies as we try to make awards to afghan firms under the terms of the afghan at first program. the contract's performance assessment reporting system is effective with u.s. commanders, but it has limitations in theater. in afghanistan, we also use the joint continues the contacting system to alleviate an ever problems and a contract, postings to currency conversion and tracking performance. it has proven to be an invaluable tool in afghanistan and iraq. oversight of contractors has been a significant concern of congress, audit agencies, and a contact in community. the federal fund and accountability act of 2006 requires contractors to provide extensive insight into subcontractor information for at the centcom contacting the man has implemented 11 clauses dealing with a subcontractor information to capture not just the data required by law, but

additional information that will aid in getting contractors and subcontractors. vetting most asian contractors is a key element in ensuring the security -- vetting most asian contractors is a key element in ensure -- vetting host nation contractors is a key element in ensuring security. non-u.s. and vendor information is trapped in the joint contingency contacting system, along with past performance. after contract awards, the key to the contract oversight resides in the contract representatives, cor's, who are the front lines of responsible stewards of taxpayer dollars. to strengthen our management and training in december 2009, the issuance of an army order mandating that the ploy to rebates have as many as 80 soldiers designated as trained cor's. over the past two years, more

than 8500 cor's cap-and-trade, and the expedition recommend provided augmented -- more than trained,s have been and expedition provided on a minute training. ensure is that technically qualified personnel are involved in the oversight of projects and afghanistan, the senior contracting official provided guidance on its importance of inspectors. corruption in afghanistan remains a challenge to our contracting personnel. the u.s. government has had several task forces in afghanistan which have played a significant role by reducing the impact of corruption on government contacting. army contract and it continues to identify more effective ways to provide excellent and provide the most value for our contract

and dollars and most effective support to our war fighters. thank you for your continued support, and i look forward to answering questions. >> chairman mccaskill and ranking member portman, my name is alex their and i am the assistant administrator for afghanistan and pakistan ant usaid. i began working in afghanistan in 1993, and since the fall that taliban, i had been engaged in assisting in implementing u.s. efforts. i've repeatedly raised concerns about the course of the affects of corruption and waste in afghanistan post-2001. these are not only issues of a fiscal importance but national security itself. one of the reasons i took this job, in fact, was to improve our performance and accountability. we all this both to the american and afghan people. with the stable transition in afghanistan will be achieved, we must ensure that our efforts are sustainable, durable, and realistic.

with the support of the american people and strong bipartisan support in congress, we have made dramatic development achievements in afghanistan over the last decade. for example, we worked with the health ministry to expand access to health services from nine to 64% of the population, literally saving tens of thousands of lives. our efforts to build schools and train teachers have allowed more than 7 million children to enroll in school, 35% of whom are girls, up from and no girls in 2001 and fewer than 1 million boys under the taliban. economic growth has exceeded 10% growth per year on average, and gdp per capita has doubled since 2002, with 5 million people listed -- lifted from a state of dire poverty. we are proud of our contribution to reversing taliban momentum and achieving progress under the toughest conditions. as we embark upon the path that

transition, the process by which our afghan partners will truly stand on their own feet, sustainability is a paramount concern to us. we've worked with afghan and international partners to identify a set of core foundational investments that will develop afghan capacity and promote economic growth and increase government revenue generation to support the sustainable and terrible transition in afghanistan those investments include -- sustainable and a durable transaction in afghanistan. those investments include energy. in energy, power availability and consumption are directly correlated with economic viability. because sustainability is essential, a key component of our work is building afghan capacity in the power sector and supporting power sector reform. in 2009, the united states helped to launch a new commercial last afghan electric utility. collection that increased 30% in the last year alone, boosting

revenues to $175 million. kabul has gone from averaging two hours of electricity in 2002 to 22 -- to 24-hour availability today, paid for by a commercially viable system. yet i cannot overemphasize the challenges involved in and taking these efforts as the afghans, the u.s. and other international partners, at a vicious insurgency and terrorist threat. security concerns on our projects are paramount. in 2010, attacks on civilian efforts rose sevenfold. to succeed in this environment, we may oversight and accountability top priority in afghanistan. just weeks into this job, administrator shaw and i concluded we needed to do more to safeguard our investments, to ensure that proper procedures are in place and protect assistance dollars from waste, fraud from otherwise being diverted from the development purpose, we developed the econo

assistance for afghan initiative. as a result, we are enhancing safeguards on our development assistance by improving our award mechanisms, increasing vetting, financial controls and project oversight. these efforts are already having concrete results. in addition, over the last two years, we have tripled our staff in afghanistan, 60% of whom are located outside of kabul, allowing us more usaid eyes on the ground. i am also proud to say we have gone from three oversight staff in country in 2009 to 71 today. many of them are staying in now for multiple-year tours. we are under no illusions about the challenges we face in afghanistan. every day, our staff and partners are under threat. security increases our cost, and other threats require us to spend significant effort to safeguard taxpayer finds. when i left kabul in 1996 after

four years working there, watching the country enveloped in chaos, the capital was heavily mined rubble heap, that taliban were taking over, and at been latent -- bin laden was moving in. our efforts have resulted in critical gains. it will allow us to carefully draw down u.s. resources in afghanistan. usaid's entire budget in afghanistan since 2002 is equivalent to the cost of the six weeks of our war effort. this progress that we ought to contribute to the war effort in afghanistan will help bring american troops will more quickly and ensure that they do not have to return. civilian assistance has been essential to these gains and will only increase in importance as afghans take the lead in forging their own future. thank you. >> thank you all very much for being here.

sedney, withmr. you. i was confused by your opening statement because it had nothing to do with contacting, and we are on contract, and you came to discuss contract in as it related to the afghan national police. my first question to you is who is in charge at the defense department in terms of making the contract decisions as it relates to infrastructure that is being built under the authority of the defense department and money coming from the defense department? i need you to turn a microphone on. we cannot hear you. >> in terms of actual responsibility for contracting processes, i may have to call on mr. denver, who is more of an expert than i am. contracting in afghanistan is done by the u.s. element in

afghanistan that does contracting for u.s. forces. they report to centcom, who have been overseeing, and eventually , the undersecretary of defense, technology and logistics'. of who is in charge planning? is that the commander of centcom? when you decide we will spend $500 million, up $400 million of -- i guess that is a related question. how much of the $17 billion in the fy12 request will come through defense and how much through state? >> i can speak for usaid. i will give you the exact number, but i believe the request for usaid assistance is around $3 billion level. >> the president has asked for $17 billion in fy12 for reconstruction projects and infrastructure projects and

afghanistan. does anybody here know how much of that will be under the control of the defense department and how much under the state department? >> again, i can say $3 billion for usaid, possibly an additional billion under the state department for civilian operations that are not under usaid. i cannot speak to the rest. >> is the rest of that defense department, mr. sedney? >> i am not familiar with the figure he mentioned, senator, in terms of the construction projects -- the figure you mentioned, senator, in terms of reconstruction projects. it includes funding for afghan security at forces, i believe about $12.4 billion is the exact figure for afghan security forces funding. in terms of a funding for reconstruction, i am not familiar with the $17 billion figure you mentioned. >> what do you think it is? what do you think we will spend next year building projects for

the afghan people? >> in terms of building projects for the afghan people, that would be the realm of aid and the department of state. >> what about cerp? >> some are in the neighborhood of $300 million to four outer million dollars -- to $400 million. it is not reconstruction morning. the funding is commander in emergency response programs, designed to assist commanders in the field to build the foundation for stability. it is not meant to replace or be in the place of long-term reconstruction funding, which is done by the state department and usaid. >> it is true that this has more to a program where we are doing projects like building roads and buildings and doing things other than small-scale projects, which was the original use of the

funds, especially in iraq, where for small-scale projects and now in afghanistan, we have the defense department managing projects that are construction projects with cerp funds, correct? >> we have for a number of years taken area roads, cerp taking roads. in the most recent appropriations bill, congress gave us the authority to establish the infrastructure fund. the purpose of that is to divide out those kinds of projects, which would be looked at as infrastructure projects and then enable cerp to maintain its original focus on small-scale projects. we are putting together that is for the implementation of the afghan infrastructure find a division of the cerp funds and oversight for that. ipad is updated yesterday in the first meeting at the department -- i participated yesterday in

the first meeting of the department of defense oversight panel which will be giving guidance in this areas. >> does the defense department at the certification process for sustainability before we spend american money afghanistan? >> i am not familiar with the details of contract and processes. i will pass that on to my colleagues -- >> who will you pass it to? >> first to the undersecretary of defense for technology and logistics -- >> ash carter? >> ultimately it would be his office. any question regarding contracting i will pass to him. >> i'm trying to figure out who is in charge. it is ironically difficult to figure out how much we're spending and who was in charge. i need to figure out who is in charge in terms of who is making the decision to go forward with the project went they turned out not to be sustainable. that has been more difficult

than it should be. let's get to where the money is going. i will try to do this very briefly, and then turn it over to senator portman. the special inspector general for afghan reconstruction, the previous special inspector general -- i want to caution that this is not the current special inspector general -- issued a report that indicated that four contractors receive over $1.8 billion in contracts in a two-year period between 2007 and 2009. that report, based on a review of information provided by the defense department, has since by identified as containing inaccurate information. spending -- in fact, that report was so inaccurate was off by hundreds of millions of dollars, ok?

another database that reports information from federal procurement data systems, pds, the government house to main database for tracking contact information, $450 million in spending over the same period of time. one report says we spent $1.8 billion i just four contractors in two years. another reports this week spent $450 million over the same period for just two of these companies and does not have information on the other companies. i know, mr. denver, your office -- i know that you are new, and i am sorry that you are the one that has to sit there today did your office is the executive agency for contacting afghanistan, which gives you oversight authority for contacting -- contracting, centcom ccc. that office provided the inaccurate information. in preparation for this hearing, your office provided the subcommittee with information

that shows one of the contractors listed as having $691 million in contracts actually only had $5 million in contracts. ccc was provided an original copy of the report, and yet said nothing about these wild inaccuracies that were contained. i think you can see where i am going. i don't think the public can have any confidence that we are accurately reporting what we are spending where on contacting in afghanistan. i would like to know how you can explain these wildly inaccurate information that was provided to the special inspector general for afghanistan. >> thank you, madame chairman. we are currently coordinating to determine where the issues rose. it is true that inaccurate information was provided. what we are working on is a process in the future where the information that was gathered directly from the centcom

contracting command to work with my office so that we can validate the information. what we're seeing is that we don't want to impact the ability to connect directly with the centcom contracting command, but make sure that what we do in the picture is that we double check the information is being provided. right now, they indicated they may need to audit to determine what was the source of information. >> thank you, madame chair. i think it might be helpful to put what we are talking about in perspective. if you could correct me if i am wrong, mr. sedney, but current troop level in afghanistan is just over 100,000? a number of contractors, dod, state, usaid, about 154,000? >> i cannot certify the total,

but i would say for the department of defense, the average figure is about 0.85 contractors for each deployed trip -- troop. we would expect about 85,000 -- >> earlier in testimony someone said it was more than one contractor per troop. >> about 1 to 1, or a little over 1 dto 1. >> this hearing is about the contractors. as i said earlier, the experience in bosnia and iraq is that as we begin the drawdown of troops, would not begin at the drawdown of contractors, initially. is that accurate, mr. solis? >> that is what we saw from prior reviews -- >> it is incredibly important that we get the contracting

right. one of the concerns raised today is about sustainability. as we continue to spend more and more taxpayer money, even relative to the military command going forward on contacting -- military commitment going forward on contracting, it is important that we create something of a value in moving afghanistan to a stable government that meets the objectives that mr. sedney laid out earlier. on sustainability, let's talk about it for a second. there is a june report by the commission of wartime contracting that was pretty pessimistic. it said that there is no indication the dod, department of state, or aid are making adequate efforts to make sure that host nations maintain projects on their own, nor are they effectively taking sustainability of this into account when devising new projects or programs. -- nor are they effectively taking sustainability risks into

account when at devising new projects or programs. the report goes on to say that in afghanistan, the u.s. has contacted for schools and clinics that lacked adequate personnel, a large power plant at the country cannot maintain or operate, security force tending and support his costs exceed afghan funding capabilities. i guess i would ask first, and maybe, mr. their, you are the right person to talk about this from a usaid perspective, but also to hear from mr. sedney and mr. denver, what are your approaches to reviewing projects to determine if they are sustainable, all you ensuring that a new commitment of u.s. taxpayer dollars is to make sure that the afghans can carry on after we have gone? how is that process formalized?

>> usaid is intensely focused on this question of sustainability. it goes in two different directions. one is are the actual investments we're making sustainable? in other words, will power projects that are being built be maintained? well schools be used? that is one aspect of sustainability. this aspect is the broader question -- the second aspect is the broader question of how this afghanistan itself maintain these investments over the longer term, and in terms of developing economic growth? on the first part, was certified at any program -- we certified that any program we are doing as capital investment must tap the sustainability plan. we have intensified this in the past few months by creating what we call sustainability guidance, where we are assessing every single program that usaid is implementing to determine if it

is going to be sustainable in both of these senses. will the actual physical investment be maintained, and more broadly, is this contributing to the afghans' ability to sustain investments in the long term? it is something we take very seriously. focuss focus on --let's on aid and investment. the kabul power plant, duel f -- dual fuel plant, rarely used, is my understanding. it is prohibitively expensive for the afghan government. it is not sustainable because the afghans cannot afford to purchase decent feel necessary to power the plant and cannot sustain the complex maintenance and technical expertise required to operate it. instead, afghans are negotiating with neighbors, including east pakistan, to get the power for a fraction of the cost --

including uzbekistan, to get that power for a fraction of the cost. how did aid get that wrong is one question i want to hear from you on. but let's talk about the next one. there is a 2011 aid contract to build a diesel fuel- power plant in kandahar. the commission has stated there thatu may disagree i-- this plant faces similar challenges. are we doing it again? one, how did aid get the first one wrong? second, are once again stepping into a situation where we are putting hard-earned taxpayer dollars into a project that is simply not sustainable? >> let me address the second one

first, the decision to invest in power in kandahar was a decision that the u.s. government, military, state department, usaid may collectively in the summer given the critical nature of our campaign in kandahar and a desire to shift the momentum away from the taliban. we made it to decisions regarding investments in kandahar power. the first was that a long-term source of power on a car was not going to come online quickly enough -- source of power for kandahar was not going to come online quickly enough to achieve that objective. there was a decision to invest in short-term power generation, diesel fuel, which, you are absolutely right, is not a long- term sustainable effort, to turn the lights on in kandahar. we are adding 50,000 connections in kandahar said that the people of kandahar as well as the people of helmand will see the

we are working to increase the power supply to that region in sustainable fashion by building lines down from the north of afghanistan that will provide long-term sustainable power, as well as increasing the power supply into that area. so, those two things together are longer-term, together with the fact that the afghan utility that i mentioned before his collecting money for the power it distributes now. that means that over a longer term, they will be responsible for sustaining the investment. that is also related to the question. today, that plant is being run as a kicking power plant. kabul, the capital of afghanistan, was known as the dark capital of asia. it had the least amount of power of any capital in the world. 20% of the afghan population

lived in kabul. when the decision to build a power plant was made, there was no assurance that this line from was pakistan would be available. once a plan was built, a landslide cut out that power line. >> was that plant constructed as a backup power plant? >> it was constructed as a peaking power plant. >> it was originally intended to be a backup power plant? >> it was, with the caveat that people were not certain that the alternate plan to bring a line down from use beckett -- was pakista -- it is pakistan. >> that was the design? >> we have made sure that the sustainability is a high priority in three ways. we are intensively engaged to make sure they are able to

maintain the plant. >> could you provide the committee with some data to provide the assertion that this was a backup plant. i'm over my time. i guess, not to leave dod out of this, with regard to the national security forces in terms of sustainability, the studies we have seen, including from the commission, and you may disagree, they think that the investment in training, preparing the afghan national security forces risked being wasted in the long run to to the same sort of sustainability problems. -- due to the same sort of sustainability problems. we have dedicated another 13 billion to the 2012 budget. the commission included the prospects for the afghan

government's ability to sustain. these forces are meager. considering the government revenues were $2 billion a year. i would ask dod, have we a evaluated the sustainability of the support, and, if so, what has our evaluation shown, and if not, how can we do that, proves a long-term effectiveness? we have committed $11.5 billion to construct facilities alone, including bases, police stations, outposts, and so on. a long-term costs, and easing the afghan government has the resources to maintain those facilities? -- and do you believe the afghan government has the resources to maintain those facilities? >> i would like to correct the record. i have the exact numbers of

defense contractors in afghanistan. it is 90,800. it is required to provide a report. this report was dated june 21. we will make sure you get copies of that report. on the issue of sustainability, the first is a question of financial sustainability. the ability of the afghan government to fund security forces that it currently has, and it may need in the future -- currently, afghanistan does not have the ability to fund security forces, and the u.s. government, into a certain extent international partners are providing those resources. currently, the cost of those forces, we are asking for fiscal years 2012 -- fiscal year 2011, we have $12.4 billion, i believe, for that.

i've read a certain percentage is in structure, another is forex -- a certain percentage is infrastructure. let me go back to our national interest in afghanistan, which is to ensure that afghanistan is no longer able to be a base from which terrorists can mount attacks against the united states. our solution to that is to drive down the insurgency to our military efforts, and to build up the afghan military forces able to do that. since afghanistan does not have the resources to do that, we, you, the american taxpayer and congress, are supporting. again, with help from our allies. the size of security forces that will be needed in the future to contain the taliban is yet to be determined, because we do not know the level to which we will

be able to drive down the insurgency. we are currently building the afghan security forces to a level of 2 ended 43,000 for october of 2012. that is based upon the levels of insurgency that we see now. also, the level of forces that the u.s. and allies have there at that time. when we are aiming for is to continue to drive down the insurgency, enabling us to continue to withdraw forces, and have the afghans continually improve that. what that equilibrium level will be we do not know yet. >> i am well over my time. i apologize. i need to get back to the chair. let me conclude by saying i understand the mission, and in many respects, what a.i.d. is doing on the ground, and what dod is doing on the ground, even outside of military involvement with contractors is carrying out politics -- policies you are asked to do. i have had the chance to visit

with dod colleagues, and it is tough work. the question is whether the policy makes sense, whether it is sustainable, because so much of what we are doing and buildings may not be able to be maintained subsequent to our departure. these numbers are indicating that there is a huge risk, so what we are asking here for is a realistic assessment of what those risks are, and the very important reassessment of how we look to those projects. if they're not going to be sustainable, why are we doing them? building a backup power plant for three and a million dollars that the afghans are not using, except for peak times, because they cannot afford the fuel -- how does that make sense? so, that is what we're asking for here today, and whatever information you can provide the committee going forward would be helpful with that. again, thank you for your service. i'm sorry for taking so much

chart -- time. >> not a problem. i'm trying to figure out where the decisions are being made as to the afghan infrastructure program at the department of defense. and the afghan infrastructure fund -- it is my understanding that in fiscal year 2011, the afghan infrastructure fund, which is all dod money, is $400 million. is that correct, mr. sedney? >> i believe that is correct. >> ok. i'm looking at a document here, and this is projects that are going to be built with that money, dod money. now, the first one is the power generation in canada are city, can our province. kandahar.he heart ci

the implementing agency is dod, not -- usaid. the next one is the power transmission. that is two hundred $31 million, and that says the part of state, usaid, one of them says dod, and the other one says the part of state, usaid. the next one says power transmission, that is $86 million, and that is just dod. the next one is in helmand province, and that is $23 million, which does not sound like surplus to me, and that is dod. the last one is government infrastructure provincial governments centers. that is $20 million, and that is dod. ok, so, who is deciding what

department of defense bills, and what usaid is billing? who was deciding that decision. where is the decision been made, and on what basis is it being made? >> first of all, for the purpose of the afghan infrastructure fund, and the reason it is funded out of department of defense funds, as my colleague mr. their said, the commander on the ground has made the determination that our success on the battlefield requires -- requires both the reality and the prospects before certain economic inputs. the largest of those is electricity. the helmont province, particularly, where the center of gravity for our campaign. that is where the majority of our search forces were put in place.

first, general mcchrystal, and then general petraeus made very clear that increasing and making sustainable and electricity supply for the city of kandahar was an essential part of our campaign plan, and in order to defeat the taliban, we needed to do it militarily, and with the population itself. so, the first up, as mr. derr said, was the provision of these temporary power plants that will be fuelled by diesel fuel. that is very expensive, and as mr. their said, it is not sustainable. >> mr. sedney, i hate to interrupt you, but i understand all of these projects somebody thinks are important to the success of our mission. what i'm trying to do is pull some thread on accountability. i am trying to figure out why the department of defense's building prudential justice centers?

why is dod in the construction right now? i do not understand that. how was that decision been made, and where is it being made? >> the recommendations, senator, come from the field, for the chain of command. on the provincial justice centers, there are some areas where the provision are so important to the success of the campaign that if it is not possible for a.i.d. to be funding them, they are it conclude -- included in the fund. >> ruled in the room decides what kind of -- what pot of money -- who in the room besides white pot of money this is coming out of? i feel like i am not seeing ghosts. is it a.i.d.? i'm upset the sustainability for these projects. it does not appear to me that it has been taken seriously in terms of sustainability.

it looks like to meet somebody in the field have said we need to do this, so we're trying to find somebody -- summary of the budget -- do it. that is not how you craft the expenditure of federal tax dollars? do you see where my frustration is. i cannot figure out who to call? >> i apologize for any confusion that has been cost. i would say the process has been much more vigorous and ordered them has but -- ban has been described so far. in terms of the afghan at infrastructure fund projects, those projects were based on requirements that the commanders in the field out lines, and discussed intensively. this was a combined civil/military effort, discussed with our colleagues at usaid. there are some areas where usaid was already working, where a

number of -- a large amount of the funds, almost 80% of the funds that usaid spends are now in the south and the west. if there were some projects in which usaid, did not have the money, which the commander in the field recognize as an urgent requirement. after the discussion out in the field over which agency would be the most appropriate implementing partner, then, those requests were sent back for approval of projects under the afghan infrastructure fund. those projects are recommended to the department, and then the decisions, the final approval decisions, are made in the department of defense. each one of those projects, which i understand were briefed by some of my colleagues last week, do have the sustainability assessment in them. >> have you looked at the sustainability assessment? >> i have not myself.

>> i would recommend them to you, and i would love your input after you have looked at them. i will tell you, i have looked at them, and i do not think this is what we are looking for. it looks to me somebody says we need to do this, and people are checking boxes, and the military is deciding what needs to be done and if a.i.d. does not of the money, we find a much did money and our budget. how long has the infrastructure been around? >> is the first year. >> would you say this is surp on steroids? >> i would not say that. there were a number of areas where commanders in the field saw a need for projects that would have the an immediate impact. a number of those projects were put forward as surp project.

>> honestly, sir, this is historic in some ways. what we have done here, for the first time that i am aware of, we have decided that we are going to do things like build the justice centers in the department of defense. there was obviously some cross pollination in iraq. some have been in a way that was helpful, and frankly, a lot of money was wasted. tens upon billions of dollars was up in smoke. what military commanders thought they needed in the moment, it turned out we would not be able to sustain them. healthcare centers that were never built, power plants that were blown up, roads and bridges that were destroyed. so, i am trying to -- do you believe that this is the new normal? in our contingency operations the department of defense will have its own construction fund

that will be commanded by the military leaders to determine what role should be built, what power line should be built, and what justice center should be built? >> first of all, i would say it is not the department of defense that determines which ones should be built. the commanders in the field make recommendations. >> with your money? what do you mean you're not deciding what is plenty belt. -- what is going to be built? this is money for the department of defense. if somebody else is not deciding. >> if we are deciding on a whole complex of things that need to be built, which are of urgent military necessity, and yes, this is a new area. as a brand new concept. it does come out of the issues that we saw with syrp, where they were tending towards things that were more than a quick

impact projects. there was consultation with congress in putting the afghan infrastructure fund into place. we of created a new office in the office of secretary of defense to work on overseeing this. >> who is that person? who is in charge of that office? >> one of my colleagues. it is in our office of stability operations. i can get you his name. >> this is the kind of stuff we would ever like to see covered in your opening statement, mr. sedney. we are a lot of projects that are being built. i know this is a really difficult environment. there are all kinds of challenges. our men and women have performed heroically. our military leaders are doing an amazing job, but i do think

we have played fast, loose, and sometimes sloppy was the way we have spent this money, and, yes, in fact, this is the priority, for military command, why is that not transferring to make it the priority of the state department? why are we not using the funds and a traditionally been always appropriated in this country for reconstruction projects? the expertise has always been a the state department, and after the military pulls out of there, guess where it will be back to? it will all be back to the state department. with this more famed ofsurp, into something bigger, i know it allows you to jump the line in terms of budget priorities, but in the long run it makes accountability and oversight very difficult, because you can go out in afghanistan, and how might project you have in usaid

right now in afghanistan? >> i would have to give you the exact number of individual projects could >> more than a couple? >> if not too many at the moment, but we have several. >> let me change the subject now come and go to the kabul bank. i know this is difficult, and in some ways delicate, but while we are pouring billions of dollars into the infrastructure of afghanistan because they have a gdp data is -- i think it is higher than two billion, what you think it is? >> i think it is about $18 billion. i think the 97% figure has been somewhat misguided part >> that is the highest i've ever heard their gdp. when i was in afghanistan, i was told by people on the ground of the gdp was somewhere around 10 billion to $12 billion. >> i think it is gone up

steadily. i might be slightly overstating my and understanding is it has been growing every year. sorry. >> what i'm trying to figure out here, is we have $90 million fraud that has happened at the kabul bang, and that is where we put international assistance for afghanistan. >>clearly we have people on the ground that were supposed to oversee the financial sector through usaid. can you explain how they were able to do insider lending to the tune of hundreds of millions of dollars that is now gone, and why we are not being more aggressive in terms of requiring the kinds of odds that the other banks that are now in question that may have the same kinds of problems? why are we not requiring independent, forensic audits,

and results of those audits before we put more money into any of those banks that has a connection to united states taxpayers? >> let me clarify that no u.s. taxpayer dollars ever gone to kabul bank. >> it is just imf money? >> i am not familiar with imf funds having gone, but i cannot speak to that. >> he say no u.s. funds have gone to the bank, but if we are paying afghan contractors, and we have blown their gdp up above what it will be after we are gone, that money is going into some banks, so i would hasten to add that a lot of the money that is gone into every afghan bank has been american money. would that be fair? >> there is no program that has existed in the past that provide support to kabul bank. what we have done as a government is support the afghan's governments ability to

develop its financial system. that has been involved in building the afghan central bank from nothing into an entity. part of that has been to build the capacity. i hasten to add that at no point has the u.s. government, or u.s. government officials or contractors by responsible for the oversight of afghanistan, the banking system. if that is a sovereign function of the government of afghanistan. we have attempted to build their capacities. critically, on the other point about the forensic audit, not only do we support that idea, but we have been demanding it. part of the imf conditions for new imf programs that have been designed around the afghans rectifying the problems in kabul bank have been precisely that from -- for -- audit of the bank needs to be conducted, and the imf program requires that ought

to be conducted prior to a new imf program being put into place. so, i do want to emphasize that we agree with you strongly that an audit needs to be done, as well as a number of other steps, conditions that need to be endorsed by the u.s. government before any imf program goes for. >> ok, and thank you for that. we will have follow-up questions on that. let me find the -- a couple of things finally i want to do. one is surp. i have had many conversations with general petraeus and others about surp. do you all have in the department of defense and analysis of where surp money has been set and -- spent in relation to where there has been challenges in our military mission, and what kind of success the surp funds have

brought about? is there data? >> senators, i do not know of any study that has been done yet, but we have repeated statements and delegation from commanders in the field, as far as i know, and i can check and see to make sure, there has been no study to validate any statistically valid correlation between surp spending and military success. in afghanistan, since we are still in the process of achieving that success, my own view would be that it would be too soon to make such an evaluation because we are still in the process of carrying out the war. >> we have done surp for as long as i've been in the senate. we have a lot of surp money that

is the spent in iraq and afghanistan. this is my question, and i would ask you to take it for the record because i wanted to be sure. my question is, does the department of defense, the american military, have data that would weigh over where surp money has been spent against hot spots, to determine whether it has been spent in areas where there are hot spots as it relates to our military mission, and if so, is there data available about the success of debt surp -- of that surp money? >> yes, we have data where the money is being spent, and where there is insurgent activity. that, we can provide to you. on the valuation of success, i do not think we have the data to evaluate the success because

we are still in the process of carrying out the fight. certainly, on the first part of the debt, we will be able to provide that to you. on the second part, i will consult with colleagues and see he is doing a study on success of surp in afghanistan is something that would be something we wanted to try to do now, or do it more retrospectively as we move further along in the campaign. >> mr. solis? >> if i could, and i did not do the specific study on surp, but i did know that we made a recommendation along the lines you mentioned about trying to measure success against some set of standards and metrics. that was in a recent report, and the department did concur with that. there is a recommendation. >> to do that kind of study? so we can get the sense of the efficacy because this is

essentially moving beyond surp, into a much bigger projects, and it worries me that we have done that without really checking to see if surp was a success in terms of the mission and whether or not the afghan people -- i do not mind that the afghan people -- i understand they need our. i understand it would be nice to have the lights on. i need to make sure that spending hundreds and hundreds of millions of dollars on the power grid and the power system in afghanistan here is, in fact, going to translate into defeating the taliban. it is nice that we turn on the lights for them. it would also be nice if we got more broadband in missouri, and those of the kinds of decisions we are going to have to make. i worry that the blinders get on, and we lose perspective about whether or not these projects are he central to the mission of defeating the taliban

and providing stability terror i am not quarrelling that we as to train the army at -- stability. i am not quarrelling that we have to train the army and police. if buildingdering the roads that we're building, the schools that we're building, the justice centers -- is the army corps taking the lead on all of these projects? >> i know they're taking the lead on at least one of them, and i can get back to you with who is on the lead. >> i assume all of these are being contracted out? >> we are in the process of doing that, and, yes, they would be contracted although -- a lot have to take that question. >> i am number of questions. guy lebas stayed long. this hearing was supposed to be

over at -- you guys have all state loan. this and was supposed to be over and noon. -- all you guys have stayed longer. this was supposed to be over at noon. sorry, i have to ask a question about the counter-narcotics. it dealt with the counter- narcotics money that we have spent and the problems there. first, for mr. denver, what'd you done to improve the management of -- what have you done to improve the management of the counter-narcotics in afghanistan, and if you're not prepared to enter this today, we're happy to take it for the record. >> i will need to take this for the record. if the space and missile defense command is the organization that oversees those contracts. >> ok. usaid, mr. their, has awarded

$1.4 billion since 2002 for agricultural programs to engage farmers to engage in something other than opium farming. there is concern that these programs are distorting the economy, or treating economies that are not sustainable. do have a measure on the impact of these programs, and will any be sustainable in terms of the alternative agricultural program? >> i would be happy to get you more on the measures, but to fundamentally answer your question, yes, i think this investment in agriculture which is about finding alternatives has been dramatically successful in two regards. first of all, a large number of provinces, and i could get you the number, have gone opium- free, and that is been very important to our strategy of reducing and eliminating opium production in afghanistan. the other is that there is no silver bullet to replace opium in afghanistan. what we're trying to do is

create an agricultural mixed and market for those agricultural products that will allow afghan farmers to make a decent living, so that the choice to plant opium will be far less attractive, the city -- with these other efforts. we have increased crop yields dramatically, and we are proud of that investment, which i think as long-term because they are able to open up new markets, and we are increasing trade across the borders. it is really a critical part of our all to the sustainability strategy for afghanistan's to increase the agricultural income. >> i think it is a terrific program. we of the missouri national guard unit that is over in the agricultural program. in fact, we lost one of hours over there. -- one of ours there. let's talk about the program for

dod and usaid -- we of now spent two billion dollars for counter- narcotics. can you speak to any of the milestones the have been reached on having a negative impact on the narcotics trafficking in afghanistan after we spent $2 billion? >> hour, again, really focuses on the crop -- our works, again, really focuses on the crop replacement. our offense focusing on agriculture have really been to find replacement crops. -- our work focusing and agriculture have really been to find replacement crops. a large number of provinces that were planting opium just a few years ago have had gone poppy- free. >> have we actually measured the amount of opium produced in afghanistan, and do we have milestones each year as to where we are in that metric?

>> we do not do that, but there are intense of measurements that are done on a year-by-year basis -- the opium crop by its price. there was a dramatic decline last year, partly in due to blight, but also due to other programs as well. >> maybe we need to work the blight. it would be less expensive than $2 billion. i would like to get information from your colleagues either at dod, or state -- what milestones we can't point to pass that this investment has been a wise investment. if the alternative crops, obviously, if we can show one, we can prove the other, and the question is -- you are not the right person, where will pose the questions to the right people if you help us find them. mr. sedney, it may be the you might not be the right person to be at this hearing, but we struggle when we do these hearings, and that is part of

our problem. i will close with this. he would be great if i could get the right people in front of this hearing that i could hold accountable on contacting in afghanistan for infrastructure, but it is harder than it looks to find the right people because it is not clear who really is making the decisions at the front end as to where the money is going to go, the decisions in the middle to as to the contracting process, and the decisions at the end, as to whether or not we have done an adequate job assessing sustainability. i certainly will look forward to the input from dod after you look at sustainability rationale that has been laid out for the projects, and i think you will continue to hear more and more questions in this area as we try, with all of our might, to find every taxpayer dollar we can in terms of spending less. i am not here to say i do not support the mission in

afghanistan. i do. i question whether all the money we have spent on contracts in the african to counter insurgency, whether or not we again any valid -- contracts we have spent in afghanistan to counter insurgency has been valid. i think a great is not a good grade. we will have questions for adopt record. >> sector, effective at one thing -- senator, if i could add one thing -- while our work focused mostly on the oversight of contractors at the dod, some of the outcomes of the data are for construction. you cannot assume that what we have out there is already to go in terms of people just going and using, and been able to sustain it. when you also have to look at is what it will take to possibly rebuild, where reconstruct

facilities that are already there. some of our work has shown that a lot of these buildings out there on these bases are not ready to be moved into. so, i think as you think about sustainment, you will have to think about are we ready to move folks in, what it will cost to rebuild or reconstruct those buildings. >> right, at the back end. we have the front and deciding where the money is going to go, the middle portion which is actually overseeing the contracts, and at the back end, who do we hold accountable if the structures are sub-standard? if they are not going to work for the purposes they are intended -- that is what we saw so frequently in iraq, frankly. some of that dealt with the safety and security of our troops. other was construction -- the health centers are a famous example. the ones that were built were not capable of being used, and

the ones that were not built we never got the money back. so, there is a disconnect between what commanders in the field wants to have happened, and what actually happens, and the money that is spent from that point to that point is where i think we could save billions and billions of dollars if we really work in getting this right. it is better. the cores are better. they're now being trained. when i first started on this path, and the idea for the war contract in commission was just an idea that i came up with because i am a student of history and what harry truman did in world war two, and i thought it was time did we did that, and with after what i learned in iraq, and jim webb and i worked hard to get that established, but we are a long way from where we need to be. i want the department of defense to take this seriously, and i want a.i.d. to take this

seriously, because the american people are going to turn off the spigot, if we do not do this right. and they have the right to turn off the spigot, if we do not do this right there is so much work to be done if all of you would study the works that has been done. we could make huge progress, but somehow it never happens. it is painful how long it's taking to get the accountability that we need, and even get the accurate information turned i will continue to follow will put the new secretary of defense on this. he and i have discussed it. i have had many conversations with commanders on the subject matter, and everybody now as their head, and says they get it, but it is not getting done right, unused to improve care if thank you very much for being here today. -- and it needs to improve. thank you for being here today. [captions copyright national cable satellite corp. 2011] [captioning performed by national captioning institute]

>> the hearing also looked at counter-narcotics scrutiny they're there is an article on our website, c-span.org.

the u.s. is in session today. they will be in session next week. majority leader harry reid announced earlier today they would cancel their week-long july 4 break. he said there is too much for lawmakers to do. as a matter of fact, in a news briefing that just wrapped up, the majority leader and other democratic senators spoke for about 15 minutes, and the majority leader said he has invited the president and the vice-president to meet with senate democrats next week. here is that briefing. [unintelligible] [laughter]

[laughter] >> i announced this morning that we would be in session next week to read what we have to do is too important not to be here, -- next week. when we have to do is too important. we do not have time to waste. we know the most important issue is reaching an agreement the cuts are deficit and grows our economy. we need to work out some of arrangement, quickly, the for

the markets start to react, an american family start to feel the consequences. mark zandi, who i think it is important to note, was john mccain's chief economic advisor, and now works as an economist at moody's. here's what the democrats and republicans all over the country. -- he's -- he has worked with democrats and republicans all over the country. he said we cannot wait until august. we need to hold a series of meetings, and we are going to do that. next week, on tuesday, the day we get back, we'll have senator conrad, who is were very, very hard, with the people on the budget committee to come up with they way to move forward on the budget. we will meet with him on tuesday. on wednesday, we will have another caucus. the caucus on wednesday will

have the administration folks come up. i've invited the president, the vice president. we are confident that they will be able to be here. or, we will go there. also, on thursday, we will have the president's economic team come. gene sperling, and of course others. we need to stay on top of this. these issues are resolved by people meeting and discussing them. i have had a number of senators, both democrats and republicans, say do we really have to be here? we have to be here, otherwise if one is not here, somebody else is not here, and we do not want anyone to think that what we are doing here just a few of us can do. the whole caucus has to be

involved in where we are headed with this most important issue. if the main obstacle, and i want to be very clear, to finding common ground is republican's stubborn insistence on protecting tax-payer funded giveaways. how many of you heard on the radio today, maybe it was on television, i did not of a chance to watch television or read all of your newspapers -- in new york, somebody went to an atm machine. they left their receipt. he withdrew $400, and it cost them $4 to do that. he still led him in his account $100 million -- he still had in his account $100 million. these are the kind of people that should be paying their fair share. we're asking people that are struggling on a day-to-day basis

to make mortgage payments, and we have people that are making these huge amounts of money that are not helping with the problems we have. week, democrats, know that we have to do the job of working. a balanced budget. we have to reduce our deficit. we know that. we need help. if it should not be a burden on middle-class americans. the more pressing issue facing us is forging a bipartisan deal. we can only do it on a bipartisan basis -- cut spending, while creating jobs, and that is what we are going to do. we are going to focus on the economy tennis center durban? >> -- senator durban. >> one of our republican colleagues was critical of the present's press conference, using harsh language -- the president of the press conference, using harsh

language. what the president had to say is very important. this august 2 deadline on the debt ceiling is serious credit is very serious. why are talking about the possibility that the united states would default at the first -- for the first time in its history at a time when countries around the world are in default. where are at risk of the recovery being endangered. if it looks it we may not meet our responsibility and extend this debt ceiling, interest rates will go up. it is exactly the worst thing we could ask for in times of recovery. so, when the president expresses a sense of urgency as he did yesterday that we roll up our sleeves, and get to work, and get this done, not the last minute, but as soon as possible, i think he is delivering a message everyone ought to hear. the president said revenue should be part of the conversation.

i even let congressman cancer explain why he walked away from the bipartisan budget negotiations. he did not want to talk about revenue. he threw the hot potato to john boehner. if we cannot bring the revenue to the table, we will not have a serious conversation about dealing with this deficit. when we have identified in the last few days on the floor and off of the floor, are ample opportunities to save money and our tax code -- subsidies going to american businesses to ship jobs overseas should aim the media elite. if it will help us on our deficit, and encourage companies -- should end immediately. will help our deficit, and encourage companies to stay in the united states. all of these are special favors in that tax code. protecting them is not protecting america. if we have to step forward and break this deadlock on the issue

of revenue. i have been involved in this for a long time. i will tell you this is the moment of truth we are facing. we have to get this done, and done quickly, otherwise the economy is going to suffer. >> senator schumer? >> thank you, leaders. it looks like we will be here in the capital for the fourth of july break, but it is time for serious negotiations. we do not need extra fireworks going off. a lot of us plans to be with our families back home next week, but that is a small sacrifice compared to what is at stake if we do not reach an agreement to avoid a default. the clock is ticking on the deal. it is crunch time. when we know that raising the debt ceiling is not popular, and no one side wants to own it by an -- by themselves. we're going to have to hold hands, and do this together. i saw senator mcconnell on the

floor demanding the president dropped -- drop everything and show up to meet with him. he knows that the president's door has always been open. we do not need any more response. we need a willingness from both sides to give a little. we have given a lot. the vice president has said more than $1 billion in cuts have been identified, and that would put us far down the road to an agreement. the question is, how to make up the rest next leader mcconnell has gone out on a limb and said there cannot be any revenue in the deal. it seems like a leader mcconnell is willing to thank the economy for the sake of protecting tax breaks for oil companies, yachts, corporate jets. just today, senator a corner and, a member of the republican leadership said, although i think the president's own fiscal commission pointed out there is a lot of money being used in tax

expenditures. i think we need to get them on the table, and see which ones might cents per call those were his -- make sense. those were his words, not ours. senator alexander said it is a good time to take a hard look at on warranted tax breaks. again, not one of us. another member of the republican leadership. so, it seems senator mcconnell has ventured out on a limb, and many in his own caucus are saw in it off. the sooner he joins the rest of his party, and abandons his -- position on revenues, the sooner we could have a deal. >> i have been on the budget committee the entire time i have been here on the senate, and all of those years to the clinton administration, through multiple wars, and to the grace -- worst recession since the great depression, i have not seen

anything like what the republicans are willing to risk today in these budget negotiations, and who they are willing to risk it all for. earlier this week, the bipartisan policy gentle put out a report that was authored by a former bush treasury official about what would happen if republicans continued to play chicken with default, and the administration was forced to make desperate spending decisions in august. those scenarios were extremely gramm. at risk are the benefits and health care that we on our veterans and absurd our nation honorably, social security checks -- that have served our nation honorably, social security checks for seniors, on a point benefits for the millions of workers desperately seeking jobs, and even pay for our active duty military. the question is, were they willing to risk that for? it is for people that are making the most in this country --

companies like exxon mobile, despite reporting a profit, we are paying more for taxes. it is large corporations shipping jobs overseas, and is the very wealthiest americans with the most generous tax rates in over 60 years. they are not being asked to sacrifice. when we are asking for in this budget deal is that everybody participate. we do not one does budget balanced on the back of our seniors, our working families, our veterans, and the hard- working americans who note that should we go to default because of their insistence on not shared sacrifice, it will hurt the most. all we are asking is that everybody be at the table to contribute. >> questions?

>> the reality is that the people at the negotiating table now are you, democratic leaders, the president, and republican leaders. why you need to keep the senate here? is this just for show? >> we have to have the entire caucus involved. i add two entire caucasus this week. they want to be involved. they want to be involved. even though the negotiations take place with some of us, the four laws have a meeting with the president yesterday, we came back, -- the four of us had a meeting with the president yesterday, which came back, and reported. >> can you say with certainty that the votes are not there if the deficit reduction package comes with no revenue measures, and what will be on the floor next week? >> first of all, we are not

going be musing on some piece of legislation we are not going to be voting on. we are doing our utmost to come up with something that senator schumer mentioned clearly -- it takes both sides to get something done. neither one of us can do it alone. we are working on a number of different proposals, just so everybody knows. we discussed four of them with the president yesterday. i do not know how many others have been discussed with other groups of people, including members of the house. we are working on that. we are going to spend some time next week on the libyan resolution. it is supported by senator john kerry, and senator john mccain. i spoke to both of them today. >> a lot of your colleagues have commented on tax breaks --

are you going to start forcing republicans to vote on those, and go on record on that, and my you start next week? >> that is certainly something we are considering. as you know, the senate rules work that is not so easy to get things on the floor. so, one of the considerations we might get our favorite, and go after that. that all takes time. working on it. everyone should accept this -- why have we done this? why have we pointed out these individual tax breaks, who standing alone, that will solve budgetary problems, but if you add them together, they are worth tens of billions of dollars. it is important, and i appreciate my colleagues going

out to the floor and lay now we are talking about. in fairness, if somebody has an atm account of $100 million, they should pay their fair share. [unintelligible] >> there are all kinds of proposals being made. senator dick durbin, was worked so hard on this as a member of the commission, he has feelings different than others, but we are not here today to negotiate what it should be. which is no would-be -- it would be very, very unfair to people that are struggling -- our economy is not doing as well as we would like it, it is not fair for them to bear the burden when the fat cats are at home. thank you, everybody.

>> the majority leader harry hour reiterating that the senate would be in the senate next week to work on debt issues. he said that would take up a resolution authorizing limited military action in libya. tune into c-span this independence day. writer michael lynn and other panelists discuss of the united states can remain united. >> of the political -- at the political level we are more divided than any point since the civil war. then, the dali lama and sister helen prejean talk about violence and the death penalty. later, nixon white house insiders talk about foreign policy. this monday, july 4, beginning at 10:00 a.m. eastern on c-span. at 10:00 a.m. eastern on c-span.