meeting of the committee will come to order today's hearing examines a three hundred million dollars contract to supply ammunition to the afghan security forces this contract is an important one because it relates directly to the success of our mission in afghanistan we'll know a lot about what went wrong after the contract a wire was awarded in january two thousand and seven we know that ammunition provided by  was unserviceable we know that much of the ammunition was illegal chinese made ammunition we know that after paying over sixty million dollars the army cancelled the contract and we know that last week the justice department indicted and its top officials with seventy one counts of fraud and related charges we have also learned that there are questions about the role of the u s embassy in albania in approving a plan to seal the chinese origins of a wise a munition a letter i sent yesterday sought additional information about the embassies actions today's hearing will examine what is not known how did the company run by a twenty one year old president and a twenty five year old former missouri get a sensitive three hundred million dollar contract to supply ammunition to afghan forces my staff is prepared an analysis of the evidence that the committee has received and i'd like to ask unanimous consent that the staff analysis and the documents it cites be made part of today's hearing record no objection and without objection that will be the order the a p why contract shows that the procurement process at the department of defense is dysfunctional there was no apparent need for the contract no effective vetting of the compan qualifications and no adequate oversight the first step in any procurement should be to ask whether the contract is necessary that's especially true when the contract will cost taxpayers hundreds of millions of dollars this apparently never happened a y acquired its ammunition from stockpiles in albania and other former warsaw pact countries these countries have surplus ammunition they are trying to give away or destroyed we learned during the investigation that the president of albania flew to iraq in two thousand and seven and offered to donate albanian stockpiles to general petra it appears that the army agreed to pay three hundred million dollars for ammunition it could have gotten for free the procurement failure that is the hardest to understand is a selection of a why the state department state department official in charge of the watch list called this a perfect trifecta but the defense department never bothered to check the watch list awarding the three hundred million dollar arms contract in the source election decision the contracting officer wrote there essentially is no doubt that a why would perform in accordance with the delivery schedules and has no history of quality rated problems based on this a wise initial rating was excellent and quote this was pure fiction if army officials had examined a wise performance under previous defense and state department contracts they would have easily discovered a dismal record of failure documents produced to the committee show that federal agencies terminated withdrew or cancelled at least seven previous contracts with a y under these contracts a y provided potentially unsafe helmets to our forces in iraq failed to deliver thousands of weapons and shipped a poor quality ammunition to u s special forces government contracting officials repeatedly warned of poor quality damaged goods junk weapons and other equipment in the reject category and they complained the company repeatedly engaged in bait and switch tactics that were hurting the mission one contracting official told us i just don't trust the guy i couldn't take anything he said credibly he told us that a why was a single worse company he dealt with in a iraq saying quote that was my lemon i had to make lemonade out of and quote in testimony to be delivered today the witness from the defense contract management agency continues to assert that quote had a history of satisfactory performance and quote that simply ridiculous rating a wise performance as excellent and satisfactory is an insult to the taxpayers the procurement deficiencies cascaded upon each other the terms of the contract left out essential details allowing a wide to deliver ammunition ammunition that was over sixty years old there were few inspections of the quality of the ammunition this unfortunately is not an aberration over the last eight years we have witnessed that came fleet breakdown in the procurement process as a y experience demonstrates it appears that anyone no matter how inexperienced or unqualified can win a lucrative federal contract with hundreds of millions of dollars there are profound lessons to be learned from the experience by examining why as a case study of what went wrong and why we can begin committee's decision to pursue questions about how and why a small inexperienced company was awarded federal contracts worth hundreds of millions of dollars obvious evidence of consistently shoddy performance was somehow missed or ignored as difficulties that can arise in trying to capture and use information on contractors past performance that such a bad actor continued to receive federal contracts only strengthens my belief that a well maintained database of current information on prior violations and other elephant information could be a valuable tool for contracting officers such a database is proposed in h r thirty thirty three and we appreciate chairman waxman the bill's sponsor representative maloney for working with us to improve the latest version of the bill it still needs some work with raga tory information on performance issues available only to acquisition officials the database could provide the two of the government need to root out the rotten apples before they can spoil even the most valuable barrels perhaps if we had acted faster to put such a system in place we wouldn't be having the hearing today but other gaps in the contracting system also appear to have played a key role in this fiasco it's one thing to have the appropriate information on past performance available it's quite another to be able to use it effectively in interviews with various contracting officials involved in a wide transactions the impact of the small business administration certificate of competency process surfaced several times under that statutory scheme contracting officials are  ejecting an offer from small businesses such as a why only on the basis the company is not responsible perspective contractor due to negative or marginal past performance instead the matter must be referred to the s b a which decides whether the firm is eligible for awar well i understand that this program was designed for the protection of legitimate small business firms it might be useful in light of this case to take a careful look at the impact of the process we should ask whether it has an intimidating impact on contracting officials who might otherwise reject firm as non responsible for reasons such as bad past performance but are reluctant to do so because the delayed action paperwork required by the federal process this case seems to speak volumes about what's wrong with the military contracting process  yet again we see poor decision making by overworking undertrained army acquisition officials over the course of a warning and monitoring twenty nine contracts worth more than two hundred million dollars someone somewhere should have heard an alarm bell and looked more closely at what this small company was doing with an impossibly large set of tasks but we should take care before extrapolating the specific hopefully the unique facts of the why any broad conclusions about the entire acquisition system this is a sordid tale of greed and ineptitude involving repackaged chinese munitions alleged kickbacks to an albanian government official and phantom plane crash there is little indication the united states routinely purchases and munition for vintage soviet weapons from twenty two year old arms dealers so we should ask what needs fixing who are keeping an eye on what needs to keep working in the vast majority of contract transactions so taxpayers can have their money spent efficiently and wisely meaningful reform forms are based on data not anecdotes even sensational ones today's testimony should an important information the public record about the mistakes and waste the heart of the debacle and we welcome the witnesses management command and the program executive officer for ammunition is accompanied by geoffrey p parsons executive director of the army contracting command at the u s army materiel command mitchel ground systems and munitions division at the defense contract management agency from the state department we have stephen d mo acting assistant secretary of state for the bureau of political military affairs we also invited attorneys that they would assert their fifth amendment rights against self incrimination and would refuse to answer questions at the hearing i ask unanimous consent to both letters be made part of the hearing record without objection that will be the order in fact both men were indicted last week on federal charges of procurement fraud false statements and conspiracy so their fifth amendment concerns would appear to be well founded i should also note that as part of their bail conditions the federal court has restricted their travel to the miami area under these circumstances we can who concluded that it did not make sense to require them to appear today we're pleased to have our witnesses from the defense department of the state department with us today solemnly swear that the testimony will give before this committee will be the truth the whole truth and nothing but the record will indicate that each of the witnesses answered in the affirmative why don't we start  what we start with the brigadier general phillips there's a button on the base of the mike mr chairman if i could like to let mr parsons go first sir he is the lead for the army here he is the director of the army contracting command and  i'm here with him sir so i'd like to defer to mr parsons that thank you mr party chairman waxman congressman davis distinguished members of the committee on oversight and government reform i appreciate opportunity to appear before you and just cus your concerns regarding the award of a contract a y incorporated to supply ammunition to the afghanistan army and afghanistan national police u s army is conduct an extensive review of this contract action to terminate policies procedures and rules regulations were properly followed in the pre award award in post war phases of the contract while i didn't indemnify any breaches in policies procedures rules and regulations we certainly learned a great deal in our review and it died down to five a number of improvements to make to our acquisition process here with me today as you know as general phillips the commanding general of the army material command joint munitions will be thout the life cycle management command general selves to address some of the improvements we are making in the management and acquisition of nonstandard ammunition to include specifications packaging expection and acceptance and respectfully request that our joint written statement be made part of the record for today's hearing without objection it will be viewed as executive director of the army contracting command i carefully reviewed the contracting process associated with contract i reviewed and discussed the source election process with the contracting officer i also reviewed relevant documents such as the pre award survey minutes from the contract post award survey meeting between a c e o and a why and post war documentation to include reports of discrepancy provided by the combined security transition command in afghanistan just recently i visited afghanistan had the opportunity to meet with the combined security transition command in afghanistan leadership and members of the afghanistan army my review indicated that the contracting officer properly followed the contracting process and made reasonable justness judgments based upon the factual information in her possession as we have come to learn however there were some factual past performance information that was not in possession of the contracting officer of the time the contract award based upon our review identified a number of small contract actions awarded by offices in the army contracting agency where a y had been terminated for cause in two thousand prior to the award of the contract and january two thousand and seven this information was not visible to the contracting officer as the dollar thresholds of the terminated contracts did not require the recording of past performance information in accordance with the defense federal acquisition regulation supplement as a result there were no reports of past performance in the past performance information management system that is used in the source election process to evaluating offers past performance although this is terminated actions were not included in the past performance information management system the solicitation did include far fifty two two zero nine dash five certification regarding responsibility matters which required a wide to identify whether they had one or more contracts terminated for  default in the preceding three years by any federal agency the provision also requires an offer to provide immediate written notice notice to the contracting officer if at any time prior to contract the word the offer and learns that his certifications was erroneous once emitted or has become or rooney is by reason of changed circumstances again eighty why did not indicate to the contracting officer that they had had several contracts that had been terminated for cause prior to the war to the ammunition contracts we had informed our platoon fraud attorneys of this situation determine if they why provided false certifications during the solicitation phase of the contract in addition we have initiated policy changes within the army that will require the posting of past performance information regardless of dollar value for all contracts that have been terminated for cause or default i believe similar policy changes or be considered at the d o d level and i would recommend similar policy changes at the federal level in my opinion while there certainly is room for improvement in the way we acquire nonstandard ammunition in support of our allies this case is more about a contractor who failed to properly represent their company and failed to comply with the terms and conditions of the contract rather than a faulty contracting process  contracting officials at the army sustainment can became aware performance issues in february two thousand and eight they initiated actions to assist sure compliance with the contract once matters became known to the became a fraud division regarding the chinese ammunition  they suspended them for the government contracts based upon a show cause letter that we issued to the or the contracting officer issue to a y and their admission that there was chinese ammunition provided under this contract they were terminated for default on twenty three may two several contracts to meet short term critical needs and will ply lessons learned to our new parent we also pursue reaper chairman costs from a wide consistent with the federal acquisition regulations i appreciate the congressional support of our army's efforts in providing our nation war fighters and allies with quality products and services we continue to pursue improvements in our contracting process and workforce as demonstrated by our secretary's commitment to implement many of the recommendations in the cancel commission report regarding army acquisition and pro management and expeditionary operations i look forward to your questions thank you mr parsons general phillips chairman waxman congressman davis distinguished members of this committee it is a privilege to appear before you and to have an opportunity to address the support that we are providing to a key ally as head of the joint munitions i want balot the lifecycle management command i've sought to gather lessons learned from our experience without you why and nonstandard ammunition and apply them simply to improve our process and early april as a direct result of the contract review that mr potter parsons just mentioned we established a team of subject matter experts and contracting program management and contract administration which included the defense contract management agency who continues to play a key role as well as the combined security transition command in afghanistan members of my command of spent the past two weeks in afghanistan and iraq working with our forces on the ground we have recognized the need to improve how we acquire nonstandard foreign and munition let me get emphasize that we have worked with all our key partners to include d c and to study non standard ammunition german procedures from acquirements to contract to delivery as a result future standards for quality packaging transfer transportation and technical specification elements for nonstandard ammunition and be more clearly state what we expect from our contractors these new terms and conditions have been prepared and have been staffed with industry and other o s d offices for their comments a request for proposal has been prepared with these new standards and will be published in early july for an history to respond let me add that our response from industry has been very important and we've sought to capture lessons learned from them from lifecycle management command will send trained personnel to the point of origin for nonstandard ammunition contracts to verify and munitions quantity and condition the army has moved aggressively to address this matter from the first notification of the problems from the field and our actions have been propped and fair we also continue to pursue improvements to our contracting process as a result of this experience your army is committed to ensuring our so and allies are properly prepared to continue the fight against the global war on terrorism in closing let me just add that we thank congressman waxman congressman davis thank you in this distinguished committee for your support for our soldiers our service members and our allies i look forward to your questions thank you very much chairman waxman congressman davis and distinguished members of the committee on oversight and government reform i appreciate the opportunity to appear before you and discuss your concerns about the defense contract management agency contract administration and more particularly product acceptance processes of various types of nonstandard ammunition the contracted issue was for the protests and delivery of various nonstandard ammunition types for the afghanistan national police and afghanistan national army the contract was awarded in january two thousand and seven to incorporate it located in south florida the joint munitions and let the lifecycle management command through their supporting acquisition center at rock island illinois requested a be satisfactory and both of the evaluated capabilities a y had a history of satisfactory performance on similar contracts showing increasing revenue growth adequate capitalization and was considered low risk for the evaluated capabilities d c m a conducted a post award conference in march two thousand and seven with a y representatives to confirm contract technical quality and safety performance requirements at the meeting it was understood that all ammunition would be off the shelf and previously manufactured all storage packaging and transportation were required to be international best commercial practices  confirm their understanding of these requirements the contract packaging and quality terms and conditions specified by the buying command had been utilized in previous contracts without any identified discrepanc that contract required count and condition inspection there was no age limitation on the perjured emanation product acceptance took two distinct forms for domestic sources except as was performed at origin for outside the continental united states kona sources acceptance was performed at destination the contract terms allow the contractor to submit certificates of risk is determined to be low in addition the government maintains its inspection rights regardless of whether the contract allows for the use of these or not the items of concern originated from  kona shipments were delivered to the airport in afghanistan due to limitations at the airfield kind count and condition inspection took place after movement of the ammunition from the airfield to the bunkers ordnance commission to noncommissioned officers conducted that inspection these officers have specialized ammunition training and the expertise necessary to perform kind count and condition inspection work knowledge by the ordnance fashion a new acquisition strategy for nonstandard ammunition letters of delegation requiring enhanced scrutiny of nonstandard ammunition non standard any additional items have recently been accepted by d already performed some of the delegate it functions on short notice and support of urgent ammunition requests we are confident that the more stringent specifications and corresponding inspection and acceptance requirements will greatly enhance the likelihood that only conforming ammunition will be presented and accepted in the future with our buying command partners to ensure we continue to improve the process related to the acquisition and acceptance of nonstandard ammunition in addition to the improvements already mentioned internal realignment enhances our contract administration operations subsequent to the award of this contract department has been responsible for regulating defense trade one hundred thirty five with the objective of ensuring that defense trade supports u s national security and foreign policy interests we carry out our work on the authority of the arms export applications and its twenty categories extends from firearms to the joint strike fighter the secretary of state has assigned the bureau of political military affairs the responsibility for performing this critical national security function for the state department the department's primary mission in this regard is to deny our adversaries access to u s defense technology while facilitating appropriate defense with our allies and coalition partners to allow for their legitimate self defense and to fight effectively alongside u s military in joint operations we do this in part by screening all export applications against our watchlist at large task given the volume of applications handled by the department  year two thousand and seven the political military bureau received approximately eighty one thousand licensing applications for exports valued at approximately one hundred billion dollars in fiscal year two thousand and eight we have to support that the trend of an average annual increase of eight percent we'll continue our watchlist is based on section thirty eight of the arms export control act and that directs the department of state as designated by the president to develop appropriate mechanisms to identify persons and entities who are ineligible to contract with the united states government or to receive an export license the watch list was created to respond to this section of law as well as to help us identify other parties who might be unreliable recipients of defense articles and services licensed by the state department watchlist currently has just under eighty thousand entries drawn from a wide array of governmental and other sources we update the watchlist daily with our compliance specialists who continuously review intelligence information long information and open source information relevant material public such as the general services administration is excluded parties list the office of foreign asset controls specially designated foreign nationals and the department of commerce is denied parties are all part of our watchlist the watch list also includes persons who are subject to criminal or civil to the barman as well as entries derived from classified intelligence reporting additionally sensitive information regarding ongoing criminal investigations is routinely provided to us by the f b i and immigrations and customs enforcement special agents who are assigned and work with us in the political military bureau and to serve as liaison among our agencies it's important to point out what the watch list is and what the watch list is not the watch list functions mainly to alert our licensing officers and compliance specialists within about potential concerns regarding a party a defense license application the wide range of information and sources and compiling the watchlist reflects the statutory requirements of the arms export control act and the wide latitude given the state department in making decisions regarding the exports of munitions consequently while some entries clearly determine whether an export may be approved for example if a party to a deal is barred or otherwise ineligible to export other entries tend to be of a more informational nature and are using coming to decision making licensing applications consequently the presence of an entity on the watchlist will prompt further scrutiny and review but it doesn't automatically entail removal of the party or the dial of a license application  license application submitted as required by the regulations to include the names of all the parties who are involved in the proposed transaction all of those parties both foreign and domestic are checked against this watch list if there is a  match license application is immediately put on hold for review by a compliance specialist if the party in question is barred by the department for conviction under the arms export control act or otherwise ineligible for example of another u entry indicates concerns in the activities of particular party without rising to the level of removal or denial compliance and licensing officers will undertake a careful review and may request additional information from the applicant additional or clarifying information regarding the entity may also be sought from other government agencies if it approved if it appears after a review that the original reasons for entering the party on the watch list have been resolved the hold will be released and the license will likely be approved without further delay we find the watchlist to be an effective tool to facilitate coordination with other government agencies that may have a concern with a particular entity for example companies under criminal investigation may be watchlist to ensure that investigative agency such as i or i c e is alerted when a company applies for an export application such watch listing can facilitate a criminal investigation by ensuring communication and coordination among government agencies it's also worth noting that such coordinate coordination it may confirm the suspicions of investigators but it's also true that such coordination may demonstrate that a particular entity in fact is acting within the law and helps ensure that investigative resources are not wasted on law by the companies thank you for your interest i'll be happy to answer any of your questions about our watchlist thank you very much for your testimony without objection the questioning will commence with a ten minute round for the majority followed by a ten minute round for the minority either side may reserve any news time of its ten minute block for use during or immediately following a five minute round by a member of that side with this reserve time to be controlled by the chairman and the ranking member respected and without objection that will be the order i'm going to start off the questions  one of the questions we're trying to figure out at this hearing is how can a company like a why get such an important contract for three hundred million dollars to provide and munition to the afghan security forces and mr howe in your written statement for today you explain a why i got the contract because of a wise strong record of past performance here's what you said quote a  history of satisfactory performance on similar contracts showed increased revenue growth adequate capitalization and was considered a low risk and quote you stand by that statement yes sir i did well we did what the army apparently never did we look back at past contracts to see what a wise past performance on the other contract was really like one cog contract got was a contract with a multinational security transition command in iraq to deliver protective helmets a u s official who examined a while shipments wrote the helmets came to abu ghraib by mistake they were not very good they had peeling paint and a few appeared to have been damaged such as having been dropped when i first saw them i put them in the reject category the same inspector also wrote this to mr d ollie the head of a why some people got a little while and up when they saw the daily receiving report they remembered the ten thousand helmets you sold them earlier this year and the junkie a case we still have in the warehouse several scenarios were being planned for you none of them pleasant another official wrote quote bottom line the helmets are damaged goods and we don't want them general phillips th contracting office or goes into to make an award on a contract they do with the review of past performance and they ask to assist in that process well if you did a thorough performance and someone came back with this kind of report performance under previous contract would you think that that sounded like satisfactory performance mr parsons maybe you can answer this question no i would not sir and as i mentioned in my opening remarks we have towns that due to dollar value of many of those contracts not being within the reporting threshold alive that information did not get reported again reason why we were initiated a policy change in the army to ensure that regardless of dollar value that type of information is sent forward i will say let me just because i wanted answer this question i have limited time under another defense department contract sale to deliver ten thousand beretta pistols under contract for five point six million dollars the contracting official who terminated that contract said this about mister i just don't trust this guy i couldn't take anything he said credibly the contracting official added all his reasons continued to build and build and then it just got to the point where it was straw in the camel's back and i said look no amount of consideration is going to take care of the fact that you've never been you have been on able to deliver you have not had one delivery order come now hearing that mr how would you think that indicated silent past performance i would not if i heard those things say it was past performance but i would the adequate performance for contractors well another under another contract with a we why this one with the u s army special operations command a why was supposed to provide the same type of ammunition that it later delivered to afghanistan the contracting officer terminated that contract said that a quote failed to deliver acceptable goods end quote unquote provided no notice of an excusable delay and quote and quote provided inadequate assurance of future performance of zat sound like satisfactory performance mr howe absolutely not the committee also looked at a wise performance under contract with other agencies under a contract with the state department to provide tactical equipment for use in iraq including optical sites and weapons adapters a y repeatedly ignored a contracting officers warnings in fact a wide delivered only one item by the delivery date and it was rejected as a nonconforming substitute when the contracting officer withdrew the order this is what he wrote to a why you are hereby notified that your failure to deliver the listed items has endangered the performance of the department of state mission further in subsequent correspondence your promises of delivery have not been met you are hereby informed that the undelivered items are being withdrawn ward of this contract a why despite these numerous examples of contracts terminated for poor performance reveals a fundamental flaw in the system for vetting contractors appears to be broken it's hard to imagine a less  broken overseas is done in light of the national security interests of the united states and i want to look at the watch list that you discussed in your  this watch list is very important then we have learned and i want to verify this that everyone involved in the contract was on the watch list let's go first to the buyer the president early flagged in april two thousand and six because of suspected illegal arms trafficking is that not correct yes now that's correct although mr chairman i'd like to put their words on the words on the record of the watch last that although he was only twenty one years old he has a brokered and completed several multi me he was also placed on the watch list in two thousand and six before this contract was awarded is that not correct yes now that's correct now the source of the ammunition was mister he's the head of albania's military export import company that he was first listed according to my information in two thousand and five is that not true yes ma'am that's you the head of the state department's directorate of the fence trade controls told us that i had and i'm here quoting a perfect and yet of course they were awarded by the army a three hundred million dollars contract how do you explain awarding the strength to somebody who is on a watch list that is not classifie the contracting officers that execute the contracts are not required to go and look at the watch list i believe that to be true and i'll ask mr parsons to elaborate on that comment just a second your testimony here is that you didn't check the watch list because you were not required to check but contracting officer was not required to check i want to ask you in  what we now know we know the contracting officer did not and the last thing i'm trying to do is blame it on the contracting officer in light of what we now know and the only reason for having hearings like this is a see what we can do to improve in the future so i'm not trying to say why in the world did you do it in light of what you now know would it not seem in the best interest of the united states to either when you are involved in sales which require a license to either check the watch list or if there is no quote requirement to have your own internal procedures so that do you know now what the entry was one of the sources for the classification was with the defense intelligence agency do you know now what the deletion was specifications of the contract which is a primary metric that we use to deliver on time didn't deliver in accordance with the specifications in both the basic contract or the model let me just go through another company ask if you think this is a response which is a company that in two thousand and seven paid a one point one million dollars settlement for overbilling for aircraft parts in two thousand and six a thirty million dollars payment to settle claims that one hundred neighbors  million dollars settlement to resolve the darling grew in scandal and other pending investigations if you remember that in two thousand and three an eighteen million dollars settlement for violations of the arms export control act and the international trafficking to arms regulation in two thousand and three a six million dollars settlement for violations of the arms export control act involving transfer of data to china in two thousand and three they paid a four million dollar fine for violations the arms export control act in the international traffic in arms control that's a different one violation in two thousand and three a two point five million dollars settlement for alleged defective pricing in two thousand and three a four hundred ninety thousand dollars settlement for action for false claims they had business unit suspended from receiving two federal contracts  priority nonstandard ammunition previously manufactured requested that we perform a ward on the financial transportation and accountability aspects of this impending contract we did that for financial and transportation and a defense contracting audit agency conducted the accountability piece of it were they aware that the  what if a contracting officer came across a news story or the president was arrested for domestic violence related charges that would not be something that would necessarily ring any bells because you look at the total company and not that this c e o sir if that was information that was available to the contracting officer i'm sure that what is you know quite some questions on their part but again we're not aware of any of that information being available today to the contracting officer would could they have taken his s clearly a criteria twenty two the fact the matter is i didn't have a lot of experience they did with the information available to the contracting officer indicated that company and had relevant recent experience that they started in one thousand nine hundred ninety had awarded contracts by the department of defense starting in two thousand and four so the contracting officer again based on the information that was available to be able to help that that the company had experience in providing these types of goods and services obviously they were wrong when you think in retrospect they were wrong don't you that they were wrong yes that contracting officer relied on again when information and was supplied on a contract  he made a good decision or a bad decision based on the information that he had i think i'm asking you in retrospect now that we know all the facts in retrospect knowing what we know now it was not a good decision that's all i want to get after  going to bifurcate my my questions i think the ranking member has done a pretty good job very good job of sort of asking the question of in retrospect is this is this award make sense no it doesn't general phillips if i can ask you a question knowing what you know from the record what tools should have been used to prevent this from happening so this is nonstandard ammunition that we are buying it's essentially foreign made ammunition soviet bloc countries former soviet bloc some things that we have to do is to make sure that we improve our specifications the way that we transport this ammunition our packaging standards those kinds of things and the team that i have stablished of subject matter experts have taken that on in a very big way and we've developed the standards in the specs and we're going to go off and improve those and for future buys that we have for nonstandard ammunition we're going to do everything possible to ensure that this doesn't happen again sir i'm i don't want to disagree with you your service in the army is much longer than mine but isn't the standard ammunition just not our standard for our standard ammunition no no no please answer the question because i asked it that way for a reason you know there's three camps of ammunition in the world there's a nato standard the old soviet calm standards and then there's like all other this is not all others is it this is basically the the old anti nato communist  bloc munition a k forty seven a seven six two that doesn't use the same casing is ours and so on it's what we dealt with all the way back in vietnam is that true correct let me ask you a question speaking of of armed services duncan hunter and we were shown by well meaning i'm sure army officers how they were going to train the afghans the guys who to a certain extent had kicked the soviets ass with with odds and ends weapons and i know we're not supposed to use that word indiscriminately but i noticed in the in the in the staff stuff i noticed there were some other words like shit ammo so i figured you know kick the soviets ass would work very well so i'll limit myself to those parts of george carlin's repertoire for today in honor of george's passing but we were there with duncan hunter and he looked at the stuff and it was junk and he asked what we're going to train with this oh no this stuff is terrible this is what was turned in we're paying to have this turned in by afghans and none of it usable is when you start training these guys what we're looking into procuring weapons i asked that day what i'm going to ask you today although i asked it with a shorter list isn't it true that both kerry and the czech republic estonia former east germany hungary lithuania latvia poland romania  slovenia and slovakia all use this standard historically have large stockpiles were known to have locked large stockpiles and virtually all of these people except for germany i guess were part of the coalition of the willing that went into afghanistan isn't that true i'm not sure i believe that to be true i said i'd bifurcate this thing but you led me right into the other part wasn't as an unnecessary contract because the truth is if you're going to buy standard ammunition and you have colleagues allies friends people you work with for whom this is still a standard they know about it general let me ask you a question why are you wasting federal taxpayers time writing standards for comm rounds when in fact all those countries i named have experts who not only have the ammunition and the weapons still in their stockpiles in many cases but have people who have the  expertise and they're all nato allies why is it in a nato war in afghanistan we didn't use our nato allies expertise not only in supply but also in inspection and why aren't you doing it policies and procedures that are defined by in the case of the army the united states army security systems command ok i'm running out of time so let me close with one question that's half comment half question you entered into agreements you didn't go there to do it but you entered into agreements with afghanistan that essentially locked out the ability for our nato allies who had large stockpiles from being the suppliers either for reduced cost or in kind now let's go back again if i take a trip to afghanistan this weekend and i talk to president karzai and i ask him would you be willing to have this product delivered to you from any source that could deliver you high quality product that your troops can use do you think he's going to tell me no no we have an agreement we have a certain standard or do you believe that in fact the united states military in a macro way and your mind is just the tail end of the macro mistake made a mistake in afghanistan that they continue to compound because we made a decision to use the weapons they were used to and then we didn't work with people had the expertise so i agree with you that we made mistakes and we need to capture those lessons learned and apply them but one thing i would like to share with you is that we are doing just want to ask you a few questions one of the things i listen to the testimony reviewed all the documents there are four things it seems to be going on here serious communication problems some serious incompeten phenomenal carelessness and a culture of mediocrity generally reviewed documentation from the defense department involved in quite a few previous contractor agency had with this company a what struck me was the number of times a year why it failed to perform and then came up with outlandish excuses for why it didn't fulfill the contract let me give you a few examples in two thousand and five a i was awa he told us that when devore rowley failed to deliver the weapons he just started making up wild excuses this is your contracting ops and now this is what he said he said the german now devereaux he said the german government was in the delivery of these italian made distills he said that the transport planes couldn't fly because of bad weather even said that there was a fire the plane crash that destroyed the documents necessary to secure an export license needed to ship the goods but that wasn't all mr devereaux we said at one point that he failed to deliver the weapons because a hurricane hit miami florida why was a base he told a contracting officer that they had no water and that quote his life was just terrible and the quote was it turns out this wasn't true in an interview with the committee staff this is what your contracting officer told us and i quote we could tell there was no hurricane in miami it wasn't like we didn't have the internet in the green zone and a quote general you concerned that mr devereaux lee would make up such excuses like this one important government contracts like that mean maajid contracts i don't hear you i'm sorry sir i appreciate your insight i have not heard those allegations that you just went over in terms of the nine millimeter contract and others but certainly certainly raises issues asked to mr temporally himself and in hindsight if we'd had knowledge army contracting the contracting officer for the contract we were discussing had knowledge of serious communication problems when you're going through i think when mr parsons and mentioned upfront that in past performance and sharing that information that we've got to improve the way that we do that i would agree so you did not know about  had was limited from the standpoint of past performance she did get a questionnaire on past performance answered by the joint contracting command rack in afghanistan many of those issues that you just identified were not highlighted in that past performance review you know it's interesting that when mr brown really said a hurricane hit florida and made his life terrible he was justifying his failure to perform one of three contracts that your team was supposed to be reviewing to assess his past performance and yet you didn't even talk to the primary contracting officer on the contract is that right sir at that's information i'm not aware of what we did talk to him and this is what he said he told us helmets accompanied by a cryptic chinese document supposedly showing they would say this officer told us quote i just don't trust the guy in the quote and there are many more examples like this it just seems like if you didn't know this then we have a fundamental problem with the way we do business the entire system must be broken and it must and i heard what you said in general about the corrections that you plan to make but i don't know that those corrections deal with the four things that i talked about this communications problems incompetence carelessness and a culture of mediocrity and so i'm hoping that the things you said will correct this but i'll tell you i don't have a lot of faith not even close and i'm not hearing that from the panel i'm hearing hedging i'm hearing some defense is about information not being available this kid was nineteen years old nineteen years old he gets a three hundred million dollars contract taxpayers money from the united states of america that's a disgrace i don't hear that from the panelists i'm hearing defense of different vigils has anybody been fired for this and i asked the panel the private sector somebody somebody would be without a job because of this i have as well you know i know the two individual indicted but it looks like based on the information they didn't because the standards are so should be no question in anyone's mind that this contract these contracts have been terminated that just sends the wrong signal to these contractors that someone could do this and still still get paid and still perform under other related contracts i mean this contract declared that he was satisfactory and satisfactory then the defense contracting officer changed that assessment changed from unsatisfactorily to documents in front of me that that u s for verification and assessments from individuals about the way these contractors perform and one of the things that gets me is that in assessing how a we're doing great you asked the vice president of the company to do an assessment of his company how how do you think that's going to come back i mean that's just a systemic this was a requirements contract as opposed to a multiple award or something like that why was this vehicle chosen congressman days my understanding after talking with the contracting officials on this is that when they were  discussing the requirements for the afghanistan ammunition they could not get the customer to specify a minimum amount of ammunition that they would need to place a minimum order against an idea contract so instead they elected a user requirements contract which doesn't require us to necessarily award a minimum requirement this is a small business that got the contract at the end of the day who checked to see if their certification was accurate is the contracting agencies is it the s b a or is it a competitor's complaint or how does that work the contractor certified certification representatives it representation is that they were a small business the contracting officer verify that they were small business and coded that in the federal procurement data system as a small i could be protested if somebody's going to protest but that was not in this case right so that small business size was not a factor in deciding whether this was a contract was open to large businesses and small businesses but if it's small business competes in this don't they have an advantage with that last part of the small business compete it's open it's more as one liners some advantage that correct  what's the difference between a small business and a small disadvantaged business certificate of competency process and the role of the s b a my understanding is that if there is a question on part of the contracting officer officer regarding the responsibility of a small business they go to the small business administration and ask for a certificate administration and give them all the particulars regarding the issue with and wait for the s b a to make an assessment how much information does the contracting officer share and how now of knowledgeable does the s b a have to be in understanding the nuances of a specific acquisition reverse one though what challenges does your agency have with the s b a certificate comments the process particularly internationalization to be a word on the basis of the low price technically acceptable offer i am not certain you don't feel you have any challenges or do you have challenges with the certificate compensate process particularly in an acquisition that's a word on the basis of a low price technically acceptable or any problems for this you miss watson i want to thank the chairman very much for having this hearing today and i thank the panelists for coming for h as we look into the background we find that in two thousand and six it was december mr devil rolly and mr allegedly beat a valet parking attendant resulting in charges of battery and possession of a stolen or forged document again year contract by the defense department the president of air from devore rowley was twenty one years old at the time that the contract was awarded and the vice president david pack off with twenty five years old i just heard one of the witnesses say that we don't look at each was suppose they were under sixteen and seventeen would you not want to be aware that they were not adults and on friday both of them and three other officials were indicted on charges that they concealed the chinese origins of ammunition shipments from albania to afghanistan if the investigation revealed that there was a contract to buy chinese goods which would be illegal in this regard how is it  after the production of one hundred percent inspection of the vessel to make sure that there is no chinese markings anywhere on the vest or on the box and i understand there were marking there and it's  like i understand a bait and switch saying that i did and there was a history of this kind of thing and i understand examining the chinese origin of the ammunition provided from albania to afghanistan under the defense department's three hundred million dollars contract but the committee appreciate your holding this hearing i want to myself with comments from previous speakers specially mr lynch to as he reference we travel together in april and had some conversations regarding a engage in brokering the sale of arms munitions overseas and as part of that process there is a watch list maintained from intelligence officials law enforcement other entities that develop it's also my understanding that one or more individuals or entities associated with a y contract were on that watch list i guess my first question is given that  how did a y get a license and what was the information that led to them being on that watch list investigated before a license was issued yes of the seventeen  state department issued we consulted with law enforcement agencies that were involved with and looking at the activities of the company and we checked with them to make sure  that issuing this license would not obstruct any of their investigations or that it would otherwise break break the law were required by the arm sex work control act to make decisions on these export applications for export licenses according to certain criteria out in the arms export control act in the licenses that we did prove there was nothing illegal but they were proposing and go off that maybe we need to wait to those investigations are completed before we issue new licenses is that not part of the consideration of whether a license is issued or not if a company is on the watchlist it will bell will go off and automatically it will attract more intensive attention from our licensing specialists our compliance to specialists to see if there's anything about that particular case that would be in violation of u s law in those cases where we  licenses we made the determination that in those discrete cases there was nothing illegal i guess i'd add to colleagues expressed somewhat disbelief that given the circumstances here a company was such a cause a license to be withheld it sounds like it has to be something yes they are proposing something illegal or yes they have done something illegal or not there's lots of questions here about whether they're worthy of this license so we access to that information well received on multiple occasions from many different government agencies who are aware of the watch list they contact us and ask us to chuck it so we have done that in the past but  there's no standard protocol that it puts somebody dealing with the sale brokering of ammunition or weapons on a watchlist that there is no automatic sharing with d o d that buys a lot of ammunition and weapons that there is not an automatic sharing of just so you know this entity of this individual put on our watch list so you may want to take a closer look at you're going to look to purchase including a three hundred million dollar contract that doesn't happen to we do not push out the information but if we are contacted i think that's one of the problems that one branch of our government has information that raises some concerns it's not automatically sharing it with another entity within our government that's engaged in the purchase of the underlying products and munitions and arms and and i think that's what dialogue is beginning to how to strengthen that and i think that's what we were after and this oversight here how do we make sure this doesn't happen  again my other one of the concerns that we would have we have close to eighty thousand and cities on this list and many much of the information is controlled and so we wouldn't know much of it comes from other classified controlled sources we chairman there's been a number of disturbing issues raised by this investigation but mr maule i want to talk to you about one that specifically relates to the role of the u s embassy in albania and the potential cover up of the countries of origin of this ammunition yesterday chairman waxman sent a letter to secretary rice asking about reports that the u s ambassador and other officials at the u s embassy in albania approved a plan to conceal the chinese origins of the ammunition that supplied to the afghan security forces the committee receive this information from major larry harrison the chief of u s office of defense cooperation in albania during an interview with this committee he stated that the ambassador and his top aides held a late night meeting with the albanian defense minister to discuss how to respond to a request by the new york times to visit the site was removing chinese ammunition from its original packaging before sending it to afghanistan according to major harrison who was at that meeting the albanian defense minister ordered one of his top generals to remove all evidence of chinese packaging before the site was inspected the following day although major harrison was quote very uncomfortable and quote with these actions he told the committee that the quote the ambassador agreed that this would alleviate suspicion of wrongdoing and quote mr maule i know you were invited here today to testify about the watch list but do you have any further information from the state department regarding this specific  issue no sir i do not all i know is what i read in the chairman's letter yesterday and in the press accounts yesterday you know while i'm personally not aware of any wrongdoing on the part of the management of the embassy of our embassy in tehran a i do know that the state department plans to respond to these serious allegations in the appropriate channels once they've collected the information well let me just ask you then hypothetically assuming that a u s ambassador to a country like albania had sat in a meeting like the one i described and was aware that an intentional act was being committed to conceal the identity of the country of origin in violation of procurement requirements would you agree that that would be a bad thing for that ambassador to do without reporting i'm reluctant to answer a hypothetical question because i can imagine there might be circumstances in which covert activity is involved of the transfer well i'm just going to have to stop right there i'm having a hard time understanding how a covert activity would justify an intentional violation of s law can you explain any situation where that would be acceptable no i think any violation of u s law by any u s government official is unacceptable what potential remedies are available against a u s ambassador who participates or allows the concealment of a country of origin of ammunition that's being shipped to an ally of this country sir i'm afraid i personally can't provide the question as to the question because i don't work on disciplinary matters or investigative matters outside of the arms export business from the united states but i'd be pleased to take your question back to the appropriate authorities to you mr bailey would you a second as a is at the embassy apparently concealed information about this meeting from the committee and the committee specifically asked for information about meetings between embassy officials and the albanian defense ministry as well as any information about in any interventions into a wise repackaging operation although major harrison argued internally that the department should inform us of those activities he was overruled and he provides documents contemporaneously to back up his story chairman waxman made a new request yesterday for all the documents relating to this meeting and for a series of interviews with the ambassador and his top aides mr maule can you tell us whether the state department tends intends to comply with that request voluntarily sir i'm sorry i can't answer the question i don't know what the intention is of department leadership except that we will respond to the chairman's request through the appropriate child well let me tell you why this is so serious and why this committee takes us so seriously a b b c news report says that major harrison was replaced in this position at the embassy on june ninth do you know if that is true the first i've heard of it sir general mr how do you have any knowledge of whether that occurred no sir the reason why that's important is because major harrison was a defense department official and if there was any retaliation against major harrison that would be a serious issue particularly since june ninth was the very same day he was interviewed by this committee mr chairman i would certainly hope that the committee will look closely understand how the defense department came to the conclusion that past performance was excellent and that there was no history of quality related problems with you just look at the report put together it is in the information they had an army special forces command contract ammunition terminated in two thousand and five because of late deliveries and poor quality but i mean contracted guns gold miles terminated in two thousand and six because of its value to deliver at the two extensions the state department contract the weapons systems terminated zero seven because they provided the wrong items the defense department terminated for delivery orders under a logic contract to supply munitions to the iraq security forces because the company failed to deliver the goods including ten thousand brother pistols general i'm curious how could there be a conclusion that there's no history of poor performance when the government agencies terminated at least eleven different contracts believe your comments and what you described are true but when you go back and you look at the decision that the contracting officer made based upon the information that was available to the contracting officer she made a reasonable decision based on the information that she had the past performance information and the pre award survey that was done by the defense they did talk to her she was interviewed and she said she never heard of those termination information regardless of dollar value the contract is captured and part of the problem we have today is past performance reporting only required on these types of contracts of five million dollars or more many of the contracts i believe you describe were below that  requirement commonly shared with the with the program office but again in our review of many of the contracts where they have been terminated for default none of those contracts our threshold and again that hole in the system that we've got to repair  i'm not sure the timing of that correspondence as it related to the timing of the pre award survey subsequent to the requests for pre award survey we looked at several financial aspects of the company that was one of them and we hope this hearing will serve a constructive purpose because what we've been talking about is not a proud day for contracting for our country we stand adjourne