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97–354 PDF 2016

S. Hrg. 114–332 

NOMINATIONS OF PETER V. NEFFENGER AND 

DAVID S. SHAPIRA 

HEARING 

BEFORE THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

NOMINATIONS OF PETER V. NEFFENGER TO BE ASSISTANT SECRETARY, 

U.S. DEPARTMENT OF HOMELAND SECURITY, AND DAVID S. SHAPIRA 

TO BE A GOVERNOR, U.S. POSTAL SERVICE BOARD OF GOVERNORS 

JUNE 10, 2015 

Available via the World Wide Web: http://www.fdsys.gov/ 

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 
(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

RON JOHNSON, Wisconsin Chairman 

JOHN MCCAIN, Arizona 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JAMES LANKFORD, Oklahoma 

MICHAEL B. ENZI, Wyoming 

KELLY AYOTTE, New Hampshire 

JONI ERNST, Iowa 

BEN SASSE, Nebraska 

THOMAS R. CARPER, Delaware 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

TAMMY BALDWIN, Wisconsin 

HEIDI HEITKAMP, North Dakota 

CORY A. BOOKER, New Jersey 

GARY C. PETERS, Michigan 

KEITH B. ASHDOWN, Staff Director 

GABRIELLE D’ADAMO SINGER, Deputy Chief Counsel for Government Affairs 

JOSE J. BAUTISTA, Professional Staff Member 

JENNIFER L. SCHEAFFER, Professional Staff Member 

GABRIELLE A. BATKIN. Minority Staff Director 

JOHN P. KILVINGTON, Minority Deputy Staff Director 

DEIRDRE G. ARMSTRONG, Minority Professional Staff Member 

LAURA W. KILBRIDE, Chief Clerk 

LAUREN M. CORCORAN, Hearing Clerk 
(III) 

C O N T E N T S 

Opening statements: Page 

Senator Johnson ............................................................................................... 1 

Senator Carper ................................................................................................. 1 

Senator Ernst .................................................................................................... 11 

Senator Sasse .................................................................................................... 13 

Senator Ayotte .................................................................................................. 16 

Senator Lankford .............................................................................................. 19 

Senator Heitkamp ............................................................................................ 22 

Prepared statements: 

Senator Johnson ............................................................................................... 47 

Senator Carper ................................................................................................. 49 

WITNESSES 

WEDNESDAY, JUNE 10, 2015 

Vice Admiral Peter V. Neffenger, to be Assistant Secretary, Transportation 

Security Administration, U.S. Department of Homeland Security 

Testimony .......................................................................................................... 3 

Prepared statement .......................................................................................... 51 

Biographical and financial information .......................................................... 57 

Letter from the Office of Government Ethics ................................................. 81 

Responses to pre-hearing questions ................................................................ 84 

Responses to post-hearing questions .............................................................. 112 

Letters of support ............................................................................................. 120 

Hon. Robert P. Casey, Jr., A United States Senator from the State of Pennsylvania 29 

David S. Shapira, to be a Governor, U.S. Postal Service Board of Governors 

Testimony .......................................................................................................... 31 

Prepared statement .......................................................................................... 135 

Biographical and financial information .......................................................... 138 

Letter from the Office of Government Ethics ................................................. 165 

Responses to pre-hearing questions ................................................................ 169 

Responses to post-hearing questions .............................................................. 183 

Hon. Patrick J. Toomey, A United States Senator from the State of Pennsylvania 32 

(1) 

NOMINATIONS OF PETER V. NEFFENGER AND 

DAVID S. SHAPIRA 

WEDNESDAY, JUNE 10, 2015 

U.S. SENATE, COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Committee met, pursuant to notice, at 9:06 a.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Ron Johnson, Chairman of the Committee, presiding. 

Present: Senators Johnson, Lankford, Ayotte, Ernst, Sasse, Carper, Heitkamp, and Peters. 

OPENING STATEMENT OF CHAIRMAN JOHNSON 

Chairman JOHNSON. This hearing will come to order. 

Good morning. I would like to welcome Admiral Peter Neffenger. 

I appreciate your willingness to serve. The hearing is obviously 

called to consider your nomination for the position as the next Administrator of the Transportation Security Administration (TSA). 

We held a pretty interesting hearing yesterday, and I think you 

come into this position understanding that you have some significant challenges ahead of you, and we are obviously looking forward 

to the hearing today and appreciate your thoughtful testimony, and 

I will be looking forward to your oral testimony and answers to our 

questions. I think I will hold off on further comments until we get 

into the question phase. 

The hearing today will also consider the nomination of David S. 

Shapira to be a Governor of the United States Postal Service 

(USPS), another agency that is going to require some out-of-the-box 

thinking, another agency that has significant problems. So I just 

want to thank both nominees for your willingness to serve and, 

again, your willingness to appear here today. 

And with that, I will turn it over to our Ranking Member. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. Thanks, Mr. Chairman. 

Admiral, welcome. Thank you for serving us for all these years— 

what, 34 years? Anybody in your family here today? OK. All right. 

Some brief comments, if I could. Thank you for joining us yesterday, too, and our staffs have enjoyed meeting with you and having 

a chance to ‘‘take the measure of the man,’’ as we say in Delaware. 

But as we know, TSA has been without a Senate-confirmed leader since the highly regarded John Pistole departed the agency at 

the end of last year. And as we have learned from press reports 

of late, as well as from numerous briefings and our hearing yesterday, TSA faces serious challenges that demand strong, permanent, 
2 

Senate-confirmed leadership. Thankfully, the President has nominated in you, Admiral Neffenger, someone whom I believe, I think 

we believe, can provide TSA with the kind of leader that it needs 

right now. 

Our Admiral has served as a commissioned officer, as we know, 

in the Coast Guard since 1982, assuming the position of Vice Commandant in May 2014. Throughout his 34-year career in the Coast 

Guard, Admiral Neffenger has displayed exceptional leadership 

skills and the will to confront difficult challenges head-on. In fact, 

Admiral Neffenger is no stranger to crisis, having served as the 

Deputy National Incident Commander for the Deepwater Horizon 

oil spill. And if you can handle that, you can handle a lot of things. 

As the Department of Homeland Security (DHS) Inspector General (IG) John Roth said to this Committee just yesterday, he said 

what TSA needs is someone willing to acknowledge and confront 

the many challenges facing this agency. And I would add that the 

agency also needs someone who will strive for perfection, realizing 

that it is hard to achieve, it may be impossible to achieve, but 

while addressing at the same time the competing priorities of security and expedited travel. We want to make sure that we are flying 

in planes that are safe, people get where they need to go safely. We 

also want to make sure that we can expedite their movement 

through the security checkpoints, and they are not always in sync 

with it. In fact, they are of oftentimes in conflict. So it is not an 

easy job. We are grateful for the people who do this work. We want 

to make sure that they are meeting their challenges and that we 

are providing this kind of support that they need and the kind of 

leadership that they need. 

I had the opportunity to meet with Admiral Neffenger recently 

to discuss his desire to lead TSA and his vision for the agency. I 

came away from our meeting confident that he is the right person 

for the job at this time. 

Following our discussion with Admiral Neffenger, we will consider our second nominee today, David Shapira, who is sitting here 

in the front row on our left, your right, to serve as a Governor on 

the Postal Service’s Board of Governors. We are considering this 

nomination at what is a very challenging time for the Postal Service. But as Albert Einstein once said—and we talked about this 

yesterday—‘‘in adversity lies opportunity.’’ Plenty of adversity for 

both positions, but by the same token, a lot of opportunity. 

The Postal Service operates at the center of a massive printing, 

delivery, and logistics industry that employs millions of people. 

Even as First Class mail is lost to other forms of communication, 

I think the future is more promising than some would believe for 

the Postal Service in a number of other ways, several of which we 

discussed yesterday. 

Advertising mail is still a popular and effective option for thousands of mailers. Millions of people still like to receive their magazines in the mail every week. They like the printed copy, even the 

Millennials like the printed copy, not just the stuff on the Internet. 

E-commerce and package delivery are booming, making the Postal 

Service a vital partner for businesses large and small. Even the 

Postal Service’s traditional competitors rely on it to carry items the 

last mile to rural communities around the country. Federal Express 
3 

1The prepared statement of Admiral Neffenger appears in the Appendix on page 51. 

(FedEx), the United Parcel Service (UPS), they want to deliver a 

lot of stuff. They do not always want to go the last mile, the last 

5 miles, or the last 10 miles, and the Postal Service is happy to do 

that because they are going anyway. 

I look forward to talking to Mr. Shapira, I think we look forward 

to talking with you, Mr. Shapira, today about what you think needs 

to be done in order to address the ongoing challenges that face the 

Postal Service and to hear about the skills and experience that he 

will bring, you will bring to the Board. As a leader of a $10 billion 

company with nearly 40,000 employees, Mr. Shapira will bring a 

unique business perspective to the Board of Governors that is very 

much needed, I think very much welcome. 

If confirmed, Mr. Shapira and the four other Board nominees 

pending before the Senate would double the size or at least the 

membership of the Board, and we need that. I see a real opportunity here with this new injection of talent to make significant 

progress toward strengthening our Postal Service. 

In closing, I want to thank both of our nominees, Admiral, and 

hopefully we will be able to call him ‘‘Governor Shapira.’’ It is a 

great job—Governor. I love that one. You will, too. 

So thank you all, and we look forward to hearing from you and 

getting to know you better. Thanks so much. 

Chairman JOHNSON. Thank you, Senator Carper. 

Admiral, it is the tradition of this Committee to swear witnesses 

in, so if you would please rise and raise your right hand. Do you 

swear the testimony you will give before this Committee will be the 

truth, the whole truth, and nothing but the truth, so help you, 

God? 

Admiral NEFFENGER. I do. 

Chairman JOHNSON. Thank you. Please be seated. 

Vice Admiral Peter Neffenger currently serves as the Vice Commandant of the United States Coast Guard (USCG). During his 34 

years of service, he has held various key leadership positions. From 

2003 to 2006, he served as the Sector Commander in Los Angeles, 

California, home to the largest port complex in the United States. 

From 2008 to 2010, he served as the Commander of the Ninth 

Coast Guard District, where he was responsible for Coast Guard 

operations throughout the five Great Lakes and helped secure over 

1,500 miles of the U.S.-Canada border. In addition, he served as 

Deputy National Incident Commander during the 2010 Deepwater 

Horizon oil spill in the Gulf of Mexico. Admiral. 

TESTIMONY OF VICE ADMIRAL PETER V. NEFFENGER,1 TO BE 

ASSISTANT SECRETARY (TRANSPORTATION SECURITY ADMINISTRATION), U.S. DEPARTMENT OF HOMELAND SECURITY 

Admiral NEFFENGER. Thank you, Mr. Chairman. I have submitted my written statement for the record, and I have a brief 

opening statement. 

Good morning, Chairman Johnson, Ranking Member Carper, and 

distinguished Members of the Committee. I am deeply privileged to 

appear before you today as the President’s nominee to head the 
4 

Transportation Security Administration. I am honored by the 

President’s call to service in this important position and by the 

support of Secretary Jeh Johnson, who has provided strong leadership for our Department. 

I would also like to thank the 50,000 men and women of the 

United States Coast Guard and the 30,000 members of the volunteer Coast Guard Auxiliary with whom I have been privileged to 

serve for more than three decades and from whom I have learned 

important lessons about leadership and about service to the Nation, commitment to excellence, and duty to people. 

And to the dedicated men and women of TSA, I want you to 

know that I am deeply honored to potentially join your ranks and 

to serve along with you and the American people in securing our 

transportation systems. You perform an incredibly important and 

difficult mission, one that demands constant attention to detail and 

vigilance while sustaining a high level of professionalism and respect. I have confidence in them, and I will be honored to lead 

them. 

As TSA pursues solutions to the challenges presented by recent 

covert testing, there are several critical concepts that must be in 

place to address the vulnerabilities noted. TSA must ensure the appropriate measures of effectiveness are in place to drive a focus on 

the primary mission across the agency, in this case, securing aviation. There must be a culture of operational evolution, one that 

constantly questions assumptions, plans, and processes, and is able 

to rapidly field new concepts of operation, new performance standards, and new capabilities. 

Finally, delivering an effective system and earning the confidence 

of the public will come only through competence, disciplined performance, and professionalism. If confirmed, I will bring this perspective, and I will relentlessly pursue these objectives, to address 

the immediate challenges, and more broadly, to accomplish the important mission entrusted to TSA. 

In addition, in my view, striking a balance between the demands 

of security and the imperatives of liberty is critical. If confirmed, 

I will take on this challenge with a leadership perspective that has 

been at the core of my approach as a Coast Guard leader and one 

that has been proven in the crucible of the real world: a well-defined statement of mission, clear and unequivocal standards of performance, training and resourcing that enable the workforce to 

achieve success, and a relentless pursuit of accountability. 

During my nearly 34 years of active service, I have been assigned 

to a broad variety of operational, staff, and leadership positions culminating in my current duties as Vice Commandant and second in 

command of the Coast Guard—the Nation’s fifth armed service and 

its premier maritime law enforcement agency. Each assignment 

has brought greater and more complex responsibilities and challenges, and, if confirmed, I will apply the leadership skills I have 

gained as well as my extensive experience in law enforcement, 

maritime transportation security, and management of large complex agencies to ensure the protection of our Nation’s transportation systems? 

Nearly 14 years after 9/11, we must recognize that the global terrorist threat has evolved. Today this threat is more decentralized, 
5 

more diffuse, and more complex. Certain terrorist groups remain 

intent on striking the United States and the West, and we know 

that some of these groups are focused on commercial aviation. 

Moreover, we see an emerging threat from lone wolf actors. The 

threats are persistent and evolving, and they are TSA’s most pressing challenge. 

Workforce training, retention, and accountability are a second 

challenge facing TSA. If confirmed, I will pay close attention to the 

development of the TSA workforce. I will examine how to use the 

TSA Academy established by John Pistole to further improve performance and to instill an ever greater sense of pride in the agency 

and its critically important mission. I will continue the focus on 

customer service. Travelers expect efficient and effectiveness 

screening, and they deserve to be treated with respect. 

A third challenge is ensuring that TSA continually fields the 

tools it needs to address the persistent and evolving terrorist 

threat. We must question ourselves; we must evolve our capabilities; we must adapt faster than those who wish to harm us. We 

must envision what comes next and direct investments appropriately. 

As such, if confirmed, I will commit myself to ensuring that TSA 

remains a high-performing, highly capable counterterrorism organization guided by a risk-based strategy; that TSA employs multi-layered, intelligence-driven operations; that TSA recruits and retains 

a skilled and highly trained work force, while placing a premium 

on professional values and individual accountability; that TSA pursues advanced capabilities with adaptation central to its acquisition strategy; and that TSA continues to strengthen its integration 

in the intelligence community, in the private sector, with its stakeholders, and among Federal, State, and local partners. If confirmed, I will follow this strategy, engage and lead the work force, 

and adapt and invest appropriately. 

I believe I have a proven record of leading people and carrying 

out complex missions. I have an extensive background in applying 

security principles to port operations and maritime threats, principles that translate effectively to other transportation modes, and 

I have a proven record of leading through crises. 

Finally, throughout my career, I have remained aware of the 

need to balance desires for greater security with the protection of 

the liberties and the rights we cherish. If confirmed, safeguarding 

the civil liberties and privacy interests of all Americans will remain 

a top priority. I look forward to partnering with this Committee on 

a range of initiatives to enhance the safety of the traveling public 

and to achieve this balance. 

In closing, I again thank President Obama and Secretary Johnson for their confidence. Mr. Chairman, Ranking Member Carper, 

thank you for the opportunity to appear before you today, and I 

look forward to your questions. 

Chairman JOHNSON. Thank you, Admiral. 

Before I begin my round of questions, it is also the tradition of 

this Committee to ask all nominees a series of three questions, so 

I will start with those. 
6 

Is there anything you are aware of in your background that 

might present a conflict of interest with the duties of the office to 

which you have been nominated? 

Admiral NEFFENGER. No, sir. 

Chairman JOHNSON. Do you know of anything, personal or otherwise, that would in any way prevent you from fully and honorably 

discharging the responsibilities of the office to which you have been 

nominated? 

Admiral NEFFENGER. No, sir. 

Chairman JOHNSON. Do you agree without reservation to comply 

with any request or summons to appear and testify before any duly 

constituted Committee of Congress if you are confirmed? 

Admiral NEFFENGER. Yes, sir. 

Chairman JOHNSON. Thank you. 

Admiral, the hearing we had yesterday I thought was pretty revealing, and I think one of the things both in my preparation for 

the hearing and during the hearing that was pretty stark is the 

dual goal, the dual mission of TSA. On the one hand, you have the 

need for efficiency, that we move passengers through the security 

check zone so that nobody misses their flight, so nobody is inconvenienced, that the public does not get impatient. On the other 

hand, we are looking for 100 percent security. 

Can you just speak to the conflicting nature of those two goals 

and how you evaluated where you place priority? 

Admiral NEFFENGER. Well, thank you, Senator. I would be happy 

to speak to that. 

The priority is always the mission, from my perspective. I think 

in terms of my career in the Coast Guard, I have never lost sight 

of the fact that it is about the safety and security of the people 

using the maritime transportation system and the safety and the 

security of the system itself. 

That said, you still need to move goods and services through 

those systems. The aviation system is no different, and it is critical 

that you move people through that system effectively and efficiently. 

It is always a balancing act between getting those right, but I 

think if you focus on security, if you are transparent with the need 

for that security—by definition, a security system creates inefficiencies. We know that. The port environment was a good example of 

that. Before September 11, 2001, most of the ports of the United 

States were wide open, and they were wide open for a reason: because you needed to move a lot of stuff in and out those ports, 

whether they be containers or bulk cargo or the like. And there are 

a lot of access points to the port because you wanted to be able to 

get trucks and rail and other services in and out as necessary to 

move that. 

After September 11, 2001, when we started looking at some of 

the first attempts to secure the maritime port environment, it was 

a real challenge to figure but how you do that without clogging up 

the system. I think the way you do that is you work very closely 

with your private sector partners. Believe it or not, they have a lot 

of good ideas out there, and I think that we can benefit from their 

ideas. I think it is, again, no different in the aviation sector. 
7 

So as you look at—and there may be some need to introduce a 

few inefficiencies in order to address some of these recent findings 

of the Inspector General. In the process of doing that, you have to 

do that very carefully with the airports, the people who are running the major airlines, the people who operate the airport environment, as well as the traveling public to explain why, as you are 

looking for those factors that mitigate. 

And in the long term, you have to think about what the security 

system looks like in the future. I know you talked about out-of-thebox thinking. Well, it is going to take out-of-the-box thinking to 

think about what would the security system look like if we designed it for tomorrow versus the one we have today? And I think 

that it will always be a balance between those two, but I do not 

think it is an impossible task. I just think it is a very difficult task. 

Chairman JOHNSON. Were you surprised by the revelation of the 

Inspector General’s report that said that there was a 95-percent 

failure rate to detect metal weapons and fake explosives? Did that 

surprise you? 

Admiral NEFFENGER. Yes, sir, it did, and it disturbs me, and, if 

confirmed, it is the immediate priority to address those findings, to 

close those gaps immediately, but then to look systemically at what 

the issues are that brought that forth in the first place. 

Chairman JOHNSON. But do you acknowledge that reality? I 

mean, those are not my words, but other people have termed what 

TSA does as ‘‘security theater,’’ which let me first say there is some 

deterrent effect and positive effect for those checkpoints for that 

theater. But do you know the fact that it is simply not working? 

Admiral NEFFENGER. Well, if I can take a step back from that 

and talk first in terms of how I view a security system—and it really is a system of security. If I think about entering into that system, from the moment I put my name into a reservation system, 

I want to know that I am being looked at in some way. So I hope 

that—some of that is behind the scenes. I want my name to be 

scrutinized, and I want it to be bounced against all the right databases. And I want to ensure that the people who are doing that 

have access to the intelligence that they need and the databases 

that they need. I know that that has been some questions that 

have been raised. 

Second, I want that to be continuous as I am moving through the 

system, and from the time I put my name in that system to the 

time I exit my destination airport on the other end, I want to be 

looked at. So I want things happening behind the scenes. 

I want some other things to be happening as well, and there are 

other ways that you can scrutinize an individual. I want to know 

as much as I can about the travelers moving through. So I am a 

big fan of Known Traveler Programs. I am a big fan of Trusted 

Traveler Programs. I am a member of Global Entry myself. I did 

that for a good reason, partly to move myself through the system, 

but to participate in the system in the way that I thought the system needed me to. 

Following that, when I get to the airport, I would like to know 

that there are a number of things that might happen. So if I am 

a bad guy and I am trying to make my way through the system, 

I do not want to see a path through, or every path I take I want 
8 

to be unpredictable on the other end. So I like the idea of layers 

in a system, but I want to be sure that those layers are effective. 

So as I look at what TSA is doing—and they have layers that 

have been described to me, whether they be Behavior Detection Officers or bomb-sniffing dogs or other methods that they use, I 

would like to understand what is the effectiveness behind that, how 

do we ensure that those are being effective, and then how do they 

overlap with one another. 

If you can devise a system that has a number of layers that overlap in such a way that you close to the maximum extent possible 

the gaps that exist in that and you evolve that system over time, 

because you still have to keep in mind what the threat is, so you 

are always looking at the threat, you are plugged into the intelligence community (IC), you understand how that threat is evolving, read Inspire magazine, look at the things that are being recommended by those who would do harm to the system, and then 

go back immediately and question whether your layers are effective. 

So although disturbing and of great concern, the IG’s findings 

are exactly what you need to find out to determine whether your 

system is effective. 

Chairman JOHNSON. Another vulnerability are really the employees of the airports and the airlines that are working behind the 

scenes and their security clearances, again, another IG report 

showing that we are not necessarily matching up everybody to all 

the potential watchlists. Is that something you will make a commitment to make sure that the TSA enters into the interagency agreements so that every possible watchlist is utilized for those checks? 

Admiral NEFFENGER. Yes, sir, I think that is an imperative, and, 

in the Coast Guard, we are a full member of the intelligence community. I have been working within the intelligence community for 

quite a few years now. As we know, one of the findings of the 

9/11 Commission was the failure of the intelligence community to 

link itself together and to provide information to the people who 

need it. So it is absolutely imperative that TSA has information to 

those same databases, to all the information that is potentially 

available out there. So I would absolutely commit to that. 

Chairman JOHNSON. OK. Thank you. Senator Carper. 

Senator CARPER. Somewhere in one of my questions is a statement that Secretary Jeh Johnson says you are the smartest flag officer that he has ever met, and I asked him how many he has met. 

He said, ‘‘Two.’’ [Laughter.] 

But you are one of the two. No, he has met a lot of them. 

But the answer that you just gave to our Chairman’s question, 

which led you to go through the various layers and so forth, I 

thought that was excellent. 

When you look at the IG’s report of the 95-percent failure rate 

at TSA in, I think, 70 attempts to try to pierce the system and the 

success of the so-called Red Team—they are not really a Red Team, 

but we will call them the Red Team folks from the IG’s office. But 

if you go back over the last 10 years or however long TSA has been 

around—it has been about a decade—we measure success with a 

lot of metrics, but for me one of the key metrics here is how many 

of our airplanes were taken down and how many people died in 
9 

flights because of explosions or crashes. And that we need to keep 

in mind. 

There was an old Methodist minister in southern Delaware who 

used to say to me, he used to say, ‘‘Just remember this, Tom,’’ he 

would say. ‘‘The main thing is to keep the main thing the main 

thing.’’ And for us, the main thing is to try to make sure that people can get where they need to go safely and expeditiously. 

I want to talk a little bit about agency morale. My colleagues 

here have heard me say more than they want to remember: Find 

out what works; do more of that. And when I was Governor, I used 

to say to my Cabinet, if we were trying to work out a particular 

issue or problem or challenge we faced in Delaware, and I would 

say some other Governor in some other State has dealt with this, 

figured out how to do it, done it successfully. We need to find him 

or her, find out who did this for them, and see if that is transferable for us from that State to Delaware. 

When you look at agency morale, the Coast Guard, as I recall, 

has very high morale as measured by comment metrics. As we 

know, TSA does not. There have to be some lessons learned, and 

the question is: Just like we tried to move ideas from one State to 

our State to see if they were transferable and would work, what 

can we learn from the Coast Guard with respect to high morale 

and help improve that morale of the folks who work at TSA? 

Admiral NEFFENGER. Well, thanks for that question, Senator, 

and you are right, I think the Coast Guard does have a very high 

morale. And to me, morale begins with a clear sense of mission and 

a clear sense of importance, and then a leadership that invests in 

the mission and the people who are performing that mission. 

You have to have alignment throughout your organization, because if you say the mission is the most important but then you 

start measuring other things, then the mission is not the most important, and that begins to affect morale. 

So a clear sense of mission, a mission that is important. I think 

TSA has a great mission, and it is a very important mission. And 

I see no problem making that a clear statement. 

Then you have to train your workforce to accomplish that mission, and it cannot just be a one-time training. It is a continuous 

process, because if you want a learning organization and a continuously improving organization, you have to continuously train that 

organization and then take advantage of what those front-line people can tell you. 

Some of the things, some of the best innovations in the Coast 

Guard have come from the people on the front lines doing the 

work. I tell people today I am not the United States Coast Guard. 

I represent the United States Coast Guard, but the United States 

Coast Guard are those men and women out on the small boats and 

out at the stations and out in those remote units doing the work. 

That is no different than for the TSA itself. I think the Transportation Security Officers (TSOs) at those airports, that is the face 

of TSA, and it is also the mission of TSA, and they are the ones 

who accomplish it. 

So you need to train them, and you need to empower them to accomplish that mission, and then you need to listen to them when 

they are telling you where the mission is not—where they are fail-
10 

ing or where procedures or equipment or the like are not allowing 

them to meet the mission. And so you have to value that workforce, 

and you have to support that workforce. You really need to have 

their backs. 

I had a great opportunity to sit down with about a dozen TSOs 

over at Reagan Airport as part of my briefings in preparing for the 

potential of this position. And they were very frank and clear. They 

understand the mission. I always remember that they are still 

among the very few who have raised their hands and said, ‘‘I swear 

to support and defend the Constitution of the United States against 

all enemies, foreign and domestic.’’ 

That is a pretty powerful statement, and I have always found 

that when you remind people of that and you connect it to a mission, that begins the upward movement. 

But then you also have to have accountability across your workforce, because the people who are performing well know the people 

who are not performing well. And if you allow that inconsistency 

to exist in an organization, then it is not long before people feel 

like, again, you do not have their back and you are not really serious about it. 

So I think you invest in the people. You train them. You set and 

communicate clear standards. You engage with the workforce. One 

of the things that you grow up with in the military is an understanding that you have to be out and you have to talk to your work 

force. Again, they are the people who do the work. My job is to support them, to provide them with the resources and the training and 

the standards and the capabilities to do it, to have their back when 

they have got challenges, and, more importantly, to look for ways 

to empower them to do their job most effectively. 

Senator CARPER. Good. You said in your testimony that from the 

Coast Guard you have learned a number of important lessons 

about leadership, and I was going to ask you to talk about some 

of them. But you have already talked about them. But think about 

that question, the important lessons of leaders. The most important 

element in any organization I have ever been a part of or observed, 

the most important element for their success is leadership. It is 

one, two, and three. And talk to us about why you think you have 

been successful as a leader. 

Admiral NEFFENGER. As I said in my opening statement, I have 

been really—— 

Senator CARPER. You picked the right parents. 

Admiral NEFFENGER. That was luck, and I did have great parents. But I have been really fortunate to work alongside some very 

dedicated people. Again, it is a privilege when you serve alongside 

people who say, ‘‘I want to do the best I can. I want to take on the 

hard jobs of this Nation, and I want to try to do them to the best 

of my ability.’’ And I do not even know how to get those done, but 

we are going to figure it out together. So that is challenging. 

And growing up in an organization helps you learn about leadership, and there are good examples of leadership, and there are bad 

examples of leadership. But the best leadership is the side-to-side 

leadership, what you learn from the people who are working with 

you. 
11 

And so what I have learned is that it starts with being trained 

to do the mission and knowing that the people around you are 

trained to do the mission, and that if somebody is not performing 

to their standards, that they will be held to account. That is important because that is part of good leadership. 

It is a leader with a strong vision as to where you are going. 

What is the job, boss? And what are we trying to do here? And how 

do we get it done? And somebody who understands how to organize 

teams, how to take the best of people’s strengths, combine them in 

a way that presents the best opportunities to succeed at whatever 

the current task is, and then evaluates how that task was conducted when it is done, and relentlessly pursues that perfection 

that you talked about in your opening comments—knowing that 

you might not get there, but you just might find excellence in the 

process. 

So I think that it is engaging with the workforce, it is listening 

to what the workforce has to say, and then carrying that through 

at every level of the organization as you move up. 

Senator CARPER. Well, my time has expired, but I would just say 

to my colleagues I think we have just received an excellent tutorial 

on leadership. Thank you. 

Admiral NEFFENGER. Thank you, Senator Carper. 

Chairman JOHNSON. Thank you, Senator Carper. Senator Ernst. 

Senator CARPER. Can I just say one—I am going to be in and out. 

We have a markup going on in one of my other committees, and 

I need to be there as well as here. We have not figured out how 

to do this cloning thing yet, but when we do, I will be at both 

places. 

Chairman JOHNSON. OK. 

OPENING STATEMENT OF SENATOR ERNST 

Senator ERNST. Thank you, Chairman Johnson, and thank you, 

Ranking Member Carper. 

Admiral, thank you for being here today, and thank you very 

much for your service. I am very impressed. You have done an excellent job of laying out your vision. 

I want to address something that Senator Carper brought up yesterday during our hearing on TSA. He asked the witnesses to provide advice to Congress in addressing the recent problems that 

were discussed earlier. And in response, TSA employee Becky 

Roering raised concerns about the lack of oversight with respect to 

TSA’s numerous contracts. And she suggested that the results of 

these numerous contracts are that there are difficulties measuring 

performance and ensuring efficient use of taxpayer dollars. And 

this is an important issue for me and for many of us, and so I am 

going to be hopefully introducing some legislation. I have been 

working on legislation to promote the importance of program management, and that is all throughout the Federal Government. 

But if you are confirmed, sir, how would you address the issues 

that are raised by Ms. Roering in regards to the numerous contracts and obligations of TSA? 

Admiral NEFFENGER. Well, thank you, Senator Ernst. I have had 

a lot of experience with overseeing contracts and looking at how 

those contracts were put in place in the Coast Guard. In my cur-
12 

rent role as Vice Commandant, I am what is called ‘‘the component 

acquisition executive’’—— 

Senator ERNST. Very good. 

Admiral NEFFENGER [continuing]. Which is a horrible title, but 

what it really means is I am responsible for all of the ways in 

which we spend money to buy things or to hire people to help us 

do things. So in the Coast Guard, our contracting is mostly in the 

area of information technology (IT) services and financial management services. 

I will tell you, you have to look at those very carefully. Contracting can be a very useful tool if it is used appropriately, but 

what I found is you have to have strong controls in place, and those 

controls are not just at the program management level, so you have 

to have people who are trained and qualified to understand what 

they are looking at, but you have to have a process. And, I used 

to tell people I am a substance guy, but I have discovered that unless you have good process, substance does not occur. 

And so first of all, how do I generate the requirements for why 

I am hiring a contractor in the first place? And then how do I review those requirements on a regular basis to determine if they are 

correct? And then how well do I explain those requirements to the 

potential contractors that are going to bid on the contract? Are they 

tight enough that they can be overseen and controlled? And what 

is my ongoing oversight of the management of that contract so that 

I understand that contract, when laid against those requirements, 

is meeting my requirement? And then what is my exit strategy if 

it is not working? Because you have to have that on the other end. 

And there is a lot more to that process, as you well know, but 

you really have to look from front to end. It is not just a matter 

of whatever exists right now. So, if confirmed, one of the things 

that I need to do and that I intend to do is to look very carefully 

at not just the way the resources are currently expended, but how 

effective the expenditure of those resources has been, particularly 

with respect to contracting, because it can be an invisible world if 

you are not careful. 

Senator ERNST. Very good. Well, I appreciate the fact that you 

do have some experience with contracting, with program management, and, of course, logistics, an important bottom line. So thank 

you. 

One other question as well. I know that TSA has committed to 

supporting a number of our veterans and hiring veterans, and veterans do make up a large portion of positions within TSA, such as 

Transportation Security Officers. And as they are uniquely qualified, I believe, of course, for these civilian positions in the security 

space, is there even more that can be done at TSA to recruit more 

of our veterans into TSA? 

Admiral NEFFENGER. That is a wonderful question. I do not have 

an answer for you right now, but I will tell you, I agree with you 

that our veterans provide a wonderful potential source of employment. These are people who know what it means to serve an important mission and who know how to accomplish that mission. So 

I think that there is room for that. 
13 

If confirmed, I will look at how that is currently being done, and 

I will look for opportunities to take advantage of that and to increase it where potentially possible. 

Senator ERNST. Very good. Thank you. 

And just last, very briefly, we did have some questions about the 

PreCheck Program that came out from yesterday’s hearing, and we 

heard a lot from a number of the different witnesses that expressed 

concerns about the PreCheck program and maybe how it is being 

expanded too much and the corresponding security risks with that. 

Could you address some of the PreCheck ideas that you might have 

to make sure that we are properly vetting those passengers or 

those travelers, just to make sure we are not just handing 

PreChecks out like candy as Ms. Roering had stated? 

Admiral NEFFENGER. Well, I think the properly vetting piece is 

the important part of your question. I believe in a trusted population. As I mentioned before, I think that the more you can know 

about a population, the more comfortable I am about that population moving through a system. So I am a fan of vetting people 

going into PreCheck, and I think the goal should be to have a fully 

vetted population in PreCheck. 

I understand that there have been some challenges with respect 

to enrollment centers. If confirmed, that is one of the things I want 

to look at, is how can those be expanded in a way that could make 

that entry into that system, for those who want to, more accessible 

and more available. But I think the goal should be to move toward 

a PreCheck population that is a known population, that is a vetted 

population, and that, to the extent possible, is one that is expanded 

based upon that rule set. 

Senator ERNST. Very good. Well, I appreciate your answers 

today, your testimony, and I look forward to working with you in 

the future. Thank you, Admiral. 

Admiral NEFFENGER. Thank you, Senator. Same here. 

Senator ERNST. Thank you, Mr. Chairman. 

Chairman JOHNSON. Thank you, Senator Ernst. Senator Sasse. 

OPENING STATEMENT OF SENATOR SASSE 

Senator SASSE. Thank you, Mr. Chairman. 

Admiral, thank you for being here, and thank you for your past 

service. In your prehearing questions, the Committee asked you if 

you believe that TSA is fulfilling its aviation security responsibilities. You did not directly answer the question, but you said that 

you ‘‘would ensure that TSA remains laser focused on its core mission.’’ Do you believe that TSA is today laser focused on its core 

mission? 

Admiral NEFFENGER. Well, Senator, I think that is the question 

given the results of the Inspector General’s investigation. I believe 

that there are still good layers of security within TSA, but clearly 

there are some challenges, particularly with respect to the equipment that was tested by the Inspector General. So I want to be 

able to provide you with a true and a complete answer to that 

question, if confirmed. And my immediate task is to, first of all, get 

the full results of the IG’s investigation as well as the GAO investigation and any internal work that has been done by the TSA 

itself, because they have their own inspection team internally. 
14 

What are they finding? Are they finding the same kinds of 

things? And then how much has that been linked up? And then 

what is the extent of the gaps that have been found? And then 

what can be done immediately to mitigate those gaps as we look 

for what the systemic issues are across the organization? And then 

going back to a comment I made previously—and then I want to 

look at how that fits into the entire system and whether there are 

any gaps in the other layers that TSA currently has in place for 

that security system, because the system as it works as a whole is 

what determines its effectiveness, in addition to those individual 

components of the system, such as the equipment that the IG 

found deficient? 

Senator SASSE. I appreciate the layering piece of your answer, 

but I guess I will ask you more directly. Do you think that TSA 

is succeeding at its mission? 

Admiral NEFFENGER. Well, I travel a lot, and I traveled to the 

west coast this past weekend. I felt safe. But I want to know if that 

feeling was a good feeling to have, and based upon the findings, 

clearly there is a problem with the way in which people are being 

screened because the screening equipment did not work in the instances in which I had done, and it occurred at a number of airports. 

I will need to look at how that is being done across the system, 

and, more importantly, what have we done to mitigate that? What 

has TSA currently done to mitigate it? And can it be safe? 

Senator SASSE. I appreciate that we were in a classified briefing 

together yesterday, so I know you are trying to do your homework 

as well. But for those of us who have been pushing on these issues, 

I will be honest that I am not that surprised by this 96-percent 

issue in this report, because there are other classified reports that 

we cannot reveal the particulars of in this setting. But I think you 

are not answering the question of whether or not you think today 

TSA is succeeding or failing at its mission. 

Admiral NEFFENGER. Well, I appreciate where you are going, 

Senator, and I think the reason that I am not giving a direct answer is because I think that there are aspects of the system that 

do work. And what I want to know is how well do they work, and 

I think some of the Secure Flight checking, some of the name-based 

checking is working. I do not know how effective it is. 

So what I will tell you is that, if confirmed, I need really to dig 

into it deeper. I have had a number of briefings about the way in 

which they do their business. I think that some of what I have 

heard is reassuring; some of what I have heard is deeply disturbing, not the least of which were the IG reports. 

Senator SASSE. Without revealing any details that would give the 

terrorists a road map to our particular vulnerabilities, do you believe the public has a right to know more of what the administration knows about TSA’s failings? 

Admiral NEFFENGER. Senator, I am a fan of transparency in government. I am a fan of making clear to people how effective their 

government is, how its performance is, and, more importantly, 

what we do about it when we find the performance has not lived 

up to the standards or has failed. So I am a fan of that. 
15 

I am not a fan of giving away secrets to our enemies, and I am 

certainly not a fan of exposing vulnerabilities that we know exist. 

And so I think that is a delicate line that has to be walked, but 

I do not want to give any comfort to those who would harm us, nor 

do I want to give any help to those who would harm us. 

Senator SASSE. I do not either, and so my calls to the administration to declassify more of the information and for the President to 

come clean with the American people about how badly TSA is failing clearly include the caveat that we should not reveal any details 

that would give the terrorists a road map. But Chairman Johnson’s 

point about security theater, clearly one of the main benefits of 

TSA has been the deterrent benefit of people who believed it was 

functioning much more effectively than we know it to be functioning at this point. Politico yesterday said you would be leading 

a Herculean turnaround at TSA. Do you think a Herculean turnaround is what is required? 

Admiral NEFFENGER. I think, first of all, a refocus, as I said, on 

the basic mission and an understanding that this organization has 

got to be one that continually changes and adapts. The day you 

think you have the security system right is the day that you are 

going to be defeated in that security system. 

One of the things you learn in the military is that you question 

every assumption that you have about your performance, and you 

question it because you know that somebody is going to be questioning you if you do not do it yourself. And so if you do not question yourself, then you are not staying ahead of the people who are 

already questioning you. And it does not surprise me that there are 

people out there that have found ways to defeat the system. The 

question is: What do you do about it internally? 

So I do think that there is a huge effort to do that. 

Senator SASSE. If you are going to fix a broken institution, I 

think that requires us admitting that the institution is broken. Secretary Johnson at this hearing last month said that TSA is the best 

model of risk-based security at DHS, and he specifically highlighted the PreCheck system. However, we now know that TSA 

failed to catch weapons 96 percent of the time and that we have 

73 airport workers that have links to terrorism. 

I am curious, your sense of the institutional history, how can we 

have these kinds of security lapses 14 years after 9/11? 

Admiral NEFFENGER. Well, I think that is the question, Senator, 

and it is the question that made me say yes to taking this job, because I travel and my family travels, and I want that to be safe 

for my family to travel, and I want it to be safe for Americans to 

travel. I care very deeply about the safety and security of this Nation, and I want to be able to answer that question in an affirmative way. I want to be able to say yes, it is safe to do so. 

I do not know if it is right now, but if confirmed, that is going 

to be my focus. And what I promise you and commit to you is I will 

come back to this Committee and other oversight committees. And 

I will lay out what I find, and I will lay out the challenges I find, 

and I will do so in a transparent way; and where it requires doing 

so in a classified setting, we will do so in a classified setting. 

Senator SASSE. But I think that the turnaround is going to require admitting the magnitude of the challenge, so I am curious as 
16 

to what letter grade you would give DHS and TSA in particular as 

you begin this mission. 

Admiral NEFFENGER. Well, it may be premature for me to assign 

a letter grade to it. I will come back to you with that if I get confirmed. But I will tell you that they are not where they need to be. 

Senator SASSE. As a former college president, I do not know any 

institution where a 4-percent success rate could be anything other 

than an F. I think we need to admit the magnitude of this problem, 

and I think the American people have a right to understand the 

issue more clearly. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Thank you, Senator Sasse. 

I do want to underscore your point. Coming from a manufacturing background, I solved a lot of problems. The first step in solving a problem is fully admitting that you have the problem and 

properly defining it. And, Admiral, I just have to say I feel safe flying as well, but only because of the odds. 25,000 flights, what are 

the odds? So, I mean, I think the line of questioning Senator Sasse 

was undertaking there is exactly right, and we have to admit the 

problem, and we have to properly define it. Senator Ayotte. 

OPENING STATEMENT OF SENATOR AYOTTE 

Senator AYOTTE. Thank you, Chairman. 

Admiral, I appreciate your being here and for your willingness to 

take on this position. And you are a nominee for this very important position, as has been outlined today, with the failures that we 

have seen that the American people can expect so much better 

from TSA. And so I appreciate your willingness to take this on, and 

as you have heard all of this testimony yesterday before this Committee, both in open and classified settings, what would you 

prioritize as the first thing that you are going to do if you are confirmed for this position? 

Admiral NEFFENGER. Well, thanks, Senator. I think that, as you 

know, Secretary Johnson laid out a pretty clear set of directions to 

address the immediate challenges, and I think that my first priority is to ensure that those are carried out, that the answers that 

he has demanded are found, but, more importantly, that they are 

extended as necessary to address the immediate crisis. That is the 

most important thing right now, to restore confidence in the system 

to the extent possible, to close the gaps, and to mitigate the 

vulnerabilities to the extent possible, but then, more importantly, 

to look systemically across the organization to see how much will 

it take to do this over time. Some of these things can be fixed right 

away, and some of these things are going to take some time to fix. 

Senator AYOTTE. Let me ask you, the testimony that we heard 

yesterday that was quite disturbing with respect to the 73 airport 

workers that the IG found links to terrorism, and then we were 

told that, in fact, TSA was not fully vetting those employees 

against all the information that the Federal Bureau of Investigation (FBI) had in terms of those that we might have based on intelligence, on our terror watchlist. 

So here is the question that I have for you: When I heard it yesterday before the Committee, I heard, yes, we identified this problem in 2014, but then we went over to the FBI and asked for infor-
17 

mation, and here we are in 2015, when we think about something 

that urgent, that there was not an immediate fix to that is pretty 

disturbing. 

And so what I would ask of you is this Committee and our oversight function, you find something like that, you do not wait for the 

bureaucracy to answer, that you let us know and that we make 

sure that a fix like that that is so obvious and so immediate so that 

we do not have 73 airport workers with ties to terrorism, that we 

find right away that we are vetting people fully, that we fix something that is so obvious immediately and do not let the bureaucracy 

bog us down. 

Will you commit to us that if you find something like that, you 

are not waiting for an answer from some other agency, but, in fact, 

you will engage us to help you be effective in protecting the American public? 

Admiral NEFFENGER. Senator, I could not agree with you more 

on that issue. Absolutely, if there are legislative fixes that need to 

be there, I will be the first one to come back to Congress and request those fixes. In the meantime, if confirmed, the first thing I 

am going to do is ensure that we are connected to all of those databases. As a member of the intelligence community now, as a full 

member, I understand the importance of connection. And, in fact, 

as we said earlier, that was one of the key findings out of the 

9/11 Commission report. 

Senator AYOTTE. September 11, 2001 was all about connection 

and communication—— 

Admiral NEFFENGER. Yes, ma’am. 

Senator AYOTTE [continuing]. And knowing the information and 

sharing it with each other. 

Admiral NEFFENGER. That is right. So I am in full agreement 

with you and absolutely commit to that. 

Senator AYOTTE. Well, I appreciate that, and I would say that 

you take on this very important task of leadership right now, but 

understand that this Committee is very committed to having your 

back. If you find things that need to be fixed right away, if you find 

things that are wrong, that you need legislation, you need us to say 

to the administration this has to be a priority, we want to work 

with you to make sure that we get this right. 

And one thing that I wanted to ask about as well, we yesterday 

had testimony before our Committee from whistleblowers, and I 

think they were compelling. But, clearly, what they went through 

individually to be able to tell their story is something that we do 

not want to have happen in an agency where we have a culture 

where, if you bring forward bad information, that you are either 

punished or you are swept aside. 

So I would like a commitment from you that as you engage with 

the employees in the organization and you have those that come 

forward as whistleblowers or with information as to deficiencies in 

the agency, that you will fully support them and make sure that 

they have the support so that we can make sure that we understand all the problems and can address them. 

Admiral NEFFENGER. I do commit to that, Senator. I believe 

strongly in listening to your workforce. I believe in finding mechanisms for the workforce to express their concerns with problems. If 
18 

they see a problem, I want to hear about it. And I will tell you, 

if they do not feel that there is any other way than to go outside 

the organization to provide that information, that is still important 

to get that information, and I do not believe that there should be 

any punishment against an individual who finds that—because, 

again, these are people who raised their hand and took an oath, 

and they are finding something. It takes a lot of courage to speak 

out, and it takes a lot of courage to go outside your organization 

to do it. We should commend them for the courage. We should listen to what it says, and then we should not be afraid to tackle the 

challenges. 

Senator AYOTTE. I was glad to hear you say in answer to Senator 

Ernst that you think that, in terms of PreCheck, we need to ensure 

a fully vetted program. I think that is a priority. And also the other 

issue I would ask you to look at is the Security Identification Display Area (SIDA) badge issue, because that issue has popped up in 

other contexts where we know those badges, behind the scenes, the 

access that is given with one of those badges in the airport, and 

that, in fact, the system is one where the airports are controlling 

that, but we cannot account for where all the badges are. So I 

would ask you to take a very careful look at those badges to make 

sure we are not giving people access that we should not be. 

Admiral NEFFENGER. I will do that. 

Senator AYOTTE. Thank you. 

And one final thing that I would say is the other thing that I 

took from the testimony yesterday, both classified and unclassified, 

was we have seen that there are many standard operating procedures (SOPs), as Director Roering mentioned, but there seems a 

disconnect in consistent application of those SOPs. So looking at 

whether it is a checklist or more consistent application of SOPs, because it only takes, as you know, Admiral, one instance of an SOP 

not being followed in terms of the checks that need to be in place 

to protect the country to allow a terrorist through. So I wanted to 

get your perspective on that and what you think we should be 

doing to make sure there is consistency. 

Admiral NEFFENGER. Well, that is a great question, and that is 

fundamental to how people perform the mission. And so, as you 

know, in the military it is all about standard operating procedures, 

and the reason you do that is so that you can ensure that you are 

focused on the mission. And, of course, those get refined over time. 

It is important, first of all, that they be straightforward, clear, and 

understandable; that you have a consistent way of training to those 

standards, whether that be through resident training or through 

teams that train, individual teams or individual units. 

And then there has to be an oversight function, too. You have to 

have a way to determine whether those standards are being adhered to. 

And so, again, in the Coast Guard, my experience has been you 

have standardization teams. We just call them ‘‘stan teams,’’ and 

these are standardization teams that then go around and they test 

that people are living up to the standards. It can be up to and including things like the Inspector General or others have done, but 

it is usually just a matter of walking people through the procedures 
19 

and say, all right, you are going to confront this situation, what is 

the procedure and how do you do that? 

And, again, checklists can help. Those are very important where 

a checklist is appropriate. But it is also an understanding of the 

process that you are trying—again, you focus on the mission, and 

you say: What do I need to do to accomplish that mission? What 

are the standards that I need to have in place to do that? What 

is the process for doing that? And what parts of that can be done 

in a checklist fashion? And then how do I ensure that it is being 

done? And then I go back and do that whole process over again. 

So I concur with you, and I think that it is important to look at 

the current SOPs. Are they appropriate? Listen to the people that 

are using them. How effective are they? From your perspective, can 

you understand what you are reading? And if you can understand 

what you are reading, does it make sense to you? Or are you seeing 

things that we ought to add that we are not doing? 

The other thing that I have discovered over time is that you can 

become a slave to your standard operating procedures and not be 

aware of what the real process is. So you have to be careful not 

to just go through the motions. You have to have a thinking population that says, ‘‘Wait a second, this does not make any sense.’’ 

And we get that all the time in the military. Somebody will say, 

‘‘Why in the world are we doing X?’’ And you look at it, and you 

go, ‘‘I have no idea why we are doing that. It does not make any 

sense. Let us do something else.’’ 

Senator AYOTTE. Thank you. 

Chairman JOHNSON. Thank you, Senator Ayotte. Senator 

Lankford. 

OPENING STATEMENT OF SENATOR LANKFORD 

Senator LANKFORD. Thank you, quite frankly, for your past service and for taking this on as a consideration. You have been asked 

to consider leading an agency right now that has very low morale, 

that has had systemic procurement problems, that has some recent 

very bad evaluations and, quite frankly, uses wrong metrics in 

some of the ways that they are evaluating some of their own performance. So you have a task to do that is not an easy thing to step 

into. It is not an easy assignment regardless, so I want to tell you 

thank you for your consideration for walking through this, and I 

want to just bounce a couple issues off you, some of your perspective on things for you personally. 

Some of the metrics of evaluating the issue of conduct versus 

performance metrics and evaluations here, whether the goal is to 

quickly get people through the line or to be able to evaluate for 

safety checks and such. I think we can do both, but right now we 

seem to be pushing on the speed side of it rather than on the safety 

side, and it is almost like we are lulling ourselves back to sleep 

again on some critical issues. 

So I want to talk about how you will adjust that as far as evaluation, and then I want to move from there, and if you want to go 

ahead and move to it, to the morale issue of how you reengage 

some really great folks. When I interact with the Oklahoma City 

TSA folks, there are some great folks that serve there and are really terrific servants of the Nation. But the morale issues are terrible 
20 

as we deal with it nationwide. So if you want to talk about some 

of those. Then we will move on to some other issues. 

Admiral NEFFENGER. Yes, sir. Thank you. I think you have hit 

on one of the key concerns: the care of the workforce and the training of the workforce and the morale of the workforce. I mentioned 

in an earlier question that was about this very same issue, I said 

to me morale starts with an important mission, so we already have 

that. This is an important mission, a clear sense of that mission 

and a dedication of the leadership of the agency to performing that 

mission. 

And so when you talk about the potential disconnect between 

what is being measured and what is most important, I think that 

is key to one fundamental aspect of morale. If I am being told the 

most important thing I can do is protect the American public and 

to protect the traveling public, but I am not being measured as to 

how I do that, then that is a disconnect right there. And my fear 

is that that starts to breed cynicism in the workforce, and cynicism 

leads to low morale. So I get that completely. 

So the first thing you do is you focus back and you say, look, 

what is the most important thing we are doing out there? Why did 

you raise your hand, take an oath of office? These are great Americans. Not many people do that in this country. So they are still 

among the one percent that say, I want to serve my Nation, and 

you deserve to support them in doing that. 

Next comes training. You have to train them, and you have to 

continually train them and get them in that continual learning 

process so that they can do the mission. 

Senator LANKFORD. If I can interrupt, how is that different than 

what is happening now? What is the change that has to happen? 

Because all those things are occurring now. 

Admiral NEFFENGER. Well, I think that over time it is very easy 

for an organization to shift focus, to think they have the mission 

right, and then to work on other things. So I think you can never 

stop referring back to it. What I have found in my service in the 

Coast Guard is that you can have—even in a high-morale organization like the Coast Guard, we can have pockets of low morale, and 

what causes it? It is the day you get even a little complacent at 

the leadership level and you think you have it right. 

No one gets tired of being reminded how important their job is, 

and no one gets tired of being trained to do that job, and no one 

gets tired of feeling good and learning how to use equipment. And 

no one gets tired of engaging with their organization and telling 

you where they think they can do it better. 

So I think it is engagement with the workforce. That is an ongoing, it cannot just be a one-time thing. You cannot think you got 

it right because you held a meeting with them and you moved on. 

Annual surveys are good places to figure out where you need to 

start engaging more effectively, but they do not answer the question for you. They raise all the questions. 

Senator LANKFORD. Both your hiring and your training there 

makes a big difference, because they work in very close quarters 

with each other. 

Admiral NEFFENGER. That is right. 
21 

Senator LANKFORD. And if there are a couple bad apples in a 

group, it is really difficult for everyone in the group. So just managing personnel and placement and attitudes there on the line 

make an enormous difference. 

Can we talk a little bit about procurement? This has been an ongoing issue. TSA has millions of dollars worth of equipment stored 

in warehouses, trying to figure out where to move old equipment, 

wrong equipment, determining the efficiency of equipment, when 

they are going to purchase something different. If it has a 2-percent gain in efficiency, is that enough? So there are lots of issues 

that involve billions of dollars in procurement nationwide. So talk 

to me as far a changing attitude for you on that. 

Admiral NEFFENGER. Well, in my current role, I serve as what 

is called ‘‘the component acquisition executive’’ for the Coast 

Guard, so I oversee all—the whole acquisition process for the Coast 

Guard, and that starts with the basic requirements—first of all, it 

starts with the mission and how that mission can be accomplished 

against what the threats are that keep us from accomplishing the 

mission. And then you begin to build the requirements that you 

need to accomplish that mission. Some of those are human requirements. Some of those are equipment requirements. And those are 

interactive as you go through. 

Then you have to have an ability to translate those requirements 

into the actual thing that you need to buy. So there is a process 

that has to be in place, and what I have learned in the Coast 

Guard is—we completely rebuilt our acquisition program over the 

past decade. We did not have one of the best acquisition processes 

in the government. I think we do have one of the best acquisition 

programs in the government now, and it is because we looked at 

it from start to finish. You cannot simply walk out to industry and 

say, ‘‘Give me something that will do something.’’ I do not blame 

industry for providing you things that do not work. They will provide you what they have. But you need to really examine what do 

I actually need to know. So if you are looking at a piece of detection 

equipment, what do I need that thing to find? And then what are 

the limitations of the technology in order to find that so that I can 

figure out what the other requirements that go on top of it are? So 

it is not just enough to have requirements for the equipment. You 

have to have the requirements for the things the equipment cannot 

do, and those are combined. So all of that feeds into the procurement process, and then you need a rigorous process. So you have 

to adhere to the oversight, the controls, and the various program— 

you have to separate the person who is writing the requirements 

from the person who is implementing the requirements to the person who is overseeing the program to the person who is contracting 

for the program. And the more separation you can have amongst 

those, the more rigorous you can hold that process. Otherwise, you 

are going to run into schedule breaches; you will run into cost overruns. 

Senator LANKFORD. And I would encourage you to evaluate the 

effectiveness of this equipment, not based on how it functioned in 

the laboratory in a sterile environment—— 

Admiral NEFFENGER. It has to be a real-world test. 
22 

Senator LANKFORD [continuing]. But how it actually functions in 

the real world. That has been a problem, that we have to have that 

real-world involvement. 

With the Chairman’s indulgence, one quick comment as well. The 

PreCheck issue, we have a lot of people coming through PreCheck 

that are not really prechecked. We are either going to have to 

change the name, because we have millions of people going through 

that are really not prechecked, or really focus on PreCheck. And I 

am not talking about other people, Trusted Traveler and all these 

other programs where they really have gone through a process. But 

it seems to me that we are increasing the number of people 

through it to get throughput and get efficiency, and we are losing 

some of the focus of what it is designed to do and what the actual 

security is designed to do at the airport and the other lanes here. 

So we are trying to increase efficiency and are losing our focus 

on security. I think that is a recipe for disaster. So PreCheck 

should be PreCheck and should have some kind of background on 

them rather than just it is random or we think—or they meet some 

sort of profile. 

So thank you, Mr. Chairman, for that. I yield back. 

Chairman JOHNSON. Thank you, Senator Lankford. Senator 

Heitkamp. 

OPENING STATEMENT OF SENATOR HEITKAMP 

Senator HEITKAMP. Thank you, Mr. Chairman, and I just want 

to add my voice to what Senator Lankford just said. It has got to 

mean something, and it cannot just be, ‘‘Oh, you flew a lot of miles 

and nothing bad happened on that plane, so now we are going to 

hand you the pass.’’ We have to actually know who we are dealing 

with. 

I want to add my voice to what I surely hope has been the sense 

of the Committee here, how grateful we are that you are stepping 

up to take on this enormous challenge. I think too often we do not 

say thank you to the folks who go through what is sometimes a 

very onerous and difficult process, but we are extraordinarily grateful, and we find that more and more people who put on the uniform 

of our country in our armed services and serving us tend to step 

up and continue their service, and so thank you so much, Admiral, 

for what you are doing and your willingness to take this on. At 

least I am excited about the changes that I know you are going to 

make and the things you are going to do having been in such important leadership positions in the past. 

The one thing I do want to talk about is something that Senator 

Lankford and I have focused a lot on in our Subcommittee, which 

is how do you engage everyone, regardless of whether they are, the 

person collecting the trays at the end of the scanning line to the 

person at the very top, how do you engage them in the overall, 

overarching mission so they have a sense of purpose and they have 

a sense of what they are doing every day? What strategies do you 

think you can deploy to improve morale by giving people a sense 

of importance? 

Admiral NEFFENGER. Well, I talked about in my opening statement the need to look at—first of all, what do we teach people 

when they come into the organization? I think back to my experi-
23 

ence coming into the Coast Guard, and you are taught the base culture of the organization. And in our case, everyone is read this 

wonderful letter that came from the first Treasury Secretary, Alexander Hamilton, and it was his first instructions to the very first 

10 commanding officers of the Revenue Cutter Service, which was 

the precursor to the United States Coast Guard. And this was a 

challenging mission because they were told to go do something that 

had never been done before, which is to collect tariffs from merchant vessels trading with the brand-new United States of America, something that merchant vessels were not really pleased about 

and did not really want to encounter this new government attempting to exert its power. 

And so in the process of writing this letter, he lays out all their 

requirements and their duties and obligations and the law that 

they have and the expectations. But he says something very interesting in the letter, and it is the thing that begins this cultural indoctrination in the Coast Guard, and he says, ‘‘Always keep in 

mind that your countrymen are freemen and, as such, as impatient 

of everything that bears the least mark of a domineering spirit.’’ 

And it is wonderful 18th Century prose, and it goes on and on. The 

letter is multiple pages long. But that one line is repeated over and 

over and over again throughout your career in the Coast Guard. 

We use it when we advance people in rank. We use it when we promote them in rank. We use it when they swear in a new oath of 

office and remind them that you are going to do things that by nature interfere with the free movement of people. And sometimes 

you are going to do things that interfere with their individual 

rights because they would like to go do something and you are 

going to get in their way. You do not have to do that in a way that 

offends them, and you do not have to do that in a way that does 

not respect them. 

How does TSA do that? One of the things I would like to examine 

is what is the way in which TSA provides a culture. There is a TSA 

Academy. I do not know how well attended it is. I would like to 

look at that opportunity. And then over time, what are the ways 

in which you can continue to engage with the workforce? We live 

in an age in which it is very easy to communicate with people. I 

do not accept the premise that because you have a widely dispersed 

and geographically distributed workforce that you cannot find a 

way to talk to them? We do this all the time. I mean, I have a 

widely dispersed and geographically distributed workforce that 

works in small unit teams. I cannot touch every single member of 

the Coast Guard every day, but I can assure myself that they are 

plugged into the organization. 

So I am going to look for ways to do that, if confirmed, in the 

TSA. I am going to find a way to connect leadership to the frontline operation. In my experience, one of the other big factors of morale is how distant is your leadership from the actual people doing 

the work. I do not do the work of the Coast Guard anymore. The 

Coast Guard does that work, those front-line men and women out 

there. So how do they know that I have their back? And how do 

they know that I am paying attention to them, that I am providing 

them with the tools and the training that they need, if I do not listen to them and if I do not find a way to engage with them? 
24 

So those are the things I think about as I look to connecting with 

the workforce, to listening to what they have to say, to learning 

from them. I meant what I said in my opening statement that I 

have learned about duty to people, I have learned about commitment to excellence, I have learned about service to this Nation from 

the people who are doing that on a daily basis. I continue to learn 

today. I am always astonished at the new things I learn about 

those things. 

Senator HEITKAMP. I know it has been said already here, but I 

think improving the morale of TSA, reducing the turnover, really 

having an appreciation by everyone how important their work is 

and how much their country is counting on them. And as we saw 

in California, their work can be dangerous, and they need to be appreciated for that, for standing on the front line trying to stop— 

being that visible signal. 

The other thing I would say that the public gets frustrated with 

is when they do not see value added to some of the things that TSA 

does. They go, ‘‘Well, why would we need to do that? And why 

would we need to do this?’’ And I think it is really important that 

your communication, as you are focusing on communicating why 

they need to do that, is also turning it outwards and talking about 

the challenges that you have so that people who are like us, who 

are at airports all the time, better understand what that goal is. 

And so I would just offer that suggestion that that communication 

not just be internal, that we spend a lot of time talking to the traveling public about the importance of what you do. I mean, I just 

think we have great hope for you, and if there is something that 

we can do and ideas that you have where laws restrict you, I hope 

that you come back to this Committee, come back to us individually 

and say, ‘‘This is something that makes no sense. Please change it.’’ 

Admiral NEFFENGER. Thank you, Senator. I will do that. 

Senator HEITKAMP. Thank you, Mr. Chairman. 

Chairman JOHNSON. Thank you, Senator Heitkamp. 

I think we have pretty well covered most of the issues. I know 

our Ranking Member has another question or two. 

I will just make this statement, though: Regardless of the fact 

that we have not had additional airplanes used as a weapon, I 

would first say that is because we did take a look at the priority 

solutions, and we hardened the cockpit doors. Again, very cost-effective, but also very effective from the standpoint of security. 

I do believe that the TSA has been in somewhat of a state of denial, that what processes and procedures and equipment we have 

in place—again, it will catch the water bottles. It will catch my little Boy Scout pocket knife that I was given and did not realize I 

had it in my briefcase. We will do that. But for determined people 

that want to defeat that system, I think the IG’s report is pretty 

telling. So it is a matter of recognizing reality and being we have 

those problems. 

I guess until the Ranking Member comes back, in testimony yesterday, one of the whistleblowers, Ms. Roering, claimed that—we 

were talking about the morale issue—there is a feeling of fear and 

mistrust within the TSA. And Senator Ayotte talked about retaliation—which, by the way, we are going to have a hearing tomorrow 

on whistleblowers and the kind of retaliation they have faced. It is 
25 

disturbing across the government how prevalent that really is. Apparently, there is that kind of problem within the TSA as well. 

So I guess I am just asking, you have a significant management 

challenge, the low morale, if it is true—and I want to ask your 

opinion. Do you believe there really is, is it possible that there really is a prevalent feeling of fear and mistrust? But, just from a 

standpoint of the tedious nature of the task, it is just prone to complacency. We are human beings. How do you manage that? How do 

you rotate shifts? How do you provide incentives to keep people 

alert? But really speak to the fear and mistrust statement of our 

witness from yesterday. 

Admiral NEFFENGER. I hope that it is not a pervasive fear and 

mistrust. But I will tell you that I start from the premise of trusting my organization. I want the people who work for the organization to feel free to bring problems to the organization. That is 

where you learn the most about what you are doing. 

I will commit to you that this is one of the most important things 

for me. It speaks right to the fundamentals of morale. If I work for 

an organization that I do not trust and that I am afraid is going 

to take action against me if I bring problems to light, then that is 

a real problem. That is a real morale killer. So you have to address 

that right up front. 

So what I will commit to you is that that is not the way I do 

business. It is not acceptable in any of the people with whom I am 

working or the people who report to me. And I will take a hard 

look at the current climate in the TSA. 

Chairman JOHNSON. I appreciate that. 

Senator Carper, do you have a question or two? 

Senator CARPER. Yes. Admiral, over Memorial Day weekend and 

I think again last week, threats were made against international 

flights that were bound for the United States, and while those 

threats were deemed ultimately not to be credible, we know that 

passenger screening overseas presents a significant risk to our 

aviation security. 

If confirmed, how would you work with our international partners to improve passenger and baggage screening standards in foreign countries? 

Admiral NEFFENGER. Well, I think it is important to have 

agreed-upon international standards, and those have to be rigorous, and they have to be at a level that assures that you are 

doing the absolute best you can to stop any potential threat. 

I have had a lot of experience with that in the maritime sector. 

As you know, the Coast Guard represents the United States to various international bodies that deal with international maritime security, international maritime safety. And what I have found is 

that, first of all, those other countries want their systems to be safe 

as well. But if you have a patchwork of approaches, then you are 

going to have gaps in your security. 

So it is important to work with the international bodies in the 

aviation world, such as the International Air Transport Association 

(IATA) and the International Civil Aviation Organization (ICAO), 

to ensure that you have clear and well-defined and consistent 

standards, that you have a mechanism for enforcing the adherence 

to those standards. In the case of the world in which I work, that 
26 

includes spot checks and verifying teams. So we send teams all 

over the world to foreign ports from the U.S. Coast Guard, and we 

inspect to make sure that they actually are doing what they claim 

to be doing on paper. And when we find evidence that they are not, 

then we apply sanctions up to and including the refusal to allow 

a vessel from that port to arrive in U.S. ports, and we do that. 

I think the same standards need to be even more imperative that 

you do that in the aviation world because we know that we have 

significant concerns with foreign fighters, we have significant concerns with increasing radicalization of terrorist groups, and we 

know that they are continuing to focus on the aviation system. 

So I intend to work, if confirmed, with counterparts around the 

world, particularly those countries that have last points of departure bound for the United States, and, more importantly, to work 

with the international associations to ensure that the standards 

that are set are appropriate and that there is an oversight mechanism for enforcing those standards. 

Senator CARPER. All right. Thanks. 

In our closed session yesterday, which you were good enough to 

join us for, one of the things we discussed was the role of patdowns 

in better ensuring our security. These flights—and it is a sensitive, 

awkward situation. It is important for our security, but it is difficult for those that are trying to ensure security and, frankly, for 

the passengers who endure this. 

I am sure that some other countries may have figured out a better way to do this. I am not sure who it is or if they have. But I 

would just ask if, as one of the things when you get settled in, one 

of the things that we do is look around the world and say everybody has to—all kinds of nations, dozens of nations deal with these 

issues, and maybe somebody has come up with a better mousetrap 

and we can learn from them. 

The last thing I want to ask is a variation of what I asked at 

the end of our session yesterday with the IG and the others on 

TSA. Give us a short to-do list for us on this side of the dais. One 

of the things that Chairman Johnson and I—and Tom Coburn for 

that matter—and our Committee, one of the things we always 

looked to the Government Accountability Office (GAO), every 2 

years, beginning each Congress, they would give us a to-do list— 

not just us specifically but its high-risk list, high-risk ways of wasting money, and we almost use it as a to-do list. But just give us 

a short to-do list, if by some small chance you are confirmed, have 

the opportunity to serve in this role, what would be a couple things 

that we could do that you think would be especially helpful to you 

as the leader but, more importantly, the folks you would lead and 

to the people of our country, what could be helpful? Just a couple 

of items. 

Admiral NEFFENGER. Senator, thank you for that. 

First, thank you for the offer to help. I believe strongly in working with the Congress because you have an important role to play 

not only in oversight but in ensuring that the right laws, the right 

legislation is in place to allow a mission like the security of our 

transportation system to succeed. And I promise to work with you 

on that. 
27 

What I would like to do, if confirmed, is to bring you a list of 

those things that I think can be most effective for this Committee 

to attend to. I really do appreciate the willingness of every member 

of this Committee with whom I have met to work with me. I promise you that it will be just as much coming from my side as it is 

from your side. And what I would like to do is bring to you in a 

very open manner the challenges that I find, where those challenges need to be addressed by work that this Committee can do, 

and where those challenges are something that the agency has the 

ability to do but you need to be aware of before it is put into place. 

Senator CARPER. All right. Thank you. 

Mr. Chairman, I would just close by saying Jeh Johnson, our 

Secretary of DHS, is not one given to hyperbole, and when he told 

me a couple of months ago, he said, ‘‘We have our leader for TSA.’’ 

And I said, ‘‘Well, who is it?’’ And he said, ‘‘It is an admiral. His 

name is Pete. He is in the Coast Guard, and he wears a lot of 

stars.’’ And he said, ‘‘You are going to really like him.’’ And I must 

say I am impressed. Thank you for your willingness to serve, and 

hopefully we will get you confirmed and you can go to work. 

Admiral NEFFENGER. Thank you. 

Senator CARPER. Thank you. 

Chairman JOHNSON. Senator Sasse, you had an extra question. 

Senator SASSE. You bet. Thank you, Mr. Chairman and Ranking 

Member Carper. 

They need to get to another nominee, so I will flag two questions, 

one of which I will submit in my letter and one I will ask you here. 

The first is: I appreciate many of your statements about your desire to skate to where the puck is going to be and ultimately be 

dealing with the security threats we face in the homeland and the 

jihadi opponents from abroad over the course of the coming decades 

and to be forward-looking on that. 

I also appreciate your clear care and concern for the workforce 

and for the morale issues inside the organization. There are lots of 

good and freedom-loving Americans inside TSA. And my worry 

about the magnitude of the challenges we face does not start chiefly with workforce issues. Obviously, you have flagged some technology failures, but I think we have big leadership problems inside 

the organization, and I think we are at a gap as far as strategic 

priorities and measurement of our performance against those priorities. 

You mentioned and yesterday Director Roering talked about the 

fact that there is this tension between a couple of different TSA 

missions, but almost none of the metrics actually go to the success 

at interdicting prohibited weapons and materials and explosives. 

I am curious—and we will submit this by letter—about what 

your familiarity is with what briefings and performance metrics 

Secretary Johnson from the Department receives at least on a 

weekly basis. Some of us who have been pushing on these issues 

for a number of months have not gotten adequate answers from the 

Department about the frequency and the quality of the performance metrics inside the key components and agencies inside DHS. 

And so I would like to understand what familiarity you have had 

with the briefings that the leadership team of DHS gets on a regular basis when you have been at the Coast Guard and what you 
28 

expect to be included on as far as these performance metrics are 

in your potential new role at TSA. So we will submit that by letter 

today. 

The final question I will ask in person is—I have had a chance 

to meet with Inspector General John Roth three times in the last 

week and really appreciated the work of his organization, and he 

has said directly to us, sometimes in classified settings but he also 

said at a public hearing the other day, that he does not believe that 

the leadership of TSA ‘‘truly understands the nature of the risks 

that they face.’’ He does not believe that TSA truly understands the 

nature of the risks that they face. 

I am curious which camp you would put yourself in. Do you believe that he is right that TSA does not understand the nature of 

the risks they face? Or do you think that the leadership has understood the nature of these risks? 

Admiral NEFFENGER. I had a chance to sit down with Inspector 

General Roth as well, as part of my preparation for this. I understand the risks, the nature of the risks that we face. I think there 

are people in TSA who do understand the risks. What I want to 

understand is how effective are those voices and how well can 

those voices be heard. And, more importantly, what are the reasons 

why that information appears to be challenging to make it to the 

right levels of the organization? 

So I think it is tied directly to your previous question. I look forward to answering that question, and, more importantly, I look forward to engaging with this Committee in the future as we look to 

ensure that the things that we do measure are the right things and 

that you continue to question whether they are the right measures. 

Again, just like security, the measures you put in place might be 

appropriate today, but they might not be appropriate for tomorrow. 

So you have to continually refine those, and you have to be relentless in your examination of those measures to ensure that you do 

keep focused on the right things. 

Senator SASSE. Thank you, sir. 

Chairman JOHNSON. Thank you, Senator Sasse. 

Admiral Neffenger, I just have to commend the President and 

the Secretary for finding such a quality individual as yourself, 

somebody who is, I think, very well qualified, very well suited for 

this position, this enormous challenge. And so I certainly want to 

tell you and voice my appreciation for your past service and for 

your willingness to serve, and I will certainly make the commitment, I think, of this Committee and for myself. A number of us 

have already voted for your confirmation out of the Commerce 

Committee. We will try and move this confirmation as quickly 

through this Committee as well as through the Senate so you can 

get on the job. 

But, again, we are just so thankful for your willingness to serve, 

and the further commitment, too, is to have this Committee here 

to have your back, to do everything we can. We will commit ourselves to helping you succeed in your mission of keeping this Nation safe. 

Admiral NEFFENGER. Thank you. 

Chairman JOHNSON. Thank you again, and we look forward to 

working with you in the future. 
29 

Admiral NEFFENGER. Thank you, Senator. 

Chairman JOHNSON. Thank you. We will seat Mr. Shapira now. 

[Pause.] 

We are going to move on to the second part of our hearing here. 

Mr. David Shapira has been nominated to be a Governor for the 

United States Postal Service. Mr. Shapira is the chairman of the 

board of directors of Giant Eagle. Under his leadership, Giant 

Eagle saw huge growth, expanding from the Pittsburgh area to 

Ohio, Indiana, West Virginia, and Maryland. By comparison, the 

United States Postal Service continues to see huge losses and decreasing volume, ending fiscal year (FY) 2014 with a net loss of 

$5.5 billion. 

The United States Postal Service needs smart, creative solutions 

to counter the loss in revenue created by changing consumer behavior. The ability to expand and adapt to customer preference 

that Giant Eagle has shown is something that the Postal Service 

vitally needs. 

Mr. Shapira, welcome. We look forward to your testimony. We 

have Senator Bob Casey from Pennsylvania here who would like to 

say a few words prior to Mr. Shapira’s testimony. 

Senator CARPER. Before he speaks, let me just say, Mr. Shapira, 

we do not trust Senator Casey. His word means—— [Laughter.] 

Chairman JOHNSON. That is why you were hoping Senator 

Toomey would be here. He might come. 

Senator CARPER. That is right. Maybe if we wait, maybe Pat will 

show up, too. Seriously, great to see you, Bob. Thanks for coming. 

This is great. 

TESTIMONY OF THE HONORABLE ROBERT P. CASEY, JR., 

A UNITED STATES SENATOR FROM THE STATE OF 

PENNSYLVANIA 

Senator CASEY. Well, I want to thank the Chairman and the 

Ranking Member for giving me this opportunity to introduce David 

Shapira. 

Mr. Chairman, you highlighted, I should say, some of his business background, and that is, I think, one of the most significant 

parts of his record and resume. I will not dwell on the details of 

his background, but I do want to say something about his character, and I think that is what I will start with. 

We all know the challenges of being in elected public service. Appointed public service comes with a lot of challenges as well. The 

process itself is a substantial challenge, and I am always amazed 

and gratified that we have people willing to put themselves forward for public service even though the process to get there to be 

confirmed or even to be considered is challenging. And I think the 

fact that David is willing to do this is an indication not just of his 

character but also his commitment to our country. 

He has been, as you mentioned, Mr. Chairman, the chief executive officer (CEO) and chairman, from 1980 until 2012 of Giant 

Eagle. Since 2012, he has served as executive chairman of Giant 

Eagle, one of the most successful businesses that I know in Pennsylvania. He graduated from Oberlin College, received his M.A. in 

economics from Stanford. We do not have a lot of that around here. 

We could use more of that with degrees in economics. 
30 

1The prepared statement of Mr. Shapira appears in the Appendix on page 145. 

He is on the board of directors of the Allegheny Conference on 

Community Development, Equitable Resources Incorporated, Extra 

Mile Education Foundation, Hillel Academy of Pittsburgh, the 

Pittsburgh Cultural Trust, the Pittsburgh Symphony, United Jewish Federation, the United Way of Allegheny County, and I could 

go on and on, but I will not. He is also a member of the CarnegieMellon University Board of Trustees. 

I believe his experience and his success will be of great benefit 

to the Postal Service, serving as a member of the Board of Governors. But, again, I come back to his character. This is a person 

of integrity and someone who truly believes that what he is doing, 

if he were to be confirmed, would be public service. As I have often 

quoted, we have an inscription on the Finance Building in our 

State capital. It reads as follows: ‘‘All public service is a trust, 

given in faith and accepted in honor.’’ I think David understands 

that, that if he is given this opportunity, he accepts it with honor, 

and the best way to demonstrate that you have accepted it in that 

fashion is to do quality public service with integrity. He will do 

that, I have no doubt about that. 

So, David, we are grateful you are willing to serve, and I am honored to be part of this nomination process for you. 

Chairman JOHNSON. Thank you, Senator Casey. We appreciate 

those words of support. 

I know Senator Toomey also wanted to come here, and I am not 

sure if he will make it. If he does, we will certainly offer him that 

opportunity. If not, I would ask unanimous consent that his statement of support be entered in the record. 

Senator CARPER. I will not object if Mr. Casey will repeat one 

time those words inscribed in Harrisburg. What was it? ‘‘All public 

service’’? 

Senator CASEY. ‘‘. . . is a trust, given in faith and accepted in 

honor.’’ 

Senator CARPER. I do not object. Thank you. 

Senator CASEY. I wish they were my words, but they are inscribed on a building in Harrisburg. 

Senator CARPER. Those are great words. 

Chairman JOHNSON. Again, thank you, Senator Casey. 

Mr. Shapira, it is the tradition of this Committee to swear witnesses in, so if you will please rise and raise your right hand. Do 

you swear that the testimony you will give before this Committee 

will be the truth, the whole truth, and nothing but the truth, so 

help you, God? 

Mr. SHAPIRA. I do. 

Chairman JOHNSON. Thank you very much. 

I could read your introduction, but we have already read it before, so we will just listen to your testimony. 

TESTIMONY OF DAVID S. SHAPIRA,1 TO BE A GOVERNOR, U.S. 

POSTAL SERVICE BOARD OF GOVERNORS 

Mr. SHAPIRA. Thank you very much, Chairman Johnson. If I can 

just say I am blown away by Senator Casey coming and saying 

what he did, and I really thank you for that. 
31 

Chairman Johnson, Ranking Member Carper and Members of 

the Committee, thank you for the honor of appearing today and for 

the privilege to be considered for nomination to the United States 

Postal Service’s Board of Governors. I want to thank President 

Obama for this honor and for the vote of confidence that it represents. It is truly humbling, and if confirmed, I will work diligently to show that this confidence and your consent is well deserved. 

I also want to thank my wife, Cindy, and my family for supporting this undertaking. The responsibility and opportunity for 

national public service will require sacrifice, and if I am confirmed, 

they will be my partners. 

My family is truly my greatest gift, and nothing I have accomplished would have been possible or even desirable without them. 

Senator CARPER. Is she the young woman sitting behind you over 

your left shoulder? 

Mr. SHAPIRA. She is this very young, beautiful woman, yes. 

Senator CARPER. We thank you for your willingness to share 

your husband with our country. 

Mr. SHAPIRA. Though my written testimony provides details, for 

more than 30 years I was the chairman, CEO, and president of 

Giant Eagle markets. 

Senator CARPER. This is what we call the walk-on. This is the 

walk-on. 

Mr. SHAPIRA. I really am now completely blown away. 

During that time our chain of stores grew from about 50 stores to over 400 stores, was doing a little bit under $10 billion in volume and employees, about 36,000 Americans. 

I do not want to take credit for this. I was always surrounded 

by smart, capable people, and the achievement is theirs, not mine. 

Large organizations like Giant Eagle only succeed when they tap 

and inspire the talents of a diverse workforce, and I am immensely 

proud of the team that I helped to lead. 

When I stepped away from the day-to-day operations in 2013, I 

left the company in very capable hands—actually, the hands of my 

daughter, Laura, who is now the CEO, and her executive and extended team. I have always had an interest in giving back to my 

community and have served on boards and in lay leadership positions in a number of civic organizations over the years. However, 

since my retirement as CEO of Giant Eagle, I have been able to 

more fully pursue what I hope will be a second career in community service and philanthropy. I believe that such service is a foundation of our great country and is a major component of our democratic society. 

A colleague of my father’s used to hand out business cards that 

said, ‘‘The more I give, the more I get.’’ Every citizen, to the extent 

that he or she is able, should look for opportunities to serve. 

Now President Obama has offered me a new opportunity, one 

with a truly national and international scope. The United States 

Postal Service epitomizes a key tenet that underlies our unique 

government of the people: the right of everyone—rich or poor, rural 

or urban, of every creed, faith, and race—to efficient, affordable, 

and reliable communications. So critically important to the Founding Fathers was this concept that they established the U.S. Post 
32 

Office at the Second Continental Congress of 1775, a year before 

signing the Declaration of Independence. The U.S. Postal Service 

is a conduit of commerce, political thought, and messaging. Perhaps most importantly, it is a bedrock to people everywhere to remain connected to family, friends, community, and the greater 

world around them. Though other communications have come—disrupting the paradigm and creating new challenges and opportunities—the mail still remains and has a significant place as an essential government service. 

Today, however, the institution is struggling. For years now, its 

expenses have exceeded its revenue. Looking deeper, its most profitable product—First Class mail—is in decline, but it is achieving 

growth in the delivery of packages. The Post Office has undertaken 

an ambitious effort to cut costs, but it faces the real risk of degrading service, which could leave it worse off in the long run. Its recent losses have forced it to delay needed capital investments, and 

like any well-managed enterprise, it needs to address its long-term 

liabilities, particularly retiree health benefits. 

To address these challenges, my business experience tells me 

that given the Postal Service’s size, the answer is multifaceted. It 

must preserve and enhance its current products while seeking out 

new opportunities to expand. It must look for ways to be more efficient, but also must preserve those assets which will enable it to 

have long-term growth. It needs a solid plan to address its longterm liabilities, but also must make near-term capital investments. 

If confirmed, I look forward to exploring these issues in much 

greater depth, and I believe that my business background, experience, and commitment to public service can help push this work 

forward. 

Thank you, Members of the Committee, for your attention, and 

I look forward to answering your questions. 

Chairman JOHNSON. Thank you, Mr. Shapira. 

We welcome Senator Pat Toomey, and Senator Toomey has got 

a few words of support as well. Senator Toomey. 

TESTIMONY OF THE HONORABLE PATRICK J. TOOMEY, 

A UNITED STATES SENATOR FROM THE STATE OF 

PENNSYLVANIA 

Senator TOOMEY. I do. Thank you very much, Chairman Johnson 

and Ranking Member Carper. I appreciate your giving me this 

chance. I apologize that I was not here at the beginning, but you 

know there is a rule in the Senate that requires conflicting simultaneously scheduled meetings. But it is a pleasure for me to be 

here and to just say a few words on behalf of Mr. Shapira with respect to his nomination to be a Governor of the U.S. Postal Service. 

I will be brief, but, first of all, let me just say the Postal Service 

and the United States are very fortunate that a man of his accomplishments and his capabilities is willing to serve in this capacity. 

I am delighted that he is willing to do this. We will benefit enormously from his wisdom, his experience, and the very hard work 

that I know he will do here. 

I think Mr. Shapira was far too modest in describing his accomplishments in guiding Giant Eagle from what started as a very 

small chain with several other families and has become a very 
33 

large business, employing tens of thousands of people and really 

doing great work. 

In addition, David has served on numerous corporate and university boards from which he has developed a terrific range of experiences and really acquired great knowledge about so many different 

business activities and models. 

His philanthropic work with his wife, Cindy, has been absolutely 

terrific and very important, especially in western Pennsylvania and 

beyond. So I just think that David Shapira just represents the best 

that Pennsylvania and Pittsburgh has to offer this country. He is 

an extremely talented and accomplished business and philanthropic leader, and we are just very fortunate to have his services, 

and I fully support his confirmation. 

Chairman JOHNSON. Well, thank you, Senator Toomey and Senator Casey, again for taking time to offer those words of support 

to the nominee. 

Mr. Shapira, it is also the tradition of this Committee to ask a 

series of questions prior to my questions. We will allow the Senators to retreat. 

Let me start with: Is there anything you are aware of in your 

background that might present a conflict of interest with the duties 

of the office to which you have been nominated? 

Mr. SHAPIRA. No, and if anything should arise, I would recuse 

myself from any possible decisions about that. 

Chairman JOHNSON. OK. Thank you. 

Do you know of anything, personal or otherwise, that would in 

any way prevent you from fully and honorably discharging the responsibilities of the office to which you have been nominated? 

Mr. SHAPIRA. No. 

Chairman JOHNSON. Do you agree without reservation to comply 

with any request or summons to appear and testify before any duly 

constituted Committee of Congress if you are confirmed? 

Mr. SHAPIRA. Yes. 

Chairman JOHNSON. OK. Thank you. 

So, Mr. Shapira, I am obviously intrigued by your business background. I started my business in 1979. You started a year later. 

You just did a whole lot better than I did. So obviously you have 

some real talents. 

You talked about new opportunities for the post office. Can you 

tell me your concern—or whether you are concerned or not concerned about the postal system competing with the private sector 

and how you would try and set up guidelines if you have concerns? 

Mr. SHAPIRA. Let me answer that question with a little bit of 

background. As I was getting prepared for this hearing, I realized 

that during my career at Giant Eagle, we faced a situation which 

I think is very—we faced then and continue to face, actually, a situation which is very similar to what the post office does, and that 

is, the rise of new competitors and new technologies which threatened various parts of our business. In the Giant Eagle case, something that most people would not think about, but there has been 

an enormous lifestyle shift from eating at home to eating out, and 

in the supermarket business, we serve food to eat at home. So 

every meal that switches from the home to a restaurant takes business away from us. 
34 

So the way we adapted to that was to continue to do what we 

did, but also to begin to diversify what we sold. And as I was saying at the staff hearing yesterday, or Monday, we started going 

into new businesses but within our stores, so that not only did the 

new business bring in revenue, but the fact that we had the new 

business reinforced the old business. 

Some examples of that are getting into the business like pharmacy. When I started in the supermarket business, there really 

was no such thing as pharmacies in supermarkets, and today, well, 

Giant Eagle in particular, but really all good supermarkets have 

very successful pharmacies. 

A second example of that is gasoline. Who ever would have imagined that you would get your gas at the same place you get your 

groceries? 

I think the post office has the same kind of problem. It has a severe technological threat and competitive threat to its best product, 

which is First Class mail. I think the way to defend that is to continuously try to improve First Class mail, but also to develop other 

products which can bring in revenue and hopefully reinforce the 

use of First Class mail at the same time. 

Actually, as I look at what the post office has been doing, it actually has been doing those things, so I do not think it needs a radical change. I think it needs an emphasis on continuing to change 

its format over time. 

In terms of competing with private businesses, or at least nongovernmental businesses, I guess is the right word, which I think 

is the essence of your question, it is a very interesting question. 

The post office has a mission; it needs to carry out the mission. Its 

competitors have a different mission. That gives them certain advantages and certain disadvantages. And, clearly, the post office 

competes against them as they compete against the post office, and, 

frankly, I think competition is a good thing. So I am in favor of seeing new products and being aggressive about building the business 

model. 

Chairman JOHNSON. OK. Having been in the business world, I 

imagine you have done a lot of strategic planning. I certainly have 

and found great value in business, we call it strengths, weaknesses, 

opportunities, and threats ‘‘(SWOT) analysis.’’ People are not really 

familiar with that here in Washington, D.C. I am pretty sure you 

are: strengths, weaknesses, opportunities, and threats. 

Can you just kind of go through in your mind a quick SWOT 

analysis of the postal system? Let us start with strengths. What 

are the primary strengths of the Postal Service? 

Mr. SHAPIRA. Well, the primary strengths are the system and the 

employees and the history. The post office has a system which calls 

on every single address every day. That is an enormous strength. 

A second strength is brand equity. Everyone understands the 

post office. Everyone understands how to mail a letter, how you go 

about getting a stamp, putting it on. In this case, brand equity is 

sort of an institutional memory, not only of the post office but the 

whole population of the country. 

Well, the weaknesses are several things. One is I think the post 

office is constrained from operating as efficiently as it might by 

law. So an example of that is the necessity to pre-fund the retiree 
35 

health benefits, which is something that I am not aware of any 

other company or institution that does. 

And a second weakness is it is in some ways constrained from 

introducing new products. My understanding is that the law says 

that the post office cannot introduce a new product that does not 

use the post box, the mailbox. In days like today where technology 

is changing so quickly, the inability to adapt to changing technology is a big weakness. And, of course, it is a huge threat. The 

threat of the Internet in terms of First Class mail or even actually 

Second Class, bulk mail, is enormous. And I know as a company 

like Giant Eagle, we are trying to move as fast as we can to sending out our communications with the public over the Internet because it is so much cheaper. 

Now, it is not so easy to do, which is a big strength of the post 

office. So while it is nice to dream about it, it cannot just carry it 

off. 

I am sure I am leaving some out, but those are the strengths and 

weaknesses. 

The threat is, I think, a number of things. Clearly, technology is 

an enormous threat. Actually, it is a threat to any kind of business 

at any time. So one reason I am happy I am retired these days is 

because technology is changing so fast, it is very hard to keep up 

with. 

And I think the other threat is the constraints that are put on 

by law and by the political system. 

The opportunities are enormous. The need to get information 

from one place to another is only going to grow. We are an increasingly interconnected world, and the question is: How can the post 

office adapt to the changes in the need to accomplish that task? 

My experience says that whenever there is disruption like there 

is today, it is an enormous threat, and it is also an enormous opportunity, and the question is: Can the post office figure out how 

to take advantage of that? 

Chairman JOHNSON. OK. Thank you. Senator Carper. 

Senator CARPER. Thanks, Mr. Chairman. 

Again, very nice to have a chance to meet with you and to meet 

Cindy as well. I used a basketball term yesterday, Mr. Chairman, 

talking with Mr. Shapira about the role that his wife played in encouraging him to let his name be put forward by the President, and 

I described her role as ‘‘getting an assist on the play.’’ So we thank 

you for your encouragement, Cindy, and for your willingness to let 

Mr. Shapira serve. 

I was born in Beckley, West Virginia, a coal mining town in 

southern West Virginia, south of Charleston, and I was back there 

a couple of months ago for a funeral of my 98-year-old Aunt Hazel, 

and she was married to my mother’s oldest brother. And back in 

about 1950, he started a little supermarket in Beckley, West Virginia, on Harper Road, right off the turnpike. It is called Patton’s 

Market. And they sold groceries and gasoline. Sounds familiar, 

huh? They were ahead of their time. 

Mr. SHAPIRA. Everything that goes around comes around. 

Senator CARPER. There you go. And as I grew up in Virginia, in 

Danville, and Roanoke. But I would go back in the summers with 

my sister just to be with our grandparents, our cousins, and I 
36 

would work at—a little bit, not a lot, but summers at that Momand-Pop supermarket. My uncle died, sadly, early. But his brother, 

my Uncle Jim, and his wife, Nell, took it over. And down the road 

from them on Harper Road, a Kroger opened up. People said, ‘‘Patton’s Market is doomed.’’ But they were not. And then later on, I 

think an A&P opened up, and people said, ‘‘Patton’s Market is 

doomed.’’ But they were not. And they continued to do reasonably 

well right up until my aunt and uncle reached retirement age. 

They worked hard. It was not easy. They did not have a chain of 

Mom-and-Pop supermarkets, but they had theirs. 

Over time they changed the way they did business to adjust to 

the competition that they had just down the road. They offered people the chance to buy food on credit. Folks wanted to have groceries 

delivered. They delivered. My grandfather was a butcher. He had 

Parkinson’s disease. His hands would shake just like this. And he 

drove those mountain roads until he was 81 to go into that butcher 

shop and cutting meat. When he was in the shop, his hands were 

steady like a rock. It was an amazing transformation that he would 

go through. But if people wanted a special cut of meat, they got it. 

If folks wanted produce, they got it. The folks who walked in that 

store, the staff knew the names of the people that were coming in, 

even their children. 

They continued to be a little supermarket, but over time they became a catering service as well. And you mentioned people changed 

the way that they eat, and they decided, well, if you want to have 

somebody prepare your food, we will help with that. 

I learned so much from my aunt and uncle and from their business in terms of customer service and being a servant. Our job is 

to serve. Our job here is to serve. Talk about the lessons, the life 

lessons that you have learned from starting and growing your business that might be appropriate or applicable to the post that you 

have been nominated for. And thank you for letting me tell my life 

story through my aunt and uncle. 

Mr. SHAPIRA. Thank you for the question. That is a great question. At Giant Eagle, we believe that we serve four constituencies, 

and the four constituencies are: our customers, our team members 

or employees, the communities we live in, and our shareholders. 

And when I talk about this, I like to say that those four are not 

in any particular order except for the last one. That does not mean 

that we do not think our shareholders are important. Obviously, 

they are important, and we know that we have to make money and 

we have to grow the business and we have to pay dividends. Otherwise, the shareholders will say, ‘‘We do not need you.’’ 

So why do I say the other three are more important? The reason 

is we take a long-run view of our business, and we think if we 

serve those other three constituencies well and that we are good, 

financially responsible business people, that in the long run the 

shareholders will be better off. And, of course, so will everybody 

else in all those constituencies. 

I think in an organization like the post office, which is a little 

different because in this case the customers actually are the shareholders—we are all the shareholders—but I think if we concentrate 

on serving our customers, taking care of the workforce and making 

sure that the workforce is well trained, well motivated, under-
37 

stands why they are here—it was interesting listening to the Admiral, who I thought spoke beautifully on this subject. If we remember that part of our mission is to serve communities, big or small, 

near or far, and if we are free from some of the constraints that 

we operate under, the post office can be very successful and adapt 

over time and change. 

Senator CARPER. I should know the answer to this question, but 

I do not, so I will ask it. In the Postal Service, there are four labor 

unions that are organized and represent different employees and 

employee groups within the Postal Service. And we have the opportunity to work with them, and the Board of Governors, the folks 

who are leaders at the Postal Service have the opportunity to work 

with them as well. And I find them to be more often than not constructive and trying to be helpful to enable the Postal Service to 

survive and thrive and go on to serve us for hundreds more years 

in this country. 

I do not know to what extent you in your business have had a 

chance to work with collective bargaining units, but if you have, 

could you share with us some of what you have learned from that 

that might be helpful for the Postal Service? And if you have not, 

then just any observations you might have with that in mind. 

Mr. SHAPIRA. Well, we have. Giant Eagle is a union company. We 

have some small non-union operations, but basically we are union 

company. We have dozens of different union contracts. I think dealing with—assuming that the unions have reasonably good leadership, then in many ways it is better to be a union company. It gives 

you an ability to communicate with people that you do not necessarily have if you are non-union. 

If the union has bad leadership, it is a different—but my view 

on dealing with employees is you have to respect them, you have 

to listen to them, you have to get feedback from them. You have 

to include them in the process. You have to train them. I will parrot some of the things that the Admiral said. You have to have a 

clear mission. You have to explain it to people. When there is a 

problem, you have to be open and honest about what the problem 

is. You have to make people understand what the problem is. And 

my experience is that in most cases—not all, but in most cases, you 

can—unions are cooperative and can help solve the problem. But, 

of course, you have to respect their point of view, too. 

It takes me back to when I talked about our constituencies. One 

of the most important constituency is the employees, and the union 

represents the employees, and so you should respect it, just like 

you would if they were not in the union, actually. 

Senator CARPER. Thanks. 

Chairman JOHNSON. Thank you, Senator Carper. 

Mr. Shapira, have you really studied the financial situation of 

the post office? Are you pretty well versed in that? 

Mr. SHAPIRA. When you use the words ‘‘really studied,’’ I would 

say no. 

Chairman JOHNSON. Casually studied? 

Mr. SHAPIRA. Well, more than casually. I did prepare for this, 

and so I would say I am reasonably familiar with it. 

Chairman JOHNSON. So I am an accountant with a business 

background. I find it rather confusing. Do you find what prepara-
38 

tion you had for this or what you have looked at as relatively confusing? Or do you think it is pretty straightforward? 

Mr. SHAPIRA. Both. But, when you look at the pre-funding requirement of the retirement health benefits, that seems to me to 

be very straightforward. And, in fact, it is, what essentially goes on 

is we put a debit against our earnings for the amount. We put it 

in our debit balance, and then we do not pay. 

Chairman JOHNSON. Right. 

Mr. SHAPIRA. And so it is like a joke. 

Chairman JOHNSON. So it is a debt that is owed to the Federal 

Government. It is really not pre-funded. It is pre-funded only to the 

extent that now you have a liability of the post office to the Federal 

Government. It is just one of the liabilities. 

Mr. SHAPIRA. It is just one of the liabilities, right. There are pension liabilities. I mean, there are all kinds of liabilities. But the 

pre-funding of the retirement benefits and the connection of it to 

whether the employees have to use Medicare seems to me that that 

should be an obvious and very easy fix. And in looking at the financial statement, the pre-funding is just very slightly smaller than 

the loss, the total loss to the system. So if the pre-funding were 

eliminated, we would not be losing money—well, we would still be 

losing money, but not very much. 

Chairman JOHNSON. But we still would have this overhang of about $100 billion of unfunded liability. I have looked at the balance sheet as best I can reconstruct it in something close to the 

Generally Accepted Accounting Principles (GAAP) versus other 

large bankruptcies, and it looks like a bankrupt entity to me. Do 

you have a similar type of conclusion? 

Mr. SHAPIRA. If you just took a straight up and down look, it 

seems like we are bankrupt. But the liabilities are actually paid 

out over many years. This is a discounted value of the future liabilities. So, bankruptcy, you can look at a balance sheet and say you 

are bankrupt, or you can look at a cash-flow statement and say you 

are bankrupt. In a cash-flow statement, I do not believe we are 

bankrupt. And so the question is—by the way, this is not just the 

post office question. This is a question for private industry. This is 

a question for the government. It is particularly true in pension liabilities. We have these enormous pension liabilities, and the question is: What are we going to do about it? 

I do not think we are bankrupt in the sense that I think we still 

have time to deal with it. But we are bankrupt in the sense that 

if we do not deal with it, it is clear what the end is going to be. 

So I think it is a matter of definition of what your terms are, but 

it is clearly a serious problem and one that—I do not want to say 

all—I know Giant Eagle faces it. We are members of collective bargaining agreements that have employer joint pension funds where 

the funds are horribly underwater. They are on, I think it is called, 

a ‘‘red list.’’ And the question is: What are you going to do about 

it? We clearly have to face up to the problem. 

Chairman JOHNSON. I think the problem is—and Senator Carper 

led the way with Senator Tom Coburn, trying to come to some political resolution to this, which was not successful. You spoke about 

all the constraints on the post office, constraints because Congress 

is trying to in some way, shape, or form manage and direct what 
39 

should be—I think the goal was to make the post office a more autonomous type of organization, but they do not have that autonomy, both operationally or financially. So the American taxpayer in 

the end is still on the hook for this. 

If you read the Constitution—and I realize the post office is an 

enumerated power, but it is pretty basic—it says in Article I, Section 8, ‘‘to establish post offices and post roads.’’ Do you think it 

is really a governmental imperative or constitutional imperative 

that no matter what the post office is, we have to maintain a post 

office as opposed to we have to perform the constitutional duty of 

delivering mail? And when the delivery of mail becomes, less and 

less vital and becomes more and more obsolete because of technology, do we have to come up with different things for the post 

office to do just to have a post office, even if it is way outside the 

mission of delivering mail? 

Mr. SHAPIRA. That is a wonderful question, which I am not sure 

I know the answer to. But I would say this: There is a big question 

within your question, which is: What is the definition of delivering 

the mail? It does not say you have to deliver the mail two times 

a day, seven times a week. It says you have to deliver the mail. 

Does that mean every day? Does it mean every other day? Does it 

mean two times a day? 

The function is important. The question of how we define the 

function is also very important. So it seems to me that the answer 

to your question, you would really have to define what it is we 

want to maintain, and general terms are not very helpful in doing 

that, which I think is what causes the controversy. 

Chairman JOHNSON. Well, and I completely agree with you. We 

need to define what the post office should do. What is the constitutional enumerated power of it? And we really need to ask ourselves 

a serious question with a bankrupt organization. Do we need to 

maintain this organization at all cost and have it expand into different areas that just might compete with the private sector companies with an implicit taxpayer guarantee, with the taxpayers on 

the hook for growing liabilities? I think these are very serious questions that the Board of Governors is going to have to be asking 

themselves, and Congress, we have to ask ourselves the same questions. But, again, I appreciate your answer. 

Mr. SHAPIRA. Senator, can I just add to that? This is the first 

time I have ever been in a hearing like this. I have seen them on 

television, but I was fascinated by the questions of the Admiral, 

who was sitting here before me, and it was obvious to me you were 

all impressed, and I was equally impressed with the kind of answers he gave. 

One of the things I really liked about the questions and answers 

was the willingness of the Committee to have his back and at least 

what appeared to be the desire on both sides, his side and the 

Committee’s side, to cooperate on helping to solve the problem. 

My view of the post office is that the post office cannot solve 

these problems itself. It needs you, it needs the Congress. There 

are laws established here. You have to follow the laws. And there 

needs to be a cooperative solution to the problem. That is obviously 

difficult because different people have different political views, but 

I like to take the attitude that there are no problems that are 
40 

unsolvable if you have good people with common objectives who are 

trying to solve it, although it would not—I do not think it would 

be me who would be interacting with the Committee, although 

maybe it would be. I think the cooperation of this Committee and 

the post office is crucial to solving these problems. 

Chairman JOHNSON. First of all, I completely agree. And, again, 

coming from a manufacturing background, I have solved a lot of 

problems, and there is a process you go through. And it starts with 

the definition of the problem, defining what it is you are trying to 

accomplish, laying out the reality of the situation, which is why I 

was asking your understanding of the financial situation of the 

post office, which, trust me, in the political environment gets all 

jumbled up and people do not really, I do not think, completely understand. I am having a hard time, and, again, I am a trained accountant. I have been in business a long time. I have looked at a 

lot of balance sheets, and it is still confusing to me. I am getting 

a little bit better handle on it, but, again, it starts with the reality 

of the situation, then based on that defining the problem, defining 

exactly what the achievable goal is. Then you start setting strategies. I think we oftentimes bypass that process, and I think that 

is what you are hearing in the earlier part of our Committee hearing, is we were really trying to get to what was the definition of 

the problem. Are we admitting we are having one? Are we looking 

at this honestly? And that is what we need to do in the post office 

as well. 

So, again, I really appreciate the fact you have this business 

background, highly successful, I think you are going to have the 

right type of mind. You are answering the questions from my 

standpoint exactly correctly. What is the definition? But we have 

to ask the right questions. 

So, again, I appreciate the input, and we absolutely want to cooperate with the Board of Governors and the Postmaster General. 

This is a big problem, and it has not been fixed. I have real questions whether or not we can resolve this through a political process 

because we have not been able to do that in the past. 

But, again, I know Senator Carper is highly dedicated to this. He 

has done a lot of work on it, and I have certainly supported his efforts in the past and want to support his efforts in the future. Senator Carper. 

Senator CARPER. Thanks. Thanks, Mr. Chairman. Thanks for 

your support and for what you just said. 

In terms of what is the role of the Postal Service, what should 

it be, and what should our role be vis-a-vis the Postal Service, I 

look back to Abraham Lincoln, who was once asked, ‘‘What is the 

role of government in our lives?’’ And he said, ‘‘The role of government is to do for the people what they cannot do for themselves.’’ 

Now, there is actually a constitutional stipulation that we have 

a Postal Service, and one of the reasons why we have it is because 

our forefathers said, if we are going to have this experiment, this 

experiment called the United States of America, it might be helpful 

if we could communicate to the far reaches of the country, however 

large we grow to be, it might be important for us to be able to facilitate commerce, and maybe the Postal Service in other countries 
41 

has been helpful, and maybe we can find a helpful role for them 

in this country. 

As you have said in your own business, over time the demand 

of your customers has changed, the needs of your customers have 

changed, and your business has changed to meet those. And I think 

the same is true with the Postal Service. 

Some of the folks that we work with—we are an enabler. I think 

the Congress is an enabler. The Chairman has heard me talk about 

one of my last trips down to Honduras, a place that I soon hope 

to visit with him, and we are trying to figure out why are all these 

people coming up here to the United States trying to get into our 

country from Honduras, Guatemala, El Salvador, and it is because 

they live very difficult lives, which we contribute directly to making 

even more difficult. 

But my last time down in Honduras, I was at a press conference, 

and at the end we were asked a bunch of questions by the press 

there, and one of the things I said to them, I told them, I said, ‘‘Do 

you guys in Honduras have Home Depots? ’’ And they said, ‘‘We 

have them. Tenemos. We have them.’’ And I said, ‘‘We have them 

in America, too.’’ And their advertising, the way they advertise in 

America for years has been—here is Home Depot’s advertising: 

‘‘You can do it. We can help.’’ 

And I said to the folks in Honduras that day, I said, ‘‘You can 

do it. We can help.’’ Just like Colombia, Plan Colombia helped pull 

them back from the brink. I said, ‘‘You can do this.’’ We can help 

with the Alliance for Prosperity that they have adopted with three 

countries. 

I think the same is true with the Postal Service. I think the Postal Service can do it. There is a need for the services to be offered. 

FedEx, UPS—they do not want to deliver packages to every door 

in America every day. They would lose their shirts. The Postal 

Service is already going to those doors, those mailboxes is a nice 

piece of business for the Postal Service, and they can work out a 

deal with FedEx and UPS to help fly and move some of the Postal 

Service’s products around the country. So one hand sort of washes 

the other. 

The issue that a lot of people keep coming back to is the issue 

of the unfunded liability for retiree health care, and the question 

is: Is it a real liability? I think it is. And my last year as Governor, 

we were up in New York meeting with the folks from Moody’s, 

Standard & Poor, and Fitch trying to get a AAA credit rating. Our 

State had never had a AAA credit rating. And we had done 8 years 

of balanced budgets, 7 years we cut taxes, we paid down some of 

our debt, strong employment numbers. And we went and really 

made the case in my last year as Governor for a AAA credit rating. 

And lo and behold, all three of them across the board gave us AAA 

the first time, and we still have it. 

But they said to us at the time, they said, ‘‘You have a liability 

that you are not addressing.’’ And I said, ‘‘What is that?’’ When I 

became State treasurer, when Pete du Pont was elected Governor, 

we had no money in our pension fund for our employees, for our 

retirees. None. We used to sell revenue anticipation of those taxes, 

and revenue anticipation to raise money to be able to make pension 

checks every payment every month. And we fixed that, fully fund-
42 

ed, amortized, like in 10 years took care of it. But they said to us, 

they said, ‘‘You have all this big liability for your retiree health 

care, and you have not set aside any money.’’ They said, ‘‘You need 

to do something about that.’’ They still gave us a AAA credit rating, but they said, ‘‘You have got to address this.’’ And we began 

to, and the State of Delaware continues to try to address that. So 

it is a real liability. 

But in order to get President Bush to sign into law the 2007 

postal legislation, the Postal Service not only had to recognize that 

liability, but they had to pay it off over like 10 years, which is— 

I do not know of any company in America that has been asked to 

do something that aggressively. 

When you look at the liability, the money that the Postal Service 

pays into the Medicare Trust Fund is greater, I believe, than any 

other employer in America. They pay more money into the Medicare Trust Fund than any other employer. They do not get full 

value for what they pay. And most postal retirees 65 and over sign 

up for Medicare Part A. A majority sign up for Part B. I think almost none, maybe none, sign up for Medicare Part D, the prescription drug program. And so the Postal Service is—in effect, by overpaying into Medicare, they are actually subsidizing their competitors so that they can underpay. 

My wife retired from DuPont when she turned 65. She still only 

looks 45, but when she turned 65, folks at Medicare reached out 

to her and said, ‘‘Martha, we love you, but by the way, you are 

going to have to sign up for Medicare Part A, Part B, Part D. We 

will provide wrap-around coverage for you.’’ And not just DuPont 

did that, but all kinds of employers in the country do that when 

their retirees reach 65. The Postal Service cannot do that. 

And one of the best things, the most important things that we 

can do is to fix this issue. We still have the liability. It still must 

be met. But we ought to level the playing field, and that is part 

of our enabling responsibility. 

Let me ask a question after I have given that diatribe there. Let 

me ask a question about—the Postal Service continues to try and 

reduce costs while also maintaining fast and reliable service and 

growing its business, and here is the question: How would you as 

a member of the Board of Governors try to find the right balance 

on this challenge, maintaining fast and reliable service and growing your business? It is a little bit like some of the questions we 

asked the Admiral. 

Mr. SHAPIRA. I think it is the responsibility of all businesses to 

keep their costs as low as possible, but I also have a very strong 

belief that you cannot cut costs and make yourself successful in the 

long run. You have to grow revenue. So the concept that we can 

cut our costs to become profitable, while I believe it is important 

to cut costs, to me it is a doomed strategy. You need to be able to 

look at a growing business to be successful, and if you cannot do 

that, then cutting costs works in the short run. But, you can only 

cut them so far, and what inevitably happens is you cut costs and 

it starts affecting the service, and the sales go down even more. 

So my view is absolutely pay attention that costs be as efficient 

as you can, but it is not a successful business strategy in and of 

itself. You have to have a strategy that grows the top line. 
43 

Senator CARPER. Mr. Chairman, one of the things that Mr. 

Shapira and I talked about yesterday on the phone was one of the 

roundtables that we have held. One of the three roundtables we 

have held dealt with—and we invited a bunch of folks to come in, 

one from the Postal Service, others from different walks of life, customers and so forth of the Postal Service. And we just asked them, 

‘‘Well, what are your ideas for growing business? Where are some 

opportunities out there?’’ I was delighted to hear how many creative ideas there are, and this was just scratching the surface. 

So I think you cannot be just cut, cut, cut. The Postal Service has 

reduced I think by almost half the number of full-time employees 

that they have over the last dozen or so years. They reduced by 

half the number of mail processing centers that they have in this 

country. They want to trim that back further. They reduced by a 

third the number of full-time post offices around the country. They 

have done a lot of rightsizing, and part of—now it is—before, it was 

to help them in ways like the pre-retirement pension liability, 

make it more fair, and—but there are some great opportunities 

here. We are going to have fun fixing this. And I look forward to 

doing that. 

Some of the best lessons I have learned in my life are from my 

failures, not so much from my successes. And I have had plenty of 

failures. I think probably if we are honest, we would all say that 

we have. But when you look back at some of the lessons you may 

have learned, for example, the dissolution and the bankruptcy of 

your company’s former subsidiary—was it Phar-Mor? Was that 

what it was called? Could you just maybe give us an idea or two 

what you learned from that and if there are any lessons from that 

experience that might be applicable here? 

Mr. SHAPIRA. I learned so much from that it would take me an 

hour to—— 

Senator CARPER. Well, we do not have that long. 

Mr. SHAPIRA. Right. I did not figure you did. 

In the first place, I agree with you. I actually have come to the 

conclusion that if one is looking at success, however one might define it, the biggest successes come from having failures and then 

recovering from them. And one of the things I learned from the 

Phar-Mor debacle—I cannot call it anything other than that—was 

that you can recover. You have to keep your eye on the ball. You 

have to fight your way out of whatever problem you are in, and 

then you have to take the lessons that you have learned from that 

and apply them as you go forward in the future. 

So just as an example, Phar-Mor’s failure, which not only bankrupted Phar-Mor but came very close to bankrupting Giant Eagle 

as well, caused Giant Eagle to be a much more focused manager 

on the bottom line, building assets, cutting debt, and being a much 

more secure and safe company. So I do not have any doubt that 

having gone through Phar-Mor, that changed the way we managed 

Giant Eagle. 

The second thing I learned—which, as an accountant, Senator, 

you will know this—is that one of the things you are always looking for is fraud. And every accountant I have ever talked to, when 

you talk about fraud, they say, ‘‘If you get a conspiracy of just a 

few key people, it is very hard to detect.’’ And that is actually what 
44 

happened at Phar-Mor. The whole conspiracy was four people. And 

so one of the things that I have become much more vigilant about 

since then is looking at the financial statements, looking at how 

they pulled off the fraud at Phar-Mor, and asking, Is there anything that is going on in our current company that is anything like 

that? 

And I have actually taken and applied that in a larger sense 

wherever I am, either as a director or as a chief executive. Whenever something goes wrong in a company that is like ours, the first 

thing I do is I call in the top executives, and I say, the first thing 

is, ‘‘Let us thank God it was not us. And in the second place, let 

us find out what happened and why it happened and if we are vulnerable to that.’’ 

The last thing I have learned is—well, I have learned lots of 

things, but I have often wondered to myself how did I survive that 

crisis. I mean, I was the chief executive. It was a very natural 

question to ask: Did he know? Should he have known? et cetera. 

And I know myself that when you read about one of these frauds, 

the first thing everyone assumes is the chief executive must have 

known. Well, I did not know. I was the one who discovered the 

fraud, actually, but what I learned is the most important thing is 

to really be totally honest and open all the time and to make sure 

that when there is bad news, you do not make any effort to hide 

it and that it comes from you. 

I think taking that and applying it to the situation at the post 

office—there is a lot of bad news at the post office, and I think we 

ought to recognize the bad news, and we ought to try and figure 

out—I mean, you are never going to deal with it unless you recognize it. And then we ought to try and come up with plans that say, 

OK, this situation is bad, that situation I bad, how are we going 

to deal with it? 

To me, if you identify what the problems are, no matter what 

people’s going-in assumptions are, you can—if you can get them to 

understand the problems, you can generally get them to agree on 

solutions, assuming there are solutions. But the solutions are often 

very tough and require changes that a lot of people do not want 

to make. So if you want to accomplish those kinds of changes, people have to have a shared understanding of the problem. 

Senator CARPER. Thank you very much. 

Mr. Chairman, we have been blessed this morning by the testimony of two nominees who I think are exceptional, and I will close 

where I started off here. We are lucky that you are willing to do 

this and that Cindy is willing to give you up to serve the people 

of our country. 

The last quick thing I would say, innovation, just to go back, the 

legislation that Dr. Coburn and I worked on had a big focus on innovation, trying to foster innovation, encourage innovation. And 

the other four people that have been nominated as Governors by 

the President to serve, a couple of them are really good on the innovation front as well. And my hope is that the legislation that we 

pass will have some thoughtful provisions that deal with innovation, fostering innovation, and hope that we will have a chance to 

work with you on that—and, frankly, a lot of other things. 
45 

I am way over my time. Thanks very much for your patience, Mr. 

Chairman. 

Chairman JOHNSON. Thank you, Senator Carper. 

Mr. Shapira, I will tell you one thing right off the bat. The solutions for the Postal Service and for the fiscal situation of this country will not be easy. So I just want to thank you for, again, coming 

here, for your testimony, your willingness to serve. I want to thank 

you for being an example of a great American, someone who is 

serving your community, your State, your Nation by doing what 

Americans do: aspiring, building something, building something 

successfully, obviously with some adversity. 

Unfortunately, in today’s society we too often demonize and 

demagogue people that are trying hard, building businesses, creating great jobs. We need to celebrate that success, and, I celebrate 

it with you, and I appreciate your willingness to serve in this capacity. And I thank your wife for being by your side here in this 

service. 

Again, I look forward to moving this nomination through as 

quickly as possible so that we can get the Board of Governors operating under regular order. 

The nominees have filed responses to biographical and financial 

questionnaires, answered prehearing questions submitted by the 

Committee, and had their financial statements reviewed by the Office of Government Ethics (OGE). Without objection, this information, together with my written opening statement, will be made 

part of the hearing record, with the exception of the financial data, 

which are on file and available for public inspection in the Committee offices. 

This hearing record will remain open until noon tomorrow, June 

11, at 12 p.m., for the submission of statements and questions for 

the record. 

This hearing is adjourned. 

Mr. SHAPIRA. Senator, thank you very much. 

Chairman JOHNSON. You are welcome. 

[Whereupon, at 11:30 a.m., the Committee was adjourned.] 

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