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87–385 PDF 2003

IMPACT OF POTENTIAL RESTRICTIONS ON ANTIDRUG MEDIA CAMPAIGN CONTRACTORS

HEARING

BEFORE THE

SUBCOMMITTEE ON CRIMINAL JUSTICE,

DRUG POLICY AND HUMAN RESOURCES

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

JULY 26, 2002

Serial No. 107–218

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpo.gov/congress/house

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

THOMAS M. DAVIS, Virginia

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

BOB BARR, Georgia

DAN MILLER, Florida

DOUG OSE, California

RON LEWIS, Kentucky

JO ANN DAVIS, Virginia

TODD RUSSELL PLATTS, Pennsylvania

DAVE WELDON, Florida

CHRIS CANNON, Utah

ADAM H. PUTNAM, Florida

C.L. ‘‘BUTCH’’ OTTER, Idaho

EDWARD L. SCHROCK, Virginia

JOHN J. DUNCAN, JR., Tennessee

JOHN SULLIVAN, Oklahoma

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, Washington,

DC

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

JANICE D. SCHAKOWSKY, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

———

BERNARD SANDERS, Vermont

(Independent)

KEVIN BINGER, Staff Director

DANIEL R. MOLL, Deputy Staff Director

JAMES C. WILSON, Chief Counsel

ROBERT A. BRIGGS, Chief Clerk

PHIL SCHILIRO, Minority Staff Director

SUBCOMMITTEE ON CRIMINAL JUSTICE, DRUG POLICY AND HUMAN RESOURCES

MARK E. SOUDER, Indiana, Chairman

BENJAMIN A. GILMAN, New York

ILEANA ROS-LEHTINEN, Florida

JOHN L. MICA, Florida,

BOB BARR, Georgia

DAN MILLER, Florida

DOUG OSE, California

JO ANN DAVIS, Virginia

DAVE WELDON, Florida

ELIJAH E. CUMMINGS, Maryland

ROD R. BLAGOJEVICH, Illinois

BERNARD SANDERS, Vermont

DANNY K. DAVIS, Illinois

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

JANICE D. SCHAKOWKY, Illinois

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California

CHRISTOPHER DONESA, Staff Director and Chief Counsel

SHARON PINKERTON, Professional Staff Member and Counsel

CONN CARROLL, Clerk

JULIAN A. HAYWOOD, Minority Counsel

(III)

C O N T E N T S

Page

Hearing held on July 26, 2002 ............................................................................... 1

Statement of:

Jaggard, Michael, Executive Director for Acquisition and Business Management, Office of the Assistant Secretary of the Navy for Research,

Development and Acquisition, Department of the Navy ........................... 13

Marston, Christopher, Deputy Chief of Staff, Office of National Drug

Control Policy ................................................................................................ 7

Martin, Al, president, A.J. Martin and Associates, Ltd. ............................... 18

Letters, statements, etc., submitted for the record by:

Jaggard, Michael, Executive Director for Acquisition and Business Management, Office of the Assistant Secretary of the Navy for Research,

Development and Acquisition, Department of the Navy, prepared statement of ........................................................................................................... 15

Marston, Christopher, Deputy Chief of Staff, Office of National Drug

Control Policy, prepared statement of ......................................................... 8

Martin, Al, president, A.J. Martin and Associates, Ltd., prepared statement of ........................................................................................................... 21

(1)

IMPACT OF POTENTIAL RESTRICTIONS ON

ANTI-DRUG MEDIA CAMPAIGN CONTRACTORS

FRIDAY, JULY 26, 2002

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON CRIMINAL JUSTICE, DRUG POLICY AND

HUMAN RESOURCES, COMMITTEE ON GOVERNMENT REFORM, Washington, DC.

The subcommittee met, pursuant to notice, at 10:39 a.m., in room

2203, Rayburn House Office Building, Hon. Mark E. Souder (chairman of the subcommittee) presiding.

Present: Representatives Souder, Barr, Mica, Davis of Virginia,

and Cummings.

Staff present: Chris Donesa, staff director and chief counsel;

Sharon Pinkerton and Nick Coleman, counsels; Jim Rendon, professional staff member; Conn Carroll, clerk; Tony Haywood, minority

counsel; Earley Green, minority assistant clerk; and Teresa Coufal,

minority staff assistant.

Mr. SOUDER. Earlier this week, the House adopted an amendment offered by our colleague, Congressman Barr, to the TreasuryPostal Appropriations Bill. The amendment would prohibit funding

for the contract recently awarded for the National Youth Anti-Drug

Media Campaign. I scheduled this hearing on short notice to examine the potential ramifications of this amendment, or whatever

similar provision may emerge from the conference on the appropriations bill.

I do not intend for this to be a general hearing on the operation

or focus of the Media Campaign, the bidding process, or the contractor irregularities which gave rise to the legislative provision in

question. These are all matters that I intend for the subcommittee

to consider carefully and deliberately as part of the reauthorization

process, and in due time we will hold hearings that allow for full

testimony and consideration of each of these issues.

Today’s hearing is intended to consider only the potential ramifications of contractor restrictions on the operation of the Media

Campaign.

My primary and overriding concern with respect to this issue is

to ensure the continued functioning of the Media Campaign, which

is one of the most important tools at our disposal and in the President’s strategy to reduce illegal drug use. I am also concerned,

however, about the questions of contractor integrity which gave

rise to this amendment. Particularly as we pay increasing public

attention to corporate responsibility and ethics, we must ensure the

accountability and effectiveness of public contractors.

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The Media Campaign cannot be forced to halt or be further disrupted. It is too important a tool in preventing drug addiction as

well as in meeting the President’s strategy to meet specific targets

in reducing youth drug abuse. Almost 20,000 Americans will die

this year of drug induced causes. If the campaign can help keep

even a tiny fraction of this number from starting drug use, it morally will be a worthwhile effort.

The Office of National Drug Control Policy has taken the position

that the amendment would effectively cause the campaign to go

dark. Other information available to the subcommittee suggests

that the situation is not so dire. In any event, however, it is clear

that significant logistical, administrative and contracting issues

have not and must be fully reviewed prior to taking the step proposed in this amendment or one like it. Today’s hearing is to review those issues and the practical ramifications of potential legislative restrictions. We have assembled excellent witnesses to do so

on short notice.

From the Office of National Drug Control Policy, we will hear

from Mr. Chris Marston, the Deputy Chief of Staff for Director

Walters. From the Department of the Navy, which is currently the

contracting officer for the Media Campaign, we have Mr. Michael

Jaggard. Finally, we have Mr. Al Martin, who is an expert in transitions between advertising agencies.

I would now like to yield to the distinguished ranking member

for any opening statement.

Mr. CUMMINGS. Thank you, Mr. Chairman. As the ranking minority member of the subcommittee, and as a Member of the House

who represented a district which has been ravaged by drugs, and

as a parent, I believe that the National Youth Anti-Drug Media

Campaign is a necessary part of our national drug control strategy,

and I believe that it is vital that we keep the campaign alive.

We have seen anti-drug messaging work in the past to reduce

drug use among children and teens. In many places across the

country it appears to be working now. Even while recent evaluations of the Media Campaign have not shown the campaign causing

reductions in marijuana usage as we’d like to see, the same evaluations do show that anti-drug ads are being seen and remembered

by parents and youth. Moreover, ads targeting parents have been

effective in getting parents to engage their children on the issue of

drugs.

In the city of Baltimore alone, there are 60,000 addicts, most of

whom began to use drugs during their early teens. I firmly believe

that if parents had talked to their children about drugs and drug

usage, there would be a lot fewer than 60,000. I think many of my

colleagues would agree with this conclusion. I think most of my colleagues want to see the campaign survive and reach its potential

to reach as many children and parents as possible.

Today, the campaign is at a critical crossroads. I have pledged

my commitment to working with Mr. Portman of Ohio to develop

reauthorization legislation that will extend and improve the campaign, and I remain committed to work with you, Mr. Chairman,

the other members of the Drug Policy Subcommittee, our counterparts in the Senate and ONDCP Director Walters to work through

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the areas of the campaign that need fixing with the single aim of

making it as effective and efficient as it can be.

Most of us are on the same page. But the amendment by our colleague Mr. Barr, adopted during consideration of the Treasury and

General Government Appropriations Act of Fiscal Year 2003 suggests that we’re not all on the same page. Mr. Barr’s provision

would prohibit ONDCP from expending funds to pay Ogilvy &

Mather under a new contract awarded on July the 3rd.

Mr. Barr has given assurances that his intent is not to cripple

or kill the campaign. But that may well unfortunately be the effect.

ONDCP tells us that if Mr. Barr’s provision becomes law it will effectively shut down the youth media drug campaign before a new

contractor could be selected and get up to speed. There would be

no activity for nearly 75 percent of the program. The Advertising

Council would lose nearly 50 percent of pro bono match and the

Partnership for a Drug-Free America and ONDCP will lose an additional match of $23 million.

Additionally, the campaign would also be required to eliminate

all local market and State-by-State media activity. By March 2003,

simply stated, the campaign would go dark. I know that Mr. Barr

disputes these representations, but if these consequences were to

occur, they would be devastating to the campaign and they would

be irreversible.

We are all familiar with the mistakes that Ogilvy made in the

past and, to be quite frank with you, I am very concerned, and we

have all heard ample testimony in the subcommittee about Ogilvy’s

extensive efforts to reform its billing and accounting procedures

and the clean bill of health Ogilvy has received from the Navy.

The Navy, with all the facts before it, selected only Ogilvy to continue in its role as primary contractor. Some of us may wish that

the contracting process had produced another result. But there is

no indication that it was conducted unfairly or improperly. At this

critical time, we should be focused on figuring out what we can do

to improve the campaign. I believe that the amendment by Mr.

Barr is simply not constructive toward this end and should not be

enacted.

While it may make some members feel good to go after an easy

political target in Ogilvy, the bottom line we should all be concerned about is that it will not improve the campaign. It will cause

more problems, problems we may not be able to surmount.

I appreciate our witnesses being here to discuss the impact of the

Barr amendment from their various perspectives. Let me say this,

that I think that whenever there is an agency, a company that does

criminal activity or is alleged to have done criminal activity, I

think we need to look at that very seriously. My constituents pay

taxes, as all of our constituents do, and they want to make sure

that when government spends money, that money is being spent

properly. And the thought that a campaign is being conducted with

government money and that government money is not being spent

the way we intend it, I think flies in the face of our constituents

and it also does damage to their hopes and their dreams that they

will have an additional tool in helping them to address the drug

issues with regard to their children.

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And so, Mr. Chairman, I certainly understand Mr. Barr’s concern. I have had an opportunity to talk to him extensively. My concern is that it’s the bottom line, and the bottom line being I want

to make sure the campaign continues. Thank you very much.

Mr. SOUDER. Mr. Barr.

Mr. BARR. Thank you, Mr. Chairman. I don’t know quite where

to start. This is a highly unusual hearing. I was not aware that

this is a hearing on the Barr amendment. That would be even more

unusual than this hearing appears to be. I have to express some

disappointment today we have a company that despite on the

record evidence of fraud, it has admitted to irregularities, there’s

a continuing, apparently a continuing criminal probe of this company, and in an effort to simply secure a vehicle whereby the Congress as stewards of taxpayer money, in this case up to in excess

of $700 million, could exert proper oversight at a critical point, that

is in the appropriations process, the reaction of some in ONDCP is

to fan out on Capitol Hill, claiming that the sky is falling, saying

that a program will go dark, which is absolutely ludicrous.

The funding that we are talking about in the appropriations bill

and through the so-called Barr amendment, it is not a Barr amendment. It was adopted by a voice vote. If the distinguished gentleman on the other side had such objections to it he should have

voted against it, demanded a roll call vote and voted against it. The

leadership on his side supported it. The reaction of some in this

committee is to try and undercut what we are trying to do. It is

to rally around the bureaucrats and, while I hope that is not the

case, the comments of the gentleman on the other side indicating

that this is an effort to stop the Barr amendment leads me to conclude that it may very well be the case. I remain open to assurances that it’s not.

No program in this government is so important that we ought to

overlook violations of the law, and I’m amazed that a Member of

Congress would take that attitude. I have assured the gentleman

on the other side, and the reason that he approached me was I

thought that he would accept my assurances, his comments indicate apparently not and I’m sorry that there’s something that I

didn’t say to him that makes it more clear. It is not my intention

to stop this program. The amendment that was adopted by the full

House will not stop this program. And I resent the fact that

ONDCP is running around up here on the Hill and probably will

sit here today and claim that the sky is falling, that a program

which we all support, including myself, Mr. Cummings, will cease

and we will lose the drug war if we simply stand up and say that

a company that has defrauded the government of this country the

people of this country and to which ONDCP is turning a blind eye

should continue to receive hundreds of millions of dollars in taxpayer moneys.

The only purpose for the amendment is to make a statement to

the taxpayers, to go on record as a Congress and to give us a vehicle to take a close look at this whole issue. And why in heaven’s

name you all are fighting me on this, to simply address this issue,

why ONDCP is fighting us on this issue is beyond me. What I am

trying to do is to bring honesty and integrity to this process, the

anti-drug media campaign, so that it works better, for heaven’s

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sake. Why do you all object to that? I don’t know why you all object

to that.

Now, I’ve heard rumors that there are sweetheart deals out

there. I certainly hope that’s not true. But we don’t have the witnesses here today, Mr. Chairman, that can answer these questions.

These questions need to be answered at the same level that we

posed the questions earlier, in earlier hearings at the top levels of

ONDCP.

Sending up a Deputy Chief of Staff, and I have great regard for

Mr. Marston, he’s not in a policy or legal position to answer the

questions that we have. Sending up an Executive Director for an

office over at the Department of Navy, and I have great regard for

Mr. Jaggard, he’s not going to be able to answer the questions that

we need.

So I go back, I’m not quite sure what the purpose of this hearing

is. Very serious questions have been raised on the record by this

subcommittee and by the full committee. And I just hope that

there’s not some effort out there to sweep all this under the rug,

because I consider this very, very serious. Something is going on

here that doesn’t smell right, and I think it’s going to take the very

program, Mr. Cummings, that you and I both support.

I am not trying to kill the program. I’m trying to make it better,

for heaven’s sake. I don’t know why you all don’t believe me. There

is demonstrated fraud that has been perpetrated by this company.

All we are saying is that company at this point in time should not

continue to benefit from taxpayer dollars, and there are other companies out there that can step into the breach if we need that.

We’re looking at 2003 fiscal year, not 2002.

I yield back.

Mr. SOUDER. Mr. Mica, do you have an opening?

Mr. MICA. Thank you, Mr. Chairman, distinguished ranking

member and my colleagues. I had the opportunity to chair this subcommittee when we initiated this program. And if we review for

just a second the history of all this, I proposed early on that we

increase the television media, public interest contribution originally

and introduced legislation to that effect. But the Clinton administration wanted to use taxpayer dollars. The compromise we reached

was a program to combine donated time and services with taxpayer

contribution and $1 billion plus program. I think you all will recall

that the whole program got off to a rocky start. We had the former

Director of ONDCP, Barry McCaffery, step forward and tell us in

the beginning they sat around and tried to figure out what to do

and finally decided to let a large number of contracts out.

Unfortunately, the contracting out got out of hand on the contractors, it got out of hand. They chose Ogilvy & Mather. And we

monitored the program to some extent, like you recall. I was dismayed after some time when we had a whistleblower come to us

with information that astounded me that there were overbilling,

fraudulent practices going on with Oglivy & Mather in this whole

program, and I believe worked with the IG and others who did the

initial investigation and since then we have found fraud, we have

pending criminal investigation. We’ve had a settlement, I believe

admitting wrongdoing.

6

I’m also concerned, like my colleague Mr. Barr, about what’s

gone on. I was floored when the contract was reawarded to Ogilvy

& Mather given the circumstances and problems that we had seen

with the contract. We have not only the unique role of being the

authorizers of this program but also government reform oversight

responsibilities to look at how this is operating. So it’s fitting that

we do see how this has come about.

I share Mr. Barr’s concern that we need to know everything is

above the board, that—and I think all of us don’t want the program

to go dark. That would be—that’s not our intention. But we must

find out what’s taking place with this program. And this contract,

as I understand it, could end up being almost three quarters of a

billion with all the add-ons. So we need to know, we need to get

some answers, we need to keep the campaign going and I support

that. But we must protect taxpayers’ interest and move the program forward.

I look forward to working with you in that regard. I yield back.

Mr. SOUDER. We’re going to recess for this vote. But let me make

it clear we’re not going to accept point blank the word of ONDCP

that the program would go dark nor would we accept the word of

Mr. Barr that it’s not going to go dark. The point of this hearing

and future hearings is to figure out what actually would happen.

I believe the witnesses before us today will provide enlightenment.

We’ll work through it. Because of Mr. Barr’s aggressive efforts we

are pursuing this. If he and Mr. Mica and others of us hadn’t been

persistent, we could have easily just gone on and said, well, we’re

going to accept this. But if we don’t accept it we have to figure out

how we’re going to do the transition. We need to figure out whether

ONDCP is preparing for any transition from the advertising community, and that is a first step in that process. Because we can’t

just make assertions, we have to look for the facts.

With that, we stand in recess.

[Recess.]

Mr. SOUDER. Before proceeding I would like to take care of a couple of procedural matters first. I ask unanimous consent that all

Members have 5 legislative days to submit written statements and

questions and that any answers to written questions provided by

the witnesses also be included in the record. Without objection, so

ordered.

Second, I ask unanimous consent that all exhibits, documents

and other materials referred to by Members and the witnesses may

be included in the hearing record, and all Members be permitted

to revise and extend their remarks. Without objection, it is so ordered.

I would like to ask the panel to come forward. Mr. Christopher

Marston, Mr. Michael Jaggard, and Mr. Al Martin. If you will

stand, raise your right hands, I will administer the oath.

[Witnesses sworn.]

Mr. SOUDER. Let the record show that the witnesses each have

answered in the affirmative.

The witnesses will now be recognized for opening statements. I

ask you to summarize your testimony in 5 minutes. Any fuller

statement you may wish to make will be included in the record.

Mr. Marston will begin as the representative of the ONDCP, who

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is a former staff member of the subcommittee, now back in his role

as deputy chief of staff. So you know how the routine goes. We welcome you in a different capacity, and we look forward to hearing

your testimony.

STATEMENT OF CHRISTOPHER MARSTON, DEPUTY CHIEF OF

STAFF, OFFICE OF NATIONAL DRUG CONTROL POLICY

Mr. MARSTON. Thank you, Mr. Chairman.

Mr. Chairman, Mr. Cummings, members of the subcommittee, it

is a pleasure to be here. I have to admit after the opening statements that I like my old seat behind the dais better. But I appreciate your commitment to this issue and the support you have

given, and everyone has acknowledged today the media campaign

and its importance to the President’s national drug control strategy.

I appreciate in particular, Mr. Barr, your commitment to work in

conference to make sure that the campaign doesn’t stop. We all are

committed to that goal. And I hope that you won’t take any of my

representations today as a Chicken Little, sky is falling commentary. We are committed to working very hard to make sure

that the campaign continues.

Our concern is over the contracting process and the difficulty in

securing a new contractor and the potential liability involved in not

having—in continuing this contact.

I, of course, am not a contracting expert, and I am pleased that

Mr. Jaggard is here representing the Navy, which does the contracting work for the media campaign at this point. So we rely on

the Navy because ONDCP, as you know, is a small office principally involved in policy work, and we have a fairly small team for

our media campaign and don’t have the infrastructure to support

a contract this large in-house. So that is why we rely on the Navy.

I have prepared a substantial statement for the record, Mr.

Chairman. I appreciate you allowing us to introduce it.

So just to summarize our concern, it is a difficulty in transition,

and I understand people have different opinions about how long a

transition would take and the steps. It is the contracting activity

that we are principally concerned about.

The recompetition that resulted in the current contract award

took 9 months. That is not necessarily how long another competition would take or the only means to secure advertising services.

But our indications are that 6 to 9 months is not atypical to have

a contractor in place. So that is our principal concern.

I will be delighted to answer further questions about the potential impact of an interruption of service after the other witnesses

have given opening statements. Thank you.

Mr. SOUDER. Thank you.

[The prepared statement of Mr. Marston follows:]

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Mr. SOUDER. Mr. Jaggard.

STATEMENT OF MICHAEL JAGGARD, EXECUTIVE DIRECTOR

FOR ACQUISITION AND BUSINESS MANAGEMENT, OFFICE OF

THE ASSISTANT SECRETARY OF THE NAVY FOR RESEARCH,

DEVELOPMENT AND ACQUISITION, DEPARTMENT OF THE

NAVY

Mr. JAGGARD. Good morning, Mr. Chairman and Mr. Cummings,

members of the subcommittee. I am Mike Jaggard, the Navy’s Executive Director For Acquisition and Business Management. And I

am pleased to be here this morning to discuss with you this contract for the antidrug media services for the Office of National

Drug Control Policy, including the contracting implications of certain potential restrictions on funding for the program.

The Navy first got involved in this project in November 2000

when we assumed responsibility for the prior contract. Based on a

report that was issued by the General Accounting Office, the Navy

contracting officer issued a referral to our Procurement Integrity

Office in July 2001 because of the alleged improper charges and

possible violations of civil fraud by the incumbent contractor,

Ogilvy.

At the request of the customer, in August 2001, the Navy decided

that we would not exercise the next option in that particular contract and would conduct a new procurement. We issued a new solicitation in December 2001. We went through an extensive source selection process and selected Ogilvy and Mather for award of the

new contract on July 3rd of this year.

On January 29, 2002, the Department of Justice entered into a

settlement agreement with Ogilvy regarding the alleged civil fraud

allegations. Under the terms of that settlement agreement, there

was no admittance by Ogilvy of any misconduct. On April 5th of

this year, the Navy’s debarring official and Ogilvy entered into an

administrative agreement, the purpose of which was to demonstrate that the contractor’s past performance problems have been

identified, constructive measures implemented, and to provide assurances that the contractor’s future conduct will comply with the

higher standards of business ethics and integrity that we expect

from those that we contract with for the Federal Government.

The decision to award the contract to Ogilvy was made in accordance with all current law and regulation. I have reviewed the contracting officer’s determination of responsibility with respect to

Ogilvy, and I concur with it.

Regarding the impact of the proposed legislation on the program,

of course that will ultimately depend on the final form of such legislation. However, based on what has been approved by the House

this week, the first step would probably be to dispose of the existing contract.

The most likely outcome if the legislation is enacted is that the

Navy would have to terminate the existing contract for convenience

of the government. A termination for convenience carries with it

the potential for substantial liability to the government for termination costs. The government would also have to award a new conVerDate 11-MAY-2000 09:53 Jun 19, 2003 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 D:\DOCS\87385.TXT HGOVREF1 PsN: HGOVREF1
14

tract which could require the government to start the whole process over again.

Thank you, Mr. Chairman, for this opportunity to participate in

today’s hearings, and I look forward to your questions.

Mr. SOUDER. Thank you.

[The prepared statement of Mr. Jaggard follows:]

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Mr. SOUDER. Mr. Martin.

STATEMENT OF AL MARTIN, PRESIDENT, A.J. MARTIN AND

ASSOCIATES, LTD.

Mr. MARTIN. Good morning, Mr. Chairman.

Mr. Chairman, the ranking member, members of the committee,

it is a pleasure to be here today to discuss the implications of certain potential restrictions on funding for the national youth antidrug media campaign, which I will call the media campaign from

here on in.

Thank you for the invitation, Mr. Chairman. I have been asked

to give my opinion regarding the likelihood that such funding restrictions would cause serious disruption to the campaign’s impact

against its target audience, that is youth 9 to 18 years old, their

parents, and other adults who may influence them.

By way of introduction, I think I should point out that I am a

marketing and advertising consultant with over 30 years of experience, including 16 years managing my own consulting business.

That business focuses primarily on advertising and advertising

agency management issues. I have worked both on the client side

of the advertising business, and on the agency side, as an employee

on the client side, and the agency side as well.

I have been a senior executive in both the commercial and government sectors. My government service was as Director of Accession Policy in the Office of the Secretary of Defense, in effect working as the senior-most DOD marketing and advertising executive

supporting the voluntary acquisition of all military manpower. I

served in that position for the better part of a decade.

As a consultant working with some of industry’s leading advertising agencies, I have been involved with many transitions as clients

have changed advertising agencies. A few examples of those that

I have been involved with are such large-scale and complex accounts, as Dell Computer, AT&T, BellSouth, Federal Express, Texaco, M&M Mars, Bayer Aspirin, Pizza Hut, the recruiting accounts

for the U.S. Air Force and the Navy, and I am currently heavily

involved with the Daimler Chrysler account, the largest advertising

account in the world.

The issue, if I can restate it, is assuming if the incumbent advertising agency is barred from continuing to service the media campaign account, beginning on the 1st of October 2002, will the campaign’s impact in the marketplace be seriously disrupted? Simply

put, in the language that has been used here, will the campaign

go dark or be seriously dimmed?

I believe with the vendor funding restriction, as I understand it,

and I am not a contract expert, there is very little chance of any

serious disruption to the media campaign. The hardest working

part of the campaign is the core working media. This includes television, radio, print, out-of home, online advertising. This is what

delivers the message impactfully to the target audience, and it is

what the managerial focus must be on if the campaign’s message

is to be sustained against the eyes and ears of the people we are

trying to reach and influence with the message.

The creative and media planning work, I am told, has been done

that will carry the program well in to fiscal year 2003. That is, the

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planning work and the creative is available, and there is a creative

available to carry the program well into fiscal year 2003.

Two things must happen if any potential disruption to the media

campaign is to be minimized or eliminated. First, a new advertising agency must be selected and awarded the contract. Second,

there must be an effective transition to that new agency. The

former requires aggressive management by ONDCP and its contract support. The latter requires an aggressive transition plan

managed also by ONDCP with the full cooperation of the outgoing

incumbent agency working with the newly selected agency.

Let’s take the easy one first, transition. In the real world—let’s

talk about how it happens in the real world—the transition to the

new agency is the relatively easier of the tasks that we are facing.

Agency turnover is frequent in the private sector. Agencies turn

over all of the time. All top-tier advertising agencies, and all of the

ones that we are dealing with here are top-tier advertising agencies, know very well what is involved in such a transition.

Most highly complex account transitions in the private sector are

accomplished in under 30 days. With the right focus on working

media, this media campaign situation should be little different

than that in the private sector.

The harder task is getting a new agency selected at light speed.

Based on my government experience and my knowledge of the advertising agency selection process, I believe it is possible to expedite and shorten the process so as to have a new agency before the

start of fiscal year 2003. Now, that would take some serious, focused, aggressive hard work in bending some of the constrictions

that you have on contracting, and I have a couple of suggestions

as to how you might do that.

In a worst case, if I am overestimating the ability of ONDCP and

its contract support to get this critical task accomplished, I would

find a way to extend the incumbent agency’s contract for a short

period and somehow fund it with fiscal year 2002 money. And you

have to understand that the whole budget for this media campaign

is not the revenue that the advertising agency gets. In order to accomplish that, or let us say for 3 months if you wanted to extend

it, the agency’s revenue is—I don’t know exactly what is it, the contracting people can tell you that, but I would guess that it is probably 8 to 10 percent of the total amount of media spending that is

going on in the account. So that means for maybe a million, a million two, a million and a half per month, for 3 months you can keep

the agency on board if you can find 2002 money that you can obligate now and keep them working.

My recommendations, Mr. Chairman, this program is clearly an

important national public policy program. We all certainly agree to

that. It should not be disrupted because of this administrative circumstance.

To ensure that it does not have a net detrimental impact,

ONDCP must manage the situation aggressively with the oversight

and support of the Congress. Specifically, I recommend that a new

advertising agency be selected on an expedited basis. For both

speed and effectiveness, I would consider the other four finalists in

the recent solicitation for this account as a selected set of

prequalified vendors and select one of them. They are all highly caVerDate 11-MAY-2000 09:53 Jun 19, 2003 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 D:\DOCS\87385.TXT HGOVREF1 PsN: HGOVREF1
20

pable advertising agencies. I believe there are four of them. If that

were not possible, I would create a shortened, truncated solicitation

process, possibly starting with agencies already on the GSA schedule to get a qualified agency on board in the next 45 days.

Now, there are people that would say that this guy Martin is

nuts, you can’t do that in the government in that short period of

time. Well, this guy Martin has worked in the Federal Government

and in the private sector, and I understand both sides of it, and

if it were my job to get it done, I would get it done.

While the agency selection process is ongoing, I would have

ONDCP and the incumbent agency prepare a comprehensive and

efficient transition plan to be kicked off the day the new agency is

identified. Last, I would keep the management focus on the hardest-working elements of the campaign; that is, the working media.

Now, I am not questioning the fact that if you did not have an

advertising agency, that this would be disruptive. The issue here

is, how do you get the resources you need to keep the campaign

running? I believe with effective and aggressive and focused management of the media campaign, that there is little risk of serious

disruption to the campaign. The creative is not a problem, you have

it. In the worst case you might have to use some of it that you have

used before.

The creative is not a problem. The media is planned well into fiscal year 2003. The support from the Partnership for a Drug-Free

America is rock solid. The ONDCP staff is in place. The incumbent

agency is a highly competent firm who surely will aid in the transition. You even have a preselected set of potential agencies. The

program is key to the Nation. All that is required is focused hard

work by everybody concerned and the will to get it done, to get the

support resources you need to keep the program running.

Mr. Chairman and members of the committee, thank you for this

opportunity to discuss this really important program.

[The prepared statement of Mr. Martin follows:]

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Mr. SOUDER. Possibly the most significant thing in your testimony, in a joking way, is that you said incumbent agency is—there

is a typo—it says surly rather than surely.

Mr. MARTIN. That is a typo. I didn’t say that.

Mr. SOUDER. You said it correctly.

A couple of things. First, for Mr. Marston, that one thing we understand is that Ogilvy may have already purchased time for this

fall and into 2003. Is that true?

Mr. MARSTON. Mr. Chairman, they have, in what is called the

up-front buying season, made reservations for the whole buying

season, which is a July to June season. Those reservations have

not all been funded. At this point only the first quarter of that period, so July through September has been committed and funded.

Those reservations would have to be funded for the subsequent

quarter, would need to be funded on August 30 to get September

through December, and then succeeding dates through the year. So

we have only actually purchased time for the first quarter of that

buying season.

Mr. SOUDER. You are talking about the first quarter of the buying season out of the government funding?

Mr. MARSTON. That is correct.

Mr. SOUDER. Do you have 2002 funds such that can purchase

into 2003?

Mr. MARSTON. We don’t believe that we could purchase into

2003—the fiscal year 2003, yes, but not into calendar 2003.

Mr. SOUDER. We have a different understanding from Ogilvy.

Our understanding is that when Ogilvy says that they have purchased into January, you are saying that they have committed for

the time, but they have not paid for the time. Is that your understanding?

Mr. MARSTON. That is correct, they have reserved the time. Commitment is when you actually pay for it. So they have made those

reservations.

Mr. SOUDER. Having been in the private sector advertising, I

know there is that difference in the public sector. We can’t do that.

It is cash on the barrelhead.

Mr. Martin, you have—you had an interesting statement. In your

statement you said that your—I forget the exact. You said creative

and media plan work, I am told that—have you heard anything

about this particular question, whether it is reserved?

Mr. MARTIN. The obligation of the funds versus the media availability?

Mr. SOUDER. Yes.

Mr. MARTIN. To me the important word in my testimony is

‘‘plan.’’ What you do is have as the advertising agency plan for you

how to expend your resources against target, and so they create

that plan. When they create that plan, they are looking to reserve

that time for the things that they have in the particular vehicles

that they want to fund in the plan.

It is my experience in the private sector is that one is really

planning forward and in a sense committing current money to that,

currently budgeted money to that plan.

You would have to ask the contracting folks exactly what they

are doing with their fiscal year 2002 money. My suspicion would

28

be that you obligate 2002 money in, let’s say the—the current quarter, and that money would be used then to actually buy the time

and space in—in the first quarter.

I think that is what was meant by the fact that we can sort of

cover the first quarter. I think if you can cover the first quarter,

that is what I meant by——

Mr. SOUDER. First quarter being October to December?

Mr. MARTIN. Yes. Of 2003. That would allow you, in my view,

plenty of time.

Mr. SOUDER. Mr. Jaggard, is that your understanding, that the

fiscal year 2002 can cover the buy for the first quarter?

Mr. JAGGARD. The $37 million that we obligated at contract

award was intended to cover the commitments and obligations of

the contractor during the remainder of this fiscal year. If those include buying of the time for the next quarter, then, yes, that would

be correct, but I don’t know that for a fact myself. I would ask if

Mr. Marston did.

Mr. SOUDER. Do you know?

Mr. MARSTON. There is a question as to what other purposes we

may have to use the funds for. If we were to terminate the contract

for convenience, there would be termination costs and we would be

unable to use 2003 funds to pay those costs. So we would have to

use some the money—fiscal year 2002 money that is currently allocated. For termination costs, I am not sure how much would be

available and how far into the October-December we could buy.

Our estimate is that we would be able to fund through late October

or possibly early November.

Mr. SOUDER. So if I understood—let me make sure I understand

what you are saying. Is that, yes, the funds would normally be

used to pay out of 2002 for October and December, but—because

if there is a termination charge, you would have to use some of

those funds you would have paid for for October to December, unless, of course, Congress gave you additional funds to cover the termination?

Mr. MARSTON. That is correct.

Mr. SOUDER. So theoretically do you know a case like that, Mr.

Martin, where there would have been—do you know of any case,

by the way, when there is a termination—did you have any case

when you were at the Department of Defense where there was termination and there were lawsuits or termination costs?

Mr. MARTIN. To my knowledge, on the major accounts there has

never been such a situation.

Mr. SOUDER. Mr. Jaggard, you said we could be exposed. Is that

something that is automatic in the contracting process, or is that

something that would be the discretion of whether Ogilvy chose to

pursue? And if an ad agency chose to pursue, of course, there may

be different attitudes for future contracting. Would that not be a

detriment for somebody seeking that, unless it is mandatory?

Mr. JAGGARD. Mr. Chairman, the terms and conditions of contract specify the termination procedure. There is a clause in the

contract that specifically lays out those costs that the contractor is

entitled to claim in the event that the government terminates the

contract.

Mr. SOUDER. Do you know what that is in this case?

29

Mr. JAGGARD. No, sir. The process would be for us to first notify

the contractor that we had terminated. We would also have to notify any subcontractors. Then he would have to prepare a proposal

and submit it to us, and it would include the proposals from the

subcontractors as well. To try to estimate that in advance would

be a difficult thing to do.

Mr. SOUDER. Well, I want to ask one other supplement with that.

Did—in the Navy’s consideration of the bidding, did they at all factor in that this 5-year contract, that—that Congress might choose

to abrogate that contract, which could expose the terminations

costs? Do those things get considered in the bidding process?

Mr. JAGGARD. It is not part of the actual source selection process,

Mr. Chairman, because we normally don’t go into the source selection assuming the possibility that this kind of action might occur.

We do structure the contract, however, with base periods and options so that we have some protection on the liability of the government. The contract also contains a clause called the limitation of

funds clause, which limits the government’s liability to the total

amount currently obligated on the contract.

Mr. SOUDER. Mr. Cummings.

Mr. CUMMINGS. Mr. Martin, is this an unusual situation where

you have a contract, but a situation where the funding might not

be there because of congressional action?

Mr. MARTIN. I think it is unusual, yes, sir.

Mr. CUMMINGS. And the—in listening to what you had to say

about a substantial portion of the funds in the contract going to—

to go to the purchase of the media; is that correct?

Mr. MARTIN. Yes, sir. If I can explain that.

Mr. CUMMINGS. Let me just put a little tail on that so that you

can answer me completely.

So I would imagine if one were to look at damages, one would

have to conclude that damages would certainly not include money

that would be normally spent for the purchase of the advertising?

Mr. MARTIN. That would be a surprise for me.

Mr. CUMMINGS. So I am trying to see—to see how limited the liability would be, do you follow me, if any?

Mr. MARTIN. Yes, sir. I don’t know the terms of the termination

clause in the contract. I can tell you what is the typical situation

in the private sector. On a big contract such as this, agencies

have—there is a termination clause, and the termination clause is

usually 90 days to—if it were liberally agreed to, maybe 6 months

where the agency continues to get paid its revenue for performing

that service.

The reason that is done is because human beings are involved

here. It is a personal service business. We have staffed up, and you

terminate the contract, you have people that are affected by that.

Agencies want to cover some risk—they want to cover the risk of

the harm to those folks.

Mr. CUMMINGS. I take it that 3-month period is like a winddown?

Mr. MARTIN. Yes, sir. That is the way it is done in the private

sector. I really don’t know about the termination in this contract,

what the clause is.

Mr. CUMMINGS. Could you comment on that, Mr. Jaggard?

30

Mr. JAGGARD. Yes, sir, I would. The normal process of terminating a government contract, we first notify the contractor, and you

ask him to take all action necessary to preclude incurring any additional costs. That is to the best of his ability. And then we give him

a 30-day period to prepare and submit to us a termination proposal.

We then go through the process of evaluating and negotiating the

proposal and come up with a settlement. And I would emphasize

again that our liability, the government’s liability, is limited to the

money that is actually obligated on the contract.

Mr. CUMMINGS. Now, when we have a situation where—when

you all were looking at the bids, is it illegal for you all to take into

consideration—I am trying to figure out how we got here. Is it illegal for you all to look at allegations or possible settlements or

whatever criminal—regarding criminal activity when you are looking at the bids themselves?

Mr. JAGGARD. It is not only not illegal, but it is actually required,

and we did do so in this situation.

Mr. CUMMINGS. Now, if you—if I have got five, six companies,

and assuming all of them are on somewhat of an equal plane, does

the fact that there are pending investigations or things that look

like it is imminent that you are going to have some kind of settlement involving criminal activity, does that take away points from

the—that contract?

Mr. JAGGARD. In the case of the ongoing criminal investigation,

no, sir. We are not allowed to consider that in the source selection

process. We did consider the settlement agreement regarding the

civil fraud allegations as part of our evaluation of the proposal, but

we have no information whatsoever regarding the criminal investigation.

Mr. CUMMINGS. Now, let’s go back to the fraud. You can imagine

what it sounds like to my constituents when someone says that

somebody has entered into an agreement, and these are companies—Ogilvy is a company with high-powered lawyers, and they

have got all kinds of resources. And my constituents will conclude

that if they—if there was not a problem here, they probably would

not be entering into a settlement. And so I am trying to figure out,

how does that look? I mean, you follow what I am saying? It is

just—for me to explain that would be incredible.

And I can understand where Mr. Barr is coming from, because

when our constituents see this kind of thing, they say, well, what

about all of those honest guys? We are talking about fraud. You

can call it criminal. Call it whatever you want to call it. Fraud is

fraud.

I mean, how does that—I mean, how do you jive that, because

that is basically, I think, pretty much why we are here.

Mr. JAGGARD. Yes, sir. The Justice Department settlement agreement specifically specifies that Ogilvy did not admit to any wrongdoing. Under the terms of the settlement agreement, they agreed

to settle for a certain sum and to take other actions to correct the

deficiencies, but did not agree to admit to any wrongdoing. The primary reason that they entered into the settlement agreement was

to avoid the costs and other issues associated with extended litigation of the issues.

31

Mr. CUMMINGS. But also—but could one of those reasons be to

make sure that they were able to get this contract?

Mr. JAGGARD. At the time that they were entering into the settlement agreement, I do not know, since I was not party to the discussions. I don’t know if that came into consideration, but clearly they

were working very hard with both the Navy and the Office of Drug

Control Policy to try and fix the problems that had been identified

from 1999 and 2000.

Mr. CUMMINGS. Last question. The fact that they had the contract already, did that have a bearing?

Mr. JAGGARD. Only with respect to the fact that it was considered in part of the source selection process; i.e., we considered their

performance under the prior contract in the awarding decision to

award the new contract to them.

Mr. CUMMINGS. Thank you, Mr. Chairman.

Mr. SOUDER. When the new restrictions require you to file accurate time cards because you weren’t, that is an admission of wrongdoing. I know the legal difference.

Mr. Mica.

Mr. MICA. Thank you, Mr. Chairman.

There were five bidders?

Mr. JAGGARD. Yes, sir.

Mr. MICA. Has the subcommittee gotten copies of their offers?

Mr. JAGGARD. Yes, sir. We have responded to the chairman’s request for all of the documentation concerning the source selection

process.

Mr. MICA. And did any of them indicate that they could provide

the same services within the same cost range, on, say, an immediate basis?

Mr. JAGGARD. All of the offerers proposed to provide the services

at a cost that was within the price range, but it was higher.

Mr. MICA. What about the time? If something happens here, and

Ogilvy and Mather are excluded, my concern is how long would it

take someone to assume the contract and move forward.

Mr. JAGGARD. Sir, that presents a couple of issues to me. One is

the fact that——

Mr. MICA. You would have to rebid?

Mr. JAGGARD. Well, in February of this year, we notified the Office of National Drug Control Policy that the Navy was not going

to be providing their contracting support beyond this fiscal year.

We did that because we need to devote our resources in the Navy

for fighting the war on terrorism and supporting our sailors and

marines.

So there is a period of transition that needs to occur to a new

contracting organization. It is my understanding that the——

Mr. MICA. Well, the problem is—well, I guess you could pass the

baton, but you sort of started this. And I guess my followup question would be, you don’t think that you could finish the reawarding?

Mr. JAGGARD. I don’t believe it could be done in the timeframe

that Mr. Martin described. One, it assumes that cooperation by

Ogilvy and Mather to turn over the responsibilities; and, two, we

would face the possibility if we tried to contract with somebody else

32

that Ogilvy and Mather might consider protesting the issue before

the General Accounting Office, which would bring us to all stop.

Mr. MICA. Mr. Martin, what is your opinion about the ability to

move forward on the basis of——

Mr. MARTIN. Well, I said in my testimony that I would look for

some way, in the worst case—and some of this information I didn’t

have about the change in contract organizations, for example,

which is another complexity that I guess if it were my responsibility, what I would do is I would say, look, I need an advertising

agency. And I would—since I can’t use 2003 money, for that small

portion of this funding that is the agency’s revenue—you have to

keep that in mind that they only get a small amount of money

here—I would look for some money in the program or someplace

or from Congress. I would reprogram some money if I had to to extend them for a quarter, and I would rebid the damn thing, doing

that, take advantage of that time, and get a new person on board.

If you believed that there was no other way to do it, I would do

it in an extremely truncated and expedited fashion. And I know

that causes the people that work in the government, who are good

folks and who have got a lot of constraints, to operate under a lot

of concern.

But if it were my responsibility, I would get this done. I would

get a new contractor on board. I would use 2002 money if the language in the amendment didn’t let me use 2003 money. I would use

that time to run another solicitation, and you could do that very

expeditiously because you have already—you could cut down how

difficult this RFP was, which it was a very difficult RFF for the

agencies to respond to. There are ways to do it in which you could

really speed it up.

Certainly I am absolutely confident that if you had another quarter in which Ogilvy was sitting there and funded, that you would

have absolutely no problem in that period of time; if you focused

your management skills on it, and got the right people to tell you

how to do it, that you could have it surely done in the first quarter

of fiscal year 2003.

Mr. MICA. Mr. Marston, given the nature of the situation we find

ourselves in, does ONDCP have a plan B? And I understand there

is also an urgency clause in the contract. What is—what is your

back-up plan? Do you have the discretion to move forward to keep

the—to keep the ad program on, and, if not, what would it take?

Do you have to come back to Congress? Do you have to reprogram?

What is your—someone has to be thinking about plan B. Tell us

what that is.

Mr. MARSTON. Absolutely, sir. We are committed to doing everything we can to keep the program running. The concern that we

have is with being able to have a new contractor in place before

Ogilvy ceases performance.

The problem with Mr. Martin’s scenario, though I appreciate his

suggestions, is that it requires the cooperation of Ogilvy. At the

point at which they know that they are going to be terminated and

entitled to termination fees, their incentive to work hard on a transition with us is not going to be very strong. I can’t speak to what

they would do, but there is the possibility that they would have an

action for breach against the government and a number of other

33

complications. So I just—I can’t be sure that they are likely to continue performance at all during the transition period or resolicitation.

Mr. MICA. So what about plans? Do you have discretion to use

other funds; can you use another part of these funds, assign the

contract, a new contract, to somebody else while that dispute is

being settled?

Mr. MARSTON. We can certainly attempt to do so. We are transferring contracting office responsibilities to the Department of Interior, some Franchise Fund, Govworks. We will work with them on

any kind of contracting option that we can develop.

Mr. MICA. Has that already been transferred?

Mr. MARSTON. We are finalizing the interagency agreement to do

that right now.

Mr. MICA. Do you have to come back for reprogramming? Do you

have enough discretion, or do you need discretion in one of these

appropriations measures to use funds to keep things going if this

program or arrangement—program arrangement with Ogilvy and

Mathers turns south?

Mr. MARSTON. At this point the only funds that we have available are those that have been appropriated for the media campaign. We will use whatever funds aren’t required for Ogilvy’s performance or termination costs to fund another contract if there is

money available.

Mr. MICA. Thank you, Mr. Chairman.

Mr. SOUDER. I apologize. They don’t have an agreement to roll

votes on the floor, so we are having to go over here in between, and

we will be back shortly and reconvene with Mr. Barr’s questions.

We stand in recess.

[Recess.]

Mr. SOUDER. We now come to order. I now recognize Mr. Barr.

Mr. BARR. Thank you.

Mr. Marston, who is the new contract administrator?

Mr. MARSTON. We are in the process of arranging an interagency

agreement with the Department of the Interior’s Franchise Fund,

Gov.Works.

Mr. BARR. When did that process start?

Mr. MARSTON. We started looking for a new contracting officer

when Navy notified us, I believe in April.

Mr. BARR. You have been in negotiations actively with the Department of the Interior since February?

Mr. MARSTON. We contacted them then, and they indicated their

willingness to proceed. We don’t need to have them in place until

the end of the fiscal year when Navy stops performing.

Mr. BARR. But, wouldn’t you want to have everything ready so

you co have a seamless transition?

Mr. MARSTON. Absolutely. I anticipate we will sign the interagency agreement early next week.

Mr. BARR. Does it normally take 6 months to do that? The Navy

notified ONDCP in February that they would no longer administer

the contract?

Mr. MARSTON. That is correct.

Mr. BARR. Since February?

Mr. MARSTON. That is correct.

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Mr. BARR. Is that standard operating procedure? Is that how

long it takes?

Mr. MARSTON. I have no experience with replacing contracting offices, but since we don’t have to have them in place until the beginning of fiscal year 2003, in fact, they can’t start earlier than that.

Navy continues to that date. We didn’t see any need to expedite

that process.

Mr. BARR. Isn’t there a need to expedite every aspect of this?

Mr. MARSTON. In light of the current situation, absolutely.

Mr. BARR. This isn’t a current situation that just cropped up.

This has been going on for 3 years now.

Mr. MARSTON. The Navy was in place to do the contract award

for this current contract, and the new contracting office wouldn’t

have had a role in that, so we didn’t see the need to expedite that

particular part of the process.

Mr. BARR. Is it ONDCP’s position that Ogilvy Mather has committed fraud against the government?

Mr. MARSTON. We don’t have a position on it. The Department

of Justice represents the government in those matters.

Mr. BARR. You don’t have a position on it?

Mr. MARSTON. Well, the Department of Justice reached a settlement with Ogilvy by which the government is bound.

Mr. BARR. I know. ONDCP does not have a position on whether

or not a company that has entered into a settlement agreement, as

to which there is an ongoing criminal investigation—the terms of

the settlement agreement are such that it is the position of the

U.S. Government that Ogilvy did submit, knowingly submit, false

claims and unjustly enriched itself, committed negligent misrepresentations and so forth. That is in the document, and ONDCP

doesn’t have a position on it?

Mr. MARSTON. We fully support the settlement agreement.

Mr. BARR. In other words, it is the position of ONDCP that

Ogilvy has and did knowingly submit false claims to the U.S. Government in connection with this contract?

Mr. MARSTON. Yes.

Mr. BARR. Then why in heaven’s name wouldn’t you be doing absolutely everything in your power to ensure that they don’t enrich

themselves $1 more at the taxpayers’ expense?

Mr. MARSTON. The decision was made last year in August that

we would not want to exercise the option on the Ogilvy contract,

because we were concerned about contract administration issues.

We worked with the Navy to conduct a fair and open, competitive

process. There was nothing that barred Ogilvy from competing in

that process, and we didn’t have any basis on which to exclude

them from participating in the competition.

Mr. BARR. How about the fact that in the opinion of the Government, based on evidence, they have knowingly submitted false

claims? That is not a reason?

Mr. MARSTON. The Federal Acquisition Regulation doesn’t provide for taking any action based on a settlement.

Mr. BARR. I am not saying taking any action based on a settlement, but this settlement is based on something. That something

is evidence that the company has, in fact, unjustly enriched itself,

knowingly submitted false claims.

35

Mr. MARSTON. Respectfully I suggest that Mr. Jaggard would be

in a better position to answer. That was part of the source selection

process.

Mr. BARR. Is ONDCP comfortable dealing with this company?

Mr. MARSTON. We believe that we have an obligation to use the

fair and open acquisition process and abide by its results.

Mr. BARR. What is it that a company would have to commit in

order for ONDCP to feel uncomfortable with dealing with them?

Mr. MARSTON. Certainly any action that would lead to a disbarment or suspension of the contract.

Mr. BARR. Why don’t you be aggressive instead of being a bunch

of pussycats? Why doesn’t the government take a position that this

is a bad egg, this is a bad company, they have knowingly submitted

false claims, they unjustly enriched themselves, they have basically—to use an old legal term—ripped off the taxpayers of this

country? Why doesn’t the government take the position, particularly on a contract that deals with legal issues, that we are not

going deal with this company; if you don’t like it, sue us? Isn’t it

the position of the government, Mr. Jaggard, that these are not the

sort of things that we would want in a company as to which is receiving benefit of millions if not hundreds of millions of dollars of

taxpayers’ money?

Mr. JAGGARD. If I understand that——

Mr. BARR. Does it bother the Navy?

Mr. JAGGARD. It bothered the Navy. That is why we conducted

an investigation of the matter.

Mr. BARR. Is that why you awarded up to an additional $762 million contract to them, because it bothered you so much?

Mr. JAGGARD. No, sir.

Mr. BARR. What was the basis on which that contract was

awarded then?

Mr. JAGGARD. The basis of the contract award is that Ogilvy submitted the proposal which represented the best value to the government.

Mr. BARR. Is the best value to the government represented by

dealing with a company that knowingly submits false claims, unjustly enriches itself, and negligently misrepresents itself to the

government?

Mr. JAGGARD. No, sir. In the evaluation process we took into consideration the Justice Department’s settlements of those allegations and the contractor’s efforts to put in place a system of controls that will prevent it from happening in the future.

Mr. BARR. Are you aware of the fact that they still are under

criminal investigation?

Mr. JAGGARD. I am aware that there is an investigation, but I

have no details of the nature of the investigation.

Mr. BARR. I mean, none of us do, but that—does that bother

ONDCP?

Mr. MARSTON. We can’t take action on the basis of investigations.

Certainly should there be an indictment, we would refer that to the

debarring official. But just knowing that there is on ongoing investigation is not something that we can take action on. It wouldn’t

be proper under the Federal acquisition regulations.

Mr. BARR. Define substantial evidence to me, Mr. Marston.

36

Let me define it for you. Substantial evidence in 48 CFR, Chapter 1 means information sufficient to support a reasonable belief

that a particular act or omission has occurred.

Do you not think that there has been substantial evidence that

this company has submitted false claims, for example?

Mr. MARSTON. Certainly the settlement suggests that is the case.

Mr. BARR. Well, then, why wouldn’t it be the position of ONDCP

that according to the Federal regulations, that is, in fact, a basis

on which not to deal with a company——

Mr. MARSTON. As I understand it——

Mr. BARR [continuing]. And then let them come in and prove that

they haven’t done all of these things?

Mr. MARSTON. I believe that was the information that was submitted to the debarring official at Navy who conducted a full investigation and decided that debarment was not warranted, and rather entered into an agreement that would ensure that such actions

would not continue in the future.

Mr. BARR. Well, I mean, to me the sooner we can get the Navy

out of this, the better. This is ridiculous. This really worried me

about the Navy. Now they are turning all of their attention to all

of those other matters. Do they take the same approach with regard to these other matters, Mr. Jaggard, that it is OK to deal with

companies that knowingly submit false claims, engage in negligent

misrepresentations and unjustly enrich themselves?

Mr. JAGGARD. No, sir. We follow the process and procedures for

suspension and debarment that are based on the assumption that

one is innocent until proven guilty and that if we had——

Mr. BARR. No. No. No. No. This is not a criminal proceeding. No,

that is not the standard for awarding government contracts, and I

hope you’re not maintaining that it is. Are you?

Mr. JAGGARD. No, sir. If——

Mr. BARR. Let’s not muddy the waters. The standard is substantial evidence, is it not? If there is substantial evidence that a company has committed fraud or engaged in misrepresentations that

is a proper basis on which to nullify or stop payment or contract,

is it not?

Mr. JAGGARD. It’s the basis for a referral to the Procurement Integrity Office for investigation and resolution of potential suspension and debarment.

Mr. BARR. I don’t want to take all the time, Mr. Chairman. I

have other questions but I certainly want to defer to the chairman,

and if we have additional time I do have some other things I’d like

to go into.

Mr. SOUDER. We’ll have a second round. Let me ask Mr. Jaggard,

under the—what are the options under the current contract that

would allow for rebidding? Is there an urgency clause that would

enable that to be expedited?

Mr. JAGGARD. There’s nothing in the current contract that would

address the issue of rebidding, Mr. Chairman. There are provisions

within the Federal Acquisition Regulations which would provide for

various alternatives to conducting either a new competition or in

some cases a sole source contract award. There are exceptions to

the Competitions and Contracting Act, and there are a total of

seven of them, one of which is on the basis of an urgent and comVerDate 11-MAY-2000 09:53 Jun 19, 2003 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 D:\DOCS\87385.TXT HGOVREF1 PsN: HGOVREF1
37

pelling national need that you could skip some of the otherwise

statutory required steps in the procurement process.

Mr. SOUDER. Is there—one of the things that was discussed

would be to award it to one of the other people who had previously

bid. In your opinion, is that—would that be the sole source clause

or would that be a rebid? How would you do that? You have that

flexibility?

Mr. JAGGARD. The flexibility is there theoretically to do either of

those. Given the fact that we just completed the competition and

we have four other interested offers, the most sound approach

would be to conduct some kind of limited competition among those

four offers, and those provisions of the exceptions to the Competition and Contracting Act could provide the basis or the foundation

for doing such an action.

Mr. SOUDER. Is—Mr. Martin, if you could comment on this, but

let me ask Mr. Jaggard first, I assume the bidding was sealed. I

know that Ogilvy’s bid has been made. Isn’t it possible that one of

the other bidders would match that bid?

Mr. JAGGARD. The original competition was on the basis of best

value. It wasn’t a sealed bid. However, Ogilvy’s awarded amount

is the only dollar value that has been made public and will be

made public. The other bidders now know what that number is. It

is completely feasible that, you know, based on that they could

sharpen their pencil and beat it.

Mr. SOUDER. What’s your reaction to that, Mr. Martin, and what

do you think the likelihood would be in a situation like that?

Mr. MARTIN. I would assume that the other four advertising

agencies very much would like to have this account. They’ve already made a significant investment to get to the point that they’ve

gotten to in terms of effort. I think that in my testimony I said

that, you know, look at them as a selected source and you’ve already done all this work. I agree with what Mr. Jaggard said, just

give them a very defined task, something that doesn’t take 6

months to figure out, give them a little test. It’s no different in my

mind than a best and final offer. And give them—you know, a task

and that’s why I said in my testimony that I thought you could get

this done by the first of October. Now, that’s what I’d prefer to do

as opposed to—if it were my business to run, as opposed to extending the contract because that sort of runs contrary to what the intent of the legislation is under consideration.

Mr. SOUDER. I apologize for not knowing this because I can’t remember, it’s always dangerous to ask a question that you don’t at

least have some range of the answer. But are you allowed to say

who the other four contract bidders are?

Mr. JAGGARD. Yes, sir.

Mr. SOUDER. Can you say who they were? Were they major advertising agencies?

Mr. JAGGARD. Yes, they were four major advertising agencies. I

have the list of names here with me if you’ll bear with me a

minute.

Mr. SOUDER. In other words, we’re not—Ogilvy, I would argue,

is one of the most distinguished names in the advertising business

regardless of what’s happened with this particular contracting, but

that we’re not arguing that it’s a choice between Ogilvy—I mean,

38

one of the earlier things we had heard in an earlier hearing was

Ogilvy has the clout of being a national advertising agency, they

have a tremendous reputation in the industry, all of which is true,

but my understanding was the other bidders also did.

Mr. JAGGARD. The other competitors were McCann-Erickson,

Foote Cone & Belding, Bates, and Sacci & Sacci.

Mr. SOUDER. Which are four of the largest names in the world

of advertising. Certainly would be able to bring large clout by having other clients that they could leverage—I mean, those were arguments that we had heard in previous hearings as we’ve looked

at the ad campaign. But as far as placement they’re all going to

have similar buying power. Would that be true, Mr. Martin?

Mr. MARTIN. Absolutely. Those four advertising agencies are four

of the finest advertising agencies in the country. And without

knowing anything about the specifics of their bid, you would assume that they would all be capable of this. It’s hard to distinguish

them from Ogilvy in a general sense.

Mr. SOUDER. Mr. Marston, I’m sure one of the arguments on best

value has to do with experience with the campaign, creative working with this issue. Do you know whether off the top of your head

any of these other four agencies have had representatives in the

past involved with partnership or other anti-drug efforts that

would suggest that they actually have some experience as well in

the anti-drug field?

Mr. MARSTON. I do not know off the top of my head, but I would

imagine given their prominence that they have at some point been

involved with the Partnership.

Mr. SOUDER. When you looked at best value, Mr. Jaggard, what

would be the, other than cost, the other main things you were looking at?

Mr. JAGGARD. In this acquisition the other two evaluation factors

were their technical capability and the their past performance, and

cost was the third and least important of the three factors.

Mr. SOUDER. And by the—if cost is third, past performance was

one of the first two, are you saying there’s an edge given to the person that had the previous contract?

Mr. JAGGARD. No, sir. What I’m saying is that in order of precedence in the evaluation the three factors were technical capability,

past performance and then cost. That was just an order of precedence. That was not to imply anything else.

Mr. SOUDER. And past performance is not including that they

would have had a settlement for altering—not charging enough, to

try to adjust the amount that they received?

Mr. JAGGARD. Past performance evaluation was conducted by the

contracting officer and it’s an assessment of prospective risk of the

performance of the new contract. He did in fact take into consideration the settlement agreement by the Department of Justice and

the administrative agreement from the Navy’s barring official, but

he also weighed those against the actions the company took to correct the problems and the ethics program they put in place and the

contract, the cost accounting system that they re-established and

had certified by the auditors to preclude recurrence of those kind

of problems on the future contract, which is what he’s looking at

for the evaluation process.

39

Mr. SOUDER. If you had five major advertising firms and one had

had past problems even though now they have procedures to fully

correct that, would that not put them in the weakest position in

the five in the past performance category at least if that is the second biggest criteria?

Mr. JAGGARD. Not necessarily because during the—the past performance evaluation includes the past performance of other relevant types of contracts, not just any one particular contract. It

would be viewed as a negative or a portion of the past performance

but not the overall.

Mr. SOUDER. Mr. Barr.

Mr. BARR. Thank you, Mr. Chairman. Just for the record, I’d like

each of witnesses to indicate whether they’re here representing

Ogilvy Mather. Are any of you all representing Ogilvy Mather?

Mr. MARSTON. No, sir.

Mr. JAGGARD. No, sir.

Mr. MARTIN. No, sir.

Mr. BARR. Let the record reflect all three have indicated no.

Therefore, in the questions I’m going to ask, I’m not interested

in the explanation of Ogilvy Mather or their defense or their position. Let me tell you something that still bothers me greatly about

what we’re looking at here. It seems to me that the government,

and this is what—I’m not quite sure why, but this is what doesn’t

smell good—it seems to me that the government has gone out of

its way to deal with this company. I don’t know whether it’s because of its past dealings with the DNC and, you know, the huge

amounts of money that it got and its relationship with the DNC or

something else, some other sweetheart deal we’ve heard about. But

these are certainly things that will be looked into.

We have a company as to which our government believes knowingly submitted false claims, knowingly submitted false claims. We

have a company that the United States believes that it has a case,

a cause of action against that company for breach of contract, unjust enrichment, negligent misrepresentation, and so on and so

forth. These are statements representing the government’s position

in the settlement agreement. And yet the government has gone to

this company and given them the opportunity which may very well

prejudice our ability to go after them.

In the agreement between the Department of the Navy and

Ogilvy Mather, for example, it goes on at great length about the

company setting up a written code of ethics. I mean, this is just

great. You have a company that the government believes has done

all of these things and then we go to them, we go out of our way

to go to them and give them an opportunity to get themselves off

the hook and we can’t even get ONDCP to say that bothers them.

That bothers me.

Mr. Chairman, I’d like unanimous consent to include in the

record the settlement agreement as to which we’ve been referring,

dated, I believe, January 30th—whatever the date is. The document itself is not dated, but the settlement agreement between the

United States of America and Ogilvy Mather North America and

the agreement between the Department of the Navy and Ogilvy

Mather of North America.

Mr. SOUDER. Fine. Hearing no objection, so ordered.

40

Mr. BARR. That just really bothers me. Maybe we ought to just

let bygones be bygones. But as a former prosecutor that sticks in

my craw. I wish it stuck in the craw of the Department of the Navy

and ONDCP and it bothers the heck out of me that it doesn’t.

Mr. Martin has testified from probably about as objective a viewpoint as there is in all this, certainly more objective than mine because I think something very wrong is happening here and smells

to high heavens and I’m going to pursue it. But he has indicated

that there is, Mr. Marston, some very reasonable and workable

ways to get us out of this problem. It may take a little hard work

on the part of ONDCP, it may take some imaginative thinking on

the part of ONDCP, it may take some legal positions that represent

the government and not Oglivy Mather. But it seems to me that

there is a way out of this if the government has the will, and that

I think was the key word in Mr. Martin’s testimony, the will to do

it.

Does ONDCP have the will to clean this business up, get rid of

Ogilvy Mather and get this program back on track with a company

that the U.S. Government doesn’t believe knowingly submitted

false claims and engaged in all these other things?

Mr. MARSTON. Sir, we’re not adverse to hard work and we’ll do

whatever we have to keep the campaign going. And that’s in everyone’s best interest and we will do so. If a law is passed prohibiting

us from obligating funds to Ogilvy we will certainly not obligate

funds to Ogilvy and do what we can to keep the campaign going.

However, we have no present plans to take action on our own to

terminate the current contract that was just awarded.

Mr. BARR. So the will is not there.

Mr. MARSTON. We don’t believe at this point we have a legal

basis to terminate the contract.

Mr. BARR. What constitutes a legal basis? What in the heck—

what are your lawyers telling you? You have a document here, a

legal document that states that it is the position of the U.S. Government, of which ONDCP last time I checked into is a part, clearly stating that it is the position of the U.S. Government that Ogilvy

Mather knowingly submitted false claims and that the United

States of America believes that it has a competent civil cause of action against this company for these things and as to which there

apparently is an ongoing criminal investigation. What more does it

take?

Mr. MARSTON. That document also settles all claims arising

under those allegations. And so the FAR is not a tool for further

punitive action. So we don’t see that provides us a basis to terminate the contract.

Mr. BARR. Mr. Martin, help me out here. Is there any hope at

all with that kind of attitude to resolving this?

Mr. MARTIN. I think that you’ve got to get yourself into a position

where you select from the other advertising agencies that are out

there and that you’ve already preselected in my view.

Mr. BARR. But ONDCP has just told us they’re not interested in

that. They see no problem with this company.

Mr. MARTIN. Well, I think the management——

Mr. BARR. I don’t mean to put words in your mouth Mr. Marston.

If you disagree with anything I’m saying, speak up.

41

Mr. MARSTON. Thank you, sir.

Mr. MARTIN. I think the focus should be on—in all of my testimony when I’m talking about aggressive management and focusing

on the media aspects of the program and not—what I mean by that

is don’t worry about ancillary elements of the thing that you could

let slip a little, focus on keeping the media out there in front of the

eyes and ears of the people out there and aggressive management

is required on the part of ONDCP.

Mr. BARR. Which is not there at this point. Apparently, Mr.

Chairman, I think we’re at the point where probably if anything is

going to be done it has to be Congress that does it. And the language that we included at my request and which was adopted by

voice vote a couple of days ago as part of the Treasury-Postal Appropriations Bill we crafted and then recrafted it, as you know, Mr.

Chairman, to try and make it appropriate language not subject to

a point of order. If, in fact, in light particularly of what Mr. Martin

has said this morning as an expert in this area, there is a way that

we can modify that language to ensure that there is—that there is

or are or will be adequate funds to create a seamless transition

here, I certainly think that we ought to do that. I certainly have

no problem doing that if that is what it takes to light a fire under

ONDCP.

I can’t tell you how disappointed I am in ONDCP that they see

nothing wrong in dealing with this company. But in light of Mr.

Marston’s statement that they—and I’m glad to hear this—that

they certainly will abide by the law if we pass a law requiring

them to deal with another company, I think that the government

is in a very strong position here, Mr. Chairman, to go to another

company or companies. I am willing to pay what seems to be a reasonable or minimum price for that, and that is to make sure that

funds are available into at least the beginning of fiscal year 2003

to ensure that we have funds to assure a transition.

But I really think in light of ONDCP’s attitude, Mr. Chairman,

that the ball really is in the Congress’ court. I appreciate very

much your holding this hearing today to begin the inquiry into

looking for a solution. I think that it is important that Justice pursue these matters. I intend to insofar as I am able to. But I do appreciate your beginning to look into finding a way out of this. I

think it’s very clear based on the testimony today, and there really

is only one way out and that is through some congressional action.

I appreciate your leadership in that regard and like forward to

working with you.

Mr. SOUDER. If the panel will hold for one more time, Mr.

Cummings actually debated on the last amendment. Let me check

with him to see if he has any other questions. I have just a couple

on the technical, and then we’ll adjourn. But for right now the

hearing is suspended.

[Recess.]

Mr. SOUDER. I thank you for your patience as we go through all

this. I couldn’t find Mr. Cummings, so I’m going to ask a couple

of questions and if he doesn’t come we’ll go ahead and adjourn and

submit any additional questions.

Reconvene the hearing. I had a couple of questions I wanted to

ask about some of the technical aspects. That was criteria No. 1,

42

I understand, in contracting that are there—I assume the terrorism ads are continuing, Mr. Marston, for the rest of this year?

Mr. MARSTON. That’s correct. We actually are in the process of

developing a second flight of drugs and terror ads that would carry

through the rest of the year.

Mr. SOUDER. So the creative basically will be done by the end of

August?

Mr. MARSTON. That’s our hope.

Mr. SOUDER. That would, then, be for the first quarter of the

next fiscal year?

Mr. MARSTON. That would be part of the campaign that was running. That wouldn’t be the whole campaign. We also have some

plans to run some ads related to marijuana.

Mr. SOUDER. Are the——

Mr. MARSTON. Those are also in development.

Mr. SOUDER. The creative, then, that would be first quarter

would predominantly be for the second quarter of the fiscal year?

Mr. MARSTON. Oh, yes, sir.

Mr. SOUDER. In the new contract of 2003 funds that were awarded the creative question is predominantly for the second quarter of

the fiscal year?

Mr. MARSTON. Yes, sir. The creative is primarily done, as you

know, by the Partnership for a Drug-Free America. And what the

advertising contractor does is supplement what they do. So for instance, if they do television and radio, then the advertising contractor supplements that with print and Internet advertising. So that’s

the part that the contractor would perform.

Mr. SOUDER. So theoretically, there are multiple options here as

far as how could you cover creative in a short term vacuum. In

other words, you wouldn’t necessarily go dark if the Partnership

which did the creative on the TV was willing to do the creative on

the print in an interim situation.

Mr. MARSTON. Correct. Our largest concern is not about the production of the creative but the actual mechanics of getting the creative distributed to networks to play on TV. And the process is

much more complicated than what I understand of trafficking advertising, they call it, kind of ironic given the subjects that we’re

advertising on. But it’s their expertise in that and linking up between the creative provider of the partnership and all the networks

that are going to play the ads through the buying process.

Mr. SOUDER. You had also I believe in the written testimony

raised here will not be able to conduct copy test research.

Mr. MARSTON. Right. As you know, we were disappointed in the

results of our evaluation, particularly as they pertained to youth

ads. One of the solutions that Director Walters has proposed is to

implement more rigorous testing for all advertising. We’d like to be

able to test all of our advertising before it goes on the air, and the

testing is done by our advertising contractor.

Mr. SOUDER. Mr. Martin, let me ask you because one of the key

questions, you said you worked with transition, is let’s assume, and

I think it’s a fairly safe assumption, that at a minimum there’s

going to be some kind of adjustment in this contract. The will of

the House was pretty clear the other day, I understand the will of

the Senate is strong, so it now becomes more—which is why we’re

43

doing this hearing—more of a technical question of do you have a

short term, at what point do we option it, what are the potential

liabilities, how do we cover those liabilities? But we want to make

sure that the technical hand-off procedures are covered as well.

And let me ask you a couple of those. This is a national campaign with a, ‘‘trafficking,’’ to use that term, placement of the ads

and just the logistics of moving them is more complicated than usually anything that I’ve certainly dealt with, which would be mostly

regional, and is a problem but is basically not that hard to hire.

How hard do you think that is? In other words, if you had a major

agency take that over——

Mr. MARTIN. It would be very hard for a lot of people that didn’t

know anything about it but it’s routine for advertising.

Mr. SOUDER. Because they have people in each market area

around the country?

Mr. MARTIN. Of course. That’s what they do. They’re experts in

doing that. In my testimony when I said that transition is not the

most important element of this, it’s the contract, agencies know

how to do transitions. And transitioning this account is not dramatically different. I’m speaking now as a guy who’s worked in the

government a lot, worked on both sides, there’s a lot of people who

will contend that a government contract is a lot more complicated.

But if you focus on the things that matter, I have difficultly seeing

why this would be difficult to transition.

Mr. SOUDER. And if in fact Ogilvy went from surely to surly—

I’m not going to let you away from that, but let’s say they weren’t

as cooperative, that the trafficking part, the placement part of this

is actually public record, it’s information they’ve already placed already for the fall—I mean they’ve reserved the time.

Mr. MARTIN. First of all, you’re way ahead of the game by virtue

of work that’s already been accomplished by Ogilvy. This has to be

handed off to the new agency and the hand-off is a relatively routine agency function that the outgoing and the incoming agencies

know how to do very well. There was some concern expressed earlier that you might not get full cooperation from Ogilvy. Ogilvy,

and from everything I know about them, and putting aside the

issues here of fraud, from the standpoint of people who can perform

advertising agency functions, Ogilvy is one of the finest advertising

agencies, most professional, most competent, to do those functions

in the country.

And in addition, I would be shocked if it were not seen at Ogilvy

as in their best interest to be fully cooperative in whatever

transitioning process was to take place here. They’re interested in

their image in their marketplace. And I’m sure that they will do

everything they can to minimize the negative impact of this, having

this contract, and surely they would be nothing less than stupid

not to be fully cooperative with every step of the transition. What

they don’t want to see are headlines that Ogilvy has been recalcitrant or surly with respect to that. And because what they care

about is their image in the minds of other potential advertisers

who read the advertising publications like Advertising Age and Ad

Week, they don’t want to see headlines that say Ogilvy is not cooperative in the transition. My heaven’s.

44

Mr. BARR. Would you yield, Mr. Chairman? I wish I could share

your optimism. I think with the cozy relationship that Ogilvy

Mather has worked out with the government here I can’t see them

doing anything other than fighting tooth and nail to, you know,

keep this contract and keep the money. I mean the whole basis

may very well have been for what’s gone on here is contained in

testimony that we had in October 2000, evidence that Bill Gray

then and now the President of Ogilvy Mather, ‘‘held a meeting with

the most senior account staff and complained about the lack of revenue with this contract,’’ this contract being this contract that

we’re talking about here. And then you see the altered time sheets,

the additional time sheets and so forth. Apparently the most important thing to this company is not reputation, it’s certainly not the

taxpayers of this country, it’s money, it’s getting revenue from

these accounts.

I enter into this thing at the point we are now presuming that

Ogilvy Mather will not cooperate. So what I have in mind, what

I anticipate is trying to move forward to remove a bad company,

get this program back on track with more integrity and improve its

chances for success, notwithstanding the fact that we’re probably

going to have to fight the company. But what I would love to see

on the part of the government is a proactive stance, not, you know,

this sort of just caving in to this. I’d like to see some backbone on

the part of ONDCP.

And I know that this subcommittee and hopefully the full committee stands behind that and certainly believes likewise. But I

think this boils down to revenue. And that’s what Ogilvy Mather

needs. That’s what they want. I think that’s what gave rise to the

problems here.

Mr. MARTIN. My only comment to that would be I’m just viewing

revenue in a different way than you are. I’m viewing their future

revenue from the perspective of other clients as very important to

them. I agree that revenue——

Mr. BARR. Do they have other clients as to which they stand to—

and I know all that $700 million is not money that goes to the company, but a contract of that size, that’s a pretty hefty contract.

Mr. MARTIN. It is a sizable contract in the advertising industry.

It is by no means in the category of the top 10 percent of the largest account.

Mr. SOUDER. Where would you place this contract? Roughly.

Mr. MARTIN. I think would you find in the publicly available information that it’s on the order of something like $2.1 billion per

year as opposed to this $150 million per year.

Mr. BARR. So it’s a lot more than that. That’s in the contract

itself. The value of the contract is 762.

Mr. MARTIN. That’s over 5 years. My point, Mr. Barr, is that I

agree that Ogilvy is concerned about revenue and return to their

stockholders. My emphasis or my conclusion would have to be

based on my experience in the advertising industry that they would

be very concerned about their future business opportunities as a

function of taking an image hit, a further image hit with respect

to how they behaved with the rest of this program. I would be

shocked if they did not cooperate because it’s in their best interest

from a long term revenue point of view to do so.

45

Mr. BARR. Could I ask just one other question of Mr. Marston,

Mr. Chairman?

Mr. SOUDER. Yes, and then I’ll conclude.

Mr. BARR. Who’s Alan Levitt?

Mr. MARSTON. Alan Levitt is the Program Manager for the Media

Campaign.

Mr. BARR. And how long has he been with ONDCP?

Mr. MARSTON. I don’t have the answer to that, sir, but I’d be

happy to followup.

Mr. BARR. It goes back to the previous administration?

Mr. MARSTON. Yes, it does, sir.

Mr. BARR. Does he have also have a relationship with the DNC?

Mr. MARSTON. Not to my knowledge.

Mr. BARR. Would you check into that because we believe otherwise?

Mr. MARSTON. Yes, sir.

Mr. BARR. And apparently he’s a key person in this whole scenario, is he not?

Mr. MARSTON. As the Program Manager he’s involved in all aspects.

Mr. BARR. Is he providing some of the legal advice that astounds

me today?

Mr. MARSTON. He does not provide legal advice. Our General

Counsel’s Office does that.

Mr. BARR. I thought he was with the Counsel’s Office.

Mr. MARSTON. No, he’s the Program Manager of the Media Campaign at ONDCP.

Mr. BARR. But isn’t he also—isn’t he with the Counsel’s Office?

Mr. MARSTON. No, sir, he’s not.

Mr. BARR. He’s not. OK. I thought he was. OK. Well, we certainly will look forward to hearing from Mr. Levitt as well. Thank

you.

Thank you, Mr. Chairman.

Mr. SOUDER. Was he on the Review Committee?

Mr. MARSTON. He was on the—one of the three panels for the review of past performance, yes, sir.

Mr. SOUDER. Could you explain——

Mr. JAGGARD. He was an alternate member of the Technical

Evaluation Board.

Mr. SOUDER. So he didn’t have an input into the decision?

Mr. JAGGARD. No, sir.

Mr. SOUDER. We may have some followup questions with that.

Because one of the—could you explain who made—the Navy doesn’t

actually make the decision, is that correct?

Mr. JAGGARD. No, sir. The Navy Contracting Officer was the deciding official of the award of the contract.

Mr. SOUDER. And so multiple people input into the deciding official?

Mr. JAGGARD. Yes, sir. He received separate inputs from the

Technical Evaluation Board that was chaired by Maple from

ONDCP and he received the past performance evaluation with himself and one of his contract specialists and then he had the Defense

Contract Audit Agency do audit reports on all of the cost proposals.

46

Mr. SOUDER. For determining who could do the technical side

best, were there outside opinions other than ONDCP?

Mr. JAGGARD. The Contracting Officer did hire an advertising

consultant to serve as an advisor to the Technical Evaluation

Board from outside ONDCP.

Mr. SOUDER. And did that person ever work with ONDCP before?

Mr. JAGGARD. Not to my knowledge, no, sir.

Mr. SOUDER. I’d like to just conclude with a couple other things

for Mr. Martin. Just so I have it in my head, that one of the things

those of us who are supportive of the program are very concerned

about are some of the recent research which suggested that at least

in some categories there were problems of sustaining the successes

of the ad campaign. And we’ve had a hearing on showing that. And

that’s a part of the reason that we’ve looked at the pretest question

and testing the ads before they go up. And I have some concerns

that sometimes advertising agencies are asked to do one thing and

then measured on another. For example, we may be very successful

in this current campaign identifying drugs with terrorism, but that

doesn’t necessarily mean that drug use would drop just because

somebody made the assumption. If you asked an ad campaign to

identify it with terrorism, you haven’t precisely asked the question

to ask them in their opinion what reduces drugs. That’s one of the

problems with getting the measurements is sometimes there’s a

setup before a final.

Do you believe that if there is a transfer that—and I would also

like to think that this is more likely or because of future business

concerns to be not necessarily a friendly transfer but that Ogilvy

understands the advantage of a transfer—that we would have

much of a setback in the copy research, the transition of market

research data? As someone who’s worked in transition programs,

that does concern me that some of the creative loss could be the

understanding of the data they’ve been working and some of the

past experiences or some of the market research.

How serious a problem has that been in your experience?

Mr. MARTIN. In my experience it varies by individual case, as you

would expect. But again, the ability to do that kind of work, the

research component of the contract is relatively routine work for all

of these agencies. And I don’t see that this would be in any way

a particularly more difficult thing to do. And you also have the advantage, the huge advantage that hasn’t been talked about much

here, of the brain power and the resources and the willingness of

the Partnership for a Drug-Free America to help you with these

things.

Mr. SOUDER. Which is a coalition of ad agencies?

Mr. MARTIN. Yes.

Mr. SOUDER. So they’re not inexperienced?

Mr. MARTIN. They are not inexperienced at all.

Mr. SOUDER. One last question on reprogramming dollars, that

one possibility would be presumably to transfer some from strategic

planning over to help cover some of the cost for the placement. But

one of the things I believe you said in your testimony is that you

felt that the most important part of what an ad agency performs

is to some degree the strategic planning.

47

Mr. MARTIN. The strategic planning is important. But what we’re

really talking about here is if this administrative problem will lesson our effectiveness in the marketplace. Even if it were a mild disruption, which I don’t think it will be, you’re only talking about a

relatively short period of time that would be a problem. This is not

as if you were going to turn everything off, you’re not going to shut

the lights out and go away for a generation and then come back

and try to start it over again. This is kind of a bump in the road.

And if it is aggressively managed by the client, that’s ONDCP, that

bump ought to be either very small or eliminated in my view.

Mr. SOUDER. And wouldn’t the bump likely be more like if the

Partnership has multiple ads in the can, it’s just the bump would

be not that we would go dark, that we might not——

Mr. MARTIN. You might have to use some ads that you used previously.

Mr. SOUDER. Or one that you didn’t retest, bottom line?

Mr. MARTIN. I wouldn’t even say that. I mean, you could I’m

sure—I haven’t talked to anybody at the Partnership about this but

I know what their general capabilities are. I mean, there are many

ways to skin a cat. The cat doesn’t like any of them, but there are

many ways to skin this. And having pretesting done of the ads, yes,

it’s an important thing and it should be done but it certainly can

be done. And I thought that Mr. Barr’s comment earlier about we

need some innovative looking at this as to how to get this thing accomplished creatively—not creative advertising but creatively from

a managerial point of view, is right on. I mean, if I had to get the

copy testing done and I didn’t have an agency tomorrow, I’d go to

the Partnership and say, hey, help me with this, how do we get

this done, and they’d stand up and help you for a short period of

time if you had a serious issue.

I’m at a loss to understand even why that’s a serious issue because I’ve got advertising sitting on the shelf that in the interim

might not be optimum but it’s already been tested, I can pick the

ones that have worked well and run them for a little while.

Mr. SOUDER. I know from the written testimony that the ONDCP

believes it’s more difficult than that. But I would encourage you

during this period to be coming up with an alternative plan because clearly something is going to happen with this and I, from

the beginning, have had some doubts about how difficult it is to do

the transition; in other words, I think that in fact if there’s a will

that we can try to make this happen and we at the very least need

ONDCP to be preparing for it, not knowing the end of the day outcome.

Mr. Barr, do you have any comment?

Mr. BARR. No. Again I appreciate the hearing. I think we’ve laid

some good ground work. I think it’s very clear where we stand and

I look forward to moving forward to again strengthen the program

by removing a company that has engaged in highly improper activities and the government knows that it has done this.

Mr. SOUDER. I thank you each for your testimony. This is a very

difficult issue to work through. I appreciate the time that you spent

here. We may have some additional written questions. And do any

of you have any closing comments you’d like to make?

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Mr. MARSTON. Mr. Chairman, if I could respond briefly to your

last statement. We certainly have the will to make this work and

are going to work diligently both now and when the final outcome

of this is known. But in the interest of giving you a full picture of

the transition, which I think you’re looking for, there are a couple

of complicating issues. They certainly aren’t things that can’t be

overcome but unlike a lot of other contracts this one has some

unique issues. One of those is our work with the Partnership for

a Drug Free America and the Ad Council, who are our key partners. So it’s not a single client relationship with some campaigns.

We had planned a 3-month transition period as part of Ogilvy’s

old contract should a new contractor receive this award. I’m sure

we can compress that time scale. And we’ll do everything we can

to do so. But that was the sort of parameter we were looking at.

Additionally, the up-front buying period, Ogilvy negotiated that

and that’s part of a total package for all their clients that they negotiated, including the part they negotiated to have pro bono to

match everything that we would pay for. That negotiation is something that, the results are something that belongs to Ogilvy. So

that would go away in a transition period. And we’d have to negotiate those again, which would likely result there in increased cost

for purchasing the time and space.

Again, it’s not an issue that can’t be overcome, but I wanted you

to be aware of it as part of the transition issue.

Mr. SOUDER. We may ask some followup questions, but I assume—I mean, the implied assumption would be that in the—I

mean, I understand the technical part of what you just stated; in

other words, Oglivy in the—and Mr. Martin, you correct me if I

misstate, but in my basic understanding of advertising if you had

a negotiated and complete package and Ogilvy negotiated a comp

time in effect with that, whoever is the next placement agency is

also going to have a large combination and even if in the transition

period it was—let’s just hypothetically say it was a partnership

representing all the major advertising firms, it’s unlikely that NBC

or whoever they were placing with or regional market station is

suddenly going to say we take back what we had negotiated with

because the people they’re in effect dealing with are going to make

future placement decisions there. It’s a public service related to the

ad campaign. We’re likely to call them on the carpet and in here

immediately all if of a sudden they pulled back. So I understand

there are risks involved with that but the likelihood of losing the

match time unless we took either a really tiny company, or they

thought we weren’t going to call them in here the second they tried

to take back their comp time, I just don’t think that’s a real threat.

I understand that there is some risk to Ogilvy in that if that in

fact in the full package had helped them, but I think that’s unlikely too. Ogilvy is a huge company and that’s what we were establishing earlier. These are big contracts, but they’re a small part

of their big contracts. And all four of the other bidders are also

huge companies. So I understand those are there, but that’s why

I say just on the face of it as somebody who basically had—I mean,

I wasn’t a management major but marketing in depth, dealt with

our furniture store and lots of different media campaigns and politics as well as our own retail business, there are some of the things

49

that I just—I think that they’re easier than have been let out to

be and I think actually some of these smaller parts other than the

other media buys are more complicated.

At the same time that Congress has shown that we’re more skeptical about the other parts of the Media Campaign and believe that

lots of money has been in effect, diverted from the original intent

of what Congress wanted to do, and I think we’ll see in this reauthorization, we saw it already in the appropriations bill, that we

believe there needs to be an advertising threshold that gets enough

frequency to the target market. And that when we start worrying

about product placement over here, running around with a magazine over here, some concert over here, some group over here, pretty soon your frequency goes down even if your reach is there, and

then we get a study back that says, oh, we’re not having as much

effect. And we believe that’s because of some of what has happened

in the campaign.

So speaking as someone who was chair of this committee, I

would not be crushed if I was told well, some of the tangential

media was lost in this process and we took those dollars instead

and put that into the main TV buy. That’s kind of what we just

voted on the other day anyway. Appropriators feel that way, the

authorizers feel that way, and that makes—and I do believe and

it’s clear in your written testimony, too, that’s what ONDCP probably legitimately feels is the highest risk, is not the major TV buys

but all the tangential.

Mr. BARR. Thank you, Mr. Chairman.

Mr. Marston, I think there are two basic type of decisionmakers.

One is the decisionmaker that you go to to solve a problem and it

gives you 10 reasons why he can’t solve it. The other is a person

that looks at the problem and looks for a reason and a way to solve

it. What I’ve heard today is that ONDCP falls into the former category. I’d like to see at least with regard to this problem, this is

not just about an advertising company, it’s about lives of 20,000,

more than 20,000 of the last figure we had was 3 years old in

19,648 drug induced deaths in the United States. Let’s not be bureaucratic about this.

Let’s stop worrying about Ogilvy Mather and let’s worry about

America, the anti-drug war that we’re trying to fight, and work

with us to find a way to solve this, not constantly come up with

reasons why it’s difficult, reasons why it can’t be done. There are

ways that it can be done. You’ve heard them here today. Maybe

there are others. That’s the attitude that I hope we see on the part

of ONDCP.

Thank you.

Mr. SOUDER. Thanks again to each of you, and with that this

hearing stands adjourned.

[Whereupon, at 1:20 p.m., the subcommittee was adjourned.]

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