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73–064 2001

HEARING ON BLACK BERET PROCUREMENT:

BUSINESS AS USUAL AT THE PENTAGON?

HEARING

BEFORE THE

COMMITTEE ON SMALL BUSINESS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

WASHINGTON, DC, MAY 2, 2001

Serial No. 107–5

Printed for the use of the Committee on Small Business

(

(II)

COMMITTEE ON SMALL BUSINESS

DONALD MANZULLO, Illinois, Chairman

LARRY COMBEST, Texas

JOEL HEFLEY, Colorado

ROSCOE G. BARTLETT, Maryland

FRANK A. LOBIONDO, New Jersey

SUE W. KELLY, New York

STEVEN J. CHABOT, Ohio

PHIL ENGLISH, Pennsylvania

PATRICK J. TOOMEY, Pennsylvania

JIM DEMINT, South Carolina

JOHN THUNE, South Dakota

MIKE PENCE, Indiana

MIKE FERGUSON, New Jersey

DARRELL E. ISSA, California

SAM GRAVES, Missouri

EDWARD L. SCHROCK, Virginia

FELIX J. GRUCCI, JR., New York

TODD W. AKIN, Missouri

SHELLEY MOORE CAPITO, West Virginia

NYDIA M. VELA ́ ZQUEZ, New York

JUANITA MILLENDER-MCDONALD,

California

DANNY K. DAVIS, Illinois

WILLIAM PASCRELL, New Jersey

DONNA M. CHRISTIAN-CHRISTENSEN,

Virgin Islands

ROBERT A. BRADY, Pennsylvania

TOM UDALL, New Mexico

STEPHANIE TUBBS JONES, Ohio

CHARLES A. GONZALEZ, Texas

DAVID D. PHELPS, Illinois

GRACE F. NAPOLITANO, California

BRIAN BAIRD, Washington

MARK UDALL, Colorado

JAMES R. LANGEVIN, Rhode Island

MIKE ROSS, Arkansas

BRAD CARSON, Oklahoma

ANI ́BAL ACEVEDO-VILA ́ , Puerto Rico

DOUG THOMAS, Staff Director

PHIL ESKELAND, Deputy Staff Director

MICHAEL DAY, Minority Staff Director

(III)

C O N T E N T S

Page

Hearing held on May 2, 2001 ................................................................................. 1

WITNESSES

Shinseki, General Eric K., Chief of Staff, U.S. Army ........................................... 4

Capps, Hon. Lois, Member of Congress, 22nd District of California ................... 18

Jones, Hon. Walter B., Member of Congress, 3rd District of North Carolina .... 19

Glisson, Lt. Gen. Henry T., Director, Defense Logistics Agency ......................... 23

Goodman, Michele, President, Atlas Headwear .................................................... 27

Cooper, David, Director, U.S. General Accounting Office .................................... 30

Whitmore, John D., Acting Administrator, U.S. Small Business Administration ........................................................................................................................ 32

Joffe, Evan, Springfield LLC .................................................................................. 34

Schooner, Steven L., Associate Professor of Government Contracts Law,

George Washington University Law School ....................................................... 36

Oliver, Hon. David R., Acting Under Secretary of Defense, Acquisition, Technology, and Logistics ............................................................................................ 38

APPENDIX

Opening statements:

Manzullo, Hon. Donald .................................................................................... 71

Vela ́zquez, Hon. Nydia ..................................................................................... 74

Issa, Hon. Darrell ............................................................................................. 76

Prepared statements:

Shinseki, General Eric K ................................................................................. 78

Capps, Hon. Lois ............................................................................................... 81

Jones, Hon. Walter B ....................................................................................... 84

Glisson, Lt. Gen. Henry T ................................................................................ 87

Goodman, Michele ............................................................................................ 92

Cooper, David .................................................................................................... 103

Whitmore, John D ............................................................................................ 110

Joffe, Evan ........................................................................................................ 122

(1)

HEARING ON BLACK BERET PROCUREMENT:

BUSINESS AS USUAL AT THE PENTAGON?

WEDNESDAY, MAY 2, 2001

HOUSE OF REPRESENTATIVES,

COMMITTEE ON SMALL BUSINESS,

Washington, DC.

The Committee met, pursuant to call, at 10:05 a.m. in Room

2360, Rayburn House Office Building, Hon. Donald Manzullo

[chairman of the Committee] presiding.

Chairman MANZULLO. This hearing will come to order. Good

morning and welcome to this hearing of the Committee on Small

Business. A special welcome to those who have come some distance

to participate and to attend this hearing.

I would like to extend an especially warm welcome to General

Shinseki. He is a true patriot having served two tours in Vietnam

and was wounded twice in combat.

Let me make it clear that this hearing is not about the policy decision to have all active U.S. Army personnel wear berets. Nor is

the hearing about what color beret a particular unit within the

U.S. Army is going to wear. This hearing is merely focused on the

decision to purchase berets from foreign sources.

I readily acknowledge that the Committee on Small Business has

no jurisdiction over the policy issues of whether the U.S. Army

should wear berets and the color of those berets. These two issues

are settled and are not within the jurisdiction of this Committee.

The military leaders of this nation who have to make the difficult

decisions to place our young men and women in harm’s way deserve our total and absolute respect.

The only reason we are holding the hearing today is to discuss

the procurement issue. This Committee has both legislative and

oversight jurisdiction to ensure that small businesses are not bypassed in the federal procurement process. I would respectfully request that the Committee members limit their questions to procurement issues.

General Shinseki has told me, and I am sure he will tell the

Committee, that if he had been informed the berets were being

manufactured overseas because of the short time period needed to

acquire the berets, he could have changed the date of delivery and

possibly other requirements.

Our purpose is to try to get the Department of Defense to follow

the existing rules of procurement and possibly to seek legislative

remedies.

2

You will hear in this hearing a gross disregard of the procurement rules. The number of textile manufacturers and apparel and

shoe manufacturers in this country continues to dwindle.

Congressman Walter Jones, Jr. was scheduled to testify at the

hearing originally scheduled for April 5. That same week Congressman Jones received word that the district he represents lost over

1,000 textile-related jobs.

As chairman of the Committee on Small Business, I have an obligation to these small businesses that are being impacted by the

military’s refusal to follow the procurement laws. The report of the

inspector general of the Department of Defense, dated over two

years ago, shows that nearly 60 percent of procurements of military

clothing made by the department violate some procurement laws

and regulations.

It is ironic. While our Army is ready to fight to keep us free, the

Defense Logistics Agency, a totally separate entity, continues to

frustrate our laws, which will result in the destruction of our domestic small businesses.

The paramount issue in this hearing is why couldn’t these berets

be manufactured in the United States.

This hearing is going to be about real people and how real people

are impacted by decisions that are made by the DLA in violating

our procurement laws.

You will hear the compelling testimony of Michele Goodman, who

has a small manufacturing facility in Phoenix. And you will hear

about the fact that she has made it a policy for years to employ

disabled and severely disabled people who have gone through workshops and whose only type of occupation are the types of positions

that Ms. Goodman offers to these people.

These are the most defenseless of all Americans. These are the

ones who, in the past, have not been able to work. These are the

ones who are impacted whenever the United States government

goes offshore in order to purchase clothing and shoes and everything.

That is what this hearing is about, the thousands of Americans

that are impacted, the small business that strive to compete on a

day-to-day basis.

As a rule of order, I fully intend to keep the questions and answers to five minutes, no four minute and 30 second questions expecting to have the same amount of time to answer the question.

We have several panelists and members here.

Ms. Vel ́azquez, as the ranking member, and I, as the chairman,

may exercise our discretion to use more than five minutes. I will

strictly enforce the five-minute rule. I can assure you of that.

Again, thank you. I now yield for the opening statement from my

good friend, the Ranking Member, Ms. Vela ́zquez.

[Chairman Manzullo’s statement may be found in appendix.]

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman.

Today’s hearing continues our effort to shine light on the contracting practices of the Department of Defense which are effectively deterring this nation’s small businesses.

This is the sixth hearing we have held that looks at the contracting practices of this agency. And every time we ask the question, ‘‘Why aren’t small businesses being awarded prime conVerDate 11-MAY-2000 12:56 Sep 26, 2001 Jkt 010199 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 E:\HEARINGS\73064 pfrm01 PsN: 73064
3

tracting opportunities,’’ the answer of the Department of Defense, ‘‘Well, we make big stuff, and these are contracts that small businesses just cannot handle.’’ First of all, you and I both know that is wrong. Second of all,

when a contract opportunity is presented that small businesses can

handle, you yank the rug right out from under them by providing

unrealistic timelines based on arbitrary deadlines. You then create

product specifications that are so restrictive as to defy the imagination, like a beret that is made as one piece.

My concern today is that we are taking opportunities out of the

hands of our nation’s economic foundation, our small businesses,

for what, on its face, is a subjective deadline.

Why do we have one U.S. manufacturer? I will tell you why, because only one U.S. company has equipment. The machinery used

to manufacture the one-piece knitted beret no longer exists, which

begs a whole host of questions.

Why is this beret so exclusively made? Is the beret indestructible? No. Is the beret bullet-proof? No. Is the beret wearable in

combat? No.

So when I ask the question, the answer I get, the Department

of Defense thinks the beret looks better with no seam. Looks better? So now fashion consciousness is the new excuse the Department of Defense uses when they sidestep federal regulations in

small business procurement?

I will tell you all that this is not the end of the issue. I want the

Army and the entire Department of Defense to know we are going

to be holding your feet—your collective feet to the fire on this and

other procurement issues.

We will not allow the DOD to carry on as they have previously

and use the same old tired excuses they have for the past seven

years. And I will tell you that there is no way that this Committee

will sit still while small business participation is continuously

blocked.

First is contract bundling. Now we are talking about unduly restrictive specification and arbitrary timeliness. Frankly, I wait with

eager anticipation to see what DOD will come up with next because

these excuses just aren’t going to work anymore.

So I suggest you either come up with something new or do something to solve the problem. I believe that problems such as the one

we are examining in this hearing will continue until we pass substantive legislation like the Small Business Contract Equity Act.

This legislation give small business necessary protections in government contracting.

Mr. Chairman, I want to thank you for your tenacity in pursuing

this issue. I believe that you are right on the mark in holding this

contract-specific hearing because it seems that these forums are

the only way to get the Pentagon’s attention.

It is my hope that today we can commit to holding regular contract-specific hearing starting with the DLA contract that has affected businesses throughout Ohio and the Midwest.

I want to close by saying that we are here today for one purpose

and one purpose only, to defend the interests of America’s small

businesses from every quarter. And nowhere are those interests

more threatened than when it comes to issues like this. And I beVerDate 11-MAY-2000 12:56 Sep 26, 2001 Jkt 010199 PO 00000 Frm 00007 Fmt 6633 Sfmt 6602 E:\HEARINGS\73064 pfrm01 PsN: 73064
4

lieve that, as we defend those interests, we are protecting the future of the American economy.

Thank you, Mr. Chairman. And, again, I look forward to more investigative hearings like this where we get to the bottom of these

practices by the department that are detrimental to our nation’s

small businesses.

Chairman MANZULLO. Thank you very much.

The first panel is General Shinseki. General?

General SHINSEKI. Good morning, Mr. Chairman.

Chairman MANZULLO. Good morning. Could you pull the mike

closer to you?

General SHINSEKI. I will. Can you hear me?

Chairman MANZULLO. Yes, sir.

STATEMENT OF GENERAL ERIC K. SHINSEKI, CHIEF OF STAFF,

UNITED STATES ARMY

General SHINSEKI. Okay. Good morning, Mr. Chairman, Congresswoman Vela ́zquez, members of the Committee. I am here to

explain the Army’s decision last October to authorize the wear of

black berets by our soldiers. And, Mr. Chairman, thank you for the

opening statement.

I would just add that, subsequent to that decision that the Army

announced last October, the Defense Logistics Agency let contracts

to meet the Army’s requirements.

I’ll provide the Army’s rationale for its decision to authorize the

wear of black beret, and I believe the following panels will address

the contracting decisions that led to the production of those berets.

For those members with whom I have spoken with in person, to

include yourself, Mr. Chairman, on this issue and other members

who may have attended a meeting last week of the House Armed

Services Committed, I regret and I apologize for the repetition

since some of my remarks will not be new.

But let me just begin by saying 22 months ago, we, the Army,

were encouraged to get on and begin the challenging process of

changing this magnificent Army, to keep it relevant for the strategic environment of the 21st century, transform the Army, do as

much as you can accomplish on your watch but don’t break nearterm war fighting readiness. That was pretty much the charter,

transform, don’t break readiness, but do it quickly.

The Army is a large institution, a million soldiers in uniform,

and change in large institutions is difficult. Even more difficult is

trying to effect a commitment for that kind of change in a short

period of time.

But thanks to bipartisan congressional support last year, we

were able to build remarkable momentum for beginning the process

of change without breaking readiness.

The decision to don the black beret is part of that commitment

to change, but it is not a new initiative. It had been considered before.

And when I became the chief in June of ’99, the black beret initiative was revisited with me. I deferred any decision on that black

beret decision for a year until the summer of 2000 in order to get

on with the challenging and more crucial need to transform the

Army-at-large.

5

After generating the requisite momentum for Transformation, I

said we would come back and consider the utility of the black beret

decision, and so I spent that first year walking the Army, talking

to our soldiers, explaining to them our need to transform and educating them on how we intended to go about it.

The very first symbols of that commitment to transform are occurring even today out at Fort Lewis, Washington, where we are

standing up our first two interim brigade combat teams.

As we began to achieve momentum, I also began to sense a growing perception on the part of our soldiers that if one were not stationed out at Fort Lewis, Washington, then somehow they were not

part of Army transformation, not on the cutting edge of the Army.

And, remembering back to our experience with the 9th Infantry

Division High Tech Test Bed, another effort to transform the Army

about 20 years ago, we needed the Army to understand that our

requirement for change was much broader than just those two interim brigades at Fort Lewis. It was comprehensive. It was about

more than just platforms, and everyone needed to be a part of it.

And so, as we engaged the Army that first year, we also rediscovered that this magnificent Army is composed of a number of

strong and proud communities, communities which have given us

the heritage we enjoy today, our active and our reserve components, aviation and ground units, maneuver and our support formations, and, within our maneuver community, heavy forces, light

forces, special operations forces.

All of them are wonderful and important in their own rights.

But, as happens with communities, each of those communities

tended to see themselves a little more clearly than the larger

Army.

We have gone to great lengths over the past 22 months to bring

these communities closer together because that is what Transformation and change is going to require. There are still some walls

out there, and, while each community is important, none of them

alone wins the nation’s wars. It takes the Army to win a war.

So the black beret is about building cohesiveness amongst those

communities because we will need all of them to transform just as

we will need all of them to win a war. Everyone is part of this commitment to change, and, for the vast majority of our 1 million soldiers, this black beret decision is not an issue. Their Army is moving out. They want to be a part of it.

We chose the black beret to symbolize this change because it is

the one relevant color that cuts across all community lines. Black

is the only color that has been worn by both our heavy and our

light formations. And it is worn today not only in the Ranger regiment, but also in our combat training centers by the 11th Armored

Cavalry Regiment, the 1st Battalion 509th Infantry, and the 1st

Battalion, 4th Infantry Mechanized.

The black beret, therefore, best reflects the Army of the future,

that Objective Force we are pursuing, which will combine the

lethality and survivability of today’s heavy forces with the

deployability and agility of our light forces.

The capabilities of this future objective force will be dominant. It

will extend the decisive capabilities of today’s M1A2 Abrams tank,

the M2A3 Bradley fighting vehicle, The Crusader, and Knowledge

6

Base C4 ISR to a future Objective Force capability that will be responsive and deployable and versatile, agile, lethal, survivable, and

sustainable in ways that today’s force cannot be.

We will begin fielding this force by the end of this decade. That

force will have the capability to put a combat brigade any place in

the world in 96 hours, a war fighting division on the ground in 120

hours, five divisions in theater in 30 days.

It will be a strong deterrent to potential aggressors. It will bring

unmatched capabilities to the joint team, and it will give the National Command Authority greater flexibility in decision-making

and crisis response options.

Part of the decision to move to the Objective Force is this decision to authorize the wear of the black beret to symbolize to all soldiers that they are part of achieving the Army’s vision.

The Army’s first birthday in the new millennium, 14 June 2001,

was chosen to symbolize and to honor our heritage and demonstrate our commitment to the rapid transformation of the Army

that we were asked to undertake.

This timing captures both our proud history and our 21st century

responsibilities for national defense and service to the nation. We

have said that the Army is prepared to adjust its implementation

plan to fit the availability of DLA’s production schedule. On 14

June the Army will begin phasing in wear of the black beret, and

this will continue until complete.

Mr. Chairman, I enjoy the privilege of serving the world’s finest

Army. And what makes our Army so magnificent is not just our

equipment, it is our soldiers. They have readily shouldered burdens

that others do not carry. They have accepted hardships and sacrifice and given us professional discipline and uncommon courage

in return.

It will take every one of them to transform the Army, just as it

will take every one of them to win the next war. And when those

soldiers are called upon to defend this nation and our way of life,

they will be ready to fight and win decisively. The American people

can count on it.

Mr. Chairman, I thank you, and I am ready to answer your questions.

[General Shinseki’s statement may be found in appendix.]

Chairman MANZULLO. Thank you, General.

General, as I announced in our opening statement, I am going

to ask you questions about procurement and not get into the policy

issue. And I would hope that the rest of the members of our Committee would also follow suit on that.

But, General, when you announced on October 17, 2000, that the

black beret would become the Army’s standard, were you aware

that most of the berets could not be procured domestically?

General SHINSEKI. I was not.

Chairman MANZULLO. Okay. And when was the first date that

you were aware of that?

General SHINSEKI. My recollection is sometime February of this

year.

Chairman MANZULLO. Okay.

General SHINSEKI. Exact date, I can’t recall, but some time

around the time when it appeared in the media.

7

Chairman MANZULLO. Do you recall the source of that? Was it

the media, or was it from somebody on your staff.

How did you find out?

General SHINSEKI. My guess, it would be probably somebody

from my staff bringing to me some information, either from the

media or information gleaned.

Chairman MANZULLO. If you had been aware on October 17,

2000, that most of the berets could have not been manufactured domestically, would you have given flexibility to that June 2001 date?

General SHINSEKI. Well, that is a hypothetical, and I have always tried to understand what the question really is. I think you

know that I have directed the return of berets that were produced

in China, and I think the answer would be I would have adjusted.

We may have gone ahead and begun the process of implementation on 14 June but phased it over a longer period of time. Again,

that——

Chairman MANZULLO. So that you could have had American production?

General SHINSEKI. Correct. That would have been generated by

what available stocks could have been generated. And I, in fact, to

this day don’t have a solid number, but my guess is probably yes.

Chairman MANZULLO. Okay. That is all the questions I have.

General SHINSEKI. Okay.

Chairman MANZULLO. Thank you.

Ms. Vela ́zquez.

Ms. VELA ́ ZQUEZ. Thank you, General. General, you were given a

copy of the Justification for Other than Full and Open Competition?

General SHINSEKI. I was just handed the document.

Ms. VELA ́ ZQUEZ. Would you please—can you please read the

highlighted portion of that?

Chairman MANZULLO. Could you identify that document for the

Record?

Ms. VELA ́ ZQUEZ. Justification for Other than Full and Open Competition.

Chairman MANZULLO. And the date of that, Ms. Vela ́zquez?

Ms. VELA ́ ZQUEZ. November 2000.

Chairman MANZULLO. Thank you.

General SHINSEKI. This is the first time I have seen this document, Congresswoman.

Ms. VELA ́ ZQUEZ. General, can you read the highlighted part of

that?

General SHINSEKI. Yes. ‘‘The Army will be seriously injured if

this action is not approved.’’

Ms. VELA ́ ZQUEZ. General, with all due respect, if Army personnel

are not all wearing black berets by June 14, 2001, will the Army

be seriously injured?

General SHINSEKI. The statement is not mine, Congresswoman.

I think the fact that I have directed that the berets that were made

in China be returned suggests that I am prepared to make adjustments here.

Ms. VELA ́ ZQUEZ. General, that is a statement made by the Department of Defense. Do you agree with that statement?

8

General SHINSEKI. Well, I am not in a position to comment on

it. I don’t write these contracts, and so I’d be——

Ms. VELA ́ ZQUEZ. It is just a simple yes or no answer.

General SHINSEKI. About the Army being seriously injured? I

don’t know that the Army would be seriously injured.

Ms. VELA ́ ZQUEZ. You don’t know.

General SHINSEKI. No.

Ms. VELA ́ ZQUEZ. General, did you tell the Defense Logistics Agency to buy a seamless black beret?

General SHINSEKI. I don’t believe that that was guidance, but I

do believe that the Army’s standard beret is something called a

seamless beret. I didn’t know there was any other kind.

Ms. VELA ́ ZQUEZ. Did you tell the DLA that, under no circumstances, could the beret they bought to fulfill your requirement

have a seam or be made in two pieces?

General SHINSEKI. I am not aware that any statement was made

by me to that regard.

Ms. VELA ́ ZQUEZ. General, I have read and reread your statements on the beret issue and haven’t seen any directions that you

gave DLA regarding a one-piece or a two-piece beret. Given the fact

that many U.S. small businesses could have manufactured the berets if the berets were made in two pieces, can I get a commitment

from you that the tan berets will be competed among small U.S.

manufacturers?

General SHINSEKI. Congresswoman, again, I don’t—I am not in

the procurement business. I make a request for beret by color and

design. Beyond that, those acquisition authorities, procurement decisions, are made elsewhere.

And I would respectfully suggest that——

Ms. VELA ́ ZQUEZ. General, what is your position? You are chief of

staff, aren’t you?

General SHINSEKI. I am.

Ms. VELA ́ ZQUEZ. So you cannot state such policies so that you

and the Army comply with statutory Congress mandates and goals

and procurement process?

General SHINSEKI. I do support the law. I do support the law

with regard to the procurement policies outlined.

Ms. VELA ́ ZQUEZ. General, I am very concerned about the commitment of federal agencies to achieving their goals for doing business

with small, small disadvantaged, and women-owned business. Will

you assure me, General, that the commitment to doing business

with small, minority owned, and women-owned businesses comes

from the top in the Army?

General SHINSEKI. Congresswoman, I will be very happy to provide an answer for the record, but I would suggest to you that I

think the Army has been quite responsive in exceeding the goals

that have been outlined for accomplishing these parameters.

Ms. VELA ́ ZQUEZ. Sir, with all due respect, I think that your staff

failed in briefing you. Last year, the Committee staff on the Democratic side, we produced a study, and we did a research about how

the federal agencies, particularly the department of defense, failed

small businesses in America.

General SHINSEKI. I can only speak for the——

9

Ms. VELA ́ ZQUEZ. And the biggest offender, General, is the Department of Defense. Were you aware of that study?

General SHINSEKI. I am not. You have information I don’t have,

Congresswoman.

Ms. VELA ́ ZQUEZ. I will submit it to you, but it is unbelievable.

The Washington Post and many major U.S. papers covered that research, covered that study, and you are going to come here today

and say that you do not know, you are not aware?

General SHINSEKI. No. I am suggesting to you that I can speak

for the Army, Congresswoman. I would be very happy to provide

the details of the Army’s performance in these categories, which

I’m led to believe, has exceeded, in most categories, the goals that

were established. And, in fact, in terms of women-owned businesses, the Army is the first agency, federal agency, to have exceeded a billion dollars. But I will provide details for the record.

Ms. VELA ́ ZQUEZ. Do you have any details in terms of how did you

comply with women-owned businesses? Did you achieve your goals?

General SHINSEKI. I think that may be one of those categories

that we may not have achieved, but I would say that we are the—

probably in that regard, the first federal agency to achieve a billion

dollars. But I will provide that in detail for the record.

Ms. VELA ́ ZQUEZ. What about the 8(a) goal?

General SHINSEKI. I will be happy to provide. I just don’t have

those details with me.

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman.

Chairman MANZULLO. Thank you, Ms. Vela ́zquez.

Mr. Hefley.

Mr. HEFLEY. Thank you very much, Mr. Chairman. I appreciate

you holding the hearing. I have as much concern as you do about

the berets being purchased in China. I don’t think I like this. I

don’t think General Shinseki likes this.

And I think from your opening statement and from our ranking

member’s questions, I really question why the chief of staff is here

today. I am not sure he’s the one we need to have here.

Chairman MANZULLO. If I may, if you would yield on that——

Mr. HEFLEY. Surely.

Chairman MANZULLO. My sole question in asking the general to

come here is that there is a line between the person who makes

the decision and the people that carry out that decision in terms

of procurement. And I requested General Shinseki to come here

and to tell this Congress and, obviously, the nation of his limited

knowledge as to what actually happened with procurement.

His job is to fight the wars and to make the orders, not to carry

out the procurement. And the procurement people will be testifying

later on.

Mr. HEFLEY. And that is good. And I think those are the people

we ought to be talking to because the general is responsible for determining what the needs are to carry out the mission of the Army.

And then he passes those needs on to the people who purchase the

equipment to meet those needs.

I don’t think the general is the one we ought to be directing our

fire to this morning. He is not the guy that made this decision.

10

I had a question about the decision on the berets, and the general and I have talked about this considerably, and I understand

it a great deal better now. So I am not worried about that.

I am concerned, General, about the purchase of the berets from

China. And, as a member of the Armed Services Committee, I have

concern about us purchasing and relying on suppliers from other

countries, particularly countries that aren’t known as our greatest

allies for our military equipment.

General SHINSEKI. Sure.

Mr. HEFLEY. I think we ought to be very, very careful about that,

and so I do have that kind of concern. So if any good comes this

morning, General, out of your being here, it may be that you will

take back with you the strong concern that this Committee has and

I think, in turn, the Congress, as a whole has, that we don’t like

military equipment, such as the berets, being purchased in foreign

countries, particularly military equipment that could be done by

small businesses across this country. And I think you share that

feeling.

So since I don’t exactly know why we have you here today, I

don’t have any particular questions, General. But I do hope that

you understand the concern that we have about the procurement

process. And insofar as you can influence that process, I would

hope you would pass our feelings along.

General SHINSEKI. I will.

Mr. HEFLEY. Thank you.

General SHINSEKI. Thank you, Congressman.

Chairman MANZULLO. Mr. Pascrell.

Mr. PASCRELL. Thank you, Mr. Chairman. Mr. Chairman, we

hope that some good comes out of this or that we change.

It is obvious that the DOD has not heard the clarion call from

this Committee over the past four years. They are constantly coming back.

And I know, General, you are not in the business of procurement,

but you and those that preceded you make the decisions. And there

is an organization here. There is a link between the decision and

those in logistics who implement and follow it out.

And I thank the chairman for stepping up to the plate. This

hearing is a clarion call to me, speaking of clarion calls, to all small

businesses in the United States of America to get into the process

of getting on the bidding list because what else is being manufactured in other countries for our troops? We don’t have enough

money for ammunition, but we have money for the making of hats.

And God knows how we look to the rest of the world when we

are asking you these questions, General. And all due respect to

your great, outstanding record, but these are the cards that are

dealt with us, and we are going to play those cards.

General SHINSEKI. Sure.

Mr. PASCRELL. The Department of Defense’s grade on the scorecard which we are referred to many, many times is D minus when

it comes to relationships with small businesses, when it comes to

the emphasis of procurement. That is not a very good record.

And if you are telling us today that you have nothing to do with

where the purchases are made in the process itself, I personally

find that hard to believe. I am not questioning your honesty. I am

11

questioning here if, as the person in charge making the decisions,

if you say, ‘‘Let us stick to the rules and the laws that we purchase

in America,’’ logistics is going to follow through on what you say.

Do you know of any other items that our troops wear that are

made in foreign countries?

General SHINSEKI. Not personally, Congressman.

Mr. PASCRELL. You are not sure about that?

General SHINSEKI. I am not. I just haven’t done the research.

Mr. PASCRELL. Well, it is interesting that the first shipment of

berets that came into this country, following through on your order,

have been less than what was ordered in terms of aesthetics, in

terms of quality.

And while this is devastating to know that taxpayers’ money was

used for inferior products that, I read in the paper today, we may

not even use since we have just made an about face. Is that correct? Yesterday, last evening, you made a decision. Could you tell

us what the decision is?

General SHINSEKI. Well, six weeks ago we recommended that—

and it’s specifically to the production of berets in China. When the

issue initially came up, the recommendation from the Army was

that we not use these berets. But the decision is not mine. We don’t

contract for those berets, and we don’t have the authority to decontract for them. But last night the directive was to take those berets that were made in China and to return them for disposition.

Mr. PASCRELL. And where is the money going to go? Who is paying for these berets that we are not going to use, that we are going

to discard because——

General SHINSEKI. I don’t have an answer, Congressman.

Mr. PASCRELL. I am sorry?

General SHINSEKI. I don’t have an answer. Again, I don’t——

Mr. PASCRELL. Well, we are trying to get us all on the same

page, Mr. Chairman. That is what you are trying to do.

General SHINSEKI. I think you are on——

Mr. PASCRELL. It would seem to me we are all trying to get on

the same page so that there is a relationship between the decision

and the procurement so that logistics in DOD knows quite well the

feelings of your office, knows quite well the feelings of those people

who sit on this Committee, because we have been attacking the

question of bundling here for four years.

General SHINSEKI. Right.

Mr. PASCRELL. And we are getting nowhere, so we would all like

to be on the same page.

Did you know—when did you first know that these berets were

going to be made in China?

General SHINSEKI. As I indicated——

Mr. PASCRELL. By the way—excuse me, Mr. Chairman—it could

be China, it could be Costa Rica.

Chairman MANZULLO. Mr. Pascrell, your time is up.

Mr. PASCRELL. Just answer the question.

Chairman MANZULLO. Well, let the gentleman ask.

General SHINSEKI. I would—I go back to the statement to—that

I gave the chairman some time in February.

Mr. PASCRELL. Some time in——

12

General SHINSEKI. Some time in February. I don’t have a date

certain.

Mr. PASCRELL. 2001?

General SHINSEKI. 2001, that is correct.

Mr. PASCRELL. That is the first you knew about it?

General SHINSEKI. That is correct.

Mr. PASCRELL. Thank you, Mr. Chairman.

Chairman MANZULLO. Thank you, Mr. Pascrell.

Mr. Grucci.

Mr. GRUCCI. General, how are you today?

Chairman MANZULLO. Mr. Grucci, before we proceed, I will remind the Committee that these mikes are live at all times—and

the staff. Go ahead.

Mr. GRUCCI. Good afternoon. Is it afternoon? No, it is still morning.

General SHINSEKI. Good morning.

Mr. GRUCCI. Good morning, General. It is great to see you again,

and I appreciate the time that you have taken out of your schedule

not only to be here, but certainly to come and to visit with members of Congress throughout these last sessions.

Chairman MANZULLO. Mr. Grucci, could you speak closer to the

mike, please?

Mr. GRUCCI. Sure. Is that any better, Mr. Chairman?

Chairman MANZULLO. Yes.

Mr. GRUCCI. I appreciate the time that you spent visiting not

only with me, but with others in Congress in expressing your interest in our views and the issues that are important to us.

I don’t have any specific questions of you, sir. I don’t believe that

at your level this issue—I find it kind of disturbing that this kind

of an issue is at your level. I would have thought that it would— it could be handled more effectively, more efficiently at a procurement level.

And I understand the chairman’s desire to have you here, and I

concur with that to demonstrate, perhaps, what your roll was in

this whole process. And I think that that’s healthy.

I think that the issue for me is not what type of head gear the

Army will wear. That’s solely in the discretion of folks like you. The

procurement of that does raise some questions, and I think that

would be more appropriately addressed to the procurement officer.

And we are certainly concerned about small business, about minority businesses having an opportunity to fully access the five percent set aside that’s there for them. And I believe we are not at

that level yet, and that is of a concern to me.

But this particular issue, and the questions are more appropriate

at a level beneath you. And I appreciate you being here, and I just

wanted to commend you on an outstanding job that you have been

doing with our army and with you taking the time to visit even

with freshman congressman.

So I thank you, and I yield back the rest of my time, Mr. Chairman for questions of others that I believe would be more appropriate to ask of.

General SHINSEKI. Thanks, Congressman.

Chairman MANZULLO. Thank you, Mr. Grucci.

Ms. Christian-Christensen.

13

Ms. CHRISTIAN-CHRISTENSEN. Thank you, Mr. Chairman.

First, I would like to commend the chairman and ranking member for calling this hearing. I realize we haven’t gotten into the real

substance of the meeting as yet, but it is important that we be constantly vigilant on the Department of Defense and their procurement practices, especially as regards small and disadvantaged businesses.

I want to welcome General Shinseki and thank you for being

here. Thank you for your service and your efforts and commitment

to transforming and strengthening our army to meet the challenges

that we face today.

General SHINSEKI. Thank you.

Ms. CHRISTIAN-CHRISTENSEN. Like others, I am one of those who

had issues with the change in the beret, as did my husband, who

is a 35 year Army retiree. But I think from your testimony I better

understand, at least, the rationale for why the beret was chosen

whether I agree with it or disagree with it.

As both the chair and ranking member have said, our issue is

with procurement, so that is going to be where most of my questions would go. But I do have maybe two questions for you.

In light of the decision to change the beret, the surrounding controversy around it, have you seen any impact on the morale of the

troops? Is it affecting the men and women in uniform?

General SHINSEKI. I have not. And, as I indicated, I have certainly spent a good bit of time walking the Army to talk to youngsters.

Two nights ago I was with the 3rd Battalion, 75th Rangers, down

in Fort Benning, Georgia, and they were loaded up and parachuted,

ready to do a rehearsal of a night operation. And I spent hours

walking through that battalion, one of three. They don’t have a

problem with this, and neither does the vast majority of the rest

of the Army.

Ms. CHRISTIAN-CHRISTENSEN. Okay. Thank you for that answer.

And just to further clarify the decision-making process, because I

am not sure that I am clear. Even though I know Congresswoman

Vela ́zquez asked the same question, whose decision was it to have

the beret be a seamless beret since that seems to have determined

where it was going to be produced?

General SHINSEKI. I don’t know whether—well, I would have to

assume it was a decision. But the Army’s standard beret for years

has been what I have come to understand as a seamless beret, and

that is the uniform that the Army has worn.

But, frankly, until I saw this statement that was provided by the

Congresswoman and the discussion that there was such a thing as

a seamed beret—not brought to my attention and unaware of it.

Ms. CHRISTIAN-CHRISTENSEN. And I would also, just in closing,

Mr. Chairman, just join my concerns to that of Congresswoman

Vela ́zquez and ask that, given this particular circumstance and

controversy and the fact that the Department of Defense does have

such a poor record with regard to our small businesses, that in the

future that you would use the influence of your office more in ensuring that, when you have things that have to be procured, that

the department comply with the Berry Amendment and do more to

14

meet the goals that we have set for small, disadvantaged, and minority-owned businesses.

General SHINSEKI. Certainly.

Ms. CHRISTIAN-CHRISTENSEN. Thank you.

General SHINSEKI. Thank you.

Ms. CHRISTIAN-CHRISTENSEN. Thank you, Mr. Chairman.

Chairman MANZULLO. Thank you.

Mr. Bartlett.

Mr. BARTLETT. Thank you very much.

General SHINSEKI. Congressman.

Mr. BARTLETT. General, welcome.

General SHINSEKI. Good morning.

Mr. BARTLETT. Although I still have concerns about the policy decision, I just want you to know that does not in any way impact

my respect for you or my admiration for your commitment to do

what you think is best for our Army.

I hope that another symbol can be used to signify the transformation of the Army. But if berets are to be it, then can we have

your assurance that, to the extent that you have influence, that

you will help to make sure that all future berets are bought in

America in conformity to the Berry Amendment?

General SHINSEKI. Yes, sir.

Mr. BARTLETT. Thank you. Thank you very much. I have here a

copy of the article from the Washington Times today. And I just

want to read one quote from it made by Mr. Wolfowitz and ask you

what you think that means. ‘‘Therefore, I direct the Army and the Defense Logistics Agency,

DLA, to take appropriate action to recall previously distributed berets and dispose of the stock.’’ Now I need to put that in context.

That’s berets made in China. What do you think ‘‘dispose of’’ means?

General SHINSEKI. I am not sure, Congressman. I am about a

month away from implementing the wear decision of the black

beret, and I needed to get on with distributing and giving guidance.

And the issue of the berets made in China is still a topic of discussion, and so my action was to direct that these berets be returned for disposition. And we would use the available stocks to get

on with the decision of implementing the wear of the black beret.

I am not sure what—— Mr. BARTLETT. I am very supportive of your decision. I just think

that most of America is very supportive of the decision that troops

will not be made to wear a beret made in China. But I am a child

of depression, and I hate waste. And to return—to dispose of these

berets in a local incinerator or something is unthinkable to me.

And I am wondering if we can find a way that we might involve

our small business community. And we have got the lemon here,

let us see if we can make lemonade.

And I would hope that we could work together and see if we can

involve our small business community so that some good can come

of this.

General SHINSEKI. What a great idea.

Mr. BARTLETT. I want to thank you very much for appearing before our Committee today. I know how busy you are. And thank

you very much for coming.

15

General SHINSEKI. Thanks, Congressman.

Mr. BARTLETT. Mr. Chairman?

Chairman MANZULLO. Thank you.

Mr. Udall.

Mr. UDALL. Thank you very much, Chairman Manzullo. I very

much appreciate you and the ranking member focusing in on this

hearing. I think it is an important area, and I am glad we are here

today doing that.

I also want to thank the general for his service. And let me get

directly to questions here.

General, in your written testimony you say that the Army’s beret

decision is about building trust and confidence in our formations,

formations that will be defending this country in the 21st century.

I think what you are hearing from this Committee is that the

issue for us is about building trust and confidence in America’s

small businessmen and women. And, for us, it is very hard to build

that trust when American’s read the morning newspapers and hear

on the evening news that the United States Army has purchased

berets that are made in China, thus bypassing the American small

businessmen and women. Do you think that this builds confidence

in American businessmen and women to see this kind of action

occur?

General SHINSEKI. I would take your lead here, Congressman,

and I would say probably not. But, again, purchase of berets is not

done within the—inside the Army. And I apologize that I am not

more conversant on it, but I think following panels will be able to

address how those decisions were made.

Mr. UDALL. Thank you, General. General, the other context for

why we are here today is a major decline in our textile industries.

We have seen the kinds of industries that produce these kinds of

products decline rapidly. And we have lost hundreds of thousands

of jobs, tens of thousands of jobs in this country because many of

those have gone to low-cost markets, low labor markets.

And it seems to me one of the jobs of our federal agencies, including the military is try to help us to rebuild those industries if we

can. And I hope that we have your commitment and the Army’s

commitment that you will try to take a look at doing that in the

future.

And I am wondering, what are you doing as a result of this incident to see that this doesn’t happen again?

General SHINSEKI. Well, I am certainly far better educated about

the procurement process. Again, it is not something that I am, at

least in this instance, involved in directly. But I am sensitive to the

issues.

Mr. UDALL. Thank you, General. I appreciate very much you

coming today.

General SHINSEKI. Thanks, Congressman.

Mr. UDALL. Thank you, Mr. Chairman.

Chairman MANZULLO. Thank you.

Mr. Ross.

Mr. ROSS. Thank you, Mr. Chairman.

And, General, thank you for being with us today.

General SHINSEKI. Good morning.

16

Mr. ROSS. On the beret issue, the only manufacturer with a plant

located in the United States happens to be from my home state of

Arkansas, Cabot, Arkansas. It is not in my district, but it is in my

home state, so it is the next best thing to be.

You know, the numbers I am looking at, nearly 5 million berets

were made, and, yet, only 1.2 million were made at the only facility

in the United States, which is in Cabot, Arkansas.

And, to kind of follow up on Congressman Udall a little bit, I

mean, I live in a state where I am sick and tired of losing population. I am sick and tired of losing jobs. And the textile industry

has especially been hit hard in Arkansas.

And, not only berets, but why can’t the Army help us save what

few textile industries are left out there because these are big contracts. There are a lot of things, berets, uniforms, shirts, ties that

these textile industries could be making.

In the United States, if we would focus on areas that are economically depressed, in areas that have lost a lot of textile jobs—

you have got a trained workforce in these areas with a nice facility,

but the doors are padlocked.

It looks like we ought to start in America, and we ought to start

especially in light of the fact that we are talking about taxpayers’

money. These are tax dollars, so why aren’t we using them more

in economically depressed areas? Do you have any thoughts on

that?

General SHINSEKI. I agree with you, Congressman. But, again, I

don’t write these contracts. I happen to agree with you, but I understand your concern.

Mr. ROSS. Well, I hope that whoever does write them will take

heed to this and recognize that I come from a district where the

average household income is $19,000. There are a lot of people that

would love to work at textile manufacturing plants, and they would

do it with pride and honor, knowing that they are making uniforms

and accessories for our United States military.

So I hope whoever writes the contracts and whoever’s in the

room that has some influence on this will think about that next

time, that there are people in America that are hurting. And we

have a lot of trained workers out there no longer working because

the textile industries have been closed.

And let us try to do better and be better focused in the future.

I think it could be a huge boost economically for economically depressed areas in Arkansas and elsewhere.

Thank you.

Chairman MANZULLO. Thank you, Mr. Ross.

Ms. Kelly, do you have any questions?

Ms. KELLY. Mr. Chairman, I am going to pass for a few minutes.

If you can come back to me, I would appreciate that.

Chairman MANZULLO. Okay. You are the last person.

Ms. KELLY. I am sorry.

Chairman MANZULLO. I do have one question to ask the general,

and perhaps, during that period of time if you want to get your

thoughts collected, then you would be the last person to ask questions.

17

General, could you—in order for clarification, could you state the

relationship that you have as chief of staff of the Army with the

Defense Logistics Agency?

General SHINSEKI. I am not sure what you mean by relationship,

but there is not a formal one. In other words, the Defense——

Chairman MANZULLO. It is a separate agency, is that correct?

General SHINSEKI. It is. It comes under the Department of Defense. It is outside the Army. I know that they exist, but the request for filling a requirement normally goes through an ordering

process that results in contracts being written by the Defense Logistics Agency to fill the requirement that the Army has requested.

Chairman MANZULLO. Okay. And the reason I asked that is because there are a lot of questions whose answers you don’t know,

and I wanted to establish the relationship between you and the

DLA.

General SHINSEKI. Sure. Thank you, Chairman. The DLA does

not work for me if that is what you are asking. They do not work

for the Army. They are not an Army——

Chairman MANZULLO. They are not under your command?

General SHINSEKI. No, they are not.

Chairman MANZULLO. Okay.

Ms. Kelly.

Ms. KELLY. Thank you, Mr. Chairman.

General Shinseki, thank you very much for appearing before the

Committee today.

There is one question I wanted to ask about the manufacture of

the berets. And that is, it is my understanding that there may not

be available in the United States some one agency or one industry

that can produce enough of these in a short enough period of time.

Is that correct?

General SHINSEKI. I will defer the specifics of that to the following panel. My understanding though, the part of the reason we

are here, is that it is apparent that they cannot all be produced

here.

Ms. KELLY. I thank you very much. I also want to compliment

you on the terrific job that I think you have been doing for us as

the leader of our army. I want to say that we have had some dealings with some areas in my district, and you have been extremely

helpful, and I do thank you very much. And I thank you for appearing here today.

General SHINSEKI. Thanks, Congresswoman.

Chairman MANZULLO. Ms. Vela ́zquez has the last question.

I just want to state that one of the purposes of this hearing is

to try to find out if any additional laws are necessary in procurement. And I have come to the conclusion—I am sure Ms. Vela ́zquez

would also—that whenever somebody makes an order and that

order cannot be fulfilled domestically, that there has to be a personal notice given to the person who makes that order, which may

have avoided this entire controversy in the first place.

General SHINSEKI. Sure.

Chairman MANZULLO. Ms. Vela ́zquez.

Ms. VELA ́ ZQUEZ. General, are you aware who do the DLA answer

to?

18

General SHINSEKI. The DLA is a Defense Department Agency

and responds, I think, most directly to the undersecretary for acquisition on the staff of the Secretary of Defense.

Ms. VELA ́ ZQUEZ. Thank you.

General SHINSEKI. I believe that is the appropriate relationship.

And the following panel will probably have more specific and a better answer than I have been able to give you.

Chairman MANZULLO. General, I want to thank you for your

service to this country. I want to thank you for your patience in

this process. I thank you for taking the time and especially your

candor this morning.

General SHINSEKI. Thanks, Mr. Chairman.

Chairman MANZULLO. Our second panel is Congresswoman Lois

Capps of the 22nd District of California and Congressman Walter

B. Jones, Jr. from the Third District of North Carolina.

Okay. The second panel is here, and let us start with the Congresswoman Lois Capps of California. Congresswoman?

STATEMENT OF HON. LOIS CAPPS, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF CALIFORNIA, 22ND DISTRICT OF CALIFORNIA

Ms. CAPPS. Thank you, Mr. Chairman. It is such a pleasure to

be here this morning.

I commend you, Ranking Member Vela ́zquez, as well as Chairman Manzullo and the entire Committee for your interest in this

most important subject.

In the interest of time, I am submitting my written testimony for

the record, and I will summarize my statement for you.

Chairman MANZULLO. All the statements will be admitted without objection. Thank you.

Ms. CAPPS. Thank you.

As you know, last night, the Pentagon announced that it had

cancelled contracts with three companies for foreign-made black berets. The Pentagon has said that it did this because of ‘‘late deliveries and substandard work on these contracts.’’

I am pleased that the Pentagon has cancelled these contracts and

that plans to seek out the most appropriate domestic source available.

And I have been calling for this since the middle of March. I

wrote a letter to President Bush. It was cosigned by 79 of my

House colleagues from across the political spectrum requesting that

the administration reconsider the Army’s contract. To date, I have

received no response from the administration.

As we said in our letter, the Pentagon had made a decision to

purchase over 4 million black berets from companies manufacturing them in foreign countries, including China, Romania, and

Sri Lanka. This decision was ill-advised and poorly thought out.

Purchasing the berets from overseas companies could easily have

undermined the very morale and unity the Army was attempting

to instill in its forces as it set out to outfit soldiers in matching

head gear.

The Army imposed an arbitrary deadline for the purchase of the

berets by June 14, 2001. This resulted in sending this business to

foreign companies and cutting U.S. manufacturers out of the bidVerDate 11-MAY-2000 12:56 Sep 26, 2001 Jkt 010199 PO 00000 Frm 00022 Fmt 6633 Sfmt 6602 E:\HEARINGS\73064 pfrm01 PsN: 73064
19

ding process. This cost American firms millions of dollars and has

probably wasted a lot of taxpayer dollars as well.

These contracts which would normally go to U.S. small busi- nesses reportedly totaled $30 million. But in its decision to purchase black berets from foreign suppliers, the Defense Logistics

Agency bypassed normal procurement procedures. The DLA did not

generate normal public notification for bidding prior to awarding

two manufacturing contracts.

It appears this action was in violation of the Competition in Contracting Act. DLA also waived the Berry Amendment. The Berry

Amendment is a staple of Defense procurement law. It requires the

Department of Defense to buy clothing and other textiles made in

U.S. factories of 100 percent American components.

It is true that waiving the Berry Amendment is permissible in

order to meet high volume requests or tight time constraints. But

I have been informed that the American apparel industry could

have produced the one-piece berets the Army requested rather than

the two-piece sewn items the American firms currently manufactured if they had been given sufficient lead time to fulfill this

order.

I was also disturbed by press accounts that awarding these contracts to foreign firms may have been more expensive to American

taxpayers. It was reported that the cost of a beret made overseas

ranged from $4.36 to $7.20 compared to $6.30 that was being

charged by the sole American manufacturer.

And this whole fiasco has cost taxpayers money as the Army has

tried to address the questions raised by buying them overseas.

The Department of Defense should employ it’s traditional procurement process that ensures fair and open competition and costeffective military purchasing standards.

Mr. Chairman, I believe Congress should continue to support improvements in the department’s acquisition programs. I hope the

Pentagon will address the challenges of this complex area and protect the interests of the department, of American businesses, and,

ultimately, the taxpayer.

Military uniforms are a powerful symbol for U.S. soldiers, representing who they are and what they stand for. That is why we

must give American companies the first opportunity when it comes

to government purchases. This reflects United States law as well

as basic common sense.

Mr. Chairman, thank you for the opportunity to appear before

your panel.

[Ms. Capps’ statement may be found in appendix.]

Chairman MANZULLO. Thank you, Ms. Capps.

Mr. Jones.

STATEMENT OF HON. WALTER B. JONES, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF NORTH CAROLINA, 3RD

DISTRICT OF NORTH CAROLINA

Mr. JONES. Mr. Chairman, I want to thank you and the ranking

member and Committee members for giving me this opportunity.

I will also summarize very briefly my comments.

As you know, I am a member of the Armed Services Committee

along with some other members of your Committee. And I must say

20

that when I first heard this decision, as Representative Capps

made reference to, I was incensed and outraged by the decision.

And I also wrote letters to the Department of Defense as well as

to the President of the United States.

In my district, the Third District of North Carolina, we have

three military bases, Camp Lejeune Marine Base, Cherry Point

Marine Air Station, Seymour Johnson Air Force Base, and I am

privileged to represent 60,000 retired veterans and retired military

in that district.

And I would like to say that the majority of those who communicate with our office were outraged by this decision. I am pleased

to tell you that two former rangers walked all the way from Fort

Benning to Washington, DC to express to the United States Congress their outrage. Both these gentlemen were former rangers who

had served both in the invasion of Panama as well as the Vietnam

War.

David Nielsen, who is here today—Sergeant David Nielsen, a

former Ranger—actually himself and others walked 750 miles to

Washington, DC from Fort Benning, Georgia to let the American

people as well as the Congress know their outrage.

Chairman MANZULLO. Congressman, could you have him stand

up please?

Mr. JONES. Would Sergeant David Nielsen stand if he is here?

Chairman MANZULLO. Thank you. Proceed.

Mr. JONES. Thank you, David.

Mr. Chairman and Ranking Member, I also want to say that

when we have a military that today pilots are not able to fly because of money for parts, many of the units do not have ammunition, and a decision was made just because a—the thinking was changing the color of a hat or the beret was worth $23 million

when our men and women in uniform need the help now, I think

that in itself is a decision that shows that it was very short-sighted

to be honest with you.

Mr. Chairman, what I want to talk about today also in the two

and a half minutes I have left are the small businesspeople in my

district. And you are exactly right. The week before the decision,

1,000 employees in my district were laid off by two companies.

In addition, I want to read very quickly I received a letter from

a manufacturer in North Carolina, and this is what he said. He

wrote to me and said that his small textile business supports 80

families, and, yet, he struggles to keep his plant operations open

because he has to compete with cheap labor and good from foreign

competitors.

He would have gladly spent the money necessary to convert some

of his operations into a facility that could help produce the berets

for our men and women in uniform.

Mr. Chairman and Committee members, I actually talked to this

gentleman, and he told me that he could do it. He could make the

conversion and still make money and ensure the jobs for those 80

people and their families that work for him.

And I must say that I appreciate this Committee more than I can

tell you because there is no excuse, no excuse, in bypassing the

Berry Amendment. And I am very grateful that you are taking this

issue up.

21

Let me say that I decided to introduce legislation, this H.R. 1352

that will hopefully help prevent a situation like this from ever happening again. The changes my legislation makes are simple, but

my hope is that these minor adjustments will give pause before any

future decision to unnecessarily waive the Berry Amendment occurs.

Mr. Chairman and Ranking Member, I want to say to you today

that this has been a ill-fated decision made by the Army from day

one. And I hope that we, as a Congress working with the administration, would do what we can to stop this outrageous decision that

was made.

It is not fair to those men and women who serve in the military,

who respect the Rangers. It is not fair to the small businesses of

this country that they are not given the opportunity to bid for this

work.

So, again, in closing, I want to thank you for giving me this opportunity to be with you today. Thank you.

[Mr. Jones’s statement may be found in appendix.]

Chairman MANZULLO. Thank you very much. I want to assure

you, Congressman Jones, that if Ms. Vela ́zquez and I have to subpoena and examine every Berry waiver, then we are prepared to

do that. We are also prepared to introduce legislation that would

tighten up the authority process on who could waive it.

We noticed that a press release was put out yesterday by the

Senate Small Business Committee agreeing that it has to go to the

highest level as opposed to somebody six rungs down the ladder.

But we are going to continue to be ever vigilant over this.

We also noticed that there are already laws on the books that

provide for the cardinals of the appropriations Subcommittees to

personally sign off on transfers, I believe, from one account to the

other in the Department of Defense.

And I think the only way that we are going to be able to straighten out the horrible procurement process going on is to allow members to be personally involved in it.

Ms. Vela ́zquez’s family is involved in the printing industry, and

my family is involved in the restaurant industry. We are both

small businesspeople. We have a passion to protect the small people of this nation, and we also happen to be members of Congress.

So we take that passion along with the authority we have to do

everything we can possible do to keep those jobs here in America.

Thank you both for coming.

Ms. Vela ́zquez.

Ms. VELA ́ ZQUEZ. No. I just echo your views, and I just want to

thank you for your commitment and coming here before us to share

some of the experiences that your own constituency has been facing

with the Department of Defense and other federal agencies.

And, again, our commitment is to make sure that the Department of Defense and any other federal agency complies with the

laws as they have been stated by the United States Congress.

Thank you.

Chairman MANZULLO. Mr. Grucci.

Mr. GRUCCI. I have no comments or questions. Thank you, Mr.

Chairman.

22

Chairman MANZULLO. Does any member have any questions to

ask of our fellow members here? I see Ms. Capps is anxious to

leave.

Mr. Bartlett, and then you are next.

Mr. BARTLETT. I want to thank my two colleagues for coming to

testify today.

Walter, you and I served together on the Armed Services Committee. I know that we both share an admiration for our military

and a commitment to do the very best that we can, and I know that

that is shared also by Lois.

I share with you, Walter, the conviction that the original decision

was a wrong decision. And here we are now this far down the road.

What we need to do now is to stop and take stock of where we are

and what now is in the best interest of our military and the best

interest of our small businesses and the best interest of our country.

And I continue to believe that perhaps a better symbol could be

chosen as to signify the transformation of the Army. And we in the

Congress, I believe, have a responsibility there that we share with

the military in our hope that the Congress will step up to its responsibility.

It is a very important hearing today because it holds the Armed

Services Committee in deference to this Committee. And I am

pleased to serve on both of them.

The Armed Services Committee was delaying any pending action

on this out of deference to this Committee. So this is a very important Committee hearing today. And I want to thank my two classmates. All three of us came into the Congress together.

Thank the Chairman and the Ranking Member for calling this.

And I want to tell you, Walter, that I am very supportive of what

you have been trying to do, and I hope that we in the Small Business Committee and the Armed Services Committee, in working together now with the Army, can make sure that the right thing happens for our American troops and our small businesses in America

in general.

Thank you very much.

Chairman MANZULLO. Congresswoman Millender-McDonald.

Ms. MILLENDER-MCDONALD. Thank you, Mr. Chairman.

And I would also like to thank the chairman and the ranking

member for convening such an important hearing.

I would like to thank these two fine congresspersons who are before us because it makes our life a little easier when we are here

in Committee, and you come before us, and you are not part of this

Committee, but you are also touting those things that we are touting. Made in America is so important to all of us, and we want to

continue to keep that banner high.

Again, thank you too for coming this morning.

Chairman MANZULLO. Okay. The second panel is excused. I believe we have a vote, is that correct? Okay. We will reconvene this

hearing as soon as we are done with the vote.

[Recess.]

Chairman MANZULLO. The Committee will reconvene. I have

been advised that we have about two and a half hours before the

next vote.

23

The third panel, I believe, is in the process of sitting down, and,

as soon as you are ready, General Glisson, the director of the Defense Logistics Agency.

General.

STATEMENT OF LIEUTENANT GENERAL HENRY T. GLISSON,

DIRECTOR, DEFENSE LOGISTICS AGENCY

Lieutenant General GLISSON. Good morning, Mr. Chairman. I appreciate the opportunity to be here today to answer questions and

discuss the acquisition strategy followed by the Defense Supply

Center, Philadelphia, to procure the black berets for the Army.

I have prepared a written statement for the record. I would like

to ask that be entered.

Chairman MANZULLO. All written statements will be entered in

the course of this hearing without objection.

Lieutenant General GLISSON. Thank you, sir.

I would like to take just a few minutes, if I may, and talk about

the sequence of events that took place that allowed us to get to the

point where we are today. And I would like to start, if I may, with

the requirement.

In October, as was previously discussed, the Chief of Staff of the

Army made the announcement that he intended to place berets on

the heads of all soldiers.

In November of last year, my Supply Center in Philadelphia received a requirements document from the Army that basically said

that they wanted 1.3 million berets by April 2001 to issue the first

beret to the Army, 1.3 million berets by July of 2001 to issue the

second beret to every soldier. That required an initial sustainment

for replacement, and so forth, of an additional 1.3 million berets or

about 3.9 million berets.

What that meant for us in the acquisition community was we

had a requirement for a high production surge during the February

to July time-frame, and then there would be a sustainment requirement thereafter of about 100,000 to 150,000 berets a month.

Now the Supply Center in Philadelphia was exceptionally well

prepared for this task, and the reason they were was for a couple

of things.

First of all, they are the primary buyer for the Military Services

of all clothing and textile products and, particularly, enlisted head

gear for the military. And they have been doing this for many,

many years. They know the marketplace very well. They know

most of the manufacturers, and they know the manufacturing process.

And the issue of potential issue of berets to the entire army was

not new. The Army had considered such a thing in 1990; again in

1996; and as late as 1999, we had done a competitive award or

competition for berets to a Cabot, Arkansas company called the

Bancroft Cap Company, which is the only domestic producer of berets in the United States today.

Bancroft had been doing this for about 20 years. Their production

capacity during that period of time was about 6,300 berets a month

or about 70,000 a year.

Over the past 10 years, then at least, we have talked to over 50

domestic companies and contractors, trying to find out if anybody

24

was interested in producing this specific beret for the military services, and none were.

The question you ask is why wouldn’t anyone want to do this

business. Well, a couple of reasons.

First of all, it takes special machinery to do it. It requires a circular knitted machine, which is really old technology. It was manufactured years ago, mostly overseas in Romania and in France.

They are hard to find. There is no new production on these machines. Cabot has the only machines in the United States, somewhere around 60, I think.

They are not dual-use, so you are only going to use them to

produce this specific beret. There is not a follow-on application in

the commercial marketplace.

And we talked to the vendors. They said it would take 12 to 18

months to set up an operation. It takes a capital investment to do

that, takes training. If you look at it from the financial return on

investment, there really wasn’t a lot of incentive there based on the

demand that we had had to produce berets. It is very labor-intensive also.

I have a story board, if you will, to show how the beret is manufactured, to give you a sense of that.

Wool is taken, placed on the circular knitting machine, and produces the shell which you see up in the top corner there. It is then

stitched where that seam is so that it becomes a single solid beret.

It is then placed in a machine that basically agitates and produces the material to the look that it has there with the piling and

with the single look that it has.

We take it and put it in a vat where it is both dyed and mothproofed. It is then put on a machine which actually blocks it and

gives it the shape that you see in the top left corner there.

Then there is a drawstring, which is attached at the base of the

beret, that allows the soldier to tighten it a little bit for sizing, and

that is attached on there with a leather band. And then, lastly,

there is a stay which is placed behind on the inside of the beret

so that the flashing, which is the unit insignia or designation, can

be placed on that machine.

Now there were only three known manufacturers at the time—

and we have been looking at this at least for the last 11 years—

that we knew could produce berets. One was Bancroft, which was

the only domestic producer. The other two were overseas, one in

Canada, which is Dorothea, which makes the Canadian beret. One

was a U.S.-based company out of New York, which is Denmark,

which had a subcontractor plant in Romania.

The first thing we did was say, ‘‘What if we gave it all to the U.S.

to the single source that we had, and what would that mean to the

delivery for the Army requirement?’’

Quite frankly, at the production rate that Bancroft was able to

produce, it would have only provided somewhere in the neighborhood of max capacity of 100,000 a month. It would have taken Bancroft about six years to meet the Army requirements, which would

not have been a reasonable period of time for what the Chief of

Staff of the Army has talked to you about previously.

25

So we had to figure out how to get 3.9 million berets in about

a five-month period with a follow-on of another sustainment quantity immediately thereafter.

So what we did, basically, is awarded to Bancroft what they said

their maximum capacity was, which was 100,000 berets a month.

We then directed the award to Denmark and Dorothea for their

max capacity, which was 60,000 and 40,000 collectively.

After we had done that, Atlas Headwear came in—and Ms. Goodman will talk to you later today as another member of the panel— and submitted a second beret for the Army to take a look at. I have

the two berets here in case you haven’t seen those.

Basically, we took that back to the Army. The Requirements Section for the Army took a look at it and said it would not meet the

needs of the Army and disapproved the use of that particular beret.

So that left us with a requirement and DLA to figure out how to

produce the remainder of the berets to the original requirement.

We did a worldwide search up in Philadelphia. We identified 20

potential producers. Five were U.S., 15 were foreign. We asked for

requests for proposals. They all sent in samples, we looked at the

samples. We reviewed the company records to determine responsibility, quality, quantity, price reasonableness.

Then we had full and open competition, and we made four

awards at that point in time. As you can see on the second chart,

we awarded two to U.S.-based companies, foreign produced, Northwest Woolens in Rhode Island and Bernard in Florida, and two foreign, which were to the United Kingdom. One was Kangol, and the

other was C.W. Headdress.

We were concerned about the child labor laws, so we asked the

Defense Contract Management Agency to visit all of the plants

both initially, and frequently thereafter, to make sure that they

were in compliance with the local child labor laws, and that has

been done.

The last thing we did was, in December we actually issued what

we call a sources sought advertisement in the Commerce Business

Daily, which is where you post procurement requirements, and that

is where the bidders come in and take a look at whether they are

interested or not to see if we had any further interest because we

really did want to try to give this business to domestic sources.

Since that time, we have had 13 telephone or written inquiries

from domestic companies. We have had no serious follow-on interest after discussion or receipt with the exception of we have announced that we are going to try to do an Industry Day on the 23rd

of May, at which point we, again, are working with small business

to try to bring in as many manufacturers and interested parties as

we can.

We do have some companies that said they are coming to that,

and so we are hopeful that we will be able to craft out of that some

sort of strategy which will allow us to work on an industrial base

here in the United States.

In regard to small business, as mentioned, we knew the business

well. We have been working over the years with our Small Business Procurement Center Representative, and, as late as 1998, we

had issued a competitive contract, no set-aside, no restricted procurements because there was only one producer in the United

26

States. And we have followed that process consistently over the

years.

I will tell you, however, when Philadelphia did these awards,

these last awards on berets, they did not send the small business

coordination record to the Procurement Center Representative,

which they should have done, so he was not aware that we had

awarded those.

It was an administrative error. The Department had a review

conducted by the Small Business Office to determine was this

something which is a major flaw in the way that we were doing

business in Philadelphia or a one time error.

We went out and randomly pulled about 50 records. They only

found one occurrence where that coordination document was not

there. We believe that this was simply an oversight as they were

trying to quickly meet the needs of the Army. And it would not

have changed the facts and circumstances, at least in our minds,

with the contract.

The bottom line, we don’t know of any violation of any Small

Business practices with the exception of that. And, in fact, as I will

mention in just a minute, we have a strong record of support to the

Small Business community.

Finally, in respect to buying American products, I will tell you

that the buying command in Philadelphia, 68 percent of all the

clothing and textile dollars that we spent in Fiscal Year 2000 or

about $750 million went to the Small Business community.

Within DLA, 40 percent, which is the highest in DOD of all DLA contracts went to Small Business. That is about $4 billion. And 90

percent of all of our clothing and textile procurements went to U.S.

companies for products made in the U.S. out of U.S. components.

I will tell you that Philadelphia used the sole domestic source to

the maximum extent possible, and, only when we saw no other way

to meet the requirement for the Army for quality, quantity, and

timeliness, did we make the proper determinations of non-availability.

They did have the delegation to waive the Berry Amendments.

They followed the spirit and the letter of the law, at least in our

mind. We take the Berry Amendment waivers very seriously. In

the last 10 years, there are only four instances, that I am aware

of, where end items for products were waived out of Philadelphia.

And we only did that to get through the initial production and try

to get sustainment.

Finally, I will tell you that the Department of Defense did conduct a separate review of our entire acquisition strategy and process. What they found is listed basically up here, and Mr. Oliver can

talk more to that than I, but that our procurement was proper, our

Small Business practices were intact, and we bought American to

the maximum extent possible. I will tell you that at every step of

the way, we tried to follow the spirit and the letter of the law.

The last points I would like to make are, over the last two days

a couple of other things have happened which I think are important to the Committee.

First of all, the Philadelphia Command terminated three contracts for default, and these are the companies that you saw up

there earlier. They happen to be Bernard, North West Woolens,

27

and Denmark, plus, the Chief of Staff of the Army decision and the

Deputy Secretary decision to terminate the contracts—not to terminate, but to not use the China-manufactured berets.

What that, in essence, does is put 2.2 million berets back to us

to try to find domestic sources or about $11 million worth of business which we have the opportunity now to try to craft a strategy

to use Small Business. We hope to be able to do that at our 23 May

Industry Day.

And the last point I would make is that on the delegation of authority to make waivers of non-availability, that authority has been

withdrawn. I think you all saw the release from the Deputy Secretary of Defense this morning.

For me in DLA, that means that the Under Secretary of Defense

for Acquisition, Technology, and Logistics, is the only person now

that can approve waivers of the Berry Amendment. That no longer

resides in the Defense Logistics Agency, and that is true also with

the Service Secretary.

Chairman MANZULLO. General, you are three minutes over.

Lieutenant General GLISSON. Mr. Chairman, I stand ready to answer questions.

[Lt. Gen. Glisson’s statement may be found in appendix.]

Chairman MANZULLO. Thank you.

I am going to go out of order for a specific reason and call

Michele Goodman because I think she has some contradictory

statements to you, General.

Lieutenant General GLISSON. Okay.

Chairman MANZULLO. Michele?

STATEMENT OF MICHELE GOODMAN, PRESIDENT, ATLAS

HEADWEAR, PHOENIX, ARIZONA

Ms. GOODMAN. Good morning. Thank you for the opportunity to

discuss the treatment of small businesses dealing with government

procurement policies. I am am particularly grateful——

Chairman MANZULLO. Michele, could you pull it closer—there

you are. Thank you.

Ms. GOODMAN. Is that better?

I am particularly grateful for the leadership shown by the members of the Committee on this issue.

My name is Michele Goodman, and I appear here today on behalf

of 120 people from Atlas Headwear. This is down from 240 people

a year ago. We are located in Phoenix, Arizona, and we are a

woman-owned small business, employing mostly Hispanic and

other minority women. We also have an aggressive policy towards

hiring the developmentally disabled and the physically handicapped.

Over the last five years, Atlas has joined a partnership with a

school, habilitation school, to hire those people that, as the chairman pointed out, are defenseless. They have no other means, except through the training they get in the school and through private businesses, to find a place, a place where they can be constructive and a place where they can feel good about themselves.

I will just cite you a couple of examples. We have an employee,

her name is Chris. She has been working for us for four years. She

28

is in a wheelchair, and she has all types of emotional and mental

handicaps.

When she first came to our facility four years ago, she had seizures on a regular basis. It was difficult, but Chris learned, and

felt welcomed, and she was diligent in her efforts towards trying

to make her life better. And she saw that other people that surrounded her were trying to help her do as well.

I can report that now, after four years or even after six months,

Chris no longer has seizures. She comes to work every single day,

and she does an excellent job, as does Lori and Crete, who happens

to be hearing-impaired, Chris, Stephanie, Joseph. And the list goes

on of those people.

I will just make one final comment on that. When we had to lay

off almost half of our staff over this past year, we made a conscious

effort to keep the people that were least able to find a place. And

all of the emotionally, developmentally handicapped are still working for us, and they represent five percent of my workforce.

This year we will complete 20 years of manufacturing for the Department of Defense. We currently make the hot weather cap for

both the Army and the Air Force for the Defense Supply Center in

Philadelphia, known as the DSCP, and the Navy and recruit hat

for NEXCOM in Virginia.

We have manufactured in the past the Temperate BDU cap, the

Desert Sun hat, and the Marine Corps utility cap. We have commercial work as well, manufacturing for golf, fashion, outdoor products, theme parks, and other industries.

I was asked to speak today about two issues, first, the issue of

the Pentagon’s decision to waive the Berry Amendment when it decided to purchase berets from foreign sources and, secondly, the

larger issue of Pentagon procurement policies.

In the interest of time and because General Shinseki was available to be here today, I would like to focus my oral testimony on

the beret issue and leave the other issues to my written testimony.

I would encourage the Committee, however, to read the written

statement regarding other procurement issues as I believe they are

as important to small business as the beret issue has become.

I submit to you that I was closely involved in the events that

took place regarding the beret decision, and my testimony is accurate from a firsthand perspective.

On October 17, 2000, General Shinseki, the Army chief of staff,

announced a directive to provide all Army personnel with berets by

the Army’s 225th birthday. The due date for having the first berets

in hand in order to meet the June 14th deadline was April 2000,

meaning contracts had to be let quickly, placed for millions of berets with more than a million to be delivered in only five months.

General Shinseki apparently paid little attention to the fact that

the task he was ordering had many obstacles before it and should

not have been rushed. Quite honestly, we had 225 years to prepare

for this.

It was not a surprise situation. Proper planning for this transition could have prevented not only the serious waiver of the Berry

Amendment, but also would have prevented excess cost to the U.S.

government, the U.S. taxpayers, and us, the small business community.

29

Normally, when a procurement solicitation is made by the officers of the DSCP, there is a fair and transparent process that takes

place where the DSCP works to ensure that not only does the military get quality products at an affordable price and in a timely

manner, but that those items are procured from American manufacturers who make up the industrial base that support the military in both war and peace.

These small businesses live and die by the fairness of the process

and the people at DSCP who work closely with business to meet

this goal. However, in this case, the DSCP was forced to act in a

manner that would shut out American manufacturers because they

were given an impossible deadline to meet. The lack of planning

and foresight exhibited by General Shinseki created this problem.

As a part of my written testimony I have provided a timeline of

the key events that occurred from the date the general’s decision

was announced, and this timeline highlights my company’s attempts to be awarded part of the contract.

When General Shinseki gave the beret order, the DLA, Defense

Logistics Agency, did not question his decision. It is my understanding that they are not permitted to. The result was that contracts were let in a manner that conflicted with two laws, the Competition in Contracting Act and the Berry Amendment.

The Competition in Contracting Act was violated when two contracts were awarded to two companies even before a public notice

was announced that the contracts were open for bidding. When the

solicitation for other bids was finally made public, the Berry

Amendment was waived within days of the announcement, and the

contracts were awarded to foreign manufacturers. Both of these actions shut out potential American manufacturers who could have

mobilized to fill the orders.

I have with me a sample beret that I made in my attempt to bid

for the contract. I was rejected. I was told, ‘‘It doesn’t look right.’’

My attempts to work with the Army on designing a beret they

could accept were repeatedly ignored.

And I have also brought with me two berets. This is the current

beret that they are using. I don’t know which beret they showed

you of ours.

We have made two attempts, without the help of the Army and

their design people, to make a beret very similar to their beret, and

it is two-piece stitched. And I am going to tell you that none of you

from there can see that, okay. I don’t know, the one you have up

there could have been the first attempt, but I would be more than

happy for you to see those.

I do not believe the Congress created laws such as the Berry

Amendment and the Competition in Contracting Act for frivolous

purposes. I believe that abusing them is a serious matter. I believe

that American companies could have fulfilled the orders had DSCP

given enough time to properly proceed and if the Army had been

more open-minded.

The question then is, what can be done at this point. As I was

prepared to testify a month ago, it was my opinion that these contracts should be carefully reviewed for adherence to specification

and delivery requirements.

30

As the general has testified today, rightfully though, some of

those contracts have been cancelled for those exact reasons, which

were predicted at the outset.

We cannot recover the last six to seven months, but we are still

left with the need for berets. It should be directed that the Army

work with domestic manufacturers and equipment companies to explore alternatives to the current requirement for a one-piece knit

beret.

The knit beret that the Army has requested is manufactured on

machinery that is antiquated and more labor-intense than the

more modern equipment used to produce the stitched beret.

The labor requirements for the knitted beret is the main reason

that the cost is so high. Additionally, the one-piece beret is going

to have to be replaced in the near future because the machinery

and the spare parts for the machinery are no longer manufactured.

Forward-thinking countries, such as Italy, are already contemplating this change. They have been perfecting the two-piece beret

and could offer assistance in perfecting ours to the Army’s liking.

The Army needs to explore other types of headwear that would

express the general’s wish for unity, excellence, and values. The

current decision and the result of this decision, buying from Third

World countries at significantly higher prices, do not achieve any

of these goals.

An American-made stitched beret would provide the following advantages to the Army. They would provide the Army with a beret

for which the manufacturing machinery will be there in decades to

come. They will reduce cost, improve the response time, increase

quality consistency, and save American jobs and protect the military’s warm industrial base of American suppliers.

In closing, I would like to thank all of you for the time you have

given me to address the struggles American small businesses have

in trying to stay alive. We are not asking the government for a

handout, simply a hand up. I would be happy to answer any questions.

[Ms. Goodman’s statement may be found in appendix.]

Chairman MANZULLO. Thank you, Michele.

The next witness will be David Cooper. I have granted some latitude to witnesses who have a personal side of the story as opposed

to those with an academic. So if you would mind adhering to the

five minute rule, Mr. Cooper, please.

STATEMENT OF DAVID COOPER, DIRECTOR, ACQUISITION

AND SOURCING MANAGEMENT, U.S. GENERAL ACCOUNTING

OFFICE

Mr. COOPER. Absolutely. I can do that.

The Army’s decision to issue the black berets to all of its forces

in just eight months placed——

Chairman MANZULLO. By the way, Mr. Cooper is with the GAO.

Mr. COOPER. Thank you.

The decision to equip the forces with these new black berets in

only eight months placed a tremendous burden and enormous demand on the normal contracting process followed in the Department of Defense.

31

In a very short order, DOD awarded contracts to purchase nearly

5 million black berets. The chart that is being put up now will

show the suppliers that were selected and the quantities and unit

prices of those contracts. The total cost there is almost $30 million, and roughly 75 percent

of those berets will be made overseas by foreign sources.

Serious problems have been encountered in this contracting

strategy. Deliveries of the berets are falling far short of the contractual requirements. And we have heard earlier that some of the

contracts are being terminated. The DOD is also experiencing a lot

of quality problems with the fit of the berets, the coloring of the

berets, and I think in one case there was an odor from the berets.

And now we found out just yesterday that the Army is going to

recall the berets that are made in China and those made with Chinese content and dispose of them.

The key event that drove the process that resulted in this outcome clearly is the urgency that was placed on getting the berets

to all the Army forces by the Army’s birthday on June 14th of this

year.

We have already heard about the actions and strategy that was

undertaken to do that. I have spent the entire week looking at

nearly 1,500 pages of contract documents and e-mail traffic and

studies and so on and so forth. Clearly, this was not a business as

usual approach to procuring these berets.

Due to the extremely short time frame for delivery, a number of

actions had to be taken to expedite the awards of the contracts. According to the contract documents, the situation was considered to

be a ‘‘unusual and compelling urgency.’’ The basis for that urgency,

again, was the timing of June 14th, and we have already heard a

statement read this morning that the documents said the Army

will be seriously injured if this action is not taken.

During the process of contracting for the berets, the Small and

Disadvantaged Business Utilization Office review was bypassed inadvertently. I don’t think there was an intention to do that, but,

in the haste to award the contracts, that review was not done.

A recently issued DOD study concluded that such a review

wouldn’t have made any difference anyway, but I would like to

make a point about that. That study accepted the June 14th requirement, and that is the basis for that conclusion in that study.

As another example of the haste, I would like to quote from one

of the contract documents.

And this has to do with the contract award to the Canadian firm.

The contracting officer must make immediate awards to attempt to meet the initial fielding requirements of the Army, so there is no time to obtain detailed cost

or pricing data, analyze that data, develop a negotiation position, negotiate with a

firm, and, then finally, make award.

We looked at some of the competitive awards that occurred after

the initial non-competitive situation, and the concern that was

raised in some of the documents about the Canadian price being

higher than perhaps warranted was borne out because we found

that the competitive prices were 27 percent below what that noncompetitive price was.

And I would like to now put up a second chart that shows the

sequence of events that surround the waiver of the Berry AmendVerDate 11-MAY-2000 12:56 Sep 26, 2001 Jkt 010199 PO 00000 Frm 00035 Fmt 6633 Sfmt 6602 E:\HEARINGS\73064 pfrm01 PsN: 73064
32

ment. To meet the deadline for fielding the berets, DLA determined

that sufficient domestic sources were unavailable and that additional contracts needed to be awarded to the foreign firms.

The center in Philadelphia that did the contracting for this procurement prepared three waivers. And the deputy commander at

Philadelphia approved the first two waivers on November 1 and

December 7.

As the first waiver approval was being processed, questions arose

from the headquarters of DLA about whether, in fact, Philadelphia

had the authority to waive the Berry Amendment.

In fact, on November 8, DLA senior procurement executive put

in a request to the undersecretary of acquisition’s office to have a

delegation of authority be given to DLA to waive the Berry Amendment. That occurred on February 1, with a delegation of authority

to the DLA director and a senior procurement executive but not

any further than that.

Let me back up for just a second. Using that delegated authority,

the senior procurement executive at DLA went back and reviewed

the previously approved waivers and, in fact, ratified the approvals

that had been made earlier.

And then, on April 24th, the delegation of authority was pulled

back into the Pentagon. So there is a lot of—seems like a lot of confusion on who had the authority to make the waivers.

In summary, Mr. Chairman, the imposition of the June 14th

deadline clearly placed DOD in a high risk contracting situation.

In their desire to serve the customer, procurement officials were

forced to take extraordinary measures to purchase the berets. However, the date allowed very little time to plan for the purchase, as

we have just heard, and little room to respond to the problems that

had been encountered in deliveries and quality.

In the end, Mr. Chairman, in my view, it is clear that the Army

asked the procurement system to do something that it couldn’t do.

In fact, DOD officials now expect that less than half the Army

forces will get the new berets by the June 14th date.

That concludes my statement.

[Mr. Cooper’s statement may be found in appendix.]

Chairman MANZULLO. The next witness is John Whitmore, who

is the acting director of the SBA.

Mr. Whitmore.

STATEMENT OF JOHN D. WHITMORE, JR., ACTING

ADMINISTRATOR, U.S. SMALL BUSINESS ADMINISTRATION

Mr. WHITMORE. Thank you, Mr. Chairman and distinguished

members. I am John Whitmore, the acting administrator of the

Small Business Administration. I appreciate the opportunity to appear today.

Chairman MANZULLO. Could you pull the mike closer to your

mouth? Thank you.

Mr. WHITMORE. We are here today to discuss a situation where

procedures were not followed. But before I discuss the beret issue,

let me explain SBA’s role in government contracting.

SBA is responsible for ensuring that America’s small businesses

receive a fair share of federal government contracts. One of the

33

agency’s responsibilities is to review proposed acquisitions to identify both prime and subcontracting opportunities.

SBA’s PCRs will recommend alternative procurement methods

when small business contract participation is unlikely due to quantity, dollar value, restrictive delivery dates, or requirements for

non-commercial specifications.

If the SBA and the contracting activity disagree regarding the

procurement strategy, SBA may appeal to the head of the procuring activity. However, it is important to note in the last five

years we have been successful less than 50 percent of the time.

Ordinarily, such acquisitions such as the beret purchase are coordinated with SBA’s procurement center representatives. They are

located at major buying activities. Their goal is to ensure maximum

small business participation.

During the last few years, an increasing amount of PCR’s responsibility is involving and evaluating cases of contract bundling.

Some positive results of PCR oversight include initiating small

business set asides, removing work from consolidated solicitations

and including them in the 8(a) program or in the small business

set aside program, and ensuring that subcontracting to small businesses is included as an evaluation factor in the solicitation.

In terms of procedure, the PCR and the small and disadvantaged

business utilization specialist review the agency’s strategy, including the extent to which small businesses will be used. The PCR reviews the procurement strategy to determine the capacity for small

businesses to meet the particular requirement.

With regard to the beret acquisition, the procurement was not

sent to SBA for review as required by the Federal Acquisition Regulations. Had it been sent to SBA, we could have been effective in

suggesting the use of modern machinery, suggesting delivery dates

that are in line with developing a domestic supplier pool, and recommending improvements to the commercial item description as

envisioned by FAR. In this instance, the commercial item description was 15 pages.

In general, our overall goal is to maintain a significant and

meaningful procurement opportunity for small business. Congress

has repeatedly acknowledged that participation of small business is

vital to the growth of the U.S. economy. More specifically, small

business participation and procurement increases competition, diversifies the supplier network, and generates the majority of innovations. It also creates many new jobs.

While the data suggests that the percentage of government contracting dollars to small business has remained relatively constant,

the actual number of contracting opportunities is declining.

New contracting opportunities declined almost 50 percent from

fiscal year 1995 through fiscal year 1999. Obviously, this reduction

has significantly reduced contracting opportunities for small businesses wishing to compete for federal contracts.

This is a classic supply and demand problem. An increasing

number of small businesses are interested in a decreasing number

of federal contracts. This is a serious obstacle to the growth of

America’s small business community.

34

In particular, small businesses are concerned because purchases under $2,500 are no longer reserved for small firms, and a large

percentage of that is going to the large office supply stores.

They are troubled by multiple award contracts, government-wide

acquisition contracts that are now used extensively, both limiting

small businesses’ contracting opportunities. And, as I previously

stated, contract bundling continues to be a major impediment to

small business.

Free markets thrive on competition. Small and new companies

epitomize that competition. The federal marketplace needs small

businesses to ensure competition and to provide the taxpayers with

the best value for goods and services.

Acquisition reform has had success. However, we must make certain that, in the process, small businesses are not precluded from

participating in the federal contracting opportunities.

If we followed procedures in this instance, we would have appealed the Defense Personnel Support Center’s decision to buy in

this way. Had we appealed this, these questions would have been

raised quite a while ago, and we probably would not be here today.

Thank you, and I would be happy to answer any questions.

[Mr. Whitmore’s statement may be found in appendix.]

Chairman MANZULLO. Appreciate your testimony.

Mr. Joffe.

STATEMENT OF EVAN JOFFE, SPRINGFIELD LLC, NEW YORK,

NEW YORK

Mr. JOFFE. Chairman Manzullo, members of the Committee, I

appreciate the opportunity to appear before you today. My name is

Evan Joffe. I am the market manager for government and military

fabrics for Springfield LLC, a small textile company headquartered

in New York with manufacturing in Gaffney, South Carolina.

My full statement has been submitted for the record. However,

I would like to summarize some of my points before the Committee

today.

A little background on Springfield: we are a small business that

employs approximately 370 associates. We manufacture apparel

fabrics worn by U.S. Air Force pilots, Army helicopter crews, Navy

seamen, and all servicemen in garrison as well as fabrics for civilian, career, and uniform applications.

I am also the immediate past chairman of the Government Textile Procurement Committee for the American Textile Manufacturers Institute, the national trade association for the U.S. textile industry.

First, I would like to applaud the Army chief of staff, General

Eric Shinseki, for his efforts to modernize the U.S. Army and bring

it into the new millennium. And, also speaking for the entire textile industry, I commend Lieutenant General Henry Glisson of DLA

for his partnership with our industry.

From his days as commander at the Defense Personnel Support

Center, now known as Defense Supply Center, Philadelphia, where

he led the efforts to modernize textile and apparel specifications to

his innovations with the best value contracting currently being employed by DLA, our industry had enjoyed a solid working relationship with him and also with the new head of the clothing and texVerDate 11-MAY-2000 12:56 Sep 26, 2001 Jkt 010199 PO 00000 Frm 00038 Fmt 6633 Sfmt 6602 E:\HEARINGS\73064 pfrm01 PsN: 73064
35

tiles at DSCP, Colonel Diamante, who has continued by reviving

the modernization effort. Will be working with him in the fall to

get some of the modernization Subcommittees started again.

If it sounds that I am pretty supportive of the military, I am because for people who spin yarn, weave fabrics, manage markets,

and executives who lead those businesses, they are a very big customer with a very big open-to-buy. And it is very important for us

as we start, because we actually have declined in membership in

our industry, to keep what’s left here.

So today, my desire is to continue to support this defense supply

team and facilitate a closer working relationship between all team

members, services, DLA, and the supplier base to keep our forces

ahead of the edge.

I would like to emphasize that the partnership between the

United States Armed Forces and the domestic textile industry is

fundamentally sound. But, like any good relationship, there are always improvements that can be made.

A foundation of this relationship is the Berry-Heffner ‘‘Buy

American’’ Amendments. Since World War II, this law has ensured

a warm U.S. industrial base for clothing and textiles, and a major

component of this base is small business. But the landscape is

changing.

Over the past 10 years the U.S. textile and apparel industries

combined have lost over 540,000 jobs, and there are new plant closings being announced every week. We have lost over a third of our

textile industry. We are now down to about 530,000 in the textile

industry. So we have lost, like I said, about 33 percent. However,

if it weren’t for the Berry-Heffner Amendment, our industrial base

would have been eroded even further.

General Henry Shelton, the chairman of the Joint Chiefs of Staff

recently spoke at ATMI’s annual meeting here in Washington. His

undergraduate degree was actually in textile technology.

Referring to the threat posed by chemical and biological weapons

to American service personnel and to our industry’s efforts to provide protective fabrics and clothing, General Shelton said, ‘‘I am

thankful that we can continue to call upon the American textile industry to help us meet that threat. You are an indispensable partner of our military forces, improving their prospects for success in

future conflicts.’’

This hearing today was prompted by the U.S. Army’s decision to

waive the Berry-Heffner Amendment in order to allow the expeditious purchase of black berets in time for the Army’s 225th birthday celebration. A more realistic deadline, as we have seen, would

have allowed U.S. manufacturers to gear up to produce these

items.

In recent years, there has been a trend towards consolidation in

all sectors of the defense supply industry, including textiles. As

small businesses are acquired by larger companies, these larger

companies may not be able to make smaller run but nevertheless

crucial items for the military. Therefore, we need to maintain a

small business supply sector to provide these vital niche products.

And, as we were talking about a little bit before, I think what

we are coming to is a challenge between having a warm industrial

36

base for our defense purposes as opposed to going into completely

commercial procurement strategies.

In conclusion, my message is basically this. U.S. small businesses

are a vital part of the military supply chain and must be maintained. And the Berry-Heffner Amendment is important to these

small businesses that supply the needs of American armed forces.

I commend the Committee for your support for a reliable defense

industrial base which needs to continue to include a strong small

business sector.

Thank you for your invitation to appear, and I would welcome

any questions you might have.

[Mr. Joffe’s statement may be found in appendix.]

Chairman MANZULLO. Thank you very much. Our next witness

is Professor Schooner, Associate Professor of Government Contracts

Law, George Washington University Law School here in Washington.

Professor.

STATEMENT OF STEVEN L. SCHOONER, ASSOCIATE PROFESSOR OF GOVERNMENT CONTRACTS LAW, GEORGE WASHINGTON UNIVERSITY LAW SCHOOL, WASHINGTON, DC

Mr. SCHOONER. Chairman Manzullo, Congressman Velazquez,

and members of the Committee, I appreciate the opportunity to appear before you today.

I believe the black beret provides a unique opportunity to consider the role of congressionally mandated policies in the federal

procurement process. Procurement statutes and regulations long

have required that the procurement system further a broad range

of social policies.

In buying black berets, Congress’s intent was clear. The military

must purchase clothing manufactured in the United States unless

the military’s needs cannot be met at market prices by domestic

manufacturers.

If the military’s needs cannot be met in a timely fashion, the

statute permits clothing purchases from foreign manufacturers.

Thus, the statutory language permits DLA to procure foreign berets if domestic capacity could not produce the berets when needed.

As the Army described its requirement to DLA, the Army needed

the berets by a certain date, June 14, 2001, and DLA acted accordingly. Yet, as this Committee has heard, no pending crisis in October 2000 required the Army to obtain millions of berets by June

14th.

Under a strict reading of the relevant statute, this self-created

exigency proudly provided sufficient legal justification to permit

purchases of foreign berets despite Congress’s wishes.

So DLA could procure the foreign berets if domestic capacity

would not produce the berets when needed. And if you look at contemporary dictionaries, you’ll see that need is defined as a lack or

something required or something desirable or something really

wanted.

So here the Army wanted a large number of berets rather quickly, and the DLA wanted to fulfill the Army’s desires. The statute

permits this behavior. But the behavior nonetheless is inconsistent

with congressional intent.

37

The Competition in Contracting Act, which we have already

heard about today, requires full and open competition in government procurements and offers a useful analogy here. There are

seven statutory exceptions to the Competition in Contracting Act

that permit the use of other than competitive procedures.

These exceptions exist because Congress did not intend government business to screech to a halt in the name of competition. But

the exceptions are narrowly construed because the acquisition planning process is intended to overcome all but the most compelling

urgency situations.

Unusual and compelling circumstances will not be found if the

agency is slow to conduct the procurement, and it won’t be found

where there is a lack of advanced planning. In other words, poor

planning which results in compressed time frames or crisis management does not justify avoidance of competitive procedures.

In the classroom I attempt to impress upon my students that, as

future lawyers, just because they can get away with something

doesn’t necessarily mean it is a good idea. This message plays out

today in the constantly evolving relationship between program

managers and contracting officers.

Program managers, such as, in this case, the Army chief of staff,

define requirements based upon missions they are tasked to

achieve. Contracting officers attempt to fulfill those requirements.

The message of the 1990s acquisition reform movement was that

customer service, pleasing the program manager, merited increased

emphasis. Accordingly, DLA bent over backwards to fulfill a need

described by the Army.

Now government buyers should have every motive to please their

customers. Unfortunately, these customers rarely appreciate the

value of congressionally mandated social policies that may delay or

deter their ability to obtain needed goods or services.

The not-so-subtle message trumpeted during the 1990s was that

it was more important to please the program manager than to adhere to long-standing procurement policies, particularly certain social and economic policies mandated by Congress.

It is not enough for our procurement professionals to focus on

satisfying the program manager or the end user. Procurement involves the expenditure of public funds, and the federal government

has been and always will be different from the commercial sector.

The federal procurement process need not be slow, ponderous, or

inefficient. And, in fact, DLA demonstrated that they can move

quickly to meet needs. But no crisis required that the Army obtain

these berets quickly. Almanacs and reference books teem with

dates commemorating births, achievements, and epochal events.

The arbitrary selection of such a date is not a compelling reason

to avoid a congressionally mandated policy. If it were, nothing

would stop program managers from routinely mandating delivery

of what they ask for by next Friday.

Better acquisition planning or, more specifically, more realistic

definition of the Army’s actual requirements could have avoided

this situation.

Mr. Chairman, that concludes my statement, and I would be

pleased to answer any questions you may have.

[Mr. Schooner’s statement may be found in appendix.]

38

Chairman MANZULLO. Thank you, professor.

The next witness is the Honorable David Oliver, Acting Undersecretary of Defense Acquisition, Technology, and Logistics.

Mr. Oliver.

STATEMENT OF HON. DAVID R. OLIVER, ACTING UNDERSECRETARY OF DEFENSE, ACQUISITION, TECHNOLOGY, AND LOGISTICS

Mr. OLIVER. Yes, sir, Mr. Chairman, distinguished members.

Let me sketch this, beginning where I—the office I occupy is in

the chain of command because we are talking about this to General

Shinseki. We have questioned him a great deal on procurement

practices.

There are four offices that report directly to the secretary and

deputy secretary of Defense in OSD. I occupy the one responsible

for all procurement.

Now, for example, General Glisson then is two levels down from

me. And, as General Shinseki said, it is a completely different

chain of command, so he is not responsible for procurement.

Now I appreciate why we are all interested in this and it is be- cause the United States Department of Defense spends $48 billion

a year on small businesses, doing business with small businesses.

And you would like to increase that amount, as would we.

Let me talk about what I was interested in this issue. I was interested when this came up as to whether or not the people working for General Glisson as well as General Glisson had followed all

the rules. So I took the person who was responsible for contracts

and some other people, a tough team, put them together and said,

‘‘I want you to go review that.’’ They did that. The results are generally what General Glisson

said, which is that they performed, in general, rather well.

The bigger question then becomes should we make some changes.

And I have made some changes as a result of this which you may

not recognize.

One is I don’t think the responsibility for the Berry Amendment

waivers should be in Philadelphia, where they are being made by

someone who is subjected to lots of different pressures and may not

understand why the Berry Amendment is important and also is not

a political person responsible to you all directly.

And so, as the general accounting office pointed out, I pulled that

back a couple of weeks ago, pulled back all the authority for that

to my office, to me.

And the deputy secretary of Defense yesterday directed the services to do the same thing, and he pulled—told them to pull back

responsibility for waivers to the Berry Amendment to the Secretary

of the Service.

And, in addition, he told them that any time they are going to

waive the Berry Amendment, they have to examine all the alternatives, and they have to present the required activity, that is, for

example, General Shinseki, with alternatives that would not require a waiver under the Berry Amendment. And then they have

to evaluate that, and only after doing so can they waive them. So

that is a significant change, and the effort was to make sure that

we were reflecting the issues I told you.

39

Secondly, the question is why, as you may ask, how many waivers do we have—I have reviewed all the Berry Amendment waivers, and there are not very many. But the question is why do you

have any.

There is one for a Muslim religious garment, and that may still

ride because I am not sure anybody’s going to make that. But there

are two others that exist. Therefore, ‘‘Tom is going to hold an open

house in Philadelphia later on this month, and we are going to do

our best to do whatever is possible to get American small businesses to make that.’’ And in Atlantic City the next month we are going to have another open house to see if we can do the same thing for substance

providers, essentially fruits and vegetables, et cetera. So we are

making every effort to eliminate the need for Berry waivers.

In addition, I have promised some members of the Congress that

once we have started the berets, that we will make sure that the

berets that are used for subsistence, in other words, the replacement berets—and you need, as Tom has said, about 1.2 million a

year—that all those will be produced in the United States.

So we hope this outreach effort will produce significant additional small businesses and will ensure future Army beret procurements will be from domestic sources.

That is all I have, sir, because I don’t want to repeat other people’s testimony. Thank you.

[Mr. Oliver’s statement may be found in appendix.]

Chairman MANZULLO. Thank you very much.

Could you put up the two page memo, the fact sheet there?

All right. Now what that fact sheet says—it is dated October 8,

1996. I can’t read it. All right. This is a fact sheet on Army berets

that comes from DLA, prepared October 8, 1996. And it states generally that DLA knew what the exact capacity of domestic production of berets were going back to 1996, which means this was nothing new. Is that correct, General Glisson?

Lieutenant General GLISSON. That is correct, Mr. Chairman. We

knew as early as 1990, again in 1996, and all the way to present

what the domestic capacity was in the United States.

Chairman MANZULLO. So you knew when the order came down

you would have to get a foreign requirement.

Lieutenant General GLISSON. When I received the requirement,

I knew that I would have to find other sources other than Bancroft,

that is correct.

Chairman MANZULLO. Well, you knew you would have to get foreign sources because Bancroft is the only domestic supplier.

Lieutenant General GLISSON. That is correct. But as we do with

all contracts, Mr. Chairman, we always go back out to try to make

phone calls to see if there is anybody else that we didn’t pick up

on.

Chairman MANZULLO. Did you ever convey to General Shinseki

that you couldn’t have the requirement fulfilled domestically by the

June date?

Lieutenant General GLISSON. Congressman, I did not. And, if I

may take a minute to explain how that communications flow went

in terms of this acquisition.

Chairman MANZULLO. Evidently, there were no communications.

40

Lieutenant General GLISSON. No, sir, that is not true. On an ordinary procurement what would happen is the buying office in

Philadelphia would communicate directly with the Army Requirement Command, whoever that is. It would never be elevated above

that level.

In this particular case, we actually had three levels going on.

Number one, I contacted and maintained direct communication

with the Army Deputy Chief of Staff for Logistics, a Lieutenant

General, who is my counterpart on the Army staff. He was designated by the Army as the point of contact for the Army on the

beret acquisition.

In addition to that, my Senior Enlisted Advisor was working with

the Sergeant Major of the Army on the wear of the beret and on

distribution. And, below that, the buying command was working

with the PM soldier, which is the requirer/generator for the Army.

So we actually had three levels of people working this and communicating on this particular acquisition to make sure we all understood what was going on at any one time.

Chairman MANZULLO. Well, you heard General Shinseki, that he

didn’t know there could not be domestic requirement until February. You heard him testify to that.

Lieutenant General GLISSON. I did, Congressman. I can’t speak

to what General Shinseki knew or didn’t know. I can only tell you

who I dealt with and who my people dealt with during that period

of time.

Ms. VELA ́ ZQUEZ. Mr. Chairman, would you yield?

Chairman MANZULLO. Sure.

Ms. VELA ́ ZQUEZ. General, why did you not notify General

Shinseki immediately that providing the June 14, 2001, deadline

would not allow for a U.S. company to produce those berets here?

Lieutenant General GLISSON. Because I was talking to his Deputy Chief of Staff for Logistics, who is his designated point of contact for the acquisition process.

It would have been extremely unusual for me to step outside the

bounds of the Army staff and go directly to the Chief of Staff of

the Army on an acquisition issue.

Chairman MANZULLO. So the members of the staff knew, but

they never told him?

Lieutenant General GLISSON. Sir, I can’t tell you that. I don’t

know.

Ms. VELA ́ ZQUEZ. This is unbelievable.

Chairman MANZULLO. Did you personally examine the waivers?

Lieutenant General GLISSON. I have.

Chairman MANZULLO. And could you take a look at them and tell

me where in the waivers it states that there be sufficient quality?

Lieutenant General GLISSON. Congressman, I would offer the following in regard to quality. I am aware of what the requirement

is to waive the Berry Amendment, and it does talk to both quality

and quantity.

I would agree with the contracting officer who said, when they

looked at the only domestic source that was available, the only

product that was available in the United States was Bancroft. Once

you had exhausted their maximum capacity——

41

Chairman MANZULLO. You are not answering my question. That

is quantity. Under the law, the waiver must specifically state three

things, the necessity to go over seas, the quantity, and the quality.

Lieutenant General GLISSON. Right.

Chairman MANZULLO. Could you show me in these waivers

where the quality is discussed?

Lieutenant General GLISSON. Congressman, I cannot because

there is no product to which to evaluate quality. You have to have

a product to evaluate quality. And once you exhaust what Bancroft

has, there is no product to make a quality determination.

Chairman MANZULLO. The product is the beret. Did you ask

these foreign firms for samples of the beret and look at them?

Lieutenant General GLISSON. We did, Congressman. We looked

at samples from all of the manufacturers who submitted under our

request for proposal.

Chairman MANZULLO. Then why didn’t you place that in the

waivers, the fact that you have examined these berets, and they

meet your quality standards?

Lieutenant General GLISSON. Sir, the first thing we did was a

technical evaluation to determine quality. Once the quality was determined, then it becomes a quantity and a timing issue.

Chairman MANZULLO. But the quality does not appear in the

waivers. The law says—and the professor can back me up—that

these waivers must state quality.

Now I understand that some of these waivers relate to contracts

on berets that have been cancelled for lack of quality, is that correct?

Lieutenant General GLISSON. That is correct.

Chairman MANZULLO. So you didn’t do your job.

Lieutenant General GLISSON. Congressman, I think the contracting officer did do their job.

Chairman MANZULLO. Well, wait a second. Wait a second.

Lieutenant General GLISSON. Yes, sir.

Chairman MANZULLO. There is nothing in these waivers to indicate the quality. And then I think just yesterday, on the eve of this

hearing, the contract is cancelled for lack of quality. And you are

telling me that the contracting officer did his job?

Lieutenant General GLISSON. Congressman, I would tell you that

the contracting officer did review quality on each and every contract. The fact that it is not so stated in the waiver, which you are

referring to, does not negate the fact that the very first thing that

the contracting officer did was look at quality.

Chairman MANZULLO. I understand that. But this is a legal requirement. You have an obligation to review these waivers, isn’t

that correct, they pass under your hand?

Lieutenant General GLISSON. Sir, I don’t have that obligation. I

have general counsel who does that.

Chairman MANZULLO. But he works for you.

Lieutenant General GLISSON. That is correct.

Chairman MANZULLO. That is correct. So, ultimately, you are the

one responsible for these contracts, isn’t that correct?

Lieutenant General GLISSON. That is correct.

Chairman MANZULLO. And you are familiar with the law?

Lieutenant General GLISSON. Yes, sir, I am.

42

Chairman MANZULLO. And the law specifically states that quality

has been examined. And don’t you think that should have been put

into the waivers?

Lieutenant General GLISSON. Sir, had that waiver required that

piece in there, I would say yes.

Chairman MANZULLO. The law required it.

Lieutenant General GLISSON. Sir, our understanding of the law

was what the law required was that we examine quality, quantity,

and reasonable price.

Chairman MANZULLO. And that is supposed to be put into the

document.

Lieutenant General GLISSON. Sir, I can’t speak to whether it

needs to be specifically in the document. I know it has to be considered.

Chairman MANZULLO. Well, I would suggest to you, General, that

because the law was violated, that the companies that made these

berets should not be paid by the United States government because

it is their obligation to review all the documents. And this document is insufficient by law. Would you agree with that?

Lieutenant General GLISSON. Congressman, I would not. I have

been advised by both Department of Defense counsel and my own

counsel that what we did was legal and appropriate and did not

violate the law.

Chairman MANZULLO. Well, Professor?

Mr. SCHOONER. As I suggested in my testimony, I guess where

I begin on this, Chairman Manzullo, is that it seems like a fair

reading of the statute that DLA did not violate the law. And, in

fact, my perception coming in was that the major problem here lies

in the requirement, not in DLA’s actions.

In addition, at least one reasonable way to interpret the statute

is that the Berry Amendment requires that, in this case, DLA determine the quality and quantity of domestic manufacture. And so,

once we determine, if, in fact, they determine that Bancroft is the

only alternative—and I am not going anywhere towards one-piece

versus two-piece beret.

Once they make a determination with regard to domestic quality

and quantity, and they put—and they make that determination,

they have pretty much fulfilled their requirement. And, on my

reading, I am not sure that what the statute requires is they make

any determination with regard to foreign-produced quantity and

quality. The exception deals with domestic quantity and quality.

Chairman MANZULLO. All right. I can appreciate that.

General, these contracts were signed on what dates?

Lieutenant General GLISSON. Congressman, I would have to go

back and look. There was one in November, one in December, and

another in February.

Chairman MANZULLO. So there were three contracts. One contract was signed November 2nd to Bancroft.

Lieutenant General GLISSON. Right.

Chairman MANZULLO. Another one to Dorothea November 2nd,

and the other one was November 6th.

Lieutenant General GLISSON. Right.

Chairman MANZULLO. Now do you know the date that the open

solicitation was released?

43

Lieutenant General GLISSON. Sir, there was no open solicitation

for those first three contracts. We waived the CICA requirements

because they were the only known source and because of the urgent and compelling—— Chairman MANZULLO. So you didn’t even ask if anybody out

there could do it.

Lieutenant General GLISSON. Sir, we did not, and that was because we had been looking at this since 1990. We knew the industry.

Chairman MANZULLO. But you didn’t ask if anybody out there in

the community, in the textile community, had the ability to do it.

Lieutenant General GLISSON. That is correct. Other then we did

make phone calls, but we did not do an open competition. That is

correct, Congressman.

Chairman MANZULLO. So you did no open competition.

Lieutenant General GLISSON. That is correct.

Chairman MANZULLO. With the open competition you would have

found out what’s available, isn’t that correct?

Lieutenant General GLISSON. Congressman, we would have

found if we had missed anything, that is correct.

Chairman MANZULLO. Now you thought it insignificant the fact

that the SBA representative in Philadelphia made an error in not

being contacted, is that correct?

Lieutenant General GLISSON. Congressman, I didn’t mean to

imply that was insignificant.

What I said was that was an administrative oversight. We require that. We demand that. It was not done. It was something

that should have been done.

Chairman MANZULLO. But it wasn’t done.

Lieutenant General GLISSON. That is correct.

Chairman MANZULLO. Why wasn’t it done?

Lieutenant General GLISSON. My guess is that in the haste of

trying to meet the Army requirement and do all of these contracting actions, there was simply an oversight.

Chairman MANZULLO. An oversight.

Lieutenant General GLISSON. That is correct.

Chairman MANZULLO. Now Mr. Whitmore says that if they had

been notified, they could have actually gone to court in order to

stop the procurement.

Is that correct, Mr. Whitmore?

Mr. WHITMORE. What I said was we could have appealed this

and raised a number of issues. One, if this is a brand new requirement that is going to be going on for a number of years, we certainly would have tried to point out that a domestic supplier

should—we should broaden the domestic supplier base. We would

also raise a number of questions on a commercial standard, which

is supposedly to be able to buy off the shelf, certainly not a 15 page

standard.

We also pointed out that the delivery dates and the quantities

here certainly were not the right size and scope to be able to deal

with small business.

If we are making a major change in what we are buying for the

Army head gear, we certainly would try to point out that domestic

suppliers, small domestic suppliers, should be involved in this beVerDate 11-MAY-2000 12:56 Sep 26, 2001 Jkt 010199 PO 00000 Frm 00047 Fmt 6633 Sfmt 6602 E:\HEARINGS\73064 pfrm01 PsN: 73064
44

cause there will be follow-on procurements for this type of thing

year after year.

If we were to appeal this, Mr. Chairman, and it would have

raised it to the highest levels over there, and these questions would

have been brought to light very early on in the process.

Chairman MANZULLO. So there would have been another opportunity for domestic requirement?

Mr. WHITMORE. Certainly. And it would also have been raised to

the highest levels of the Army, and the questions that were not

asked about are they being purchased out of the country, where

would they have been done, and what quantities certainly would

have been raised. And they would have had to address that very

early on.

Chairman MANZULLO. When was the SBA finally notified by the

DLA?

Mr. WHITMORE. I am not sure of the exact date, but I think it

was three to four months after——

Chairman MANZULLO. March 24th.

Mr. WHITMORE. Right. It was after the awards were already

made.

Chairman MANZULLO. After we sent out notice of our hearing

and after members of Congress were continually raising hell over

the fact that these berets were being made in China, Sri Lanka,

Romania, and elsewhere.

Mr. WHITMORE. Yes, sir.

Chairman MANZULLO. I have another question that I wanted to

ask, and I will try to be as short as possible, on the line of authority and the chain of command which I find—well, would you give

me a minute?

General, were you in charge of supplying the documents to me

and Ms. Vela ́zquez pursuant to our subpoena duces tecum?

Lieutenant General GLISSON. I was.

Chairman MANZULLO. I got these yesterday, last night. There

must be 400 pages in there. Could you explain to me why it took

you until last night to come up again with this latest batch of documents? I haven’t even had a chance to read them.

Lieutenant General GLISSON. Congressman, is that the first book

or the second book? I don’t know which one you have there.

Chairman MANZULLO. Try the fourth book.

Lieutenant General GLISSON. Congressman, that was a follow-on.

In your subpoena you told me to continue to provide you with documents as they occurred. And that is what we have tried to do, as

those have been developed, to continue to provide those as we put

them together.

Chairman MANZULLO. But these documents are dated prior to

the date of our subpoena duces tecum.

Lieutenant General GLISSON. Congressman, all I can tell you is,

as we locate the documents, as we find them, we try to be as open

and honest with the Committee as we can.

Chairman MANZULLO. Do you know what you didn’t give us?

Lieutenant General GLISSON. No, sir.

Chairman MANZULLO. You didn’t give us General Shinseki’s

memo that he gave to you six weeks ago that said that he didn’t

45

want to have Chinese procurement. Did you hear him testify to

that?

Lieutenant General GLISSON. Congressman, I do not have that

document.

Chairman MANZULLO. You don’t have that document?

Lieutenant General GLISSON. I do not.

Chairman MANZULLO. Where is it?

Lieutenant General GLISSON. Congressman, I have no idea.

Chairman MANZULLO. I think it is extremely relevant. I mean,

that is what this hearing is about. The chief of staff said as long

as six weeks ago to your agency that he did not want to have Chinese procurement. And you don’t have the document?

Lieutenant General GLISSON. Congressman, I have never seen

such a document.

Chairman MANZULLO. You have never seen such a document?

Lieutenant General GLISSON. Have not.

Chairman MANZULLO. Is there anybody on your staff here that

has the document?

Lieutenant General GLISSON. Congressman, I don’t know of anybody who has seen such a document.

Chairman MANZULLO. I would like you to bring all of your documents relating to this to my congressional office tomorrow, at

which time Ms. Vela ́zquez and I can go through everything to see

if there are anymore surprises there. I mean, that is a critical document.

Lieutenant General GLISSON. Congressman, I would agree. I

have not seen such a document. Obviously, you say one exists. It

has not been given to me.

Chairman MANZULLO. General Shinseki says it exists, and I believe him.

Lieutenant General GLISSON. Yes, sir. Congressman, the only

document I saw was a release that was made last evening where

General Shinseki agreed to not wear the China-manufactured

beret.

Chairman MANZULLO. Ms. Vela ́zquez and I sent you a letter

April 5th on our Small Business Committee letterhead to your liaison that states,

Pending completion of congressional investigation into the procurement of U.S.

Army berets in whole or part from non-domestic U.S. sources, in light of possible

violations of federal law and unanswered questions that may seriously undermine

the validity of the procurement, we must insist that you suspend any contracts or

orders coming from non-domestic U.S. sources.

Do you remember getting that letter?

Lieutenant General GLISSON. I do.

Chairman MANZULLO. Was there any production made in China

after April 5th?

Lieutenant General GLISSON. Congressman, there was.

Chairman MANZULLO. Did you ever answer my letter?

Lieutenant General GLISSON. Congressman, I did not.

Chairman MANZULLO. Why?

Lieutenant General GLISSON. For several reasons. Number one,

I was under a review at the time which had not been completed

by the Department of Defense.

46

Chairman MANZULLO. I am not part of the Department of Defense. I am the chairman of the Small Business Committee with

subpoena powers.

Lieutenant General GLISSON. Sir, I understand.

Chairman MANZULLO. And you did not answer this letter. You

knew there was concern. And now General Shinseki said that he

sent you a note six weeks ago, and you still continued production

in China. Is that correct?

Lieutenant General GLISSON. Sir, I have never seen a note from

General Shinseki telling me that.

Chairman MANZULLO. But you saw my letter.

Lieutenant General GLISSON. Sir, I did.

Chairman MANZULLO. And you ignored it.

Lieutenant General GLISSON. I did not ignore it.

Chairman MANZULLO. You didn’t answer it.

Lieutenant General GLISSON. Congressman, I did not ignore it

even though I didn’t answer it.

Chairman MANZULLO. You didn’t answer the letter.

Lieutenant General GLISSON. No, sir.

Chairman MANZULLO. Don’t you have an obligation to answer

letters from members of Congress?

Lieutenant General GLISSON. Sir, I do. The Office of the Secretary of Defense said it was fine—— Chairman MANZULLO. Did he tell you not to answer our letter?

Lieutenant General GLISSON. Sir, the instructions I had were

they were trying to gather all of the facts to give you a proper response and that we should not provide an interim until that was

concluded.

Chairman MANZULLO. We got no response.

Lieutenant General GLISSON. Right.

Chairman MANZULLO. This Committee got no response, none.

And it is apparent that, until the U.S. Congress became active in

this situation, you wouldn’t have done anything. In fact, Mr. Oliver, what we have got here on this designation of people who have

the authority to sign the Berry waiver were all over the place on

this.

First, we have somebody at DSC in Philadelphia. Would you put

up one of the waivers? There it is right at the bottom there, the

one waiver that is dated November 11, 2000, that document right

there. Do you see that?

Why don’t you put it so Mr. Oliver and the general can see it.

That is one of the waivers signed by George Allen. Now who is

George Allen?

Lieutenant General GLISSON. George Allen, Mr. Chairman, is the

Deputy at the Defense Supply Center in Philadelphia.

Chairman MANZULLO. All right. And then read underneath that

date. Read to us what that says. What is typed in underneath and

who signed it?

Lieutenant General GLISSON. Sir, on the other side is Mr. William Kenny, who is my Senior Procurement Executive.

Chairman MANZULLO. And what is the date of that?

Lieutenant General GLISSON. The date on that is 23 March 2000.

Chairman MANZULLO. And what does it say?

Lieutenant General GLISSON. I can’t see that far.

47

Ms. VELA ́ ZQUEZ. 2000 or 2001?

Chairman MANZULLO. 2001.

Lieutenant General GLISSON. 2001.

Chairman MANZULLO. And what does it say?

Lieutenant General GLISSON. ‘‘Reviewed and approved.’’

Chairman MANZULLO. Reviewed and approved four months after

it was signed.

Lieutenant General GLISSON. Yes, sir.

Chairman MANZULLO. Signed by somebody who had no authority

in the first place, is that correct?

Mr. Oliver.

Lieutenant General GLISSON. Not to my understanding, Mr.

Chairman. Mr. Allen was serving in the capacity as Acting Commander. And, under the Directive which we have, he had authority

to sign that.

What Mr. Kenny did is, when I was given the authority from Mr.

Oliver at a later date, what we did is, we went back. I asked Mr.

Kenny to take a look at the records and to review to see if there

had been any wrongdoing on the part of the Supply Center in

Philadelphia in the acquisition strategy. His comment there and

his signature indicates he did review those and that he approved

what they had done.

Chairman MANZULLO. That he reviewed the contract?

Lieutenant General GLISSON. He did.

Chairman MANZULLO. Or that he is trying to ratify the validity

of this?

Lieutenant General GLISSON. No, sir. He reviewed the entire acquisition process and ratified exactly the process that had——

Chairman MANZULLO. Did he sign every single document with

that same type of signature?

Lieutenant General GLISSON. No, sir, he did not.

Chairman MANZULLO. But just the waivers?

Lieutenant General GLISSON. That is correct.

Chairman MANZULLO. And, General, I mean, it is obvious that

whenever there is an investigation of documents, and the documents are shown to be true, the person who did the investigation

doesn’t sign off on the bottom and say, ‘‘This is okay.’’ You don’t

sign documents in that manner.

Lieutenant General GLISSON. Congressman, what Mr. Kenny was

attempting to do was to show that he had reviewed the files, concurred with the actions taken by the Supply Center in Philadelphia. And this happened to be the document that he signed to so

ratify.

Chairman MANZULLO. What he was attempting to do was to give

retroactive ratification to the document.

Lieutenant General GLISSON. That is not correct, sir.

Mr. OLIVER. He was attempting to follow my guidance, Mr.

Chairman.

Chairman MANZULLO. And your guidance was?

Mr. OLIVER. By the way, I had my attorney write down what had

happened. They were researching the Berry Amendment for the

purpose of drafting language for a potential legislative initiative.

And, during the course of the research, they were unable to locate

48

a copy of the written delegation of DLA for the authority to make

determinations. They couldn’t find a paper trail.

Chairman MANZULLO. There is no—there is no document on written authority for the Berry Amendment.

Mr. OLIVER. They could not find a paper trail. The people who

had been involved told me that for more than 11 years Philadelphia had exercised that waiver authority, and there were certainly

indications that people did not think they were doing things dishonestly.

Chairman MANZULLO. This isn’t a matter of honesty. It is a matter of competence, chain of command.

Mr. OLIVER. Yes, sir. I understand.

Chairman MANZULLO. And authority.

Mr. OLIVER. So what happens is they said, ‘‘We want a letter of

delegation.’’ 1 February they came up to me and gave me a draft

letter. And, as you can see, because I made pen and ink changes,

I was thinking at the time that I did not want to give authority

for waiver of the Berry Amendment down further than someone

that I knew well. And so I limited it at the time to General Glisson

and his procurement executive.

Chairman MANZULLO. That would be somebody down further

than the one who had signed it, isn’t that correct?

Mr. OLIVER. No. No.

Chairman MANZULLO. George Allen?

Mr. OLIVER. No, he is down further. No, sir.

So what happens, Mr. Chairman, is when we looked at the Berry

Amendments—and, first of all, we reviewed all of them to see

where they were there—I said to Tom, ‘‘Under the new guidance,

I would like your procurement executive to go back and re-sign all

those if he agrees with them because I would like to find out

if——’’

Chairman MANZULLO. To re-sign and thus ratify the documents,

is that correct?

Mr. OLIVER. Well, the real purpose is to see if there are waivers

in force that shouldn’t be. In other words, I would like someone

more senior to look at that and say that.

Chairman MANZULLO. In other words, to make sure the documents were legal.

Mr. OLIVER. No, to make sure that he agreed with the decisions.

My attorneys believe the documents are legal.

Chairman MANZULLO. Wait a second. There is no document

showing who had the authority to sign, is that correct, that George

Allen had the authority to sign.

Mr. OLIVER. That is correct.

Chairman MANZULLO. Would you agree on that? So he signs.

Congress gets involved. We start asking inquiries. We send a letter

dated April 5th. There is no authority. There are all kinds of problems. No one answers it. Then, all of a sudden, there is this flurry

of activity to find somebody who has the authority to do so.

Mr. OLIVER. The time frame doesn’t hold, does it, sir, because in

November they came to my office saying that they could not find

the paper trail. And I signed that waiver authority on 1 February

and was distributed—— Chairman MANZULLO. But why did that take so long?

49

Mr. OLIVER. A good question, sir, and I can ask——

Chairman MANZULLO. You knew February 1st there was no authority, no signing authority?

Mr. OLIVER. Actually, what I did was I knew there wasn’t a piece

of paper, and I signed a piece of paper to give them that.

Chairman MANZULLO. But that wasn’t until after the person

down the line who had no authority or questionable authority had

already signed and contracts had been awarded and production

started.

Mr. OLIVER. You wouldn’t believe this at the time, but we

weren’t focused on berets at the time, nor did I have any idea that

they were doing—this is just a matter of routine. In fact, I have

a paper to that effect.

Chairman MANZULLO. This is routine? The authority to waive

the Berry Amendment is a matter of routine?

Mr. OLIVER. No. It is a decision. It is not related to the——

Chairman MANZULLO. The statute says that only the secretary or

his designee can sign it.

Mr. OLIVER. That is correct.

Chairman MANZULLO. This is not routine. This is authority to

sign a contract, to sign a waiver.

Mr. OLIVER. Yes, sir. And I think, in fact, the fact that I marked

this letter up and changed it shows that I was thinking about that

very carefully.

Chairman MANZULLO. Evidently, thinking about it from November until February.

Mr. OLIVER. It landed on my desk.

Chairman MANZULLO. Ms. Vela ́zquez please.

Ms. VELA ́ ZQUEZ. I regret, Mr. Chairman, that the witnesses were

not put under oath. Do you hear me?

Chairman MANZULLO. I am sorry?

Ms. VELA ́ ZQUEZ. I regret the fact that, you know, the witnesses

here are not being put under oath.

General, I am going to ask the same question that I asked to

General Shinseki. And this is in regard to the justification for other

than full and open competition, the comment that was there that

says that the Army will be seriously injured if this action is not approved.

He said that he couldn’t comment because this was the first time

that he saw that. So I guess this is not the first time that you saw

that.

Lieutenant General GLISSON. That is not the first time I have

seen that. That is correct.

Ms. VELA ́ ZQUEZ. So what is your reaction to that?

Lieutenant General GLISSON. Congresswoman, that the wording

leads one to believe that there would be serious harm or damage.

And our opinion, based on the requirement from the Army, the

chief of staff had said he had an urgent and compelling reason to

have these ready in June. I had no reason, nor did any of my people have any reason to question that requirement.

Ms. VELA ́ ZQUEZ. Professor Schooner.

Mr. SCHOONER. Yes.

Ms. VELA ́ ZQUEZ. Would you please comment on that?

50

Mr. SCHOONER. I guess what I had hoped that my testimony

would suggest is that at some point in the process it would be nice

if someone asks that question.

One of the most difficult issues that frequently arises in any procurement is the tension between the procurement people, the contracting officers or, in this case, DLA, and the requirement’s determiners, the program manager, the people who say, ‘‘I want this.’’

It seems to me that in a good dialogue in a working organization

it would be perfectly reasonable for someone at DLA to, as we

might say, push back and ask the question, ‘‘Is this necessary.’’

Similarly, I think it is perfectly reasonable to expect from DLA’s

perspective that someone in the chief of staff’s office, whether they

are general counsel’s office or some of their staffers, would have already asked those reasonable questions.

But the concern here is that it appears that no one asked the

question or, if they did, the question wasn’t asked in a manner that

it got the attention of the people that realized or would have realized that this was going to be a problem.

Ms. VELA ́ ZQUEZ. Thank you.

General, I am trying to get a handle on the number of berets

that you were buying with the Berry Amendment Waiver. My understanding is that the immediate need is for 1.3 million berets so

that the June 14th deadline can be met.

Lieutenant General GLISSON. That is correct.

Ms. VELA ́ ZQUEZ. An additional 1.3 berets will be required so that

each soldier can have a second beret by October of this year. A

third 1.3 million are sustaining berets, meaning that they will be

used for new Army personnel and in case berets get torn or damaged in some way.

My question is, this adds up to 3.9 million, and yet you are ordering 4.17 million, an additional 860,000 beyond your immediate

need. In fact, it could be argued that your immediate need is only

1.3, isn’t it?

Lieutenant General GLISSON. Not quite, Congresswoman. If I

may explain what the additional buy is for.

Ms. VELA ́ ZQUEZ. Would you please explain to me why are you

using the urgency waiver of the Berry Amendment for all these

4.76 million?

Lieutenant General GLISSON. Yes, ma’am. There are three increments really. The first 1.3 gets to the issue of the first beret to

every soldier, another 1.3 to get the second beret issued.

The wear-out rate on a beret is about—you are going to run

through those on an annual basis, so if you issue 1.3, you are going

to use up 1.3 million berets in a year, so you have to have a replenishment stock for that.

It is not quite so simple in pure numbers because you have size

differences and tariffs that you have to meet. So you need additional quantities in order to cover the large number of sizes that

you have.

In addition to that, you also have distribution issues that you

must consider. These are soldiers stationed around the world, and

the issuing sites for these are stationed at various places. So you

have to have quantities of sizes at all of these places.

51

And then the third part of this is that you have to offer sale of

these items into the Army/Air Force Exchange for soldiers who lose

them and/or somehow damage them, and it is their own fault, that

they have an opportunity then to either go buy, or someone else

can go buy those.

That total requirement adds up to about 4.8. They are all part

and parcel of the same requirement document that we had received

from—— Ms. VELA ́ ZQUEZ. General?

Lieutenant General GLISSON. Yes, ma’am.

Ms. VELA ́ ZQUEZ. The rationale to use the waiver—— Lieutenant General GLISSON. Yes, ma’am.

Ms. VELA ́ ZQUEZ. It was that you needed them to be ready by

June 14th.

Lieutenant General GLISSON. That is correct.

Ms. VELA ́ ZQUEZ. Did you need all of them, 4.76 million by June

14th?

Lieutenant General GLISSON. I did not.

Ms. VELA ́ ZQUEZ. Thank you.

Ms. Goodman, I find it really ironic that your business was

awarded an Innovative Business Partner Award by the DLA and,

in fact, by General Glisson, and yet the DLA did not want to consider your innovation to the beret to make a more updated product.

How do you respond to that?

Ms. GOODMAN. Well, it is my understanding that the Army has

the final decision on what the beret looks like, not DLA. So I am

not sure that that really holds true that DLA didn’t want to. But

I find it ironic though that they are the buying activity for the

Army, and the Army still refuses to look at that.

I did want to add something though, if I may on what you were

talking about the waiver.

Ms. VELA ́ ZQUEZ. Mm-hmm.

Ms. GOODMAN. Atlas, at a cost of $20,000 in legal expenses, on

November 24th, as outlined in my timeline, filed a protest exactly

based on what you just brought up, the fact that there was a

known quantity. And this protest originally was filed with the

GAO.

But, however, on December 7th, the DLA issued an authorization

for contract award and performance notwithstanding a protest. And

in that they basically said that they couldn’t wait for the GAO’s decision on my protest, so they awarded the contracts. So they were

aware of that.

Additionally, when they did that, I turned around and filed an

injunctive action in the Court of Federal Claims, challenging the

awards based on both the violation of the CICA, the Competition

in Contracting Act, and the Berry Amendment.

Ms. VELA ́ ZQUEZ. Thank you, Ms. Goodman.

Mr. David Oliver, I am happy to see you again. Now that you

have admitted, and you said that you have pulled the Berry

Amendment waiver authority back to your office from Philadelphia,

my question is, would you have approved these Berry Amendment

waivers for the beret procurements?

Mr. OLIVER. I don’t know, Congresswoman. It is really hard to

say in retrospect and for all the reasons that we have talked about.

52

What we tried to set up with new guidance that went out is that

you have to evaluate the alternatives. And you essentially do a

three step process to determine if there is somebody who will come

in, and then you go back with the alternatives. For example——

Ms. VELA ́ ZQUEZ. Mr. Oliver, excuse me.

Mr. OLIVER. I don’t know the answer to that.

Ms. VELA ́ ZQUEZ. With all this time, and you don’t have an opinion of this?

Mr. OLIVER. Yes, ma’am.

Ms. VELA ́ ZQUEZ. You didn’t have time to evaluate this?

Mr. OLIVER. No. I think it is very complicated because of what

the chief of staff said about he actually needs the berets, and there

are really good reasons that he made that decision whether or not

everyone agrees. And he wanted the berets, and he wanted to buy

them for what I happen to think are tremendously important reasons to the integrity of the Army.

Then the question becomes, should we do a different design than

the other berets in the world—and these are fighting berets—or

should we do this different design. I don’t know the answer because

we didn’t go through that process. So I am giving you an honest

answer. I don’t know the answer.

Ms. VELA ́ ZQUEZ. Mr. Oliver, I would like to ask you a question

that is related to procurement but not to the beret procurement.

Mr. OLIVER. Yes, ma’am.

Ms. VELA ́ ZQUEZ. Would you please read the highlighted portion

of the letter that you sent to Chairman John Warner?

Mr. OLIVER. ‘‘I believe strongly the department must remain the

final authority on how to structure its procurements as it is in

other matters that relate to the accomplishment of its mission,’’ a

letter of November 17, 2000, having to do with bundling.

Ms. VELA ́ ZQUEZ. Correct.

It appears, Mr. Oliver, from your statement in this letter to Senator Warner that you do not believe that Congress has jurisdiction

over Defense procurement matters as they relate to small businesses.

Mr. OLIVER. Absolutely not. You certainly have jurisdiction, and

that is the reason I am here. I mean, all I said in this case is I

don’t think you should change rules on bundling. It is just, as in

the Berry Amendment, I was trying to tighten bundling up to

change things so you would not have to change the law so we could

remain responsive to the soldier.

We went to Desert Storm. They had to go out and do a Berry

waiver to provide tents so the Army had enough tents to actually

fight the war. Now the Army did not buy them in the end, but they

needed to be prepared.

I don’t want to set up situations in which you have something

like the berets. We want to fix those problems so we don’t make

war-fighting problems.

Ms. VELA ́ ZQUEZ. You want to fix. I am going to give you some

numbers so that you realize that you haven’t fixed. And let me just

say this to you. As I said it before when you came before our Committee, you know, when the Department of Defense misplaces

small businesses whom we all know are the primary employers in

53

this country, this Committee is going to have and to tell you what

to do.

When the numbers of contracts to small businesses are decreasing by nearly 35 percent over the past three years, and the department is telling us that purchasing berets is urgent and implies that

national security is at stake, this Committee is going to tell you

what to do.

I have seen nothing from your agency so far that leads me to believe that you care even the slightest bit about small business participation in Department of Defense contracts. This is even confirmed by the LMIS study.

I want for you to tell me, Mr. Oliver, don’t you think that if a

contract bundle doesn’t show cost savings, it should be unbundled?

Mr. OLIVER. I think, as you know, that you should not do a bundling unless you can think that you are going to get a cost savings.

Ms. VELA ́ ZQUEZ. General Glisson, I believe that the reason contract bundling as well as the beret procurement are problematic is

because the underlying procurement processes within the DOD are

flawed. Because of this, this Committee is going to stay and deal

with this until these laws are corrected. In light of this, can you

tell me, General, has the DLA set an 8(a) program goal?

Lieutenant General GLISSON. We have.

Ms. VELA ́ ZQUEZ. What goal have you set?

Lieutenant General GLISSON. I don’t recall the number right

now. I don’t know the answer to that, Congresswoman. I will have

to provide it for the record.

Ms. VELA ́ ZQUEZ. You knew that we would be discussing today

procurement processes in the DOD.

Lieutenant General GLISSON. I did. I did.

Ms. VELA ́ ZQUEZ. And you come here, and you are not prepared

to answer that question?

Lieutenant General GLISSON. I cannot.

Ms. VELA ́ ZQUEZ. So, Mr. Chairman, I will request from the general to submit a written answer to my question, to that and other

questions that I will be submitting to you——

Chairman MANZULLO. I think the general stated that he is willing to do that. Ms. Vela ́zquez, the procurement is a little bit different than 8(a) here. We are dealing with this particular situation.

I will give you plenty of latitude, but just keep that in mind.

Ms. VELA ́ ZQUEZ. General Glisson, how many hours of training do

contracting officers in your command receive regarding the Berry

Amendment?

Lieutenant General GLISSON. They don’t take specific classes on

Berry Amendment. It is part of the overall acquisition training

which all contracting officers receive. It varies at what level they

are and how much training and experience they have had.

Ms. VELA ́ ZQUEZ. General, are you aware that in 1998 DOD’s inspector general report said that 59 percent of contracts issued in

fiscal year 1996 and ’97 did not include the proper contract

clauses?

Lieutenant General GLISSON. I am, Congresswoman. I would also

point out though that that report highlighted the military services

and did not include the Defense Logistics Agency.

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman.

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Lieutenant General GLISSON. So I would like to be careful that

we are not included in those numbers.

Chairman MANZULLO. Would you yield on that?

Ms. VELA ́ ZQUEZ. Sure.

Chairman MANZULLO. I just have to put this in general. This is

a summary of recommendations by the Office of Inspector General,

dated October 29, 1998. ‘‘Summary of Recommendations. We recommend the director Defense procurement——’’

Lieutenant General GLISSON. That is not me, Congressman.

Chairman MANZULLO [continuing]. ‘‘Issue guidance, emphasize

the requirements to incorporate and enforce the Buy American Act

and Berry Amendment provisions and clauses and solicitations and

contracts for clothing and related items. The guidance should also

remind contracting officers, when they procure incidental non-federal supply schedule items, that they should verify that the procurement complies with the Buy American Act.

‘‘We recommend that the Deputy Undersecretary of Defense Acquisition Reform ensure that the Defense Acquisition University

stress the ramifications of not buying with the Buy American Act.’’

The Deputy Undersecretary of Defense for Acquisition

Reform——

Mr. OLIVER. Works for me.

Chairman MANZULLO. Did he ever institute this report?

Mr. OLIVER. Yes, she did. Yes, she did. On 30 September 1998

she got a report back from the Defense——

Chairman MANZULLO. Which would have been two months before

this report was issued.

Mr. OLIVER. What happens is, when the report is issued, of

course, as you know, you pass these things around, and, if people

are really doing their job, they, of course, take action before it even

comes out if they agree with it.

Chairman MANZULLO. If they had been doing their job, we would

have had the written authority.

Mr. OLIVER. Mr. Chairman, the answer to your question is yes,

they did issue the guidance, and it is taught at the school, sir.

Chairman MANZULLO. Who are the contracting officers referred

to in this? Are they the ones that work with DLA?

Mr. OLIVER. All the contracting officers.

Chairman MANZULLO. It says, ‘‘Additional instructions should

emphasize the important responsibility that contracting officers

have to incorporate and enforce the Buy American Act.’’

Mr. OLIVER. Yes, sir.

Chairman MANZULLO. The Berry Amendment Act.

Why don’t you finish with——

Ms. VELA ́ ZQUEZ. I am finished with my questions, Mr. Chairman.

Chairman MANZULLO. Okay.

Then Mr. Bartlett? I am sorry.

Mr. BARTLETT. Thank you very much.

Mr. Oliver and General Glisson, can I assume that you now have

an appreciation of the intensity of the commitment of our Committee to protect small business interests?

Lieutenant General GLISSON. Absolutely, Congressman.

Mr. OLIVER. Yes, sir.

55

Mr. BARTLETT. Okay. We don’t need to pursue that any further.

You understand that we take our responsibility very seriously.

Mr. Oliver, who first became aware that there was not a defensible paper trail for the waivers that were made on November 1

and December 7, and when did that happen?

Mr. OLIVER. Let me read this. It doesn’t say. It says they were ‘‘unable to locate a copy of the written delegation to DLA of the authority. The DLA federal regulations supplement, however, for

many years has provided delegations of authority, et cetera.’’ Since they couldn’t do it in November 2000, it says the acquisition procurement executive of DLA submitted a formal request. It

doesn’t say who it was.

Mr. COOPER. Mr. Bartlett, I think I can answer your question

more specifically.

Mr. BARTLETT. Yes, sir.

Mr. COOPER. I looked at the e-mail traffic that surrounded all

this. And I think it was on November 2nd that the question was

raised by DLA headquarters about whether Philadelphia had the

authority. That is where it started. And then on November 8th the

request letter was sent to Mr. Oliver’s office.

Mr. BARTLETT. What sort of paper trail is there for this delegation of authority? The statute gives that authority to only two individuals, is that correct?

Mr. OLIVER. The Secretary of Defense and the military service

secretaries, sir.

Mr. BARTLETT. Or their designee.

Mr. OLIVER. Right.

Mr. BARTLETT. Okay. So that is two levels of—okay, Secretary of

Defense or—— Mr. OLIVER. My lawyers tell me it is to whomever that is delegated down, sir.

Mr. BARTLETT. When was this delegated to Philadelphia? Is there

a paper trail for that, or was this just an assumption that was

made in the past?

Mr. OLIVER. That is what I am saying. The people could not find

the paper trail. When they looked back, they knew it had been assumed for at least 11 years, but they could not find a paper trail,

which is the reason they asked me to provide that. Now I chose,

as you know, not to delegate it to Philadelphia.

Mr. BARTLETT. Understand. The next question I want to ask is

one that just would appear there ought to be a reasonable answer

to. Somebody must have asked themselves did General Shinseki

really want these berets that bad.

Somebody should have told him, ‘‘General, I am not sure that the

juice is worth the squeezing here. If you are going to get those berets by June 14th, you are going to have to procure a whole bunch

of them outside the country, and a bunch of those are going to be

made in China. General, is that really what you want?’’ Now it is

incomprehensible to me that somebody didn’t have those thoughts.

Mr. Oliver, do we have such a structured system that nobody

down the line could raise that question? I think General Shinseki

was very honest when he told us that he didn’t know they were

being procured overseas. He didn’t know they were being procured

in China. But somebody sure as heck knew that.

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Mr. OLIVER. I am sure he didn’t. And, as General Glisson has

told you, he was informing people at the three-star level in the

Army and General Glisson’s staff at the senior enlisted E–9 level

and also through some other—in other words, I don’t know where

that broke down, sir.

Mr. BARTLETT. But you don’t think that there were more than

one person who wondered whether or not this was a wise course

of action to be procuring berets from overseas and particularly from

communist China, that our military people, when they took that off

their heads, were going to see a ‘‘Made in China’’ on it, and that

was going to be a problem?

What I am looking for is a way of providing an open door. I

worked at IBM for eight years. We had an open door policy. If I

had a serious enough question, I could go to Tom Watson himself.

Mr. OLIVER. Right.

Mr. BARTLETT. And there would be no recriminations for that.

Can we have kind of an open door policy so when something—and

this was dumb. I think, looking back on this, procuring these

things overseas and from China was dumb. And I think that General Shinseki would have said, ‘‘Yeah, let us not do that.’’

But, apparently, the system did not permit that several people

who must have had that question in their mind—because we don’t

have a bunch of dummies in procurement. And several people must

have had that question in their mind, and the structure of the system did not permit them to voice that, is that correct?

Mr. OLIVER. Yeah. And when Alan did the review for me, a whole

bunch of e-mails came up of conversations, and you could see that

people were doing that. And it obviously didn’t get up to General

Shinseki, didn’t get to me. That is my thought on pulling back the

waiver authority to me, that it will have to get up to me then.

You know, if I am aware of each of the waivers that are made

and become the decision authority, then, obviously, people bring

their thoughts and complaints to me. So I agree that is what happened. That is my fix to it.

Mr. BARTLETT. I have a concern about a chain of command that

is so rigidly adhered to that if one person—and I can understand

that any one person may not have had this question in his mind

because he may not have had all the information.

But a chain of command that prohibits this kind of concern from

coming up so that it gets to you or General Shinseki, if it had gotten to anybody at a responsible level, I think that the plug would

have been pulled on this a long time ago, wouldn’t it?

Mr. OLIVER. Well, we certainly have cancelled some contracts

and cancelled some other things and spent a great deal of time on

this, sir, since we became aware of it.

Mr. BARTLETT. But that was only when the fire was burning

pretty hot, wasn’t it?

Mr. OLIVER. Yes, sir.

Mr. BARTLETT. Can we do something so that this kind of thing

in the future doesn’t happen because we have a system which permits people, at whatever level they are, if they have a real serious

concern, an anonymous suggestion box or something?

Mr. OLIVER. Yes, sir.

57

Mr. BARTLETT. ‘‘Hey, Chief, this is dumb.’’ Can’t we have some

way so that this kind of thing won’t happen again because I am

certain there were a whole bunch of people out there—e-mails

verify that—that had some serious concerns about whether the

juice was going to be worth the squeezing in this operation.

Mr. OLIVER. Yes, sir.

Mr. BARTLETT. Well, we would like a report, I think, as to how

you might implement such a system so that we can avoid this in

the future.

Mr. OLIVER. I will give you one. I will give you one, sir.

Chairman MANZULLO. If you would yield, it is pretty simple. The

head of DLA just calls the man who made the orders. That is how

simple it is.

Mr. OLIVER. It is even more simple now because, since it has to

come up to me, I can do this. I mean, do you understand? What

I am doing is I am taking the responsibility up to the political appointee who is confirmed by you all who has to answer to you.

Chairman MANZULLO. You took direct action on that.

Mr. Pascrell.

Mr. PASCRELL. This is a civics lesson. It really is. Of course, it may not rise to the level of $700 hammers, but the more we talk,

it is getting there.

The only document that we have from Walter Holten, who is

colonel of the infantry, a memorandum he sent to Paul Diamante,

Director of Clothing and Textiles, Defense Supply Center Philadelphia.

This is the order for, when you add it all up, first requirement

for 1.3 million berets to be available on the April 14, 2001. The berets would be issued to how many active soldiers, how many reserve National Guard soldiers. The additional quantity required is

for an appropriate size tariff for the force. Now this went November

the 1st.

Now these are followed by three contract actions. And if I listened to Mr. Cooper correctly—correct me if I am wrong, Mr. Cooper—you say on page one of your testimony that the first three

contract actions in November 2000 were taken by DLA without

providing for full and open competition as required by the Competition in Contracting Act of 1984. You stand by that statement?

Mr. COOPER. That is correct. Yes, sir.

Mr. PASCRELL. And what do you think of that statement, General?

Lieutenant General GLISSON. That is an accurate statement,

Congressman.

Mr. PASCRELL. That is an accurate statement.

Lieutenant General GLISSON. Yes, sir.

Mr. PASCRELL. That is what he said.

All right, the second point, the quality of work. We have had a

review of what’s been already produced, and the quality of work is

not up to standard. That is interesting. And it would seem to me

that because of expediency we have not only changed what is law

or not regarded it, but the results of that have been a product that

is not acceptable. Now who is going to eat that?

Mr. OLIVER. They are. That is one of the key things perhaps that

I meant to bring up when they were talking about earlier because

58

she asked someone else. You have to realize that the quality that

is not accepted is not paid for. And the United States government

is not bearing that, the company has to eat it.

Mr. PASCRELL. So we don’t have to worry about that?

Mr. OLIVER. Absolutely do not at all.

Mr. PASCRELL. The company has agreed.

Mr. OLIVER. It doesn’t matter whether they agree.

Mr. PASCRELL. Oh, it doesn’t?

Mr. OLIVER. They don’t get the money.

Mr. PASCRELL. Well, that leads me back to the general’s question. You were starting to get into the conditions that you reviewed

in factories where these are going to be produced, and I am particularly interested in that.

And I realize that there are 3,000 sweatshops in the city of New

York itself where people work 120 hours a week. You said that

there were no child labor laws being broken in any of these factories where these berets would be produced. I think you said that.

Lieutenant General GLISSON. Congressman, I think what I said

is I asked the Defense Contract Management Agency to visit these

plants and make frequent visits to ensure that they complied with

local child labor laws.

Mr. PASCRELL. The local child labor laws?

Lieutenant General GLISSON. That is correct.

Mr. PASCRELL. You mean in the country that the factories existed

in?

Lieutenant General GLISSON. Congressman that is correct. And

we had taken their local labor laws and compared them to our own.

And what we found is they met the minimum standards that we

would ask in this country.

Mr. PASCRELL. Do you know where the berets were manufactured

in China?

Lieutenant General GLISSON. Yes, sir, I do.

Mr. PASCRELL. Do you have a list of those?

Lieutenant General GLISSON. Sir, there is only one manufacturing plant in China.

Mr. PASCRELL. And who visited this particular factory?

Lieutenant General GLISSON. The Defense Contract Management

Agency sent a representative there, and they have made a visit

since then.

Mr. PASCRELL. Can you tell us what wages were paid at these

factories?

Lieutenant General GLISSON. I cannot.

Mr. PASCRELL. Could you tell us whether there was any overtime

involved in these factories?

Lieutenant General GLISSON. I cannot, Congressman.

Mr. PASCRELL. We have a Kathy Lee syndrome here. Nobody

knows where anything is done.

Lieutenant General GLISSON. Sir, the Contract Management

Agency can give you those numbers. I just don’t know what they

are because that is what they do for a living.

Mr. PASCRELL. Well, we request through the chair those numbers

to see where these berets were being made, whether it be China

or any other foreign country.

59

Chairman MANZULLO. I would like to have a list of where every

beret has been made, the city, the company, how much money was

paid on each contract, and the date that each was made, especially

any payments made after April 5th.

Lieutenant General GLISSON. Okay.

Chairman MANZULLO. The date which you got the letter which

you refused to answer to this date.

Lieutenant General GLISSON. Okay.

Mr. PASCRELL. You say, General, that only 10 percent of the garments made for our men and women in the forces that protect us

every day are made overseas, is that correct?

Lieutenant General GLISSON. That is not exactly what I said,

Congressman. I think what I said was 90 percent are made by U.S.

companies, with U.S. products in the United States, which means

there are 10 percent that are not fully total U.S. components.

Mr. PASCRELL. Well, could you have a list of those products that

are made outside of this country?

Lieutenant General GLISSON. I would have to——

Mr. PASCRELL. Now I am saying can you provide for this Committee all of those items that are manufactured for our armed

forces, the people who defend us day in and day out.

Lieutenant General GLISSON. Right.

Mr. PASCRELL. I am not talking about any armament. I am talking about the very uniforms that they wear, from fatigues, hats,

boots. Ninety percent of that is made in the United States of America, you are telling us today.

Lieutenant General GLISSON. That is correct.

Mr. PASCRELL. So I want to know what about the 10 percent.

Lieutenant General GLISSON. I can provide that, Congressman.

Mr. PASCRELL. And would you do that for the Committee and

have that as soon as possible? We would like to review that to see

what other things we could discover, Mr. Chairman, that we don’t

know anything about.

Lieutenant General GLISSON. I certainly will.

Mr. PASCRELL. I am sorry. Go ahead.

Chairman MANZULLO. For the record, we are requesting that you

furnish us the letter stating the location of manufacture of all

items furnished to the DLA that are not made in this country.

Lieutenant General GLISSON. I understand, Congressman.

Chairman MANZULLO. Okay. And then we will probably have follow-up letters from that, which I trust you will answer, unlike my

April 5th letter, which has still not been answered.

Lieutenant General GLISSON. I will, Congressman.

Mr. PASCRELL. Mr. Chairman, there has obviously been an avoidance of competitive bidding here. I mean, it is clear. And I would

like the Committee to reserve through you, the chair and ranking

member, the ability to bring folks back here under oath to discuss

the question of bidding and to discuss the question of how, through

avoidance, how we have avoided competitive bidding in not only

this particular matter, but any other matter.

Chairman MANZULLO. I don’t know about the issue of under

oath, but let me put it this way. Every member of the Committee

will have 21 days within which to submit questions. And if we

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don’t get responses within 14 days, I will very seriously consider

another round of subpoenas plus the people testifying under oath.

Mr. PASCRELL. Well, I think, Mr. Chairman, that the question of

without providing for a ‘‘full and open competition’’, again, Mr. Cooper, I think is devastating, I think needs thorough examination.

And it is not very different than what members from both sides of

the aisle have said in the last four years in this Committee on various occasions beyond the subject of putting contracts together,

simply understanding the bidding process and the competitive nature or the lack of it.

And we are not going to accept that. I can say that, and most

of the members of this Committee could say I voted for the four defense budgets that I had to vote for since being here. So I unequivocally support the military.

But we are not going to accept what we have heard today. And

it is got to go beyond this Committee. The American people aren’t

going to accept it. And for us to be a blink and a wink with the

Chinese authorities and then give them contracts that our armed

forces will be using is an insult to every man and woman in the

armed forces. There is no question about it.

Morale? You are talking about the boosting of morale when you

take off the hat made in China? Tell me how that works. Tell me

what I am missing, General, please. I will listen. I sympathize and

I respect your position. I respect you as a person. Tell me what I

am missing when I say that. You tell me.

Lieutenant General GLISSON. Congressman, I can’t tell you on

the wear of the beret. That is an Army decision. I can only tell you

that we told the Army. We were very vocal with the Army on

where we would have to buy these berets in order to meet the requirement.

I can tell you that I feel like we did that at the appropriate levels

and that we thought we were acting in the spirit of the law and

in the procurement practices.

Chairman MANZULLO. Would you yield?

Mr. PASCRELL. Sure.

Chairman MANZULLO. Do you have documents to that effect? Did

you put anything in writing to those individuals?

Lieutenant General GLISSON. Sir, we have memoranda from both

meetings, and we have other memorandums which they produced

which so indicate.

Chairman MANZULLO. Those were not furnished to us either.

Lieutenant General GLISSON. Sir, they should have been in book

one. If they are not, I can——

Chairman MANZULLO. Should have been, would have been.

Lieutenant General GLISSON. I will check, sir. They should have

been there.

Chairman MANZULLO. I am sorry. We do have them.

Lieutenant General GLISSON. Yes, sir.

Chairman MANZULLO. I apologize.

Ms. Christian-Christensen?

Ms. CHRISTIAN-CHRISTENSEN. Thank you, Mr. Chairman.

I apologize for having to step out, and I understand from speaking to staff that many of the questions that I would have asked

have been answered.

61

But I would like to just run the risk of asking this if it has been

asked already on the Berry Amendment and the confusion that we

saw in the chart as to who had the ability to waive and not waive

and the fact that it was waived. I direct my question to Professor

Schooner.

Mr. SCHOONER. Schooner.

Ms. CHRISTIAN-CHRISTENSEN. Schooner. And you may have answered it already. You indicated in your testimony that, because

the standard that might have been used would have been what

someone wanted to happen and that it still fell within the purview

of that amendment.

Is there a way in which that amendment should be strengthened

to tighten up the language to preclude the possibility of waivering

the use of companies in the U.S. to just make it stronger?

Mr. SCHOONER. I think that is an interesting question, Congresswoman. The language itself, I think, is actually reasonably good.

What the language basically says is that no part of the appropriation shall be available for the procurement of an article, so it is

very broad, basically, unless it is produced in the United States.

And then the exception is unless it cannot be procured as and

when needed at United States market prices.

As I suggested in my testimony, the problem that you have from

a semantical standpoint is the word ‘‘needed,’’ I think, many of us

would suggest has been diluted over the last generation. I think

that if we compared, for example, Webster’s I versus Webster’s II

versus the more contemporary dictionaries, what some of us think

the word ‘‘need’’ means might have something closer to a definition

like requisite as opposed to want.

Unfortunately, from your perspective, I think the frustration is

that, under a dictionary definition, need, in contemporary American usage, means want. And the Army wanted it.

And I think that while they may or may not win in the court of

law, I think that that is a perfectly defensible position and one that

would have a pretty good chance of success, given the contemporary meaning of the word.

Ms. CHRISTIAN-CHRISTENSEN. Did anyone else want to answer

that question? Okay.

Mr. JOFFE. Yes, if I may.

Ms. CHRISTIAN-CHRISTENSEN. Sure.

Mr. JOFFE. Excuse me, Michele. Please go ahead.

Ms. GOODMAN. Well, excuse me. Because we filed a suit that

dealt with this issue, I believe that the exception though says clearly, Professor, that the need cannot have arisen out of a lack of

proper planning. And I believe that in this instance that is the key

thing. We all, I think, can agree that there was a lack of proper

planning.

So I would ask the professor to verify that. I think that is part

of the statute.

Mr. SCHOONER. As I suggested earlier in my testimony, the best

analogy here, being the Competition in Contracting Act, suggests

that poor planning or crisis management isn’t a legitimate exception.

I think, in terms of the actual words of the Berry Amendment

though, your escape hatch that I think is available to DOD here

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is the ‘‘as needed’’ language. But I think the point that she is made

is a valid one.

Mr. JOFFE. There is also in the House right now, House of Representatives Bill 1458 to strengthen that.

Ms. CHRISTIAN-CHRISTENSEN. Yes.

Mr. JOFFE. And it says to limit the exceptions to certain Buy

American requirements and to expand such requirements. So that

is already, I think, being worked on right now by the Committee

on Armed Services.

Ms. CHRISTIAN-CHRISTENSEN. Okay. One of the reasons that

DOD is here and will probably pretty assuredly be back again is

because there—we found that there are many obstacles to small

businesses participating in contracting with the department.

We have a businesslady here with us today, Ms. Goodman, who

attempted to appeal her beret procurement, and yet she was found

not to have ‘‘standing,’’ as her company was not capable of producing one piece berets.

Mr. Cooper, I direct this question to you. Could you help us understand the concept of standing as it applies to procurement?

Mr. COOPER. Well, that is more of a legal term.

Ms. CHRISTIAN-CHRISTENSEN. Okay.

Mr. COOPER. But I can, I think, get at what you are after. This

whole issue and the reason we are all here today trying to explain

this—and it is difficult to explain.

Ms. CHRISTIAN-CHRISTENSEN. Yes, it is.

Mr. COOPER. It goes back not just to the contracting people that

took the actions, it goes back to the requirement that was established. Once the requirement was established to have these berets

by June 14th and only a one-piece beret, all the normal contracting

processes went out the window. That is what drove this situation

simply.

Ms. CHRISTIAN-CHRISTENSEN. Well, I don’t have any further

questions, Mr. Chairman.

As I said, I did have to step out, and I am sure most of the questions have been asked.

Chairman MANZULLO. Appreciate that.

I have a couple of questions. Thank you.

General Glisson, who specifically told you not to answer the letter of April 5th that was signed by Ms. Vela ́zquez and me?

Lieutenant General GLISSON. Sir, the decision came from the Office of the Secretary of Defense Public Affairs. They had been inundated, as I understand, with many letters. They knew the investigation was on. They were trying to gather the right information

in order to make the response to you.

Chairman MANZULLO. The Office of Public Affairs?

Lieutenant General GLISSON. Yes, sir. Congressional liaison, yes,

sir.

Chairman MANZULLO. Who sent it there, you did?

Lieutenant General GLISSON. Pardon me, sir? Sir, they had recalled all documents which had been sent to us in writing. Those

were to be consolidated and tried to be answered out of the Office

of the Secretary of Defense.

Chairman MANZULLO. I think maybe somebody consolidated

them and put them in a shredder.

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Lieutenant General GLISSON. Congressman, I don’t know the answer to that.

Chairman MANZULLO. I mean, you knew why you were coming

here today.

Lieutenant General GLISSON. I did.

Chairman MANZULLO. Is that correct?

Lieutenant General GLISSON. I did.

Chairman MANZULLO. I mean, you knew you were aware that

you didn’t answer this April 5th letter.

Lieutenant General GLISSON. Congressman, I am.

Chairman MANZULLO. Were you aware of the fact that money

had been paid to vendors after April 5th?

Lieutenant General GLISSON. I am.

Chairman MANZULLO. Who wrote the check?

Lieutenant General GLISSON. The Department of Defense probably. We obligated that one to the Defense Contract Management

Agency.

Chairman MANZULLO. Who authorized the writing of the check?

Lieutenant General GLISSON. Sir, it was based on a legal document, a legal contract which we have out of Philadelphia.

Chairman MANZULLO. That doesn’t answer the question. Legal

contracts don’t write checks, people do.

Lieutenant General GLISSON. Yes, sir. The way that—— Chairman MANZULLO. Who wrote the check to pay for—— Lieutenant General GLISSON. Sir, the Defense Finance and Accounting Office wrote the check.

Chairman MANZULLO. They wrote the check.

Lieutenant General GLISSON. That is correct.

Chairman MANZULLO. Did you ever contact them when you got

my letter, saying, ‘‘Here’s the letter from the ranking minority

member or the chairman of the Small Business Committee, saying

that there could be possible violations of applicable federal law?’’ You never contacted them?

Lieutenant General GLISSON. Congressman, I did not. I sent a

copy of that letter to the Office of the Secretary of Defense and to

their Legislative Liaison, Public Affairs.

Chairman MANZULLO. Now who is that?

Lieutenant General GLISSON. I will have to ask Mr. Oliver for

the name of the person there, Congressman. I don’t know. But it

was not—— Chairman MANZULLO. Was it Larry Dorita at the time?

Lieutenant General GLISSON. Congressman, I don’t know. I guess

the point that I would try to make to you it was not an effort to

ignore you or anything like that. I think they honestly were trying

to gather the right facts from which to make a public response.

Chairman MANZULLO. Our office contacted yours when this letter

wasn’t answered. Were you aware of that?

Lieutenant General GLISSON. Congressman, I was not.

Chairman MANZULLO. Mr. Oliver, do you know anything about

this letter, April 5th?

Mr. OLIVER. I think it is sitting on my desk, sir, because what

happens is, as Tom said, is we got several letters and we were trying to get organized to make sure we gave you good answers.

Chairman MANZULLO. And we got none.

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Mr. OLIVER. Yes, sir.

Chairman MANZULLO. It is sitting on your desk? This letter is

sitting on your desk?

Mr. OLIVER. It is not physically on my desk, but I know it is

someplace in a—— Chairman MANZULLO. This is a letter from two members of Congress.

Mr. OLIVER. Yes, sir.

Chairman MANZULLO. We are here representing thousands of

small business people in this country that are losing contracts on

a daily basis because of bungling going on by the federal government. And this letter is sitting on your desk, and it hasn’t been answered. That is what you are telling me.

Look at Michele Goodman. She is the one that lost 100 employees. Why can’t you answer a letter from two members of Congress?

Mr. OLIVER. It will be answered this week, sir.

Chairman MANZULLO. It will be answered this week probably

along with the contract bundling report that you were supposed to

have before us a year ago, and it got filed last week.

Ms. VELA ́ ZQUEZ. Eighteen months later.

Chairman MANZULLO. Eighteen months later.

Ms. VELA ́ ZQUEZ. Correct?

Mr. OLIVER. Yes, sir.

Chairman MANZULLO. You know, I am just too totally shocked.

So it was up to you to answer this letter, correct?

Mr. OLIVER. No, it was not up to me. You asked physically where

it was, I gave you an honest answer. It is on my desk right now

with the—— Chairman MANZULLO. But it is up to you to answer the letter,

is that correct?

Mr. OLIVER. No, sir.

Chairman MANZULLO. You had authorized General Glisson to answer the letter.

Mr. OLIVER. Congressman, as you know, we have spent a great

deal of time on this issue, and we really have tried to think

through this. And there is lots of things that have gone on.

Chairman MANZULLO. It is a very simple question. How do you

answer a letter to two members of Congress? Or you just ignore it,

you think we are insignificant?

Mr. OLIVER. No, sir.

Chairman MANZULLO. Or does it go with your philosophy that

the Department of Defense has the final answer? I mean, have you

seen this letter?

Mr. OLIVER. I have seen that letter, sir.

Chairman MANZULLO. And when did you first see it?

Mr. OLIVER. Probably the day you sent it over, sir.

Chairman MANZULLO. April 5th or the day that General Glisson

sent it.

Mr. OLIVER. Whenever—— Chairman MANZULLO. General, I presume you sent it over as

soon as you got it.

Lieutenant General GLISSON. That is correct.

Chairman MANZULLO. And it is just sitting on your desk. It has

taken you a month to think about answering this letter.

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Mr. OLIVER. Actually, I have had several answers to that letter,

Congressman.

Chairman MANZULLO. No, I understand. But you know what we

are asking for? We asked that you cancel contracts. And do you

know what you did? First, you paid money to the Chinese, isn’t

that correct, for Chinese production. And then you canceled it.

Mr. OLIVER. Not that one.

Chairman MANZULLO. What do you mean, not that one.

Mr. OLIVER. Not the Chinese one.

Chairman MANZULLO. The Chinese one has been canceled.

Mr. OLIVER. No, it hasn’t. It will be completed at the end of this

month.

Chairman MANZULLO. Are the Chinese still in production at this

point?

Mr. OLIVER. The Chinese are still in production, and—— Chairman MANZULLO. Did you tell them to stop production?

Mr. OLIVER. We can’t sir.

Chairman MANZULLO. So you are going to take all these berets

and pay for them?

Mr. OLIVER. We are going to. By contract, we have to.

Chairman MANZULLO. You are going to take all the berets and

pay for them?

Mr. OLIVER. Sir—— Chairman MANZULLO. Yes or no?

Mr. OLIVER. Yes. Yes, sir. Absolutely.

Chairman MANZULLO. And then what are you going to do with

them?

Mr. OLIVER. Then we are going to resell them. We are going to

consider some of the suggestions about how we dispose of them.

What we have thought about is disposing them by reselling them

by foreign military sales to those countries who use them.

Chairman MANZULLO. We are a middleman for small businesses.

When members of Congress send letters, these are red flags. Did

you ever offer to come into my office and talk to me about this?

Mr. OLIVER. No, sir.

Chairman MANZULLO. Did anybody from your office say, ‘‘You

know, two members of Congress have requested an answer’’?

Mr. OLIVER. No, sir.

Chairman MANZULLO. And how many of these letters did you

have from members of Congress?

Mr. OLIVER. I don’t recall, sir.

Chairman MANZULLO. Was it five, 10, 15?

Mr. OLIVER. I didn’t count them, sir.

Chairman MANZULLO. You have no idea?

Mr. OLIVER. We were trying to answer the best possible answer

to you.

Chairman MANZULLO. But you didn’t give us any answer. Somehow I can’t get that across.

Mr. OLIVER. Yes, sir. I understand, and I accept it.

Chairman MANZULLO. And you—— Mr. OLIVER. No, I understand it, sir. I just don’t have an answer

for it.

Chairman MANZULLO. I mean, do we have to go through this

every time there is a waiver of Berry?

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Mr. OLIVER. Well, I am trying to fix that. I told you how I did.

I pulled that back so that I have to make that determination.

Mr. PASCRELL. Mr. Chairman?

Chairman MANZULLO. Yes?

Mr. PASCRELL. I have one more question to add on to yours.

Chairman MANZULLO. Yes.

Mr. PASCRELL. What is the quality of the work of the berets that

are made in China?

Mr. OLIVER. Congressman, that isn’t a good question. It happens

to be the best possible.

Mr. PASCRELL. It is the best possible?

Mr. OLIVER. It is the best.

Mr. PASCRELL. In other words, if we went to an outfit that knew

what they were doing, we would have a better product. So this is

the best we can expect from that factory where they are.

This is the best work they can do. You don’t mean that.

Mr. OLIVER. No.

Mr. PASCRELL. What do you mean?

Mr. OLIVER. I mean it is the best beret we are getting.

Mr. PASCRELL. It is basically the beret that we saw before.

Mr. OLIVER. It is the best beret of any of the people we contracted with.

Chairman MANZULLO. Is this better than Bancroft’s?

Mr. OLIVER. I will ask Tom to answer that.

Lieutenant General GLISSON. Yes, sir, it is.

Chairman MANZULLO. How is it better?

Lieutenant General GLISSON. Better quality, better workmanship.

Chairman MANZULLO. And at what price?

Lieutenant General GLISSON. At less than the Bancroft price, sir.

Ms. VELA ́ ZQUEZ. Ms. Goodman? She would like to comment.

Chairman MANZULLO. Ms. Goodman.

Ms. GOODMAN. Yeah. I believe that the Chinese berets were

bought by Kangol.

Lieutenant General GLISSON. That is correct.

Ms. GOODMAN. Wasn’t their price considerably higher than—— Lieutenant General GLISSON. The price on the Kangol beret is $6.24 each. The price on the Bancroft Beret is $6.30 each.

Ms. GOODMAN. And the labor cost of the two?

Lieutenant General GLISSON. I mean, that is the acquisition

price that we paid.

Chairman MANZULLO. Ms. Goodman, you could have made these

berets, is that correct, the one piece?

Ms. GOODMAN. No, sir.

Chairman MANZULLO. No. I mean, if you had some time to gear

up and get some equipment.

Ms. GOODMAN. The situation is a little bit more complicated than

that. The machinery that is currently used hasn’t been made in

over 50 years.

Chairman MANZULLO. Okay.

Ms. GOODMAN. There are no spare parts for it.

Chairman MANZULLO. What about the blocking machine?

Ms. GOODMAN. There is machinery to make a two piece beret,

okay? The Army has failed to even consider sitting down with inVerDate 11-MAY-2000 12:56 Sep 26, 2001 Jkt 010199 PO 00000 Frm 00070 Fmt 6633 Sfmt 6602 E:\HEARINGS\73064 pfrm01 PsN: 73064
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dustry, not just myself, but other small businesses who have put

forth the effort to try and work with them to come up with a solution.

As far as the one-piece knitted beret, there are many obstacles.

The only way that they can get what they want is by doing it over

a long-term basis. Machinery would have to be made that would

copy the process of a very antiquated machine into a new machine.

And whether the equipment people are willing to put forth the

effort and the funds to do that is yet to be determined because the

Army never gave American small businesses the opportunity to

present this position.

Mr. PASCRELL. Mr. Chairman?

Chairman MANZULLO. Yes.

Mr. PASCRELL. Doesn’t that sound rather peculiar that one item was $6.30 per beret, and the other, coming across the ocean, is

$6.24? We have a word for that in New Jersey which I won’t repeat. But doesn’t that strike you as rather strange, General?

Lieutenant General GLISSON. Congressman, based on the prices

that we saw with the other contracts, they are all reasonably in

line with each other within a dollar or so of each other. The lowest

is $4 and something up to the range of $7 and something. So they

are all within that price range.

Mr. PASCRELL. Did Atlas bid first? Did you have their number in

first before you got the number from China?

Lieutenant General GLISSON. Sir, we never got that far as she

testified because the Army rejected her beret. So she never made

an offer that I am aware of on a price.

Mr. PASCRELL. Well, who bid besides this—— Ms. GOODMAN. I did make a bid. Excuse me.

Mr. PASCRELL. You did make a bid.

Ms. GOODMAN. I did bid on a two piece stitched beret, yes.

Mr. PASCRELL. You did?

Ms. GOODMAN. Mm-hmm.

Mr. PASCRELL. Is that correct, General?

Lieutenant General GLISSON. Congressman, I don’t know whether she bid or not. There was no requirement for a two-piece beret.

What she offered was, in fact, a two-piece beret at a price. The

Army rejected that, so it was never considered as part of the—— Mr. PASCRELL. Well, how did you wind up in China?

Lieutenant General GLISSON. Congressman, basically, what we

did is, as I said previously, at the time we knew three manufacturers, Bancroft, Dorothea in Canada, and Denmark out of New York

City. Those were the three that we did directed awards to because

we knew them to be in business today, and we knew they could

make the beret.

We then did an open competition worldwide, and we invited anybody who could produce berets to come in. We called people who

had berets, asked them where they got them from.

Mr. PASCRELL. Did you call the Chinese manufacturer?

Lieutenant General GLISSON. We talked to Kangol, which is a

United Kingdom manufacturer who manufactures berets for the

British army and other countries. And they did produce a beret.

We got samples from all of the proposals. We looked at them, examined them for quality. We took a look at the companies to see

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if they were responsible companies, went through the normal contracting procedures that one would go through before we made the

award. And we ended up then with the four additional awards, two

U.S.-based foreign produced and two foreign-located foreign producers.

Mr. PASCRELL. They were all produced outside the United States.

Lieutenant General GLISSON. That is correct. Yes, Congressman.

Mr. PASCRELL. Who was the contact with the Chinese? Who has

the responsibility in the chain of command as far as these kinds

of manufacturing contracts are concerned, what office?

Lieutenant General GLISSON. Well, the acquisition took place in

my Philadelphia buying office through the contracting officer there.

He also has a Senior Procurement person there who watches him.

That then flows back up to the Senior Procurement Executive in

the Agency.

Mr. PASCRELL. So you would expect that the Philadelphia office

would reach out to foreign countries and companies, and that is

how they reached out to the company in China? Is that how that

works?

Lieutenant General GLISSON. At the point in time when it was

determined there was no domestic capacity to produce these berets

and still meet the Army requirement, at that point in time, then

they did a worldwide search, which they are authorized to do. And

then they can go offshore to try to determine if, in fact, there are

sources to meet the compelling requirement.

Mr. PASCRELL. Are you also telling us that because of the disqualification of some of the berets that were made in some parts

of the world, we are still in contract with the Chinese company.

That is right?

Lieutenant General GLISSON. The United Kingdom—— Mr. PASCRELL. We are not going to be able to meet the deadline

anyway, are we?

Lieutenant General GLISSON. Based on the production schedule,

that is correct, Congressman.

Mr. PASCRELL. So we did all of this. It is amazing.

Chairman MANZULLO. If the Chinese cannot meet the deadline,

then they are breaching the contract, isn’t that correct?

Lieutenant General GLISSON. Sir, the Kangol contract from the

United Kingdom, which has a production plan in China is, in fact,

ahead of schedule. They accelerated schedule. They have been our

best producer to date.

Chairman MANZULLO. General, did you ever convey to General

Shinseki or anybody on the staff that perhaps they could consider

making a two piece beret so it could be homemade?

Lieutenant General GLISSON. Congressman, we did. We actually

took the sample that Ms. Goodman gave us. We gave it to the

Army to look at. The Army came back and said they disapproved

it. They would not use that beret.

Chairman MANZULLO. Who gave it to whom? Who from your

agency—— Lieutenant General GLISSON. Sir, my Supply Center in Philadelphia gave it to the PM soldier, which is the requirement generator

for this particular contract and for this requirement.

Chairman MANZULLO. Mr. Bartlett.

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Mr. BARTLETT. I would just like to ask for a point of clarification.

Lieutenant General GLISSON. Yes, sir.

Mr. BARTLETT. We did not directly contract with the Chinese

firm, did we?

Lieutenant General GLISSON. We did not, Congressman.

Mr. BARTLETT. Okay.

Lieutenant General GLISSON. We contracted with the United

Kingdom company.

Mr. BARTLETT. Okay. Yes. And then they subcontracted to

China?

Lieutenant General GLISSON. That is correct, Congressman.

Mr. BARTLETT. Okay. I just wanted to make that clear.

Lieutenant General GLISSON. We knew their plant was in China.

Mr. BARTLETT. Yeah.

Lieutenant General GLISSON. I don’t want to mislead you.

Mr. BARTLETT. But our contract was not with the Chinese company. It was with the—— Lieutenant General GLISSON. With Kangol, which is the United

Kingdom.

Mr. BARTLETT. Okay. And then they had the work done in China.

Lieutenant General GLISSON. They own that plant in China.

That is not a sub-contractor.

Mr. BARTLETT. Yeah. And you knew when you let the contract

that it was going to be made there.

Lieutenant General GLISSON. I did. I did, Congressman. And we

were concerned at the time about child labor, not about procurement from China. Hindsight is wonderful, obviously.

Mr. BARTLETT. How many of our weapon systems do we procure

from China?

Lieutenant General GLISSON. Sir, I don’t buy weapon systems. I

can’t tell you.

Mr. BARTLETT. You don’t. Okay. Do we buy other clothing from

China?

Lieutenant General GLISSON. Generally not, no, sir.

Mr. BARTLETT. Thank you.

Chairman MANZULLO. Well, we want to thank you all for coming.

It is obvious what has happened here is that when we started

off——

Ms. VELA ́ ZQUEZ. Mr. Chairman?

Chairman MANZULLO. I am sorry?

Ms. VELA ́ ZQUEZ. I have a last question for General Glisson.

Chairman MANZULLO. Yes. Go ahead. Please.

Lieutenant General GLISSON. Yes, ma’am.

Ms. VELA ́ ZQUEZ. You mentioned to us before that you communicated with a staffperson from the chief of staff about—you know

that it will require to award the contract to a foreign company.

Lieutenant General GLISSON. That is correct. Yes, ma’am.

Ms. VELA ́ ZQUEZ. Can you please tell us the name of that person?

Lieutenant General GLISSON. Yes, ma’am. My counterpart on the

Army staff is Lieutenant General Mahan, M-a-h-a-n.

Ms. VELA ́ ZQUEZ. Thank you.

Lieutenant General GLISSON. Yes, ma’am.

Chairman MANZULLO. I want to thank you all for coming. I don’t

know how you summarize this incredible weave of events, but the

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victims out there are the people that this Small Business Committee is trying to protect.

It is obvious to me that General Shinseki was never advised as

to the availability or the unavailability of domestic production until

some time mid-February. He stated that, and I believe him.

It is also obvious that if he had known about that, that he would

have changed the procurement date or the date necessary to fulfill

the needs. He stated that, and I believe him.

But what has happened here is this incredible maze of people,

lack of accountability, failure to give this Small Business Committee documents that it needs. We did request them, we had to

subpoena them. And as a result of all these memos and everything

going back and forth, we end up with the incredible situation of

American people having to buy these Chinese berets, having to pay

for them, and now they are not being used.

And I would suggest the following, that if the cries of the members of Congress had been heeded initially way back when, that efforts could have been made to stop the production of these berets

in China. But no one heeded that, not until the eve of this hearing

when yesterday, miraculously, all kinds of things happened. Three

contracts were cancelled. The Chinese berets would no longer be

used. That happened as the order came down from Mr. Wolfowitz

yesterday.

And yet General Shinseki stated it, and I believe it, that as long

as six weeks ago he was imploring procurement not to use Chinese

berets.

Now isn’t that interesting? He is the one who gave the order for

June 14th. He is the one that could have changed that date. He

is the one that could have put an end to Chinese production, and

no one listened to him.

This meeting is adjourned.

[Whereupon, at 2:12 p.m., the Committee was adjourned.]

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