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81–309 PDF 2002

NATIONAL YOUTH ANTI-DRUG MEDIA CAMPAIGN:

HOW TO ENSURE THE PROGRAM OPERATES

EFFICIENTLY AND EFFECTIVELY

HEARING

BEFORE THE

SUBCOMMITTEE ON CRIMINAL JUSTICE,

DRUG POLICY AND HUMAN RESOURCES

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

AUGUST 1, 2001

Serial No. 107–86

Printed for the use of the Committee on Government Reform

(

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

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

THOMAS M. DAVIS, Virginia

MARK E. SOUDER, Indiana

JOE SCARBOROUGH, Florida

STEVEN C. LATOURETTE, Ohio

BOB BARR, Georgia

DAN MILLER, Florida

DOUG OSE, California

RON LEWIS, Kentucky

JO ANN DAVIS, Virginia

TODD RUSSELL PLATTS, Pennsylvania

DAVE WELDON, Florida

CHRIS CANNON, Utah

ADAM H. PUTNAM, Florida

C.L. ‘‘BUTCH’’ OTTER, Idaho

EDWARD L. SCHROCK, Virginia

JOHN J. DUNCAN, JR., Tennessee

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, Washington,

DC

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

JANICE D. SCHAKOWSKY, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

——— ———

———

BERNARD SANDERS, Vermont

(Independent)

KEVIN BINGER, Staff Director

DANIEL R. MOLL, Deputy Staff Director

JAMES C. WILSON, Chief Counsel

ROBERT A. BRIGGS, Chief Clerk

PHIL SCHILIRO, Minority Staff Director

SUBCOMMITTEE ON CRIMINAL JUSTICE, DRUG POLICY AND HUMAN RESOURCES

MARK E. SOUDER, Indiana, Chairman

BENJAMIN A. GILMAN, New York

ILEANA ROS-LEHTINEN, Florida

JOHN L. MICA, Florida,

BOB BARR, Georgia

DAN MILLER, Florida

DOUG OSE, California

JO ANN DAVIS, Virginia

DAVE WELDON, Florida

ELIJAH E. CUMMINGS, Maryland

ROD R. BLAGOJEVICH, Illinois

BERNARD SANDERS, Vermont

DANNY K. DAVIS, Illinois

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

——— ———

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California

CHRISTOPHER DONESA, Staff Director and Chief Counsel

SHARON PINKERTON, Counsel

CONN CARROLL, Clerk

TONY HAYWOOD, Minority Counsel

(III)

C O N T E N T S

Page

Hearing held on August 1, 2001 ............................................................................. 1

Statement of:

Jurith, Edward H., Acting Director, Office of National Drug Control Policy; Bernard L. Ungar, Director, Physical Infrastructure Team, General

Accounting Office; Robert H. Hast, Director, Office of Special Investigations, General Accounting Office; John Conney, Senior Special Agent,

General Accounting Office; Mark D. Westin, Officer in Charge, Fleet

and Industrial Supply Center Norfolk Washington Detachment, Department of the Navy; Susan L. David, Deputy Chief of Prevention Research, National Institute on Drug Abuse; and John Cooney, Office

of Special Investigations, General Accounting Office ................................ 11

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

Barr, Hon. Bob, a Representative in Congress from the State of Georgia,

prepared statement of ................................................................................... 68

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 5

David, Susan L., Deputy Chief of Prevention Research, National Institute

on Drug Abuse, prepared statement of ....................................................... 59

Jurith, Edward H., Acting Director, Office of National Drug Control Policy:

Information concerning actual expenses ................................................. 103

Information concerning money paid to Ogilvy & Mather ...................... 101

Prepared statement of ............................................................................... 15

Ungar, Bernard L., Director, Physical Infrastructure Team, General Accounting Office, prepared statement of ....................................................... 39

Westin, Mark D., Officer in Charge, Fleet and Industrial Supply Center

Norfolk Washington Detachment, Department of the Navy, prepared

statement of ................................................................................................... 52

(1)

NATIONAL YOUTH ANTI-DRUG MEDIA CAMPAIGN: HOW TO ENSURE THE PROGRAM

OPERATES EFFICIENTLY AND EFFECTIVELY

WEDNESDAY, AUGUST 1, 2001

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON CRIMINAL JUSTICE, DRUG POLICY AND

HUMAN RESOURCES,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 2:05 p.m., in room

2154, Rayburn House Office Building, Hon. Mark E. Souder (chairman of the subcommittee) presiding.

Present: Representatives Souder, Gilman, Barr, and Cummings.

Staff present: Christopher Donesa, staff director and chief counsel; Conn Carroll, clerk; Sharon Pinkerton, counsel; Tony Haywood,

minority counsel; and Earley Green, minority assistant clerk.

Mr. SOUDER. The subcommittee will come to order.

This afternoon the subcommittee will consider how to ensure

that the billion dollar Youth Anti-Drug Campaign, now in its 4th

year, operates effectively and efficiently to enable it to have a

meaningful impact to prevent drug abuse among youth. The fundamental question is simple: Are the program’s funds being administered in a way to ensure that the program is efficient and influences attitudes and actions and keeps more Americans, especially

teenagers, drug-free?

Our subcommittee has the responsibility to ensure that the Nation’s largest and most expensive drug prevention program is accomplishing the goals we set for this critical campaign. Congress

first funded the media campaign in 1997 to address the dramatic

spike in youth drug use starting in 1993. Clearly, this campaign is

an unprecedented private sector initiative, and Congress, with bipartisan support, has committed to spending $185 to $195 million

a year for 5 years. While the campaign has stirred some controversy over a variety of issues in the past, we continue to support

the important goal of educating kids and parents about the dangers

of drug abuse.

I personally am a strong supporter of effective prevention programs to ensure that we are not ignoring the demand side of the

equation as we seek to find a balanced approach to reducing drug

use in this country. This particular program, because of its breadth

and depth, is far too important to allow it to get off track. We must

all pull together toward the goal of reducing drug use in this country.

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While it is too early to draw a final conclusion about the effectiveness of the campaign, the indications of continued youth drug

use strongly suggest the importance of careful oversight to make

sure that its future direction is chosen carefully. A recent survey

from CASA, The National Center on Addiction and Substance

Abuse at Columbia University, found that 61 percent of 12 to 17-

year-olds are at moderate or high risk of substance abuse; 19 percent are at high risk, and 42 percent are at moderate risk.

There are other indications that drugs remain a serious threat

to our children. In 1999, 60 percent of teens said they expected to

never try an illegal drug in the future; in 2000 the figure dropped

to 51 percent. In 2000, more than 60 percent of the teens in high

school said drugs were used, kept, or sold at their school. It is clear

that drug abuse remains a widespread problem in this country. We

cannot and will not sit idly by while our Nation’s most precious resource is destroyed by drugs. Accordingly, I have worked with our

leadership in Congress and the White House to support efforts to

reduce the demand for drugs. I believe we can and must make a

difference, which is why we are focusing today on this important

program.

Last year the subcommittee conducted several oversight hearings

on the campaign at which the General Accounting Office reported

concerns about potential contract mismanagement, overbilling, and

possible fraud. As a result of the GAO study and the subcommittee’s oversight, the Department of Justice now is conducting an investigation into the charges of fraudulent behavior. The issues before the subcommittee today include: What actions have been taken

to improve administration of the contract? How is ONDCP handling up to $7 million of outstanding costs

which were previously ‘‘disallowed’’ because of inadequate justification or documentation?

What is the decisionmaking process at ONDCP involving renewing the largest media buying contract?

Are the taxpayers’ dollars being spent on actual media buys or

on overhead and other peripheral items?

Today we have asked ONDCP, the GAO, and the new contract

administrators, the Navy, to update us on those and other program

issues and report to us on the changes that have been implemented

to ensure that ONDCP’s media contracts are well managed and

that the taxpayer is getting value for their tax dollars.

Finally, the National Institute of Drug Abuse will report to us on

the initial findings of their Evaluation Study. Again, while these

findings may be preliminary, it is important for the subcommittee

to understand the trends and implications of this effort on the overall effectiveness of the program.

I want to thank all the witnesses for appearing here today and

will yield to the ranking member for an opening statement.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

The Office of National Drug Control Policy’s Youth Anti-Drug

Media Campaign plays an important role in the Government’s efforts to reduce demand for illegal drugs. The goal of the campaign

is to halt youth substance abuse before it starts by spreading the

word and encouraging the belief that drugs are harmful and inconsistent with success in life.

3

The campaign also stresses the importance of frank and honest

discussion about drugs among parents and their children. Because

the majority of drug users are introduced to drug use during their

pre-teen and early teen years, the media campaign’s focus on this

age group and parents of children in this age group is a prudent

one. Because marijuana and inhalants are the illegal drugs that

children in this age group are most likely to use first, the campaign’s emphasis on these drugs also makes sense.

The comprehensiveness of the Anti-Drug Media Campaign is impressive. Its multimedia approach is designed to reach as many

teens and parents in as many settings as possible. Television advertising is at the core of the campaign and it is this component

that receives the most attention.

But I have been impressed to learn about the program’s other

components. These include partnerships with youth organizations

and the entertainment industry, targeted outreach to minority

groups, and cooperation with community anti-drug coalitions. The

ONDCP has also exceeded its congressionally mandated 100 percent pro bono media match requirement.

The early evidence seems to suggest that this young campaign is

having an impact, and, indeed, accountability is an important element of the campaign itself. To this point, ONDCP’s own surveys,

the Nielsen surveys, and the ongoing evaluation study being conducted by the National Institute on Health’s Institute on Drug

Abuse all suggest that awareness of the campaign is high among

parents and children, and that the campaign’s aggressive anti-drug

message is getting across.

It is important that we not lose sight of the campaign’s goal and

early accomplishments. Even as we delve, as our oversight responsibility compels us to, into questions about management and administration of the campaign’s phase III contract with the advertising firm of Ogilvy and Mather, the Government Accounting Office’s

June 2001 report makes it abundantly clear that both Ogilvy and

the Government erred in their management of the phase III contract.

The report concludes that Ogilvy improperly charged the Government for certain labor costs and lacked an adequate accounting system to support a cost reimbursement Government contract. The report also concludes that the Department of Health and Human

Services did not properly manage parts of the contract, in part by

failing to determine beforehand whether Ogilvy’s accounting system was adequate.

Whether Ogilvy or any of its employees engaged in fraud under

Federal statutory law is the focus of a separate ongoing investigation by the U.S. Department of Justice. It does not seem to me that

Ogilvy entered into phase III with a malicious intent to defraud the

Government out of money, and in any event, Ogilvy has undertaken extensive and expensive efforts to reform its accounting and

management systems and to help Government investigators gain a

clear picture of what problems occurred. Indeed, GAO’s report acknowledges that the problems that gave rise to these problems are

being addressed aggressively, conscientiously, and thoroughly by

all parties involved.

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Obviously, the Navy, as new contract manager, has an important

role to play, and it appears to be taking all appropriate steps to ensure that the problems do not reoccur on its watch. The Defense

Contract Audit Agency has completed a review of all these revised

accounting and management systems, has concluded that they are

adequate to handle a Government cost reimbursement contract

going forward.

It is important, Mr. Chairman, that we not allow past contract

management problems to overshadow the good work that ONDCP

is doing to prevent substance abuse from entering, degrading, and

destroying the lives of young people across the country. As I have

often said, our children are the living messages we send to a future

we will never see.

There are no doubt some who take issue with the Government’s

use of funds for some of these activities. In the hands of such parties, administrative problems such as we have seen can be used to

cast doubt upon the basic thrust of the program itself. I trust that

is not what we are up to today.

As the title of today’s hearing suggests, our objective ought to be

to ensure that the media campaign operates as efficiently and effectively as possible. We should be united in our desire to see the

campaign maximizes positive impact on the lives of America’s

young people.

I look forward to hearing the testimony of our witnesses today,

and I hope that this hearing will serve the purpose of putting some

of these problems behind us, so that we can focus on moving our

anti-drug efforts forward. The challenge before us is too enormous

to do otherwise, and the role of the Anti-Drug Media Campaign is

too critical.

With that, Mr. Chairman, I yield back.

[The prepared statement of Hon. Elijah E. Cummings follows:]

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Mr. SOUDER. Thank you. Before proceeding, I would like to take

care of a couple of procedural matters.

First, I ask unanimous consent that all Members have 5 legislative days to submit written statements and questions for the hearing record; that any answers to written questions provided by the

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

ordered.

Second, I ask unanimous consent that all exhibits, documents,

and other materials referred to by Members and the witnesses may

be included in the hearing record; that all Members be permitted

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

Now would the witnesses please rise and raise your right hands,

and I will administer the oath. As an oversight committee, it is our

standard practice to ask all our witnesses to testify under oath.

[Witnesses sworn.]

Mr. SOUDER. Thank you very much. Let the record show that all

the witnesses answered in the affirmative.

Witnesses will now be recognized for opening statements. As

many of you know, we typically ask our witnesses to summarize

our testimony in 5 minutes, and you may include your full statement in the record as well as other materials.

This afternoon we first welcome the Acting Director of the Office

of National Drug Control Policy, Mr. Ed Jurith. Mr. Jurith, you are

recognized for your opening statement.

STATEMENTS OF EDWARD H. JURITH, ACTING DIRECTOR, OFFICE OF NATIONAL DRUG CONTROL POLICY; BERNARD L.

UNGAR, DIRECTOR, PHYSICAL INFRASTRUCTURE TEAM,

GENERAL ACCOUNTING OFFICE; ROBERT H. HAST, DIRECTOR, OFFICE OF SPECIAL INVESTIGATIONS, GENERAL ACCOUNTING OFFICE; JOHN CONNEY, SENIOR SPECIAL AGENT,

GENERAL ACCOUNTING OFFICE; MARK D. WESTIN, OFFICER

IN CHARGE, FLEET AND INDUSTRIAL SUPPLY CENTER NORFOLK WASHINGTON DETACHMENT, DEPARTMENT OF THE

NAVY; SUSAN L. DAVID, DEPUTY CHIEF OF PREVENTION RESEARCH, NATIONAL INSTITUTE ON DRUG ABUSE; AND JOHN

COONEY, OFFICE OF SPECIAL INVESTIGATIONS, GENERAL

ACCOUNTING OFFICE

Mr. JURITH. Thank you, Mr. Chairman. On behalf of the entire

staff of ONDCP, I really welcome this hearing today. It’s interesting. For the last 8 months we’ve been a professional staff, career

employees of the Federal Government, that have been running this

agency. It’s my pleasure to do that.

I’ve been involved with the drug policy of this Government,

under President Reagan, President George Bush, then Clinton, and

now President George W. Bush, for the last 20 years. I’m a career

employee of this Government dedicated to the resolution of drug

abuse. And it’s with that intention that I bring my testimony

today. I’ve got a written statement for the record that I submit to

the committee.

Since I’ve taken over the office in January, we’ve taken very seriously our responsibility for campaign management and administration. Over the past year we’ve taken numerous steps to address

12

contract administration issues that Mr. Cummings addressed in his

remarks.

Last October we told this committee that we would transfer contract administration from HHS to the Navy. We did this in December, and we have a close, effective working relationship with the

Navy in the implementation of the media campaign contract.

What we like about what the Navy brings is that they bring with

us the Defense Contract Audit Agency, probably the best entity of

this Federal Government to review each and every audit of the

Government submitted by our contractors, whether it be Ogilvy,

the Ad Council, or Fleishman-Hillard.

We’ve also reorganized the Media Campaign and Program Office.

All Media Campaign staff has been trained and certified as

COTRS, Contracting Officer Technical Representatives. This will

allow additional time for management and technical direction to

the contractors to make sure that we’re on the same page, to make

sure that we know where the contract is heading, and that was an

issue before this committee back in October. We fixed that problem.

Moving to a new program this year, under my leadership, if you

would, as the Acting Director, we are examining our options for the

advertisement course in the campaign that we need to award this

year. ONDCP and the Navy are conducting market research to determine whether the current contract terms meet the Government’s

requirements, whether the current contractor is best suited to meet

those needs.

It’s kind of interesting. That’s a requirement of the Government.

We need to look right now whether or not the current contractor

meets our needs, not whether or not there were past questions

about contract administration. The issue is whether or not right

now that current contractor will meet the Government’s needs.

We’re doing that research right now because we need to answer

that question.

ONDCP and the Navy are conducting market research to determine whether the current contract terms meet the Government’s

requirements and whether the current contractor is best suited to

meet those needs. Our decisions will ensure the current level of

services are provided by the contractor to the best value to the

Government.

In the original authorization of the campaign, Congress required

that ONDCP report to the Government on campaign effectiveness.

We take this mandate very seriously. You know, it is kind of interesting, as you know, Mr. Chairman, as a former staff director of

a congressional committee, very often the evaluation of a Government campaign is 2 to 3 years after the Government does its work.

This campaign we do it every 6 months. I don’t know of any other

campaign in the Government where we’re accountable to the Congress every 6 months or every 8 months, depending on the reporting requirements, to give you a report. That’s so unique. This campaign is doing that. We take that mandate very seriously.

We’ve contracted with NIDA, the National Institute on Drug

Abuse, and I love to say this when I’m overseas because when I’m

in Europe, as I was a couple of weeks ago, and they talk to us

about harm reduction, whether or not the U.S. policy is effective.

I said to my European colleagues: Where is your research? The NaVerDate 11-MAY-2000 08:02 Sep 05, 2002 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 C:\DOCS\81309.TXT HGOVREF1 PsN: HGOVREF1
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tional Institute on Drug Abuse does that, 90 percent of the world’s

drug abuse research—90 percent. About another 5 percent is by my

friends in Britain. The other 5 percent is scattered around the

world.

We contracted with NIDA. We went to the experts to determine

whether or not this campaign is going to be effective, and I will

defer to Susan David to give you greater detail about the results

of their own research.

But results today show that our parent and youth audiences

have a high awareness of our campaign. NIDA surveys indicate

that the response of this campaign is trending in the right directions, although more conclusive data is not expected until earlier

next year, but we’re on the right path. Parents and young people

understand where this campaign is going. They see the ads. They

understand the importance of what we’re doing. That’s critical.

It’s kind of funny, I sat back in that chair back in the early

eighties when Congress was debating with then the Reagan administration: What is our drug strategy? How do we respond to the cocaine epidemic? What do we do about our national—how do we address the cocaine epidemic? And everybody uniformly said we need

a media campaign, but it kind of floated around out there for a

number of years. Finally, somebody stepped forward. Congress,

under the leadership of this committee, with the last administration, said yes, we need a paid media campaign to effect those attitudes, to make sure that our young people are not tempted by

drugs.

It’s kind of interesting, Mr. Chairman, you know, it’s great talking public policy in the abstract, but I think we need to look at it

in a longitudinal point of view. We have advanced so far on drug

policy in this country in the last 20 years. We knew a media campaign was required, and between the Congress in a bipartisan approach came together and said, yes, we’re going to put this campaign together. It’s required. We need it. It’s the right thing to do.

It’s kind of interesting that, even though our initial reports of

this campaign show that it’s kind of equivalent in terms of, what

are the direct effects of this campaign? We know our adults who

are using are identifying with the ads; our young people are. But

reports from other surveys of drug use suggest that the campaign

is influencing attitude significantly. The Monitoring Survey study,

Dr. Lloyd Johnston at the University of Michigan, reports that 34

percent of eighth graders said anti-drug ads are making them less

favorable to drugs.

What I find the most fascinating in my 11-year-old, on Saturday

morning, when he sits down in the basement watching TV, he’s

funny—we allow him to watch TV on Saturday morning—tells me

how many of our ads he sees and which of those he thinks are the

most important. I bring that back every Monday morning to my

staff—my own child.

I was down at the National Boy Scouts Jamboree over the weekend on Sunday in the slushy, rainy episode. Unfortunately, the

President could not make it down because of the weather, but we

went ahead anyhow. And we have a tent down there sponsored by

the Media Campaign. Talking about a branding activity for antidrugs, 15,000 Scouts—15,000 Scouts—signed up with the anti-drug

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wars, part of our branding effort because our experts in this campaign told us that the best thing that we can do is tell America’s

youth what stands between them and drug use, whether it’s family,

Scouting, basketball, tennis, whatever it might be—15,000.

Now my son was down at the Jamboree. He shaved his head

down there, but what the heck, I’ll deal with that when he gets

home tomorrow. [Laughter.]

We’ve engaged children of America with this campaign, so that

it includes them. We’re very proud of this campaign. Yes, we’ve had

some contracting issues, and we’re going to deal with them. I really

thank GAO and DCAA and Navy for helping this ONDCP deal

with those issues, but the bottom line, Mr. Chairman, is what we’re

doing for America and America’s young people, and we’re having an

effect. I saw it on Sunday personally. The President was going to

be down there himself. The weather deterred the helicopter from

coming down there, but he was going to be down there witnessing

the same thing. That’s what we’re trying to do. Thank you so

much.

[The prepared statement of Mr. Jurith follows:]

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Mr. SOUDER. Thank you for your testimony.

Our second witness, from the General Accounting Office, is Mr.

Bernard Ungar, who is Director of the Physical Infrastructure

Team. Mr. Ungar will provide the GAO’s testimony. He is joined

by Mr. Robert Hast from the Office of Special Investigations, who

will be available for questions. Mr. Ungar.

Mr. UNGAR. Mr. Chairman, Mr. Cummings, we’re pleased to be

here today to discuss our work with respect to the Anti-Drug Youth

Media Campaign. Mr. Hast and I are also accompanied by our able

staffs who assure us that they will help bale us out when the questions come, and they assure us they’re right behind us. Hopefully,

they’ll stay there.

GAO, within the last 13 months or so, has looked at this program

three times. The first report we issued was in July 2000, which

looked at various programmatic aspects of the program. During the

course of our work on that review, allegations came to the surface

about potential overbilling by the contractor at that time, Ogilvy

and Mather, as well as problems with the Government’s award and

management administration of the contract.

In October 2000 Mr. Hast presented the results of our first review that we completed with respect to those allegations. He advised the subcommittee of what we had found in connection with

the extent to which ONDCP was aware of these allegations and

what actions it had taken as a result of them, in particular, what

actions with respect to an audit that had been recommended.

Our third review was just completed in July, at the request of

a House Subcommittee on Appropriations, and it dealt specifically

with the issue of the allegations; that is, the contractor overbilled

the Government for time not worked. It also addressed the allegations concerning the management of the Government’s part of the

award and administration of the contract, at least those aspects

that were related to the allegations of overbilling.

Indeed, as you and Mr. Cummings indicated, we had found in

our report relative to our review that the contractor, Ogilvy and

Mather, did overbill the Government for labor costs. The full extent

of that is not clear yet, but we certainly found that there were

some cases in which that did happen.

There were at least two types of situations, one in which certain

Ogilvy employees were instructed by certain Ogilvy managers to

add time to their timecards for hours they did not work on the contract. This apparently stemmed from discussions from within the

company that the company was not earning as much as it had projected in terms of labor hours in the contract during the summer

of 1999. A second set of overcharges, overbilling, resulted from employees who worked at Ogilvy whose timecards were changed;

hours were added by somebody else other than the employees, not

to their knowledge.

Both of these situations occurred. Again, we really feel that this

was an improper situation, and as you know, we have referred this

issue to the Department of Justice, and the Department of Justice

is currently looking into that.

In addition to the overbilling issue on the contractor’s part, we

did look, as I mentioned, at the management of the contract. We

focused in on the award of the contract. In this case it was HHS

38

who awarded the contract on behalf of ONDCP. Indeed, we did find

that, unfortunately, HHS did award this contract without assuring

that the contractor had an adequate accounting system to deal with

a cost reimbursement contract of over a half a billion dollars. In addition, the contractor failed to provide to the Government, to HHS,

a disclosure statement that would have identified its proposed accounting practices. These problems, in our view, contributed to the

problem the Government had then subsequently without being able

to prevent and detect the problems that were experienced with the

overbilling.

Finally, another problem on the part of the Government in this

particular case was the oversight and administration of the contract. In this particular situation we had a dilemma in that for a

period of time the Government had disallowed a number of the

costs claimed by the contractor and raised a number of concerns

about the billing practices. In our view, there was plenty of warning to the Government that something was amiss.

In addition to that, allegations of fraudulent conduct came to the

attention of the Government in the early part of 2000, and as we

similarly reported, the Government decided at that point that there

should be an audit but decided to put it off until the ONDCP transferred responsibility for the contract from HHS to the Navy. In our

view, that was a substantial period of time that elapsed, and we

really feel that action could have and should have been taken sooner to deal with the billing problems and the allegations of fraud.

Even as we were doing our review, as we completed our review,

we did discuss our findings a number of times with ONDCP and

with the contractor’s representatives, and both have been quite responsive. In fact, both had started corrective actions before we had

completed our review.

The most significant issue in our mind that remains today is

whether or not the Government should recompete this contract.

That really depends upon a number of issues on which I think information is yet to be fully obtained. It has to do with such factors

as: What will be in the best interest of the Government in terms

of the costs that would be associated with retaining the current

contractor by exercising the next option or obtaining another contractor through a recompetition? What effect a recompetition might

have on the program goals, the program objectives, and the timing

of program services? Finally, the current integrity and responsibility of the contractor in a sense of while the contractor has taken

certainly a number of corrective actions very aggressively, the

question that still remains in our mind is: Who in the company is

really responsible for these overbilling situations? That’s still not

clear, and I think, hopefully, the Department of Justice will help

resolve that. But that is a question we think that really needs to

be addressed at some point in the near future.

Thank you, Mr. Chairman. That concludes my summary.

[The prepared statement of Mr. Ungar follows:]

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Mr. SOUDER. Thank you very much.

Our next witness is from the Department of the Navy, which now

administers the contract for the media campaign. We are joined

today by Captain Mark Westin. Captain Westin, you are recognized

for 5 minutes.

Captain WESTIN. Mr. Chairman, distinguished members of the

committee, thank you for the opportunity to discuss the Navy’s role

in providing contract administration support to the Office of National Drug Control Policy’s Youth Media Campaign. I’m Captain

Mark Westin. I’m the Officer in Charge of Navy Fleet and Industrial Supply Center in Norfolk’s Washington Detachment. We provide logistics support, including contract services, to Navy and

some non-Navy customers, primarily in the National Capital Region.

As a field contracting office under the Naval Supply Systems

Command, we also leverage expertise from throughout the Command to deploy the best service possible to our customers. As a

DOD contracting office, we follow applicable Federal contracting

statutes and agency regulations, including the Federal Acquisition

Regulation [FAR]; the DOD Supplement to the FAR, and implementing DOD and Navy guidance.

ONDCP previously obtained their contract administration support for the Youth Media Campaign from the Department of Health

and Human Services, and they awarded three contracts for this effort. One contract was awarded in March 1999 to the Advertising

Council for media match coordination of pro bono public service announcements to match paid advertising. A contract for media outreach and partnership and alliance-building was awarded to

Fleishman-Hillard in December 1998 to coordinate non-advertising

communications strategies and activities. A third contract was

awarded to Ogilvy and Mather in December 1998 for the overall

management of the advertising component of the campaign. A June

25, 2001 General Accounting Office report cited several problems

with the Ogilvy contract.

In October and November 2000 several meetings were held with

ONDCP about the Navy assuming contract administration over

these three contracts. We were informed by ONDCP and HHS that

there were payment delays with all the contracts and a number of

other issues with the Ogilvy contract. We agreed to this request because we felt that our professional Navy staff, with the availability

of the services of the Defense Contract Audit Agency [DCAA], and

the Defense Contract Management Command, had the ability to

improve this contract administration. We also have experience with

Navy advertising contracts. On November 29, 2000, at the request

of ONDCP, HHS transferred all the contracting responsibilities and

files for these three contracts to the Navy.

Since assuming contracting responsibility, the Navy has made

notable improvements in contract administration. We have worked

to correct previous discrepancies and establish controls relating to

the contractor’s accounting and billing systems. There has been significant progress in these areas, allowing us to resolve a backlog

of unpaid bills with the help of DCAA. We clarified the role of the

contracting officer and increased the number of trained Contracting

Officer’s Technical Representatives at ONDCP. The contracting ofVerDate 11-MAY-2000 08:02 Sep 05, 2002 Jkt 000000 PO 00000 Frm 00053 Fmt 6633 Sfmt 6633 C:\DOCS\81309.TXT HGOVREF1 PsN: HGOVREF1
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fice has established proactive communication and coordinated actions between the Government and all of the contractors.

One contract was for media match coordination with the Advertising Council. We obtained a favorable DCAA audit of the contractor’s internal controls and compliance with the requirements applicable to Federal public service campaigns. In March 2001, at the

request of ONDCP, we exercised the next contract option extending

this contract through March 21, 2002. DCAA audited the unpaid

backlog of 11 invoices and authorized payments of more than

$340,000. In summary, the administration of this contract is on

track.

A second contract with Fleishman-Hillard covered media outreach, as well as partnership and alliance-building. Upon request

of ONDCP, we exercised the option to extend that contract through

December 3, 2001. We obtained favorable DCAA audit reports on

the adequacy of the contractor’s accounting system, related internal

controls procedures, and the billing system. DCAA audited 19 backlogged invoices and authorized payments of more than $6.1 million

to Fleishman-Hillard. Significant progress has been made on this

contract, including the resolution of longstanding payment delays.

A third contract was with Ogilvy and Mather for advertising

management. On January 4, 2001, the contracting officer exercised

option II to extend this contract through January 3, 2002, as requested by ONDCP. We instituted regular biweekly progress reviews with the contractor, ONDCP, and DCAA. We requested an

audit of the contractor’s accounting and billing systems and all past

unpaid invoices. The contractor hired PricewaterhouseCoopers in

November 2000 to restructure its accounting system to meet Government contracting standards for a cost-reimbursable contract.

The DCAA audit of the accounting system was completed on July

25, 2001, and the report received July 31, 2001, yesterday, stated

that Ogilvy’s accounting system and related internal control policies and procedures were adequate. A review of the billing system

is underway. DCAA is performing a 100 percent audit of all invoices before authorizing payments.

In March 2001 Ogilvy made a disclosure to the Navy, DCAA,

ONDCP, and the Department of Justice regarding costs that they

could not certify. Due to this disclosure, the Navy contracting officer referred the matter to the Navy Criminal Investigative Service

to coordinate with the Department of Justice and the investigative

arm of DCAA. On July 11, 2001, Ogilvy certified their incurred cost

proposals for 1999 and 2000, and DCAA has not yet provided a

final report on these.

It is our intention to comply with all Federal Acquisition Regulation requirements regarding the exercise of any future options

under the contract to include, among other things, all requirements

related to the adequacy of accounting systems. We are working

with the customer to plan for contracting alternatives to ensure

continuity of the media campaign services.

The Navy’s Fleet and Industrial Supply Center Norfolk, Detachment Washington, has provided a valuable service and significantly

improved contract administration. We implemented a structured

approach to acquisition planning and contract management. This

included improvements in financial controls, payment processing,

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training, and Government and contractor relations. These actions

are consistent with our mission to provide quality services and supplies to a wide range of customers.

This concludes my statement. I am prepared to answer your

questions.

[The prepared statement of Captain Westin follows:]

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Mr. SOUDER. Thank you very much.

Our final witness this afternoon is from NIDA, and we’re joined

by Ms. Susan David, the Deputy Chief of Prevention Research. Ms.

David, you are recognized for 5 minutes.

Ms. DAVID. Mr. Chairman and members of the subcommittee,

good afternoon. I am pleased to be here on behalf of the National

Institute on Drug Abuse to discuss the status of the phase III evaluation of the ONDCP Media Campaign. I am Susan David, the

NIDA project officer for the evaluation. Today I would like to provide some background, present some early findings, and discuss

plans for future reporting on evaluation results.

In January 1998, ONDCP, in response to a congressional mandate, asked NIDA to develop an independent science-based evaluation to assess the outcomes and impact of the phase III campaign

on parents and children. After an open competitive process, NIDA

awarded the contract in September 1998 to the nationally known

health survey research company, Westat. Westat and its subcontractor, the Annenberg School at the University of Pennsylvania, one of America’s leading communications research centers,

assembled a team of scientists and survey experts to work on the

project.

The overall objective of the phase III evaluation is to measure

the impact of the television and radio advertising in the campaign

on the knowledge, beliefs, attitudes, and behaviors of parents and

children in regard to drug use. A rigorous research design was developed that focuses on the specific targets, messages, and content

of the ONDCP campaign. The evaluation will also tell us whether

any attitude or behavioral changes that occur can be linked to campaign exposure.

To accomplish this, we developed a new evaluation survey, the

National Survey of Parents and Youth, which was approved by

OMB in the summer of 1999. The survey involves interviews conducted in the home with youth and their parents or caregivers

three times over the course of the evaluation. Interviewers bring

laptop computers to each household and ask about some of the following: the drug use, knowledge, beliefs, attitudes, and behaviors

of youth; the attitudes and behaviors of parents toward preventing

drug use among their children; family and other demographic factors, and exposure to the media campaign.

Exposure to the campaign is measured by asking parents and

youth if they can recall seeing specific campaign ads which are

shown to them on the computer. Linking this exposure to changes

in attitudes and behaviors is the key to this evaluation approach.

The data collection, while continuous, is divided into seven waves

over a 31⁄2 year period. This allows NIDA to report results at the

end of each wave as feedback to the campaign. Since the beginning

of the project, we have been pleased to keep this committee informed about all of these activities by submitting copies of our

monthly progress reports.

Now I would like to talk about some early results of the evaluation. So far two semi-annual reports have been released. Based on

the first and second waves, here are some of the things we found.

About 70 percent of parents and youth across the country report

that they see anti-drug ads on a weekly basis. Between these two

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waves, one and two, we have not yet seen changes in marijuana

use so far. We are starting to see, however, a positive shift in antidrug attitudes, beliefs, and intentions among teens, but we cannot

yet attribute these changes to the campaign.

For example, between waves, we saw a 4 percentage point increase among 14 to 18-year-olds who said they have no intention

of using marijuana in the next year. There was also an increase in

this group in the belief that parents would strongly disapprove of

their trying marijuana, from 92 percent to 97 percent.

The next report, covering January through June of this year, will

be released in October. This report will include expanded data information on effects for different populations such as ethnic minority youth. Future reports, due in May and October of next year,

will yield more definitive results as the report on followup interviews with youth and parents.

NIDA has also asked the Westat Annenberg team to prepare

data on a variety of influences that may have some effect on campaign impact, such as news coverage of drug issues and events that

are happening at the community level.

To conclude, I would like to thank you on behalf of NIDA for providing us with this opportunity. I would be happy to answer questions.

[The prepared statement of Ms. David follows:]

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Mr. SOUDER. I thank you each for your testimony.

Mr. Gilman has an opening statement he would like to give when

he gets back, and I believe Mr. Barr said he wanted to do his in

the record.

[The prepared statement of Hon. Bob Barr follows:]

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Mr. SOUDER. So we’ll go to questioning, and I presume we will

do several rounds because I know I have a number of questions.

One, just off the top of my head, that I don’t fully understand,

and I ask Captain Westin: Do you know if the Navy was approached originally to do this contract administration?

Captain WESTIN. To my knowledge, sir, no, we were not. Do you

mean before HHS, sir?

Mr. SOUDER. Yes.

Captain WESTIN. No, sir.

Mr. SOUDER. Mr. Jurith, you said that you felt that they were

clearly the best choice to do it. So why weren’t they contacted the

first time then?

Mr. JURITH. Mr. Chairman, in all honesty, I’m sorry, Mr. Chairman, when the initial coverage of this campaign was given to HHS,

I was on sabbatical overseas, so I can’t answer why it didn’t initially go to Navy.

Early in the year 2000, after we ran into a number of difficulties

with HHS, ONDCP looked at a number of different vendors—Navy,

other Government agencies—that would be able to provide us with

good service on this contract. The decision was made within

ONDCP between our legal shop and the program agency. The program office said the Navy was the best vendor to assist us in this

contract. It was done through an analysis of which contracting shop

in the Government could give us that service.

Mr. SOUDER. Would you see if, for the record, you can give us a

statement—we may have that from our previous hearings—of why

ONDCP, provide that?

Mr. JURITH. Absolutely. I’d be happy to.

Mr. SOUDER. Mr. Ungar, my understanding is that there is ap- proximately $850,000 in billings in question, is that correct?

Mr. UNGAR. Mr. Chairman, it is a little more than that. The

$850,000 is the amount of money that Ogilvy and Mather believes

ought to be disallowed. The Government actually disallowed over

$1 million in the process of going through the billings. And what

yet is to be determined is exactly how much should be disallowed,

based on costs, either the billings for time that was not actually

spent on the contract or for other bills that would have been submitted for items that would not be appropriately reimbursed by the

Government. So until DCAA finishes its audit, I don’t think it will

be clear how much actually ought to be paid back—or one way or

the other.

Mr. SOUDER. So they admit $850,000, but it could be higher, basically?

Mr. UNGAR. Ogilvy has suggested $850,000, but it could be more,

that’s correct.

Mr. SOUDER. And this is predominantly labor or production

costs? It’s not media purchase time?

Mr. UNGAR. That’s correct. The issues that we’re aware of have

to do with the labor charges. Now there’s also an overhead issue

that needs to be resolved in terms of what overhead rate. Perhaps

the Navy would be in a better position to address that specific

question.

Mr. SOUDER. Do you know what percent commission they were

getting on the contract?

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Mr. UNGAR. Excuse me, sir? What?

Mr. SOUDER. Often, when you buy TV time, you get 15 percent,

and your amount of overhead you factor in depends how much of

that, in fact, gets rebated by the stations. Do you know what percent they were working on, the 15?

Mr. UNGAR. That I don’t know, sir.

Mr. SOUDER. Does anyone else know the answer to that question?

Mr. JURITH. Mr. Chairman, I don’t think this concept works that

way. I think that at least what we’re looking at is a 7 percent labor

rate. This is not a fixed-price contract. In fact, one of the things

that——

Mr. SOUDER. I understand the answer to that then. Because if

you are working on a fixed-rate, that means, in effect, the Government got the 15 percent discount. That is the standard way it

works. I want to ask a direct followup to that. If you are working

on a 7 percent fixed rate, is that 7 percent then cost-plus on top

of the 7 or how does that work?

Mr. JURITH. Well, I’m not sure. Right now this is for our own

staff to look at the possibilities. I think we need to change that.

OK? So you get better value to the Government. So as you go about

exercising next year’s option, I think Navy and ONDCP need to

look at that issue. We have market research going on right now to

look at that before we decide the option in December. I think that’s

the best thing to do for the Government, the best thing to do for

this campaign.

Mr. SOUDER. Thank you.

Mr. Cummings.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

Mr. Ungar, let me just go to you. You have said some things here

this morning, this afternoon, which should concern everybody in

this room. I think, as I understand it, we have a situation where

you did an investigation, you and your staff, and you made a determination, and it seems to be unequivocal that the Government, the

U.S. Government, paid for some work that was not performed. Is

that a fair statement?

Mr. UNGAR. Yes, sir, it is.

Mr. CUMMINGS. Now if Ogilvy—I mean, is there any room there

for—first, let’s go back for a moment. I find it phenomenal that we

would have a contract worth a quarter or a fifth of a billion and

in the RFP process—I mean, I have done small RFPs, I think,

when I was practicing law and worked with clients in preparing responses, and whatever, to like million dollar contracts. They really

laid out every single thing you needed. I’m just wondering what

happened here. I mean, this is a lot of money.

Mr. UNGAR. Right.

Mr. CUMMINGS. So I was just wondering—I was trying to start

from the very beginning of how this process started. Do you see a

problem in that part of it?

Mr. UNGAR. Yes, sir.

Mr. CUMMINGS. What would your comments be?

Mr. UNGAR. Yes, sir. Unfortunately, let me start: The RFP for

this particular procurement did specify that this contract would be

subject to the cost accounting requirements in the FAR, in the FedVerDate 11-MAY-2000 08:02 Sep 05, 2002 Jkt 000000 PO 00000 Frm 00077 Fmt 6633 Sfmt 6633 C:\DOCS\81309.TXT HGOVREF1 PsN: HGOVREF1
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eral Acquisition Regulation, and that there would be the need for

an accounting system that met those requirements, plus there

would be the need for a disclosure statement under which the prospective—the bidder, and eventually the contractor, would have

provided to the Government what is called a disclosure statement

which would lay out the critical parts of the accounting system that

the contractor would use, that the bidder would use, if the contract

were awarded.

Now in this case, again, unfortunately, it was clear that it was

required, but HHS did not adequately address those issues. It allowed in this case Ogilvy to come forward, get the contract, before

it had adequate assurance that the contractor had an adequate accounting system and without requiring the disclosure statement.

There was an individual in HHS who was charged with the responsibility of looking at the accounting system of Ogilvy on behalf of

the contracting officer. Unfortunately, he did not do a good job. He

basically fell down on the job, in our opinion.

Second, with respect to the disclosure statement, it clearly should

have been required, but the HHS contracting officer just didn’t enforce that requirement. It came up a couple of times during the

course of the contract, and it still wasn’t required. Had the accounting system been looked at appropriately initially, had the disclosure statement been filed timely, it’s fairly obvious that some of

these problems with Ogilvy’s accounting system would have been

identified—and noted now, it may not have prevented inappropriate billing intentionally, but at least other problems with the accounting system would and should have been identified.

Mr. CUMMINGS. We had a situation with Ogilvy where they said,

‘‘OK, we didn’t have an appropriate accounting system in place, but

what we did was we decided—and our people were a little negligent. They did the work and they didn’t put their time down, and

when we went back, we went back and said, ‘Joe, you know we

spent 15 hours on this thing and you only put 5 because you were

busy, and I understand that. Now let’s correct that.’ ’’ Are these the

kind of allegations that you—I mean, is this the kind of stuff you

found or did you find something else?

Mr. UNGAR. Mr. Cummings, we found that, plus something else.

There were situations here on both sides. On the one hand, there

were employees at Ogilvy who said, ‘‘Yeah, we aren’t very fastidious, meticulous about our time,’’ because most of their contracts

were not cost reimbursement contracts. So they had a situation

where they really weren’t accustomed to keeping time meticulously.

They didn’t have good procedures for that and policies/procedures

at the time at Ogilvy. They did have employees who came and said,

‘‘Yes, I forgot. I did work some time I didn’t charge, and so we need

to go back and do that.’’ But they also had a situation——

Mr. CUMMINGS. Would that have bothered you a lot, that what

you just said? Would that have bothered you as far as your investigation is concerned? Would that have been of great concern?

Mr. UNGAR. I think the problem here is that the company got a

fairly hefty Government contract without having an adequate time

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charging, I think the Government wants to fairly reimburse the

contractor for the costs that the contractor is entitled to.

What this situation did is create additional work for everybody— the auditors, the managers—because now somebody’s going to have

to go through like DCAA is and go through each and every invoice

and try to decipher from the T&A records and the other records

what an appropriate amount to pay Ogilvy is.

Mr. CUMMINGS. You said there is something else, but I’ll get to

that when I come back. Please make a note. I want to get back to

that.

Mr. UNGAR. Sure.

Mr. CUMMINGS. Time has run out.

Mr. SOUDER. Mr. Gilman.

Mr. GILMAN. Thank you, Mr. Chairman. I regret we have had another hearing in our International Relations Committee at the

same time.

I want to welcome our panelists, and I want to thank you, Chairman Souder, for holding today’s hearing to further evaluate the effectiveness of our National Youth Anti-Drug Media Campaign.

National Youth Anti-Drug Media Campaign serves as an important component of a key pillar in our war against drugs. For years

we have heard from the supply source countries that America

needs to do its part in reducing demand and providing drug education prevention programs to meet our goals.

The National Media Campaign proposal was born during the

Reagan administration, which was fighting a wave of drug use

among adolescents and an unforgivably tolerant attitude toward

drug use from the entertainment industry. The resulting creation

of a Partnership for a Drug-Free America in 1987 helped to usher

in a longstanding series of anti-drug ads which proved to be effective at no cost to the taxpayer. That, in part, helped lead to a

steady decline in adolescent drug use from 1987 to 1993.

While the original anti-drug media campaign relied on donated

air time from the three primary TV networks, increased competition from deregulation of the industry led to sharp cutbacks in that

area. Since 1997, the anti-drug media campaign has relied on a

combination of congressional funding and private sector donations

of air time and print space.

The drug abuse environment facing today’s teenagers, though,

has changed drastically from that of a decade ago. Drugs today are

much cheaper with a higher purity, more readily available than

ever before. Furthermore, unlike a decade ago, the media today

doesn’t emphatically communicate the dangers of drug use. This

situation presents a greater challenge to the organizers of the drug

media campaign than that faced by the predecessor. They are fighting an uphill battle, but it is a battle that we cannot afford to lose.

Far too much attention is being paid today to create a culture of

tolerance for drug use. More emphasis is needed to convey the

point that the road to hell is paved with good intentions and that

the culture of tolerance is sowing the seeds for a greater social

problem down the road.

However, let’s get to an important part of this hearing. During

our last oversight hearing, held by this committee in October of

last year, on the Anti-Drug Media Campaign, we learned of the

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possibility of excessive and irregular contractor costs resulting from

improper billing practices conducted by the campaign’s advertising

agency, Ogilvy and Mather.

I am interested in learning today from our witnesses on the

progress of the audits being conducted on this contract and whether additional remedies are warranted. I am interested also in

where we are going on the future advertising campaign.

Let me ask a question of the GAO people. Is the audit completed

at this point?

Mr. UNGAR. Sir, our audit is. The audit, though, by the DCAA

is still ongoing.

Mr. GILMAN. What is the difference between your audit and the

DCAA audit?

Mr. UNGAR. Sir, we look specifically at whether or not the contractor overbilled and we looked at the Government’s management

of the award and administration of the contract—— Mr. GILMAN. Could you put the mic a little closer to you? You

are fading away from me.

Mr. UNGAR. Yes, sir. We did not look at the actual total cost

charged and the allowability of those costs to the contract. We focused our review on some fairly narrow issues, but we did not do

a comprehensive audit.

Mr. GILMAN. Well, what did you find?

Mr. UNGAR. Well, sir, we found, as I had indicated, that, one,

there was overbilling by the contractor for labor hours not worked.

In other words, the Government was billed for—— Mr. GILMAN. By how much?

Mr. UNGAR. The full amount, sir, is not clear at this point.

Mr. GILMAN. Well, roughly, what was it?

Mr. UNGAR. Well, the contractor, Ogilvy, estimates $850,000 at

the max.

Mr. GILMAN. What did you estimate?

Mr. UNGAR. Well, we didn’t come up with the total dollars, sir.

We identified a sample of people who we questioned——

Mr. GILMAN. Well, I understand. You audited this and you don’t

know what the total of overbilling is?

Mr. UNGAR. No, sir, we didn’t look at the total cost. All we were

focused on was to determine whether or not overbilling took place.

In this particular situation, because of the problems with the accounting system of the contractor and the problems with the billings and the problems with the time and attendance records, we

really would not have had the time to complete our major focus in

a reasonable amount of time had we focused on the entire

issue—— Mr. GILMAN. Are you going to continue with your auditing?

Mr. UNGAR. No, sir. Actually, DCAA is going to do that. That’s

more of its role than our role. There’s a defense contract——

Mr. GILMAN. OK. Let me turn to DCAA. What are you doing on

the additional billing?

Mr. UNGAR. Excuse me?

Mr. GILMAN. What is DCAA doing on a further audit of the billing?

Mr. UNGAR. Right.

Mr. GILMAN. Can I ask the DCAA——

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Mr. UNGAR. They’re doing what they would typically do, sir, in

the course of a contract audit, making sure that the bills are

appropriately—— Mr. GILMAN. Is there someone here from DCAA?

Mr. UNGAR. No, sir, but the Navy is here and maybe he would

like——

Mr. GILMAN. Well, Captain Westin, you are doing the investigation, I take it?

Captain WESTIN. Sir, I am at the Navy Contracting Office.

Mr. GILMAN. I realize that.

Captain WESTIN. DCAA is working for us.

Mr. GILMAN. They contracted you to pursue it? Is that right? Are

you fulfilling the investigation now?

Captain WESTIN. Our office has asked DCAA to conduct the investigations for us as the contracting officer. DCAA completed just

yesterday a 3-month investigation of the accounting system and

certified it as adequate.

Mr. GILMAN. Could you put the mic a little closer, please?

Captain WESTIN. Sure. The DCAA completed just yesterday a 3-

month audit of the accounting system to indicate that it was compliant with cost accounting standards for this type of contract.

They are looking at the billing system now and expect to complete

that shortly.

Mr. GILMAN. Well, Captain, what is taking so long? We had a

hearing in October of last year, and here it is we’re in August already and still the audit isn’t completed. Why is that?

Captain WESTIN. The Navy first took over the administration of

these contracts in December, and we asked the DCAA to conduct

a number of audits, including this one.

Mr. GILMAN. All right, from December until now, what is that,

8 months, 9 months? Why aren’t we complete?

Captain WESTIN. They completed audits of this accounting system as well as the other contractors. However, in November the accounting system or ONDC—excuse me, Ogilvy and Mather hired

PricewaterhouseCoopers to construct a Government-compliant accounting system, and they didn’t complete that until March.

Mr. GILMAN. I am not talking about internal construction. I am

asking about the audit to find out were there some overcharges or

weren’t there some overcharges. Who’s working on that? I notice

the Navy turned this over for criminal investigation, from your remarks.

Captain WESTIN. Sir, the criminal investigation was to coordinate with the office of the Justice Department for us. The accounting system review began in March because Ogilvy and Mather had

to construct a compliant accounting system before it could be audited. They didn’t have one at the beginning.

Mr. GILMAN. Well, tell me specifically now, when will we have a

final audit of all of this?

Captain WESTIN. I don’t have that date, sir. However, they are

proceeding with—now that they have completed the audit of the accounting system, they’re going right to the billing system and beginning to look at the—— Mr. GILMAN. Well, how long do you expect it to take to complete

all of this?

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Captain WESTIN. I don’t have——

Mr. GILMAN. It’s now taken 10 months. Is it going to take another 10 months?

Captain WESTIN. I don’t believe it will take 10 months for them

to complete their audit. However, it may take longer than that for

the Department of Justice to complete their work, but we’re

not——

Mr. GILMAN. Mr. Jurith, you are about to engage in another renewal of the contract, are you not?

Mr. JURITH. That’s correct, sir.

Mr. GILMAN. Are you going to do that before these audits are

completed?

Mr. JURITH. Absolutely. Mr. Gilman, what we’re doing right now

is looking at under—we have the obligation right now between

ONDCP and Navy to exercise an option before December. Under

the Federal Acquisition Regulation, what we’re doing right now is

looking at whether or not it makes sense for the Government to

continue with Ogilvy. That’s based upon whether or not Ogilvy can

give us the best value for the dollar, based upon market research.

Navy and ONDCP is engaging——

Mr. GILMAN. Let me interrupt. Despite the fact that they may

have overbilled or may have not——

Mr. JURITH. Mr. Gilman, under the law right now, that’s a separate issue. That goes to the issue of whether or not their past performance was not acceptable. Whether or not——

Mr. GILMAN. Do you consider the performance acceptable if they

overbill the Government?

Mr. JURITH. The question is whether or not to exercise the option

or whether or not it makes sense for the Government to do that,

OK, but whether or not past performance goes to the assessability

of that corporation; it goes to true to performance. In terms of

whether or not we should exercise the option goes to the issue of

whether or not they can perform the service to the Government.

Mr. GILMAN. Well, I am not too sure I understand your delineation between the overbilling and whether they can provide the

services.

Mr. JURITH. Sure, yes, sir.

Mr. SOUDER. Mr. Gilman, we’re going to have additional rounds,

and we all share that concern right now.

Mr. GILMAN. Thank you, Mr. Chairman.

Mr. SOUDER. Mr. Barr.

Mr. BARR. The FBI is investigating Ogilvy/Mather, is that correct, Mr. Hast?

Mr. HAST. Yes, it is.

Mr. BARR. The U.S. Attorney’s Office is investigating, is that correct?

Mr. HAST. Yes, that is correct.

Mr. BARR. When was the most recent check written to Ogilvy/

Mather by the U.S. Government? Anybody know?

Mr. UNGAR. Sir, for labor charges Ogilvy has not billed the Government since, I believe it was, July of last year because of the

problems with its accounting system. It now does have an accounting system that has passed muster. So I presume they will begin

79

billing. Now for media buys, I believe they have been billing and

being paid.

Mr. BARR. And when was the most recent check cut to them?

Mr. UNGAR. That I don’t know, sir.

Mr. BARR. Does anybody know?

Captain WESTIN. No, sir.

Mr. BARR. Is it unreasonable to expect somebody to know?

Mr. UNGAR. Well, probably we should, sir, but media buys

haven’t really been an issue that we’re aware of with this particular contract. It’s been the labor issue that’s been in question, not

the media buys, at least to our knowledge.

Mr. BARR. So we can take a company that is under investigation

by the FBI, under investigation by the U.S. Attorney’s Office for

the Southern District of New York for fraud, and we can say there

is no problem giving them a great deal of money, simply because

we compartmentalize that aspect of their work and they’re doing

just a fine, bang-up job on getting those ads out, while in another

part of their work they may very well be or have defrauded the

Government? And, Mr. Jurith, you apparently are perfectly happy

with that? You’re ready absolutely to go out and renew their contract?

Mr. JURITH. No, no, Mr. Barr. We’re looking at the exercise of the

option under the FAR. Whether or not the FAR requires determination of costs and the issue of continuity of service, that’s the

test under the law.

Mr. BARR. No, the test under the law is whether or not you believe that they’ve committed fraud.

Mr. JURITH. No.

Mr. BARR. If you believe, as a Government official, if any of you

believe that this company has committed fraud, you can move to

suspend that contract. You all are sitting there saying, not only

have you not done that, but you are ready to just go out there and

renew a contract with this company—— Mr. JURITH. No, sir.

Mr. BARR [continuing]. Even while they are being investigated by

the FBI and the U.S. Attorney’s Office.

Mr. JURITH. No, as I understand it, sir, Justice is investigating

the allegations. They have consistently updated ONDCP on the

progress of their investigation, and they have not made any decision one way or the other. We’re waiting to hear back.

Mr. BARR. Why can’t you—isn’t it—aren’t any of you indignant

about what this company has done?

Mr. JURITH. Sir, the——

Mr. BARR. Doesn’t it bother you, Mr. Jurith? You are a sworn official. You are upholding our criminal laws. Doesn’t this bother you

what this company has done? Don’t you have any regard for the

taxpayer moneys that have been given to this company?

Mr. JURITH. That is under investigation by the Department of

Justice, sir. The issue from OND——

Mr. BARR. Well, why can’t you move to suspend the contract?

Mr. JURITH. The issue from ONDCP——

Mr. BARR. There is clear evidence that they have committed

fraud, isn’t there?

Mr. JURITH. I have not seen that.

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Mr. BARR. Oh, you haven’t?

Mr. JURITH. That’s under investigation by the Department of

Justice.

Mr. BARR. How about this? Have you seen this report, Mr.

Jurith?

Mr. JURITH. Yes, sir.

Mr. BARR. And you don’t consider that evidence that they have

committed fraud?

Mr. JURITH. The issues in that report are under review by the

Department of Justice. The issue is——

Mr. BARR. What are you going to wait, for a final conviction

upheld on appeal before you do something?

Mr. JURITH. No. No, sir. We’re in constant contact with DOJ,

waiting for their report.

Mr. BARR. And how long are you going to wait, Mr. Jurith? How

many more millions of dollars of taxpayer money are going to go

out before you do something?

Mr. JURITH. Sir, in terms of exercising the option, the issues

under the FAR are very clear: Are the funds available? Is there a

continuing need?

Mr. BARR. It is very clear that if there is evidence of fraud you

can suspend it. Why haven’t you done that?

Mr. JURITH. That’s a decision to be made by the Department of

Justice. Neither GAO——

Mr. BARR. What have you recommended to them? You are with

the Department—excuse me——

Mr. JURITH. No, I’m not, sir.

Mr. BARR. Why haven’t you recommended that take place?

Mr. JURITH. I’ll defer to the Navy on that issue.

Mr. BARR. No, I’m asking you. Why have you, based on what you

have before you, which is clear evidence of fraud, why haven’t you

at least recommended to the Department of Justice that they move

to suspend the contract?

Mr. JURITH. I’m not going to—because the Department of Justice

is still looking at that matter, sir.

Mr. BARR. OK. When will there be sufficient evidence of fraud to

satisfy the high burden that you set for yourself as a Government

official?

Mr. JURITH. It’s not a question of a high burden. It’s a question

of what is the burden.

Mr. BARR. You have apparently set a very high one.

Mr. JURITH. There’s a process in the Department of the Navy, as

our contracting officers, that they’re looking at in that regard. Captain Westin——

Captain WESTIN. If I may, sir, I’d like to——

Mr. BARR. No, I’m not finished. I’m not finished with you, Mr.

Jurith.

Mr. JURITH. Thank you.

Mr. BARR. You reviewed a memo and made changes to it on April

12, 2000, correct, regarding the Ogilvy contract?

Mr. JURITH. What memo is that, sir?

Mr. BARR. Your memo?

Mr. JURITH. Not my—what memo?

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Mr. BARR. You want to do some other things? OK, we will see

you in a few minutes, Mr. Jurith.

Mr. JURITH. Thank you.

Mr. SOUDER. In starting a second round of questioning, I want

to point out for the record, because I think we all find this troubling, that there are several questions here. One, this is not a question about the media campaign, but how we administer the media

campaign, but it does potentially put the whole media campaign at

risk when the taxpayers and representatives of the taxpayers have

doubts, and that is why it is important to do this.

A second point is that Ogilvy is one of the most distinguished advertising firms in the United States and has been for years. They

obviously have many other contracts. Whatever caused this, possibly lack of oversight combined with a contract proposal that

wasn’t reasonable, there may be pressures that resulted in

misbilling, but the fact is that it is not in dispute whether there

was misbilling. Ogilvy admits to at least $850,000. We don’t really

have to wait for the Justice Department to find that out because

Ogilvy has already admitted, and we have in the record today—and

I don’t think anybody is disputing—that they admit that they overbilled, based on Government contracts, $850,000.

We also know from this committee and this subcommittee, and

we sit on other subcommittees here, that this is not the only case

that this has happened in the Government. I know in Medicaid/

Medicare oversight that we have had similar problems in Medicaid

with companies billing and overbilling, and that, in fact, sometimes

we suspend contracts and sometimes we don’t, and that the variables that have been stated here, which are continuation of contract, costs—for example, we sat in one miserable hearing where

the Department of Justice wanted the contract suspended because

there had been $1 billion of fraud, but we didn’t know what to do

with the senior citizens if their homes closed down. So there can

be extenuating circumstances.

But, generally speaking—and if I may ask Mr. Ungar this—in

your experience in GAO, if there was an admitted case of $850,000

in overbilling, which may be more, would it not be typical for the

Government to at least show uncommon restraint before they

would allow that company to continue? In other words, it would be

a factor?

Mr. UNGAR. Yes, sir, it would be a factor. In this particular case,

there’s no question that the company overbilled. It acknowledges

that. Now it does not say it was fraud. I mean, it doesn’t say that

it was intentional overbilling. Nonetheless, it does acknowledge

that. In this particular case, we’re saying in our report that we

think that the ONDCP and the Navy really do need to look at this

option and whether it ought to be extended, to consider both the

technical performance and the administrative performance, including the issue of whether it feels comfortable that this company has

really cleaned up its act and is in a position to do the work in the

future in an appropriate manner, including the billings.

Mr. SOUDER. Captain Westin, if the Defense Department in other

areas in contract billing had contractors who came forth and said,

‘‘We admit to at least $850,000 errors,’’ which in the labor portion

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of this—let me ask Mr. Ungar first. The $850,000 is roughly what

percent that they overbilled?

Mr. UNGAR. I believe the labor charges——

Mr. SOUDER. And that’s the low number.

Mr. UNGAR. Yes. I think the labor charges were somewhere

around $24 million for the period that we were looking at.

Mr. SOUDER. At least 4 percent that they were——

Mr. UNGAR. So it’s a small percent.

Mr. SOUDER. But that is 4 or 5 percent.

Mr. UNGAR. Yes. I think to be fair, sir, to Ogilvy, if one wants

to be, I think what Ogilvy did is they took a look at the information

that we reported to them and extrapolated from that, and then

they took a number of other cases which they felt would be questionable and erred, in their view, on the side of upping the amount

of money. So, in their view, the $800,000 would be more than probably they would say was definitively overcharged.

Mr. SOUDER. OK.

Mr. UNGAR. Our view of that is we’re not really sure of that, sir.

Mr. SOUDER. So there could be a range. Captain Westin, if somebody admitted, or at least attempted to try to establish that number, and they were 5 percent off, would the Navy continue that contract if there were alternatives?

Captain WESTIN. Sir, the continuation of the contract would be

OK under the FAR. What we have the responsibility to do, if we

get information similar to the GAO report here, is that we would

refer that to the suspension and debarment officials within the Department of Defense. In the Navy in this case it’s at the Office of

the General Counsel. In fact, we have done that in this case. We

referred this GAO report through our chain of command to what’s

called the Office of Procurement Integrity within the Navy.

Mr. SOUDER. And if this goes on in a weapons procurement case,

for example, and for 2 years somebody has admitted that they had

billing errors, how long would you wait until you did something?

Captain WESTIN. Well, those decisions as to whether to suspend

or debar are made by those procurement officials. However, the

purpose of suspension and debarment is to protect the Government

and the issuance of future contracts. In this case the DCAA’s mission is to take a look at the billings and the accounting system and

determine what the correct amount that the Government should be

paying, and whether that’s $850,000 or some larger amount or

some smaller amount, that’s what they’re going to try to do, and

then they’ll let us know, authorize the right amount of payments.

Mr. SOUDER. This is an important thing because in our drug-free

communities bill that we just passed through last week, I mean the

$850,000 is 81⁄2 communities’ programs for a whole year. It is not

an insignificant sum.

Mr. Cummings.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

Mr. Ungar, I listened to Mr. Barr and his questions. I guess it

goes—the question becomes, when you made the determinations

that you made with regard to overbilling, you in answering an oral

question of mine, you said you saw one type of overbilling where

they had said, well, you know, the employee said, ‘‘Well, maybe I

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did something, just forgot to put it down.’’ The other type of overbilling was what? What was that?

Mr. UNGAR. There were two situations, sir. One set of circumstances was such that there were some employees who said

they were instructed by their supervisors to increase the time, go

back and adjust the time that they charged to the contract. In fact,

they did not work—some of those employees had not worked those

hours. So we have some employees being instructed to add time to

this account, the ONDCP account, that they did not actually work.

That’s one set of circumstances.

Another set of circumstances is there is another group of employees whose timecards were changed after they prepared them initially and time was added to the ONDCP account by people other

than the employees. We don’t know the full extent of that, but we

know that it did happen. So that’s one of the issues that, hopefully,

DCAA may try to get a handle on.

So you have two different situations: employees being instructed

to change their timecards to add time and employees whose timecards were changed by somebody else to add time to this account

that was not worked.

Mr. CUMMINGS. In your judgment, were you left with questions

as to whether or not—and this is just your opinion—whether or not

criminal activity took place? Did you have questions or did you

feel——

Mr. UNGAR. Yes, sir.

Mr. CUMMINGS. You are a professional.

Mr. UNGAR. Yes.

Mr. CUMMINGS. You know what a crime is.

Mr. UNGAR. Yes, sir.

Mr. CUMMINGS. I mean, so—— Mr. UNGAR. In our view, charging the Government, in effect, falsifying time records and charging the Government for time not

worked is fraud in our view. And that is why we did refer this to

the Department of Justice for further followup and action.

Mr. CUMMINGS. Then when we go to Mr. Jurith and this whole

discussion here, this discussion of whether to suspend the contract

and all of that kind of thing, does GAO make recommendations?

Let’s say you are in the middle of an investigation and you say, ‘‘My God, what has happened here?’’ I mean, is there ever any time

you go and you say, ‘‘Look, red flags, we’ve got to stop this right

now’’? I mean, does that ever happen? I’m sorry, I’m talking to you,

Mr. Ungar. I apologize.

Mr. UNGAR. Oh, yes, sir. Actually, we did recommend that

ONDCP should work with the Navy to—actually, we said, don’t

award this next option, first, unless the contractor cleans up its accounting system and has an adequate accounting system and takes

appropriate action. Then, second, we said, in making its decision,

ONDCP needs to take into consideration both the technical performance, which it’s been very pleased about, and the contractor’s

administrative performance, which is the billing practices, in deciding whether or not to recompete this contract.

So we certainly think that this is an issue that ONDCP needs

to deal with, and it does have discretion. It is not under any obligation under the FAR to award this option.

84

Mr. CUMMINGS. I am running out of time. Did you read the report, this report that just came out yesterday? Did you read it? The

report that just—oh, you did it?

Mr. UNGAR. No—which—yesterday?

Mr. CUMMINGS. The report that somebody said was completed

yesterday.

Captain WESTIN. DCAA.

Mr. CUMMINGS. Yes, the DCAA, have you seen that report?

Mr. UNGAR. No, sir, I have not seen that.

Mr. CUMMINGS. OK. All right. Well, they say that they have

cleaned up their act, Ogilvy has cleaned up their act. You are saying that is not enough to say, OK, guys—you know, as I am sitting

here, I am thinking about, as a lawyer, if I screwed up as a lawyer,

let me tell you something, if I overbilled as a lawyer, I am disbarred for the rest of my life. I mean that is deep.

Mr. UNGAR. Right.

Mr. CUMMINGS. If I screw up on one client one time—I can be

the greatest lawyer in the world—I am disbarred.

Mr. UNGAR. Right, sir.

Mr. CUMMINGS. So I am just wondering, the cleanup factor, how

much does that play? If I am caught and then I clean up, the Bar

Association is going to say, ‘‘Sorry.’’ Mr. UNGAR. There’s a couple of different issues here, maybe more

than a couple, sir. One is these formal suspensions, the debarment

proceedings which were talked about, that’s a formal process that

has to take place. The other issue is whether to recompete this contract. Unless the contractor is suspended or proposed for debarment, if that happens, then ONDCP could not recompete the contract—or excuse me, exercise the option. But if that doesn’t happen, then ONDCP does have discretion as to what to do when this

contract expires at the end of the year.

There’s a number of things that ONDCP needs to take into consideration. One is this accounting system, because obviously if the

contractor didn’t fix the accounting system, it would be impossible

to tell how much it was appropriately paid. The contractor has

done that, according to the Navy and DCAA. So that’s taken care

of.

Now the other issue is, that we talked about is, the situation of

the overbilling. The contractor has taken action to fix its time and

attendance system, put in a new system. It has provided, through

contractual help, training to its employees. It has certainly taken

corrective action. It also, as has been indicated, came forward to

the Justice Department and acknowledged that it overbilled and

said, ‘‘Yes, we did make mistakes.’’

The one issue that still remains for us in this case I think that

we think as a very minimum needs to be considered: What was the

real start of this process? We know that the overbilling came after

a discussion that the president of the company had with certain

employees saying he was disappointed with the revenue.

Mr. CUMMINGS. Can we pick up on that?

Mr. UNGAR. OK, sure.

Mr. CUMMINGS. I mean, we are running out of time, unfortunately. I hope you won’t forget that though.

Mr. SOUDER. The subcommittee now stands in recess.

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[Recess.]

Mr. SOUDER. I call the subcommittee back to order and would

now yield to Mr. Gilman for further questioning.

Mr. GILMAN. Thank you, Mr. Chairman.

Let me ask GAO, was Ogilvy cooperative and helpful to your

team in collecting information for your report?

Mr. UNGAR. Sir, during our review, generally, it was cooperative.

We had a few wrinkles along the way, but I’d say overall it was

cooperative and it did provide us the information that we had

asked for for the most part.

Mr. GILMAN. Does GAO have any recommendations? Considering

your findings of the improper billing by Ogilvy, what should

ONDCP do now regarding the remaining 2 years of the campaign

contract?

Mr. UNGAR. We think that the most urgent action that ONDCP

needs to take is to decide whether or not to recompete this contract, and, of course, in doing so, it needs to consider all the factors

that have been brought forward in terms of the performance of the

contract, both technically and administrative-wise, including the

overbilling. It needs to take into consideration the corrective action

that has been taken, the situation with respect to what’s in the

best interest of the Government, both cost-wise and program-wise.

It also needs to work with the Navy to resolve the billing questions that are outstanding. There’s been somewhere between $6

and $7 million disallowed of the contractor’s billings so far, and

there needs to be determination of what was an appropriate

amount to have been disallowed. So it certainly needs to do that.

It needs to make sure that there is a continued effective relationship between its folks, the Contracting Officer’s Technical Representatives, and the Navy contracting officers, to make sure that

there’s not a repeat of the problem that existed when HHS had the

contract.

Mr. GILMAN. Has Ogilvy undertaken any corrective actions, do

you know, regarding this contract?

Mr. UNGAR. Yes, sir. It had retained consultant help to come up

with, develop, an accounting system for it that would meet the

Government standards. That’s been done. It also got contractual

help to look at its time and attendance system and develop a new

system and help train its employees. It certainly did come forth to

the Justice Department on its own earlier and acknowledged that

there were problems with its accounting system and its billings.

Mr. GILMAN. And to what extent were the improprieties—how

much did that add up to?

Mr. UNGAR. Sir, Ogilvy and its representatives suggest $850,000

be disallowed as a result of the problems with the time charges. We

are not in a position to determine whether or not that’s an appropriate amount. We think that’s really up to the Defense Contract

Audit Agency to look at in its audit.

Mr. GILMAN. Well, Captain Westin, you are the contract agency,

right?

Captain WESTIN. Yes, sir.

Mr. GILMAN. What did you find to be the amount that was overcharged?

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Captain WESTIN. Again, we received that $850,000 number and

did not feel that we had enough information to make that judgment and referred that to the Defense Contract Audit Agency. They

are looking—they received from Ogilvy just on July 11th incurred

cost reports for 2000 and—or 1999 and 2000, the timeframe of

these billings, alleged billing irregularities, and they are auditing

those to determine appropriate overhead rates. Then they’ll use

that information to figure out what the right number is.

Mr. GILMAN. Well, Captain Westin, when did the Defense agency

become involved in this? At what date?

Captain WESTIN. We asked them—they became involved almost

immediately when we took over the contract administration on the

first of December. Their initial task was to look at the accounting

system of the other contractors who already had accounting systems, and immediately upon Pricewaterhouse completing work on

Ogilvy’s accounting system so that it could be audited, they undertook that work and completed that just yesterday. They’ve also

been looking at 100 percent audit of all billings that were presented. Because of the lack of an adequate accounting system, they

did extra auditing to ensure that any money that was paid to them,

which has been only non-labor charges or media buys primarily,

were proper for payment. As soon as Ogilvy begins to rebill using

an adequate accounting system for labor charges, then they will

audit those as well to ensure that then the Government only pays

for supportable labor.

Mr. GILMAN. Did you state that it was just a few weeks ago that

some important documents were turned over to the Defense agency?

Captain WESTIN. Ogilvy and Mather, it was previously stated by

GAO that they stopped billing for labor in, I think it was July

2000. They also did not present any cost reports until July 11th

here.

Mr. GILMAN. This July?

Captain WESTIN. Yes, sir, just a couple of weeks ago. Those are

the documents which are used to establish appropriate overhead

rates to apply to direct labor amounts.

Mr. GILMAN. Well, what took so long between December and July

of this year for them to bring the information to the attention of

the Defense agency?

Captain WESTIN. I don’t know, sir, exactly, but my suspicion is

because they didn’t have an adequate accounting system to, in

their own mind, be able to certify their labor—incurred cost reports. In other words, they have, before DCAA can audit them,

they have to be certified by the company themselves as an accurate

representation of their labor.

Mr. GILMAN. Well, Captain Westin, it was my impression this is

one of the largest and one of the older advertising agencies in the

country, is that right?

Captain WESTIN. It’s my understanding one of the world’s largest, yes, sir.

Mr. GILMAN. Is there some question in your mind about why they

haven’t got an accounting system that could tell them what is

wrong with their oversight or their overpayments?

Captain WESTIN. Yes, sir, it was a surprise.

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Mr. GILMAN. Well, I am concerned that we still, 10 months later,

don’t have any answers to all of this, and at this point ONDCP is

unwilling to cancel the contract apparently and is considering the

possibility of a further renewal. Is that right, Mr. Jurith?

Mr. JURITH. Mr. Gilman, these matters are under inquiry right

now by DCAA, by the Department of Justice. We have a very technical issue to examine right now: whether or not that option is in

the best interest of the Government, and the law spells out whether or not we should do that. Are the funds available? Is there continuing need for the service? And is exercising that option in the

best interest of the Government? Now you balance that which is

overriding and true about whether or not there is wrongdoing here,

which is in the purview of DOJ and DCAA. But, they are two—unfortunately, Mr. Gilman, they’re two—not unfortunately—the fact

is, under the law, they are two separate inquiries.

Now we’re going on two tracks. I’ve told Navy I want to do market research as long as I’m the Acting Director, pending the confirmation of the President’s nominee. I want to do market research

to make a determination whether or not we should continue with

Ogilvy, whether it’s in the best interest of the Government to carry

out the terms and objectives under the contract. That’s my responsibility.

The issue of whether or not there’s wrongdoing, that’s in DOJ,

and I’m willing to be bound by that decision. And the Navy is going

forward with their recommendation based on the DOJ report as to

what should be done. But, again, Mr. Gilman, I think you’ve got

to segregate the two decision processes that are ongoing right now,

and that’s what we’re doing.

Mr. GILMAN. Mr. Jurith, do you feel that you have any responsibility, once an agency of this nature has been charged with the

fact that they have overcharged and there’s a criminal investigation pending in the Department of Justice, do you think you have

any responsibility—please listen to me.

Mr. JURITH. Sure.

Mr. GILMAN. Do you think you have any responsibility of terminating that contract?

Mr. JURITH. Termination is a dramatic response, is a dramatic

action by the Government. You’re saying, then, to the contractor, ‘‘We no longer need your services.’’ DCAA has found out that

Ogilvy—— Mr. GILMAN. Could you put the mic a little closer to you?

Mr. JURITH. I’m sorry, Mr. Gilman. DCAA has found out a contractor—it’s the only given contractor who we have. The contractor—yesterday’s report by DCAA has found that the contractor had

developed excellent ethics, timekeeping, and training program.

Training was presented to its employees in the first half of 2001.

Ogilvy had also provided training to all new hires. Now that’s current.

If you’re going to use debarment and suspension, it goes to

whether or not in the future the Government can rely on the credibility of that contractor. It’s a future determination. There are 10

points laid out in the FAR that Government agencies need to look

to whether or not that vendor is capable of fulfilling those requirements. We’re not there. We haven’t found out about——

88

Mr. GILMAN. But, Mr. Jurith, if I might interrupt——

Mr. JURITH. Yes, sir.

Mr. GILMAN [continuing]. You have the responsibility now of determining, are you going to rehire this company or are you going

to suspend their contract? How do you—and you say it might be

in the best interest of Government to continue working with this

company, but how would it be in the best interest of working with

a company that has defrauded the Government?

Mr. JURITH. There’s been no finding of defrauding the Government. That’s a matter——

Mr. GILMAN. Well, they’re being charged with it in a criminal investigation by the Department of Justice.

Mr. JURITH. It’s a different——

Mr. GILMAN. Does that lead you to have some reservations?

Mr. JURITH. There’s a matter going on within the Civil Division

of the Department of Justice that my staff is in constant communication on. We’re being monitored. Whether or not——

Mr. GILMAN. Wait a second. Captain Westin said——

Mr. SOUDER. Mr. Gilman——

Mr. GILMAN. Captain Westin said there’s a criminal investigation

pending.

Mr. SOUDER. Mr. Gilman——

Mr. JURITH. Well, they referred it up to the——

Mr. GILMAN. Is that right, Captain Westin? Is there a criminal

investigation pending?

Captain WESTIN. I, sir, don’t know whether—I know it’s in the

hands of the Department of Justice. I think I mentioned that the

Navy Criminal Investigative Service is what the Navy uses to coordinate investigations, our side of any investigation with the Department of Justice.

Mr. GILMAN. Well, in your testimony——

Mr. SOUDER. Mr. Gilman——

Mr. GILMAN [continuing]. Didn’t you say, Captain Westin——

Mr. SOUDER. Mr. Gilman——

Mr. GILMAN [continuing]. That in March 2001 that Ogilvy made

a disclosure to the Navy, the DCAA, ONDCP, the Department of

Justice regarding costs they couldn’t certify, and due to the disclosure, the Navy contracting officer referred the matter to the Navy

Criminal Investigative Service to coordinate with the Department

of Justice and the investigative arm of DCAA. Is that correct?

Captain WESTIN. Yes, sir.

Mr. SOUDER. Mr. Gilman, we need to go to Mr. Barr. We have

gone over.

Mr. GILMAN. My time has run. Thank you, Mr. Chairman.

Mr. SOUDER. Mr. Barr.

Mr. GILMAN. Could you just respond to that? Is that correct, that

it has been turned over to that investigative agent service?

Captain WESTIN. For a contracting officer, that organization is

what we use to coordinate with investigations going on——

Mr. GILMAN. Could you put the mic a little closer?

Captain WESTIN. Our contracting officers use that organization

to coordinate in this case with the Department of Justice and any

input that we——

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Mr. GILMAN. So is it now before the Navy Criminal Investigative

Service? Is this matter now before them?

Captain WESTIN. The Department of Justice, as I understand it,

has taken jurisdiction over this.

Mr. GILMAN. Thank you.

Mr. SOUDER. Mr. Barr.

Mr. BARR. It is my understanding, Mr. Chairman, that this matter is being handled as a criminal matter by the U.S. Attorney’s Office and by the FBI. There may be a civil component to it, but if

there is an effort to characterize this more benignly as simply a

civil matter, that is not my understanding. I believe that there is

a criminal—that this is being handled as a criminal matter. Is that

your understanding, Mr. Hast?

Mr. HAST. Yes, that is correct. This is being handled as a criminal matter in the Southern District of New York.

Mr. BARR. OK. You all may want to communicate that to

ONDCP, please.

Are any of you all familiar with the provisions of the CFR that

relate to suspension of Government contracts and payments?

Mr. UNGAR. Some familiarity, sir.

Mr. BARR. Apparently, more familiar than some of the other people at the table. The fact of the matter is, is it not, Mr. Ungar, that

the U.S. Government, if they believe that there is evidence of

fraud, it can suspend a contract and suspend payments under that

contract? Is that correct?

Mr. UNGAR. I believe so, sir. There is a process, a formal process,

for that which would be within the Navy’s purview right now, and

I believe that’s, you know, underway.

Captain WESTIN. Yes, sir, we forwarded the allegations and the

GAO report to Navy’s Office of Procurement Integrity, and they are

the ones charged with determining whether a suspension or debarment is warranted.

Mr. BARR. What was the recommendation? What was the conclusion?

Captain WESTIN. Our contracting officer’s recommendation was,

because of there are about 10 factors in the Federal Acquisition

Regulation that they should use to make a recommendation for

suspension and debarment, that because Ogilvy has substantially

cooperated with the Government, had taken corrective actions, and

that we had not—they had suspended billing the Government back

in July, that we had sufficiently protected the Government. So the

contracting officer thought that, unless something changes—and

that might include, for example, an indictment or other information

coming out of the investigation that DOJ is conducting—unless

something changed, that he felt the Government was adequately

protected. But it is, again, just the contracting officer’s recommendation, and it is the Navy Procurement Integrity Office that

makes that determination.

Mr. BARR. I am just flabbergasted that, except for GAO, you all

are just so willing to just sit back and let this process continue. It

does not require an indictment. It does not require a conviction. It

simply requires, ‘‘substantial evidence.’’ And substantial evidence

means simply, ‘‘information sufficient to support the reasonable beVerDate 11-MAY-2000 08:02 Sep 05, 2002 Jkt 000000 PO 00000 Frm 00093 Fmt 6633 Sfmt 6633 C:\DOCS\81309.TXT HGOVREF1 PsN: HGOVREF1
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lief that a particular act or omission has occurred.’’ That’s from

CFR.

Would you all’s attitude regarding Ogilvy/Mather be the same if

it was your personal money at stake? Would you just sit back for

month after month after month after month after month and let

them walk away, pocketing additional money, in the face of what

everybody here, I think, could not argue with a straight face is anything other than very serious irregularities, if not fraud? That is

what dumbfounds me, just this silence.

Captain WESTIN. Well, speaking for the Navy, we did follow the

appropriate procedure and refer it to the appropriate officials, and

they will—— Mr. BARR. But how long does this take? Have long have you all

been—you all have been working on this since last year. We had

a hearing in October of last year, and as far as I can tell, other

than churning a bunch more paper, nobody has done anything except GAO.

Captain WESTIN. Well, since our involvement, sir, we have followed our—— Mr. BARR. When did your involvement begin?

Captain WESTIN. In January, sir. I mean, excuse me, December

1st.

Mr. BARR. So since last year, 8 months, and going on 9 months,

have gone by. Why is there no sense of urgency? Why is there no

sense of anything other than, well, gee, you know, this thing will

take its course; we’ve sent the paperwork forward. And then Mr.

Jurith says, in response to a question, ‘‘Are you all going to send

this forward,’’ ‘‘Absolutely,’’ to renew the contract. That is a phenomenal attitude.

Captain WESTIN. Well, sir, the GAO report came out on June

25th, and that was a clear statement of their findings in this investigation.

Mr. BARR. Weren’t there pretty clear statements from GAO before that? Wasn’t there pretty clear evidence before that? That is

why you all are involved.

Captain WESTIN. Yes, sir, but the actual allegations concerning

the fraudulent—— Mr. BARR. And Mr. Jurith knew about this back in October—in

April. He knew there were serious problems in April 2000, well

over a year ago, right?

Mr. JURITH. Mr. Barr, I mean, clearly——

Mr. BARR. Or are you going to dispute that?

Mr. JURITH. Sir, under the law—and I know it’s something that

you’re always mindful of, all agencies about—debarment and suspension are remedial actions. OK?

Mr. BARR. No kidding?

Mr. JURITH. OK, they’re used to punish the contractor. They’re

forward-looking. If a contractor has taken steps to correct those actions, notwithstanding the past irregularities, as I’ve been advised

by our counsel—— Mr. BARR. Oh, come on, are you saying that——

Mr. JURITH. Sir, that’s the law.

Mr. BARR. You might want to get another lawyer for ONDCP.

Maybe that is why we are having these sorts of problems. You are

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telling me that, if somebody comes to you with substantial evidence

that a company has committed fraud, that as long as from the moment they come to you from that point forward, as long as they

clean up their act and promise not to do it again—and, by the way,

I don’t know that Ogilvy has even promised that—that you think

there is nothing the Government can do to suspend their contract

or debar them?

Mr. JURITH. Sir, what I’m saying to you—no, what I’m saying,

sir, in the present context, it’s gone into the Civil Division. They’re

looking at all of those allegations and will make a recommendation

to us. Thus far, they haven’t done it.

I have an obligation right now to decide whether or not we

should exercise the option. OK? And we’re going to do that in the

context of all these issues: whether or not it’s in the best interest

of the Government to do so. I feel confident that we’re on the right

path to make sure—— Mr. BARR. You feel confident you are on the right path?

Mr. JURITH. Absolutely.

Mr. BARR. I think you may be the only one here.

Mr. JURITH. Well, and I have that decisionmaking authority right

now, so I’m prepared to exercise it.

Mr. BARR. To exercise what?

Mr. JURITH. That decision, whether or not we should exercise

that option or not.

Mr. BARR. When did you first become aware of irregularities in

Ogilvy’s billing?

Mr. JURITH. In the allegation made in April 2000, sir.

Mr. BARR. And this is despite the fact that you had told GAO,

when they questioned you, that you were not, that you had not

been aware of it then, right?

Mr. JURITH. That’s not—that’s not—I don’t believe I was ever

asked that by GAO.

Mr. BARR. I’m sorry, what?

Mr. JURITH. I don’t believe I was ever asked that by GAO.

Mr. BARR. That you were what?

Mr. JURITH. I don’t believe I was ever asked that question by

GAO, sir.

Mr. BARR. Well, maybe we will talk about that.

Mr. SOUDER. We are going to do one more round here, and I am

going to be a little more generous with the clock so that we can

try to finish up with this round.

I want to start with just a comment of: It is not an acceptable

position of this committee and of the Congress that overbilling admissions, whether or not a conviction is found, is not part of an

evaluation, and that I understand that at times in a military contract that, to use our earlier debate, that if there is a weapons system and you’ve invested so much and you’re partway through, and,

in fact, then you clean up the accounting procedures, just as I mentioned in the nursing home area, that at times you continue the

contract.

But the burden of proof switches, because in this case we have

a GAO audit; we have an admission of overbilling by the company.

So the burden of proof now would have to go that, to continue with

this company, that it would be a problem to switch the contract.

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And, in fact, in advertising, since we have NIDA’s research, since

purchasing is not—that Ogilvy is a tremendous agency but there

are other tremendous agencies as well, it is going to be a fairly difficult argument to maintain that the experience in purchasing

time, that the experience in using research, given the fact that

we’ve contracted out the research portion, is compelling over the

question of not whether there has been overbilling, but whether

that was fraudulent and criminal overbilling or something less

than that, which would be something we don’t fully understand

here.

But I actually want to make sure that Ms. David gets asked

some questions here because we also want to look where we are

headed next in the campaign, and I have some questions about the

media campaign and your research with that.

Have you noticed significant trends in drug use by the youth who

have been targeted by the ads? You mentioned a few things such

as the marijuana. Do you feel that in some of those trends, which

are small but, nevertheless, significant—every change is significant—did they respond in general about ads or to these ads specifically?

Ms. DAVID. They appeared to respond to the ads, but we can’t tell

yet whether they were the specific ads. They have been exposed to

a lot of anti-drug advertising. Their attitudes are generally negative, which is a good thing. But we aren’t yet able to tie together

the exposure to the ads and significant change. And what we mean

by that is, while there were significant changes, we couldn’t see

among those who were the most exposed the most change, and

that’s the kind of connection we make. We haven’t seen that yet.

We believe that’s because we need more time for the evaluation period.

Mr. SOUDER. Now I understand that whenever you are in social

policy, it is a little bit different than retail marketing, but that was

part of my earlier life, and including contracting market research

studies. Quite frankly, my division, it would not have been acceptable to go into management after a market research study and say,

well, sales in this category went up, but it had nothing to do with

your ad. Do you know why that wasn’t a component in the first

round, to try to find whether the response was directed to the ad?

Ms. DAVID. Well, we asked the questions, but we don’t have

enough people yet in the sample, which we expect—I mean we

have people in the sample, but not tied directly to this exposure

measure to find that connection yet, but we expect that in the fall

when we report, and absolutely by the spring, we will have more

data. So it’s going to take a little more time.

Mr. SOUDER. Because one of the questions you said that the

group that’s exposed the most has not had necessarily as much response, and that could be because they are higher risk and more

difficult. It could be several different variables, but that certainly

is a warning sign.

For example, I remember years ago in my other life as a staff

person, there was a research study in Minnesota on the effectiveness of birth control clinics in the schools and whether or not they

reduced incidents of teen pregnancy. In fact, teen pregnancy went

down in the schools with the clinics, but in all the adjacent disVerDate 11-MAY-2000 08:02 Sep 05, 2002 Jkt 000000 PO 00000 Frm 00096 Fmt 6633 Sfmt 6633 C:\DOCS\81309.TXT HGOVREF1 PsN: HGOVREF1
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tricts it went down by farther, which doesn’t prove either direction

because there were obviously variables going on besides the clinics.

Do you have any sort of a control group that you are measuring

to see whether their usage is going down? It is a little difficult in

mass media advertising, but certainly you are doing regional advertising as well.

Ms. DAVID. Well, what we’ve done in this is a national sample.

As you know, the ad campaign runs and everyone has the potential

for exposure. So we didn’t have control groups, but what we’re trying to do is to look at those who admit they’ve seen the ads. We

show them on a computer. They identify those ads, yes, we’ve seen

them in the last couple of month, and those who most see these ads

have the greatest change in attitudes and behavior as a method of

analyzing that, yes, they saw the ads; yes, there is change. When

those two things come together, we should be able to discern that

there was exposure and there is change, but you’re right, there

were other influences that we have to set aside and understand

those.

Mr. SOUDER. In your charge in the analysis, do you make any

recommendations or do any analysis? Generally speaking, what

they tell us, because all of us in politics become somewhat media

experts because we buy a lot of time, that it takes 1,000 points to

get your ad through. Roughly, what kind of intensity are the individuals in this target being exposed? Because by trying to cover

every drug or at least many of them and many different markets,

I assume that this media buy is not getting out 1,000 points in a

week to any target.

Ms. DAVID. Well, I’d say that I would defer to—— Mr. SOUDER. I would guess you are looking at more like 100 to

200.

Ms. DAVID [continuing]. To ONDCP for those specifics. They report to us, and we look at those in the survey. But, actually, what

we report is what the people in our survey say.

Mr. SOUDER. So you are not looking at reaching frequency?

Ms. DAVID. Well, no, that’s not our primary. We take it into consideration, but that is reported directly to us from ONDCP and the

campaign. They tell us what the reaching frequency is, and we look

at that along with our own data.

Mr. SOUDER. Mr. Ungar, did you look at any of these kind of

questions in your analysis?

Mr. UNGAR. No, sir, we did not in our most recent review.

Mr. SOUDER. Mr. Jurith, in the targets—I know in our discussion

as well—we talked about the problems with ecstacy. Do you believe

that the media campaign, given the fact that the greatest threats

to different subgroups change almost every 6 to 12 months, and

what we just heard from the research is that, even after a fairly

long monitoring period, we can’t get a subgroup large enough to get

a good handle on whether this ad campaign is actually effective or

whether there are other variables, how can we have enough flexibility to deal with the problems and yet have the research catch

up?

Mr. JURITH. Mr. Chairman, it’s a challenge, but I think the campaign does work. Remember, this is a primary prevention campaign. So, granted, we have a whole host of new challenges:

94

ecstacy, oxycontin, a whole range of issues that have cropped up

since this campaign was developed. But at the end of the day, it’s

a primary prevention campaign, and we know from our experts

that we deal with routinely—Allen Libben and his team run the

campaign in terms of we know that, if you send a clear and consistent message to young people about the dangers of drug use, how

to respond to peer pressure, sending good parenting skills to parents, whether it’s ecstacy, marijuana, cocaine, heroin, you’ll be able

to inoculate children to the dangers of drug use. So we shouldn’t

be so much blindsided by the fact that there’s a new drug out there

because at the heart of it is the primary prevention campaign.

In terms of ecstacy specifically, you’re right, it’s a real challenge

out there now. There’s a notion out there that somehow in popular

media that this is a safe drug to use—patently absurd. I mean

there was a New York Times magazine article back in January in

the Sunday Times magazine exulting the benefits of ecstacy. Fortunately, we got through on the media campaign an effective letter

back, not myself, but Dr. Alan Leshner from the National Institute

of Drug Abuse, refuting that notion. We need to do a better job. One thing the media campaign is doing, in addition to a $5 million media buy, specifically targeted at ecstacy through the Internet or radio and print ads, we’re sitting down through our media

outreach, we’ve done two roundtables for producers and writers in

Hollywood and New York to talk about this issue, to make sure

that when they put ecstacy in the script, it’s portrayed accurately

based on the science.

On Monday Dr. Don Vereen, my Deputy, testified before the Senate Governmental Affairs Committee on just this issue. We need to

get that accurate information out there. The media campaign is

doing it.

Mr. SOUDER. Thank you. It suggests to me that one of the things

that I wanted to followup with and will be doing through our oversight is to see whether a wide number of dollars, with the kind of

research we’re approaching, and it’s relatively generic, can actually

have a direct impact or whether targeted subcampaigns to supplement your other efforts that can get relatively rapid turnaround in

the market research, like is required in other sectors of the business world, and we’ll continue to look at that question with you.

Mr. JURITH. You know, prior to the Media Campaign, I don’t

know any of the drug prevention campaigns in the 20 years I’ve

been doing this business—I started in this business working for

Ben Gilman 20 years ago and Charlie Rangel—I don’t know any

other prevention campaign that requires that every 6th month we

give to the Congress a report.

Mr. SOUDER. But the fact is, as we have just heard——

Mr. JURITH. And we’re doing that.

Mr. SOUDER. But we just heard from the report that we can’t

find that it was accurately measured.

Mr. JURITH. Not yet. Not yet.

Mr. SOUDER. So it doesn’t do us any good to get one every 6

months if it doesn’t measure the specific ads as opposed to a general societal track.

Mr. JURITH. But we’re heading in that direction. It takes us a bit

of a time to get that. We’re working on that and providing those

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reports to the Congress. I think that’s very unique in this campaign. It’s the first time it’s ever been done that I know in the history of drug abuse prevention.

Mr. SOUDER. Thank you. Mr. Cummings.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

I am just curious about something. Just picking up where the

chairman left off, Mr. Ungar, do you think if we had a report every

6 months that included the financial end of things also, that would

be helpful? In other words, we now talk about the effectiveness, but

I’m just wondering.

Mr. UNGAR. I don’t know if the straight financial numbers would

be helpful, sir, but I think it might be helpful to get progress reports periodically on the actions being taken to address the problems that did exist and periodically receive at least a summary of

the results of DCAA audits of the billings.

Mr. CUMMINGS. You know, as I sat up here, I first was a little

bit confused about where the Acting Director was coming from, Mr.

Jurith was coming from, but now I get it because I have now had

an opportunity to read, and I see where Mr. Barr was coming from,

but I also see why the responses are what they are. If I could kind

of summarize what I think has happened here.

I think what happened is that GAO found some problems, some

major problems, and what appears to be fraud, and two types of

situations with regard to employees and time being submitted for

work that wasn’t done. We are at a point now where the Navy

can—reports have been done. Mr. Jurith is in a position where he

is sitting there trying to defend, first of all, a decision that he

hasn’t even made yet that’s within his discretion. It is interesting

when we look at—and then when we are talking about this debarment and I listened to Mr. Barr, my good friend, and I listened to

his basically asking why certain things have not been done. When

we look at the regulations, the contracting regulations, I now understand what position you find yourself in, Mr. Jurith. It is very

interesting.

First of all, it is my understanding that debarment or suspension

cannot be imposed for penal purposes, which is very significant.

You can’t do that. You can’t do that, and that is according to the

Federal Acquisition Regulation.

Now let’s just take it a step further. If we want to talk about debarment, I guess the question is, well, what factors—we keep hearing this factors thing. You talked about it, Captain Westin. When

I began to look at the factors, I understand why we are where we

are. Because I will just read the 10 factors and all credit due to

you, Mr. Ungar, and your agency, you have done—you see what

you see, and you come to certain conclusions, but then you have

this debarment law, Mr. Jurith, that says, ‘‘before arriving’’—and

I am citing section 9406–1 of the Federal Acquisition Regulation.

It says, ‘‘before arriving at any debarment decision, the debarring

officials should consider factors such as the following.’’ Let me just

give you a few of them.

Listen to this one: No. 5, it says, ‘‘whether the contractor has

paid or has agreed to pay all criminal, civil, and administrative liability for the improper activity, including any investigative or adVerDate 11-MAY-2000 08:02 Sep 05, 2002 Jkt 000000 PO 00000 Frm 00099 Fmt 6633 Sfmt 6633 C:\DOCS\81309.TXT HGOVREF1 PsN: HGOVREF1
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ministrative costs incurred by the Government and has made or

agreed to make full restitution.’’ Well, that is interesting because what that implies is that there

could have been criminal activity. It is our judgment up here, and

I feel pretty strongly, that if somebody defrauds the U.S. Government, that perhaps they should not be participating in contracts,

but here we have these regulations and we still don’t know whether they are, in fact, guilty of anything. Although they have admitted certain things, the reasons for their admissions may be a whole

other thing.

But let’s just look at some of the other things that they say, because that was probably the one that surprised me the most. But

when I look at the items, it says, for example, No. 6: ‘‘whether the

contractor has taken appropriate disciplinary action against the individuals responsible for the activity which constitutes cause for

disbarment.’’ No. 7: ‘‘whether the contractor has implemented or agreed to implement remedial measures, including any identified by the Government.’’ No. 8: ‘‘whether the contractor has instituted or agreed to institute new or revised review and control procedures and ethics training programs.’’ No. 9: ‘‘whether the contractor has had adequate time to eliminate the circumstances within the contractor’s organization that

led to the cause of debarment.’’ No. 10: ‘‘whether the contractor’s management recognizes and

understands the seriousness of the misconduct giving rise to the

cause of debarment and has implemented programs to prevent recurrence.’’ And I have left out one through four, but they are basically the

same kinds of things.

No. 4: ‘‘whether the contractor cooperated fully with the Government agencies during the investigation in any court or administrative action.’’

No. 3: ‘‘whether the contractor has fully investigated the circumstances around the cause for debarment and, if so, made the

result of the investigation available to the debarring official.’’

No. 2: ‘‘whether the contractor who brought the activity cited as

a cause for debarment to the attention of the appropriate Government agency in a timely manner.’’

No. 1: ‘‘whether the contractor had effective standards of conduct

and internal control systems in place at the time of the activity

which constitutes cause for debarment or had adopted such procedures prior to any Government investigation of the activities cited

as a cause for the debarment.’’

The problem is that when we look at these things—we say, on

the one hand, Mr. Jurith, why haven’t you gotten rid of or suspended, but we have some problems. One, nobody has been found

guilty of anything. This is still the United States of America, innocent until proven guilty. Problem.

Two, you have a situation here where you have got, even when

you look at one of the worse things that could happen, which is debarment, and it already says, the regulation says, debarment is not

punishment; it is basically to protect the Government, but then it

97

tells you the factors that you have to take into consideration. And

based on the testimony of everybody up here today, I would venture to guess that, just from what I have heard this afternoon, that

it would be kind of hard, based on these factors, to debar this company.

I must tell you that while these are the—he said he was going

to be liberal with our time, and he was quite liberal with his own.

I see you reaching for your mic.

Mr. BARR [assuming Chair]. But we will have some more time.

Does the gentleman have an estimate of how much longer he

needs?

Mr. CUMMINGS. I need the same amount of time that he took,

which is about 5 minutes more.

Mr. BARR. The gentleman is recognized for an additional 2 minutes.

Mr. CUMMINGS. Mr. Chairman, I think that is unfair, but that

is OK.

Mr. BARR. No, there will be additional time, Mr. Cummings.

Mr. CUMMINGS. No, I just have a few more.

Mr. BARR. There will be plenty of time. Don’t get upset over this.

Mr. CUMMINGS. No, I just want fairness; that’s all I want. I want

fairness.

Mr. BARR. You shall have it.

Mr. CUMMINGS. All right, thank you.

Mr. BARR. The gentleman is recognized for 2 minutes.

Mr. CUMMINGS. As I was saying, I understand the situation. I

think what is incumbent—and I don’t think that—I think we have

several problems, too. As you said, Mr. Ungar, from the very beginning this thing was put on the wrong track. HHS was not doing

what it was supposed to do. Ogilvy I think could have been a lot

fairer to the Government by admitting that or at least trying to put

into place—I mean, I have seen clients; they look at the RFP; if

they don’t have it, then they scramble to try to put it together, to

put something in place that fits the contract. I don’t think that basically happened here.

Then when we got into the contract, we had a situation where

perhaps ONDCP didn’t do all it was supposed to do. So we have,

it just seems like, a series of errors. Now the question becomes, and

now this is sort of why I can understand Mr. Barr’s concerns, the

question is, going back to the reasons for debarment, and that is

to protect the Government. So the question is: Is the Government—

I am not so much worried about a decision, Mr. Jurith, that you

haven’t made yet. I am more concerned about what is happening

right now and whether the Government is, whether our funds are

being protected, whether they are being spent properly. That is

what I am concerned about because my taxpayers want to know

that their tax dollars are being spent effectively and efficiently. The

last thing I want to be able to report to them is that they are not

going to where they are supposed to be going and spent properly.

So I would ask you, Mr. Jurith, and I would ask you, Mr. Ungar,

and you, Captain Westin, I mean, are we in pretty good shape right

now with regard to what I just said?

Mr. JURITH. Mr. Cummings, I think we are. I think Ogilvy, in response to the 10 facts that you pointed out, I think Ogilvy——

98

Mr. CUMMINGS. The chairman has only given me 2 minutes. So

I am about down to about 35 seconds.

Mr. JURITH. They responded. They have responded in time. That

decision I referred to will be a joint decision between us and Navy

as to whether or not we assert that option.

Mr. UNGAR. Mr. Cummings, I think the taxpayers can sleep tonight at least in one respect, and that is that, fortunately in this

case, the Government disallowed several million, between $6 and

$7 million it has not paid Ogilvy for the time. So the Government

has the money. So it just needs to be determined how that is going

to be resolved.

In terms of the other issues, the one issue on suspension and debarment, in our mind, that is still open is disciplinary action

against the appropriate people and whether any of those people

who are responsible for the overbilling will still be working on the

contract.

Third, there needs to be a separation, at least to some extent, between the suspension and the debarment, which is one process, and

the decision that Ed Jurith has to make on the other about whether to recompete the contract, because they are related but not necessarily totally dependent upon one another.

Mr. CUMMINGS. Captain Westin.

Captain WESTIN. Yes, sir, I think since the Navy has become involved, we have taken every step we felt we could under the rules

of the Federal Acquisition Regulation to protect the Government.

We referred the allegations to the appropriate official to look at

suspension and debarment. We are also working closely with

ONDCP to review the requirements of their statement of work and

look at the possibility of alternate contracting methods, should he

decide it is in the best interest of the program and the Government

to resolicit.

Mr. CUMMINGS. Mr. Chairman, I thank you very much for giving

me that extra 31⁄2 minutes.

Mr. BARR. According to the official timekeeper, it was almost 12

minutes total, but we are more than happy to extend the additional

time.

Mr. Hast, has OSI developed any additional information regarding this case since you last testified before this subcommittee in

October of last year?

Mr. HAST. Yes, Mr. Barr. At your request, we interviewed Bill

Gray, the president of Ogilvy. We also received information that

was troubling to us from Richard Plethner, ONDCP’s contracting

officer, who testified at the last hearing. He informed us that he

has filed a formal notice for whistleblower protection because he

believes he’s being retaliated against because of his cooperation

with this investigation.

Finally, in concert with Mr. Ungar’s people, who conducted the

audit of the media contract, we met with the U.S. Attorney for the

Southern District of New York and the Federal Bureau of Investigation in New York and referred evidence of possible criminal

conduct.

Mr. BARR. Could you summarize for us very briefly what Mr.

Gray told you, told your special agents?

99

Mr. HAST. Yes. Mr. Gray told us that he had no knowledge of

any accusations of contract fraud prior to GAO conducting this investigation. He also stated that he never told anyone to falsify

timesheets or otherwise commit fraud in conjunction with the

media campaign. Also, contrary to what General McCaffrey told us,

Mr. Gray stated that the general never brought up the question of

overbilling to him at a meeting.

Mr. BARR. Can you explain, can you expand maybe, on your

agents’ subsequent contact with Mr. Plethner, just briefly?

Mr. HAST. Yes. Mr. Plethner expressed that he had deep concern

about what he described as retaliation directed against him by

ONDCP management once he announced he was claiming whistleblower status. He said that he was basically effectively relieved of

all of his duties.

He also told us that, based on our testimony, he wanted to give

us a copy of an April 13th memo. It’s the same one that we had

on a posterboard that General McCaffrey had made a number of

comments on. He stated that on an earlier version of that he had

handwritten notes from Mr. Jurith prior to it going to General

McCaffrey, and of course the one for General McCaffrey had Mr.

Jurith’s initials on it. Mr. Jurith had told us, when we interviewed

him, that although he was—last August—although he was aware

of billing, possible billing concerns, that he had no knowledge of

memorandums that were presented to him or to General McCaffrey

alleging contract fraud.

Mr. BARR. Do you consider this information significant?

Mr. HAST. Yes. I believe that, in response to the direct questions,

Mr. Jurith told us that there were no memorandums, although he

had corrected the memorandum that we had given—had received

from Mr. Plethner and his initials were on another memorandum.

Had Mr. Plethner not come forward, I doubt that we would be here

discussing this. He is the individual that brought it to the attention

of ONDCP, and then when he found he was getting no results,

came to us during the very first audit that was done by GAO, and

told them that there were irregularities. Our interview of him resulted in the investigation that we conducted both at ONDCP and

at Ogilvy.

Mr. BARR. I am looking at these various memos here and trying

to reflect on the prior testimony as well. So are you saying that,

in response to a direct question, Mr. Jurith told your agents that

no memoranda or e-mails had ever been presented to him or to

General McCaffrey alleging overbilling?

Mr. HAST. To the best of his knowledge and recollection, yes.

Mr. BARR. Does that now appear to be the case?

Mr. HAST. Well——

Mr. BARR. Looking at all the evidence and looking at the memos?

Mr. HAST. I’m sure that’s not what happened. I mean, I can’t

comment on his memory.

Mr. BARR. The final version of the memo, does it have Edward

Jurith’s initials on it?

Mr. HAST. It does.

Mr. BARR. And that is the memo dated April 13th?

Mr. HAST. Yes, sir.

Mr. BARR. OK. And is Mr. John Cooney here today?

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Mr. HAST. He is.

Mr. BARR. OK. Do you have anything to add to this discussion,

Mr. Cooney? I know you have been very much involved in the investigation as well.

Mr. COONEY. Congressman, no, I believe Mr. Hast has answered

all of your questions correctly, the way I would have.

Mr. BARR. OK. Thank you all very much.

The Chair recognizes the distinguished gentleman from New

York, Mr. Gilman.

Mr. GILMAN. Thank you, Chairman Barr.

Mr. Jurith, at this moment what is your intention with regard

to the Ogilvy contract? What do you plan to do?

Mr. JURITH. Mr. Gilman, at this point I think we’re going to follow what the law requires. OK? I think we have an option to exercise, and the law requires that in exercising that option we look at

whether or not it’s in the best interest of the Government from a

fiscal and programmatic point of view to exercise that option,

which I think is up in December or early January.

Mr. GILMAN. Let’s see, when does it expire?

Mr. JURITH. I believe it’s January 2, 2002.

Mr. GILMAN. Are they still under contract at the present time?

Mr. JURITH. Yes, sir, they are.

Mr. GILMAN. How much has been paid to Ogilvy to date?

Mr. JURITH. A total, I don’t have that figure in front of me, but

we can supply it for the record.

[The information referred to follows:]

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Mr. GILMAN. Approximately.

Mr. JURITH. About $224 million, that’s what my staff informs me.

Mr. GILMAN. I can’t hear you.

Mr. JURITH. About $224 million.

Mr. GILMAN. All together over the entire period of the contract?

Mr. JURITH. Correct, sir.

Mr. GILMAN. $200 and—— Mr. JURITH. $24 million.

Mr. GILMAN. And how much is due for the balance of the contract?

Mr. JURITH. It depends on their billables, sir.

Mr. GILMAN. It depends on?

Mr. JURITH. It depends on the billables under the contract, which

are a mix of direct costs and labor costs.

Mr. GILMAN. Well, what does your contract provide? What does

your contract provide for the remainder of their billable period?

Mr. JURITH. It involves the direct payments by the company to

put on the advertising plus their costs incurred. So I don’t have an

exact number in front of me. Roughly, total thus far would be

about $484 million, as provided to me by staff.

Mr. GILMAN. Hold it just a moment. $484 million for the balance

of this year?

Mr. JURITH. That’s what I’m informed. I mean total under the

contract.

Mr. GILMAN. And they received so far $285 million, is that right?

I am talking about the total contract now.

Mr. JURITH. $224 million, sir.

Mr. GILMAN. Pardon?

Mr. JURITH. $224 million.

Mr. GILMAN. $224 paid to date.

Mr. JURITH. Correct.

Mr. GILMAN. The balance of this year is $600-and——

Mr. JURITH. $484 million. Mr. Gilman, if I could, if you will, let

me provide the committee with the exact numbers.

Mr. GILMAN. If you would just give us right now an approximate

amount that is due this year.

Mr. JURITH. Mr. Gilman, it’s a little bit difficult only because

there’s a question between what is actually billed in invoices, and

so forth. I would hate to be locked into any specific figure—— Mr. GILMAN. Well, you prepared a budget for your committee, for

your agency.

Mr. JURITH. No question, sir——

Mr. GILMAN. You must have taken this into account.

Mr. JURITH. We have. We have, sir.

Mr. GILMAN. So what are you providing for in your budget?

Mr. JURITH. The budget right now for this year, for 2001, under

the present media plan calls for about $135.1 million in media buy,

and only about 7 percent of that, about $11.2 million in total out

of a media plan of $160.3 million is in labor costs.

Mr. GILMAN. Well, how did you get that $600 million figure you

just rattled off?

Mr. JURITH. I’m sorry, if you would allow me to have staff put

together a complete breakout for the subcommittee?

[The information referred to follows:]

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Mr. JURITH. We average about $162 million per year to Ogilvy.

What I want to do, sir—— Mr. GILMAN. What do you plan to do with that?

Mr. JURITH. Here’s what I plan to do: I’ve directed both my staff

in conjunction with the Navy to follow the FAR. We have to exercise an option. What do you do? Are the funds available? Is there

a continuing need for the service? Clearly, the funds are available.

Congress has appropriated it. There’s a clear, continuing need for

the service, and is that in the best interest of the Government?

Maybe—and ONDCP needs to be doing market research. We’re

going out to the market; we’re asking whether or not it makes

sense to continue the contract the way it is right now.

One of the things I was told, I was told the—— Mr. GILMAN. Well, does that survey include whether the provider

of the service is under criminal investigation?

Mr. JURITH. Mr. Gilman, that’s a separate issue. I mean that’s

what Mr. Cummings was getting to. That’s a separate inquiry

under the law.

Mr. GILMAN. It seems to me that’s all part of the issue.

Mr. JURITH. Well, Mr. Gilman I can’t invent what the law is. The

law says, if you’re going to debar—— Mr. GILMAN. Chairman Barr pointed out to you that there is a

bar for any contractor that is under criminal investigation.

Mr. JURITH. Incorrect. If they’ve not taken steps to cure the problems. Clearly, I think in both our view and in the Navy’s view,

they’ve done that.

Mr. BARR. Would the gentleman yield?

Mr. GILMAN. I would be pleased to yield to the chairman.

Mr. BARR. Thank you. Again, I am not asking you a question because I don’t want to get in another conversation. We don’t seem

to get anywhere that way.

The Code of Federal Regulations provides very clear authority for

a Government agency, when there is substantial evidence of fraud,

to suspend a contract, and it would be absurd to argue otherwise,

and I can’t believe that you’re sitting there with a straight face trying to tell us there’s nothing the Government can do except go out

and conduct market research. The market doesn’t know about the

fraud.

I yield back.

Mr. GILMAN. I thank the chairman.

Will you consider suspension of the Ogilvy contract based on this

provision?

Mr. JURITH. At this point, as Captain Westin has indicated, both

in looking at the factors under the law, under the FAR, in terms

of the steps taken by the agency, that remedy at this point is not

available. Now, remember, Mr. Gilman, the Department of Justice

is still looking at this issue. At this point they haven’t told us a

definitive answer one way or the other. We’re waiting for that decision.

Mr. GILMAN. You admit that they are under a criminal investigation. That has been brought to your attention, isn’t that correct?

Mr. JURITH. As I understand it, this review has been taken, from

what we understand, by the Civil Division of the Department of

Justice. I understand that there’s been a referral to the Naval InVerDate 11-MAY-2000 08:02 Sep 05, 2002 Jkt 000000 PO 00000 Frm 00108 Fmt 6633 Sfmt 6633 C:\DOCS\81309.TXT HGOVREF1 PsN: HGOVREF1
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vestigations Service for the Navy. They’ve referred up to their

chain of command through their contracting processes. I found out

today that there’s been a referral to the Southern District of New

York. I did not know that until today.

Mr. GILMAN. To the Criminal Division.

Mr. JURITH. I just found out that at this hearing.

Mr. GILMAN. Now you know that there is both a Navy criminal

investigation and a Southern District Department investigation in

New York. Are you aware of both of those now?

Mr. JURITH. I am, Mr. Gilman, but, again, I’m bound by the FAR,

and what the FAR, the Federal Acquisition Regulation, tells me

what I can and can’t do. I need to follow that. I need to follow the

law, and I’m going to follow that.

Mr. GILMAN. Well, what about the law that says, if there is a

criminal investigation underway, that you can suspend the contract? What about that law?

Mr. JURITH. It doesn’t say that. It says, has the agency taken

steps to cure the problem? Because, remember, the issue is whether or not they’re not reliable to the Government. That’s the test

under the law, as I understand. I have been advised by my

staff—— Mr. GILMAN. Chairman Barr, would you read that section again

for us?

Mr. BARR. The section that I believe is operative is section 32.006

of 48 CFR, Chapter 1, and it provides that payments may be suspended or reduced to a contractor—in this case Ogilvy/Mather— when the agency determines there is substantial evidence that the

contractor’s request for advanced partial or progress payments is

based on fraud. And it defines, Mr. Gilman, substantial evidence to

mean not a criminal indictment, not a conviction, not conviction affirmed on appeal, but information sufficient to support the reasonable belief that a particular act or omission has occurred.

Mr. JURITH. Mr. Gilman, in response to that—— Mr. GILMAN. Is there any question about your interpretation of

that law?

Mr. JURITH. No question about it, but I think in terms of what

we’ve seen at ONDCP, and I think the Navy will concur, that we’ve

not seen evidence rising that would—rise concluding that conduct

to the corporation—that’s what we’re talking about, OK, whether

or not that corporation in the future or right now is not a reliable

vendor to the Government. That’s the issue.

Mr. GILMAN. In your opinion, are they a reliable vendor?

Mr. JURITH. At this point I have not seen any evidence to say

that they’re not.

Mr. GILMAN. Well, do you know whether Ogilvy has made any

remedial changes in their accounting practices?

Mr. JURITH. They have made quite a few. As a matter of fact,

yesterday DCCA has signed——

Mr. GILMAN. Do you know that to be on your own personal—— Mr. JURITH. Yes.

Mr. GILMAN [continuing]. Review of this, that these changes have

made, or just a report that they have——

Mr. JURITH. Based upon the information provided to me by

DCAA.

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Mr. GILMAN. By who?

Mr. JURITH. The Defense Contract Audit Agency. They have

signed off information that we received yesterday from them.

Mr. GILMAN. What is the date of that report?

Mr. JURITH. It’s dated—it’s just says, Mr. Gilman, dated July 31,

2001.

Mr. GILMAN. And who submitted that report?

Mr. JURITH. By the Defense Contract Audit Agency.

Mr. GILMAN. And what did they say?

Mr. JURITH. They have said——

Mr. GILMAN. What are their findings?

Mr. JURITH. That the current accounting system and internal

control policies and procedures of Ogilvy are adequate. Finding by

the Government—in addition, there’s been a finding by DCAA that

the contractor had developed excellent ethics, timekeeping, and

FAR Part 31 training programs.

Mr. GILMAN. Now what do they say about the overpayment?

Mr. JURITH. That wasn’t an issue that DCAA was looking at. In

addition, Mr. Gilman——

Mr. GILMAN. Wait. Hold it. They didn’t review the overpayment?

Mr. JURITH. That’s the matter that’s under review by the Department of Justice.

Mr. GILMAN. And this review was not part of the overpayment?

Mr. JURITH. Mr. Gilman, there are two things going on. There’s

the review of the past billing issues that’s under review by a combination of the Department of Justice and DCAA, and there was

a prospective requirement to make sure, because it wasn’t done in

the initial award of this contract, to make sure that the accounting

system was up to standard.

In addition, OK, Ogilvy has taken a number of steps in addition

to that. They have replaced their Government contracts manager.

OK? The financial manager in New York that had oversight of this

contract has been replaced, and PricewaterhouseCoopers has revised Ogilvy’s accounting systems to meet Government requirements. That’s been certified to by DCAA.

So the company has taken a number of steps. So, based upon all

of that, I can’t tell you right now today, pending an outcome of the

DOJ inquiry, whether or not debarment is applicable or not. I

think the Navy concurs in that opinion.

Mr. BARR. Will the gentleman from New York yield for a moment?

Mr. GILMAN. I would be pleased to yield to the chairman.

Mr. BARR. Mr. Hast, maybe I could pose to you the same question that the gentleman posed to Mr. Jurith. Let me preface it by

referring to the memo that Mr. Jurith signed off on dated April

13th, the very title of which I would think would raise some question about whether the company in question is a reliable vendor.

The title is ‘‘Irregularities with Ogilvy Billing.’’ It says there are excessive billing irregularities, growing uncertainties with Ogilvy’s

management practices, timesheets were altered, people were

charged who had not worked on the contract or in the billing period, the labor mix is top-heavy, staffing levels are extremely excessive, salaries are extraordinarily high, etc.

107

Are these to you, coupled with the other evidence that you all

found in your report, indices of a reliable vendor?

Mr. HAST. No.

Mr. BARR. Is this the standard or is the standard that Mr. Jurith

indicates that, in spite of all this, they are a reliable vendor? Is

that view held by other officials in other agencies, do you know?

Mr. HAST. Not being a contracting expert, I wouldn’t know, but,

as Mr. Cummings said before, it all comes down to how you spend

your own money. I certainly would not spend my money on a company that I felt was doing these types of things.

Mr. BARR. Thank you. I yield back. Thank you, Mr. Gilman.

Mr. GILMAN. Just one more question, Mr. Chairman.

Mr. Jurith, as I understand it, despite an admission by Ogilvy

that they committed overpayment, a fraud, do you intend to not act

until you receive the Department of Justice report? Is that correct?

Mr. JURITH. Mr. Gilman, I don’t know of any statement where

Ogilvy admitted fraud. What I’m doing now is what’s required

under the FAR. We have to exercise this option. We’re going

through a process where we are now to make sure that if we exercise either the option to Ogilvy or rebidding this contract, that it’s

in the best interest of the Government. We’re working on that

through the Navy, doing the market research, making sure we’ve

got the right processes and the control.

Whether or not there’s a finding to debar in Justice, that’s a separate issue. We’ll take that into account down the line.

Mr. GILMAN. If the Department of Justice issues a criminal

charge against Ogilvy, is that going to affect your thinking?

Mr. JURITH. Mr. Gilman, at this point we’ve had no indication to

that effect from the Department of Justice, and my staff is in contact weekly with DOJ on that issue.

Mr. GILMAN. I have asked you, if the Department of Justice

issues an indictment against this company for some criminal conduct, will that affect the way you are going to handle this contract?

Mr. JURITH. Absolutely, but we have no indication that that’s

happening.

Mr. GILMAN. Assume, hypothetically, assume that they do issue

an indictment. What will be your recourse then?

Mr. JURITH. Mr. Gilman, my job at this point, I have to make a

decision in conjunction with the Navy in the next few weeks if

we’re going to start a procurement process over the next few

months that may require a new vendor for this contract. We’re

going to start that process. What DOD does in their inquiry, obviously, we’re going to be cognizant of as that goes forward. My job

is to make sure that I have an ad campaign not only for ONDCP,

but for the incoming Director when he gets confirmed, hopefully, by

the Senate—— Mr. GILMAN. The job is to have a good campaign with a reliable

vendor?

Mr. JURITH. Absolutely, Mr. Gilman.

Mr. GILMAN. And if you find that the vendor is not reliable or

has some criminal indictment pending, I assume you will then cancel the contract?

Mr. JURITH. That’s a fact. Absolutely.

Mr. GILMAN. Is that correct?

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Mr. JURITH. That’s correct. That’s the fact, but I don’t want to

speculate on what DOJ may or may not do.

Mr. GILMAN. Thank you, Mr. Chairman.

Mr. JURITH. Thank you, Mr. Gilman.

Mr. BARR. I thank the gentleman from New York. The gentleman

from Maryland is recognized.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

Mr. Jurith, I have always, since I have been on this committee

for 5 years, I have always whenever anyone was accused of anything and they were sitting here, I gave them an opportunity to defend themselves, because I think that if I were in that position, I

would hope that somebody would do that for me. I just want to go

back very briefly to Mr. Hast’s statement with regard to—and he

didn’t have to make it; it is all in the record now, but some earlier

statements that you made that you didn’t know of any memos, and

now we have the memo here. What do you have to say about that?

What do you have to say about that?

Mr. JURITH. Could you repeat the question, Mr. Cummings?

Mr. CUMMINGS. Sure. Mr. Hast made some statements, and what

he said was that you had made some earlier statements or statement that you had not known of any memos—and correct me if I

am wrong, Mr. Hast—warning of some possible improprieties with

regard to Ogilvy. I was just asking—then the memos show up, and

I was just wondering if you had a response to that.

Mr. JURITH. Thank you, Mr. Cummings.

Mr. CUMMINGS. I know it was based upon your memory, or lack

thereof, but go ahead.

Mr. JURITH. I spoke to Mr. Hast’s personnel, Mr. Cooney and Ms.

Sullivan, twice, I believe in August of last year. The first time they

spoke to me, they did not question me about this memo. It never

came up, nor did I ever see my comments on an earlier draft.

When I did see the memorandum was about a week or so after

that initial interview when they questioned General McCaffrey

about this memorandum. At that inquiry the question was directed

to General McCaffrey and not me.

Mr. CUMMINGS. OK. Let me, just two things: One of the things

that Mr. Barr said—and if we really listened to what he said very

carefully when he was reading from the Code about suspension of

payment or reduction of payments, I think what happened in this

case, and I hate to be the interpreter, but the more I listen I see

what happened. It sounds like what happened is Ogilvy kind of

suspended itself. It says, suspending payments. So in a way I guess

Ogilvy suspended itself until it could get itself straightened out,

changing its accounting procedures. So they kind of did it themselves.

Let me just go back to one other point.

Mr. JURITH. Mr. Cummings.

Mr. CUMMINGS. Yes, please.

Mr. JURITH. If I could reflect, GAO never at any point with the

OSI or Mr. Ungar’s investigation ever questioned me specifically

about this document. I want the record to reflect that.

Mr. CUMMINGS. I understand, and I want the record to reflect

that also.

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As far as the president, Mr Hast or Mr. Ungar, the president of

the corporation, what is his name? Of Ogilvy?

Mr. HAST. Bill Gray.

Mr. CUMMINGS. Gray. Apparently, he has been very cooperative,

is that right? Do you feel he has been very cooperative, Mr. Ungar?

Mr. UNGAR. Excuse me, sir. We did not deal with him, but Mr.

Hast did.

Mr. CUMMINGS. Yes, I’m sorry, Mr. Hast?

Mr. HAST. We requested an interview through his attorneys, and

he was willing to be interviewed and was willing—answered all the

questions we had to ask.

Mr. CUMMINGS. All right, just this last thing, Mr. Jurith, and I

think this will help all of us up here. Mr. Gilman has gone, but I

think this is very crucial.

You know, if I were a lawyer representing a competitor of Ogilvy,

first of all, I would have somebody sitting in this room right now.

Second of all, I would be on the sidelines jumping up and down

saying, ‘‘Bid this contract.’’ I mean, that is what I would be doing.

OK, so hang in with me now because I have a point I am trying

to get to, so that you can help us understand your process.

And what I would be saying, if I were a competitor, is, ‘‘Look, I’m

clean. I haven’t done anything. Nobody’s investigating me. I’ve

done a great job, and I can do just as good a job. At least give me

a chance to compete.’’ And my question is simply this: What kind of considerations go

into—I mean, what do you say to that person? In other words, he

is saying, you know, let Ogilvy be a part of the bidding process, but

let me in, too. And I wouldn’t be surprised if there aren’t people

doing that. There is probably somebody sitting in here right now.

I don’t know who they are, but there probably are. And I am just

saying: What do you say to that person? Because we in this Government, we are trying to be fair. I mean, even when I look at all

the arguments, everything that has been said, and I understand it

completely, what is happening here.

Mr. Gilman spent a phenomenal amount of time trying to figure

out what goes into that decision process, and I understand the decision process of whether you continue with the contract is separate

from debarment, but let me ask you this. Hang with me now. Is

there some advantage of keeping Ogilvy on? I am not asking you

for your decision. In other words, because they are already on the

job, does that reduce our cost? Is there a familiarity thing? I am

just trying to figure out, is there anything that being in place already becomes a part of the consideration for maintaining an

Ogilvy as opposed to that guy who is sitting out, or that lady who

is sitting out there saying, ‘‘I’m just as good and I want an opportunity’’?

Mr. JURITH. Mr. Cummings, clearly, that’s one of the issues that

the market research will surface. I mean, we’re heading into the

last year of the current authorization of this program. One of the

things the ONDCP and Navy team is going to look at is, does it

make sense to the Government to change the contractor? Obviously, I think that’s an issue on the table.

Mr. CUMMINGS. Last, I just want to thank all of you for your testimony. I know it has been a long afternoon. We really do appreVerDate 11-MAY-2000 08:02 Sep 05, 2002 Jkt 000000 PO 00000 Frm 00113 Fmt 6633 Sfmt 6633 C:\DOCS\81309.TXT HGOVREF1 PsN: HGOVREF1
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ciate it. I have said it many times: I think so often people who

work in Government don’t get the credit that you are due, and I

really do appreciate what you all are doing to try to address these

problems.

Are you in Government, too?

Ms. DAVID. Yes.

Mr. CUMMINGS. I don’t have your name. Yes? I just wanted to

make sure that everybody was covered by my statement. [Laughter.]

But we really do appreciate what you do, and I thank you.

Mr. SOUDER [resuming Chair]. I just may have a couple of questions, but I want to make a couple of closing comments. One is that

I don’t think it is quite technically correct to say that Ogilvy suspended itself because they suspended themselves after the GAO report, but they certainly suspended themselves before a criminal investigation started, is that correct, Mr. Ungar?

Mr. UNGAR. Yes.

Mr. SOUDER. In other words, the payments that came in? But

they certainly knew the report was there and they certainly knew

there was going to be an investigation. So it is to their credit they

suspended, but they had, in effect, their hand in the cookie jar at

the time they suspended. And in the example of disbarment and

outside things, that wouldn’t be quite voluntary. It is partly voluntary and partly under pressure.

I think it is also true that there certainly have to be benefits

from a contract continuation, but it is also true that there are other

people who do advertising in the Government, and the Partnership

for a Drug-Free America has worked with this for a long time, and

there probably are other people in that coalition who have worked

with it. We want to make sure, Mr. Jurith, as you go through the

process that all that is given due consideration, because it is— while until you are told by law that you can’t contract with somebody, you have the flexibility, a certain part of the consideration,

even if they have taken what appears to be protective changes, like

Captain Westin was referring to, whether or not they will follow

through with that, given the past performance, and that is a factor

in the mix of whether you are comfortable with that contractor.

It is important here in Congress that those of us who are not numerous—in Indiana we have an expression, ‘‘You can count them

on one hand and have enough fingers left to bowl’’—who take an

aggressive interest in the drug areas, and we want to be supportive

of these efforts, it is important that the people who are most supportive of prevention efforts understand and have confidence as we

go out to sell it. That is not precluding that Ogilvy isn’t the person,

but let’s just say you can hear there’s deep concerns and hope that

these type of things don’t happen in the future.

I am also interested—and, Mr. Ungar, maybe you can tell me off

the top of your head whether you know this—have we looked at

other ad campaigns that the Government does in any generic or

comparative way compared to what is being done in this campaign?

Or do you know of any GAO audits that look across the board of

how we deal with advertising?

Mr. UNGAR. Not off the top of my head, sir. We would have to

look at some of—I know we’ve looked at advertising contracts for

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the Government. I’m not quite sure we have done it as comprehensively as you’re suggesting. I would have to look into that.

Mr. SOUDER. And I don’t know whether that would be worth the

effort to do that, but I would appreciate it if you could see what

is there. Clearly, it would be recruiting campaigns in the military.

Clearly, there are multiple things in HHS. We have all sorts of research on different ad campaigns. But to kind of look at how we

do this—it almost appears like we charged in as if this was a new

concept for the Government, and I want to see that doesn’t happen

in the future, that we look at the research measurements.

I want to thank you for spending your afternoon with us. I would

repeat what Congressman Cummings says: It is not easy being in

the public servant’s spot because the fishbowl is different than in

the private sector, and Ogilvy has learned that the fishbowl in advertising is different. What we need to do is we need to enforce the

standards of the Government that are rigid, but the fact is that we

don’t want to discourage private sector people from getting involved, but it definitely is—there are many more guidelines, and

when there are errors, you are in a national fishbowl. It is our job

as an oversight committee to make sure that those guidelines are

followed.

With that, our subcommittee stands adjourned.

[Whereupon, at 5:07 p.m., the subcommittee was adjourned.]

Æ