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PROGRAMS IN PERIL: AN OVERVIEW OF THE

GAO HIGH-RISK LIST—PART II

HEARING

BEFORE THE

OVERSIGHT OF GOVERNMENT MANAGEMENT, 

THE FEDERAL WORKFORCE AND THE DISTRICT 

OF COLUMBIA SUBCOMMITTEE

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

MARCH 15, 2006

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs

(

(II)

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

SUSAN M. COLLINS, Maine, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

JOSEPH I. LIEBERMAN, Connecticut 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

MICHAEL D. BOPP, Staff Director and Chief Counsel 

JOYCE A. RECHTSCHAFFEN, Minority Staff Director and Chief Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL 

WORKFORCE AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE 

GEORGE V. VOINOVICH, Ohio, Chairman 

TED STEVENS, Alaska 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

DANIEL K. AKAKA, Hawaii 

CARL LEVIN, Michigan 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

ANDREW RICHARDSON, Staff Director 

RICHARD J. KESSLER, Minority Staff Director 

NANCI E. LANGLEY, Minority Deputy Staff Director 

EMILY A. MARTHALER, Chief Clerk 

(III)

C O N T E N T S 

Opening statements: Page 

Senator Voinovich ............................................................................................. 1

Senator Akaka .................................................................................................. 10

Senator Carper ................................................................................................. 12

WITNESSES 

THURSDAY, OCTOBER 6, 2005

Hon. David M. Walker, Comptroller General, U.S. Government Accountability 

Office ..................................................................................................................... 3

Hon. Clay Johnson, III, Deputy Director for Management, Office of Management and Budget .................................................................................................. 6

ALPHABETICAL LIST OF WITNESSES

Johnson, Hon. Clay, III: 

Testimony .......................................................................................................... 6

Prepared statement .......................................................................................... 60

Questions and responses submitted for the Record ....................................... 62

Walker, Hon. David M.: 

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

Prepared statement .......................................................................................... 23

APPENDIX 

Letter dated April 7, 2006, from Mr. Walker containing additional information related to issues ............................................................................................ 52

Questions and responses submitted for the Record .............................................. 56

(1)

PROGRAMS IN PERIL: AN OVERVIEW OF THE 

GAO HIGH-RISK LIST PART II 

WEDNESDAY, MARCH 15, 2006

U.S. SENATE, OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL

WORKFORCE AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE

COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS

Washington, DC. 

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

SD–342, Dirksen Senate Office Building, Hon. George V. Voinovich, 

Chairman of the Subcommittee, presiding. 

Present: Senators Voinovich, Akaka, and Carper. 

OPENING STATEMENT OF SENATOR VOINOVICH 

Senator VOINOVICH. The hearing will please come to order. I 

want to thank you for coming, and apologize that my colleagues are 

not here. The President of Liberia is speaking before a joint session 

of Congress. 

Today the Subcommittee on Oversight of Government Management, the Federal Workforce and the District of Columbia, meets 

to conduct a mid-course review of the Government Accountability 

Office 2005 high-risk list. This hearing marks the sixth time our 

Subcommittee has met to examine the high-risk list this Congress. 

For the past 16 years, the GAO high-risk list has outlined government-wide and agency specific programs that are susceptible to 

waste, fraud, abuse and mismanagement. 

Comptroller General Walker, I commend GAO for its continued 

work on the high-risk list. I know how seriously you take it. 

Each of the 25 programs listed in the current high-risk series impacts the daily lives of citizens across the country. Many of the programs are dysfunctional and fail to deliver the intended services to 

the taxpayer. In other instances, high-risk programs are wasting 

billions of dollars that could be better used for higher priority programs or cutting the deficit. 

Two of the most egregious examples of mismanagement explained on the high-risk list can be found at the Department of Defense and within the Medicare program. For example, the Secretary of Defense stated that DOD could save 5 percent, or more 

than $20 billion of its budget, by improving its business practices, 

in other words, transforming what they are doing over there. In addition, the high-risk list notes that Medicare’s improper payments 

for 2004 were calculated to an astounding $20 billion. For a program with a $297 billion in total spending, that is quite a bit. 

2

Based on these examples, it is evident that the high-risk series 

provides an excellent road map for oversight and reform, and it 

should be taken seriously by Federal agencies, the Administration 

and Congress. 

To this end, Senator Akaka and I have taken steps to highlight 

the high-risk list with our colleagues. In addition to our hearing 

schedule, Senator Akaka and I wrote letters to the Chairman and 

Ranking Members of each Senate authorizing committee, detailing 

high-risk areas within their jurisdiction. We are going to do it 

again. This is an important step, but I believe that real progress 

in the high-risk list areas will only happen when the Appropriation 

Subcommittees begin funding programs based on their performance. I know that the Office of Management and Budget is rating 

programs, and I think that is a good step forward. 

Senator Akaka and I held our first hearings 13 months ago, and 

tremendous strides have been made in several high-risk areas. 

I would like to recognize Clay Johnson for his steadfast determination to ensure that Federal agencies are taking the high-risk 

list seriously, and through his leadership and commitment to improving the management of our government, Mr. Johnson is having 

a positive impact on the performance of Federal programs. 

Clay, I want to thank you for reinvigorating the management capacity of the Office of Management and Budget. 

At the Subcommittee’s hearing in February 2005, the Comptroller General’s testimony outlined a bleak situation for several of 

the high-risk areas. Much of Mr. Walker’s attention focused on the 

longstanding issues facing the Department of Defense. There was 

evidence that DOD lacked a dedicated strategic plan for each of the 

areas on that high-risk list. That is why four of our six high-risk 

hearings this last February examined programs in DOD. During 

the hearing on DOD business transformation in April 2005, Mr. 

Johnson noted that OMB was working with DOD on an overall 

supply chain management improvement plan. This plan, produced 

in collaboration with DOD, OMB and GAO was unveiled in July, 

and outlines key programmatic improvements to supply chain management practices and process. 

In addition to the Subcommittee’s hearings, a great deal of work 

is going on behind the scenes as my staff and Senator Akaka’s staff 

has met with DOD, OMB and GAO on at least a dozen occasions 

to ensure that the goals and objectives of the supply chain management strategic plan are being met. 

Although the Department is still developing the long-term 

metrics to measure success, I believe the plan is a positive step in 

the right direction. Hopefully, with continued collaboration between 

DOD, OMB and GAO, the Department will implement useful longrange measures to track improvements in the supply-chain management process. 

In addition, the DOD supply chain plan has broader implications 

as well. I understand that OMB is using this plan as a template 

for the rest of the high-risk areas, and that plans have been developed for 19 of the 25 high-risk areas. I believe this is excellent 

progress. In fact, I was impressed with the Office of Personnel 

Management testimony before our Subcommittee last November, 

when they released their strategic plan to address the Federal GovVerDate 0ct 09 2002 07:48 Sep 07, 2006 Jkt 027751 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 C:\DOCS\27751.TXT SAFFAIRS PsN: PAT
3

1The prepared statement of Mr. Walker appears in the Appendix on page 23. 

ernment’s security clearance backlog, which at the time consisted 

of 232,000 pending cases. 

I am interested in hearing from Mr. Johnson on his progress as 

well as General Walker’s assessment of the Administration’s effort 

to improve the performance of high-risk program areas. 

Senator Akaka and I will continue our oversight into the supply 

chain management and personnel security clearance high-risk 

areas until they are removed from the list. 

However, in some instances, improving the performance of the 

high-risk program area requires more than implementing sound 

business practices and oversight from Congress. That is why Senator Akaka and I have introduced two bills that would create chief 

management officers at the Department of Defense and Homeland 

Security. As indicated in the high-risk list, each of these Departments faces serious management challenges that are compounded 

by the unique importance of their mission. We believe creating a 

chief management officer at each Department would ensure that 

leadership continuity transcends changes in administration, thereby, fostering and sustaining a results-oriented culture and continuous improvement. 

I know that General Walker is a staunch advocate of this and I 

have talked to Mr. Johnson about it on several occasions. 

I am grateful that you are here today. We have a tradition of 

swearing in the witnesses. Do you swear that the testimony you 

are about to give is the truth, the whole truth, and nothing but the 

truth, so help you, God? 

Mr. WALKER. I do. 

Mr. JOHNSON. I do. 

Senator VOINOVICH. We are happy to have General Walker’s wife 

here with us. 

Mr. WALKER. Yes, and I am happy that she is here too. Thank 

you, Mr. Chairman, for recognizing her. 

Senator VOINOVICH. I want to thank you publicly for the sacrifice 

that you and your family make so that your husband can serve this 

country, as he has, in his capacity as Comptroller General. He has 

done a fantastic job, and we are grateful for everything he has done 

for this Subcommittee and for our country. 

Mrs. WALKER. You are welcome, Senator. Thank you for your 

kind words. 

Senator VOINOVICH. General Walker, please proceed. 

TESTIMONY OF THE HON. DAVID M. WALKER,1 COMPTROLLER 

GENERAL, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. WALKER. Thank you, Mr. Chairman. That is very kind of 

you. 

It is a pleasure to be back before this Subcommittee to talk about 

GAO’s high-risk list. I would respectfully request that my entire 

statement be included in the record. 

Senator VOINOVICH. Without objection. 

Mr. WALKER. I know you have a series of votes, and so I will hit 

the highlights. 

4

Senator VOINOVICH. It will not start until 3 o’clock, so we have 

a little time. 

Mr. WALKER. I will hit the highlights, and that way you will 

have plenty of time for Q&A. 

As you know, Mr. Chairman, our latest high-risk list was updated in January 2005, and we are scheduled to update it again 

in January 2007. I want to thank and commend you, Ranking 

Member Akaka, as well as this Subcommittee, for your dedication 

to looking at the high-risk areas. I am pleased to confirm that this 

is the sixth hearing that your Subcommittee has held since the list 

came out in January 2005. I am also pleased to note that according 

to my office, there have been over 60 hearings throughout the Senate and the House on GAO’s high-risk list, covering at least 20 of 

the 25 high-risk areas since our list came out in January 2005. 

Candidly, Mr. Chairman, that is particularly gratifying given the 

fact that, with a few exceptions, including this Subcommittee and 

the full Committee, there is not enough oversight going on right 

now in the Congress. So I really do appreciate this. 

I would also like to confirm that this Administration has continued to take the management issue more seriously over time. I work 

with Deputy Director Johnson and others on a recurring basis. As 

you know, the President’s Management Agenda was based in large 

part on GAO’s high-risk list. There is a lot of synergy there, and 

I would also like to commend Deputy Director Johnson for his commitment to make sure that every one of the 25 high-risk areas has 

its own action plan for addressing and, hopefully, eventually getting off the high-risk list. 

As you noted, the area that is the prototype for this is DOD’s 

supply chain management. A number of others have been completed, although with varying degrees of quality and thoroughness. 

We have had a high-risk list since the early 1990s. It commenced 

under the leadership of my predecessor, Chuck Bowsher. While for 

many years it was focused on how to fight fraud, waste, abuse, and 

mismanagement, under my tenure, the list has been broadened to 

also deal with a number of fundamental areas in need of transformation. 

As you know, Mr. Chairman, we issued in February of last year, 

our 21st Century Challenges Report, re-examining the base of the 

Federal Government. That document includes over 200 illustrative 

questions of Federal programs, policies, functions and activities 

that are in need of re-examination, re-engineering, to meet 21st 

Century challenges and capitalize on related opportunities. Our 

high-risk list is but a subset of some of those areas. 

I am pleased to say that over time we have removed 16 areas 

from the high-risk list since the beginning, 8 of which were among 

the original 14 programs, but there are still a number of programs 

that remain from the beginning, including many from the Department of Defense. The Department of Defense has, directly or indirectly, 14 of 25 high-risk areas. 

As you know, the purpose of the high-risk list is to bring light 

to areas in need of attention, because with light comes heat, and 

with heat comes action. 

Last, Mr. Chairman, I would note that because of recent events 

in the Gulf Coast dealing with the after effects of Hurricanes 

5

Katrina and Rita and the related flooding that has occurred down 

there, the National Flood Insurance Program has incurred within 

the last 10- to 12-month period, about $23 billion in claims. During 

its entire existence it had only incurred $15 billion in claims, and 

now it has moved to the point where it has an unfunded obligation 

or an accumulated deficit of about $23 billion. As a result of this, 

and the importance of this program, not just to the Gulf Coast but 

also to other parts of our nation, we have decided to add the National Flood Insurance Program to our high-risk list, effective immediately, thereby bringing the list to 26. And just to reaffirm, we 

plan to issue a more comprehensive update in January 2007. 

So thank you, Mr. Chairman, and thanks to Ranking Member 

Akaka, for your dedication in sticking with these issues. You are 

making a difference, and by continuing to work together, I am confident that more progress can and will be made in the future. 

Thank you. 

Senator VOINOVICH. Thank you. 

Senator Akaka, would you like to make a statement before we 

hear from Mr. Johnson? 

Senator AKAKA. Thank you very much, Mr. Chairman. I just 

want to ask whether we are running tight on time? 

Senator VOINOVICH. We have a vote, I think at 3 o’clock. 

Senator AKAKA. Then, Mr. Chairman, let me welcome Mr. Walker and Mr. Johnson, and to ask that my statement be placed in the 

record. 

Senator VOINOVICH. Without objection. Thank you, Senator. 

[The prepared statement of Senator Akaka follows:]

PREPARED STATEMENT OF SENATOR AKAKA 

Thank you, Chairman Voinovich. As always, it is a pleasure to work with you to 

increase government accountability. I look forward to today’s hearing, and I join you 

in welcoming David Walker, the Comptroller General, and Clay Johnson, the Office 

of Management and Budget’s (OMB) Deputy Director of Management, to examine 

the progress being made on Government Accountability Office’s (GAO) high-risk list. 

You noted that this mid-course review is our sixth hearing in 12 months to focus 

on high-risk government programs identified by GAO. The people of Ohio and the 

nation are fortunate to have you in the Senate, Mr. Chairman. Your continued leadership—and that of our distinguished witnesses—is improving government operations. 

Reducing the number of programs susceptible to waste, fraud, abuse, or mismanagement will save the American taxpayers billions of dollars—improve Federal 

services—and help reestablish the trust we should have in government. 

As the Rank Member of both this Subcommittee and the Armed Services Readiness Subcommittee, I am shocked that the Department of Defense (DOD) continues 

to have more programs on the high-risk list than any other Federal agency. Because 

of this outrageous imbalance, Senator Voinovich and I have focused our efforts on 

improving DOD’s high-risk programs. One such area is supply chain management, 

which includes an inventory valued at $77 billion and an annual expenditure of over 

$7 billion on logistics operations. And yet, supply chain management has been on 

GAO’s high-risk list since 1990—that’s 16 years! 

Ignoring the long-term, systemic problems associated with supply chain management harms our troops on the ground and is just plain wrong. However, I am optimistic that with the partnerships undertaken by DOD, OMB, and GAO, and with 

our continued oversight—we will be successful in strengthening supply chain management. 

I am particularly interested in one change—the Joint Regional Material Management (JRIMM) which is operated by the Defense Logistics Agency. The JRIMM concept seeks to eliminate duplicative inventories and streamline the flow of material. 

After a successful pilot program with the Navy in San Diego, the concept has been 

expanded to the Island of Oahu and encompasses all military Services. Right now 

6

1The prepared statement of Mr. Johnson appears in the Appendix on page 60. 

the Services are testing the JRIMM concept by using the Defense Distribution 

Depot, Pearl Harbor, as the hub for inventory distribution throughout Oahu. 

I wish DLA and JRIMM success in what I hope will be a state-of-the-art, centralized logistics supply center. GAO and OMB are working with DLA to ensure that 

this new system will have the needed metrics and controls in place to manage effectively DOD’s supply chain system. 

Yet, despite positive steps forward, we must remember that without sustained 

leadership, neither incremental changes nor wholesale transformation will be integrated into an agency’s management culture. That’s why I have sponsored legislation with Senator Voinovich and Senator Ensign to establish a deputy director for 

management at DOD. Our measure was introduced at the recommendation of the 

Comptroller General, and I thank him for his steadfast support of the chief management officer concept. Senator Voinovich and I have also introduced similar legislation for the Department of Homeland Security to help the new department avoid 

the same long-term management problems plaguing DOD. 

Mr. Chairman, I look forward to our continued partnership in attacking waste 

and mismanagement of government programs. We must take this opportunity to instill sound management practices within Federal agencies so that the taxpayer’s dollars are used most effectively. Thank you.

Senator VOINOVICH. Mr. Johnson. 

TESTIMONY OF THE HON. CLAY JOHNSON, III,1 DEPUTY DIRECTOR FOR MANAGEMENT, OFFICE OF MANAGEMENT AND 

BUDGET 

Mr. JOHNSON. Mr. Chairman, Ranking Member Akaka, thank 

you both, and congratulations to you both for your support and 

your passion about fiscal restraint, good management, thinking of 

and treating employees like professional public servants, not like 

bureaucrats, for focusing our spending on real needs and making 

sure we get what we pay for. In short, thank you for your passion 

and commitment and support for results. 

General Walker and yourself have recognized, publicly and privately, to me the progress that this Administration has made on 

the high-risk list, the attention we pay, the priority we have given 

it, and I think those kudos are well deserved, if I do say so myself. 

I think a lot of attention is being paid to this, but there is more 

that can be done. I think the attention to the high-risk list exists 

in every area. It is inconsistent. It is high in probably half the 

areas, and it is not as high as it should be in probably the other 

half. 

It is all about getting results. One way to think about this is the 

risk. The other way to think about it is we are spending a lot of 

money, what are we getting for that money? The President’s Management Aagenda is about establishing habits and disciplines and 

having agencies adopting these habits and disciplines; so that they 

have the ability to spend our money more wisely to get results, 

where we were not able to get results before. 

Senator Voinovich, you mentioned focusing more light on how 

programs work now. The website, Expectmore.gov, is something 

that we have spent a lot of time on this past year to develop. As 

David said, with light you get heat, and with heat you get action. 

We think it is important that the taxpayers know what they are 

getting for their money, what is working, what is not, and in every 

case, what we are doing about it. 

We think the first big step in that direction, or a very important 

step in that direction is to bring a lot of transparency to what is 

7

working and what is not. OMB’s role in this is pretty straightforward. We, both in the PMA and the high-risk list, see our primary role as helping agencies, helping programs find success. What 

are we trying to do? What is the definition of success? This has to 

be done to everybody’s mutual satisfaction, has to be done to the 

agency’s satisfaction, and to OMB’s satisfaction. And with regard 

to the high-risk list, it has to be done to GAO’s satisfaction as well. 

Let us agree together on what we are trying to do. 

Our second role in all of this is to ensure that the agencies, with 

your oversight activities, are held accountable for doing what they 

say they are going to do. They have an action plan that calls for 

this to be done in the next 6 months, and this to be done in the 

next year, and so forth and so on, holding agencies accountable for 

doing what they said they are going to do. 

I have done focus groups each of the last 2 years with Federal 

managers, SES and GS–14s and 15s, about management topics. 

And they talk about, ‘‘We always have had plans, we always have 

had goals. We are really great. We like to do them in four color and 

black and white, and paper and PowerPoint. We can really do those 

plans.’’ The new news in the last few years is: ‘‘Somebody is actually holding us accountable for implementing the plans that we 

said we are going to implement.’’ To me, that is the key in removing the risk from these high-risk items: Accountability causes programs to work and to spend money wisely. A lot of things go into 

it, but the level of accountability, I believe, has more to do with our 

success in spending the taxpayers’ money than just about any other 

factor. 

Again, thank you for inviting me up here. Thank you for those 

kind words at the beginning of the hearing, and I welcome your 

questions. 

Senator VOINOVICH. Thank you, General Walker. 

General Walker and Mr. Johnson, on October 7, DOD approved 

the establishment of the Business Transformation Agency. Now, 

this agency is responsible for centrally managing some of the Department’s largest business systems. Do you believe that the Agency has enough visibility and leadership clout within the Department to affect the necessary changes in DOD’s culture, or should 

these responsibilities be handled by a chief management officer? 

Mr. WALKER. First, Mr. Chairman, let me say that I think that 

was a step in the right direction. It shows that the Deputy Secretary is taking this issue seriously. It also shows that he is trying 

to commit some resources to it, and the approach that they are taking with regard to business process engineering and related systems update is, clearly, I think, an approach that is preferable to 

the one that they had before, but the jury is out on whether or not 

it will be successful. 

I continue to believe, Mr. Chairman, that in order for the Department of Defense to successfully address its eight individual highrisk areas, and the six others that it shares with other agencies 

across government, that one of the elements that it will ultimately 

need to do is to create a Level 2 senior official reporting directly 

to the Secretary, responsible for the overall business transformation effort. We are talking about a professional with a proven 

track record, who would have a term appointment, a performance 

8

contract, and would be there long enough in order to place sustained attention that could last beyond indivudal administrations. 

I continue to believe that DOD will not be successful in addressing 

these areas in a reasonably timely manner unless they have that 

type of person there. I do not think there is a person on the planet, 

Gordon England included, who can be both Deputy Secretary for 

Policy, and alter ego to the Secretary, as well as place the time and 

attention necessary to deal with these many longstanding, deeply 

ingrained business transformation issues within the Department 

that have been there since 1947, in many cases. 

Senator VOINOVICH. Mr. Johnson. 

Mr. JOHNSON. I think Gordon England’s answer to that question 

was he would like to look at it for 6 months or so and then get back 

to you, and I defer to him on that. OMB does not yet have an official position on that. My personal position is it can work, but there 

is nothing automatic about it. We have said in here, I have said 

in here before, and others have agreed, this is not a silver bullet. 

The key to transformation in the Department of Defense is whether 

the Secretary wants it to happen or not. If he really wants it to 

happen, it is going to happen, whether there is a chief management 

officer, whether the senior person driving this effort is the level 

person they appointed last November, whether it is a chief management officer, whether it is someone above that, less than that. 

If the Secretary does not want it to happen, it is not going to happen, whether the person is term or not, whether they are Level 2, 

Level 3, Level 4. So that is the key. There is nothing automatic 

about a termed position. A Secretary can make a termed person ineffective or highly effective if he or she so wants. So it is nothing 

magic about it. 

But it can work. The key is that there has to be somebody, as 

I mentioned at the beginning, somebody held accountable for implementing the very clear aggressive action plan that has been laid 

out to everybody’s mutual satisfaction, that if implemented, will 

achieve the desired goal. If there is somebody with the Secretary’s 

endorsement, who can be held accountable, one person who can be 

held accountable for implementing that plan, it does not make any 

difference what level it is, in my opinion. 

Mr. WALKER. Mr. Chairman, could I come back real quick? 

Senator VOINOVICH. OK. 

Mr. WALKER. We are doing work in this area to try to help this 

Subcommittee, as well as the Congress, understand the experiences 

of other countries in addressing these types of issues. I would agree 

with Deputy Director Johnson, that if the Secretary is not committed, one will not be successful. I would also, respectfully, suggest that that is not enough. There are a number of countries that 

have similar positions to what I am talking about, and they have 

made a real and lasting difference. Part of the problem is people 

are not in their jobs long enough to be able to make substantial 

and sustainable progress. I provided more information for the 

record before, and would be happy to respond to any other questions you might have. 

Senator VOINOVICH. It is an issue that I think we really need to 

continue to pay attention to. I have written down a note to talk to 

Gordon England about it again. 

9

Mr. JOHNSON. I think getting a more formal response at this 

point from Gordon would be a good idea. 

Senator VOINOVICH. That is exactly what I intend to do. 

General Walker, you have said there is a need for a comprehensive national threat and risk assessment in the planning for the 

2010 census. Do you think the Administration is taking the necessary steps to address these broad-based challenges, to keep them 

from becoming high-risk areas? 

Mr. WALKER. First, Mr. Chairman, with regard to the census, I 

would like to provide some more information for the record, but I 

will tell you that based upon information that I have been provided 

within the last couple of weeks, I am told that the census is ahead 

of schedule as compared to where they were for the last census at 

this point in time. So they are clearly ahead of where they were 

last time, and I would be happy to provide some more information 

for the record. 

With regard to the need for a comprehensive national threat and 

risk assessment, more needs to be done in that regard, and this is 

an issue that not just applies to the Department of Homeland Security, but quite frankly, it applies to the Department of Defense and 

other agencies. I will tell you that personally I was very disappointed with the Quadrennial Defense Review, tough choices not 

made. The bottom line with that review was, for the most part, everything we wanted before and more, and we still are not taking 

enough of a threat and risk-based approach to determining our 

needs, and we are still not adequately considering the limitations 

on our resources that are very real, especially given our huge deficits. 

So it is not just DOD. It is not just DHS, but I think we have 

a way to go in both those regards. 

Senator VOINOVICH. I was at a meeting today with some of my 

colleagues, and we are talking about the borders, and the threat 

that is there. I kind of smiled because they were saying, ‘‘Well, we 

put $2 billion in today by unanimous consent for the borders.’’ And 

then somebody said, ‘‘Well, if we are really going to do the job, we 

need to put in another $2 billion.’’ I just smiled and said, ‘‘Where 

is the money going to come from?’’

And in terms of the Defense Department, has anybody really 

looked at what they want to do, and then looked at the threat that 

is out there, and the change in the threat in terms of the fact that 

we have a non-traditional enemy? There is no question that the 

technology we have is helping us, but, is it the right technology and 

the right resources? 

You have to step back and say, ‘‘Is that really needed?’’ So often 

the Defense Department comes back with recommendations in 

many areas, and does not recommend spending in these areas. Yet, 

Congress comes along and funds these programs anyway. 

That brings me back to the threat assessment issue. If we do everything everyone wants us to do to protect this country, we will 

bankrupt it. The real weapon in this war on terror is good intelligence so it does not happen here. 

Public diplomacy around the world, and perhaps spending money 

toward humanitarian efforts, goes a long way in creating a more 

peaceful world. That being said, has anybody really sat down and 

10

looked at all of these resources and said, ‘‘We cannot do all this.’’ 

The financial resources are just not there. The non-defense discretionary budget is being picked apart right now to the point where 

I think we are not going to be able to do the things that government should be doing. 

I think it gets back into this threat assessment. Secretary 

Chertoff should come back to Congress and say, here is an honest 

portrayal of where we are, what we need to protect Americans. 

When Congress comes along and says, ‘‘We got to do this and we 

got to do that,’’ somebody ought to say, ‘‘No, we do not. First, we 

do not have the money to do it, and second, because if we have 

good intelligence we do not have to worry about spending money 

on certain programs.’’ If we keep going the way we are, we are in 

big trouble. 

Enough preaching. Mr. Johnson. 

Mr. JOHNSON. You talk in terms of whether there is threat assessment, and are we spending our money where the threats are 

the greatest? From the management side of OMB, we think in 

terms of: Are we getting anything for our money? When we talk 

about port security, there was a meeting this morning—we have a 

morning meeting every day at OMB—and they were talking about 

why Congress wants to do so much for port security, and someone 

says, ‘‘Well, a billion dollars is better than $700 million, or $4 billion is better than $2 billion,’’ whatever. I am asking the question, 

‘‘What are they going to do with this money?’’ ‘‘Well, they are going 

to secure the ports.’’ Maybe you can really secure the ports for a 

billion dollars, or maybe the minimum is $10 billion. Has anybody 

figured out—are we just throwing a number out there and $4 billion is better than $2 billion? What is the goal? What are we trying 

to do here? There is not enough of that. 

There is so much attention being paid to inputs, what we are 

spending, what kind of money, that there is a general mindset in 

Washington, Executive and Legislative Branch, that says, the more 

I am willing to commit to something, the more I care about it. 

General Walker talked about the level of oversight that you all 

are trying to bring to this process, in particular, to this Subcommittee. There is not enough of it. What are we getting for our 

money is the question, and needs to be the question much more frequently than it is now. That is you all’s perspective here, and we 

think that when we put the budget together at OMB, with the help 

of the agencies, we are making those kinds of calls, because what 

are our priorities? We cannot spend money on everything. What 

are our really important priorities? Let’s spend it on that. Maybe 

it is not expressed in terms of what our risks are—well, it would 

be on national security—but the Defense Department wants to do 

things, we think it is a low risk, it is not as important as some 

other things. The same thing with Homeland Security. And we do 

not fund those low-risk, low probability kinds of things. 

So there is attention being paid to debt, and I am almost certain 

that it is not as much as it could be or should be. 

Senator VOINOVICH. Thank you. Senator Akaka. 

11

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. Thank you very much, Mr. Chairman. I wanted 

to thank you again for all the work you have done, Mr. Chairman. 

This is our sixth hearing in a year on high-risk government programs. The people of Ohio, Mr. Chairman, and the Nation, are fortunate to have you in the Senate, and your continued leadership, 

and that of our distinguished witnesses, is improving government 

operations. 

I want to commend our two witnesses, General Walker and Director Johnson, as you point out are trying to think this out. We 

need people in place who will stay and be accountable. 

Reducing the number of programs susceptible to waste, fraud, 

abuse, or management will, no question, save the American taxpayers billions of dollars, improve Federal services and help reestablish the trust they should have in government. 

Mr. Walker and Mr. Johnson, again, I want to thank you for 

working with us. I know this effort goes back several years. It is 

16 years now that we have been working on high risks, and are 

still doing that. You folks have really been working on this with 

us, and I look forward to more of that. 

I have a question for both of you that probably cuts through 

some of the problems we continue to see, especially in the area of 

contract management. Federal agencies have contract employees 

working side by side with Federal employees. Federal managers, 

who manage only Federal workers are evaluated on the performance of all employees, Federal and contract workers. In addition, 

Federal employees are subject to conflict of interest and ethics 

rules, while most contract workers are not legally bound by the 

same ethics rules. 

As an example, the IRS will use private debt collectors to track 

down and collect unpaid Federal taxes, and yet, Federal IRS employees are subject to stringent rules, that if violated, could result 

in termination. My question to you is how would you reconcile the 

differences in laws and regulations for governing what is now being 

called the multi-sector workforce within the Federal Government, 

and how could this address some of the cost-cutting programs on 

the high-risk list? General Walker. 

Mr. WALKER. First, Senator Akaka, as you know, there are a 

number of areas on GAO’s high-risk list that deal with contract 

management, and there is a multiplicity of problems relating to 

contract management. In my view, if we are contracting for nongovernment workers to do work that otherwise the government is 

responsible for doing, then there should not be a substantive difference in the standards that apply to those individuals who are 

serving as an agent of the government. In other words, they should 

not be able to do things that a government employee would not be 

able to do. 

Now, it is different with regard to financial disclosures and it is 

different with regard to certain other aspects that have to do with 

the fact that you are a government employee. My view is: one, we 

are contracting out, in some cases, too much, including oversight; 

two, we do not have enough people with the right kind of skills and 

knowledge to manage cost, quality and performance of contractors; 

three, our contracts are incredibly complex, they are not outcome 

12

and results oriented enough, and even in circumstances where we 

try to engage in performance-based contracting arrangements, the 

culture in government is you end up paying out a vast majority of 

those award and incentive fees just for people showing up to do 

their work, and returning your telephone calls, rather than because 

they are meeting their commitments on cost, quality and performance. 

We issued a report within the last year, noting that the Defense 

Department has spent billions of dollars in incentive and award 

fees in circumstances where the contractors were behind schedule, 

over budget, and/or not making related performance requirements. 

This is an example of one of the fundamental transformation 

challenges that has to take place, just one of many in the Defense 

Department, but it is not solely confined to the Defense Department. 

Senator AKAKA. Thank you. Director Johnson. 

Mr. JOHNSON. On the specific IRS case that you talked about, I 

am only vaguely familiar with the history of that. I know that 

there were prohibitions placed on what IRS tax collectors could be 

required to do, what they could be held accountable for doing. Basically, as I understand it, the law is now that they cannot be held 

accountable for anything. The feeling was that they were being 

held accountable for collecting so much money, they would be too 

rough on the taxpayers and there would be a customer service 

problem and so forth. So as a result, they cannot be held accountable for their production levels of the quality of their work, or the 

quantity of their work. 

Somehow or another, a bill was passed that allowed IRS to hire 

outside contractors to collect monies that IRS would never work on, 

no matter how much debt collection money they had in their budget, the hard to collect and so forth, and those people have been 

given, I think it is up to a 25-cent on a dollar commission. So it 

is a function of two things, the inability to hold IRS employees 

truly accountable, because of a law that was passed, and the legal 

opportunity to hire outside contractors because of a law that was 

passed, and the ability to hold those people accountable. It is nuts. 

Colleen Kelly, of the National Treasury Employees Union 

(NTEU), thinks it is nuts, and it is like the right hand and the left 

hand not knowing what they are doing, but that is the law. So it 

is allowed. It does not seem like it should be that way, but it is. 

And Congress, in both cases, elected not to be able to hold these 

people accountable, and elected to allow outside contractors on a 

commission basis to collect these very hard to collect monies. 

The way prospective spending is scored, as I understand it, if we 

are going to spend a quarter to get a dollar, like on debt collection 

or on working bad Social Security claims, or something, that scores 

money scores, expense scores this year and the revenue derived 

from that. We do not get an offset. It shows as an increase in the 

budget. That suggests that maybe some rethinking in how these 

kinds of spend-money-to-make-money kinds of efforts should be 

scored ought to be looked at. But it is a seemingly inconsistent, if 

not contradictory, approach to debt collection at the IRS. 

Senator AKAKA. Thank you. Mr. Chairman, my time has expired. 

Senator VOINOVICH. Senator Carper. 

13

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. Thank you, Mr. Chairman. 

Gentlemen, it is great to see both of you here today. Thanks for 

coming before us again. 

As General Walker knows, Senator Coburn and I have been holding a series of hearings on another Subcommittee of this Committee. Among the things we focused on are improper payments, 

and we are grateful to you and to the team that you lead, General 

Walker, for working with us there, and putting a spotlight on the 

agencies that are doing a good job reducing their improper payments, and putting another kind of spotlight on the agencies that 

could do better. 

One department that I suspect probably makes a number of improper payments is the Department of Defense. I do not know if 

DOD actually has the financial systems in place that will actually 

talk to each other and will enable them to help us to identify some 

of the mistakes that are being made. I would ask, how far do you 

think we are from consolidating some of their systems, and maybe 

getting a better picture of the kind of shape they are really in? 

Mr. WALKER. The last estimate that I heard, Senator Carper, 

was that the Defense Department had over 4,000 legacy and nonintegrated information systems that contain financial and other 

key management information. I believe that one of the things that 

has to be done there is we need to employ a toughlove concept at 

the Defense Department, not just in this area but elsewhere, such 

that we understand which one of these systems are critical stayin-business systems and which ones are not. If they are not critical 

stay-in-business systems, we kill them, we de-fund them. We take 

that money and we use it to invest in creating a more positive future that not only would help with regard to financial management 

but would help with regard to a whole range of high-risk areas. 

If the Ministry of Defense in the U.K. can do it, if the Brazilian 

Government can do it on a consolidated basis, I don’t see why the 

U.S. Defense Department can’t do it. 

Now, they have a new approach to trying to address their 

BMMP, or business systems modernization efforts now. It is better 

than the old approach. It is going to take many, many years of attention to really make meaningful and lasting progress here, which 

brings me back to the issue we started with, Mr. Chairman. 

Senator CARPER. Well, that is not very encouraging. In terms of 

what we ought to be doing, can be doing to be helpful or embracing 

this toughlove approach, what would be your advice for us? 

Mr. WALKER. Well, candidly, let me mention a couple of things 

based on what all three of you have said. As all of you know, I have 

been spending a lot of time lately talking about our large and growing budget deficits and long-range fiscal imbalance. Clay Johnson 

is correct in noting that the Administration is focused on results. 

One of the problems we as a country have, is that we do not have 

a set of key national indicators—safety, security, economic, social, 

environmental, and other outcome-based indicators to be able to inform strategic planning, enhance performance accountability reporting, and frame legislative actions, whether it is authorization, 

reauthorization, appropriations, or oversight activities. 

14

As a result, what happens is when you have a problem the assumption is if you throw more money at it, you are going to get 

more results, or if you give more tax preferences, you are going to 

get more results. The fact is those assumptions may be totally 

false. 

So one of the things that we need to start doing is we need to 

move towards developing some indicators, national and then local, 

that would be used as a basis to engage in planning activities. For 

example, before you end up giving money, let’s understand what we 

are going to get for the money. Before we pass a new bill that creates a new program or a new policy, why are we doing it and what 

do we expect to get for it on an outcome basis? 

We need to start thinking outside the box and do things fundamentally differently because the path that we are on right now 

is not only imprudent, it is unsustainable and it threatens our future. 

Senator CARPER. Thank you. I agree. 

Another question for you, General Walker. One item that I do 

not believe is on your agency’s, GAO’s high-risk list and maybe it 

ought to be is FEMA contracting and spending procedures during 

major disasters. And maybe that is not something we focused on 

a whole lot before last August. Mr. Johnson, how are GAO and 

OMB helping FEMA and Homeland Security to better prepare 

for—I guess from a financial management perspective—the next 

hurricane season, which is, I think, less than 3 months to go. 

Mr. WALKER. We do not have the Department of Homeland Security’s contract management area on the list at the present time by 

itself. We do have the implementation and transformation of the 

Department of Homeland Security as an entity on the list. As you 

know, Senator Carper, we have done and are doing a tremendous 

amount of work in the aftermath of Hurricanes Katrina and Rita. 

I have already testified a couple of times—and will be doing some 

more—making specific recommendations about what we think 

needs to be done in order to do better next time and to be better 

prepared. 

There are major contracting problems with FEMA. We have a report that I just looked at this morning where we paid over $10 million more for an item than we should have. We paid $39 million 

for a particular contract which was at least $10 more than we 

could have based on the GSA schedule. 

You will be seeing more coming out from GAO as well as the Inspector General of the Department of Homeland Security and others on this issue in the near future. 

Senator CARPER. I have a follow-up question to that. Going beyond what you just said, what kind of steps might FEMA, or really 

the Congress, need to undertake to improve FEMA’s financial controls? What do we need to be doing? 

Mr. WALKER. I will give you some examples of areas where we 

are likely to have as recommendations. We have not issued the 

products yet, but these are things that we are working on. 

We need to recognize that natural disasters happen. They have 

happened, and they will continue to happen, all throughout the history of this country. Certain types of natural disasters happen with 

recurring frequencies in particular regions of the country. One of 

15

the things that we need to do with regard to contracting, is to understand what type of capabilities and resources we might need in 

the event of a disaster and to enter into contracting arrangements, 

well in advance of the disaster, that can be drawn upon if, and 

when, the disaster occurs, rather than being held hostage to the 

conditions and the urgency of the moment to be able to pay whatever price is necessary in situations, where the government has no 

leverage and is looking to get things as quickly as possible for 

whatever price is necessary. 

And so advanced contracting: Incorporating a number of internal 

controls, which I won’t go into the details here, in order to maximize the chance that we are getting value for money, and that only 

people who should be paid are getting paid. I would be happy to 

provide some more information for the record if you would like. 

Senator CARPER. Good. Thank you. Thank you, Mr. Chairman. 

Senator VOINOVICH. I was not going to raise this issue, but I am 

going to raise it because I think it is urgent. We have just been 

talking about FEMA and some of the things that need to be done 

in order to improve the agency. I guess the first question is: What 

do we have to do to make sure that FEMA is not put on the next 

high-risk list? That is the first issue. But, more importantly, the 

last time I looked, there were 12 management positions in FEMA; 

eight of them have temporary people filling them. They have lost 

over 500 people. Half their workforce is over 50. And from what I 

understand, we have a pretty demoralized group of people because 

they have been beaten down as an agency. 

I would like to ask both of you if you think FEMA is hampered 

by being part of the Department of Homeland Security? As you 

know, we are approaching hurricane season. I am concerned that 

FEMA does not have the staff or resources necessary to be able to 

respond. We are running out of time. I want to ensure that DHS 

is giving FEMA the appropriate attention that it needs to be able 

to respond and to attract the individuals needed to get the job 

done. Is FEMA going to be ready for the upcoming hurricane season? 

Mr. JOHNSON. I believe that FEMA is not hampered by being a 

part of the Department of Homeland Security. Staffing is the biggest problem they have right now. OMB had Homeland Security 

and FEMA outline what their plan was for dealing with the extra 

risks presented by Hurricane Katrina. Hurricane Katrina is a big 

risk of making an improper payment—a huge risk. What are the 

different kinds of risks and what extra preventions or extra resources are we going to apply against that extra risk to lower that 

risk to acceptable levels? They identified all the things they needed 

to do, the extra checks and balances and so forth. Just with regard 

to Katrina, they identified the need to hire—it is either 120 or 200 

people in a combination of procurement and then in the financial 

world with regard to internal control. 

Senator VOINOVICH. If I could just interrupt you a minute, the 

question I have is that if you have an agency that is beaten down, 

has a bad reputation, and you have people who, from what I understand, are going to leave if they get a chance, how in the world are 

you going to get the people that you need into the positions so that 

this thing will work the way we want it to? 

16

Mr. JOHNSON. Right. What I am saying is—let me put some 

numbers on it. They wanted to hire—it was either 120 or 200 people. They have hired half those people. They have been working on 

it for 3 months, and they have had extra help from OPM, they have 

had extra expedites for this and that, and it is all the things you 

talked about. So it is a significant problem. 

I believe it actually helps FEMA to be a part of Homeland Security in that you have Deputy Secretary Michael Jackson. I saw him 

on Sunday. He said he spends probably 80 percent of his time on 

FEMA matters. If FEMA was separate, they would be hard pressed 

to have somebody of Secretary Chertoff’s caliber and Michael Jackson’s caliber trying to help them get more strategically aligned. It 

is a problem. Hurricane Katrina and all the repercussions of that 

were unprecedented in its magnitude. And whether it was a part 

of Homeland Security or not, the people at FEMA would be worn 

out, ready to retire, ready to move on, ready to go into the ministry—whatever the next steps might be. And it is a problem that 

needs to be dealt with, and I do not believe their being a part of 

Homeland Security has any bearing on the quality or the expedited 

nature of the solution. 

Mr. WALKER. Mr. Chairman, I would say two things. 

First, the quality of the leadership. You need top-flight, capable, 

credible, and inspired leadership at FEMA, and if you do not have 

that, you have a big problem. One of the challenges that we are 

going to have now, I would respectfully suggest, is attracting somebody into that job under the current circumstances. I hope and 

pray that the Administration will be successful in attracting somebody that meets all these criteria. 

Second, they are going to have to have adequate resources, and 

that means human resources as well as financial and other types 

of capabilities. As you know, Mr. Chairman, we do not put agencies 

on our high-risk list. We put programs, functions, and activities, 

and the reason being is it really would not be fair to an agency. 

It is not the entire agency that is the problem. Rather it is certain 

aspects of an agency that might be a problem. Therefore, by putting an entire agency on the list, it really tends to indict the entire 

agency. Every agency does some things well, and some things, 

quite frankly, are beyond their control and they need the Congress’ 

help to be able to deal with them. 

Senator VOINOVICH. You mentioned the National Flood Insurance 

Program (NFIP). That is a big part of it, right? 

Mr. WALKER. Well, that is at DHS, and it does relate to FEMA, 

that is correct. We are putting the National Flood Insurance Program on our high-risk list as of today. As you will recall, Mr. 

Chairman, we put the Single Employer Insurance Program, which 

is the biggest part of the Pension Benefit Guaranty Corporation, on 

our high-risk list, off-cycle, several years ago when it had a similar 

financial condition. 

I believe that whether or not FEMA will be successful does not 

have as much to do with whether or not it is in DHS. It will depend on the quality of its leadership and the adequacy of its resources. After all, the Coast Guard did a great job, in my opinion, 

based on everything we have seen, relating to Katrina and Rita, 

17

and it is part of the Department of Homeland Security. And before 

that, it was part of the Department of Transportation. 

It is leadership and resources that count the most. One last thing 

on this. We have talked about the CMO concept. I would respectfully suggest that one of the things that Congress needs to consider 

is: Are there certain positions in certain agencies that you ought 

to think about having statutory qualification requirements, thinking about getting a pro with a term appointment? Is FEMA one of 

those agencies? I raise that question. 

For example, I look at the Internal Revenue Service. The Commissioner of Internal Revenue has a 5-year term appointment. The 

Commissioner of Social Security has a term appointment. There 

are certain positions that, given the nature of the position and the 

agency’s mission, you want a pro and you want somebody who obviously is politically acceptable. A person with the right kind of 

qualifications but who hopefully knows they are going to be there 

for a certain amount of time, which I think can make all the difference. Frankly, if you ask some of the people who have been appointed to some of these term appointments, including Mark 

Everson at IRS, I think he would tell you it makes a difference 

having a term appointment. 

Mr. JOHNSON. Senator, can I make one additional comment? 

Senator VOINOVICH. Yes. 

Mr. JOHNSON. I think the issue here is not whether the head of 

FEMA is termed or not. I think the issue is Hurricane Katrina. Before Katrina, Michael Brown was going to go into the Emergency 

Management Hall of Fame for the work that he and FEMA did in 

Florida when those five hurricanes went through there in 2004. 

FEMA’s track record of response to natural disasters was more 

than satisfactory for many years leading up to Katrina. In FEMA, 

we have an agency that is demoralized. Lots of people are leaving. 

It did not perform well in Katrina. The main factor is Katrina. 

Think back—which nobody talks about—to how well regarded 

FEMA was in 2004 and 2003 and 2002 and 2001 and in 1999. 

There were no discussions about if we could get good leadership. 

There were no discussions about it needed to be a term appointment. We had a once-in-a-100-year or a once-in-a-200-year natural 

disaster that knocked the bejesus out of the United States of America, and we did not respond as well as we would have responded 

to a Category 3 or a Category 4 hurricane. And so we are going 

to learn from it and move on, but the issue is not looking back that 

Michael Brown was termed or not. 

Senator VOINOVICH. Senator Akaka. 

Senator AKAKA. Thank you very much, Mr. Chairman. 

FEMA is an agency that we have been discussing throughout our 

22 hearings on Katrina. At one of the hearings with the Inspector 

General sitting where you are sitting, Mr. Johnson—I asked him 

the question: Today, if there is a disaster, will FEMA be able to 

operate successfully? Without hesitating, his answer was no. And 

so that is scary. And for me, I wonder why we are continuing to 

pay all these salaries and having an organization that will not 

function. 

For the past 3 weeks, as you know, parts of Hawaii have been 

hit by exceptionally hard and heavy rains, causing flooding, landVerDate 0ct 09 2002 07:48 Sep 07, 2006 Jkt 027751 PO 00000 Frm 00021 Fmt 6633 Sfmt 6601 C:\DOCS\27751.TXT SAFFAIRS PsN: PAT
18

slides, and just yesterday, a dam failed and it killed—well, they 

found one person, six are missing. And at this point in time, I don’t 

know whether FEMA is going to be involved, but I thought I would 

just mention that. And I want to thank the Chairman for mentioning FEMA because this is something that we need to work on 

to help our country in case there are future disasters. 

Mr. Walker, I would like to commend GAO for its evaluation of 

a fundamental element of DOD acquisition, contract award, and incentive fees. Given the DOD acquisition failures that I mentioned 

previously, I do not understand how DOD can continue to pay 

award fees, which amount to more than $8 billion, regardless of 

program outcomes. This precedent of awarding contractors for inadequate performance, no question, must change. The December 2005 

GAO report you mentioned indicated that, in some cases, DOD 

evaluates contractors based on award fee criteria not directly 

linked to program success. 

So my question is: What changes would you recommend that 

DOD make regarding award and incentive fee structures? 

Mr. JOHNSON. Senator Akaka, we have made some, and I expect 

that we will make some additional ones as well. As you may know, 

the Senate Armed Services Committee—which you are a member 

of—has a hearing coming up on this, I believe, the first week in 

May. 

One of the things that I think has to happen is to make it clear, 

ideally without legislation but, if necessary, with legislation, that 

the only way that one should be paid an award fee is if there are 

positive outcome-based results based on cost, quality and/or performance. It is as fundamental as that. 

You would think just looking at Webster’s Dictionary that you 

would be able to figure out that these types of criteria need to be 

met, but it is as fundamental as that. 

Now, I will tell you that the Under Secretary for Acquisition, 

Technology and Logistics at the Defense Department has agreed 

with our findings and recommendations to date, and we are looking 

to see what type of concrete actions are taken to deal with them. 

I will tell you that one of the problems at the Defense Department 

is things, in form, look great. They have beautiful manuals. They 

will end up adopting a lot of recommendations on paper. But as we 

all know, there is a difference between plan and actual, and the 

real key is what actually happens on implementation, and that is 

where I think we have to wait and see whether or not adequate 

steps are taken or, if not, we may want to come back to Congress 

and recommend that you do something. 

Senator AKAKA. Thank you. General Walker, do you believe that 

the Federal acquisition regulations should be altered to provide 

Federal agencies with discretion on the structuring and payment of 

award fees? 

Mr. WALKER. Senator, I would like to talk to my staff and provide a response for the record on that, if it is OK with you. 

Senator AKAKA. That is fine with me. 

Mr. WALKER. Thank you. 

Senator AKAKA. Mr. Walker, you testified that DOD weapons 

systems acquisitions has been a high-risk area for more than a decade. Within the past 12 months, we have seen at least three multiVerDate 0ct 09 2002 07:48 Sep 07, 2006 Jkt 027751 PO 00000 Frm 00022 Fmt 6633 Sfmt 6601 C:\DOCS\27751.TXT SAFFAIRS PsN: PAT
19

billion-dollar major defense acquisition programs exceed their baseline cost estimates by more than 25 percent, and yet DOD acquisition policies seem to include sound best practices. 

Are the major problems we are seeing with DOD weapon systems 

acquisition related to insufficient policy? Or is this a case of failing 

to follow the existing policies? 

Mr. WALKER. There are several issues with regard to acquisition 

policy. One, if you look at the total wants—and I consciously pick 

that word, ‘‘wants’’—that all the services that they have at the Defense Department and the programs that they have in the pipeline 

at the present point in time, and if you compare those wants to realistic current and expected resource levels, there is a huge difference. That difference has not been reconciled. It needs to be reconciled. Unless, and until, it is, we are going to spend billions of 

dollars on wants that, when the budget crunch comes, we are not 

going to be able to have for the needs. So that is the first thing. 

The second thing is that after the decision is made to fund a particular weapons systems acquisition based upon credible current 

and future threats and based upon needs rather than based upon 

wants, then it is critically important that the Pentagon nail down 

its requirements and follow commercial best practices on the design, the development, and the production of these systems, and 

that they have adequate maturity of technology before they move 

through the various stages. On paper, their policies say they are 

supposed to. In practice, they don’t, all too frequently. And history 

has shown that if you don’t do that, you are just asking for cost 

overruns, scheduled delays, and compromised performance standards. 

There is a long-standing history, with a few exceptions—but it 

tends to be more the rule than the exception—of over-promising 

and under-delivering and that people are not held accountable. 

Contractors are not held accountable. DOD employees are not held 

accountable. I would respectfully suggest, that this is a problem not 

just for the Executive Branch but also for the Legislative Branch. 

As you mentioned, Mr. Chairman, sometimes the DOD is forced 

to buy things that they say they do not need. However, because of 

interest in the Congress—the branch of government that I work 

for—it is forced on them. We need to have better incentives, more 

transparency, and clearly enhanced accountability in order to make 

real and sustainable progress here. 

Senator AKAKA. Thank you. Let me follow up here. General 

Walker, in GAO’s review of DOD weapons systems acquisition processes, has any evidence been found showing a linkage between 

threat assessment and acquisition decisions? 

Mr. WALKER. In our view, Senator Akaka, there is an inadequate 

job done at the departmentwide level in looking at current and future credible threats and in reconciling those with the different 

wants of the various services. It is more of a problem in certain 

services than others, but I would respectfully suggest that after 

this latest QDR, which, again, is a bid document—it is not a formal 

policy or law—the delta that I talked about, the difference between 

wants, needs, affordability, and sustainability, is worse, not better, 

after that document. And that is a real disappointment, because I 

know there are a lot of people at the Defense Department—includVerDate 0ct 09 2002 07:48 Sep 07, 2006 Jkt 027751 PO 00000 Frm 00023 Fmt 6633 Sfmt 6601 C:\DOCS\27751.TXT SAFFAIRS PsN: PAT
20

ing Secretary Rumsfeld, that recognizes this problem and they 

want to make more progress on it than they have been able to. 

Senator AKAKA. Thank you very much, Mr. Chairman. 

Senator VOINOVICH. Senator Carper. 

Senator CARPER. I understand we have just a couple, maybe 5 

minutes left in this vote, and so I will just ask one question of Mr. 

Johnson and one quick question of Mr. Walker. 

Mr. Johnson, who is the Administration’s point person that we 

should be working with as we go to conference on the postal reform 

bill? Do you know? Should we just work with you? 

Mr. JOHNSON. It would be somebody in the White House on the 

Policy Council. I think it is Tevi Troy that is the senior-most person. 

Senator CARPER. What is the name again? 

Mr. JOHNSON. Tevi Troy. 

Senator CARPER. OK. Who is the domestic policy adviser now? 

Mr. JOHNSON. It is an open position. 

Senator CARPER. OK, thank you. All right. 

And a related question, if I could, Mr. Walker, for you. You mentioned transparency a couple times, actually, and we know that the 

Postal Service is going through a transformation process. I just alluded to it in my question of Mr. Johnson. I think the Postal Service has been on the high-risk list, at least its transformation process has been on the high-risk list for a while. And I think most observers would say there has been some improvement in the Postal 

Service in the last couple of years. I think they are doing a better 

job in terms of harnessing technology and being more productive. 

And I think any fair-minded person would say they have made 

some good progress. 

What I want to ask is your views on whether or not the Postal 

Service has in place—I guess I would call it a transparent strategy 

to rationalize its facilities and its workforce. Do you think they 

have a strategy in place to rationalize its facilities on the one hand 

and its workforce on the other? And sort of an adjunct to that, 

what do you think the Postal Service needs to be doing in this regard? 

Mr. WALKER. Well, first, Senator, let me say thank you for your 

leadership on postal reform, and your colleagues. Stay the course. 

They need it. 

Senator CARPER. Good. I will. 

Mr. WALKER. Second, I would agree with you that they have 

made considerable progress administratively in dealing with a 

number of challenging issues over the last several years, although 

I do believe that they need help through legislative reforms in certain key areas. 

We have recommended for some time that the Postal Service 

have a comprehensive and more transparent rationalization and restructuring plan with regard to its infrastructure and its employees. I have not seen that plan to date, but I will talk to my staff 

as soon as I get back and find out if they may have seen something 

that I have not seen yet. 

Senator CARPER. Well, would you just let me know on the record 

for the record, please? 

Mr. WALKER. I will do that, Senator. 

21

Senator CARPER. Thank you. Mr. Johnson. 

Mr. JOHNSON. My understanding is that it is impossible to close 

one post office, and it is not because it is not in the plan. It is because Congress refuses to let them do it. And so it is very difficult, 

as I understand it, to rationalize the Postal Service’s physical plant 

and workforce for a variety of reasons and only some of them are 

business related. A lot of them are political. 

Mr. WALKER. Senator, my understanding—but I will check it for 

the record—is that there are certain legal restrictions, but they are 

not necessarily legal restrictions down to the individual post office 

level. There is, however, a considerable amount of cultural resistance—all the more reason why I think you need a comprehensive 

plan. I think you and most of your colleagues would be surprised 

if the post office did something as simply as do a graphic presentation of where the population of the United States is, and then 

overlay that where all the post offices are. It would be dramatic. 

And then to be able to compare that to how many post offices do 

we have per square mile, how many do we have per citizen, because what ends up happening is like most things in government. 

Once it is in the base, it stays, and then we keep on layering and 

layering and layering, and what we need to do is we have to rationalize the base, because with the $760 billion all-time record accrual-based deficit for fiscal year 2005, we have got to do some 

things differently. 

Senator CARPER. Thank you both. 

Senator VOINOVICH. We have to wrap this hearing up because we 

are about to have a vote. I want to thank you very much for being 

here today. I thought this was very fruitful. I have additional questions that I will submit for the record. 

I look forward to continuing to work with you as we deal with 

the high-risk list. 

Thank you very much. 

[Whereupon, at 3:20 p.m., the Subcommittee was adjourned.] 

(23)

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