U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

29–933 PDF 2006

CODE YELLOW: IS THE DHS ACQUISITION

BUREAUCRACY A FORMULA FOR DISASTER?

HEARING

BEFORE THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

JULY 27, 2006

Serial No. 109–180

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

CHRISTOPHER SHAYS, Connecticut

DAN BURTON, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

CHARLES W. DENT, Pennsylvania

VIRGINIA FOXX, North Carolina

JEAN SCHMIDT, Ohio

BRIAN P. BILBRAY, California

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. DUTCH RUPPERSBERGER, Maryland

BRIAN HIGGINS, New York

ELEANOR HOLMES NORTON, District of

Columbia

———

BERNARD SANDERS, Vermont

(Independent)

DAVID MARIN, Staff Director

LAWRENCE HALLORAN, Deputy Staff Director

TERESA AUSTIN, Chief Clerk

PHIL BARNETT, Minority Chief of Staff/Chief Counsel

(III)

C O N T E N T S

Page

Hearing held on July 27, 2006 ............................................................................... 1

Statement of:

Ervin, Clark Kent, director, Homeland Security Initiative, the Aspen

Institute ......................................................................................................... 109

Sullivan, Michael J., Director, Acquisition and Sourcing Management,

U.S. Government Accountability Office; David M. Zavada, Assistant

Inspector General for Audits, U.S. Department of Homeland Security;

and Elaine C. Duke, Chief Procurement Officer, U.S. Department of

Homeland Security, accompanied by, John Ely, Executive Director of

Procurement for Customs and Border Protection, and Richard Gunderson, Assistant Administrator for Acquisition, Transportation Security

Administration .............................................................................................. 47

Duke, Elaine C. ......................................................................................... 74

Sullivan, Michael J. .................................................................................. 47

Zavada, David M. ...................................................................................... 62

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

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

of Maryland, prepared statement of ............................................................ 117

Davis, Chairman Tom, a Representative in Congress from the State of

Virginia:

Prepared statement of ............................................................................... 4

Staff report ................................................................................................. 7

Duke, Elaine C., Chief Procurement Officer, U.S. Department of Homeland Security, prepared statement of .......................................................... 76

Ervin, Clark Kent, director, Homeland Security Initiative, the Aspen

Institute, prepared statement of .................................................................. 112

Platts, Hon. Todd Russell, a Representative in Congress from the State

of Pennsylvania, prepared statement of ...................................................... 120

Sullivan, Michael J., Director, Acquisition and Sourcing Management,

U.S. Government Accountability Office, prepared statement of ............... 50

Waxman, Hon. Henry A., a Representative in Congress from the State

of California, prepared statement of ........................................................... 40

Zavada, David M., Assistant Inspector General for Audits, U.S. Department of Homeland Security, prepared statement of .................................. 64

(1)

CODE YELLOW: IS THE DHS ACQUISITION

BUREAUCRACY A FORMULA FOR DISASTER?

THURSDAY, JULY 27, 2006

HOUSE OF REPRESENTATIVES, COMMITTEE ON GOVERNMENT REFORM, Washington, DC.

The committee met, pursuant to notice, at 10 a.m., in room 2154,

Rayburn House Office Building, Hon. Tom Davis (chairman of the

committee) presiding.

Present: Representatives Tom Davis, Waxman, Duncan, Gutknecht, Higgins, Ruppersberger, Porter, Kucinich, Platts, Watson,

Norton, Van Hollen, and Cummings.

Staff present: Keith Ausbrook, chief counsel; Jennifer Safavian,

chief counsel for oversight and investigations; Steve Castor, counsel, Rob White, communications director; Andrea LeBlanc, deputy

director of communications; Edward Kidd, professional staff member; John Brosnan, procurement counsel; Teresa Austin, chief

clerk; Michael Galindo, deputy clerk; Phil Barnett, minority staff

director/chief counsel; Karen Lightfoot, minority communications

director/senior policy advisor; Jeff Baran and Margaret Daum, minority counsel; Earley Green, minority chief clerk; and Jean Gosa,

minority assistant clerk.

Chairman TOM DAVIS. Good morning. The committee will come

to order.

No one thought that merging 22 disparate functions, personnel

systems and cultures into the new Department of Homeland Security would be quick or easy. But we did expect that by now critical

acquisition functions would be well integrated and well managed—

an efficient engine driving the Department’s evolving mission. Instead, through aggressive oversight, we have uncovered clear evidence of huge cost overruns, chronically lax contract management

and preventable vulnerability to waste, abuse and mismanagement.

In a very bipartisan effort here, the staff report provided to our

committee today documented large-scale systematic flaws in the

Department of Homeland Security’s acquisition management. A

fractured purchasing system is hobbling the Department’s ability to

meet core missions in border security, emergency management, information sharing and other key issues.

Now, in reaching these conclusions, we reviewed over 6,000

pages of documentation. Through a formal document request, the

committee obtained copies of audits, reports and other assessments

that cast doubts on contractor cost estimates, billings, accounting

and estimating systems in contract performance. In five separate

productions, DHS provided 196 unique oversight documents, 149 of

2

which were prepared by DCAA, the Defense Contract Audit Agency.

Throughout this effort, we worked with the ranking member and

his staff, and I want to commend my good friend and colleague,

Henry Waxman, for his persistence and constructive approach.

This is a textbook example of bipartisan oversight that gets results.

This committee has been concerned about DHS acquisition challenges for quite some time, initiating a GAO study as early as December 2003. The subsequent report, released in April 2005, confirmed many of our initial fears about acquisition dysfunction at

DHS. GAO found procurement responsibilities scattered throughout the Department, with no clear lines of authority, decisionmaking or accountability. The lack of trained and skilled acquisition professionals compounded DHS acquisition ills.

An alphabet soup of DHS elements: TSA, the Transportation Security Administration; CBP, the Customs and Border Protection

Bureau; ICE, the Immigration and Customs Enforcement Bureau;

FPS, the Federal Protective Service; FEMA, the Federal Emergency Management Association; and NDPO, the National Domestic

Preparedness Office, and others, must be supported by an enormous array of goods and services provided under contracts valued

at almost $10 billion a year. DHS buys everything from major information systems, cutting edge technologies and sophisticated

technical support services to mundane commodities like bottled

water and blue roof tarps.

These diverse and complex procurements are supported by a disjointed management structure that does not integrate the acquisition function across the Department under a single official with responsibility to manage and oversee the multi-million dollar enterprise.

That lack of overall accountability and control has spawned a sad succession of disastrous acquisitions. A $104 million TSA contract

for training airport screeners tumbled out of control, eventually

costing over $700 million. Poorly defined requirements resulted in

airport bomb detection machines that continually produce false

alarms. Billion dollar technology contracts have yet to deliver basic

telecommunications infrastructure to many of our Nation’s airports.

And as the Katrina Select Committee found, FEMA lacked the scalable contracting and logistics capacity needed in the wake of catastrophic loss.

Just last week, GAO concluded a weak control environment exposed the Department to rampant abuse in the use of purchase

cards. For want of final purchase card, up to 45 percent of purchase cards transactions during last year’s hurricane relief efforts

lacked proper authorization.

This morning, we are going to focus on several troubled DHS acquisitions as cautionary tales and guideposts for reforms. What lessons should be gleaned from troubled TSA contracts to assess and

hire airport passengers screeners, screen luggage at commercial

terminals and upgrade airport computer networks? What would

have improved Customs and Border contracts for radiation detection equipment, for the Integrated Surveillance Intelligence Systems or the America’s Shield Initiative? We will ask what needs to

be done to create a coherent organization within DHS that will faVerDate 11-MAY-2000 10:18 Oct 19, 2006 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 D:\DOCS\29933.TXT HGOVREF1 PsN: HGOVREF1
3

cilitate successful management of the successful acquisition function.

DHS has been tasked with critical missions subject to hard deadlines. Addressing our myriad vulnerabilities requires the Department to acquire complex, high-risk state-of-the-art solutions likely

to have problems even under an ideal management structure. But

with so much at stake, and so little room for error, the size or the

difficulty of the challenge can be no excuse for a failure to put an

effective management structure in place.

[The prepared statement of Chairman Tom Davis follows:]

4

5

6

Chairman TOM DAVIS. At this time, I would ask unanimous consent to submit into the record a bipartisan staff report entitled

Waste, Abuse and Mismanagement in Department of Homeland Security Contracts, and a summary of the DCAA audits prepared by

staff.

Without objection, so ordered.

[The information referred follows:]

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

Chairman TOM DAVIS. Before I recognize our distinguished ranking member, let me just say, this Congress either tonight or tomorrow is going to go through a lengthy discussion and debate over

legislation passed out of this committee last week that takes a look

at all Federal programs across the board and should they be there,

can we effectively combine them, and the like. The reaction of Government so many times when we have to lose weight or cut budgets is to cutoff fingers and toes.

But what we see here is that the fat in Government is layered

throughout the bureaucracy in the way we do business. I would

gather that there are billions of dollars in losses and just general

procurement and business management practices where you have,

I think, far greater losses than you had just cutting programs, Mr.

Waxman. That is the tragedy of this as we look at it, is that we

are just not running as efficiently as we should.

Again, I want to thank you and your staff for helping put this

together. I look forward to your opening remarks. Thank you.

Mr. WAXMAN. Thank you very much, Mr. Chairman. I want to

thank you for holding this important hearing to examine homeland

security contracts. I think you are absolutely right, this committee

has operated in a bipartisan way in developing this report that we

are putting out today and taking seriously the job that we have before us.

With literally billions of dollars and the security of the American

people at stake, congressional oversight is urgently needed and

long overdue. Since the attacks of September 11, 2001, the Department of Homeland Security and its predecessor agencies have gone

on a spending spree. In 2003, the Department entered into 14,000

contracts worth $3.5 billion. By 2005, the Department’s spending

on contracts swelled to 63,000 contracts worth $10 billion.

Our Nation has pressing security needs. If the money were well

spent, it would be a good investment. But the problem is, hundreds

of millions of dollars are being squandered. The taxpayers are

being taken to the cleaners and our security is not being protected.

Boondoggle contracts may enrich private contractors, but they

drive us deeper into debt and leave our borders unprotected and

our ports and airlines vulnerable to attack.

Today, the chairman and I are releasing a new report assessing

the administration’s record on homeland security contracts. The report describes a pattern of reckless spending, poor planning and ineffective oversight that is wasting taxpayers’ dollars and undermining our homeland security efforts. The report is entitled, ‘‘Waste,

Abuse and Mismanagement in Department of Homeland Security

Contracts.’’

There are key findings in our report. First, we are spending more

and more each year on Homeland Security contracts. In just the 3-

years since the creation of the Department of Homeland Security,

contract spending has increased 189 percent from $3.5 billion in

2003 to over $10 billion in 2005. Homeland Security spending is

growing 31 times faster than inflation. It is even growing 11 times

faster than the rest of our ballooning Federal budget.

Second, most of the new spending is occurring through non-competitive contracts, many of them no-bid contracts. In the 3-years

since the creation of the Department of Homeland Security, the

38

dollar value of non-competitive contracts has grown by an astronomical 739 percent. Last year over half of the Department’s contract spending was awarded without full and open competition.

Competition protects the taxpayers by driving prices down and

quality up. But the administration squelches full and open competition so it can offer lucrative deals to hand-picked contractors.

Third, the report finds that there is no effective system of contract management at the Department of Homeland Security. There

is little contract planning and only meager contract oversight.

Fourth, the costs to the taxpayers are enormous. The report identifies 32 Federal Homeland Security contracts worth $34.3 billion

that have experienced significant waste, fraud, abuse or mismanagement. In February 2002, the Transportation Security Administration awarded $104 million contract to hire airport screeners. In less than 1 year, the contract ballooned to $741 million, yet

the rate at which screeners detected weapons never improved and

Government auditors identified hundreds of millions of dollars in

unjustifiable charges.

Several months later, TSA awarded a $1.2 billion contract to

Boeing to install and maintain luggage screening equipment at airports. But the baggage screening equipment never worked right.

GAO says the taxpayer will now have to spend an additional $3 billion to $5 billion to upgrade to more efficient machines. Unfortunately, I can go on and on and on.

As described in the committee’s bipartisan report, the Department has botched the contracts to upgrade airport computer networks, detect nuclear devices and create a virtual border. What is

most inexcusable is that no one in the executive branch seems to

care. The same mistakes happen over and over again. This administration treats the taxpayer as its own piggy-bank.

A striking example is the Department’s new Secure Border Initiative, which is its new high-tech plan to protect the border. I

want to read to you the request for proposal, also called the RFP,

that the administration released earlier this year. The RFP is a remarkable document, because it is devoid of any substance. Instead

of identifying specific Government needs, it takes the fairy godmother approach to the immensely difficult task of protecting our

border.

Here is the only substantive requirement in the RFP. The Department wants private contractors, not Government officials, but

private contractors, to figure out ‘‘highly reliable, available, maintainable and cost-effective solutions to manage, control and secure

the border, using the optimal mix of proven, current and next generation technology, infrastructure, personnel, response capabilities

and processes.’’ In case the contracting community missed the

point, DHS Deputy Secretary Michael Jackson told potential bidders for the new Secure Border Initiative, ‘‘We are asking you to

come back and tell us how to do our business.’’

Well, that is not good governing, that is not planning. It is utterly incompetent, and it is going to cost the taxpayers billions. Mr.

Chairman, in closing, I want to commend you for your leadership.

You have approached this issue with bipartisanship and put the interests of the taxpayers first. This committee is doing an important

39

public service by exposing the astronomical levels of wasteful

spending at the Department of Homeland Security.

[The prepared statement of Hon. Henry A. Waxman follows:]

40

41

42

43

44

45

46

Chairman TOM DAVIS. Mr. Waxman, thank you very much.

The gentleman from Tennessee, Mr. Duncan.

Mr. DUNCAN. Thank you very much, Mr. Chairman, and thank

you for calling this hearing on this very important report. You and

the ranking member have both given outstanding statements and

have mentioned several things that I would have mentioned.

But I can tell you that just a few days ago, the Department of

Homeland Security came out with a terrorist target list that immediately or very quickly became a joke around the entire Nation. It

had 8,591 sites listed in Indiana, including the Amish Country Popcorn Factory, but only 3,212 sites in California.

But what got my attention, it had in my district the Sweetwater,

Tennessee Flea Market. And I can assure you, the Department of

Homeland Security became the laughingstock of Sweetwater and

east Tennessee for a couple of days. That was a total waste. They

might as well have just put out a report saying that any place that

more than two or three people are gathered was a target list.

Now we get this report which is not really a laughing matter.

Anybody who is not really sickened or horrified by the things that

are in this report cannot legitimately call themselves a conservative Republican or a fiscal conservative in any way. The chairman

and the ranking member have already mentioned the $104 million

TSA contract that went to over $700 million to train airport screeners, the contracts awarded without competition that increased 739

percent between 2003 and 2005.

The report has so many other things, the two TSA employees

that used Government purchase cards to buy $136,000 worth of

personal items, $297 million of questionable or improper charges by

NCS Pearson on a contract to hire airport screeners. The GAO

found that FEMA cannot locate 22 printers and 2 GPS units worth

$170,000, as well as 12 boats the agency bought for $208,000. It

just goes on and on and on.

The Department, if the top people of the Department are not embarrassed by this, something is wrong. Something has to be done,

and I think this hearing is the start of it. I can tell you, if these

types of things were going on in a private company, heads would

roll, people would be fired, action would be taken. So I eagerly

await to see what is going to be done by the Department in response to what is a scandalous report of waste, fraud and mismanagement in this contracting by the Department of Homeland

Security.

Thank you very much, Mr. Chairman.

Chairman TOM DAVIS. Thank you very much.

Any other Members wish to make opening statements? Mr. Gutknecht.

Mr. GUTKNECHT. Just briefly, Mr. Chairman. I just want to congratulate you and Ranking Member Waxman, because if there is

one area where Congress has sort of let its guard down, it is in

terms of the oversight responsibility we have. Frankly, I think

Americans deserve better answers that they have received. I think

this hearing is a very important step in the right direction.

I yield back.

Chairman TOM DAVIS. Thank you very much.

47

Members will have 7 days to submit opening statements for the

record.

We are now going to recognize our first panel. We have Mr. Michael Sullivan, who is the Director, Acquisition Sourcing and Management, at the Government Accountability Office. Thank you for

your work. Mr. David Zavada, who is the CPA, Assistant Inspector

General’s Office of Audits, Department of Homeland Security.

Thank you for being here. And Elaine Duke, the Chief Procurement

Officer at the Department of Homeland Security. She is accompanied by Mr. John Ely, who is the Chief Procurement Officer,

Customs and Border Protection Service at the Department of

Homeland Security, and Mr. Richard Gunderson, the Acting Assistant Administrator for the Office of Acquisition at the Transportation Security Administration at the Department of Homeland Security.

It is our policy to swear everyone in before they testify. So if you

would rise with me and raise your right hands.

[Witnesses sworn.]

Chairman TOM DAVIS. Thank you very much.

Mr. Sullivan, we will start with you and then we will move to

Mr. Zavada and then to Ms. Duke. I thank you all again for being

with us today. Your entire statement is in the record. I know you

have a lengthy analysis you have done. That is all in the record.

So if we could try to keep to 5 minutes. I am going to apologize,

because at about 10 of, I have to leave for a few minutes to go over

to the Senate and introduce two nominees from my district that are

up, and then I will be back for questions. But I will want to get

my first questions in.

Go ahead and start, Mr. Sullivan.

STATEMENTS OF MICHAEL J. SULLIVAN, DIRECTOR, ACQUISITION AND SOURCING MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; DAVID M. ZAVADA, ASSISTANT INSPECTOR GENERAL FOR AUDITS, U.S. DEPARTMENT OF

HOMELAND SECURITY; AND ELAINE C. DUKE, CHIEF PROCUREMENT OFFICER, U.S. DEPARTMENT OF HOMELAND SECURITY, ACCOMPANIED BY, JOHN ELY, EXECUTIVE DIRECTOR OF PROCUREMENT FOR CUSTOMS AND BORDER PROTECTION AND RICHARD GUNDERSON, ASSISTANT ADMINISTRATOR FOR ACQUISITION, TRANSPORTATION SECURITY

ADMINISTRATION

STATEMENT OF MICHAEL J. SULLIVAN

Mr. SULLIVAN. Thank you, Mr. Chairman, for the opportunity to

appear here today to update you on GAO’s work on the Department

of Homeland Security’s acquisition policies and practices.

As you know, we designated the establishment of the Department and its transportation as high-risk, and pointed out that not

effectively addressing management challenges could have serious

consequences for national security. My testimony today is based on

recent GAO work concerning various aspects of the Department’s

acquisitions. I will address areas where the Department has had

some success and where it still faces challenges.

48

The Department has some of the most extensive acquisition

needs within the U.S. Government. In fiscal year 2005, it obligated

almost $17.5 billion to acquire a wide range of goods and services.

Its acquisitions included sophisticated screening equipment, technologies to secure the Nation’s borders, trailers to meet the housing

needs of hurricane victims and the upgrading of the Coast Guard’s

entire offshore fleet of service and their assets.

In March 2005, we found and reported on two acquisition areas

where the Department had achieved some success. DHS’s organizations collaborated to leverage buying power for various goods and

services such as office supplies, boats, energy and weapons, and recorded about $14 million in savings across the Department.

Also, the Department has had success with its small business

program, which is felt across DHS. It recorded that about 35 percent of its contracting dollars went to small businesses, exceeding

its goal of 23 percent.

Much more must be done, however. In 2005, we also reported

that DHS’s efforts to create a unified accountable acquisition organization had been hampered by policies that create ambiguity

about who is accountable for acquisition decisions. Further, we

found that acquisition organizations across DHS were still operating in a disparate manner, with oversight left primarily up to each

individual organization.

Today, DHS continues to face challenges in these areas. For example, the policy directive intended to integrate the acquisition

function still relies on a system of dual accountability for acquisitions between the chief procurement officer and the heads of each

DHS component, and still does not apply to the U.S. Coast Guard

and the Secret Service.

Also, although the chief procurement officer has recently issued

guidance providing a framework for acquisition oversight and

added five staff to carry it out, implementation has been limited.

We have work ongoing in this area now and will be updating the

status of this policy in the near future.

Finally, staffing shortages in the Office of Procurement Operations, which handled about $4 billion of the Department’s contracting activity last year, led this office to rely on outside agencies

for contracting support for about 90 percent of its obligations, often

for a fee. The Office also did not have adequate internal controls

in place to effectively oversee this interagency contracting.

There has been some improvement in this area recently. The Office recently increased its staffing level from 42 to 120, and the

interagency agreements have now fallen from 90 percent to 72 percent of the Department’s obligations. However, it still lacks internal controls to oversee these interagency agreements.

To protect its major acquisition investments, DHS has put in

place an investment review process that adopts best practices to

help the Department reduce risks. However, the process does not

include two critical management reviews: the first, to reduce technological risk by helping to ensure that the right technologies and

funding will be ready to develop the program or product prior to

beginning; and second, to reduce design risk by hoping to make

sure the product or program’s design will perform as expected before moving into mass production.

49

In addition, the Department’s policy does not require critical information to be delivered at program reviews for these major investments. For example, before a program is approved to begin,

DHS has no policy to require cost and schedule estimates for the

acquisition based on knowledge from preliminary information or

designs. Our prior reports on large DHS acquisition programs, such

as TSA’s Secure Flight program and the Coast Guard’s Deepwater

program have highlighted the need for improved oversight.

In closing, I believe that DHS has taken some strides toward

putting in place a more effective acquisition organization. However,

they are not enough to ensure that the Department is effectively

managing the acquisition of the multitude of goods and services it

needs to meet its mission. More must be done to fully integrate the

Department’s acquisition function, pave the way for the chief procurement officer’s responsibilities to be effectively carried out, and

put in place internal controls needed to manage interagency agreements, activity and large, complex investments. DHS’s top leaders

must address these challenges or continue to exist with a fragmented acquisition organization that can only provide stop-gap, ad

hoc solutions.

Mr. Chairman, this concludes my statement.

[The prepared statement of Mr. Sullivan follows:]

50

51

52

53

54

55

56

57

58

59

60

61

62

Chairman TOM DAVIS. Thank you very much.

Mr. Zavada, thank you for being with us.

STATEMENT OF DAVID M. ZAVADA

Mr. ZAVADA. Thank you. Good morning, Mr. Chairman, Ranking

Member Waxman and members of the committee. Thank you for

inviting me to testify before this committee today on DHS acquisitions.

We have reported acquisition management as a major management challenge for the Department of Homeland Security. DHS

must have an acquisition management infrastructure in place that

allows it to effectively oversee the complex and large dollar procurement critically important to achieving the Department’s mission. We have also completed a number of reports in this area. I

will focus my comments today on some common themes that have

emerged from our work.

Acquisition management is not just the wording of a contract,

but an entire process that begins with identifying a mission need

and developing a strategy to fulfill that need through a thoughtful

and balanced approach that considers cost, schedule and performance. The Department must develop a cadre of skilled program and

acquisition personnel, as well as robust business practices and information systems to effectively meet DHS’s schedule demands and

complex program objectives.

Expediting program schedules and contract awards necessarily

limits time available for adequate procurement planning and developing of technical requirements, acceptance criteria and performance measures. The urgency and complexity of the Department’s

mission, coupled with the Department’s current program of procurement management capabilities, creates an environment in

which many programs have undertaken high-risk acquisitions.

Common patterns that we have seen in our reviews are the dominant influence of meeting an accelerated schedule, poorly defined

requirements and inadequate oversight. This can lead to higher

costs, schedule delays and systems that do not meet mission objectives.

DHS is beginning to improve its acquisition management capability. In a 30 day acquisition management assessment we completed for Secretary Chertoff in 2005, we made recommendations to

DHS to expand procurement and ethics training, create and staff

an organization to develop program management policies and procedures, and ensure sufficient procurement staff in the Bureau and

at the Department level. DHS has concurred with each of these

recommendations and has taken steps to implement them.

The urgency and complexity of the Department’s mission will

continue to demand rapid pursuit of major investment programs.

While DHS continues to build its acquisition management capabilities, the business of DHS goes on and major procurement continue

to move forward. One of those major procurement is SBInet.

Our review of SBInet is underway, but based upon our past

work, we believe CBP faces some tremendous challenges and risks

in pursuit of SBInet. These challenges and risks include one, an expedited time. The Department has set a tight deadline of September 2006, requiring CBP to press hard to meet the deadline while

63

mitigating risks and avoiding mistakes. To mitigate these risks,

CBP must have an institutional capacity to plan and implement a

new program, administer this complex contract and establish cost,

schedule and performance controls.

Second, defining operational or contract requirements. High-risk

acquisition strategies call for mitigators and controls. The use of a

statement of objectives type of contract is made risky by broadly

defined performance requirements and limited program management capabilities. Translating the Border Patrol’s operational requirements effectively into contract requirement entails thoroughly

identifying the problems with status quo border control, communicating that problem to industry, negotiating a best value solution

and applying measures of performance and effectiveness to gauge

success.

Third, building an organizational oversight capacity. Building a

program office entails not only recruiting and contracting for qualified acquisition managers and technical experts, but also establishing robust business processes. The SBInet acquisition strategy calls

for scoping a series of task orders over a number of years, entailing

vigilant contract administration.

Acquisition management will continue to be a priority area for

the OIG. We plan a proactive approach to identify the risks that

we see and provide recommendations to help the Department avoid

wasteful spending and obtain the right equipment and services to

achieve DHS’s mission.

Mr. Chairman, this concludes my prepared remarks. I would be

happy to answer any questions.

[The prepared statement of Mr. Zavada follows:]

64

65

66

67

68

69

70

71

72

73

74

Chairman TOM DAVIS. Thank you very much.

Ms. Duke, thank you for being with us.

STATEMENT OF ELAINE C. DUKE

Ms. DUKE. Good morning Chairman Davis, Ranking Member

Waxman and members of the committee. Thank you for the opportunity to appear before you to discuss the Department of Homeland

Security acquisition program.

I am a career executive and have spent my 23 years of public

service as an acquisition professional. On January 31, 2006, I was

selected as the Department’s Chief Procurement Officer.

Accompanying me today are Mr. John Ely and Mr. Rick Gunderson. Mr. Ely is the Executive Director of Procurement for Customs

and Border Protection. Mr. Gunderson is the Assistant Administrator for Acquisition for the Transportation Security Administration.

My two main priorities as the DHS Chief Procurement are to:

No. 1, build the DHS acquisition work force; and No. 2, enhance

acquisition planning. These priorities, detailed in my written testimony, are designed to mitigate the challenges the Department

faces due to significant increases in contract spending, shortages of

acquisition personnel and mission urgency driving aggressive

schedules.

Since our establishment in 2003, the Department has seen significant growth in its acquisition program. In less than 3 years, the

Department has grown from $6.7 billion to over $17 billion in obligated contract dollars in fiscal year 2005, with 66,000 contract actions with 15,000 prime contractors.

The Chief Procurement Officer has initiated staffing solutions to

resolve personnel shortages and build in-house capacity to handle

contracting actions. Balancing the appropriate number of DHS contracting staff with the growth of the contracting requirements has

been a challenge. My office has taken the lead department-wide to

create a centralized recruiting system for contracting personnel

within DHS components and enhance the DHS Acquisition Fellows

program, targeting recruitment efforts to recent college graduates.

As a new department, it has been a challenge to grow DHS, since

our mission requires the infrastructure to be built while simultaneously meeting operating requirements. But despite the challenge,

the Department has had significant accomplishments in securing

the vital infrastructure, products and services that ensure the security of the American public.

Each initiative is guided by an acquisition process that includes

three key factors: performance, cost and schedule. These factors

comprise the major elements of procurement decisionmaking and

valuation. Balancing performance cost and schedule requirements

is challenging for all agencies, and is especially challenging for

DHS, given its mission and current contracting staffing levels.

When necessary due to urgency of mission, DHS has entered contracts for goods and services in short periods of time to provide immediate relief to meet pressing humanitarian needs and protect life

and property.

Since DHS operation is in a rapid acquisition environment, it

must prioritize its acquisition planning beyond what is generally

75

expected of a non-emergency response agency to ensure that decisions are made properly and timely. It is critical that DHS continue to develop an acquisition system that includes professionals

in all disciplines forming an acquisition team, including program

management.

DHS has initiated a program management counsel to build this

necessary cadre of professionals in the Department. We want to

make sure we have accountability at DHS, so that we are responsible stewards of the public funds. But we want to make sure that

we can act quickly to save lives.

The challenges DHS has experienced since its inception have

tested our capabilities, but have also demonstrated our resolve,

strengthened our determination, increased the urgency of our efforts and underscored a solemn responsibility that all of us may

face.

In closing, I would like to express my gratitude to Chairman

Davis and Mr. Waxman for working with DHS to develop better

business practices at the Department. I look forward to continuing

to work with the committee on developing solutions to current and

future issues, including the ones we are discussing today.

I am glad to take any questions and thank you.

[The prepared statement of Ms. Duke follows:]

76

77

78

79

80

81

82

83

84

85

86

Chairman TOM DAVIS. Thank you very much.

Mr. Ely and Mr. Gunderson, do you want to make brief statements?

Mr. ELY. I just want to say good morning, Chairman Davis, to

you and Ranking Member Waxman and the distinguished members

of the committee. I am John Ely, that has been said before, and

I am the Chief Procurement Officer of Customs and Border Protection. I just want to let you know that I am pleased to be here today

to answer any of your questions.

Thank you.

Chairman TOM DAVIS. Thank you.

Mr. GUNDERSON. Just a couple of minutes, please.

Chairman TOM DAVIS. Sure.

Mr. GUNDERSON. Chairman Davis, Congressman Waxman and

members of the committee, thank you for the opportunity to discuss the Transportation Security Administration’s acquisition and

contracting programs. As the Assistant Administrator for Acquisition, I provide direction and oversight of TSA’s acquisition program, including the award and administration of contracts, grants

and financial assistance. Since TSA was enacted, it has obligated

more than $2 billion per year for supplies, services and financial

assistance in support of various TSA missions.

As you are aware, through its enacting legislation, TSA was

faced with significant mission challenges. To meet those challenges,

TSA awarded several large contracts to industry teams in an abbreviated time period with minimal staffing. Major contracts included the purchase, deployment and maintenance of security

screening equipment at more than 440 airports, the outfitting of

TSA operations with the necessary information technology equipment and the recruitment, assessment and hiring of screeners.

While these contracts resulted in the successful accomplishment

of the missions, they came at a higher cost than originally estimated. The increases were due to several factors, but changing requirements was the primary driver. As a result, the final cost of

these contracts should not be compared to the original amounts

without considering the original work performed. These major contracts, awarded in the stand-up phase of TSA, have been replaced

with new contracts that implement a more streamlined approach,

greater opportunities for small businesses, and a greater emphasis

on performance-based measures.

For example, maintenance of our security screening equipment

was originally accomplished through a single large integrator contract but has since been replaced with several contracts that have

fixed price terms and eliminated unnecessary layers of contractor

support. As a result, TSA has transferred cost risks to industry and

lowered the maintenance costs per machine.

I will continue to strengthen the acquisition program at TSA

through the implementation of policies and procedures targeted to

provide greater effectiveness and oversight, implementing new

business strategies to decrease costs and increase performance, and

building a stronger acquisition work force.

Thank you for the opportunity to testify before the committee,

and I would be pleased to address any questions you may have.

87

Chairman TOM DAVIS. Thank you. Let me start the questions,

because I am going to have to run.

I understand there are changes in scopes in contracts and that

is what causes them to grow on many occasions. It is not just always that they bid low, do a buy-in and then try to come back. Of

course, one of the difficulties is when you bid the contract out originally and it comes in at $104 million and then grows to $700 million, it is not competitive all the way through. You might have gotten a different outcome had you known what you wanted in the

first place. Is that a fair comment?

Mr. GUNDERSON. Yes.

Chairman TOM DAVIS. I had been in Government contracting for

15 years before I came to Congress. I was the general counsel for

a billion dollar company that did a lot of Government contracts. I

understand where it goes right and where it goes wrong.

The other thing that really alarmed me, just looking here on the

macro, was the number of contracts that were awarded that were

sole source, without full and open competition. It seems to have exploded here. Not just in your agency, but I am saying, across the

Department.

Now, I wouldn’t be sitting here complaining about that, because

I understand the need to do that on occasion, you get a unique

technology, you need it quickly, you can go out and respond to an

unsolicited proposal or whatever. And we even set up something in

the Department of Homeland Security called Other Transactions,

the OT, where people who aren’t used to selling to the Government

can come in and do it. So I don’t think it is inherently bad, but

when you are getting terrible results like this, we have to ask the

question, and assume that maybe that is part of the problem.

Ms. Duke, do you want to address that?

Ms. DUKE. I would agree with you, Mr. Chairman, competitive

contracting is the preferred way to go. We did have a dip in our

competitive numbers, primarily due to the Katrina contracting in

FEMA. Our numbers were at about 76 percent competitive at the

onset of the hurricane season.

What we are doing to counteract that is putting the contingency

contracts in place, in FEMA specifically, and improving our planning so we have the contracts competitively.

Chairman TOM DAVIS. But let me just add, to get back to

Katrina, as you know, I was the author of the investigative report.

One of the problems we found there is that we were giving out

these large contracts, contingency contracts, and at the end of the

day we didn’t make use of locals, there were a lot more efficient

ways we could have done this downstream. It really wasn’t thought

through. We gave it to these big companies and they add surcharge

after surcharge as it moves on down. You get the local guys doing

the work, but you have a huge markup along the line.

I think we have learned, hopefully, we have learned our lessons

from that.

Ms. DUKE. Yes, we have. We have national strategies for immediate response for regional or local. But we also have regional programs in place, for instance, the maintenance and deactivation of

trailers is all being done now by local contractors in the Gulf region. So we do agree with you on that strategy.

88

Chairman TOM DAVIS. We got a letter today from FEMA on the

trailers. I don’t know if anybody can answer this, but basically they

are telling us something different from what the IG has said.

FEMA puts out this fact sheet. They say, FEMA is unaware of a

termite problem in any of the 95,000 trailers that are currently deployed along the Gulf Coast, with the exception of just one report.

A random sample of 200 trailers also negative results for termites.

My understanding is, and I haven’t been there, that at the site

in Arkansas where we have stored literally thousands of trailers

that we have a number of termite-infested trailers there. Can anybody shed any light on that?

Ms. DUKE. I do know that in the Gulf region termites are an

issue, and there is a quarantine in 11 of the parishes for Formosan

termites. FEMA has procedures in place to ensure that as those

trailers are moved in the Gulf region that we have the appropriate

compliance with the Louisiana——

Chairman TOM DAVIS. Well, here is what I want to ask, and if

you don’t have the answer today, I would like to send a couple of

people down to go through those trailers that are sitting down

there in Arkansas. We purchased a lot of trailers that it doesn’t

look like will ever be used. I understand sometimes contingency

planning and storage and things go awry and that appears to have

happened in this case.

But my question is, are any of those trailers that we have stored

for ‘‘future use’’ that American taxpayers have paid for, have we

stored them in a way down there that they are termite-infested?

If you can’t answer that, I would like you to just give us a straight

answer.

Ms. DUKE. I do not have information about the stored trailers in

Arkansas.

Chairman TOM DAVIS. Could you please check on that?

Ms. DUKE. Yes.

Chairman TOM DAVIS. That again would just be—I don’t want to

dwell on it, but just go back and check that, because we have information that they are. We would be happy to send an inspector

down. I know Members have been denied that right. Mr. Waxman

and I and Mr. Duncan would be, we just want to see what has happened, what has gone wrong here. Maybe there are better places

to store them. We understand what happened with Katrina, it is

the largest reported storm in history. And the response just was

not as efficient as it might have been had we been more prepared

and seen it coming and everything else, so I don’t want to dwell

on that.

I want to ask you just a couple of other questions. Do you have

enough trained procurement personnel, or do you need more?

Ms. DUKE. We need more. We have an increase coming in the

current 2007 budget of about 200 additional. We are working toward needing even more over time. As you know, Mr. Chairman,

our spending is increasing. We increased 35 percent just between

2004 and 2005.

Chairman TOM DAVIS. Well, you are darned if you do and darned

if you don’t. I remember when we started up, contractors were

lined up, when is Homeland Security going to start coming out

with all these contracts. I think the philosophy at the top was, we

89

are going to wait until we know what the mission is, what our requirements are before we go out and spend money. I think on that

stage we did a good job.

The problem is, once they came out, some of the oversight and

everything else, and particularly emergency response has just been

a little sloppy. My concern is, a procurement officer in the Government is worth their weight in gold. If we can buy what we want

and get the best value for the taxpayer, we are going to save tens

of billions of dollars annually. We don’t spend enough time doing

that. It is not your fault, Ms. Duke, but Government-wide, this just

has not been given the appropriate attention. In fact, some of it has

been tied from Congress. We have Members who think, to save

money, we are going to cut procurement officers. And that makes

it very difficult to give appropriate oversight to contracts.

But more importantly, that contracting officer is not always in

touch with what the agency needs, and doesn’t always use the best

vehicle. I think Mr. Waxman and I would say, competitive vehicles

are usually best, because it offers you an array of choices and competition tends to bring costs down for the taxpayers.

I don’t want the agencies to come up here and say we haven’t

given them enough resources and that we are asking you to do

more with less. I understand you are a career employee that they

have sent up here today to answer for some of these things. But

these mistakes start at the top where they have just not kept their

eye on the ball, haven’t committed the resources here. Yet TSA in

particular, we gave them particular flexibilities in hiring that no

other agency in Government has to try to get to this.

And I just think on the procurement shop, from this committee’s

perspective, we don’t have jurisdiction over all of the funding and

everything else. We need to know what you need. Because one

huge cost overrun or $100 million ends up costing more than hiring

25, 100 good people that could have overseen this thing and done

it right. Is that a fair comment?

Ms. DUKE. It is. And as we prepare our fiscal year 2008 budgets,

I am looking at each’s component’s budget and how they are budgeting for acquisition work force members, and am taking a consolidated Department look at that to make sure that we are putting

into our budget the right amount of contracting basics.

Chairman TOM DAVIS. How much buying do you do off the GSA

schedules?

Ms. DUKE. I don’t have an exact number, but a considerable

amount.

Chairman TOM DAVIS. Ballpark?

Ms. DUKE. If I had to guess—we could get you an exact number.

But I would say of dollars, potentially up to 30 percent.

Chairman TOM DAVIS. When you give the schedules, do you usually go to two or three groups to shop around, right?

Ms. DUKE. Yes.

Chairman TOM DAVIS. It is not just one. How much do you do

off of GWACS, off of wider contracts? What percent, ballpark?

Ms. DUKE. Mostly in the IT area, like integrated wireless. I

would say in IT dollars, a lot of those vehicles are new, so less, 10,

15 percent maybe.

90

Chairman TOM DAVIS. OK. I have a lot of other questions, but

I have to run over to the Senate, so I am going to give Mr. Waxman a few minutes, and I am going to turn the Chair over to Mr.

Duncan.

I appreciate your being here. This is a serious, serious problem,

and it is a black eye for the administration to have these things.

We just need continued oversight. And don’t hesitate to ask. We

don’t want to just keep you out there, and if you are not getting

the tools you need, we need to know about it. But the oversight

that has come from the top here has ended up costing us billions

of dollars that we could have better spent on a lot of other items.

We will go over and fight on the floor over $20 million or $10 million sometimes on a program or an earmark or something like that,

while billions get wasted just in the way we are doing business.

That is what we are trying to get at today, and I appreciate your

being here.

Mr. Waxman.

Mr. WAXMAN. Thank you, Mr. Chairman.

One of the frustrating parts of all of this to me is how this administration and its approach to Federal contracts is that no one

seems to learn from their mistakes. We have seen incredible waste

in Iraq. We have seen the same thing in response to Hurricane

Katrina and now we see it at the Department of Homeland Security.

A good example is how this administration approaches border security. Under a deeply flawed contract called Integrated Surveillance and Intelligence System [ISIS], the Customs and Border Protection Office wasted enormous sums on a high-tech surveillance

system that never worked. Now, instead of learning from these

mistakes, the Department wants to enter into an even bigger contract called the Secure Border Initiative, which will cost taxpayers

$2 billion. In my questions in this round, I want to focus on these

two contracts.

Under the ISIS contract, over $400 million was spent on thousands of cameras and sensors to monitor our borders. Most of this

money was spent during the past 5 years. The idea was that this

would be a high-tech, state-of-the-art surveillance system for protecting our borders. Mr. Zavada, the Inspector General examined

the ISIS contract and the equipment purchased under it. I would

like to ask about your findings. Weather conditions on the border

can be demanding. How well did the cameras function when exposed to snow, ice, humidity and extreme temperatures?

Mr. ZAVADA. We reported problems with the functioning of the

equipment in our report.

Mr. WAXMAN. They malfunctioned, in other words?

Mr. ZAVADA. Yes. Some issues with the operation of the equipment.

Mr. WAXMAN. I understand that another problem was power outages. Did the cameras experience this problem?

Mr. ZAVADA. I am not aware of that.

Mr. WAXMAN. What we found out was that even if the cameras

systems were working, I understand that they didn’t detect movement automatically. Instead, the Border Patrol officials had to be

91

monitoring the cameras at all times, which rarely happened, is that

right?

Mr. ZAVADA. I believe that was the case.

Mr. WAXMAN. When you took all these factors into account, what

did you conclude? Was the ISIS system an effective system?

Mr. ZAVADA. I think from a contract management standpoint, we

found problems with the way that the program managers managed

that contract. There were communication problems, that was a contract that GSA was the contracting officer for that. What we reported in our report was that there were communication issues between the Border Patrol program people and the GSA contracting

officers that inhibited effective program management.

Mr. WAXMAN. The taxpayers spent $400 million on this system,

which didn’t work. Even if the cameras had worked, they only covered 5 percent of the border, leaving 95 percent unprotected. This

hardly sounds like a dependable state-of-the-art equipment.

Mr. Ely, do you agree that this equipment was inadequate?

Mr. ELY. Yes, sir, but I would like to qualify that with a little

bit of personal experience. I have been down on the border and I

have watched the cameras and sensors. It is interesting to see that

it does expand the capability of Border Patrol agents to keep an

eye on particular geographical areas.

I did study the ISIS situation. You are correct with many of the

things that you say. But I would like to swing back to the contract

management issue. That is a gigantic issue, not just in Homeland,

but I believe in Government, that we think we are there when we

sign a contract, but the delivery is the really important part. We

have to manage these carefully.

Border Patrol was working through GSA, GSA is not what I

would call a ‘‘family member’’ when it comes to managing contracts. They work hard, they do a good job. But they are not inhouse procurement experts.

Mr. WAXMAN. Well, let me go through this issue, because auditors for the General Services Administration Inspector General concluded that the dismal oversight of this program placed taxpayers’

dollars and national security at risk. Rather than learn from this

mistake, DHS officials seem poised to repeat them. Because in

March of this year, DHS asked contractors for proposals for a new

Secure Border Initiative [SBI]. It will be a $2 billion Federal contract to design, build, test and operate a massive border security

system.

Here is the only requirement DHS established in its request for

proposals. DHS wants ‘‘highly reliable, available, maintainable and

cost-effective solutions to manage, control and secure the border,

using the optimal mix of proven, current and next generation technology, infrastructure, personnel, response capabilities and processes.’’ Mr. Zavada, in your opinion, does that adequately define

technical and cost requirements?

Mr. ZAVADA. In terms of SBI, we have, based upon the past work

that we have done, we have identified three risk areas related to

that contract. The first one is the accelerated schedule. Certainly

the accelerated schedule to meet the September deadline, combined

with the program management capabilities, as they stand, is a potential risk area.

92

Mr. WAXMAN. Do you think it is a problem that it is such a vague

description of what is needed to create this program?

Mr. ZAVADA. That was the second risk area that we pointed out.

The contract objectives in the past, in our past reports we pointed

out that broad contract objectives can be problematic and have created issues in other contracts.

Mr. WAXMAN. Mr. Sullivan, do you agree, this $2 billion contract

rests on deeply flawed contracting philosophy. In January, Secretary Michael Jackson told potential bidders for SBI, we are asking you to come back and tell us how to do our business. That is

incredible. There is no plan. There is no attempt to do the hard

thinking about what needs to be done to secure our borders. Instead, DHS is outsourcing the job of Government to private contractors.

What is your view on that?

Mr. SULLIVAN. It is interesting, because one of the reasons I am

here testifying today for GAO is the work that I have done in the

area of the Department of Defense and some of the major acquisitions that it has to make for weapons systems. In doing the work,

I did the work looking at DHS’ major investments and some of the

strategic sourcing and things that I talked about.

There are so many similarities, it seems to me, including the cost

schedule and performance outcomes that I hear, in the Department

of Defense I would say that there are very similar problems. The

requirement setting process at both the strategic level and at a tactical level for a specific weapons system is flawed, very similar to

what Mr. Zavada explained for the DHS.

Mr. WAXMAN. It seems that the Department is asking private

contractors to tell the Department what it needs, rather than the

Department defining its own needs. It doesn’t make sense to me,

and I would be curious whether it makes sense to you, do you really think it is a good idea to launch a multi-billion dollar procurement program without adequately defining technical or cost requirements?

Here is the problem as I see it. The Department, in fact the

whole administration thinks private contractors are like fairy godmothers. You tell them we want a certain thing done, we want to

protect our borders, we want to keep these illegal aliens from getting in here or terrorists getting into the country. It is a hard problem. It is a hard problem to rebuild Iraq. It is a hard problem to

restore the Gulf Coast, making our country secure, it is hard.

But the administration assumes that private contractors will be

able to wave a magic wand and solve the problem.

Mr. SULLIVAN. Yes, sir. I think when you are setting requirements for systems and programs as complicated as what we are

talking about here, you are going to have perhaps a limited industrial base. So in order to do that, you have to set requirements, you

have to study requirements, you have to study the needs, the mission needs of the DHS, and understand very thoroughly, I think,

what you need, rather than asking them to supply that information

for you.

And then in addition to that, because I think you are asking for,

in many cases, systems that aren’t necessarily going to have other

markets or are going to be technologically challenging and risky,

93

you need to have way more internal controls in place than it appears DHS has when you put an RFP out for a contractor. You

need to do, for example, you need to ask them for cost data. If they

are going to come back with a proposal to meet your requirements,

they should provide the cost. You are in a sole source environment

because perhaps the technology is proprietary or very limited and

very risky. Sole source means that the Government needs to understand how much it is costing that contractor to bid those kinds of

proposals, so that a fair and equitable price can be determined.

Mr. WAXMAN. Well, the net result of all this is the contractors

get rich, the problem doesn’t get solved and taxpayers get stuck

with the bill. That is what our concern is, and I think it is shared

by everyone on this panel.

Thank you, Mr. Chairman.

Mr. DUNCAN [presiding]. Thank you, Mr. Waxman.

Let me ask you this. Both the chairman and the ranking member

mentioned this $104 million airport screener contract that ran to

$740 million that NCS Pearson did. The report says in addition

that NCS Pearson had $297 million worth of very questionable

costs.

Then we have the L3 Company that came up with the $400 million surveillance system that apparently doesn’t work. Is the Department still doing business with those companies? Has any action been taken toward either one of those companies or other companies that have huge cost overruns or questionable costs?

Ms. DUKE. The screener hiring contract, the $104 million, that

ended in December 2002. So it was just used during the initial rollout, from April to December 2002.

Mr. DUNCAN. But that wasn’t my question. Is the Department

still doing other business with NCS Pearson, or was any kind of

action taken against them?

Ms. DUKE. I don’t know of any major contracts with—I know we

don’t have any major contracts. We might have a small one. I could

check on that. But we do not have any major hiring contracts with

NCS Pearson at this time.

Mr. DUNCAN. What about the L3 Communications Company that

provided this $400 million surveillance system that is not working?

Mr. GUNDERSON. Are you referring to the explosive detection systems? Yes, we still have contracts with L3 for the delivery of systems.

Mr. DUNCAN. So you are not taking any action against companies

that have these huge cost overruns or provide equipment that

doesn’t work?

Mr. GUNDERSON. With respect to the effectiveness of the machines, there was no cost overruns on the production of the machines. The increased costs associated with that program was with

the deployment of the machines, outfitting the airports to install

the machines.

With respect to the effectiveness of the machines, the chief technology officer is best to address those issues. What we have done

in other areas from a contracting perspective is incentivized the

contractor to improve the reliability of the machines, as far as how

often it breaks down.

94

Mr. DUNCAN. So you mean when they provide equipment that

doesn’t work, you give them extra money, incentive money to come

in and make sure the equipment works?

Mr. GUNDERSON. I would term it as disincentives. If the machines do not achieve a certain amount of reliability, then they

would lose money from their profit.

Mr. DUNCAN. Let me ask you this. We have a later witness that

says that all contracts should be competed, even when the dollar

amount is under the legal threshold. What do you think about

that? Mr. Sullivan. Ms. Duke.

Mr. SULLIVAN. I think that contracts should be competed. I think

there are situations where it might not be possible to always have

competition in cases where you have proprietary technologies or

risky technologies or where you might have to go to a cost plus arrangement to push technology or something like that. But other

than that, I think competition is always the most healthy way to

purchase things.

Mr. DUNCAN. Ms. Duke, when you referred a few minutes ago to

the 76 percent competition, were you talking about 76 percent of

all contracts over the limit, or 76 percent of all contracts total?

Ms. DUKE. Of all our DHS contracts.

Mr. DUNCAN. That was counting even those under the legal

threshold, is that what you are saying?

Ms. DUKE. We are required to compete. The competition in con- tracting as a statute kicks in over $100,000. But even under

$100,000, we are required by regulation to compete those or justify

not competing them.

So there are different guidelines, one is statute, one is regulatory. But our requirement is to compete all contracts as a standard business practice.

Mr. DUNCAN. And this later witness says under no circumstances

should the Department allow contracts to become de facto, illegal,

cost plus percentage of cost contracts. What do you think about

that?

Ms. DUKE. I agree with that, that cost plus percentage of cost

contracts are illegal and should not be done.

Mr. DUNCAN. All right. He says it was done in this Boeing $1.2

billion contract to install and maintain explosive detection systems.

Ms. DUKE. I believe the IG report said that there was an appearance of that. Because of the urgency of awarding that contract, the

award fee provisions were not negotiated until after award. And

some provisional award payments were made. That was corrected

during the performance of the contract. So there was an appearance, but it was not a cost type percentage of cost contract.

Mr. DUNCAN. And finally, he is recommending that when the

bulk of the work is being done by subcontractors, that as much as

possible the middleman should be cut out. I can tell you that I got

a call from a trailer manufacturing company, not in my district,

but from Tennessee back when all the Katrina stuff was going on.

This was a company making a lot of these trailers that we have

heard so much about. This company owner said that they were

having to provide DHS these trailers through a middleman who

was doing nothing to the trailers but adding $4,000 to the cost of

each one.

95

He said he would like to find somebody, he said he was perfectly willing to sell these trailers directly to DHS and save that $4,000

per trailer. But they wouldn’t let that be done. What I am wondering about, it would have been so simple for one person at DHS to

handle something like that. Has that gotten any better?

Ms. DUKE. I think whether you should layer or not is really a

value proposition. It is similar to if you are having remodeling in

your home and you are deciding whether you want to have a general contractor [GC], or you want to contract directly with a plumber and electrician. But I do think it is a decision that should be

consciously made on each program and that we shouldn’t add

layering unless there is that value of management or integration.

Mr. DUNCAN. Let me mention one other thing. The day before

yesterday we had the third in a series of hearings pointing out tremendous waste by the Department of Defense selling items, even

items that cost $120,000 or $200,000 for just almost nothing to people in the private sector. Some of these things were brand new.

One of the smaller items was they sold $23,000 and some odd dollars worth of brand new boots that had never been worn for $69

to this one company. Not $69 per pair of boots, but $69 for the

whole $23,000 and some hundred dollars.

I hope that you will make sure that we don’t start selling these

thousands of trailers that are sitting unused for just pennies on the

dollar.

Ms. DUKE. The current plan is to use the manufactured homes

that have not been used yet for future disasters. There is no current plans to resell them.

Mr. DUNCAN. Let me ask one final question. The major problems

that plague DHS acquisition, these are not new. Since the Department started, these problems have been the subject of hearings in

both the House and Senate, reports by the Inspector General, by

the GAO, by the press. Yet despite the fact that everyone hears

about and reads about and knows about these things and everybody says they are terrible and scandalous, they never get fixed.

Do you have an opinion, Mr. Sullivan, on why we are not seeing

more progress? It is just not possible for a gigantic bureaucracy to

handle an acquisition program in a cost efficient, effective way?

Mr. SULLIVAN. In fairness, I think we should remember, it is still

a young organization and its mission, it is probably still working

very hard to bring these 22 or 23 different cultures together and

be able to put in unified policies into that.

But that said, I think it is possible, obviously, to do better. I

think the things that the organization has to focus on are some of

the things we discussed here. They need to understand the mission

needs, they need to be able to articulate requirements for the goods

and the services and the big acquisitions that they have to make.

They need people in place who understand that. And then they

need internal controls to ensure that the industrial base that is

supplying these is supplying them to them at reasonable cost and

with reasonable performance.

Mr. DUNCAN. All right. I think Mr. Ruppersberger is next.

Mr. RUPPERSBERGER. A couple of things. We do have a serious

problem in Homeland Security. A lot of it is because of what you

just said, it is a young organization, we don’t have our systems

96

down completely, and I think because of the fact that we are talking about Homeland Security, there is a lot of rushing to get equipment that hasn’t been properly tested, and that we really need to

maybe move forward with pilot programs, or even a contract if we

could get it in there, a penalty if a contractor is saying this equipment works and it turns out that it doesn’t.

Would you think that we could have that? I guess I would ask

you, Mr. Ely, about the possibility of a penalty clause in a contract

for our contractors that are supplying radiation equipment or other

equipment that just isn’t working.

Mr. ELY. Yes, sir, I think you have hit it right on the button,

what you are telling us, and I agree with you 100 percent, it is

post-award management. Penalties are doable under Government

contracts. And we are moving in this direction very similarly to

what you are discussing, by building post-award management capability that will allow us to be even closer to the results of these contracts, and penalize contractors when they should be penalized and

incentivize them when they should be incentivized.

Mr. RUPPERSBERGER. We need to have you get back to us on that

from our oversight point of view. There are cases, and I just want

to name a few here, your airport screeners contract, baggage

screening equipment contract, airport computer network contract,

radiation detector contracts, the cruise ship area where we probably could have sent a family to a top-rated hotel in Las Vegas

than where we were now.

Now, I understand we were working under difficult situations

and Homeland Security is new. But sooner or later, we are going

to have to step up, because there is just not, we can’t continue to

lose billions, not millions, of dollars. I am asking you all to come

back to us, and with the help of GAO, to let us know what the

proper systems are. Your internal controls, things of that nature.

Let me, since we only have a short time, just to review one area.

I don’t know if I can get to another. I represent the Port of Baltimore and am the co-chair of the Port Security Caucus, the congressional caucus. I want to talk to you about the radiation detector

contracts. Again, we have an issue there that the contract that was

given out, I think $286 billion to a major contractor, really turned

out to be wasting a lot of money. The machines turned out to be

so sensitive to radiation that they can’t distinguish between weapons-grade nuclear material and items that naturally emit radiation, like cat litter, porcelain toilets, bananas, things like that.

Mr. Ely, would you agree that this major contract that has provided the radiation detector contracts cannot quickly determine the

type of radioactive material they detect?

Mr. ELY. Sir, the best I can do to answer that question is to clarify that with the RPMs, we are actually——

Mr. RUPPERSBERGER. With the what?

Mr. ELY. Radiation portal monitors. We are actually engaged in

a contract through an interagency agreement with DOE. Energy

provides other services, along with bringing in the portal monitors,

radiation monitors. It is an ongoing test and evaluation environment.

So unlike a direct contract between Customs and Border Protection and a commercial firm, we are working with another GovernVerDate 11-MAY-2000 10:18 Oct 19, 2006 Jkt 000000 PO 00000 Frm 00100 Fmt 6633 Sfmt 6633 D:\DOCS\29933.TXT HGOVREF1 PsN: HGOVREF1
97

ment agency. The rules are a bit different in working that way. But

from what I have gleaned, this is a continuous development and

learning process in the application of these devices. We can enforce

these, but only working through Department of Energy.

Mr. RUPPERSBERGER. Do you agree that there is technology that

is out there that can provide the detection we need for nuclear components?

Mr. ELY. Sir, I am not qualified, I am a procurement guy. But

what I have learned in talking to the CBP program people is that

it is constantly evolving. The Department, and DNDO in particular

is looking at a higher level machine right now. It looks like we are

moving toward working more with this new type of technology.

Ms. DUKE. The Advanced Spectroscopic Portals [ASP], we just

awarded three contracts through Domestic Nuclear Detection Office. That is a new technology, and has a much lower false alarm

rate and better detection. And ASP is the new generation of the

machines you are talking about now.

Mr. RUPPERSBERGER. I had occasion, right after the Dubai Port

issue, to go to Dubai and to meet with their port security people

and to also observe equipment that they have, which is probably

some of the best equipment in the world. When we decide to move

forward and to try new equipment, do we look at other equipment

throughout the world? Do we test it? Or are we again jumping into

an area where we are going to spend millions and millions of dollars and we find out that it doesn’t work?

Because the first set of equipment that is there, we wasted all

that money. The contractor got paid and we don’t have the money

to use for something else. So you need a system to make sure that

you are getting what is out there, the top technology, and to do

your research throughout the world. Do we do that? Is the system

in place to do that now?

Ms. DUKE. I agree with you, we need to do that. I think that was

the reason for setting up the Domestic Nuclear Detection Office, to

make sure we have that centralized, cohesive strategy that is not

just a DHS office, it is a Federal-wide office, housed within the Department of Homeland Security. So I do believe that is an initiative

to support what you are saying.

Mr. RUPPERSBERGER. Do you work with the Department of Energy in that regard?

Ms. DUKE. No, that is not through the Department of Energy.

Mr. SULLIVAN. I would just say, on this generally speaking, in

terms of technologies like this where we are going to spend millions, hundreds of millions and maybe even billions of dollars, one

of the things that we found when we did our work in 2005, and

we still find deficient in their policies for big acquisitions, is the

need to have thorough reviews and testing of technologies before

you start a program like this. I think that is one thing.

When you look at the investment review board policy that DHS

has right now, they could strengthen, that is a control they could

use right now to strengthen their major investment, their major acquisitions, is to focus on technology readiness before they let those

contracts.

Mr. RUPPERSBERGER. And also the possibility of a pilot program.

Mr. SULLIVAN. Yes, absolutely.

98

Mr. RUPPERSBERGER. It seems to me that GAO should be in the

picture before instead of after. We might be a lot better off.

Mr. SULLIVAN. We try.

Mr. RUPPERSBERGER. Well, it didn’t work here.

Is my time up? I can’t see the clock. I yield back my time.

Mr. DUNCAN. Well, thank you very much, Mr. Ruppersberger.

For 18 years, I have heard, every time a Government agency

messes up, either they are under-funded or their technology is out

of date, although the Federal Government has much newer computers and technology than in the private sector.

Mr. GUTKNECHT. Thank you, Mr. Chairman.

Let me just first of all offer a couple of observations. In response

to something that Mr. Waxman said earlier, I think he made the

reference that the contractors’ response to most of our problems is

to throw more money at it. Well, the truth of the matter is, we are

responsible for that as well. I think that many times is the response here in Congress.

I was a healthy skeptic of the whole idea of combining these 22

agencies into one super-agency. I remember, and I am not that old,

I can still remember what the argument was, that there would be

efficiencies and this would be less expensive in the long run. Well,

that was then and this is now, I guess.

The other point I would like to make in response to something

that you said, Chairman Duncan, and that is, as we do dispose of

some of this equipment, whether it be trailers or boots, and I am

a licensed and bonded auctioneer, so I have a vested interest in

this in some respects, but I understand what the Federal Government just resists every step of the way is hiring auctioneers to get

rid of some of this surplus equipment.

I am going to make that comment. I have said it a hundred

times, and I will keep making the point. Because it is one way that

you can at least ensure there is some competition, instead of selling

all these boots for $69. You would have gotten fair value, I think,

if they had been willing to pay an auctioneer 10 percent of the proceeds, they would have made a lot of money for the taxpayers.

Anyway, my real issue, and I am going to come to you, Mr.

Zavada, and I want to say a special thank you to one of our colleagues who can’t be here today, and that is Congressman Platts

from Pennsylvania. He has really been a leader in trying to bring

about more accountability, not only in this Department, but in Government in general. I want to call your attention, I am sure you

are aware of Public Law 108–330, Mr. Zavada.

I will just give you a little background. My daughter and her

husband are both CPAs. One works in the private sector, one

works on the public side. One of them loves Sarbanes-Oxley and

the other one hates it. But essentially that act, if I understand and

remember correctly, was about bringing some of those kinds of

standards to bear on the Department of Homeland Security.

One of the things that is in that law is the requirement that they

create—I want to make sure I use the right term here—but they

have internal controls. We have had a process, we understand

there are a lot of problems, but I wonder if you could talk about

the quarterly reports and the progress that you see being made

under Public Law 108–330.

99

Mr. ZAVADA. I assume you are talking about in the area of financial management?

Mr. GUTKNECHT. Exactly.

Mr. ZAVADA. Right now, the Department needs to focus on corrective action plans. We have been working with them and providing

some guidance through some audits that we have been doing to direct them toward the corrective action plan process. What they

have done to date is put together, or are working on putting together a Department-wide corrective action plan and corrective action plans in particular focus areas.

There are some signs of progress. To a large extent, the CFO suffers from the same issues that we are talking about today in relation to the chief procurement officer, staffing and capabilities. But

there are some signs of progress in some of the bureaus.

Mr. GUTKNECHT. Well, in October, don’t they have to come forward with a full financial report?

Mr. ZAVADA. Yes, in November, yes.

Mr. GUTKNECHT. Any idea of what that report is going to look

like?

Mr. ZAVADA. I am hopeful that there will be some marginal signs

of improvement. But to a large extent, correcting many of the material internal control weaknesses that the Department has is

going to take a long-term effort.

Mr. GUTKNECHT. I am always skeptical when I hear about this

long-term thing. Mr. Sullivan said, well, the Department is still relatively young. I always remind people, we won World War II in 31⁄2

years. This country can do big things. But we have to raise our expectations.

I think one of the weaknesses we have had here in Congress is

we have been too willing to accept low expectations in some of

these departments, in managing their funds and being accountable

for the taxpayers’ dollars that we give them.

So I really am glad we are having this hearing. I hope we have

a lot more hearings. And again, I want to congratulate my colleague, Congressman Platts, for what he has been doing on his subcommittee to try and hold more of these departments more accountable.

I yield back the balance of my time.

Mr. DUNCAN. Thank you very much, Mr. Gutknecht.

Mr. Kucinich.

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

I am looking at the title of this report. If I walked into this hearing just cold, from nowhere in particular, and I looked at the title

of it, Waste, Abuse and Mismanagement in—fill in the blanks. The

blanks could be filled in, it could be Waste, Abuse and Mismanagement in the Department of Defense, Waste, Abuse and Mismanagement in the Administration of Contracts in Iraq, Waste, Abuse and

Mismanagement in Army Surplus Material. I have heard this so

many times before, and someone comes here and tries to pass it off,

well, we are just a new agency, apparently you are not new at all,

because you are doing what everyone else does.

I am offended when I hear this stuff. People in our district work

real hard to pay their own bills, and they pay their taxes and what

they get is this kind of thing. I am looking at the appendix, Mr.

100

Chairman, and I am looking at some of the biggest companies in

America. They don’t know how to run a contract? Or is it that they

feel it is Government money, taxpayers’ money, they just take the

taxpayers for a ride? Accenture and Partners, $10 billion contract,

here is what the investigation says, lack of defined requirements,

wasteful spending, mismanagement. Bechtel, $100 million contract,

mismanagement, wasteful spending. Boeing Service, $1.2 billion

contract, wasteful spending, mismanagement. Carnival Cruise

Lines, $82 million contract, $62 million contract, $91 million contract, wasteful spending, wasteful spending, wasteful spending.

I mean, what is going on here? This is like Government as a

scam. It really is. And we shouldn’t stand for it.

Another thing we ought to look at, Mr. Chairman, and you know,

I say this having voted against the creation of this monstrosity

known as the Department of Homeland Security, I said it would

take them 20 years to figure out what the left and right hand are

doing. And that goes beyond the corruption.

This raises issues. I am a former mayor. And I understand what

happens when you start passing contracts around and you don’t

have oversight. You have people who are just making themselves

rich at the taxpayers’ expense.

We ought to go a little bit deeper on this committee. We ought

to find out who the executives are in these corporations, we ought

to find out who their attorneys are and who their accountants are.

We ought to find out if they are giving contributions to any political parties or if they are giving contributions to any individuals.

We ought to be looking at the stock options of these executives. We

ought to be looking at their pension benefits. We ought to be looking at who their lobbyists are. There is a whole system here. We

are just scratching the surface.

I would like to ask the representative of the Inspector General

here, Mr. Zavada, I would like to ask you a couple of questions in

this regard. When you review these contracts, do you interview the

companies that are involved as far as their conduct with the Government’s money?

Mr. ZAVADA. I think it would depend on the circumstances involved in the particular contract.

Mr. KUCINICH. Well, let’s start with Accenture. Did you interview

anybody at Accenture?

Mr. ZAVADA. I don’t know the answer to that, but I would be

happy to get back to you on that.

Mr. KUCINICH. How is it possible that you can talk about the administration of a contract and not talk to the people who have the

contract?

Mr. ZAVADA. I think many of the issues that we pointed out deal

with the oversight, with the program management and the procurement management and the risks in those areas. So the focus of our

reports have primarily been on the staffing in both of those areas.

Mr. KUCINICH. Well, you have reported here that these contracts,

the administration of contracts is woefully understaffed, right?

Mr. ZAVADA. Yes.

Mr. KUCINICH. If then it is woefully understaffed, then that

means they can’t really see how the contractor is performing, right?

101

Mr. ZAVADA. That has been a problem. The combination of broadly defined contracts with the oversight issues, the lack of staffing,

we mix acceleration, an accelerated time line in there, and that is

a high risk formula.

Mr. KUCINICH. So Mr. Chairman, this is kind of like a multi-billion dollar honor park. When you have an honor park, some people

come in, they pay what they are supposed to do, because they are

good citizens. But nobody really watches, because it is an honor

park.

We have reduced Federal contracting kind of like honor parks. If

you have people that are of good intention and goodwill, they do

the right thing. But if they are not of good intention and good will,

they rip the taxpayers off for billions of dollars.

Why aren’t you interviewing the people who are actually executing these contracts as contractors? Do you intend to do that?

Mr. ZAVADA. I think the focus of our work and the problems we

have seen to date in many respects has been in the way that the

objectives are defined in these contracts. That would involve both

the way the Department and the contractor define—the Department defines what it wants and then measures the contractor’s

performance in getting what they intended.

Mr. KUCINICH. I thank you for pointing that out, but Mr. Chairman, we have only half of the equation here. Think about it. We

are acting as though, well, these contractors, they just don’t know

what to do, they don’t know how to run a business, and it is only

if the Government tells them what to do. We are not keeping an

eye on the contractors, is what it amounts to, because we don’t

have enough personnel.

I think that we need to haul in front of this congressional committee some of these contractors, such as the Halliburtons of the

world, the Bechtels, the Accentures, the Boeings, if necessary, the

Carnival Cruise Lines. All of these people are ripping off the taxpayers. And put them, have them raise their right hand, put them

under oath, ask them how come this contract has gotten out of

hand, how did you execute the contract, how did you manage it.

The Government didn’t do its job. You pointed that out. But this

takes two to tango here. You have contractors who know, well, the

Government is not watching me, ha, ha, ha. So I think that we

have a moral obligation here to the taxpayers of this country who

not only expect better, but they demand better. And on their behalf, I am speaking. I am saying that this is criminal.

And Mr. Chairman, I just would suggest to you respectfully that

our committee, this isn’t a partisan matter. This is something we

can agree on. The taxpayers are getting ripped off. We don’t have

to buy that for a second. And I don’t want anyone coming to this

committee and saying, well, we are kind of new at the job. Right.

Handling multi-billions of dollars, oh, well, we are just kind of new

at the job. No, no, no, that doesn’t work here.

Mr. DUNCAN. Thank you very much, Mr. Kucinich. Almost every

major Federal contract is a sweetheart deal of some sort or another. In fact, that is why all these big companies hire these high

level Federal employees when they leave their offices, it is why all

the defense contractors hire all the retired admirals and generals,

102

and then they come back and get the offices that they headed up,

or the departments they headed up, to give them contracts.

Mr. KUCINICH. Amen.

Mr. DUNCAN. That is what it is all about. And it is not right, but

unfortunately, it is the way it is.

Ambassador Watson.

Ms. WATSON. Mr. Chairman, I really want to thank you for holding this hearing. The Congress, since I have been here, hasn’t done

much oversight. We are the protectors of the tax dollars, supposedly. And we have given five tax breaks. So that pile of money

is being decreased. So we have to really zero in.

I am bewildered as to why we are still giving out no-bid contracts. I must apologize, Mr. Chairman, for not being here earlier,

so I probably missed a lot of the testimony from these witnesses.

So please forgive me if I am being redundant, and just let me know

that you have already responded.

But I would like to go to Mr. Zavada, about the no-bid contracts

and what your overall response is to the no-bid. Do they place our

taxpayers at risk? Why do we do so much of that no-bid? I can go

all the way back to the Iraqi war, when Halliburton was on the

ground before we as policymakers knew it. I understand that after

Katrina they were on the ground down in New Orleans before we

knew it. They have a big, big chunk of the money that is allotted,

in many cases, without accountability. We have had some hearings.

And we know that they have not, in every case, provided the kinds

of services that they were contracted for in a timely manner.

So if you could talk about the no-bid contracts and the risks that

we are under, but why we do so much of it.

Mr. ZAVADA. I can address the issue of risk with those contracts.

Certainly, they are not the preferred way of doing business. They

are higher risk contracts, and they require mitigating controls,

other steps that you have to take to make sure that the Government is getting the best value for their money.

So from our standpoint as an auditor, we would certainly see

those types of contracts as more high-risk type contracts.

Ms. WATSON. I have not read the GAO report, but I have read

former reports. They will give you an example. Halliburton was

supposed to deliver ice and cold drinks out on the front, and they

charged $65 to the Government for a case of Coca-Cola. So somebody, and there is a $9 billion amount of missing dollars, and they

just kind of pass it off. So I don’t know, in your no-bid process, why

we continue to choose the same companies. I heard because they

have the experience. But I do know personally that there are companies lined up to do the job, and they don’t get a chance at them

because of the no-bid process.

So is there a mechanism for very quickly going to competitive

bidding, so that we can get the best bang for our buck?

Mr. ZAVADA. I think that is a good question, it is probably one

best addressed by the Department’s Chief Procurement Officer.

Ms. WATSON. Is there someone here? I do know that each one of

you comes from a specific department. Can anyone address that?

If not, I will wait.

Ms. DUKE. Yes, I can address in general. I am the Chief Procurement Officer for the Department of Homeland Security. We do preVerDate 11-MAY-2000 10:18 Oct 19, 2006 Jkt 000000 PO 00000 Frm 00106 Fmt 6633 Sfmt 6633 D:\DOCS\29933.TXT HGOVREF1 PsN: HGOVREF1
103

fer competitive. Our numbers for doing competitive solicitations are

actually a little bit better than the Federal Government average.

But we need to get better as a Federal Government.

We can do limited competitions under urgent circumstances. So

you don’t have to jump from everyone competing to just one. So

that is a preference.

The other thing we are trying to do is put contracts competitively

in place before, in the case of disaster type, before they hit. So I

do agree with you.

Ms. WATSON. That is really the kind of answer I wanted to hear.

Because I would think now, after September 11th, and after the

creation of this humongous department, which I thought was going

to be too sluggish in moving, so you have to go to the people you

know can do the job, but I would think you would start lining up

those providers who can then immediately, if given a contract,

move in.

Hurricane Katrina was a disaster in more ways than one. If that

is an example of how we respond to a natural or man-made disaster, we are going to perish. That was an absolute disaster. It is

really scary to think that we are no better prepared.

I represent the west coast. There is an airport adjacent to my

district. We have bridges, we have freeways and so on. I don’t see

us having the resources to move in and protect them. Homeland security is not really about the land, it is about the people on the

land. We need to be sure that those services are there when there

is an emergency.

Thank you so much, Mr. Chairman.

Chairman TOM DAVIS [presiding]. Thank you very much.

Ms. Norton.

Ms. NORTON. Mr. Chairman, first I want to thank you and the

ranking member for this report, which exposes this extraordinary

boondoggle, that means that this war has been a boondoggle for everybody except the troops who are stuck in Iraq. I wanted to stop

by amidst other duties this morning, and hope that during the

course of the testimony and the questions you have uncovered why,

how this long after the war over half the contracts have been nobid contracts, whether there is something structural. I can’t believe

that wasn’t somehow attempted to be answered.

I must say, Mr. Chairman, that this report comes late in the

war. But I want everybody to remember that during World War II,

World War II, a war that had unanimous, shall I say, or virtually

unanimous support of the American people, Harry Truman held

hearings on contracting irregularities, during that war, when his

party controlled the Senate, when his party controlled the White

House. He held those hearings. Oversight of contracts, in the midst

of a war that was supported by the American people. That is the

way, it seems to me, is the pattern that this Congress has finally

to assume.

By the way, Harry Truman, instead of being punished for that,

later became Vice President of the United States. That I think——

Chairman TOM DAVIS. I think he went higher than that. [Laughter.]

104

Ms. NORTON. Ultimately he went even higher than that. So it

does show you that exposing such problems, Mr. Chairman, may

not get you into trouble, it may help you.

Mr. Chairman, I must tell you, you and I have shared the concern that in the national capital region that you and I both share

as Members of Congress, we have shared the outrage that there

has been a 40 percent cut in funds to this region, and would you

believe, to New York City, so that when you read of homeland security contracts and the overruns that have come out in the report

and the no-bid contracts that have continued, and you live where

Al Qaeda has most targeted, your outrage is very special.

I have only one question, and I asked whether this question has

been answered, and I am told it hasn’t been answered. It is really

about perhaps one reason that at least the airport screeners contract cost so much more than it should have. That is something of

interest to me also in my role on the Aviation Subcommittee. I am

also with the chairman on the Homeland Security Committee as

well. So it is very painful to see this waste in contracts.

I understand this may be a question for Mr. Gunderson, I am not

certain. But I would like to know why, and the testing that was

done was not done at the assessment centers, at Pearson’s assessment centers, but apparently at hotels, some of them luxury hotels.

Individuals at expensive hotels in cities like New York, where

these were tested, cost the taxpayers, who are responsible for a

good deal of the cost to the taxpayers, I understand that in New

York City, TSA spent $14,000 for each person hired. That sounds

pretty high.

But I am truly interested in this testing, and whether or not TSA

decided, or why this testing was done in hotels instead of an assessment center, why it was done in hotels where you had to rent

the space, to test this equipment.

Mr. GUNDERSON. Yes, I will address that. It fundamentally starts

with the requirements. When the contract was awarded, the estimated value was just over $100 million. It was premised on the use

of the Pearson recruiting model for assessing them and the other

various aspects before you hire a screener, which was a decentralized process, meaning that the screeners would have to show up at

wherever Pearson had established a center, they would be sent off

to get whatever medical testing was required, and the other aspects.

There was a decision made shortly after the contract award that

determined that the best way to do the recruiting was to use a different model, which focused on getting closer to the airports, within

a couple of hours, I believe was the baseline. That is what resulted

in the changed model to end up using hotels.

Ms. NORTON. Did you ask if there was Government space that

could be used in New York City and other places to do this testing

of individuals to be screeners?

Mr. GUNDERSON. I am not aware.

Ms. NORTON. Well, you can see my concern. I can see why people

turn to hotels generally. But when you consider what the price, the

cost of the most expensive place, the most expensive space in a

place like New York City are hospitals, if you want to stay in a

105

hospital or a hotel room or space to be rented in a hotel room.

Thank you very much, Mr. Chairman.

Chairman TOM DAVIS. Thank you all very much.

Mr. Van Hollen, do you want to ask some questions?

Mr. VAN HOLLEN. Thank you, Mr. Chairman.

I apologize for missing the testimony. I was next door at another

hearing, in another committee. But I did want to thank the chairman and the ranking member and the staff for their report on this

very important issue and trying to make sure that we don’t have

the kind of rampant abuse of taxpayer dollars.

I just wanted to focus on one issue that was raised in this report,

and if I could, Mr. Zavada, I will ask you a question regarding the

TSA contract with Unisys. I understand it was a $1 billion contract

to upgrade computer networks at various airports.

If you could just give us a sense of your assessment of how quickly money is being spent on this particular contract. There is apparently an issue on the payout schedule.

Mr. ZAVADA. Yes. I don’t remember the exact numbers. But when

we conducted our review, we found that much of the money that

was on the contract was spent far in advance of the schedule. I

think a lot of that was attributed to this issue of changing requirements. This was at a point when TSA had a very limited procurement operation. The combination of the changing requirements

with the lack of oversight resulted in the high costs.

Mr. VAN HOLLEN. Well, let me ask you about that question of

changing requirements, or whether there was sort of an understanding up front that there were going to be changes and a failure

to anticipate the costs associated with those changes. Because as

I understand it, and I want to know if this is true, TSA officials

estimated the contract costs would reach $3 billion to $5 billion,

but decided to set an artificial contract ceiling at $1 billion, despite

expectation that it would be much higher.

Mr. ZAVADA. What we said in our report was that at the billion

dollar amount, we could not identify specific requirements that

were attributed to that number.

Mr. VAN HOLLEN. Well, let me just make sure I understand that.

Did you find that there was a belief or understanding that in fact

the costs would be higher than $1 billion, or did you not find that?

Mr. ZAVADA. My recollection from the report is that the ceiling

on the contract was constrained, I think, by the budget.

Mr. VAN HOLLEN. Well, let me ask you this. As I understand it,

there was a former chief information officer at TSA who said that

he was instructed by senior administration officials to cite the $1

billion cost figure to Congress and that they ‘‘pulled a number out

of the air’’ that would ‘‘be more palatable.’’ Was that part of your

finding?

Mr. ZAVADA. Well, again, what I will say is that we could not

identify specific requirements attributable to that billion dollar

amount. So it was suspect in our mind.

Mr. VAN HOLLEN. Well, there is a reference that it would be

more palatable. So that raises a question, more palatable compared

to what. And the implication is more palatable compared to the

higher number that everybody agreed would be more reasonable.

106

You didn’t find as part of your determination that there was a belief that it would be higher?

Mr. ZAVADA. I believe we said in our report that some TSA offi- cials did tell us that it might be between $3 billion and $5 billion

in total. I believe that is in our report.

Mr. VAN HOLLEN. And despite that assessment that they had at the time, Congress was told that it would be $1 billion, is that

right?

Mr. ZAVADA. I don’t know what was communicated to Congress.

Mr. VAN HOLLEN. You don’t know what the figure provided to

Congress for the cost? Because my understanding is that Congress

was told that it would be $1 billion. Does anyone have any knowledge of that at the table here?

Ms. DUKE. I don’t know if it was communicated to Congress, but

that was the ceiling on the contract. So that was the maximum

amount we could award under the Unisys contract.

Mr. VAN HOLLEN. I am just interested in a response. Here we

have a situation where internally, according to testimony of people

who were there, there was an understanding that the cost of this

contract would be between up to $3 billion to $5 billion. And yet

a ceiling on the contract was set at $1 billion. It just seems to be

a case of obvious effort to mislead people with respect to what the

true costs were. I am just interested in a response. I don’t know

who was involved.

Mr. GUNDERSON. I wasn’t there in the summer of 2002. I joined

TSA in December 2002. But my understanding from a requirements standpoint, when TSA was trying to assess what is that

what I called the realm of IT requirements, they were having a difficult job trying to get their hands around that.

Ultimately, there was a decision made that OK, we know that we

are going to have this billion dollar need, and that is what we are

going to move forward with. Whether there might have been something else beyond that, there may have been. But the decision was

to award a contract that was able to be kind of geared toward the

billion dollar ceiling.

Mr. VAN HOLLEN. Let me ask you this. Is the job going to get done for $1 billion?

Mr. GUNDERSON. In some of the other contracts we have had, as

TSA’s mission evolved, the requirements changed. So what may

have set out to be done at $1 billion, other things came in and took

different priorities.

Mr. VAN HOLLEN. Were you personally involved in this whole decision?

Mr. GUNDERSON. No.

Mr. VAN HOLLEN. Because what you are saying really contradicts

what I understand the record found. You are saying that it was $1

billion, you set it and then there were changes that you discovered

later on that caused this cost overrun. The testimony in the findings as I understand it, from the IG, are very different. It is that

there was an understanding up front that this was going to cost

more than $1 billion, and yet a contract ceiling was put on for $1

billion, knowing full well that wasn’t going to be the case.

Do you have information to suggest that is not what happened?

Do you agree with the assessment that there were people inside

107

the Department of Homeland Security who knew full well that the

costs were going to be more than $1 billion at the time they set

a contract cap of $1 billion?

Mr. GUNDERSON. What was written in the IG report is what I know with respect to a number larger than $1 billion. I don’t know

of anything in my discussions at TSA that support the larger number.

Mr. VAN HOLLEN. All right. Well, thank you. Thank you, Mr.

Chairman.

Chairman TOM DAVIS. Thank you very much. Just a couple

wrap-ups and I will let you go.

Ms. Duke, let me just ask you, who has contractual authority

within the Department of Homeland Security? As the Chief Procurement Officer, do you have any warrants yourself, or do you just

kind of oversee policy?

Ms. DUKE. I do not have a warrant. I oversee policy and I also

directly supervise one of the eight contracting shops.

Chairman TOM DAVIS. Does the CIO have any contracting authority?

Ms. DUKE. No.

Chairman TOM DAVIS. He has no warrants, either?

Ms. DUKE. Correct.

Chairman TOM DAVIS. Now, if someone has a product that they

think they should sell, is it appropriate for them to talk to the CIO,

or to you, to say, what are the needs of the Department?

Ms. DUKE. Yes, either.

Chairman TOM DAVIS. And you don’t consider that selling to the

Government, that is more of an information type of meeting?

Ms. DUKE. Yes.

Chairman TOM DAVIS. If they actually want to sell it, they would

have to talk to a procurement officer, isn’t that correct?

Ms. DUKE. Yes.

Chairman TOM DAVIS. OK. There is a lot of misunderstanding

about what you do. But you are kind of the policy shop at this

point. A real problem comes down a couple tiers where you get to

the people who are contracting who, you tell us you don’t have

enough people, they need appropriate training. Do you have enough

tools? Do you need more tools for contracting, like more share on

savings contracts, more fixed price vehicles? Give us any thought

on the vehicles that you have available for contracting.

Ms. DUKE. Share in savings or that type of methodology is something we are looking at where, because of some new mission requirements we don’t have the up-front capital to deploy technology.

So we are looking internally at how we could possibly do a share

in savings type.

Chairman TOM DAVIS. That limits your downside, doesn’t it?

Ms. DUKE. It does. But it is the standard argument of whether

it is more expensive to do a lease-utility type of arrangement. But

we are looking at that in the preparation of the fiscal year 2008

budget submission.

Chairman TOM DAVIS. Mr. Zavada, two of the contracts highlighted in our staff report were managed by TSA. Congress has exempted TSA from the competitive acquisition laws. Do you think

that TSA’s exemption helped or hurt its ability to award and manVerDate 11-MAY-2000 10:18 Oct 19, 2006 Jkt 000000 PO 00000 Frm 00111 Fmt 6633 Sfmt 6633 D:\DOCS\29933.TXT HGOVREF1 PsN: HGOVREF1
108

age the contracts for airport screeners and information technology

infrastructure?

Mr. ZAVADA. From my perspective, it seemed that the problems

were so fundamental in terms of shifting requirements and lack of

oversight that they might not have been related to the differing authority.

Chairman TOM DAVIS. OK. What does that mean? [Laughter.]

Mr. ZAVADA. I guess what I am saying is that in those two contracts, the pattern was similar. They had changing requirements,

they had a lack of oversight. They were both at a time when TSA

had just begun their operations and they were doing things on a

very accelerated time table.

Chairman TOM DAVIS. Thank you.

Mr. Ely, let me just ask you, how is U.S. VISIT coming? That is

the largest procurement, I think, from this Department, one that

had some controversy in the House. How is that coming together?

How is the oversight of that? How are contractors performing? How

is the schedule? Can you give me a brief overview? Or if you can’t,

I will ask Ms. Duke.

Mr. ELY. Yes, this is more her area, sir.

Chairman TOM DAVIS. That is a higher level, what you are kicking it up to.

Ms. DUKE. There was a recent report on U.S. VISIT in terms of

contract management. It was rated as the contracts that DHS is

administering itself are going actually well. Only about half of

those are done by DHS and there are some done by other agencies.

The main criticism has been whether it is an effective program.

We are dealing with U.S. VISIT in terms of new credentialing programming office and trying to deal with it that way. But there

have been questions about the effectiveness of the program.

Chairman TOM DAVIS. The reason I ask is, you mentioned the

GAO released a report stating that the Department’s management

and oversight of U.S. VISIT related contracts are not yet at the

level they need to adequately ensure success. We have a lot of the

top contractors in the country working on this who have a lot of

innovative—you have to rein them in and direct them. So often

when these things go south it is the fact that we are not on top

of them. I can’t emphasize enough how important it is that this

contract work and that we bring this in. Can you assure us we are

doing everything we can to oversee this, at least from your Department?

Ms. DUKE. Yes.

Chairman TOM DAVIS. I think that is all I have. Anyone else?

Mr. Van Hollen.

Mr. VAN HOLLEN. Mr. Chairman, just a couple of things. First

of all, I want to say to Ms. Duke, welcome. I know you are relatively new to the Department and I wish you all the best.

Chairman TOM DAVIS. She is a career employee, too, so they sent

her up here today.

Mr. VAN HOLLEN. Yes, I know, and I wish you all the best as you

try and clean up a lot of the mess that we have been talking about

today. I hope all of us can work together to make sure that we address the serious problems that have come to light.

109

Just for the record, Mr. Chairman, with respect to the Unisys

airport contract I was talking about, I would like to just point out

that in the Office of Inspector General’s report that was issued in

February, they said, ‘‘Several TSA officials said they never expected to complete all of the contract objectives within the original

contract ceiling and originally estimated the contract could cost between $3 billion to $5 billion, but set the contract ceiling at $1 billion.’’ And in a Washington Post article dated October 23, 2005,

Patrick Schambach, who is the former chief information officer at

TSA who managed the project, said that it was just a guess and

that Government officials who spoke at a background briefing said

that they knew at the time that the project would cost closer to $3

billion, but used the $1 billion figure because it would be more palatable to Congress. Schambach said senior Transportation Department officials told him to cite the $1 billion figure.

It is just outrageous, actually, that people would be trying to

game Congress and trying to game the American people by providing a number to the Congress that they know at the time they submit it is wrong. We have unfortunately seen this in other legislation and we don’t need to talk about the prescription drug bill and

the changing estimates, one known at the administration at the

time to be much higher in terms of cost to the American people

than the number that was provided to Congress.

But this kind of thing has to end, and I hope, Ms. Duke, on your

watch it will certainly end with respect to procurement issues at

the Department of Homeland Security.

Thank you, Mr. Chairman.

Chairman TOM DAVIS. Would you like to add anything?

Ms. DUKE. I am committed to working honestly and openly with

this committee and Congress. I thank you for that opportunity.

Chairman TOM DAVIS. Thank you very much. We will dismiss

this panel and take a 2-minute break and get our next panel.

Thank you.

[Recess.]

Chairman TOM DAVIS. The meeting will come to order.

We have our second witness up today, no stranger to this committee, Clark Kent Ervin. He is the director of the Homeland Security Initiative at the Aspen Institute. We very much appreciate

your being here today. Of course, you have had prior work at

Homeland Security to this.

It is our policy that we swear you in. If you would rise and raise

your right hand.

[Witness sworn.]

Chairman TOM DAVIS. Thank you very much.

We expect a vote momentarily, but why don’t you go ahead, get

your statement in and try to get through as quickly as we can.

Thank you for your patience in being here today.

STATEMENT OF CLARK KENT ERVIN, DIRECTOR, HOMELAND

SECURITY INITIATIVE, THE ASPEN INSTITUTE

Mr. ERVIN. It is my pleasure, Mr. Chairman, and thank you very

much, and ranking member all the members of the committee, very

much for having me. Thank you for holding this hearing on a very

important topic, needless to say.

110

Though the Department is only 3 years old, it has already firmly

established a reputation, needless to say, as one of the more dysfunctional agencies in Government. This is especially true in the

area of procurement. This is not just a matter of wasting precious

taxpayer dollars, as bad as that is, especially at a time of tight

budgetary circumstances, it also constitutes a gap in our security

that terrorists can exploit to kill Americans and harm our economy.

Because every dollar wasted on a flawed contract or flawed contracting process is a dollar that could have been spent to make our

Nation more secure.

If that is the bad news, the good news is that lessons can be

learned from the last 3 years. These lessons translate into several

common sensical principles, as follows.

First, the lesson to take away from FEMA’s disastrous performance during Katrina and from TSA’s $19 million contract to set up

an elaborate operations center is that all contracts should be competed, even when the dollar amount is under the legal threshold,

to ensure that the best possible value is obtained for the American

people. In the past, emergencies have been used to justify no-bid

contracts. But emergencies, especially at a Department of Homeland Security, should be anticipated and planned for in advance by

putting in place competitively bid contingency contracts, so that the

Department is not forced to do in extremis what it would not willingly do under normal circumstances.

Second, one lesson to take away from the Boeing Company’s $1.2

billion contract to install and maintain explosive detection systems

at airports is that under no circumstances should the Department

allow contracts to become de facto illegal cost plus percentage of

cost contracts. Such contracts are illegal for a good reason: because

the higher the contract’s cost, the greater the contractor’s profit.

There is no incentive for contractors to economize, and every incentive for them to overcharge.

Third, another lesson to take away from that particular contract

is that when the bulk of the work under a contract is to be done

not by the prime contractor but by subcontractors, the Department

should save money by cutting out the middleman and contracting

directly with the subcontractors.

Fourth, the lesson to take away from the $1 billion Unisys contract, which we have talked about, and also the $2 billion Secure

Border Initiative contract, is that under no circumstances should a

contractor be allowed to define contract requirements. If we leave

it up to contractors to determine what Government agencies need,

chances are high that contractors will decide that the agencies

need more expensive things than they actually do.

Fifth, under no circumstances should contractors in the business

of providing the very goods and services at issue oversee the work

of fellow contractors.

Sixth, one of the lessons to take away from the contract to provide limousine services to DHS personnel that has been linked to

the Duke Cunningham congressional bribery case is that background checks should be required not only on those of the contractor’s employees who are to provide services under the contract, but

also on the contractor’s officers, directors and major shareholders.

111

Seventh and finally, penalties should be built in contracts for

failure to perform, tardiness, bonuses, performance awards and

other incentives should be paid only when earned.

In addition to the foregoing, the number of procurement officers

in the Department should be significantly higher than it presently

is. It is not just a question of throwing more bodies at the problem.

The people hired should have years of Government contracting experience. Otherwise, there will simply be more DHS procurement

officials for more experienced private sector procurement experts to

take advantage of.

Further, part of the problem with procurement is that the Department’s Chief Procurement Officer does not have the authority

that her title implies. The CPO, as we just heard, lacks presently

and should be given the power to hire, fire, and otherwise direct

the work of the component procurement heads. Otherwise, components will continue to make discrete purchases that are not in the

overall interest of the Department.

I will submit the rest of my statement for the record, Mr. Chairman, and will be happy to take your questions. Again, thank you

very much.

[The prepared statement of Mr. Ervin follows:]

112

113

114

Chairman TOM DAVIS. I will just say, I think your testimony

speaks for itself. I think you have given us some very good suggestions.

Mr. Waxman.

Mr. WAXMAN. Thank you, Mr. Chairman. I also agree with the

chairman. I think you have given us very specific, important suggestions for improving the way contracts are handled.

You have been the Inspector General for DHS. You have examined several of the most problematic Homeland Security contracts.

I want your frank insights as to what went wrong and how we can

fix it, so that future contracts increase our security and protect the

taxpayer.

I asked the previous panel about contracts for border security. They had this contract called ISIS. Over $400 million was spent on

thousands of cameras and sensors to monitor our borders, and then

these cameras malfunctioned. If the weather was bad, it didn’t

work at all. And it only covered 5 percent of the border.

So they realized that is not going to protect our border. Now

DHS, after botching this one, is trying to develop another contract.

But they didn’t seem to learn their lessons. Instead, they have this

vague proposal, request for proposals, with words like, we want

something that is highly reliable, available, maintainable, cost effective, to manage, control and secure the border using the optimal

mix of proven, current and next generation technology, infrastructure, personnel response capabilities and processes.

Now, that sounds good, but it is so vague. Does this adequately

define technical or cost requirements? Aren’t they just making the

same mistake over and over again?

Mr. ERVIN. You are absolutely right, Mr. Waxman. Einstein defined insanity as doing the same thing over and over again and expecting a different result. In fact, it is not just ISIS. Before ISIS,

or rather, before the Secure Border Initiative, right after ISIS,

there was the American Shield Initiative that was intended to do

the very same thing, a combination of more border patrol agents

and greater use of technology.

So essentially, we have the same thing with the Secure Border

Initiative, but arguably it is worse in this instance, because as you

say, of the vagaries of the contract mechanism let here. Under no

circumstances, as I say, it seems to me, should any department, especially the Department of Homeland Security, leave it up to contractors to define exactly what it is the Department should obtain,

because needless to say, it is pretty clear that the contractors are

going to decide that the Department needs more expensive technology than it actually does. It is highly questionable whether in

the end the technology will actually work.

Mr. WAXMAN. Well, it is really amazing to me. The Republicans

are saying, we have to do something to protect our borders, we

have all these people coming to the borders, it is an open border,

in effect, even terrorists can get through. But certainly millions of

illegals are getting through.

So they are going around the country holding hearings on this

problem. Some of them have suggested already they passed the bill

before they had the hearings. We ought to build this huge fence.

Now, can you imagine what it would be like if they follow these

115

kinds of procedures? They are going to say to contractors, give us

a contract, we will spend whatever billions it takes to build a

fence? Do you think that is a clear enough idea of how to protect

the borders?

Mr. ERVIN. Absolutely not. It is the job of Government to decide

how to execute policy. If the policy judgment has been made that

we need to secure our border, and certainly, we do need to secure

our border, and I support that policy judgment, needless to say,

then it is up to the Government to determine exactly how that

should be done, and then to define contract requirements for contractors to follow, not the other way around.

Mr. WAXMAN. Well, I want to commend you for your work as Inspector General, your testimony to us today. I hope this hearing

will serve as a wakeup call for the administration. This utter incompetence has to stop. Americans deserve better than more of the

same, and we need to head in a new direction.

I yield back. Thank you.

Chairman TOM DAVIS. Thank you.

Mr. Cummings.

Mr. CUMMINGS. Just very briefly. I too agree that you have done

a great job here.

But I am just wondering, is this basically incompetence? Is it a

lack of—it seems like it is deja vu all over again. I am just trying

to figure out, is it that we are hiring the wrong people? Is it structural? In other words, the structure of the process. Is it a systemic

process?

I just want to get down to the nitty-gritty of it, the bottom line.

Mr. ERVIN. I think that is a key question, Mr. Cummings. I guess

I would start by saying that all of these problems that we are talking about here today were anticipated at the very beginning. I

wrote a memo, or attempted to write a memo, to the then-Secretary, Secretary Ridge and to the Deputy Secretary, Gordon England, on March 18, 2003, which was less than a month after the

Department was officially established. In that memo, I said, two

areas that DHS needs to get control of early to minimize waste and

abuse are the procurement and grant management functions, getting the right leadership and systems in place for both functions

should be made a high priority. Early attention to strong systems

and controls for acquisition and related businesses processes will

be critical to ensuring success and maintaining integrity and accountability.

I subsequently found out that this memo actually did not make

it to the Secretary and the Deputy Secretary because it was held

up in the clearance process, even though Inspector General memos

are not to be held up, uniquely, unlike any other communication

from any other official in the Department, by, of all people, the

Under Secretary for Management. Her rationale, I subsequently

learned, for having done that, was that she knew that the controls

I was recommending were not in place and she didn’t want the Secretary to know that.

So the seeds of all this were laid at the beginning. To answer

your question directly, I think it is a combination of things. First

of all, incompetence, as you say. Two, I think under-funding. And

I say that as a conservative Republican who typically does not call

116

for greater Government spending. But you can’t do anything on the

cheap, and you certainly can’t do homeland security on the cheap.

And a key part of homeland security is procurement. There were

too few, at the beginning, there were too few and there remain too

few procurement professionals. As I say, it is not just a question

of numbers, but we need people who are also experienced and expert in this area.

Finally, I would say it is a question of accountability. There are

no consequences when on a repeated basis these kinds of things

happen. One of the questions in the earlier round was whether

there had been any penalties meted out against the companies that

failed to perform in these instances. We heard in prior testimony

that at least one of these companies continues to perform contracts

for the Department.

And by the way, finally, I would say, people in the Department

of Homeland Security who oversaw these functions subsequently go

on to the private sector to some of the very companies that have

taken advantage of the Department.

So unless and until we get to these root problems, this kind of

thing will happen again and again.

Mr. CUMMINGS. Mr. Chairman, I will submit some written questions.

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

117

118

119

Chairman TOM DAVIS. Thank you very much.

Mr. Van Hollen.

Mr. VAN HOLLEN. In light of the time, I will be very brief as well.

I want to thank you for your testimony. I think it is particularly

valuable, because as others have said, you have some very specific

recommendations in here that I would hope on a bipartisan basis

we could implement as soon as possible.

Your last remark suggested that if maybe the memo had gotten

to the top, maybe someone would have done something about it. I

do believe leadership starts at the top. I do know elsewhere you

have said that in fact you were able to at least have a conversation

with Secretary Ridge about this, and sort of the response you got

at the time was, why are you always being so critical. Well, if your

early warning had been heard then, we might be in a better position today.

Can you just briefly, that was the response you got from the very

top leadership, what are you so worried about, why are you always

carping about this. Can you just respond to that?

Mr. ERVIN. That unfortunately is an attitude that I found time

and again at the Department of Homeland Security. Rather than

seeing these kinds of recommendations as being helpful and as the

kind of thing that if put in place could reflect well on the Department, on the administration, instead, as you suggest, all too often

it was taken the wrong way.

But the good news, as I say, is that it is not too late. We can

prevent these kinds of abuses from going forward in the future if

the recommendations that I am advancing today are put in place.

Chairman TOM DAVIS. I was going to ask you how you got the

name Clark Kent Ervin before we started, but you have certainly

shown yourself bullet proof to some of the occurrences during your

career. [Laughter.]

Thank you. You have given us a lot of food for thought on this.

This is not a political issue, it is our job as oversight. We appreciate you coming forward, and others, trying to identify problems.

We are trying to solve them for the American people and solve

them money. This has been very, very helpful to us. Thank you for

your patience and thank you for your great testimony.

Thank you.

At this point, I think we have, Mr. Waxman thanks me for asking you about the Clark Kent question. [Laughter.]

At this point, I think this has exhausted us, and I am going to

adjourn the hearing. Thank you very much.

[Whereupon, at 12:15 p.m., the subcommittee was adjourned.]

[The prepared statement of Hon. Todd Russell Platts and additional information submitted for the hearing record follows:]

120

121

122

123

124

125

126

127

128

129

130

131

132

133

134

135

136

137

138

139

140

141

142

143

144

145

146

147

148

149

150

151

152

153

154

155

156

157

158

159

160

161

162

163

164

165

166

167

Æ