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44–868 PDF 2008

S. HRG. 110–534

DEPARTMENT OF DEFENSE CONTRACTING IN IRAQ

AND AFGHANISTAN

HEARING

BEFORE THE

SUBCOMMITTEE ON READINESS AND MANAGEMENT 

SUPPORT

OF THE

COMMITTEE ON ARMED SERVICES 

UNITED STATES SENATE

ONE HUNDRED TENTH CONGRESS

SECOND SESSION

APRIL 2, 2008

Printed for the use of the Committee on Armed Services

(

COMMITTEE ON ARMED SERVICES 

CARL LEVIN, Michigan, Chairman 

EDWARD M. KENNEDY, Massachusetts 

ROBERT C. BYRD, West Virginia 

JOSEPH I. LIEBERMAN, Connecticut 

JACK REED, Rhode Island 

DANIEL K. AKAKA, Hawaii 

BILL NELSON, Florida 

E. BENJAMIN NELSON, Nebraska 

EVAN BAYH, Indiana 

HILLARY RODHAM CLINTON, New York 

MARK L. PRYOR, Arkansas 

JIM WEBB, Virginia 

CLAIRE McCASKILL, Missouri 

JOHN MCCAIN, Arizona 

JOHN WARNER, Virginia, 

JAMES M. INHOFE, Oklahoma 

JEFF SESSIONS, Alabama 

SUSAN M. COLLINS, Maine 

SAXBY CHAMBLISS, Georgia 

LINDSEY O. GRAHAM, South Carolina 

ELIZABETH DOLE, North Carolina 

JOHN CORNYN, Texas 

JOHN THUNE, South Dakota 

MEL MARTINEZ, Florida 

ROGER F. WICKER, Mississippi 

RICHARD D. DEBOBES, Staff Director 

MICHAEL V. KOSTIW, Republican Staff Director 

SUBCOMMITTEE ON READINESS AND MANAGEMENT SUPPORT

DANIEL K. AKAKA, Hawaii, Chairman 

ROBERT C. BYRD, West Virginia 

EVAN BAYH, Indiana 

HILLARY RODHAM CLINTON, New York 

MARK L. PRYOR, Arkansas 

CLAIRE McCASKILL, Missouri 

JOHN THUNE, South Dakota 

JAMES M. INHOFE, Oklahoma 

SAXBY CHAMBLISS, Georgia 

ELIZABETH DOLE, North Carolina 

ROGER F. WICKER, Mississippi 

(II) 

C O N T E N T S 

CHRONOLOGICAL LIST OF WITNESSES 

DEPARTMENT OF DEFENSE CONTRACTING IN IRAQ AND AFGHANISTAN

APRIL 2, 2008

Page

Finley, Hon. James I., Deputy Under Secretary of Defense for Acquisition 

and Technology ..................................................................................................... 4

Bell, Hon. P. Jackson, Deputy Under Secretary of Defense for Logistics and 

Materiel Readiness ............................................................................................... 10

Thompson, LTG N. Ross, III, USA, Military Deputy to the Assistant Secretary 

of the Army for Acquisition, Logistics, and Technology; Accompanied by 

Jeffrey P. Parsons, Executive Director, Army Contracting Command ............ 18

(III) 

(1)

DEPARTMENT OF DEFENSE CONTRACTING IN 

IRAQ AND AFGHANISTAN 

WEDNESDAY, APRIL 2, 2008 

U.S. SENATE, SUBCOMMITTEE ON READINESS

AND MANAGEMENT SUPPORT, COMMITTEE ON ARMED SERVICES, Washington, DC. 

The subcommittee met, pursuant to notice, at 2:35 p.m. in room 

SR–222, Russell Senate Office Building, Senator Daniel K. Akaka 

(chairman of the subcommittee) presiding. 

Committee members present: Senators Akaka, Levin, McCaskill, 

and Thune. 

Committee staff members present: Richard D. DeBobes, staff director; and Travis E. Smith, special assistant. 

Majority staff member present: Peter K. Levine, general counsel. 

Minority staff members present: Pablo E. Carrillo, minority investigative counsel; David M. Morriss, minority counsel; and Christopher J. Paul, professional staff member. 

Staff assistants present: Fletcher L. Cork, Ali Z. Pasha, and Benjamin L. Rubin. 

Committee members’ assistants present: Bonni Berge, assistant 

to Senator Akaka; Jon Davey, assistant to Senator Bayh; Stephen 

C. Hedger, assistant to Senator McCaskill; and Jason Van Beek, 

assistant to Senator Thune. 

OPENING STATEMENT OF SENATOR DANIEL K. AKAKA, 

CHAIRMAN 

Senator AKAKA. The Subcommittee on Readiness and Management Support will come to order. 

This subcommittee meets today to hear testimony regarding the 

steps taken by the Department of Defense (DOD) to implement the 

recommendations of the Gansler Commission on Army Expeditionary Contracting. 

This is the subcommittee’s second hearing on this topic. At our 

first hearing, last December, our Army witnesses pledged to work 

quickly to implement the Gansler Commission’s recommendations. 

At that time, the Assistant Secretary of the Army for Acquisition, 

Technology, and Logistics testified, ‘‘The Secretary of the Army, 

Pete Geren, has directed swift implementation of specific recommendations of both the Commission and the Task Force. For example, the Army has approved a two-star-level Army Contracting 

Command (ACC) organization; the Army also plans to grow the 

military contracting structure, in line with the Commission’s recVerDate 0ct 09 2002 14:17 Oct 14, 2008 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\DOCS\44868.TXT SARMSER2 PsN: JUNEB
2

ommendations, by approximately 400 soldiers, and our civilian contracting workforce by an additional 1,000 professionals. We are currently addressing the need to expand, train, structure, and empower our contracting personnel to support a full range of military 

operations.’’ 

I have a particular concern about the status of our acquisition 

workforce. I share the view of the Gansler Commission that the 

root cause of our contracting problems in Iraq and Afghanistan is 

‘‘a culture that does not sufficiently value or recognize the importance of contracting, contract management, and contractors.’’ I also 

agree with the Gansler Commission’s conclusion that the Army has 

‘‘excellent, dedicated people, but they are understaffed, overworked, 

undertrained, undersupported, and, most important, undervalued.’’ 

It is vitally important that we work together to address these 

problems by implementing the Gansler Commission’s recommendations for improving the size, status, and training of the acquisition 

workforce, including the recommendations that we add 10 new general officers for contracting positions and 2,000 new contracting 

personnel to meet the needs of the Army alone. I look forward to 

working with the DOD, and the Department of the Army, in particular, to get this done. 

Senator Thune, you have a statement, I know, and you may proceed. 

Senator THUNE. Thank you, Mr. Chairman. 

STATEMENT OF SENATOR JOHN THUNE 

Senator THUNE. I want to thank you for holding the hearing 

today, and I want to thank our witnesses for joining us today, as 

well. 

With the recent efforts of the Gansler Commission, the Army 

Contracting Task Force, the DOD’s Task Force in Contracting, 

Contract Management, and Expeditionary Operations, continuous 

work by the GAO and others, we finally seem to be getting our 

arms around how much of a problem our eviscerated acquisition 

workforce is, and what kinds of things need to be done to get back 

on track, particularly with regard to contingency contracting. I 

hope that with relevant legislation we enacted in our authorization 

bill last year, this hearing, and followup efforts by this committee, 

we help the Army and the DOD stay on track. 

From today’s hearing, I’d like to get a particularly good understanding of what challenges lie ahead for the Army and DOD in 

trying to implement our legislation regarding the acquisition workforce and the recommendations of the Gansler Commission. Where 

the Army or the Department disagree on implementing any particular recommendation, I ask the witnesses to comment on why 

they disagree with the Gansler Commission’s call for a particular 

solution; what alternative they propose that responds to the 

Gansler Commission’s underlying concerns; if they agree with those 

concerns; and where they are in implementing that alternative. 

In this regard, I’d like to focus on the recommendation to give 

the Army more general officer slots to address structural deficiencies with the workforce and the lack of contingency contracting 

capability. Would the Army benefit from more time to study where 

those additional billets should come from? 

3

As I mentioned in our December hearing, support of Army leadership is going to be important here. So, if the Army or the Secretary has ideas on an interim solution, I’d like to hear about that. 

I also look forward to discussing the Department’s position on 

the use of private security contractors (PSCs) in theater, and where 

the Department is on implementing the legislation we enacted last 

year to help improve the Department’s ability to manage this important component of our ability to assert our national security interests abroad. 

Once again, I want to thank our witnesses for their time today. 

I look forward to their testimony. 

Thank you, Mr. Chairman. 

Senator AKAKA. Thank you very much, Senator Thune. 

Senator McCaskill. 

Senator MCCASKILL. Thank you, Mr. Chairman. 

I do have to preside at 3:30, so I don’t know if that’s good news 

or bad news for everyone who’s here today. I won’t have as much 

time as I would like to go into some of the issues I’d like to talk 

about today. 

I will take just a moment, before your testimony, to reiterate how 

we’re looking forward to the contracting commission that has become law and that will become operational within a few months—

Senator Webb and Senator Levin and I are working to identify the 

appointees that will come from our side of the aisle from Congress. 

I know that the minority side is working on their representatives 

for the contracting commission. But I want to reiterate, we have a 

May 28 deadline for the appointment that must come from a recommendation of the DOD and the Secretary of State to the President. I want to make sure that I go on record today saying that 

I have figured out that government doesn’t exactly do things quickly, and I’m a little worried that May 28 is going to be here in 10 

minutes and we will not have the appointments from the administration. I know Secretary Bell has indicated that he is anxious to 

cooperate, and that DOD is anxious to cooperate with the contracting commission. So many of the issues we’re going to talk 

about today, we will have an opportunity to really get into with the 

contracting commission, and I think it is a great opportunity for us, 

in a bipartisan way—not a ‘‘gotcha’’ mentality, but a bipartisan 

way—to address the overarching problems of acquisition and contract management that have become so very large as we’ve looked 

at this contingency operation. 

I thank you, Mr. Chairman, for giving me a few moments to say 

that. 

Senator AKAKA. Thank you very much, Senator. 

We have on our panel today Honorable James I. Finley, Deputy 

Under Secretary of Defense for Acquisition and Technology; Honorable P. Jackson Bell, Deputy Under Secretary of Defense for Logistics and Materiel Readiness; Lieutenant General N. Ross Thompson III, USA, Military Deputy to the Assistant Secretary of the 

Army for Acquisition, Logistics, and Technology; and Jeffrey P. 

Parsons, the Executive Director, Army Contracting Command. 

Secretary Finley, will you please begin? 

4

STATEMENT OF HON. JAMES I. FINLEY, DEPUTY UNDER SECRETARY OF DEFENSE FOR ACQUISITION AND TECHNOLOGY 

Mr. FINLEY. Thank you, and good afternoon. 

Senator AKAKA. Good afternoon. 

Mr. FINLEY. Chairman Akaka, Senator Thune, and Senator 

McCaskill, I’m very pleased to be here today to address the DOD 

contracting in Iraq and Afghanistan. 

I am fully committed to acquisition excellence and the restoration 

of the confidence in our leadership for the DOD acquisition system, 

which includes contracting. Thank you for the opportunity to participate in today’s hearing. 

The Department has stood up a task force to integrate the many 

activities associated with contracting and contract management for 

expeditionary operations. The task force is addressing the Commission recommendations from the report on Army Acquisition and 

Program Management in Expeditionary Operations, and also the 

associated legislative, regulatory, and policy recommendations, and 

also the steps to be taken by the relevant requirements of section 

849 of the National Defense Authorization Act (NDAA) of 2008, 

and the acquisition requirements in section 807 and section 852. 

Membership of the task force is crosscutting. The task force includes the Joint Staff, all the Services, the Defense Contract Management Agency (DCMA), the Joint Contingency Contracting Office 

for Iraq and Afghanistan, the Defense Acquisition University, and 

various other elements of the Office of Secretary of Defense. We are 

assessing joint approaches to, one, provide command, control, and 

acquisition authority that are in alignment with checks and balances; two, provide scalable solutions for contract management in 

support of large and small expeditionary operations; three, provide 

training for the way we fight, factoring in the lessons learned for 

our acquisition and nonacquisition officers; four, assess the appropriate size and competency requirements of the contracting workforce; and five, take steps to shape and leverage the DOD acquisition workforce development fund for expeditionary operations. 

The Commission report on Army Acquisition and Program Management in Expeditionary Operations identified 40 recommendations. Of the 40, 22 recommendations were directed to the Army. 

Lieutenant General Thompson and Mr. Parsons will address those 

22. My focus will be on the balance, 18 DOD-level recommendations. 

The Department is addressing the stature, quantity, and career 

development of contracting personnel for all Services. The Department has reviewed pertinent personnel directives and issued updated guidance to support increased civilian deployment capability. 

Two medals for civilian employees of the DOD have been established. First, the Secretary of Defense Medal for the Defense of 

Freedom, established September 27, 2001, which I have illustrated 

here in front of me today, and second, the Secretary of Defense 

Medal for the Global War on Terror, established March 12, 2003. 

It’s to my left here in front of me, as well. I’ll be happy, after the 

hearing, to show you the medals and explain more details about 

the medals. 

The Department is assessing the appropriate number of general 

and flag officers, senior executives for contracting positions. In adVerDate 0ct 09 2002 14:17 Oct 14, 2008 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 C:\DOCS\44868.TXT SARMSER2 PsN: JUNEB
5

dition, the Department is conducting a competency assessment of 

the contracting workforce. The results of this assessment, along 

with an analysis of demographics and the workload throughput, 

will enable us to identify the appropriate need. 

This effort was initiated last year for the entire DOD contracting 

career field, and is planned for completion this summer. 

The Joint Contingency Contract Use Support Office, a concept 

implemented for Iraq and Afghanistan about 2 years ago, has provided lessons learned for our training needs for expeditionary contracting. The global war on terror is far more different than the 

Cold War era, especially for expeditionary contracting. We are 

making progress to train the way we fight. For example, the expeditionary contracting curriculum has been redesigned to support 

journeyman-level personnel. The Community of Practice Web Portal has been redesigned to streamline collection and analysis. An 

advanced expeditionary contracting training course has been developed for senior-level contracting personnel. Standardization and 

certification for an expeditionary contracting officer has been coordinated with all the Services to better understand the joint environment. Five programs of instruction are being developed for expeditionary acquisition for our Joint and Service staff schools, formalizing the training for the acquisition and nonacquisition career 

fields. Also, the Joint Contingency Contracting Handbook, which I 

have several examples here to share with you, were developed last 

year, and thousands of copies have been distributed. 

We are assessing the possibility of recommending specific supportive legislation actions, as well as regulatory and policy assistance. We will provide additional information when we submit our 

report to Congress by May 28, 2008. 

The DOD Acquisition Workforce Development Fund will help position the Department to more strategically address our acquisition 

workforce needs. Although the past 5 years have indicated top-line 

workforce stability, in terms of personnel, the workload has increased. We have a far different concept of operations with the 

global war on terror versus the Cold War. The preparation and 

planning phase to leverage this fund for expeditionary operations 

has started. Proposals from the components have been received and 

are being mapped into three areas of focus: one, recruitment and 

hiring; two, training and development; and, three, recognition and 

retention. Reviews with civilian and military leadership have started and are ongoing. 

In summary, our objective is to train the way we fight, participate in exercises with expeditionary contracting personnel, and 

continually integrate the lessons learned in this new era of the 

global war on terror. We will improve with joint scalability, integration, and synchronization of expeditionary contracting and program management. Alignment of checks and balances for decisionmaking authorities for expeditionary operations will be improved. 

Utilization of the Acquisition Workforce Development Fund as a resource will be done and will help facilitate needed change. Measurable progress has been made. Much more remains to be done. A 

plan for that work has been established. 

Chairman Akaka and members of the subcommittee, I will be 

pleased to address any questions you may have. 

6

Thank you. 

[The prepared statement of Mr. Finley follows:]

PREPARED STATEMENT BY HON. JAMES I. FINLEY

Chairman Akaka, Senator Thune, and members of the subcommittee, I am 

pleased to come before you today to address the Department of Defense (DOD) contracting in Iraq and Afghanistan. I am pleased that Congress has focused on contracting. I am fully committed to acquisition excellence and the restoration of the 

confidence in our leadership in our acquisition system that includes contracting. I 

pledge to work together with you and Congress, as stewards of our taxpayer dollars, 

to provide the capability needed for our national security. Thank you for the opportunity to appear before you to participate in today’s hearing. 

I will focus on the three areas outlined in your request for my testimony, summarized as follows:

(1) The steps the DOD is taking to implement the recommendations of 

the Commission on Army Acquisition and Program Management in Expeditionary Operations, which released its final report, ‘‘Urgent Reform Required: Army Expeditionary Contracting’’ on October 31, 2007. 

(2) The Department’s recommendations on legislation that may be needed 

to implement those recommendations; and 

(3) The steps that the Department is taking to implement relevant requirements of the National Defense Authorization Act (NDAA) for Fiscal 

Year 2008, including the acquisition workforce requirements in sections 807 

and 852 of that Act.

In response to all of the above areas of interest, and to implement the requirements of section 849 of the NDAA for Fiscal Year 2008, we have stood up The Task 

Force on Contracting and Contract Management in Expeditionary Operations to address the specific Commission recommendations and to integrate with the many 

other relevant areas that are being addressed within the DOD. Membership of this 

Task Force is cross cutting to include the Services, the Defense Contract Management Agency (DCMA), the Joint Staff, the Joint Contingency Contracting cell for 

Iraq/Afghanistan and various elements of the Office of the Secretary of Defense. The 

Task Force meets weekly for progress tracking purposes, meets periodically with the 

Services and DCMA to ensure a coordinated and consistent Department approach, 

and meets about once a month with Dr. Gansler to discuss any points of clarification 

regarding the Commission’s recommendations. 

Section 849 of the NDAA for Fiscal Year 2008 directed the Secretary of Defense, 

in consultation with the Joint Chiefs of Staff, to evaluate the Commission’s recommendations to determine the extent to which such recommendations are applicable to the other Armed Forces. In addition, section 849 requires the Secretary, not 

later than 120 days after enactment, to provide a report to the congressional defense 

committees indicating the conclusions of the evaluation and a description of the 

plans for implementing the Commission’s recommendations for Armed Forces other 

than the Army. The evaluation required by section 849 is underway, and the report 

to the congressional committees is on schedule for submission on May 28, 2008. 

I am fully committed to address the recommendations of the report of the Commission on Army Acquisition and Program Management in Expeditionary Operations, summarized as follows:

(1) Increase the stature, quantity, and career development of military and 

civilian contracting personnel (especially for expeditionary operations); 

(2) Restructure organization and restore responsibility to facilitate contracting and contract management in expeditionary and continental United 

States operations; 

(3) Provide training and tools for overall contracting activities in expeditionary operations; and 

(4) Provide legislative, regulatory, and policy assistance to enable contracting effectiveness in expeditionary operations. 

1. STEPS TO IMPLEMENT THE COMMISSION RECOMMENDATIONS

The Commission identified 40 recommendations for action. Of the 40 recommendations, 22 are directed to the Army specifically, and you will hear from 

Lieutenant General Thompson and Mr. Parsons about the Army response to those 

recommendations. Eighteen of the 40 recommendations are directed to the Department for consideration and implementation. I will focus on those 18 DOD-level recommendations. 

7

The Task Force, at this time, is not in agreement with 2 of the 18 Commission 

recommendations at the DOD level, summarized as follows. The Commission recommended that the DCMA should be responsible for all base, post, camp and station 

contracting, and that it should be resourced to accomplish that mission. The Task 

Force is developing alternative approaches to achieve the Commission’s goal of enhanced post-award contract management during routine times as well as during 

times of contingency and war. The alternatives under consideration address the Department’s concern that the Services need to be able to deploy in operations of all 

sizes; scalability of operations is important. Through our monthly discussions with 

Dr. Gansler, we believe he agrees we are on a path to achieving the Commission’s 

intent. In our assessments of the future role and structure of the DCMA we are 

striving to ensure the most efficient, effective contract management support for future contingencies. The Task Force believes the Department should be positioned to 

be able to respond to the full range of contingencies from those requiring very little 

contracted effort to those requiring a great deal. We must have scalable processes. 

The Army and Marine Corps are making the changes they believe will enable this 

approach. The Marine Corps has completely restructured and updated its approach 

to training in support of contingency operations. 

We have issues today in service contract administration, and we are working to 

correct them in our Improvement Plan for Contract Management in response to the 

GAO High Risk Series. In addition, under the section 813 Panel on Contracting Integrity, subcommittees on Contracting Integrity in a Contingent Environment and 

on Contract Surveillance have identified their initial actions for 2008 and are on 

track to accomplish them. These actions include enhanced training as well as 

leveraging best practices and lessons learned. In addition, we have already incorporated into the Joint Contingency Contracting Handbook guidance on how to run 

and transition a contracting office in a contingent environment. A newer subcommittee on Procurement Fraud Indicators is assessing the need for a Procurement Fraud Indicators handbook for acquisition personnel similar to the Inspector 

General Procurement Fraud Indicators handbook for auditors; reviewing best practices from existing training courses to determine the potential for a training module 

for insertion into Defense Acquisition University (DAU) training; and pursuing the 

feasibility of developing a database of procurement fraud indicators available on an 

acquisition website. We are ensuring that we enhance our overall contract management capabilities, as well as our ability to step up to the contract management 

needs of contingency environments. 

The Commission recommended increasing the stature, quantity, and career development of contracting personnel. We have reviewed the civilian personnel directives 

that pertain to civilian personnel involvement in military operations, and have 

issued a memorandum dated February 12, 2008, ‘‘Building Increased Civilian Deployment Capacity’’ to provide guidance and interim policy to promote opportunities 

for DOD civilians to contribute their talent to DOD’s mission. This memorandum 

will be reflected in an update to DOD Instruction 1400.32 ‘‘DOD Civilian workforce 

Contingency and Emergency Planning Guidelines and Procedures’’ August 2008. In 

addition, the Department has created two new medals for civilian contributions to 

the global war on terror. One was established after September 11, 2001, and the 

other is so new that it was awarded for the first time on February 26, 2008. 

The Department is actively assessing and developing its position regarding the 

appropriate numbers of General and Flag Officers, and Senior Executive Service authorizations, for contracting positions. Our report to the congressional committees 

in response to section 849 of the NDAA for Fiscal Year 2008 will contain additional 

information on this subject. 

The Commission provided recommendations pertaining to organizational structure 

and responsibility to facilitate contracting and contract management. I just discussed our ongoing assessments regarding the future role of DCMA in order to ensure effective and efficient contract management support for future contingency operations. This planning is taking place in conjunction with a subcommittee formed 

under the section 813 Panel on Contracting Integrity with a specific focus on contract surveillance. In addition, the Department is considering the most effective approach to achieve an integrated, joint approach to contract and program management support for future contingencies. This effort was already underway in response 

to section 854 of the NDAA for Fiscal Year 2007. The preliminary concept of a Joint 

Contingency Contracting Support Office was previously reported to Congress last 

year in an interim report required by section 854. This initiative responds to congressional mandates for the development of capabilities for requirements definition, 

contingency program management, and contingency contract support. Our goal is to 

achieve the integration and synchronization of contract support across combatant 

8

commands and United States Government agencies to support effective program 

management, and to consolidate and incorporate lessons learned. 

The Commission provided recommendations to provide training and tools for overall contracting activities in expeditionary operations. We have made significant 

progress, summarized as follows:

1. DAU has redesigned the contingency contracting curriculum to improve training supporting journeyman level contingency contracting operations. This will enable experienced contingency contracting officers to be 

deployable worldwide and be effective immediately upon arrival to support 

the mission. The redesigned curriculum is synchronized with the Joint Contingency Contract Handbook. It includes interactive simulations, hands-on 

practical work, and robust capstone projects; we emphasize cultural awareness and ethics training; and bring in subject matter experts to provide 

their perspective on contracting in theater. 

2. DAU is redesigning its Contingency Contracting Community of Practice web-portal. The redesign will streamline the collection and analysis of 

after-action reports. 

3. An advanced Contingency Contracting Course is also being developed 

by DAU. This course will provide ‘‘just in time’’ training to senior level contracting personnel deploying to a management position.

DAU has collaborated closely with all the Services to standardize the required 

training a contingency contracting officer must complete to become fully qualified/

certified. This will help ensure commanders in the field get fully trained contingency 

contracting officers who understand the joint environment. The Army has determined the majority of their additional training requirements will be provided by the 

U.S. Army Logistics Management College located in Fort Lee, VA, and Huntsville, 

AL. 

As contractors on the battlefield are a reality for future expeditionary operations, 

operators outside the acquisition community must be trained on the role and importance of contracting, Contracting Officer’s Representatives (CORs) and contractors 

in expeditionary operations. DOD actions to address these issues pre-date the Commission’s Report. 

As a result of the NDAA for Fiscal Year 2007, DOD assessed noncontracting officer training courses and existing training curriculum at DOD and Service schools 

at all levels (basic, intermediate, and senior). Based on this assessment, the Department is developing a broad program of instruction for operational military leaders, 

both officer and enlisted, across all grades, on management of contractors deploying 

with forces. 

In addition, we are developing programs of instruction on contingency acquisition 

for our Military Departments’ Staff Colleges and Senior Military Service and Joint 

Staff Schools to train, more formally, our senior planners and leaders on roles and 

responsibilities of planning and managing contracts and contractor personnel in forward areas. This training will focus all leaders on determining requirements, translating those requirements into statements of work and then overseeing work. 

In a parallel effort, the Army has instituted junior officer training in the proper 

use of contractors who accompany the force in support of Army contingency operations. This training covers the role of contractors in support of Army contingency 

operations, describes how contractors are integrated into Army operations, and explains user responsibilities for requesting and overseeing contract support. Thus, 

through this emphasis on oversight in training, both military leaders and junior officers will be educated on the important role of contracting, Contracting Officers, and 

CORs. 

With regard to increasing the number of contracting personnel, we are conducting 

a competency assessment for the entire DOD Contracting Career Field. We anticipate completion of the assessment this summer. Once we have completed the competency assessment, along with an analysis of our demographics and workload 

throughput, we will be in a position to provide the appropriate number of additional 

contracting personnel needed by the Department. 

The Commission recommended establishing an Expeditionary Contracting Manual 

to support the expedited processes and tempo necessary for procuring the support 

needed by our warfighters in the theater of operations. The Department has developed and distributed thousands of copies of the Joint Contingency Contracting 

Handbook. Feedback from deployed users has been outstanding—we receive requests for more every day! The handbook provides a consolidated source of information for our contingency contracting officers, and provides the essential information, 

tools, and training to meet the challenges they will face, regardless of mission or 

environment. 

9

This February, DAU delivered its first course to incorporate the handbook into 

formal training, and the feedback received from the students indicates it was an 

overwhelming success! 

In addition, the Department has developed a draft Expeditionary Contracting Policy, which provides the foundation for the Joint handbook. This draft policy is in 

coordination with all relevant stakeholders, and is expected to be published in May 

2008. 

The Commission recommended an adequately resourced contingency operation 

transfer fund. The Department is considering the recommendation; however, the Department is also aware of congressional oversight concerns that have precluded the 

funding of these accounts in the past. The Commission also recommended that the 

Department ensure that policy and practice support intelligent funding apportionment for expeditionary operations. The next update of the Joint Contingency Contracting Handbook will clarify the pertinent guidance. 

2. THE DEPARTMENT’S RECOMMENDATIONS ON ANY LEGISLATION THAT MAY BE NEEDED

TO IMPLEMENT THOSE RECOMMENDATIONS

As the Department reviews the Commission’s recommendations, and appropriate 

implementation actions, we are assessing the possibility of recommending specific 

supportive legislative actions. As required by section 849 of the NDAA for Fiscal 

Year 2008, we will submit a report to the congressional defense committees with 

the results of our assessments by May 28, 2008, and will provide additional information at that time. 

3. DOD STEPS TO IMPLEMENT RELEVANT REQUIREMENTS OF THE NDAA FOR FISCAL YEAR

2008, INCLUDING THE ACQUISITION WORKFORCE REQUIREMENTS IN SECTIONS 807 AND

852 OF THAT ACT

The implementation steps we have taken for the relevant requirements of section 

807 and section 852 of the NDAA for Fiscal Year 2008 are summarized as follows:

Regarding section 807, ‘‘Inventories and Reviews of Contracts for Services,’’ we are working across the Department establishing guidelines for the 

military departments and Defense agencies that will identify the targeted 

type of services, and standardize the collection of data required to create 

an inventory of the contracted services. This statute amended 10 U.S.C. 

§ 2330a, ‘‘Procurement of services: tracking of purchases,’’ by directing us to 

not only collect greater granularity of data, but to share it with the public, 

and then conduct reviews of the contracts listed in that inventory. This is 

a large undertaking by the Department. We need to work with Congress 

to ensure we meet your intent. The inventory should be invaluable for shaping our contractor support workforce.

Regarding section 852 of the NDAA for Fiscal Year 2008, the Department has 

begun to take steps to shape the DOD Acquisition Workforce Development Fund 

(the Fund) for targeted recruitment, training and retention initiatives. The 852 initiatives could significantly improve the Department’s overall management of the Defense acquisition workforce, including contract management, contingency operations 

and position the Department to successfully sustain and appropriately size the future acquisition workforce. 

We have established partnerships within the Department and are working collaboratively with the DOD Comptroller’s office and the Office of the Under Secretary 

for Personnel and Readiness. Additional implementation details on Section 852 will 

be in the DOD civilian human capital strategic plan to be delivered to Congress 

within the next few months. 

The purpose of the fund can help to ensure the Defense acquisition workforce has 

the capacity, in both personnel and skills, to properly perform its mission. This includes ensuring appropriate oversight of contractor performance and that the Department receives the best value when using public funds. 

We have engaged the military Services and Defense components to establish DOD 

enterprise initiatives. These efforts will position the Department to strategically address our acquisition workforce shortfalls. 

I want to thank Congress for their support of the acquisition workforce and the 

flexibilities provided for using the Fund. 

SUMMARY

In summary, measureable progress has been accomplished. Much work remains 

to be done. A plan for that work has been established with measureable criteria. 

10

We believe that contracting and contract management are vital elements of acquisition excellence. Contracting and contract management are an important military 

task for leadership and execution on a global basis for all situations. The Acquisition 

Workforce Development Fund can be utilized to help facilitate the strategy for the 

achievement of acquisition excellence for Expeditionary Operations. 

Mr. Chairman, I am pleased to address any questions that you may have for me. 

Thank you.

Senator AKAKA. Thank you, Secretary Finley. 

Now we’ll hear from Secretary Bell. 

STATEMENT OF HON. P. JACKSON BELL, DEPUTY UNDER SECRETARY OF DEFENSE FOR LOGISTICS AND MATERIEL READINESS 

Mr. BELL. Thank you, Chairman Akaka and Ranking Member 

Thune, and Senator McCaskill. Thanks again for this opportunity 

today to discuss four topics of interest to your subcommittee: the 

role of PSCs in Iraq and Afghanistan; the role of contractors in detainee interrogations; the status of DOD efforts to implement sections 861 and 862 of the 2008 NDAA; and the status of efforts to 

address gaps in legal accountability of PSCs in Iraq and Afghanistan. 

I’ve submitted detailed written testimony addressing these topics, which I will not be able to cover in my brief oral testimony 

today, so I request that my written testimony be incorporated into 

the record of this hearing. 

Regarding PSCs: recently, questions have arisen about the appropriateness of using PSCs in areas of military operations. As described in more detail in my written testimony, DOD policies governing the use of PSCs in contingency operations are in compliance 

with existing laws and regulations. These policies, collectively, restrict PSC authority and missions to defensive operations; establish 

firm policies, rules, and procedures governing their conduct and 

their operations; provide for clear government oversight to ensure 

that they’re not performing either inherently governmental functions or even entering areas of high risk or areas of military operations; and, finally, of course, firmly establish legal jurisdiction 

over their conduct. 

Notwithstanding media coverage regarding PSC operations in 

Iraq, the frequency of serious incidents among DOD PSCs is relatively low. During the period of August 2004 through February 

2008, a period of intense insurgency and sectarian violence in Iraq, 

more than 19,000 DOD convoy operations were recorded. Of those, 

less than three-quarters of 1 percent involved the use of deadly 

force by a DOD PSC; and then, not necessarily causing casualties. 

The recent execution of a memorandum of agreement between 

DOD and the Department of State (DOS) is having an even more 

disciplining effect on PSC operations there. General Petraeus recently reported to Secretary Gates that, ‘‘There has been a 67 percent reduction in graduated-force incidents involving contractors, 

and both the Government of Iraq and the Iraqi people have taken 

notice of the changes made in the operating procedures and in the 

attitudes of PSCs.’’

Regarding contractor roles in detainee interrogations, as we all 

know, detainee operations are a matter of great importance to the 

U.S. Government, as much as they are a matter of great sensiVerDate 0ct 09 2002 14:17 Oct 14, 2008 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6602 C:\DOCS\44868.TXT SARMSER2 PsN: JUNEB
11

tivity. My testimony today addresses only the question of DOD 

policies regarding the use of contractors in detainee interrogations. 

This role of contractors is authorized and governed by a number 

of DOD policy directives and instructions that specifically establish 

a policy framework for the use and the supervision of contractor 

personnel in detainee interrogations. These are covered in detail in 

my written testimony. 

Regarding the legal accountability of deployed contractors, all 

DOD civilian employees and DOD contractors deployed outside the 

United States in support of our military forces are legally accountable for their conduct under the jurisdiction of both the Uniform 

Code of Military Justice (UCMJ) and the Military Extraterritorial 

Justice Act (MEJA), as well as other statutes. Nonetheless, both 

DOD and DOS are on record about the need for legislation to 

strengthen the legal accountability of other U.S. Government contractor personnel deployed outside the United States in support of 

other U.S. Government missions, besides the DOD mission. 

Regarding the status of efforts to implement sections 861 and 

862, DOD is working actively now with the DOS and with the U.S. 

Agency for International Development (USAID) to implement, on 

schedule, the requirements of the 2008 NDAA. The Memorandum 

of Understanding (MOU), required under section 861, is already in 

draft form, and should be executed by July 1, with implementation 

targeted within the required 120 days after the MOU is executed. 

Regarding section 862, work is nearing completion on an expanded framework of regulations and reporting requirements relating to U.S. Government PSCs working in Iraq and Afghanistan. 

In closing, and a personal note, I would ask that this committee 

reconsider legislation passed in 2007, of the NDAA, that mandates 

the downgrade of the position of the Deputy Under Secretary of Defense for Logistics and Materiel Readiness, upon my leaving the position. This position has oversight of all DOD logistics functions, 

which, in 2006, represented about $162 billion of DOD’s $537 billion budget. 

Subsequent to this legislation, this position has assumed additional ongoing responsibilities, including leadership of DOD efforts 

to strengthen management of deployed contractors and negotiating 

and overseeing implementation of agreements with the DOS and 

USAID regarding the operations of all of our contractors in Iraq 

and Afghanistan, including, particularly, PSC operations in those 

countries. 

In the future, additional work is going to be required to expand 

this governance to other U.S. Government departments and agencies. The downgrade of this position sends the wrong signal about 

the importance of these areas of responsibility at the very time of 

their increasing significance to DOD and in global war on terror 

operations. 

Hopefully, this brief oral testimony and my written testimony 

will provide a useful baseline of information for your questions as 

we get into a discussion. 

Thank you. 

[The prepared statement of Mr. Bell follows:]

12

PREPARED STATEMENT BY JACK BELL

Chairman Akaka, Ranking Member Thune, and members of the committee: thank 

you for the opportunity to appear before you today to discuss four topics of interest 

to your subcommittee: the role of private security contractors (PSCs) in Iraq and Afghanistan; the role of private contractors in the interrogation of detainees in those 

conflicts; the steps the Department of Defense (DOD) is taking to implement sections 861 and 862 of the National Defense Authorization Act (NDAA) for Fiscal Year 

2008; and the status of efforts to address gaps in the legal accountability of and jurisdiction over PSCs in Iraq and Afghanistan. 

Any discussion of the roles of contractors in performing private security services 

and detainee interrogations should be based on recognition of the historical background of and current policy framework governing the use of contractors in these 

roles. 

BACKGROUND

The use of civilian contractors in support of the armed forces is not new. Historically, contractors have been used by the U.S. Government and other governments 

to perform a variety of military support roles, including private security, intelligence, and interrogation. This practice has been so long established that contractors are specifically recognized in both U.S. policy and international agreements of 

longstanding relating to their status as prisoners of war:

• Article 50 of the U.S. Army General Order No. 100 (1863) states: ‘‘Citizens who accompany an army for whatever purpose . . . if captured, may 

be made prisoners of war. . . .’’ • Article 13, Annex to the Hague Convention IV (1907) states: ‘‘Individuals 

who follow an army without directly belonging to it, such as . . . contractors, who fall into enemy’s hands . . . are entitled to be treated as prisoners of war. . . .’’ • Article 4 of the Geneva Convention Relative to the Treatment of Prisoners of War (1949) states: ‘‘Prisoners of war . . . [include] persons who accompany the Armed Forces without actually being members thereof, such 

as civilian members of aircraft crews . . . supply contractors. . . .’’

Through World War II and Korea, support from the private sector was common, 

but normally performed in secure areas, since the battlefield was usually demarcated between secure and nonsecure areas. Contractors assumed key roles in the occupation phase of these conflicts—in the securing of peace and the reconstitution or 

reform of state security institutions. 

As the Vietnam conflict unfolded, the nature of the battlefield changed and the 

role of contractors expanded to provide construction, reconstruction, intelligence, 

and security services in nonsecure areas. Contractors were also key players in reconstruction, economic development, and development of institutional governance 

capabilities of the host nation. 

Since Vietnam, DOD has become increasingly dependent on contractors, both at 

home and when deployed, to perform critical support functions that are integral to 

the success of military operations, but not inherently governmental functions. Several factors contribute to the increased DOD reliance on contractor support:

• The shift to an All-Volunteer Military Force in the 1970s; 

• An effort to capture a ‘‘peace dividend’’ following the collapse of the Soviet 

Union, which led to the significant reduction of United States Government 

military and civilian forces over the last 15 years. 

• Initiatives (e.g., including A–76) to transfer work that could be done more 

cost-effectively by contractors than by military forces or DOD civilians; 

• The increasing technical complexity of military equipment and information technology hardware and software, requiring maintenance by a narrow 

set of in-depth, sometimes proprietary technical skills that are not cost effective for the military force maintain a capability to support. 

• The shift from traditional equipment sustainment programs to outsourced 

performance-based logistics programs, to improve equipment readiness at 

lower costs.

As a result, the U.S. military force has been reduced from 2.1 million in 1989 to 

less than 1.4 million today, and the total U.S. Army from 111 combat brigades to 

76. As dependence on contractors has increased, it is now common for contractors 

to provide a wide variety of support services, and even to be embedded with our 

military units performing critical technical support functions. For example, the Government Accountability Office (GAO) noted in 2006 that a Stryker brigade typically 

deploys with 75 technical support contractors, in addition to those performing the 

13

highly technical battle damage repairs at forward support facilities. Similarly an 

Apache Battalion deploys with embedded contractors, whose numbers may vary due 

to mission requirements to perform support missions for them in the field. 

The history of DOD’s (and its precedent organizations’) use of civilians accompanying military forces to forward areas is shown in the table below.

CIVILIANS ACCOMPANYING THE FORCE HISTORICAL PERSPECTIVE 1

War/Conflict Civilians/Contractors Military Ratio 

Revolution ................................................................................ (est.) 1,500 9,000 1:6 (est.) 

Mexican/American .................................................................... (est.) 6,000 33,000 1:6 (est.) 

U.S. Civil War ........................................................................... 200,000 1,000,000 1:5 (est.) 

World War I .............................................................................. 85,000 2,000,000 1:24 

World War II ............................................................................. 734,000 5,400,000 1:7 

Korean Conflict ........................................................................ 156,000 393,000 1:2.5 

Vietnam Conflict ...................................................................... 70,000 359,000 1:5 

Operation Desert Shield/Storm ................................................ 9,000 500,000 1:55 

Balkans .................................................................................... 20,000 20,000 1:1 

Operation Iraqi Freedom2 ........................................................ ∼163,590 ∼160,000 1:1 

1 Source: Zamparelli, Steven J., ‘‘Competitive Sourcing and Privatization: Contractors on the Battlefield: What Have We Signed Up For?’’ Air Force Journal of Logistics, Volume XXIII, Number 3, p. 12. 2 Data addresses only DOD contractors and does not address civilians or contractors supporting other U.S. Government Agencies and Departments. 

At the same time, military operational tempo has increased significantly under 

the global war on terror and as a result of the proliferation of regional conflicts that 

ensued with the end of the stability engendered by the Cold War balance of power. 

From 1990 to 2000 the U.S. Army alone has deployed troops on 36 occasions, compared to 10 deployments during the 40 year Cold War. 

Consistent with applicable laws and regulations defining inherently governmental 

functions, the structure of our military forces has been adapted to this environment. 

DOD identified opportunities where competitive sourcing of contractor support for 

our deployed forces would allow DOD to concentrate its manpower to distinctly military activities in support of our National Military Strategy. This focus is reflected 

in the current DOD Directive (DODD) 1100.4, ‘‘Guidance for Manpower Management’’ (February 12, 2005), Paragraph 3.2.4.3., which states, ‘‘During a conflict, military personnel shall be assigned only to those tasks that directly contribute to the 

military effort. . . .’’ 

‘‘Military effort’’ is generally defined as the inherently governmental function of 

the military force role to engage in combat—to identify, close with, and destroy 

enemy or terrorist forces. 

PRIVATE SECURITY CONTRACTORS

Recently, questions have been raised about the ‘‘appropriateness’’ of using PSCs 

in areas of military operations. DOD’s decisions to use PSCs (including subcontractors) are in compliance with current U.S. Government policy and regulations. Relevant policy direction and guidance on this subject are found in the following:

• Circular A–76 (amended in 2003); • The Federal Activities Inventory Reform Act of 1998; and • The current Federal Acquisition Regulation (FAR), including the recent 

final rule to add a new FAR Subpart 25.3, which specifically governs the 

contracting for PSCs.

It is significant that the final rulemaking on Subpart 25.3 (Federal Register: February 28, 2008, Volume 73, Number 40, pages 10943–10959) explicitly recognizes 

that:

• The United States Government has the authority to hire security guards 

(i.e., PSCs) worldwide (page 10944); 

• The protection of property and persons is not an inherently governmental 

function (page 10944); Also see FAR 7.503 (d)(19); 

• There is an important distinction between self-defense and combat operations, and that individuals have an inherent right of self defense (page 

10943); 

• PSCs are not mercenaries and are not authorized to engage in offensive 

operations (page 10944); 

• PSCs have been given a mission to protect other assets/persons, and so 

it is important that the rule reflect the broader authority of PSCs in regard 

to the use of deadly force (page 10944); 

14

• The standard on the use of deadly force by PSCs should be when it ‘‘reasonably appears necessary,’’ a standard in DODD 5210.56 that applies to 

the [defensive] use of deadly force by military security personnel (page 

10944);

DOD Instruction (DODI) 1100.22, ‘‘Guidance for Determining Workforce Mix’’ 

(issued September 22, 2006, and updated April 6, 2007) provides additional guidance on the strategic structuring of military, civilian, and contractor forces. It states 

that, ‘‘the DOD may authorize deliberate action against another sovereign government or nonstate actors on behalf of the United States (i.e., the authority to plan, 

prepare and execute operations to actively seek out, close with, and destroy enemy 

forces, including the use of firepower, and other destructive and disruptive capabilities on the battlefield. Combat authorized by the U.S. Government is IG [inherently 

governmental]. . . . (Paragraph E2.1.3.). PSCs are not authorized to participate in 

combat operations. 

Other sections of DODI 1100.22 describe security operations under conditions that 

could make them inherently governmental or not inherently governmental, as follows:

• ‘‘Security provided for the protection of resources (people, information, equipment, supplies, et cetera) in uncontrolled or unpredictable high threat environments inside the continental United States or outside the continental United 

States entails a wide range of capabilities, some of which are inherently governmental and others of which are commercial. Security is IG [inherently governmental] if it involves unpredictable international or uncontrolled, high threat 

situations where [military] success depends on how operations are handled and 

there is a potential of binding the United States to a course of action when alternative courses of action exist.’’ (Paragraph E2.1.4.1.). PSC operations and 

missions are not of a scale to impact the overall success of the military mission 

or to bind the United States to any course of action other than the one selected 

by it. 

• ‘‘Security forces that operate as part of a larger, totally integrated and cohesive Armed Force typically perform operations that require deadly force and 

substantial discretion.’’ (Paragraph E2.1.4.1.2.). However, DOD PSCs do not operate as an integral part of a larger military operation, and their operations are 

governed by strict Rules on the Use of Force (RUF) and escalation procedures 

on the use of force. 

• ‘‘Security operations could entail defense against a military or paramilitary 

organization whose capabilities are so sophisticated that only military forces 

could provide an adequate defense. This includes situations where there is such 

a likelihood of hostile fire, bombings, or chemical attacks by groups using sophisticated weapons and devices that, in the judgment of the military commander, the operation could evolve into combat.’’ (Paragraph E2.1.4.1.3.). PSCs 

carry out strictly defensive security missions, with emphasis on attempting to 

disengage and leave the area as soon as possible. 

• ‘‘Security operations that involve more than a response to hostile attacks typically entail substantial discretion and are IG.’’ (Paragraph E2.1.4.1.4). Policies 

governing PSC operations emphasize that their security mission is strictly defensive in response to threatened hostile attacks. 

• ‘‘A decision is not IG if it can be limited or guided by existing policies, procedures, directions, orders, or other guidance that identify specific ranges of acceptable decisions or conduct and subject the discretionary authority to final approval or regular oversight by government officials.’’ (Paragraph E2.1.4.1.5.). 

Again, PSCs operate under strictly defensive RUF established by the military 

commander, not combat-oriented Rules of Engagement. 

• ‘‘Contingency contractors may provide security services for other than uniquely military functions provided the geographic combatant commander:

• ‘‘Clearly articulates rules for the use of deadly force that preclude ceding 

governmental control and authority of IG functions to private sector contractors. . . .; 

• ‘‘Sets clear limits on the use of force . . .; 

As indicated above, PSCs operate under clearly articulated policies and 

rules established by the geographic combatant commander and the local 

area commander (e.g., General Petraeus). 

• Department of State and DOD are not the only Government agencies to 

employ PSCs with the right to use deadly force. For example, 10 CFR 73.50, 

permits contract security personnel protection nuclear material to use deadly force. Also, the U.S. Marshal Service employs PSCs to guard prisoners 

15

being transported between locations, armed and with the authority to use 

deadly force.

In summary, DOD’s current policies are in compliance with these regulations and 

policies. Specifically:

• The mission of PSCs is strictly defensive—protecting persons, facilities, 

places or supplies, depending on the specific contract under which they operate. They are specifically prohibited from engaging in combat (offensive) 

operations. 

• PSCs do not operate as part of a larger, totally integrated and cohesive 

military force, where their actions could affect the success of the military 

mission could be adversely affected, or could bind the U.S. to a course of 

action where alternative courses of action exist. 

• All DOD PSCs in Iraq and Afghanistan are contractually bound to follow 

the policies and rules established by the U.S. Central Command 

(CENTCOM), MNF–I, and Commander, Joint Task Force 76 commanders. 

These rules include specific language on RUF, which are entirely defensive 

in nature. These rules call for emphasis on avoidance of conflict and de-escalation of the use of force where possible. When force is required, PSCs 

are trained and instructed to use graduated force response-sequential actions which begin with nonlethal force response measures to ward off an 

attack such as firing flares, shining bright lights, or blowing horns. Only 

when these actions are ignored, as required by the situation, do they escalate their response, such as firing into the air or shooting into the engine 

block of an approaching vehicle. Use of deadly force aimed fire is authorized 

only as a last resort to kill or disable the individual or individuals posing 

the threat, while minimizing the possibility of casualties among innocent 

persons. 

• All U.S. Government PSC operations in Iraq are under the oversight of 

the battle space commander to the area battlespace commander, who can 

redirect or terminate a private security operation that would enter an area 

of combat operations, or have a high risk of either being attacked or of risking causing casualties among innocent civilians. Final authority for U.S. 

Embassy moves rests with the Chief of Mission, but he will generally honor 

the battlespace commander’s recommendation. The battlespace commander 

also has the authority to take control of any battlefield situation, including 

one in which a PSC is being attacked or is involved in an incident. Similar 

controls will be put in place shortly for Afghanistan under section 862 of 

the 2008 NDAA.

As of the end of the first quarter, fiscal year 2008 (December 31, 2007), 

CENTCOM reported that there were approximately 6,467 DOD-funded armed PSCs 

in Iraq and approximately 2,745 DOD-funded armed PSCs in Afghanistan. The table 

below illustrates the distribution by nationality and delineates armed versus unarmed PSCs in Iraq and Afghanistan.

DOD PRIVATE SECURITY CONTRACTORS IN IRAQ AND AFGHANISTAN AS OF 31 DECEMBER, 2007 

Total U.S. Citizens Third Country 

National 

Local/Host Country National 

Total DOD PSCs in Iraq ................................................ 9,952 830 7,590 1,532 

Armed PSCs in Iraq ...................................................... 6,467 429 5,318 720

Total DOD PSCs in Afghanistan ................................... 2,998 19 30 2,949 

Armed PSCs in Afghanistan ......................................... 2,745 16 30 2,699 

These PSCs are employed in accordance with the guidance outlined above as well 

as paragraph 6.3.5 of DOD Instruction 3020.41, ‘‘Contractor Personnel Authorized 

to Accompany the U.S. Armed Forces,’’ October 3, 2005. This paragraph provides 

that contracts shall be used cautiously in areas where major combat operations are 

ongoing or imminent. In accordance with this paragraph, the combatant commander 

weighs the following factors when considering specific security contracts: where the 

contract security personnel will operate; the anticipated threat; what property or 

personnel is to be protected; the manner in which the contractor will be operating 

in areas of increased risk, including command and control, the sharing of threat information, and communication with forces; and the training and qualifications of the 

contract security personnel. 

16

In a recent audit of PSCs in Iraq, GAO noted significant improvements in PSC 

coordination and oversight and in the tracking and reporting of incidents when they 

happen. Notwithstanding media coverage regarding incidents involving PSCs, the 

frequency of serious incidents among DOD PSCs is low. The period of August 2004 

through February 2008 covers a period of rampant insurgency and sectarian violence in Iraq affecting U.S. military forces. During that time, 19,268 DOD contractor 

convoy operations were recorded. Of those, only 151 (or less than eight-tenths of 1 

percent) involved the discharge of a firearm by a PSC, and not all of those involved 

aimed fire at an enemy combatant. This was in spite of the fact that during that 

time, 1,441 hostile attacks were made against those convoys. These statistics reflect 

a high degree of discipline and effective management of DOD PSCs operating within 

a strict policy framework. 

The recent execution of the Memorandum of Agreement between DOD and the 

State Department is having an even more disciplined effect on PSC operations in 

Iraq. General Petraeus recently reported to Secretary Gates that, ‘‘There has been 

a 67 percent reduction in graduated force incidents involving contractors, and both 

the Government of Iraq and the Iraqi people have taken notice of the changes made 

in the operating procedures and attitudes of PSCs.’’ 

In recent testimony, I have discussed the potential consequences of any policy decision to replace PSCs in Iraq and Afghanistan with military forces. Using Congressional Budget Office methodology from their 2005 contractor study on Logistics Support for Deployed Military Forces, it would require the manpower equivalent of nine 

brigades of manpower to support that role. Such a requirement would be a major 

challenge for DOD to resource. 

CONTRACTOR ROLE IN DETAINEE INTERROGATIONS

Detainee operations are a matter of great importance to the U.S. Government, as 

much as they are a matter of sensitivity. This testimony addresses only the question 

of the role of DOD contractor personnel in detainee interrogations. 

The role of contractors in detainee operations is governed by a number of DOD 

policy directives and instructions:

• DODD 2310.01E (September 5, 2006) specifies that,

• ‘‘The Under Secretary of Defense for Intelligence shall exercise primary 

responsibility for developing policy pertaining to DOD intelligence interrogations, detainee debriefings, and tactical questioning . . . .’’ (Paragraph 

5.4.1.). 

• ‘‘All DOD contracts pursuant to which contractor employees interact with 

detainees include a requirement that such contractor employees receive 

training regarding the international obligations and laws of the United 

States applicable to detainee operations.’’ (Paragraph 5.3.1.) 

• ‘‘The Under Secretary of Defense for Acquisition, Technology, and Logistics shall ensure contractor employees accompanying DOD components in 

conducting, participating in, or supporting detainee operations complete 

training and receive information on the law, regulations, and policies applicable to detention operations, and the requirements to report possible, suspected, or alleged violations that arise in the context of detention operations. . . .’’ (Paragraph 5.3.2.)

• DODD 3115.09 (November 3, 2005) states that,

• ‘‘The Under Secretary of Defense for Intelligence shall exercise primary 

responsibility for DOD intelligence interrogations, detainee debriefings, and 

tactical questioning and serve as the advisor to the Secretary and Deputy 

Secretary of Defense regarding DOD intelligence interrogations policy.’’ 

(Paragraph 4.1 and 4.1.1.) 

• ‘‘A trained and certified DOD interrogator shall monitor all interrogations, debriefings, and other questioning conducted by non-DOD or non-U.S. 

Government agencies or personnel.’’ (Paragraph 3.4.4.3.)

• DODI 1100.22 (September 7, 2006) states that:

• ‘‘Direction and control of intelligence interrogations are IG functions. This 

includes the approval, supervision, and oversight of interrogations. However, in areas where adequate security is available and is expected to continue, properly trained and cleared contractors may be used to draft interrogation plans for government approval and conduct government-approved 

interrogations consistent with DODD 3115.09, if they are properly supervised and closely monitored throughout the interrogation process by sufficient numbers of properly trained government officials.’’ (Paragraph 

E2.1.6.2.). 

17

STATUS OF LEGAL ACCOUNTABILITY JURISDICTION OVER DEPLOYED CONTRACTORS

All DOD contractor personnel, regardless of nationality, are legally accountable 

for their conduct in complying with the DOD policies and regulations, as well as 

with the laws of the United States and applicable laws of the host country. This 

legal accountability proceeds from a number of statutes including:

• The Uniform Code of Military Justice, extended by section 552 of the 

NDAA for Fiscal Year 2007 to cover all contractors located outside the 

United States accompanying the military forces in the field in contingency 

operations against a hostile force. 

• The Military Extraterritorial Justice Act provides Federal criminal jurisdiction over felony-level crimes committed by DOD civilian employees and 

contractors (except host country nationals) accompanying the Armed Forces 

outside the United States. 

• Other statutes address legal accountability of U.S. citizens alleged to 

have committed specific crimes against other U.S. citizens and other criminal acts overseas. 

• Coalition Provisional Authority Order #17 is a law signed into effect prior 

to the transfer of authority to the Government of Iraq in 2004 and is scheduled to expire with the conclusion of the U.N. Security Council mandate of 

the Multinational Force-Iraq (MNF–I), currently set for December 31, 

2008,. It provides non-Iraqi contractor personnel working on behalf of coalition forces (as well as those working for foreign diplomatic or consular missions, or foreign humanitarian aid, reconstruction or development projects) 

immunity from Iraqi legal process for acts committed pursuant to the terms 

and conditions of their contract. Assuming no further action by the U.N. Security Council, any continuing immunity after December 31, 2008, for individuals not covered through other means, will have to be provided for in 

negotiations between foreign governments and the Government of Iraq. 

Otherwise, such contractors may be subject to Iraqi laws and its criminal 

justice system.

While DOD civilian employees and DOD contractors are considered to be legally 

accountable for their actions, both DOD and the State Department are on record 

about the need for legislation to strengthen the legal accountability of other U.S. 

Government contractor personnel deployed outside the United States. 

STATUS OF EFFORTS TO IMPLEMENT SECTIONS 861 AND 862 OF THE 2008 NDAA

DOD has launched a number of significant initiatives to strengthen the management of DOD contractors accompanying deployed military forces. Also, we are currently implementing a Memorandum of Agreement with the State Department 

signed on December 5, 2007, to strengthen the coordination of DOD and State PSC 

operations in Iraq. We are now working actively with the State Department and the 

U.S. Agency for International Development (USAID) to address the requirements of 

sections 861 and 862 of the NDAA for Fiscal Year 2008. Sections 861 requires the 

establishment of a Memorandum of Understanding (MOU) among DOD, the State 

Department, and USAID, to cover all contracts being implemented in Iraq and Afghanistan, and all contractors and contractor personnel there. In addition, Section 

861 requires the establishment of a comprehensive data base of contract and contractor personnel data, available on an online basis to appropriate legislative branch 

committees and the GAO. 

Progress is well underway regarding the drafting of an MOU responsive to the 

requirements of section 861, and there should be no problem in executing such an 

MOU by the deadline on July 1, 2008. The more difficult challenge will be the establishment of the data bases required under section 861 to provide the multi-disciplinary data bank required to be put in place. Efforts have already been launched to 

define the software and system requirements to support this requirement, with a 

view towards compliance with the requirement to implement the provisions of the 

MOU within 120 days of its execution. 

Similarly, work is underway to implement the provisions of section 862 of the 

NDAA for Fiscal Year 2008. In this section, Congress has acknowledged the use of 

PSCs, and has prescribed specific requirements for their oversight in a declared 

combat operation. It requires the Secretary of Defense, in coordination with the Secretary of State, to prescribe regulations governing the policies, procedures, and operational control of PSCs under contract to DOD, the State Department, and USAID 

for work in Iraq and Afghanistan. In several ways, these regulations will be much 

broader than the currently effective MOA between DOD and the State Department 

relating to the coordination of PSC operations in Iraq. Nonetheless, major elements 

18

of the MOA will form the core of the regulations currently being drafted to comply 

with section 862. 

In closing, I would like to highlight the fact that the DOD, the GAO, the Office 

of Management and Budget, the Congressional Budget Office, and the Congressional 

Research Service have continuously reviewed the expanded use of PSCs, the potential for their performance of inherently governmental functions, and the appropriateness and manner in which they are employed. 

Hopefully, this testimony provides a documentary baseline of the four topics I was 

asked to address at this hearing. I will be happy to answer any questions you have 

regarding the policy framework regarding contractors in these areas of concern and 

interest. Thank you.

Senator AKAKA. Thank you very much, Secretary Bell. 

General Thompson? 

STATEMENT OF LTG N. ROSS THOMPSON III, USA, MILITARY 

DEPUTY TO THE ASSISTANT SECRETARY OF THE ARMY FOR 

ACQUISITION, LOGISTICS, AND TECHNOLOGY; ACCOMPANIED BY JEFFREY P. PARSONS, EXECUTIVE DIRECTOR, 

ARMY CONTRACTING COMMAND 

General THOMPSON. Chairman Akaka, Senator Thune, Senator 

McCaskill, thank you for the opportunity to appear before you 

again today on the Army’s contracting operations in Iraq and Afghanistan. 

Since our last report to you, and in keeping with the recommendations of the Gansler Commission, Secretary of the Army 

Pete Geren directed the realignment of the Army Contracting 

Agency to the Army Materiel Command and the establishment of 

the Army Contracting Command Provisional. We stood up this organization on March 13 of this year. With me today is Jeff Parsons, 

our first Executive Director of the new Army Contracting Command Provisional. We have a joint written statement that I respectfully request also be made a part of the record for today’s 

hearing. 

I would like to take this opportunity to thank the committee and 

the committee leadership for your unwavering support to the men 

and women in uniform. 

Mr. Chairman, the Secretary of the Army created the Special 

Commission on Contracting, led by Dr. Jacques Gansler, to look at 

the long-term strategic view of the Army’s acquisition and contracting system in support of expeditionary operations. The Army 

Contracting Task Force, which I co-chaired with Ms. Condon of the 

Army Materiel Command, was formed to review current contracting operations and take immediate actions, where necessary. 

The Gansler Commission’s four key recommendations for improvement are consistent with the Army Contracting Task Force’s 

findings. The Army is making steady progress in addressing the 

structural weaknesses and the shortcomings identified, and we continue to work very closely with the Office of the Secretary of Defense (OSD) and our sister Services on the way forward. It is clear 

that achieving our objective will require resources, time, and a sustained leadership focus. Our written statement outlines the major 

actions that we’ve taken to date, which include accelerating plans 

to set up the contracting structure recommended by the Commission and increasing the size of the contracting workforce in the 

Army. 

19

As a result of the ongoing operations in southwest Asia, the 

Army has increased its focus on contingency contracting. Up until 

a year ago, we didn’t have a defined structure to support expeditionary operations or to support the modular Army. We have now 

established a contingency contracting structure that consists of contracting support brigades, contingency contracting battalions, and 

four-person contingency contracting teams. We are beginning to fill 

those with trained military contracting officers and noncommissioned officers (NCOs): the 4 brigades, the 6 battalions, and the 

121 teams that we’ve already established. Since we last met, we’ve 

looked at the size of that structure, and we plan on expanding that 

by adding 3 brigades, 5 battalions, and 51 teams to the work that 

we had already done. 

A critically important issue is the size, the structure, and the 

training of both the military and the civilian contracting workforce. 

The acquisition workforce has declined significantly in the last decade, but the workload and the number of dollars associated with 

that workload have increased significantly. The Army has never 

fought in an extended conflict that required such reliance on contractor support. 

We are addressing the need to expand, train, structure, and empower our contracting personnel to support the full range of military operations. We are developing a detailed contracting campaign 

plan to implement the necessary changes to contracting, and looking at changes in doctrine, organization, training, materiel, and 

leadership. 

This is going to require the Army, OSD, administration, and 

Congress to work together to make the systemic fixes needed for 

contracting to be a government core competency. 

Mr. Chairman, this concludes my opening remarks, and Mr. 

Parsons’s, and I look forward to your questions. 

[The joint prepared statement of General Thompson and Mr. Parsons follows:]

JOINT PREPARED STATEMENT BY LTG N. ROSS THOMPSON III, USA, AND JEFFERY P. 

PARSONS

INTRODUCTION

Thank you for this opportunity to report to you again on the U.S. Army’s comprehensive, ongoing efforts to ensure policies and procedures are in place for all 

joint, expeditionary contracting operations in Iraq, Afghanistan, and Kuwait, and to 

better prepare the Army for acquisition and logistical support of future combat operations. In this statement, we address the: (1) work of the Army Contracting Task 

Force; (2) the steps that the Army is taking to implement the recommendations of 

the Commission on Army Acquisition and Program Management in Expeditionary 

Operations, which released its final report, ‘‘Urgent Reform Required: Army Expeditionary Contracting,’’ on October 31, 2007; and (3) the steps that the Army is taking 

to implement relevant requirements of the National Defense Authorization Act 

(NDAA) for Fiscal Year 2008, including the acquisition workforce requirements in 

sections 807 and 852 of that Act. 

We are grateful for the wisdom, guidance, and strong support that you and other 

Members of Congress have shown for our efforts. Our goal is to be good stewards 

of the resources provided by Congress and to free human and financial resources 

for higher priority operational needs. 

As background, Secretary of the Army Pete Geren chartered the Commission on 

Army Acquisition and Program Management in Expeditionary Operations chaired 

by Dr. Jacques Gansler, the former Under Secretary of Defense for Acquisition, 

Technology, and Logistics. The Gansler Commission provided an independent, longterm, strategic assessment of the Army’s acquisition and contracting system—and 

20

its ability to support expeditionary operations and sustained high operational demand in an era of persistent conflict. To complement the work of the Commission, 

the Army Contracting Task Force was established to review current contracting operations and take immediate action where appropriate. The recommendations of the 

Commission were consistent with the findings of the Task Force. We are currently 

addressing structural weaknesses and shortcomings identified, with a view to improving both current and future expeditionary contracting operations. We are committed to finishing the development and then implementing an Army-wide contracting campaign plan to improve doctrine, organization, training, leadership, materiel, personnel, and facilities. Achieving this objective will require resources, time, 

and sustained leadership focus. The contracting campaign plan will continue the initiatives already underway in the Army. 

Since our last report to you, Secretary Geren has directed the realignment of the 

U.S. Army Contracting Agency to the U.S. Army Materiel Command (AMC) and the 

establishment of the U.S. Army Contracting Command (ACC) (Provisional) under 

AMC. The ACC (Provisional) stand-up ceremony on March 13, 2008 is in keeping 

with the Gansler Commission’s second recommendation—to restructure Army contracting organizations and restore responsibility to better facilitate contracting and 

contract management in expeditionary and U.S.-based operations. The ACC, whose 

first Executive Director, Jeff Parsons, will testify before this committee, is a twostar level command with two one-star level subordinate commands—an Expeditionary Contracting Command and an Installation Contracting Command. 

Before we continue, we would also like to publicly thank Deputy Secretary of Defense Gordon England for presenting on February 26, 2008, the first Armed Forces 

Civilian Service Medals (AFCSM) for service in Iraq. As a result of the Gansler 

Commission’s recommendations on contracting effectiveness, the Department of Defense (DOD) reviewed its regulations/policy with regard to the AFCSM and agreed 

to make this honor available for DOD civilians involved in direct support of expeditionary operations. This was a policy change and no legislation was required. 

GANSLER COMMISSION IMPLEMENTATION UPDATE

The Commission made four overarching recommendations to ensure the success 

of future expeditionary operations: (1) increase the stature, quantity, and career development of military and civilian contracting personnel, particularly for expeditionary operations; (2) restructure organization and restore responsibility to facilitate contracting and contract management; (3) provide training and tools for overall 

contracting activities in expeditionary operations; and (4) obtain legislative, regulatory, and policy assistance to enable contracting effectiveness in expeditionary operations. 

Secretary Geren directed the establishment of an Army Contracting Campaign 

Plan under the acting Under Secretary of the Army to ensure that the Gansler Commission’s findings and recommendations are implemented as quickly as possible 

without the loss of any momentum. We are making steady progress in this area. 

With regard to the first recommendation to increase the stature, quantity, and career development of the Army’s contracting personnel, we have a number of initiatives underway. We now have a contingency contracting structure that consists of 

Contracting Support Brigades, Contingency Contracting Battalions, and four-person 

Contingency Contracting Teams. Each Contracting Support Brigade is commanded 

by a Colonel who assists the Army Service Component Commander (ASCC), a threestar commander, in his contracting support—by planning and coordinating contracting operations in a theater. These brigades oversee Contingency Contracting 

Battalions and teams—Active, Reserve, and National Guard—in executing the 

ASCC’s contracting support plan. The contracting brigades, battalions, and teams 

are being activated and will eventually total 7 brigades, 11 battalions, 18 senior contingency contracting teams, and 153 contingency contracting teams. These brigades, 

battalions, and teams will coordinate and integrate their plans with Army Field 

Support Brigades. These two new brigade designs support the Army modular force 

in the development of a single, fully integrated planning cell to provide quick response, command, and control of acquisition, logistics, and technology activities 

needed to support and enable the full spectrum of operations. 

The Army plans to grow our military contracting structure in the Active Force as 

well as our civilian contracting workforce. We realize the need for members of the 

military to begin their acquisition careers earlier. Plans are underway to move the 

accession point for military officers 2 to 3 years earlier, immediately following their 

Branch qualification at the Captain level (normally at the 4- to 5-year mark in their 

development). For noncommissioned officers, the accession point will occur upon 

achieving the rank of staff sergeant. We have implemented a policy stating that 

21

military members will not deploy during their first year in contracting. This will 

help ensure the requisite training is accomplished prior to deploying on an expeditionary contracting mission. Lastly, the Army is formally interviewing units as they 

return from theater to capture ‘‘expeditionary contracting’’ lessons learned and incorporate the findings into doctrine, training guides, and user handbooks. 

With regard to the second recommendation to restructure organization and restore responsibility, as stated in our introduction, we established the ACC on March 

13, 2008. This new command will leverage contracting assets across AMC and will 

better prepare us to support expeditionary operations. The one-star Expeditionary 

Contracting Command will be a deployable Headquarters, enabling the proper oversight and structure for extended conflicts. In addition, regarding the recommendation to establish a Chief of Contracting for the U.S. Army Corps of Engineers 

(USACE) headed by a one-star and supported by a deputy from the Senior Executive 

Service, the USACE is developing a concept plan, and we are working with them 

to complete, publish, and implement this plan. 

Concerning recommendation three to provide training and tools, the Army is assessing opportunities to improve contingency contracting training at our Combined 

Training Centers. In addition, we are expanding the mission of the Battle Command 

Training Program by including acquisition professionals to train brigade, division, 

and corps organizations. We are also evaluating ways to incorporate contractor 

training into all military exercises. At present, 12 professional military education 

courses have new or enhanced operational contract support subject matter, and we 

have put in place an intensive training and management program for our Contracting Office Representatives (CORs). In addition, all Army CORs must complete 

the Defense Acquisition University’s on-line continuous learning module, ‘‘COR with 

a Mission Focus,’’ prior to appointment. For example, since October 1, 2007, 190 

CORs have been trained in Kuwait. All contracts awarded now by the Kuwait Contracting Office have a trained COR performing surveillance. 

To improve our contingency contracting training and doctrine, we have taken several actions. We are taking a set of concrete steps which include: (1) working with 

the Joint community on the final draft of Joint Publication 4–10, Operational Contract Support, (2) distributing the recently released Joint Contingency Contracting 

Handbook, (3) developing Field Manual 4–10, Commanders Guide to Contracting 

and Contractor Management and Field Manual Interim 4–93.42, Contract Support 

Brigade; (4) accelerating efforts to enhance leader education in contracting and contractor management; (5) re-examining the training curriculum and timing for all 

newly accessed acquisition officers and civilians; and (6) re-examining the accession 

point for contracting officers and noncommissioned officers into the Army Acquisition Corps. In addition, we are evaluating solutions to develop and field a Virtual 

Contracting Enterprise to provide electronic, web-based tools to enable total visibility and analysis of the full scope of our entire contracting mission. 

The Department is actively assessing and developing its position regarding the 

appropriate numbers of General and Flag Officers and Senior Executive Service authorizations for contracting positions. Our report to the congressional committees in 

response to section 849 of the NDAA for Fiscal Year 2008 will contain additional 

information on this subject. 

As the Department reviews the Commission’s recommendations and appropriate 

implementation actions we are assessing the possibility of recommending specific 

supportive legislative actions. As required by section 849 of the NDAA for Fiscal 

Year 2008, we will submit a report to the congressional defense committees with 

the results of our assessments by May 28, 2008, and will provide additional information at that time. 

ARMY CONTRACTING TASK FORCE UPDATE

The Task Force was directed to implement reforms and corrections immediately 

to correct deficiencies specifically identified in Kuwait, which have already resulted 

in significant improvements in contracting operations. Several new leaders are now 

in place, along with new internal control processes for effective checks and balances. 

A systematic review of Kuwait contract files from fiscal year 2003 to fiscal year 

2006 was directed to identify issues that weren’t already being addressed by an ongoing investigation by either the U.S. Army Audit Agency (AAA) or the U.S. Army 

Criminal Investigation Command (CID). A 10-person military team deployed to Kuwait and completed a review of 339 contracts under $25,000. The team found poor 

contract documentation, referred several contracts to AAA and CID for additional 

analysis, and documented ‘‘lessons learned’’ for future expeditionary contracting 

support. 

22

The review of contracting actions over $25,000 is almost complete at the U.S. 

Army Tank-automotive and Armaments Command (TACOM) Life Cycle Management Command in Warren, MI. Roughly 90 boxes of contract files were sent there 

from Kuwait. The review of 319 contracts is complete. Several of these contracts 

have been referred to AAA and CID for further analysis. The team specifically recommended improvements in the areas of source selection procedures, lease versus 

buy analyses, performance-based contracting research, and solicitation and contract 

review processes. The TACOM team is also reviewing financial data to ensure appropriate disbursements and accounting of payments. 

Work continues with the orderly transfer of existing and future major contract actions from Kuwait to the U.S. Army Sustainment Command (ASC) at Rock Island, 

IL, a subordinate command under AMC. ASC established a dedicated 12-member 

team, supported by legal professionals, charged to assist in resolving a number of 

claim actions, definitizing unpriced actions, and negotiating new contracts for requirements in ways that will result in significant cost avoidance or savings. The 

leasing of nontactical vehicles was renegotiated with an estimated savings of $36.6 

million over a 3-year period. 

Several other initiatives designed to enhance contracting support for contingency 

operations are underway. The Army established a team to examine our contingency 

contracting force design and determined the need to add 3 additional contracting 

support brigades, 5 additional contingency contracting battalions, 3 additional senior contingency contracting teams, and 48 additional contingency contracting teams. 

These were included in the totals on page four. 

The Army Contracting Task Force final report was completed on March 17, 2008, 

and has been presented to the Secretary of the Army for his review and consideration. The details in the report will be included in the Section 849 of the NDAA 

for Fiscal Year 2008 report to Congress. 

ACQUISITION WORKFORCE

We would like to discuss the steps the Army is taking to implement sections 807 

and 852 of the NDAA for Fiscal Year 2008, and briefly highlight section 851. The 

Army has implemented a contractor inventory system as referenced in section 807. 

In 2002, the DOD Business Initiative Council approved the Army as the DOD pilot 

to test a contractor manpower and cost reporting process, designed to provide better 

visibility over the labor and costs associated with the contract workforce and the 

missions supported by that workforce. The Contractor Manpower Reporting system 

was implemented in March 2005. With this process already in place, we will work 

closely with DOD to define, refine, and implement the contractor inventory requirements of section 807. 

The Army is actively engaged in helping to shape DOD’s response to the NDAA 

for Fiscal Year 2008, section 851 which requires a separate section on the Defense 

acquisition workforce in the DOD Human Capital Strategic Plan. This plan is directly linked to implementation of NDAA for Fiscal Year 2008 section 852. In supporting this effort, the Army is taking aggressive action to review its existing workforce development programs and define opportunities to improve the Army’s acquisition workforce. Section 852 requires that DOD address acquisition workforce needs 

in three separate areas: recruitment, training, and retention. 

A joint acquisition workforce group composed of the military Services and Defense 

agencies have met to facilitate the prioritization. These joint meetings have facilitated the prioritization and funding strategy in order to determine best value investment for the DOD acquisition workforce. Although some of the initiatives represent 

Service-specific programs, pilots, or opportunities, the proposed initiatives in many 

cases represent best practices from among the Services and those that have potential for enterprise across DOD. The details and merits of these and other initiatives 

will be presented to the Service Acquisition Executives in the near future as we 

move to final recommendations and decisions on how best to execute the Defense 

Acquisition Workforce Development Fund. 

Over the next few weeks, we will jointly discuss and analyze all Section 852 initiatives to determine the best enterprise solutions for our recruitment, training, and 

retention challenges. This has been a very robust process, and when the funding is 

provided, DOD and the Services will be poised to implement the highest priority solutions in a way that optimizes DOD results. The Army appreciates the opportunities that section 852 will provide our workforce. These programs will help ensure 

a well-trained and educated workforce, focused on providing the soldier with worldclass capabilities. 

23

CONCLUSION

As stewards of American taxpayers’ dollars, the Army is improving its structure 

and capacity to manage contracts to better support expeditionary operations and improve overall contractor performance. 

Expeditionary military operations in Iraq and Afghanistan have placed extraordinary demands on our contracting system and the people who make it work. As 

stated before, the vast majority of our military and civilian contracting personnel 

perform well in tough, austere conditions. We know that the success of our 

warfighters and those who lead them is linked directly to the success of our contracting workforce, and we are working hard to ensure that contracting is a core 

competency within the Army. We are also working hard to change the culture in 

the Army to one that recognizes the critical and complex role of contracting as a 

core competency. The Army’s focus on contracting is not just for contracting professionals. Warfighters set requirements and help manage contract execution, and they 

must be totally involved in their part of the contracting process. 

The commitment of our contracting professionals and to our contracting professionals must be 100 percent. They must stay focused on supporting the warfighter, 

and inspire the confidence of the American people. This will not be easy; it will take 

time, but getting it done is essential. We cannot and will not fail—our warfighters 

and our taxpayers deserve no less.

Senator AKAKA. Thank you very much, General. 

Now I’d like to give my opening time to Senator McCaskill for 

your questions. 

Senator MCCASKILL. Thank you very much. I really appreciate it. 

Obviously, we have serious challenges, and I do appreciate the 

testimony of all of you today. I think everyone is working hard to 

implement the Gansler recommendations and the contracting task 

force recommendations, and I do think some progress is being 

made. But, obviously, in the management of acquisitions and the 

ongoing management of contracts, we still have great challenges. 

I have reviewed a very lengthy article that was written in the 

New York Times on March 27, and, I have to tell you, I feel sick 

to my stomach about a munitions contract that we entered into 

with a 22-year-old man with a record of carrying a fake identification (ID) so he could drink, and became the head of his company 

when he was 18 years old. We’ve done $200 million a year in business with him, and this stuff is coming from old Communist-bloc 

countries, and a lot of this ammunition is, in fact, 40 years old and 

unreliable, and it’s not been tested. Have any of you read this article? Are you familiar with this AEY case? [No response.] 

It’s just mind-boggling to me how somebody like this gets this 

contract, and how we have a contract to supply munitions that 

doesn’t require the same kind of standards that we would require 

for our military or from the North Atlantic Treaty Organization. 

Whoever would like to tackle that, as to how we entered into a 

$200-million-a-year contract for munitions to supply the Afghan 

Army that is working on our behalf, and paid with taxpayer dollars, and to the Iraqis, without any kind of minimum standards or 

testing; I just have to figure out how that happened. 

General THOMPSON. Ma’am, we have looked at that article, and 

the examination of that contractor and that contractor performance 

way predated the article. There’s been about a 7-month look at that 

contractor and his performance. 

There is an ongoing investigation. That contractor was suspended from contractor work with the U.S. Government. That suspension happened about the day the article was published, but the 

24

investigation that led to that formal suspension action, which is a 

very deliberate process, had been ongoing for months. 

The contract was properly let. It followed all the proper procedures. The DCMA evaluated that contractor for past performance 

and financial solvency before the contract was let. The requirement 

in that contract was for commercial ammunition in order to be 

used by the Afghan forces, and the requirement did not have the 

same specifications that we have for our military ammunition. 

They did meet the commercial standards. 

The basis for the contractor suspension is what’s under investigation right now, because it appears that he did make a false claim 

that the ammunition that he provided came from a certain source, 

when, in fact, it was Chinese-manufactured ammunition. So what 

you have here is a case, I think, of a contractor that was not performing, and is not performing. Therefore, we are taking the proper 

procedures in order to remedy that. 

Senator MCCASKILL. I’m curious why, if you say proper procedures were employed, who made the decision that there was no 

quality assurance standards to cover packaging, storage, testing, or 

transport? That wasn’t an important part to the contract? Who 

would have made that decision? 

Mr. PARSONS. Ma’am, I’m very familiar with the contract on that, 

as well. As General Thompson said, when that ammunition was 

purchased, it’s considered what they call ‘‘nonstandard ammunition,’’ so we don’t buy that to the same standards that we do our 

military ammunition. 

Senator MCCASKILL. But, why? Who makes that decision, that 

you don’t buy it to the same standards? That’s what I want to find 

out. Who makes the decision that the ammunition that we are 

sending to the Afghan Army to fight terrorists for us in a dangerous situation doesn’t have to have the same standards as our 

American military? 

Mr. PARSONS. You raise a good point, and that is one of the 

things that we are addressing with the Joint Munitions Command 

now, which was responsible for that requirement, to go back and 

understand, why is it that the requirements for that ammunition 

did not meet the same standards that we use for our own U.S. ammunition? A lot of this ammunition is bought from former Sovietbloc countries. It’s, like I said, nonstandard ammunition. It’s used 

in AK–47s and those types of weapons. But, you raise a very good 

point. We’re taking a very hard look at a lot of our foreign military 

sales (FMS) procurements, where we’re buying nonstandard equipment, and to address your exact position there, that we ought to 

be looking at the requirements and what we are buying. 

Senator MCCASKILL. I want to try to figure out who’s responsible, 

because somebody needs to be held accountable for this situation. 

The past performance was rated as ‘‘excellent.’’ This is a 22-yearold that had no prior contracting experience. Now, who decided 

that their past performance was ‘‘excellent,’’ and on the basis of 

what? Does anyone know? 

General THOMPSON. Ma’am, when we let a contract with somebody, we use the DCMA to evaluate both past performance and the 

financial solvency, and that was the process that was used in this 

particular case. 

25

Senator MCCASKILL. I’m going to follow up on this, but I want 

to drill down on this, and I want to figure out where in the—when 

you sit here and you want things to get better, it’s very hard to pinpoint who is the person that’s responsible for these mistakes. This 

contract was a terrible mistake. I assume half of what I read in the 

newspaper is wrong, and the other half may be slanted, but if you 

just sweep away a lot of the factual information that’s in this article, and look at it, this contract was a mistake, and somebody has 

to be responsible for this mistake. It’s not good enough to say, 

‘‘Well, the fact that he was only 22, and he was providing hundreds 

of millions of dollars worth of munitions,’’ and he was dealing with 

somebody in one country that we had to be called by their embassy 

to say the guy had been in black-market munitions. 

General THOMPSON. Ma’am, like Mr. Parsons and I both have 

said, we are looking at all the circumstances surrounding that contract and that contractor, not just this individual contract, but any 

other contracts that individual’s had. When we get all the facts out 

on the table, then we’ll be able to determine what mistakes were 

made, and by whom. 

I, like you—there’s always another side of a story, and I’m not 

defending this contractor, in any way, shape, or form. I’m just saying, I want to get all the facts on the table. What’s reported in the 

press, either in this article or others, is not necessarily all the 

facts, and we are determined to get to the bottom of it, and get all 

the issues out on the table, and then we will use the legal mechanisms that we have, and the contracting policy venues that we 

have, and I assure you, we’ll make the proper decisions, and people 

will take appropriate action, across the board, whether in the government or outside the government. 

Senator MCCASKILL. I will follow up with some more specific 

questions about that arms contractor, because I do think that there 

are some more specific questions that I hope you guys get to the 

bottom of as it relates to that contract. 

I’m not going to have time to go into my other two questions, but 

I will just tell you, I will direct those questions to you, too. 

The first one is on Kellogg Brown and Root (KBR), the policy 

that we’ve decided it’s okay to allow a contractor to use an offshore 

account to avoid Medicare and Social Security and unemployment 

taxes. We have 10,000 Americans working for KBR that have no 

Medicare payments being made, and they have no unemployment 

compensation insurance, and they have no Social Security payments being made. There’s a post office box in the Cayman Islands 

somewhere that’s taking care of all that, so that none of those responsibilities are met by KBR. I’m not saying that what has happened is illegal, but I will ask for you all to respond in writing as 

to whether you think this is a good thing for us to be doing. If it’s 

not, what help do you need from us, in terms of laws, to make sure 

that it’s illegal? Because it’s offensive. 

Then the final thing is jurisdiction. Secretary Bell we talked, in 

a previous hearing, about jurisdiction for criminal acts by contractors. I know there has been some regulations, the guidelines that 

came out in that regard since the last time we spoke, but I want 

to make sure that anybody who’s working with taxpayer money in 

a foreign place is held accountable if they’re raping people or comVerDate 0ct 09 2002 14:17 Oct 14, 2008 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6602 C:\DOCS\44868.TXT SARMSER2 PsN: JUNEB
26

mitting any other kinds of crimes. We have to make sure that our 

laws apply to them, regardless of whether they are actually physically in the United States or not. So I will have some followup 

questions on that, also. 

I apologize that I have to leave and won’t be here for another 

round of questions. Senator Akaka, I really appreciate your giving 

me a chance to ask those questions before I have to go preside. 

Senator AKAKA. Thank you, Senator McCaskill. 

Senator Thune. 

Senator THUNE. Thank you, Mr. Chairman. 

Mr. Parsons, I understand that one attractive aspect of the ACC 

concept is the ability to surge expeditionary contracting support capability to the field through the use of contracting support brigades. Now, given the current shortage in the acquisition workforce, where will ACC get the bodies, in terms of workforce, to acquire this surge capability, and how many total people in the workforce do you think the ACC will need, at the end of the day, to provide that surge capability? 

Mr. PARSONS. Sir, you do raise a good point about the ability to 

bring additional people into the workforce rapidly. One of the 

things that we’re doing, and especially General Thompson has done 

already on the military side, is to look at moving—General Thompson has directed that the accession point for our officers and our 

NCOs into contracting be moved to the left, so that we can start 

assessing more officers—junior officers and NCOs into the contracting workforce, so that we can get them into these contingency 

contracting teams and battalions and brigades, to get the training 

that they need. 

On the civilian side, we’re working closely with a lot of universities on establishing programs with them that will allow us to hire 

new graduates into the civilian side of the contracting workforce 

rather quickly. 

Where we really are challenged is hiring experienced contracting 

personnel. Across the Federal Government, there is a huge demand 

for contracting subject-matter experts, whether it’s the homeland 

security, other sister Services—Air Force, Navy—and we are very 

challenged in being able to try to hire experienced personnel. So, 

our goal, while we’re trying to provide incentives, like entitlements 

for permanent change of station to civilians to come join us that 

have experience, we’re really targeting the college graduates, to try 

to bring them on quickly. 

What this new contracting command will do for us, though, is, 

now, by bringing 72 percent of all the contracting assets across the 

Army into one command, we’ll now be able to surge across that 

command, looking for the type of expertise and talent that we need 

to support an expeditionary operation. 

So, these contracting support brigades, while they’re small, we 

will be able to tap into other parts of the ACC to help facilitate 

them. 

A good example of that right now is in Kuwait. We’ve been challenged in being able to track trained civilians into Kuwait. We 

have a new contracting support brigade commander there, Colonel 

Bass, who has made a lot of improvements, and he has added additional personnel to his staff. But, we’ve also created what we call 

27

a ‘‘reachback capability’’ at one of our major acquisition centers, 

and we’re performing an awful lot of the contracting now for Kuwait out of the contracting office in Rock Island, where we had 

some subject-matter experts that can perform that function. 

So, we’re looking across the current command to see how best we 

can surge; but, the big challenge, as you point out, will be bringing 

the new people onboard to staff this up. 

Senator THUNE. To the ACC, when do you expect to achieve initial operating capability (IOC)? What exactly does that mean to the 

Army Contracting Command? 

Mr. PARSONS. To date—as we said, we activated the new command on March 13. It’s a provisional status, so we are in the process of building the command. We’ve requested the additional resources we need that are—from the Army—that we need for the 

command. I don’t expect to be in an IOC, beyond where we are 

today, with supporting installations and supporting expeditionary 

contracting, until October 1 of this year. That’s when we will bring 

the rest of the pieces of this command together and start bringing 

people onboard. I don’t expect that we’ll be fully operational and capable until the following year. 

What we’ve given the Department is a 3-year plan to bring both 

the military and the civilians onboard, and expect to have them 

through their—what we call level-two certification training within 

that 3-year period of time. That’ll also give us a year or 2 to start 

getting a lot of these people training. 

But, there is no short-term fix. As I said, it’s a 3-year plan before 

we expect that we’ll be fully operational. 

Senator THUNE. Secretary Bell, your written testimony lays out 

the statutory and regulatory framework for the use of private contractors and the distinction that prohibits private contractors from 

carrying out inherently governmental functions. There are those 

who have argued that the line between what is an inherently governmental function, and what is not, is not as clear as it should 

be. The distinction may be particularly difficult to maintain in a 

high-risk environment, where PSCs could reasonably be expected 

to face circumstances requiring the use of deadly force to protect 

the people or property covered by their contract. 

In response to those who say that private security contracts 

should be replaced by uniformed military forces, your written statement indicates such a policy would require the manpower equivalent of nine additional brigades of combat troops. Do existing policy 

guidance and oversight by battlefield commanders prevent PSCs 

from conducting inherently governmental functions, even in highrisk environments, or is this an area that needs more work? 

Mr. BELL. I think, as you’re pointing out, Senator Thune, there 

are two aspects to effective management of contractors. One is to 

have an adequate policy framework that sets the boundaries for acceptable missions and acceptable conduct; the other part is oversight of the activity in the field. 

We believe that we have an adequate policy framework that sufficiently demarks between the capabilities that are allowed under 

the rules of law and the regulations, and those that are permissible. There is a challenge, which we have been working on, of implementing the effective supervision in the field. We’ve been workVerDate 0ct 09 2002 14:17 Oct 14, 2008 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6602 C:\DOCS\44868.TXT SARMSER2 PsN: JUNEB
28

ing on that, very focused, in the last 6 months, and we’ve made significant improvements in internal DOD management of operations 

in theater, as well as as a result of the MOA with the DOS, that 

General Petraeus has referred to in his letter to Secretary Gates. 

Having said that, we believe that continuing emphasis on this, 

particularly now that military commanders have UCMJ authority 

over contractors in the field, is going to be another step in improving the effective oversight, in terms of their conduct and their permissible behavior. 

It is an area that requires focus, and one that we are continuing 

to emphasize in our work in CENTCOM, both in Iraq and Afghanistan. 

Senator THUNE. What policies, regulations, and coordination 

steps would ensure that PSCs working for a department or agency 

outside the DOD do not negatively impact the DOD’s combat missions or counterinsurgency operations? 

Mr. BELL. As I indicated, both in my written testimony and my 

oral testimony, Senator Thune, we believe, and we’re on record, as 

is the DOS, that legislative action is required in order to establish 

clear-cut accountability for contractors supporting other U.S. Government missions outside the United States. There are several suggestions about the approaches to that. 

Our concern is that, as we work through whatever the issues are, 

there is a sense of urgency that that accountability needs to be established. It is the opinion of our legal people that that requires 

legislation in order to accomplish that. 

In addition, as you may know, the current legislation on the 

books, even under the 2008 NDAA, does not address the capability 

of the DOD and the DOS to have oversight of other U.S. Government agency PSC operations outside the United States. We believe 

that it’s a significant step forward to extend this coverage for DOD, 

DOS, and USAID. But, a better approach would be to expand that 

to all U.S. Government—those regulations, those rules and procedures, to all U.S. Government agencies. 

The additional question to be addressed, at some point down the 

road, is the activities of PSCs who are there working for private 

sector companies. To the extent that we have a sovereign state in 

place that has jurisdiction over those, they have that authority over 

them. To the extent that we have a Coalition Provisional Authority 

type of situation, at some point in the future, where we’re exercising sovereign powers, there is the question of, how do you exercise the authority of that? Again, the focus of the 2008 NDAA is 

strictly on governance for DOD, DOS, and USAID. 

Senator THUNE. What would be the impact on DOD of a change 

in the law that required uniformed military forces to perform the 

roles currently conducted by PSCs in high-risk environments, such 

as Iraq and Afghanistan? 

Mr. BELL. As you indicated in your earlier comments, Senator, 

using the Congressional Budget Office methodology for the number 

of PSCs that we have, it would take the equivalent of nine combat 

brigades worth of military personnel to perform that function. We 

have approximately 9,000 armed security contractors working for 

DOD alone in those two countries, and that would be the equivalent requirement, which would require not only the deployment of 

29

personnel, but, obviously, extensive training the particular skill requirements for personal security. 

Senator THUNE. Is it the DOD’s intention to have all of the articles of the UCMJ apply to civilians under their guidance, or just 

a few? 

Mr. BELL. Sir, it is not. General Petraeus and I have discussed 

this at some length; his view is obviously to put the greatest emphasis on criminal conduct. There are a number of aspects of the 

UCMJ that have to do with things that essentially do not relate to 

civilian personnel, and he plans to take a very conservative, but 

firm, approach regarding criminal conduct. 

Senator THUNE. I see my time’s expired, Mr. Chairman. 

Senator AKAKA. Yes. We’ll have a second round. 

The Gansler Commission report recommended the establishment 

of, ‘‘A core set of 10 additional general officers for contracting positions,’’ 5 of them in the Army, and 5 of them in joint positions. 

Now, General Thompson, at our last hearing you testified that 

you personally agree with this recommendation and, at that time, 

said, ‘‘I think you will see the Army reflect its support of that in 

the very near term.’’ Is the Army still on track to establish the new 

general officer positions recommended by the Gansler Commission? 

General THOMPSON. Senator, the Army has evaluated that, and 

we’ve passed our recommendation to OSD, and—both on the general officers and also the other legislative recommendations that 

were made in the Gansler Commission report. It’s my understanding that OSD is close to finishing, or has finished, their evaluation, as well. I don’t know where that is inside of the administration. But, the Army did finish their evaluation and gave their recommendations to OSD several weeks ago. 

Senator AKAKA. Secretary Finley, what is the position of DOD on 

the need for 10 new general officer positions in the contracting 

field, with particular attention to the 5 joint positions? 

Mr. FINLEY. Mr. Chairman, I believe we would depend on the 

Army leadership to know their business better than us. What we’re 

looking at is, not only the Army, but we’re looking at the crosscutting requirements for leadership and the pipeline of all the 

workforce that supports that leadership, including the flag officer 

and the general officer population. 

We have not made a determination whether or not five general 

officer joint positions is the right number. We have tasked the Air 

Force and the Navy for their positions on all of the Gansler recommendations that address the Army, and we have received those 

reports back from both Services, reflecting their respective positions and recommendations. 

We are in the process of digesting all that information. We will 

be proceeding with some due diligence to understand their positions and their recommendations. In parallel, we are still conducting the competency model for contracting, which goes from 

entry-level to flag-level personnel, which we expect to be completed 

by this summer. But, by May 28, when we are required to report 

back to Congress, we do expect to bring some closure as to what 

our recommendations will be for the Army and joint general officer/

flag officers requirements. 

30

Senator AKAKA. Secretary Finley and General Thompson, do you 

believe that legislation is needed to authorize these new general officer positions, or can the Department establish the new positions 

within its existing authorization? 

General THOMPSON. Sir, from the standpoint of the current legislation that authorizes a fixed number of general officers in the 

Army, the position that I have taken in the acquisition corps as to 

the recommendation is that this needs to be additive to the current 

Army ceiling on general officers. For us to be able to look at existing positions, which are all critically important, senior-level positions, and downgrade those positions to something less than a flag 

officer in order to staff the contracting general officer, would not be 

helpful to the Army. So, to the extent that there’s a growth in the 

total number of authorizations allowed to the Army, that would 

have to be handled by legislation. But, again, that’s something that 

has to go both through the OSD and the Office of Management and 

Budget administration review process; and our commitment, internally with the DOD, is to have that process completed by the time 

we turn in the report on the 28th. 

Senator AKAKA. Secretary Finley? 

Mr. FINLEY. I believe that one of the debate issues is how to best 

handle any changes in top line on the number of general officers/

flag officers. That discussion is ongoing in the Department. We 

have raised those issues for discussion—not for decision yet, but for 

discussion—for situation awareness of our military and our civilian 

leadership. 

I expect there are many different views. There are, I would say, 

pragmatic matters where we are with general officers today, in 

terms of the quotas that have been set, and where we are in actuality against those quotas. There are also matters of how many of 

our quotas are filled with joint billets, and how they’re consumed 

and allocated across the different parts of the Services. All of this 

has to come together, from my perspective, from a strategic point 

of view, as to how we have to change the way we’re going to fight 

the global war on terror. Fundamentally, this gets into the roles, 

the missions, the concept of operations, and what kind of a pipeline 

of military personnel/civilian personnel will we have in contracting 

management for the future, as we look ahead. 

So, my perspective is, this is part of the debate. We have not 

made decisions. There are people who believe we should come forward and increase the top line. Other people believe we should 

take it out of hide and start to reconfigure the way we are organized, the way we are structured. 

We are having that discussion, as General Thompson reflected. 

I do believe we will bring this to some form of conclusion before the 

report comes out on May 28. 

Senator AKAKA. The Gansler Commission report states that ‘‘The 

number and expertise of the military contracting professionals 

must be significantly increased,’’ to address the problems we have 

experienced in theater. 

General Thompson, at the last hearing, you testified that the 

Army endorsed the Gansler Commission recommendation to grow 

the military contracting workforce by 400 and to grow the civilian 

31

contracting workforce in the Army by about 1,000. Are those proposed increases still on track? 

General THOMPSON. Sir, the military increase is on track. The 

standup of the ACC, our internal process to look at all of the actions that need to be taken, is in the form of a concept plan. We 

have about 16 concept plans across the Army right now that all address growth in the contracting structure or adjustments to the 

contracting structure to some degree. We have all of those 16 plans 

under review right now, but we still think the number of the civilians that need to increase is somewhere in the 800-to-1,000 range. 

Then the question’s going to be putting the money against them. 

But, the critical thing, as Mr. Parsons indicated in his answer to 

Senator Thune’s question, is, you have to get started on hiring the 

right people, and we need to begin that almost right away. So, from 

my perspective, the quicker we get this thing resourced, and the 

quicker we reach out to the colleges and the universities and the 

population to begin to attract the right people into this career field, 

the quicker we’re going to be able to address the long-term systemic issues. Because, like anything else, it takes people, and it 

takes good people, if you want to make systemic fixes. 

Senator AKAKA. Secretary Finley, I understand that the military 

Services have resisted the recommendations to increase the DCMA 

workforce by 600. Can you explain what action the Department is 

taking to implement this recommendation? 

Mr. FINLEY. Mr. Chairman, I believe what the Services have resisted, including the Army, is the Gansler Commission characterization that all post/base campaign contracting efforts go under the 

auspices of DCMA. In DOD, we fundamentally agree with that position, that we believe that’s not an appropriate move or recommendation. But, in discussions and followup discussions—and 

we meet with Dr. Gansler about every 2 or 3 weeks; we meet with 

principals of the Commission almost on a weekly basis—understanding the intent of that recommendation, that DCMA would 

have global post/base campaign responsibility would be an enormous change in the headcount for DCMA, and we believe it is a 

fundamental role and mission of the military to conduct that business. 

At this point in our discussions between Dr. Gansler and myself, 

the intent and where we are at in trying to evaluate alternative approaches as to how to conduct expeditionary operations between 

the military/civilian service, expeditionary contracting activity, I 

believe we are very close in terms of what we believe needs to be 

done. 

So, I think that this is part of the process we’re going through 

to better understand the complications as to how we’re going to 

fight the fight, and train for the fight, in the era of the global war 

on terror. It is very, very different. It needs to be scalable for big 

operations, as well as small operations. We’re going through some 

alternative approaches, sharing that with the Services, sharing 

that with the Joint Staff, sharing that with the combatant commands, as to how does this make sense? Because this is a cultural 

change as to how we’ll fight the fight. The headcount that would 

go along with that, and where that would belong, has had 

pushback from everybody. 

32

In the Army’s case, my personal opinion is, where they’re at and 

where they’re headed, I fundamentally believe, is in the right direction. But, the actual numbers, I believe, is still up to them, not up 

to OSD. We will support them, if that’s what they believe has to 

be done to make the Army do its role and mission. That would be 

my perspective, sir. 

General THOMPSON. Senator, if I can add just a brief comment 

to what Secretary Finley said, the current workforce that does the 

contract management on the Army posts and camps, we don’t believe needs to transfer to DCMA. We are putting our arms around 

the workforce that does that today, and understanding how many 

people there are, and what functions they perform. 

We do think there is a role for DCMA. DCMA’s role, fundamentally, for the DOD, is a quality assurance role for weapons-systems 

contracts in plants and factories. That is a big mission shift for 

them to be the Service contract management on posts, camps, and 

stations, but they do have a core competency in quality assurance 

on contract management, so there is a linkage between what 

DCMA can do and what the Services do for themselves in the 

posts, camps, and stations. The key issue, to me, really is having 

a trained workforce that is prepared to go on deployments to be 

able to provide that post, camp, and station contract management. 

Those are mostly a civilian workforce, so we’re working that with 

OSD and the other Services, on what that proper balance is between DCMA and the Services. 

Senator AKAKA. Thank you very much. 

Mr. PARSONS. Sir, I’d just like to add, real quickly, too, that the 

concept plan that we had submitted as part of the ACC does build 

in some additional resources to start performing some of these 

quality assurance functions that we believe will be needed to enhance our ability to do contractor management. As General Thompson said, the piece that we’re still wrestling with is, do we need additional subject-matter experts at the installations that will be 

trained in performing contract management functions, whether it’s 

food services, transportation services, laundry services. So, that’s 

the piece that we’re still working on. But, we have built into this 

concept plan the actual requirement for quality assurance representatives that will oversee and train, work with DCMA in building up these contracting officer representatives. 

Senator AKAKA. Let me call on Senator Levin for any remarks or 

questions, and he will be followed by Senator Thune. 

Senator Levin. 

Senator LEVIN. Thank you very much, Chairman Akaka. 

I want to go to a question that I believe Senator Thune raised, 

which is the question of the private security contractors. 

I guess, Secretary Bell, this question really is for you. Do you believe that PSCs in Iraq perform security operations, ‘‘in highly hazardous public areas where the risks are uncertain’’? 

Mr. BELL. I’m sorry, is the question as to whether I believe that’s 

an inherently governmental function? 

Senator LEVIN. No. 

Mr. BELL. What is the question? 

33

Senator LEVIN. I’ll get to that in a moment. My question is, do 

you believe the PSCs in Iraq perform security operations in ‘‘highly 

hazardous public areas where the risks are uncertain’’? 

Mr. BELL. Actually, the way they are managed is that the military commander has the discretion to make the decision as to 

whether the areas in which they would operate would represent either a high risk of enemy encounter or even interfere with military 

operations. He has the authority to redirect any convoy operation 

away from those areas that he assumes to be high risk. 

Senator LEVIN. He has the authority to do it. Is there a statement in that direction, that they will not be performing security operations in highly hazardous public areas where the risks are uncertain? 

Mr. BELL. There is direction for them, in terms of approving the 

missions in advance, regarding where they’re allowed to go and 

during what times they’re allowed to go there. They are allowed, 

as any PSC operation, under military authority, to defend themselves in the event that they are attacked. 

Senator LEVIN. Do the commanders have authority—do they 

have discretion to permit the contractors to perform their operations in highly hazardous public areas? Do they have the authority to allow it? 

Mr. BELL. I don’t know that I can answer that question. 

Senator LEVIN. Why not? 

Mr. BELL. I believe that’s a matter of command decision, and 

that would be something you probably should ask General 

Petraeus. 

Senator LEVIN. I can ask General Petraeus, but my question is 

the other side of the coin. Do they have authority, then, to allow 

the contractors to operate in those hazardous public areas? 

Mr. BELL. I would assume, if they have the authority to make 

the decision, they would have the authority to do that. The direction in the policy is that they not do that. So, I would assume the 

authority does not exist. 

Senator LEVIN. The authority is the direction that they not perform in highly hazardous areas, or is it simply a matter of giving 

authority to the commander to prohibit them from operating in 

those areas? 

Mr. BELL. The commander has the authority to make that decision. 

Senator LEVIN. All right. I think you are obviously familiar with 

what I’m driving at here, which is the DOD manpower-mix criteria, 

which says that security operations that are performed in highly 

hazardous public areas where the risks are uncertain could require 

deadly force that is more likely to be initiated by U.S. forces than 

occur in self-defense, as an example of where there is a governmental function being performed. It’s clear you’re familiar with the 

language that I’m talking about. 

Mr. BELL. I’m quite familiar, as I’m sure you are, sir. This is a 

complex document. It’s 56 pages of instructions. It describes a number of generalized conditions under which security functions would 

be inherently governmental, and it describes other conditions 

under which it would not be inherently governmental. Specifically, 

in paragraph 2.1.4.1.4, it specifically describes the conditions under 

34

which the military commander is authorized to have PSCs functioning in a defensive role. The DOD’s position is that we comply 

with those requirements, as well as requirements elsewhere in regulations. 

Senator LEVIN. Part of that paragraph, though, also reads, does 

it not, that ‘‘security operations that are performed in highly hazardous public areas where the risks are uncertain’’ is an example 

of a governmental function? 

Mr. BELL. As I said, it’s a complex document, and that’s the reason there’s specific language in the document defining the conditions under which it is not inherently governmental to have PSCs 

perform those functions. 

Senator LEVIN. I also, did I not, correctly read the part where 

they give an example where it is inherently governmental? 

Mr. BELL. I believe you did, sir. 

Senator LEVIN. All right. 

Now, what about interrogation of detainees. Is it true that in the 

2005 document about the use of contractors in interrogating prisoners of war, terrorists, and criminals, that ‘‘the handling of these 

people cannot be transferred to the private sector to contractors 

who are beyond the reach of controls otherwise applicable to government personnel’’? Did I accurately read from the 2005 document—before we get to 2006, did I accurately read from the 2005 

document? 

Mr. BELL. Not having seen the 2005 document, my understanding from your counsel is that you are reading that accurately. 

Senator LEVIN. All right. If I did read that accurately, is it true 

that we did have contractors, prior to 2006, when they were authorized to engage in detainee interrogation, that, prior to that, 

they were not authorized to engage in detainee interrogation? 

Mr. BELL. I’m sorry, but I don’t have qualified knowledge of that. 

Senator LEVIN. Is there anyone here that does? [No response.] 

Okay. Do you want to answer that, then, for the record? Would 

you give us, Secretary Bell, an answer for the record? 

[The information referred to follows:]

The Department of Defense (DOD) experienced a shortage of interrogators during 

the onset of Operation Enduring Freedom, and the shortage continued into Operation Iraqi Freedom. The Department contracted for qualified, experienced civilian 

contractor employees to address this shortfall while the Army aggressively sought 

to recruit and train a larger government interrogator force. It appears that those 

responsible for acquiring these contract interrogators in 2003 and 2004 were unaware of the DOD Manpower Mix Criteria that were in effect at the time. These 

criteria provided: ‘‘How enemy prisoners of war, terrorists, and criminals are treated 

when captured, in transit, confined, and interrogated during or in the aftermath of 

hostilities, entails the discretionary exercise of government authority. Their handling, as well as decisions concerning how they are to be treated, cannot be transferred to the private sector to contractors who are beyond the reach of controls otherwise applicable to government personnel.’’ 

The August 2004 Fay-Jones-Kearn investigation of intelligence and detention activities at Abu Ghraib noted that there was a lack of Army policy regarding the use 

of contract interrogators. In response to this Fay-Jones-Kearn finding, Headquarters, Department of the Army, G–2, published guidance on February 15, 2005, 

addressing contract interrogator selection, employment criteria, training, validation, 

and disqualification. The memo continues in force today. 

In addition, DOD Directive 3115.09, which establishes DOD policy on intelligence 

interrogations, is being updated to reflect current DOD policy on the limited but 

necessary role that contract interrogators may play under the proper supervision 

and close monitoring of Government officials throughout the interrogation process.

35

Senator LEVIN. Before I arrived, Mr. Secretary, you made the 

statement that section 862 of last year’s NDAA, which is the PSC 

provision, applies only to the DOD, DOS, and USAID, and that the 

application to other government entities is needed. 862 does apply 

to all government agencies. 

Mr. BELL. Good. Pleased to hear that. 

Senator LEVIN. I’m pleased you’re pleased. But, I think, then, 

that we would expect that that’s the way it will be implemented, 

because there is no loophole, such as the one you described. 

Thank you. I’ll go back and forth. I have a few more questions, 

but if there’s others that have questions, I’ve taken more than my 

time, probably. 

Senator AKAKA. Thank you, Senator Levin. 

Senator Thune. 

Senator THUNE. Secretary Bell, I want to come back to this question of the legal framework that would govern a command response 

to any suspected illegal activity and the March 10 guidelines that 

the Secretary of Defense issued to commanders on the exercise of 

the UCMJ authority during those contingency operations. Basically, the guidelines provide that, whenever an offense allegedly 

committed by a civilian violates Federal criminal law, the DOD has 

to notify the Department of Justice (DOJ) and give it 14 days, unless extended, to decide whether it’s going to prosecute the case. In 

the interim, DOD has the authority to investigate, make arrests, 

and continue to address the immediate impact of the alleged criminal act. 

As a threshold matter, what is the Department’s opinion about 

the applicability of the UCMJ to all civilian DOD employees and 

contractors? 

Mr. BELL. Our view is that all DOD contractors and civilians 

who are accompanying military forces in the field—is the way the 

legislation reads, which we interpret to be in contingency operations—are subject to the UCMJ. 

Senator THUNE. I guess the followup question then is, does that 

guidance reflect dissatisfaction or constitutional concerns about applying the UCMJ to civilians? 

Mr. BELL. Because the MEJA law is well-established, I believe 

there is a preference to use that law, because it has been tested 

in the courts. Obviously, the legislation relating to the application 

of UCMJ is a new law that has not been tested in the courts. So 

there is some natural preference to give the DOJ the opportunity 

to prosecute under MEJA. 

Senator THUNE. So, the DOD, at least at this point, absent that 

opportunity to test it in the courts, believes that MEJA provides a 

sounder basis for bringing justice to DOD civilian employees? 

Mr. BELL. I don’t believe that’s the judgment, no, sir. I believe 

that we have full confidence in the ability of UCMJ to be applied 

equitably to contractors and DOD civilians. I think the concern is 

whether there is some basis on which the legislation might be constitutionally challenged, as opposed to being applicable for enforcement. 

Senator THUNE. Okay. I guess the other question has to do with 

the Federal Bureau of Investigation (FBI), which doesn’t currently 

have sufficient capability or an organizational structure outside the 

36

States to support prosecutions in a way that would effectively implement the DOD guidance. Does that—given the lack of that capability by the FBI, except in, maybe, what are very egregious 

cases—suggest that the DOJ is likely going to decline to prosecute, 

and, in most cases, going to cede prosecution of a given case to 

DOD? 

Mr. BELL. As a practical matter, the difficulty, we believe, in the 

DOJ taking the case, is that they actually have to get the U.S. Attorneys office in the location of last residence of the alleged criminal to agree to take the case to prosecute it. That means that if 

the individual last left Boise, ID, on his way to Iraq, where he committed a crime, that the U.S. Attorney for the area in Boise, ID, 

would have to agree to take the case/all other considerations, in 

terms of his caseload, the availability of his people, his familiarity 

with military operations, his familiarity with Iraq, would all be 

considerations that might cause him or her to agree to take the 

case, or not. 

So, while we give them that preference, and we’ve limited it to 

14 days, by agreement with the DOJ, because if they make a decision not to take that case, then we believe we should proceed to 

a speedy investigation and indictment, if it’s so called for. 

Senator THUNE. Would that be the outcome that the DOD had 

intended? It looks like it gives you the constitutional protection of 

giving DOJ the right of first refusal to prosecute, but ultimately, 

DOD is going to end up with most of those cases, it would appear. 

Mr. BELL. We’re certainly prepared for that. In the discussions 

I had when we discussed this in September, when I was over in 

Iraq, we discussed with General Petraeus and his staff judge advocate what some of the staffing implications would be for both investigators, as well as attorneys and paralegals, which they are prepared to support in moving ahead with UCMJ. 

Senator THUNE. Mr. Parsons, the Army Contracting Task Force, 

found among other things, that post-award contract management 

was inadequate, and referred to, in particular, the failure to appoint and train contracting officer representatives. What actions 

will the ACC undertake to help assure that, one, an adequate number of contracting officer representatives will be retained to provide 

post-award contract management support for expeditionary operations, and, two, that those contract operating representatives will 

be sufficiently trained to provide that support? 

Mr. PARSONS. Sir, we’ve already taken a number of actions. As 

I mentioned earlier, the concept plan that we have submitted—for 

the ACC—actually establishes what we call ‘‘quality assurance representative’’ positions. These individuals are experts in quality control and quality management. We are going to be assigning them 

the responsibility of ensuring that contracting officer representatives are, one, appointed for each contract; two, are trained; and, 

three, are actually performing their duties. We already have initiated this in Kuwait, where we’ve trained over 200 additional contracting officer representatives. Every contract in Kuwait now has 

an assigned and trained contracting officer representative. Now 

what we’re doing is actually going out and evaluating how well 

they’re performing those duties. So, we’re going to take that model 

and start applying that across the Department of the Army. 

37

The other thing that we have been doing is working very closely 

with the Combined Armed Support Command, which is part of 

TRADOC, the Training Doctrine Command, and they are developing additional contracting officer representative courses that are 

now being taught to all the logistics officers and logistics NCOs. 

Many of the pre-command courses now are giving the contracting 

officer representative training in it, as well. 

General THOMPSON. Sir, if I can add to that, just a minute. We 

have evaluated, not just the contracting courses, but also the content for the nonacquisition personnel, to make sure they recognize 

the importance of contracting. The operating part of the Army, not 

the contracting workforce, has an inherent responsibility—and this 

gets back to the Gansler Commission recommendation, to recognize 

they have a role in contracting. Their role is helping define that requirement. What do they want? When do they want it? How much? 

Then, on the back end of the contract, they have a significant role 

in appointing contracting officer representatives. These are not professional contracting individuals—military, civilian—these are the 

Sergeant Thompsons or the Captain Thompsons or the Lieutenant 

Thompsons out there, that are there to see that the product or 

service that we contracted for is properly delivered and is the right 

product or service. 

So this is part of a culture change in the operating part of the 

Army, that we need to get them to understand and accept, and we 

are actively adjusting all the course content, all the way up to the 

general officer level. The Chief of Staff of the Army has me, personally, talking to the general officer classes now about the importance 

of their role in contract requirements and in contact management, 

and part of that is appointing the right number and the right people to do the contracting officer representative tasks. 

Senator THUNE. Mr. Finley, what will Acquisition, Technology, 

and Logistics (AT&L) do, if anything, to support what the Army’s 

trying to do to develop this critical post-award contract management capability? 

Mr. FINLEY. Senator Thune, AT&L will be extremely integrated 

and support not only the Army, but, from a best of best practices, 

we will take all the good things that the Army is doing, and we 

will factor that in with the efforts that are already ongoing, which, 

to a large extent, have been coordinated with the Army, the Air 

Force, and the Navy, but we are resetting, restructuring, implementing new coursework for all levels—acquisition, contracting, as 

well as nonacquisition, noncontracting personnel—geared toward 

the global war on terror environment that we’re now in. 

To a large extent, a lot of that work has been done. We have the 

ability to have people tap in on the Internet, when they’re in theater, and come into our library of capabilities and training. I believe we’re on the right track. 

We have a lot of work to do, though, to get this to the next level 

of effectiveness to fight the fight, train the way we fight, and get 

this expeditionary training done more as a part of our normal way 

doing business in our training commands, if you will, than make 

it the exception. 

Senator THUNE. You do see the need, though, to strengthen that 

capability across the other Services as well. 

38

Mr. FINLEY. Absolutely. 

General THOMPSON. Sir, the Defense Acquisition University that 

reports to Mr. Finley and Secretary Young has strengthened their 

coursework, and they do have an online course for contracting officer representative, and we continue to upgrade the content of that 

course with the lessons learned. It’s a requirement for the Army 

Contracting Office Representatives (CORs) to take that online 

course, and then we have the additional training that we put them 

through now with the direct help that they get with the quality assurance representatives. 

Senator THUNE. Okay. 

Thank you, Mr. Chairman. 

Senator AKAKA. Thank you, Senator Thune. 

Section 852 of the NDAA for Fiscal Year 2008 established an Acquisition Workforce Development Fund. Substantial amounts of 

money are supposed to be transferred to that fund, beginning this 

summer. 

Secretary Finley, can you describe the steps that the Department 

is taking to ensure that this money is spent in a sound manner to 

address deficiencies in DOD’s acquisition workforce? 

Mr. FINLEY. Yes, Mr. Chairman. We have solicited proposals 

from all the components in DOD for their recommendations on how 

to address this Acquisition Development Fund. Those proposals 

have been received. We have over 80 proposals that we have received, and we have binned those into the different categories of 

training, retention, recruitment, hiring, and so on. 

The efforts are to see how we fund this. There’s many ways the 

Department can look to fund this—basically, what’s been authorized, but not appropriated. We have met with the Comptroller’s Office to provide us some alternatives on how to implement some of 

the funding scenarios that have been identified for going forward. 

We have met with all the Services. We have integrated in with 

the various other organizations in OSD to start and communicate 

the fund, and the approach. We’re taking a very strategic approach 

on this. Again, the global war on terror is very different than the 

Cold War. This is not a personnel account that needs to be tapped 

into, it’s more of a strategic account for addressing some pockets 

of areas that we feel need attention. 

My personal concern on this is, this is a lot of money. This needs 

the oversight and the checks and balances to assure ourselves that 

we’re spending the taxpayers’ money wisely. 

I’m not fast to spend, but I am fast with a sense of urgency to 

determine where the proposals have come in, where they best fit, 

where are the gaps in these proposals that have come in, that we 

have missed the needs, if you will. That comes about by having a 

discussion and reflection with the Services and the Joint Staff and 

the members of OSD to say, ‘‘Here’s what we have, here’s where 

we’re headed.’’ This needs to be reflected in our human-capital strategic-planning process for DOD, as well as AT&L. It’s receiving a 

very high level of attention from me, personally. 

Senator AKAKA. General Thompson and Mr. Parsons, is the Army 

taking steps to evaluate its need for this funding and the way in 

which you could use it to address deficiencies in your acquisition 

workforce? 

39

General THOMPSON. Yes, sir, we definitely are. The working 

group with the Services in the different staff elements of OSD have 

been tightly linked in this. We are just a couple of weeks away 

from taking the recommendations on those 80 proposals forward to 

the service acquisition executives to make some decisions. With me 

today is my senior person that does all of the workforce planning 

and initiatives for the Army, and he spent a significant amount of 

his time over the last couple of months helping to develop those 

proposals and prioritize them from the Army’s perspective, 

leveraging what we already do. So, like Secretary Finley said, we’re 

looking, not to duplicate what we already do, from the standpoint 

of recruitment, training, and retention—we’re looking at where are 

there gaps today, and where are additional resources, and what do 

we get with those additional resources? 

Mr. PARSONS. Sir, I’d just like to add—and it gets to the point 

that Senator Thune raised earlier. In order to get this contracting 

command the additional resources, we definitely are going to need 

to take advantage of some of the programs that are being considered in the area of recruitment and retention. A lot of interest has 

been expressed about increasing the number of interns, and looking 

at student loan repayment opportunities. These are all things that 

the team is taking a look at, in trying to prioritize and figure out 

how we distribute that. 

Senator AKAKA. Secretary Finley, General Thompson, and Mr. 

Parsons, a related provision to section 852, section 807 of the 

NDAA for Fiscal Year 2008 requires DOD to develop inventories 

and review functions currently performed by contractors. The idea 

is that you can’t effectively manage your workforce, including your 

contractor workforce, unless you know what they are and what 

they aren’t doing. This provision is a counterpart to the Federal Activities Inventory Reform Act, which already requires similar inventories of functions performed by government personnel. 

Can you tell us what steps the Department is taking to implement the requirements of Section 807? 

Secretary Finley? 

Mr. FINLEY. Yes, sir. Section 807, for us, represents a major effort to implement. There are parts of section 807 that have already 

been well underway, in terms of trying to understand acquisition 

services and address acquisition services, which is a substantial 

part of the overall budget. We’ve already implemented policy in 

this respect, but it’s the implementation of this policy that’s going 

to need to be executed. I would see opportunities, for example, from 

the 852, to leverage a fast start in the area of the 807, to get us 

going. 

The fundamental challenge, though, is that this kind of activity—

be it interns or other hiring of people—to jumpstart some shortfalls, which is, I think, excellent for the short-term, but for the 

longer-term, this has to be POM’d into our planning for the DOD. 

That’s where some of the planning activity right now needs to come 

together, from the strategic planning point of view, as to how we 

are, in fact, going to make this happen. My personal recommendation is that we start making this happen in the POM–10 cycle. 

So, we envision that the 807 is a work in progress that needs to 

be further defined, further understood. How will we meet the reVerDate 0ct 09 2002 14:17 Oct 14, 2008 Jkt 000000 PO 00000 Frm 00043 Fmt 6633 Sfmt 6602 C:\DOCS\44868.TXT SARMSER2 PsN: JUNEB
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quirements of this, from a strategic planning point of view and 

going forward? So, we don’t just shoot from the hip, we don’t have 

a knee-jerk reaction. We have addressed this from an acquisitionof-services point of view over the past 18 months, and we have policy out there, but we are going to need to do far more work now 

for implementation. 

General THOMPSON. Sir, from an Army perspective, before section 807 was made part of the law, the previous Army Secretary 

really recognized the need to get our arms around the total workforce, to include the contractors, and he required much to the chagrin of many people that had to do the reporting, for us to count 

noses on the contractor manpower equivalents. We’ve been doing 

that for a number of years, and have a pretty thorough process in 

place right now to do that. 

We also are now looking at those things that are really inherently governmental, and looking at the business-case analysis and 

insourcing things that we are currently, in many cases, using contractors for. If it’s an enduring function and it’s inherently governmental, it should be a government employee who’s doing that. 

Just on my own staff, I use one example where we have 11 different support contracts. We’ve now consolidated them into one. 

The next step to that is taking about 50 of those contract employees and insourcing the appropriate number to be government civilians, Army civilians, because it’s enduring functions that we’re 

having contractors perform. That kind of activity is going on across 

the Army, and that’s part of what I use as an example when I educate the senior leaders, that they need to be doing that in their organizations, as well. 

Senator AKAKA. Mr. Parsons? 

Mr. PARSONS. I’ll just add to that, sir, that what we are finding 

now with our contracting people, as a way of enforcing that, is to 

make sure that all contract services have been reviewed by a commander and determined to be necessary with addressing these 

issues, like whether it’s an enduring service. So, our contracting 

folks will not execute a contract for contract services unless approval has been in there by the commander. So, we have a very 

disciplined process to where we now start focusing on contract services and how we ought to be executing it. 

General THOMPSON. Inside the direct-report organizations that 

come to me, all of those approvals for contract services come to me 

to be signed off on. I assure you, I ask some very hard questions. 

Senator AKAKA. Thank you. 

Senator Levin. 

Senator LEVIN. Thank you, Mr. Chairman. 

A few weeks ago, the Boston Globe reported that KBR employs 

about 10,000 Americans in Iraq through subsidiaries in the Cayman Islands. These subsidiaries are shell corporations, they have 

no function other than to taxes. A KBR spokesman acknowledged 

that these subsidiaries were created to enable the company to 

avoid paying Social Security and Medicare taxes, as well as State 

unemployment taxes. I know that Senator McCaskill raised this 

question, but I’d like to pursue it with you, Secretary Finley, a little bit more thoroughly than she had an opportunity to do. 

41

Now, the tax savings are passed along to DOD, but the workers 

of KBR suffer, and KBR gains a competitive advantage over companies that pay their taxes. I don’t think it’s the intent of the Internal Revenue Code that companies be able to form shell corporations, wholly-owned subsidiaries and tax havens, and then avoid 

paying Medicare taxes and Social Security taxes. That cannot be 

the purpose of the Internal Revenue Code. 

The article in the Boston Globe reports that the DOD has known 

about KBR’s avoidance of taxes since at least 2004, when the issue 

was flagged in DCAA audit reports. 

So, Secretary Finley, let me start with you. Does it concern you 

that 10,000 Americans working in Iraq are not going to have unemployment benefits and will receive less money from Social Security 

when they retire because of KBR’s activities in the Caymans? 

Mr. FINLEY. Yes, sir. 

Senator LEVIN. What is the Department doing about it? 

Mr. FINLEY. I’m not familiar with the details, Senator Levin. I 

would have to take the question for the record, and would be more 

than happy to get back to you on the details of what the DOD is 

doing. 

[The information referred to follows:]

There is no prohibition on the use of foreign subsidiaries by defense contractors. 

Under section 3121 of title 26, U.S.C., commonly referred to as the Internal Revenue 

Code, a company is not subject to Federal Insurance Contributions Act (FICA) taxes, 

if the services are performed outside of the United States by a United States citizen 

or resident who is an employee of a foreign company or subsidiary. Payment of 

FICA taxes is a requirement of U.S. tax law, rather than contract law or regulation. 

Accordingly, we do not consult the Internal Revenue Service on this subject.

Senator LEVIN. Do you know whether the DOD has ever consulted with the IRS on this subject? 

Mr. FINLEY. No, sir, I do not. 

Senator LEVIN. Now, there’s a contract going on now, a competition for LOGCAP IV, which is a follow-on to the contract that KBR 

currently holds, and KBR is one of the companies that’s competing 

for the follow-on contract. Are you familiar with the competition 

that’s going on now for LOGCAP IV, Secretary Finley? 

Mr. FINLEY. I do not have a detailed familiarity with that contract. 

Senator LEVIN. Okay. By the way, General Thompson, are you 

familiar with this issue? 

General THOMPSON. On the LOGCAP IV? 

Senator LEVIN. Yes. 

General THOMPSON. I’ll let Mr. Parsons address that. 

Senator LEVIN. Okay, fine. Sure. 

Mr. PARSONS. Sir, the LOGCAP IV has been under re-evaluation, 

based on the Government Accountability Office (GAO) decision that 

the protests that were filed by the two unsuccessful offers were 

sustainable. So, that process is underway. The evaluation has been 

taking place for a number of months. Beyond that, I can’t really address the specifics on this exact issue on the offshore and the impact on that evaluation. 

Senator LEVIN. Putting aside the impact on the evaluation of a 

particular contract—and I can understand the reluctance to get 

into the details of a competition—but, in general, are you troubled, 

Mr. Parsons, by what I’ve described? 

42

Does it trouble you, that we have 10,000 Americans working in 

Iraq who lose their unemployment compensation while they’re 

there because the company that is operating in Iraq has created a 

phony subsidiary in the Caymans, a total shell corporation, paper 

corporation, with no purpose other than to avoid taxes? Is that 

something which, at least on its surface, would trouble you? 

Mr. PARSONS. Sir, I’m not real familiar with the issue. I do know 

enough that there is nothing that prohibits it in law or regulation. 

I’ll have to defer to the DOD on this, because I really believe it’s 

a broader policy issue than at my level or at the Army level. 

Senator LEVIN. Do you know whether the IRS has ever been consulted as to whether or not this is an appropriate way to avoid 

taxes? 

Mr. PARSONS. I have no knowledge of that, sir. 

Senator LEVIN. General, would you know anything about this 

issue? 

General THOMPSON. No, sir, I have no knowledge of that either. 

Senator LEVIN. Okay. Either Mr. Parsons, then, or Secretary Finley, would you get back to the subcommittee with answers to the 

questions? 

[The information referred to follows:]

Mr. FINLEY. There is no general prohibition on the use of foreign affiliates by defense contractors. Under section 3121, title 26, U.S.C., which is part of the Internal 

Revenue Code, an American employer, while not required, may elect to have the insurance system established by title II of the Social Security Act extended to services 

performed outside of the United States by a citizen or resident of the United States 

who is an employee of the American employer’s foreign affiliate. By statute, the decision to extend coverage in such cases rests with the American employer. We have 

not consulted the Internal Revenue Service on this subject. 

General THOMPSON. There is no prohibition on the use of foreign subsidiaries by 

defense contractors. Under section 3121 of title 26, U.S.C., commonly referred to as 

the Internal Revenue Code, a company is not subject to Federal Insurance Contributions Act (FICA) taxes, if the services are performed outside of the United States 

by a United States citizen or resident who is an employee of a foreign company or 

subsidiary. Payment of FICA taxes is a requirement of U.S. tax law, rather than 

contract law or regulation. Accordingly, we do not consult the Internal Revenue 

Service on this subject.

Senator LEVIN. I’m glad to hear that Secretary Finley’s troubled 

by it, because I think Americans in these families that these workers are in would surely directly be troubled by it. It’s easy to say, 

‘‘DOD benefits, because their contract can go for less; because 

they’re not paying taxes that they should be paying.’’ That’s an 

easy out for all the employees of the DOD. Maybe the DOD ought 

to stop paying taxes on all of its employees, or all contractors’ employees, so that contractors can bid lower, because they’re not paying taxes on their employees. We wouldn’t tolerate that for 1 

minute for a contractor that’s operating in the United States, and 

I’m not sure we should. I don’t think we should tolerate it for a 

contractor who’s hiring American citizens overseas. 

So I guess, Secretary Finley, maybe I should put this responsibility on you. I’m not sure whether you or Mr. Parsons is the right 

person to give us an answer for the record, has the Department 

consulted with the IRS on this issue? What’s the IRS’s response 

been? Whether or not the Department is considering including in 

its specifications for contracts requirements that American employVerDate 0ct 09 2002 14:17 Oct 14, 2008 Jkt 000000 PO 00000 Frm 00046 Fmt 6633 Sfmt 6602 C:\DOCS\44868.TXT SARMSER2 PsN: JUNEB
43

ees working abroad have their Medicare and their other payroll 

taxes deducted—would you get back to us, Mr. Secretary? 

Mr. FINLEY. Yes, sir. I’d be happy to. 

[The information referred to follows:]

There is no prohibition on the use of foreign subsidiaries by defense contractors. 

Under section 3121 of title 26, U.S.C., commonly referred to as the Internal Revenue 

Code, a company is not subject to Federal Insurance Contributions Act (FICA) taxes, 

if the services are performed outside of the United States by a United States citizen 

or resident who is an employee of a foreign company or subsidiary. Payment of 

FICA taxes is a requirement of U.S. tax law, rather than contract law or regulation. 

Accordingly, we do not consult the Internal Revenue Service on this subject. The 

clauses and provisions in our contracts relate to contract performance; we do not 

contractually require our contractors to comply with unrelated laws and regulations. 

In addition to payment of FICA taxes, related payroll taxes are also a requirement 

of U.S. tax law. Any requirement for a foreign company or subsidiary to pay FICA 

taxes and related payroll taxes must come from a change to the tax law and not 

by incorporating a clause in our contracts.

Senator LEVIN. Thank you. 

Thank you very much, Mr. Chairman. 

Senator AKAKA. Thank you, Senator Levin. 

Senator Thune. 

Senator THUNE. Mr. Chairman, I don’t have any further questions. I appreciate our panel being here, and thank you. 

Senator AKAKA. Let me ask one question, here, before we adjourn. 

The Gansler Commission reported extensively on the inadequacies of contract management in Iraq, explaining that ‘‘After the 

contract is awarded, there are no resources trained to monitor and 

ensure that the contract is performing and providing the services 

needed by the warfighter.’’ 

I understand that the Army is trying to address this problem by 

shifting existing contract oversight resources to Iraq. However, the 

Army and other DOD components have long had a shortage of 

trained, experienced, and qualified personnel to perform needed 

oversight on service contracts here in the United States. For example, in March 2005, GAO reported that the Army failed to even assign contract surveillance personnel to 13 of 30 contracts reviewed. 

In October 2005, the DOD Inspector General (IG) reported that 

only one-third of 23 contracts reviewed contained adequate contract 

surveillance plans, and 14 had no surveillance plans at all. In 2006 

and 2007, the IG reported that DOD failed to perform adequate 

contract surveillance on 23 of 24 task orders awarded through the 

Department of the Interior; 15 of 61 task orders awarded through 

the Department of the Treasury; and 54 of 56 task orders awarded 

to the General Services Administration. 

Secretary Finley, General Thompson, and Mr. Parsons, what 

steps are the DOD and Department of Army taking to address 

shortcomings in the surveillance of service contracts and ensure 

that you have the workforce you need to ensure that the Department gets the performance that it pays for? 

Mr. Finley? 

Mr. FINLEY. Mr. Chairman, I’m not familiar with the specific statistics that you have cited, but the efforts underway involve a review of our contracting competencies for all of the DOD. It’s an effort that we started last year, and it’s an effort that we expect will 

be completed by this summer. Within that construct, I would exVerDate 0ct 09 2002 14:17 Oct 14, 2008 Jkt 000000 PO 00000 Frm 00047 Fmt 6633 Sfmt 6602 C:\DOCS\44868.TXT SARMSER2 PsN: JUNEB
44

pect that the surveillance plans and the effectiveness of our oversight in those surveillance plans will be addressed from a contractual contract management point of view. 

So, I’ll be happy to take the question for the record and outline 

for you what work we have left to do. 

[The information referred to follows:]

Since early 2007, the Army’s acquisition policy for services valued greater than $2,500 requires contracting officers to appoint certified Contracting Officer’s Representatives (CORs) in writing before contract performance begins, identify properly 

trained CORs for all existing service contracts, and ensure that a Government Quality Assurance Surveillance Plan is prepared and implemented in service contracts. 

In January 2007, the Army partnered with the Defense Acquisition University to 

provide training in COR responsibilities. To date, they have trained more than 6,500 

Army personnel to be CORs. As documented in the Army’s response to the Gansler 

Commission Report, the Army has realigned the Army Contracting Agency (ACA) 

under the Army Material Command (AMC) and established the U.S. Army Contracting Command (ACC) to centrally manage all contracting activities. The ACC 

will contain subordinate elements designed to address those challenges identified in 

the past and develop and lead way ahead solutions. The Expeditionary Contracting 

Command (ECC), an ACC subordinate command, is designed to provide effective 

and agile expeditionary contracting capability across the full spectrum of military 

operations. The ECC will standardize operations and provide oversight of contracting activities to ensure contract compliance. Within the ECC, subordinate commanders are responsible for making available various training necessary to ensure 

mission readiness and success. The Installation Contracting Command (ICC), another ACC subordinate command, will provide the pre- and post-award contracting 

support to Army installations worldwide. The ICC will provide hands-on contracting 

training and experience for Army contingency contracting personnel, provide reachback support to deployed personnel and units, and examine and assess contract 

management at the installation level. Section 813 of Public Law 109–364 directed 

the Secretary of Defense to establish a ‘‘Panel on Contracting Integrity.’’ This Panel 

identified contract surveillance as an area of vulnerability that could lead to fraud, 

waste, and abuse. CORs are a critical element to manage this vulnerability. As 

such, the Panel initiated several actions to improve contract surveillance, as detailed in the Panel’s 2007 Report to Congress. The Panel also recommended policy 

changes. One would require contracting officers to designate CORs prior to contract 

award, rather than prior to commencement of contract performance. Another would 

reinforce the COR’s responsibilities and compel requiring activities to affirm that 

performance of COR functions be addressed as part of their annual performance assessment. Additionally, the Panel established a Sufficient Contract Surveillance 

Work Group to develop a DOD standard for COR functions, responsibilities, and certification.

Senator AKAKA. General Thompson? 

General THOMPSON. Sir, like Dr. Finley, I’m not familiar with the 

specific examples cited in the GAO and the audit reports, but, from 

a broader perspective, we do have an Army policy now that we are 

enforcing that all service contracts over $2,500 have an appointed 

COR. The example that Mr. Parsons gave you earlier, about the 

shortfall that we found in Kuwait, and now, in Kuwait, in particular, we’ve assigned a COR to every contract, I do know that 

about 100 DCMA personnel have been sent in the last couple of 

months to Iraq to increase the contract management ability of the 

Joint Contracting Command in Iraq, and there is an additional 

number of personnel—and I’m not sure of the exact number—that 

will deploy over there once we identify them and get them ready. 

So, this is something that we are systemically addressing across 

the board. 

Sir, if I could just take one opportunity—I made a statement earlier, to a question that was asked by Senator McCaskill about the 

AEY ammo contract and the role of DCMA. DCMA did conduct a 

pre-award survey for that contract, but the past-performance 

45

award was something that was done by the Army Source Selection 

Authority. The actions of the Army Source Selection Authority on 

that contract are part of what we’re reviewing. So, I just want to 

make sure that I made that correction for the record, publicly, because I didn’t want to have a misstatement for the record. 

Senator AKAKA. Thank you very much. That certainly will be recorded. 

Mr. Parsons? 

Mr. PARSONS. Sir, I’d just like to amplify on the contracting-officer-representative discussion, that in addition to this additional 

training that we are providing CORs, we’ve developed a new training course at the Combined Armed Support Command to focus on 

preparing performance work statements for service contracts. Part 

of that training now teaches the individuals how to prepare a quality assurance surveillance plan. We are instructing our contracting 

personnel that, for every service contract that they issue, that that 

quality assurance surveillance plan must be a part of the contract 

surveillance in the post-award activity. 

So, again, a lot of this is training the nonacquisition people on 

their role in contractor management and contract management; 

we’re developing as many new courses as we can to get them additional training and better educated. 

Senator AKAKA. Okay. 

I thank you all very much for your part in this—your testimony 

and your responses in this hearing on contracting in Iraq and Afghanistan. I look forward to working with all of you to continue to 

try to improve our programs, wherever they are. It’s a huge operation here, but we want to do the best we can to help our military 

be the best that they can, as well. 

With that, I thank you, again. This hearing is adjourned. 

[Questions for the record with answers supplied follow:]

QUESTIONS SUBMITTED BY SENATOR CARL LEVIN

MANPOWER MIX CRITERIA

1. Senator LEVIN. Secretary Bell, the 2005 version of the Department of Defense’s 

(DOD) Manpower Mix Criteria defined the confinement, interrogation, treatment, 

and actions relating to enemy Prisoners of War (POWs), terrorists, and criminals 

as inherently governmental functions. Paragraph E1.2.2.5 of the 2005 Manpower 

Mix Criteria states:

‘‘How enemy POWs, terrorists, and criminals are treated when captured, 

in transit, confined, and interrogated during or in the aftermath of hostilities entails the discretionary exercise of government authority. Their 

handling as well as decisions concerning how they are to be treated cannot 

be transferred to the private sector to contractors who are beyond the reach 

of controls otherwise applicable to government personnel.’’

In 2006, this language was revised to add a new paragraph authorizing contractor 

employees to conduct interrogations ‘‘if they are properly supervised and closely 

monitored throughout the interrogation process by sufficient numbers of properly 

trained government officials.’’

Is it your understanding that DOD was in compliance with the 2005 version of 

the Manpower Mix Criteria at the time that it was in effect? 

Mr. BELL. The DOD experienced a shortage of interrogators during the onset of 

Operation Enduring Freedom, and the shortage continued into Operation Iraqi Freedom. The Department contracted for qualified, experienced civilian contractor employees to address this shortfall while the Army aggressively sought to recruit and 

train a larger Government interrogator force. It appears that those responsible for 

acquiring these contract interrogators in 2003 and 2004 were unaware of the DOD 

Manpower Mix Criteria that were in effect at the time. To prevent this from hapVerDate 0ct 09 2002 14:17 Oct 14, 2008 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6621 C:\DOCS\44868.TXT SARMSER2 PsN: JUNEB
46

pening again, DOD Directive 3115.09, which establishes DOD policy on intelligence 

interrogations, is being updated to reflect current DOD policy on the limited but 

necessary role contract interrogators may play under the proper supervision and 

close monitoring of Government officials throughout the interrogation process.

2. Senator LEVIN. Secretary Bell, can you explain why the Manpower Mix Criteria 

was modified to authorize contractor employees to conduct interrogations? 

Mr. BELL. In late 2005, the DOD intelligence components asked for clarification 

on how contractors could be used to support DOD interrogations. They believed that 

they could utilize contractor personnel in a support role and still retain control of 

all inherently governmental (IG) responsibilities. The Department concluded that 

there were certain functions that could be performed by contractors provided that 

the contractors were properly trained and cleared and the Department retained 

final approval authority for all products produced by the contractor and maintained 

constant oversight and control of all services provided by the contractor. 

Initially, the 2005 Manpower Mix Criteria stated that direction and ultimate control of defense missions, functions, and operations, to include intelligence and 

counterintelligence operations, and interrogations were IG responsibilities. Paragraph E1.2.2.5 of the Manpower Mix Criteria stated that ‘‘how enemy POWs, terrorists, and criminals are treated when captured, in transit, confined, and interrogated 

during or in the aftermath of hostilities entails the discretionary exercise of government authority. Their handling as well as decisions concerning how they are to be 

treated cannot be transferred to the private sector to contractors who are beyond 

the reach of controls otherwise applicable to government personnel.’’

In late 2005, this guidance was revised to specifically include ‘‘civilian internees 

retained persons, other detainees.’’ Paragraph E2.1.8.2 of the Criteria still stated 

that ‘‘direction and control of intelligence interrogations, to include approval, supervision, and oversight of interrogations are IG activities.’’ Paragraph E2.1.8.2 also 

stated that ‘‘performance of those aspects of an interrogation that entail substantial 

discretion are IG.’’ However, paragraph E2.1.8 revised the policy to state that ‘‘responsibility for their handling as well as decisions concerning how they are treated 

cannot be transferred to the private sector to contractors who are beyond the reach 

of controls otherwise applicable to government personnel.’’ Paragraph E2.1.8.2 also 

stated that ‘‘in areas where adequate security is available and is expected to continue, properly trained and cleared contractors may be used to draft interrogation 

plans for government approval and conduct government approved interrogations if 

properly supervised and closely monitored throughout the interrogation process by 

sufficient numbers of properly trained government officials as prescribed in OUSD 

(Intelligence) approved procedures.’’

These changes are consistent with the May 29, 2003, Office of Management and 

Budget Circular No. A–76 (Revised). Section B.1.c of Attachment A of the Circular 

states that an activity may be provided by a contractor provided that ‘‘the contractor 

does not have the authority to decide a course of action, but is tasked to develop 

options or implement a course of action with agency oversight.’’ Section B.1.b. of Attachment A states that an action is not IG if the decisionmaking is ‘‘limited or guided by existing policies, procedures, directions, orders, and other guidance that: (1) 

identify specific ranges of acceptable decisions or conduct; and (2) subject the discretionary authority to final approval or regular oversight by agency officials.’’

3. Senator LEVIN. Secretary Bell, is it your understanding that DOD has sufficient 

qualified government personnel to ‘‘properly supervise and closely monitor’’ contract 

interrogators throughout the interrogation process? 

Mr. BELL. Yes, the Department believes it has sufficient qualified government 

personnel to properly supervise and closely monitor contract interrogators throughout the interrogation process.

4. Senator LEVIN. Secretary Bell, if DOD has sufficient qualified government personnel to supervise and monitor all interrogations, why don’t those government personnel conduct the interrogations themselves? 

Mr. BELL. The DOD normally conducts interrogations with pairs of interrogators. 

If a contract interrogator is used, he or she is paired with a DOD civilian or military 

interrogator, thus fulfilling the monitoring requirement. Additionally, all interrogations are subject to remote monitoring by live video feed, which makes it possible 

to monitor multiple interrogations at the same time.

47

CONTRACTORS AND FOREIGN SUBSIDIARIES

5. Senator LEVIN. Secretary Finley, at the hearing, I asked you about an article 

in which the Boston Globe reported that Kellogg Brown & Root, Inc. (KBR) employs 

more than 21,000 workers in Iraq, including about 10,500 Americans, through subsidiaries in the Cayman Islands, which appear to exist largely on paper. A KBR 

spokesman acknowledged that these subsidiaries were created to enable the company to avoid paying Social Security and Medicare taxes, as well as State unemployment taxes. You agreed that this seems inappropriate. 

Has the DOD informed the Internal Revenue Service (IRS) of KBR’s actions to 

avoid the payment of Social Security and Medicare taxes, so that the IRS can determine whether those actions are legal? If so, what position has the IRS taken on this 

issue? 

Mr. FINLEY. In response to this question, we conferred with the IRS. The IRS confirmed that under section 3121 of title 26, U.S.C., commonly referred to as the Internal Revenue Code (IRC), a company is not subject to Federal Insurance Contributions Act (FICA) taxes if the services are performed outside of the United States 

by a United States citizen (or resident) who is an employee of a foreign company 

or subsidiary. Because the workers at KBR’s subsidiaries are employees of a foreign 

company performing work outside the United States, KBR believes payroll taxes 

such as FICA are not required under the IRC. The IRS would not comment on the 

legality of KBR’s practice because to do so would involve the disclosure of taxpayer 

return information, which is confidential and can only be disclosed in narrowly prescribed circumstances under section 6103 of title 26, U.S.C.

6. Senator LEVIN. Secretary Finley, does the DOD believe that legislation would 

be needed to preclude contractors from obtaining a competitive advantage by using 

foreign subsidiaries to avoid the payment of Social Security and Medicare taxes? If 

so, has the DOD proposed such legislation? Would the DOD support such legislation? 

Mr. FINLEY. Payment of FICA taxes and related payroll taxes is a requirement 

of U.S. tax law, not contract law or regulation. As such legislative proposals to 

change the tax law would come from the Department of the Treasury. The DOD 

would support any legislation that is in the best interest of the United States. 

QUESTIONS SUBMITTED BY SENATOR CLAIRE MCCASKILL

MUNITIONS CONTRACT FOR AFGHANISTAN

7. Senator MCCASKILL. Lieutenant General Thompson, on March 27, the New 

York Times reported that in January 2007 the Army awarded a Federal contract 

worth nearly $300 million to AEY, Inc., making them the main supplier of munitions to Afghanistan’s army and police forces. At the time the contract was awarded, 

the company’s president was 21 years old and the company had little substantive 

procurement experience, especially as it relates to a contract of such magnitude. 

Past contracts with AEY had been much smaller, and according to two officials involved in contracting in Iraq, AEY’s performance on even those smaller contracts 

was troubling. These officials stated that AEY was not reliable and ‘‘if they did come 

through, they did after many excuses.’’ AEY has not performed as expected under 

the January 2007 contract. The company has provided ammunition that is in some 

cases over 40 years old and in decomposing packaging. Some of the ammunition arrived in such poor condition that it was not used. 

At the hearing I was informed that before AEY was awarded the contract its bid 

went through all the normal procurement procedures of both the Army and DOD. 

It seems to me the fact that normal procedures were followed and AEY was still 

awarded the contract indicates a flaw in how the Army is evaluating potential contractors. Furthermore, it was stated to me that the Army has been reviewing the 

AEY contract for the past 7 months, but when I asked which office or person was 

responsible for awarding this important contract to an immature, and ultimately 

unsuitable company, I was not able to get an answer. 

Can you tell me whose office was ultimately responsible for signing off on the January 2007 AEY contract to supply munitions to the Afghans? 

General THOMPSON. Headquarters, United States Army Sustainment Command 

(ASC), Acquisition Center, 1 Rock Island, Rock Island, IL 61299–6500. ASC was acting as the contracting office for the Joint Munitions Command, the Army’s command 

responsible for ammunition procurement. 

The total dollars awarded to AEY is $154 million. This amount represents the 

total value of all delivery orders issued against the contract. 

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Past performance was evaluated and responses regarding AEY’s performance 

were positive. AEY had performed under a similar contract for nonstandard ammunition and weapons with a not-to-exceed price of $300 million with the Joint Contracting Command-Iraq/Afghanistan (JCC–I/A). 

The Afghanistan National Army and National Police did not identify or specify an 

age requirement for the nonstandard ammunition. 

The solicitation was issued on a full and open competition basis for a 2-year requirements contract for nonstandard ammunition. This procurement action called 

for a best value award, which included the evaluation of past performance, price, 

and small business utilization. AEY was determined to be the best value. A preaward survey was requested and completed by Defense Contract Management Agency (DCMA) with support from Defense Contract Audit Agency, which reviewed 

AEY’s financial capability, accounting system, and transportation capabilities. The 

DCMA report recommended full award. The Excluded Parties List was also checked 

prior to award and neither AEY nor any company affiliate was listed as being suspended or debarred.

8. Senator MCCASKILL. Lieutenant General Thompson, you stated that in awarding this contract, AEY’s past experience and reputation were considered. Can you 

tell me specifically which of AEY’s past contracts indicated they were capable of delivering on a contract of the magnitude and importance of the January 2007 contract? 

General THOMPSON. The past performance criteria evaluated was On-time Delivery, Quality, System Integrator, and International Movement. Past performance 

surveys were issued by the evaluators who received the following information regarding AEY:

AEY was awarded an Indefinite Delivery, Indefinite Quantity (IDIQ) 

(Contract W914NS–05–D–9012) issued by the JCC–I/A on March 15, 2005, 

for the same and similar ammunition items and associated weapons and 

components (various nonstandard ammunition items and other weapon 

items and components). The maximum potential value of this contract was 

not to exceed $300 million or, if multiple awards were made, the aggregate 

total would not exceed $300 million. JCC–I/A’s Multi-National Security 

Transition Command-Iraq Support Division provided past performance information regarding Delivery Order 0004 for the supply and air delivery of 

21 different nonstandard ammunition items, to include small caliber, shot 

shell, anti-tank, fragment grenade, 40mm ammunition, and the associated 

weapon components and systems. The input provided showed that deliveries were made within the contract schedule and that AEY performed satisfactorily against the contract requirements. Under two other contracts, 

AEY performed as subcontractor for other prime contractors. Positive feedback was returned indicating no performance issues.

These contracts were evaluated using a past performance criterion that addressed 

the magnitude and relevancy of anticipated contract requirements. Based on all of 

the information we received prior to the AEY contract award, all indication was that 

the ASC contract would be similar to the contracts previously performed by AEY.

9. Senator MCCASKILL. Lieutenant General Thompson, what was the specific 

value of each AEY contract that was used to rate their past performance? 

General THOMPSON. The specific dollar values of the contracts that were evaluated for AEY’s past performance are as follows:

a. JCC–I/A Contract No. W914NS–05–D–9012. The contract was an IDIQ 

Contract for various types of nonstandard ammunition, conventional ammunition, weapons, and components. It had a not-to-exceed dollar value of 

$300 million. 

b. AEY’s other two contracts are as a subcontractor for private companies 

valued at approximately $2 million.

10. Senator MCCASKILL. Lieutenant General Thompson, please describe how these 

contracts were related to ammunition and delivery. 

General THOMPSON. These contracts were similar to the procurement in question. 

They also were evaluated using past performance as an evaluation criterion, and 

they called for the delivery of the same or similar nonstandard ammunition items 

and other weapons and components with deliveries from an outside continental 

United States (OCONUS) location into other OCONUS locations.

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11. Senator MCCASKILL. Lieutenant General Thompson, you stated that the Army 

has been reviewing the AEY contract for the past 7 months. Please tell me what, 

if any, problems the Army has identified in its procurement process that allowed 

AEY to be able to receive a contract they seem incapable of performing? Has the 

Army taken any steps to correct these problems in its procurement process? If yes, 

please describe the changes in detail. 

General THOMPSON. The Army places the safety of U.S. and allied soldiers as a 

priority in the global war on terror. As a result of our concern with the subject AEY 

contract, we are conducting a thorough review to ensure our Afghan allies are provided with good quality ammunition, and to ensure the soundness of the processes 

the Army uses to acquire supplies for its allies. As an Army, we continually assess 

how we are meeting the needs of our customers and ensuring that we are improving 

our business practices. As a result of our review so far into this matter, we recognize 

that changes need to be made in our acquisition of nonstandard ammunition. We 

have already made changes to our packaging requirements for nonstandard ammunition and will ensure that we cite appropriate international packaging and quality 

standards as the applicable U.S. standard and hold our contractors to that standard. 

We also have chartered a team of subject matter experts to better define the quality 

standards necessary for future nonstandard ammunition requirements, how and 

where the ammunition should be inspected, and the best DOD agency to accomplish 

these inspections.

12. Senator MCCASKILL. Lieutenant General Thompson, Defense Criminal Investigative Services and Immigration and Customs Enforcement initiated an investigation into AEY in October 2005 in order to look at issues dealing with violations of 

the Arms Export Control Act. Which, if any, contracting or auditing agencies were 

notified? How were they notified? 

General THOMPSON. Based on direction from the Department of Justice, questions 

relating to investigations need to be addressed to the various investigative agencies.

13. Senator MCCASKILL. Lieutenant General Thompson, was AEY awarded any 

other contracts while under audit? 

General THOMPSON. AEY did receive a number of other contract awards from 

other contracting activities across DOD and from other Federal agencies such as the 

Department of State.

[Whereupon, at 4:18 p.m., the subcommittee adjourned.]

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