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37–534 2008

[H.A.S.C. No. 110–59]

PROCUREMENT OF NAVY BOAT BARRIERS

HEARING

BEFORE THE

SEAPOWER AND EXPEDITIONARY FORCES

SUBCOMMITTEE

OF THE

COMMITTEE ON ARMED SERVICES

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

HEARING HELD

JUNE 6, 2007

(II)

SEAPOWER AND EXPEDITIONARY FORCES SUBCOMMITTEE

GENE TAYLOR, Mississippi, Chairman

NEIL ABERCROMBIE, Hawaii

JAMES R. LANGEVIN, Rhode Island

RICK LARSEN, Washington

MADELEINE Z. BORDALLO, Guam

BRAD ELLSWORTH, Indiana

JOE COURTNEY, Connecticut

JOE SESTAK, Pennsylvania

ROSCOE G. BARTLETT, Maryland

KEN CALVERT, California

TERRY EVERETT, Alabama

JO ANN DAVIS, Virginia

J. RANDY FORBES, Virginia

JOE WILSON, South Carolina

WILL EBBS, Professional Staff Member

HEATH BOPE, Professional Staff Member

JENNESS SIMLER, Professional Staff Member

JASON HAGADORN, Staff Assistant

(III)

C O N T E N T S

CHRONOLOGICAL LIST OF HEARINGS

2007

Page

HEARING:

Wednesday, June 6, 2007, Procurement of Navy Boat Barriers .......................... 1

APPENDIX:

Wednesday, June 6, 2007 ........................................................................................ 27

WEDNESDAY, JUNE 6, 2007

PROCUREMENT OF NAVY BOAT BARRIERS

STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Bartlett, Hon. Roscoe G., a Representative from Maryland, Ranking Member,

Seapower and Expeditionary Forces Subcommittee .......................................... 2

Taylor, Hon. Gene, a Representative from Mississippi, Chairman, Seapower

and Expeditionary Forces Subcommittee ........................................................... 1

WITNESSES

Betro, Thomas, Director, Naval Criminal Investigative Service (NCIS) ............. 4

Riddick-Brown, Cathy, Deputy Assistant Director for Acquisition and Logistics, Naval Criminal Investigative Service (NCIS) ............................................ 8

Williams, James A., Commissioner, Federal Acquisition Service, General

Services Administration (GSA) ........................................................................... 9

APPENDIX

PREPARED STATEMENTS:

Betro, Thomas ................................................................................................... 31

Williams, James A. ........................................................................................... 40

DOCUMENTS SUBMITTED FOR THE RECORD:

[There were no Documents submitted.]

QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD:

Mr. Bartlett ....................................................................................................... 48

Mr. Taylor ......................................................................................................... 47

(1)

PROCUREMENT OF NAVY BOAT BARRRIERS

HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED SERVICES, SEAPOWER AND EXPEDITIONARY FORCES SUBCOMMITTEE, Washington, DC, Wednesday, June 6, 2007.

The subcommittee met, pursuant to call, at 2:45 p.m. in room

2212, Rayburn House Office Building, Hon. Gene Taylor (chairman

of the subcommittee) presiding.

OPENING STATEMENT OF HON. GENE TAYLOR, A REPRESENTATIVE FROM MISSISSIPPI, CHAIRMAN, SEAPOWER AND EXPEDITIONARY FORCES SUBCOMMITTEE

Mr. TAYLOR. The subcommittee will come to order.

I would first like to make an observation to my colleagues that

we have received a unanimous consent from the full committee to

meet while the full committee is meeting, so in case anyone is

questioning the legitimacy of this subcommittee meeting.

Today the subcommittee will receive testimony from senior officials at the Naval Command Investigative Service, or NCIS, or the

General Services Administration, GSA, on the acquisition of floating barriers, which, along with other measures, help protect Navy

ships and installations from the specific threat of small-boat attack.

Testifying before this committee today we have Mr. Thomas

Betro, Director of NCIS; Ms. Cathy Riddick-Brown, Deputy Assistant Director for Acquisition and Logistics at NCIS; Mr. James Williams, Commissioner of the General Services Administration, GSA.

On behalf of the members of the subcommittee, I thank you for

coming and look forward to your testimony.

After the tragic suicide bombing of the USS Cole in October of

2000, the Navy correctly recognized that additional security measures must be taken to protect our ships pierside and at anchor. The

NCIS was given the task to lead the effort in this vital force protection initiative.

Unfortunately that effort appears to have been beset with contractual irregularities which have caused significant additional

costs to our Nation’s taxpayers. Make no mistake, this subcommittee fully supports force protection measures. This subcommittee

under both the chairmanship of Mr. Bartlett and continuing today

has led the fight to up-armor Humvees, expedite improved body

armor and helmets, and, most significantly, increase the rate of

production of mine-resistant, ambush-protected vehicles, commonly

known as MRAPs.

Our main concern is with cost and schedule overruns in Navy

and Marine Corps programs. Unfortunately, I am hard pressed to

2

point to a single significant acquisition program which is currently

progressing on budget or on schedule.

Members of this subcommittee are determined to provide to our

Navy and Marine Corps the best ships and equipment in sufficient

numbers that the Nation can provide, but we will continue to be

frustrated as program after program reports cost overruns and

schedule delays.

It is not the concept of installing force protection barriers which

brings us here today. In fact, I applaud former Chief of Naval Operations (CNO) Admiral Vern Clark with recognizing that our Nation has a vulnerability and moved quickly to solve it. I am sure

he expected his organization would execute his orders with the

proper level of professionalism.

Today we on this subcommittee, with the full support of our full

committee and Chairman Ike Skelton, are attempting to fund the

construction of 313 ships for our United States Navy for our current CNO Mike Mullen. We will not be able to accomplish this goal

if the service itself cannot adequately handle routine acquisition

projects. Every dollar wasted is a dollar that cannot go to buy a

ship or an aircraft or right now an MRAP.

This issue is particularly troubling since our committee was first

made aware of possible waste of taxpayers’ money by reading on

the front page of the Washington Post. I was not briefed, nor do

I believe that any of the members of this subcommittee were informed by the Navy that there had been irregularities in contracting.

Based on the information available to this committee, it appears

that the acquisition program violated a number of standard procedures. These include the improper use of the governmentwide GSA

services contract which was designed to provide IT support to government agencies; the use of multiple invoices to stay below contract price thresholds; and authorizing unnecessary contractor fees.

These are serious irregularities, possibly criminal.

What is of interest today are the questions: How did this happen,

where was the oversight, why did it take two years for the improper practices to be revealed, and, most importantly, what have

you done to fix the internal problem?

Finally, I would like to remind the members of this subcommittee that an ongoing criminal investigation into these matters is in

practice. It is not the intentions of this hearing to jeopardize that

effort. I understand that the NCIS and the GSA have continuing

efforts to resolve all issues relating to these contracts. I further understand that based on this event, the NCIS and the GSA have reorganized departments and have accomplished other internal

changes to prevent this type of issue from occurring again. I look

forward to the witnesses’ testimony concerning these changes.

I will now turn to my friend, the gentleman from Maryland,

Ranking Member Roscoe Bartlett.

STATEMENT OF HON. ROSCOE G. BARTLETT, A REPRESENTATIVE FROM MARYLAND, RANKING MEMBER, SEAPOWER AND

EXPEDITIONARY FORCES SUBCOMMITTEE

Mr. BARTLETT. Thank you, Mr. Chairman.

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Good afternoon, ladies and gentlemen. I wish I could say we were

here today to applaud the Navy’s responsiveness to an urgent force

protection requirement that emerged after the attack on the USS

Cole in Yemen on October 12, 2000. This is a personal and important issue to me. It may seem unimaginable, but 2 of the 17 sailors

who were killed on the USS Cole came from small towns in Washington County, Maryland. U.S. Navy Seaman Craig Wibberley from

Williamsport, and Fireman Apprentice Patrick Roy of Keedysville

were both 19.

What I will always remember, and this was before 9/11, were the

hundreds and thousands of people who lined the routes to Craig

Wibberley’s grave at St. Mark’s Episcopal Church in Booneboro and

Patrick Roy’s grave at Antietam National Cemetery. The Civil War

hallowed ground was reopened by the National Park Service at the

request of Patrick’s family.

Unfortunately, the good work the Navy did do to ensure our sailors and marines were protected from small-boat attacks while they

were at port or anchored have been overshadowed by the recent article in the press headlining the millions of dollars apparently

wasted on this important effort. So for the record, let me echo

Chairman Taylor’s remarks and emphasize that in comparison to

the amount of time it typically takes the DOD to procure a new capability, the speed of this program was indeed impressive. From

the time of the attack, the fleets’s requirements for barriers were

identified and the funds provided within three months. A solution

was found and tested within five months after that, and orders

were being placed within five months after testing.

By the time allegations of procurement irregularities surfaced

two years ago, most of these systems were installed and protecting

our men and women. That is good news. Sadly, we now know that

this program had its share of bad news. I am interested in the testimony from our witnesses today because I believe there is more to

this story than appeared in the press. I am hopeful that we will

learn that the system responded appropriately and addressed any

wrongdoing that may have been found. But whether the story represents another example of systemic problems with our defense acquisition system, or whether this is merely a case of a few bad apples, those are two important takeaways.

First, Mr. Taylor is right. The first time I learned of this was

when I read the paper a couple of weeks ago. While I understand

that an investigation is ongoing, and it would be inappropriate to

reveal too many details publicly, I would strongly encourage the

Navy to keep us informed about these matters. It does a disservice

to the good work of our acquisition personnel who perform every

day on behalf of the warfighter and taxpayer for Congress to remain in reactionary mode in responding to incidents after they are

first reported in the media.

Second, we have another lesson in the need for thorough acquisition workforce training and understanding contractual issues not

only within acquisition programs, but also within the investigative

services and the prosecutor’s office.

Clearly, it is possible that a more thoroughly trained acquisitions

staff within NCIS might have caught these issues earlier or better,

yet kept them from happening in the first place. This committee is

4

strongly supportive of keeping inherently government functions

within the government, in part to avoid the cost of contractors who

provide little value added to the procurement process. I sincerely

hope the Department of Defense and the Congress can work together to stem the erosion of these critical functions within the government.

Again thank you to our witnesses, and thank you, Mr. Chairman.

I hope we learn from valuable lessons today.

Mr. TAYLOR. The Chair now recognizes Mr. Thomas Betro.

STATEMENT OF THOMAS BETRO, DIRECTOR, NAVAL

CRIMINAL INVESTIGATIVE SERVICE (NCIS)

Mr. BETRO. Thank you, Mr. Chairman, Ranking Member Bartlett. It is a pleasure to be here today to try to address this issue

of procurement of boat barriers. I had submitted a statement for

the record, but if it pleases the committee, I would like to summarize that statement orally today.

Mr. TAYLOR. Mr. Betro, it is the custom of this committee to have

a five-minute rule. It has been the custom of this subcommittee to

allow the witness to speak as long as he would like as long as we

don’t find ourselves in a filibuster. So with unanimous consent, we

will waive the five-minute rule and allow you to speak freely.

Mr. BETRO. Thank you, Mr. Chairman.

My name is Thomas Betro, and since January 2006 I have served

as Director of the Naval Criminal Investigative Service. With me

is Cathy Riddick-Brown, who is our Deputy Assistant Director for

Acquisition and Logistics.

We very much appreciate the subcommittee’s sensitivity to the

fact that the matter before us today remains the focus of an ongoing criminal investigation. There will be some limitations, I believe,

on what we can discuss in an open hearing, but we understand the

subcommittee’s desire to receive information, and we will be as responsive as we can to those desires.

As the element within the Department of the Navy that has primary responsibility for investigating procurement fraud, we are

acutely sensitive to the fact that every time a Navy dollar is wasted, it means one less dollar to support our warfighters. As we

speak today, approximately 120 NCIS personnel are deployed to

Iraq, Afghanistan, the Horn of Africa and elsewhere in support of

the global war on terror. We understand that lost dollars may

mean the difference in NCIS’s ability to properly train and equip

our own personnel before we send them in harm’s way.

I would like to start today by highlighting some of the things

that NCIS has done relative to the reported improprieties associated with the boat barrier procurements.

In June 2003, NCIS initiated a criminal investigation into these

matters following the receipt of allegations of improprieties. We initially tasked the NCIS inspector general to look into these matters,

but upon determination that there may be some criminal involvement, the case was transferred to our Washington, D.C., field office

where they initiated a criminal investigation.

From the outset, NCIS has included the Defense Criminal Investigative Service, which is the felony investigative arm of the Department of Defense Inspector General, in all of our investigative

5

efforts. This includes interviews, interrogations, and even polygraph examinations of former NCIS employees. All 24 NCIS investigative reports associated with these matters have been provided

to both DCIS and the GSA Inspector General’s Office. We also

sought out and received audit support from the Defense Contract

Audit Agency. We have shared information fully with our partners

in this joint criminal investigation.

Moreover, NCIS and DCIS have jointly presented this case to

three separate U.S. Attorneys for potential prosecution and civil action starting in April 2004. NCIS has been diligent in pursuing

both prosecution and civil remedies. The case remains pending before the U.S. Attorney for the District of Columbia.

Additionally, upon determining that these improprieties occurred, NCIS made major structural and process changes. In a moment Ms. Riddick-Brown will address procurement reforms we

have implemented.

I want to note that in October 2003, NCIS divested itself of the

mission of technology validation, procurement and installation of

physical security equipment, including the boat barriers in question. We have also disestablished the NCIS department that had

been responsible for these procurements. Because we divested ourselves of these operations and disestablished this department, we

have had to reconstruct many of the events described today from

our investigative case files and from the recollection of those who

worked in that department but not directly involved in the Waterside Security Systems. None of the individuals who were directly

involved by those procurements are currently employed by NCIS.

Let me turn now to the areas that the subcommittee specifically

inquired about. First, what was the requirement for these barriers,

and how did NCIS become the lead organization for their procurement? The requirement was identified in the aftermath of the USS

Cole in October 2000. Within weeks of that event, each of the fleet

commanders was tasked by the Chief of Naval Operations to identify measures to boost force protection. Several fleets identified the

need for boat barriers.

The NCIS Law Enforcement Physical Security Department, at

the time known as NCIS Code 24, was tasked to execute the funding identified for these measures. At the time, Code 24 was responsible for program management of a number of Navy physical security systems stemming from additional CNO staff responsibilities

held by the Director of NCIS, as the Special Assistant to the CNO

for Naval Investigative Matters and Security.

Prior to the Cole attack, Code 24 had the responsibility for DON

electronic security system design and installation, as well as other

security systems, though not boat barriers. In the immediate wake

of the Cole bombing, Code 24 and contractor personnel conducted

site surveys and worked to identify boat barrier options. In the interest of urgency, to deploy boat barrier capability as soon as possible, attention focused on commercial off-the-shelf, or COTS, solutions. The Dunlop boat barrier, a British system already in use by

the Royal Navy in Scotland, was identified as the only COTS option.

Full-scale tests of the Dunlop boat barrier system were conducted

in San Diego in May 2001 with the help of the Naval Facilities EnVerDate 22-MAR-2001 12:26 Sep 16, 2008 Jkt 037534 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 C:\DOCS\110-59\157280.000 HAS2 PsN: HAS2
6

gineering Service Center. In May 2001, the Navy established new

security standards, including requirements for the use of water

barriers where appropriate and/or practical, especially for strategic

assets.

In August 2001, NCIS Code 24 was identified as the Navy boat

barrier program manager by the CNO’s staff element responsible

for antiterrorism and force protection. From September 2001 to

February 2003, Code 24 was involved in buying 667 Dunlop barriers. After NCIS’s original purchase of 667, 30 more boat barriers

were procured by other Navy commands. According to the Naval

Facilities Engineering Command, NAVFAC, these barriers today

remain in use at five CONUS and five OCONUS sites, with 535 deployed and 75 spares in the Navy inventory. Thus, some 90 percent

of the barriers are still deployed or available for use.

Based on the records we have, NCIS estimated that the costs associated with Code 24’s procurement of these 667 barriers was

$30.7 million. This is a slight downward revision from the estimate

provided in my formal statement. Of this amount we estimate that

some $2.6 million was applied toward contractor and subcontractor

administrative fees.

NCIS estimates that the cost of installing these barriers was some $24.1 million, including up to $2.1 million of this amount in

similar administrative fees. I should note that we never have received any allegation of illegality with regard to the installation of

the barriers.

NCIS’s Code 24 initiated boat barrier procurements in September

2001. It engaged GSA, which had previously supported NCIS security systems procurement on this acquisition. Several irregularities

occurred thereafter. First, Code 24 sought to use the same GSA

contract vehicle it has previously used for other security work.

However, this contract vehicle, a small business set-aside Governmentwide Acquisition Contract, was created strictly to enable firms

to provide information technology solutions to GSA’s government

customers. Code 24 improperly sought to use this IT contract vehicle to purchase boat barriers, and GSA improperly agreed to this.

Second, the boat barrier orders were improperly structured by

Code 24 and approved by GSA so as not to exceed the $3 million

each. In this manner, those involved sought to circumvent competition requirements.

Finally, a security consultant utilized by Code 24 to advise on

boat barrier requirements, a single individual doing business as P–

CON, was also directly responsible as a subcontractor for purchasing boat barriers on behalf of prime contractor Northern NEF. As

the liaison between the vendor of boat barriers, Dunlop, and Northern NEF under the GSA contract, P–CON received a fee for each

task order handled. In essence, P–CON both helped specify the requirements for affected installations and profited from the purchase of barriers slated for those installations. In March 2002 P–

CON was removed from the middle of this arrangement, but P–

CON had already earned a fee on the procurement of the first 317

of the 667 boat barriers ordered by Code 24.

Code 24 initiated its last purchase of boat barriers in February

2003, supported by RMES, which by then had succeeded Northern

NEF as the prime contractor. In May 2003, NCIS received allegaVerDate 22-MAR-2001 12:26 Sep 16, 2008 Jkt 037534 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 C:\DOCS\110-59\157280.000 HAS2 PsN: HAS2
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tions of potential illegalities associated with the boat barrier procurements. The NCIS IG was tasked to look into these matters,

and at the same time NCIS was told by GSA that an audit had

identified irregularities with these procurements. Upon determining that criminal violations may have occurred, the NCIS IG referred this matter to our Washington, D.C., field office in June of

2003. Also in June, NCIS asked DCIS to participate in the investigation and first briefed the assistant U.S. Attorney heading the

Criminal Division for the District of Maryland on this matter.

In July 2003, NCIS met with the GSA OIG to obtain preliminary

audit findings. These findings heightened NCIS’s concerns, and in

August of 2003 the manager of the NCIS boat barrier program was

polygraphed twice by NCIS. In September 2003, he resigned. That

same month the P–CON security consultant was escorted out of

NCIS headquarters.

At this time, NCIS leadership made a determination that the

agency did not have the capacity to handle this burgeoning acquisition program. For context, in fiscal year 2000, Code 24 received

$4.4 million to execute physical security equipment responsibilities

for the entire Navy. In fiscal year 2001, following the Cole attack,

this number quadrupled to over $17 million. The next year following 9/11, the figure grew astronomically to $106 million. Moreover,

the new requirements were for equipment that was generally different from that which Code 24 had historically purchased.

In August 2003, NCIS proposed divesting itself of these responsibilities in favor of a naval command better able to manage these

requirements, and NCIS voluntarily transferred this mission to

NAVFAC in October 2003.

In sum, Mr. Chairman, it is recognized that in the interest of

providing a rapid solution to protect Navy vessels, a small number

of NCIS employees took improper actions. Shortcuts were taken to

meet urgent fleet requirements, the expectation of Navy seniors,

and fiscal deadlines. These actions were wrong. I neither excuse

nor condone them. With adequate oversight, I do believe that these

improper actions would not have occurred.

Importantly, upon learning of these irregularities, NCIS took remedial measures. We investigated actively and realigned functions,

and we undertook major process reforms. In the end the barriers

that were procured were sufficient to satisfy the Navy’s physical security requirements for ships in port. They have been in place for

several years, and the vast majority of them are still in service.

The purpose of the barriers was to deter and prevent small-boat

attacks similar to the attack on the USS Cole. We do not know

whether such attacks would have occurred had these barriers not

been installed, but the barriers undoubtedly have provided a deterrent.

With that, let me ask Mr. Riddick-Brown to offer some brief comments on our acquisition reforms. Thank you.

[The prepared statement of Mr. Betro can be found in the Appendix on page 31.]

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STATEMENT OF CATHY RIDDICK-BROWN, DEPUTY ASSISTANT

DIRECTOR FOR ACQUISITION AND LOGISTICS, NAVAL

CRIMINAL INVESTIGATIVE SERVICE (NCIS)

Ms. RIDDICK-BROWN. Mr. Chairman, Mr. Bartlett and distinguished Members, I am Cathy Riddick-Brown. I am a GS–15 supervisory contract specialist at NCIS. I joined the organization in July

of 2004, and in this capacity, I serve as the Deputy Assistant Director for Acquisition and Logistics.

I would like to highlight a few things that Director Betro shared

earlier and talk about the measures that we have taken to improve

our acquisition process.

First of all, we did divest ourselves of the function to procure, to

assess, and to install any equipment or processes in Waterside Security Systems. That now is handled by NAVFAC. Equally important, we disestablished Code 24 that used to manage that program.

Additionally, with the creation of my department, the Acquisition

and Logistics Department, we have put in place acquisition professionals with currently combined 70 years of procurement experience. Currently, our acquisition process, we manage about $30 million. Also very importantly is we have in the department created

a training program for Contracting Officer’s Representatives, also

known as CORs, and in this training program the responsibility of

a COR is to have the technical expertise on contracting matters,

whatever they may be. This is required not only by DOD and the

Department of Navy, but it is required for the Federal Government

if you are going to have a contract that requires technical oversight. These individuals are trained and certified and recertified

once every three years as the programs are currently managed.

Additionally, we also ensure that we are following the Federal

Acquisition Regulations, the FAR; we are following the DFARS, the

Defense Federal Acquisition Regulations Supplement; and also

Navy’s internal process, Navy Marine Corps Acquisition Regulation

Supplement. We follow those; our teams are trained in those requirements. We follow those processes.

Also most recently, DOD and the Department of the Navy revised their policy from 2002 that talked about if you have requirements that exceed $100,000, and you plan to use non-DOD contracting assets, you must have what is called an acquisition strategy. The revision to that legislation talks not only to services, but

it also talks to supplies. Further, any DOD organization that will

have requirements that will exceed $100,000, be it a service or supply, must have an acquisition strategy, must go to the comptroller

for review, and also a DOD contracting officer, and we do follow

that practice.

Mr. Chairman, I do believe had these mechanisms and practices

been in place and adhered to before 2004 when I arrived, we

wouldn’t be here discussing this matter.

I gladly will respond to any questions you might have regarding

our reform and our contracting acquisitions. Thank you very much.

Mr. TAYLOR. Mr. Williams, do you have a statement?

Mr. WILLIAMS. Yes, I do, sir.

Mr. TAYLOR. Would you like to begin?

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STATEMENT OF JAMES A. WILLIAMS, COMMISSIONER, FEDERAL ACQUISITION SERVICE, GENERAL SERVICES ADMINISTRATION (GSA)

Mr. WILLIAMS. Good afternoon, Chairman Taylor, Ranking Member Bartlett and committee members. I am Jim Williams, Commissioner for the Federal Acquisition Service within the U.S. General

Services Administration. I am pleased to appear before this subcommittee to testify on GSA’s role in the 2002–2003 procurement

of floating security barriers designed to protect U.S. Navy ships in

port or at anchor.

GSA is the central acquisition agency in the Federal Government, and its Federal Acquisition Service leverages the government’s buying power on behalf of Federal agencies by acquiring

products, services and solutions at best value in support of agency

missions.

Over the last five years, GSA set out a program to address and

carry out significant changes in the management and execution of

its acquisition and contract management policies, procedures and

practices. GSA and the Federal Acquisition Service have made significant positive management and financial changes to our procurement operations over the last five years to ensure our customers

get best value for their contracting requests.

Several years ago GSA senior management reviewed our contracting activities, including GSA’s Office of the Inspector General,

performing audits of contracting practices throughout GSA. One of

the serious problems found was the purchase of boat barriers made

by GSA’s then Federal Technology Service on behalf of NCIS,

which began shortly after the terrorist attacks of September 11,

2001, and in the aftermath of the attack on the USS Cole.

The original contract request was for floating security barriers

designed to protect American men and women serving on our Navy

ships. In 2003, after becoming aware of the ongoing GSA IG audit

and the issues identified on the boat barrier projects, GSA terminated for the convenience of the government all remaining work on

this matter.

GSA recognizes serious contracting irregularities that occurred

and moved swiftly and aggressively to fix the problem and prevent

it from happening again. GSA made the corrective action in the

Federal Technology Service the top priority for the agency. The

OIG also recommended several areas that needed to be improved,

and GSA senior management agreed with those audit findings and

recommendations and took action to address them.

GSA created an initiative entitled Get It Right to specifically address acquisition concerns. Our Get It Right initiative made GSA

a better, more effective and compliant contracting agency. I would

like to specifically highlight several key areas implemented under

the Get It Right program where GSA is a better agency as a result

of the hard lessons learned years ago.

Strengthened management controls: GSA instituted a review

process for preaward task orders over $1 million using contract review boards, which includes senior managers in that review. In addition, GSA has a policy that all task orders over $5 million must

be reviewed by GSA legal counsel prior to award. The agency also

10

conducts procurement management reviews annually by a team of

GSA procurement experts external to the area reviewed.

Training for GSA’s contracting and program officers: GSA has

worked aggressively to provide core training in appropriations law,

the proper use of schedules and governmentwide acquisition contracts, and project management training and certification.

Customer relationship management: We have implemented a

GSA working group that meets weekly to address GSA DOD acquisition issues and concerns from both agencies, and we have recently signed a joint memorandum agreement with the Department

of Defense that further outlined our commitment to ensure a sound

and compliant acquisition process.

Contractual results: In December of 2006, GSA’s Office of the Inspector General published the results of a second series of audits

of the Federal Acquisition Service. I am proud to report that the

OIG’s findings showed GSA had significantly addressed weaknesses previously found in our contract management practices. Specifically, the OIG said that FAS was providing acquisition services

with proper management and internal controls in place. We take

management and internal controls seriously at GSA, and the time

to improve our controls, train our employees, and develop improved

customer relationship management has resulted in significantly

improved contract management practices.

In summary, GSA recognizes that we have a responsibility to

provide sound acquisitions for our Federal customers. Our employees are inspired to help our customer agencies be better stewards

of taxpayer dollars and more effective and efficient in meeting their

missions every day by providing best value products services and

solutions in compliance with Federal laws and rules.

Thank you, Mr. Chairman. I welcome any questions you or the

committee may have.

[The prepared statement of Mr. Williams can be found in the Appendix on page 40.]

Mr. TAYLOR. Thank you, and I want to thank all of you for appearing. The motto of one of our service academies is: Deeds, not

words. I have got to tell you after hearing your testimony, I think

you would have failed to fulfill that. I am hearing a lot of strong

talk, but the fact of the matter is that according to what I can see,

NCIS made a series of blunders.

Again, from published reports, no one was told by NCIS to hire

P–CON Consulting of Alexandria, someone who was already working for NCIS. Apparently people were paid millions of dollars of

fees for doing absolutely nothing, and subcontractors to them were

paid additional millions of dollars for apparently doing nothing.

Four years later, yes, it is great that none of our vessels have

been attacked from the sea as the Cole was. But four years later

I am not convinced that this was the only solution. I am certainly

not convinced this was the most cost-effective solution. I did not see

a sense of urgency there. The Cole was bombed in October. The

testing was not done until the following May. And so if there was

any sense of urgency, why the first 6-month delay, 8-month delay?

And then apparently in a move to catch up, contracts were issued,

it would certainly appear to be, through favoritism. And then a series of contracts and invoices are issued for slightly under the $3

11

million limit including—again, according to published reports, multiples of up to six on one day were issued for slightly under $3 million, and no one in NCIS finds this unusual? No one at GSA finds

this unusual? This goes on for some time.

And I have got to believe if I would have heard that testimony

five years ago, I would have heard the same thing, that you have

strong procedures in place to keep this from happening. Well, apparently you did not. And what is most troubling of all, apparently

there has been some criminal wrongdoing. The taxpayers are out

of a heck of a lot of money, and I don’t see charges being levied

against anyone. Your name is Naval Criminal Investigative Service. Why aren’t you doing it? Again, you were the wronged party.

I would think you would have the resources to look into this. And

I would like to hear what you have to say to that.

Mr. BETRO. Well, Mr. Chairman, as I indicated, we definitely recognize there were breakdowns in oversight at NCIS at the time

that allowed these things to occur. The small group of folks who

were handling the procurements for that particular code at the

time certainly were not experienced enough to be able to adequately carry out this large acquisition.

Mr. TAYLOR. Mr. Betro, no one in the system found it unusual

that on one day six contracts were let for slightly under $3 million?

No one thought to think that maybe someone is trying to skirt the

law?

Mr. BETRO. Sir——

Mr. TAYLOR. No one in the whole system found that unusual?

Mr. BETRO. The only folks in the NCIS system who were providing any oversight to those particular statements of work were the

individuals doing it themselves. They were—our processes at the

time——

Mr. TAYLOR. Is that a good business practice?

Mr. BETRO. It is not a good practice. It is a terrible business

practice, one that we have corrected since then. The individuals

who were performing the acquisitions were not even contract specialists. They were budget technicians who had been previously responsible for $800,000 worth of procurement.

Mr. TAYLOR. Let’s back up a little bit. Obviously you have looked

into this. Did anyone at that time when tasked with this responsibility—is anyone on record of contacting anyone in the Navy

chain of command and saying, I am not so sure we are the right

people to be doing this?

Mr. BETRO. No, sir, not until after we noticed or were alerted to

these improprieties.

Mr. TAYLOR. At no time did someone step forward and say, we

are not the right people, this is out of our level of expertise?

Mr. BETRO. No sir, at no time did we step forward prior to the

improprieties being surfaced to senior leadership.

Mr. TAYLOR. Yes, sir?

Mr. WILLIAMS. I would just like to add that I agree with you, Mr.

Chairman, that what was done was wrong. There were not proper

internal controls in place. We do agree with that. I do believe that

we did not perform this in the most cost-effective manner either.

However, we have also instituted the reforms, and it was someVerDate 22-MAR-2001 12:26 Sep 16, 2008 Jkt 037534 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 C:\DOCS\110-59\157280.000 HAS2 PsN: HAS2
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thing that GSA found the problem, worked with our IG to identify

what had gone wrong, and took quick action to fix it.

Mr. TAYLOR. Are you prohibited by law, is NCIS prohibited by

law from doing an internal criminal investigation?

Mr. BETRO. No, sir.

Mr. TAYLOR. Since you have told me—I thought I heard you say

we have identified wrongdoing.

Mr. BETRO. That is correct.

Mr. TAYLOR. Why haven’t you done so?

Mr. BETRO. Sir, we did initiate both a criminal—first an administrative review, which very quickly, within the first 30 to 45 days,

identified the potential for criminal wrongdoing. We did immediately initiate a criminal investigation into those matters.

Mr. TAYLOR. And what became of it?

Mr. BETRO. It is still ongoing. We have presented findings of that

investigation first to three separate U.S. Attorneys’ offices, first in

the District of Maryland in 2004. Their response was essentially

that this was part of a larger investigation, and they believed it

should be handled administratively potentially for civil remedies,

and they suggested a new venue of Kansas City. We then took the

case, we continued to work the case based on their review, and we

did not go to Kansas City. At the time we believed we had proper

venue in Virginia, the Eastern District, and we began dialogue almost immediately with the U.S. Attorney’s Office in the Eastern

District of Virginia pursuing both civil and/or criminal remedies for

this investigation.

Eventually that U.S. Attorney’s office decided formally that another venue would be better, either Kansas City or Washington,

D.C. We did eventually—and that is where it remains today—have

been working with the United States Attorney’s Office in Washington, D.C., continuing with the investigation, because we weren’t

satisfied to let it go with the first declination from the first U.S.

Attorney’s office in 2004. We persisted in investigating and persisted in trying to seek justice by presenting the case to a second

and now a third U.S. Attorney’s office. We still have the potential

of going all the way back to Kansas City to that venue if the U.S.

Attorney’s Office in Washington, D.C., also declines prosecution or

civil remedies.

Mr. TAYLOR. According to the Washington Post article, and I am

quoting now, Northern was told by NCIS officials to hire P–CON

Consulting of Alexandria. Who were those officials?

Mr. BETRO. Those officials were the same individuals who remain

the focus of this criminal investigation, an individual who no longer

works for NCIS that resigned in 2003 shortly after these improprieties were surfaced. There does appear to be a preexisting relationship. And that is, as we mentioned, part of the details of our criminal investigation which we would request that we could address

in—potentially in a closed session.

Ms. RIDDICK-BROWN. Sir, if I may?

Mr. TAYLOR. Yes, ma’am.

Ms. RIDDICK-BROWN. It is not uncommon for a customer to say,

I want to go to a particular venue. But it is the responsibility of

the contracting officer to say, what is in the best interest of the

government? So the record shows that an official said, go to a parVerDate 22-MAR-2001 12:26 Sep 16, 2008 Jkt 037534 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 C:\DOCS\110-59\157280.000 HAS2 PsN: HAS2
13

ticular company, but as a contracting officer I must ensure that

what I am doing is in the best interest, cost-efficient, et cetera. So

the client can make all kinds of recommendations, but the contracting officer bears the burden of the decision.

Mr. WILLIAMS. The contracting officer was at GSA after the joint

decision was made between NCIS and GSA to move this under the

small business thresholds for competition, which was wrong. Then

they it put it into the sole source, legitimate sole source. Had it

been legitimate, we would have named a small business company

to do it. It was not legitimate to split the orders, to put it underneath that $3 million threshold.

Mr. TAYLOR. How much money do you think would have been

saved——

Mr. BETRO. Well, Mr. Chairman——

Mr. TAYLOR [continuing]. If all the barriers had been purchased

in one purchase order rather than in a series of small purchases?

You have got to have some experience in that field.

Mr. BETRO. Yes, I think, as I mentioned in my statement, we

would look at some of the administrative fees that were charged or

provided to the contractors and subcontractors for their efforts in

this procurement. There are fees; that is acceptable to charge some

level of fee. We would probably say the fees in this case were excessive, should not have been accepted by us at NCIS, but they were

not mentioned in any way as being excessive. That was about $4

million total between the procurement and the installation of the

barriers.

There is no way for us to tell on the actual base cost of the systems themselves. At least I certainly can’t, and maybe our colleagues from Naval Facilities Engineering Command could, to say

what would have been the cost. They were a COTS solution, we

were going for a COTS solution. This is the one found, the only one

known to be available in all likelihood. I guess if there was a sole

source done legitimately, sole-source contract, they may still have

ended up being the provider of those barriers.

But the administrative fees that I mentioned, a little over $4 million that we would point to somewhere in there, I would say would

represent the excess and potentially the wasted expenditure of

money.

Mr. TAYLOR. What are the names of the NCIS officials? Who directed Northern to hire P–CON Consulting?

Mr. BETRO. Mr. Chairman, I would respectfully request that we,

if possible, address that in a closed session for the interest of the

matter being an ongoing criminal investigation.

Mr. TAYLOR. I understand you saying that, but I would also tell

you that this is not the only acquisition program going on in our

Nation. I would sure hate for another agency being bilked out of

money by the same people as we speak. They have not been convicted of anything, but they certainly are under some suspicion of

mismanaging the citizens’ money. This is not the only wasteful

thing going on in the Navy. The Littoral Combat Ship (LCS) program comes to mind. And I would hope that one or two things

comes out of this today. Number one is that we are sending the

message that we are going to take care of our troops. The second

14

part is that this is not carte blanche for contractors to defraud our

Nation in the process.

And after reading these articles in the Post, I certainly have reason to believe that we have been defrauded, and it looks like an

inside job. And I would like the message to be that those people

are going to be brought to justice, and that steps are being taken

so that this won’t happen again, and that the message being sent

is that if you use your position to enrich yourself or your friends,

you are going to pay for it criminally. That has not happened yet.

Mr. BETRO. No, sir. And we will endeavor and have been endeavoring to continue to pursue the criminal charges complaints against

the one or two or three individuals involved. And like I say, we are

currently in the United States Attorney’s Office in the District

awaiting a decision.

Mr. TAYLOR. I would like to request for the record—it is my understanding that U.S. Attorneys cannot talk about ongoing investigations, but it is also my understanding that those people who

have approached a U.S. attorney are free to say, I have approached

that U.S. Attorney and asked them to look into this subject. And

for the record, I would like the names of the United States attorneys that have been approached, and what days they were approached, and what information was given to them.

[The information referred to can be found in the Appendix beginning on page 47.]

Mr. TAYLOR. The Chair yields to the gentleman from Maryland.

Mr. BARTLETT. Thank you very much.

Had this been competed on a fast-track basis, how much longer

would it have taken?

Ms. RIDDICK-BROWN. Possibly, sir, three to nine months, depending on the venue. If we decide to stay in a sole-source venue, sole

sources tend to go quicker than a competitive venue. At a minimum three to nine months.

Mr. BARTLETT. You are all familiar with the article in the Washington Post. Are there any errors in that article?

Mr. BETRO. Sir, I would say there are not any latent errors that

I can speak of, just information we mentioned that was not included in the article because they were not aware of. It was information that the authors of the articles were not aware of that we

shared today, but generally the information in the article is accurate.

Mr. WILLIAMS. I would say, sir, the information is accurate. I

don’t think it noted that while things were done wrong, this was

a different time frame. This request came to us to help out one

week after September 11th. There certainly was a sense of urgency.

It still does not excuse or condone the wrongdoing that happened,

but it was a different time, and, frankly, it is a different time now.

I believe we have fixed those problems so they won’t happen again

under my watch.

Mr. BARTLETT. If another request like this came, how would the

procurement proceed differently?

Ms. RIDDICK-BROWN. One, sir, we would put together a team that

consists of both the requirements team, the comptroller’s team and

the contracting team within, in our case, NCIS. We would look at

all the venues within DOD. It is always better to use existing conVerDate 22-MAR-2001 12:26 Sep 16, 2008 Jkt 037534 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 C:\DOCS\110-59\157280.000 HAS2 PsN: HAS2
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tracts which can save time in that venue. You look at within the

DOD structure what is available, you look at what is in the marketplace. We assess what that looks like, and if it, in fact, does

meet our needs, we then go to either an existing vehicle, we either

can go sole source, or we can compete. And there are enough

venues in the acquisition arena that we could hopefully choose the

venue that best works for the government.

Following that, if, in fact, we had a competition, there would be

an evaluation of the potential offerers, those who are proposing. If

there was even a sole source within a small business venue, we

could actually even compete within the small business venue. So

there are various avenues one could take be it small business, be

it sole source, be it competitive in that arena.

But the one challenge that we always have in the arena is putting another adequate statement of work that reflects our needs so

we will know where to go and get the resources to make our purchases, be it a service or supply. The evaluated contractor who is

a potential offerer we then make determinations what is the best

value to the government, and we then make the award.

Mr. BARTLETT. Certainly there will be occasions when time is of

the essence, which it was deemed to be here. And we need to proceed very rapidly. This was a fair-sized procurement. The regulations as they were interpreted required that these contracts be let

in amounts of less than $3 million. There were a large number of

those let, sometimes several in one day, a clear, clear attempt to

skirt the requirements.

Recognizing that there may be times when instances—when time

is of the essence, and we need to move very quickly, and we really

can’t wait 6 to 9 months for a competition, how can we structure

that kind of procurement to avoid the problems that we had here?

Clearly we just ignored the rules, and you have got to have it real

quickly, so you can’t spend more than 3 million in one contract, so

we will let three contracts in one day, each of them less than $3

million. That is an obvious ruse to get around the regulation. But

recognizing that there may be times when we need to move very

quickly, how can we do that without the kind of problems we created here?

Mr. WILLIAMS. I think, sir, there are legitimate ways to do that

within the Federal Acquisition Regulation. Other shortcuts were

taken here that shouldn’t have been taken. But where you have in

this particular case an urgent and compelling need and a single

source, I believe it could have been easily done by either NCIS, or

as we do at GSA—we help agencies do their acquisitions—it could

have been done right, and it could have been done fast under the

existing regulations.

Mr. BARTLETT. Dave Nelson from Northern said he did not have

any idea why NCIS selected his company. He apparently did not

feel that he had the kind of credentials which would have recommended him for that contract. Why do you think the company

was selected?

Mr. BETRO. I believe, sir, that he was inappropriately selected

because the individuals involved tried to use an existing vehicle

that they had been using to make other procurements for a while.

Clearly improper. And in their interest to expedite and to use a

16

system that was familiar to them, they used an improper vehicle,

and his company was an 8(a) set-aside.

Mr. BARTLETT. What company?

Mr. BETRO. Small business.

Mr. BARTLETT. 8(a)?

Ms. RIDDICK-BROWN. Yes.

Mr. BARTLETT. Why was he directed to hire P–CON, which apparently was one man already fully employed?

Mr. BETRO. Yes, sir. P–CON, he had been an employee—P–CON

had been a subcontractor for NEF working for NCIS as a security

consultant before the barrier procurements ever came up, and it

was definitely a focus of our investigation as to why an individual

in NCIS would have further recommended that individual to NEF

to participate in the boat barrier procurements.

As mentioned before, it is not necessarily that unusual that a

preference or a recommendation would be made. In this instance

we believe there was potentially some irregularities based on prior

relationships that the individuals had which is a focus and a subject of our criminal investigation.

Mr. BARTLETT. When you investigated this, was there any value

added by the Navy hiring both Northern and P–CON? What they

did couldn’t the Navy buyers have done directly? Now, I have trouble understanding what value is added to this procurement process

by hiring these two companies. They did not do anything except let

contracts to somebody else, which is what I thought our buyers did.

Mr. BETRO. Sir, as I mentioned, the Navy could have gone directly through different vehicles to Dunlop, and there is no question that the individuals who were involved in this took improper

action. But clearly there was another venue or vehicle that we

could have used to go directly without using NEF or P–CON industries.

Mr. BARTLETT. When you say were improper, do you mean dumb

or criminal?

Mr. BETRO. Sir, I think it could be one or the other or both, and

I think that is what we are waiting for the U.S. attorney’s ruling

or judgment on the merits of the criminal investigation. Clearly the

inferences there raised our concern that it did meet the threshold

of criminal violations.

Mr. WILLIAMS. If you don’t mind, sir, I believe the splitting of the

procurements under the competition rules was wrong. Then picking

any company to be the prime contractor as Northern was with the

understanding that they were not going to do any work was wrong.

So you start with splitting the award was wrong, and then the

GSA contracting officer agreed to that. That was wrong. Then picking any company, and under this particular 8(a) set of contracts

there were 165 contractors, if you picked any one of them by throwing a dart at the wall and saying, we want you to be the prime,

you don’t have to do any work, it is just a passthrough, that was

wrong.

Mr. BARTLETT. It says in the article that the auditors wanted to

question NCIS officials about the boat barrier project, but NCIS officials declined to discuss it. Why would your people decline to discuss it with the auditors if our intent is to get to the truth?

17

Mr. BETRO. Sir, I am not aware of any NCIS officials declining

to discuss.

Mr. BARTLETT. I thought you said the article was factual.

Mr. BETRO. I said generally I thought the article was accurate.

That is one of the specifics that I have not been able to find out

who might have refused. As I said, we worked with DCIS and

GSA’s OIG office almost immediately from the outset and have

worked closely with them from that time until now.

Mr. BARTLETT. NCIS agents said they were conducting an investigation of their own and wanted to take over the case. GSA

agreed?

Mr. WILLIAMS. My understanding is the GSA officer and inspector general did agree with that.

Mr. BARTLETT. And that was four years ago?

Mr. WILLIAMS. I believe, sir.

Mr. BARTLETT. And we still are investigating it?

Mr. BETRO. Yes, sir, still open investigation today.

Mr. BARTLETT. Seems incredible to me that that investigation

could take more than four months let alone four years.

Mr. BETRO. Well, any procurement investigation does. There are

some complexities, sir, involved with contract reviews and trying to

find records and task orders. But we did present it to the first U.S.

Attorney in the May time frame of 2004. So at that point we had

investigated enough where we thought there was sufficient information enough for a U.S. attorney.

We could have stopped. We could have closed our investigation

in 2004 with that U.S. Attorney’s declination, but we did not. We

took the information they provided with what the weaknesses were

in the case from a criminal prosecutive standpoint, and we continued to investigate. We continued to do lots more interviews, records

reviews until we thought we had enough additional information to

bring it to another U.S. Attorney’s office, which we did.

Likewise, that U.S. Attorney’s office chose not to prosecute the

case. We did not stop there. We could have stopped at that particular point in time, but we did not. We have continued to investigate

these allegations and improprieties, and currently we are at a third

U.S. Attorney’s office. We also did this fully jointly with the Defense Criminal Investigative Service in addition to the GSA OIG.

So it is three different investigative organizations with full visibility on this investigation, all sharing information and sharing

each other’s reports, jointly presenting these cases to the various

U.S. Attorneys’ offices.

But I recognize in hindsight, now that it has come to my attention, there might be some things in the investigation we could have

done more rapidly. But I do believe we have carried out due diligence in continuing to pursue the criminal and civil remedies that

might be available.

Mr. BARTLETT. Mr. Chairman, I think that this case is instructive enough that it would be useful—I am not desirous of identifying specific people to be hung for this. That is not my goal. I am

sure mistakes were made. I am sure each step—I hope that each

step the person thought they were making the right decision; in

hindsight they clearly did not.

18

But I think this could become a textbook study on how to really

screw up a procurement so that we wouldn’t do it again. And I

would like to see this not kind of swept under the rug and some

people administratively disciplined or whatever. I would like to see

this—and you can call them employee A, B and C if you wish, but

I would like to see this exposed in the clear light of day, because

I think there were enough things that went wrong here that this

would be an excellent case study for looking at contracting in urgent situations like this so we did not repeat these mistakes.

Can you get that kind of information to us so that we can see

what we might do with that?

Mr. BETRO. Sir, we actually have an investigative time line that

we were prepared to share if we were to go into a closed session

and leave with the committee. It just outlined broadly the investigative steps and chronologies. We could make that available for

the committee.

[The information referred to can be found in the Appendix beginning on page 48.]

Mr. BARTLETT. I have a couple of questions for the record.

Mr. Chairman, thank you very much.

Mr. TAYLOR. Sure. Before going to Mr. Larsen, I would be curious, what is the name of the CEO of Northern NEF on or about

the date of September 28, 2001?

Mr. BETRO. Excuse me, Mr. Chairman, I will try to find that

name.

Sir, I believe the president was Ken Dyer.

Mr. TAYLOR. How do you spell the last name?

Mr. BETRO. D-Y-E-R.

Mr. TAYLOR. Okay. With that, the Chair yields to Mr. Larsen.

Mr. LARSEN. Thank you, Mr. Chairman.

Mr. Betro, the article says that the cost for the program was at

least $100 million, I think. But you have testified that at least in

the procurement of the boat barriers, NCIS estimates that the cost

will be 30.7- after adjustment. Why that discrepancy? What is

being counted in the article that you are not counting?

And second, you also mentioned in terms of fees and costs, fees

of $2.6 million and some other costs of 24.7- leaves about 27.3 million that you have accounted for of your 30.7-. Where did that other

4.4 million go to? Can you address that for me?

Mr. BETRO. First, I believe that I was trying to address the total

cost of the boat barrier program. The $100 million I can only surmise might have referenced our overall budget for Waterside Security Systems, which included several other things in addition to the

boat barriers. So I am surmising that this article might have referred to that amount.

The boat barrier program, as best we can reconstruct, is just

under the total of $60 million, which included both base costs of

the materials and installations. It also included those miscellaneous administrative fees which I referenced, I believe, totaled a little

over $4 million.

Mr. LARSEN. And you are saying the procurement part of that 60-

plus million was 30.7 million?

Mr. BETRO. That is correct.

19

Mr. LARSEN. And then you talked about some of the fees associ- ated with that procurement which still left, by my math, $4.4 million left unaccounted for, which I would like you to account for.

Maybe you can account for the record.

Mr. BETRO. Yes, sir. I have it here in terms of where the 4.4 or

so million dollars went broken down between Northern NEF, P–

CON. Those fees would be—I believe that P–CON received a total

of $1.1 million in fees for participating as a middleman between

Dunlop and Northern NEF, and that NEF received $1.5 million in

fees associated with the procurement activity, and then in the installation piece was the remainder of the 4.4-, which is 1—I am

sorry—$1 million in fees that went to a company called ITA, which

was responsible for the installation of the boat barriers. So if I got

this correct it is $1.1 million to P–CON, $2.6 million to NEF and

$1 million to ITA, and I have a total of 4.7-.

Mr. LARSEN. So beyond the other $2.6 million for otherwise, that

is not doing much.

Actually, honestly, what is that, 6 million, 7 million out of 30.7

million for fees to procure the program—to procure the boat barriers?

Mr. BETRO. I believe, sir, that is out of 56.7.

Mr. LARSEN. Okay. About 12 percent or so; 12 to 15 percent.

Some questions with regards to the attorneys’ offices. I don’t

quite understand it. You said that USAO Maryland declined prosecution, and in your oral testimony you said it was because it was

part of a larger investigation so they wanted to move it to Kansas

City? Is that what I heard you say?

Mr. BETRO. It was presented jointly with a larger case of kickbacks—alleged kickbacks, which, when this first came up, some of

the companies were the same, and so they were brought under a

worn umbrella for ease of understanding who the companies and

individuals were. We did subsequently break out the boat barrier

one pure and simply by itself, but by that time the entire package,

including P–CON and NEF and the boat barrier issue, were declined by the U.S. attorney’s office in Maryland saying basically

that the P–CON issues are deemed more administrative, and that

the appropriate venue for that could be Kansas City where the

GSA office which was the contracting office for those particular acquisitions.

Mr. LARSEN. Is that a determination that NCIS agreed with, or

did not agree with but had to live with?

Mr. BETRO. We had to live with, but didn’t agree with. That is

why we went on to the Eastern District of Virginia believing that

P–CON, the company that was middleman in this, was incorporated in Virginia, so we thought potentially that was a better

venue.

Mr. LARSEN. And their determination—your written testimony

says they asked you to explore other options, which is a different

way of saying they declined prosecution.

Mr. BETRO. They did not formally decline; they recommended

that they were not the appropriate venue and wouldn’t consider the

case any further.

Mr. LARSEN. Nobody says no in this business. So they were not

going to pursue an investigation. Can I ask, was P–CON and

20

Northern NEF part of this broader investigation that USAO Maryland declined, or was this a clean break, to your knowledge?

Mr. BETRO. For us it was a clean break. The other case involved,

sir, grand jury and other related materials.

Mr. LARSEN. Maybe that can be discussed in a different venue.

Then so now you are at DCAO, and there actually has been no

determination from them whether or not a crime has been committed, whether or not there has been a determination that this needs

to go any further; is that correct?

Mr. BETRO. That is correct. We have no kind of final determination, civil or criminal, from the U.S. Attorney’s office here in D.C.

Mr. LARSEN. Is there an expectation when that would occur from

your end?

Mr. BETRO. They did not give us a specific date. And so we will

continue to make contact with them.

Mr. LARSEN. Can I—that is somewhat disconcerting. I am not an

attorney, and some of us are up here, and some of us aren’t, but

it sure sounds like things happened that were extremely bad and

extremely illegal from a layman’s point of view.

Can I just suggest—and I don’t want this to sound smart-alecky,

but I would rather hear from you the results of the U.S. Attorney’s

office of D.C. determination rather than read it in the Washington

Post.

Mr. BETRO. Yes, sir.

Mr. LARSEN. So certainly, I don’t know how we can set that up

or if we can even do that, but it would certainly be appropriate.

Mr. BETRO. We can certainly be sure that happens, sir.

Mr. LARSEN. I think Mr. Bartlett asked some questions about

this convoluted relationship between P–CON Consulting and

Northern NEF and the other side of the security consultant contract within NCIS. But just one more question, Mr. Chairman. It

does not look like you are keeping time, but I know that Ms.

Bordallo is here.

For Mr. Williams, on page four of your testimony, you say that—

this is just trying to define terminology. It says specifically the

OIGs—the FSA was providing compliant assisted acquisition services with proper management. What is the definition of ‘‘compliant

assisted acquisition services’’?

Mr. WILLIAMS. Well, assisted acquisition services means that

when other agencies need help doing their acquisition, they come

to GSA with a statement of work. We then do an acquisition plan.

We may do the competition or do the award for them and help

them with postaward management.

What they found, the IG, when they came back to us after looking at it—after they initially helped us identify these problems,

they came back and reviewed us again and said that we had proper

internal controls, and we were doing these assisted acquisitions,

helping other agencies with their procurements, in a compliant

manner, compliant with the Federal Acquisition Regulations.

Mr. LARSEN. Okay. One more point to make, Mr. Chairman. I

have to step out for a meeting, and I will be right back in for the

remainder of questioning from other Members, but just a quick review. From what I can gather, on the $56 million or so in a procurement, about 12 to 14 percent or so went to fees of some sort,

21

sounds like; that we don’t have a determination yet from the U.S.

Attorney’s office in D.C. on whether or not there will be—at least

from their view, there is enough there to say there is either a civil

violation or a criminal violation took place. I mean, from my understanding, we are waiting to see if these folks get off the hook essentially. I don’t know if there is anything else to go beyond that, unless we go to the U.S. Attorney’s office of Peoria, Illinois, or some

other venue.

Mr. BETRO. Kansas City.

Mr. LARSEN. The final point I want to make is this whole—this

thing started in some ways because obviously there are individuals

there who were not the folks we want in those kinds of positions.

The second is I have seen this before, and maybe we could dig into

this one broader issue about something we might call procurement

migration. That is using a program that is not designed at all, but

is available because someone sees it as available, so they use it for

something that it was not designed to be used for; in other words,

using a technology program—it has a tangential relationship with

security, it is physical security, not technology security, but it has

the word ‘‘security’’ in it, so let’s use that to pursue this other program. And whether you call it procurement migration or some

other term, there are other examples of that that we have seen in

the past several years that don’t end up with the same extreme result, but end up with money being wasted because we are using

things that were not designed to be used for. And that may be

something that warrants us looking into as well.

Thank you, Mr. Chairman.

Mr. TAYLOR. I would like to thank the gentleman. If I could do

a quick follow-up.

Who paid P–CON the million dollars? Was it—did they get a

check from the United States Government? Did they get a check

from Northern? Did they get a check from Dunlop?

Mr. WILLIAMS. It would have been made by Northern their prime

contractor. They were a subcontractor to Northern.

Mr. TAYLOR. So this is a cost of doing business that Northern

had?

Mr. WILLIAMS. Yes.

Mr. TAYLOR. Just as a matter of curiosity, what is the time that

a former naval uniformed person would have to wait before they

could have gone to work for Northern under the law?

Ms. RIDDICK-BROWN. Well, it depends, sir. If it is $10 million or

more, then there is usually a—has to be a direct correlation with

the program you just left than simply knowing about the program.

Mr. TAYLOR. Are the employees or the management of Northern

former Navy personnel.

Mr. BETRO. Not to our knowledge, sir.

Mr. TAYLOR. The Chair yields to Mrs. Bordallo.

Ms. BORDALLO. Thank you, Mr. Chairman, and thank you for

calling the hearing today on such an important issue. Unfortunately, today our full committee heard testimony about another

force protection issue and that was on body armor, and the news

that members of our Armed Forces in harm’s way may not have

the best body armor they need to meet the best operational requirements.

22

And in this case today, it seems our sailors and marines in the

wake of the USS Cole bombing had their protection compromised

for the sake of expediency and favoritism.

I have, Mr. Betro, I have some questions that I think were—

some of the members here were leading up to, and I would like to

get more information.

How could the Navy’s own inspector general and internal auditing units allow the prime contractors to bill one major contractor

into many separate invoices always totaling under the $3 million

threshold. Is this what put up the red flag?

Mr. BETRO. Ma’am, no red flags were raised internally by us.

There was no detection of those improprieties. It wasn’t until it

was brought to our attention by the Program Integrity Office of the

Department of Navy as one way, plus the GSA audit was indicating that there was some improprieties, and those both surfaced

roughly in the spring of 2003.

Regrettably, there was no oversight on to the actions of the individuals who were orchestrating.

There were two ways this could have been caught at the time.

Our employees certainly should have known better and shouldn’t

have done it, and certainly our next was our contracting officer also

potentially should have advised or known that this shouldn’t have

occurred.

So we clearly stand up and say the folks at NCIS took improper

actions and we are trying to again further investigate that now.

Ms. BORDALLO. What was the time frame when you finally

caught it?

Mr. BETRO. It was in roughly April–May of 2003.

Mr. WILLIAMS. If you would like a little background from GSA,

GSA’s management had actually identified some problems in another region of GSA, and we essentially have 11 regions all doing

similar work. They then decided we should have an audit done of

all of the 11 regions. The original irregularities occurred in another

GSA region, but then when they looked at our region out of Kansas

City, that is when our Office of Inspector General identified the

problems with the boat barrier project.

Ms. BORDALLO. Now on the investigation, I think Mr. Bartlett

brought up the idea that it has been four years; is that correct?

Mr. BETRO. Yes, ma’am.

Ms. BORDALLO. The principals involved, were they reprimanded

or put on leave, or how did you handle that?

Mr. BETRO. The government employee involved resigned in the

immediate kind of wake of us initiating this investigation and beginning questioning of that individual, and some polygraphs.

There is a subcontractor we have discussed earlier, P–CON, who

was escorted out of the building, and his work with NCIS was terminated at that time.

Those are the only kind of immediate—under our control, individuals that we took some action on immediately.

Ms. BORDALLO. Inasmuch as this investigation is ongoing and

has been ongoing, and I find it very unusual for an investigation

to be stretched out into a four-year period—and I don’t know how

much longer—is there a statute of limitation here? Would that kick

in?

23

Mr. BETRO. Five years.

Ms. BORDALLO. How hard are you pushing this investigation?

Mr. BETRO. A lot harder right now.

But honestly, there are lots of procurement cases that the U.S.

Attorney’s offices are taking. We are presenting the information to

various U.S. Attorneys offices in hopes of getting—exhausting any

final decisions regarding prosecution that we can get. We are continuing to pursue that. That is why we are at our third office. We

know at least potentially there is at least one more venue that we

could approach. But we have tried to persist in getting a determination on either the civil or prosecutive or criminal remedies for

this particular case.

Ms. BORDALLO. Mr. Chairman, there is not much time left.

Mr. Williams, I have a question for you. It seems that the Navy

leadership was hasty to find a solution and they took advantage of

the GWAC loose contracting guidelines. What steps, beyond additional training, has GSA taken to clarify the rules governing

issuance of governmentwide acquisition contracts known as

GWACs?

Mr. WILLIAMS. We have done training in that area. We have also

instituted management controls where we do reviews now that

weren’t done before. We did have a lack of proper management controls. We did take action across all of our 11 regions to put in the

training, the management controls, sign the agreement with DOD

on how we were going to improve that. We monitor on a regular

basis.

I would say that we also ask our IG to come back in and check

up on have we put those proper management controls in place.

For these assisted acquisition services where we help other agencies, we feel like we are now on solid ground. We still do help all

Federal agencies when they need help with their acquisitions. We

don’t want them to come to GSA thinking we take shortcuts to help

them. We want them to come to us knowing we can help their mission in a compliant way.

Ms. BORDALLO. Thank you. Thank you very much, Mr. Chairman.

Mr. TAYLOR. Mr. Williams, I find several things curious. I would

ask for your intelligence on this.

I was here for September the 11th. The Cole was built in my congressional district. It was brought back to my congressional district

for repairs. Two of my local newspaper editors, who are both Vietnam veterans, brought it to my attention that they had gotten

within 50 or so yards of the Cole on the other side of the

Pascagoula River, undetected. Just walked up. Both Vietnam veterans said if we had another RPG, we could have put another hole

in it.

I remember at another hearing bringing that to the CNO’s attention. But I also remember going to the home port at Pascagoula

and the shipyard and the Coast Guard station adjacent to it, because after they brought it to my attention, I felt like I had to do

something. So I go to the Coast Guard station. Who has got responsibility for the watershop application of the Cole? Well, the Navy

does. So I went to the Naval Station. Who has got responsibility

24

of the watershop of the Cole? The shipyard does. Went to the shipyard. The Coast Guard did.

So about the time line that this procurement is being issued,

September 28th of 2001, it again—it is almost a year since the

event of the attack on the Cole, and really nothing has happened.

And I think someone could draw the conclusion that it wasn’t until

the events of September the 11th that some people within the Navy

said, Go do something and do something in a hurry.

The reason I say all of that is, Mr. Williams, now that someone

has lit a fire under someone at the Navy to do something almost

a year after the attack on the Cole, if they had come to the GSA

and said we need to do something, we need to do something really

fast, under the normal procedures could GSA have been tasked to

buy these barriers and how quickly could they have done it under

the normal rules? Or are there expedited rules that would have

gone into place?

Mr. WILLIAMS. Well, I believe we could have done the task. We

had people who received this request from the Navy a week after

September 11th. They did a task but they broke the rules. I believe

we could have done it within the rules and done it fast, given that,

as Director Betro said, this is really a single source. I believe you

also had an urgent and compelling situation and the Federal acquisition regulations allow you to move fast when you have both an

urgent and compelling situation.

Mr. TAYLOR. How fast?

Mr. WILLIAMS. Maybe not as fast as we did it. But probably if

we did everything right, I think we probably could have done it

within a couple of weeks, or maybe a month. But we did this—we

can do an urgent, compelling, in 30 days or less. I believe we could

have done this, and it would have been appropriately justified, and

we could have done it in under a month. And we do this to the tune

of several billion dollars a year for all Federal agencies. We now

do it right. We just did it wrong.

And, again, there were people who didn’t have the proper oversight, they probably didn’t have the proper training. They tried to

break the rules to help the Navy with their urgent mission. It was

wrong what they did, but I believe we could have done this in a

correct manner and we could have done it fast.

Mr. TAYLOR. Playing devil’s advocate, is there any evidence that

the rules were broken? I realize a year has gone by since the Cole

was first attacked. Or very close to a year. But is there any evidence in your—from what you can see, that the rules were broken

to expedite the purchase? Or do you feel like the rules were broken

to enrich someone?

Mr. WILLIAMS. Well, let me answer both questions. The rules

were broken to expedite the purchase.

When the Navy came to us after having already tested the boat

barriers in May of 2001, then they came to us in September. Then

went to our contracting officer, decided it was okay to split these

procurements, which was wrong.

And whether somebody enriched themselves, I think that is part

of the ongoing investigation. And I think Director Betro has already talked about what he saw in that regard.

25

What came to us was, as we agreed to do this under the small—

under the threshold for competition for an 8A, to do it in a sole

source manner, we then got a request to go to northern NEF and

to P–CON.

Mr. TAYLOR. Mr. Betro, I am curious. As Mr. Williams mentioned, the tests were conducted in May. It is June, July, August,

almost all of the month of September passes, apparently nothing

was purchased.

Two weeks after the events of September 11th, someone gets a

fire lighted, probably in the proximity of their body parts, and decides to move. Is there any evidence between May and September

that any movement at all took place?

Mr. BETRO. I really can’t answer that. I can’t say NCIS wasn’t

designated until August of 2001 as being responsible for the program of boat barriers. And we did not—I believe the report was not

done until August of 2001. Which suggested that these barriers

met the minimum requirements for the intended purpose.

So it was August, about 2001, when we had a program manager

identified NCIS; the test results came back to us saying yes, it met

the minimum threshold of requirements, and the first procurement

was in October.

Mr. TAYLOR. But that certainly in my mind gets a little confusing, when in all of this time apparently there is only one supplier,

so there really should—it is not a competition any longer. So it is

a question of whether or not that one supplier made a product that

was adequate. Is that what took this long to decide, made the determination by August?

Mr. BETRO. The combination of site surveys and examinations of

what was available commercially did come down to Dunlop, and

then the tests were conducted and the results of the test that came

back in August of 2001 said even though they were the only manufacturer, we now had some confirmation that that manufacturer

could meet the minimum basic requirements. It is about the same

time as, well, that NCIS was then designated as the program manager.

There were things going on but until we knew we had the requirement met minimally at least, we weren’t going to extend any

money to procure any technology, at least boat barriers.

Mr. TAYLOR. Because the Washington Post raised the issue and

you mentioned that about 90 percent of the barriers are still available, was there a significant problem with the barriers leaking and

sinking, or was that just something that happened to a few of

them?

Mr. BETRO. I have some colleagues from Naval Command here.

We divested on the program back in 2003 and so we would not

have been tracking, and I don’t have information available.

Mr. TAYLOR. But you started buying them in September of 2001.

I would imagine by now there is a sense of urgency. So those deliveries were in a month or two of that, and I would have hoped that

you would have known early on if you had problems on them.

Mr. BETRO. I had no information available to us.

Captain SAMUELS. I am Mark Samuels. I am the commanding officer of Naval Facilities Engineering Service Center, which is technical agent for NAVFAC. Like my other dynamic pieces of equipVerDate 22-MAR-2001 12:26 Sep 16, 2008 Jkt 037534 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 C:\DOCS\110-59\157280.000 HAS2 PsN: HAS2
26

ment that is maintained and that has to be done, we have been involved in some of this maintenance, but most of that has been done

at the local bases. And I am not prepared right now to talk about

any of those specific patterns or problems that may exist.

Mr. TAYLOR. If you would, Captain, for the record, since you have

been identified as a program officer, if there have been a—when I

say ‘‘substantial,’’ over ten percent of them having problems with

leaks or other quality effects that have lead to a premature life diminishment, I would like you to get back to this committee.

Captain SAMUELS. Yes, sir.

Mr. TAYLOR. If there is anything consistent that was causing this

problem that could be pointed to as a manufacturing problem.

Captain SAMUELS. Yes, sir.

Mr. TAYLOR. Mr. Bartlett.

Mr. BARTLETT. Thank you. I don’t have any further questions.

Mr. TAYLOR. If I may, I think Mr. Betro has offered to give us

a time line of what he feels are the criminal events. That would

have to be done in closed session. And I would, if Mr. Betro is prepared to do that today, I would be open to doing so today if that

fits your schedule.

With that in mind, I am going to call this hearing to a close and

announce a ten-minute recess, and then ask our panelists to come

back at that time so we can receive testimony in closed session.

I would also like to ask unanimous consent for Mr. Ron O’Rourke

to attend that hearing in his capacity.

Mr. BARTLETT. So moved.

Mr. TAYLOR. The hearing is adjourned.

[Recess.]

[Whereupon, at 4:20 the subcommittee proceeded in Closed Session.]

A P P E N D I X

JUNE 6, 2007

PREPARED STATEMENTS SUBMITTED FOR THE RECORD

JUNE 6, 2007

(31)

32

33

34

35

36

37

38

39

40

41

42

43

44

QUESTIONS AND ANSWERS SUBMITTED FOR THE

RECORD

JUNE 6, 2007

(47)

QUESTIONS SUBMITTED BY MR. TAYLOR

Mr. TAYLOR. You mentioned that about 90 percent of the barriers are still available, was there a significant problem with the barriers leaking and sinking, or was

that just something that happened to a few of them?

Mr. BETRO. Prior to installing the Dunlop Anti-Boat Barrier (DABB) system, a

full-scale test was performed by the Naval Facilities Engineering Service Center

(NFESC) on the existing commercial-off-the-shelf (COTS) 6-foot diameter units.

Testing demonstrated DABB’s effectiveness in stopping the threat for which they

were designed.

NFESC recommended to NCIS the implementation of a larger diameter unit to

deter the widest range of expected small boat attacks. The larger diameter unit required modification of the existing COTS 6-foot diameter design and was put into

production very rapidly in the immediate wake of the 9/11 attacks. Operational verification testing was conducted in Norfolk, VA in early 2002 on initial DABB units.

The units were found to be susceptible to leakage around and through the end

flanges. Upon Navy notification, Dunlop pursued modifications, improving both

lifecycle and performance capabilities. By the end of the production run in late 2003,

leakage issues had been minimized.

In October 2003, the Navy designated the Naval Facilities Engineering Command

(NAVFAC) as manager of the AT/FP program. NAVFAC tasked NFESC to manage

the Navy’s Waterside Security Systems. In this capacity, the NFESC has established standardized maintenance, inspection, and operation procedures for the Dunlop barrier systems. A centralized storage and maintenance depot for the Dunlop

barriers was established. This pneumatic design requires adjustment of the air bladder from daily thermal expansion and contraction. Depending on the site and range

of temperature differentials this can impact regular maintenance actions. As early

production units show leakage problems in the field, they are removed from service

and returned to the depot for refurbishment. New units from the end of the production run are issued from the depot to replace the leaking units.

In our experience, the maintenance requirements are typical for this type of structural system when operating in a marine environment. As noted in the NCIS testimony, roughly 90 percent of the DABB units purchased by the Navy remain deployed or in the NFESC depot available for deployment today.

Mr. TAYLOR. It is my understanding that U.S. Attorneys cannot talk about ongoing investigations, but it is also my understanding that those people who have approached a U.S. attorney are free to say, I have approached that U.S. Attorney and

asked them to look into this subject. And for the record, I would like the names of

the United States attorneys that have been approached, and what days they were

approached, and what information was given to them.

Mr. BETRO. Below is the list of all Assistant United States Attorneys (AUSAs)

briefed and the date of declination/referral, or, in the case of DC, the last meeting

on this topic:

48

QUESTIONS SUBMITTED BY MR. BARTLETT

Mr. BARTLETT. You mentioned that about 90 percent of the barriers are still available, was there a significant problem with the barriers leaking and sinking, or was

that just something that happened to a few of them?

Mr. BETRO. Prior to installing the Dunlop Anti-Boat Barrier (DABB) system, a

full-scale test was performed by the Naval Facilities Engineering Service Center

(NFESC) on the existing commercial-off-the-shelf (COTS) 6-foot diameter units.

Testing demonstrated DABB’s effectiveness in stopping the threat for which they

were designed.

NFESC recommended to NCIS the implementation of a larger diameter unit to

deter the widest range of expected small boat attacks. The larger diameter unit required modification of the existing COTS 6-foot diameter design and was put into

production very rapidly in the immediate wake of the 9/11 attacks. Operational verification testing was conducted in Norfolk, VA in early 2002 on initial DABB units.

The units were found to be susceptible to leakage around and through the end

flanges. Upon Navy notification, Dunlop pursued modifications, improving both

lifecycle and performance capabilities. By the end of the production run in late 2003,

leakage issues had been minimized.

In October 2003, the Navy designated the Naval Facilities Engineering Command

(NAVFAC) as manager of the AT/FP program. NAVFAC tasked NFESC to manage

the Navy’s Waterside Security Systems. In this capacity, the NFESC has established standardized maintenance, inspection, and operation procedures for the Dunlop barrier systems. A centralized storage and maintenance depot for the Dunlop

barriers was established. This pneumatic design requires adjustment of the air bladder from daily thermal expansion and contraction. Depending on the site and range

of temperature differentials this can impact regular maintenance actions. As early

production units show leakage problems in the field, they are removed from service

49

and returned to the depot for refurbishment. New units from the end of the production run are issued from the depot to replace the leaking units.

In our experience, the maintenance requirements are typical for this type of structural system when operating in a marine environment. As noted in the NCIS testimony, roughly 90 percent of the DABB units purchased by the Navy remain deployed or in the NFESC depot available for deployment today.

Mr. BARTLETT. It is my understanding that U.S. Attorneys cannot talk about ongoing investigations, but it is also my understanding that those people who have

approached a U.S. attorney are free to say, I have approached that U.S. Attorney

and asked them to look into this subject. And for the record, I would like the names

of the United States attorneys that have been approached, and what days they were

approached, and what information was given to them.

Mr. BETRO. Below is the list of all Assistant United States Attorneys (AUSAs)

briefed and the date of declination/referral, or, in the case of DC, the last meeting

on this topic:

Æ