U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

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

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

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

38–850 PDF 2008

S. Hrg. 110–500 

IMPROVING FINANCIAL AND BUSINESS 

MANAGEMENT AT THE DEPARTMENT OF DEFENSE 

HEARING 

BEFORE THE

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

OCTOBER 16, 2007 

Available via http://www.gpoaccess.gov/congress/index.html 

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs 

( 

(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

BARACK OBAMA, Illinois 

CLAIRE McCASKILL, Missouri 

JON TESTER, Montana 

SUSAN M. COLLINS, Maine 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

PETE V. DOMENICI, New Mexico 

JOHN WARNER, Virginia 

JOHN E. SUNUNU, New Hampshire 

MICHAEL L. ALEXANDER, Staff Director 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, 

FEDERAL SERVICES, AND INTERNATIONAL SECURITY SUBCOMMITTEE 

THOMAS R. CARPER, Delaware, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

BARACK OBAMA, Illinois 

CLAIRE McCASKILL, Missouri 

JON TESTER, Montana 

TOM COBURN, Oklahoma 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

PETE V. DOMENICI, New Mexico 

JOHN E. SUNUNU, New Hampshire 

JOHN KILVINGTON, Staff Director 

KATY FRENCH, Minority Staff Director 

CLAUDETTE DAVID, Chief Clerk 

(III) 

C O N T E N T S 

Opening statements: Page 

Senator Carper ................................................................................................. 1 

Senator Coburn ................................................................................................. 3 

Senator McCaskill ............................................................................................ 21 

Prepared statement: 

Senator Voinovich ............................................................................................. 37 

WITNESSES 

TUESDAY, OCTOBER 16, 2007 

Hon. David M. Walker, Comptroller General of the United States, U.S. Government Accountability Office ............................................................................. 6 

J. David Patterson, Principal Under Secretary of Defense (Comptroller), U.S. 

Department of Defense ........................................................................................ 7 

Paul A. Brinkley, Deputy Under Secretary of Defense for Business Transformation, U.S. Department of Defense ............................................................. 9 

Dov S. Zakheim, Former Under Secretary of Defense (Comptroller), U.S. 

Department of Defense ........................................................................................ 12 

ALPHABETICAL LIST OF WITNESSES

Brinkley, Paul A.: 

Testimony .......................................................................................................... 9 

Prepared statement .......................................................................................... 86 

Patterson, J. David: 

Testimony .......................................................................................................... 7 

Prepared statement .......................................................................................... 81 

Walker, Hon. David M.: 

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

Prepared statement .......................................................................................... 38 

Zakheim, Dov S.: 

Testimony .......................................................................................................... 12 

Prepared statement .......................................................................................... 97 

(1) 

IMPROVING FINANCIAL AND BUSINESS 

MANAGEMENT AT THE DEPARTMENT 

OF DEFENSE 

TUESDAY, OCTOBER 16, 2007 

U.S. SENATE,

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT,

GOVERNMENT INFORMATION, FEDERAL SERVICES,

AND INTERNATIONAL SECURITY, 

OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 3:19 p.m., in Room 

SD–342, Dirksen Senate Office Building, Hon. Thomas R. Carper, 

Chairman of the Subcommittee, presiding. 

Present: Senators Carper, McCaskill, and Coburn. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. Welcome, one and all. The Subcommittee will 

come to order. Dr. Coburn and I were talking and it looks like we 

are going to start voting. We are working on one of our 13 appropriations bills, the Commerce-Justice appropriations bill, and they 

have an amendment at 3:30. We are probably doing amendments 

about every 15 minutes after that. It will make this a long hearing. 

No, hopefully it won’t be that often, but it will seem that way, I 

am sure. 

I am grateful my colleague here is with us, Dr. Coburn. We are 

going to be joined by some others on our Subcommittee later. Senator McCaskill is presiding right now. As soon as she can get someone to relieve her, she will be over to join us and some others will, 

too. 

I think it was the day before September 11, 2001, former Secretary of Defense Donald Rumsfeld, with whom and for whom some 

of you have worked, gave a blunt and accurate assessment of one 

of our greatest adversaries while speaking to Pentagon employees 

and this is what he said, ‘‘The topic today is an adversary that 

poses a serious threat to the security of the United States,’’ and he 

went on to say, ‘‘the adversary is closer to home. It is the Pentagon 

bureaucracy, not the people, but the processes; not the civilians, 

but the systems; not the men and women in uniform, but the uniformity of thought and action that we too often impose upon them.’’ 

Unfortunately, some 6 years later, those words are as true today 

as they were back then and our hearing today will focus on this 

adversary. Specifically, we will discuss how to continue to improve 

2 

financial and business management at the Department of Defense, 

focusing on both the progress made by the Department in the area 

of business transformation as well as on the monumental challenges that the Department continues to face. 

I am told that the Department of Defense is one of the largest, 

most complex entities in the world. It employs nearly 1.4 million 

people on active duty, roughly 825,000 in the Reserve and National 

Guard, and nearly 720,000 civilians. Its fiscal year 2006 financial 

statements included $1.4 trillion in assets and nearly $2 trillion in 

liabilities. 

To support DOD’s operations, the Department performs an assortment of interrelated and interdependent business functions 

using almost 3,000 business systems. For fiscal year 2007, the Department of Defense spent approximately $4.5 billion to operate, 

maintain, and modernize these business systems, including their 

infrastructure. The ability of these systems to operate as intended 

affects the lives of our war fighters both on and off the field. 

While the Department of Defense has long been acknowledged 

for its premier war fighting capabilities, the dismal state of its financial and business management practices leave the Department 

vulnerable to waste, fraud, and abuse. 

We all share the same objective, and that is to try to figure out 

how the Department of Defense can successfully transform its financial management and business systems. The questions I hope 

will be addressed today are the following ones. 

The Department recently assigned Chief Management Officer duties to the current Deputy Secretary of Defense. One of the questions that I have is, is this action sufficient? 

Since 1999, the GAO has urged the Department to develop a 

strategic enterprise-wide business transformation plan. Why has 

this plan not yet been developed? 

Given the personnel turnover that will happen between now and 

January 2009, how will the Department ensure that progress is 

sustained? 

And finally, how can Congress play a constructive role in charting the best path forward for the Department? 

The Department of Defense has needed a Chief Management Officer who puts taxpayers first and is committed to sound financial 

and business management and transparency. Some of us, including 

the Comptroller General, have been pushing for this change literally for years. In fact, along with Senators Ensign, Voinovich, 

and Akaka, I joined them in cosponsoring legislation to establish 

in the Department of Defense, a Deputy Secretary of Defense for 

Management, who would serve as a Chief Management Officer. 

Now, certainly, Deputy Secretary of Defense Gordon England, for 

whom I have enormous respect, has ably served in this capacity 

unofficially even while tackling the challenges of being at the Department itself. Furthermore, Secretary Gates took a step in the 

right direction when in a September 18, 2007, DOD Directive he 

expanded Secretary England’s official role to include serving as 

Chief Management Officer, as we know. 

But a number of others, and certainly myself, and that includes 

GAO, the Institute for Defense Analysis, and the Defense Business 

Board, do not believe this action is sufficient. I believe this addiVerDate Aug 31 2005 12:30 Sep 18, 2008 Jkt 038850 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 P:\DOCS\38850.TXT SAFFAIRS PsN: PAT
3 

tional title will not necessarily result in the kind of meaningful reform that we are looking for. Only a full-time, term-based senior 

management official will be able to provide focus and sustained 

leadership over DOD’s business transformation. 

Sound financial and business management is critical to the success of the Department. It is the foundation of any organization, 

any program, or any activity. The Department of Defense has one 

of, if not the most, important missions of any U.S. Government 

agency, and that is to protect and secure our homeland. Waste and 

mismanagement undermine that very important mission. Anything 

that weakens the Department weakens its ability to respond quickly and effectively to meet the real threats that our country continues to face. 

As elected Members of Congress, we have an obligation to the 

United States of America and to our people to ensure that their 

dollars are being used as effectively and as efficiently as possible. 

To date, the war in Iraq has cost us just over a half-trillion dollars 

and the meter is still running. Since 2003, we have passed eight 

supplemental bills for Iraq and Afghanistan. We will soon consider 

another $150 to $190 billion. The deficit this year is forecasted at 

roughly $160 billion, and although that is a little better than last 

year, it is not great. 

At home, we are faced with huge growing fiscal imbalances due 

at least in part to our aging population and skyrocketing health 

care costs. This is not the time to be frivolous with our hard-earned 

money. But we know that there is never a time to be frivolous with 

the hard-earned money of the people of our country. 

Congressional oversight is imperative to make sure that Federal 

agencies like the Department of Defense step up to the plate, confront the waste of precious taxpayers’ dollars, and take immediate 

corrective action so that more of our dollars support the real mission of the Department of Defense, and that is protecting Americans and our national interest both here and abroad. 

Dr. Coburn. 

OPENING STATEMENT OF SENATOR COBURN 

Senator COBURN. Senator Carper, thank you for having this 

hearing. It is our biggest expenditure, the Department of Defense. 

That is where we have the most money. 

I was glad you alluded to former Secretary Rumsfeld’s statements. I am anxious to hear how things have changed since then. 

As I have studied and prepared for this hearing, I am not sure 

large quantities of measurable change have, in fact, happened. 

My primary concern pertaining to DOD’s financial management 

is the goal for DOD to become audit-capable. Whether they pass or 

fail the audit, you have to become audit-capable first, and the fact 

that we are not anywhere closer to that now than we were when 

I came to the Senate is simply unacceptable. 

DOD continues to play the key role, with 15 programs or activities on GAO’s 2007 high-risk list. Six of them have been on the list 

for at least 10 years, some dating as far back as 1990. The DOD 

contracting continues to be unaccountable. I want to restate that 

word, unaccountable, unmeasurable, not manageable. It still is unaccountable. It is plagued with longstanding problems and it has 

4 

been on the high-risk list for 15 years, almost three Administrations. 

There have been numerous initiatives and strategies that have 

been implemented, but there still hasn’t been any demonstrable 

progress in the key areas, or there hasn’t been any significant 

metrics that I am aware of or benchmarks to gauge the progress 

of new standards and guidelines. 

I am almost to the point where I agree with David Walker that 

there ought to be a permanent position at DOD called the Chief 

Management Officer. I know that is not in the framework. I know 

it is not there. But I am wondering how long—6 years from now, 

we will continue to sit at a hearing like this and still have 15 to 

20 programs on the high-risk list, still not have metrics, and still 

not measure things? 

And this is not meant to reflect on any of you gentlemen. I am 

not talking about you personally. I am talking about the leadership 

above you that has to be there to make this happen. The efforts 

have to be held accountable, and that is part of the reason that we 

are having this hearing. I hope that there are clear milestones and 

firm commitments in both planning, financial planning as well as 

purchasing planning, that I haven’t seen. 

What I am hoping that will come out of this hearing is a commitment from the Defense Department to sit down with this Subcommittee and the GAO on a regular basis to try to hash some of 

this out. To me, I think we are kind of like we are on a paddleboat 

and we are going against the current. We haven’t lost any, but I 

am not sure we have made any headway. As we continue to change 

things and change techniques and change strategies, I am not sure 

we are any closer to the goal. So I look forward to hearing that. 

I want to thank Comptroller Walker for his work and analysis 

and I thank each of you all for the input and the effort that you 

are—this is a daunting task. If it was easy, you would have already 

fixed it, I am sure. But the fact is, the frustration level and the financial consequences to not having an audited financial statement, 

to not having procurement under control, is, in fact, costing lives. 

And more importantly, it is costing the future of the next two generations of Americans because this is the largest expenditure that 

we have and if we can’t get this right, we can’t get any of it right. 

So I look forward to your testimony and I am hopeful that we 

can start a dialogue with both Chairman Carper and myself and 

really get some benchmarks for you all in terms of the implementation of this. 

The other thing that I worry about, as your staff and you have 

so ably pointed out and I know you are going to bring up, is there 

going to be an Administration change coming up in 2009? Are we 

going to see another great big setback? Are we going to start all 

over again? I want some assurance today that the things that are 

in place are going to continue to move forward rather than we are 

going to change it again and change the goal. What are we, at 2016 

now, I believe, is when we said we can have an auditable financial 

statement? That is not acceptable anywhere else in this country 

and it shouldn’t be acceptable here. Thank you. 

Senator CARPER. Let me go ahead and take a minute or two and 

introduce our witnesses. Again, welcome to each of you. 

5 

We are going to lead off today with our Comptroller General, 

General David Walker. I said to General Walker before we started 

that I am glad we don’t have to pay him on a piecemeal basis for 

every time that he testifies. Otherwise, you would run this deficit 

up even more than it has. He said he would like to go to work on 

a commission basis, I think is what he said. But it is not going to 

happen anytime soon. 

He is currently serving his ninth year of a 15-year term. Part of 

me says it would be nice to have a 15-year term, but I am not sure 

sometimes. But General Walker has been a vocal advocate of ensuring fiscal stewardship in the Federal Government. We are grateful for your service and for that of the team that you lead. 

J. David Patterson is the Principal Deputy Under Secretary of 

Defense, the Comptroller. As the Principal Deputy, he is directly 

responsible for advising and assisting the Under Secretary of Defense as Comptroller for oversight of DOD’s financial management 

activities. His responsibilities also include developing and implementing DOD financial policy, financial management systems, and 

business modernization programs. 

Mr. Patterson served in the Air Force, I am told, from 1970 to 

1973 and retired at the rank of Colonel. During that time, he held 

responsible leadership and management positions with assignment 

at the Air Wing level as—are you ready for this, Dr. Coburn—a C– 

5A aircraft commander. Were you the wing commander for a wing 

that included C–5s? 

Mr. PATTERSON. I was the deputy forward air controller at Dover. 

Senator CARPER. At Dover? Good for you. Welcome, a special welcome. 

Next, we have Paul Brinkley—welcome, Mr. Brinkley—Deputy 

Under Secretary of Defense for Business Transformation at the Department of Defense. Mr. Brinkley leads business management 

modernization for the Department of Defense. Prior to assuming 

his current role, Mr. Brinkley served as Senior Vice President of 

Customer Advocacy and Chief Information Officer for the JDS 

Uniphase Corporation. I hear from my staff that you have been 

doing great economic development work over there in Iraq and we 

commend you for that and say welcome. 

Last, we are glad to have Dr. Dov Zakheim with us today, currently a Vice President at Booz Allen Hamilton. Dov was appointed 

to be the Under Secretary of Defense and Comptroller from 2001 

to 2004. I think his tenure there began as my tenure here in the 

U.S. Senate started. I remember fondly the opportunities we had 

to work together and we are delighted that you could be with us 

today. Dr. Zakheim is a member of the Defense Business Board 

and the Council on Foreign Relations. He has taught at the National War College, at Yeshiva University and Columbia University 

to name but a few. We are delighted to see you and thank you for 

coming today. 

I don’t know if we started a vote or not. Could somebody—— 

Senator COBURN. Yes, we have. 

Senator CARPER. Have we? OK. 

Senator COBURN. Let me just add something. It takes a lot of 

courage for Booz Allen Hamilton to allow you to come and testify 

here. They are a contractor at the Defense Department and I want 

6 

1The prepared statement of Mr. Walker appears in the Appendix on page 38. 

to thank them for their courage. Input into our government is the 

thing that we need and we value, and when people are intimidated 

to not do that because of the fear that they might not have the next 

contract, we all lose. So I want to thank your employer for that, 

Dov. 

Mr. ZAKHEIM. Thank you. I am speaking in my own personal capacity, but I am glad to be here. 

Senator CARPER. Dr. Coburn, do you want to just—— 

Senator COBURN. Do you want me to go vote? We have got three. 

Senator CARPER. In a row? Let us just get started and then we 

will take a break. 

General Walker, you are on. Welcome. 

TESTIMONY OF HON. DAVID M. WALKER,1 COMPTROLLER GENERAL OF THE UNITED STATES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. WALKER. Chairman Carper, Dr. Coburn, it is a pleasure to 

be back before the Subcommittee again to talk about this time the 

Department of Defense’s efforts to transform its business operations and what further action is needed to maintain continuity of 

effort, to change the status quo, and to achieve sustainable success. 

As has already been mentioned, DOD represents 15 of 27 highrisk areas on our latest list. Eight are DOD-specific. Seven are government-wide challenges. 

As you all know, in addition to representing the largest single domestic agency as far as spending—discretionary agency, I should 

say, for spending, our Nation is already running deficits and they 

are going to get a lot worse in the future because of the retirement 

of the baby boomers of the generation, absent reforms. 

Every dollar of waste is a dollar we don’t have to meet a need, 

and every dollar of waste is an additional dollar of debt with compound interest that our kids and grandkids are going to have to 

pay off. We should have zero tolerance for waste at any time, but 

especially at a time of deficits and facing a period of sustained deficits and debt burdens that lie before us absent meaningful reforms. 

Transformation takes a long time to make happen, even in the 

private sector. And clearly, the senior leadership at DOD is committed to transformation and there are a lot of good people working 

very hard in order to try to achieve success. Progress has been 

made at differing rates in these 15 different areas, but candidly, 

there are a number of critical things that have to be done that 

have not been done, and I am here to tell you unless and until they 

are done, we will never be successful. 

We have to have a single integrated, comprehensive, strategic 

business transformation plan that goes beyond systems, that deals 

with all 15 high-risk areas, a comprehensive strategic and integrated plan with key metrics and milestones and with assigned accountability and responsibility for achieving results. We don’t have 

it. 

Second, we need a Chief Management Official, a full-time job, not 

a part-time job, with a term appointment, with responsibility and 

authority to develop, implement, and oversee that plan, to work in 

7 

1The prepared statement of Mr. Patterson appears in the Appendix on page 81. 

partnership with others who would provide continuity both within 

and between Administrations. GAO, the Defense Business Board, 

and IDA have all recommended a new full-time position with a 

term appointment. 

The recent action to appoint Deputy Secretary Gordon England 

as the CMO, in my view, is form, not substance, and let me be 

clear here. I have tremendous respect for Secretary England. He is 

an extremely capable individual, and this has nothing to do with 

him as an individual. In fact, what we need to start doing is look 

beyond individuals and recognize that we have got an institutional 

problem that cries out for institutional and sustainable solutions, 

and that is not what is being done. 

The only outlier in this debate is the Department of Defense. 

That is the only outlier in the debate about what we need to do 

to move this thing forward, and frankly, I am growing more frustrated as time goes on, not because of these good people here. 

These are very capable, dedicated people who are making a difference because the status quo is not going to achieve sustainable 

success, and the sooner the Congress recognizes that and the sooner that the Executive Branch acts, the better off we will all be. 

I will be happy to answer any questions you may have after 

hearing from my co-panelists. 

Senator CARPER. Thank you, General Walker. 

From a General to a Colonel. David Patterson, please proceed. 

You are recognized for 6 minutes. If you want to summarize your 

testimony, that would be fine. Your entire statement will be entered into the record. Please proceed. 

TESTIMONY OF J. DAVID PATTERSON,1 PRINCIPAL UNDER 

SECRETARY OF DEFENSE (COMPTROLLER), U.S. DEPARTMENT OF DEFENSE 

Mr. PATTERSON. Thank you very much, Mr. Chairman, Dr. 

Coburn. Again, it is a great privilege to be here to talk to this Subcommittee and discuss the progress that I believe we have made 

in the Department in improving our business and financial management and preparing the Department for an independent audit. 

We are always happy to bring the Subcommittee up to date and 

to clarify any questions you may have about the Department’s modernization efforts. Indeed, before I finish today, I would hope that 

I would leave you with a better understanding of what I consider 

to be the three most important considerations on this topic. 

First, to your point, Chairman Carper, the size and the scope of 

the Department of Defense is indeed a great challenge. But to address that challenge, we are making progress in the Department 

along a sound plan for success. And the DOD’s strong commitment 

to wise stewardship with our resources, sustained business and financial modernization, and a solid leadership support. 

To the first point, the size and scope of our challenge, we often 

hear it asked with some astonishment, how can it possibly be that 

the Department of Defense has never been independently audited? 

Well, on its face, it seems like a simple question and a relatively 

8 

straightforward task. In an organization as large as the Department of Defense, the task is anything but simple. 

To put it in perspective, the Department of Defense is not only 

the largest department in the Federal Government, but the largest 

and most complex organization in the entire world. With an annual 

budget nearly twice the annual revenues of Wal-Mart and assets 

three times the size of Wal-Mart, IBM, and ExxonMobil combined, 

it is also the largest entity in the world ever to consider being audited end to end. 

And again to your point, Chairman Carper, we are also a global 

enterprise with 600,000 facilities in 163 countries around the globe, 

over five million inventory items, and $3.4 trillion in assets and liabilities. 

Now, before the Chief Financial Officers Act of 1990, the Department of Defense operated under a very simple system. We received 

appropriations from Congress and tracked expenditures to ensure 

their proper execution. Business processes were slow, business operations inefficient, and because systems that had evolved over decades were incompatible across a spectrum of the agencies and components, information was inaccurate and incomplete. The result: 

Inaccurate inventories, material weaknesses, and an inability to 

obtain a clean audit. 

So that is the first point. The Department of Defense is a huge 

organization, a huge enterprise that for decades has utilized an 

outmoded collection of disparate systems incompatible with each 

other in a modern systems world. 

The second I would like to bring to your attention is the progress 

in light of that challenge that we have made toward a sound path 

for success. In 2005, a detailed plan was launched to modernize 

DOD financial management and prepare the Department for audit. 

Today, that plan is producing measurable results, transforming the 

way we do business, improving process, and reducing costs and 

making the Department more accountable. 

In 2001, only two Department of Defense entities were auditable, 

the Defense Finance and Accounting Service and the Military Retirement Fund. Today, seven Defense enterprises are auditable, 

whose combined assets and liabilities comprise 15 percent of the 

Department’s total assets and 49 percent of its total liabilities, and 

they all have clean audit opinions. By the end of fiscal year 2009, 

we expect to have nearly 40 percent of DOD assets and 90 percent 

of the liabilities, or nine of our financial enterprises, with clean 

audit opinions. 

So we have the largest enterprise in the world, but thanks to a 

solid plan that is working, we will have gone from two auditable 

entities in 2001 to nine Department entities, or 90 percent of our 

liabilities and nearly 40 percent of our assets being auditable by 

the end of next fiscal year. And I might add just in passing that 

those seven auditable agencies that we have today have a combined 

value of assets and liabilities twice the next largest government 

agency, Health and Human Services. 

So that brings me to my third point, and I would like to leave 

with you a very strong understanding that the Department of Defense, the heads of our agencies, and military leaders are absolutely committed to wise stewardship of resources and sustained 

9 

1The prepared statement of Mr. Brinkley appears in the Appendix on page 86. 

modernization that supports not a bureaucracy, but the mission 

and the brave fighting men and women who put their lives on the 

line every day to accomplish that mission. 

So we have the largest and most complex organization. We have 

a plan to achieve success. And we have an organization, and more 

importantly a senior leadership that is absolutely committed to 

achieving that success. 

So, Mr. Chairman, thank you again for allowing us to come and 

talk to you. I look forward to your questions. 

Senator CARPER. Thank you, Colonel Patterson. 

We are going to take a little break here. We have a series of 

three votes. We are going to get there for the end of the first one, 

vote two more times, and be back probably in about 20 minutes. 

We will get back as quickly as we can. 

The hearing will stand in recess and we will return shortly. 

Thank you. 

[Recess.] 

Senator CARPER. The hearing will come to order. I am delighted 

that you are all still here. Thank you. I apologize for the interruption. 

Mr. Brinkley, you are next in line, so please feel free to proceed. 

I am going to ask you to summarize in about 6 minutes and we 

will enter your full statement into the record. You are recognized. 

Thank you. 

TESTIMONY OF PAUL BRINKLEY,1 DEPUTY UNDER SECRETARY OF DEFENSE FOR BUSINESS TRANSFORMATION, 

U.S. DEPARTMENT OF DEFENSE 

Mr. BRINKLEY. Thank you, sir. Chairman Carper, Senator 

Coburn, Members of the Subcommittee, it is my honor to appear 

here today to discuss Defense business transformation and its associated governance. 

As the largest industrial organization in the world, the size and 

complexity of the Department of Defense combined with its singular mission present unique challenges not faced by other entities 

undergoing transformational change. The Department’s mission requires that its business operations adapt to meet new challenges 

not faced by other organizations undergoing transformation. The 

Department must be able to react with precision and speed to support our Armed Forces. Despite these challenges, I believe the 

progress the Department has made at all levels under the leadership of Deputy Secretary of Defense Gordon England over the past 

3 years has been remarkable. 

Fundamentally, business transformation requires a number of 

things, including a sound enterprise-level strategy for transforming 

business processes and the culture that our people work within, 

leadership commitment, and a strong investment, management, 

and governance structure to ensure alignment to that strategy. 

Over the last 3 years, the Deputy Secretary of Defense has led 

our transformation efforts, devoting extensive time and energy to 

the effort to improve the Department’s business operations. In 

many ways, Secretary England has been acting in the capacity of 

10 

Chief Management Officer throughout his tenure, most notably in 

his role as the Chairman of the Deputy’s Advisory Working Group 

and the Defense Business Systems Management Committee 

(DBSMC), the overarching governance board for the Department’s 

business activities. 

Since its inception in 2005, the DBSMC, in concert with functionally aligned investment review boards, has served as the governance structure that guides transformation activities of the business 

areas of the Department, such as finance, acquisition, personnel 

management, and logistics. Authorized by the fiscal year 2005 National Defense Authorization Act and reiterated in the DBSMC 

charter, the DBSMC has responsibility for approving business systems modernizations over $1 million, the Business Enterprise Architecture for the Department of Defense, and the Enterprise Transition Plan, a comprehensive, milestone-based plan that lays out, 

in 6-month increments, measurable progress that the entire Department has opened up to scrutiny and measures itself on 6- 

month increments in published reports to the Congress. This gives 

the DBSMC statutory oversight and control of spending to ensure 

alignment to Department-wide objectives, the key to our success to 

date. 

The DBSMC charter extends the authority of the DBSMC beyond 

statutory requirements to include responsibility for ensuring the 

strategic direction of the Department’s business operations are 

aligned with the rest of the DOD and for measuring and reporting 

the progress of our business transformation efforts. With this expanded focus, the DBSMC has become an integral driving force behind the Department’s adoption of continuous process improvement 

and Lean Six Sigma methodologies. The Department’s shared focus 

on enterprise resource planning system and process deployments, 

and the requirement to change longstanding business practices necessary for these ERP projects to succeed. In each of these areas, the 

DBSMC has provided invaluable top-level direction for the business 

transformation efforts of the Department. 

As you mentioned, the Deputy Secretary’s role in business transformation was recently codified in a September 18, 2007 directive 

issued by the Secretary of Defense designating the Deputy Secretary of Defense as the Chief Management Officer (CMO) of the 

Department. This ensures that the Department’s top leadership 

will continue to make business transformation a top priority. 

The directive formally institutes into departmental policy the 

Deputy Secretary’s responsibilities as the CMO. As CMO, the Deputy Secretary shall ensure Department-wide capability to carry out 

the strategic plan of the DOD in support of national security objectives; ensure that the core business missions of the Department are 

optimally aligned to support the Department’s war fighting mission; establish performance goals and measures for improving and 

evaluating overall economy, efficiency, and effectiveness, and to 

monitor and measure the progress of the Department; and finally, 

to develop and maintain the Department’s Department-wide strategic plan for business reform. 

The official designation of the Deputy Secretary of Defense as the 

CMO affords the President and the Secretary of Defense necessary 

flexibility to implement an integrated management team that can 

11 

quickly meet the changing requirements of business transformation 

and positively affect outcomes while formally instituting accountability at the top levels of the Department for the future of our 

transformation activities. 

Finally, I want to highlight a few points. The Department under 

Secretary England’s leadership, we have successfully established 

the Business Transformation Agency in 2005. This organization 

provides an accountable entity for all DOD-wide business and system improvement efforts, staffed by the best and brightest career 

civil servants along with highly-qualified experts hired from private 

industry, bringing best practices to the business of government. 

We have developed and continue to evolve the Business Enterprise Architecture and its associated federation strategy. Biannually, we do publish the Enterprise Transition Plan, which serves 

as our business transformation strategic road map. 

We are implementing the Department-wide adoption of continuous process improvement principles and implementing Lean Six 

Sigma, as I mentioned, and we are improving the acquisition and 

fielding process for information systems, the development of what 

we call the Business Capability Lifecycle (BCL). This BCL process 

will help resolve longstanding challenges that have impacted the 

delivery of business capabilities in a timely manner. Under process 

rules, initial operating capability of an IT program must be reached 

within 12 to 18 months of the contract award or else the business 

case will not be approved for funding. This shifts the entire mentality of how we invest in business systems within the Department 

of Defense. 

There are over 20 DOD-wide systems programs that are critical 

to the DOD and its interoperability that have directly benefitted 

from this transformation approach. Using a similar approach, programs like the Defense Travel System (DTS) and Defense Integrated Military Human Resources System (DIMHRS) have been restructured and are on a path to deliver longstanding value to the 

Department of Defense. 

Finally, I have two last points I want to make that I think we 

lose sight of. Some of the most effective and rewarding work the 

business transformation effort is involved in is in the midst of our 

fighting forces in Iraq, working to ensure business processes that 

directly support military operations in the field are agile and that 

they are aligned to war fighting needs. 

Three years ago, the business mission of the Department and the 

war fighting mission were viewed as very separate activities. In 

three short years, that mentality has changed. The effect of our 

business operations on stability operations in the war fighting 

arena are now widely understood and seamlessly linked. In considering any changes to organizational structure, it is critical that we 

not structurally recreate a boundary between these two mission 

areas. 

Finally, regarding sustaining our effort, we have taken several 

steps to ensure our progress is sustained. Transformation of an entity this size cannot be achieved in a single Presidential term. It 

took Lou Gerstner 10 years to transform IBM into the global competitor it is today, as an example. By establishing a culture of 

measured 6-month incremental improvements, published and clearVerDate Aug 31 2005 12:30 Sep 18, 2008 Jkt 038850 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 P:\DOCS\38850.TXT SAFFAIRS PsN: PAT
12 

1The prepared statement of Mr. Zakheim appears in the Appendix on page 97. 

ly articulated in our transition plan, by establishing the new entity 

within government, the BTA, staffed with career and business professionals, and creating a sense of direct customer focus by engaging with our war fighters, we believe the Department now has the 

tools needed to help ensure continued progress and to avoid lost 

momentum in a change of Administration. 

Thank you, and I look forward to your questions. 

Senator CARPER. Mr. Brinkley, you are recognized. Please proceed. Thank you. 

TESTIMONY OF DOV S. ZAKHEIM,1 FORMER UNDER SECRETARY OF DEFENSE (COMPTROLLER), U.S. DEPARTMENT 

OF DEFENSE 

Mr. ZAKHEIM. Thank you, Mr. Chairman and Senator Coburn. It 

is a privilege to be here before you today to discuss ways to improve financial management in the Department of Defense, and as 

I said to Senator Coburn earlier, I am speaking in a personal capacity. 

When I appeared in 2001 before the Senate Armed Services Committee at the hearing for my confirmation as Under Secretary of 

Defense, I told the Members of the Committee that I considered 

being CFO as important as being Comptroller. The fact is that financial management traditionally has been a backwater at DOD 

and that is for two reasons. The first is because the Department’s 

primary task is to support the military’s mission, to fight and win 

the Nation’s wars. So everything else, and particularly everything 

that can be categorized as back office, tends to be subordinated to 

this essential task. 

The second reason is that while the Under Secretary of Defense 

(Comptroller) is also the Chief Financial Officer, the CFO role has 

traditionally been subordinated to that of Comptroller, because as 

Comptroller, it is the Under Secretary of Defense’s responsibility to 

formulate the budget and secure its passage through the Congress. 

This activity is naturally critical to the ongoing functioning of the 

Department while financial management is seen as an ancillary exercise. As one of my predecessors put it to me just as I was taking 

on the job, ‘‘as long as you can get your budget submitted on time, 

you have done your job.’’ He never mentioned CFO at all. 

This situation, by the way, is exactly the reverse of what goes on 

in the private sector. In most corporations, it is the Comptroller 

who is subordinated to the CFO. Budget preparation is just one financial task and hardly the most important at most private firms. 

It is a lot more important to know how the money actually is spent 

and managed throughout the year, what DOD terms ‘‘budget execution.’’ But it is noteworthy that only in 2002–2003 did the Department of Defense formally include execution as part of what is now 

called the planning, programming, budgeting, and execution process. 

This focus on the budget is a natural outgrowth of the Department’s relationship with the Congress. It is by means of the budget 

that the Congress exercises its control over the DOD program. In 

the private sector, shifting funds from one division to another is a 

13 

routine matter. For DOD, those actions are strictly regulated by 

the Armed Services and Appropriations Committees as well as, in 

some cases, the Intelligence Committee. There are severe, and in 

my view excessively low, limits on reprogramming funds. 

Reprogrammings of any significance require prior Congressional 

approval, normally from the four defense-related committees. The 

combination of Congressional practice and rules with the culture of 

a Department whose top priority is war fighting poses a fundamental challenge to any effort to improve the Department’s ability 

to improve upon the management of its business finances and all 

of its business management operations. 

Nevertheless, the last 7 years have witnessed considerable 

progress in the financial management arena and that of business 

management. DOD is realizing the objectives that result from 

sound financial and business management. You have heard details 

from my former colleagues who are sitting alongside me. But as in 

other aspects of DOD activity, business transformation remains 

and must remain an ongoing effort. 

In addition, the Department continues to face major hurdles well 

beyond those created by Congressional limitations and execution 

management. That is understood. So improving financial management is going to be a painstaking process. There is no quick fix or 

panacea that is going to change the situation overnight. 

Beyond those actions already taken to improve the situation over 

that which prevailed in the 1990s, I would suggest the following. 

None of these are particularly original ideas. 

First, Congress should reconsider its reprogramming ceilings. 

These should be raised to 5 percent of the baseline budget so as 

to give the Department’s financial managers the ability to execute 

budgets more efficiently. Congress would still retain prior approval 

to satisfy its oversight role. 

Second, I believe the Department should ensure that the Business Transformation Agency be led by a three-star general or flag 

officer or the civilian equivalent, and that the agency report directly to the Department’s Chief Management Officer, currently the 

Deputy Secretary of Defense. While I currently see no need for legislation to codify such a relationship, that may have to be considered in the future. 

Finally, since I am running out of time, I would like to address 

this question of a Chief Management Officer. In my view, the Department should have one with the rank of a principal under secretary who would hold office for a fixed term. I stated this view 

during my final appearance before the Congress when I was still 

Comptroller, when I sat alongside Comptroller General David 

Walker, with whom I agreed then and with whom I still agree. 

I recognize, and you have heard this before and I am in complete 

agreement, that the Department currently has a strong CMO. In 

my opinion, Deputy Secretary Gordon England is the most capable 

senior manager the Department has had in decades. But Secretary 

England’s term expires with that of the Administration. He hasn’t 

indicated that he wants to serve another 20 years. There is no 

guarantee that his successor will bring the same managerial background to the job as, by the way, did Secretary Rumsfeld, who in 

many ways was his own CMO. Moreover, the post of CMO should 

14 

be one that is for a fixed term, perhaps 5 years. Nevertheless, a 

way needs to be found that the CMO should serve at the pleasure 

of the Secretary and Deputy to whom he or she would report. 

Some say it is going to be exceedingly difficult to find a top manager willing to take the job. They point to the fact that Congress 

has imposed increasingly onerous financial and reporting burdens 

on those who otherwise would be willing to serve the Nation in a 

senior capacity. Clearly, the Congress is going to have to do its 

part. It is going to have to ease restrictions to the point where senior people would be prepared to leave industry and finance to serve 

as CMO without, for example, putting their pensions at risk. Otherwise, the right people will never be available and the CMO concept for DOD will remain just that, just a concept. 

Again, I appreciate the opportunity to testify before this Subcommittee and I am prepared to respond to questions the Members 

might put to me. Thank you. 

Senator CARPER. Dr. Zakheim, thanks very much for your testimony. 

We have been joined by Senator McCaskill. I understand you 

choose not to offer an opening statement, is that correct? 

Senator MCCASKILL. No. I just have questions. 

Senator CARPER. OK. Well, you will have them. Thank you for 

joining us today. 

Dr. Zakheim, very briefly restate your four points right at the 

end. 

Mr. ZAKHEIM. The four points about CMO or generally? 

Senator CARPER. The last four points that you made. 

Mr. ZAKHEIM. What I said, first of all, is the—— 

Senator CARPER. Starting with reprogramming ceilings—— 

Mr. ZAKHEIM. Yes. Reprogramming ceilings are just far too low. 

The second point that I made was that the Business Transformation Agency needs to be permanently linked at a high level 

to the Deputy Secretary and the Secretary and to the CMO if there 

is one. In this case, it is still the Deputy Secretary. 

And then I made several other points in my written statement, 

but finally I did address the question of the CMO. I believe it 

should be someone with a fixed term, preferably 5 years, a principal under secretary, that is to say outranking the other under 

secretaries, reporting to the Secretary and the Deputy, obviously 

having to work with them, but if this person is a technocrat, it 

shouldn’t be that much of a problem. 

Finally, that Congress needs to take action to ensure that the reporting requirements that make it so difficult for people to get 

through the confirmation process are made a little easier. You are 

just not going to get Wall Street bankers and industrial tycoons 

who really know this domain well to come in, go out or come back 

into government. It is not so much the salaries. They don’t care 

about the salaries. They are serving their country. It is the agony 

of the process. Why should they want to do that? Congress just has 

to ease up, I think. 

Senator CARPER. I remember being nominated by former President Clinton when I was Governor of Delaware to serve on the Amtrak Board of Directors and going through the process itself, just 

15 

the paperwork alone was enough to, as much as I wanted to do it, 

I almost said a couple of times, that is it. I am not going to do this. 

Let us just go with the last point that Dr. Zakheim mentioned 

and that is the issue of whether we ought to have basically a Chief 

Management Officer. Is this somebody who should serve a set number of terms, somebody who would not be part of the team, if you 

will, appointed by a President? I know Messrs. Patterson and 

Brinkley have different perspectives, but let us just go back to you 

on that point. 

One of the things that the Secretary has done, I think, is by executive order or by direction he has said that Gordon England, Deputy Secretary, who is, I think we all acknowledge, very talented 

and valuable leader, he ought to be the CMO. Is that action sufficient? That is one question. The second is how is this designation 

any different from some of the previous arrangements that we have 

had? 

Mr. WALKER. First, the action is not sufficient. It is largely a status-quo scenario. I have great respect and admiration for Gordon 

England. He is an extremely capable professional. But the simple 

fact of the matter is, Secretary England is G–O–N–E on January 

20, 2009, gone, and we don’t know who the next Deputy Secretary 

is going to be. We have no idea what their background is going to 

be. We have no idea what their interest is going to be. There is no 

statutory requirement for the Deputy Secretary to have the kind of 

qualifications that would lead to sustainable success with regard to 

business transformations. If you look at recent deputy secretaries, 

some have had backgrounds that would lend them towards being 

successful and some have had backgrounds that would not lead 

them to be successful in that role. 

And so as I have said before, I think there is agreement between 

the Defense Business Board, IDA, and GAO that there is a need 

for a new position as a full-time job with a term appointment and 

certain other elements. There is agreement on that, and I think it 

is essential. 

Senator CARPER. One of the statements, it maybe came from Secretary England, but someone, I think, has indicated that CMO position that meets GAO’s recommendations and the recommendations of Dr. Zakheim will interfere with future Presidents’ and Secretaries of Defense’s ability to create their own management team. 

Would you just respond to that? 

Mr. WALKER. Clearly, there has to be a basis that if there are 

irreconcilable differences between the CMO and the Secretary or 

potentially the Deputy Secretary, depending on the reporting relationships, then there has got to be a mechanism in place to be able 

to deal with that, and one way you could deal with that is to have 

some type of a reporting requirement to the Congress where they 

could end up proposing to take an action to end somebody’s term 

before the end of that term for specified reasons and just advise the 

Congress. 

But I think one of the things we have to keep in mind is that 

by getting somebody to agree on the front end to serve a specified 

period of time, with the right type of qualification requirements 

and with the potential to be reappointed if they do a good job, that 

sends a powerful signal within the organization, as well, that you 

16 

can’t underestimate because I have been a Presidential appointee 

of Ronald Reagan, George Herbert Walker Bush, and William Jefferson Clinton, and my prior positions have been at the pleasure 

of the President until this current one. 

The fact is that PAS-es, by definition, are temporary help. I 

mean, they are only going to be there for a temporary period of 

time if you serve at the pleasure of the President, and the kind of 

things that we are talking about needing to get done here—that 

these gentlemen are making a very meaningful contribution towards, I might add—they are going to take a long time. 

Senator CARPER. I just want to turn to Mr. Brinkley, if we could, 

to follow up on this question. I know you and, I think, Mr. Patterson have a different take on this, but there is concern about if we 

don’t allow the President to appoint the CMO as part of his or her 

team, that it is going to interfere with their ability to create a management team to their liking. I just wonder, why does the Department hold this position if the CMO is supposed to be nonpartisan 

and focused solely on business transformation. 

Mr. BRINKLEY. I can only offer observations. The sense the Department has is that a new Secretary coming into the Department 

with a management agenda aligned to the Administration’s managerial priorities should have as much freedom as possible to take 

the people that he has available and build the team that he believes best aligns to his management style and his management 

discipline, and the more statutory structure you build in place—a 

private sector analogy would be you hire a new CEO into a major 

corporation. He needs to be able to build his team. He needs to be 

able to organize. 

So anywhere that you have a statutorily-defined structure, you 

reduce the flexibility of the CEO of the organization to organize effectively, and so I believe there is a natural resistance within the 

Executive Branch of government to efforts to legislate and put in 

statute things that hinder the ability of the accountable individual 

because it will be the Secretary of Defense held accountable for 

execution within the Executive Branch, there is a resistance to 

having statutory structures imposed. And so I believe that is the 

source of the concern that the Department has about having a position this senior defined in a way that is not—having this statutorily put into place. 

Senator CARPER. Dr. Zakheim, would you just comment on that, 

please? 

Mr. ZAKHEIM. It seems to me that, first of all, as you said, Senator, we are talking about a technocrat here. We have lots of people 

who have served as technocrats inside the Department of Defense 

under a variety of Secretaries. Let me give you two. 

The late Doc Cook, David O. Cook, who was called the ‘‘Mayor 

of the Pentagon.’’ He had lots of power. Some people said he had 

more power than the Secretary. When he swore me in, he told me 

the Bible that he used was the same one he had sworn in Don 

Rumsfeld 25 years earlier in the same job. He always was the Secretary’s purse man, whoever the Secretary was. 

Another example, and he should be alive and well, is Andy Marshall, who has been serving as the head of Net Assessment in the 

Department of Defense since he was appointed by Secretay Jim 

17 

Schlessinger, Mr. Rumsfeld’s predecessor the first time Mr. Rumsfeld was Secretary, which was a couple of years ago. 

So it is quite possible for somebody who is technically brilliant 

at what they do to serve as the Secretary and the Deputy Secretary, and obviously, as David Walker said, there has to be some 

leeway that they have to serve at the pleasure of the top two people. In other words, if there is a fundamental personality disagreement that is paralyzing the Department, you can’t turn around to 

the Secretary and the Deputy and say, well, you are stuck with 

this individual. That wouldn’t work, either. 

Senator CARPER. General Walker. 

Mr. WALKER. Very quickly, Mr. Chairman. First, look, there is a 

balancing of interest here that we have to keep in mind. On one 

hand, any President or any Secretary would like to have total discretion to pick whoever they want and remove whomever they 

want. That is understandable. That is human nature. 

On the other side of the coin, we have an institutional need. You 

have to balance the two. What is more important, to meet the institutional need irrespective of who the President and the Secretary 

is, or to meet the individual want based upon who that is. 

The other thing is, is this is not a new issue. The Commissioner 

of Social Security and the Commissioner of the Internal Revenue 

Service are Presidential appointments with Senate confirmation 

with significant responsibilities and they have term appointments. 

Senator CARPER. Have they always been that way? 

Mr. WALKER. They have been that way for a number of years. I 

mean, we are not crossing the rubicon here, and those jobs are at 

least equivalent in level of responsibility as this one. 

Senator CARPER. All right. Good. Thanks. Dr. Coburn. 

Senator COBURN. Thank you. Let me just go back for a minute. 

General Walker, last year’s appropriation had $9 billion in earmarks in the Defense Department, something like 12,000 earmarks, which we are trying to get a handle on now with the Defense Department on how the money was spent. You are talking 

about progress being made. I just want to make it clear. Is there 

any interference in the progress of managing the Defense Department when we have 12,000 earmarks out there laid out for things 

that they have to do that are non-competitively bid that have to 

happen? 

Mr. WALKER. I think earmarks are a problem. I think not all earmarks are equal. Some earmarks, frankly, represent waste. I recently was asked by the House to come up with a definition of 

waste and some examples, and my definition was basically on the 

following lines. When the taxpayers as a whole do not receive reasonable value for money because of an inappropriate act or omission by a party that has discretion over government resources, that 

is waste. That can happen by Executive Branch officials, by Legislative Branch officials, by contractors or grantees. One example I 

gave was inappropriate earmarks that are not based upon value 

and risk, where we would not be doing it but for the earmark. 

But as you know, Dr. Coburn, an earmark by itself doesn’t increase government spending, but if you have got constrained resources, the fact that you are telling somebody how to spend the 

money when you are going to have tighter and tighter budgets 

18 

causes other problems and it serves to undercut the integrity of the 

process and the credibility of the Congress in the eyes of the American people. 

Senator COBURN. General Patterson, you went from two to seven. 

You expect to be nine entities in 2009. How many total entities are 

there in the Defense Department? 

Mr. PATTERSON. There are roughly 15. 

Senator COBURN. Fifteen? 

Mr. PATTERSON. Fifteen, yes. 

Senator COBURN. In your report, this report, you list the DOD reporting entities. It is 15 percent of assets, 49 percent of liabilities. 

What percentage of net operating expenditures is that? 

Mr. PATTERSON. We don’t audit net operating expenditures. That 

is an appropriation and we don’t audit—and as I understand it, we 

don’t intend to audit net operating expenditures. 

Senator COBURN. What percentage of the Defense Department is 

it? 

Mr. PATTERSON. Well, it is about $152 billion in O&M, which is 

operations and maintenance, of a roughly $460 billion—— 

Senator COBURN. So it is about 30 percent? 

Mr. PATTERSON. Yes, sir, that is about right. 

Senator COBURN. OK. So we have 30 percent of the Pentagon or 

the DOD now auditable, correct? 

Mr. PATTERSON. That is correct. But sir, if I could explain—— 

Senator COBURN. OK. 

Mr. PATTERSON [continuing]. I don’t want to leave the wrong impression. Within the O&M account, you have a number of other 

things—civilian personnel, you have the contractors, you have services, you have maintenance, and depot maintenance. You have a 

variety of things within it, all of which are accountable line items 

in a budget. Those are the things within the services and the various agencies that we would look at for auditing. 

Senator COBURN. OK. But as a percentage of the DOD, that is 

what my point is, we are up to about 30 percent where we were 

at 5 percent before. 

Mr. PATTERSON. I couldn’t attest to that sir, I mean—— 

Senator COBURN. Well, it is about 30 percent of the DOD budget? 

Mr. PATTERSON. Yes, sir. 

Senator COBURN. That is my point. But none of the Army isn’t 

in there, right? 

Mr. PATTERSON. Yes, sir, it is. The Army is in operating and 

maintenance accounts, of course. 

Senator COBURN. I am talking about auditing. 

Mr. PATTERSON. Oh, I am sorry. 

Senator COBURN. The Army isn’t in there. The Air Force isn’t in 

there. The Marines and Navy are not in there. 

Mr. PATTERSON. That is correct. 

Senator COBURN. So this 70 percent would include the services. 

Mr. PATTERSON. The 90 percent on liabilities and 40 percent in 

assets would include, when we get to that point, the Marine Corps, 

it would include the Corps of Engineers and the Army, it would include the Defense Information Systems Agency, and it would include the Medicare fund that we have. 

Senator COBURN. When you get there. 

19 

Mr. PATTERSON. When we get there in—correct. 

Mr. WALKER. Dr. Coburn, the answer to your question, I think, 

is yes. The 70 percent of net operating costs that have not been audited yet include the services. 

Senator COBURN. OK. Paul, you are in a appointed position, correct? So unless you are reappointed, everything you are doing now 

at the Business Transformation Agency is going to have a jump 

start with the next Administration? 

Mr. BRINKLEY. We have staffed an SES-level director of the BTA 

that reports to my office. My office is a political appointment, a 

non-Senate-confirmed political appointment that supports that 

Deputy Secretary of Defense’s business transformation objectives. 

My role will be replaced no later—no earlier—maybe no later— 

than January 20, 2009. 

Senator COBURN. OK. And so understanding the political nature 

of this, if you were asked to serve no matter what the next Administration, would you give that a consideration? We are not going to 

hold you to it—— [Laughter.] 

Mr. BRINKLEY. I don’t want to be on the spot here—— 

Senator COBURN. This is a great point. Look at our problem. We 

have somebody fairly effective, or highly effective at what they are 

doing now, and because we are going to have an election, we are 

going to gut that. That is the whole point. The point is, we don’t 

have the ability to put great managers in and keep them there. Go 

to the point of David Walker or Dov Zakheim. 

Give me, Mr. Zakheim, if you will, give me some examples of 

where the military or DOD could have used a higher reprogramming, or some examples where we were wasting or not being able 

to effectively do things because we have so much—such a limitation 

on reprogramming. 

Mr. ZAKHEIM. You are asking me to think back 3 or 4 years. We 

have had cases, as I recall, where we needed to move money into 

faster spending accounts. I will give you an example of where it 

would have been nice to be able to reprogram a lot of money quickly. 

Up-armored Humvees, we moved the money eventually. We had 

to move mountains on the Hill to make that happen. There 

shouldn’t have been anything requiring that kind of work. There 

were kids out there getting killed. It is that sort of thing, or the 

body armor, where it needs to be left to the discretion of the managers. 

Again, as you heard from Dave Patterson and Paul Brinkley, we 

know generally where the money is, and nobody is running off to 

the Swiss banks with the DOD budget. The real question is, do the 

managers of that budget today, who are executing the budget, have 

the ability to move money around to where it needs to be spent urgently. The answer is ‘‘no’’, 99 percent of the time, and that just 

makes no sense in any context, including the government. 

Senator COBURN. So your position is if you had a 5 percent limit, 

still reportable—— 

Mr. ZAKHEIM. Yes. 

Senator COBURN [continuing]. You still had to come and get 

clearance—— 

Mr. ZAKHEIM. Absolutely. 

20 

Senator COBURN [continuing]. That would give the flexibility? 

Mr. ZAKHEIM. Sure, because then you—— 

Senator COBURN. What kind of resistance, when you talk to appropriators, do you get on that? 

Mr. ZAKHEIM. Well, it is not just the appropriators. I mean, we 

have to get the authorizers to agree and you have to get the Intelligence Committees, when it is their budgets, as well. The staffers 

feel that this is the way they control, and I can understand that. 

I agree that Congress needs to maintain oversight. But it seems to 

me that as long as you still have the prior approval requirement, 

you are maintaining that control. 

Senator COBURN. Do you think there is adequate oversight in 

Congress of the Department of Defense? 

Mr. ZAKHEIM. Very often, the Congress seems to be looking for 

the key under the lamp post, because you get oversight that verges 

on or actually is like micromanagement. In other cases you don’t 

get it at all, and it seems to me that what you really need is a dialogue between responsible leaders on both sides of the river, where 

both sides have the country’s interest at heart. There just hasn’t 

been that kind of a dialogue to say, ‘‘Look, how do we straighten 

this out?’’ In fact, we are still functioning in the realm of financial 

management and budgeting as if we were living in the 1960s. 

If you permit me to relate an anecdote about this. Around the 

time I took over as Comptroller, I bumped into Robert McNamara 

and we got to talking about the planning, programming, and budgeting process because there wasn’t execution even as part of that 

process. And McNamara said to me, ‘‘You have got to be kidding. 

This is what I was dealing with 40 years ago.’’ 

Now, think about that. We are still functioning in many ways, 

because of the interplay between Congress and the Pentagon, the 

same way we were at the height of the Cold War. Something has 

got to give here. 

Senator COBURN. Earlier, you alluded to the fact that you, or 

maybe Mr. Brinkley, I don’t know which, that you have a management structure and that in the private sector, we have a business 

plan, we have auditing, we have financial controls, we have benchmarks, we have metrics, and we have reassessment all the time of 

what we are doing. The point was made is that their primary thing 

is to defend the country, and so therefore this is second. I will put 

forward to you is you can’t defend the country unless you have the 

other first. 

Mr. ZAKHEIM. I don’t disagree. I am just saying that there is a 

culture here that exists, and when you think about it, these are 

folks who are laying their lives on the line every day. Many of 

them are coming home pretty badly beaten up, if they come home 

alive, and so naturally when the requirement comes, when I want 

to pull some people off to do some of this anolytical management 

activity, the military is going to say, ‘‘Well, wait a minute. We are 

short of people out in the field.’’ 

Senator COBURN. Yes. 

Mr. ZAKHEIM. You have this tremendous tension there. It is not 

just money resources, it is human resources, maybe even more so 

human resources. It is very understandable, and that is why I 

21 

think you can’t really start pointing fingers at anybody and blame 

anyone. We have a system that just needs to be revisited. 

Senator COBURN. All right. Thank you, Mr. Chairman. 

Senator CARPER. I think we are about to start another vote. If 

we do, I am going to ask Dr. Coburn if he would be willing to go 

over and vote and then just come back and, while I vote, chair the 

hearing. 

Senator McCaskill, welcome. We are glad you are here. 

OPENING STATEMENT OF SENATOR MCCASKILL 

Senator MCCASKILL. Thank you. I have, as usual, like 14 different things I would like to pursue with this particular group, but 

let me for a minute focus on contracting. 

Clearly, we are going to be contracting in the future forever, and 

clearly, DOD and the various branches have done a miserable job 

of contracting in this conflict. Whether it is LOG CAP, whether it 

is reconstruction funds, there has been a lack of definitization. 

There has been a lack of oversight. There has been a lack of monitoring. There has been a lack of competitive bidding. And we have 

example after example after example. 

We have had several references to the private sector. I have got 

to tell you, and I think, Mr. Brinkley, you mentioned a CEO and 

having the ability to organize. Somebody would have been fired in 

a private business over the way these contracts have been overseen. Someone would have been held accountable, not necessarily 

maybe the CEO, but I guarantee you the Board of Directors, if all 

the information had come forward about literally—I had actually 

the contracting people at LOG CAP in Iraq, when they put up the 

bar graph of LOG CAP going from $20 billion to $15 billion to $12 

billion. When I asked them what caused the difference, I actually 

had this woman say to me in Baghdad it was a fluke, a $5 billion 

fluke that the contract went down that much. 

Now, what I would ask of you, Mr. Brinkley, any of you, and Mr. 

Walker and all of you, is don’t we need to either have a Reserve 

component for conflicts that are contracting specialists, or more importantly, don’t we need to engrain contract oversight in military 

training? I had a general say to me over there, I don’t care if it 

costs $10 billion or $15 billion. I wanted it yesterday and I wanted 

to make sure there was ice cream in the mess hall. It didn’t make 

any difference to me. And he was kind of offended that I was trying 

to drill down on this. 

And ultimately, this comes back to a level of trust. Congress is 

going to continue to overreact and over-regulate because they don’t 

trust that the military is going to be responsible, and the military 

is going to run around and do whatever they can to go around the 

regulations because they need what they need when they need it. 

And it doesn’t appear to me that this dog is going to ever catch his 

tail, because it hasn’t for 40 or 50 years. 

What do we do about the contracting piece to provide some measure of accountability? Can we demote someone? Can we promote 

someone? More importantly, can we fire someone? 

Mr. BRINKLEY. I will answer the first two questions and comment 

on the rest. Your points, and it was good to hear the focus on the 

root cause of what exactly has transpired, the idea of a Reserve 

22 

1 Appendix 1 appears in the Appendix on page 81. 

component for contracting, I have seen firsthand, and I will give 

you an anecdote from the private sector. 

The company I worked for before I came to DOD bought about a billion dollars worth of materiel all over the world, just $1 billion, 

right. It seemed like big money at the time. We had a large staff 

of engineers and contracting, procurement experts, we called them, 

contracting experts who managed those supply relationships, ensured that product was delivered on time. It was key to our ability 

to ship a product to our customer. 

Now, compare and contrast within government. The scale of the 

spending to support our mission in Iraq and the number of people 

we have doing a phenomenally good job—I am in awe of how our 

contracting officers are able to manage the scale of the spending 

they oversee. 

We do need to look at, in my opinion, and I know that this has 

been acknowledged and people are looking at how to do this, Joint 

Forces Command is looking at a contracting, a scalable Reserve 

component for contracting, but we do need, if we anticipate future 

conflict that requires us to contract at this level, and also to ensure 

that the economic effect of our contracting is being applied to support the economic stabilization missions that we have in places like 

Iraq, that we ensure that we create a contracting corps that has 

the expertise not just in contracting in peacetime, but also contracting in times of conflict when a general is going to pound the 

table and he is going to want his forces to have the very best they 

can get and you get overwhelmed with the natural desire to support immediately the needs of the force and to balance that trade 

against your ability to adhere to contract regulations and rules and 

have systems and processes that support that mission. 

That is a very important area that we must focus on going forward, and there are some bright folks who are looking at how we 

structure the contracting community to do that in the future. 

Senator MCCASKILL. Yes, Me. Walker. 

Mr. WALKER. Senator, on pages 40 and 41 of my testimony, 

which is Appendix 1,1 there are 15 longstanding systemic structural problems within the Defense Department with regard to acquisition and contracting that need to be addressed. You’re tough 

on another issue, and that is when you have a conflict or another 

type of contingency, for example, Hurricane Katrina. To the extent 

that you have systemic weaknesses that have not been addressed, 

they are exacerbated and multiplied when you have a contingency 

operation, whether that be in Iraq, which is a military operation, 

or whether that be Hurricane Katrina, which is a natural disaster. 

And yes, one of the challenges on the 15 is the capacity and the 

capability, both in numbers as well as skills and knowledge, to get 

the job done, and I think we do need to consider having some type 

of Reserve for contingency operations, but we also need to make 

sure we have enough for just day-to-day ongoing operations and I 

question whether we do. 

Senator MCCASKILL. Mr. Patterson, I have a letter from a constituent who used to work at KBR. He is retired Navy and he left 

in November 2006. His job at KBR was a subcontract close-out speVerDate Aug 31 2005 12:30 Sep 18, 2008 Jkt 038850 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 P:\DOCS\38850.TXT SAFFAIRS PsN: PAT
23 

cialist. His job was basically an auditing function to look at the 

contracts and find if there had been errors, omissions, and money 

that was paid inappropriately. 

He found a number of problems, and when he left in November 

2006, he not only talked to KBR about it, he also talked to DCAA 

about it, the Defense Contract Audit Agency. It is $50 million. He 

hasn’t heard a word. So he sent me all the documentation and it 

is pretty obvious, and this is the other issue. At some point in time, 

it is like Monopoly money. Who cares about $50 million? I mean, 

we have got billions that are out there. 

Who is responsible within the Comptroller’s Office to take obviously very credible—this is the work we paid for, by the way. This 

is somebody who we paid for, found this money that we are owed, 

and nothing has happened and it has been almost a year. I mean, 

not a word. So he recently forwarded it to me because he figured 

out that I am talking about this stuff a lot out here and figured 

I was interested, and I am. 

I would certainly appreciate, first of all, your response about how 

successful have we been at getting money back that was paid that 

shouldn’t have been paid? I know that lack of definitization of the 

contracts is a big problem, but this is definitely definitized, and 

this was not a cost-plus. This is a firm fixed price subcontract. And so this is a situation where there is $50 million here ripe 

for the picking and nobody seems interested in picking it. Multiply 

that times thousands of contracts. We are talking real money. 

Mr. BRINKLEY. Well, I certainly appreciate that, and I will be 

more than happy—if you ask, who is responsible, it is the Comptroller and myself. I will ensure that you get an answer back on 

that particular incident. 

Senator MCCASKILL. And I would like to know how many of 

these there are. How many auditors have we paid to find money 

that we are owed and how successful have we been at getting that 

money back? 

Mr. BRINKLEY. Well, to that particular point, we have done 

33,800 audits through the Defense Contract Audit Agency (DCAA) 

throughout the entire Department of Defense. We have recovered 

$1.2 billion from vendors that were overpaid incorrectly. We have 

a very high incidence of—the percentage of improper payments is 

extremely low in a very large organization. 

But to your point, we take it very seriously, particularly with regard to what is going on in the theater. We have Defense Finance 

and Accounting Service (DFAS) representatives who are in theater. 

We have DCAA, as you point out, in theater and looking at all of 

the contracts. The KBR has been a particularly important company 

for us to look at because it has had such high visibility. 

So I can assure you that the Department of Defense takes its 

contracting responsibilities extremely seriously, and when we find 

that there are areas where we find discrepancies, we send teams 

to immediately work through those things. We have sent people to 

jail, as you well know, because they have defrauded the government. 

Senator MCCASKILL. And there are going to be, unfortunately, in 

a heartbreaking way, there are going to be a lot more that go to 

jail—— 

24 

Mr. BRINKLEY. Absolutely. 

Senator MCCASKILL [continuing]. Because we are a long way 

from done, and I think the American people, when they realize that 

for the first time, really, we have had men and women who, unlike 

the 99.9 percent of the men and women who step forward and 

across the line for us, have stolen millions and millions and millions of dollars, and it is a dramatic failure of the Department of 

Defense. I appreciate you take it seriously that this has been a 

complete breakdown of appropriate financial accountability. 

Mr. WALKER. Senator McCaskill, we have a report coming out on 

improper payments dealing with the Defense Department within 2 

weeks that I would commend to you. 

Senator MCCASKILL. OK, and I will read it in depth and hopefully I can get back and ask some more questions after I go vote. 

Senator CARPER. We are going to take a quick recess. Dr. Coburn 

will be back momentarily and resume the hearing. But until he returns, we will just be in recess for a few minutes. 

[Recess.] 

Senator COBURN [presiding]. Well, we will start again, if we may. 

General Patterson, in 2006, the DOD spent $300 billion on contracts, 71 percent of the entire Federal Government’s contract 

work. Many of these contracts were time and materials, one of the 

riskiest contract types for the government because they could be 

awarded quickly and labor hours or categories can be adjusted if 

the requirements are unclear or the funding is uncertain. DOD’s 

management of contracts have been on the GAO’s high-risk list 

since 1992, 15 years. Why in contracting has this not been resolved 

in 15 years? 

Mr. PATTERSON. Well, I can’t account for the years prior to my 

coming to the Department of Defense, but I can—— 

Senator COBURN. Well, what are your thoughts about it? 

Mr. PATTERSON. I think that we use too many time and materials 

contracts. Within 2 weeks of my taking the job, I came in and 

found out that the logistics management program had a $1.3 billion 

time and materials contract that looked as though it had no end 

and we simply refused to fund it because that is ridiculous. 

I have a very negative reaction to people who use time and materials contracts because they can’t figure out how to justify the individual elements of what they want to do and we have to get to a 

point where we apply structure and discipline to the way in which 

we use the taxpayers’ dollars. To simply go in and say, well, I don’t 

know exactly what I want to do, so I guess a time and materials, 

or an Indefinite Delivery/Indefinite Quantity (IDIQ) contract, is the 

way I should go. 

Particularly odious to us has been the interagency contracting, 

and we have gone a long way to eliminate the abuses that have 

taken place—— 

Senator COBURN. Explain what that is, interagency. 

Mr. PATTERSON. As you know, you have GSA and NASA, the 

Treasury, they all have open contracts, IDIQ contracts. They all 

have them. Well, when something is very urgent and there is an 

open contract that is open in that category, it is perfectly reasonable to sign a MPR over to another agency because you need to get 

something very quickly. 

25 

Well, what we found was that wasn’t the case at all. People were 

having Multi Interagency Procurement Requests (MIPR) signed 

over to the GSA or the Department of the Interior that said things 

like office equipment. I can’t tell whether that is urgent or not. So 

consequently, we have taken very strong steps to eliminate that as 

a potential area for fraud, waste, and abuse. The Department of 

Defense IG has identified 640 potential ADAs. Of those, we have 

done a cursory review and found that, effectively, it is people using 

the wrong appropriation or doing something else. It is simply an 

administrative error. But there are some that we are taking action 

on, and 90 of those are now for official review by the Department 

of Defense General Counsel. 

Senator COBURN. What percentage of contracts at DOD are fixed 

price? 

Mr. PATTERSON. I couldn’t tell you right off the top of my head. 

Senator COBURN. Would that seem to be an important number 

for us as we look at this? 

Mr. PATTERSON. I am not sure that it is, because the exigencies 

of what you want to purchase drive you to make a determination 

as to whether or not you will use a fixed-price contract or a costplus contract. If you know very clearly what the bounds are of what 

you want to buy and how long you are going to purchase it for and 

the cost of that is very well known, then a fixed price is perfectly 

reasonable. 

Senator COBURN. Let me give you a little example. We had the 

Air Force and Lockheed here on the C–5 problems and the NunnMcCurdy breach that was just filed about the time we were having 

that hearing. 

Mr. PATTERSON. Yes, sir. 

Senator COBURN. You can have all sorts of fixed-price contracts 

in the private sector where you say, if we buy this many, it is this 

price. If we buy this many over this time, it is this price. If we buy 

this many over an extended period of time, it is this price. 

I guess what I am going towards is it seems like we are not sharing some of the risk with the suppliers of the Defense Department. 

All the risk is being placed on the American public because we go 

cost-plus for a limited fixed-price contract. What is wrong with contracting the way the private sector does? How many contracts are 

you aware of that the private sector does that 70 percent are costplus? Mr. Brinkley, would you want to answer that? 

Mr. BRINKLEY. I think the motive in that, and I am not sure it 

is applicable anymore given all the consolidation that has taken 

place, but I think the desire for cost-plus and the motives that 

drove that and continue to drive that, in the private sector, you can 

always find another customer. In government, you win a big government contract, you do cost-plus, and in the event that you lose 

that contract, you have the ability to ramp down your cost structure as opposed to just instantly facing a bankruptcy situation. So 

I think the structural definition or why we got into cost-plus was 

lent to that. Now whether in a globalized defense environment that 

is still a motive or not, I think may be worth looking at in terms 

of whether that structure and those motives that drove the creation 

of that still make sense. 

26 

Mr. ZAKHEIM. There is something else, too. If you look at shipbuilding, in the 1970s, there were huge cost overruns on fixed-price 

contracts, so the decision was made to go to cost-plus because that 

way, you accounted for a lot of front-end research. You don’t have 

formal R&D accounts as much in the shipbuilding account, but it 

is basically front-end R&D for the first ship. It is very difficult to 

predict a fixed price on research and development, and so they 

moved to cost-plus. Then there was a swing back to fixed price because then no one was happy with cost-plus. Then they realized 

why they had gone away from fixed price in the first place. 

So to some extent because—and this is what Mr. Brinkley was 

talking about—because of the peculiar nature of a lot of, of a monopsony environment, there is only one buyer here, it is much more 

difficult to say there is a cookie cutter answer, whether it is for 

cost-plus or fixed price, or for that matter, as Mr. Patterson said, 

in some cases, time and materials also is legitimate. 

I think maybe having a better sense of what is the most appropriate, we have some distance to go there, but I don’t think you can 

just have a meat ax approach to a particular kind of contract. 

Senator COBURN. Mr. Patterson, I am going to go to you in just 

a second because I think a lot of our problems with these contracts 

is a lack of oversight in the contracts. In other words, the contract 

is out there and we don’t have the oversight. That brings me up 

to another problem which I would like both Mr. Brinkley and Mr. 

Patterson to address. It is my understanding that we have a real 

shortage of contract purchase managers. What are we doing to address that? What are we doing to train for that? What are we doing 

to get those people in, get them the experience so that we have 

them on board? 

Mr. PATTERSON. I think there is something that we can do in the 

near term, and we are, and that is to train people within the individual units on very rudimentary statement of work, purchase 

order. A lot of the problems that we have are at the very lowest 

level and they don’t amount to a great deal of money, but they continue to be problems. We have a dearth of qualified contracting officers, that is true, and I would attribute that to the zeal at which 

we reduced the number of professional government employees in 

the 1990s. We went from 550,000 in the acquisition world, down to 

something less than 300,000 in a matter of 7 years. We basically 

took the very guts out of the talented pool of professionals that did 

this kind of thing. 

Now, I am not saying that if we got them all back that everything would be wonderful again, but at least it is symptomatic, I 

think, of what you are getting at, and that is a lack of contracting 

officials to do the work. 

Senator COBURN. Are there certain regulations that should be 

waived in terms of hiring to help solve this problem? 

Mr. PATTERSON. I think there just needs to be a very strong, enthusiastic management emphasis on bringing back qualified and 

skilled government employees. 

Senator COBURN. Where do you get those? 

Mr. PATTERSON. You get them from the private sector. I would 

start out—the Congress gave us the authority to bring back IPAs 

27 

and highly-qualified experts. We need to use that authority more 

liberally. 

Senator COBURN. General Walker. 

Mr. WALKER. Well, first, I think training clearly is an issue, especially—including for our deployed forces. They need to have more 

training with regard to some of the basic issues of contracting that 

they are responsible for executing and they don’t necessarily have 

that type of training. 

Second, cost-plus contracts are a problem to the extent that they 

are used in circumstances where they shouldn’t be, but they are 

only one of many challenges that we have. And I come back to page 

40 and 41 of my testimony where I lay out a number of them. I 

mean, part of the problem is that we know we have a want. The 

want may or may not be a need. We may or may not have defined 

it clearly enough. And then we ask a contractor to go out and try 

to work on a want, or even if it is a need that is not clearly defined, 

and we do it on a cost-plus basis with inadequate training, with inadequate risk sharing between the taxpayer and the contractor, 

with inadequate oversight. You get a combination and a compounding of problems of which cost-plus is only one element. 

Mr. PATTERSON. And to follow up on what Dr. Zakheim said, I 

think that what we are missing here is we are missing a set of 

clear standards that drive you to make decisions on whether or not 

you are going to use a cost-plus incentive fee, a fixed price. We 

don’t have those kinds of standards whereby we would be driven 

one place or the other. We also live in a world of extraordinary vagaries in terms of what the next year will bring in terms of budgetary authority. 

Senator COBURN. I am going to go back to the Lockheed—— 

Mr. PATTERSON. OK. 

Senator COBURN. We have a contract that by the Air Force’s assessment has a Nunn-McCurdy breach because it looks like the 

costs are going to be—why accept that contract in the first place? 

Why not say, Lockheed, if you want this business, you are going 

to have to share a good portion of the risk and here is what we will 

commit to, and you take, based on what an appropriations plan is 

and an authorization plan is, and the only out for Lockheed would 

be is that we are not going to ever fund this again. And ask Lockheed to quote on the basis of those parameters. 

We don’t do that. We say, well, here is the way it works, and so 

therefore that is the only way we are going to contract. Well, the 

fact is, we could change to a different paradigm in defense contracting if we said, look, you get a bunch of gravy but you’re going 

to take a bunch of risk. We have a defense contracting business, 

I believe, in this country that doesn’t have much risk. We have conditioned them to low risk and they make billions of dollars off the 

Federal Government every year, and it is time that their contracting reflected them taking some of the risk. 

So I am asking, why can’t you change the paradigm under which 

you buy, and maybe shipbuilding is an exception, but in Lockheed, 

we did all the steps. Now the question is, the real question is does 

the Air Force want the C–5 or not. That is the real question. It is 

not whether or not we are going to buy it or whether or not there 

28 

is going to be a contract. It is whether or not the generals really 

want it. 

Mr. PATTERSON. Well, aside from your last question, the fact is, 

you are exactly right. We can modify contracts. We can write contracts to get the very best advantage for the government. But we 

are also responsible for getting cost schedule and performance, and 

what I believe and what I think we found when we did the Defense 

Acquisition Performance Assessment a couple or 3 years ago is that 

what we are missing here is stability in programs. 

The C–5 program, for example, starts in 2007 and doesn’t finish 

until 2021 for 108 airplanes. In the 1950s, we bought 535 Boeing 

707s for air refueling. That price, I guarantee you, stayed fairly 

consistent over the 5 years in which those airplanes were purchased. 

What we need to understand, and to your point, we need to revamp the way in which we consider contracts. They can’t be what 

I refer to, and it is unfair, I realize that, but it appears as though 

what we say is we need it faster, better, cheaper. The contractors 

say, outstanding. We can make it faster, better, cheaper, no matter 

how long it takes or how much it costs. And we say, where do we 

sign? We have to change that fundamental way of thinking in order 

to get a better deal for the American taxpayer, and I can guarantee 

you that we are committed to doing that. 

Senator COBURN. Well, I think General Walker’s point is the reason we have trouble bidding contracts on research is because we oftentimes don’t know what we want. 

Mr. PATTERSON. We have no idea. 

Senator COBURN. And so why are we letting contracts when we 

don’t know what we want? That is management. That is the thing 

that Mr. Brinkley has brought to this, is this has to be clarified. 

What is your intent? What is your need? And is it a real need, and 

that is where upper management has to make those decisions. 

Where are the standards for cost-plus versus fixed-price contracting 

in the Pentagon? Is there a set of standards that people have to 

follow? 

In other words, the Secretary says, here is when you will make 

a decision fixed price versus cost-plus. Are there standards within 

the Pentagon, or is there just freedom to do whatever you want? 

Mr. PATTERSON. Well, I think to your immediate question, and 

I am somewhat embarrassed, I have not seen those standards—— 

Senator COBURN. So why not? Where are the standards that 

should drive the management of purchasing things that say, here 

are the circumstances in which it should be correct to use a costplus contract. Here are the circumstances when it is not. Where is 

the management tools? Mr. Walker. 

Mr. WALKER. Well, first, there is something in the Federal Acquisition Regulations (FAR), that lays out guidance. To what extent 

has that been communicated and to what extent is that being followed? 

Senator COBURN. And where is the follow-up to see if it is correctly followed? 

Mr. WALKER. Right. 

Mr. PATTERSON. But I think to General Walker’s point that it is 

guidance, and there is nothing that tells us if these conditions, A, 

29 

B, C, exist, then you have the conditions necessary for a fixed-price 

contract. If other conditions exist, then you will choose some other 

way of contracting. I think that very specificity needs to be part of 

the way we do our business in the Department of Defense. 

There may have been in the past people, as I mentioned, who 

knew this stuff intuitively and it wasn’t necessary to come to this, 

what I refer to as the rules of acquisition. But in the absence of 

that skilled labor, I am coming to the point where I believe we need 

a strong set of rules. 

Senator COBURN. Is that in the planning? 

Mr. PATTERSON. The planning. I provided what I consider to be 

a reasonable set of rules to the acquisition community. But it is a 

process and we will talk about it and we will come to some accommodation because, quite frankly, I mean, as much as I would like 

to think so, I don’t have the inside track on everything that takes 

place. But I do know from my experience both in government and 

in the corporate world that you need discipline and structure if you 

are ever going to achieve cost, schedule, and performance as you 

expect to have it. 

Senator COBURN. It is called line management. Here is your area 

of accountability. Step up to it. You step over, you are in trouble, 

but if you don’t come up to it, you are in trouble, and that is the 

kind of management techniques that we need. 

Mr. Brinkley, do you have any comment on that? 

Mr. BRINKLEY. I just want to reinforce. I mean, Federal Acquisition Regulations and to be Defense Acquisition Workforce Improvement Act (DAWIA) certified as an acquisition professional requires 

you to learn those guidelines, and they are guidelines. I have witnessed myself courageous contracting and acquisition professionals 

put in place fixed firm price agreements for large programs that almost immediately then went off the rails, and the pressures then 

that they felt because now their whole program was at risk given 

all of the issues that General Walker pointed out in terms of the 

up-front requirements definition that was not well crafted. And so 

I know that the pressure on a contracting professional or an acquisition professional is to use the most flexible vehicle possible in the 

absence of that up-front requirements definition discipline that exists. 

Senator COBURN. That makes a lot of sense. When was the last 

time the Pentagon sued a contractor for non-performance based on 

a fixed-price contract? 

[No response.] 

Senator COBURN. There is the problem. The fact is, if we haven’t, 

that means we have been contracting poorly. There should have 

been people taking enough risk that some didn’t perform and we 

aren’t holding them accountable. Most of these are very wealthy 

companies that do the big contracts for the Pentagon, and so with 

risk comes reward. I have no problem with them making a lot of 

money off of our purchasing, but they also ought to have to carry 

a lot of risk and I don’t see that risk in our contracting and that 

is a big problem and one of the reasons the costs are so great. If 

it goes off the rails, why isn’t the contractor on the hook? And that 

is my point. We are on the hook, you and I as taxpayers, not the 

contractor. 

30 

Mr. Chairman. 

Senator CARPER [presiding]. Mr. Brinkley, do you head the Business Transformation Agency? 

Mr. BRINKLEY. The Business Transformation Agency reports 

through my office within the Department, within the Office of the 

Secretary of Defense. 

Senator CARPER. All right. That is the way it looks today. Help 

me figure out who is included under the Defense Business System 

Management Committee. Does that include the Deputy Secretary? 

Mr. BRINKLEY. That would be chaired by the Deputy Secretary. 

It includes all of the Service Secretaries, the heads of the Defense 

agencies, as well as the under secretaries in the business mission 

area of the Department, so the Comptroller, AT&L, personnel, and 

readiness. 

Senator CARPER. All right. Fair enough. And then we have the 

Principal Staff Assistants. These would be the Comptroller, the 

Under Secretary of Defense for Acquisition Technology and Logistics, and then the Under Secretary for Personnel and Readiness, 

right? 

Mr. BRINKLEY. Correct. 

Senator CARPER. OK. Let us move ahead to January 2009. I don’t 

think any of us know who is going to be the next President, but 

there is strong suspicion that there will be some changes, as there 

normally is at the end of an Administration after 8 years. What our 

staff has done is they color-coded these different boxes with red, 

which suggests majority turnover, beige, which is sort of partial 

turnover, and yellow, which is relatively no turnover. I don’t know 

if that is a vote of confidence in you, Mr. Brinkley, or not, but we 

don’t have much turnover at all expected at the Business Transformation Agency. 

But up here, a lot of turnover from among the senior governing 

body. Among the Principal Staff Assistants, we have a fair amount 

of turnover. Here, we have some turnover at the Investment Review Board and relatively little down here below. 

Mr. Brinkley, with this much turnover at the Department, especially at some of the higher levels up here, how do you think the 

next Administration will continue the transformation efforts that 

have begun? 

Mr. BRINKLEY. So this is something we have thought about since 

the very beginning, and early on, we did some research on this 

problem, and I counted up nine times since 1960 that bright people 

came into the Department of Defense and launched efforts to modernize the Pentagon’s business operations, and they all follow a trajectory: A head of steam, a vision, a strategy, some talented people 

come in, establish some momentum, a change of Administration, 

start over. That is a problem. 

Senator CARPER. Have there been nine changes? How many 

changes in Administration since 1960? 

Mr. BRINKLEY. You would have to count. I guess I have to do the 

math. 

Senator CARPER. You said nine times. 

Mr. BRINKLEY. I counted nine times since 1960 we have attempted to do a business modernization—— 

31 

Do some quick math. Anyway, so the question is whether it is 

turnover of individuals, turnover of Administrations, that is a concern. So we have taken tangible steps to address this. Some of this 

is codified into statute and none of that structure existed prior to 

the efforts we have had underway for the past 3 years, building on 

what Dr. Zakheim launched back in 2001. 

We believe that establishing the civilian agency, Business Transformation Agency, we moved all of the people who were part of that 

political structure into a civilian organization. That organization in 

yellow there will not see turnover in the transition. It is a Defense 

agency. It is directed by David Fisher, a gentleman from the private sector who has come in at the SES level. He is the BTA’s Director. I am a political appointee within the Office of the Under 

Secretary for AT&L in the middle there. I will turn over. 

But we also believe that there are a series of other steps we have 

taken to mitigate the risk of a loss of momentum. We publish, and 

sometimes I think we take this lightly, but it was a monumental 

achievement to publish for the entire Department of Defense our 

transition plan, and in some of the testimony earlier, people claim 

that such a plan doesn’t exist or it is not complete enough and we 

will probably continue to debate that forever, whether it is comprehensive enough or not. But that plan lays out 6-month milestones, which was a change in thinking for the Department, that 

we publish and we measure ourselves to, and we make clear to you 

and we make clear to the public. And we hit about 70 to 80 percent 

of those milestones every 6 months. The ones we miss, we put in 

place recovery plans for. 

There are milestones in that plan that go out well past this Administration, 2012, 2013. Those are things that the Congress can 

hold the next Administration accountable to. And if the next Administration decides they think some of those are bad ideas, political—Democratic or Republican supply chain, right, or a Democratic or Republican accounting system, if they can identify things 

like that and they want to stop or redirect, well, then they can do 

that, but they do it in a way that is transparent and that you can 

hold them accountable to, and that is a very powerful tool that has 

been placed in your hands as an overseeing body to hold the Department of Defense accountable not to lose momentum, and I 

think that is important. 

So those are tangible steps. The structure that you have defined, 

that is in statute. The Congress put that structure into place, the 

DBSMC, these Investment Review Boards were put into place in 

the 2005 National Defense Authorization Act. The next Administration can’t just wipe that structure out. It must place new leaders 

into those key roles and they must assume their responsibilities. 

So there are things that are continuity that have never existed 

before, that are necessary steps to create continuity beyond Administrations. What you have to decide is are they sufficient. I know 

Mr. Walker doesn’t believe they are sufficient. There are people 

who argue passionately that this is good progress but not sufficient. 

That is above my pay grade. But I do think we have taken steps 

for the first time to see this work. 

My worst nightmare is to wake up back in California in March 

2009 and read in the paper that all the work we have done has 

32 

been washed away and that we are going to start over—because I 

know what will happen. A few months later, we will start again, 

right, because the need for this isn’t going to go away. 

Senator CARPER. General Walker, you are raising your hand? 

Mr. WALKER. First, there have been nine Administrations since 

1960, all right. 

Senator CARPER. All right. 

Mr. WALKER. Second—and some were two-term Presidents. Second, there is a plan for systems. There is not a comprehensive integrated strategic business transformation plan that deals with all 15 

high-risk areas with metrics and milestones. There has never been 

one. 

Senator CARPER. Why do you suppose that is? 

Mr. WALKER. Because there is nobody in charge. You can’t run 

a country by committee. You can’t run an agency by committee. 

Now, don’t get me wrong. I think the DBSMC is a very positive 

thing, and let me reinforce, I think that Gordon England is one of 

the most talented executives that the Defense Department has ever 

seen, all right. But there is going to be massive turnover. It is a 

reality. It is not a theory, it is a reality. 

Now, one of the things, and I will just mention this briefly, that 

I think we need to think about as a country is how many political 

appointees should we have? How deep should they go? How many 

of them should be Presidential appointees with Senate confirmation? How many of them ought to be Presidential appointees? 

And of the ones that are Presidential appointees with Senate 

confirmation, I think we have to recognize the reality that there 

are three kinds of positions. There are policy positions, which clearly ought to serve at the pleasure of the President because they are 

executing the President’s policy. There are operational and management positions which are different where you ought to have 

statutory qualification requirements and maybe a term appointment. And then there are independent adjudicatory and oversight 

positions, like Comptroller General, IGs, judges, where not only do 

you need the right kind of qualifications and potentially a term, 

but you also need independence. You need people who are independent. 

We have one-size-fits-all approaches in government and we need 

to kind of step back and fundamentally reassess that. 

Senator CARPER. All right. Thank you. Mr. Zakheim. 

Mr. ZAKHEIM. Obviously, you have pointed to a very serious problem. Let us play a mind game and say that the next Deputy Secretary of Defense, who still would be CMO, is someone who is not 

interested in management. We have had some of those. How effectively do you think that individual will run that committee that he 

or she will chair? The committee then will become useless. 

What does that do? It totally undermines the Business Transformation Agency because now the head of the agency, who by the 

way stays on, as I understand it, now doesn’t really have any real 

reporting chain because the head of that agency has to deal with 

three quarrelling barons, the Comptroller—again note Comptroller 

is in the title, it is not CFO in the title. It is very interesting. So 

the Comptroller—you may have a Comptroller that is only interVerDate Aug 31 2005 12:30 Sep 18, 2008 Jkt 038850 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 P:\DOCS\38850.TXT SAFFAIRS PsN: PAT
33 

ested in the budget and not even interested in financial management. We have had some of those. 

And so it would be the Comptroller, the Acquisition Under Secretary, and the Personnel Readiness. How do you expect the business transformation person to deal with all three of those if there 

is a weak chairman of that business management committee at the 

top? It just doesn’t work. It doesn’t work in business and it won’t 

work in government. 

So I feel that you have to have, in effect, a parallel to what we 

have already done. I mean, the fact is the Defense Department has 

a permanent managerial person, namely the head of the Business 

Transformation Agency. I believe that person has got a term, That 

person is seen as a technocrat, as an expert. Well, if that is the 

case, the same model ought to apply to a CMO, as I said in my testimony, and I would have the head of the Business Transformation 

Agency report directly to that CMO to get out from under competing baronies who are all legitimately claiming resources, but 

you just can’t satisfy everybody. 

Senator CARPER. All right. Thank you. Colonel Patterson, if you 

want to say anything on this one, feel free. Otherwise, I have another question for you. Do you want to opine on this briefly? 

Mr. PATTERSON. Well, obviously, I support the Deputy Secretary 

of Defense and the position that he has taken on this. I would also 

mention the fact that one of our responsibilities and that we take 

very carefully and very—it is an important responsibility, and that 

is we hire good managers. That is our responsibility. We vet them. 

Sometimes we are not perfect. But we are accountable for what 

happens to them and what happens on their watch. And so I would 

tell you that we take that very seriously and that is our responsibility, is to hire good managers. Good managers are people and 

sometimes we don’t make the right choice. 

But to pick up on what Dr. Zakheim said, I think it is an extraordinarily important point, and it was the point that when you 

asked me the last time I was here, you said, what could we do for 

you, and I said you could help eliminate the byzantine labyrinthine 

process by which good people are systematically eliminated from 

being candidates for these important jobs, and I can’t stress that 

enough. 

Senator CARPER. I remember you saying that. It is good that you 

are staying on message. 

Mr. PATTERSON. Thank you, sir. 

Senator CARPER. Let me move on to Mr. Walker for a quick question. We will come right back to you for my last question. General, 

how do challenges in DOD’s business operations affect the war 

fighters? 

Mr. WALKER. Well, first, I would say that there are three Ms in 

the Department. Mission is No. 1, and it should be, and it should 

be in every department and agency. Money is No. 2. Get the 

money, spend the money. And management is No. 3. Now, don’t get 

me wrong. I am not trying to downplay what has been accomplished because a considerable amount has been accomplished. And 

I think to be fair, you have to analyze things based upon where do 

things stand now, what type of progress is being made, and then 

how do you benchmark it against a comparable organization. You 

34 

need to look at all three to be fair and to provide contextual sophistication. Progress has been made. 

To the extent that we have inefficient and ineffective business 

processes, several things happen. One, we waste a lot of money. 

And if we waste a lot of money, when the crunch comes, and the 

crunch will come, including for the Department of Defense, we 

won’t be able to acquire some things that we need. 

Second, we may not have good accounting over what we have in 

deciding what we are going to buy. We may not have an ability to 

deliver things that we do have, and we know where they are, as 

effectively as we should. And so I can give you more and more examples, but there are consequences to the war fighter and those 

consequences are anywhere from short-term tactical to longerrange strategic implications, not just for the war fighter, but quite 

frankly, for our national security. 

Senator CARPER. Say those three Ms one more time. 

Mr. WALKER. OK. Those three Ms are mission, money, and management. 

Senator CARPER. All right. Thank you. 

Mr. Patterson, one more question for you and that is it for the 

questions I want to ask here today. But GAO has previously reported that it has found, I think, numerous problems with DOD’s 

process for recording and reporting costs for ongoing operations related to the Global War on Terrorism, raising significant questions 

about the reliability of DOD’s reported costs and its future requirements. Are the steps that DOD has previously taken regarding reliability having an impact in improving its reported Global War on 

Terrorism costs? 

Mr. PATTERSON. Yes, sir, I believe they have. 

Senator CARPER. Would you talk about that a little bit? 

Mr. PATTERSON. Yes, sir. I would be happy to. Because it is so 

visible and we have a responsibility to be very accurate about the 

cost of this war, we have established a senior executive working 

group that I am a co-chair and the lead chair with the Director of 

the Defense Finance and Accounting System. And to this day, our 

processes and improvements have brought us to a point where we 

believe and we can show that 92 percent of all of the costs that we 

identify are costs that come from an accounting system, so that you 

can trace it back to an established accounting system. 

Only 8 percent of the costs of the Global War on Terror are attributed to modeling or estimating, and more modeling than estimating. We are attempting in every way possible to start to eliminate completely estimates and use actual costs in our Global War 

on Terror reporting and we are coming very close. I believe that the 

GAO in their latest accounting of the way in which we do things 

have given us credit for the fact that we are making progress in 

that area. 

Senator CARPER. Is there anything to what he just said there, 

General Walker? Are you here to back him up? 

Mr. WALKER. They are making progress and I have been asked 

to be briefed on this matter and I have yet to be briefed on it, but 

I am scheduled to be briefed on it in the near future and I will be 

happy to report back to this Subcommittee when I am. 

35 

Senator CARPER. Thank you. I said that would be my last question, but I want to go back to Mr. Brinkley, one thing we have not 

really gotten into. I understand one of the things that you focus on 

deals with how do we help foster economic development and job 

creation within Iraq. It is an important subject, real important, actually. I would be interested in your telling us how we are doing. 

Are we doing any better? What are some of our lessons learned? 

Mr. BRINKLEY. To synthesize quickly on this, Iraq has a $35 to $40 billion gross domestic product (GDP), most of that generated 

with oil sales. 

Senator CARPER. Is that both before and after the war? 

Mr. BRINKLEY. I think it has grown a bit in terms of the price 

of oil has gone up. Therefore, GDP has grown since 2003. Now, it 

was an industrial economy prior to 2003. Under U.N. sanctions, 

they were not allowed to import anything other than what they 

could smuggle in. They had a large industrial base. We are bringing DOD’s industrial expertise to bear to get that industrial base 

up and running again. It provided employment for, the World Bank 

estimates, about half-a-million people in Iraq. That served as the 

core engine of the Iraqi economy, and so where we can bring business expertise from the Department of Defense to bear to restore 

industrial operations in Iraq, we are doing that. 

The way we are doing that is we are spending, as you know, well 

in excess of $10 billion a month in Iraq. Now, you are spending 

over $10 billion a month in Iraq to sustain our troop presence, acquiring a wide variety of goods and things that are necessary to 

sustain our presence there. That can be a huge economic stimulus 

to that country. So this area of contracting, not just how we do it 

transparently and more effectively so that the Congress and the 

American people have confidence in where their dollars are going, 

but also so that the war fighting community can wield our spending as a tool of economic policy in Iraq to help stabilize and restore 

employment and normalcy in areas. 

As General Petraeus establishes a security footprint, we follow 

with rapid economic reconstruction and development by restoring 

employment and the industrial base there. That is what we are 

working on today, and we have made significant progress and anticipate significant ongoing progress in that effort. 

Senator CARPER. How do you measure your progress? 

Mr. BRINKLEY. Progress is measured in multiple levels. First and 

foremost is the efforts we have in partnership with Joint Contracting Command for Iraq-Afghanistan. Major General Darryl 

Scott under MNF–I Command has—we have registered over 5,000 

Iraqi companies, private companies, that are currently receiving almost $400 million a month in U.S. Government contracts for goods 

and services to sustain our forces. Four-hundred-million dollars a 

month is a significant economic stimulus in the Iraqi economy, and 

these were goods that were not being imported from America but 

were being purchased in the region to support our mission. So this 

is not removing economic stimulus from home, but actually channeling regional economic stimulus into the place where we need it 

most, Iraq. 

The other measurement is in our restarting of factories. Up until 

September of this year, we brought back online 17 industrial operVerDate Aug 31 2005 12:30 Sep 18, 2008 Jkt 038850 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 P:\DOCS\38850.TXT SAFFAIRS PsN: PAT
36 

ations in Iraq that restored sustained employment to over 5,000 

Iraqis. We will impact 30 more factories between now and January. 

Unlike construction or some of the other jobs, programs that we 

have underway in Iraq, a manufacturing job is a sustained employment that has a multiplier effect on the economy in Iraq, and so 

in partnership and in support of MNF–I Command objectives, we 

believe this is a key element to helping continue the stabilization 

we see starting to take hold in areas in Iraq today. 

Senator CARPER. Dr. Zakheim. 

Mr. ZAKHEIM. Yes. I was just going to say as the one non-member of any part of the government, I am reasonably objective, I 

think. Paul Brinkley has done a remarkable job out there. He has 

paid a very high personal cost. He spends most of his time in what 

is now the garden spot of the world. He has been developing U.S. 

investments in Iraq, which is good for our businesses and good for 

the Iraqis, as well as what he has talked about. And fundamentally, if we are going to turn that place around, and now I am biased because I am an economist, it is only going to be done by turning the economy around. And so the gentleman to the right of me 

has done a remarkable job in that regard. 

Senator CARPER. Mr. Brinkley, are you going to let him get away 

with saying that about you? 

Mr. BRINKLEY. Yes. [Laughter.] 

Senator CARPER. All right. Dr. Coburn, any closing words? 

Senator COBURN. No, I am fine. 

Senator CARPER. We appreciate each of you being here. We appreciate your current service to our country and your previous service. Dr. Zakheim, it is great to see you again. 

Your testimony has been valuable, but I think our questions 

have been of value to us and I hope to some of you. 

One request that I asked Mr. Patterson before was what can we 

do to be of help, and he has again reminded us of one of the things 

that we can do to be of help and we will try to be helpful there. 

Go ahead. 

Senator COBURN. I just wanted you to know that I elevated his 

rank while you were gone to General. [Laughter.] 

Mr. PATTERSON. And consequently, my answers to you were 

much better. [Laughter.] 

Senator CARPER. That is not always the case. [Laughter.] 

We have field hearings. That would be a field promotion. 

This hearing record is going to be open for a couple of weeks for 

any additional statements that our colleagues might have and 

questions. To the extent that you receive those, we would appreciate your promptly responding to them. 

Thank you for bearing with us today through all these votes, and 

again, we appreciate very much your presence and testimony. 

Thank you so much. 

The hearing is adjourned. 

[Whereupon, at 5:58 p.m., the Subcommittee was adjourned.] 

(37) 

A P P E N D I X 

PREPARED STATEMENT OF SENATOR VOINOVICH 

Senator Carper and Senator Coburn, thank you for holding this important hearing 

to address the business management and financial challenges facing the Department of Defense. Improvements in these areas are essential to ensuring that the 

Department manages its people, systems, and programs in an efficient manner. 

Since 2005, as Chairman and now Ranking Member of the Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia, I have held hearings on the Department’s GAO high-risk areas; three on 

DOD supply chain management and one on the Department’s transformation efforts. 

My interests in this area is three fold. First, the Government Accountability Office 

designated eight areas within the Department as high-risk for waste, fraud, abuse, 

and mismanagement. In addition, there are seven government-wide high-risk areas 

for which DOD shares responsibility. Many of these problem areas have been on 

GAO’s list since 1990. These high-risk areas, and the resources and management 

efforts they consume, diminish the ability of the Department to perform its missions 

effectively. 

Second, the men and women serving abroad and fighting for our freedom deserve 

the best support possible from their government. Finally, the American taxpayer deserves a Department that is transparent and held accountable for every penny it 

spends. With a budget of well over $400 billion, the Department must be a good 

steward of the taxpayers’ money. 

As I have noted in the past, former Secretary of Defense Donald Rumsfeld once 

estimated that the Department wastes 5 percent of its budget—more than $20 billion a year at current budget levels—on redundant or outdated business practices. 

Based on my experience, I believe the actual number is much higher. 

I have been extremely pleased with the work Mr. Brinkley and the Business 

Transformation Agency have been able to accomplish in such a short period of time. 

By developing and issuing the Enterprise Transition Plan every 6 months, BTA has 

been able to monitor the Department’s transformation. Mr. Brinkley, I look forward 

to hearing how you plan to institutionalize BTA’s transformation plan. 

Regardless of the progress, the Department will never see true transformation 

until they have a Chief Management Officer dedicated solely to management. While 

I applaud the decision of Secretary Gates to name a Chief Management Officer, the 

designation of the existing Deputy Secretary does not get the job done. After all, 

there are only 24 hours in a day, and Gordon England is already responsible for 

a multitude of tasks. I think Comptroller General Walker will agree with me that 

we need a dedicated senior level official whose full-time job is focused on management. 

True transformation is driven by committed leadership and must stand the test 

of time. With the coming transition to a new Administration, we need to ensure that 

progress continues. I look forward to hearing from our witnesses today. 

Thank you, Senator Carper. 

38 


38850.001
39 


38850.002
40 


38850.003
41 


38850.004
42 


38850.005
43 


38850.006
44 


38850.007
45 


38850.008
46 


38850.009
47 


38850.010
48 


38850.011
49 


38850.012
50 


38850.013
51 


38850.014
52 


38850.015
53 


38850.016
54 


38850.017
55 


38850.018
56 


38850.019
57 


38850.020
58 


38850.021
59 


38850.022
60 


38850.023
61 


38850.024
62 


38850.025
63 


38850.026
64 


38850.027
65 


38850.028
66 


38850.029
67 


38850.030
68 


38850.031
69 


38850.032
70 


38850.033
71 


38850.034
72 


38850.035
73 


38850.036
74 


38850.037
75 


38850.038
76 


38850.039
77 


38850.040
78 


38850.041
79 


38850.042
80 


38850.043
81 


38850.044
82 


38850.045
83 


38850.046
84 


38850.047
85 


38850.048
86 


38850.049
87 


38850.050
88 


38850.051
89 


38850.052
90 


38850.053
91 


38850.054
92 


38850.055
93 


38850.056
94 


38850.057
95 


38850.058
96 


38850.059
97 


38850.060
98 


38850.061
99 


38850.062
100 


38850.063
101 


38850.064
102 

Æ 


38850.065