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S. Hrg. 112–502 

AFGHANISTAN RECONSTRUCTION CONTRACTS: 

LESSONS LEARNED AND ONGOING PROBLEMS 

HEARING 

BEFORE THE

AD HOC SUBCOMMITTEE ON CONTRACTING 

OVERSIGHT 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

JUNE 30, 2011 

Available via http://www.fdsys.gov 

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs 

( 

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(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 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

MARK BEGICH, Alaska 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JERRY MORAN, Kansas 

MICHAEL L. ALEXANDER, Staff Director 

NICHOLAS A. ROSSI, Minority Staff Director and Chief Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

JOYCE WARD, Publications Clerk and GPO Detailee 

AD HOC SUBCOMMITTEE ON CONTRACTING OVERSIGHT 

CLAIRE MCCASKILL, Chairman 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

JON TESTER, Montana 

MARK BEGICH, Alaska 

ROB PORTMAN, Ohio 

SUSAN M. COLLINS, Maine 

JOHN MCCAIN, Arizona 

JERRY MORAN, Kansas 

MARGARET DAUM, Staff Director 

BRIAN CALLANAN, Minority Staff Director 

KELSEY STROUD, Chief Clerk 

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C O N T E N T S 

Opening statements: Page 

Senator McCaskill ............................................................................................ 1 

Senator Portman .............................................................................................. 4 

WITNESSES 

THURSDAY, JUNE 30, 2011 

Larry D. Walker, President, The Louis Berger Group, Inc. ................................. 7 

Wahid Hakki, Chief Executive Officer, Contrack International, Inc. ................. 9 

William M. Solis, Director, Defense Capabilities and Management, U.S. Government Accountability Office ............................................................................. 25 

David S. Sedney, Deputy Assistant Secretary of Defense for Afghanistan, 

Pakistan and Central Asia, U.S. Department of Defense ................................. 27 

Kim D. Denver, Deputy Assistant Secretary of the Army for Procurement, 

U.S. Army ............................................................................................................. 29 

J. Alexander Thier, Assistant to the Administrator and Director, Office of 

Afghanistan and Pakistan Affairs, U.S. Agency for International Development ...................................................................................................................... 30 

ALPHABETICAL LIST OF WITNESSES

Denver, Kim D.: 

Testimony .......................................................................................................... 29 

Prepared statement .......................................................................................... 93 

Hakki, Wahid: 

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

Prepared statement .......................................................................................... 59 

Sedney, David S.: 

Testimony .......................................................................................................... 27 

Prepared statement .......................................................................................... 90 

Solis, William M.: 

Testimony .......................................................................................................... 25 

Prepared statement .......................................................................................... 67 

Thier, J. Alexander: 

Testimony .......................................................................................................... 30 

Prepared statement .......................................................................................... 103 

Walker, Larry D.: 

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

Prepared statement .......................................................................................... 53 

APPENDIX 

Picture referenced by Mr. Walker .......................................................................... 58 

Additional statement from Mr. Walker ................................................................. 109 

Certificate referenced by Mr. Hakki ...................................................................... 151 

Questions and responses for the Record from: 

Mr. Walker with attachment ........................................................................... 152 

Mr. Hakki .......................................................................................................... 155 

Mr. Solis ............................................................................................................ 158 

Mr. Denver ........................................................................................................ 165 

Mr. Sedney ........................................................................................................ 188 

Mr. Thier ........................................................................................................... 209 

Report referenced by Mr. Sedney ........................................................................... 234 

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AFGHANISTAN RECONSTRUCTION 

CONTRACTS: LESSONS LEARNED AND 

ONGOING PROBLEMS 

THURSDAY, JUNE 30, 2011 

U.S. SENATE,

AD HOC SUBCOMMITTEE ON CONTRACTING OVERSIGHT,

OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:01 a.m., in 

Room SD–342, Dirksen Senate Office Building, Hon. Claire 

McCaskill, Chairman of the Subcommittee, presiding. 

Present: Senators McCaskill and Portman. 

Senator MCCASKILL. I am going to go ahead and call the hearing 

to order and begin my opening remarks. I know that Senator 

Portman is on his way and when he gets here, assuming he gets 

here before I finish, he will have a chance for his opening statement, and if the witnesses have begun, I will ask your indulgence 

to interrupt you long enough to give him a chance to make an 

opening statement. 

OPENING STATEMENT OF SENATOR MCCASKILL 

Senator MCCASKILL. I have a formal opening statement that has 

been prepared, but I have decided to not give a formal opening 

statement and just express the reason for this hearing. This is not 

the first hearing we have had in this Subcommittee on contracting 

in our contingency operations, and I began working on this problem 

almost the day I arrived in the Senate. 

I traveled to Iraq to do nothing but look at contracting oversight 

because I could not figure out how in the world things have gotten 

so out of control in terms of contracting in Iraq. I went over to Iraq 

and I realized why they had gotten out of control. Contracting representatives in each unit were just the low man on the totem pole 

that had been handed a clipboard. 

There was no training. There was not sufficient effort made on 

sustainability. There were decisions made that, frankly, were made 

with an almost myopic look at the mission and not a realistic look 

at security and sustainability and competency in terms of available 

personnel to continue whatever money we were spending on reconstruction. 

I always point out the Logistics Civil Augmentation Program 

(LOGCAP) contract is probably, if you look up an example, the initial LOGCAP contract, and look up everything wrong with conH605-41331-79W7 with DISTILLER

2 

tracting, that would be the poster child. People may not remember 

that the estimates for that contract for the first year were supposed 

to be under a billion dollars. In the first year, that contract cost 

our country $20 billion. It is just one example. 

I want to try to focus today on reconstruction contracting, and 

the sad thing about this hearing is, I had been hopeful back in 

2007 that by this year, we would have done a lot to overcome some 

of the problems in reconstruction contracting in theater. This hearing does not make me feel good about the progress we have made. 

There has been some progress, but the American people cannot afford this anymore. 

In next year’s budget, the President has requested $17.3 billion 

for reconstruction contracting in Afghanistan. Now, that is a big 

number if the United States of America was humming along. That 

is a big number if our roads were not crumbling because we do not 

have the money to fix them. That is a big number if we are not 

looking at cutting many programs that are essential to the health 

and welfare of this Nation. 

But in light of the fact that we are facing the fiscal problems we 

are in this country, that is an enormous number that is going to 

go into the country of Afghanistan to build roads, to build public 

structures, whether they are schools or other public structures, and 

I think it has now become an urgent matter for this Congress to 

look seriously at whether or not that kind of reconstruction money 

is absolutely essential to our mission in Afghanistan. 

I think if you look at the lessons that we have learned in the 

past in Afghanistan and Iraq, that the government has been very 

slow to apply those lessons, and I am not sure that the implementation of Afghan First is leading to the kind of outcomes that would 

make any American proud. 

I am not sure that the government and contractors have taken 

the steps necessary to provide the transparency and accountability 

that we have to demand in light of the incredibly difficult decisions 

that we are faced with in the U.S. Congress in terms of our fiscal 

picture in this country. 

This is the tenth year and we have spent over $61 billion total 

already on reconstruction, and the vast majority of the spending 

has been through contractors. The Defense Department (DOD) and 

the U.S. Agency for International Development (USAID) are primarily responsible for this and part of our problem that we will 

talk about today is that no one is totally responsible. There is no 

one that I can really find that wants to say, I am responsible. 

In fact, I will be surprised if I do not hear testimony today from 

people that say, I am not really responsible. It is time that somebody is responsible for money that is spent on roads that will not 

ever be sustained and for buildings and electrical power facilities 

that are built that no one there even knows how to use, much less 

access the power that supposedly we are going to provide. 

It is time for someone to step forward and say, I am responsible, 

I am the one that is planning these projects, I am the one that is 

certifying sustainability. The Department of Defense is not even 

certifying sustainability, and we all know that the Commander 

Emergency Response Program (CERP) funds which originally—I 

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3 

remember at the beginning we talked about CERP and here is 

what CERP was supposed to be. 

It was supposed to be almost like walking around with money. 

It was supposed to be money that was used by various units that 

were on the ground in Iraq to—the example I was given, I will 

never forget, in one of my very first Armed Services hearings. Well, 

Senator, this is if one of our sergeants is on the ground in a community and he knows there is a really good guy who is stabilizing 

the neighborhood and the window of his store is broken, and we 

need that sergeant to be able to say to that store owner, I have the 

money right here to fix your window. 

That provides goodwill, it provides stability, it is the kind of 

thing that wins the hearts and minds, it gives people a sense of 

community. We have gone from broken store windows to hundreds 

of millions of dollars of construction projects in CERP. 

And meanwhile, no one has really taken ownership of what is the 

difference between the responsibilities of AID, which traditionally 

has done big construction, and the responsibilities of the Department of Defense that is now engaged in seriously large projects for 

construction. 

Sustainability is going to be the key issue that we are going to 

talk about today, and it is going to be something that I think is 

very important that we get our arms around. Inadequate contracting and program management practices, once again, we are 

going to cover that ground. Contractors overseeing contractors, and 

obviously transparency, and insufficient contract personnel, which 

is another key problem that we have not yet dealt with. 

Are the contracting officer representatives (CORs) within the 

units getting better training now? Yes, they are, and I congratulate 

General Caldwell and others that have worked on doing better 

training. But we are still not where we need to be. Poor coordination of interagency efforts. I do not think anybody in this room is 

going to have a strong argument that the coordination has not been 

what it should be. 

Continual personnel turnover. We are getting a 1-year turnover 

on AID right now, and I know that is probably because it is very 

difficult to get folks that want to go to Afghanistan for 2 to 4 years. 

But when we embrace a constant turnover like we have in theater, 

we are going to have bad things happen. We are going to have 

problems that are going to occur because the beginning of the 

project is not going to have any idea what the end of the project 

looks like and vice versa. 

Security challenges obviously remain a big problem. And I think 

that we are going to have to try to dig through all those problems 

today. And I will tell you that if we do not get some strong substantive answers that every dime that is being spent in Afghanistan on reconstruction is being spent wisely and being spent with 

the kind of oversight that we would expect if we were building a 

highway down the road in the United States of America, then I 

think it is time that we focus on the mission where we are training 

security forces and we are working to provide stability against the 

Taliban and the kind of structure that we need to support going 

after al-Qaeda on the border of Pakistan and Afghanistan. 

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4 

Perhaps it is time to shut down $17 billion worth of money going 

for reconstruction projects when our track record really stinks 

when it comes to reconstruction projects. 

Now, I hope that you all are going to convince me that I have 

become cynical and angry and frustrated about the way we are 

spending money in theater, and I want to tell you, I am looking for 

good news and I hope we hear some today. But I think it is really 

time for a gut check because I have too many people in Missouri 

saying, why can’t we fix this road? 

And then I look at the projects that we are building in Afghanistan and it is very hard to explain to them why we cannot fix that 

road, because we cannot afford it. But yet, we can throw money 

away in Afghanistan on projects that are clearly not sustainable, 

and if anybody would have spent any time thinking about it in the 

first place, they would have realized that. And that kind of planning has to begin happening and that kind of accountability has to 

be present. 

I am pleased that we have a number of witnesses today that are 

going to testify to contracting in theater. Senator Portman is here. 

I will give him time to get settled. We will continue to do these 

hearings and continue to provide oversight in this arena. I think 

that it is a place we need to draw the country’s attention. 

I think we need to draw Congress’s attention. I think we need 

to certainly bring the attention of the Department of Defense and 

the Department of State to these problems and we need to begin 

to do one of two things. Do it right or stop doing it. I will turn it 

over to Senator Portman for his opening statement. 

OPENING STATEMENT OF SENATOR PORTMAN 

Senator PORTMAN. Thank you, Madam Chairman. I appreciate 

your holding the hearing today. It is an incredibly important topic 

given the resources that we are devoting to Afghanistan. I was 

there about a month or so ago and had the opportunity to meet not 

just with some of our brave soldiers and Marines, but also with 

some of the Federal Government agencies that are onsite and some 

of the contractors. 

I know this Subcommittee, under your leadership, has done some 

of the most diligent and searching oversight of Afghan reconstruction and development over the last several years, and again, it is 

critical work and I am pleased to now join you as your Ranking 

Member. 

The hearing is especially timely as it comes on the heels of a 

major announcement last week concerning the U.S. mission in Afghanistan. The President announced, as you all know, his intention 

to withdraw the full complement of the 30,000 so-called surge 

troops by September 2012, with the first 10,000 coming out by the 

end of this year. 

I have noted my concerns about the lack of clarity regarding 

some of the strategic objectives in Afghanistan, but what is clear 

is that we are now in a critical planning window with respect to 

our military and our civilian mission in Afghanistan. Today we 

have over 154,000 private contractors working for the Defense Department, State Department, AID in Afghanistan. 

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5 

The issue of effective and efficient use of those contractors assumes a new urgency as we near both the surge drawdown that I 

have talked about, and also the planned 2014 transition to Afghanled security. It is also, of course, a timely discussion given our fiscal problems and the fiscal crisis at our doorstep. 

Over the past 91⁄2 years, our military service men and women 

have done everything they have been asked to do and more in Afghanistan. They have performed remarkably well, and again, with 

bravery and extraordinary skill under some very tough conditions. 

Given our reconstruction efforts in Afghanistan, which are incredibly important to the sustainability of this effort, we need to 

be sure that what we are doing is right, be sure that we are consolidating some of the hard-earned gains that we have achieved. 

The counterinsurgency strategy that was outlined by President 

Obama has been to clear, hold, and build, and ultimately transfer. 

And as we have reached the transfer stage in many areas of the 

country, the objective, I think, has to be leave behind a more functioning society and economy, more resilient local governing structure, and a stable, more constitutional and stable government in 

Afghanistan, one that is capable of withstanding the radical 

Taliban and other elements. 

So one of my questions, Madam Chairman, in this hearing today 

is going to be talking about that and the sustainability of some of 

the efforts. We have invested heavily, as Americans, to achieve this 

goal of building up Afghan institutions and fostering economic development and job creation since 2002. Congress has appropriated over $60 billion for relief and reconstruction in Afghanistan, the great majority of which has been 

channeled through private contractors. Now we know from experience in Bosnia in the 1990’s and more recently in Iraq that a reduction in troop levels does not mean a drop in contractor activity. 

In fact, sometimes it has been an increase. In fact, there has 

been an increased reliance on contractors to fill some of the support 

and logistical roles once performed by the military in those two instances. 

Eventually, however, the contractor presence will also decrease 

as we move our support from large scale off-budget spending to 

more direct on-budget aid to the Afghan government directly. And 

this is why, again, our reconstruction strategy must focus now 

more than ever on ensuring that Afghans are prepared to sustain 

what we have helped to build. 

This means we must consider not only, for example, how many 

additional schools and health clinics we construct, but also whether 

Afghanistan will have teachers and medical professionals to sustain those institutions. It means we have to consider not only the 

megawatt output of a new power plant, but whether Afghans have 

the resources and expertise to manage the long-term operation and 

maintenance of those power plants. 

On a related note, as we encourage more contracting with local 

Afghan firms under the Afghan First Policy, we must consider seriously revamping the process for vetting contractors to ensure that 

they do not pose security risks. Reconstruction is a critical component of our counterinsurgency strategy and reconstruction dollars 

must never be diverted to support terrorists or insurgent elements, 

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6 

and that is one of the concerns that I have as we go through this 

Afghan First Policy. 

We should have no illusions that Afghanistan will immediately 

be prepared to stand alone, unsupported by friends and allies when 

the large scale U.S. military does conclude. According to a World 

Bank estimate, as much as 97 percent of Afghanistan’s gross domestic product (GDP) is currently derived from spending related to 

international military and donor community presence. 

Think about that. Ninety-seven percent of their GDP. That reliance will not simply disappear with the drawdown of troops. But 

our reconstruction efforts must be directed to empowering Afghans 

to regain responsibility and control over their own future. So we 

have plenty of challenges and I look forward to the hearing today, 

and specifically, the discussion, Madam Chairman, about reconstruction contracts, lessons we have learned and some ongoing 

problems. Thank you. 

Senator MCCASKILL. Thank you, Senator Portman. 

Let me introduce—if we could have both of our witnesses, Mr. 

Hakki. 

Mr. HAKKI. Hakki. 

Senator MCCASKILL. Hakki. Yes. Would you mind taking a seat? 

We are ready to begin. Did I pronounce it correctly? Is it Hakki? 

Mr. HAKKI. Hakki. 

Senator MCCASKILL. Hakki. That will be easy for me to remember. Hakki. 

Let me introduce the two witnesses. Larry Walker is the President of the Louis Berger Group, an international consulting company which holds large contracts with USAID in Afghanistan. In 

that capacity, Mr. Walker is responsible for providing strategic direction for the firm and ensuring the company has adequate resources and support for the successful completion of its programs. 

He also oversees the development of strategic operating plans for 

each business unit, and oversees the implementation of companywide initiatives. Thank you very much for being here, Mr. Walker. 

Mr. Hakki is currently the Chief Executive Officer (CEO) of 

Contrack International, Inc., which holds millions of dollars of contracts with the Defense Department in Afghanistan. Since joining 

Contrack in 1994, Mr. Hakki has been responsible for overseeing 

operations at the U.S. headquarters office. 

His responsibilities include oversight of U.S. material procurement, engineering review and quality control, shipping logistics 

and monitoring the staff of engineers and administrative personnel. 

Mr. Hakki holds a Master’s in structural engineering from Penn 

State and has been in the construction business for nearly 30 

years. 

I look forward to both of you coming today. I am glad you are 

both here and I look forward to your testimony. It is the custom 

of the Subcommittee to swear in all witnesses that appear before 

us, so if you do not mind, I would like you to stand and raise your 

right hands. 

Do you swear the testimony you will give before the Subcommittee will be the truth, the whole truth, and nothing but the 

truth, so help you, God? 

Mr. WALKER. I do. 

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7 

1The prepared statement of Mr. Walker appears in the appendix on page 53. 

2The picture referenced by Mr. Walker appears in the appendix on page 58. 

Mr. HAKKI. I do. 

Senator MCCASKILL. Thank you both. Mr. Walker. 

TESTIMONY OF LARRY D. WALKER,1 PRESIDENT, THE LOUIS 

BERGER GROUP, INC. 

Mr. WALKER. Chairman McCaskill, Ranking Member Portman, 

Members of the Subcommittee, I am Larry Walker, President of the 

Louis Berger Group (LBG). I appreciate the opportunity to provide 

our firm’s perspectives on the Gardez-Khost Highway project and 

our observations regarding reconstruction projects in Afghanistan. 

The Louis Berger Group is an international consulting firm of 

approximately 3,000 employees worldwide. We provide diverse, 

multi-disciplinary expertise including engineering, program and 

construction management, and economic development services. 

Many of our projects are carried out in some of the most fragile and 

challenging regions of the world. 

LBG first began working in Afghanistan in the 1970’s, and in December 2001, the company was the first engineering firm to enter 

Afghanistan after the September 11th attacks. Our work in Afghanistan has consisted mainly of reconstructing and rehabilitating 

Afghanistan’s physical infrastructure. 

We have successfully reconstructed more than 2,000 kilometers 

of paved roads, provided nearly 40,000 jobs to Afghans, and trained 

thousands more. LBG’s USAID-funded projects have irrigated more 

than 90,000 acres of land and constructed more than 90 schools 

and clinics to seismic 4 standards. 

The improved road network has dramatically decreased transit 

times, which has spurred economic development along the road corridors and improved access to education and health care. I have 

traveled these roads myself and I can truly say that the work has 

improved the quality of life in Afghanistan. 

The Gardez-Khost Highway is a critical commercial link between 

Pakistan and Afghanistan. The road provides a reliable transportation route from the border province of Khost to the capital city 

of Kabul providing improved access to government, trade, health 

care, and education. 

I want to say a few words about the circumstances surrounding 

the reconstruction of this road. As the picture2 accompanying my 

written statement shows, the topographical and geological features 

of this area where our reconstruction work has occurred is some of 

the most challenging we have faced in Afghanistan. 

The degraded security environment has made this the most dangerous project our company has attempted. On this project alone, 

we have suffered 21 killed, 51 injured, and 4 missing. Security as 

a percentage of the overall project cost is around 30 percent. To 

compare, in other parts of Afghanistan, security costs average oftentimes 8 to 10 percent of overall project cost. 

On the Gardez-Khost road alone, our project has experienced 147 

direct attacks, 108 IEDs, and 40 mine and other ordnance explosions. My point is that the traditional metrics by which the government measures the efficacy of projects and contract performance do 

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not paint the full picture. The lack of existing infrastructure or 

technical capacity, the inexperience of Afghan companies, the need 

for capacity building, and the defacto war zone all work against 

measuring success just against scope, schedule, and budget. 

Sustainability is critical to ensuring the long-term benefits of 

construction projects for the Afghan people and to protecting the 

significant investment made by the American taxpayer and other 

donors. Even before the Afghan-First policy existed, the Louis 

Berger Group made a significant effort to hire locally and incorporate sustainability concerns into the training we provide our subcontractors and their employees and we continue to do so. 

This approach has been at the heart of LBG’s work in the developing world for more than 40 years. In the long run, the ultimate 

sustainability of many projects in Afghanistan will turn on the 

ability of the Afghan economy to generate enough revenue to provide the workers and materials that will be needed in order to 

maintain and sustain projects we and other companies have completed. 

The security environment increases the importance of communications between the contractor and the government. We at LBG 

have worked hard to communicate with the contracting officers, 

technical staff, as well as the U.S. military to properly address security-related issues as they arise. 

The Louis Berger Group is honored to support USAID and other 

clients in the critical efforts to improve Afghanistan’s physical, social, and economic infrastructure. We have met with the Commission on Wartime Contracting on four occasions to discuss reconstruction, and most recently, to discuss the recommendations found 

in their recent report. 

We support several of the Commission’s recommendations including integrating contract support into operational plans, expanding 

and improving the qualifications and experience level of government acquisition personnel, expanding competition requirements, 

and requiring improved contract administration and oversight of 

contingency contracts. 

LBG believes these would all be constructive improvements in 

the contracting process. We applaud the efforts of the Commission 

and the Subcommittee to improve the manner in which the U.S. 

awards and oversees its contracts in overseas conflict environments, and its emphasis on sustainability of our reconstruction programs. 

At the Louis Berger Group we strive to deliver quality construction in a timely fashion and within the funding parameters for 

each project. The company and our employees do this work because 

we have seen the tangible improvements in the lives of the Afghan 

people that result from our work. 

Thank you. 

Senator MCCASKILL. Thank you, Mr. Walker. Mr. Hakki. 

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1The prepared statement of Mr. Hakki appears in the appendix on page 59. 

TESTIMONY OF WAHID HAKKI,1 CHIEF EXECUTIVE OFFICER, 

CONTRACK INTERNATIONAL, INC. 

Mr. HAKKI. Chairman McCaskill—— 

Mr. HAKKI. OK. Chairman McCaskill, Ranking Member 

Portman, distinguished Members of this Subcommittee. On behalf 

of Contrack International, I thank the Subcommittee for the invitation to share some of our experiences and lessons learned as part 

of the reconstruction efforts in Afghanistan over the past 9 years. 

We share your interest in examining how the government can 

bring greater efficiency, transparency, and accountability to the 

construction contracting process. We believe these goals can help 

everyone deliver projects that are on schedule, within budget, and 

sustainable. 

Since 1985, Contrack has operated as a privately owned U.S. corporation headquartered in McLean, Virginia. I joined the company 

in 1994 as Executive Vice President and was appointed CEO in December 2010. 

Contrack has offices in Egypt, Qatar, Bahrain, and Afghanistan. 

We provide engineering, procurement and construction services, as 

well as facilities operations and maintenance (O&M). Our focus primarily is on military, institutional, and infrastructure projects 

throughout Northern Africa, the Middle East, and Central Asia. Over the past 9 years, Contrack has completed more than $1.5 

billion worth of fast track design-build projects in Afghanistan for 

the U.S. Army Corps of Engineers (USACE) and the Air Force Center for Engineering and the Environment (AFCEE). Working as a 

prime contractor, we have constructed ANA Brigade camps, airfields, entry control points, ammunition supply points, bulk fuel 

storage and supply systems, forward operating bases, and other facilities. 

We were also awarded a contract for the permanent operations 

and maintenance services required to perform O&M work in numerous ANA and ANP sites throughout Afghanistan. Contrack’s 

business model in Afghanistan is somewhat different than most 

contractors in that we self-perform the majority of our work, rather 

than acting purely as a construction manager of major subcontractors. 

Contrack has been a vital partner with the Corps of Engineers 

(COE) in accomplishing the AED’s mission statement to provide 

sustainable development projects for the Afghan people that employ the populace, build skilled human capital, and promote the future stability of Afghanistan. 

In order to utilize the local labor force, the majority of Afghans 

must be trained in a skill. To accomplish this task Contrack set up 

a training center to train and educate the Afghans on a variety of 

construction trades. To date, we have graduated more than 3,000 

students, most of whom are still employed by Contrack. 

As a prime contractor, we also try to foster relationships with 

local firms so they can succeed. This requires ongoing training and 

guidance concerning U.S. technical and contractual requirements 

and obligations. Under the challenges that we are still facing over 

there, we have here the contracting with foreign contractors. 

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10 

Afghan and international contractors often receive contracts 

which are more than they can handle. Many of them are also not 

familiar with U.S. contract requirements. Unfortunately, we share 

the perception in the international community that there is an uneven playing field and that foreign contractors typically are not 

subjected to the same standards as U.S. contractors. 

These include safety, ethics, bonding, and cost accounting requirements that are established both to protect workers and interests of the U.S. Government. We believe that the Corps of Engineers has begun recognizing the risks in awarding projects to foreign firms based on low price only. 

For example, the government recently awarded a MATOC contract to 14 firms, all of which are American firms. Future task orders will be competed among these 14 firms only. This promotes 

full and open competition with qualified construction contractors to 

deliver the best value for taxpayers’ dollars invested in Afghanistan. 

We appreciate the difficulties faced by the government and commend the professional manner in which so many contracting personnel perform their work in a hostile region. However, the frequent rotation of COE field staff has created a cascade of challenges to the contractor and the government. 

For example, delays in resolving contract modifications due to 

government contracting officers and related personnel causes 

delays in payment to the contractors. Similarly, high turnover of 

government personnel in the field causes delays in submission of 

the final CCASS evaluations. 

Quality at the job site is overseen by the USACE’s quality assurance (QA) representatives. COE QA representatives are experienced in other trades, but lack sufficient training to understand 

and enforce the technical requirements of the contract they are assigned to. Lack of partnering between the contractor and the COE 

is another unfortunate result of the personnel turnover. 

Contrack has participated in numerous partnering sessions with 

the COE in other regions such as Qatar, Bahrain, and Egypt. We 

believe these sessions vitally contributed to the success of the 

projects in those regions. However, in 9 years in Afghanistan, and 

after completing over 50 projects, we have had only one partnering 

session with the COE. 

High turnover of government personnel exacerbates lack of coordination between different government agencies in charge of the 

projects and their respective end users. This often causes delays to 

the project and cost overruns. Sometimes the end users’ requirements are not fully understood by the Corps. 

For example, on design-build projects, early partnering sessions 

involving the contracting agency, the contractor, and the facilities 

end user would really help parties to achieve the end users’ design 

goals. 

Transportation and logistics. The high volume of cargo creates 

delays at the base entry control points. Material and equipment 

convoys are at the mercy of the transporter. Meanwhile, border politics that can block or delay shipments of material to the project 

sites make matters even worse. 

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11 

Working with the Afghan ministries is a challenge. The Afghan 

ministries change procedures on a regular basis. Requirements for 

tax exemption documentation, approval of visas, et cetera, lack of 

stability is further compounded by a thin staff that lack the crosstraining. 

New and constantly changing Presidential Decrees further increase the uncertain risk environment. For example, the latest ban 

on private security firms will cause disruptions, delays, and safety 

problems. 

We believe that the foundation of a good project is a well-coordinated design. Such design must meet the general guidelines by the 

COE and address the end users’ needs. On a project in Bagram Air 

Base, we were tasked to design and build the main entry control 

points. 

We had our designers onsite for a meeting with the COE and the 

Force Protection staff to agree on a design that satisfied everyone’s 

requirements. This eliminated a lengthy review process and clarified the objectives of the project. All of these partnering efforts resulted in a successful project completed on time and on budget. 

I appreciate this opportunity to share our experience in Afghanistan and would be pleased to answer any of your questions. 

Senator MCCASKILL. Thank you both very much. 

Mr. Walker, I want to talk a little bit about the road. I understand where the road is located. I understand the strategic planning that went into this particular road, but I am trying to figure 

out whether or not someone along the way should have pulled the 

plug. Let us talk about the initial price tag of the road, and we are 

talking about now the highway, the Gardez-Khost Highway that 

goes down through rough territory and significant elevations and 

covered in snow in the winter and, frankly, a very challenging 

highway project under the best of circumstances. 

Clearly, very difficult under the circumstances, especially considering you are going through some significant Taliban real estate. 

The initial price was $69 million. We are now up to $176 million 

for 64 miles of highway. What went wrong in terms of the initial 

price tag for this highway? Why are we barreling toward three 

times as expensive as it originally was intended, and of that price 

tag, $43.5 million of that is security. 

So what we are seeing is that a third of the cost of building this 

is, in fact, security. Did no one have any idea that was going to be 

the case before it began? 

Mr. WALKER. When we started with the project, the incidents of 

violence were not nearly as high as they were as we got into the 

project. The original estimate of security cost as a percent of the 

contract was around the 12 percent level, as I recall. 

The challenge was, as we got into it and probably a year into it, 

the attacks really began to increase and the security situation really began to significantly deteriorate. At the time—and we have 

worked on roads throughout Afghanistan for many years. 

At the time that the project was initiated, there was no reason 

to assume that the security conditions would deteriorate the way 

they did, recognizing that the possibility always existed, we have 

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12 

tion. But no one anticipated the level of violence and the level of 

attacks that the project was going to sustain. 

Senator MCCASKILL. And who made the decision as to what the 

level of attacks would be? I mean, was that the military that decided the attacks—because it would be hard not to guess that this 

is going to be significantly different than many of the other highway projects just by sheer—the fact of where it is located. 

Everyone knows. Frankly, the reason they wanted the road in 

the first place is they wanted to clear out the hornet’s nest of 

Taliban in the area. So I am trying to figure out who I can talk 

to that misjudged the security environment by so much. 

Mr. WALKER. I am not sure it is a question of misjudgment. I can 

appreciate that perspective that it certainly might appear that way. 

The security in the country in general really began to deteriorate. 

At the same time, when looking at security in Afghanistan, it is not 

one single footprint. Clearly, the north and the west is a different 

security profile than what we have in the east and the south. 

When we began work on one road in the south, for example, 

working in the same type of conditions, other roads that we have 

worked in that area—as a matter of fact, the Kabul-Gardez road, 

which is the other extension of Gardez-Khost, we did that road. We 

did not have nearly the security situation that developed later into 

the program. 

So our historic experience was certainly at a serious level of security, but not to the extent of what we are experiencing now. 

Senator MCCASKILL. Is it typical that you would have as many 

subcontractors as you have on this project? Is this typical? 

Mr. WALKER. Yes. 

Senator MCCASKILL. So you would typically have 24 first tier 

subs and 147 second tier subs on projects that you would work? 

Mr. WALKER. The 24 first tier subs, most of those subs would be 

very small subcontracts. 

Senator MCCASKILL. Give me an example. I am trying to figure 

out, for 64 miles, you have 167 different subcontractors for 64 

miles. What in the world are all those subcontractors for? 

Mr. WALKER. You could have a small Afghan subcontractor 

whose job would be clearing ditches of debris. Another Afghan subcontractor who would build—makes new walls on the approach to 

a bridge. You would have another subcontractor who could work on 

the culverts with the primary and first tier construction firm. 

There are many small aspects to a construction project. One of 

the things that we wanted to encourage was the use of Afghans as 

much as possible, the use of Afghan firms. 

Senator MCCASKILL. How many of these subcontractors are Afghan companies? 

Mr. WALKER. Without looking at the list I cannot say, but I 

would guess it is the majority of them. 

Senator MCCASKILL. Well, we would love to get the exact number. 

Mr. WALKER. We can get you that for the record. 

Senator MCCASKILL. That would be very helpful. I am most concerned about the money that was paid on security to folks that 

there is every indication that they are the bad guys. Is this a reality that America has to accept, that in order for us to do things 

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13 

for the Afghan people, that we have to pay the people that are killing us? 

Mr. WALKER. I do not believe that is the case. Certainly on this 

road, with the security firm that we have providing security on the 

road, all of the local Afghan security providers are placed into the 

military’s biometric data system to check against the bad guy list. 

If someone were to turn up, the military, through USAID, would 

get back to us and say, We have a problem here. 

Senator MCCASKILL. Have there been any you have had to remove because of that? 

Mr. WALKER. I am not aware of any. 

Senator MCCASKILL. Mr. Arafat. 

Mr. WALKER. Mr. Arafat, his information, as I have been informed, was put into the biometric database and there was no indication that he was a person of interest. As a matter of fact, Task 

Force 2010 specifically told us that he was not on their list. 

Senator MCCASKILL. But he was fired? 

Mr. WALKER. Pardon me? 

Senator MCCASKILL. He was fired? 

Mr. WALKER. Consent to use him on the project was withdrawn, 

so his employment was terminated. 

Senator MCCASKILL. And he was getting a million a year? 

Mr. WALKER. No, ma’am. He was responsible for providing drivers and vehicles. He did not provide security, as I understand it. 

His responsibility was to provide drivers and vehicles, which he 

did. The cost of those vehicles and drivers and fuel was $40 a day 

per vehicle. We compared that against similar charges for running 

vehicles and that was consistent. The charge of those vehicles was 

a little bit over a million dollars. 

Senator MCCASKILL. OK. I have additional questions that I will 

ask in the next round, but I will now turn it over to Senator 

Portman. 

Senator PORTMAN. Thank you, Madam Chairman, and again, I 

thank the witnesses for being here today. 

Mr. Walker, I think this hearing should be forward looking, but 

I think there are some questions that should be asked and some 

assurances, I hope, can be given with regard to steps you have 

taken, not so much with regard to the road—I do have some questions about that following on the Chair’s questions, but with regard 

to some of the over-billing practices and what kind of internal audits or other controls have been put in place. 

In November of last year, my understanding is that your firm received the largest fine ever imposed on a contractor working in a 

war zone of $18.7 million in criminal penalties and $50.6 million 

in civil penalties for over-billing. 

And as part of that deferred prosecution agreement, your company admitted that from 1999 to 2007, former executives submitted 

false, fictitious, and fraudulent overhead rates for indirect costs 

and correspondingly resulted in overpayments by the government 

in excess of $10 million. Federal prosecutors charged in addition to 

that between 15 and 20. 

But what I want to ask today, and give you a chance to respond 

to is, what assurances can you give the Committee that these kinds 

of abuses will not occur in the future with taxpayer dollars? Have 

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14 

you improved internal audit controls? How frequently do you plan 

to have your billing practices reviewed by outside accounting firms? 

What safeguards have you put in place? 

Mr. WALKER. In 2006, we noticed a problem in our overhead and 

we initiated an internal review, and in June 2007, we initiated a 

refund to the U.S. Government of $4.3 million. In August 2007, the 

Justice Department (DOJ) let us know that we were under investigation and intervened with us at that point. 

Being that we had already seen that there were some problems 

in the overhead structure, we, of course, immediately pledged our 

full cooperation. We brought in an outside accounting firm to do a 

forensic analysis of what was going on in the overhead structure. 

We shared that completely with the Department of Justice. 

And what was determined was costs that were associated with 

one overhead pool were inappropriately moved to another overhead 

pool. That overhead pool was the overhead pool for U.S. Government overseas work. That was absolutely wrong. 

In looking at that situation and recognizing that we had that 

problem, we worked with the Department of Justice to, again, identify what the damages were to the U.S. Government and certainly 

volunteered our cooperation to initiate the refunds. 

The individuals who were associated with that improper practice 

are no longer with the firm. We initiated a complete restructuring. 

I took over the presidency of the firm about 21⁄2 years ago and initiated a complete restructuring of the controls and policies and procedures in the company. 

I created a much more robust Compliance and Ethics Department in the company. We put the entire company through training, 

the Accounting Department, through many, many types of training. 

We put in place scores of new controls. We brought in yet another 

outside accounting firm to test those controls. 

It is one thing to have policies and procedures; it is another thing 

to make sure that they work. So I brought in another independent 

accounting firm to test us to see how we are doing because we need 

to make sure that not only does the policy and the control exist on 

paper, but that it exists in the culture of the company. And so, we 

have been in that process. 

As part of the DPA, as you are aware, we are under a monitor 

and we share everything, of course, with that monitor, all the 

training programs, all the testing to provide assurance that the 

controls that we put in place to protect the U.S. taxpayer. 

We have shared this from day one with the Justice Department, 

with USAID, many presentations, and we have just laid everything 

open bare to make sure that we are as transparent as we can possibly be in this situation. 

Senator PORTMAN. Well, thank you. I am glad to have given you 

the opportunity to respond. Obviously what this Committee is concerned about is that there are ongoing efforts to have both internal 

and external reviews, and through the monitor and other safeguards, we want to be sure that, as I said earlier, this incredible 

expenditure of taxpayer funds is being properly spent. Given where 

we are in Afghanistan, it is all the more important. 

Let us go to the specific project, if we could, that you discussed 

with the Chair and that is the 64-mile highway that has now cost 

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15 

about $121 million. Final price tag, I am told, is expected to reach 

$176 million, or about $2.8 million per mile. Cost overruns, as I 

look at this, have now exceeded 100 percent. I do not know if that 

is accurate or not, but that is the way I read the numbers. 

In your testimony, you attribute this to the security environment. 

You have responded to the Chair’s questions about the security environment. I guess I would ask you a question, in addition to the 

security issue, can you tell us what is the cost overrun excluding, 

security costs? 

Mr. WALKER. When Senator McCaskill had mentioned $69 million, I would like to clarify it a little bit. That was our estimate of 

what we thought at the time it would cost to build that road, the 

construction cost. The bids that came in and the firm that won the 

contract, who was the low bidder, came in at, I believe it was $85 

or $86 million. 

That was really the starting point for us for the construction of 

the road, not counting security or the construction management 

over the contractor. So from our perspective, the construction starting point is about $85 or $86 million. And the total cost at that 

starting point, when you include security and the construction 

management, was about $107 million. 

The $85 or $86 million that was bid by the construction firm, the 

job will come in basically at that price. The construction costs are 

not experiencing large overruns. The primary driver of these costs 

are security. It has exceeded 30 percent. It has grown throughout 

the process. And it grew to such a point that—we are not in the 

security business and we saw that the security costs continued to 

grow as a result of the security situation. 

So last year in one of the modifications to the contract, without 

prodding by USAID, but on our own volition, we told USAID that 

we were going to forego profit on security moving forward from last 

year. And so, we were entitled to it, but we voluntarily chose to 

forego $1.4 million in profit on security because we are not interested in making profit because of that type of a situation, so we 

voluntarily decided not to. 

Senator PORTMAN. My time is running out here. 

Mr. WALKER. Yes. 

Senator PORTMAN. We will have a chance for further questions 

in a moment, but if you could provide the Subcommittee with the 

cost overrun data, that would be helpful. You just said the primary 

driver of these costs are security-related. What we would be interested in knowing is which of those costs are not security-related, 

understanding what you said about security and the fact that there 

is a change in the security environment in the country as a whole. 

But if you could give us the data on cost overruns that are not security-related? If there are none, we want to hear that. If there are 

some, we want to hear what they are and why. 

Mr. WALKER. Be happy to, Senator. 

Senator PORTMAN. And there is, as I understand it, because of 

the basis of the contract being on a cost-plus basis, I assume there 

would be a profit involved. So we want to hear what those cost 

overruns are. Thank you, sir. 

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Senator MCCASKILL. Let us just get an overview here. Approximately how many different contracts does your company have in 

Afghanistan, Mr. Walker? 

Mr. WALKER. The largest one is the IRP IQC contract that we 

hold in joint venture with Black & Vetch. 

Senator MCCASKILL. Which is for all the highways, all the roads? 

Mr. WALKER. Not all the roads. The roads are being executed 

under different contract mechanisms, but our responsibility has 

been roads. So under the IRP contract, road task orders, I believe 

we have done four roads, if I am not mistaken. 

Senator MCCASKILL. OK. And are there other types of projects 

that your companies are doing besides roads in Afghanistan? 

Mr. WALKER. We have some small contracts where we are a subcontractor to some other firms on non-infrastructure. We also have 

some—we have had a couple of small projects under the AFCAP 

contract, but they are—I do not think we have any current and we 

have had just a handful of those. 

Senator MCCASKILL. Mr. Hakki, you indicated most of the work 

you have done has been under the aegis of work with the Army 

Corps for the military as it relates to structures either supporting 

the Afghan police, the Afghan national army, or the U.S. military. 

Mr. HAKKI. Correct, ma’am. 

Senator MCCASKILL. Have you done any projects that would be 

considered civilian infrastructure projects, electrical plants, health 

centers, schools, anything of that nature? 

Mr. HAKKI. No, we have not, ma’am. 

Senator MCCASKILL. OK. Let us talk about oversight. I was 

shocked in your testimony, Mr. Hakki, when you said in 9 years 

you had one meeting with the Corps of Engineers. For both of you, 

how often do you see USAID officials, Mr. Walker, at the GardezKhost project? How often are they there? 

Mr. HAKKI. I am sorry, Senator. The meeting I was talking about 

was a partnering meeting, not normal regular meetings. We have 

regular meetings with the Corps in country on—— 

Senator MCCASKILL. Partnering like the planning meeting? 

Mr. HAKKI. Partnering planning meetings where we have top executives from both agencies, along with the end user, and they 

meet for a whole day or perhaps 2 days in a remote location and 

they discuss the strategy and the partnering for the whole project. 

Senator MCCASKILL. And sustainability, I assume? 

Mr. HAKKI. And sustainability. For that, we have only had really 

one in Afghanistan, but as far as regular meetings with the clients, 

we have had those on a regular basis. 

Senator MCCASKILL. I understand. What about oversight on your 

end, Mr. Walker? How often does USAID show up onsite? 

Mr. WALKER. In the projects that we have around the country, 

they definitely come in. One of the restrictions that USAID works 

under is the restriction for being able to move in the country. And 

I have known quite a number of USAID personnel who want to get 

out more than they are allowed to. 

They do come to the case of Gardez-Khost, USAID does come out 

to the road. They are forced to travel under very restrictive security restrictions such as movements in MRAPs, for example, but 

they do get out. They do get out to the road. 

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Senator MCCASKILL. What about the contracting officers, the 

CORs? Do you all have very much contact with CORs, either one 

of you? 

Mr. HAKKI. Yes, we do. 

Senator MCCASKILL. You do? 

Mr. HAKKI. We do, but I have to emphasize that our projects are 

a lot different than the Louis Berger projects because our projects 

are all inside the wire. 

Senator MCCASKILL. Right. 

Mr. HAKKI. They are all inside the perimeter of the base where 

most of the times, the COR’s officers are there. 

Senator MCCASKILL. Right. 

Mr. HAKKI. So it would be a lot easier for us to meet than they 

do. 

Senator MCCASKILL. Do you think the CORs are doing a better 

job in terms of contract oversight than 4 or 5 years ago? 

Mr. HAKKI. They have definitely improved over the past 9 years. 

We have definitely seen a lot of improvement in all aspects—— 

Senator MCCASKILL. That is good. 

Mr. HAKKI [continuing]. Including the government turnover of 

personnel that you just mentioned. Most of them are now on one 

year rotations, when initially in 2003, we used to see people on 60 

day, 90 day rotations. Now they are getting into one year. I think 

there is still room for improvement there. I think they can still increase that, but there is definitely an improvement. 

Senator MCCASKILL. And let us talk about bribes. I mean, I 

spent some time in Afghanistan and I am hopeful that neither one 

of you will test us here and not acknowledge that bribes have been 

an essential part of us doing business in Afghanistan, regardless 

of what we are doing. 

What can you tell the Committee about bribes and the bribes 

that have been paid at various places and levels, whether it is 

under the aegis of security or other services that are needed by 

local folks that are used to getting their piece of the pie? 

Mr. HAKKI. No, I can tell you, ma’am, we do not have any part 

of that whatsoever. We have a very strict company policy against 

bribes and we just do not participate in that. And on several occasions, it cost us delays and we had to suffer because we did not 

agree to play that game. But we really do not. 

Senator MCCASKILL. Mr. Walker. 

Mr. WALKER. We have seen no evidence of our security personnel 

providing bribes. I mean, I think the casualties that we are taking 

would indicate that is not something that we sponsor or that our 

security provider sponsors. 

Senator MCCASKILL. Well, I assume when the security costs went 

way up, the casualties began to go down. 

Mr. WALKER. No, ma’am. 

Senator MCCASKILL. The casualties have remained at the same 

level even though security has increased by a dramatic fashion? 

Mr. WALKER. We have had, for example, 2 weeks ago, two of our 

security personnel were kidnapped and taken to a local village. 

They brought the villagers out and they executed them. Whether 

that happened 2 weeks ago or whether it might happen 30 days 

from now we still have to maintain a level of security. 

H605-41331-79W7 with DISTILLER

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In ramping up the security, it is one of those unknowns. We do 

not know what we may have prevented by having more security, 

better security. But what we do with our security profile is to create a security bubble and to make that as airtight as possible so 

that the work can occur. 

But when you move on from that bubble, you still have infiltration to plant IEDs, to plant mines. When workers go home, in the 

case of the gentlemen 2 weeks ago who were kidnapped, they were 

on their way home after they had left duty when they were kidnapped and then executed. We have to maintain a level to allow 

us to get our work done. 

Around 3 to 4 weeks ago, you all are probably aware of the attack that occurred north of the road in which 36 construction workers were killed. I believe it was a PRT road. They were trying to 

use a lower level of security, as I understand it, and the result was 

they could not withstand a serious assault. 

So how much is our security footprint a deterrent from a serious 

assault like that? I do not know if we can answer that question. 

Senator MCCASKILL. Right. You cannot prove what you can prevent. 

Mr. WALKER. Yes. 

Senator MCCASKILL. Well, I do not think either one of you would 

say that bribing is not a serious issue in Afghanistan, right? I 

mean, you are not going to tell me that? 

Mr. HAKKI. No, it is definitely a serious issue. 

Senator MCCASKILL. OK. 

Mr. HAKKI. And it happens on a daily basis. 

Senator MCCASKILL. Right, everywhere. 

Mr. HAKKI. We get threatened and we get calls to give the bribe 

and if we do not, we face the consequences. Like I said, we have 

been forced to suck it up and delay material delivery, delay in normal procedures with the government simply because we are not 

playing the game. We are refusing to succumb to that. 

Senator MCCASKILL. Right. Do you think we should have built 

this road, Mr. Walker? 

Mr. WALKER. A couple of years ago, a reporter for the Wall Street 

Journal asked me if we should have built the Kabul-Kandahar 

Highway, which we had constructed. It has been under attack. All 

the bridges have been damaged. And he said, it is under such attack, was it worth building the Kabul-Kandahar Highway in the 

first place? 

And I said to him that they are attacking it because it is important and if it is important, it is worth building. I think the question 

is not should we have built it or not built it, but is there a different 

way of building it that would get it done quicker or lower the casualty count or lower the security profile? 

Again, when we started the road, we were at one level and then 

it advanced. We built a road a few years back up to Tarin Kowt, 

which is in Uruzgan Province, under the REFS contract which was 

the first contract that we had, and we knew that was going to be 

bad from day one. And so, we got together with the military, I 

think it was the 864th Combat Engineer Battalion, and we embedded ourselves with them. 

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So we had a battalion around us. They actually did the groundwork—did the earthwork. They had their ’dozers out there and 

they blazed it, and we came behind doing the asphalt work. And 

we were surrounded by a battalion. There were no casualties on 

that road, and Uruzgan Province was Taliban territory from day 

one that the United States came into Afghanistan. That was 

never—— 

Senator MCCASKILL. So why don’t you do the same on this road? 

Mr. WALKER. Because when we started, no one recognized that 

it was equivalent to a Tarin-Kowt, and our experience working on 

roads in the area indicated that it was not like a Tarin-Kowt. 

Senator MCCASKILL. But once you figured out it was, why did 

you not go back to the drawing board and do what you had done 

in the previous incident? 

Mr. WALKER. Senator, I think that is a great question and my 

understanding with this hearing is getting to the lessons learned, 

and going back to my opening statement where I said we cannot 

just look at the typical metrics of scope, schedule, budget, there 

comes a time when we probably should have stepped back and 

said, We have to change the scope because we need to get the road 

done, but maybe there is a different way of getting that road done. 

What ended up happening is we all—we went into a reactive 

mode. So we have a security situation, we have to increase the security footprint to prevent that particular situation from happening 

again where we have another incident. 

So I think from the lessons learned, that we have to recognize 

how the security environment can change relatively quickly in a 

contingency environment like Afghanistan. 

Senator MCCASKILL. Well, it is sad to me that we are just now 

talking about that lesson learned because that lesson was learned 

many times in Iraq where the security environment changes and 

billions of dollars worth of investment was blown to smithereens 

because the security environment changed. 

And I guess what I would say is that it seems this is a long time 

that we have had lessons learned, and it is so frustrating that— 

let me ask this last question because my time is up. Who is the 

person that you would see, Mr. Walker, that could have, in this 

whole enterprise of building this highway, who is the person that 

should be held accountable for not changing the way the highway 

was being built in light of the security environment changing? 

Not within your company, but within the government part of 

this, the military or the State Department. Who is the person that 

should have said, We have to go back and do this differently? 

Mr. WALKER. I do not know if there is any one person, but I do 

know that it is really important that we make sure that our communication between the military, between our client, with ourselves, is always at its best. 

Senator MCCASKILL. Who can I blame? 

Mr. WALKER. Who can you blame? 

Senator MCCASKILL. Yes. Who can I blame that we did not 

change the way we were doing it sooner? Who could the American 

people look to hold accountable that we have poured tens upon millions of dollars into security not really sure where all that money 

H605-41331-79W7 with DISTILLER

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has ended up? Who is it that I should ask to come in front of this 

Committee to talk to about it? 

Mr. WALKER. I am reasonably confident that we have maintained 

controls over the money that is going to security. 

Senator MCCASKILL. OK. I should not have added that. I am 

wanting to know, who is the person—and if there is not a person, 

that is the problem. Who is the person that I should ask to come 

in front of this Committee and explain that they were monitoring 

this expenditure of American tax dollars, that they saw it getting 

out of control, and they said, ‘‘Stop, we need to have a meeting, we 

need to figure out a different way to do this, we are going to put 

way too much money into this project? ’’ Who is that person? 

Mr. WALKER. And I guess I would have to say there is not one 

person who could be held to that standard. I think it is incumbent 

on all of us to sit down and look, is there a different way? 

Senator MCCASKILL. You know what happens with all of us? 

That means none of us because we do not know who we can hold 

accountable and we have to figure that part out. Somebody has to 

be held accountable. There has to be somebody in the whole organization that has primary responsibility and accountability for these 

projects if they are not sustained and they ended up costing way 

more than they should have cost and not achieving the objectives 

of the original project. Thank you very much. Senator Portman. 

Senator PORTMAN. Thank you, Madam Chairman. Three quick 

questions and I would appreciate it if we could try to go through 

these quickly because there is another panel right behind you, I 

know, that is already here with us. 

Again to Mr. Walker, giving you chance to respond, you talked 

about the highway that is under discussion here today, the GardezKhost Highway, and we have talked about the security situation 

and the cost overruns. 

But let me give you a chance to respond to a report. This comes 

from the New York Times back in May. It is a quote, Despite the 

expense, a stretch of the highway completed just 6 months ago is 

already falling apart and remains treacherous, end quote. 

One, do you agree that parts of the highway that you have already constructed is deteriorating, and if so, is your firm paying for 

the repairs to that stretch of road, or is USAID and the taxpayer 

picking up the tab? 

Mr. WALKER. First, I would absolutely disagree with that reporter’s assessment. The reporter was referring to one particular crack 

that was on the road. If you have the photograph that I included 

with the opening statement—and if you do not have it with you, 

you could look at it later—on the right-hand side of that photograph, you will see where that crack is. 

You will also see a fault line that runs down the mountain and 

the crack was a result not of workmanship. It was the result of a 

fault. It is there, the road goes over that fault, and whether it is 

Colorado where I used to live, whether it is West Virginia, whether 

it is Afghanistan, mountains move. 

It was not a quality issue. It was not an issue of workmanship. 

It was an issue of that fault moving. I have spoken—we have had 

a senior geotechnical engineer who has been out there taking a 

look at it. It goes over a fault. 

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21 

Senator PORTMAN. Who is going to pay for the repair? 

Mr. WALKER. In the case of it going over a fault, that is a maintenance repair. Where there have been issues of quality, as there 

is also some issue of quality, we have had the contractor pay for 

that when it is their responsibility. But when a mountain moves, 

it is not the responsibility of the contractor. It is a maintenance 

function. 

Senator PORTMAN. To both Mr. Walker—and Mr. Hakki, we are 

not going to leave you out totally here. After all, you got your engineering degree from Ohio University. 

Mr. HAKKI. Yes. I was hoping you would mention that, Senator. 

Senator PORTMAN. Yes. We are proud of that. Let us talk briefly 

about Afghan First. As I said in my opening statement, this is a 

policy now of the Administration I supported. Hire Afghans first, 

buy Afghan products, build Afghan capacity. You addressed this a 

little bit in your opening statement with regard to the 3,000 students you say have graduated from a training course, and you said 

you have local firms engaged in some retraining efforts. 

I would ask you both, how do we get Afghans engaged in the sustainability I talked about in my opening statement? This road, the 

next time there is a crack and you all are gone and we begin our 

withdrawal, who is going to fix it? Can they afford it? Do they have 

the technological capacity to do it? 

I just would like to hear from, first, Mr. Hakki quickly. What are 

you doing exactly to ensure that there will be this ongoing support 

by retraining, by developing this expertise? What are the challenges you see by this stated policy, the Afghan First Policy, and 

do you see any unintended consequences of it? And I think Mr. 

Walker alluded to some of those earlier. But if you could respond 

to that, Mr. Hakki? 

Mr. HAKKI. Yes, Senator Portman. The Afghan First program is 

really not something that we are very familiar with. That is very 

limited to Afghan companies. We know it is there, we know it has 

been fairly successful, but I really cannot comment on that because 

we have not really participated in that. 

Senator PORTMAN. But the policy is to have contractors like you 

hire Afghans. 

Mr. HAKKI. I think the Afghan First program is limited to Afghan companies, if I am not mistaken. But that does not mean that 

we are excluding the Afghans from our projects. Like I said, we 

hire a lot of Afghans on our projects, we train them. We also engage with the local Afghan subcontractors. 

Senator PORTMAN. But you do it just because you think it is a 

good idea, not because there is any direction in terms of a policy 

related to your contracts? 

Mr. HAKKI. Correct. There is a requirement in our contract that 

encourages the engagement of the local labor and local companies, 

but it is really not a requirement. We have taken that way over. 

Senator PORTMAN. You would not have to do any hiring of Afghan subs. 

Mr. HAKKI. Contractually speaking, no. 

Senator PORTMAN. Interesting. 

Mr. HAKKI. But we do that. 

Senator PORTMAN. In terms of policy—— 

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22 

1The certificate mentioned by Mr. Hakki appears in the appendix on page 151. 

Mr. HAKKI. But we do that and it has been very successful, and 

the training center that we established really was completely out 

of pocket. There was no government funding associated with the 

training center that we developed. It was completely out of pocket 

and we thought it was a great idea because it really addresses Senator McCaskill’s concern with sustainability. The best way to sustain these projects after we all leave Afghanistan would be the 

training and the education. 

The way we really did it is very simple. We hired these students, 

believe it or not. We had to pay them like a daily allowance. We 

had to transport them and we had to give them actually like food 

while they are there. 

But it is really peanuts. I mean, the cost of all that was very little compared to the overall reconstruction process. And in 2 to 3 

weeks, we would graduate them with a simple—maybe I can introduce this as part of the record if it is possible. 

But it is a simple certificate,1 really, that states that this individual has been trained for about 2 to 3 weeks on a specific skill, 

and it really does not cost much, but it means the world to this individual because it provides him with the security and a skill and 

with a job that he can use long after we leave. So that is why it 

has been really successful, this whole program for us. 

Senator PORTMAN. I look forward to talking to the government 

panel afterwards. There must be some disconnect here between the 

work you have done, which it sounds like successful in terms of 

moving toward not just using Afghan subcontractors and labor, but 

also training them for the future, and what my understanding was, 

which is that should not be something that is discretionary, but 

rather, part of a policy. So we will talk more to the government 

panel about that. 

Mr. Walker, other thoughts? 

Mr. WALKER. Yes. Under USAID’s auspices, we have a major and 

significant program of sustainability underway for roads. Currently, we have basically an Afghan-led program where 1,500 kilometers of road under active maintenance, we have been developing 

the capability of the Afghan firms, the Afghan employees for a 

number of years now. And again, it is 1,500 kilometers under 

maintenance. 

Our employees, our Afghan employees, we have moved up the 

ranks so that the deputy task order manager is a local Afghan engineer, Engineer Wali. He could take that program over probably 

in another 6 months, maybe a year. 

The important point about that is sustainability also means 

funding, and we have worked with the Afghan Government, with 

the Ministry of Public Works and the Ministry of Finance, to establish the framework for a road authority, as well as a road fund. 

The Minister of Finance has indicated that he feels it is very important in that roads can be funded, maintenance of roads can be 

funded through a fuel tax or something along those lines. 

This initiative is now on President Karzai’s desk on the decision 

on whether or not the authority goes under Public Works or whether it is an independent authority. But I think it is an example of 

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23 

planning for things, as we have discussed here earlier, having some 

foresight into, will these roads be able to be maintained? And I believe the answer is yes. 

The crack that we talked about from the fault is being repaired 

by Afghans under that maintenance task order. So I think it is a 

real example of success in looking at sustainability and protecting 

the investment that the United States has made for roads. 

Senator PORTMAN. OK. Madam Chairman, if I could ask one 

more quick question? 

Senator MCCASKILL. Sure. 

Senator PORTMAN. And this is one that I think is important to 

get on the record. It has to do with, in a sense, what the Chair 

asked earlier about which was these multiple subcontractors, and 

GAO has raised concerns about this, what they call the excessive 

use of multiple tiers of subcontractors. They talk about concerns 

over project management, over vetting, over cost control. 

I am going to focus on one area and that is what kind of contract. 

It seems to me we are creating the wrong economic incentives 

when some of these multi-million dollar contracts are structured as 

cost-plus contracts. And in that case, prime contractors actually 

earn more when their subcontractors spend more. So you all would 

be earning more as they spend more, rather than creating an incentive for efficiency. 

Rather than encouraging subcontractors who, for example, economize on the material cost or delivery cost, prime contractors would 

actually profit from that waste at any level. So my question to you 

is, do you think we ought to change it? Do you think we ought to 

use fixed-cost contracts more widely, and why would that not be 

feasible in some of these reconstruction efforts? And if so, what 

kind of projects would those work best on? And if you think that 

we should not move to fixed-cost contracts, why not? 

Mr. HAKKI. Senator Portman, 99 percent of our contracts are 

fixed price and we really have little subcontractors on them, because like I said, we always tend to self-perform the majority of the 

work. And I think out of 50 projects we have done in Afghanistan, 

only one has been cost-plus. All the others have been fixed price 

competitively bid with very little amount of subcontractors. 

Senator PORTMAN. Fixed price for your subcontracts—— 

Mr. HAKKI. No, fixed price for us. 

Senator PORTMAN [continuing]. Or for your contracts? 

Mr. HAKKI. It is a fixed price for us. 

Senator PORTMAN. And outside the wire, is that true, outside the 

compounds? 

Mr. WALKER. Working outside the wire, it is extraordinarily difficult to do a fixed-price contract. There are just so many unknowns 

when you are dealing with mine fields on either side of a road that 

you are working on. 

What we have done is we have tried to blend pieces of fixed-price 

in with cost-plus, and to that end what we have done is we have 

created a contract modality where we have fixed unit prices so that 

the only thing that would vary would be the quantities. An example would be on the Gardez-Khost road, it cost $4.40 a cubic meter 

for dirt for excavation. That holds, and if it costs more than that, 

that unit price does not change. 

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What changes are the quantities and the quantities are monitored every day, every dump truck to make sure that however 

many cubic meters are pulled out of a particular section are, in 

fact, accounted for. So we have tried as best we can to blend both 

aspects of fixed-price as well as cost-plus. 

Senator PORTMAN. So is there more opportunity for fixed-price 

contracting at the subcontractor level? 

Mr. WALKER. If it is a smaller contract that is defined—and that 

is really the key—if you can define what the work is, then it is certainly possible. 

Senator PORTMAN. Thank you, Madam Chairman. One final 

thing I want to say and that is, just as we are concerned about the 

safety and security of our troops, we are for your employees and 

your subcontractors and we wish them well. 

Mr. WALKER. Thank you. 

Senator PORTMAN. Thank you. 

Mr. HAKKI. Thank you. 

Senator MCCASKILL. Thank you both for being here. We really 

appreciate it and we will followup if we have any additional questions. 

Mr. WALKER. Thank you. 

Mr. HAKKI. Thank you, Senator. 

Senator MCCASKILL. And I want to second Senator Portman. 

While our job is to oversee the way money has been spent on all 

of these various contracting initiatives in Afghanistan and Iraq, 

make no mistake about it. The people who have worked on many 

of these projects are in as much danger as many of our military, 

and we certainly wish them well and certainly mourn the loss of 

people who work on reconstruction projects for our government, as 

much as we mourn the loss of our soldiers who lose life and limb 

in theater. So we wanted to pass that along to both of you. Thank 

you for being here. 

Mr. WALKER. Thank you. 

Mr. HAKKI. Thank you, Senator. 

Senator MCCASKILL. I will go ahead and introduce our next 

panel. Our first witness will be William Solis who is the Director, 

Defense Capabilities and Management Team at GAO. In that capacity, Mr. Solis is responsible for a wide range of program audits 

and evaluations, focusing on Army, Navy, Air Force, Marine Corps, 

and Defense Logistic Agency programs. 

His portfolio of work covers issues including operational contract 

support, operational energy, urgent needs, force protection for 

ground forces, in-theater supply chain management, maintenance, 

transportation, sustainment, and equipment reset. I understand 

that the schedule change for this hearing was very difficult for you 

and I want to thank you especially for joining us today. 

David Sedney has served as Deputy Assistant Secretary of Defense for Afghanistan, Pakistan, and Central Asia since 2009. From 

2007 to 2009, Mr. Sedney was the Deputy Assistant Secretary of 

Defense for East Asia. 

Prior to joining the Defense Department, Mr. Sedney was a career diplomat with the State Department where he held a position 

on the National Security Council and was the Deputy Chief of Mission in Afghanistan as well as several other countries. Mr. Sedney 

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1The prepared statement of Mr. Solis appears in the appendix on page 67. 

previously testified before the Subcommittee at the April 2010 

hearing on the Afghan National Police Training. 

Kim Denver is the newly appointed Deputy Assistant Secretary 

of the Army for Procurement. In that capacity, Mr. Denver manages the Army’s procurement mission, including the development 

and dissemination of policies, processes, and contracting business 

systems. He directs the evaluation measurement and continuous 

improvement actions for over 270 Army contracting offices worldwide. 

As the functional career representative for contracting, Mr. Denver oversees the recruitment, training, certification, and professional development of the Army’s contracting workforce. He was 

previously the Director of Contracting for the U.S. Army Corps of 

Engineers National Contracting Organization. 

J. Alexander Thier has been the Assistant of the Administrator 

and Director of the Office of Afghanistan and Pakistan Affairs for 

the U.S. Agency for International Development since June 2010. 

Prior to joining USAID, Mr. Thier served as Director for Afghanistan and Pakistan at the U.S. Institute of Peace, and Chair of the 

Institute’s Afghanistan and Pakistan working groups. 

Once again, as is the custom of the Committee, if you would 

stand so I can administer an oath? 

Do you swear that the testimony you will give before the Subcommittee will be the truth, the whole truth, and nothing but the 

truth, so help you, God? 

Mr. SOLIS. I do. 

Mr. SEDNEY. I do. 

Mr. DENVER. I do. 

Mr. THIER. I do. 

Senator MCCASKILL. Thank you all for being here and we will 

begin with Mr. Solis. 

TESTIMONY OF WILLIAM M. SOLIS,1 DIRECTOR, DEFENSE CAPABILITIES AND MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. SOLIS. Good morning, Madam Chairman, Ranking Member 

Portman. I appreciate the opportunity to be here to discuss DOD 

contract oversight in Afghanistan and the vetting of non-U.S. vendors by DOD, AID, and State. Collectively, DOD, AID, and State 

have obligated billions of dollars for contractor-provided services 

and goods in Afghanistan. 

Given the magnitude of these obligations, the importance of contract oversight cannot be overstated. To this end, we have made 

numerous recommendations aimed at improving contract management and oversight. My statement today will focus on two areas. 

First, the extent that DOD’s contracting officer representatives are 

prepared to conduct their oversight and management responsibilities in Afghanistan, and the extent that DOD, AID, and State vet 

non-U.S. vendors in Afghanistan for ties to terrorist or criminal activities. 

With regard to contractor officer representatives they act as the 

eyes and ears of the contractor officer and thus serve a critical role 

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26 

in providing contract oversight. To its credit, DOD has taken actions to better prepare CORs to conduct contract oversight and 

management in Afghanistan. However, CORs are not fully prepared for their roles to provide adequate oversight there. 

To improve the capability of CORs to provide contract management and oversight contingencies, DOD has developed a new contingency focus COR training course, issued new guidance, and developed a COR certification program. Nonetheless, gaps in training 

and technical capabilities exist. 

For example, according to the DOD personnel in Afghanistan, the 

required training does not provide CORs with enough specificity 

about contracting in Afghanistan such as information about Afghan 

First program, which encourages the increase in local goods and 

services or working with private security contractors. 

Also, whether a COR has relevant technical expertise is not always considered prior to assigning an individual to oversee a contract, even though CORs have a significant role in determining if 

products or services provided by the contractor fulfill the contract’s 

technical requirements. 

According to officials, some CORs appointed to oversee construction contracts have lacked the necessary engineering or construction experience, in some cases resulting in newly constructed buildings that were to be used by U.S. or Afghan troops having to be 

repaired or rebuilt. 

According to CORs and commanders in Afghanistan, poor performance on construction contracts has resulted in money being 

wasted, substandard facilities, and an increased risk to bases. For 

example, contracting officials from a regional contracting center 

stated that construction of guard towers at a particular forward operating base was so poor that they were unsafe to occupy. 

In addition to oversight concerns related to CORs, we recently reported on the extent that DOD, State, and AID have processes in 

place for vetting non-U.S. firms in Afghanistan for ties to terrorists 

or criminal activity. We reported that while DOD began to vet nonU.S. firms in August 2010, there are several gaps in its process. 

For example, vendors with contracts below $100,000 are not routinely vetted. In fiscal year (FY) 2010, around three-quarters of 

those contracts with non-U.S. vendors were below the $100,000 

level. Subcontractors are also not routinely vetted. Command officials stated that the central command (CENTCOM) uses other risk 

factors to prioritize vendors to vet such as contracts performed in 

Taliban strongholds, but these factors have not been documented. 

While officials stated that the vetting cell was created to vet vendors prior to award, CENTCOM is largely vetting vendors with existing contracts, which means it is likely there are a large number 

of new vendors that have not been vetted prior to award and may 

not be vetted in the future. 

Also, the vetting effort now includes some Army Corps of Engineer vendors. However, the vetting cell has not been staffed to accommodate this workload. So it is uncertain how existing resources 

will be able to vet vendors in a timely manner. 

In January 2011, AID created a process intended to vet non-U.S. 

implementing partners in Afghanistan. However, this process may 

face similar limitations as CENTCOM’s. According to AID officials, 

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1The prepared statement of Mr. Sedney appears in the appendix on page 90. 

this decision was based on urgent need to mitigate the risk of AID 

funding being diverted to insurgent groups. 

While AID’s process is in the early stages, it proposes to vet nonU.S. implementing partners in at least the first tier subcontractors 

with contracts valued at $150,000 or more. AID officials said they 

are considering changing the dollar threshold or vetting of other 

potential assistance recipients based on risk. However, the available documentation does not include other risk factors. 

As of March 2011, State had not developed a process to vet contractor firms in Afghanistan. Since 2008, State has required a terrorist financing risk assessment to be completed of any new program or activity prior to a request or obligation of funding. However, it does not use the same information that CENTCOM or AID 

use in their vetting cells. Additionally, its use of Afghan vendors 

may increase under Afghan First Policy. 

In closing, the Secretary of Defense has recently called for a 

change in the Department’s culture related to operational contract 

support and directed the Joint Staff to identify resources and 

changes in doctrine and policy necessary to improve it. 

We echo his call and believe that these changes should include 

an examination of how DOD manages and provides oversight of 

contracts and contractors in deployed locations. This concludes my 

statement. I will be happy to answer any questions. 

Senator MCCASKILL. Thank you, Mr. Solis. Mr. Sedney. 

TESTIMONY OF DAVID S. SEDNEY,1 DEPUTY ASSISTANT SECRETARY OF DEFENSE FOR AFGHANISTAN, PAKISTAN, AND 

CENTRAL ASIA, U.S. DEPARTMENT OF DEFENSE 

Mr. SEDNEY. Thank you, Senator. Thank you for inviting me here 

to testify today. My office falls under the Under Secretary of Defense for Policy, so I would like to comment on the overall larger 

strategy background for the contracting activity that is being executed in Afghanistan. 

I will begin by reiterating the U.S. objectives in Afghanistan: To 

deny safe havens to al-Qaeda, and to deny the Taliban the ability 

to overthrow the Afghan Government. To support these objectives, 

U.S. and Coalition forces are working to continue to degrade the 

Taliban-led insurgency in order to provide time and space to increase the capacity of the Afghan National Security Forces and the 

Afghan Government, so that they can assume the lead for Afghanistan’s security by the end of 2014. 

As you know, based on the success of our strategy, President 

Obama recently announced that United States would begin a deliberate responsible drawdown of our surge forces. An initial drawdown of 10,000 troops will occur over the course of this year, with 

a further drawdown of the remainder of the surge by the end of the 

summer of 2012. 

Our strategy in Afghanistan is working. The momentum has 

shifted to the Coalition and the Afghan security forces, and together we have degraded the Taliban’s capability and achieved significant security gains, especially in the Taliban’s heartland in the 

south. 

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28 

As we look ahead, the key to our success is the presence and the 

capability of the Afghan National Security Forces and those forces 

are making progress in both size and capability. By the end of the 

summer of 2012 when the last of our surge forces are out, there 

will actually be more Afghan and Coalition forces in the fight than 

there are today. 

That is because we will have increased Afghan security forces to 

352,000 by October 2012, in addition to the 68,000 forces that we 

will have and an—and that is also augmented with forces by a 

number of our partner allies in NATO and elsewhere. 

These security gains are enabling key political initiatives to 

make progress. We have begun a transition process that will ultimately put Afghans in the lead for security nationwide by the end 

of 2014. We are beginning to see reintegration and reconciliation 

processes gain traction and are discussing a strategic partnership 

with the Afghans to signal our enduring commitment to regional 

peace and stability. 

I want to emphasize that while our progress in Afghanistan is 

substantial and our strategy is on track, significant challenges remain. The Taliban will make some strong and sometimes spectacular efforts, as they did the other day in Kabul on the attack on 

the InterContinental Hotel, in order to try and regain the momentum. However, just as that attack was defeated, those attempts 

will also be countered. 

At the same time, we find that the enemy is increasingly facing 

an Afghan population that, through experiencing the benefits of 

stability and self-governance and seeing those become clear to 

them, they are becoming part of the transition process. Afghan 

communities are providing useful lessons in security and governance, as well as a potential model for other parts of the country as 

we move forward in our strategy. 

I want to emphasize how important the role of our Coalition 

partners is in Afghanistan, 48 countries with over 47,000 troops 

today. These partner nations have made significant contributions 

and significant sacrifices. 

Madam Chairman, Senator Portman, I want to close by thanking 

you and your colleagues in the U.S. Senate for your support for our 

men and women in uniform. Thank you again for allowing me to 

appear before you today. 

Senator MCCASKILL. Mr. Denver. 

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1The prepared statement of Mr. Denver appears in the appendix on page 93. 

TESTIMONY OF KIM D. DENVER,1 DEPUTY ASSISTANT 

SECRETARY OF THE ARMY FOR PROCUREMENT, U.S. ARMY 

Mr. DENVER. Madam Chairman, Ranking Member Portman, and 

distinguished Members of the Subcommittee on Contracting Oversight, thank you for the invitation to appear today to discuss the 

lessons the U.S. Army has learned and the ongoing challenges in 

management and oversight of contracting in Afghanistan. I will 

provide brief opening remarks and request that my full written 

statement be submitted for the record. 

The U.S. Army has had boots on the ground in Afghanistan for 

nearly a decade. As we know from past military engagements, 

when our Army deploys, they depend on civilian support from contractors. Currently, more than 90,000 contractors are supporting 

our troops in Afghanistan, a ratio of just under one contractor for 

each soldier. 

The contracting force supporting our troops in Afghanistan is the 

largest contract oversight mission the United States has ever managed. We still face challenges, but the Army has made significant 

progress in improving contract management and contract oversight. 

I would like to share with you what the Army has done to change 

the contingency contracting environment, how we award and manage contracts, our oversight, and the training our non-acquisition 

personnel receive before deployment and when they arrive in theater. 

Most of the contracts issued by the CENTCOM Contracting Command are awarded competitively ensuring the best possible price 

for the U.S. Government. We accomplish this by transitioning from 

cost contracts to fixed-price contracts. In a fixed-price contract, the 

contractor is paid only the amount that was agreed upon at the 

time of award. 

Contracting officers must ensure the U.S. Government obtains 

the best value. An important element is the use of past performance information. The availability of data has been especially problematic with host nation companies as we strive to give preference 

and make awards to Afghan firms under the terms of the Afghan 

First program. 

The Contractor Performance Assessment Reporting System 

(CPARS) is effective with U.S. vendors, but we have learned it has 

limitations in theater. In Afghanistan, we also use the Joint Contingency Contracting System (JCCS) to alleviate a number of problems in resident and theater contracting from solicitation postings 

to currency conversions and tracking performance. It has proven to 

be an invaluable tool for contracting in Iraq and Afghanistan. 

Oversight of subcontractors has been a significant concern of 

Congress, the audit agencies and the contracting community. The 

Federal Funding Accountability and Transparency Act of 2006, requires prime contractors to provide extensive insight into subcontractor information. The CENTCOM Contracting Command has implemented 11 clauses dealing with subcontractor information to 

capture not just the data required by law, but additional information that will aid in vetting of contractors and subcontractors prior 

to award. 

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1The prepared statement of Mr. Thier appears in the appendix on page 103. 

Vetting host nation contractors is a key element in ensuring the 

security of the workplace for U.S. Warfighters, civilians, and contractors, as well as the security of our reconstruction efforts in Afghanistan. 

In August 2010, a vetting cell was established at CENTCOM 

headquarters in Tampa, Florida, to vet prospective non-U.S. contractor firms in Afghanistan. Non-U.S. vendor information on contract awards and options is tracked in the Joint Contingency Contracting System, along with past performance. 

After a contract award, the key to our contract oversight resides 

with the contracting officer’s representatives who are the front 

lines as responsible stewards of American taxpayers’ dollars. The 

Army strengthened our COR management and training in December 2009 with the issuance of an Army Executive Order mandating 

that deploying brigades have as many as 80 soldiers designated as 

trained CORs. 

As a result, in the past 2 years, the Army Logistics University 

trained more than 8,500 CORs, and 2,317 soldiers since October 

2010, the Expeditionary Contracting Command provided augmentation training to more than 2,300 soldiers as CORs. 

The Army recognizes that success in contingency contracting results when deployed CORs are trained and technically qualified for 

their assignments. To ensure that technically qualified personnel 

are involved in the oversight of construction contracts in Afghanistan, the Senior Contracting Official in Afghanistan (SCO–A) recently provided guidance on the appointment of Construction Inspectors (CIs) to assist the technical expertise for our construction 

CORs. 

Endemic corruption in Afghanistan remains a challenge to our 

contracting personnel. The U.S. Government has stood up several 

anti-corruption task forces in Afghanistan which have played a significant role in improving the contracting environment by reducing 

the impact of corruption on government contracting. 

Madam Chairman, Army Contracting continues to identify more 

effective ways to ensure excellence in all contracting activities, to 

provide the most value of our contracting dollars, and the most effective support to our war fighters. Thank you for your continued 

support and I look forward to answering your questions. 

Senator MCCASKILL. Thank you, Mr. Denver. Mr. Thier. 

TESTIMONY OF J. ALEXANDER THIER,1 ASSISTANT TO THE ADMINISTRATOR AND DIRECTOR, OFFICE OF AFGHANISTAN 

AND PAKISTAN AFFAIRS, U.S. AGENCY FOR INTERNATIONAL 

DEVELOPMENT 

Mr. THIER. Chairman McCaskill and Ranking Member Portman, 

my name is Alex Thier. I am the Assistant Administrator for Afghanistan and Pakistan at USAID. I began working in Afghanistan 

in 1993 and since the fall of the Taliban, I have been intensively 

engaged in implementing and assessing the U.S. effort to stabilize 

Afghanistan. 

I have repeatedly raised concerns about the corrosive effects of 

corruption and waste in Afghanistan post-2001. Indeed, these are 

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not only issues of fiscal importance, but of national security itself. 

One of the reasons I took this job, in fact, was to improve our performance and our accountability. We owe this both to the American 

and to the Afghan people. 

If the stable transition in Afghanistan will be achieved, we must 

ensure that our efforts are sustainable, durable, and realistic. With 

the support of the American people and strong bipartisan support 

in Congress, we have made some dramatic development achievements in Afghanistan over the last decade. 

For example, we have worked with the health ministry to significantly expand access to health services from 9 to 64 percent of the 

population, literally saving tens of thousands of lives. Our efforts 

to build schools and train teachers have allowed more than 7 million children to enroll in school, 35 percent of whom are girls, up 

from no girls in 2001 and fewer than 1 million boys under the 

Taliban. 

Economic growth has exceeded 10 percent growth per year on average, and GDP per capita has doubled since 2002, with 5 million 

people lifted from a state of dire poverty. Together, we are proud 

of our contribution to helping reverse Taliban momentum and 

achieving development progress under the toughest conditions. 

As we embark on the path of transition, the process by which our 

Afghan partners will truly stand on their own feet, sustainability 

is of paramount concern to us. We have worked with Afghan and 

international partners to identify a set of core foundational investments that will develop Afghan capacity, promote economic growth, 

and increase government revenue generation to support a sustainable and durable transition in Afghanistan. 

Those investments include things such as agriculture, extractive 

industries, human capacity development, and energy. For example, 

in energy, analyses shows that power availability and consumption 

are directly correlated with economic viability. Because sustainability of our investments is essential, a key component of our work 

is building Afghan capacity in the power sector and supporting 

power sector reform. 

In 2009, the United States helped to launch a Da Afghanistan 

Breshna Sherkat (DABS), a new commercialized Afghan electric 

utility. Collections have increased 30 percent in the last year alone, 

boosting revenues of that utility to $175 million. Kabul has gone 

from averaging 2 hours of electricity in 2002 to 24-hour availability 

today paid for by a commercially viable system. 

Yet, I cannot overemphasize the challenges involved in undertaking these efforts as the Afghans, the U.S., and other international partners combat a vicious insurgency and terrorist threat. 

Security concerns on our projects are paramount. In 2010, attacks 

on civilian efforts rose sevenfold. 

To succeed in this environment, we have made oversight and accountability a top priority in Afghanistan. Just weeks into this job, 

Administrator Shah and I concluded that we needed to do more to 

safeguard our investments. To ensure that proper procedures are 

in place, to help protect assistance dollars from waste, fraud, or 

otherwise being diverted from their development purpose, we developed the Accountable Assistance for Afghanistan Initiative, or A 

Cubed. 

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32 

As a result, we are enhancing the safeguards on our development 

assistance by improving our award mechanisms, increasing vetting, 

increasing financial controls, and project oversight, and these efforts are already yielding concrete results. 

In addition, over the last 2 years, we have tripled our staffing in 

Afghanistan, 60 percent of whom are located outside of Kabul, allowing us more USAID eyes on the ground. I am also proud to say 

that we have gone from three oversight staff in country in 2009 to 

71 today. Many of them are staying now for multiple year tours. 

We are under no illusions about the challenges we face in Afghanistan. Every day our staff and partners are under threat. Insecurity increases our costs and other threats require us to expend 

significant effort to safeguard taxpayer funds. When I left Kabul in 

1996 after 4 years working during the civil war there, watching the 

country enveloped in chaos, the capital was a heavily mined rubble 

heap, the Taliban were taking over, and Bin Laden was moving in. 

Despite the turmoil today, our efforts have resulted in critical 

gains. These results will enable the President to carefully draw 

down U.S. resources in Afghanistan. USAID’s entire budget in Afghanistan since 2002 is equivalent to the cost of just 6 weeks of our 

war effort. This progress that we helped to contribute to the effort 

in Afghanistan will help bring American troops home more quickly 

and ensure that they do not have to return. 

Civilian assistance has been central to these gains and will only 

increase in importance as Afghans take the lead in forging their 

own future. Thank you. 

Senator MCCASKILL. Thank you all very much for being here. 

Let us start, Mr. Sedney, with you. I was confused by your opening statement because it did not have anything to do with contracting and we are here on contracting. Obviously, you came to 

discuss contracting as it related to the Afghan National Police. And 

so, I guess my first question to you is, who is in charge at the Defense Department in terms of making the contracting decisions as 

it relates to infrastructure that is being built under the authority 

of the Defense Department and money coming from the Defense 

Department? 

Mr. SEDNEY. In terms of contracting, I would defer to—— 

Senator MCCASKILL. I need you to turn your microphone on. We 

cannot hear you. 

Mr. SEDNEY. I am sorry. In terms of actual responsibility for contracting processes within the Department of Defense, I may have 

to call on Mr. Denver who is more expert in the contracting area 

than I am. In terms of our contracting in Afghanistan, that contracting is done by C–STCA, which is the U.S. element that is in 

Afghanistan that does contracting for U.S. forces. They report to 

CENTCOM, which is then overseen eventually by the Under Secretary of Defense for Acquisition Technology and Logistics. 

Senator MCCASKILL. I am looking for who is in charge of planning. Is that the Commander of CENTCOM? So when you all decide that we are going to spend $500 million on $400 million—I 

guess that is a related question. How much of the $17 billion in the 

fiscal year request, how much of that is going to come through Defense and how much of it is going to come through State? 

H605-41331-79W7 with DISTILLER

33 

Mr. THIER. I can speak for USAID. We will get you the exact 

number, but I believe the request for USAID civilian assistance is 

around the $3 billion level. 

Senator MCCASKILL. Well, the President has asked for $17 billion 

in fiscal year for reconstruction projects and infrastructure projects 

in Afghanistan. Does anybody here know how much of that is going 

to be under the control of the Defense Department, how much is 

going to be under the control of the State Department? 

Mr. THIER. Again, I can say that about $3 billion of that—— 

Senator MCCASKILL. $3 billion. 

Mr. THIER [continuing]. For USAID and possibly an additional 

billion under the State Department for operations, civilian operations that are not under USAID, but I cannot speak to the rest. 

Senator MCCASKILL. So is the rest of that Defense Department, 

Mr. Sedney? 

Mr. SEDNEY. I am not familiar with the $17 billion figure that 

you mentioned, Senator, in terms of reconstruction projects. The 

Department of Defense budget, as I am familiar with it, has funding for operations in Afghanistan which include funding for the Afghan Security Forces fund which we are asking for about, I believe, 

$12.4 billion—I can get you the exact figure—for Afghan Security 

Forces funding. 

INFORMATION FOR THE RECORD

The President’s budget request for fiscal year 2012 for the Afghanistan Security Forces Fund is $12.8B. 

But in terms of funding for reconstruction, I am not familiar with the $17 billion figure you mentioned. 

Senator MCCASKILL. What do you think it is? What do you think 

we are going to spend next year on building projects for the Afghan 

people? 

Mr. SEDNEY. In terms of building projects for the Afghan people, 

that would the realm of the AID and the Department of State. 

Senator MCCASKILL. What about CERP? How much is CERP 

going to spend building projects for the Afghan people? 

Mr. SEDNEY. CERP funding for this year will be—CERP funding for this year will be somewhere in the neighborhood of $300 to 

$400 million. The appropriations for the last several years have not 

been fully spent. CERP, however, is not reconstruction money. 

CERP funding is Commander Emergency Response Programs. 

These are programs designed to assist commanders in the field to 

build the foundations for stability. It is not meant to replace—to be 

in the place of the long-term reconstruction funding, which is done 

by the State Department and USAID. 

Senator MCCASKILL. But it is true that CERP has morphed into 

a program where we are now doing projects like building roads and 

building buildings and doing things other than small-scale projects 

which was the original use of CERP funds, especially in Iraq, were 

for small-scale projects and now in Afghanistan, we have the Defense Department actually managing projects that are construction 

projects with CERP fund, correct? 

Mr. SEDNEY. We do have, over a number of years, particularly in 

the area of roads, CERP began to be used for roads. In the most 

recent appropriations bill, the Congress gave us authority to estabH605-41331-79W7 with DISTILLER

34 

lish the Afghan Infrastructure Fund (AIF). The purpose for that is 

to divide out those projects which would be looked at as infrastructure projects and then enable CERP to maintain its original focus 

on those small-scale projects. 

We are in the process of putting together guidance for the implementation of the Afghan Infrastructure Fund and the division of 

the CERP funds and oversight for that. I participated yesterday in 

a first meeting of a Department of Defense oversight panel which 

will be giving guidance in those areas. 

Senator MCCASKILL. Does the Defense Department have a certification process for sustainability before we spend any American 

money in Afghanistan? 

Mr. SEDNEY. Senator, I am not familiar with the details of contracting processes or certifications, but I will pass that question on 

to my colleagues who do that responsibility in that area. 

Senator MCCASKILL. Who would you pass it to? 

Mr. SEDNEY. I would first send it to the Under Secretary of Defense for Acquisition Technology and Logistics (AT&L), which supervises policy regarding contracting—— 

Senator MCCASKILL. Is this Ash Carter? 

Mr. SEDNEY. That would be his office I would be passing your request to. 

INFORMATION FOR THE RECORD

Sustainability is critical to the success of the Commander’s Emergency Response 

Program and Afghan Infrastructure Fund infrastructure projects. Recognizing this, 

the Department of Defense continues to develop and implement a number of processes to ensure that the infrastructure it builds will be sustained by the Afghan 

Government. For example, a variety of stakeholders—including the Government of 

Afghanistan, the U.S. Department of State, the U.S. Agency for International Development, international donors, and regional and local government officials and citizens—review electrical, water, and other AIF projects for sustainability. All AIF 

projects must have sustainability plans that identify Afghan responsibilities, any 

non-U.S. funding sources, and maintenance and operation requirements. 

The infrastructure projects funded by CERP also address sustainability. For those 

projects requiring sustainment—such as irrigation canals and wells—the Department of Defense coordinates with the host government and interagency partners to 

develop sustainment agreements and plans, as well as to identify sustainment funding. Specifically, for CERP projects costing more than $50,000 that require 

sustainment—like the Hezar Joft Beltway project in Helmand Province—a responsible Afghan Government official must sign a Memorandum of Agreement (MOA) 

with U.S. forces to acknowledge sustainment responsibility to budget and execute 

project operations and maintenance. In addition, U.S. and international stakeholders review CERP infrastructure projects, with the additional requirements that 

all projects costing more than $1M are reviewed by the Office of the Secretary of 

Defense (OSD) CERP Management Cell; projects costing more than $1M up to $5M 

require Commander, U.S. Central Command approval; and all projects costing $5M 

up to $20M require Commander, U.S. Central Command endorsement and Deputy 

Secretary of Defense approval. In addition, the congressional defense committees are 

notified of any CERP project with a total anticipated cost of $5M or more at least 

15 days before funds are obligated. 

Senator MCCASKILL. OK. 

Mr. SEDNEY. But any request that you have regarding contracting, I will pass to them. 

Senator MCCASKILL. OK. I am trying to figure out who is charge. 

I am trying to figure out how much money we are spending and 

who is in charge. It is ironically difficult to figure out how much 

we are spending and who is in charge. I particularly need to figure 

out who is in charge in terms of who is making the decision to go 

H605-41331-79W7 with DISTILLER

35 

forward with projects when they turn out not to be sustainable. 

And that has been more difficult than it should be. 

Let us get to where the money is going, and I will try to do this 

very briefly, and then turn it over to Senator Portman. The Special 

Inspector General for Afghan Reconstruction, the previous Special 

Inspector General—I want to caution that this is not the current 

Special Inspector General. 

The previous issued a report that indicated that four contractors, 

Contrack, Kabuljan, United Infrastructure Projects, and Red Sea 

Construction Company received over $1.8 billion in contracts in a 

2-year period between 2007 and 2009. That report, which SIGAR 

stated was based on a review of information provided by the Defense Department, has since been identified by both SIGAR and 

the Defense Department as containing inaccurate information. 

In fact, that report was so inaccurate it was off by hundreds of 

millions of dollars. OK? Then USA Spending, another database 

that reports information from Federal Procurement Data Systems 

(FPDS), the government’s main database for tracking contract information, lists $454 million in spending over the same period of 

time. 

So one report says we have spent $1.8 million on just contractors in 2 years. Another report says we spent $454 million over the 

same period for just two of these companies. Does not even have 

information on the other companies. I know, Mr. Denver, that your 

office—and I know that you are new and I am sorry that you are 

the one that has to sit there today. 

Your office is the executive agent for contracting in Afghanistan, 

which gives you oversight and authority for contracting which is 

now called Triple C, CENTCOM Triple C, which is the contracting 

command. 

That office provided the inaccurate information to SIGAR and in 

preparation for this hearing, your office provided the Subcommittee 

with information that shows that one of those contractors listed by 

SIGAR as having $691 million in contracts actually only had $5 

million in contracts. 

CCC was provided an original copy of the SIGAR report, but yet 

said nothing about these wild inaccuracies that were contained. I 

think you all can see where I am going. I do not think the public 

can have any confidence that we are accurately reporting what we 

are spending where on contracting in Afghanistan. And I would 

like to know how you can explain this wildly inaccurate information that was provided to the Special Inspector General for Afghanistan. 

Mr. DENVER. Thank you, Madam Chairman. We are currently coordinating with SIGAR to determine where those issues arose. It 

is true that inaccurate information was provided. What we are 

working with them on is a process in the future where this information that is gathered directly from the CENTCOM Contracting 

Command would be forwarded to my office so that we can also, in 

addition, pull reports to validate the information. 

What we are seeing is that we do not want to impact their ability 

to connect directly with the CENTCOM Contracting Command, but 

we want to make sure that what we do in the future, that we are 

able to double-check the information that is being provided. But 

H605-41331-79W7 with DISTILLER

36 

right now, even SIGAR has indicated that they may need to audit 

to determine why and what was the source of the inaccurate information. 

Senator MCCASKILL. Senator Portman. 

Senator PORTMAN. Thank you, Madam Chairman. I think it 

might be helpful just to put what we are talking about in perspective. 

If you could correct me if I am wrong, Mr. Sedney, but current 

troop levels in Afghanistan is just over 100,000? 

Mr. SEDNEY. Yes, Senator. 

Senator PORTMAN. And number of contractors, DOD, State, 

USAID contractors in Afghanistan about 154,000? 

Mr. SEDNEY. I am not—I cannot certify the total, but I would say 

for the Department of Defense, the average figure is about .85 contractors for each deployed troop. I think that is the ratio that we 

are operating under. So with 100,000 troops, we would expect 

about 85,000. 

Senator PORTMAN. Earlier in testimony someone said it is more 

than one contractor per troop. Mr. Solis, what are your numbers? 

Mr. SOLIS. I do not have the exact number, but it is about one 

to one or a little over one to one. 

Senator PORTMAN. So let us say roughly 100,000 troops, 150,000 

contractors. So this hearing is about the contractors. As I said earlier, the experience in Bosnia and Iraq is that as we begin a drawdown of troops, we do not begin a drawdown of contractors initially. 

Is that accurate, Mr. Solis? 

Mr. SOLIS. That is what we saw in some of our prior reviews, I 

think. 

Senator PORTMAN. So this is incredibly important that we get 

this contracting right, and one of the big concerns, obviously, that 

has been raised today is about sustainability. So as we continue to 

spend more and more taxpayer money, even relative to the military 

commitment, going forward on contracting, we are really creating 

something of value that is going to last and be able to be successful 

in moving Afghanistan to a stable government that meets the objectives that Mr. Sedney laid out earlier. 

So unsustainability. Let us talk about it for a second. There is 

a June report by the Commission on Wartime Contracting that was 

pretty pessimistic. It said, There is no indication that DOD, the Department of State, or AID are making adequate plans to ensure 

that host nations would be able to operate and maintain U.S.-funded projects on their own, nor are they effectively taking sustainability risks into account when devising new projects or programs. 

That is particularly concerning if that is accurate because having 

learned the lessons, you would think that we, on the new projects, 

would be looking at sustainability. The report goes on to say, In Afghanistan, the United States has contracted for schools and clinics 

that lack adequate personnel, supplies, and security; a large power 

plant that the host country cannot maintain or operate; roads that 

will need substantial continuing maintenance; security force training and support whose costs exceed Afghan funding capabilities. 

So I guess I would ask first, and maybe, Mr. Thier, you are the 

right person to talk about this from an AID perspective, but I 

would also like to hear from Mr. Sedney and Mr. Denver from a 

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DOD perspective. What are your agencies’ approaches to evaluating 

at least these ongoing development and reconstruction projects to 

ensure that they are sustainable? 

Are you redesigning or terminating programs that are not viewed 

as sustainable? Are you ensuring that any new commitment of U.S. 

taxpayer dollars is for an undertaking that the Afghans can carry 

on after we are gone? And how has that process been formalized? 

Mr. THIER. Thank you, Senator. USAID is intensively focused on 

this question of sustainability and it really goes in two different directions. One is, are the actual investments that we are making 

sustainable? In other words, will power projects that are being 

built, will they be maintained? Will schools be used? That is one 

aspect of sustainability. 

The second aspect of sustainability is the broader question of 

how does Afghanistan itself manage to sustain these investments 

over the longer term in terms of developing their economic growth? 

On the first part, we certify that any program that we are doing 

that has a capital investment must have a sustainability plan. In 

fact, we have intensified this just in the last few months by creating what we call a sustainability guidance, where we are assessing every single program that USAID is implementing to determine 

if it is going to be sustainable in both of these senses. 

Will the actual physical investment be maintained? And more 

broadly, is this contributing to the Afghans’ ability to sustain these 

investments in the long term? So it is something that we take very 

seriously. 

Senator PORTMAN. Let us focus in for a second on AID and 

projects. Let us talk about the Kabul power plant. I know you are 

familiar with it. The American taxpayers have paid $300 million 

for this power plant. It is a dual fuel plant. It is now rarely used, 

is my understanding, and the cost to operate it is prohibitively expensive for the Afghan government. 

There is an audit by your Inspector General recently at AID who 

found that the project is not sustainable because the Afghans cannot afford to purchase the diesel fuel necessary to power the plant 

and they cannot sustain the complex maintenance and technical expertise required to operate it. Instead, actually, the Afghans are 

negotiating with neighbors, including Uzbekistan, to get their 

power for a fraction of the cost that they would from your dual 

source, dual fuel source plant that cost 300 million bucks. 

So how did AID get that wrong, is one question that I want to 

hear from you on, but then let us talk about the next one. There 

is a 2011 AID contract to build a diesel-fueled power plant in 

Kandahar. And so, you say that you now certify that any program 

we are doing has a sustainability plan. 

The Commission has stated there, and you may disagree with 

the Commission, but this plant faces similar sustainability challenges. The financing plans have not been made for the transmission or distribution grid that would make this plant a useful 

source of energy. Are we doing it again? One, how did AID get the 

first one wrong, and second, are we once again stepping into a situation where we are putting hard-earned taxpayer dollars against a 

project that is simply not sustainable? 

H605-41331-79W7 with DISTILLER

38 

Mr. THIER. Let me address the second one first. The decision to 

invest in power in Kandahar was a decision that the U.S. Government, the military, the State Department, USAID made collectively 

in the summer given the critical nature of our campaign in 

Kandahar and our desire to shift the momentum away from the 

Taliban. 

So we made two decisions with regard to the investment into 

Kandahar power. The first decision was that a long-term source of 

power for Kandahar was not going to come online quickly enough 

in order to achieve that objective. So there was a joint decision 

with the International Security Assistance Force (ISAF) and 

USAID to invest in some short-term power generation, diesel fuel, 

which you are absolutely right is not a long-term sustainable effort, 

to turn the lights on in Kandahar. 

And we are adding 50,000 connections in Kandahar so that the 

people of Kandahar, as well as the people of Helmand, are going 

to see the positive results of this effort. 

There is, however, important sustainability components in that 

program. The first is that we are working to increase the power 

supply to that region in a sustainable fashion, both by building line 

down from the north of Afghanistan that will provide long-term 

sustainable power, as well as increasing the power supply from the 

Kajaki Dam into that area. 

So those two things together are a longer-term sustainability 

plan, together with the fact that the Afghan utility, DABS, that I 

mentioned before, is collecting money for the power it distributes 

now, and that means that over the long term, they will be responsible for actually sustaining the investment. 

That is also related to the question about Tarakhil. Today that 

plant is being run as a peaking power plant. Kabul, the capital of 

Afghanistan, was known until recently as the dark capital of Asia. 

It had the least amount of power of any capital in the world. 

Twenty percent of the Afghan population lives in Kabul. When 

the decision to build that plant was made, there was no assurance 

that this line coming down from Uzbekistan would, in fact, be 

available. And even once the plant was built, a landslide, for example, cut out that power line allowing the only reliable source of 

power, which is the Tarakhil plant, to function and to—— 

Senator PORTMAN. So was that plant constructed as a back-up 

power plant? That is what you are saying it is? 

Mr. THIER. It was constructed as a peaking power plant. 

Senator PORTMAN. It was originally intended for 300 million 

bucks to be a peaking back-up power plant? 

Mr. THIER. It was with the caveat that people were uncertain of 

whether the alternative plan, which is to bring a line down from 

Uzbekistan which has its own reliability problems as well as the 

terrain that was to traverse—— 

Senator PORTMAN. So that was the design here? Because that is 

not my understanding. 

Mr. THIER. That was, in fact, the design, but we made sure that 

the sustainability of that plant is a very high priority in three 

ways. One, that we are intensively engaged with DABS to make 

sure that they are, in fact, able to maintain the plant. 

H605-41331-79W7 with DISTILLER

39 

1 A copy of the report appears in the appendix on page 234. 

Senator PORTMAN. Could you provide us, the Committee, some 

data to back up the assertion that this was built as a back-up 

power plant for peaking only? And with regard to the sustainability, we would love to see more information on that. 

Mr. THIER. Sure. 

Senator PORTMAN. I am over my time. I guess just quickly, not 

to leave DOD out of this, with regard to the Afghan National Security Forces in terms of sustainability, again, the studies we have 

seen, including from the Commission, and you may disagree with 

the Commission. I would like to hear if you do disagree. They think 

that the investment in training and preparing the Afghan National 

Security Forces risk being wasted in the long run due to the same 

sorts of sustainability problems. In 2002 until now, we have appropriated almost $35 billion of taxpayer money to establish the security forces, and another $13 

billion, as was talked about earlier, is being added to the 2012 

budget. The Commission concluded, The prospects for the Afghan 

government’s ability to sustain these forces are meager, particularly considering that the national government’s entire domestic 

revenues are about $2 billion a year. 

So I would ask DOD, have we evaluated the sustainability of the 

support here, and if so, what has our evaluation shown? And if not, 

how can we do that? How can we improve its long-term effectiveness? Just as background again, we have committed $11.5 billion 

since 2005 to construct facilities, facilities alone, including bases, 

police stations, outposts and so on. What are the long-term maintenance costs of these facilities, and do you believe that the Afghan 

government has the financial resources ever to be able to maintain 

those facilities? 

Mr. SEDNEY. Senator, those are important questions and let me 

take them in two parts. First, however, I would like to correct the 

record. In fact, I do have the numbers. The exact numbers of Department of Defense contractors in Afghanistan is 90,800. The Department of Defense is required to submit a report, which it does, 

to the Armed Services Committee and to the Appropriations Committee. This report was dated June 21 and we will make sure you 

get copies of that report. 

INFORMATION FOR THE RECORD

A copy of the report1 to Congress on contractors, pursuant to Section 9013 of the 

Department of Defense and Full-Year Continuing Appropriations Act, 2011 (P.L. 

112–10), dated June 21, 2011 is attached. 

Senator PORTMAN. Great. 

Mr. SEDNEY. On the issues of sustainability, as I said, I will divide them in two. The first is a question of financial sustainability, 

the ability of the Afghan government to fund the security forces 

that it currently has and that it may need in the future. Currently, 

Afghanistan does not have the ability to fund the security forces 

and the U.S. Government and, to a certain extent, our international partners are funding those forces. 

Currently, the cost of those forces, we are asking for fiscal year 

12—not fiscal year 12–FY11, we have $12.4 billion, I believe, for 

H605-41331-79W7 with DISTILLER

40 

that. A certain percentage of that is for infrastructure; another is 

for training; and for the sustainment of the forces themselves. As 

you point out, this is well beyond the capacity of the Afghan government to provide for. 

However, let me go back to our national interests in Afghanistan, 

which is to ensure that Afghanistan is no longer able to be a base 

from which terrorists can mount attacks against the United States. 

Our solution for that is to drive down the insurgency through our 

military efforts and to buildup the Afghan security force to be able 

to do that. Since Afghanistan does not have the resources to do 

that, we, you, the American taxpayer, the American Congress are 

funding those security forces, again with some help from our allies. 

The size of the security forces that will be needed in the future 

to contain the Taliban is yet to be determined because we do not 

know the level to which we will be able to drive down the insurgency. We are currently building the Afghan security forces to a 

level of 352,000 for October 2012. That is based upon the level of 

insurgency that we see now and the level of forces that the United 

States and our allies will have there at that time. 

What we are aiming for is to continue to drive down the insurgency enabling us to continue to withdraw our forces and have the 

Afghans continuing to improve that. What that equilibrium level 

will be we do not know yet. 

Senator PORTMAN. Mr. Sedney, I am well over my time. 

Mr. SEDNEY. I am sorry. 

Senator PORTMAN. I apologize. I need to yield back to the Chair. 

Let me just conclude by saying, I understand the mission and, in 

many respects, what AID is doing on the ground and what DOD 

is doing on the ground, even outside of the military involvement 

with contractors, is carrying out policies that you are asked to do. 

It is under very difficult circumstances. I have been there, had 

an opportunity to visit with some of your AID colleagues, and it is 

tough work. The question is whether this policy makes sense, 

whether it is a sustainable policy, because so much of what we are 

doing and building may not be able to be maintained subsequent 

to our departure. 

These numbers are indicating that there is a huge risk. And so, 

what we are asking here is for a realistic assessment of what those 

risks are and the very important reassessment of how we look at 

these projects. If they are not going to be sustainable, why are we 

doing them? If we are building a back-up power plant for 300 million bucks that the Afghans are not using except for peak periods, 

because they cannot afford the fuel, how does that make sense? 

So that is what we are asking here today and whatever information you can provide the Committee going forward would be helpful. With that, again, I thank you for your service and I give it back 

to the Chair. Sorry for taking so much time. 

Senator MCCASKILL. Not a problem. Thank you, Senator 

Portman. 

I am trying to figure out where the decisions are being made as 

to the Afghan Infrastructure program at the Department of Defense and the Afghan Infrastructure Fund. Now, it is my understanding in fiscal year 2011, the Afghan Infrastructure Fund, 

H605-41331-79W7 with DISTILLER

41 

which is all DOD money, is $400 million. Is that correct, Mr. 

Sedney? 

Mr. SEDNEY. I believe that is correct. 

Senator MCCASKILL. OK. And I am looking at a document here 

and this is projects that are going to be built with that money. This 

is DOD money. Now, the first one is the power generation in 

Kandahar City, Kandahar Province. Fuel operations maintenance 

for all DOD and USAID procured generators in Kandahar. That is 

$40 million. And the implementing agency is DOD, not USAID. 

The next one is power transmission, Kandahar to Lashkar and then power transmission, Chimtala to Ghazni and that is $231 million and that says—Department of State, USAID, one of them says 

DOD on it also, and the next one just says Department of State 

USAID. 

The next one says power transmission Chimtala to Gardez. That is $86 million. And that is just DOD. The next one is a road in 

Helmand Province. That is $23 million, which does not sound like 

CERP to me, and that is DOD. The last one is Government Infrastructure Provincial Justice Centers. That is $20 million and that 

is DOD. 

OK. So who is deciding what Department of Defense builds and 

what USAID is building? Who is making that decision? Is that 

CENTCOM Command that is making that decision? Is that the 

Secretary of State? Where is that decision being made and on what 

basis is it being made? 

Mr. SEDNEY. First of all, on the—for the purpose of the Afghan 

Infrastructure Fund and the reason it is funded out of Department 

of Defense funds, as my colleague, Mr. Thier said, the commander 

on the ground has made the determination that our success on the 

battlefield requires both the reality and prospect for certain economic inputs. The largest of those is electricity. 

Helmand Province and Kandahar Province, particularly, were 

the center of gravity for our ongoing campaign. That is where the 

majority of our surge forces have—were put into place. First General McChrystal and then, after he took over, General Petraeus 

made very clear that increasing and making sustainable an electricity supply for the city of Kandahar was an essential part of our 

campaign plan, and in order to defeat the Taliban, we needed to 

do it both militarily and with the population itself. 

So the first step, as Mr. Thier said, was the provision of these 

temporary power plants that will be fueled by diesel fuel. As Senator Portman pointed out, that is very expensive, and as Mr. Thier 

said, that is not sustainable. 

Senator MCCASKILL. Mr. Sedney, I hate to interrupt you. I understand that all of these projects someone thinks are important to 

the success of our mission. I think what I am trying to do is pull 

some thread here on accountability. 

I cannot figure out why in the world is Department of Defense 

building provincial justice centers. Why is that not USAID? Why 

is DOD in the construction of provincial justice centers right now? 

I do not understand that. And how is that decision being made and 

where is it being made? 

Mr. SEDNEY. The recommendations, Senator, come from the field 

through the chain of command. On the provincial justice centers, 

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there are some areas where the provision of provincial justice centers, we believe, are so important to the success of the campaign 

that if it is not possible for AID to be funding those at this time, 

they are included in the Afghan Infrastructure Fund. 

Senator MCCASKILL. Well, who is it that is in the room that is 

deciding which pot of money you are taking this out of? It makes 

it very difficult to hold anybody accountable because what happens, 

I feel like I am boxing ghosts. I cannot decide is it USAID that is 

responsible for the sustainability assessment, which clearly in some 

instances, I think, has been lacking? 

I look at the sustainability language for these projects. It does 

not appear to me that it has been taken seriously in terms of the 

sustainability. It looks like to me that somebody in the field has 

said, We need to do this, and so we are just trying to find the 

money somewhere in the budget to do it and DOD is going with 

it and that is not the way that you carefully craft this expenditure 

of Federal tax dollars. 

I mean, do you see where my frustration is about—I cannot figure out who to call. 

Mr. SEDNEY. Well, I apologize for any confusion that has been 

caused, but I would say that the process has been much more rigorous and ordered than has been described so far. 

In terms of the Afghan Infrastructure Fund projects, those 

projects were vetted first out in the field. They were based on requirements that the commanders in the field outlined and discussed intensively. This is a combined civil/military effort. Discussed extensively with our colleagues at the U.S. embassy and 

USAID. 

There are some areas where USAID was already working where 

a number of—a large amount of the funds, almost, I think, 80 percent of the funds that USAID spends are now in the south and the 

west. But there were some projects which USAID did not have the 

money and which the commander in the field identified as an urgent requirement. 

After discussion out in the field over which agency would be the 

most appropriate implementing partner, then those requests were 

sent back for approval of projects under the Afghan Infrastructure 

Fund. Those projects are recommended to the Department and 

then the decisions, the final approval decisions, are made in the 

Department of Defense. 

Each one of those projects, which I understand were briefed by 

some of my colleagues last week, do have a sustainability assessment in them. 

Senator MCCASKILL. Have you looked at the sustainability assessments? 

Mr. SEDNEY. I have not reviewed the sustainability assessments 

myself. 

Senator MCCASKILL. I would recommend them to you and I 

would love your input after you have looked at them, because I will 

tell you, I have looked at them and I do not think that this is what 

we are looking for. It looks to me like somebody says, We need to 

do this, and then people are checking boxes, and it looks like to me 

that the military is deciding what projects need to be done, and if 

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43 

AID does not have the money, we just find the money in our budget. How long has the Afghan Infrastructure Fund been around? 

Mr. SEDNEY. This is the first year, ma’am. 

Senator MCCASKILL. OK. And would you say this is an outgrowth 

of CERP? This is CERP on steroids? 

Mr. SEDNEY. I would not say that this is CERP on steroids. I 

would say that over the last several years, as we encountered this 

complex civil/military environment, there were a number of areas 

where commanders in the field saw a need for projects that would 

have immediate impact. A number of those projects under CERP 

were put forward as CERP projects. 

Senator MCCASKILL. We have never before—honestly, sir, this is 

really historic in some ways, because what we have done here for 

the first time that I am aware of, we have decided that in a military operation, we are going to do things like build justice centers 

in the Department of Defense. 

Now, we did some of this. There was obviously some cross-pollination in Iraq, some that happened in a way that was helpful and, 

frankly, a lot of money was wasted. Tens upon billions of dollars 

went up in smoke in Iraq because what the military commanders 

thought they needed that moment turned out we were not going to 

be able to sustain it. Health care centers that were never built, 

power plants that were blown up, roads and bridges that were destroyed. 

And so, I am trying to—do you believe that this is the new normal, that in contingency operations in the United States, the Department of Defense will have its own construction fund that will 

be commanded by the military leaders to determine what roads 

should be built, what power lines should be built, and what justice 

centers should be built? 

Mr. SEDNEY. First of all, Senator, I would say it is not the Department of Defense that determines which ones will be built. The 

commanders in the field do make recommendations, they do consult intensively with—— 

Senator MCCASKILL. But it is your money. What do you mean 

you are not deciding it is going to be built? This is money we appropriated to the Department of Defense. 

Mr. SEDNEY. Right. 

Senator MCCASKILL. Surely you are not telling me somebody else 

is deciding how to spend your money. 

Mr. SEDNEY. No. What I am saying is, we are not deciding on 

the whole complex of things that need to be done in Afghanistan. 

We are deciding which ones are of urgent military necessity, and 

yes, this is a new area. The Afghan Infrastructure Fund is a brand 

new concept. 

It does come out of the issues that we saw with CERP where 

CERP was tending toward things that were more than just the 

quick impact projects that it was originally designed for. There was 

intensive consultation with Congress on putting the Afghan Infrastructure Fund in place. We created a new office in the Office of 

the Secretary of Defense to work on overseeing this, and the—— 

Senator MCCASKILL. And who is that person? 

Mr. SEDNEY. Pardon? 

Senator MCCASKILL. Who is in charge of that office? 

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Mr. SEDNEY. One of my colleagues in our Office of Stability Operations. I can get you his name. 

INFORMATION FOR THE RECORD

The CERP Management Cell (CMC) is led by an executive level director, Mr. Robert Doheny, a member of the Senior Executive Services (SES). He leads the activities of the CMC and chairs the CERP Working Group, with responsibilities for review and oversight of assigned programs, including the review, assignment, tracking, and reporting of OSD/Joint Staff/Military Department/Combatant Commandlevel and interagency CERP activities, as well as Afghan Infrastructure Fund issues 

and tasks. In addition, the Department has recently established the Afghanistan Resources Oversight Council (AROC) that is co-chaired by three Under Secretaries of 

Defense: Comptroller; Acquisition, Technology, and Logistics; and Policy. The AROC 

is charged with providing senior management review and oversight of DOD programs and funds related to Afghanistan, including the Afghanistan Security Forces 

Fund (ASFF), AIF, and CERP in Afghanistan. 

Senator MCCASKILL. I think this is the kind of stuff that we 

would have liked to see covered in your opening statement, Mr. 

Sedney. We have a lot of projects that are being built, and I know 

that this is really a difficult environment. There are all kinds of 

challenges, and our men and women have performed heroically, 

and our military leaders are doing an amazing job. 

But I do think that we have played fast and loose, and sometimes sloppy, with the way we have spent this money, and if this 

is the priority for the military command, then why is that not 

transferring to make it the priority of the State Department? Why 

are we not using the funds that have traditionally been always appropriated in this country for reconstruction projects. 

The expertise has always been at the State Department. And 

after the military pulls out of there, guess where it is going to be 

back to? It is all going to be back to the State Department. 

And what has happened is, with this morphing of CERP into 

something even bigger, I understand it allows you to short-circuit 

some of the processes that traditionally are in place, and it allows 

you to jump the line in terms of budget priorities, but in the long 

run, it makes accountability and oversight very, very difficult, because you are going to go out—how many power projects do you 

have in USAID right now in Afghanistan? 

Mr. THIER. I would have to get you the exact number of individual projects. 

Senator MCCASKILL. But more than a couple? 

Mr. THIER. Not too many at the moment, but we have several. 

Senator MCCASKILL. Let me change the subject now and go to 

the Kabul Bank. I know this is difficult and, in some ways, delicate. But while we are pouring billions of dollars into the infrastructure of Afghanistan, because they have a GDP that is, I do not 

know, I think it is higher than $2 billion. What do you think it is, 

Mr. Thier? Without us, what is their GDP? 

Mr. THIER. I think overall GDP is about $18 billion. I do want 

to say that I think that this 97 percent figure has been somewhat 

mis-cited. 

Senator MCCASKILL. That is the highest I have ever heard their 

GDP. When I was in Afghanistan, I was told by the people on the 

ground in Afghanistan, including, I believe, the Ambassador, that 

the GDP was somewhere around $10 to $12 billion in Afghanistan. 

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Mr. THIER. I think it has gone up steadily. I may be slightly 

overstating—— 

Senator MCCASKILL. Optimistic. 

Mr. THIER [continuing]. But that was my understanding—— 

Senator MCCASKILL. Right. 

Mr. THIER [continuing]. It has been growing every year. 

Senator MCCASKILL. I guess what I am trying to figure out here is, we have a $900 million fraud that has occurred at the Kabul 

Bank and that is where we put international assistance for Afghanistan. And clearly, we have technical assistance on the ground that 

is supposed to be overseeing the financial sector through USAID. 

Can you explain how they were able to do insider lending to the 

tune of hundreds of millions of dollars that is now gone, and why 

we are not being more aggressive in terms of requiring the kinds 

of audits that the other bank that now is in question, that may 

have the same kinds of problems, the Azizi Bank, why we are not 

requiring independent forensic audits and results of those audits 

before we put any more money in either one of those banks that 

has any connection to the U.S. taxpayers? 

Mr. THIER. So let me clarify two things. No U.S. taxpayer dollars 

have ever gone to Kabul Bank. 

Senator MCCASKILL. It is just IMF money? 

Mr. THIER. I am not familiar with any IMF funds ever having 

gone, but I cannot, obviously, speak to that. 

Senator MCCASKILL. Well, you say no U.S. funds have gone to 

the bank, but if we are paying Afghan contractors and if we have 

blown their GDP up way above what it will ever, ever be after we 

are gone, that money is going into some bank. So you say it is not 

United States’ money, but I would hasten to add that a lot of the 

money that has gone in every Afghanistan bank for the last 3 years 

has been American money. Would that not be a fair assessment? 

Mr. THIER. Well, there is no program that has existed in the past 

that provides any type of support to Kabul Bank. The only way— 

what we have done as a government is to support the Afghan government’s ability to develop its financial system. That has primarily been involved in, for instance, building the Afghan Central 

Bank from nothing into an entity. 

Part of that assistance has been to build their capacity. But I 

hasten to add that at no point has the U.S. Government or U.S. 

Government officials or contractors been responsible for the oversight of Afghanistan’s banking system. That is a sovereign function 

of the government of Afghanistan. We have attempted to build 

their capacity. 

I think critically on the other point about Azizi Bank and the forensic audit, not only do we support that idea, but we have been 

demanding it. 

Part of the IMF conditions for a new IMF program that have 

been designed around the Afghans rectifying the problems in Kabul 

Bank has been precisely that a forensic audit of the Azizi Bank 

needs to be conducted, and that the IMF program, which these conditions we support strongly, require that audit to be conducted 

prior to a new IMF program being put into place. 

So I do want to emphasize that we agree with you strongly, that 

an audit needs to be done, as well as a number of other steps, conH605-41331-79W7 with DISTILLER

46 

ditions that have been endorsed by the U.S. Government, before 

any IMF program goes forward. 

Senator MCCASKILL. OK. Thank you for that and we will have 

some followup questions on that. 

Finally, a couple of things I want to do. One is CERP. I have had 

many conversations in the Armed Services Committee with General Petraeus and others about CERP, Ash Carter and others about 

CERP. Do you all have, in the Department of Defense, an analysis 

of where CERP money has been spent in relationship to where 

there have been challenges in terms of our military mission and 

what kind of success the CERP funds have, in fact, brought about? 

Is there data? 

Mr. SEDNEY. Senator McCaskill, I do not know of any study yet 

that has been done on the connection of CERP funding to military 

success. While we have repeated statements and validation from 

commanders in the field, as far as I know, and I will check and see 

to make sure, there has been no study trying to validate any statistically valid correlation between CERP spending and military success. 

In Afghanistan, since we are still in the process of developing or 

achieving that success, my own view would be that it would be too 

soon to be able to make such an evaluation because we are still in 

the process of carrying out the war. 

Senator MCCASKILL. Well, we have done CERP now for as long 

as I have been in the Senate, and so we have lots of CERP money 

that has been spent in Iraq and Afghanistan. And this is my specific question and I would ask you to take it for the record, because 

I want you to be sure before you answer this question. 

Does the Department of Defense, does the American military 

have data that would lay over where CERP money has been spent 

versus hot spots to determine whether or not the CERP money is 

actually being spent in areas where there are hot spots as it relates 

to our military mission? And if so, is there any data available about 

the success of that CERP money in terms of helping directly with 

the military mission other than anecdotal? 

Mr. SEDNEY. In terms of the first part of your question, yes, we 

do have data which shows where CERP money is being spent and 

where there is insurgent activity, and that is something that we 

can provide to you. 

On the second part, as I said, on the evaluation of the success 

in Afghanistan, which is the area that I am responsible for, I do 

not think we yet have the data to be able to evaluate the success 

because we are still in the process of carrying out the fight. 

But certainly on the first part of the data that you requested, we 

will be able to provide that to you. On the second part, I will consult with my colleagues and see if doing a study on success of 

CERP in Afghanistan is something that would be something we 

would want to try and do now or do it more retrospectively as we 

are further along in the campaign. 

INFORMATION FOR THE RECORD

Yes. The Department of Defense does have a map overlaying CERP expenditures 

with areas of Afghanistan that are a priority in the military campaign. Attached is 

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47 

the ‘‘For Official Use Only’’ chart that overlays CERP project locations relative to 

the map of Afghanistan. 

Senator MCCASKILL. Mr. Solis, do you have any—— 

Mr. SOLIS. Senator, if I could, and I did not do this particular 

study on CERP, but I do know that we did make a recommendation 

along the lines that you mentioned about trying to measure success 

against some set of standards and metrics, and that was in a recent report. The Department did concur with that. 

So there is a recommendation out there to do that and the Department has concurred. 

Senator MCCASKILL. To do that kind of study—— 

Mr. SOLIS. Yes. 

Senator MCCASKILL [continuing]. So we could get some kind of 

sense of the efficacy, because essentially, we have now moved beyond CERP into much bigger projects based on AIF, and it worries 

me that we have done that without really checking to see if CERP 

was a success in terms of the mission and whether or not the Afghan people need power, I understand that it would be nice to have 

the lights on, but I need to make sure that spending hundreds and 

hundreds of millions of dollars on the power grid and the power 

system in Afghanistan is, in fact, going to translate into defeating 

the Taliban. 

It is nice that we turn on the lights for them, but it would also 

be nice if we got more broadband in Missouri. And those are the 

kinds of decisions we have to make, and I worry that the blinders 

get on and we lose perspective about whether or not these projects 

are essential to the mission of defeating the Taliban and providing 

stability. 

I am not quarreling that we have to train the army. I am not 

quarreling we have to train the police. But I just think it is time 

for us to really button down whether or not building the roads, the 

schools, and building the justice centers that we are building, and 

sometimes USAID is building them, sometimes the Department of 

Defense is building them. Is the Army Corps taking the lead on all 

these projects, the AIF projects? 

Mr. SEDNEY. I know they are taking the lead in at least one of 

them, but I can get back to you with who is on the lead. 

INFORMATION FOR THE RECORD

The U.S. Army Corps of Engineers is the lead for four of the FY 2011 Afghan Infrastructure Fund projects—three power projects and one transportation project. 

Other components within the Department of Defense will implement the Provincial 

Justice Centers project, and the Rule of the Law Field Force-Afghanistan—a subordinate command of U.S. Forces-Afghanistan—will oversee them. USAID will implement one of the power transmission projects that will be executed in concert with 

the Afghanistan power company—Da Afghanistan Breshna Skerkat (DABS). 

Senator MCCASKILL. And I assume all of these are being contracted out? 

Mr. SEDNEY. We are in the process of doing that, but yes, they 

will be—they will be contracted, although I think—I will have to 

take that question, ma’am. 

INFORMATION FOR THE RECORD

Yes, all six fiscal year 2011 Afghanistan Infrastructure Fund projects will be contracted out, in accordance with the ‘‘Afghan First’’ policy. As delineated in DOD’s 

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48 

AIF notification to Congress, the Department of State/USAID will implement one 

of the projects, and the Department of Defense will implement the other five 

projects. 

Senator MCCASKILL. OK. I have a number of other questions in 

here. You all have stayed long and this hearing was supposed to 

be over at noon. Sorry. I have to ask about counter-narcotics before 

we go. 

The Committee released a report, Mr. Denver, on the counternarcotics contracts in Afghanistan. Frankly, it dealt with all the 

counter-narcotics moneys that we have spent and the problems 

there. First, for Mr. Denver, what have you done to improve the 

management of the counter-narcotics contracts in Afghanistan, and 

if this is something you are not prepared to answer today, we are 

happy to take it for the record. 

Mr. DENVER. Thank you, Madam Chairman. I will need to take 

this for the record. I do know that the Space and Missile Defense 

Command is the Army organization that oversees the counter-narcotics contracts so I will need to take it for the record and coordinate with them and get back to you. 

INFORMATION FOR THE RECORD

The Army appreciates the opportunity to share the progress made in the management of counternarcotics contracts in Afghanistan. The U.S. Army Space and Missile Defense Command/Army Forces Strategic Command (USASMDC/ARSTRAT) 

Contracting and Acquisition Management Office (CAMO) is the primary Army contracting office awarding and managing contracts in support of 

counternarcoterrorism and the Department of Defense Counter Narcoterrorism 

Technology Program Office (CNTPO). USASMDC/ARSTRAT CAMO has implemented many improvements since the 2009 Department of Defense Inspector General Report was published (D–2009–109, Contracts Supporting the DOD Counter 

Narcoterrorism Technology Program Office). 

Personnel improvements include growing the contracting team from two to nine 

and the project management team has grown from 8 to 21 government personnel. 

Recruiting actions have targeted particular skills that closely match the functional 

expertise of the missions supported, training has been tailored to reflect the unique 

aspects of the types of missions supported, and continuous learning is embraced as 

a mandate to ensure training is sufficiently robust to meet missions support requirements. 

Process improvements have been made to ensure the comprehensiveness of files. 

Templates and desk guides have been developed to aid in the training of new personnel and ensure consistency and continuity of work products. 

A quality assurance hierarchy had been implemented that provides a team approach to quality assurance. Of importance is the location and approach to QA. 

Given the complexity and nature of the acquisitions supported in Afghanistan, 

CNTPO has stationed a forward deployed QA cell, from which skilled QA evaluators 

deploy to specific performance locations throughout the theater of operations and 

local geographic area. 

Although substantial progress has been made to remedy concerns voiced in the 

2009 Defense Inspector General Report (D–2009–109, Contracts Supporting the 

DOD Counter Narcoterrorism Technology Program Office), USASMDC/ARSTRAT 

CAMO still faces many challenges. A program of this nature requires uniquely 

skilled professionals, dedicated to keeping pace with evolving requirements. Like 

many organizations, staffing authorized must appreciate not only the level of resource required, but must also understand that it takes a complement of skills to 

ensure all aspects of the acquisition are properly and effectively executed. These actions are directly improving the execution and oversight of these critical activities; 

however, the challenges of the operational environment, changes in requirements, 

funding priorities and the experience level of new personnel remain. 

Senator MCCASKILL. OK. USAID, Mr. Thier, since 2002, has 

awarded $1.4 billion for agricultural programs as a means to encourage farmers to engage in something other than opium farming. 

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49 

There is concern that these programs are distorting the Afghan 

economy or creating false economies that are unsustainable. Do you 

have any real measure of the impact of these programs, and will 

any of these impacts be sustainable in terms of the alternative agricultural programs? 

Mr. THIER. I would be happy to get you more on the measures, 

but to fundamentally answer your question, yes. I think that this 

investment in agriculture, which has really been about finding alternatives for people who are growing opium poppy, has been dramatically successful in two regards. First of all, a large number of 

provinces, and I can also get you the number, have gone opiumfree, and that has been very important to our strategy of trying to 

reduce and eliminate opium production in Afghanistan. 

The other is that there really is no silver bullet to replace opium 

in Afghanistan, but what we are trying to do is to create an agricultural mix and market for those agricultural products that will 

allow Afghan farmers to be able to make a decent living so that the 

choice to plant opium will be far less attractive, vis-a-vis, other efforts. 

And we have reached literally tens of thousands of farmers with 

these programs that have increased crop yields dramatically, and 

I think we are quite proud of that investment, and I do think it 

is a long-term investment because they are able to generate seed 

from those, they have opened up new markets, we are increasing 

trade across the borders as well, and it is really a critical part of 

our ultimate sustainability strategy for Afghanistan to increase agricultural income. 

Senator MCCASKILL. I think it is a terrific program. I know that 

we have a Missouri National Guard unit that is over an agricultural program and has done great work. In fact, we lost one of ours 

over there that was there on that program. 

Let us talk about now not the agricultural program, but for both 

DOD and for USAID. We have now spent $2 billion in counter-narcotics contracts in Afghanistan. Can either of you speak to any specific milestones that have been reached in terms of having a negative impact on the narcotics trafficking in Afghanistan and exporting out of Afghanistan after we have spent $2 billion? 

Mr. THIER. Our work again really focuses on the crop replacement side. Other aspects of the State Department are responsible 

for the elements of interdiction and law enforcement. Our efforts 

focusing on agriculture have really been, as I said, to find replacement crops. 

I think one of the most significant factors that I noted is that a 

large number of provinces that were planting opium just a few 

years ago have gone poppy-free. 

Senator MCCASKILL. Have we actually measured the amount of 

opium being produced in Afghanistan and do we have milestones 

in each year as to where we are in that metric? 

Mr. THIER. We do not do that, but there are very intensive measurements that are done on a year-by-year basis of the opium crop, 

of its price, of the number of hectares. There was a dramatic decline last year that was in part due to blight, but also, I think, due 

to other programs as well. 

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50 

Senator MCCASKILL. Maybe we need to figure out that blight, 

work the blight. Maybe it will be less expensive than $2 billion. I 

would like to get that information, if I could, from your colleagues 

at either DOD or at State, what milestones we can point to that 

this investment of $2 billion has been a wise investment. 

I think the alternative crops, obviously, if we can show—I mean, 

one is going to prove the other. But I guess the question is, and 

you are not the right person. We will try to pose questions to the 

right people if you will help us find them. 

And it may be, Mr. Sedney—I was hard on you today—you may 

not have been the right person to be at this hearing. But we struggle when we do these hearings and that is part of our problem, and 

I will close with this. It would be great if I could get the right people in front of this hearing that actually I can hold accountable on 

contracting in Afghanistan for infrastructure. 

But it is harder than it looks to find the right people because it 

is not clear who really is making the decisions at the front end as 

to where the money is going to go, the decisions in the middle as 

to the contracting process, and the decisions at the end as to 

whether or not we have done an adequate job assessing sustainability. 

I certainly will look forward to the input from DOD after you 

look at the sustainability rationale that has been laid out for the 

projects in the AIF, and I think you are going to continue to hear 

more and more questions in this area as we try with all of our 

might to find every taxpayer dollar we can in terms of spending 

less. 

I am not here to say I do not support the mission in Afghanistan, 

I do, but I question whether all of the money we have spent on contracting in the effort against counterinsurgency, whether or not we 

have any value for it. And this has been a giant experiment, what 

we have done in Iraq and Afghanistan, and so far, from where I 

sit, in terms of doing contracting oversight, I think the grade is not 

a good grade in terms of the amount of money we have spent and 

what we have for it in the long run. 

So, I thank all of you. We will have questions for the record and 

I really appreciate your time this morning. 

Mr. SOLIS. Senator, if I could add just one thing—— 

Senator MCCASKILL. Yes, Mr. Solis. 

Mr. SOLIS [continuing]. About sustainability very quickly? While 

our work focused mostly on the oversight of contractors at DOD, 

as we looked at it, some of the outcomes that you could have is 

poor construction. And as we talk about sustainment, you cannot 

assume that what we have out there is already ready to go in 

terms of people just going in and using it and then be able to sustain it. 

I think what you have also got to look at is, what is it going to 

take to possibly rebuild or reconstruct—— 

Senator MCCASKILL. Right. 

Mr. SOLIS [continuing]. Facilities that are already there. And 

some of our work has shown that a lot of these buildings that are 

out there, particularly on some of these bases, are not ready to be 

moved into. And so, I think as you think about sustainment, you 

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51 

are going to also have to think about, are we ready to move folks 

in, what is it going to cost to rebuild or reconstruct those buildings. 

Senator MCCASKILL. You are right at the back end. I mean, we 

have the front end deciding where the money is going to go, we 

have the middle portion which is actually letting the contracts in 

a cost-effective way and overseeing the contracts, and then at the 

back end, who do we hold accountable if the structures are substandard, if they are not to spec, if they are not going to work for 

the purposes they were intended. 

That is what we saw so frequently in Iraq, frankly, and some of 

it dealt with the safety and security of our troops in terms of the 

construction that had been done. Other was construction. The 

health centers are a famous example of the health centers that 

somebody got paid for and the ones that were built were not capable of being used, and the ones that were not built, we never got 

the money back. 

So there is a disconnect between what the commanders in the 

field want to have happen and what actually happens, and the 

money that is spent from that point to that point is where I think 

we can save billions and billions of dollars if we really work at getting this right. 

It is better, the CORs are better, they certainly are better. The 

CORs are now being trained. When I first started down this path, 

when the idea for the War Contracting Commission was just an 

idea that I came up with because I am a student of history and 

what Harry Truman did after World War II, and I thought it was 

time that we did that after what I learned in Iraq, and Jim Webb 

and I worked hard to get that contracting commission established. 

But we are a long way from where we need to be, and I want 

the Department of Defense to take this really seriously and I want 

AID to take it really seriously because what is going to happen is 

the American people are going to turn off the spigot if we do not 

do this right, and they have a right to turn off the spigot if we do 

not do this right, and there is so much work to be done. 

If all of you would just study the work that GAO has done, we 

could make huge progress. But somehow that just does not ever 

happen. It is painful how long it is taking to get the accountability 

we need and to even get the accurate information. 

So I will continue to followup with the new Secretary of Defense 

on this. He and I have discussed it. I have had many conversations 

with commanders on this subject matter and everyone nods their 

head and says they get it, but it is not getting done right and it 

needs to improve. 

Thank you all very much for being here today. 

[Whereupon, at 12:40 p.m., the hearing was adjourned.] 

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H605-41331-79W7 with DISTILLER


68014.024
77 

H605-41331-79W7 with DISTILLER


68014.025
78 

H605-41331-79W7 with DISTILLER


68014.026
79 

H605-41331-79W7 with DISTILLER


68014.027
80 

H605-41331-79W7 with DISTILLER


68014.028
81 

H605-41331-79W7 with DISTILLER


68014.029
82 

H605-41331-79W7 with DISTILLER


68014.030
83 

H605-41331-79W7 with DISTILLER


68014.031
84 

H605-41331-79W7 with DISTILLER


68014.032
85 

H605-41331-79W7 with DISTILLER


68014.033
86 

H605-41331-79W7 with DISTILLER


68014.034
87 

H605-41331-79W7 with DISTILLER


68014.035
88 

H605-41331-79W7 with DISTILLER


68014.036
89 

H605-41331-79W7 with DISTILLER


68014.037
90 

H605-41331-79W7 with DISTILLER


68014.048
91 

H605-41331-79W7 with DISTILLER


68014.049
92 

H605-41331-79W7 with DISTILLER


68014.050
93 

H605-41331-79W7 with DISTILLER


68014.038
94 

H605-41331-79W7 with DISTILLER


68014.039
95 

H605-41331-79W7 with DISTILLER


68014.040
96 

H605-41331-79W7 with DISTILLER


68014.041
97 

H605-41331-79W7 with DISTILLER


68014.042
98 

H605-41331-79W7 with DISTILLER


68014.043
99 

H605-41331-79W7 with DISTILLER


68014.044
100 

H605-41331-79W7 with DISTILLER


68014.045
101 

H605-41331-79W7 with DISTILLER


68014.046
102 

H605-41331-79W7 with DISTILLER


68014.047
103 

H605-41331-79W7 with DISTILLER


68014.051
104 

H605-41331-79W7 with DISTILLER


68014.052
105 

H605-41331-79W7 with DISTILLER


68014.053
106 

H605-41331-79W7 with DISTILLER


68014.054
107 

H605-41331-79W7 with DISTILLER


68014.055
108 

H605-41331-79W7 with DISTILLER


68014.056
109 

H605-41331-79W7 with DISTILLER


68014.057
110 

H605-41331-79W7 with DISTILLER


68014.058
111 

H605-41331-79W7 with DISTILLER


68014.059
112 

H605-41331-79W7 with DISTILLER


68014.060
113 

H605-41331-79W7 with DISTILLER


68014.061
114 

H605-41331-79W7 with DISTILLER


68014.062
115 

H605-41331-79W7 with DISTILLER


68014.063
116 

H605-41331-79W7 with DISTILLER


68014.064
117 

H605-41331-79W7 with DISTILLER


68014.065
118 

H605-41331-79W7 with DISTILLER


68014.066
119 

H605-41331-79W7 with DISTILLER


68014.067
120 

H605-41331-79W7 with DISTILLER


68014.068
121 

H605-41331-79W7 with DISTILLER


68014.069
122 

H605-41331-79W7 with DISTILLER


68014.070
123 

H605-41331-79W7 with DISTILLER


68014.071
124 

H605-41331-79W7 with DISTILLER


68014.072
125 

H605-41331-79W7 with DISTILLER


68014.073
126 

H605-41331-79W7 with DISTILLER


68014.074
127 

H605-41331-79W7 with DISTILLER


68014.075
128 

H605-41331-79W7 with DISTILLER


68014.076
129 

H605-41331-79W7 with DISTILLER


68014.077
130 

H605-41331-79W7 with DISTILLER


68014.078
131 

H605-41331-79W7 with DISTILLER


68014.079
132 

H605-41331-79W7 with DISTILLER


68014.080
133 

H605-41331-79W7 with DISTILLER


68014.081
134 

H605-41331-79W7 with DISTILLER


68014.082
135 

H605-41331-79W7 with DISTILLER


68014.083
136 

H605-41331-79W7 with DISTILLER


68014.084
137 

H605-41331-79W7 with DISTILLER


68014.085
138 

H605-41331-79W7 with DISTILLER


68014.086
139 

H605-41331-79W7 with DISTILLER


68014.087
140 

H605-41331-79W7 with DISTILLER


68014.088
141 

H605-41331-79W7 with DISTILLER


68014.089
142 

H605-41331-79W7 with DISTILLER


68014.090
143 

H605-41331-79W7 with DISTILLER


68014.091
144 

H605-41331-79W7 with DISTILLER


68014.092
145 

H605-41331-79W7 with DISTILLER


68014.093
146 

H605-41331-79W7 with DISTILLER


68014.094
147 

H605-41331-79W7 with DISTILLER


68014.095
148 

H605-41331-79W7 with DISTILLER


68014.096
149 

H605-41331-79W7 with DISTILLER


68014.097
150 

H605-41331-79W7 with DISTILLER


68014.098
151 

H605-41331-79W7 with DISTILLER


68014.099
152 

H605-41331-79W7 with DISTILLER


68014.100
153 

H605-41331-79W7 with DISTILLER


68014.101
154 

H605-41331-79W7 with DISTILLER


68014.102
155 

H605-41331-79W7 with DISTILLER


68014.103
156 

H605-41331-79W7 with DISTILLER


68014.104
157 

H605-41331-79W7 with DISTILLER


68014.105
158 

H605-41331-79W7 with DISTILLER


68014.106
159 

H605-41331-79W7 with DISTILLER


68014.107
160 

H605-41331-79W7 with DISTILLER


68014.108
161 

H605-41331-79W7 with DISTILLER


68014.109
162 

H605-41331-79W7 with DISTILLER


68014.110
163 

H605-41331-79W7 with DISTILLER


68014.111
164 

H605-41331-79W7 with DISTILLER


68014.112
165 

H605-41331-79W7 with DISTILLER


68014.113
166 

H605-41331-79W7 with DISTILLER


68014.114
167 

H605-41331-79W7 with DISTILLER


68014.115
168 

H605-41331-79W7 with DISTILLER


68014.116
169 

H605-41331-79W7 with DISTILLER


68014.117
170 

H605-41331-79W7 with DISTILLER


68014.118
171 

H605-41331-79W7 with DISTILLER


68014.119
172 

H605-41331-79W7 with DISTILLER


68014.120
173 

H605-41331-79W7 with DISTILLER


68014.121
174 

H605-41331-79W7 with DISTILLER


68014.122
175 

H605-41331-79W7 with DISTILLER


68014.123
176 

H605-41331-79W7 with DISTILLER


68014.124
177 

H605-41331-79W7 with DISTILLER


68014.125
178 

H605-41331-79W7 with DISTILLER


68014.126
179 

H605-41331-79W7 with DISTILLER


68014.127
180 

H605-41331-79W7 with DISTILLER


68014.128
181 

H605-41331-79W7 with DISTILLER


68014.129
182 

H605-41331-79W7 with DISTILLER


68014.130
183 

H605-41331-79W7 with DISTILLER


68014.131
184 

H605-41331-79W7 with DISTILLER


68014.132
185 

H605-41331-79W7 with DISTILLER


68014.133
186 

H605-41331-79W7 with DISTILLER


68014.134
187 

H605-41331-79W7 with DISTILLER


68014.135
188 

H605-41331-79W7 with DISTILLER


68014.136
189 

H605-41331-79W7 with DISTILLER


68014.137
190 

H605-41331-79W7 with DISTILLER


68014.138
191 

H605-41331-79W7 with DISTILLER


68014.139
192 

H605-41331-79W7 with DISTILLER


68014.140
193 

H605-41331-79W7 with DISTILLER


68014.141
194 

H605-41331-79W7 with DISTILLER


68014.142
195 

H605-41331-79W7 with DISTILLER


68014.143
196 

H605-41331-79W7 with DISTILLER


68014.144
197 

H605-41331-79W7 with DISTILLER


68014.145
198 

H605-41331-79W7 with DISTILLER


68014.146
199 

H605-41331-79W7 with DISTILLER


68014.147
200 

H605-41331-79W7 with DISTILLER


68014.148
201 

H605-41331-79W7 with DISTILLER


68014.149
202 

H605-41331-79W7 with DISTILLER


68014.150
203 

H605-41331-79W7 with DISTILLER


68014.151
204 

H605-41331-79W7 with DISTILLER


68014.152
205 

H605-41331-79W7 with DISTILLER


68014.153
206 

H605-41331-79W7 with DISTILLER


68014.154
207 

H605-41331-79W7 with DISTILLER


68014.155
208 

H605-41331-79W7 with DISTILLER


68014.156
209 

H605-41331-79W7 with DISTILLER


68014.157
210 

H605-41331-79W7 with DISTILLER


68014.158
211 

H605-41331-79W7 with DISTILLER


68014.159
212 

H605-41331-79W7 with DISTILLER


68014.160
213 

H605-41331-79W7 with DISTILLER


68014.161
214 

H605-41331-79W7 with DISTILLER


68014.162
215 

H605-41331-79W7 with DISTILLER


68014.163
216 

H605-41331-79W7 with DISTILLER


68014.164
217 

H605-41331-79W7 with DISTILLER


68014.165
218 

H605-41331-79W7 with DISTILLER


68014.166
219 

H605-41331-79W7 with DISTILLER


68014.167
220 

H605-41331-79W7 with DISTILLER


68014.168
221 

H605-41331-79W7 with DISTILLER


68014.169
222 

H605-41331-79W7 with DISTILLER


68014.170
223 

H605-41331-79W7 with DISTILLER


68014.171
224 

H605-41331-79W7 with DISTILLER


68014.172
225 

H605-41331-79W7 with DISTILLER


68014.173
226 

H605-41331-79W7 with DISTILLER


68014.174
227 

H605-41331-79W7 with DISTILLER


68014.175
228 

H605-41331-79W7 with DISTILLER


68014.176
229 

H605-41331-79W7 with DISTILLER


68014.177
230 

H605-41331-79W7 with DISTILLER


68014.178
231 

H605-41331-79W7 with DISTILLER


68014.179
232 

H605-41331-79W7 with DISTILLER


68014.180
233 

H605-41331-79W7 with DISTILLER


68014.181
234 

H605-41331-79W7 with DISTILLER


68014.182
235 

H605-41331-79W7 with DISTILLER


68014.183
236 

H605-41331-79W7 with DISTILLER


68014.184
237 

H605-41331-79W7 with DISTILLER


68014.185
238 

H605-41331-79W7 with DISTILLER


68014.186
239 

H605-41331-79W7 with DISTILLER


68014.187
240 

H605-41331-79W7 with DISTILLER


68014.188
241 

H605-41331-79W7 with DISTILLER


68014.189
242 

Æ 

H605-41331-79W7 with DISTILLER


68014.190