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21–436 PDF 2005

S. Hrg. 109–172

WAGING WAR ON WASTE: AN EXAMINATION

OF DOD’S BUSINESS PRACTICES

HEARING

BEFORE THE

OVERSIGHT OF GOVERNMENT MANAGEMENT, 

THE FEDERAL WORKFORCE AND THE DISTRICT 

OF COLUMBIA SUBCOMMITTEE

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

APRIL 28, 2005

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs

(

(II)

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

SUSAN M. COLLINS, Maine, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

JOSEPH I. LIEBERMAN, Connecticut 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

MICHAEL D. BOPP, Staff Director and Chief Counsel 

JOYCE A. RECHTSCHAFFEN, Minority Staff Director and Counsel 

AMY B. NEWHOUSE, Chief Clerk 

OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL 

WORKFORCE AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE 

GEORGE V. VOINOVICH, Ohio, Chairman 

TED STEVENS, Alaska 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

DANIEL K. AKAKA, Hawaii 

CARL LEVIN, Michigan 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

ANDREW RICHARDSON, Staff Director 

RICHARD J. KESSLER, Minority Staff Director 

NANCI E. LANGLEY, Minority Deputy Staff Director 

TARA E. BAIRD, Chief Clerk 

(III)

C O N T E N T S 

Opening statements: Page 

Senator Voinovich ............................................................................................. 1

Senator Akaka .................................................................................................. 3

Senator Lautenberg .......................................................................................... 5

Senator Levin .................................................................................................... 20

WITNESSES 

THURSDAY, APRIL 28, 2005

Hon. David M. Walker, Comptroller General, U.S. Government Accountability 

Office ..................................................................................................................... 7

Hon. Clay Johnson, III, Deputy Director for Management, Office of Management and Budget .................................................................................................. 10

Bradley M. Berkson, Acting Deputy Under Secretary for Logistics and Materiel Readiness, U.S. Department of Defense ...................................................... 11

ALPHABETICAL LIST OF WITNESSES

Berkson, Bradley M.: 

Testimony .......................................................................................................... 11

Prepared statement .......................................................................................... 71

Johnson, Hon. Clay, III: 

Testimony .......................................................................................................... 10

Prepared statement .......................................................................................... 68

Walker, Hon. David M.: 

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

Prepared statement .......................................................................................... 33

APPENDIX 

Responses to questions for the Record from: 

Mr. Walker ........................................................................................................ 92

Mr. Johnson ...................................................................................................... 95

Mr. Berkson ...................................................................................................... 96

Charts submitted by Mr. Berkson: 

Focus on continuous improvement (Maintenance Cycle Time Days) ........... 104

Performance Based Logistics (PBL) proven in the Global War on Terrorism ............................................................................................................. 105

IRAQ Air Shipments Cycletime ...................................................................... 106

(1)

WAGING WAR ON WASTE: AN EXAMINATION 

OF DOD’S BUSINESS PRACTICES 

THURSDAY, APRIL 28, 2005

U.S. SENATE, OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL

WORKFORCE AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE, OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:09 p.m., in room 

SD–562, Dirksen Senate Office Building, Hon. George V. Voinovich, 

Chairman of the Subcommittee, presiding. 

Present: Senators Voinovich, Akaka, Levin, and Lautenberg. 

OPENING STATEMENT OF SENATOR VOINOVICH 

Senator VOINOVICH. The hearing will please come to order. The 

Subcommittee on Oversight of Government Management will be in 

order. 

Good afternoon, and thank you all for coming. This afternoon’s 

hearing is entitled ‘‘Waging War On Waste: An Examination of the 

Department of Defense’s Business Practices.’’

The rules of this Committee give the Subcommittee jurisdiction 

over the management, efficiency, and effectiveness, and economy of 

all departments, agencies, and programs of the Federal Government. 

I will never forget what my predecessor in the Senate John 

Glenn said, ‘‘If you can get on Governmental Affairs, George, do it, 

because it means that you can meddle in anything you want to.’’

It is pursuant to this broad oversight jurisdiction that this Subcommittee is holding the first of what will be a series of oversight 

hearings on the programs and operations of the Department of Defense that have been designated as high risk by the Government 

Accountability Office. High-risk programs and operations are considered especially vulnerable to waste and mismanagement. 

This past January, GAO designated eight areas of DOD as high 

risk. Many of these problem areas were first identified in the 

1990’s. In addition, there are six government-wide high-risk areas 

that DOD shares with all Federal agencies. 

Today’s hearing focuses specifically on a new area designated by 

GAO—DOD’s approach to business transformation. This high-risk 

area impacts many facets of the Department’s business systems 

and program areas, including business systems modernization, support infrastructure management, financial management, weapon 

systems acquisitions, contract management, and supply chain manVerDate 0ct 09 2002 08:42 Nov 10, 2005 Jkt 021436 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\DOCS\21436.TXT SAFFAIRS PsN: PHOGAN
2

agement. In other words, improvements in this high-risk area are 

essential to ensure that the Department manages its people, systems, and programs in an efficient manner. 

We are holding this hearing because these high-risk areas and 

the resources and management efforts they consume degrades the 

ability of our Armed Forces to perform their missions as effectively 

as possible. We are holding this hearing because the men and 

women serving abroad and fighting for our freedom and interests 

deserve the best support possible from the agencies responsible for 

those missions. 

I think there would be a universal agreement that, despite our 

current best efforts, we need to do better. Let me also say at the 

onset that we are all in this together. We are all interested in reducing inefficiency at the Department of Defense and providing the 

best possible support. 

As I mentioned at the Subcommittee’s hearing on the high-risk 

list in February, I intend to address the management challenges 

confronting the Department of Defense in a manner similar to how 

we have addressed the Federal Government’s human capital challenges. In fact, the management challenges at DOD remind me of 

the government’s human capital challenges in a key respect. It is 

a case of good people caught in a flawed system. At DOD, these 

challenges are exacerbated by the enormous scope of its operations 

involving millions of people spanning the globe. 

The Subcommittee will examine and explore the management 

challenges at DOD. Once we have a firm grasp on the challenges, 

I will work with Senator Akaka, Senator Collins, and all other interested parties in trying to find solutions. 

Legislation may be required. Indeed, just last week, Senator 

Akaka and I joined Senator Ensign in introducing S. 780, which 

would establish the Deputy Secretary of Defense for Management 

at the Department of Defense. Other solutions may require new approaches to doing business and can be done internally by the Executive Branch of government. 

When the Secretary of Defense Rumsfeld began his efforts to 

transform the Department of Defense, he meant far more than just 

the way the Armed Forces fight in the field. He also meant the way 

the Pentagon itself works on a daily basis. Ironically, Secretary 

Rumsfeld began his own campaign to transform the defense bureaucracy on September 10, 2001. At a speech at the Pentagon, 

Secretary Rumsfeld stated, ‘‘The modernization of the Department 

of Defense is a matter of urgency. In fact, it is a matter of life and 

death, ultimately, every American’s.’’

He went on to say, ‘‘This effort will succeed because it must. We 

really have no choice. It is not in the end about business practices, 

nor is the goal to improve figures on the bottom line. It’s really 

about the security of the United States of America. Our job is defending America, and if we cannot change the way we do business, 

then we cannot do our job well, and we must.’’

In our invitation letter to the Secretary, Senator Akaka and I 

asked for DOD’s response to GAO’s assessment, as well as an outline of DOD’s comprehensive plan to address these challenges. We 

also wanted to learn the Department’s views on establishing a nonVerDate 0ct 09 2002 08:42 Nov 10, 2005 Jkt 021436 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 C:\DOCS\21436.TXT SAFFAIRS PsN: PHOGAN
3

political chief management officer to oversee the Department’s operations. 

Based upon the testimony of Under Secretary Wynne before the 

Armed Services Committee on April 13, DOD is opposed to the 

idea. As this concept has not yet been fully explored, this strikes 

me as a little premature in terms of their judgment. 

It is my hope that, through oversight, we can affect positive 

change for the Department of Defense so that the men and women 

who defend our Nation can get the best possible support. 

I now yield to Senator Akaka. Quite frankly, he is far more familiar with these issues than I am, due to his service on the Armed 

Services Committee, where he is the Ranking Member of the Readiness and Management Support Subcommittee. 

Senator Akaka, I thank you for your leadership. And it is just 

wonderful that the two of us are involved in this Subcommittee, 

particularly on this subject. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. Thank you very much, Mr. Chairman. 

Again, I say it is a pleasure working with you to increase government efficiency through the oversight of government operations in 

high-risk programs. And I also want to say it is good to see our witnesses again, as they have really helped to shape what we are 

doing here. 

As you know, 2 weeks ago, the Armed Services Readiness Subcommittee held a hearing on management weaknesses at DOD. As 

that panel’s Ranking Member, I had the opportunity to discuss 

with Comptroller General Walker and DOD officials the problems 

facing the Department. At that hearing, I reiterated my disappointment that out of 25 high-risk areas on the year 2005 list, 8 are 

unique to DOD, and 6 are government-wide areas that apply to 

DOD. 

I sincerely appreciate Senator Voinovich’s interest in working on 

this issue by adding DOD’s management challenges to the portfolio 

of this Subcommittee. I am proud to join you, Mr. Chairman, in 

this effort because I believe we are at a crossroads with the Department of Defense, given the growing deficit and the costs associated 

with the war in Iraq. 

GAO has long pointed to the billions of taxpayer dollars wasted 

annually because of systemic weaknesses in DOD’s business operations. Every extra tax dollar that DOD spends on business systems is one less dollar for our war fighters. 

Today’s hearing, which builds upon both our February hearing 

and this month’s Armed Services Readiness Subcommittee hearing, 

keeps the pressure on DOD to resolve its long-standing financial 

and business management problems. Until DOD drops its cultural 

resistance to change and addresses the lack of sustained leadership 

within the Department, we will continue to see DOD occupying the 

bulk of the high-risk list. 

To deal with these challenges at DOD, the Readiness Subcommittee has enacted legislation addressing several of the DOD 

high-risk areas. For example, after DOD failed to have a promised 

enterprise architecture blueprint for its business systems in place 

by March 2003, we required the Department to develop and impleVerDate 0ct 09 2002 08:42 Nov 10, 2005 Jkt 021436 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 C:\DOCS\21436.TXT SAFFAIRS PsN: PHOGAN
4

ment a new financial management architecture and transition plan 

by early 2004. I am troubled that there is no plan today, despite 

statutory requirements. 

To improve efficiencies across the more than 4,000 non-integrated and duplicative business systems, the Fiscal Year 2005 Defense Authorization Act placed conditions on the obligation of funds 

for defense business systems modernization, which included approval requirements and accountability for purchases over $1 million. 

As I noted, the barriers to DOD’s business transformation are 

long-standing and deep-rooted. But there is progress. In addressing 

congressional mandates, and as Mr. Berkson will testify, DOD has 

taken steps toward improvement. For example, in May 2003, DOD 

established the Business Management Modernization Program 

Committee. 

However, despite these efforts, there continues to be an overall 

lack of progress in DOD’s business transformation efforts. Wheels 

are turning without much forward movement. The lack of sustained leadership and commitment to business transformation is 

why I worked with Senator Ensign, the Chairman of the Readiness 

Subcommittee, and with you, Chairman Voinovich, on a legislative 

proposal recommended by the Comptroller General to establish the 

position of chief management officer, a CMO, within DOD. 

I am hopeful our measure, S. 780, will be included in this year’s 

DOD authorization bill. This new position will create a Level 2 deputy secretary, who will be responsible for business operations at 

DOD, including planning and budgeting, acquisitions, logistics, financial management, and human resources and personnel. The 

CMO would also be responsible for developing and implementing a 

department-wide strategic plan for business reform. 

Our bill does not add another layer of bureaucracy at DOD. 

Rather, it divides the responsibilities of the existing deputy secretary between policy and management so that both areas receive 

adequate attention. DOD needs one person whose term of office 

overlaps administrations and who will be accountable and responsible for leading change. Without one person in charge of overall 

business transformation within DOD, I fear the Department’s programs will remain on GAO’s high-risk list for many years to come. 

Our war fighters are supported through the various management 

systems within DOD. We can no longer afford a fragmented and 

half-hearted approach to DOD business transformation. No less 

than the security of our Nation depends upon it. 

Our growing deficit puts us on an unsustainable fiscal path that 

will damage our national security, as General Walker observes in 

his testimony. This is not a partisan issue, and it can only be resolved by bipartisan cooperation. 

I want to again commend Chairman Voinovich for his efforts. We 

intend to do everything we can to ensure DOD solves these management problems. I look forward, Mr. Chairman, to the testimony 

of our distinguished witnesses, and I thank you for having this 

hearing. 

Senator VOINOVICH. Senator Lautenberg, I want to thank you 

very much for being here today and I am looking forward to your 

statement. 

5

OPENING STATEMENT OF SENATOR LAUTENBERG 

Senator LAUTENBERG. Thanks very much, Mr. Chairman. It is a 

pleasure to work with you and Senator Akaka. In particular, you 

have established a reputation for getting to the bottom of things in 

your term as mayor, governor, and U.S. Senator. We greatly admire that quality. 

Two weeks ago, Comptroller General Walker told the Senate 

Subcommittee that the DOD, the Department of Defense, can’t account for tens of millions of dollars that it spent in Iraq, Afghanistan, and elsewhere in the U.S. war on terrorism. And I quote you 

here, General Walker, trying to figure out where the money went 

is ‘‘like pulling teeth.’’

This isn’t, unfortunately, anything new. For years, the Government Accountability Office has reported that DOD squanders billions of taxpayer dollars through waste, fraud, and abuse, and poor 

management. Now this would be a serious matter for any part of 

our government. It is especially serious in this case because the Department of Defense is the Federal Government’s largest purchaser. 

Now reference was made to Secretary Rumsfeld’s speech on September 10, 2001, the day before the great American tragedy took 

place. Secretary Rumsfeld then said that he never saw an organization that couldn’t save 5 percent of its budget with better management. In DOD’s case, that comes to $21 billion. So we should all 

be concerned about management practices at the Pentagon. 

Now I am especially concerned about several sweetheart contracts that were given to the Halliburton Company. They had been 

the beneficiary of a $2.5 billion no-bid contract and a cost-plus contract that actually provides an incentive to waste taxpayer dollars. 

Now under this cost-plus arrangement, also known as LOGCAP, 

Halliburton gets reimbursed for every dime that it spends. And 

then, on top of that, it gets a calculated percentage for profit. And 

that is why Halliburton didn’t hesitate to pay $1.50 for a can of 

soda. After all, it wasn’t their money. And that is why they overcharged taxpayers more than $27 million for meals that were never 

even served to our troops. After all, it wasn’t their money. 

And that is why they overcharged the Army $61 million for gasoline delivered to Iraq. Once again, it wasn’t their money. It came 

out of the pockets of American taxpayers. 

Now, Mr. Chairman, I understand that cost-plus contracts are 

sometimes justified by special circumstances. When that is the 

case, the contractor must account for every dollar spent. And Halliburton hasn’t done that. 

Army auditors wanted to withhold payments from Halliburton 

because it couldn’t account for how it spent hundreds of millions 

in taxpayer dollars. But as it always seems to do, the Pentagon 

gives Halliburton special treatment, waiving the requirement for 

accountability. 

Now we saw something in the newspapers just a couple of days 

ago about four Marines who had been in combat, and they were 

brave, loyal troopers. But they pointed out that lack of proper 

armor on the Humvees was responsible for the deaths of their colleagues because the armor was not only inadequate, it also was too 

6

short to really protect them. So the head wounds that came from 

shrapnel killed four of their colleagues. 

Families in this country are giving their sons and daughters, 

husbands and wives. And when they see this profligate spending, 

when they couldn’t get the equipment they want, they are justifiably complaining about the lack of appropriate protections for 

themselves. The American people want to get to the bottom of 

these contracts, and allegations that they are not available turn 

out to be truths. 

The public wants to know whether Halliburton or any other company is engaged in war profiteering. Yet no Senate committee has 

held a bipartisan hearing about these specific allegations of waste, 

fraud, and abuse. 

Mr. Chairman, once again, I thank you for convening this hearing today. And I hope that when the full Committee holds a hearing in the future that one of the things that they will focus on, Halliburton and its contracts. Not because I want to pick on Halliburton, but because they are the most glaring example of 

unaccountability. 

And coming from the corporate world, as I have, and good sense, 

as my colleagues here have, you just can’t favor anybody to that 

extent and then complain about waste. 

Thanks, Mr. Chairman. 

Senator VOINOVICH. Thank you, Senator Lautenberg. 

Today, we have a distinguished panel of witnesses before us. The 

Hon. David Walker is Comptroller of the United States. I understand you have just flown back from Indonesia to make this hearing. I thank you for your efforts. 

Mr. Walker has been sounding the alarm from GAO and conducting valuable evaluations of DOD’s business practices for some 

time. 

Joining him is the Hon. Clay Johnson, Deputy Director for Management at the Office of Budget and Management. Mr. Johnson is 

the leading the charge at OMB on addressing DOD’s management 

challenges. 

Mr. Johnson, I commend you and the Bush Administration for 

the no-nonsense approach you have taken to management issues. 

The President’s management agenda is the most comprehensive results-oriented program that I have seen of any administration during my years in public service. I tell many people that this is one 

of the Administration’s most overlooked achievements, and I believe it will be one of the Bush Administration’s greatest legacies. 

I would like to state that there are a lot of issues that we are 

getting into today that, quite frankly, we just haven’t bothered 

with. There is a tendency sometimes to just do nothing. If we do 

nothing, then we will never see change within the DOD. 

I had Steve Perry in my office yesterday from General Services 

Administration. He was talking about pay-for-performance and how 

they have changed the attitude over there in the Department in 

terms of their rating and so on. Quite frankly, he was a yellow on 

where he was and a green on his progress. So that people are being 

held accountable for the things that they are doing. And that is 

something that we ought to be doing, and I congratulate you for 

that. 

7

1The prepared statement of Mr. Walker appears in the Appendix on page 33. 

Representing the Department of Defense is Bradley Berkson, 

Acting Deputy Under Secretary of Defense for Logistics and Materiel Readiness. Mr. Berkson, thank you for your service to this 

country. 

On Tuesday, I had the opportunity to meet Ken Krieg, the President’s nominee for the Under Secretary of Defense for Acquisition, 

Technology, and Logistics. He began his service at the Defense Department in July 2001, and it is admirable that Mr. Krieg has decided to remain in public service. 

One of the things that I appreciate is the fact that people who 

have served in the first 4 years of the President’s Administration 

have stuck around because they have all this knowledge and everything. And the fact that they are going to stick around and continue, I think, is really important because their contribution will be 

so much greater because of the time that they have spent. 

I understand that your office will play a role in reforming the Department’s business practices. I look forward to working with both 

of you. When it comes to managing the Department of Defense, we 

have to do better. I know you realize that. The Secretary does. I 

applaud your efforts to address these challenges, and we look forward to learning what you intend to do. 

If you will stand, it is the custom of this Subcommittee to swear 

in the witnesses. Do you swear that the testimony you are about 

to give is the truth, the whole truth, and nothing but the truth, so 

help you, God? 

[Witnesses sworn.] 

Senator VOINOVICH. Let the record show that they answered in 

the affirmative. We will start with Mr. Walker. 

TESTIMONY OF HON. DAVID M. WALKER,1 COMPTROLLER 

GENERAL, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. WALKER. Thank you, Mr. Chairman, and other Senators. It 

is a pleasure to be back before this Subcommittee today to discuss 

business transformation at the Department of Defense. 

At the outset, I would like to thank you, Mr. Chairman, and all 

Members of this Subcommittee for your continued commitment to 

engage in oversight of key management operations and issues, including the Department of Defense. 

Mr. Chairman, I would also like to commend you, Senator 

Akaka, and Senator Ensign for your leadership and your sponsorship of proposed legislation to establish a Deputy Secretary of 

Defense for Management. Implementing a CMO position, in our 

opinion, is critical to successfully transforming DOD’s business operations. 

While DOD maintains military forces with unparalleled capabilities, it continues to confront pervasive and decades-old management problems related to business operations that support these 

forces. These management problems cost the American taxpayer 

billions of dollars a year. 

DOD senior leadership is committed to transforming DOD’s business operations to correct these problems and has taken a number 

of steps to begin this effort. We recognize that overhauling the 

8

business operations of one of the largest and most complex organizations in the world represents a daunting challenge, and it is not 

a new challenge. 

The extent of this challenge is further demonstrated by our 2005 

high-risk list, which you touched on before, Mr. Chairman. Counting the six government-wide high-risk areas, DOD has 14 of 25 

high-risk areas, and several of these have been on the list since the 

beginning. 

Although OMB has worked closely with a number of agencies 

that have high-risk areas historically, over several administrations, 

OMB has been much less engaged with regard to DOD. Quite candidly, Mr. Chairman, the Congress has been much less engaged in 

oversight of DOD over many years as well. That must change. 

To his credit, Clay Johnson, OMB’s Deputy Director for Management, recently reaffirmed plans to re-engage with GAO on the new 

high-risk list and to make as much progress as possible in the second term of the Bush Administration. He is also committed to 

working with DOD on a much more active basis to help make sure 

that they put together a plan to address all their high-risk areas. 

I think it is critically important that they do so. In addition to 

OMB’s engagement, it is critically important that Congress stay on 

the case as well with regard to these matters. 

There are a number of institutional barriers to change at DOD. 

DOD has begun several broad-based reform efforts to transform its 

business operations over several decades. But to date, there has 

been little tangible evidence of substantial and sustained progress. 

Yes, there has been progress, but not substantial enough and, 

clearly, not sustained. 

We do not fault the ability or commitment of those individuals 

who have been involved in these efforts over the years, including 

those who are involved at the present point in time. Our work has 

identified four underlying causes or institutional barriers that we 

think represent real impediments to long-term progress. 

First, the lack of sustained leadership and accountability for correcting problems. Mr. Chairman, the simple truth is that nobody 

is in charge of business transformation at DOD. If there was, I 

would want to know why they are not here today and why they 

weren’t at the hearing last week. Nobody is in charge of overall 

business transformation at DOD. 

Second, cultural resistance, service parochialism, and stove-piped 

operations—or I call them hardened silos—that end up reinforcing 

the status quo. The absence of a department-level, results-oriented 

business culture that places values on plans containing results-oriented goals and performance measures, coupled with centralized 

monitoring processes, inadequate incentives, and accountability 

mechanisms for change, and historically inadequate oversight has 

led to our current situation. 

There are three key elements that we have noted in my testimony—which I would respectfully request, Mr. Chairman, be included in the record—that have to be addressed in order to be successful. First, there has to be a plan. There is no comprehensive 

strategic and integrated business transformation plan at DOD, 

which sets priorities, has appropriate key milestones, and puts individuals responsible for accomplishing certain objectives within 

9

specified timeframes. To my knowledge, there never has been one 

over decades. But there clearly is not one now. 

Second, there needs to be more centralized control over the billions of dollars in systems investments. Third, DOD needs a chief 

management official. 

I want to conclude by talking about the chief management officer 

position. I want to discuss what it would and would not do, because 

there is some misinformation with regard to this position. First, 

the CMO would be responsible and accountable for overall business 

transformation, not for policy issues such as military transformation. 

This responsibility would involve planning, integrating, and executing an overall business transformation plan. That is, with all 

due respect, a full-time job that has never been filled. 

The CMO would not assume the responsibility of the under secretaries of defense, the service secretaries, or other DOD officials 

for day-to-day management of various business activities. Quite 

candidly, the under secretaries and the service secretaries have 

full-time jobs dealing with their day-to-day responsibilities, and it 

is inappropriate to have a new layer involved in discharging those 

responsibilities. 

At the same time, the breadth and complexity of DOD’s management problems and the overall level that this has to be addressed 

within the Department precludes the under secretaries, such as the 

DOD comptroller and also the under secretary for AT&L, for asserting the necessary authority over selected players and processes 

while continuing to fill their substantial day-to-day responsibilities. 

Since the CMO and DOD managers would have clearly delineated roles and responsibilities, creating a CMO would not add another hierarchical layer to oversee day-to-day management of the 

Department. As Senator Akaka mentioned your legislation clearly 

delineates roles and responsibilities and makes it very clear that 

this is not a new layer. It does, however, for the first time, make 

somebody responsible and accountable for business transformation. 

Some say this concept was tried in the past and didn’t work. I 

would respectfully suggest that people need to go back and read 

the legislation and the related legislative history. Such an assertion 

compares apples and oranges. 

Over 30 years ago, Secretary of Defense Mel Laird asked Congress to establish an additional deputy secretary of defense for 

many of the same reasons we are proposing now, and Congress did 

so. But there were a number of substantive differences. Your legislation clearly delineates responsibility and authorities, makes it 

clear that it is not a new layer and level, and focuses the individual 

full time on business transformation. That past legislation did not 

do that. It did not specify duties and responsibilities for the new 

position thereby creating potential confusion and overlaps. 

Second, unlike your legislation, which would provide for a 7-year 

term appointment, therefore, making sure that you had a professional which had enough continuity to try to be able to make real 

and sustainable progress. The past legislation did not do that. 

Therefore, in form, you may call it the same thing, but in substance, it is very different. Mr. Chairman, I believe that we have 

to focus on substance, not form. 

10

1The prepared statement of Mr. Johnson appears in the Appendix on page 68. 

In closing, I would like to quote two secretaries of defense. The 

first quote, ‘‘Management deficiencies that we have all observed in 

the past have, in large measure, been due to insufficient senior 

management attention to the affairs of the Department of Defense. 

I am convinced that authorization for an additional deputy secretary will provide the capability for this necessary level of attention. At the same time, I think it is particularly important that we 

do not increase the layers of management within the department.’’

That was Secretary Mel Laird, February 9, 1972—33 years ago. 

The second secretary of defense’s quote. ‘‘Our challenge is to 

transform not just the way we deter and defend, but the way we 

conduct our daily business. Let us make no mistake. The modernization of the Department of Defense is a matter of some urgency. In fact, it could be said that it is a matter of life and death, 

ultimately, every American’s. Every dollar squandered on waste is 

one denied to the war fighter.’’

That was Secretary of Defense Donald Rumsfeld, September 10, 

2001. I strongly agree with both secretaries. How many more years 

and decades will we have to continue to deal with the status quo? 

Mr. Chairman, as you and Senator Akaka mentioned before, this 

is all about supporting the war fighter and recognizing fiscal realities. The status quo is unacceptable and unsustainable, and we appreciate your, and the Members of this Subcommittee’s, interest. 

Thank you. 

Senator VOINOVICH. Thank you, General Walker. Mr. Johnson. 

TESTIMONY OF HON. CLAY JOHNSON, III,1 DEPUTY DIRECTOR 

FOR MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET 

Mr. JOHNSON. Mr. Chairman and Senators, thank you. 

We are all working to make sure the Defense Secretary’s commitment to business transformation is translated into demonstrable 

improvement in all of DOD’s business operations. OMB’s experience is that management opportunities—normal opportunities and 

super complex opportunities, like those at DOD—get addressed 100 

percent of the time when four things exist. 

There is top management commitment to solving the problem. 

There is a clear picture of what needs to be accomplished. There 

is a clear, aggressive action plan, like General Walker talked about, 

for solving the problem. And there is a clear definition of who is 

responsible overall, and who is supposed to do what by when. 

OMB’s role in this is that we help ensure that these elements 

exist so DOD, or any agency, can most assuredly get to where it 

wants to be in the desired timeframe. We also help agency leadership ensure that progress occurs as planned and scheduled. In the 

case of the high-risk items, we also help ensure that Congress and 

GAO are satisfied with the Agency’s plans and progress. 

Mr. Chairman, I look forward to working with you and your Subcommittee on these matters. You have a proven record of getting 

more for the taxpayers’ money, and that is what all of us are focused on and capable of doing here. 

Thank you. 

Senator VOINOVICH. Thank you. Mr. Berkson. 

11

1The prepared statement of Mr. Berkson appears in the Appendix on page 71. 

TESTIMONY OF BRADLEY M. BERKSON,1 ACTING DEPUTY 

UNDER SECRETARY OF DEFENSE FOR LOGISTICS AND MATERIEL READINESS, U.S. DEPARTMENT OF DEFENSE 

Mr. BERKSON. Chairman Voinovich, Senators, thank you for the 

opportunity to appear before this Subcommittee and discuss business transformation at the Department of Defense, and thank you 

for your kind comments. 

Since this is my first appearance before the Senate, I would like 

to briefly describe to you my background and how it is relevant to 

DOD business transformation. 

I have been working on business transformation full time since 

arriving at the DOD 2 years ago. I am currently serving as Acting 

Deputy Under Secretary of Defense for Logistics and Materiel 

Readiness. In this role, I am the senior DOD logistics official. Logistics, by the way, is probably the largest business operation at 

the Pentagon. I am engaged daily in transforming our Nation’s 

$129 billion DOD logistics and supply chain enterprise. 

I am an engineer by training. I earned an MBA from Harvard, 

and I was a partner in McKinsey & Company, where I was serving 

leading commercial enterprises around the globe on matters of 

strategy, organization, finance, and business operations. I have 

worked in the commercial sector from start-ups to the world’s largest corporations. 

Mr. Chairman, you mentioned in the last hearing on this subject 

the need for talent from the private sector that would come into 

government and help ensure and accelerate transformation. I hope 

my background had some of the qualities that you would like to 

see. 

I would like to frame the challenge of business transformation 

within DOD. What has been most surprising to me in coming from 

the commercial world to DOD is the dramatic difference in scale 

and complexity. DOD has the world’s largest fleet of aircraft, but 

it is not an airline. We have the largest fleet of ships, but are not 

a shipping company. We have one of the largest fleets of trucks, 

and we are not a trucking company. We have the largest fleet of 

ground vehicles, and we are not a car rental company. 

We are the second-largest operator of warehouse space, but logistics is a supporting mission. In the private world, any one of our 

programs, armories, depots, shipyards, transportation modes, or logistics systems would be of sufficient scale to compete in the global 

market. 

A key point to note, though, is although we have world-scale 

business operations, business is not our mission. In every commercial forum in which I have ever served or worked for, the business 

missions were primary, particularly finance. For example, the mission of General Electric is to make money for its stockholders. It 

does so by aligning its business operations, personnel, and capabilities to maximize its financial performance. 

As I understand it, the mission of the Department of Defense is 

to defend the United States of America from its enemies. The job 

of the secretary of defense is to see that that mission is accomVerDate 0ct 09 2002 08:42 Nov 10, 2005 Jkt 021436 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 C:\DOCS\21436.TXT SAFFAIRS PsN: PHOGAN
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1The chart entitled ‘‘Focus on continuous improvement (Maintenance Cycle Time Days)’’ submitted by Mr. Berkson appears in the Appendix on page 104. 2The chart entitled ‘‘Performance Based Logistics (PBL) proven in the Global War on Terrorism’’ submitted by Mr. Berkson appears in the Appendix on page 105. 3The chart entitled ‘‘IRAQ Air Shipments Cycletime’’ submitted by Mr. Berkson appears in 

the Appendix on page 106. 

plished. Business transformation is necessary, but it is not sufficient for the secretary to be successful in his duties. 

When Secretary Rumsfeld announced his intentions to transform 

the Department of Defense, I feel certain that business transformation was central to that intent. Twenty-four hours later, our 

country faced the most significant challenge to its security in several decades, requiring complete attention be focused on defending 

our country. 

While he and our senior leadership have remained consistent in 

driving their vision for transformation, the ability of the Department of Defense to focus exclusively on fixing business operations 

in the midst of our largest sustained military campaign since Vietnam is problematic. 

That said, I would like to show you what we have been doing 

over there. The chart to my right depicts some of the results of 

DOD business transformation. In this case, it is the cycle time performance for the F404 engine.1 This is the engine on the F–18 

Superhornet. 

Overall cycle time for this engine has been reduced by an order 

of magnitude. We have taken it from 85 to 5 days. This was accomplished using Lean 6 Sigma. Lean 6 Sigma is a business process 

improvement methodology widely used in industry, and it has 

helped us to achieve dramatic performance improvements not only 

in the F404, but in dozens of systems and locations from Pearl Harbor to Warner Robins, from tank engines to radar systems. 

In my opinion, Lean 6 Sigma has the most potential of any single 

initiative to transform the business operations of the Department. 

We have plans within each of the services and at OSD to accelerate 

and institutionalize it. 

Another bold transformation is found in our performance-based 

approach to buying.2 Historically, DOD has been a buyer of parts 

and labor. This left us with the job of integrating these and other 

production factors across the Department. Led by us in logistics 

and materiel readiness, through performance-based logistics, we 

are emphasizing the more valuable task of managing outputs vice 

inputs. 

In the last 4 years, DOD has migrated over 100 systems to performance-based contracts. The results of this can be seen in the 

chart to my left. This chart shows the readiness of several of our 

critical weapon systems in a PBL regime on the left and under a 

traditional support approach on the right. 

We have responded to suggested improvements from people, from 

folks like Mr. Walker, not only by improving the traditional approaches, like inventory management, but in transformational 

ways, like eliminating the need for inventory. The next chart shows 

our distribution cycle time to the CENTCOM area of operations.3

This is for aerial shipments. It shows that we have cut the time 

nearly in half. 

13

Using leading-edge technologies, like radio frequency identification, or RFID, and unique identification, or UID, the DOD is leading the world in applying these cutting-edge technologies to its 

business operations. 

In closing, Mr. Chairman, I would like to reiterate the great 

strides we are making in transforming the business operations of 

the DOD. We have daunting challenges in scale and complexity. At 

the same time, we have an unswerving commitment to mission accomplishment. 

We are convinced that transforming the business operations at 

DOD, as you are, are key to serving our war fighters and our Nation. My colleagues and I are dedicated to making that happen. 

I invite you and your fellow Subcommittee Members to receive 

our briefings on the business process changes we are making, especially Lean 6 Sigma. I would also encourage you to visit the locations and meet the people that have been making it happen. 

Thank you for the opportunity to testify, and I would be happy 

to answer your questions. 

Senator VOINOVICH. Thank you, Mr. Berkson. 

General Walker, last month, the deputy secretary of defense 

moved DOD’s business transformation efforts from the under secretary of defense comptroller to the under secretary of defense for 

acquisitions, technology, and logistics. Do you think that this organizational shift will create a clear and accountable business transformation effort? 

Mr. WALKER. No, I don’t think it is enough. There is a lot of work 

that needs to be done in AT&L. There are high-risk areas that deal 

with AT&L. It is true to say that some progress has been made. 

There is no question about that. You have just heard several examples of where progress has been made. But much more work needs 

to be done. 

As you know, AT&L is involved both on the policy side, as well 

as on the operational management side, and there are major challenges on both sides of the house dealing with AT&L. So I believe 

you still need a chief management official. I don’t believe that the 

head of AT&L can do both jobs. 

I believe it is important that, in addition to having a person at 

the right level focus full time on business transformation, they 

need to have a term appointment. You need somebody who has a 

proven track record of success, who has the requisite experience, 

who, if they do a good job, is going to be there for at least 7 years. 

I have been in the private sector for 21 years and consulted all 

over the world on change management it takes 7-plus years to 

achieve effective cultural transformation. Namely, to make changes 

that will stick beyond the person who started it. 

We don’t have anybody at DOD that long. It is going to take 

more than 7 years at DOD, but we don’t have a fighting chance unless we have somebody with the right kind of track record focused 

full time for a sustainable period in order to give us a fighting 

chance of success. 

Senator VOINOVICH. Could you point to some other agencies 

where this concept has worked? 

Mr. WALKER. This is a relatively new concept. If you look in the 

government, most of the presidential appointee positions that exist 

14

with Senate confirmation are not term appointments. There are 

some notable exceptions. The comptroller general of the United 

States, my position, has a 15-year term appointment. 

Believe me, that makes a huge difference in being able to take 

on serious management challenges and to engage in a fundamental 

transformation of an agency. I have been at GAO now 61⁄2 years. 

I would respectfully suggest that we have engaged in a fundamental transformation in that 61⁄2 years. If I got hit by a truck tomorrow, it is a different place today than it was 61⁄2 years ago. 

But other than the comptroller general, then you go to what 

other positions? The head of the FBI, which is 10 years. The Federal Reserve is 14 years. There are very few term appointments 

other than board positions like SEC commissioners. 

Senator VOINOVICH. How about the Internal Revenue Service? 

Mr. WALKER. You are correct. Thank you, Mr. Chairman. The 

commissioner of the Internal Revenue Service, I believe, has a 5-

year appointment. 

Mr. JOHNSON. Social Security is now term. 

Mr. WALKER. Social Security is now term. I think both of those 

are very good examples. Thank you, Clay. Those are very good examples because both of those jobs are not intended to be policy 

jobs. As you know, tax policy is set by the Treasury Department 

in conjunction with the White House and others. The Internal Revenue commissioner is supposed to basically handle tax administration. 

The head of the Social Security Administration is supposed to 

handle administration of Social Security’s huge retirement income, 

disability, and survivors benefits responsibilities. They are not in 

policy positions. 

So there are some analogies in government, Mr. Chairman. 

Thank you, Clay, for mentioning that. 

Senator VOINOVICH. Mr. Johnson, this afternoon, you outlined a 

template for addressing DOD’s supply chain management challenges in your testimony. I commend you for your efforts because 

this issue has been on the list since 1990. 

Based on your testimony, it appears that the Administration is 

taking what I would like to refer to it as a ‘‘bottom-up approach’’ 

to solving DOD’s business transformation efforts. What steps will 

the Administration take to ensure that the Department of Defense 

is taking also a ‘‘top-down approach’’ to solve the overreaching 

high-risk area of business transformation? 

Mr. JOHNSON. Right. You talked about Ken Krieg earlier. I have 

talked to Ken about this because it is one thing to look at, how to 

tackle each one of the seven, but then with what priority? All seven 

probably can’t and shouldn’t be tackled with the same priority. 

Some are more important than others. Some are more problematic. 

Some have huge costs associated with them. All that needs to be 

looked at as a total. 

And there is a change now taking place, as you know, with the 

deputy secretary. And so, what Ken suggested we do is if and when 

Secretary England is confirmed for being the deputy secretary, that 

we then sit down with him and review this and understand what 

he would recommend be the priorities and the timeframes. Because 

we can agree on amongst ourselves and GAO on a 3-year timeVerDate 0ct 09 2002 08:42 Nov 10, 2005 Jkt 021436 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 C:\DOCS\21436.TXT SAFFAIRS PsN: PHOGAN
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frame or a 6-year timeframe on some of these things, but it should 

not be done without the consent and the full participation of, today 

without a CMO, of the deputy secretary. 

So you talk about as soon as Gordon, if and when he is confirmed 

for the position, gets in there and gets settled, that we sit down 

and work out the corporate timeframes for this. He has to be there 

to create an attitude and an approach to business transformation. 

One of the things that needs to be understood about a chief management officer is that the most fantastically talented chief management officer will be totally ineffective if the secretary of defense 

and the President are not fully supportive of management change 

to the Defense Department. No term, no set of credentials can 

make a management officer effective at the Defense Department, 

or any place else, if the head of that Department or the President 

don’t consider it to be a very high priority. And so, it is important 

in this case that the deputy be there and be involved, intimately 

involved, in setting the timeframes and the priorities for overall 

business transformation. 

I think, as I understand it from Ken, and his suggestion to Senator Ensign on the subject of a chief management officer is that he 

be allowed a little time to get in there and survey the situation. 

I think he had agreed totally that there needs to be a person that 

is clearly in charge of this, and that is working with the relevant 

under secretaries to drive their individual initiatives. Let him have 

a chance to take a look at the situation and come back and engage 

you all in a more intelligent debate about the pros and cons of a 

chief management officer. 

Senator VOINOVICH. As I mentioned, I think that Mr. Krieg has 

been with the current administration for 31⁄2 years and hopefully 

is going to stick around. But once a new administration steps in, 

how do we keep the momentum going? 

I would like to know that if we get things moving in the DOD, 

and I leave this place, that there is somebody who will be there to 

make sure that business transformation is accomplished. 

Senator Akaka. 

Senator AKAKA. Thank you very much, Mr. Chairman. 

Mr. Berkson, the GAO has testified previously that cultural resistance to change and the lack of sustained leadership are two underlying causes of DOD’s inability to resolve its long-standing financial and business management problems. 

As you know, I joined with Senators Voinovich and Ensign in introducing legislation establishing the position of chief management 

officer. In your written testimony, you said that the creation of this 

office would ‘‘further remove the Secretary of Defense from vital 

and timely information on the workings of the department.’’

In the absence of such a new position, who, in your opinion, is 

responsible for creating and implementing the business transformation plan at DOD? 

Mr. BERKSON. Senator, thank you for the question, and I appreciate your comments. 

In reaction to the notion of the cultural efforts and the term efforts, I would also like to just also get us back to the scale. At one 

point, we were talking about when an issue was raised about sepaVerDate 0ct 09 2002 08:42 Nov 10, 2005 Jkt 021436 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 C:\DOCS\21436.TXT SAFFAIRS PsN: PHOGAN
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ration of the military and the business side of the Department of 

Defense. I will just give you it from where I am working, Senator. 

My job has been full time on business transformation for the last 

2 years. And if I look at what do I need, did I need another supervisory role with expertise like a number of our senior officials—Secretary Wynne, Secretary England, Ken Krieg? I mean, Mr. Krieg 

actually hired me. So that requirement for more bosses hasn’t been 

what I have been missing. 

To really get this done, you need fundamental transformation 

across a $130 billion logistics enterprise and a $450 billion overall 

enterprise. And my experience so far, in doing this every day, has 

been actually driving the change down to the workers, the managers, and the people who run shipyards, the people who run depots, the people who run our distribution warehouses. That is 

where the real business operations occur. 

And transformation, in my experience so far there, has really 

been about introducing and driving change in transformation ways 

of thinking. Lean 6 Sigma is a transformation way of thinking. 

Unique identification and RFID is a transformation way of thinking. 

We just had our first receipt of RFID. Radio frequency identification tag was placed on by one of our suppliers and received in a 

DLA distribution warehouse this week, using Wide-Area Work 

Flow. I just picked off three of the major business transformations 

we have been working on, and they are starting to come together. 

I agree that it takes a long time to do this. But the thing that 

I am not sure of and I haven’t seen is how another supervisor in 

this role, given how complex and vast this enterprise is, how that 

person would bring me something that would allow me to do this. 

If I look at what the real characteristics of the proposed legislation, I think definitely we are looking at it and considering it carefully. If I just tick off a few of the things, a Level 2 with business 

experience who is third in precedence. Currently, that describes for 

the business operations, the under secretary of defense for acquisition, technology, and logistics. 

Under Title 10, he must have business experience. Or he or she 

must have business experience. The chief business operations of 

the Department of Defense, in my experience so far, are in those 

acquisition, technology, and logistics arenas. And the secretary has 

just designated and as the Congress has designated a chairman for 

business transformation, the BMM program. And again, now that 

Secretary Wynne and the AT&L has that role by law, he is the 

third in the order of precedence for all matters related to that. 

So as I look at the structure of what is being proposed, I try to 

understand how it is going to continue to move us down. I know 

the intent is very strong, and we really want to improve. And we 

are all desperately working to make that happen, but I step back, 

and I have secondary questions. 

One is I have a role that can do that. Another issue that I would 

raise—these are my personal opinions—is that I ask what does the 

AT&L do in the event that all the business operations at the Defense Department, which he is currently responsible for—acquisition, technology, logistics—are now superseded and taken up to a 

17

level, and a level which, as I am hearing more about it, which is 

not going to interact with the military. 

In my experience, I am the chairman of the Joint Logistics 

Board. So I have all of the joint logistics leadership in my room 

when I am leading that board. That board is primarily made up of 

three-star and four-star general officers and admirals in our Nation’s defense. They are the senior business leadership who is driving a majority of our business operations. 

The notion of separating the business from the military operations in logistics at least, where I am familiar, is something I 

cannot even imagine. Logistics in our operations is a military maneuver. A convoy is a military operation. And the notion of that 

separation is something that I struggle to understand. 

Senator AKAKA. General Walker, do you have anything to add? 

Mr. WALKER. If I can, Senator. I thought your question was who 

is in charge? The answer is nobody. Memos get issued from time 

to time at DOD. I have seen plenty of them. 

The problem is you don’t solve problems with issuing memos, and 

you can’t take a command and control approach to the civilian side 

of business transformation. I can show you memo after memo after 

memo appointing somebody in charge. It’s not memos but results 

that count. 

With all due respect, Management 101, you have to have somebody who is in charge. You have to have, as Clay Johnson said, 

committed and sustained leadership from the top. You have to have 

a plan that clearly sets priorities and fixes responsibility and accountability. You have to link institutional unit and individual performance measurement and rewards systems in order to make sure 

everybody is pulling in the same direction in order to achieve the 

priorities within the specified timeframes. 

We also have to recognize these things are interrelated. But my 

point is that none of these things have been done in 30-plus years. 

Senator AKAKA. Mr. Chairman, may I ask Mr. Walker just one 

more question to follow up on what he said? 

Mr. Walker, the issue is span of control. Mr. Wynne has no authority over financial systems, which are the responsibility of the 

comptroller. He has no responsibility for personnel systems, which 

are Dr. Chu’s responsibility. Mr. Walker, would you care to comment on that? 

Mr. WALKER. Thank you, Senator Akaka. You are exactly right. 

The fact of the matter is AT&L is right now the third-ranking 

person. It is a Level 2 position. I would respectfully suggest that 

the under secretary for AT&L has a full-time job dealing with the 

logistical and acguistion transformation that Brad has mentioned. 

Some progress has been made, no doubt about it. But much remains to be done. That sounds like a typical GAO report. 

In addition to that, AT&L has to deal with a number of high-risk 

areas and also is involved in the military transformation side of the 

business in addition to the business transformation side. Ordinarily 

there is no way that we are going to be able to afford and sustain 

all the weapon systems that are currently in the pipeline. It isn’t 

going to happen. 

So you are correct, Senator Akaka, in noting that in Chairman 

Voinovich’s, Senator Ensign’s and your bill recognizes that we need 

18

to take a more strategic and intergrated approach crossing a number of different under secretaries of which AT&L doesn’t have responsibility and authority, as well as the service secretaries and 

the military. Thank you. 

Senator AKAKA. Thank you, Mr. Chairman. 

Senator VOINOVICH. Senator Lautenberg. 

Senator LAUTENBERG. Thank you very much, Mr. Chairman. 

There is a culture in the military, I think, that almost defies the 

kind of control that we like to see. The war fighters have their job, 

and they do it wonderfully. We want them to pay attention to it. 

But I see a difference in availability of materiel, when we are 

budgeting, especially with these supplementals. I mean, there 

frankly is not a lot of detail that is explored when we do these 

things. Mr. Berkson, we are happy that you are here. You bring a 

lot of experience. But I think there is another look to be had at 

whether or not the business side of the thing can be separated from 

the management side of the war fighters. 

And I served on a hospital board. They never had a doctor in 

charge, chairman of the board. And there are lots of examples 

where the skilled person, the scientist, doesn’t run the company. 

Someone else runs the company, and those who are assigned their 

responsibilities pick up from there. 

Because, very frankly, Mr. Chairman, I am delighted that you 

are holding this hearing because I think it triggers a kind of thinking in our minds that doesn’t go into the budgeting process. Yes, 

there is an Armed Services Committee, and they are diligent, and 

there are good people on the committee. 

But I think it needs an intermediate step. You have budgeting. 

You have reauthorization. You have appropriations. And when it 

comes to the military and you see the stars. It took me 3 years to 

make corporal. And when I used to see a captain’s bars, my knees 

used to knock, and you know, here we sit among the stars. And it 

is transformational. 

Here comes a guy with all these ribbons that he has earned in 

his lifetime and his career, heroic medals, many of them, and they 

make the case. And it is really kind of hard to say no. It is hard 

to say, ‘‘Hey, but how are you spending this money?’’

Mr. Chairman, I went full time in uniform in 1943, and I drew 

KP on a train going from New Jersey to Camp Crowder, Missouri, 

where I had basic training. And the worst guy in the world to work 

for was the cook because he had very few people to pick on. So he 

picked on those who were assigned KP duty, and I was one of 

those. 

And when we got to the end of the journey, we had these full 

jars. I remember them. I think they are number 10 size. But they 

are big ones with pickles and mustard and ketchup, and he said, 

‘‘Throw them out.’’

I said, ‘‘Throw them out?’’ I came from a poor family, and we 

would have given anything to have a jar of pineapple that size. And 

I said, ‘‘Sarge, why are we throwing these away?’’ He said, ‘‘Shut 

up and throw them away. Because you know what happens if I get 

there, and I have got stuff left over? Do you know how much I get 

the next time?’’

19

Well, you don’t have to be a mathematician to figure that one 

out. And we have seen flagrant abuses in the contracting side. 

This high-risk list began, I believe, in 1990? In 1992, contracting 

was listed as one of the worst parts of the DOD expenditures or 

purchasing routine. And there were eight areas of high risk listed 

then. And Mr. Berkson, you have a right to be satisfied or at least 

encouraged with some of the progress made, as demonstrated by 

your proofs here. But we still have eight units, high-risk units listed as areas that need serious attention, that are easily subjected 

to waste, fraud, and abuse. 

So I don’t know when we catch up, but I think thought has to 

be given to how the whole management process is done. A four-star 

general may be a brilliant tactician, strategist in fighting the battle, but that doesn’t mean that he also ought to be making the financial decisions. He ought to be making the recommendations, but 

I think there ought to be some intermediary step that should get 

a look. 

We have lots of questions, and I appreciate the fact that Senator 

Akaka and Senator Voinovich have asked some of the questions. I 

am going to ask one here because you have heard me talk about 

Halliburton, and I, for some time now, have wanted to look at how 

Halliburton has managed its own money. 

One question I have, Mr. Johnson—forgive me. I understand that 

DOD recently decided to pay Halliburton in full for its work, overruling Army auditors’ recommendation that it be penalized for 

overcharging on its contract. Do you, or perhaps Mr. Berkson is the 

one that I should address this to. Do you know why DOD overruled 

the Army auditors’ recommendations? 

Mr. BERKSON. Sir, I would have to take that question for the 

record. I am not familiar with it. 

Senator LAUTENBERG. Well, I hope so. Was OMB, Mr. Johnson, 

involved in this decision? 

Mr. JOHNSON. I really know nothing about it. I can get back to 

you on that. 

Senator LAUTENBERG. Well, I would appreciate it. And Mr. Walker, earlier this month, you said that in a Senate subcommittee that 

DOD is unable to track how it spent tens of millions of dollars in 

Iraq and Afghanistan and elsewhere in the war against terror. I 

just heard you say a couple of minutes ago that no one was responsible or no one in charge for tracking these things? 

Mr. WALKER. There are persons in charge of tracking that. What 

I said was that there is not a single person who is responsible and 

accountable for overall business transformation. 

As you know, Senator Lautenberg, DOD’s financial management 

is one of the areas that has been on GAO’s high-risk list for a long 

time. There are interrelated problems here. I mean, DOD has thousands of legacy systems that are non-integrated. In many cases, 

you have to input a 16-digit code for a single transaction, and you 

might have to enter the same transaction into multiple systems. 

The comptroller may have recently taken a step to make sure 

that there is separate visibility over the use of supplemental funds, 

such that, hopefully, you would be able to find out how that pot of 

money was used in a more efficient manner than has been the case 

in the past. 

20

We are doing work, at the request of the Congress, to find out 

how the supplemental funds were spent. It is very difficult getting 

detailed records. Furthermore, a lot of costs are based upon estimates rather than actual. We will be reporting later this summer, 

but I expect that there will potentially be a material difference between what we come up with and what has been reported. 

Senator LAUTENBERG. Colleagues, I just say this. That DOD is 

the one place where if you make mistakes, it doesn’t matter. You 

can always get more money if you need it. 

And once again, Mr. Chairman, I commend you for holding this 

hearing, and I think follow-up is critical here. I thank the witnesses. 

Senator VOINOVICH. Thank you, Senator Lautenberg. 

We are going to follow up, just like I did on reform of the personnel system. I am going to devote 51⁄2 years to this. We are going 

to have a lot of hearings on DOD transformation. We are going to 

stay on this. 

I am really pleased that we have the Ranking Member today 

with us and anxious to hear the questions he would like to ask the 

witnesses. 

It seems to me that we just can’t keep going on like this. We are talking about a $22 billion savings. Today, we have a tight Federal 

budget and a rising deficit. A billion dollars would make a big difference. This has got to stop. 

Senator Levin. 

OPENING STATEMENT OF SENATOR LEVIN 

Senator LEVIN. Thank you very much, Mr. Chairman. I think 

half of our discretionary spending now is Department of Defense 

spending. 

First, let me thank you and commend you and Senator Akaka for 

what you are doing here. This is not particularly glamorous work, 

and that is an understatement. 

I remember back in the early 1980’s, when Bill Cohen and I 

served as Chairman and Ranking Member of this Subcommittee, 

we took on a lot of issues. We made some progress in some of those 

issues—competition in contracting. We made progress in inventory 

management. We used to have hundreds of warehouses stocked 

with stuff, when we wanted just-in-time delivery to replace it. We 

made some real progress there. 

We made some real progress on commercial products, making it 

easier to buy commercial products. But there is a whole area of financial management which you have identified, where we did not 

make much progress. Despite some efforts, we just have not made 

progress. 

And it is essential that there be Senators such as the two of you 

who are just willing to sink your teeth into this subject, and your 

determination to do this for 51⁄2 years, or whatever it takes, is as 

far as I am concerned not just music to my ears, it should be music 

to the ears of every taxpayer in this country. Because it takes Senators like you or Members of Congress like you who will just take 

it on and not let it go. And I am very appreciative of that. 

Just a few questions, and I apologize that I couldn’t get here earlier. First, for you, Mr. Walker, I want to congratulate the GAO. 

21

Without your efforts here, the task of the few senators and members of Congress who are willing to take on an unglamorous area 

would just be probably impossible. They need your full assistance, 

and I know they have had it, and they are going to continue to 

have it. 

But shortly after the then-DOD comptroller Dov Zakheim was 

confirmed, he came before the Armed Services Committee. He testified that the Department would prepare a comprehensive business 

enterprise architecture and transition plan to serve as a blueprint 

for fixing the Department’s ‘‘systems and business processes—now 

isolated from each other across the functional areas—logistics, 

health care, accounting, finance, and others.’’

He promised to have that blueprint in place by March 2003. And 

we went through this with the then-comptroller to press him for 

the very type of blueprint which, you have so effectively pointed 

out, does not exist. 

Well, March 2003 obviously has come and gone. It is 2 years 

later. DOD spent hundreds of millions of dollars on a contract to 

develop a business enterprise architecture. So, Mr. Walker, is it 

fair to say that more than 2 years after the date set by Dr. 

Zakheim that we still do not have that blueprint that he promised 

us? 

Mr. WALKER. We don’t have it yet, Senator. My understanding 

is they are working on it and trying to put something together by 

the end of this fiscal year, but you may want to ask the DOD witness. 

Senator LEVIN. OK. I will do that in a moment. You, I think, told 

the Armed Services Committee last year that the Department had 

made no significant progress in addressing its financial management problems. Is that still true? 

Mr. WALKER. They still do not have a comprehensive plan for 

dealing with their financial management problems. 

Senator LEVIN. All right. So now, Mr. Berkson, where is the 

plan? Where is the beef? Where is the plan? 

Mr. BERKSON. On which aspect, Senator? 

Senator LEVIN. Well, we were promised—I will read it to you 

again—a comprehensive business enterprise architecture to serve 

as a blueprint to fix the Department’s—and I am quoting Dr. 

Zakheim here—the Department’s ‘‘systems and business processes—now isolated from each other across the functional areas—

logistics, health care, accounting, finance, and others.’’

Where is that architecture? 

Mr. BERKSON. OK. First of all, I want to take that question for 

the record. I will tell you about my knowledge of where that plan 

is. At this point, and I think pursuant to legislation that described 

a new structure for the business management modernization plan, 

they are currently developing and, in fact, installed Mike Wynne 

as the vice chairman of a group that will be actively reviewing all 

of the investments in what is called, I think the term is, an investment review board. 

So all investments over $10 million, I think that is the threshold, 

for IT systems, we are setting up the architecture and the infrastructure and the efforts to manage that consistent with the legislation. In doing that, there has also been a transfer of that role, 

22

of driving that process from the comptroller to the AT&L side. And 

there are a number of folks that are in the midst of, and I think 

Mr. Wynne testified to this as well, in the midst of redrafting and 

formulating how we are going to proceed and go forward on that. 

It is very challenging. In fact, again, this is my experience in 

serving and seeing dozens and hundreds of these implementations 

put in in different companies around the world. Ours is, by far, the 

most challenging of any that I have ever seen. And the team is at 

work and is, I think, putting a plan together that will address that. 

And again, I need to take that for the record because it is not exactly what I do. 

Senator LEVIN. What is the time table? 

Mr. BERKSON. I think in order to be compliant with the authorization act, that team and process is to be in place, with regard to 

business systems approval of the investment review board, by the 

end of the fiscal year is my understanding. 

Senator LEVIN. This fiscal year? 

Mr. BERKSON. My understanding is, again, according to the act, 

we——

Senator LEVIN. Well, forget the act, putting the act aside for a 

moment, how are you coming along? Will you meet that deadline? 

Mr. BERKSON. The deadline for being compliant with the act? 

Senator LEVIN. In the act. Assuming it is the end of the fiscal 

year, will you meet that deadline? 

Mr. BERKSON. My understanding—again, it is not my area of the 

Defense Department—is that they are working to meet that deadline. 

Senator LEVIN. Mr. Johnson, last year’s defense authorization 

act, this is what the Armed Services Committee basically did. We 

told the Department to stop spending money on financial audits. 

And the reason for this was as follows. The GAO consistently 

told us that there is a right way and a wrong way to fix the Department’s financial management problems. The right way is to attack the problems at the root by fixing the business systems that 

yield bad data. The wrong way is to unleash an army of auditors 

to audit the system into compliance, to try to audit the system into 

compliance but without addressing the underlying systems’ problems. 

Now the DOD agreed with that assessment. The Department 

told us last year, however, that it still wanted as much as $2 billion to try to achieve an auditable financial statement by fiscal 

year 2007, which is before the Department is going to address its 

underlying system problems. We responded by prohibiting them 

from spending more money on financial audits until they have a 

business enterprise architecture and transition plan in place, which 

is the origin, I believe, of what Mr. Berkson made reference to. 

Now I understand, Mr. Johnson, that some of the pressure on 

DOD to get an auditable financial statement as soon as possible 

comes from OMB. Do you agree with the assessment that the right 

way to fix DOD’s financial management problems is to attack them 

at the root, rather than just try to get a favorable audit without 

fixing the underlying system problems? 

Mr. JOHNSON. I do. 

Senator LEVIN. Long question, short answer? 

23

Mr. JOHNSON. And I don’t think the 2007 goal came from us. It 

was what I heard the very first time I met with Dov Zakheim. And 

I had a meeting last week with Defense Comptroller Tina Jonas, 

and they laid out exactly what you talked about, which is the goal 

is not to get a clean audit. 

The goal is to have an audit reflect the business practices that 

are as they should be and that are creating the disciplines within 

the Defense Department that will allow us to address material 

weakness, that will allow us to get a clean audit, or both are, in 

fact, the business practices that would allow us to save money or 

improve service. That it is a reflection of just what you said, improved disciplines, improved method of operation, and it is not a 

clean audit for the sake of a clean audit. So I agree totally with 

that. And they do, too. 

Mr. WALKER. Clay Johnson is correct, 2007 was the DOD’s date. 

They don’t have a plan to meet that date, and they don’t have a 

prayer to meet that date. 

Mr. JOHNSON. They don’t have a desire to meet that date. 

Mr. WALKER. Well, good thing. But they need a plan, just like 

they need a plan for the other areas that we are talking about. 

Furthermore, I think it is important to note some of the words that 

you touched on. 

There are assertions coming out of DOD saying that they can’t 

make progress in certain areas because the act is written such that 

they can’t spend money on things that they want to address. To 

me, there is a fundamental difference between financial management and financial auditing. Executive leadership has an ongoing 

responsibility to assure that they have appropriate controls in 

place, that they have appropriate financial management systems in 

place, and that they continuously improve those controls and systems. 

That is different than spending a lot of money to try to re-create 

the books and engage in work-around auditing procedures or by 

doing preliminary audit assessments before you have done the 

basic work. I think there may be some problems with regard to nomenclature here. I think they need to be able to make progress 

with regard to internal controls, and with regard to improving financial management systems. 

What they shouldn’t be doing is spending money on audits or 

work-around procedures or preaudit assessments before they have 

layed the fundamental foundation. 

Senator LEVIN. Thank you, Mr. Chairman. And the defense authorization bill is being marked up in a few weeks. If you or Senator Akaka or our witnesses have suggestions for any steps that 

can be taken immediately that will move in the direction that I 

know we all want to move, I am sure that Senator Warner and I 

will be happy to consider any suggestions. 

These are long-term solutions, not the next few week solutions. 

But I just say that on the chance that there may be something immediate which does need attention. And I also want to assure you 

and Senator Akaka that both Senator Warner and I are very open 

to any suggestions and recommendations that this Subcommittee 

may have. 

24

Senator VOINOVICH. I really appreciate that because you have all 

of this history, and so does Senator Akaka. I have very little. 

And I think that if we can collaborate on some of these things 

because part of the problem around here is you have the authorization committee, then you have the appropriations committee. And 

it is going to take, I think, in many instances, appropriations and 

authorization to work together and team up to get the kind of result that we would like to get. 

I am going to have another round, if it is all right with you, Senator Akaka? 

Mr. Berkson, I have a question that has two parts. First, on 

April 13, Under Secretary Wynne testified before the Senate Armed 

Services Committee on readiness and management. In his testimony, he said the acquisition, technology, and logistics workforce 

fell from 149,439 employees in March 1998 to 134,000 employees 

in September 2004. 

At the same time, the number of contract actions, over 100,000, 

increased from 101,663 in fiscal year 1998 to 160,338 in 2004. 

Could you describe the impact that these dynamics have on AT&L’s 

ability to manage its workload? 

Mr. BERKSON. Yes. Senator, I will have to, respectfully, take that 

one for the record. The acquisition workforce is outside of my domain. So I will have to get back with you on that one. 

Senator VOINOVICH. The Deputy Secretary of Defense moved 

business transformation from the Under Secretary of Defense 

Comptroller to the Under Secretary of Defense for AT&L. AT&L’s 

workforce is already operating with the resource limitations. 

The question is do they have the ability to take this on? 

Mr. BERKSON. With regard to the place with which I would want 

to have responsibility for business transformation, I actually support and think it is very valuable to have the acquisition, technology, and logistics under secretary driving the business management modernization program. 

The majority—again, as you look in commercial industry and you 

look in our system—the majority of the business functions and operations are in the AT&L portfolio. And to the extent that we are 

trying to go beyond audits and we are trying to improve processes 

and improve operations, the senior executive leading those business 

operations should, in my opinion, be actively responsible for the 

systems that support those. 

So that migration is a very good move and, I think, will actually 

improve the progress we make. And we will apply the improvements we need to the places where the business operations are 

most significant and most large scale. 

Senator VOINOVICH. One thing you said earlier was that you are 

trying to drive it down to where the people are that are actually 

getting the work done. Is there any effort in the Department to 

look at total quality management and empowering the people in 

those agencies to come back with recommendations on how they 

can do it better? 

Or are we in the same area we have been for years, where somebody comes in and says, ‘‘This is the way you are going to get the 

job done because some consultant told us this is the way you are 

supposed to do it.’’

25

Mr. BERKSON. What has been most successful in business process 

change, and TQM was a term that was popular and an active program pursued over 10 years ago. What we have found to be more 

successful in taking TQM and actually going on as it has evolved—

as you know, TQM drove concepts like 6 Sigma, GE’s program to 

minimize variance and get working on quality. Quality and 6 

Sigma are closely related. And then the Toyota production system, 

which is Lean, has also driven a lot of value. And we have combined those. 

But what the most valuable force of application of those has actually been directly from the working-level of the Department, literally at the business operations. The example I showed you where 

we went from 85 to 5 days is a group of sailors out at the Lemoore 

Naval Air Station. Those sailors—those aren’t a kind of business 

gurus or consultants—and their experiences in industry, a very 

strong and intelligent commander came in from industry and realized how much value these processes could have. And she took it 

upon herself to make that happen at Lemoore. 

And we have now dozens and dozens of cases where we have 

started that business transformation literally from the ground up, 

and we are essentially constructing a network now that connects 

and provides resources so that those happen and can accelerate, 

and best practices can be shared across the massive scale we have. 

So, it is an interesting concept. But the top-down, one has to be 

very careful when you apply it. ‘‘I am from the Office of Secretary 

of Defense. I am here to help you’’ is sometimes helpful and necessary. But also it is often better to let many of those changes start 

springing up and then feed them and grow them and make them 

accelerate. And that is what we have found so far. 

These changes, as they are coming, and we have been putting 

the vision out and providing resources and driving them, now we 

are actually working at the working levels to create them and 

make them happen. 

Another one that we just have to be really clear on. There seems 

to be this discussion that came up, some of the discussion today. 

I have three air logistics centers. They are the largest industrial 

operations of the Department of Defense. 

I have three air logistics centers at Hill Air Force Base; Ogden, 

Utah; and Oklahoma City. These are run by military leaders. I 

have three NADEPs, naval aviation depots, again, $500 million 

businesses—huge businesses. These are run by military officers, 

06s—captains, Navy captains. I have probably a half dozen Army 

depots also run by 06s. 

Our business operations are run by the military. So the separation of the business from the military is very difficult. And driving 

change, therefore, isn’t something I just do as a civilian workforce. 

I have to have every sailor, soldier, airman, and marine in the logistics side capable as any GM employee of driving change and 

working their team out and being able to provide that kind of expertise at that level. 

And again, the notion is I have to go work that right down at 

the cold face, and I have to drive that change from there and then 

accelerate it. And again, driving it from the top is, again, we have 

a focus on it. 

26

But I struggle in trying to figure out, as I have been doing this, 

I can’t separate the military from the civilian. The change has to 

happen in a thousand different places around the system. And to 

do that requires things—process changes, Lean 6 Sigma, taking the 

next generation of TQM—and efforts that have been done in the 

commercial sector and applying them here. 

So I think your hypothesis and your drive on a TQM as an approach is right. I think I would suggest some alternatives. But it 

has to be driven in these hundreds and thousands of different locations where we are running the business. 

Senator VOINOVICH. In Ohio, we have Wright-Patterson Air Force 

Base and the materiel command in Dayton, Ohio. 

One thing that bothers me is, we get general after general, at the 

end of their career, taking over command. They are there for 3 

years and then leave. I don’t understand why the military moves 

these people around every 3 years. 

I think we need to look at time commitment, when it comes to 

reforming the DOD. We can’t expect reform to happen when turnover is so frequent. 

Mr. WALKER. Mr. Chairman, I think that is a good point. In fact, 

I remember testifying several years ago before a Senate Subcommittee of Armed Services regarding how much turnover there 

is. 

Starting from the secretary of defense, deputy secretary, under 

secretary, all the way down to the program managers or program 

directors. I mean, there is preprogrammed turnover in the case of 

some of these critical positions, and it just doesn’t make sense to 

have preprogrammed turnover to the extent that we currently have 

it. 

I have to follow up on something that both Clay and Brad said. 

You absolutely need committed and sustained leadership when you 

are talking about transformation. Let’s talk about one of the most 

important transformation efforts going on at the Department of Defense right now, NSPS, normally the National Security Personnel 

System. 

They are currently in the meet and confer period. I asked this 

morning whether or not there are any PASs, presidential appointees, with Senate confirmation—participating actively in the 

face-to-face meetings among the meet and confer period. The answer I was given was no. As a result, it is my understanding that 

the president of AFGE, and other key unions, have not been participating either. 

This is the most probably fundamental transformation issue on 

the civilian side that is going to happen in the Department of Defense. I mean, how can you not have top people actively and visibly 

engaged in these types of substantive discussions. In my view, 

human capital is key to my successful transformation effort? 

I hope I am wrong on that, and I am going to follow up to try 

to make sure. But I am very disappointed if that is the case. 

Senator VOINOVICH. I agree with you, Mr. Walker. NSPS is the 

most important transformation effort going on within the DOD. 

Having all parties involved with the process is imperative. 

I have received many complaints about the process and I hope 

the DOD is listening. I spent time yesterday with Steve Perry and 

27

stressed to him my support for NSPS but also my concerns with 

involvement of all interested parties. I plan to monitor the implementation. 

Senator Akaka. 

Senator AKAKA. Thank you, Mr. Chairman. 

After hearing the comments from General Walker, I can’t help 

but think of our Chairman and human capital, which is rearing up 

as a huge problem for our country. And I know, Mr. Chairman, we 

will certainly look at NSPS. We know if it is not done correctly, we 

are going to be in trouble. 

Let me follow up on something, Mr. Berkson, since we have 

heard a response from General Walker, can you respond to Mr. 

Walker’s comments on NSPS? 

Mr. BERKSON. Unfortunately, no, sir. I am not involved in the 

NSPS rollout. So I can’t do it. I absolutely support and know how 

important that a human capital change is, and I get very parochial 

about it. 

I need very high-performing business people. And if you were to 

give me something, it probably wouldn’t be another boss. It would 

be 50, 100 people I could get in quickly to help me go about the 

change in the Department at the various levels that we can work. 

So I am clearly committed to making that happen, and it is a very 

daunting personnel challenge. 

Senator AKAKA. Mr. Johnson. 

Mr. JOHNSON. On NSPS, there is one person in charge, who is 

talking about whether there should be a chief management officer. 

Gordon England is the person that the secretary has put in charge 

of the NSPS adoption process. 

So if things are not working there, it is not because—or if they 

are working there, it is because there is a very capable person in 

charge. So what I suggest you do is ask Gordon England because 

he is the one that is responsible for that, and he is very involved 

in all of that. 

I don’t know about your particular claim was if someone from the 

union was there, they cut them off. But whether there are PAS 

people involved or not in individual meetings, I don’t know. But I 

do know there is a very well-regarded, high-ranking PAS person in 

charge of the whole thing, and he is the one that needs to be held 

accountable for whether it works or not. 

Senator AKAKA. Mr. Walker. 

Mr. WALKER. Senator Akaka, yes, it is my understanding that 

Gordon England is responsible and accountable, he has been deputized by the secretary for NSPS. He is a very capable professional 

and an excellent choice by the President to nominate as deputy secretary. 

It is also my understanding that during this very critical meet 

and confer period, that no PAS—not just Gordon England, but any 

PAS—is involved in any meet and confer meetings dealing. 

I am hoping that is wrong, but that is what I was told this morning. We are going to follow up and try to find out whether or not 

that is accurate. 

Mr. JOHNSON. But that is a process concern. The question is, is 

it having an impact? But I mean, again, Gordon England is the one 

to ask that. 

28

Mr. WALKER. I would respectfully suggest there are two things 

you have to get right because if you don’t get them right, you fight 

a 2-front war. One, you have to get the policy framework right. 

Two, you have to get the process right. 

If you don’t get both right, your odds of success change dramatically. Process is important. You need to have top people visibly involved. Not in every meeting, however, you are not going to get the 

top labor leaders there if you don’t have top people from the Department there. They are going to delegate it, too. 

You are going to have people there who are not empowered to 

make a decision, and this isn’t negotiations. It is meet and confer. 

But nonetheless, you have to have people who are empowered to 

make decisions at some of the meetings. There is a lot more details 

that it wouldn’t be appropriate for a PAS to be involved with. 

Senator AKAKA. Well, I really appreciate learning from your experiences and having your wisdom. Mr. Berkson, I am asking that 

you bring our concerns to Secretary Rumsfeld so he will be aware 

of them. 

Mr. Johnson, DOD, and you, have alluded to this DOD business 

transformation requires a commitment from both the Legislative 

and Executive Branches. Do you support creating a chief management officer at DOD? 

Mr. JOHNSON. Let me give you my personal opinion. It is probably a pretty good idea. It is not a silver bullet. You can put the 

kind of person that General Walker has suggested, put them in a 

term, although I don’t think the term buys you anything. But 

again, that is my personal opinion. And it is possible that you won’t 

get the transformation that we all want. 

It has to be, as I mentioned earlier, a high priority for the administration, for the President and the secretary. Because if it is 

not, the most effective chief management officer can be made to be 

ineffective. 

For instance, I am in a specific management position that has 

been created at OMB. This position has existed since 1990. Some 

of the people in my position have been effective. More than that 

have not. 

So the presence of a management person in that at OMB has not 

necessarily guaranteed that the Federal Government, the Executive Branch would be as focused on management as I think we are 

today. It is not a silver bullet. 

Senator AKAKA. General Walker. 

Mr. WALKER. I agree with Clay, but it is not a silver bullet. You 

have to have the President’s commitment. You have to have the 

secretary of defense’s commitment. You need more OMB involvement. So I agree with that. 

However, I would respectfully suggest that while it, in and of 

itself, is not a silver bullet, having a CMO is essential if you want 

to be successful. 

Senator AKAKA. Let me ask a final question, Mr. Chairman. Mr. 

Johnson, today and at our February hearing, you pledged your 

commitment to working more closely with DOD on addressing the 

high-risk areas. And you heard Mr. Berkson say there is no business modernization plan. 

29

DOD needs help. So my question is what are your goals over the 

next 3 years regarding DOD high-risk areas? 

Mr. JOHNSON. Well, let me tell you what we have been doing 

since the hearing in February. OMB, the people that work for the 

DOD, the DOD branch, and GAO have been working on supply 

chain management to figure out, get agreement on what a good 

plan looks like, and we are very close. 

We will be back to you within not days, not months, but in a few 

weeks with a plan for that particular area as an example of the 

level of detail—the clarity of the definition of success, the specificity of due dates, the clarity about who is responsible for doing 

what to whom by when—for you all to say this is adequate or inadequate. 

Then once there is agreement on that, the staff at DOD and GAO 

and OMB are generally pleased with what we have. I think if you 

would ask any of them, they would say there has been very good 

working relationship between the three entities. We think we are 

going to come to you in a couple of weeks with something that you 

all will be impressed with. 

Once there is agreement on that, or if there is not, then we will 

get something to where we are in agreement on, and we will go 

back and work with DOD and GAO to develop similar templates, 

similar plans for the other six areas. 

So then, all of a sudden now, there is a plan with all of the 

clarities that I have talked about and all of the implied accountabilities that I have talked about when you talk about your next 

51⁄2 years, my suggestion to you is that is what all your hearings 

be focused on is their adherence to those plans. 

And it shouldn’t be a hearing upon the due date or a month after 

the due date when the whole thing is supposed to be finished. It 

ought to be with the kind of regularity that you are talking about, 

where it is every 6 months or whatever. And the same thing with 

OMB working with DOD on whether they are adhering to the plan 

and accomplishing the subgoals that they laid out for themselves. 

So that is the approach we are taking. And that is the approach 

we have taken with the one area. And it is very important that it 

be to everybody’s satisfaction, and we are close to getting back to 

you with a proposed approach using one of the seven areas as an 

example. 

Senator AKAKA. General Walker, Mr. Berkson’s testimony discusses the accomplishments of the Defense Acquisition University. 

However, you testified that, and I am quoting, ‘‘DOD also needs to 

have the right skills and capabilities in its acquisition workforce to 

effectively implement best practices and properly manage the goods 

and services it buys.’’

You correctly point to DOD workforce reductions between 1989 

and 2002 that resulted in a loss of skills and competencies needed 

to ensure proper acquisition and contracting. Do you believe this is 

an issue of insufficient staff or improperly trained contract and auditing staff, or both? And has GAO examined the training issue? 

Mr. WALKER. We believe that the acquisition workforce is under 

significant stress. We believe that there are real issues with regard 

to whether or not it is an adequate size. There are clearly skills, 

imbalances, and succession planning challenging. 

30

The Defense Acquisition University does a good job. We have 

partnered with the Defense Acquisition University on some areas 

of mutual interest and concern. We have actually provided some information and I think even co-instructed certain classes from time 

to time. We have also taken some of their classes. It is a quality 

organization. 

But the workforce as a whole is part of the high-risk area that 

deals with human capital at DOD. I might note that with regard 

to Clay’s comment, he is correct that we are trying to work on a 

constructive basis with OMB and DOD to come up with a model 

for one area, namely, supply chain management. 

But I would respectfully suggest that DOD has 14 because it has 

got 8 on its own and 6 that it shares with others in high risk, and 

they need to have plans on all 14. 

Senator AKAKA. All right. Well, thank you very much, Mr. Chairman. 

Senator VOINOVICH. Thank you very much for your testimony. 

Clay, I would like to stress to you the importance of having everyone involved in implementing your plan to reform the DOD’s 

supply chain management process. 

Mr. JOHNSON. Well, that has got to be a key part of that plan, 

what is the plan. 

Senator VOINOVICH. Yes. But the people that are doing the work 

are the ones that should have input in driving the plan and saying 

this is what we think needs to be done. 

I have been visiting bases in Ohio and it has been a great experience for me. About 8 years ago, Patterson Air Force base in Springfield, Ohio was asked to put together an additional training facility 

for F–16 pilots. 

The reason why they have been successful is that team has been 

working together. They worked it out. They talked about it. They 

brought in the technology. It is an example of where you have had 

a team together that can feed off each other. This was their baby, 

they had a plan, and they were really proud of what they were 

doing. 

I would like to find out who decides that these people are rotated 

every 3 years. 

Mr. WALKER. My son is in the Marine Corps. He is a Captain 

and fought in Iraq. 

That, my understanding, is long-standing policy to try to be able 

to make sure that military officers get a broad range of experience 

within a certain period of time in order to position them for promotion to the next level. 

I think that we need to relook at a number of the critical positions, especially in the acquisitions area. The problem is when you 

have preprogrammed turnover nobody is really responsible and accountable. Everybody is focused on trying to make sure nothing 

bad happens during their, in many cases, 2-year or 3-year tours. 

We are talking about weapon systems that, in some cases, involve hundreds of billions of dollars. 

Senator VOINOVICH. So the Joint Chiefs of Staff probably, that 

is——

Mr. WALKER. Well, no. It is a combined effort. Mr. Chairman, I 

will provide more for the record because I know I am under oath 

31

here. My understanding is that the desire for the frequent turnover 

has come from the services. That is not something that has come 

from the OSD or from the under secretaries or even from the service secretaries. 

It is something that the services have wanted to do, and I think 

it is something that has been in existence for many years. This 

needs to be relooked at. 

Senator VOINOVICH. I want to thank all of you for testifying 

today. This hearing is adjourned. 

[Whereupon, at 3:59 p.m., the Subcommittee was adjourned.] 

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106

Æ


21436.074