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37–359 PDF 2009

S. Hrg. 110–891 

FEDERAL ACQUISITION: WAYS TO STRENGTHEN 

COMPETITION AND ACCOUNTABILITY 

HEARING 

BEFORE THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

JULY 17, 2007 

Available via http://www.access.gpo.gov/congress/senate 

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 

(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

BARACK OBAMA, Illinois 

CLAIRE McCASKILL, Missouri 

JON TESTER, Montana 

SUSAN M. COLLINS, Maine 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

PETE V. DOMENICI, New Mexico 

JOHN WARNER, Virginia 

JOHN E. SUNUNU, New Hampshire 

MICHAEL L. ALEXANDER, Staff Director 

TROY H. CRIBB, Counsel 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

AMY L. HALL, Minority Director for Governmental Affairs 

TRINA DRIESSNACK TYRER, Chief Clerk 

(III) 

C O N T E N T S 

Opening statements: Page 

Senator Lieberman ........................................................................................... 1 

Senator Collins ................................................................................................. 4 

Senator Akaka .................................................................................................. 7 

Senator Carper ................................................................................................. 8 

WITNESSES 

TUESDAY, JULY 17, 2007 

Hon. David M. Walker, Comptroller General of the United States .................... 12 

Marcia G. Madsen, Chair, Acquisition Advisory Panel ........................................ 14 

Stan Soloway, President, Professional Services Council ...................................... 18 

ALPHABETICAL LIST OF WITNESSES

Madsen, Marcia G.: 

Testimony .......................................................................................................... 14 

Prepared statement with an attachment ....................................................... 71 

Soloway, Stan: 

Testimony .......................................................................................................... 18 

Prepared statement .......................................................................................... 91 

Walker, Hon. David M.: 

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

Prepared statement .......................................................................................... 45 

APPENDIX 

Barry M. Cullen, President, Contract Services Association, letter dated July 

17, 2007 ................................................................................................................. 103 

Questions and responses for the Record from: 

Mr. Walker ........................................................................................................ 105 

Ms. Madsen ....................................................................................................... 106 

Mr. Soloway ...................................................................................................... 109 

(1) 

FEDERAL ACQUISITION: 

WAYS TO STRENGTHEN COMPETITION 

AND ACCOUNTABILITY 

TUESDAY, JULY 17, 2007 

U.S. SENATE, 

COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:05 a.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Joseph I. Lieberman, Chairman of the Committee, presiding. 

Present: Senators Lieberman, Akaka, Carper, and Collins. 

OPENING STATEMENT OF CHAIRMAN LIEBERMAN 

Chairman LIEBERMAN. Good morning and welcome to this hearing. This morning the Committee is going to focus on one of the 

most important parts of our oversight jurisdiction, and that is the 

acquisition of goods and services by the Federal Government. 

The fact is that the U.S. Government is the largest buyer of 

goods and services in the world by far. 

The numbers are stunning and demand our attention. Government spending on contracts has exploded, while the trained workforce that oversees Federal contracting has shrunk. This has already contributed to widely publicized—and I would have to say infuriating—examples of waste, and the problem will only worsen in 

the years ahead if we do not act together to better protect the expenditure of taxpayer dollars for Federal contracting. 

Let me give you some of the numbers. Between 2000 and 2006, 

spending on government contracts has grown from almost $219 billion a year to $415 billion. That is an astounding 89-percent increase in the past 6 years. 

Yet, the number of Federal acquisition specialists who help write 

and negotiate and oversee these contracts has remained pretty 

much constant over that same period of time, and that follows a 

significant downsizing of the acquisition workforce during the 

1990s. The numbers are particularly striking at the Department of 

Defense, where the workforce has declined by almost 50 percent 

since the mid-1990s. Government-wide, the workforce is about to 

shrink even further if nothing is done because roughly half the current acquisition workforce is eligible to retire within the next 4 

years. 

2 

So it is imperative we attract fresh new talent into this critically 

important public service profession because the work is crucial to 

the effective and efficient use of taxpayers dollars. 

I want to point out something that I have been educated to better understand, which is that a successful system for buying goods 

and services is more than just selecting the right vendor and signing a contract. Successful purchasing requires, in the Federal Government and the private sector, careful planning and negotiation of 

the contract before the contract is signed, and then followed by rigorous oversight throughout the life of the contract. It requires that 

government agencies have the competence to know what they need 

and understand how to work with the private sector to meet those 

objectives. And it requires government officials whose only allegiance is clearly to the taxpayer, and not in any way to contractors 

who might become their future employers. 

If you dig into the causes of some of the most dramatic examples 

of wasteful spending through contracting that we have seen in recent years, you can see a very sad story of a system breaking down 

with very bad consequences for the taxpayers. 

For example, TSA’s contract for recruiting airline screeners grew from an original estimate of $104 million to a final settlement with 

the contractor of $741 million. That contract was for the recruiting 

of airline screeners. Auditors identified nearly $300 million in questionable costs submitted by the contractor. And TSA itself helped 

drive up the costs by changing the scope of the contract after it was 

signed, without sufficient regard to what those changes would cost. 

The FBI’s Trilogy project is very well known, painfully known. The project to upgrade the FBI’s IT systems grew from $380 million to $537 million, due in part to poorly designed contract requirements, unrealistic scheduling, and weak oversight. GAO also 

identified over $10 million in questionable costs submitted by the 

contractor. As we know, in 2004 the FBI scaled back the project 

and determined that key elements were absolutely unfeasible as 

originally planned. 

The U.S. Coast Guard turned too much of its decisionmaking for 

the Deepwater Project over to its contractors, with very bad results. The costs for the first two National Security Cutters alone 

are expected to increase by more than $300 million, and that does 

not include the additional hundreds of millions of dollars required 

for structural redesigns to those two ships and future cutters. So 

what we are talking about really matters. 

Insufficient competition in awarding government contracts is a 

trend that is also troubling. Since 2000, the dollar value of contracts awarded without full and open competition has more than 

tripled, from $67.5 billion to almost $207 billion. 

Recently, the Office of Federal Procurement Policy reviewed 

awards at major contracting agencies and found that 36 percent, 

more than one-third, of the money spent on contracts last year was 

awarded without full competition. 

The Department of Defense, which is, of course, the largest 

spender on contracts, averaged about 37 percent awarded without 

full and open competition. NASA let half of their contracts without 

full and open competition, and the Department of Homeland Security slightly more than 50 percent. 

3 

The Federal Government is also increasingly using contracts not 

just to buy goods, which is how we think of as contracting conventionally, but to provide services to an array of agencies. Now, I understand that this can provide government with increased flexibility to meet urgent or unforeseen needs, and it also can provide 

access to expertise that might not be resident within the government agency. But the amount of contracting for services does raise 

questions as to whether our Federal Government has retained sufficient in-house capacity to effectively manage and oversee contracts and whether the Federal Government is ensuring that contractors do not perform what is inherently, and ought to remain, 

a government function. 

Expanding the role of contractors providing services has created 

separate management challenges, and there is an irony, at least to 

me, to the fact that contractors are now being hired to oversee 

other contractors and to assist agencies with the process of awarding contracts. 

We have actually even heard recent examples of contractors 

being retained to write Federal regulations, which, of course, we 

think of as an inherently Federal Government responsibility, therefore to be performed by full-time employees. 

Looking back, in the 1990s Congress enacted a series of reforms 

to Federal procurement law to streamline the government’s purchasing and to encourage the purchase of goods and services that 

are readily available in the marketplace. While I would say that 

these reforms have given our Federal Government greater flexibility as a purchaser, the level of inefficiency and waste definitely 

is still unacceptable, and for that reason I am pleased to join with 

Senator Collins who has taken the lead in drafting legislation to 

address some of these procurement problems. The proposal is 

known as the Accountability in Government Contracting Act of 

2007, S. 680. 

I think that the evidence is so strong that there is a lot that ails 

Federal contracting procedures today that I intend to do everything 

I can as Chairman of this Committee to make sure that we do not 

just oversee and investigate, but that we legislate in this area to 

try to improve the status quo. And I think S. 680 is a good place 

to start. 

Over the past 2 years, the Committee has held numerous hearings that have addressed contracting challenges, for instance, in rebuilding the Gulf Coast, executing reconstruction contracts in Iraq 

and Afghanistan, and acquiring services to protect the Nation from 

acts of terror or to facilitate recovery from natural disaster. All of 

those efforts, unfortunately, have been marred by some wasteful, 

and occasionally fraudulent, contracting practices. 

Contractors are essential to the functioning of our government. 

No one expects the government, for instance, to produce its own 

computers or build its own fighter planes or perform services that 

are better provided by the private sector. But with billions and billions of dollars of taxpayers’ money at stake, both the government 

and contractors have a responsibility to do a better job than we are 

now at seeing to it that the taxpayers are getting their money’s 

worth. And that will be the focus of this Committee and this hearing and beyond. 

4 

Senator Collins. 

OPENING STATEMENT OF SENATOR COLLINS 

Senator COLLINS. Thank you, Mr. Chairman, and thank you for 

holding this important hearing this morning. 

As you have mentioned, the challenge of overseeing Federal contracting has grown over the years. Spending under Federal contracts now exceeds $400 billion a year. As you pointed out, Mr. 

Chairman, that makes the U.S. Government by far the world’s 

largest purchaser, and the government purchases a huge variety of 

goods and services, ranging from staplers to studies to satellites. 

During the past two decades, Federal purchasing has undergone 

several waves of reform. As a Senate staffer many years ago, I 

helped to draft the Competition in Contracting Act of 1984, and I 

look out at the audience today and I see many of the people who 

were on the Committee staff at the same time that I was. Who 

would ever have guessed that I would be here today and that we 

would be working together once again on contracting reforms? As 

you mentioned, Mr. Chairman, there were other major procurement reform laws enacted in 1994, 1996, and 2003, on and on. 

Unfortunately, many of the problems that we have sought to correct over the years are still with us, like a drug-resistant virus that 

defies a doctor’s best efforts. 

This Committee firsthand has heard truly alarming reports on 

acquisition problems, particularly in the response to Hurricane 

Katrina and also in the reconstruction efforts in Iraq and Afghanistan. But it is not just the big emergency projects that run into acquisition problems. Oftentimes even routine Federal acquisition 

projects are rife with troubles. I want to mention just three examples to supplement some of the ones that the Chairman noted. 

The Special Inspector General for Iraq Reconstruction found that 

the Department of Defense’s management of $7.3 million in contracts relating to the Babylon Police Academy had numerous deficiencies, including $1.3 million wasted on duplicate construction 

and unneeded equipment, $2 million in unaccountable spending, 

and, indeed, examples of outright fraud. FEMA, in a well-publicized case, spent more than $900 million 

to buy manufactured homes for the victims of Hurricanes Katrina 

and Rita that was largely wasted. More than 2,000 of the units did 

not fit FEMA’s size specifications, and FEMA’s own floodplain rules 

prevented the large-scale deployment of these manufactured homes 

in the most heavily damaged areas of Louisiana and Mississippi. 

This was an example where literally the left hand did not know 

what the right hand was doing within the same agency. 

The Department of Energy contracted with Bechtel to build a 

$4.3 billion waste treatment plant at the contaminated Federal nuclear facility in Washington State. GAO has reported this year that 

the cost estimate now exceeds $12 billion and that completion is 

likely to be 8 years later than originally scheduled. 

Mr. Chairman, I do not cite these examples to question the goals 

or the importance of these programs and these contracts. Instead, 

I cite them precisely because they are important for advancing our 

national interests, for enhancing the capabilities of our armed 

forces, for protecting our citizens. And that is why, beyond the conVerDate Nov 24 2008 10:49 Oct 29, 2009 Jkt 037359 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 P:\DOCS\37359.TXT SAFFAIRS PsN: PAT
5 

cern for wasted dollars and delayed deliveries, it is so troubling 

that the contract management functions at Defense, DHS, and the 

Department of Energy, are all on the GAO’s high-risk list. 

We know that just as the problems are varied, so are the causes. 

They include a severe and growing shortage of qualified acquisition 

professionals, an overreliance on sole-source contracts, inadequate 

specification of requirements and delivery dates, too many award 

fees in the face of poor performance, a lack of transparency in the 

process, deficient monitoring and evaluation, and, sadly, in some 

cases decisionmaking corrupted by individuals accepting gifts or 

seeking future private employment. 

That is why you, Mr. Chairman, along with Senators Coleman, 

Carper, and McCaskill, and I have introduced S. 680, the Accountability in Government Contracting Act of 2007. This is a strong, bipartisan package of reforms that would tackle many of the problems we have seen in the Federal acquisition process. It would help 

to strengthen the acquisition workforce, improve oversight of contracts, and promote more competition and better transparency. 

Mr. Chairman, the rest of my statement goes into many of the 

provisions of the bill. In the interest of time, I am just going to 

focus on one, and that is a growing practice of contracting officers 

awarding what are called ‘‘undefinitized contracts,’’ and by that I 

mean contracts that are actually missing key terms, such as the 

price or the scope or the schedule. This practice is out of control, 

and it creates considerable problems. So the legislation that we 

have introduced would help mitigate the award of those kinds of 

contracts by requiring the contracting officer to unilaterally determine the missing terms within 180 days if it cannot be worked out. 

But, obviously, those kinds of contracts, which are missing such 

key elements, pose great risks. 

I also want to just briefly focus on the shortfalls in the rank of 

Federal acquisition professionals. This may not be the most glamorous of issues, but, arguably, they are the most important provisions of this bill, because no matter how we tighten up the law, if 

we do not have well-trained professionals in adequate numbers administering these contracts, then all of the legal reforms will be in 

vain. 

I am eager to hear the ideas from our witnesses for making our 

bill even more comprehensive and effective. You have invited, Mr. 

Chairman, a superb panel today. This is a vitally important subject 

for the Committee. Delays and defects in procuring goods and services frustrate our goals and can actually endanger the lives of our 

citizens and our soldiers. And every dollar that is lost to waste, 

fraud, abuse, or mismanagement is a dollar denied to some other 

worthy objective. 

Thank you, Mr. Chairman. 

[The prepared statement of Senator Collins follows:] 

PREPARED STATEMENT OF SENATOR COLLINS 

The challenge of overseeing Federal contracting has grown over the years. Spending under Federal contracts now exceeds $400 billion a year, making the U.S. government by far the world’s largest purchaser of goods and services, from staplers 

to studies to satellites. 

6 

During the past two decades, Federal purchasing has undergone several waves of 

reform. As a Senate staffer years ago, I helped draft the Competition in Contracting 

Act of 1984. More recent reform efforts were enacted in 1994, 1996, and 2003. 

Unfortunately, many of the problems we sought to correct over the years are still 

with us, like a drug-resistant virus that defies a doctor’s best efforts. 

This Committee has heard truly alarming reports on acquisition problems such 

as arose in the response to Hurricane Katrina and in the reconstruction efforts in 

Iraq and Afghanistan. But even routine Federal acquisition projects are often rife 

with problems. 

I will mention three examples from a regrettably long list of candidates: 

• The Special Inspector General for Iraq Reconstruction found that the Department of Defense’s management of $7.3 million in contracts relating to the 

Babylon Police Academy had numerous deficiencies, including $1.3 million 

wasted on duplicate construction and unneeded equipment, $2 million in unaccountable spending, and possible fraud. 

• FEMA spent $915 million to buy manufactured homes for victims of Hurricanes Katrina and Rita that was largely wasted. More than 2,000 of the units 

exceeded FEMA’s size specifications, and FEMA’s flood-plain rules prevented 

large-scale deployment in the most heavily damaged areas of Louisiana and 

Mississippi. 

• The Department of Energy contracted with Bechtel to build a $4.3 billion 

waste-treatment plant at the contaminated Federal nuclear facility in Hanford, Washington. GAO reported this year that the cost estimate now exceeds 

$12 billion, and that completion will likely be in 2019 or later, 8 years later 

than originally scheduled. GAO points to contractor performance, DOE management and oversight, and technical issues as problems. 

Mr. Chairman, I don’t cite these examples to question the goals or importance of 

the programs. I cite these programs precisely because they are important for advancing our national interests, for enhancing the capabilities of our armed forces, 

and for protecting our citizens. That is why, beyond the concern for wasted dollars 

and delayed deliveries, it is so troubling that the contract-management functions at 

Defense, DHS, and the Department of Energy, are all on GAO’s high-risk list. 

We know that just as the problems are varied, so are the causes. They include 

a severe and growing shortage of qualified acquisition professionals, an over-reliance 

on sole-source contracts, inadequate specification of requirements and delivery 

dates, too many award fees in the face of poor performance, a lack of transparency 

in the process, deficient monitoring and evaluation, and even decision-making corrupted by individuals accepting gifts or seeking future private employment. 

That is why I, along with Chairman Lieberman and Senators Coleman, Carper 

and McCaskill, introduced S. 680, the Accountability in Government Contracting 

Act of 2007, earlier this year. 

This strong, bipartisan package of reforms would tackle many of the problems we 

have seen in Federal acquisition. It would help to strengthen the acquisition workforce, improve oversight of contracts, and promote competition and transparency. 

Among other reforms, S. 680 would mandate competition for task or delivery orders that are currently not subject to competition. To increase the quality of competitive bids and bring additional transparency to task or delivery order competitions, the bill establishes the right to post-award debriefings for unsuccessful bidders on orders valued over $5 million. This will help vendors shape better offers for 

the future and sharpen competition. 

S. 680 also lessens the risks inherent in sole-source contracts by requiring prompt, 

on-line publication of notices of all sole-source task or delivery orders above the Simplified Acquisition Threshold. 

The bill would mitigate the practice of awarding contracts missing key terms, 

such as price, scope or schedule—that is, ‘‘undefinitized contracts’’—by requiring the 

contracting officer to unilaterally determine missing terms within 180 days or a 

specified completion percentage. 

Equally important, several measures in S. 680 would address the shortfalls in the 

ranks of Federal acquisition professionals. Mechanisms include an acquisition internship program and a government-industry exchange program; an Acquisition Fellowship Program offering scholarships in exchange for a commitment to Federal 

service, requirements for human-capital strategic plans by chief acquisition officers, 

and a new senior-executive-level position in the Office of Federal Procurement Policy to manage this initiative. 

I am eager to hear ideas from our witnesses for making our bill even more comprehensive and effective. As Comptroller General, Mr. Walker has performed a great 

7 

service to the country by overseeing GAO’s numerous and insightful reports on government programs, and in publicizing the high-risk list. Ms. Madsen’s legal background in contracting and her service with the SARA Panel establish her as a particularly acute diagnostician in this area. And Mr. Soloway’s government experience 

in earlier reform programs and his private-sector expertise will give us valuable insights in how we can improve the contracting process while taking into account legitimate business concerns. 

This is a vitally important subject for the Committee. Delays and defects in procuring goods and services frustrate our goals, and can endanger the lives of our citizens and our soldiers. And every dollar lost to waste, fraud, or abuse is a dollar denied to some other worthy objective. 

Chairman LIEBERMAN. Thank you very much, Senator Collins, 

for an excellent statement and for your leadership in putting forth 

legislation on this subject. 

Normally we would go to the witnesses now, but I would ask 

Senator Akaka and Senator Carper if either wants to make a brief 

opening statement. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. Mr. Chairman, I want to thank you very much 

for holding this hearing. Acquisition management has become a 

huge challenge for the government, as you pointed out so well in 

your statement, due in large part to the increasing use of contracting that has gone on. Many of the problems in acquisition 

management stem from an understaffed acquisition workforce, and 

that is something that we need to work on. 

I have a statement here, and in the interest of time, I will ask 

that it be placed in the record. 

[The prepared statement of Senator Akaka follows:] 

PREPARED STATEMENT OF SENATOR AKAKA 

Thank you, Mr. Chairman, for holding this hearing. Government acquisition is a 

very important subject, which I have followed closely in my role as Chairman of the 

Subcommittee on Oversight of Government Management. 

Over the past 6 years, the use of contracts has ballooned. In 2006, the Federal 

Government spent over $400 billion taxpayer dollars on procuring goods and services—double what was purchased in 2000. At the Department of Homeland Security 

alone, procurement spending has tripled since its creation in 2003. Senator Voinovich and I held a hearing on DHS acquisition management just last month where 

we heard about progress made in contract management and lessons learned from 

past problems. 

One of these problems, which unfortunately illustrates what happens when contracts do not receive enough oversight, is the Coast Guard’s Deepwater contract for 

fleet modernization. Due to inadequate oversight after awarding the contract, costs 

soared and deliverables did not meet the Coast Guard requirements. The entire contract had to be overhauled, showing that the government cannot always rely on contracted support to oversee major acquisitions. 

Many of the problems in acquisition management stem from an understaffed acquisition workforce. While contract spending has doubled, our acquisition workforce 

has remained steady at around 55,000 government employees. As a result, contractors are being used to supplement the acquisition workforce. Sometimes contractors 

are even hired to study whether or not certain government activities should be contracted out. One may wonder, are the foxes guarding the henhouse? 

The terms and requirements of contracts are also too vague. In some cases, the 

government issues requests for proposals that are too broad with few specific requirements. Agencies then rely on a contractor to tell them what it is the agency 

needs to achieve its mission. The SBInet program relied heavily on such broad 

terms, and this contract must be continually monitored to ensure it is not mismanaged. 

The increasing reliance on certain types of contracts is also a serious problem. 

Cost-plus contracts, in which the government pays for the costs of a good or service, 

plus a percentage, can lead to abuse and waste. With these terms, there is little 

8 

incentive to find the lowest cost solutions. The more an item costs, the bigger the 

commission for the contractor. These contracts can also include an additional award 

fee, which is routinely awarded nearly in full, even if there was admittedly poor performance, as we have seen with several contracts in Iraq. 

Most troubling is the reliance on no-bid and limited competition contracts. While 

time is of the essence for many acquisitions, no-bid and limited competition contracts are not always responsible procurement options. Such contracts are only 

meant to be used sparingly when there is clearly a single provider of the needed 

service. However, it is more often the case that we ask for so much in umbrella contracts; bloated requests for services so large that only a handful of companies can 

deliver. Better planning and a bigger workforce could allow government agencies to 

create manageable contracts that can be opened up for more competition which 

saves the government money. 

Again, thank you Mr. Chairman for holding this hearing. This is a very important 

issue. I hope to work with you, the Ranking Member, and Members of this Committee to find meaningful solutions that can improve acquisition management. I 

look forward to hearing from our witnesses today, who will offer their expertise as 

we move forward. 

Chairman LIEBERMAN. Thanks, Senator Akaka. 

The record should note that Senator Akaka, in partnership with 

Senator Voinovich, has been really persistent in pursuit of what 

Senator Collins quite correctly called the ‘‘unglamorous’’ questions 

associated with human capital management for the Federal Government, including the workforce and the acquisition workforce. So 

I thank you. 

Senator Carper. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. Thanks, Mr. Chairman. 

It ought to be clear to anyone who has been paying attention to 

the news in recent years that our Federal Government has serious 

problems with the way that we manage our contractors and the 

way we manage our contracts. The U.S. Government is the biggest 

buyer in the world. I am told we purchased over the last 7 years 

or so nearly a half trillion dollars’ worth of goods and services. 

That is an increase of almost 90 percent. This enormous increase 

has been triggered, I think at least in part, to our support for efforts in Iraq and Afghanistan. 

Unfortunately, auditors and investigators have exposed extensive 

waste, fraud, and abuse involving a number of government agencies and contractors. In fact, many of the contracts involving our 

government during the past 4 years in Iraq and Afghanistan have 

resulted in profound waste and mismanagement, some of which we 

visited 4 weeks ago. Senator McCaskill and I were over there on 

a mission to look into some of it. 

Most of those contracts have been awarded on a no-bid or costplus basis. As a result, billions of taxpayers’ dollars have unfortunately been wasted. I just want us to consider two examples over 

the past 2 years alone. 

Last year, the Defense Contract Audit Agency identified about 

$263 million as ‘‘potentially excessive or unjustified’’ costs charged 

by Kellogg, Brown & Root, known as KBR—the government contracting firm formerly under Halliburton—under a no-bid contract 

known as ‘‘Restore Iraqi Oil.’’ Yet the Department of Defense chose 

to pay $253 million of the disputed costs, despite the auditors’ objections. 

9 

This past May, according to an audit by our own Special Inspector General of Iraq, we learned that KBR did not keep accurate 

records of gasoline distribution, put its employees in living spaces 

larger than necessary, and served meals that cost $4.5 million 

more than necessary under its contract to perform work in Iraq. 

As I said earlier, Senator McCaskill and I were over there about 

a month ago, and we learned firsthand, when we visited Iraq, some 

of this information. The oversight that our congressional delegation 

performed in both Iraq and Kuwait—over contractors operating 

there and the contracts they ostensibly oversee—was very constructive. 

Mr. Walker, I was briefed, prior to my trip, by a couple of people 

from your shop, and I think Carole Coffey was one and Bill Solis 

was the other, and they did really an excellent job. We thank you 

and them. 

According to the Department of Defense, there are more than 

127,000 contractors in both countries supporting our war effort. 

These contractors do everything from doing the laundry, serving 

meals, driving convoy trucks, repairing trucks and vehicles that 

have been blown up, and you name it. They protected us while we 

were there. 

The oversight, though, of the contractors who support the deployed forces has been a longstanding problem, which GAO has reported on since, I guess, 1997. Last December, the GAO argued the 

Department of Defense continues to have inadequate contractor 

oversight personnel in deployed locations, which makes it nearly 

impossible for the Department of Defense to receive assurances 

that contractors are meeting contract requirements efficiently and 

effectively at each location. Similarly, the GAO noted commanders 

and other military personnel—integral players in contractor oversight—receive little or no training on the use of contractors as part 

of their predeployment training or their professional military education. 

This week, I am offering an amendment to the Defense Authorization bill to correct that, an amendment that I hope Senator 

McCaskill will join me in offering. Our amendment will help ensure 

military personnel understand the scope and the scale of the contractor support they have in contingency operations and prepare 

them for their roles and responsibilities for oversight and contingency contracting. 

Over the past 5 months, Congress has started to pressure the 

Executive Branch to end bad contracting practices, and not a moment too soon, I might add. However, many problems do persist, 

and the key is to stay on it. We must remain vigilant in our congressional oversight of Federal taxpayer dollars going to pay contractors, whether it is in Iraq or Afghanistan or some other place 

around the world. 

The questions I hope will be addressed today are these: 

One, how do we make the Federal acquisition process more efficient, more effective, transparent, and accountable? 

Two, how do we establish a capable acquisition workforce and 

hold it accountable? 

Three, how can the Congress play a constructive role in the path 

forward? 

10 

Federal agencies, particularly the Departments of Homeland Security and Defense, have critically important missions—to protect 

and secure our homeland. Waste and mismanagement undermine 

their missions. Anything that weakens our government’s quick and 

effective response to the real threats our country continues to face 

here and abroad is just too much. 

As elected Members of Congress, our greatest stakeholders are 

the American people. We have an obligation to ensure their dollars 

are being used as effectively as possible. That is why I am also 

proud to be an original cosponsor of the legislation Senator Collins 

has offered, along with Senator Lieberman, to ensure proper oversight and accountability in Federal contracting. 

Last, let me just conclude by saying congressional oversight is 

imperative to make sure that Federal agencies like the Department 

of Homeland Security and like the Department of Defense step up 

to the plate, confronting the waste of precious taxpayer dollars and 

taking immediate, corrective action so we protect Americans and 

our interests abroad as well as the nearly 300 million Americans 

at home. 

I look forward to hearing from each of you. We welcome our witnesses and we look forward to continuing to work with our colleagues on this Committee and others to provide the oversight that 

ensures these agencies do not shy away from their duty to forcefully confront waste and mismanagement. 

Welcome. Thank you for coming. 

PREPARED STATEMENT OF SENATOR CARPER 

It should be clear to anyone paying attention to the news in recent years that our 

Federal Government has serious problems with the way it manages contractors and 

contracts. 

The U.S. government is the biggest buyer in the world, purchasing nearly half a 

trillion dollars in goods and services over the past 7 years—an increase of almost 

89 percent. This enormous increase has been triggered, in part, to support our war 

efforts in Iraq and Afghanistan. 

Unfortunately, auditors and investigators have exposed extensive waste, fraud, 

and abuse involving a number of government agencies and contractors. In fact, 

many of the contracts involving our government during the past 4 years in Iraq and 

Afghanistan have resulted in profound waste and mismanagement. Most of those 

contracts have been awarded on a no-bid or cost-plus basis. As a result, billions of 

taxpayers’ dollars have been wasted. Consider just a few examples over the past 2 

years alone: 

• Last year, the Defense Contract Audit Agency (DCAA) identified about $263 

million as ‘‘potentially excessive or unjustified’’ costs charged by Kellogg, 

Brown & Root (KBR)—the government contracting firm formerly under Halliburton—under a no-bid contract known as ‘‘Restore Iraqi Oil.’’ Yet the Department of Defense chose to pay $253 million of the disputed costs, despite 

the auditors’ strong objections. 

• This past May, according to an audit by our Special Inspector General of Iraq, 

we learned that KBR did not keep accurate records of gasoline distribution, 

put its employees in living spaces larger than necessary and served meals 

that cost $4.5 million more than necessary under its contract to perform work 

in Iraq. 

• We have also learned the California-based Parsons Corporation, which has received $186 million over the past 3 years for a healthcare center project, has 

completed construction on only 15 of 142 planned health care centers. Of 

those 15 centers, only six are open to the public. 

I learned this first-hand when I visited Iraq last month. The oversight our congressional delegation performed in Iraq and Kuwait—over contractors operating 

there and the contracts they ostensibly oversee—was very constructive. 

11 

According to the Department of Defense, there are more than 127,000 contractors 

in both countries supporting our war effort. These contractors do everything—prepare meals, do laundry, drive hundreds of trucks thousands of miles to re-supply 

U.S. and Iraqi forces, repair damaged vehicles, and, even provide protection to congressional delegations that come to Iraq on an almost weekly basis. 

Oversight of contractors who support deployed forces has been a long-standing 

problem, which the General Accountability Office (GAO) has reported on since 1997. 

Last December, the GAO argued the Department of Defense continues to have inadequate contractor oversight personnel in deployed locations, which makes it nearly 

impossible for the Department to receive assurances that contractors are meeting 

contract requirements efficiently and effectively at each location. 

Similarly, the GAO noted commanders and other military personnel—integral 

players in contractor oversight—receive little or no training on the use of contractors as part of their pre-deployment training or their professional military education. 

This week, I am offering an amendment to the Defense Authorization bill to correct this. My amendment will require training for all military personnel outside the 

acquisition workforce, including operational field commanders and officers performing key staff functions for operational field commanders expected to have acquisition responsibility and oversight of contracts and contractors. My amendment will 

help ensure military personnel understand the scope and scale of the contractor support they have in contingency operations and prepare them for their roles and responsibilities for oversight and contingency contracting. 

Over the past 5 months, Congress has started to pressure the Executive Branch 

to end bad contracting practices. Slowly, bad contracting practices are disappearing 

and will, with our continued oversight, be replaced with fixed-price contracts and 

competitive bidding. 

For example, the Defense Department, which spent $151 billion on service contracts in fiscal 2006, has made some effort to increase oversight. However, many 

problems persist. The key is to stay on it. We must remain vigilant in our congressional oversight of Federal taxpayer dollars going to pay contractors in Iraq and Afghanistan. 

The questions I hope will be addressed today are: 

• How do we make the Federal acquisition process more efficient, effective, 

transparent and accountable? 

• How do we establish a capable acquisition workforce and hold it accountable? 

• What tools do our Federal agencies need to accomplish those objectives? 

• How can the Congress play a constructive role in the path forward? 

Federal agencies, particularly the Departments of Homeland Security and Defense 

have critically important missions—to protect and secure our homeland. Waste and 

mismanagement undermine their missions. Anything that weakens our government’s quick and effective response to the real threats our country continues faces 

here and abroad is too much. 

As elected Members of Congress, our greatest stakeholders are the American people. We have an obligation to ensure their dollars are being used as efficiently and 

effectively as possible. This is why I am also proud to be an original cosponsor of 

the bipartisan bill—introduced by Senators Lieberman and Collins—ensuring proper 

oversight and accountability in Federal contracting. 

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

this year is forecast at just over $200 billion. This is not a time to be wasteful with 

our citizen’s hard-earned money. In fact, there is never a time to be frivolous with 

the hard earned money of the American people. 

Congressional oversight is imperative to make sure Federal agencies like the Department of Homeland Security and the Department of Defense step up to the plate, 

confronting the waste of precious taxpayer dollars, and taking immediate, corrective 

action so we protect Americans and our interests abroad as well as the nearly 300 

million Americans at home. 

I look forward to hearing from each of you. And I look forward to continuing to 

work with our witnesses and my colleagues on this Committee to provide the oversight that ensures these agencies do not shy away from their duty to forcefully confront waste and mismanagement. 

Chairman LIEBERMAN. Thanks, Senator Carper. 

I am very grateful to the three witnesses. This is an excellent 

panel that brings a lot of expertise and experience to the table that 

will help us in our desire to legislate effectively here. 

12 

1The prepared statement of Mr. Walker appears in the Appendix on page 45. 

We will begin with David Walker, obviously the Comptroller 

General of the United States since November 1998. GAO’s body of 

work related to government procurement has been invaluable to 

this Committee and to Congress in helping us understand both the 

weaknesses in the system and the means of addressing those weaknesses. 

Mr. Walker, I thank you for your really exemplary service to our 

government, to our country, and I welcome your testimony now. 

TESTIMONY OF HON. DAVID M. WALKER,1 COMPTROLLER 

GENERAL OF THE UNITED STATES 

Mr. WALKER. Chairman Lieberman, Senator Collins, other Members of the Senate Homeland Security and Governmental Affairs 

Committee, first, thank you very much for holding this hearing. It 

is a very important topic, clearly worthy of your time. And, second, 

thank you very much for inviting me to testify at this hearing. 

The U.S. Federal Government is the single largest buyer in the 

world, obligating over $400 billion in fiscal year 2006 alone. While 

acquisitions are made throughout government, the majority are 

concentrated in just a few agencies: The Department of Defense 

represents 71 percent, and the top five agencies represent 86 percent of all Federal acquisitions. 

GAO’s work extending back over many years has demonstrated 

that agencies face a number of recurring and systemic challenges 

in their acquisition of goods and services. Let me make it clear. A 

vast majority of Federal employees do a good job, and a vast majority of Federal contractors do a good job. I think that is important 

to note. But in examining our defense work in particular, which is 

where 71 percent of contracting dollars were done last year, we 

have observed 15 systemic and longstanding acquisition challenges 

which I have included as Appendix I, and I would commend it to 

you and your key staff. These have been there for years. Many of 

these require action by Executive Branch officials. Some might require legislation. All require additional oversight by the Congress. 

For example, not only have we identified contract management 

as a high-risk area for DOD, but also for the Department of Energy 

and NASA, as has been mentioned. Furthermore, we have identified interagency contracting as a new government-wide high-risk 

area. 

Let me be clear. These systemic challenges and high-risk areas 

cost the taxpayers billions of dollars every year. In my testimony, 

I highlight these acquisition challenges, and I categorize them into 

four areas: 

First, the importance of separating unlimited wants from true 

value and risk-based needs. 

Second, establishing and supporting realistic program requirements and sticking with them. 

Third, using contractors in appropriate circumstances and contracts as an effective management tool. 

And, fourth, creating a capable workforce in the acquisitions area 

and holding it accountable for results. 

13 

Separating wants from needs in an affordable and sustainable 

manner will be critical to improving management within our current fiscal environment. No less important is the need for clearly 

defined program requirements and to stick with those requirements over time. It is also important to use appropriate contract 

types as well as effective oversight, both by the Executive and Legislative Branch. 

Contract management challenges can jeopardize successful acquisition outcomes in normal times, but they take on heightened significance in contingency operations such as Iraq, Afghanistan, and 

Katrina. A significant part of our challenge relates to the evolving 

and enlarging role of contractors in acquisitions, particularly 

through service contracts, which accounted for nearly 60 percent of 

all government contract obligations for fiscal year 2006. This raises 

the basic question of which type of work should be done by contractors versus government personnel. This is a major issue that is a 

growing concern and is in need of serious attention by both the Executive Branch and the Congress. 

In addition, an accountable and capable workforce underlies the 

Federal Government’s ability to strategically plan, to effectively 

manage, and to properly oversee whatever contracting activities 

are done. Tackling these and other systemic challenges will be fundamental to helping achieve better value for money and reducing 

but not eliminating waste. Let’s face it. The Federal Government 

is the largest, the most complex, and, arguably, the most important 

entity on the face of the Earth. We should have zero tolerance for 

fraud, waste, abuse, and mismanagement. It will never be zero, but 

we can do a lot better than we are doing now. 

And in that regard, let me offer a definition of ‘‘waste’’ because 

I think we need to keep in mind waste is where the money is. 

Waste involves the taxpayers in the aggregate not receiving reasonable value for money in connection with any government-funded 

activities due to an inappropriate act or omission by players with 

control over or access to government resources. That is noted in 

Appendix II of my testimony, and I might note that waste can be 

caused by either the Executive Branch or the Legislative Branch, 

and there are specific examples that are noted therein. 

In closing, I would like to re-emphasize why it is important, in 

fact, imperative that we address these longstanding and systemic 

acquisition and contracting challenges. Given our current and projected financial condition, we should have zero tolerance for waste. 

We need to make some tough decisions. Some will have to be made 

by the Executive Branch, others by the Legislative Branch, but it 

is important that we do it sooner rather than later. The failure to 

do so will cost American taxpayers billions of dollars each year. 

Last, but certainly not least, let me make some comments about 

the Accountability in Government Contracting Act of 2007, S. 680. 

Let me commend Chairman Lieberman, Senator Collins, and others who are sponsors of this legislation. The act addresses a number of areas of concern that GAO has had over the years. In the 

aggregate, we believe that it has a number of meritorious provisions, and we are broadly supportive of this legislation. As I mentioned to Senator Collins, we have a few suggestions for improvement, and she is open to those suggestions. I am sure the other 

14 

1The prepared statement of Ms. Madsen with an attachment appears in the Appendix on page 

71. 2The document can be accessed on the Web at https://www.acquisition.gov/comp/aap/ 

24102lGSA.pdf. 

Members of the Committee are as well, and I promise you that you 

will have those this week, possibly as early as today, because I 

think it is important that we try to work together in a constructive 

fashion. I know you have put a lot of time and effort in the legislation, and I want to thank all of you for your efforts in this regard. 

Thank you very much. 

Chairman LIEBERMAN. Thanks very much, Mr. Walker, and we 

do look forward to those suggestions that you have about the legislation. You are a critical participant in this, and we wanted to 

come at it in a constructive way. 

As our second witness today, we are very grateful to have Marcia 

Madsen appearing before us in her capacity as Chair of the Acquisition Advisory Panel, which was established by the Services Acquisition Reform Act of 2003 to examine this complicated area of law 

and make recommendations to Congress. Ms. Madsen is a partner 

and expert in this area in the law firms of Mayer Brown. It is a 

happy coincidence, I suppose, that the Government Printing Office 

has just within the past few days produced a hard copy of the panel’s report that came out in January. And it is both hard and 

heavy, I might add, and each of the Members has a copy at their 

desk before them. 

Ms. Madsen, we look forward to hearing your testimony on the 

panel’s recommendations. On behalf of the entire Committee, I 

want to thank you, the other panel members, and the panel staff 

for your hard work to produce this report, which will be a real help 

to us as we go forward with both our oversight responsibility and 

our desire and commitment to legislate. 

Thank you very much. We look forward to your testimony now. 

TESTIMONY OF MARCIA G. MADSEN,1 CHAIR, ACQUISITION 

ADVISORY PANEL 

Ms. MADSEN. Mr. Chairman, Senator Collins, thank you very 

much for holding the hearing and for inviting me to testify in my 

capacity as Chair of the Acquisition Advisory Panel. I am very 

happy to be here to talk about the panel’s work product, and as 

Senator Lieberman mentioned, I am also very happy—and greatly 

relieved, I might add—to see that GPO has finally printed the document. I am not sure that without the impetus of this hearing we 

would have gotten it. But we have it, and we are very grateful to 

have it. 

Just so you know, you have some of the first copies of the report. 

The report has actually been officially transmitted to OFPP, and it 

is in the process today of being distributed to all Members of Congress and senior government officials by GPO. And we will be posting the report on the Web. It may take a couple of weeks, but it 

will be on the panel’s Web page as well.2

I just want to note that accompanying me today are Ty Hughes 

and Roger Waldron, sitting in back of me, each of whom co-chaired 

panel working groups and who wrote substantial portions of this 

report. And also accompanying me is Laura Auletta, the panel’s 

15 

Executive Director and solo permanent staff person. She was really 

the backbone of our efforts, and we are very grateful to her. 

I would also like to acknowledge Panel Member David Drabkin, 

who has changed hats here. He is sitting behind you, Senator Collins. David also co-chaired two panel working groups and contributed to this report. 

The Committee’s interest in our report is greatly appreciated. We 

have been following S. 680—I have—and noted the inclusion of 

many of the panel’s ideas and concepts in the legislation. 

At this point I would like to request that my full statement be 

included in the record, and I will just summarize some of the key 

points. 

Chairman LIEBERMAN. Without objection. 

Ms. MADSEN. Thank you. There is no way I could talk about the 

whole thing. 

Section 1423 identified key topics for the panel as commercial 

practices, performance-based contracting, and the use of government-wide contracts, or interagency contracts as we know it. The 

panel was sworn in February 2005. It consisted of 13 members balanced between government and the private sector. 

The panel tried very hard to use an evidence-based policymaking 

process. We did our best to ground our findings and recommendations in research and in data. We heard testimony from more than 

100 witnesses representing government and public interest organizations. We held more than 30 public meetings. We adopted over 

100 findings and 80 recommendations. Obviously, they can only be 

touched on here. 

The panel was subject to the Federal Advisory Commission Act 

(FACA), so this was a very open and transparent process. Congressman Davis, who I was talking to the other day, after he listened to the statistics, said, ‘‘That is a lot of Diet Coke.’’ [Laughter.] 

And both Comptroller General Walker and my friend Stan 

Soloway here both testified in front of the panel. 

The panel was very well aware that with Federal spending approaching, at the time we were working, $400 billion and serious 

and competing demands on the taxpayer dollars that an accountable and transparent acquisition system that delivers innovative 

and high-quality goods and services was absolutely critical to our 

national interests. 

I will talk a little bit about some of the subjects in the panel’s 

work. Because of the emphasis in the legislation regarding appropriate use of commercial practices, and because performance-based 

acquisition is a commercial practice, the panel spent significant efforts on the subject of commercial practices. One of the first things 

we did was reach out to large commercial buyers of services, and 

the private sector consultants who support them. And they talked 

to the panel about current commercial practices and services acquisition, and I want to note here that the panel focused on services 

acquisition, but we did not do it to the exclusion of all acquisition. 

We also took testimony from many government buyers and users 

of services, both DOD and civilian agencies, and we heard from 

many government contractors as well as watchdog groups. 

16 

As detailed at length in our report, there is a large and robust 

private sector market for services, particularly IT and IT-related 

services. Commercial companies are acquiring billions of dollars in 

services, and they have well-developed acquisition and contracting 

procedures, and we set out to find out what those were. 

The large commercial buyers who testified before the panel identified requirements development—what are your needs, just as 

Comptroller General Walker has talked about—and competition as 

the keys to successful service contracting. These companies told us 

that they make large up-front investments in defining requirements, typically on an outcome basis. This investment makes vigorous competition possible. It facilitates the use of performancebased contracts as well as fixed-price contracts. Requirements development is to the commercial sector the most basic and fundamental building block of services acquisition. 

One of our witnesses told us if you do not know what you are 

going to buy, perhaps you should not buy anything at all. They 

were a little astonished, some of our private sector witnesses, at 

some of the government practices. 

Government practice, our observation based on our work, on the 

other hand, is driven by the need to get to award quickly to meet 

mission needs and obligate funds. And we recognize that inadequate requirements definition is not a new topic. It has been an 

issue at least for every group that has looked at these issues for 

30 years. But the problem in the services context is that poor requirements definition results in reduced competition, the inability 

to use performance-based contracts, the inability to make use of 

fixed-price contracts, and ultimately it results in increased costs. 

The panel’s commercial practices recommendations focus on improving competition. The recommendations recognize that competition fuels innovation, drives fair prices, and disciplines the responsible and effective use of streamlined acquisition vehicles and improves opportunities for small businesses. 

The panel worked hard to develop data using FPDS–NG on the 

extent to which government acquisition is competitive. We noted, 

as has been observed here already, that government spending on 

services accounted for 60 percent of procurement dollars in 2004 

and 2005, including at DOD. So DOD is not spending most of its 

money on weapons systems. It is spending it on services. The details are in our report, but in fiscal year 2004, one-third of the government’s procurement dollars were awarded non-competitively. 

This is based on our analysis of FPDS data. And even when competed, the percent of dollars awarded, when only one offer was received, has more than doubled from about 9 percent in 2000 to 20 

percent in 2005. And we fear that the amount of non-competitive 

awards may be understated. Although we tried for months and 

months, we could not obtain reliable data on competition for orders 

under multiple award contracts available for interagency use. We 

do know that in 2004, $142 billion, or 40 percent of procurement 

spending in that year, went through interagency vehicles. 

Our recommendations, I guess many of which have been picked 

up in the bill, focus on requirements development through use of 

Centers of Excellence and requiring that the program manager and 

17 

1The copy of the executive summary is retained in the files of the Committee. 

the contracting officer be responsible for requirements regardless of 

the acquisition vehicle that they use. 

With respect to interagency contracts, our recommendations try 

to achieve a balance between recognizing that these vehicles are 

necessary to allow for streamlined acquisition of what we call ‘‘bitesized’’ requirements for repetitive needs and with the fact that a 

significant proportion of large orders, single transactions in excess 

of $5 million each is flowing through these vehicles. For example, we found that in 2004, $66.7 billion of that $142 

billion was awarded in orders for single transactions that exceeded 

$5 million in value. These are single orders. We could not get data 

that showed what the award with options was, so those are single 

orders in those years. 

For interagency contracts, we recommended making the requirements of Section 803 of the 2002 DOD bill applicable governmentwide for orders over $100,000, and we recommended some other 

things as well, for example, requiring a synopsis post-award for 

sole-source orders, something that is picked up in the bill. For orders over $5 million, we recommended more formalized competitive 

procedures that are outlined in the report. We also recommended 

post-award debriefings, and we recommended, after quite a bit of 

debate and discussion, allowing protests on orders of over $5 million. And I am happy to talk about that more if the Committee 

would like later. 

On interagency contracting, we recommended that those contracts need to be better managed. Among other things, our findings 

recognized that the government does not know how many of those 

contracts it has, so our findings start with identifying where those 

contracts are, who is using them, and OFPP, I am happy to say, 

already started down that path early in the panel’s work. 

On the workforce, the panel determined that there is a significant mismatch between demands placed on the workforce and the 

personnel and skills available within that workforce to meet the demands. The problem that the panel encountered was that there 

was just not reliable information about the size, composition, and 

the competencies of the Federal acquisition workforce. 

The procurement panel that was empaneled in 1972 to look at 

these issues had the same problem, and we did the same thing 

they did. We commissioned our own study of the Federal acquisition workforce. This is the executive summary of our study. It actually consists of nine volumes. We are happy to provide it to the 

Committee. I will leave this copy with the staff today of the summary.1 But the problem that we identified is clearly identifying 

where the workforce is, what the competencies are. The data just 

is not available. And based on what we heard from the commercial 

sector, our perception is that this just is not an issue of numbers, 

it is an issue of skills, it is an issue of resources, it is an issue of 

people with the right mix of skills to do the kinds of acquisition 

that are required in a heavily services-dependent environment. 

We also looked at the challenges of the blended workforce. That 

was a topic that we encountered later, and I think we have scoped 

those issues. I do not think we have all the answers to those issues. 

18 

1The prepared statement of Mr. Soloway appears in the Appendix on page 91. 

But we start, I think, with the premise that with 60 percent of the 

government’s money being based on going to services, that agencies 

need to have a better sense of what they are buying. 

In the A–76 area, where the inherently governmental rules 

apply, there is some discipline to the acquisition of services and 

what skills and what activities those workers are performing. 

Outside of that environment, where agencies are buying services, 

there is no definition really of what are the core government competencies that the government needs to maintain. And it is that 

area that our recommendations focused on. 

With that, I will close and am happy to answer any questions 

that you may have. 

Chairman LIEBERMAN. Thank you very much. Excellent testimony. A very interesting point that you conclude that we do not 

have enough data about the acquisition workforce to make informed judgments about what it lacks. So I will come back to that 

in the question period. Thank you. 

Our final witness is Stan Soloway, who is President of the Professional Services Council (PSC), a leading trade association of 

companies that provide professional and technical services to the 

government. Prior to joining PSC, Mr. Soloway served as the Deputy Under Secretary of Defense for Acquisition Reform, and concurrently as Director of the Secretary of Defense’s Defense Reform Initiative. The record shows that he, like Senator Collins, is a graduate of the William Cohen School of Public Service, a very fine 

school with a great mentor, a former member of this Committee. 

Mr. Soloway, thanks for being here, and we look forward to your 

testimony now. 

TESTIMONY OF STAN SOLOWAY,1 PRESIDENT, PROFESSIONAL 

SERVICES COUNCIL 

Mr. SOLOWAY. Thank you, Mr. Chairman, Senator Collins, and 

Senator Akaka. I want to thank you for the invitation and the opportunity to provide our views on S. 680, and generally the whole 

area of government procurement. This is a very important discussion, as my colleagues on the panel have suggested. We all recognize that, given the centrality of acquisition to the functioning of 

government, we have a shared responsibility to most effectively 

and efficiently utilize taxpayer dollars. 

I will note that the other great value and benefit not only of the 

legislation but of this hearing is the opportunity to have a serious 

discussion about solutions. In too many other forums we spend an 

awful lot of time pointing fingers and operating in a somewhat context-free zone, and I really appreciate the opportunity to have that 

broader substantive discussion. 

Whether it is assisting citizens seeking compensation for radiation sickness, providing support to our military men and women 

stationed at home or abroad, or developing scientific analyses to 

better protect sensitive wildlife habitats, PSC’s members are 

among the leading small, mid-tier, and large companies providing 

the full range of professional services to virtually every Federal 

agency. In fact, our 220 member companies employ hundreds of 

19 

thousands of people across the country in virtually every region 

and State. 

As you have noted, over the last decade the government’s missions have evolved rapidly, increased in complexity, and required 

new technologies, resulting in both growing challenges for the government itself and its workforce and a substantial increase in the 

reliance on contractors. The evidence suggests that these challenges and trends will continue well into the future. 

In fact, the July 2007 report of the Partnership for Public Service 

highlighted very clearly that the Federal Government will need 

nearly 200,000 ‘‘mission critical’’ new hires over just the next 2 

years to keep pace with the rising requirements to meet our national security and evolving agency needs and the expected Federal 

workforce retirements. That does not even begin to account for the 

thousands of positions across government, including in the acquisition workforce, which are today vacant and which the government 

is struggling to fill. 

S. 680 represents a valuable starting point for discussing how to 

ensure that the Federal procurement process fully protects how the 

government spends taxpayer dollars while also enabling the government to acquire the full array of necessary resources and support. When viewed in its totality, and despite its evident problems, 

the Federal acquisition system actually functions better than it 

might seem, and in most cases, quite well. As my colleague, the 

Comptroller General, pointed out, the vast majority of procurements are well constructed and the vast majority of contractors 

perform well. 

At the same time, improvement is clearly needed and we look 

forward to an ongoing dialogue about solutions that will deliver 

real value and improvement. 

Before I comment on specific aspects of the bill, let me just step 

back for a minute and offer a little bit of context and in some cases 

perhaps challenge some common myths that have surrounded this 

debate that all too often fail to recognize the complexities and nuances of this giant process we are dealing with. 

It is true that since September 11, 2001, Federal procurement 

spending on both goods and services has grown dramatically. But 

this should not come as a surprise. Among other things, September 

11, 2001, significantly changed many of the government’s missions 

and created requirements for new technology and innovative solutions to secure the homeland and fight the global war on terror. 

Today, more than ever, the government finds itself competing for 

people and capabilities in the broader economy, in which the availability of those very skills is in short supply. 

This contracting growth did not happen in a vacuum. During 

that same period, the overall discretionary budget of the government has grown nearly two-thirds. Thus, while significant, spending on service contracts has actually increased as a proportion of 

the government’s operations about 15 percent, from 21 to 24 percent of the discretionary budget. This is significant, clearly, but it 

is hardly the unconstrained rush others have suggested. 

Similarly, we continue to see claims that the so-called ‘‘shadow’’ 

contractor workforce supporting the government now numbers over 

8 million—making it more than four times the size of the Federal 

20 

workforce. Simply put, by any meaningful measure, that figure is 

wildly overstated and based on faulty premises and is mathematically impossible. 

We also have a lot of confusion around the issue of competition 

and, Mr. Chairman, I agree with you fully that competition must 

be a core value of Federal procurement. It is a core value among 

our members and we strongly support an open and competitive 

process in every possible way. 

However, some suggest that the amount of competition for government work today may, in fact, be less than it used to be. But 

when looked at proportionally, it is not clear that is the case, that 

it may, in fact, be relatively consistent. Some of the confusion in 

this area does come down to the unique terminology in government 

contracting. 

Many contracts are highly competitive even if they are not technically awarded through what we call ‘‘full and open competition,’’ 

which is a term with special meaning in Federal acquisition. For 

example, current law provides a 23 percent government-wide goal 

for small business and other preference programs, such as Section 

8(a) firms, firms owned by women, service-disabled veterans, 

HUBZone firms, and so forth. None of these awards are coded in 

the database as ‘‘full and open competition’’ because they are only 

available to qualified companies. It is not full and open. 

Similarly, with multiple award contracts, where there is typically 

a competition through which companies vie for a position on the 

contract—those companies that win a position on the contract, they 

then compete for incremental, as Ms. Madsen pointed out, bitesized pieces of performance. Those awards themselves may be competitive, but they are not full and open because they, too, are only 

available to those who won a position on the initial contract. 

This is not to say we should be satisfied with the degree of competition. As Ms. Madsen pointed out, Congress addressed this for 

the Defense Department in 2003. S. 680 appropriately extends the 

rules that were applied to the Defense Department at that time 

across the government and we support doing so in the same manner that was done for DOD. I do think it is important, as we have 

that discussion, to understand the definitions and the context clearly. 

We also need to be very clear that the bipartisan objectives of the 

acquisition reforms of the 1990s were not about procurement for 

speed’s sake. The goal was to rationalize and modernize an almost 

comically cumbersome process—a process, for example, through 

which the government dictated to cookie makers how many chocolate chips could go into a cookie made for the military; a process 

that was so arcane that large segments of the commercial sector 

simply refused to participate. The goal was to move from the rigid, 

rule-based process that was in part responsible for those dysfunctions to one based on critical thinking, business judgment, and 

smart decisionmaking. 

Far from simplifying the life of Federal acquisition professionals, 

many of those reforms actually made the acquisition process more 

demanding, and as you have pointed out and the Acquisition Advisory Panel and GAO and others have pointed out, the investment 

21 

in that workforce and their training and development has simply 

not kept pace. 

The private sector believes that the best customer is smart and 

well prepared and that is why 5 years ago PSC recommended to 

Congress the creation of what is now known as the Federal Acquisition Workforce Training Fund. Although the fund is growing, it 

is far from adequate. 

Which brings me to the legislation before us. Through S. 680, you 

recognize—and, Senator Collins and Chairman Lieberman, you 

made clear in your opening comments—that the greatest returns 

and improvements in the acquisition process will be found in an aggressive focus on the Federal acquisition workforce and the ways 

in which they are supported, developed, and resourced. That focus 

is long overdue and has never been more critical. 

It is also vital to recognize that the acquisition workforce is not 

just contracting people. It is a broad range of functional responsibilities, whether it be engineering, program management, financial and cost analysis, and so forth that must be included in any 

discussion of that workforce. 

The legislation contains important provisions that we support 

that we believe will help and enhance the acquisition workforce. 

But we also believe that more can be done. In fact, we believe that 

today we need a kind of workforce Marshall Plan that aggressively 

addresses the hiring, retention, training, reward, and development 

of the workforce we are asking to manage 40 percent of the discretionary budget. It is standard commercial practice for companies to 

develop, reward, and otherwise foster their core workforces differently than they do other elements of the company. Unfortunately, such is not the case in government, and it is time to change 

that paradigm. 

We also believe this initiative should include a special focus on 

emergency and contingency contracting. As an alternative to further restrictions or rules that could collide with mission realities, 

we propose that Congress direct the creation of a government-wide 

Contingency Contracting Corps. This corps would be drawn from 

across the government contracting workforce, be given special 

training in emergency and contingency contracting, and be 

deployable when the need arises. 

My written testimony contains more detailed comments on a 

number of other key provisions, and in some cases, while we recognize and support the underlying concerns that drove the recommendations in the bill, we also believe those provisions could be 

modified or improved upon. This would include the sections on limits on task orders, the use of fixed-price versus cost-type contracts, 

the tiering of subcontracts and debarment. Each of these is important, and I will be happy at any time to discuss our perspectives 

in more detail. 

We also share your belief, as reflected in Section 123, that interagency contracting remains an area worthy of further study and we 

support the intent of the provision. I will add that among our members, 65 percent of which are small or mid-tier firms, the mix and 

structure of the Federal contract landscape has enormous implications for the long-term competitiveness and diversity of the services 

industry. Thus, we recommend that Section 123 require a broader 

22 

analysis of the relative role and balance of interagency and enterprise contracting and how best to ensure that whatever we do fosters continued diversity and competitiveness in the marketplace. 

We do have particular concerns, which we can discuss in a few 

moments, with Section 114 that would allow the filing of protests 

on task order awards. This might be one area in which the views 

of industry are perhaps the most relevant, because if there is concern about the government adherence to the rules of fair play, it 

is the companies that will be the first to call for more opportunities 

for redress. Yet, across industry, there is a resounding consensus 

that adding protests to task order awards is unnecessarily costly 

and time-consuming. 

There are also other bills before this Committee and in other 

committees about which we have very grave concerns and which 

we believe will have a very deleterious effect on the environment, 

do little or nothing to improve actual acquisition or mission performance, and potentially have a significant negative effect on the 

long-term competitiveness of the marketplace. Given your leadership and your jurisdiction, we hope you will not hesitate to engage 

on those other bills and demand of them the same kind of rigor you 

are applying to your own legislation. 

Let me once again thank you for your leadership on these crucial 

issues and for your nonpartisan approach and openness to dialogue. This concludes my opening statement. I would be happy to 

answer any questions you might have. 

Chairman LIEBERMAN. Thanks very much, Mr. Soloway. Normally, it is the Committee Members that give the witnesses static. 

[Laughter.] 

I apologize that we are all going to have to put up with that static, but we are trying to stop it. Thanks for excellent testimony. We 

are going to do 8-minute rounds of questions for each of the Senators. 

Ms. Madsen, I wanted to start with you. I thought that you had 

a very interesting comparison of private sector acquisition practices 

as compared to the governmental sector, and the differences are 

really striking, particularly in terms of the planning going into the 

contract as well as the negotiation. The government seems to do 

too little planning. The private sector does a lot of it and also monitors the carrying out of the contract better than the government 

does. 

I wonder if you have any thoughts about the causes of that difference in what might be called acquisition cultures. 

Ms. MADSEN. I do have some thoughts. The panel, I think, heard 

quite a bit of testimony from the private sector because they are 

buying—private companies are buying services at a phenomenal 

pace, and they are buying them because they see the ability, particularly where they are technology-related services, to reduce their 

costs. So we were very interested in the techniques that they were 

using and the kinds of skills that they involved. 

The things that they told us, the first place they start is really 

aggressive and rigorous requirements development. They get the 

user, the vice president or the executive vice president whose substantive area of responsibility that is, and the acquisition people in 

23 

the same room, and they have to agree. They have to buy in. They 

have to agree. 

Our acquisition system in the government is a little stovepiped. 

We do not necessarily view acquisition in those terms, in terms of 

getting sign-off from particularly the user at the program community. So that is one of the things that struck us. It is also the investment they make. They will bring in—private sector companies 

will bring in, if they need to, a consulting firm, and they will spend 

some time and resources actually getting their requirements rounded up and defined on an outcomes basis, typically on a performance 

basis. And they do it with very complex services and with very 

complex missions. So we know it can be done, but it takes a lot of 

planning on the front end. 

I think the other piece probably—and this is a tougher issue for 

the government—is funding. The private companies are not worrying about spending their money in 12 months or 9 months or 8 

months, as the case may be. So they have a little more luxury in 

terms of knowing the funds are going to be available, but at the 

same time, I think the planning things that they do are a valuable 

lesson because those can be done regardless of when you know you 

are going to get your funding. 

Chairman LIEBERMAN. How much of it is because of the current 

shortage of acquisition specialists in the government? Or does that 

shortage merely exacerbate the existing difference in cultures? 

Ms. MADSEN. The private companies we talked to—and I think 

many of them would be happy to come and talk to you, if you wanted them to—told us that they just have a different model. They use 

typically a smaller group of people who are very sophisticated in 

doing large sourcing transactions. Folks who not only have acquisition expertise, but who understand what it is that they are buying, 

and they put those skills together. I think what we are lacking in 

the government side maybe is putting those skills together. We are 

asking—and Mr. Soloway mentioned this—government acquisition 

people to be good commercial buyers, to know that market, to know 

the government’s rules, and to know the government’s special missions. And that is a lot to put on their plate, and they are not really necessarily being given the tools and the training to do that all 

at one time. 

So part of it, I think, goes to the acquisition people, but part of 

it goes to the skill set and the way the function is organized. 

The commercial firms told us that they conduct extensive market 

research up front, so they do not just run a competition and they 

do not just define their needs. They also do market research, and 

they pinpoint who are the best potential competitors for this work. 

And that is something else government is not doing a very rigorous 

job of. 

One of our recommendations—and it looks, I think, to some people a little soft, but we think it is very important—is to actually 

establish a market research function in the GSA to do this kind of 

work. The government has a lot of data about what it buys, what 

it paid for it last year, what it paid for it last month. But the data 

is not pulled together in a way that is meaningful for conducting 

market research. 

24 

Chairman LIEBERMAN. I thank you for that. That is a helpful answer. I want to, before my time is up, ask Mr. Walker a question. 

You have noted your concern that Federal acquisition employees 

rotate too frequently between government and industry, and I 

know that GAO has ongoing work in this area. We have pending 

before our Committee a bill authored by Congressman Waxman, 

H.R. 1362, which comes to us from the House, which would enact 

new restrictions on former and current procurement officials. 

I wonder if you are prepared to offer us, first, a description of the 

extent to which you think this is a problem, and then, second, if 

you have any recommendations to make about how we might fairly 

and constructively legislate in this area. 

Mr. WALKER. Two things, Chairman Lieberman. First, with regard to the question you asked previously, the items in Appendix 

I are based on commercial best practices. So if we look at the items 

in Appendix I, they are based on our commercial best practices 

work. 

Second, there are two issues with regard to rotations. One issue 

is the rotation of government personnel too frequently such that 

you do not have appropriate, clearly defined responsibility and accountability. 

Chairman LIEBERMAN. Within the acquisition—— 

Mr. WALKER. Within the government. 

Chairman LIEBERMAN. So they stay in the Federal Government 

but just keep moving around. 

Mr. WALKER. For example, where the Defense Department may 

have a policy that you are assigned to serve as a senior program 

official for 2 years and then you rotate off rather than until you 

hit a major milestone. Waiting until a major milestone would facilitate a more effective and accountable transition. So that is the first 

type. 

The second type is what you touched on, which is a rotation between government and the private sector, the so-called revolving 

door. We do have concerns there. There are issues there. What I 

would like to do is look at that specific provision and then provide 

you something for the record, if that is possible. 

Chairman LIEBERMAN. OK. Ms. Madsen, did the Advisory Panel 

examine the revolving-door issue or would you care at this time to 

offer any views on it? 

Ms. MADSEN. Mr. Chairman, we did not really look at the revolving-door issue per se. We did try to get a sense of the number of 

people working in the Federal workforce. We just did not have good 

data on the number of contractors supporting the Federal workforce. The data is just not available. It is among our recommendations that we get data, but we did not look specifically at people 

rotating in and out. 

Chairman LIEBERMAN. Mr. Soloway, how about your reaction to 

this? I believe that the current law is that for one year after leaving government service, Federal procurement officials are prohibited from working for contractors to whom they awarded contracts. 

Is this a problem and one we should legislate on? 

Mr. SOLOWAY. The answer is we have a very clear standard out 

there. When I left government, although I did not have responsibility for specific procurements, all of us leaving the last adminisVerDate Nov 24 2008 10:49 Oct 29, 2009 Jkt 037359 PO 00000 Frm 00028 Fmt 6633 Sfmt 6601 P:\DOCS\37359.TXT SAFFAIRS PsN: PAT
25 

tration had very clear guidance from our ethics officers of what we 

were allowed and not allowed to do, who we could talk to and who 

we could not talk to and so forth. 

I do not think the problem is the need to change the law as it 

is making certain that everybody who is affected by it has the clarity of guidance that they need. Unfortunately—and I do not use 

this in any way as an excuse—in the few cases that we have seen 

the people admitted they knew exactly what they were doing when 

they did it. And I am not sure adding another year of restrictions 

would have changed their behavior. 

The other issue is the so-called blended workforce, and how you 

are now getting lots of closer, different kinds of relationships, is 

something we have been working on, looking at with the National 

Academy of Public Administration and others, because this is the 

new face of government and we do have some management issues 

we need to look at in this area. 

Chairman LIEBERMAN. Take a moment—and I am over my 

time—just to say for the record what is a blended workforce and 

what are the problems we are worried about? 

Mr. SOLOWAY. You very often now will look in a government 

agency, and you have much more of an integrated workforce than 

you used to have, where there are contractors and government employees working side by side in offices. It is a much greater preponderance today than it was in the past. As I said, although it is not 

massive to the extent that some people might think, it is clearly 

a growing trend. And that raises interesting questions about how 

you manage that workforce and how you incentivize. For companies, frankly, it is a big challenge: How do I drive any institutional 

loyalty amongst my own employees? What are the incentive and 

pay and other performance challenges when I have people doing effectively this same job? 

It is the new face of government. It is an area that we have been 

looking at and talking about internally and with external groups 

like the National Academy and others to think about what are all 

of those issues. 

As Ms. Madsen said, there are a number of them, and they have 

solutions, but we have not thought about this new face of government. I believe the Volcker Commission at one point said that we 

have a 21st Century challenge and a 19th or 20th Century government structure. In many ways, I think that applies to this as well. 

Chairman LIEBERMAN. Well said. That was helpful. You are absolutely right. People not involved in contracting, when they hear 

about contracting with the Federal Government, will naturally assume that the work is contracted out to a business that does it 

somewhere else. But there is increasingly a very blended workforce, including as all of us who have been to Iraq and Afghanistan 

know, a quite remarkable blending of full-time Federal employees, 

including, most importantly, the military, and a lot of contract employees. And how they work together raises important questions. 

Mr. SOLOWAY. Would it be appropriate to add—I am sorry to interrupt you, Mr. Chairman. 

Chairman LIEBERMAN. No. Go ahead. 

Mr. SOLOWAY. I would add one thing to Ms. Madsen’s answer to 

your first question, which I thought was a very important one. As 

26 

I listened to her comments and the Comptroller General’s, when 

you think about the difference in cultures between the commercial 

side and the government side, there are two things that we hear 

a lot. One is that the commercial side operates very much at a 

partnership level. They get very closely engaged with their contractors. Years ago, when we had the hearings about the Federal Acquisition Streamlining Act, one of the witnesses said that in the 

private sector the mark of excellence is the degree of communications and close cooperation between customer and supplier, and in 

the government that gets you thrown in jail. So we have cultural 

differences there in terms of how much we communicate, but it also 

gets to the investment in the people. 

So when we talk about the elements of commercial practice that 

Marcia set forth, those are absolutely consistent with what we tried 

to do in the Federal Acquisition Streamlining Act or the ClingerCohen Act, or I suppose here I should call it the Cohen-Clinger Act 

of 1996, and other reforms. But where we have really fallen down 

is in that investment in people that she spoke to, the recognition 

that they are a core, vital element of the management and leadership team, not just a support workforce. 

Chairman LIEBERMAN. Thank you. Time is up. Senator Collins. 

Senator COLLINS. Thank you, Mr. Chairman. 

One of the purposes of S. 680 is to decrease the reliance on solesource contracts to strengthen the competitive process. When this 

Committee investigated the contracts awarded in the wake of Hurricane Katrina, we saw that contracting officers frequently invoked 

the exception to competition, that is, the urgent and compelling exception. And, clearly, in many cases that was warranted in order 

to get the contract awarded very quickly. The problem, however, 

was then the follow-on contract for the same kind of service or 

goods—debris removal comes to mind—also became a sole-source 

contract. 

So one of the provisions of our bill says, fine, there are times 

when you have to use the urgent and compelling exception, but 

when you are doing the follow-on contract, it should be competitive, 

and there should be a limit for how long the initial sole-source contract can be in place. 

Now we chose 150 days, which may be too short. It may not be 

long enough. Perhaps it is too long. I am not certain. I would like 

to get the views of each of you on the concept that I have outlined 

of requiring the follow-on contract to be competitive and to limit 

the amount of time that a sole-source contract using the urgent 

and compelling justification can be in place. 

I will start with you, Mr. Soloway, and then just work down the 

panel. 

Mr. SOLOWAY. Senator, we fully agree with you that the emergency contracting provisions need to be used only in the correct circumstances, and there clearly have been some cases where they at 

least apparently have been used beyond the time or size intended 

by law, and in Hurricane Katrina there certainly appear to be some 

cases. I would make two quick comments. 

I believe that the Contingency Contracting Corps concept that is 

in our testimony would greatly help to alleviate the problem beVerDate Nov 24 2008 10:49 Oct 29, 2009 Jkt 037359 PO 00000 Frm 00030 Fmt 6633 Sfmt 6601 P:\DOCS\37359.TXT SAFFAIRS PsN: PAT
27 

cause you would have a corps of people who were specially trained 

in emergency contracting. 

One of the things we saw—and I was down in the Gulf Coast 4 

days after the storm—there was nobody home, as we know. There 

was a complete infrastructure meltdown because of this storm. Two 

weeks later it was a different story, 4 weeks, 6 weeks, as things 

began to come to life. But what we did know is FEMA had very 

few contracting folks available, and people—some being deployed or 

to support it—had no experience in emergency contracting. 

So I believe the Contingency Contracting Corps will help go a 

long way towards alleviating further cases in which the contracting 

authorities may be used incorrectly. 

The only caution I would add to your question: Is 150 days the 

right time or the wrong time? Is it 180? Is it 240? Is it 30 days? 

As a general proposition, our concern with putting a firm 

timeline like that into statute is it could collide with certain mission realities. Again, generally 150 or 180 days may be more than 

enough time, but I can imagine in some cases it might not be. For 

instance, in Iraq today we are still in many areas still engaged in 

very heavy warfare, a great deal of uncertainty. Emergencies arise. 

So I don’t know that putting in statute a time definite limit 

makes the most sense, but we certainly agree with you that we 

want to make sure that these contracts are used appropriately. 

Senator COLLINS. Thank you. Ms. Madsen. 

Ms. MADSEN. Senator Collins, we did not speak directly to followons to non-competitive contracts, but our recommendations do emphasize the importance and the recognition that on occasion agencies may need to do something on a sole-source or non-competitive 

basis. But I think where we come out, the panel report comes out, 

is do what you need to do, but then behind that get the people involved who can help you define your requirements in such a way 

that the next time you can do competition. 

One of the things that your bill would do by putting a time 

frame, even if you do not make it mandatory—and I share some 

of Mr. Soloway’s concerns in terms of making it, a hard stop. But 

if there is a time frame in there where people need to be attentive 

to, OK, it is time to look at doing something else, then they have 

got the incentive to begin right away looking at what their requirements are, because they will learn from that experience that they 

have with the sole-source contract that will inform them about how 

to get competition the next time and how to set their requirements 

so that they can get competition. 

So I would agree. I do not know that you need a hard stop in 

the statute, but I think you need an incentive in the statute for 

people to focus on how to do it competitively the next time. 

Senator COLLINS. Thank you. Mr. Walker. 

Mr. WALKER. Three things. Yes, first, I agree that follow-on contracts should be competitive. 

Second, I think there is a concern with regard to the duration of 

the initial non-competitive contract. We have some concerns about 

whether 150 days is realistic in some circumstances. 

And, third, I think there is another issue that we need to focus 

on. Contingencies happen. Wars happen. Natural disasters happen. 

And, quite frankly, in addition to these very worthwhile things that 

28 

you are addressing through your legislation, I think there needs to 

be more advanced planning, whereas FEMA, for example, recognizes that hurricanes are going to happen, earthquakes are going 

to happen, and floods are going to happen. We ought to anticipate 

what type of needs we might have in the event of such events. We 

ought to be entering into contingency contracts that we can draw 

upon if and when those events happen. We need to have competition and we need to be able to draw on task orders in an appropriate circumstances. But there may need to be some changes in 

law because of how the obligation rules work. So we would like to 

work with you on that. 

So it is not just the issue of making sure that follow-ons are competitive. They should be. It is not just an issue of having some limitation on the initial award. It is also making sure that these departments and agencies are doing appropriate planning, entering 

into appropriate contingency contracts so that they can draw upon 

them when and if that event happens. 

Senator COLLINS. Thank you. I look forward to hearing from all 

of your specific recommendations on that. 

Let me turn to another issue, Ms. Madsen. Mr. Soloway in his 

comments expressed some concerns about the expansion of bid protest rights for unsuccessful bidders on large task orders under multiple-award contracts that are included in this bill. And I want to 

give you an opportunity to talk about this provision because we 

took it from the SARA panel’s recommendations. 

I am a little surprised that Mr. Soloway has concerns about that 

because our goal is to help smaller businesses, and medium-sized 

businesses who feel that they could have competed and were shut 

out, and to give them an affordable, fast, reliable remedy at GAO. 

So I would like to ask you to give us a little more background 

on why the panel recommended these provisions. 

Ms. MADSEN. Thank you, Senator. The first thing I would say to 

you, although not of the stature of this body, our panel was a very 

deliberative process, a very deliberative body, and this is an issue 

we talked about a lot. As it was adopted, it was adopted, I think, 

only with one dissenting vote despite the balanced nature of the 

panel. 

The things that the panel found to be of concern were the amount of dollars flowing through interagency contracts—$142 billion in 2004; the size of the orders. We found, looking at FPDS 

data, almost $67 billion of that was in single orders over $5 million. And we know that number is low because it only reflects the 

single order; it does not reflect the base year plus options. We looked at agencies using—when they get above about $5 million, they are using evaluation criteria, they provide a statement 

of work evaluate criteria. They do best value trade-off. In other 

words, it looks very much like a standard best value negotiated 

procurement, but it is in a regime where it is not transparent and 

people cannot object to the way the evaluation process worked. 

We recognized, we think, in our recommendation that there 

needs to be some flexibility for the government to get bite-sized repetitive needs satisfied in an environment that has lesser constraints posed on it, and we thought $5 million was the right number based on the data we saw. 

29 

I think one of the things that became apparent to the panel is 

nobody expected these task—at the time the legislation was enacted in the mid-1990s—people just did not expect these task orders to get as big as they have. We are seeing task orders that— 

I mean, we are talking about $5 and $10 million task orders, but 

we are seeing task orders that are $50, $60, $100 million and that 

last for 4 or 5 years. And it is when you get to that size and they 

start to look like traditional negotiated procurements, you wonder 

why they are under the task order regime and they are not under 

a more traditional procurement regime. 

Senator COLLINS. Thank you. 

Ms. MADSEN. I just have one more point, Senator Collins. I apologize. I do not want to leave out that under the GSA schedule, any 

order of any size can be protested, and that is something that the 

panel also noted. 

Senator COLLINS. I am going to ask both of our other panelists 

to come back to this issue in our second round. 

Chairman LIEBERMAN. Do you want to do it now? 

Senator COLLINS. Is it all right? 

Chairman LIEBERMAN. You can do it now. 

Senator COLLINS. OK. Mr. Walker, since it is GAO that would be 

doing the work, do you have the ability to take this on? And what 

is your view of the merits of this approach? 

Mr. WALKER. We support expanding the bid protest in this regard. We think for cost/benefit reasons there needs to be some 

threshold. We do not believe it should be any lower than $5 million. Our preliminary analysis says $5 million seems reasonable. 

We clearly do not think it should be lower than that, potentially 

higher than that. We are continuing to do analysis. 

The reason we believe it is for transparency and accountability 

purposes. We have not seen a big clamor of a problem here, but 

there is clearly a movement for more of this type of activity to 

occur, and for transparency and accountability reasons, we believe 

it ought to be there. 

We do have some concerns about the express option provision as 

to what type of burdens that might end up imposing, not on us because we already have an expedited process but on the departments and agencies. And that would be an area that we would like 

to work with your staff of. 

Senator COLLINS. Thank you. Mr. Soloway. 

Mr. SOLOWAY. Senator, I think there is a certain irony here that 

in some ways people view protests as a redress for the companies, 

and it is the company side that is saying, well, we do not want that 

redress as if we do not care. 

Senator COLLINS. That is why it surprises me. 

Mr. SOLOWAY. I think you have to recognize a couple of things. 

First of all, for the multiple-award contract under which these task 

orders are awarded, that multiple-award contract award is fully 

protestable. In addition, there are aspects of task order awards, 

particularly regarding scope of the contract, if it is not consistent 

with the original formation of the multiple-award contract, it is 

protestable. So it is not as if there are no means for redress in 

some areas. 

30 

We support other elements of this bill that we think actually 

would do more to help transparency and the process and the protests, such as the debriefing provisions where you require 

debriefings, such as publicly posting—I believe the panel recommended publicly posting task order awards so that everybody, 

especially on that contract or outside, knows what is going on. 

But there is a huge difference between a multiple-award contract 

such as we are talking about here and in the schedules—the schedules do not have a competitive construct up front that is a 

protestable process. 

Transparency is important. We support it. The greatest concern from smaller and mid-tier firms is that $5 million is not a small 

amount of money; it is a very significant amount of money. In the 

pantheon of Federal contracting, it is a fairly routine amount, and 

you could be adding costly litigation that is very burdensome on 

smaller and mid-tier firms especially, a burden that they do not 

particularly savor taking on. 

So if we wanted to have a discussion about higher thresholds where we get to that point, as Ms. Madsen said, of $75 million, we 

are really talking about large contracts that, if they are going to 

be under a task order, really look a lot like the old negotiated oneoff procurement, that is a separate discussion. But $5 million, as 

much money as it is, is a relatively routine procurement, and this 

is, in fact, not necessarily a fast process and it is a very expensive 

litigative process. That is a lot of the concern that the companies 

have. 

Senator COLLINS. Thank you. Thank you, Mr. Chairman. 

Chairman LIEBERMAN. Thanks, Senator Collins. Important questions. Senator Akaka. 

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

Ms. Madsen, and to all of the panel, I would like to focus on the 

workforce. Many of the recommendations in the Acquisition Advisory Panel’s report focus on enhancing the acquisition workforce. 

Acquisition management is a very specialized function in the Federal Government. 

What kind of skill sets should the government be looking for in 

recruiting Federal acquisition personnel? 

Ms. MADSEN. Thank you, Senator. I think we talked about this 

a little bit when we were in front of your Subcommittee. I think 

the panel’s view and concern actually was that the skill sets that 

one needs to acquire services are different. They are skill sets that 

involve knowledge of the market, the relevant market, access to 

market data, the ability to understand how the services work, not 

just buying labor hours but really understanding how complex IT 

projects are structured, and how that marketplace works. And part 

of that is understanding what the requirements are. 

So while our traditional model is you have the acquisition people 

here and you have the program people here, it may be that traditional model in the services context does not work the way we need 

it to for the 21st Century, where we have such a focus on services 

acquisition. 

The private sector buyers told us that they combine those skill 

sets. They have people who understand what the buyer needs at 

a substantive level, what the requirements are. They help define 

31 

them themselves. And they do the acquisition work. So they do it 

all together. 

Senator AKAKA. Comptroller General Walker, as I mentioned earlier, many of the problems in acquisition management stem from 

an understaffed acquisition workforce. As a result, contractors are 

being used to supplement the acquisition workforce, and sometimes 

contractors are even hired to study whether or not certain government activities should be contracted out. One may wonder are the 

foxes guarding the henhouse? 

I am concerned, Comptroller General Walker, about the increasing reliance on contractors to manage and oversee acquisitions at 

the agencies. Should we rely so heavily on contract personnel to 

manage agency procurement? 

Mr. WALKER. Well, Senator Akaka, this comes to a point that I 

made earlier. I think that to a great extent we need to be relying 

upon contractors in certain circumstances, but we are relying upon 

contractors in other circumstances that may not make sense and 

may not be in the government’s, as well as the taxpayers’, overall 

interest. 

Let me give you some examples. In my view, we should never 

contract in the determination of government policy, in the exercise 

of enforcement or adjudicatory power, or in conducting certain critical oversight responsibilities that need to be done. 

On the other hand, we surely should contract for non-core support services, non-recurring surge and contingency needs, and critical skills and knowledge where the government, because of its hiring practices or because of its classification and compensation systems, we cannot hire the people. 

My concern is we have defaulted to the contracting option with 

recurring frequency in circumstances where it may not be appropriate, where there may be conflicts, where we may be asking for 

contractors to do things that civil servants ought to be doing. And 

one of the things that we need to do is we need to do a much better 

job on workforce planning, on understanding what kind of skills 

and knowledge are necessary. We need to understand what are the 

problems with the Federal recruiting classification and compensation systems. And we need to solve the root-cause problems rather 

than defaulting to a contracting option because it is the easy and 

quick thing to do. 

Senator AKAKA. Thank you very much for your response, Comptroller General Walker. 

I would like to ask this to both Ms. Madsen and Mr. Soloway. 

Congress has provided funding, most recently at DHS, to increase 

their acquisition workforce. DHS recently testified before my Subcommittee that these positions have not been filled. 

Do we need to implement more programs to attract, recruit, and 

retain the workforce? Do agencies need additional hiring flexibilities? Or is there just a lack of individuals with necessary skills? 

Ms. Madsen. 

Ms. MADSEN. Senator, I think it may be all of those things. I 

know that in our work we find—and even in working with the 

panel, getting enough people who have the right understanding of 

all of the rules was difficult. So I think there is definitely something to that point. 

32 

We make a number of recommendations for more flexibility in recruiting and training in our report. We make recommendations for 

a government-wide internship program. We make recommendations for training. And a number of our recommendations go to enhanced human capital planning so that agencies, I think, have a 

better understanding—not only do they just need contracting people, but what kinds of skills do they need so that the training 

matches the people. 

Mr. SOLOWAY. Senator, I think you have touched on a number 

of problem areas on which we all agree. If I could just harken back 

a little bit to my experience at the Defense Department where I 

had responsibility for the acquisition workforce. We did at that 

time, at Congress’ direction, try to implement a program with special hiring authorities, pay flexibilities, and so forth, as part of our 

effort to bring in more people. Many thanks to this Committee and 

the Armed Services Committee in those days. We were also doing 

battle with your colleagues across the Hill who were trying to reduce the number of so-called shoppers at DOD and recognizing that 

not everybody was a shopper. 

The challenge, I think, is not just do we have enough money or 

do we have the positions. This is an area the government should 

compete well for. There are people out there who do procurement. 

Government procurement is not only the largest but it is also the 

most complicated type of procurement and it includes acquisition 

management, not just contracting. This should be a relatively competitive area for the government, so you pose the right question: 

Why are we not getting them in? Given my experience in the Defense Department, it comes back to our basic personnel structure. 

Both Ms. Madsen and Mr. Walker have spoken to the fact that we 

really need to focus on this and think about what it is going to take 

to get the right people in, because it is not going to go away. We 

may make modifications and some mid-course corrections, but this 

challenge exists. 

But it does raise all these questions about basic personnel policies, the ability to focus, as I said earlier, kind of a Marshall-like 

focus on this workforce, and do what the best commercial companies do. The reason they get the people is because they identify 

those folks who are core to their mission, and they develop, resource, pay, incentivize, and otherwise support those folks differently, perhaps, than other elements of their workforce, which I 

realize is in many ways anathema to our structure of the civil service. I think that is not a small part of the issue. 

The last point I will make is we cannot underestimate today— 

and this has been building for a number of years—the morale of 

the current acquisition workforce and in many ways the disincentive to people coming into government procurement despite the 

complexity and challenge of the work. 

In the late 1990s, when we were facing some challenges from the 

House side around cutting the acquisition workforce. We had people who did not want to be defined as being a member of that 

workforce because they were under the axe, if you will. 

Today, given the tenor of the discussion and our relative intolerance for mistakes and for error—I think the Comptroller General 

spoke to this when he said these things are going to happen. Those 

33 

may be the toughest times, but the most important times to stand 

up and support our civil servants who are out there by and large 

trying to do good work, often with inadequate tools and training. 

They do feel, as I said in my written submission, somewhat assaulted and unsupported. And if we want to incentivize people to 

come into that workforce, we collectively need to support them 

more visibly as well as substantively. 

Senator AKAKA. Thank you so much for all of your valuable responses. Thank you, Mr. Chairman. 

Chairman LIEBERMAN. Thank you, Senator Akaka, for your good 

questions. Let’s do a second round of 6 minutes each, if the Members would like to ask questions. 

I wanted to go for a moment to something that Mr. Walker mentioned before, which is, how do we try to develop a workable definition of what services the Federal Government ought appropriately 

to be able to contract for and those that they should not? I find 

using a phrase, ‘‘inherently governmental work,’’ I think that may 

come at some level from existing Federal Acquisition Regulations. 

But is there a workable definition of it? 

For instance, we have heard recently that both the IRS and the 

Department of Homeland Security have contracted out for assistance in writing regulations. Now, my first reaction to that is, hey, 

wait a second, that is really inherently governmental work. Maybe 

not. Maybe they do not have an ongoing pool of people who are 

skilled at doing that. Maybe it is better that they hire somebody 

from outside. 

Is there a workable definition of what is open to contracting and 

what is not? And I am thinking about services here. Mr. Walker. 

Mr. WALKER. Well, the term that you use, ‘‘inherently governmental,’’ is a term that has some legal significance now. I want to 

suggest for the record—the need to dust off the 2002 Commercial 

Activities Panel report, of which Stan was a member and I had the 

opportunity to chair. I would ask you to take a look at this again, 

and your capable staff, to take a look at the recommendations we 

made. 

I think we need to relook at when and under what circumstances 

is it appropriate to be contracting out and when is it not, because 

we are in a very different situation today, and we are likely to continue to have to rely on contractors of the so-called total force in 

order to accomplish government’s mission. But I think that a lot 

has happened since those definitions were determined, and I think 

they need to be relooked at. 

Let me mention one other thing that I wanted to get on the 

record. It is one thing to talk about economy, efficiency, effectiveness, ethics, and equity. Those are all important things. There is 

another dimension that you need to be aware of that I am concerned about with the total force. With increasing frequency, you 

can go to meetings, whether it is the Pentagon or elsewhere in government, and you do not have any idea which one is a civil servant 

and which one is a contractor. With increasing frequency, we are 

relying upon contractors to perform various functions. In some 

cases it makes sense. In other cases it does not. 

But we have started to see circumstances in which we at GAO, 

and potentially the Congress and others, may be denied or reVerDate Nov 24 2008 10:49 Oct 29, 2009 Jkt 037359 PO 00000 Frm 00037 Fmt 6633 Sfmt 6601 P:\DOCS\37359.TXT SAFFAIRS PsN: PAT
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stricted access to certain information where we actually have contractors doing the work. To me, that is an oxymoron. If you have 

a contractor doing work, then GAO, Inspectors General, and the 

Congress should have an automatic right to that information, subject to appropriate security clearances, if you will. 

So this is a new dimension that I am starting to see emerge that 

I think is going to be an increasing issue that we all need to be 

concerned about. 

Chairman LIEBERMAN. Good point. 

Ms. Madsen, are there certain kinds of governmental activities 

that ought never to be contracted out that are definable? 

Ms. MADSEN. Senator, I think that the panel would agree with 

the definition of ‘‘inherently governmental,’’ and I think there is 

something called the ‘‘Inherently Governmental A List’’ that we 

talked about. 

Chairman LIEBERMAN. What is the definition? 

Ms. MADSEN. ‘‘Inherently governmental,’’ it is necessary to be 

performed by a Federal employee and in the interests of the government. But the piece that is missing—and I probably did not 

phrase this very articulately earlier—is when you are operating in 

this environment under A–76, people look at those definitions. Otherwise, when agencies are just buying services every day, they are 

not looking at those definitions. 

So our very first recommendation when we talk about the blended workforce is that the agencies, consistent with their mission, 

need to define what their core needs are for government employees 

in their agency. And we believe that the definitions under A–76 of 

‘‘inherently governmental’’ are the right place for them to start, but 

they may be different for an agency depending on its mission. And 

the agencies should think about that, not just when it does an outsourcing under A–76, but when it buys services, because they are 

buying services in such large quantities. 

Chairman LIEBERMAN. Right. 

Mr. Soloway, this is an odd question to ask you since you are 

representing contractors, but is there any category of services that 

the Federal Government should never contract out? 

Mr. SOLOWAY. Absolutely. And I think I agree with the Comptroller General, having served on the Commercial Activities Panel 

under his leadership, that we do have a definition in regulation 

that talks to the commitment of government funds, adjudication, 

law enforcement, and so forth. You asked a very important question, and that is, if I understand, that somebody is involved in the 

writing of regulations, is that or is that not inherently governmental. What is their role? Are they doing a kind of economic analysis to support a regulatory process? Are they doing scientific analysis? Is that analysis really inherently governmental, or is it the 

decision and the policymaking that is actually the inherently governmental focus? 

I think you would find relative unanimity on this panel about it. 

How to go about the periodic reviews of the current regulation is 

probably always appropriate. Ultimately it does get down to a very 

specific agency mission focus and agency need that will sometimes 

vary from agency to agency. 

35 

The other piece to recognize is not only, as the Comptroller General said, have we seen a growth in service contracting in the last 

number of years, much of it in the post-September 11 environment 

for obvious reasons in terms of skill sets and requirements, but we 

have, in fact, seen the government challenged more and more in 

trying to hire, even for positions it has open, getting those skills 

in and the agencies having to have certain kinds of information 

and expertise. That has not created questions about crossing the 

line, but it caused us to step back and say, OK, what part of regulation development is or is not inherently governmental. 

The last point I would make—and Ms. Madsen referenced the A– 

76 process—which is all about how the government outsources 

services that are currently being performed by a civil servant. 

Under the law that has been in place for a number of years, every 

agency of the government publishes an annual inventory of every 

position within that agency being performed, and it identifies the 

position as either inherently governmental or commercial, or commercial but not available for contracting. It is that third category 

where the discussion always is relevant. We know if it is clearly 

inherently governmental; we also probably can identify what is 

clearly commercial. But there is that in-between area, and that is 

where the change has taken place. 

Chairman LIEBERMAN. Thank you. Senator Collins. 

Senator COLLINS. Thank you, Mr. Chairman. 

In fiscal year 2005, more than half of all dollars obligated were 

for task and delivery orders issued under IDIQ contracts. A provision of our legislation—and, again, this is our attempt to decrease 

the amount of non-competitive contracting—would prohibit the 

award of IDIQ contracts over $100 million on a sole-source basis. 

Instead, it says that agencies would be required to award contracts 

valued over $100 million to a minimum of two contractors, who 

would then compete for the various task orders under the contract. 

Now, there is a waiver provision in extraordinary circumstances 

when a sole-source contract is the only feasible option. But I would 

like to get the views of the panel on this provision given the fact 

that increasingly we are using this kind of contract. Mr. Soloway. 

Mr. SOLOWAY. Senator, again the concern that we have here is 

not with the intent, which I know is to drive greater competition. 

After all, I may have one member company that benefits and 220 

that do not benefit, so their interest is in a competitive marketplace because that is how they grow and access new customers. 

Again, thresholds in statute, what is the right number and what 

are the circumstances? 

I recall the Chairman very eloquently, in the aftermath of Hurricane Katrina, talking about his disappointment that FEMA did not 

have in place enough prepositioned contracts to deal with a natural 

disaster. In many cases, those prepositioned contracts by definition 

of the work being requested, which is—I need someone who is capable of doing certain functions in the entire Southeast Region. 

Given almost any circumstance, the contracts are going to be IDIQ 

by definition because we do not know when the disaster will hit, 

and they may well be single-award because I need instant response. I need to be able to pick up a phone and then the next day 

the water is going, or whatever it might be. 

36 

So there are circumstances in which that is actually the smartest 

way for the government to contract because, otherwise, you may 

not have capability. Again, the real issue here is whether the $100 million is the 

right threshold, and I come back to—as we looked at this and recognized that there are concerns about too much—in your eyes, your 

concern that there are too many large individual task orders, that 

a lot of that could be dealt with through our concept of the Contingency Contracting Corps, that folks who have the training to create 

and then implement in an emergency environment, which is where 

you see this kind of dynamic most often. In our view that might 

help achieve the same goal without putting into statute some hard 

and fast stops. 

Senator COLLINS. Ms. Madsen. 

Ms. MADSEN. Senator Collins, I agree with Mr. Soloway, I think 

periodically you need some flexibility in a disaster or wartime context. But I think the way you have drafted the bill with the waiver 

provision may well provide that flexibility. 

But setting aside the disaster context, certainly both our panel’s 

focus on competition and your focus on competition would suggest 

that a sole-source award of that magnitude on an IDIQ where the 

requirements are really not defined is really kind of out of the basket. 

It is kind of perverse in a sense, and it is one of the things we 

noticed with the IDIQ contracts, and it is one of the reasons for our 

recommendations about heightened attention to the competitive 

process for the orders—is that in many ways that kind of vehicle 

is antithetical to good requirements definition. 

So I think your sense of putting some restraints on it are proper, 

as long as there is room for an emergency. But I do not think we 

should approach the problem with the assumption that we are 

starting with the emergency. 

Senator COLLINS. Thank you. Mr. Walker. 

Mr. WALKER. I think it is reasonable; I think it is appropriate. 

I think you need to have an exception for extraordinary circumstances, which you are trying to do. But I come back to what 

I said before. I think we need to understand that certain types of 

contingencies will happen, and we should be doing more to plan for 

those, anticipate those, and to engage in competitive contracting 

that one can be able to draw task orders on when the contingency 

occurs, not if the contingency occurs. 

Mr. SOLOWAY. Senator, may I mention just one last thought for 

your consideration as you are thinking about the provision further? 

Senator COLLINS. Yes. 

Mr. SOLOWAY. I think it would be very helpful—and I have not 

seen this, and your staff or the Chairman’s staff may have this 

data—to pull some data to look at from a trend perspective how 

many single-award IDIQ contracts—in other words, an IDIQ contract awarded to one company, which then gets the sole-source task 

orders—and how much volume is flowing through competitive multiple-award contracts. There are two different kinds of IDIQ vehicles. I do not know and I have not seen any data that tells me that 

we have actually seen a substantial growth outside of the emergency environment—we certainly had a couple of major continVerDate Nov 24 2008 10:49 Oct 29, 2009 Jkt 037359 PO 00000 Frm 00040 Fmt 6633 Sfmt 6601 P:\DOCS\37359.TXT SAFFAIRS PsN: PAT
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gency events in the last few years—outside of that environment, if 

that contract type has actually grown, the so-called sole source. I 

think we ought to look at some of that data. 

Senator COLLINS. I think the data is pretty clear that it has. 

Mr. WALKER. I think one of the things you need to be concerned 

about as well, Senator Collins, is whatever threshold you set, what 

types of mechanisms will be in place to prevent unbundling to get 

under the threshold? 

Senator COLLINS. Good point. Thank you. Thank you, Mr. Chairman. 

Chairman LIEBERMAN. Thank you, Senator Collins. Senator 

Akaka. 

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

Mr. Soloway, at a hearing last month in my Subcommittee, we 

heard that contract award fees are often awarded almost in full. 

Even those with poor performance, such as Lockheed and Northrop, which ran the Deepwater program, received over 80 percent 

of available award fees. 

Do service providers generally expect to receive most available 

award fees regardless of their performance? 

Mr. SOLOWAY. The question is very fair, Senator Akaka, and I 

am not in any way trying to be cute about this. It really depends 

on the contract itself. Sometimes award fees are structured by the 

government as a reward for performance. Other times it is a mix. 

An 80-percent award fee in many contracts actually reflects relatively poor performance. There is very little consistency in their 

application very often. 

The issue here is to understand—and I do not have the visibility 

into those individual contracts, and sometimes for all of us it is difficult to get—what is it that led the government to determine that 

the contractor deserved some, all, or most of their award fee. Were 

the problems on the program driven by government, whether it is 

requirement stability, funding issues, or what have you? There are 

a variety of factors there, and it is certainly an area worth discussing. But I would not accept at face value that an 80-percent 

award fee from a company perspective is a victory. Very often there 

is very little relationship between the percentage and how it works. 

It is a stepping process. 

So an area definitely worth discussion. There is a lot of confusion 

about it, often, and something that we would be more than happy 

to talk to you about more in the future. 

Senator AKAKA. Comptroller General Walker, can you share your 

thoughts? 

Mr. WALKER. Senator Akaka, as you know, GAO has done a fair 

amount of work in this area. Like in most of the problems in acquisition and contracting, it is a shared responsibility between the 

government and the contractor, but the relative allocation of responsibility varies. 

My personal view is that one of the reasons that we have seen 

so many incentive and award fees paid in circumstances which do 

not pass the straight-faced test—meaning taxpayers are not getting 

value for money and we are not paying for positive outcomes, 

therefore, I think by definition it meets the definition of ‘‘waste’’ 

that I talked about before. Part of it is because of the systemic 

38 

problems that I mentioned earlier. The government many times 

does not do a very good job of being very clear about what we are 

asking the contractor to do. It is not very clear with regard to the 

requirements, or it keeps on changing the requirements and, therefore, you are moving the bar; and, therefore, we have seen circumstances in which, because the contractor is doing their best, 

they have a positive attitude, they are doing the best that they can, 

trying to hit a moving target that many times the government will 

award an incentive and award fee because of their attitude and effort and recognition of the fact that the government keeps moving 

the bar. 

So I think many of these challenges are interrelated, and we 

need to address them in a comprehensive and integrated fashion. 

Senator AKAKA. Ms. Madsen, would you also comment on this 

issue? 

Ms. MADSEN. I would agree with Comptroller General Walker. 

We did not look at the award fee issue in particular in the panel, 

but the issue we saw with requirements development we believe is 

persuasive. That is why we made such a focus on it. 

Award fee is a sort of performance-based contract, and if you 

cannot define the baseline such that people understand what they 

are performing to, then it is very hard to deal with the performance 

measures on the back end and do it in a way that is fair. And I 

agree, I think in many instances where there are changes, where 

the requirements were not properly defined in the first place, and 

the contractor is kind of caught in the middle, the contractor and 

the agency try to do the best they can with where they find themselves, despite the fact that they did not have a good baseline to 

start with. 

That is why we emphasized—that is our first recommendation— 

get your requirements right first. 

Senator AKAKA. Thank you all for your responses. 

Mr. Soloway, contract employees work side-by-side with Federal 

employees, though they are not subject to all government ethics 

rules, such as the Ethics in Government Act. Does your organization try to promote ethical practices among contractors working for 

Federal agencies? 

Mr. SOLOWAY. Senator, we try to do a lot. First of all, as a term 

of membership, companies must validate or certify that they have 

an ethics program in place. We have, in fact, conducted training, 

particularly for smaller and mid-tier firms. I think you will find— 

I believe it was GAO, but I do not want to put words in the Comptroller General’s mouth—that most of the large companies have 

very formal, well-developed ethics and compliance programs. We 

try to help our smaller and mid-tier firms figure out how they can 

also do that to make sure that they have the right culture in place. 

We are strong believers that when you are dealing with the public 

dollar and public trust, you have to have an ethical culture and an 

appropriate culture in place. 

With regard to the issues that do arise relative to different ethical standards, let’s not make a mistake. Contract employees are 

subject to a variety of ethics requirements. They may not be entirely the same as the government employees, but they themselves 

also have legal requirements they have to meet. So we, as an orgaVerDate Nov 24 2008 10:49 Oct 29, 2009 Jkt 037359 PO 00000 Frm 00042 Fmt 6633 Sfmt 6601 P:\DOCS\37359.TXT SAFFAIRS PsN: PAT
39 

nization, ask our companies—as a term of membership, they must 

adhere to a basic code of conduct. And we have also done a number 

of programs to help them review or reflect on or make sure they 

have the right ethics program in place. 

Senator AKAKA. Again, I want to thank the panelists very much 

for your excellent responses. Thank you, Mr. Chairman. 

Chairman LIEBERMAN. Thank you, Senator Akaka. 

And the wind-up now. Senator Carper. 

Senator CARPER. Thank you, sir. I have been referred to in less 

complimentary terms than the ‘‘wind-up,’’ even today. Thank you 

for this. 

Chairman LIEBERMAN. I hope things get better. 

Senator CARPER. It has actually been a pretty good day. 

Chairman LIEBERMAN. Good. 

Senator CARPER. To our witnesses, thank you for joining us and 

for your testimony and for your willingness to respond to our questions and comments here. 

Let me just start off by asking, When might sole-source contracts, no-bid contracts, cost-plus contracts be appropriate? There 

are instances when they are, but what might those instances be? 

Mr. WALKER. I think there is a difference between no-bid and 

cost-plus. In no-bid, where you are doing a sole source contract, if 

you have an emergency situation, you have a critical need that 

could not have reasonably been anticipated, then there may be circumstances in which it may be appropriate, at least for the initial 

contract award. Coming back to what Senator Collins and Senator 

Lieberman, you and others are trying to address through legislation, that does not mean indefinitely. It may mean you need to do 

another contract award that should be competitively bid after the 

initial award. 

As to cost-plus, it really is a circumstance where you are trying 

to contract for something where it is virtually impossible to define 

with any degree of specificity the related requirements. But, quite 

frankly, there are not that many that are—— 

Senator CARPER. Could you give us an example of that? 

Mr. WALKER. If you are trying to—maybe when we were deciding 

that we were going to go to the Moon and John F. Kennedy set the 

goal for the United States to land a man on the Moon and return 

him in the 1960s, there were probably aspects of that that we needed to do some type of cost-plus. But as things moved along and we 

got more definitive, what we were looking for and as technology 

started to be developed or whatever, then we should have been able 

to move potentially past that in certain circumstances. But that 

would just be a thought. 

Senator CARPER. The next time we have on the drawing boards 

proposals to send another mission to the Moon, it will be interesting to see, first of all, how we bid that one out and what it cost 

compared to what we spent the last time. 

Ms. MADSEN. Senator, could I comment, sir? 

Senator CARPER. Please. 

Ms. MADSEN. I think there is a tendency to sort of lump both 

terms together, and I agree with Comptroller General Walker, 

there is a big difference between what kind of competitive process 

you use and what kind of contract you award. 

40 

Certainly for sophisticated technology-type procurements, very 

often a cost-type contract on the front end where the government 

and the contractor are trying to figure out what is this—it has got 

a research component to it, it has got a development component to 

it. You see this all the time in weapons system development where 

the first stage is frequently—they are usually competitive, almost 

always competitive, but they are for cost-type contracts. 

The second stage is for production. There may be a down-select, 

and those contracts may—— 

Senator CARPER. When you say a ‘‘down-select,’’ what does that 

mean? 

Ms. MADSEN. A competition between two or three solutions for 

who will do the next stage and make that next stage fixed-price because now everybody knows what the requirements are, they have 

been developed. 

There seems to be a tendency in the discussion lately to talk 

about cost-type contracts as though they are some sort of evil. I 

think they certainly have their place. There are a lot of controls in 

terms of rules and regulations that govern what kinds of costs can 

be charged. The trick is to use them appropriately and, when you 

do not need them anymore, to move onto the next stage. 

I think part of the problem here is when people start to talk 

about acquisition of things that are more commercial and maybe 

services are more in the commercial marketplace, that is where requirements definition makes such a difference, because if you have 

something that is definable that you do not define, you end up with 

a cost-type contract maybe where you did not need it because you 

did not get your requirements right in the first place. That is why 

our panel report emphasizes requirements development so significantly because it is hard to do a competition if you did not do your 

requirements on the front end. 

Senator CARPER. Mr. Soloway. 

Mr. SOLOWAY. Thank you, sir. A couple of quick comments. Philosophically, most businesses, certainly most of our members, would 

prefer a firm fixed-price contract over a cost-type contract. It is a 

preferred way of doing business. I believe Ms. Madsen would probably agree that in the commercial world, in the investigations that 

the panel did, that is the preferred method of doing business. 

What it often comes back to is, with all due respect to the Comptroller General, not just something as elegant as going to the Moon, 

but the difficulty the government has not only in defining requirements but providing adequate insight and information into its own 

processes, its own systems, the entire breadth and scope of networks and so forth, so that a contractor with some confidence can 

develop a fixed-price bid, because, of course, that is a high-risk proposal for the contractor. So it is not just philosophically. Philosophically we agree where you would want to have cost-type versus 

fixed-price. It is also the practical implementation and the government’s ability to be able to answer those critical questions. 

On the sole-source question, there are in regulations a whole set 

of circumstances under which sole-source contracts would be appropriate, not just in emergency circumstances but for logical followon to existing work. 

41 

One of the big issues that GAO and others have identified that 

has been interpreted as assuming we are doing too much solesourcing is that the government, frankly, is not doing a very good 

job or does not have a very good system for keeping track of the 

paperwork to determine when a sole-source determination was 

made and why. So the Comptroller General’s team or an IG team 

or an audit team comes in, and they do not even have access to 

records, because they do not exist, to say, well, why did you do this 

as a sole source. So part of it is also a recordkeeping issue. 

But we have pretty clear guidance in law and regulation as to 

when a sole-source contract is appropriate. 

Senator CARPER. Thanks. 

Mr. Chairman, my time has expired. I just want to mention two 

questions. I am not asking necessarily for answers now. 

Senator Collins has left, but I suspect there was some discussion 

about the legislation that she has introduced and that Senator Lieberman and I and others have cosponsored. I have been off to other 

hearings, but did you talk about some improvements that might be 

made to that legislation? So those are on the record? Good. 

Mr. WALKER. We did, Senator Carper. But the other thing is that 

I committed to provide this week some specific recommendations 

from GAO to try to improve the bill. 

Mr. SOLOWAY. We also have been working with both Senator Collins’ and Senator Lieberman’s staffs on some additional details, and 

some of it is contained in my testimony. 

Senator CARPER. Thanks. The last one is Senator McCaskill and 

I were over in Kuwait and Iraq about 4 weeks ago, and we had a 

chance to talk to Mr. Walker a little bit about it. We will have 

hopefully a chance to talk some more later today. 

One of the things that we heard when we were over there is that 

we learned a lesson about procurement in Kosovo 10 years ago, and 

we forgot those lessons, and we have to relearn them again in Iraq 

and Kuwait. Somewhere down the line, unfortunately, there will be 

another Kosovo, another Iraq, and the question is: Are we going to 

have to relearn those same lessons again and go through 2, 3, 4, 

or 5 years of just wasting money in too many instances before we 

finally say, oh, didn’t we already learn this 10, 20, or 30 years ago? 

What are some thoughts that you might have? When I was in the 

Navy, we used to have a pass-down log. Our squadron would be deployed for a half a year, and we would come home, and we would 

have a pass-down log, and we would give it to the squadron that 

was relieving us on duty wherever we were around the world. 

But how do we provide for a pass-down log in this particular 

arena? 

Mr. SOLOWAY. Senator, your reference to Kosovo made me smile 

only because I remember going to the Balkans in 1999 when I was 

in the Administration, and so many of the issues—not as much 

with the contractor, but just the deployment of the force and how 

this all was working, it was so evident then on a much smaller 

scale than they are in Iraq. And at the Professional Services Council, we did a ‘‘lessons learned’’ study in partnership with the Army 

in 2004, and when we presented the results to the Army leadership, the General said, ‘‘This is terrific, but let’s not call it ‘lessons 

learned’ because we have not learned a darn thing.’’ 

42 

There are certainly a lot of lessons, and our ability to share 

knowledge and share history and also maintain a focus on something that, when it gets out of the limelight, tends not to get the 

continued leadership focus it needs. It is really the biggest challenge here. Whether it was contingency contracting in 1999 and 

again in this century, or the acquisition workforce, which is a focus 

for all of us now, but 3 years from now will we have maintained 

that focus is really one of the biggest challenges we have. 

Senator CARPER. Mr. Walker. 

Mr. WALKER. I will give you one example, and that has to do 

with LOGCAP, for example, where you might enter into an IDIQ 

under a cost-plus arrangement, where you have not really defined 

what you are looking for, where you are putting the contractor in 

a situation where they can decide what you need, they can decide 

what quantities you need, they can decide a lot of things, and in 

many circumstances they may be doing it in good faith and best 

efforts, but in some circumstances they may be providing you more 

than you really need. And the incentives are to do that. 

So I come back to what I said before. There are a number of recurring systemic challenges that exist that get repeated over and 

over again. And most of it has to do with execution in the Executive Branch. Some of it may require legislation, but most of it is 

just execution, and most of it is just institutionalizing that knowledge, providing the right type of processes, having the right type 

of people, and making sure that the lessons learned or whatever 

you want to call them get passed down to people who have the responsibility and the authority down the road. 

The other thing is that people need to be held accountable when 

they make the same mistakes over and over again. If there are no 

consequences, then why change? And all too frequently, there have 

been no consequences. 

Senator CARPER. Last word, Ms. Madsen. 

Ms. MADSEN. I hope not the last word, but just really a comment. 

I think as we looked at the workforce issues sometime in the next 

5 to 10 years, basically almost all of the current expertise in terms 

of agent experience and the acquisition workforce and the rest of 

it is going to retire. So there is a huge challenge here for people 

in acquisition to move down a generation in terms of the kinds of 

knowledge that you are talking about, and we think our recommendations address that, but it may need to be done in a way 

that is different than has been done in the past. 

Senator CARPER. Good. Thanks. Thank you all very much. 

Thanks, Mr. Chairman, for being so generous with the time. 

Chairman LIEBERMAN. Thanks, Senator Carper. Thanks for those 

goods questions. 

My thanks to the witnesses. It has been a very thoughtful, I 

would say constructive exchange here. I repeat what I believe most 

people think, which is that we have a problem. The scope of contracting is growing dramatically, it is costly, and not all of it is 

being well managed. And I suppose it is fair to say, as you said at 

the beginning, Mr. Walker, that most of it is being well managed, 

and we also ought to say that. But the part that is not being well 

managed is costing taxpayers a lot of money that they should not 

have to spend. 

43 

So we are going to legislate here, and we invite your help in assisting us to do that in a way that is informed and constructive. 

The testimony today has been extremely helpful, and I thank you 

for it. 

We are going to keep the hearing record open for 15 days if you 

want to submit any statements for the record afterward, and we 

may have some questions that we want to direct to you. But in the 

meantime, I thank you again, and the hearing is adjourned. 

[Whereupon, at 12:12 p.m., the Committee was adjourned.] 

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