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38–851 PDF 2008

S. Hrg. 110–530 

IS THE DEPARTMENT OF HOMELAND SECURITY 

TOO DEPENDENT ON CONTRACTORS TO DO 

THE GOVERNMENT’S WORK? 

HEARING 

BEFORE THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

OCTOBER 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 

DAVID A. DRABKIN, Minority GSA Detailee 

TRINA DRIESSNACK TYRER, Chief Clerk 

(III) 

C O N T E N T S 

Opening statements: Page 

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

Senator Collins ................................................................................................. 3 

Senator McCaskill ............................................................................................ 18 

WITNESSES 

WEDNESDAY, OCTOBER 17, 2007 

John P. Hutton, Director, Acquisition and Sourcing Management Team, U.S. 

Government Accountability Office ...................................................................... 5 

Elaine Duke, Chief Procurement Officer, U.S. Department of Homeland Security ......................................................................................................................... 8

Steven L. Schooner, Co-Director, Government Procurement Law Program, 

the George Washington University Law School ................................................ 11 

ALPHABETICAL LIST OF WITNESSES

Duke, Elaine: 

Testimony .......................................................................................................... 8 

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

Hutton, John P.: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 29 

Schooner, Steven L.: 

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

Prepared statement .......................................................................................... 58 

APPENDIX 

Responses to Post-Hearing Questions for the Record from: 

Ms. Duke ........................................................................................................... 69 

Mr. Schooner ..................................................................................................... 82 

GAO Report submitted for the Record by Mr. Hutton, GAO–07–990, ‘‘Department of Homeland Security—Improved Assessment and Oversight Needed 

to Manage Risk of Contracting for Selected Services,’’ dated September 

2007 ....................................................................................................................... 84 

(1) 

IS THE DEPARTMENT OF HOMELAND SECURITY TOO DEPENDENT ON CONTRACTORS 

TO DO THE GOVERNMENT’S WORK? 

WEDNESDAY, OCTOBER 17, 2007 

U.S. SENATE,

COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:34 a.m., in Room 

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

Present: Senators Lieberman, McCaskill, and Collins. 

OPENING STATEMENT OF CHAIRMAN LIEBERMAN 

Chairman LIEBERMAN. Good morning, and thank you for being 

here this morning. I appreciate your indulgence. I just had the 

honor of introducing Judge Mukasey at his hearing before the Judiciary Committee. 

This morning in this Committee, we are going to examine the extent to which the Department of Homeland Security (DHS) relies 

on contractors to carry out its crucial mission to secure our homeland from terrorism and natural disaster. Plainly put, we will ask 

who is in charge at the Department of Homeland Security—its public managers and workers or its private contractors? 

Today this Committee is releasing the Government Accountability Office’s (GAO) report, which we requested, in which GAO 

calls on the Department of Homeland Security to improve its oversight of contractors and better manage the risks associated with relying on contractors. The fact is that the GAO, in its report, expresses profound concern that there is inadequate oversight now of 

contractors and that there is a serious need to better manage the 

risks associated with relying on contractors. 

GAO examined 117 statements of work for the Department of 

Homeland Security service contracts and found that over half of 

those contracts were for services that closely support inherently 

governmental functions. GAO then examined nine of those contracts in detail. 

While GAO did not make any conclusions on whether DHS improperly allowed contractors to perform inherently governmental 

work, it did find that: First, DHS has not revisited its original justification for relying on contractors—which was the need of this 

new Department to stand programs up quickly—and has not conVerDate Aug 31 2005 09:49 Oct 14, 2008 Jkt 038851 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 P:\DOCS\38851.TXT SAFFAIRS PsN: PAT
2 

ducted a comprehensive assessment of the appropriate mix of Federal employees and contractors. 

Second, DHS did not assess the risk that its decisions may be influenced by, rather than independent from, contractors. 

Third, most of the contract officials and program managers interviewed by GAO were unaware that Federal procurement policy requires heightened oversight when contractors perform these types 

of services. 

Fourth, six of the nine contracts called for the contractor to perform a very broad range of services or lacked detail. Without clearly specifying requirements for the contractor, the Department exposed itself, according to GAO, to waste, fraud, and abuse. 

And, fifth, none of the oversight plans reviewed by GAO contained specific measures for assessing contractor performance. 

Now, to bring this down to real-life examples, let me mention a 

few of the questionable uses of contractors that were uncovered by 

GAO. 

The Coast Guard hired a contractor to help manage its competitive sourcing program, meaning that it hired a contractor to help 

determine whether existing Coast Guard jobs should be contracted 

out. 

One $42.4 million contract to support the Department’s Information Analysis and Infrastructure Protection Directorate was so 

broad that it covered 58 different and distinct tasks. This very 

large, all-encompassing umbrella of a contract covered such disparate items as acquisition support, intelligence analysis, budget 

formulation, and information technology planning. And how many 

DHS employees were assigned to help the contracting officer provide technical oversight of this enormous job? Just one. 

Another example: The contractor supporting TSA’s employee relations office provided advice to TSA managers on dealing with personnel issues, including what disciplinary actions to take—the very 

same function that TSA employees were already being paid to perform themselves in that very office. 

GAO says that the Department of Homeland Security’s reliance 

on contractors during the days when the Department was first 

being stood up post-September 11 was understandable, but they 

question whether it is now. 

Now, let me mention the Federal Acquisition Regulation (FAR), 

which governs procurement for Federal agencies, prohibits inherently governmental work from being performed by contractors. FAR 

allows contractors to perform work that ‘‘closely supports inherently governmental work,’’ but does not allow contractors to perform ‘‘inherently governmental’’ work itself. The line between those 

two is, admittedly, hard to draw and something that perhaps this 

Committee and the Office of Management and Budget and separate 

departments like DHS should take a fresh look at. But the FAR 

says specifically, for example, that the government itself is supposed to determine agency policy, including regulations, not private 

contractors, and that the government itself must make, quite naturally, its own governmental contract arrangements. 

But GAO’s report leads us to question whether DHS is in control 

of all the activities occurring at the Department or whether in too 

3 

many cases the Department may be rubber-stamping decisions 

made by contractors. In fiscal year 2006, DHS spent $15.7 billion on goods and serv- ices. Of this, $5 billion, almost one-third, went to contractors providing professional and management support—often sitting side by 

side with Federal employees performing similar work, if not the 

same work. This heavy reliance on contractors certainly suggests 

the requirements of the FAR are being ignored, and I want to raise 

two questions that come off of that. 

First, is the risk that the Department is not creating the institutional knowledge within itself that is needed to be able to judge 

whether contractors are performing as they should. That could 

mean vulnerability to overcharges and other forms of fraud and 

abuse. 

Second is, of course, the risk that the Department may lose control of some of its own decisionmaking. The danger is that the Department may become so dependent on private contractors that it 

simply does not anymore have the in-house ability to evaluate the 

solutions its private contractors propose or to develop options on its 

own accord. In that sense, the Department may lose some of the 

critical capability to think and act on its own for we the people of 

the United States. 

So these are serious questions, and GAO has done a critically important report, and we have an excellent group of witnesses to discuss that report. 

Senator Collins. 

OPENING STATEMENT OF SENATOR COLLINS 

Senator COLLINS. Thank you, Mr. Chairman. 

The theme of today’s hearing is captured quite well in a handbook published by the Office of Personnel Management. It reads as 

follows: ‘‘Managers need to keep in mind that when they contract 

out . . . they are contracting out the work, not the accountability.’’ 

That handbook, ‘‘Getting Results Through Learning,’’ was released in 1997. To judge from the GAO’s report this morning, the 

government has yet to embrace that important lesson. 

The Department of Homeland Security offers a useful case study 

in the benefits—and the risks—of government contracting for services. 

There are many legitimate reasons for contracting work out: For 

example, helping with stand-up requirements, meeting intermittent 

or surge demands, and keeping agency staff focused on core responsibilities. The GAO report notes that DHS has faced many of these 

challenges over its short life, leading to the use of contracts to 

cover needed services. But GAO also notes, ‘‘Four years later, the 

Department continues to rely heavily on contractors to fulfill its 

mission with little emphasis on assessing the risk and ensuring 

management control and accountability.’’ 

Despite OPM’s admonition a decade ago, DHS has failed in numerous instances to ensure appropriate accountability for service 

contracts. GAO’s report provides troubling evidence that DHS has 

not routinely evaluated risks in acquiring services by contract and 

has not properly monitored services that are closely related to ‘‘inherently governmental functions.’’ These examples of inadequate 

4 

oversight are particularly troubling given the billions of taxpayer 

dollars that DHS used last year to procure professional and management-support services. 

Some of GAO’s findings are especially disconcerting: 

First, without sufficient oversight, contractors were preparing 

budgets, managing employee relations, and developing regulations 

at the Office of Procurement Operations, TSA, and the Coast 

Guard. As the Chairman has pointed out, these seem to be inherently governmental functions that should not be contracted out. 

Second, some DHS program officials were unaware that a longstanding Federal policy requires an assessment of the risks that 

government decisions may be influenced by a contractor’s actions. 

Worse, even when informed of this policy, some DHS officials said 

they did not see the need for enhanced oversight. 

Third, in six of the nine cases studied by GAO, statements of 

work lacked measurable outcomes, making it difficult to hold contractors accountable for the results of their work. 

And, fourth, DHS has not assessed whether its contracting could 

lead to a loss of control and accountability for mission-related decisions, nor has it explored ways to mitigate such risks. 

These concerns are very similar to many raised by the DHS Inspector General, who identified instances of poorly defined contract 

requirements, inadequate oversight, unsatisfactory results, and unnecessary costs. I would note that I think it is a very positive sign 

that DHS has brought an experienced procurement official, Elaine 

Duke, to the Department to try to improve its processes. But it is 

troubling that we are finding this pattern of problems. 

To address the reports of contracting failures like those identified 

in this and other GAO reports—and these failures are found in 

agencies other than DHS—Senator Lieberman and I introduced S. 

680, the Accountability in Government Contracting Act of 2007, 

along with several of our colleagues, earlier this year. The bill was 

unanimously reported by this Committee at the beginning of August, and it would reform contracting practices; strengthen the procurement workforce; introduce new safeguards against waste, 

fraud, and abuse; and provide increased oversight and transparency in the Federal Government’s dealings with its contractors. 

I want to highlight one other provision of the bill that I think 

is particularly important and would apply to some of the problems 

we found in DHS, and that is the bill would also limit the duration 

of non-competitive contracts. This has been a problem identified by 

GAO in this report, as many DHS service contracts were extended 

well beyond the original period of need. 

The GAO report that is being released today delivers a troubling 

judgment, especially when so much of DHS service contracting 

seems to come very close—and in some cases crosses the line—to 

the performance of ‘‘inherently government functions.’’ 

So, Mr. Chairman, I appreciate your holding this hearing today 

and assembling a distinguished group of experts. 

Chairman LIEBERMAN. Thanks very much, Senator Collins. 

Thanks for mentioning the legislation that we have cosponsored, 

the Accountability in Government Contracting Act, and just to say 

briefly, the focus today is on the GAO report on the Department 

of Homeland Security, which is troubling. But it raises questions 

5 

1The GAO Report submitted by Mr. Hutton, GAO–07–990, ‘‘Department of Homeland Security—Improved Assessment and Oversight Needed to Manage Risk of Contracting for Selected 

Services,’’ dated September 2007 appears in the Appendix on page 84. 1The prepared statement of Mr. Hutton appears in the Appendix on page 29. 

that obviously go beyond the Department more broadly in our government. 

At this moment, there is much attention both from Congress and 

the public, the media, on the use of private security guards in Iraq 

and Afghanistan, which is understandable, apart from the rights or 

wrongs of those particular contracts and the contractors and their 

employees who are carrying them out. That is a separate question. 

It does raise exactly the same questions as raised here. What are 

‘‘inherently governmental responsibilities’’ that ought to be carried 

out by public employees? Second, do we have sufficient public employees to carry out those responsibilities? And if we do not and, 

therefore, we determine that to get the job done to fulfill the responsibility that Congress has given an agency circumstances require that they have to use private contractors, then is the oversight adequate? And I think all of these questions that we will be 

discussing today about DHS have applicability broadly throughout 

the Federal Government, including in the particular case of private 

security guards in Iraq and Afghanistan. Of course, we hope that 

our legislation will help answer those questions in the right way 

in all of these cases. 

Our first witness today is John Hutton, Director of the GAO Acquisition and Sourcing Management Team. Mr. Hutton has had a 

wonderful career at GAO dating back to 1978 and has been instrumental in many of the reports that the office has prepared for this 

Committee on contracting issues, for which we are grateful. The report being issued today is one in a series that GAO is conducting 

for this Committee—it is not the last one—on contracting by the 

Department of Homeland Security, which, after all, is a major responsibility of oversight for this Committee as the Homeland Security Committee. Last fall, GAO reported to us on the Department’s 

use of interagency contracts, and still to come are reports on performance-based contracting and on the acquisition workforce. 

Mr. Hutton, we thank you and your team for the extraordinary 

work that you have done for this Committee, indeed, for the public, 

and I now welcome your testimony about your latest report.1

TESTIMONY OF JOHN P. HUTTON,1 DIRECTOR, ACQUISITION 

AND SOURCING MANAGEMENT TEAM, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. HUTTON. Thank you very much. Chairman Lieberman, Senator Collins, and Members of the Committee, thank you for inviting 

me here to discuss our report today on work done for this Committee, as you note, on the Department of Homeland Security’s reliance on contractors that perform mission-related services. As you 

know, when DHS was established over 4 years ago, it faced enormous challenges in setting up offices and programs that would provide a wide range of activities that are very important to this country’s national security. And to help address this challenge, as we 

know, the Department relied on contractors, many for professional 

management support, and these are services that increase the risk 

6 

of contractors’ unduly influencing the government’s control over 

programs and accountability for actions. And for this reason, longstanding Federal policy requires attention to this very risk. 

And I would like to point out also that the scope of this work was 

really focused on those activities that are closely supporting inherently governmental functions. We did not address specifically inherently governmental functions that may be performed by contractors. And that is a key point here because for services that closely 

support, you are getting real close to government decisionmaking, 

and that is where the decisions ought to be made—in the government. 

But my testimony today will highlight our key findings. First, I 

want to describe the types of professional management support 

services for which DHS has contracted and the associated risks. 

And, second, I will then discuss DHS’ consideration and management of risk when contracting for such services. And, Senator 

Lieberman, I must say you did a nice job summarizing our methodology, so I will move on to some of our key points. 

DHS contractors performed a broad range of activities under the 

four types of professional management services that we reviewed, 

and most of the statements of work we reviewed requested contractors to support policy development, reorganization and planning, 

and acquisitions. And, again, these are services that closely support 

inherently governmental functions. 

For example, the Transportation Security Administration acquired contractor support for such activities as assisting the development of acquisition plans and hands-on assistance to program officers to prepare acquisition documents. 

The Office of Procurement Operation’s Human Capital Services 

Order provided for a full range of professional and staffing services 

to support DHS headquarters offices, including writing position descriptions, assigning official offer letters, and meeting new employees at DHS headquarters for the first day of work. 

Now, as we drill down further into our case studies, we gained 

additional insights into the types of services being performed and 

the circumstances that drove DHS’ contracting decisions. Many of 

the program officials we spoke with said that contracting for services was necessary because they were under pressure to get these 

programs and offices up and running quickly, and they did not 

have enough time to hire staff with the right expertise through the 

Federal hiring process. 

Given the decision that contractors were to be used, we then 

looked at DHS’ consideration and management of the risk when 

contracting for such services. Federal acquisition guidance highlights the risk inherent in these services, and Federal internal control standards require assessment of risks. 

Now, in our nine case studies, while contracting officers and program officials generally acknowledged that such support services 

closely support inherently governmental functions, none assessed 

whether these contracts could result in a loss of control and accountability for policy and program decisions. Also, none were 

aware of the Federal requirements for enhanced oversight in such 

cases, and most did not believe enhanced oversight was need. 

7 

Our nine case studies provided examples of conditions that needed to be carefully monitored to help ensure the government does 

not lose this control and accountability. For example, in seven of 

the nine cases, contractors provided services integral to an agency’s 

mission and comparable to those provided by government employees. To illustrate, one contractor provided acquisition advice and 

support while working alongside Federal employees and performing 

the same tasks. 

In each of the nine case studies, the contractor provided ongoing 

support for more than 1 year. In some cases, the original justification for contracting had changed, but the DHS components extended or re-competed services without examining whether it 

would be more appropriate for Federal employees to perform the 

service. 

Third, in four of the case studies, the statements of work contained broadly defined requirements lacking specific details about 

activities that closely support inherently governmental functions. 

And, in fact, several program officials noted that the statements of 

work did not accurately reflect the program’s needs or the work the 

contractor actually performed. 

Moreover, Federal Acquisition Regulations and policies state that 

when contracting for services, particularly for the ones we are 

speaking of, a sufficient number of qualified government employees 

are needed to plan the acquisition and to oversee the activities to 

maintain that control and accountability over their decisions. 

We found some cases in which the contracting officer’s technical 

representative lacked the capacity to oversee contractor performance due to limited expertise and workload demands. For example, 

one technical representative was assigned to oversee 58 tasks ranging from acquisition support to intelligence analysis to budget formulation and planning, and these were across multiple offices and 

locations. Similarly, another technical representative assigned to 

oversee a contractor provide an extensive range of personnel and 

staffing services lacked technical expertise which the program 

manager believed affected the quality of oversight provided. 

Now, in prior work, GAO has noted that agencies facing these 

workforce challenges, such as lack of critical expertise, have used 

strategic human capital planning to develop these long-term strategies to achieve programmatic goals. While DHS’ human capital 

strategic plan notes that the Department has identified some core 

mission-critical occupations and seeks to reduce these skill gaps, it 

has not assessed the total workforce deployment across the Department to guide decisions on contracting for selected services. 

We have noted the importance of focusing greater attention on 

which types of functions and activities should be contracted out 

and which ones should not while considering other reasons for 

using contractors, such as a limited number of Federal employees. 

In closing, until the Department provides greater scrutiny and 

enhanced management oversight of contracts for selected services— 

as required by the Federal guidance—it will continue to risk transferring government responsibility to contractors. To improve the 

Department’s ability to manage this risk and help ensure government control, the report we are releasing today recommends that 

the Secretary of Homeland Security take several actions. These acVerDate Aug 31 2005 09:49 Oct 14, 2008 Jkt 038851 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 P:\DOCS\38851.TXT SAFFAIRS PsN: PAT
8 

1The prepared statement of Ms. Duke appears in the Appendix on page 45. 

tions include: Establishing a strategic level guidance for determining the appropriate mix of government and contractor employees; assessing the risk of using contractors for selected services 

during the acquisition planning process; again, more clearly defining contract requirements, acquisition planning is of note there; 

and assessing the ability of the government workforce to provide 

sufficient oversight when using services. 

Mr. Chairman, this concludes my statement, and I will be happy 

to answer any questions you will have. 

Chairman LIEBERMAN. Thanks very much, Mr. Hutton. We certainly have questions for you. 

We will next go to Elaine Duke, who is the Chief Procurement 

Officer at the Department of Homeland Security. Ms. Duke brings 

considerable experience with her to this position, having previously 

served as Deputy Chief Procurement Officer at DHS, Deputy Assistant Administrator for TSA, and for many years before that held 

a series of acquisition-related positions with the U.S. Navy. 

Since being appointed Chief Procurement Officer last year, 2006, 

Ms. Duke has undertaken a number of initiatives to strengthen acquisition practices at the Department, which we on this Committee 

appreciate. But obviously, having heard Mr. Hutton and having 

read his report, I am sure you recognize that you have a tremendous challenge that you have found to improve acquisition management in a Department where the procurement needs are so vast 

and so complex. 

So, with that, we thank you for being here and welcome your testimony now. 

TESTIMONY OF ELAINE DUKE,1 CHIEF PROCUREMENT 

OFFICER, U.S. DEPARTMENT OF HOMELAND SECURITY 

Ms. DUKE. Thank you, Mr. Chairman, Ranking Member Collins, 

and Members of the Committee. I really appreciate the opportunity 

to be here this morning before your Committee for the first time. 

Since it is my first time before you, I wanted to take a moment 

to talk about the priorities we are working on within the procurement program within DHS, and then I will specifically address the 

GAO report. 

We have three procurement priorities within the Department of 

Homeland Security. They are all essential for our stewardship of 

the taxpayers’ dollars: The first is to build the acquisition workforce; the second is to make good business deals; and the third is 

to perform effective contract administration. I share these priorities 

with the heads of contracts in each of the components within DHS. 

Within the first priority, building the acquisition workforce, some 

of the initiatives we have undertaken over the last year include a 

Centralized Hiring Initiative, where we at the corporate level are 

recruiting and hiring for key acquisition positions throughout the 

Department of Homeland Security. We used direct hire authority 

extensively for this. As the Committee knows, the direct hire authority has expired, and we appreciate that being part of your proposed bill to renew that hiring authority. That is something we 

9 

have used for well over 100 people just in the last 8 months, and 

we appreciate your efforts to reinstate that. 

We have in the President’s budget for fiscal year 2008 a new centralized Acquisition Intern Program. We will essentially manage 

and fund interns for a 3-year period, rotating them throughout 

DHS to provide that continuity in one DHS field. This is a program 

that we think will bring a new workforce into the Department of 

Homeland Security and are very much looking forward to starting 

that in this fiscal year. 

We also in the President’s budget have a centralized Acquisition 

Workforce Training Fund. We have partnerships with the Federal 

Acquisition Institute and the Defense Acquisition University to use 

for delivering these central training skills throughout DHS. 

Under the second priority, make good business deals, we have 

several policy and oversight initiatives in this area. We have a 

Homeland Security Acquisition Manual that addresses key aspects 

of a good business deal, including competition, acquisition planning, small business, contractor responsibility, lead systems integrator issues, and organizational conflicts of interest. This past 

June we issued DHS’ first Guide to Source Selection to try to institute a culture of good source selection, best values throughout the 

Department. 

We recently received an actual kudos in a GAO report on Alaska 

Native use, and it said that DHS was one of the leaders in having 

good oversight policy and proper use of Alaska Native corporations. 

And this fiscal year, initial numbers have greatly increased our 

level of competition going from about 50 percent in fiscal year 2006 

to about 65 percent in fiscal year 2007—still much room to improve, but a great improvement over 1 year. 

Additionally, we are on the Office of Federal Procurement Policy 

working groups for some of the Federal initiatives, including how 

to do interagency agreements better and how to improve the use 

of performance-based service contracts—one of the focuses of the 

GAO report. 

Under the third priority, effective contract administration, we 

are working heavily with Defense Contract Management Agency 

and Defense Contract Audit Agency to augment with Federal employees DHS’ workforce in these key areas. 

We have had a series of Excellence in Contracting workshops 

done by persons on my staff to target certain areas, such as government property management, COTR functions in many of the key 

areas. 

We also have cross-cutting initiatives that really cover all three 

of the priorities. I would like to specifically mention the achievements of my Office of Small and Disadvantaged Business Utilization. We were one of the few Federal agencies to receive a green 

in the Small Business Administration’s first annual scorecard. During fiscal year 2007, we conducted our first major on-site acquisition reviews. We reviewed FLETC, Office of Procurement Operations, FEMA, and U.S. Citizenship and Immigration Services in a 

comprehensive review, in addition to a number of targeted specialized reviews. 

One of the areas that I would like to distinguish that we are 

doing is expanding the authority and responsibility of my office 

10 

from procurement to acquisition, and that may sound like a semantics issue, but it is not. Some of the issues we are talking about 

here, and as the GAO report identifies, we have to start with a 

good requirement, and that starts in the program office. And to 

wait until the end of the process, the end result, the procurement, 

is really just Band-aiding in or inspecting in a solution. So we are 

working with expanding both at my office and within the components to make sure we have the full range of acquisition competencies and people in place to manage these programs. I have selected a Senior Executive Service program manager that will lead 

this effort in my office, and we have the full support of the Under 

Secretary of Management, as you know, in this initiative. 

Now I would specifically like to address the GAO report, and it 

addresses the government’s increasing reliance on government 

services. It has already been said that this is not just a DHS issue. 

It is a Federal problem. I think that was most evidenced by the 

Services Acquisition Reform Act, the SARA Acquisition Advisory 

Panel results, who devoted a whole chapter to this and made some 

recommendations, which we and OFPP are looking at to see what 

is the best answer for the Federal Government. 

I think there are two issues raised by the report. One of them 

is: Is DHS contracting out inherently governmental services? And 

the second, is it properly managing the service contracts that it 

has? 

We agree with the recommendations of the report. There is a risk 

in reliance on government contractors. We do agree that we have 

much more to do, but we do not agree that we have not done anything to start managing this risk. 

To keep in mind perspective, Mr. Chairman, you brought up the 

fact that we are building and executing at the same time in DHS. 

One other point to bring up is we are actually growing, to add another dimension of complication. Just a few years ago, we had 

about $2 billion worth of contracts. Last year, if you include interagency agreements our contracting officers had to execute, we had 

well over $17 billion worth of responsibility in contracting. 

So what are some of the things we have done to address the concerns of the GAO report? I issued a memorandum to all the component heads talking about DHS service contracting best practices, 

risks, things to look out for and enforce in the contracting. We 

brought to the attention of Defense Acquisition University, who 

does the COTR training for all the Federal agencies, the importance of the OFPP Letter 93–1 that was mentioned in the GAO report to make sure that the COTR training is modified to include 

the specific risk areas. 

We are focusing heavily on the requirements piece, as I said earlier. We really think that is the true solution, to have good requirements so that we can increase our use of performance-based contracting, decrease the risk. We are doing work in the areas of organizational conflicts of interest, both in awareness and training, to 

ensure that when we have a blended workforce, as was stated earlier, a contractor sitting next to a government employee, that the 

risks and the nuances between that is recognized and managed. 

And we are addressing staffing, and that is a big thing. At least 

in the near future, we will continue to have what is classified as 

11 

1The prepared statement of Mr. Schooner appears in the Appendix on page 58. 

nearly inherently governmental services necessary to accomplish 

our mission, but we have to make sure that we have the in-house 

government forces in the program office as COTRs and in the contracting officers to make sure we adequately manage that risk. 

We are currently looking at all our major programs under a 

‘‘Quick Look’’ review to assess risk of those programs, and then we 

are going to prioritize and target the programs for what we are 

calling ‘‘deep dives’’ based on those Quick Look reviews and an assessment of risk. And that has started now, and we are about halfway through our Quick Look reviews. 

We are increasing the certification of program managers. We 

have acquisition career certification standards for contracting, 

COTRs, and program managers. And we currently have about 250 

certified program managers. They are not all in the right jobs, 

though, and that is another thing we are working on. 

So these are some of the efforts we are working on within the 

Department. I would also like to point out that seven of the nine 

most troubling acquisitions in the GAO report are no longer active 

contracts, so we are working in the right direction in that regard, 

too. 

Mr. Chairman, Ranking Member Collins, I really thank you for 

the opportunity to address this important issue and look forward 

to your questions. 

Chairman LIEBERMAN. Thanks very much, Ms. Duke. We will obviously have questions for you. 

The third witness, who we welcome now, is Professor Steven 

Schooner, Senior Associate Dean for Academic Affairs, Associate 

Professor of Law—that is quite a title. 

Mr. SCHOONER. Too many titles. 

Chairman LIEBERMAN. You are a busy man. And Co-Director of 

the Government Procurement Law Program at the George Washington University School of Law. Before joining the faculty at GW, 

Mr. Schooner was the Associate Administrator for Procurement 

Law and Legislation at the Office of Federal Procurement Policy at 

the Office of Management and Budget. So he is extremely well 

qualified to offer expert testimony this morning, which we now welcome. 

TESTIMONY OF STEVEN L. SCHOONER,1 CO-DIRECTOR, GOVERNMENT PROCUREMENT LAW PROGRAM, THE GEORGE 

WASHINGTON UNIVERSITY LAW SCHOOL 

Mr. SCHOONER. Chairman Lieberman, Ranking Member Collins, 

and Members of the Committee, I commend this Committee for its 

focus on improving the procurement process, and I support many 

of the initiatives in the current version of S. 680, particularly the 

Acquisition Workforce Human Capital Succession Plan. I concur 

with the GAO report, and I echo the three priorities that Ms. Duke 

articulated for her organization. 

You asked me to comment on the benefits, challenges, and risks 

of DHS’ increased reliance on contractors, so let me begin by saying 

the key benefit is that using contractors avoids failure where the 

government lacks the ability and the resources to perform its misVerDate Aug 31 2005 09:49 Oct 14, 2008 Jkt 038851 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 P:\DOCS\38851.TXT SAFFAIRS PsN: PAT
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sion. Contractors also provide surge capacity. They can add resources quickly, efficiently, and effectively, and contractors also 

permit agencies to quickly employ superior technology and better 

talent. 

But I do not suggest and I take issue with those who do suggest 

that a primary benefit of reliance on contractors is merely the potential for cost savings. 

Of course, extensive contractor reliance creates significant challenges. To use contractors well, agencies have to plan, which means 

they need to understand what outcome they want and accurately 

describe that to the private sector. They need to select appropriate 

qualified contractors in a timely fashion. They need to negotiate 

cost-effective agreements, draft contracts that contain effective incentives in order to maximize contractor performance. Agencies 

then must manage those relationships to ensure that the government gets value for its money. 

Against that backdrop, the risks of relying on contractors are 

constrained only by your imagination. If a contractor fails, the 

agency can fail. Contractor failures, just like government failures, 

can result in harm being inflicted upon the public, the government, 

or others. Of course, also at risk is loss of confidence in the government and always excessive expenditure of scarce public funds. 

Now, you also asked me to comment on the adequacy of current 

laws and regulations concerning the acquisition process. There is 

always room for improvement, but the legal and regulatory regime 

generally is adequate. The lion’s share of DHS’ and the government’s acquisition difficulties result from implementation of the 

laws, regulations, and policies, and the root cause of that is an inadequate acquisition workforce. 

Now, let me digress. One area where the legal regime is not adequate is the government’s rather chaotic reliance upon private security. As recent events involving Blackwater make clear, the risks 

in this area are particularly grave. The existing legal and regulatory regimes are inadequate to address them, and the government has waited far too long to address them in a thoughtful and 

responsible manner. 

Now, as my testimony suggests, I think it oversimplifies the 

problem to suggest that DHS currently is too dependent on contractors. It is distinctly possible that under different circumstances, an 

outsourced and privatized DHS might best serve the government’s 

interest, but that debate—how much we should outsource—is simply irrelevant here. We rely on the private sector because we have 

restricted the size of government and, more specifically, the number of government employees. It is true that the Bush Administration did not mask its preference for outsourcing, but that initiative 

is a statistically insignificant percentage of the new service contracts we see. 

We have no short-term choice but to rely on contractors for every 

conceivable task that the government is understaffed to fulfill. For 

example, in Iraq, the military relies on contractors not only for 

transportation, shelter, and food, but unprecedented levels of battlefield and weaponry operations support and maintenance. DHS 

cannot simply consolidate its mission, jettison a number of the 

tasks, start terminating contracts, and take on only the missions 

13 

that it is appropriately staffed to perform. Nor can it wait as it embarks upon an aggressive program to identify, recruit, hire, and retain an extraordinary number of civil servants. And, frankly, it is 

quite unclear whether there is political will to grow the Federal 

workforce as we need to do. It is going to take years for DHS to 

have a significantly larger and, most importantly, cohesive organization. 

So, accordingly, DHS has to acknowledge that it is, frankly, a 

hollow agency and do its best to achieve its mission with the resources available. One oft-criticized practice, the use of Lead Systems Integrators—one of the most relevant examples here was 

Deepwater—is a direct result of the human capital gap. Similarly, 

contractors will continue to perform what historically has been perceived as inherently governmental functions. That is acquisition 

support, engineering and technical services, intelligence services, 

policy development, and reorganization and planning. 

All of which brings us to the inescapable conclusion that the government must devote more resources to acquisition. This is urgent 

following a bipartisan 1990s congressionally mandated acquisition 

workforce reduction. No empirical evidence supported the reductions, and the sustained reductions and subsequent failure to replenish them created a full generational void and devastated procurement personnel morale. Simultaneously, the government 

skimped on training, and contracting officers were facing increasingly complex contractual challenges. In addition—and this is critical—despite the explosive growth in the reliance on service contracts, no emphasis was placed on retaining or obtaining skilled 

professionals to plan for, compete, award, or manage sophisticated 

long-term service contracts. 

The dramatic and now sustained increase in procurement spending since the September 11, 2001, attacks exacerbated an already 

simmering workforce crisis. Congress has been quick to call for 

more auditors and inspector generals to scrutinize contracting, and 

that is responsible. But the corresponding call for more contracting 

experts to proactively avoid the problems has been both delayed 

and muted. The workforce today, understaffed, underresourced, 

and underappreciated, desperately requires a dramatic recapitalization. 

We not only have too few people to do the work, many of the people we have lack the necessary qualifications. We need businesssavvy professionals to promptly and accurately describe what the 

government wants to buy, identify and select quality suppliers, ensure fair prices, structure contracts with appropriate monetary incentives for good performance, and then manage and evaluate the 

contractors’ performance. 

The Acquisition Advisory Panel report appropriately acknowledged, while the private sector invests substantially in a core of 

highly sophisticated, credentialed, and trained business managers, 

the government does not make comparable investments. It is a mistake. But acquiring that talent is not going to be easy. Senior procurement officials today increasingly bemoan that no young person 

in his or her right mind would enter government contracting as a 

career today. 

14 

Let me wrap up with a symptom of the current acquisition crisis: 

The increased reliance on personal services contracts. 

Now, DHS already enjoys greater authorities than most agencies 

in that regard, but the longstanding prohibitions against personal 

services contracting have become dead letter. We have witnessed 

an explosive growth in what we refer to as ‘‘body shop’’ or ‘‘employee augmentation arrangements.’’ As the name implies, the government uses these contracts to hire contractor personnel to replace or supplement civil servants or members of the military. This 

is the antithesis of the government’s preferred approach, known as 

‘‘performance-based service contracting.’’ 

The worst-case scenario is where contractors work under openended contracts without guidance or management from a responsible government official, typically facilitated by an interagency 

contracting vehicle. Civil servants work alongside and at times for 

contractor employees who sit in seats previously occupied by civil 

servants. Unfortunately, no one ever stopped to train the government how to operate in such an environment, which we commonly 

refer to as a ‘‘blended workplace.’’ In addition to the potential conflicts of interest, the other human capital issue is that if we are 

going to try to attract and retain a qualified workforce, DHS may 

find it increasingly difficult to articulate why an individual should 

come and work for DHS rather than its contractors. This is particularly problematic where contractors use incentives, such as raises, 

bonuses, training opportunities, travel and entertainment, to reward their top talent. This is particularly troubling now that the 

market for talent is increasingly global, and we see, for example, 

a global shortage of engineers. Serious, long-term, far-reaching personnel reforms are needed to reverse the trend. 

So let me conclude by saying I agree with many of GAO’s recommendations, but I am not optimistic that DHS can fully implement them. Yes, there is no higher priority for heavily outsourced 

agencies such as DHS than to assess program office staff and expertise necessary to provide sufficient oversight of its service contracts. DHS should assess the risks of relying on contractors as 

part of the acquisition process. And while DHS may have no choice 

but to rely on those contractors, the discipline will help control the 

risks. Surely, any additional energy devoted to acquisition planning 

will pay dividends during contract performance. 

But, in closing, let me be clear. More than 15 years of ill-conceived underinvestment in the acquisition workforce followed by a 

governmentwide failure to respond to a dramatic increase in procurement activity has led to a triage-type focus on buying with insufficient resources available for contract administration, management, or oversight. The old adage we all learned in kindergarten— 

‘‘An ounce of prevention is worth a pound of cure’’—rings true. A 

prospective investment in upgrading the number, skills, and morale of government purchasing officials would reap huge dividends 

for the taxpayers. 

I thank you for this opportunity, and I would be pleased to answer any questions. 

Chairman LIEBERMAN. Thanks, Mr. Schooner. I have a very unsenatorial response to your testimony, which is, ‘‘Bingo.’’ [Laughter.] 

15 

You have made the case very well. I serve, as other Members of 

this Committee do, on the Armed Services Committee. I happened 

to have the privilege over the last several years of being either 

chair or ranking member of the Airland Subcommittee. The U.S. 

Air Force has had terrible acquisition problems, some cases of 

fraud—and, of course, some people have gone to jail—and also 

cases of waste and illogical judgments made. And you just come 

back to the fact that as the demand for acquisition went up, the 

acquisition workforce at the Air Force went down, and we are paying for it. So I think you state the case very well on that ultimate 

point, and I thank you for it. 

Do you think we are contracting out too many professional and 

management services in DHS or in the Federal Government generally? 

Mr. SCHOONER. In the short term, no, I honestly do not believe 

we have a choice. In terms of the long-term best approach for government, I do not think that there is any way for the government 

to maintain the institutional knowledge necessary for the government to make good long-term decisions if we, in fact, cede all of 

this authority to the private sector. 

Chairman LIEBERMAN. Understood. And you say in the short 

term, no, and generally speaking—I presume that you are not in 

a position to comment on every private contract let out. Generally 

speaking, you think the private contractors are actually carrying 

out responsibilities that the various departments have to carry out. 

Mr. SCHOONER. Absolutely. I think it is just a common reflection 

of the fact that we have hollowed out the government, particularly 

among the most knowledgeable, skilled, and talented people that 

we need to rely on the most. 

Chairman LIEBERMAN. And you said quickly in your testimony, 

but it is relevant here, that you do not believe that cost savings is 

a justification for private contracting. And I take it you meant that 

not only in the broader sense of institutional knowledge, but you 

are skeptical that we actually save money when we private contract out. Am I right? 

Mr. SCHOONER. I think the latter part of that is more accurate. 

What I was trying to communicate is I do not believe the primary 

justification for relying on the private sector should be cost savings 

alone. It troubles me when I hear people say that all that matters 

is the marginal dollar. The most compelling arguments for relying 

on the private sector are if you need surge capacity, if you need 

quality or talent that is not available to the government in the 

short term. The private sector can make the government better, 

more flexible, and more potent, but chasing only the marginal dollar, worrying about whether it is cheaper, does not make sense. 

Can I offer you a brief analogy or an example? If we look at the 

reliance on private contractors providing support for the military in 

Iraq, we could focus on whether it costs more or less than what the 

Army used to spend to take care of the people in the military. 

Chairman LIEBERMAN. Right. 

Mr. SCHOONER. But the bottom line is if you bring in a contractor 

who can more quickly provide hot meals, showers, clothing, and a 

general quality of life to our troops, I am willing to pay more for 

that, and I believe the public is, too. So the marginal dollar is not 

16 

the issue. The question is can they effectively provide a service that 

the government cannot do as presently constituted? 

Chairman LIEBERMAN. OK. Then notwithstanding that, let me 

turn to you, Ms. Duke, and ask: Just looking at all of the contracts 

that Mr. Hutton has cited in his report on DHS, and actually noting that you have said that seven of the nine troublesome, inadequate, questionable contracts that the GAO report cites are no 

longer in existence, don’t you think that the Department of Homeland Security is contracting out too many services now? 

Ms. DUKE. I think it is an issue that we are looking at, to be honest. I think that you have inherently governmental services, and if 

you look at what is inherently governmental and what is commercial, they are very similar. One is deciding on the budget; the other 

is assisting with budget development. And so we are systematically 

looking through the numbers, contract renewal by contract renewal, to make sure that we do have those core competencies within the Department of Homeland Security. So when we do execute 

this inherently governmental function, such as signing a document, 

we have the knowledge to know what we are signing. It is not an 

administrative exercise. I think that is very important. 

Chairman LIEBERMAN. OK. But I take it from your opening 

statement that you do believe—and you have come in relatively recently as the CPO—that the Department of Homeland Security is 

not exercising adequate oversight of these contracts, including particularly, if I heard you correctly, the initial requirements decision. 

In other words, is this something we want to contract out? 

Ms. DUKE. I think that deciding if we are going to contract it out 

and clearly defining the requirement are the two up-front actions 

that we need to focus on to manage risk. After it is awarded, what 

we need to focus on is making sure that the right COTRs, who are 

the ones that accept the services and monitor the services, that the 

right people are in place in the right numbers, in addition to the 

contracting officers. So I think there are actions on both ends of the 

timeline. 

Chairman LIEBERMAN. Let me ask you finally in this round 

about competition for the contracts. In OMB’s latest review of 

major agencies, the Department of Homeland Security actually 

ranks first—or last, depending on your point of view—in terms of 

the percentage of contracts entered without full and open competition. That means you are No. 1 in most of them. In fact, 51 percent 

of DHS’ contracts last year were awarded without full and open 

competition. 

I noted in your opening statement you cited fiscal year 2007 

numbers that put that number down to 35 percent—I believe that 

is correct—and that is an improvement, which I appreciate. But it 

still says that more than a third of the contracts, which involve billions of dollars, are being awarded without open competition. And, 

of course, this not only creates the risk that the Department does 

not get the best value for the taxpayers’ money, but the perception 

and possible danger of a coziness between the Department and the 

contractors that will undermine confidence, both here in Congress 

and in the public, in the Department’s work. 

So are you concerned about the questions that I have just raised? 

And if so, what steps are you taking to increase competition hopeVerDate Aug 31 2005 09:49 Oct 14, 2008 Jkt 038851 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 P:\DOCS\38851.TXT SAFFAIRS PsN: PAT
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fully to as close to 100 percent as you can get it for contracts at 

DHS? 

Ms. DUKE. I am always concerned about competition. That is one 

that, regardless of how high we get, we are not done yet. Competition clearly is the basis of our economy, and it works. 

Some of the steps we are taking is, I think, better defining the 

requirements, like I said earlier. We have instituted competition 

advocates with each of the components that are reviewing all the 

sole-source actions within the operating components of DHS so that 

we can look at these one by one. We have bolstered our acquisition 

planning so we get reports up front what people are planning on 

doing in the next fiscal year in addressing those. 

The other thing I think we have to do is systematically look at 

urgency. One of the things Mr. Schooner mentioned is we should 

not singularly look at cost. I really think that you have cost, you 

have schedule, and you have performance. And if any one of them 

is out of balance, then you really are going to get a poor result. And 

I think that because of the urgency in which DHS was started and 

then when Hurricane Katrina hit mid-time between our beginning 

and current, an overreliance on the impact of schedule, which in 

essence minimizes the importance of competition, and so we have 

to get that back in balance. 

Chairman LIEBERMAN. OK. My time is up. I take your answer to 

be that 51 percent of contracts awarded without full and open competition was unacceptable to you. 

Ms. DUKE. Yes 

Chairman LIEBERMAN. You got it to 35 percent, and I take it that 

your goal is to get it as close to zero percent as you can. 

Ms. DUKE. Yes, sir. 

Chairman LIEBERMAN. Thank you. Senator Collins. 

Senator COLLINS. Thank you, Mr. Chairman. 

Ms. Duke, let me pick up exactly where the Chairman left off because I, too, am very concerned about the Department’s reliance on 

other than full and open competition. 

After Hurricane Katrina hit, the Department awarded four noncompetitive contracts to help with installing temporary housing 

throughout the Gulf Coast. Originally, each of these contracts had 

a ceiling of $500 million. 

Now, there may have been an initial justification to award noncompetitive contracts using the urgent and compelling exception 

under the Competition in Contracting Act. So I am not questioning 

that initial decision. What I am questioning is why, instead of competing the contracts later, they were, in fact, just extended. The 

ceiling for one of the contracts went from $500 million to, I think 

it was, $1.4 billion. 

Do you think that the Department should take a look at the duration of noncompetitive contracts when the urgent and compelling 

exception to competition is employed? 

Ms. DUKE. Yes, I think the duration is important. With the specific Hurricane Katrina circumstance, the issue was there were 

many actions. We were not prepared in a contracting response in 

general, so those contracts were one of many problems where we 

had urgent issues, and so it did take longer to recompete those 

than it should have. But I do support having some restrictions on 

18 

the length of an initial urgency justification in situations like the 

one you are speaking of. 

Senator COLLINS. And that is a provision of our bill as well. 

When I look at the Department, in addition to the FEMA contracts and the problems there, the other area that troubles me 

greatly is the Coast Guard’s Deepwater contracts. I am such a 

strong supporter of the Deepwater program, I know firsthand of 

the need to recapitalize the assets of the Coast Guard. But there 

is no doubt that the entire acquisition procurement process for the 

Deepwater program was a disaster. And it led to cutters having to 

be scrapped. It led to the waste of millions of dollars, dollars that 

the Coast Guard desperately needs for new cutters that work and 

for new helicopters. 

Could you give us your analysis of what went wrong with the 

Deepwater program and what is being done now to get it back on 

track? It seems to me a fundamental thing that went wrong is that 

the Coast Guard just lost control of the program by putting too 

much responsibility on the contractors. 

Ms. DUKE. The commandant, Admiral Allen, and I are aligned on 

many things. One of them is the accountability that we have when 

we are appropriated funds, and we believe that we maintain the 

accountability for that. We do believe in partnership with the contractor, but that means an effective working relationship. It does 

not mean transferring responsibility or accountability. And that is 

the primary function and the cultural change that is going to improve the continued administration of the Deepwater program. 

Some of the things that have been done is the blueprint for acquisition reform; we have put some key senior executives in those 

programs and flag officers that have significant shipbuilding experience. We moved a senior executive from my office to head contracts for the Coast Guard, who has a significant career with Naval 

Sea Systems Command to see that expertise. She does have to 

build a staff with the same expertise, but that is key. A senior executive for the Deepwater program has been selected, as well as 

one to be a deputy to Admiral Blore. 

Those key positions are important, especially on the civilian side, 

to make sure that this attitudinal change continues into the future 

and does not change with change of military members. 

I think the other area that we have improved the Deepwater is 

the alternatives analysis that is ongoing. It is a pause point for the 

Coast Guard to reassess. It had a major change in mission postSeptember 11. This is a pause point to really look at the mission 

need and do a true look at the alternatives and what major assets 

are needed to fulfill the Coast Guard’s mission in the future. 

Senator COLLINS. Thank you. 

Chairman LIEBERMAN. Thanks very much, Senator Collins. Senator McCaskill, good morning. 

OPENING STATEMENT OF SENATOR MCCASKILL 

Senator MCCASKILL. Good morning. Thank you, Mr. Chairman. 

Mr. Hutton, when you all were there—did you have any sense of 

how many of these contracts are definitized in terms of an appropriate level of the standards at GAO in terms of what is being 

asked? What percentage of these things are like a LOGCAP where 

19 

we said, hey, tell us what we need and when we need it, and by 

the way, it is cost-plus so you tell us how much it is going to cost? 

How much of that is at DHS similar to what we have seen in—— 

Mr. HUTTON. I think of the ones that we drilled down in, there 

were several that were basically off of the GSA schedules. There 

are others like the Information Analysis and Infrastructure Protection Directorate contract. That was one that started with a fairly 

narrow scope. I think that was probably back in 2002 or 2003, but 

it was off of VA—they provided assistance, and they went off of 

GSA’s schedule. But in that issue, you found that the requirements 

just expanded. Initially, I think the contractor had expectations to 

do a few things, but over time more and more things were added 

to their areas of services to be provided. 

But in terms of undefinitized contract actions, I could look at 

that for you, but I do not recall that being an issue, say, such as 

what work we might have done in Iraq where you saw that happening a lot. 

Senator MCCASKILL. Right. 

Ms. Duke, are there more contractors working at DHS now or at 

this time last year? 

Ms. DUKE. I do not have information about the specific number 

of contractor employees, but in terms of percentage of dollars, there 

are slightly more in our current 2007 numbers than were in 2006. 

Senator MCCASKILL. Well, that is what I am really worried 

about. Because I think that we had a great excuse to take a short 

cut, because you all were stood up as a new Department and everyone understood the need for urgency and quick movement and everyone understood that you did not have the people on staff, a Federal employee workforce was not available for some of these functions. 

But the problem is that was at the beginning. Well, we are not 

at the beginning anymore, and it seems to me, what I have looked 

at, it just keeps growing, that there is absolutely no attempt, particularly in the area of overseeing the overseers. You have a number of contractors that have oversight responsibility, and the ones 

that bother me are the contractors that are overseeing companies 

that they work for. So it is incestuous. 

You have Booz Allen Hamilton who works for Boeing, who is now 

overseeing Boeing on the Secure Borders Initiative (SBInet). And 

when you have overseers that are supposed to be providing the government assurances that the work is being done, and the people 

they are checking on are also the people they work for, that is not 

a good business practice. I mean, that is an audit finding, is what 

that is. 

Can you speak to this phenomenon that you have where you are 

hiring people to perform the oversight function and they are overseeing people that they need in business relationships? 

Ms. DUKE. Well, I think the core issue, again, is keeping inherently governmental the true oversight in Federal employees. That 

is clear and that is the way we have to go. 

In terms of some of the measures we have taken, for instance, 

in our EAGLE contract, which is our big DHS IT contract that we 

expect to probably have about $6 billion worth of work a year anticipated, we have a separate group, and if you are going to be 

20 

doing independent verification and validation, meaning giving a 

third-party objective look, if you are in that category of EAGLE, 

you cannot bid on any actual work performance. So that is making 

a clear line. It is not leaving potential organizational conflicts of interest up to individual legal interpretations. It is saying if you are 

doing this, you are not doing performance. 

In the specific area of the SBInet, I did look into that because 

it was brought to my attention, and from a purely legal standpoint, 

Booz Allen is not overseeing. They are supporting the contract office. But I do understand, Senator, the issue that you bring in 

terms of appearance to not only our oversight but to the American 

people, and that is something we are looking at. 

So I really think what we have to do is we have to go program 

by program—I do not think there is a ratio. I do not think it is one 

in four. But we have to program by program look at the risk and 

make sure we have the right number with the right skills of government people dedicated to overseeing these contracts and manage them. 

Senator MCCASKILL. Well, the trend needs to go the other way 

than the way it is going, and I just want to close. I have some questions I want to ask on the record that I will have to submit, but 

I want some response on the DHS data breaches and the problem 

that is a very large contract. And I am concerned about these DHS 

data breaches, particularly because of the Chinese connection. 

But as my time is slipping away, I want to mention a comment 

from the DHS officials about this issue of the use of contractors. 

And one of the things is tightening acquisition training and requirements on contractors. The DHS spokesman said that part 

would be very difficult to achieve. Now, let’s think about that— 

tightening acquisition training and requirements on contractors. 

There should be no uncertainty about our appreciation to be a good 

steward of taxpayer dollars, but this objective will be very difficult 

to achieve, and it is far too early to place a progress or a timeline 

on completion. 

Acquisition training and requirements on contractors, that is 

such a difficult goal that we cannot even talk about when we might 

be able to get it done? I think that is what makes the taxpayers 

shake their head and kind of go, ‘‘Huh?’’ How can we not accept 

that tightening requirements on contractors and acquisition training? I would like the Department to take another run at that as 

to what steps they are taking and can take immediately. I mean, 

we are not talking about completely changing out your workforce. 

We are talking about a core competency of government. And the 

idea that we cannot even put a timeline on completing it—when I 

read that in the paper this morning, I kind of went, well, that is 

a problem. 

So I would like someone to take another look at whether or not 

we cannot tighten acquisition training and requirements on contractors at some time without saying we have no idea when we 

would be able to do that. Thank you. 

Chairman LIEBERMAN. Thanks, Senator McCaskill. 

Mr. Hutton, let me go to one of the examples that we cite just 

to elucidate our discussion with a little detail. I am speaking of the 

$42.4 million task order to support the DHS Information Analysis 

21 

and Infrastructure Protection Directorate. The order included 58 

tasks for the contractor to perform and support for over 15 program 

offices and 10 separate Directorate-wide administrative efforts. It 

was big. And as I indicated in my opening statement, there was 

only one DHS employee to serve as a technical representative to 

provide oversight. 

So let me ask you to step back and tell the Committee what in 

that case, in the best of all professional worlds, should DHS have 

done differently. 

Mr. HUTTON. OK. That is a great question because the way I 

look at it, first of all—we have all been talking that there are times 

when there may be no way to meet an urgent mission need with 

existing resources, maybe even across the enterprise, and a decision is to go with a contractor. 

At that point, though, as part of the acquisition planning process, 

I think one would want to start thinking about, OK, what specifically do we need this contractor to do? What types of activities? 

How do those activities translate to types of services that closely 

support inherently governmental? 

If they do, what kind of oversight do we need, what kind of expertise do we need to ensure that the contractor is not performing 

inappropriate activities and that the government is able to maintain their independence and their decisionmaking? 

I think, Senator McCaskill and Senator Collins, you mentioned 

as well about urgent and compelling and the nature of that. I 

would argue that if that is the justification, at that point you probably already need to be starting to think ahead. What are you 

going to do? Because the initial contract will not go on forever. And 

yet I think you need to start thinking about where do we want to 

go with this? Do we want to continue to use a contractor? If we do 

and we feel we have to, then what kind of process are we going to 

put in place to make sure that we have a competition because competition is a bedrock, I think, ultimately to get the best possible 

service. 

I would just say that, to me, a lot of it is the front-end acquisition planning. 

Chairman LIEBERMAN. Would you say that just self-evidently it 

was too big a contract? Or might there have been justification for 

having an umbrella contract that large? 

Mr. HUTTON. Well, Senator, it is a hard thing because, as I mentioned earlier, it appeared that the types of activities that the contractor undertook kind of evolved over time. And so that was not 

an intended outcome, I do not believe, at the outset. That again, 

I believe, takes you back to more strategically where do we want 

to go with a contractor for providing these types of services. 

Chairman LIEBERMAN. How about the oversight that should have 

been there from the Department in the best of all worlds? Let us 

assume that the contract was executed as it was. Presumably, one 

employee was not enough. 

Mr. HUTTON. No, sir, and this is an issue that is just across government. Mr. Walker has been up here talking about systemic acquisition issues. 

Chairman LIEBERMAN. Right. 

22 

Mr. HUTTON. And the policies require, what expertise do we 

need? If you assess the risk and you think about the vulnerabilities 

to the government decisionmaking, that is when you start thinking, 

what is the expertise of folks we need to ensure that the contractor 

is performing as required and that we are protecting the government’s interests? It may be several people. It may be six people. 

But you have to go through that calculus, that thought process. 

Chairman LIEBERMAN. Let me ask you to speak for just a moment or two in response to the general questions that I asked the 

two other witnesses in the first round. You are the GAO expert 

here. Why is there so much more contracting for services now than 

before? Is there too much? And if so, why? 

Mr. HUTTON. To say whether it is too much, we do not really 

have criteria for that. You would have to look at it on a case-bycase basis. But I do point out, Senator, that GAO has done some 

work looking at service contracting in a broad sense. And in that 

report we talked about the need to look at it from a strategic level, 

the enterprise-wide level, as well as the transactional level. And I 

think a lot of the things that we are talking about today were more 

at the transactional level, individual decisionmaking on a particular need, how do you meet that requirement. 

But when you loop back up to the strategic level, you need to 

have certain processes. You really need to know what you are buying, what kind of services are you buying, what are the contractors 

doing, and you have got to start thinking about where do I want 

to end up 5, 10 years from now. Do I want to have these types of 

services provided by contractors, or do I want to have a different 

mix? And how do I get there? 

Chairman LIEBERMAN. Is it fair to assume that you agree with 

what Mr. Schooner said about the urgent need to improve and expand the Federal Government’s acquisition workforce? 

Mr. HUTTON. That is an issue that the SARA panel brought up. 

As you mentioned yourself, we are looking at it for DHS. I do not 

have any information that would be able to make that generalization, but I do point out there are even fundamental issues as to 

what do we mean by acquisition officials. There are different definitions out there. So how do you get a handle on that across all the 

different government agencies? And I think you would find it is 

probably a case-by-case situation. There may be some agencies that 

will not cross the line and use a contractor for a certain type of acquisition support, while others may. And I think that is where, 

again, the agency focus on what they are buying with these services and do they want to have the contractor perform certain ones 

or not. 

Chairman LIEBERMAN. Generally, do you reach a judgment on 

the question of whether we save money when we contract out professional management services as opposed to spending more money 

than we would if the Federal employees did it? 

Mr. HUTTON. That would be a hard generalization to make because, again, it is just case by case. 

Chairman LIEBERMAN. OK. My time is up in this round. Senator 

Collins. 

Senator COLLINS. Thank you. 

23 

Professor, you raised an interesting point, which I am going to 

ask Mr. Hutton about shortly, about whether there are shortages 

not just in the procurement workforce, which I think is widely accepted as being at risk right now, but generally across the Federal 

Government causing us to rely on private security firms in Iraq, to 

use your example, but also raising questions about inherently governmental functions being contracted out. 

Based on what you have seen, if we were to strictly enforce the 

inherently governmental requirement, would we see a massive expansion in the Federal workforce? Is it even possible to do that? 

Mr. SCHOONER. Let me take that on in two parts. 

First, you would have to experience a massive increase in the 

size of government if we are only doing government personnel head 

count, or you would have to restrain the ambition and the commitments of the Federal Government. You cannot really do both. 

I find it remarkable—and, again, this has been a bipartisan 

move. The public is very enamored with the concept of small government, and it is one of the reasons why I think Paul Light’s work 

on shadow government is so important. It has been consistently 

represented in the annual budgets that the government is small, 

the line I always like, ‘‘the smallest administration since the Kennedy administration.’’ But we all know that government’s reach is 

expanding, the amount of expenditure is expanding, the tasks that 

government takes on, the services that it hopes to provide for the 

public. Government has grown, but we have artificially constrained 

the size of the government. Maybe today there is no more example 

of how acute this problem is than the troop strengths we have 

placed on the military, and it has a direct result being that we 

have more contractors supporting the military in Iraq right now 

than we have members of the military and, more specifically, we 

have an extremely disconcerting number of arms-bearing contractors in the operational theater that do not necessarily work for the 

government, do not necessarily speak the same language, and, 

frankly, do not like each other. And that has to concern you not 

only if you are a member of the public but if you have any military 

experience whatsoever. 

Senator COLLINS. Mr. Hutton, based on the work that you have 

done generally, are agencies and departments essentially winking 

at the requirement that they are not supposed to contract out inherently governmental functions? 

Mr. HUTTON. We do not have any indication, even in our drill 

downs. To be able to actually demonstrate that a contractor is performing an inherently governmental function oftentimes means 

that you have to show that the contractor actually made the decision and that the government really did not have any knowledge, 

did not have any understanding of the issues, and basically rubberstamped. That is a very hard thing to do. 

To say that there is perhaps a winking at it, we did not get any 

indication of that case, but we do have serious concerns because, 

as we have all been talking here, there are more and more service 

contracts in government and they are performing many more services than they may have done in the past, perhaps for some of the 

reasons that Mr. Schooner mentions. But the key is, though, is this 

just happening or is it a managed outcome. I think it is just hapVerDate Aug 31 2005 09:49 Oct 14, 2008 Jkt 038851 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 P:\DOCS\38851.TXT SAFFAIRS PsN: PAT
24 

pening. And I think through some of the work that we have done 

in the service contracting more broadly, where we are advocating 

looking at it from a strategic as well as a transactional standpoint, 

is one vehicle and one way to help agencies get a better handle on 

what it is that they are actually requiring and what is the best way 

to fill that need. 

Senator COLLINS. Professor, I want to go back to the issue of the 

enormous noncompetitive contracts that were awarded in the wake 

of Hurricane Katrina. Do you think it is possible for DHS to plan 

for the unexpected—in other words, to have on-the-shelf contracts 

that would be pre-negotiated, that if a storm hits, DHS could take 

those contracts, fill in the terms, make them specific? Is there a 

way around awarding huge noncompetitive contracts every time a 

disaster strikes? It seems like there ought to be. Even if you cannot 

define precisely where the storm is going to hit or how much assistance is going to be needed, isn’t there a way to prepare contracts 

in advance? 

Mr. SCHOONER. I think the short answer is it is unequivocally 

feasible to create contingency contracts for almost any conceivable 

or even the inconceivable contingency. So you can plan for things. 

You can have a contractor in reserve ready to provide whatever it 

is you need—water, body bags, portable housing. 

But I think that the important thing to keep in mind is once the 

realm of what is feasible grows and you begin planning for contingencies past a certain point, the risk you run is that by pre-purchasing surge capacity, you are going to end up paying a very high 

premium for that. And, again, we get into some extremely complex 

economic arguments as to how many supplies need to be pre-positioned, what the capacity needs to be on hold, and what you have 

available because that costs the private sector money. And if we 

want it, we have to pay for it. 

Senator COLLINS. Ms. Duke, do you have any comments on this 

issue? 

Ms. DUKE. I think it is not only possible, but it is necessary. And 

we have done a lot of work with FEMA since Hurricane Katrina 

in having pre-positioned contracts. 

The pre-positioned contracts or the in-place contracts are often 

national and large. I do think it is important to, as soon as possible, move to local contracts under the Stafford Act to revitalize 

the economy. But I do think that is important, and we have done 

a lot of work in that area. 

I also think the people issue and knowing how to deal with contingency operations—I know your proposed bill has an issue in it 

about contingency contracting officers, and we started that under 

the Office of Federal Procurement Policy Working Group that I cochair. I think that is important to have the people that know how 

to use these pre-positioned instruments. 

Senator COLLINS. Thank you. I think having, as our bill proposes, a contingency corps of contracting officers who can be 

brought together from different agencies to help in an emergency 

would greatly increase the quality of contracts and allow for this 

surge approach. So I appreciate your comments on that as well. 

Thank you, Mr. Chairman. 

25 

Chairman LIEBERMAN. Thanks, Senator Collins. This hearing is 

not about the Blackwater situation or private security contractors, 

but while I have this expertise in front of the Committee, I do want 

to ask a couple of questions that will be immediately helpful, but 

also will guide us as to whether there is a constructive role this 

Committee can play in oversight, investigation, etc. 

Professor Schooner, let me start with you. You said, generally 

speaking, that you thought with regard to procurement that current laws were adequate, but their implementation was not, but 

that you did believe, if I heard you correctly, that some of the laws 

in the area of the government’s use of private security contractors 

are insufficient. And I wanted to ask you to elaborate on that, if 

you would, and indicate whether you have specific areas of concern 

that you believe the Committee might constructively assess. 

Mr. SCHOONER. The short answer is yes, and if you will indulge 

me for just a moment, let me begin first with the legal regime, 

which is, at best, confusing and, at worst, inadequate. 

Chairman LIEBERMAN. By legal regime here, what do you mean? 

Mr. SCHOONER. I am including the fundamental laws that we 

know, for example, the Uniform Code of Military Justice (UCMJ); 

Military Extraterritorial Jurisdiction Act (MEJA); the conventional 

approach that we take on these matters, which is a Status of 

Forces Agreement (SOFA); and then, of course, we also have the 

General Order 17 in Iraq, which complicates this all the more. But 

the bottom line is many of our arms-bearing contractors in Iraq fall 

into a vacuum, and to the extent that Congress has now repeatedly 

attempted to fix the legislative vacuum, we do not have the precedent and we surely do not have the regulatory structure in place 

to ensure that those legal regimes are going to work. 

A very important issue here is that there is a tremendous 

amount of expertise in terms of dealing with contractors in varying 

industries, but the government did not have that expertise in place 

at September 11, 2001. No one planned for the dramatic increased 

reliance on arms-bearing contractors. And we simply do not have 

sufficiently sophisticated regulations or policy in place for them. 

That process has begun, but, for example, the private security industry has been screaming for years, I think appropriately, begging 

to be regulated, begging to have quality standards in place. We 

should have an ISO that specifically indicates what we expect the 

credentials and qualifications of private military to be. Now, once 

we set those standards, we may be disappointed to find that many 

of the contractors we are relying on do not meet them. 

Then the last point on this—and I think this is the inherently 

obvious part of it—is that to the extent that we are using private 

military, all of the other acquisition workforce problems come to 

bear. We did not have the time to write the best possible contracts, 

and, therefore, the government has not always clearly communicated to the contractors what is particularly important and how 

they want their behavior to be constrained. And then the next part 

of that is we do not have sufficient people in place, in theater, to 

manage those contractors effectively once the contracts have been 

awarded. 

Chairman LIEBERMAN. Let me ask you the prior question in a 

way, the baseline question, and I know you had experience in the 

26 

military as well as your extensive procurement experience. And let 

me ask it with an edge to it. Isn’t it an inherently governmental 

responsibility to provide arms-bearing security personnel in a war 

zone? In other words, is it appropriate to contract out such services? 

Mr. SCHOONER. It is a little bit more complicated, but let me give 

you what I believe the easiest answer first. I am very comfortable 

with a doctrine that says that government shall have a monopoly 

over the use of force. But as we all know from our experiences, 

there is any number of static security functions that contractors 

can do. Whether you want to call people rent-a-cops or the kind of 

people that provide security at the gates to military installations, 

that is all fine. But we used to be quite confident or comfortable 

with a doctrine that said private contractors do not engage the 

enemy in combat. And that is the line that is blurred. And where 

we see it as an extremely complicated issue is when we have a 

fuzzy battle area, where it is not so clear where the lines are 

drawn. 

Put yourself in the shoes of the military commander on the 

ground in Iraq, knowing that there are tens of thousands of people 

who are theoretically on our side, bearing weapons, who, first, do 

not necessarily work for the military commanders and do not even 

necessarily work for the military commanders’ agencies or do not 

even work for the government because the largest population of 

arms-bearing contractors in Iraq are contractors that work for 

other contractors and do not even have a contract with the government. 

Chairman LIEBERMAN. Right. In other words, the contractor providing food, for instance, or servicing of vehicles will retain private 

security guards to protect his personnel. 

Mr. SCHOONER. Absolutely. 

Chairman LIEBERMAN. There is a story in the papers today, attributed to Secretary Gates, suggesting that he may have raised 

the question of whether all the private security personnel in military theater should come under Department of Defense control or 

oversight. What do you think about that? 

Mr. SCHOONER. I think that it is a solution. I do not think that 

it is a satisfactory solution, and I am not convinced it can be implemented in the short term. Let me just give you a simple explanation on that. 

I am very comfortable that anyone in uniform over there would 

much rather have all of the contractors under the thumb of the 

military because, again, it empowers the military commander. 

Now put yourself in the shoes of the State Department. One of 

the reasons that Blackwater is so exposed and has so raised the ire 

of the Iraqi people is they are not providing static security. They 

are guarding the most attractive targets that we have placed in the 

most dense urban environment, which is also the hottest area on 

the ground there. I am quite confident—— 

Chairman LIEBERMAN. Right, our State Department personnel 

and visitors, for example. 

Mr. SCHOONER. Sure, and the Ambassador and folks like yourselves. But I am quite confident the State Department does not 

want to be told by the military when they can and cannot move the 

27 

Ambassador, where they can hold meetings, and the like. It is perfectly reasonable for the military to say, ‘‘If we keep the Ambassador inside the protected area, he or she will not be harmed.’’ 

Well, that is not the way the State Department operates. 

Chairman LIEBERMAN. I am just going to take a quick moment 

on this. I am interested, Mr. Hutton, based on your extensive work 

experience in contracting oversight, whether you have anything to 

add to this discussion from a GAO historical perspective of the 

oversight of private security contractors in war zones. 

Mr. HUTTON. Well, GAO has done work on oversight of contractors 10 years ago, back in the Balkans, but also more recently in 

Iraq, but Iraq is where you really see the heavy use of private security contractors. But in doing that work, we pointed out back in 

2005 that there were obvious coordination problems between the 

military and the private security contractors, particularly in the 

early stages where a lot of those contractors were working more as 

it relates to the reconstruction and the civilian side of things. And 

so coordination was a big issue. 

Also, we looked at the fact that when units were going over, they 

were not getting insight and training and understanding or guidance as to how you work with the PSC, and that was pointed out 

as a particular issue. 

We are looking at private security contractors right now. We 

have some work just getting underway. And, one, we are looking 

at are the PSCs properly trained and vetted. We are looking at 

what are the processes in place to ensure that there is accountability over the actions of the employees. And we are looking at 

some cost issues as well. But it is a very interesting question. 

Chairman LIEBERMAN. I appreciate it, and Senator Collins and 

I are going to be talking about whether there is a constructive role 

for a hearing or some oversight on this specific question of private 

sector security contractors in war zones. 

Senator Collins, do you have other questions or final comments? 

Senator COLLINS. No. Thank you. 

Chairman LIEBERMAN. I want to thank the witnesses. I want to 

thank you, Mr. Hutton, for another excellent report. 

Ms. Duke, it is obvious that this is a tough report and it is a critical report about DHS. You have the benefit of coming to this Chief 

Procurement Officer position relatively recently. Senator Collins 

and I never want to play a ‘‘gotcha’’ game here. We really believe 

in the Department, and we want to work together with the personnel of the Department to make it work. 

This report is troublesome, and I hope you will respond to it with 

the attitude that I saw here today, which is that you have some 

work to do as the Chief Procurement Officer to make this situation 

of contracting at the Department of Homeland Security a lot better, 

more competitive, and with more oversight than exists today. 

Thank you very much. 

The hearing record will remain open for 15 days for additional 

questions or comments from the witnesses. Again, I thank you. 

The hearing is adjourned. 

[Whereupon, at 12:05 p.m., the Committee was adjourned.] 

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