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38–663 2008

[H.A.S.C. No. 110–91]

ACCOUNTABILITY DURING CONTINGENCY

OPERATIONS: PREVENTING AND FIGHTING CORRUPTION IN CONTRACTING

AND ESTABLISHING AND MAINTAINING

APPROPRIATE CONTROLS ON MATERIEL

COMMITTEE ON ARMED SERVICES

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

HEARING HELD

SEPTEMBER 20, 2007

(II)

HOUSE COMMITTEE ON ARMED SERVICES

ONE HUNDRED TENTH CONGRESS

IKE SKELTON, Missouri

JOHN SPRATT, South Carolina

SOLOMON P. ORTIZ, Texas

GENE TAYLOR, Mississippi

NEIL ABERCROMBIE, Hawaii

SILVESTRE REYES, Texas

VIC SNYDER, Arkansas

ADAM SMITH, Washington

LORETTA SANCHEZ, California

MIKE MCINTYRE, North Carolina

ELLEN O. TAUSCHER, California

ROBERT A. BRADY, Pennsylvania

ROBERT ANDREWS, New Jersey

SUSAN A. DAVIS, California

RICK LARSEN, Washington

JIM COOPER, Tennessee

JIM MARSHALL, Georgia

MADELEINE Z. BORDALLO, Guam

MARK UDALL, Colorado

DAN BOREN, Oklahoma

BRAD ELLSWORTH, Indiana

NANCY BOYDA, Kansas

PATRICK J. MURPHY, Pennsylvania

HANK JOHNSON, Georgia

CAROL SHEA-PORTER, New Hampshire

JOE COURTNEY, Connecticut

DAVID LOEBSACK, Iowa

KIRSTEN GILLIBRAND, New York

JOE SESTAK, Pennsylvania

GABRIELLE GIFFORDS, Arizona

ELIJAH E. CUMMINGS, Maryland

KENDRICK B. MEEK, Florida

KATHY CASTOR, Florida

DUNCAN HUNTER, California

JIM SAXTON, New Jersey

JOHN M. MCHUGH, New York

TERRY EVERETT, Alabama

ROSCOE G. BARTLETT, Maryland

HOWARD P. ‘‘BUCK’’ MCKEON, California

MAC THORNBERRY, Texas

WALTER B. JONES, North Carolina

ROBIN HAYES, North Carolina

JO ANN DAVIS, Virginia

W. TODD AKIN, Missouri

J. RANDY FORBES, Virginia

JEFF MILLER, Florida

JOE WILSON, South Carolina

FRANK A. LOBIONDO, New Jersey

TOM COLE, Oklahoma

ROB BISHOP, Utah

MICHAEL TURNER, Ohio

JOHN KLINE, Minnesota

CANDICE S. MILLER, Michigan

PHIL GINGREY, Georgia

MIKE ROGERS, Alabama

TRENT FRANKS, Arizona

BILL SHUSTER, Pennsylvania

THELMA DRAKE, Virginia

CATHY MCMORRIS RODGERS, Washington

K. MICHAEL CONAWAY, Texas

GEOFF DAVIS, Kentucky

ERIN C. CONATON, Staff Director

ANDREW HUNTER, Professional Staff Member

JENNESS SIMLER, Professional Staff Member

MARGEE MECKSTROTH, Staff Assistant

(III)

C O N T E N T S

CHRONOLOGICAL LIST OF HEARINGS

2007

Page

HEARING:

Thursday, September 20, 2007, Accountability During Contingency Operations: Preventing and Fighting Corruption in Contracting and Establishing

and Maintaining Appropriate Controls on Materiel ......................................... 1

APPENDIX:

Thursday, September 20, 2007 ............................................................................... 39

THURSDAY, SEPTEMBER 20, 2007

ACCOUNTABILITY DURING CONTINGENCY OPERATIONS: PREVENTING AND FIGHTING CORRUPTION IN CONTRACTING AND ESTABLISHING AND MAINTAINING APPROPRIATE CONTROLS ON MATERIEL

STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Hunter, Hon. Duncan, a Representative from California, Ranking Member,

Committee on Armed Services ............................................................................ 2

Skelton, Hon. Ike, a Representative from Missouri, Chairman, Committee

on Armed Services ................................................................................................ 1

WITNESSES

Assad, Shay D., Director, Defense Procurement and Acquisition Policy, Office

of the Under Secretary of Defense (Acquisition & Technology), Department

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

Condon, Kathryn A., Executive Deputy to the Commanding General, U.S.

Army Materiel Command .................................................................................... 11

Gimble, Thomas F., Principal Deputy Inspector General, Department of Defense ...................................................................................................................... 5

Thompson, Lt. Gen. N. Ross, III, Military Deputy to the Assistant Secretary

of the Army for Acquisition, Logistics and Technology, U.S. Army ................. 9

Velz, Peter M., Foreign Affairs Specialist for Iraq, Office of the Deputy Assistant Secretary of Defense for Middle East, Office of the Secretary of Defense 12

APPENDIX

PREPARED STATEMENTS:

Assad, Shay D. .................................................................................................. 74

Gimble, Thomas F. ........................................................................................... 43

Thompson, Lt. Gen. N. Ross, III, joint with Kathryn A. Condon ................. 83

Velz, Peter M. ................................................................................................... 93

DOCUMENTS SUBMITTED FOR THE RECORD:

[There were no Documents submitted.]

QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD:

[There were no Questions submitted.]

(1)

ACCOUNTABILITY DURING CONTINGENCY OPERATIONS:

PREVENTING AND FIGHTING CORRUPTION IN CONTRACTING AND ESTABLISHING AND MAINTAINING APPROPRIATE CONTROLS ON MATERIEL

HOUSE OF REPRESENTATIVES,

COMMITTEE ON ARMED SERVICES,

Washington, DC, Thursday, September 20, 2007.

The committee met, pursuant to call, at 11:38 a.m., in room

2118, Rayburn House Office Building, Hon. Ike Skelton (chairman

of the committee) presiding.

OPENING STATEMENT OF HON. IKE SKELTON, A REPRESENTATIVE FROM MISSOURI, CHAIRMAN, COMMITTEE ON ARMED

SERVICES

The CHAIRMAN. Ladies and gentlemen, let me welcome you to today’s hearing.

Let me mention to the members and the staff—please remind

members as they come in that, because of the votes, we will have

a short grace period on who is here at the time of the gavel, but

we do want to proceed with this hearing, and I trust the staff will

tell people that.

We had a classified briefing a short while ago involving this subject matter, and I remind the members that it is classified and

there is also sensitive material that may not be raised correctly in

this hearing.

This morning, the committee received that classified briefing,

and we will proceed with the open hearing now. There are dedicated men and women working for the Department of Defense overseas, and we know they face enormous pressures to operate in very

challenging conditions.

The majority of them, of course, do ethical and very proper work.

Taken as a whole, they are absolutely the finest group of men and

women you will ever see.

There will be no excuse, however, for those who engage in outright fraud or accept bribes large or small in the performance of

their duties.

It is also unacceptable for serious losses of accountability to occur

in the tracking and control of military weapons provided to foreign

forces, as losses can lead to serious embarrassment for our country.

As has been reported in the press, the Department of Defense Inspector General and the Army have uncovered a cluster of fraud

and corruption problems arising out of a series of support contracts, many of which were let from an office in Kuwait.

2

As of August 28th, the Army reported that it had 76 cases of

fraud and corruption under investigation, 20 pending indictments

and had uncovered over $15 million in bribes.

The people involved range from civilians and enlisted military

personnel to relatively senior officers. These problems were so severe that they represent a culture of corruption, at least in one location.

General Thompson, I hope that you will address that concern. I

am extremely disappointed to learn that so many individuals violated their integrity and undermined the oaths that they made.

Through the course of this hearing, the committee hopes to learn

what factors may have contributed to an atmosphere in which so

many problems did occur.

The Special Inspector General for Iraq Reconstruction and General Accountability Office have also reported on serious losses of accountability for weapons provided to Iraqi Security Forces (ISF).

These accountability problems concern us both because they

could undermine our vital efforts to train and to equip the Iraqi Security Forces, because they can lead to diversion of materiel in

ways that threaten our interest, but also because the Department

of Defense is seeking significantly expanded authority to train and

equip foreign security.

We have before us five witnesses, all excellent witnesses: Principal Deputy Inspector General of the Department of Defense

Thomas Gimble.

Shay Assad, the Director of Defense Procurement Acquisition

Policy and Strategic Sourcing.

Lieutenant General Ross Thompson, Military Deputy to the Assistant Secretary of the Army for Acquisition, Logistics, and Technology.

And a co-chair in the Army task force investigating these problems, Kathryn Condon, Executive Deputy to the Commanding General of Army Materiel Command.

And last, we have Mr. Peter Velz, Foreign Affairs Specialist for

Iraq, from the Office of Assistant Secretary of Defense for the Middle East.

And before we hear from these witnesses, who I know will give

us thorough information—and if we venture into a classified area,

I take it that the witnesses will say something to that effect and

that the question can be answered to that individual or to our committee as a whole on a classified basis.

Duncan Hunter, Ranking Member.

STATEMENT OF HON. DUNCAN HUNTER, A REPRESENTATIVE

FROM CALIFORNIA, RANKING MEMBER, COMMITTEE ON

ARMED SERVICES

Mr. HUNTER. Thank you, Mr. Chairman. And thanks for holding

this hearing.

Good morning to our witnesses. Ladies and gentlemen, thank you

for being with us. And we had a chance to have this classified hearing earlier that I think set the stage fairly effectively for this hearing.

And you know, one thing that strikes me is the depth of the

problem and the involvement of Americans who are bound by a

3

sense of duty and honor and integrity, or should be bound by a

sense of duty and honor and integrity, who apparently have been

part of this.

Today we are going to talk about two separate issues, and they

have been loosely linked by the media in the sense that the issues

were reported in the same series of articles.

The first issue is allegations that bribes were paid to Army contracting officials in order to get lucrative contracts steered toward

certain contractors.

The second issue is the lack of accountability, as reported by the

Government Accountability Office (GAO), for weapons procured by

the Department of Defense intended to equip the Iraqi Security

Forces.

And while I am clearly concerned about the allegations of bribery, and we went into that in some depth in the classified meeting,

especially among field grade officers—and I believe that such incidents set a terrible example for the Iraqis who we are now meant

to be mentoring—I am hopeful that the various investigations will

show that the number of bribery cases we are seeing is an aberration caused by bad choices made by people in a localized environment, rather than a pervasive culture of corruption.

I am also hopeful that we will hear today that the system did

work in catching these individuals, because there will always be individuals who make bad choices, and we expect to hear more about

the lessons that the Army has learned and the changes it will implement to make the system work more effectively.

More troubling are the implications of the reports that weapons

we have provided to the ISF may have fallen into the wrong hands.

I think we have got to be realistic enough to know that we can’t

maintain 100 percent control of property we provide to other nations’ security forces.

But if, in fact, there is a wholesale movement of weapons that

U.S. taxpayers have paid for into the hands of those who would do

us harm or further destabilize the region, we must make resolving

this problem one of our top priorities in theater.

General Kicklighter has promised us that this will be his number

one goal, to ensure that this is not happening.

My judgment is that these two distinct issues share a root cause,

which is a lack of experience and standardized procedures for planning the administrative side of contingency operations.

On one hand, we have a small contracting office ill-equipped to

handle the volume of work it received when operations in Iraq

began in earnest. As a result, the system was slower in catching

irregularities than it otherwise would have.

We have also inadvertently created an environment where those

with less experience and those who might be more easily tempted

to make self-serving decisions lack the support structure to enable

better decision-making, although I would say that at least the classified information that we have seen goes far beyond those descriptions.

Traditionally, this primary responsibility for equipping Iraqi Security Forces has been a State Department function supported by

the Defense Security Cooperation Agency. There are policies and

procedures in place for such foreign military assistance.

4

Yet in this case, the military entered uncharted waters. They

made organizational changes to facilitate the training and equipping of the ISF in order to secure transition to Iraq.

But the new organization didn’t have the accountability procedures in place to maintain adequate records of weapons and equipment that they transferred to these forces.

Again we see a situation where an organization was ill-equipped

to handle the administrative burden of contingency operations because it lacked the personnel and systems necessary to enable accountability.

And that takes me to something that this committee did three

years ago. Three years ago, Mr. Skelton and I put in a provision

in the 2006 National Defense Authorization Act, Section 813, in

which we required the secretary of defense to establish a contingency contracting corps.

And the idea was to have a robust contracting corps in theater

that was responsive to and under the command of the combatant

commander in theater, so that you didn’t have a disconnect of an

operational military which is out there trying to win the war on the

battlefield and a bureaucracy which is many thousands of miles

away in Washington, D.C.

Now, we put this together, and I want to quote what we put together in the law that we passed or the legislation that we passed

out of this committee.

We said, ‘‘This corps would be directed by a senior commissioned

officer with appropriate acquisition experience and qualifications

who, when deployed, would report directly to the combatant commander in an area of operations requiring contingency contracting

support. Training of the corps would take into account all relevant

laws, regulations and policies related to contingency contracting

and would be required even when the corps is not deployed.

‘‘The committee intends that the contingency contracting corps

maintain a sufficient level of readiness in peacetime to be able to

rapidly deploy to emerging contingency operations. The commander

of the contingency contracting corps should consider the development of a standardized contingency contracting handbook which

summarizes all relevant laws, directives and regulations related to

contingency contracting to assist the day-to-day operations of the

contingency contracting workforce.

‘‘Finally, the committee urges a contingency contracting corps

utilize an integrated contracting and financial management system

to ensure that contracting operations are not hindered by technological limitations that can be easily avoided through the use of

readily available systems.’’

Now, we put that in our markup in 2005, and if we had had that,

some of the problems that we have today might not have occurred.

Naturally, when we took this to the conference with the Senate,

the Senate, in their inimitable fashion, managed to water it down

to some degree, but nonetheless we came out of conference with a

direction to DOD that it was our policy that this contingency contracting corps be stood up and be utilized.

So one thing that I am interested in today is any information

that you have on this incipient operation that, as I understand you

5

have now stood up—or you have teams of contingency contracting

personnel.

And I understand there are not too many of them, but that you

have a few personnel now who are basically carrying out the directive that we put into law several years ago. So I would be interested in what we actually have done and have on the ground in

Iraq and how that is operating.

So thank you for being with us today.

And, Mr. Chairman, this is a sad day for the United States, especially coming out of this classified briefing, not because occurrences

like this aren’t present in every major military operation to some

degree, but that the size and scope and the number of folks who

have enormous responsibility to this country are involved has, I

think, made this a real tragedy for our country.

On the other hand, we have a military which is resilient and capable of recovering and has strong leadership and lots of people

who do have a high standard of honor and integrity.

And I think that if we will put this contingency contracting corps

in place, where we have a strong team that responds directly to the

war fighting commander in theater, we are going to be able to

avoid problems like this in the future.

So thank you, Mr. Chairman, for teeing up this hearing.

I thank our witnesses, and I look forward to their testimony.

The CHAIRMAN. Mr. Hunter, thank you very much.

This is a reminder to those of us that are interested in the history of procurement that my fellow Missourian Harry Truman had

his very own committee that looked at problems like this.

However, during the Second World War, weapons systems and

other materiel was not sent directly to the front. It went through,

as I understand it, various military depots here within our country,

and consequently Senator Truman’s committee did not have to go

outside the boundaries of our country as we are doing today, sadly.

Mr. Gimble, we are going to start with you, and I am not sure

the order to whom we should call. I assume Mr. Assad and General

Thompson would be next, but I will call on you first. And if you

have other suggestions, please make them to us.

Mr. Gimble.

STATEMENT OF THOMAS F. GIMBLE, PRINCIPAL DEPUTY

INSPECTOR GENERAL, DEPARTMENT OF DEFENSE

Mr. GIMBLE. Mr. Chairman, Ranking Member Hunter and members of the committee, thank you for the opportunity to appear before the committee today and testify on accountability issues during contingency operations and also to discuss the work of the Department of Defense (DOD) Inspector General (IG) in Southwest

Asia.

Specifically, I will discuss our ongoing assessment of the accountability of weapons, munitions and explosives, and overall contracting issues. To date, over $550 billion has been appropriated to the Department of Defense in support of our armed forces in Southwest Asia

and to the fight against terrorism. We have over 225 personnel

working on 29 audits and 90 investigations providing oversight on

matters such as accountability in contracting.

6

The DOD I.G. has been concerned about the accountability and

control of equipment provided to the security forces in Afghanistan

and Iraq since 2005.

More recently, the DOD Inspector General, Claude M.

Kicklighter, briefed Members of Congress and the Department of

Defense leadership on specific issues related to these concerns. As

a result, an interagency, interservice assessment team lead led by

the inspector general is on the ground in theater assessing current

conditions.

An objective of the munitions assessment team is to determine

whether there is adequate control and accountability over the munitions provided to the security forces and to whether the underlying contracting process also contains an appropriate level of control

and accountability.

In addition, the team is focused on reducing the risk of contract

fraud and corruption and will continue to investigate and refer

those who broke the law for prosecution.

The Government Accountability Office continues to designate

DOD contract management as a high-risk area. And since fiscal

year 2000, over 240 DOD I.G. reports have identified contracting

problems and recommended corrective actions.

These problems include contract administration, source selection

procedures, contract payments. Such problems are recurring and

continue to impact the effectiveness of U.S. forces forward deployed

in Operations Iraqi Freedom and Enduring Freedom.

As stated earlier, the DOD I.G. has 29 ongoing audit efforts to

address overall accountability of wartime expenditures.

This work has generated efforts to improve the collaboration between support organizations and forward deployed forces to help

standardize procedures in a wartime environment, such as procedures for the retention of accounting, disbursing, and property

records.

The DOD I.G. is also working to identify any systemic problems

and control weaknesses and to also determine the status of any

corrective actions that are in place.

Also, the DOD I.G. is summarizing 210 GAO, DOD I.G., Army

Audit Agency and Air Force Audit Agency audit reports and testimonies on accountability issues impacting support to operations in

Southwest Asia.

The Defense Criminal Investigative Service, or DCIS, is the

criminal investigative arm of the DOD Inspector General, and it

has been investigating DOD-related matters pertaining to the Iraqi

theater, to include Kuwait, since the start of the war.

As previously noted, the DOD I.G. has about 90 ongoing investigations related to the war effort, to include war profiteering, contract fraud, and contract corruption. Most of these investigations

are being conducted as part of a joint effort with other law enforcement organizations.

As an example, in January of 2004, an investigation was initiated on information from the Defense Contract Audit Agency concerning allegations of kickbacks and gratuities solicited and/or received by Kellogg Brown & Root (KBR) employees—also charges

that KBR was overcharging for food, meals, and fuel.

7

These criminal allegations continue to be examined, but some associated prosecutions have occurred and others are anticipated.

More recently, as a result of the magnitude of alleged criminal

activities in the Iraqi theater, a group of federal agencies has formalized a partnership to combine resources to investigate and prosecute cases of contract fraud and public corruption that are related

to the U.S. Government expenditures for Iraqi reconstruction.

The participating agencies include: on the International Contract

Corruption Task Force are the DOD I.G., Army Criminal Investigation Division (CID), Department of State Inspector General, the

FBI, the Special Inspector General for Iraq Reconstruction, and the

Agency for International Development, the Office of Inspector General.

In closing, the DOD Inspector General assessment on accountability and control of weapons, ammunition, and explosives provided to the Afghan and Iraq security forces is one of our highest

priorities.

If we find shortfalls, we will make the appropriate recommendations and work with commanders on the ground and the senior

leadership in the Department to find solutions.

We will continue to work on contracting issues to tighten up controls and strengthen processes and also to continue work with U.S.

law enforcement agencies to identify potential criminal activity for

investigation and prosecution.

We will also attempt to apply the lessons learned and work with

the Department and Congress to fix the systemic issues. And I look

forward to your questions.

[The prepared statement of Mr. Gimble can be found in the Appendix on page 43.]

The CHAIRMAN. Mr. Gimble, thank you.

Mr. Assad.

STATEMENT OF SHAY D. ASSAD, DIRECTOR, DEFENSE PROCUREMENT AND ACQUISITION POLICY, OFFICE OF THE

UNDER SECRETARY OF DEFENSE (ACQUISITION & TECHNOLOGY), DEPARTMENT OF DEFENSE

Mr. ASSAD. Thank you, Mr. Chairman, Representative Hunter,

distinguished members of the House Armed Services Committee.

Thank you for the opportunity to discuss the Department of Defense’s initiatives in the area of contracting integrity in contracting

in a combat environment in general.

Contracting integrity is a topic that we always consider to be of

key importance within the Department. Integrity in all endeavors,

including our contracting function, is and must remain a core value

of the Department of Defense.

My name is Shay Assad, and I serve as the director of defense

procurement and acquisition policy and strategic sourcing for the

Department.

Before assuming this position in April of 2006, I served as a senior contracting official with the Marine Corps for a period of two

years.

Prior to government service, I spent 25 years in industry, serving

in a number of operational and contract management positions, primarily with the Raytheon Company.

8

My experience includes senior vice president of contracts. I was

the president and chief operating officer of one of Raytheon’s many

subsidiaries, and finally, as an executive vice president of the company and chairman and chief executive of one of its major subsidiaries.

I am a graduate of the United States Naval Academy, and I

started my career as an officer in the United States Navy, serving

two tours on Navy destroyers, and finally as a Navy procurement

officer at the Naval Sea Systems Command.

In recent years, the Department of Defense has increasingly relied on supplies and services provided by the private sector under

contract. In fiscal year 2006 alone, DOD obligated over $300 billion

on contracts for goods and services, becoming the largest purchasing organization in the world.

Given the magnitude of the dollars involved, it is essential that

DOD acquisitions be handled efficiently, effectively, and with integrity. In other words, DOD needs to ensure that it buys the right

things the right way.

In your invitation to appear before this committee, you stated

that you were interested in hearing what DOD is doing to prevent

and fight corruption in contracting. The Department has and is

taking several steps in this area. Let me give you some examples.

On February 16th, 2007, the Department established a panel on

contracting integrity in accordance with the requirements of Section 813 of the 2007 National Defense Authorization Act.

Although the statute provides a sunset date of 2009 for the

panel, we as a matter of policy will continue this panel indefinitely.

As required by Section 813, the panel is conducting a review of

the progress made by DOD to eliminate areas of vulnerability that

allow for fraud, waste and abuse to occur.

The under secretary established Dr. James Finley, the deputy

under secretary of defense, as the panel chairman, and I serve as

the executive director of the panel.

To date, there have been eight subcommittees established, five

which address five areas of fraud and vulnerability that the GAO

report addressed.

One addresses contracting structure, and I mean the organizational structures under which we do contracting. We have a seventh panel that addresses what legislative action we believe is necessary to assist us in this regard.

And the eighth panel is on contracting integrity in a combat environment, and I have placed myself responsible for that subcommittee.

We are also doing work with the procurement fraud working

group. The Department established a DOD-wide procurement fraud

working group in January of 2005. The working group provides a

forum for acquisition professionals to address contracting

vulnerabilities.

This working group of over 300 men and women within the Department in various I.G. and fraud activities meets monthly and

attends the Department of Justice Procurement Fraud Task Force

meetings.

We have updated acquisition regulations relating to ethics. The

Department has initiated several changes to the Federal AcquisiVerDate 22-MAR-2001 13:44 Dec 02, 2008 Jkt 038663 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 C:\DOCS\110-91\263000.000 HAS2 PsN: HAS2
9

tion Regulation (FAR) to update the regulations pertaining to ethics in contracting.

The Defense Acquisition Regulations Council, in concert with the

Civilian Agency Acquisition Council, proposed an amendment to

the FAR to address a contractor code of ethics and business conduct.

DOD will continue to work with the Office of Federal Procurement Policy to recommend changes in laws, regulations and policy

that would serve to clarify or strengthen issues identified through

the work of the panel on contracting integrity.

We have also taken a serious look at our training. The DOD

Standards of Conduct Office has updated the mandatory annual

ethics training yearly to ensure that it is always current and that

it is relevant.

The latest revisions issued, this August, modify the curriculum

to focus beyond just rote understanding of law and regulations and

rules, but now provides interactive decision exercises so people can

make judgments about how to do contracting properly. We also provide an ongoing employees guide to the standards of conduct.

In closing, I would like to emphasize that the Department views

integrity in contracting as the most essential feature of our defense

procurement system. We are taking a number of actions to ensure

that we deal appropriately with vulnerability in our system to

waste, fraud, and abuse.

We fully understand the foundation of our ability to assure our

taxpayers that we are being good stewards of their money is to ensure that the Department conducts business with integrity to acquire the supplies and services necessary to meet the needs of our

war fighters.

And I stand ready to answer your questions, Mr. Chairman and

members of the committee, on this very important matter.

[The prepared statement of Mr. Assad can be found in the Appendix on page 74.]

The CHAIRMAN. Looks like General Thompson.

STATEMENT OF LT. GEN. N. ROSS THOMPSON, III, MILITARY

DEPUTY TO THE ASSISTANT SECRETARY OF THE ARMY FOR

ACQUISITION, LOGISTICS AND TECHNOLOGY, U.S. ARMY

General THOMPSON. Good afternoon, Chairman Skelton, Congressman Hunter and distinguished committee members. I want to

thank you for this opportunity to appear today before the committee.

And with me—and she will speak in just a minute—is Ms. Kathryn Condon, who is the Executive Deputy to the Commanding General at the Army Materiel Command, as indicated by Congressman

Skelton in his opening remarks.

We have a joint written statement that I respectfully request be

made part of the record for today’s hearing.

The CHAIRMAN. Without objection.

[The joint statement of General Thompson and Ms. Condon can

be found in the Appendix on page 83.]

General THOMPSON. As is normal procedure, the Army conducted

audits and investigations into the oversight, execution, and management of our contracting in the theater of operations.

10

While most of our military and civilian contracting personnel

performed well in extreme conditions, auditors and investigators

discovered cases of potential fraud in contracting operations, with

the worst cases originating in Kuwait.

The Army, in a comprehensive effort involving the Audit Agency,

the Criminal Investigation Command, the Army Materiel Command, the Sustainment Command underneath the Army Materiel

Command, Defense Contract Management Agency and Defense

Contract Audit Agency, acted decisively to correct those deficiencies.

Last February, then-Secretary of the Army Dr. Harvey asked my

boss, the assistant secretary of the Army for acquisition, logistics,

and technology, to assess contracting activities throughout Central

Command and to implement an action plan.

After a review of all the contract operations, the Army in April

of 2007 began implementing an action plan that reorganized the

Kuwait contracting office, installed new leadership, established a

joint logistics procurement support board together with the requiring activities, the operational commanders that that contracting office supports.

We increased the staffing level, deployed more senior contracting

professionals and attorneys to be part of the office in Kuwait, and

provided additional ethics training and assigned legal support.

To broaden the Army’s ongoing efforts, Secretary of the Army

Pete Geren recently announced a Special Commission on Army

Contracting to examine the big picture.

This commission is headed by Dr. Jacques Gansler and has distinguished military and civilian leaders that will fully examine theater acquisition and program management processes; review management controls to prevent fraud, waste, and abuse; assess legislative needs; and recommend changes in policies and procedures.

The internal Army contracting task force which Ms. Condon and

I co-chair will coordinate with and reinforce the work of the commission headed by Dr. Gansler.

Ms. Condon and I will look at contracting activities across the

Army. Part of our plan will be to increase both the scope and the

frequency of contracting operation reviews, which is part of the

routine examination of contracting activities.

We are also going to examine the size, the structure, and the

training of the Army’s military and civilian contracting workforce.

The Army acquisition workforce has declined in the last decade

while our workload has increased substantially, and this is probably one of the key things that is going to come out of the work

of both Dr. Gansler’s group and the Army internal task force, is

what is the proper size of the military and civilian contracting

workforce.

Mr. Chairman, weight or emphasis must continue to be placed on

the management and oversight of all types of service and construction contracts. These contracts now represent an ever-increasing

percentage of our overall contract dollars, surpassing even the dollars awarded for major weapons systems programs.

We look forward to working closely with the Special Commission

on Army Contracting headed by Dr. Gansler and all the other entities in support of the many initiatives ongoing in the Department

11

of Defense to improve contracting. Many of them were mentioned

today as part of the integrity panel talked about by Mr. Assad.

We also look forward to our continued positive work with this

committee and the Congress.

And for Congressman Hunter, a lot of the things that are in the

Section 813 law are things that are well under way, and I will be

happy to answer your questions and other members of the committee today about what we have done to put the specific procedures

in place to make sure that we do contingency contracting right.

We are committed to providing our war fighters the very best

equipment they deserve and are mindful of our obligation to be

good stewards of the taxpayers’ funds.

This concludes my opening remarks, Mr. Chairman. And with

your permission, Ms. Condon has a very brief statement. We look

forward to your questions.

The CHAIRMAN. General, thank you.

Ms. Condon.

STATEMENT OF KATHRYN A. CONDON, EXECUTIVE DEPUTY TO

THE COMMANDING GENERAL, U.S. ARMY MATERIAL COMMAND

Ms. CONDON. Mr. Chairman, Mr. Hunter and members of the

distinguished committee, I am Kathryn Condon, and I am the deputy to the commanding general of the United States Army Materiel

Command.

And as you are aware, the 50-plus members of Army Materiel

Command provide technology, acquisition support, and logistics to

our war fighter. And each and every one of our civilians and military are committed to provide our war fighters what they need

when and where they need it.

Contracting, especially complex contracting, is one of the core

competencies of Army Materiel Command. And because of this capability, we are building upon it to provide contracting to support

to our forward deployed forces.

Army Materiel Command recently established four contracting

support brigades, and these brigades are designed to provide our

contracting force structure that will support our Army modular

force.

We are committed to fixing the contracting issues that have been

identified in Southwest Asia through reach-back to one of our Army

acquisition centers.

Along with General Thompson, we will examine current Army

operations and future plans for how we plan to provide contracting

support to contingency operations.

I look forward to your questions as well. Thank you.

[The joint statement of Ms. Condon and General Thompson can

be found in the Appendix on page 83.]

The CHAIRMAN. Ms. Condon, thank you very much.

And, Mr. Velz.

12

STATEMENT OF PETER M. VELZ, FOREIGN AFFAIRS SPECIALIST FOR IRAQ, OFFICE OF THE DEPUTY ASSISTANT SECRETARY OF DEFENSE FOR MIDDLE EAST, OFFICE OF THE

SECRETARY OF DEFENSE

Mr. VELZ. Thank you, Mr. Chairman.

Mr. Chairman, Ranking Member Hunter, members of the committee, thank you for this opportunity to appear before the House

Armed Services Committee to discuss the subject of accountability

for weapons and other equipment that has been procured by the

Department of Defense for the Iraqi ministries of defense and interior as part of our effort to reconstruct and stabilize Iraq.

This is an important program that has enjoyed generous support

from the American taxpayers, and I want to assure the committee

that DOD fully recognizes the imperative to be good stewards of

these funds and to ensure that they are put to their intended uses.

We particularly acknowledge that DOD must ensure that weapons we buy for the Iraqi military and police forces are, in fact,

being used by those forces.

In this regard, we expect that the Department of Defense Inspector General munitions inspection team that Mr. Gimble mentioned

will make an important contribution to ensuring the materiel handling processes used by the Multi-National Security Transition

Command-Iraq, known as MNSTC–I, are robust and fully meet, if

not surpass, DOD standards.

DOD has worked closely with GAO on a number of its reviews

and audits of efforts to stabilize Iraq during the past few years.

The GAO, in its audit on equipment accountability, identified some

weaknesses in the Department’s ability to fully ensure that we can

account for the transfer of weapons to the Iraqis.

It is important to point out that while the audit trail for some

of these weapons is incomplete, the GAO did not draw any conclusions that suggest the weapons in question are physically missing.

I point this out only to make it clear that these are audits. They

are accountability audits. They were not criminal investigations.

They were not physical inspections of the weapons.

The DOD I.G. team will get into those issues in more detail in

the work they are currently doing, and we are working closely with

them on that effort.

The problem at the time was that walking back from the point

of transfer of the weapons to the Iraqi government, to Iraqi army

or police forces, some portion of the documentation that can show

the chain of custody, mainly in the form of entries in MNSTC–I’s

property book, was found to be incomplete by the GAO.

So therefore, they could not verify whether or not the number of

weapons that were reported as given to the Iraqis were, in fact,

given to the Iraqis.

It is important to note that the GAO and Special Inspector General for Iraq Reconstruction, or SIGIR, as it is commonly known,

which completed a somewhat similar audit in October of 2006,

again only did an audit of accountability and record-keeping.

They did not look at the physical disposition of those weapons

while it was in MNSTC–I custody en route to being transferred to

the Iraqi government.

13

This is not to minimize the shortcomings that GAO and SIGIR

found. Rather, the key point to understand is that at the time that

these problems with accountability occurred there were extremely

difficult Spartan conditions in which MNSTC–I found itself, and

Mr. Hunter referred very articulately to some of those problems in

his opening remarks.

The GAO noted the various factors that contributed to this in its

audit, such as the lack of sufficient staff and a nascent distribution

network that was essentially an ad-hoc operation in a contingency

environment.

The GAO has made a number of recommendations, and we are

working very closely with them on implementing them, and I will

be glad to discuss what we are doing about that, and I look forward

to answering questions from the committee. Thank you.

[The prepared statement of Mr. Velz can be found in the Appendix on page 93.]

The CHAIRMAN. Thank you very much.

Before I call on Mr. Hunter and we begin our questioning, let me

comment first that Congress got it right again. Last year, this committee established the Panel on Contracting Integrity. As I understand it, this panel today fully endorses what we did last year.

Am I correct, Mr. Gimble?

Mr. GIMBLE. Yes, sir.

The CHAIRMAN. Let me ask Mr. Gimble, from your point of view,

my one question. How did this culture of corruption come to pass

in the office in Kuwait? And further, how do we prevent it from reoccurring?

Mr. GIMBLE. Mr. Chairman, I think the environment that allowed this to occur was a lack of controls. Also it had to be the intent of the people that were involved.

I think it will be important as we unfold these investigations and

audits that we determine what the percentage of the so-called ‘‘bad

apples’’ are.

I think there is a lot of hard-working people, and I think the environment will fix itself. But it is important that we put the proper

controls in place, the checks and balances, and we believe that that

is under way from what we see.

But General Kicklighter, I think, will have a lot of good information to give an assessment as to how successful this is becoming.

I don’t think there is a short-term solution to this. I think it is

going to take a lot of hard work for an extended period.

But I think we will have a good assessment as to how well that

is progressing.

The CHAIRMAN. Mr. Hunter.

Mr. HUNTER. Thank you, Mr. Chairman.

Gentlemen, we put this contingency contracting corps requirement in place in the fiscal year 2006 law. Tell us what we have

stood up at this point.

General.

General THOMPSON. Sir, what the Army has done is created contracting support brigades and contingency contracting teams.

The brigades are, as all brigades in the Army, commanded by a

colonel. But they are just now standing up in the structure. The

effective date for beginning that structure is just this month.

14

It is what we think is the long-term solution to have the proper

structure and make sure that the people in that structure are properly trained.

Up until this point, we did not have a deployable contingency

contracting capability in the United States Army.

So from 2003 even up until today, to meet the demands for contracting in that theater, were a series of evolutionary changes to

manning documents in Kuwait and Afghanistan and Iraq in order

to put the right number of people over there with the right expertise to do contracting.

We think that it is going to take us a while to fill out that structure. The entire structure in the Army for contingency contracting

is about 240 people.

I think it needs to be bigger than that based on our initial assessments in looking at that, and that is one of the recommendations that Ms. Condon and I will take back to our leadership. And

that is the military structure.

The other thing that we have got to do is we have got to use the

authorities that we have got for our civilian workforce that do contracting, which is the majority of the contracting professionals in

the Army and in the other services, and use those authorities to

get the expertise that many of those civilian contracting professionals have got, to be able to deploy them to overseas locations

when we need them.

One of the issues, to follow on to the question that the chairman

asked Mr. Gimble on the conditions that caused the specific issues

in Kuwait—the office was undermanned. It was undermanned from

the beginning. We never caught up with the manning needs and

the total numbers of people.

And then the training of the people that we did have there was

not up to the complexity of the contracting actions or the volume

of contracts that they were being asked to deal with.

Mr. HUNTER. Yes. I would say, though, General, that dishonesty

is not a function of manning levels. And that is, I think, the tragedy that is reflected in the deeper scrutiny of this thing that we

undertook during the classified hearing.

But, General, let me ask you this. We passed this thing—in fact,

the first thing that we wrote that Mr. Skelton and I put in the

bill—it was the fiscal year 2006 bill. That was calendar year 2005.

That is two years ago.

To have a contingency contracting corps led by a senior officer—

and as I said, in the House we put it answerable directly to the

combatant commander. The Senate didn’t like that, but they did go

along with having a contingency corps, and that was emplaced in

law in the fiscal year 2006 law.

Now, correct me if I am wrong, but that has been a couple of

years. And you can’t, within two years, move a team of individuals

across that water and have them undertake this operation?

I mean, that is half the time it took us to win World War II, and

you can’t move a team of folks over there and get them into the

theater and have them undertake these operations?

General THOMPSON. Sir, the individuals that are doing that contracting over there are the very individuals that will fill out this

structure. The people, both military and civilian, are over there in

15

all three of the countries in the Central Command area—Iraq, Afghanistan, and Kuwait.

They are not over there in the structure and in a deployable way

like we built the modular organizations in the rest of the Army.

They are over there on joint manning documents and temporary

duty assignments (TDAs), and that is clearly not the way to go.

It is not that we didn’t move out with this. It just takes a while

to both build the structure—and our challenge is going to be properly manning that structure, because the size of the military contracting workforce in the Army is not large enough to do all the

things it is being asked to do.

Mr. HUNTER. But, General, we are talking about a war. We are

talking about two years. World War II only lasted four years.

In that time, we totally mobilized, put together a massive industrial base, expanded, brought in millions of troops, trained them

and defeated the Axis powers.

And it is not within the capability of the Army to field a team

of contingency contracting corps, the little small team, in less than

a couple of years? And as I understand it, you don’t have it fielded

yet? I mean, that just occurs to me.

Maybe Mr. Assad has got more information. That seems awful

doggone slow.

Mr. ASSAD. Yes, sir.

If I might, General.

The general has really been addressing the Army’s progress in

going toward increasing its contracting capability, but the concept

and the structure, Congressman, that the Congress recommended

we proceed with, in fact, is on the ground right now.

We have a two-star major general, Major General Daryl Scott,

who is the Joint Contracting Command commander. He is the most

capable military officer who does contracting that we have in the

Department of Defense.

Mr. HUNTER. Well, now, is that in response to the legislation, or

are you saying that is status quo?

Mr. ASSAD. No, sir, that is not status quo. We were moving in

that direction, and it is—I will call it a transitionary phase. But

General Scott reports directly to the combatant commander. And

he is responsible for the contracting that is being done in theater.

Now, there are a number of other folks who do contracting who

are adjunct to him, and in this case there was a Kuwait office

doing contracting responsible for the operations in Kuwait, and I

think that is where the general is addressing.

But that Joint Contracting Command structure, that kind of a

concept, is what we are moving toward. One of the other things

that you recommended we do was to develop a joint contingency

contracting handbook. That is what this is.

It did not exist a year ago. It is now online for all of our contingency contracting officers to use.

Mr. HUNTER. When did that come online?

Mr. ASSAD. That came online about two months ago, sir, but this

is still being printed, but this is what it is going to look like in

everybody’s hands, hard copy, and this is what they will train with

to take to the fight.

But it has been online for a while now, and it was developed——

16

Mr. HUNTER. Well, you say it has been online for a while—for

two months?

Mr. ASSAD. For a couple of months. It took us a year——

Mr. HUNTER. Okay.

Mr. ASSAD [continuing]. To put this together, Mr. Chairman.

Mr. HUNTER. Okay. Now, do you have this identification of a

deployable cadre of experts?

Mr. ASSAD. We are in process. One of the other things we had

to do was we didn’t have any joint doctrine on how to do contracting in a combat environment. We now have joint doctrine. That

started a year ago.

This publication was put online on May 27th. This is the first

draft of it. It is being reviewed by all the military services right

now.

It addresses the very issues that you are talking about in terms

of how we should be structured, who should be in charge, and what

should this contingency contracting workforce consist of. There is

a lot of discussion going on as to how it should be properly manned.

And I think that was one of the points that the general was trying to make in terms of we need to look at how is the Army approaching its contingency contracting corps, how is the Air Force

structured, how do the Marines do it, and how do we bring that

force together as one contingency combating fighting unit.

Mr. HUNTER. Okay.

Mr. ASSAD. And that is what we are trying to——

Mr. HUNTER. Well, Mr. Assad, here is what I have got. I just got

this from staff. They say the handbook is still in print, but it has

not been used for training yet, nor is it in the field.

And they also tell me that General Scott, who heads the Joint

Contracting Command, the JCC, has a number of responsibilities,

but the JCC is not a group with contingency contracting expertise

or deployable corps for future conflicts. Is that accurate?

Mr. ASSAD. No, it is not, sir.

Mr. HUNTER. Okay. Explain.

Mr. ASSAD. This document, I said, has been in print. We are trying to get it hard copy. It has been online for a couple of months.

It is true that——

Mr. HUNTER. Well, does that mean it is in the field in Iraq?

Mr. ASSAD. It is online and available to our folks in the field in

Iraq, yes, sir.

Mr. HUNTER. Okay, for a few months.

Mr. ASSAD. But they don’t have these yet. These are being printed right now for them to be sent to Iraq.

Mr. HUNTER. Okay.

Mr. ASSAD. It is our intention to incorporate this into all of the

training for our Marines, our airmen and our soldiers. We are not

there yet. It took us a year to put this together.

This was done by folks with boots on the ground. Nobody touched

this unless they were in a combat environment and understood

what was the environment that they had to exercise in.

Mr. HUNTER. Okay.

Mr. ASSAD. But the point with General Scott—the Joint Contracting Command that we have—the structure, as I mentioned, is

transitionary. It is where we want to go, but it is what we have

17

got. And there are approximately 200 officers and enlisted that

make up the Joint Contracting Command right now.

It needs a lot of work. We did not properly train our officers and

enlisted to function in this environment. The fact is that the capability set that is needed for what is there right now requires someone to be able to do engineering and construction contracting,

major systems acquisition, support to major systems, base operations and stations.

And that breadth of experience is very difficult to have in an environment here in CONUS. Now to bring that forward in a combat

arena, it is going to take us some time, as the general mentioned,

to fill out that structure.

What we are doing right now is we are overlaying the training

that we are doing in all three services, because we want to make

sure that when an officer or an enlisted, either a Marine, an airmen, a sailor, or a soldier—that they can execute in the joint fight.

And what we have got right now are very good technical training

courses in contracting. What we don’t have, for example, is if I am

a young major and I am being brought to a forward operating base,

how do I set my office up?

What are the checks and balances that I should have in place?

What are the fraud indicators that I should look for in my turnover

to know that there may be a problem? What documents and training should my people have? What if I don’t have any power, how

do I execute in that environment?

So this is where we are going. And we are all headed in the right

direction, all the services, and——

Mr. HUNTER. Mr. Assad, let me interrupt. I think you are heading in the right direction. I think you are heading kind of slow. And

I think you need all those things that you have talked about.

But in the meantime, you could have folks on the ground who do

simple stuff that doesn’t require a lot of hand-holding or a lot of

time or a lot of slow policy development, things like how many

trucks have we got? What are the serial numbers? Where are the

weapons that we issued to the ISF? How do we issue them?

Those are simple things, but they require people, and they require folks that just have basic training in being able to account

for items that are issued under government authority. Those aren’t

complicated things.

And I think the fact that it has taken us two years from the time

that this committee put this requirement in place is an indication

of a system that is quite slow. That means we got halfway through

World War II without getting this little team of contractors in

place.

So there are lots of folks on the battlefield that have lots more

complicated requirements than what you have just described for

this young major who is going to be part of a contracting corps.

I think we could put the basics in place and try to stop the hemorrhage of these systems that manifest in these reports in the classified briefings that we have had.

So I think, Mr. Chairman, that is my contribution to this hearing

this morning.

You have got the direction from Congress. We wrote it on this

committee. We need to get it in place.

18

Mr. ASSAD. Yes, sir.

Mr. HUNTER. Thank you.

The CHAIRMAN. I thank the gentleman.

You know, there is an old saying, and I don’t think it is limited

to Missouri, that the horse has gone out of the barn, then you shut

the door. I think that is probably what happened here.

Mr. Gimble, can you give this committee a general scope of the

dollars amount involved in the procurement and fraud problems

that you have uncovered to date?

Mr. GIMBLE. Mr. Chairman, we can get that information. I don’t

have it at hand. I would like to get back for the record with——

The CHAIRMAN. My question is: Can you say that in an open

hearing such as this?

Mr. GIMBLE. You are talking about the criminal investigations

that we have ongoing, the value of the contracts? I believe we can

say that.

The CHAIRMAN. We would like to have a general scope of the dollar amount involved in your investigation.

I am not asking for the specific dollars and cents, but can you

give us a general scope of what you have thus far uncovered?

Mr. GIMBLE. Mr. Chairman, we would like to get back with an

answer.

The CHAIRMAN. Do you know if it is classified or not?

Mr. GIMBLE. I don’t think it will be classified. I think we can give

you an unclassified answer. But we just don’t have that in hand.

The CHAIRMAN. Can we do it during this hearing?

Mr. GIMBLE. We can try that, yes, sir.

The CHAIRMAN. I would certainly appreciate it.

Mr. Taylor.

Mr. TAYLOR. Thank you, Mr. Chairman.

General, for your uniformed personnel under existing law, what

is the time line that they would have to wait for a decision maker

once he leaves the service to go to work with one of the firms that

he has awarded with contracts?

General THOMPSON. The time line that individual would have to

wait depends on the rank of the individual and the kind of job that

they had.

Mr. TAYLOR. Okay, so if the individuals involved—which I understand were majors and colonels. Those time lines would be——

General THOMPSON. I don’t know the exact answer on how long

a major would have to wait before he would go to work for a firm,

especially one that he had dealings with while he was in an acquisition position or a contracting position.

Mr. TAYLOR. Do you think the major would know?

General THOMPSON. He has to know, because it is part of his ethics training that he goes through.

Mr. TAYLOR. Okay. For a lieutenant general, what would it be,

sir?

General THOMPSON. It is a year.

Mr. TAYLOR. General, I am not an attorney, and I am told an attorney’s rule is you never ask a question that you don’t know the

answer to, so I don’t know the answer to this one.

But given the reports of the vice president’s ties to Halliburton,

given Halliburton’s huge contracts in the area, I am just curious.

19

In your interviews with the people suspected of these crimes—because I don’t think anyone has been convicted yet, is that correct?

General THOMPSON. I would have to defer that to the investigators. I know there are a number of people that have been turned

over for prosecution, but there are more people——

Mr. TAYLOR. I would like to open this up to the panel.

In your interviews with those people, I am curious if any of the

suspects replied, ‘‘Well, everybody is doing it,’’ because I would sure

hate to think that that was part of their answer.

And I would sure hate to think that the vice president’s ties to

Halliburton—although severed, but the compensation package did

continue for five years—was a part of that.

And I will open that up to the panel. Did any of the suspects at

any time somehow throw that back out in their defense?

Mr. GIMBLE. Representative Taylor, according to my information

on our interviews and the criminal investigations, no one has offered that back in the course of a subject interview, that everybody

is doing it.

Mr. TAYLOR. Okay. Well, how about the explicit mention of Halliburton and the vice president?

Mr. GIMBLE. No, sir.

Mr. TAYLOR. Okay. Mr. Gimble, I am curious, in the course of

this, has your group made a recommendation to lengthen the period of time from which a decision maker, someone who actually

awards contracts, once they retired, could go to work for one of

these companies?

Because we are dealing with enormous amounts of money. And

I have got to believe human beings, being human beings, that that

temptation would just be astronomical for someone to favor one

company over another if they thought that that company was going

to turn around and hire them for a substantial amount of money.

Mr. GIMBLE. Sir, there are set ethics laws on the books today

that would limit the time that someone could retire. For example,

if I retire from the government service, I have a cooling-off period

before I can deal with government—the people I worked with or

represent, contractors.

So there are a number of different rules, and they change the

higher up your rank is. It gets a little more restrictive the higher

rank you are. But those are a good part of the process.

Mr. TAYLOR. But again, my question was: Has your group offered, as a recommendation, to extend those times? I mean, let’s

face it. A lieutenant general is an extremely important individual.

If the waiting period for a lieutenant general, of which there are

very few and of great influence, is only one year, that is not very

long.

Mr. GIMBLE. Our organization has not made a recommendation

to lengthen the waiting period in the ethics law.

Mr. TAYLOR. Okay.

Mr. Chairman, I yield back the balance of my time.

The CHAIRMAN. Thank you.

Mr. Saxton.

Mr. SAXTON. Thank you, Mr. Chairman.

20

And thank you all for being here today with us. It is a day of

obviously great concern when we come together to address issues

like this one.

Ranking Member Hunter pointed out that in our Fiscal Year

2006 Authorization Bill there was specific language that was included, which I have here, which required the, for example, identification of a deployable cadre of experts with the appropriate tools

and authority and training to—and trained in the process, under

paragraph six, which refers to this process; and the requirement to

provide training under a program to be created by the Department

of Acquisition and appropriate steps to ensure that training is

maintained for such personnel; and a requirement that not later

than 365 days after the date of enactment of this act, the Secretary

of Defense shall submit to the Committees on Armed Services of

the Senate and the House of Representatives an interim report on

requirements, definition, contingency contracting, and program

management.

And my first question is what is the status of that report?

Mr. ASSAD. General, I think I can answer that. Sir, it is in draft

form right now, and it should be submitted shortly.

Mr. SAXTON. I understand that the 365 days expires on October

17th. Will we have it by October 17th?

Mr. ASSAD. You should, sir.

Mr. SAXTON. Let me ask this question. We are here to review a

situation in which military officers apparently carried out dishonest acts for their own aggrandizement.

As of 12 September, there are 78 criminal investigations and 20

indictments, we are told, related to contract fraud in theater. The

20 indictments are a combination of civilian and military personnel, which General Thompson pointed out a few minutes ago.

Of the billions of dollars and thousands of contracts that have

flowed through theater since 2003, in your opinions, each of you,

does this situation indicate that we have a cultural issue within

the officer corps of individuals who are involved in procurement or

management of procurement?

Or does it appear to be a series of isolated events? I just guess

we would like to start with General Thompson and just kind of

move through the panel to get your impressions of this.

General THOMPSON. Congressman Saxton, I have heard the briefings and the details from both the criminal investigation in the

Army and the auditors. I do not think it is a culture. They are, for

the most part, isolated incidences.

Some of these cases are connected by the individuals and by geography. You know, somebody that was in the Kuwait office, and

then another case that has turned up in the Kuwait office. But

from what I can tell, there is no conspiracy here.

I think I can speak for the great majority, nearly the 100 percent

majority, of military officers. This sickens me when there is even

one case of an officer or non-commissioned officer who is involved

in a case of fraud or accepting a bribe.

And the initial hotline tip that came that started the investigations that the Criminal Investigative Command (CID) and the

DOJ, Department of Justice, are now heavily involved in was someVerDate 22-MAR-2001 13:44 Dec 02, 2008 Jkt 038663 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 C:\DOCS\110-91\263000.000 HAS2 PsN: HAS2
21

body that saw that this was not proper and reported that to the

proper authorities.

I think the checks and balances are there. In many cases, it also

comes down to just basic leadership. And in some cases you might

not have the strongest leader, but where you have got good leadership you don’t have problems like we are seeing here.

And I think you are going to come back down to that we didn’t

have the right leadership and the right command climate in some

of the places where you have got some of these investigations, but

I do not think it is a widespread conspiracy and a culture issue out

there.

We have embedded ethics training in every acquisition course

that we have got that deals with contracting. All the services have

annual ethics training requirements for the acquisition folks. Those

annual ethics requirements are greater than the normal civilian

and military member of the service.

And that is how I would answer that question, and I will ask

anybody else to comment on that as well.

Mr. GIMBLE. Mr. Chairman, we think that at this point, now, it

is more of an isolated incident. We think the——

The CHAIRMAN. Please proceed and answer the question. Please

proceed and answer the question. Mr. Gimble, go ahead.

Mr. GIMBLE. I am sorry. What we think this is is pretty much

isolated incidents as we could see now, a little more widespread

than we would like. It does cause great concern.

But we think the real issues here—it was a lack of controls, a

lack of integrity and a lot of opportunity with a lot of money, and

the temptation was there. And we have to work very hard to put

those controls in place to mitigate that temptation and also reemphasize the ethical training of the corps, both civilian and military.

Mr. ASSAD. Mr. Chairman, I would like to start my comments off

by saying I have the highest degree of respect for the folks in our

military, both men and women, who do what we do for a living,

and that is contracting.

And the vast majority of them have incredibly high ethics and a

great deal of honor. But one of the reasons why we set up the Integrity in Contracting in a Combat Environment subcommittee in

the integrity panel process that we are going in is because we really need to look at this very closely and very deeply.

And we really do need to examine the entire process of how we

are training our officers, the information we are giving them, as

well as our enlisted, to ensure that there isn’t some underlying aspect to this that we are not getting at.

And that is the reason why I think the panel will be very effective in doing that. And, in addition to that, one of the holes that

we found, for example, is that we have not done a very good job

of educating our leadership, our officers who are on the ground

doing contracting, on what fraud indicators are, what they should

be looking for.

And that is a failure in terms of our training process, and we

need to include that. But we need to look at this more deeply and

examine it very carefully, because this is at the root of what we do,

and we need to make sure that if there is some type of an issue

that is not obvious on its surface that we root it out.

22

The CHAIRMAN. Dr. Snyder.

Dr. SNYDER. Thank you, Mr. Chairman.

One of the worst incidents of fraud in the military history of the

United States was at the end of the Civil War when the steamship

The Sultana, the ferryboat on the Mississippi River, was contracted

to haul a substantial number of former POWs who were released

from Confederate prisoner-of-war camps at the end of the war.

They were loaded up on the steamship. A lot of them were emaciated—you all know this history—very weak. The ship was not

properly inspected. It was terribly overloaded.

At a time of flooding a few miles up the river from Memphis, the

boilers blew up, and we lost more personnel than died on the sinking of the Titanic. Family members tried to get investigations done,

and there were investigations done, but the Nation was really tired

of war. And it is an event that is not very well known.

Maybe, General Thompson, I will direct this question to you. In

all the things that you are looking at—and you don’t have to tell

me about a specific case—of all the potential infractions out there,

are there any that you are investigating that you think may have

the potential to have led to problems in safety for our men and

women in uniform?

I am asking: Is it something more than just somebody taking a

cut or making money, or was there some kind of product sold or

not delivered in a timely fashion or not in the amounts necessary

to put at risk some of our troops?

General THOMPSON. I would defer the details on all the investigations to the investigative agencies. But the things that they are

looking at, for the most part, involve services being delivered in

Iraq, Afghanistan, and Kuwait, not the weapons systems or the

products that our soldiers, sailors, airmen, and Marines use.

The checks and balances in the procurement of those systems,

which are done back here, and the testing that goes on for those

things that we put in the hands of our war fighters—I am highly

confident that those procedures are proper and that we have a very

rigorous process with an independent testing organization in all

the services, overseen by the director of operational testing and

evaluation of the Defense Department.

So I am highly confident that the weapons systems that we give

to our men and women in uniform do not have any of the issues

like a faulty ship that has been under contract——

Dr. SNYDER. So at this point you all think that the services are

being provided. It is just the contractors that are providing them

either shouldn’t have got the contracts because they paid money to

get them, or somebody is making money off the contract itself.

It is a question of funds, not necessarily the quality of the product. Is that a fair statement, Mr. Gimble?

Mr. GIMBLE. I think the one exception we have—we did have a

product substitution issue dealing with food, but not of any—when

we typically think of product substitutions, it is critical parts on

weapons systems, and we haven’t investigated any of that in this

theater up until now, and hopefully we won’t have cases of it.

Dr. SNYDER. General Thompson, in your written statement you

talked about—you are apparently doing file reviews of 18,000 conVerDate 22-MAR-2001 13:44 Dec 02, 2008 Jkt 038663 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 C:\DOCS\110-91\263000.000 HAS2 PsN: HAS2
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tract actions out of Kuwait. How many different contractors does

that involve?

General THOMPSON. I don’t know the answer to the number of

contractors. The contract actions is a greater number than the

number of contracts.

We are doing the file reviews both in Kuwait for the lesser expensive, less complicated ones and we are moving the more complicated contracts and the contract actions associated with them

back to the acquisition center as part of Army Materiel Command.

And we will very systemically go through those with a team of

very highly trained contract professionals augmented with auditors

and augmented with CID fraud investigators. And we are doing

what Mr. Assad alluded to a while ago, putting together a very

comprehensive fraud checklist that we will use, using the checklist

at all the different agencies that have responsibility in this area.

And out of that, I think one of the things that will come is a comprehensive, maybe DOD-wide, checklist that we will be able to use

in the training and in future incidents where we have to go in, as

part of our contract operations reviews, and look at the integrity

of a contracting operation no matter where it may be.

Dr. SNYDER. Who gave us this handout?

Mr. ASSAD. I did, sir.

Dr. SNYDER. What the hell does this thing mean?

Mr. ASSAD. I didn’t know whether it would come up, but this is

another tool that we are providing now to our contracting officers.

It didn’t exist a year ago. And it is on the Web, and any contingency contracting officer in the world can enter into this site. It is

made for them.

It gives them all their policy and guidance, deployment information to different theaters. They can click on—there is a map behind

it. Do you see? They click on their combatant command. It tells

them all the policies and procedures that are now applicable to

their combatant command.

This is information they never had before, all in one place. Now

they have got it.

Dr. SNYDER. So this is not a chart that I should follow this trail

around here. That is where I was—this is just——

Mr. ASSAD. It is a Web site.

Dr. SNYDER. These are icons to take me to——

Mr. ASSAD. Yes, sir, the Web site. Yes, sir.

Dr. SNYDER. Now, what does ‘‘Ask A Professor’’ mean?

Mr. ASSAD. ‘‘Ask A Professor’’ means that you are a contracting

officer, you are in the field, you are trying to place a contract. You

don’t quite understand a technical term, or you have got a problem

with a source selection, and you don’t know how to solve it.

You can go online. You can ask a Defense Acquisition University

(DAU) professor, and he will get back to you within 24 hours with

the answer.

Dr. SNYDER. Okay, thank you.

Thank you, Mr. Chairman.

The CHAIRMAN. Mr. Hayes.

Mr. HAYES. Thank you, Mr. Chairman.

And, ladies and gentlemen, thank you for being here. This is a

critically important matter, the fact that you are here—and thank

24

you for doing this, Mr. Chairman—out in the open reemphasizing

again and again how vitally important it is that we maintain the

integrity of the process.

Having said that, this is a unique set of circumstances. We are

at war. We in the committee have every day said to you and the

military, ‘‘We need you to get everything you need as quickly as

you need to get it.’’

We are all a part of this. But again, going forward, what are the

lessons learned? That is a good question to ask. And I am sure that

people will look at us today and say, ‘‘Oh, if I had any doubt, this

is important.’’

And we are moving aggressively to make certain that human nature doesn’t do what it has done throughout the ages, as Dr. Snyder and others pointed out.

Having said all that, the question that I would ask as clearly as

I can—and, Ms. Condon, ladies usually understand these questions

better than the men, so I am going to start with you.

There are two policies that seem to potentially conflict here. We

have the policy that you use to equip—and I am talking specifically

of arms, weapons—the multi-national force, MNSTC.

And to my knowledge, that is a different policy from the one that

we use when we are equipping foreign forces under more traditional circumstances. If I am correct, what is the history there?

And is the policy that we now have effective, given the urgency

of the circumstances and the situation we find ourselves in?

Ms. CONDON. Sir, I apologize. I am probably not the appropriate

one——

Mr. HAYES. Okay.

Ms. CONDON [continuing]. Discuss policy issues.

Mr. VELZ. I will address that.

Mr. HAYES. Whoever would like to——

Mr. VELZ. Congressman Hayes, I will address that. Traditionally,

when the Department of Defense, working with Department of

State, does security assistance to foreign militaries, it is subjected

to the Arms Export Control Act and the Foreign Assistance Act.

The type of money, the appropriations, that are used by MultiNational Security Transition Command-Iraq are supplemental appropriations that are, if you will, not subjected to the same laws.

This basically enables MNSTC–I to do direct commercial contracting, to procure stuff, outside of the FMS world, outside of the

foreign military sales world.

This is a policy that Congress has supported since the first appropriations in 2004 in the Iraq Relief and Reconstruction Fund,

which was the initial appropriation that provided $3.2 billion to

really begin to train and equip the Iraqi forces.

And then there have been three subsequent appropriations, in

2005, 2006 and 2007, for the Iraq Security Forces Fund, and those

have basically the same—the same language attaches to that that

attached to the earlier appropriation, that, if you will, puts this

outside of the foreign military sales/security assistance type of

arena.

Mr. HAYES. I guess another way to expand on what you said is:

Have we taken the parts that are most effective for our normal forVerDate 22-MAR-2001 13:44 Dec 02, 2008 Jkt 038663 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 C:\DOCS\110-91\263000.000 HAS2 PsN: HAS2
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eign military sales (FMS) contracts and applied them again to

these circumstances?

Are there any policy changes that we need to be working on

through the committee here that would make you more effective in

pursuing your duties here?

Mr. VELZ. Well, sir, I can address what we are doing with the

GAO in response to their recommendations that highlight some of

these problems.

There clearly has been a lack of guidance to MNSTC–I on what

accountability requirements apply to them. There have been debates over whether some apply or some don’t apply.

Working with the Joint Staff J–4, we are making sure that we

go through all of the DOD instructions and guidance and make

sure that we extract out the relevant and applicable guidelines and

instructions that can, if you will, form a clear, unambiguous policy

for MNSTC–I that, despite the fact that it is ambiguous, what accountability applies to them.

But we will develop that guidance. And this is a result of the

very good work that GAO did in highlighting this issue.

Mr. HAYES. So you think you have got a handle on that.

Mr. VELZ. Yes, sir.

Mr. HAYES. Mr. Chairman, I yield back my time. Thank you.

The CHAIRMAN. I thank the gentleman.

For clarification, whoever wishes to answer the question, where

do most of the problems come from? Do they come prior to the

warehouse in Kuwait, after the warehouse in Kuwait? Where along

the line is the major problem that you have run into regarding

fraud and corruption?

Mr. VELZ. Sir, are you referring to the procurement of equipment

for the Iraqi Security Forces?

The CHAIRMAN. Correct. That is correct.

Mr. VELZ. Well, you know, I wouldn’t want to comment on anything that involves any potential investigations, but I can speak

generally.

The CHAIRMAN. That is what I am asking.

Mr. VELZ. Yes, sir. The problem that GAO identified was that the

equipment was basically coming into Iraq via multiple paths, sometimes over land, sometimes over sea—or, I am sorry, sometimes

through the air being delivered to Baghdad International Airport.

And then in some cases, it would go directly out to an Iraqi unit.

In other cases, it would go into the warehouse. And there simply

weren’t enough people on the ground handling all this materiel

flow to make sure that every single item got a serial number reported on MNSTC–I’s property book.

There was an imperative to get this equipment out to the fighting forces as quickly as possible. And that was done through multiple means that, as GAO found, meant that the documentation

was just lacking in many cases.

And therefore, we cannot tell if the number of weapons that

MNSTC–I believes it transferred to the Iraqis were, in fact, transferred.

The CHAIRMAN. Ms. Bordallo.

Ms. BORDALLO. Thank you very much, Mr. Chairman.

26

And I wish to greet the witnesses, the gentlemen and the gentlewoman. Thank you very much for being here.

To me, this is a very important subject matter, and my question

to you, Mr. Gimble, is how will the Department of Defense record,

analyze, and disseminate the lessons learned from contracting mistakes and abuses and apply them during future contingencies and

large contracting efforts?

And I ask this because to successfully relocate the 3rd Marine

Expeditionary Force from Okinawa, Japan to Guam—and I represent Guam—in the coming years will require a significant

amount of DOD contracting activity to occur.

So while the relocation of Marines to Guam is not a contingency

operation as is Iraq and Afghanistan and Hurricane Katrina relief,

it will require massive, complex contracting operations to occur

during a relatively short period of time and, I might add, in a remote area.

The challenges the DOD will face in the process will be very

similar. Is working to incorporate lessons learned today into future

activities a priority for the Department inspector general? What is being done now in relation to the estimated $14 billion

move of the U.S. Marines from Okinawa and enhancing other military forces on Guam? Are we on your radar screen?

Mr. GIMBLE. Yes, you are on our radar screen, but let me maybe

answer that in just a couple of ways. Lessons learned can come

from two things. We in the inspector general oversight community

do a number of reports, audit reports, inspections, also, the results

of the investigations on the criminal side.

And periodically, we summarize those reports into a summary report that identifies trends and corrective actions or an assessment

of the actions being taken.

We are in the process of doing that right now on 210 reports that

are more than just DOD I.G. reports. There was a number of GAO

reports, Army audit, Air Force audit and our own. That is one set

of contracting issues that we are doing to help come up with some

lessons learned.

Also, in another project that we are doing, and this is where we

take DOD I.G. only, and it is not necessarily limited to Southwest

Asia, but just work we have done over the past. Since the year

2000 there was about 240 reports that we have issued that identify

contracting issues, and so we are looking at those to make recommendations. Now, that is on the oversight side of the house.

Also, you know, the Army stood up their big study on contracting

issues. Mr. Assad has studies ongoing. So there is lessons learned

off of the acquisition side that will be forthcoming.

I think the challenge for all of us in the Department is to bring

all of those factors together and, you know, have a good robust lessons learned, particularly in the contracting process.

Now, to address your Guam issue, we and DOD I.G. are now in

the process of trying to establish a presence off the audit side in

the Pacific Command (PACOM) arena which would cover Guam.

We recognize that this move out of, you know, Okinawa into

PACOM, as an example, is a huge challenge, and we are looking

at that, and you can expect to see some audit reports coming forth

on that as this progresses on.

27

Mr. Chairman, I would like to just provide a bit of information

you asked me for just a moment ago, if I could, ma’am.

I don’t have the specific number of contracts that you asked

for——

The CHAIRMAN. This is in response to my question to you, Mr.

Gimble, regarding the dollar scope involved in your investigations,

is that correct?

Mr. GIMBLE. Yes, sir, it is. Under criminal investigation, the

value of the contracts and actions that they are currently looking

at is about $6 billion, okay?

Now, on the audit side of the house, we have 29 projects in the

DOD I.G. that are addressing a scope of contracts and programs

valued at $88 billion.

The CHAIRMAN. Eighty-eight——

Mr. GIMBLE. Billion.

The CHAIRMAN. Billion with a ‘‘B.’’

Mr. GIMBLE. Yes, sir, acquisition programs. Now, those are all—

this is not criminal investigations. And I must say, on the $6 billion under criminal investigation, that is not to say that all of that

is, you know, tainted, or there is actual criminal—there is just

some activity on those contracts, but the contracts are valued at

about a total, as I am told today, about $6 billion.

The CHAIRMAN. Thank you very much.

Ms. BORDALLO. Mr. Chairman.

The CHAIRMAN. Yes.

Ms. BORDALLO. Mr. Chairman, I would just like to ask Mr.

Gimble, just for the record, in answer to my question, then. This

move, this $14 billion move that we are anticipating very soon, it

is on your radar. You are monitoring it now, yes or no?

Mr. GIMBLE. Yes, ma’am, we are, and I might add that we have

issued an audit report that has budget implications on this move,

and we can——

Ms. BORDALLO. Very good.

Mr. GIMBLE. I think it is classified, but we can make it available

to you.

Ms. BORDALLO. Very good. Thank you.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much.

Dr. Gingrey.

Dr. GINGREY. Thank you, Mr. Chairman.

I do want to ask a question but, you know, it is hard to come

up with one. I am really appalled today. I appreciate the witnesses

being here.

This is almost as sad a day to me as hearing that another patriot

has fallen from my district. That has happened seven times in the

five years that I have been a member and been on this committee.

But this is a pretty dark day. I mean, this is just as, almost as

bad as a blue-on-blue death, as far as I am concerned. And I don’t

think I am overstating that.

Some of the witnesses have said that we need more ethics training. Ethics training for a full colonel in the United States Army to

me is like asking a Catholic bishop to re-read the Baltimore catechism. I am just absolutely appalled to hear about this, and I am

concerned.

28

I don’t know whether to be more concerned about the corruption

from officers of the United States military as I am about the diversion of weapons that ended up not only in the hands of people

fighting in Turkey, the Kurdish terrorist organization in northern

Iraq, but also the possibility that weapons are being diverted to the

bad guys in Iraq that are killing our soldiers.

So this is, to me—I am very depressed and upset to hear about

this, and I will ask this specific question, and any of you can respond to it.

The number of cases of fraud and corruption that seem to have

developed in Kuwait—is this an indication of a cultural problem

within the Army or any of its components?

And as a follow on to that, how confident are we that the problems identified in a fairly small office in Kuwait are not representative of similar problems in large contracting offices engaged in

contracting in Iraq? Anybody.

General Thompson, let’s start with you.

General THOMPSON. Well, sir, as I said previously, I don’t think

we have got a cultural issue. You have got a number of individual

cases, all the ones that we know about, being actively investigated

today by the right investigative agencies.

We do have internal controls and procedures both on the audit

side and the investigative side to make sure that we don’t have

problems in other places.

One of the things that Ms. Condon and I are looking at is the

frequency and the scope of those periodic reviews—adequate, to

make sure we don’t have something like this happen again. And

that is all part of what is on our radar screen, and it is all——

Dr. GINGREY. Well, General, with all due respect, and I think Mr.

Hunter said this earlier, I think you are looking a little bit too

long. And it is time for some action.

And I hope these people that are responsible are brought to justice in the same manner that Lieutenant Calley was brought to justice in the Vietnam War. I think you ought to lock them up and

throw away the key.

You have got bad guys. You need to make an example of them.

General THOMPSON. And, sir, I am confident that with the judicial process and the investigative process, they are doing what they

need to do to make sure that they gather the evidence, and those

people that need to be indicted will be prosecuted and appropriate

punishment handed out.

There has been no delay, once the problem was identified, in

turning it over to the right investigative authorities. There is no

delay there at all.

Mr. GIMBLE. I would like to add just this thought. We in the

oversight community, both in investigative and audit, we don’t

know that this is isolated. We have said it is isolated incidents. I

think the jury is out. We are still looking aggressively.

We are committed to—if we find waste, fraud, and abuse or corruption, it will be referred with appropriate authorities, and it is

a very high priority with us in the DOD I.G.

Mr. ASSAD. Mr. Congressman, I met a couple weeks ago with

Major General Scott. I mentioned he is the commander of the Joint

Contracting Command over in Iraq. And we talked about this.

29

And the discussion was centered around what more can we do to

support him in this whole idea of ensuring that we get contracting

with integrity. And you know, he and I concluded that this is all

about leadership.

And in his particular case I asked him is this look-in-your-eye

ethics. In other words, are you looking in the eyes of the people

that work for you so they understand from your point of view what

you expect from them in this regard. And his answer was unequivocally ‘‘yes.’’

And I think that, you know, it is at the fundamental root. It sickens all of us when someone suggests that an officer in our armed

services is doing something inappropriate with regard to his honor.

It is hard to understand that more than one would be.

And so this is more—you are absolutely right. This is more than

just putting ethics courses on Web sites. It is really more than just

running people through ethics courses.

And it is ensuring that every one of us who does what we do for

a living know that if you do something inappropriate, we will find

you, and we will refer you to the appropriate authorities, and we

will prosecute you as much as we possibly can, that, you know, if

you are going to go down that path, we are going to find you.

Dr. GINGREY. Thank you, Mr. Chairman. I yield back.

The CHAIRMAN. Thank you.

Before I call Ms. Davis, Mr. Gimble, let me clarify. Contracts under investigation for criminal irregularities total $6 billion. Is

that correct?

Mr. GIMBLE. Yes, Mr. Chairman, that is correct.

The CHAIRMAN. Contracts being audited by the Department of Defense and inspector general total $88 billion.

Mr. GIMBLE. It is funds. It is not just contracts, but——

The CHAIRMAN. Is that correct?

Mr. GIMBLE. Well, it is a combination of funds. In other words,

when they—the Iraqi Security Fund—some of that is not contracted. But we are looking at the funds, so it is a total of $88 billion being looked at on those 29 projects.

The CHAIRMAN. Thank you so much.

Ms. Davis.

Mrs. DAVIS OF CALIFORNIA. Thank you, Mr. Chairman. And I join

my colleagues as well. I think that this is a—really does sadden me

personally as well, and I think it is of great concern.

You have talked about the fact that you don’t think this is, you

know, so-called ‘‘bad apple,’’ perhaps bad apples, and not necessarily the culture. But you have also said that you believe that

there was an opportunity.

And we know that environments can be conducive to bad behavior. Certainly environments can give people the impression that either no one is watching, or it is okay, or we are too busy, we can’t

focus, all those things.

Talk a little bit more about that in terms of what we can take

away from this and the kind of opportunity that you, I think several of you, suggested existed. What should we know about that?

Mr. ASSAD. Maybe I could just address, ma’am—world-class companies, world-class organizations, have very effective checks and

balances. They have separations of responsibilities. And I think

30

what we are going to find is that those checks and balances and

separations of responsibilities were very fuzzy, were unclear.

When we are operating in an operation within the United States,

we have a number of organizations—Defense Contract Audit Agency, Defense Contract Management Agency, the DOD I.G., CID and

CIS—a number of activities which provide the foundation of our

checks and balances.

It is fair to say that when we got into a combat environment, we

didn’t have those checks and balances in place in all cases.

And if you have a chaotic environment to begin with, very hectic,

you have folks who may be trained but don’t have a lot of experience, and then you don’t have the necessary checks and balances,

there is a higher likelihood that those people who don’t have ethics

or integrity are going to be successful in doing inappropriate

things.

So I think that what we are really getting from this, from a Department of Defense point of view, is, as we look toward providing

the joint contracting force, is to ensure that we have those checks

and balances in place, not just contracting folks, controllers folks

and the folks that accept the materials and goods and services, that

there is a separation——

Mrs. DAVIS OF CALIFORNIA. Is that something that also would

apply? I know that the New York Times article highlighted the fact

that in a war theater people are trying to do things quickly, very

quickly.

And in fact, even General Petraeus, I think, indicated that it was

more important to get ammunition, to get weapons, out to those

who were going to help us as opposed to trying to have a data system, a tracking system, in place at that particular time.

Does that also apply in that case, and would it—how would you

assess that?

Mr. ASSAD. My view is that we always need adequate checks and

balances in place.

General THOMPSON. Ma’am, if I can just—you know, my answer

would be very, very similar to what Mr. Assad said. And I will

make a point of clarification here.

In simple terms, there are three different things involved. It is

the requirement. What do you want to buy, or what service do you

want to provide? The contract instrument itself—and there is multiple contract instruments. And then it is the management of the

delivery of that service or product and the execution.

Those checks and balances—if you have a separate requiring activity, a separate contracting activity or individual, and a separate

individual or activity that is managing the delivery of that product

or service, that is one of the best checks and balances.

And then there is oversight on top of that, oversight in the contracting organization, and then the oversight agencies like the

DOD I.G. and the audit agencies.

Even on something that you need very, very quickly, you can still

have those three separable pieces there.

And I think it is fair to say in general that there is a number

of cases under investigation right now where a contracting official

was also the official that was monitoring the execution of that conVerDate 22-MAR-2001 13:44 Dec 02, 2008 Jkt 038663 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 C:\DOCS\110-91\263000.000 HAS2 PsN: HAS2
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tract, as opposed to a different individual, and the necessary oversight wasn’t there.

And so that is one of the systemic issues that we have got to address.

Mrs. DAVIS OF CALIFORNIA. Were these checks and balances in

place as we went to Iraq? I mean, what was in place? Because we

talked about the law that was put in place in 2006, but in essence,

I mean, what was in place prior to that—those same checks and

balances?

And were there plans to implement those? What happened to

that?

Mr. GIMBLE. Let me address just a piece of that, if I could. One

of the things that we see continually is that a part of this contract

surveillance that the general is talking about is that when you

have somebody that receives the materiel and how they document

the receipt of the materiel—all through these audit reports and investigations, one of the things you see as a critical failure is the

closing out the loop that, if I received a weapon, a truck or whatever, who signed for it, and how is it identified, and how did it get

back into the repository to be paid, and so forth.

We see that as being a critical weakness, and that is one of the

things which we have done a lot of work on. In fact, we started

working collaboratively with the Defense Finance and Accounting

Center, and they are working also with the command, to determine

how do we best put a repository of these needed documents.

One, do you have them? But also, when you have them, do you

have them stored in a manner that you can find them and close

the loop on that? That in itself is a control that would take away

a lot of temptation.

In other words, if I take a good in, and I have got to put my

name on the document, well, there is a paper trail there that, if

I didn’t have to put my name on it, there is no paper trail and it

could disappear and——

Mrs. DAVIS OF CALIFORNIA. I think that we have always assumed, and I know I always believed, that we had those kinds of

logistics controls in place. And we are obviously teaching the Iraqi

army how to do this now, so we would certainly be concerned about

how we are transmitting that.

Thank you.

The CHAIRMAN. Before I call on Mr. Kline, it is interesting to

note that in the corporate world, there are some large corporations,

international in scope, that do a great deal of work involving billions of dollars and billions of sales, and they don’t have a problem

like this.

Why is it that the United States military has this problem, as

opposed to large multinational corporations, Mr. Gimble?

Mr. GIMBLE. Mr. Chairman, that is a great question, and if I

could give you a really definitive answer, I think I would be in

pretty good shape.

I think the issue, really, though, is that when you have the large

multinational corporations, a lot of times they don’t go into a combat zone.

I am not trying to say that as an excuse, but one of the issues

that we saw, like on this documentation, is you are rotating the

32

core groups in and out. Initially it was at four months to six

months. And there would be whole units of these people that were

doing the paying and contracting, and the files got separated.

And I think there is a point that firmly needs to be brought out,

too, is that just because you can’t account for a piece of equipment

or a weapon, that doesn’t necessarily mean it is missing. It may be

somewhere in the warehouse.

And we have seen some evidence where there wasn’t a record of

where the weapon came in. You could go in the warehouse, and it

would actually be in the warehouse. We have seen a couple of examples of that.

So I don’t think I have answered your question very well, but

why does this happen? I think it happens because you have a huge

turmoil and, you know, a combat situation. And I don’t necessarily

think that is a good answer, but I think that is what caused the

issue.

The CHAIRMAN. Mr. Kline.

Mr. KLINE. Thank you, Mr. Chairman, and thank the panel for

being here.

We have some interlocking issues here, but following along General Thompson’s idea of sort of breaking this down into a couple

of pieces, one of them is that we had what has made this a very

dark day for me.

We had apparently some senior officers who solicited, accepted

bribes, were involved in just horrific illegal conduct. And as the

general said, I think there are a number of things involved here,

but one of them is a breakdown in leadership in this.

And I concur with a number of statements made here today. This

isn’t a matter of holding another ethics training class for a colonel,

but it is a matter of making sure that colonel goes to jail, or whatever the appropriate punishment is.

But I would also hope that the Army—and I am just looking at

the general here; he happens to be the man in uniform—that the

Army is going to look at the leadership failures which occurred

here. Because I am convinced they did occur, and whether they

were civilian leadership or uniformed leadership, that those people

are held accountable.

There is another issue that we have been going at, and that is

a matter of process and controls. And I have a question I am going

to ask Mr. Gimble here in just a minute.

But I want to identify with some of the remarks that my colleagues have made about this. There has been a lot of stress here.

There is no question.

We in this Congress and commanders and troops in the field and

parents and all manner of people have put a great deal of pressure

on the system, if you will, to get the appropriate services and

equipment in the hands of our soldiers as quickly as possible.

We didn’t want soldiers to continue to operate in 130-degree temperature without having some air conditioned quarters. We didn’t

want them to eat meals ready to eat (MREs) indefinitely. We wanted them to have a place to go and have good chow.

And we certainly wanted the armor on those trucks and vehicles

faster than immediately, and we didn’t want to delay and have a

six-month contract letting bidding process.

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We wanted to get the armor on the trucks and start saving lives.

So I understand that there was pressure to do that.

But to Mr. Gimble’s point about major corporations, in response

to the chairman, not going to combat, the United States Army and

the United States Marine Corps do go to combat and have gone to

combat. And this isn’t the first time. And it isn’t the first time we

have had to let contracts in such a circumstance.

So I am doubly, triply, quadruply appalled at this day, at the

horrific conduct of commissioned officers and a clear breakdown in

leadership. The fact that the Army is unprepared to respond in

these circumstances is—I am sorry, I know it is tough. I explained

the pressures. But it is also inexcusable.

So the question: When do you think—and it can be to anybody,

but Mr. Gimble brought it up, that part of the problem is we have

got a process, and we don’t have controls—when are we going to

have those controls that we can count on so we are not back here

at another hearing in six months? When is that going to happen?

I know Mr. Assad addressed it, Mr. Velz. We have got all sorts

of things going, panels and subpanels and things. When are we

going to have the controls?

Mr. GIMBLE. Let me maybe take the first crack at that. We

issued a report in 2005, and one of the recommendations that was

in there was the fact that the MOI, or the ministry of interior police, did not have the accountability on their weapons.

And the Department has responded back to us, MNSTC–I in particular, that they have got the procedures in place, and they have

got to detail all the things that you are doing.

Now, one of the things that I would tell you is that it looks good

on paper, and General Kicklighter is over in theater, and that will

be one of the things that that team follows up on, is to test—okay,

you say you have these controls in place.

And I can tell you, looking on paper, they look pretty good. They

look pretty robust. But it is one of those trust but verify, and it will

be—I hope that we can come back to you when he gets back to

make his report and have good news on that.

I will have to hold that in abeyance until we see what the results

of his review, you know, turns up.

Mr. KLINE. Thanks for that answer. I would hope that inside the

United States Army and in our contracting process, not just in the

ministry of the interior or ministry of defense in Iraq, that we have

got some controls and processes in effect.

We have American contracting officers here. How are we doing

there?

Mr. GIMBLE. Well, I probably should explain. The event that led

us to make that recommendation was our review in the ministry

of interior looking for those weapons.

But the procedures that they have come back with are the warehouse procedures that would take care of, you know, not just the

ministry of interior but it is a MNSTC–I total look at how they do

their process, procedures. They have developed internal controls.

Mr. KLINE. Okay.

Mr. Chairman, I yield back.

The CHAIRMAN. Thank you, Mr. Kline.

Mr. Ellsworth from Indiana, please.

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Mr. ELLSWORTH. Thank you, Mr. Chairman.

Thank you, witnesses, for coming today. I was sitting over here

listening to everybody and had a lot of the same comments. The

chairman took one of my questions about multinational corporations.

I was going to say if UPS can tell me where a package is on

any—in real time—why can’t we track some of our things.

And Dr. Gingrey said a blue day and talked about appalled. And

I got to thinking about that, you know, this is not just the military.

In fact, our own body of Congress has several cases pending of bribery, theft, taking money, crashing and burning in shame, both in

the House and the Senate.

Members of the clergy certainly have been shamed in media reports, as well as past presidents have been accused. And we all ask

ourselves how could this happen. And I heard that today: How

could this happen?

And really, I think the bigger question is that—are we doing everything we can do to prevent this? And that is what we really

have to do, is find the best and the brightest.

I was a cop for 25 years before coming to Congress in January.

I had a jail full of people, 512 people, and a percentage of those,

everybody said, ‘‘How could this person have done this?’’ Some people you might expect by their past record.

And so there is always going to be people that will try to, out

of greed or whatever, will try to do things. Our responsibility in

this Congress is to try—and then by hiring you and the Administration hiring you, to try to combat that as best you can, with the

best. And we expect our government to have that best process in

place.

One thing I found since being here in January is that—and I

wrote down a couple of quotes today. And it is not just Armed Services. I was in a Small Business hearing yesterday and I heard the

exact same—we were kind of beating up on the Small Business Administration (SBA) a little bit.

And I heard some of the same things: We need to look at this

more deeply, we are moving toward, recently formed, we are going

to, we need to form, and we are in the process.

And I am not against that, but these, as we said before, these

are not the first cases of waste, fraud, abuse, and theft in any

branch of government, and you know, we had these before. We

probably had it in Vietnam, Korea, Bosnia. You name the conflict,

we had these.

And the American public expects us to do a better job and find

the best. And if we can’t, if we aren’t the best, then hire the people

away from UPS or FedEx, to be fair, and whoever that person is.

The one thing I don’t want our troops to get the message is

that—I gave out public-owned equipment to my deputies. I told

them, ‘‘Take care of it. Do the best you can. But if you have to

break that piece of equipment to defend your life, if you have to

throw it away or do something with it, that is okay; just be able

to explain it later.’’

And I think I don’t want to send the troops a message that two

guys in the field can’t exchange their clip because I have to account

35

for—I only get three and I can’t trade that. That is not what our

troops need to hear.

But we are public, and this Congress has sunk a ton of money

into what the gentleman just said—MRAPs. Do it now better than

later.

But our public, no matter how they feel about this war—whether

we should be there, whether we shouldn’t, come home, stay there,

whatever it is—want us to spend their dollars wisely and give the

best accounting.

They know people will steal. It is going to happen. But then they

expect us to catch them and punish them. That being said, I would

go forward from here and find those people, do the best we can,

and in the fastest manner we can so, as I said, we don’t have to

come do this a lot, and our whole entire government, from Congress down to the leaders, get egg on our face again.

And with that, Mr. Chairman, I would yield back.

The CHAIRMAN. I thank the gentleman.

Ms. Shea-Porter from New Hampshire.

Ms. SHEA-PORTER. Thank you, Chairman.

As a former military spouse, my heart is sickened by what I have

heard today. I am hearing all the little words like ‘‘put proper controls,’’ ‘‘lessons learned,’’ ‘‘checks and balances,’’ ‘‘teach them to look

for fraud.’’

That is probably one of my favorites, because I know how to look

for fraud, and I know the American public knows how to look for

fraud.

As a matter of fact, they have been hollering, absolutely hollering, in the papers for several years now, very suspicious of certain

companies which we don’t need to name again, and suspicious of

connections to companies.

We knew there was fraud. I cannot understand this at all. And

then saying that our troops were not up to the complexity of the

job of finding the fraud. Now, I don’t mean to sound facetious, but

we have contracted everything else out. Why didn’t we contract

that out, so that we could at least have somebody who knew how

to look for it and would look for it?

And the reason that you are hearing this kind of controlled rage

right now is because we have other decisions to make when we go

to votes, and we have to be fiscally responsible. We have the greatest deficits in history.

And so I am looking, saying, ‘‘No, we can’t vote for this program which would help our people,’’ but $6 billion here, $9 billion unaccounted for—you know, I feel sorry for you all, because you are

here defending the indefensible, and you and I know that.

But Americans are asking us how could this have happened, and

what was the climate for this?

And another problem that I am having here is what about our

troops?

You made a comment, Mr. Velz, about the small arms, that we

wanted to get things out, not all of them were registered with serial numbers. I would like to tell you how many were not registered—370,000. Ten thousand were registered.

Now, is anybody else worried about the safety of our troops if we

are not even tracking this? And when we see certain people—I

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mean, everybody can recognize when suddenly somebody is living

better than the other guys. That should send a flag, even if they

never had a bit of training.

But I do remember reading something in the paper about when

they were trying to send over accountability teams to do this, that

it was stopped. And so my question is painful, but I am going to

ask it.

Mr. Velz, I will start with you. Mr. Gimble, I don’t even know

who would have had this. Was the former Secretary of Defense,

Donald Rumsfeld, ever discouraging any of this? Was this ever

brought to his attention?

Mr. VELZ. Ma’am, I just don’t know the answer to that question.

I have never met him. I don’t know.

Ms. SHEA-PORTER. Okay. Does anybody know? And I am sure

you know what I am talking about when I read in the papers before I was in Congress that they wanted to send some teams there

to take a look at, and have financial accountability, and that was

not allowed.

Does anybody remember that part?

Mr. VELZ. Ma’am, I can tell you, I have been on assessment

teams that have been sent by the Secretary of Defense. And among

the issues we looked at was the capacity and capabilities of

MNSTC–I and other organizations doing reconstruction activities

in Iraq.

And we did report back honestly that we thought they needed

many more people. I don’t know what the results of that were,

though.

Ms. SHEA-PORTER. So you don’t know where the report went.

Mr. VELZ. I was just one of the staffers working on the report

in the field, gathering the data, building the response. I was not

involved in any of the briefings that reported that back to the secretary.

Ms. SHEA-PORTER. What year was that?

Mr. VELZ. 2005 and 2006. I have done others.

Ms. SHEA-PORTER. Okay. So two years ago you knew that we

didn’t have enough people there to——

Mr. VELZ. Yes, ma’am. I mean, that has been an issue that many

people have raised. General Petraeus, when he was the commander

of MNSTC–I, told us he needed many more people. We reported

back that recommendation as well.

But there are limitations on the availability of personnel

throughout the military with the right skill sets to do these very

unique types of jobs that they are doing there.

Can I just address the small arms issue really quickly?

Ms. SHEA-PORTER. Sure.

Mr. VELZ. You are right, that was a significant problem that

most of the weapons were not being registered in the small arms

registry.

SIGIR, Special Inspector General for Iraq Reconstruction, pointed that out to MNSTC–I last year. MNSTC–I at first was resistant

to entering that data into the——

Ms. SHEA-PORTER. Okay, I will have to cut you off because I am

almost done with my time. But we are talking only 10,000 of

370,000, so——

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Mr. VELZ. Ma’am, they are entering all the records now, and they

are—retroactively, they have entered as many as they can find.

Ms. SHEA-PORTER. Well, the problem is that we have troops there

who could be exposed to our weapons that we lost track of, and

that we had dishonest contractors.

And what I have heard today, while I certainly appreciate the

fact that we have checks and balances and lessons learned and

paper controls, we are in our fifth year with a war that has just

absolutely, absolutely divided this Nation in money and in lives

and in political world.

And how do we go out and explain to the American public what

you just said to us today? That we have learned lessons and we

have checks and balances now, when they knew—the Americans

knew—they could read the front page—that we were having problems two years ago, three years ago, four years ago.

I can’t explain the gap in time, and I really don’t think you can

either. And that is probably the reason for the heaviness in my

heart today, hearing what I heard. But I thank you for being here.

The CHAIRMAN. I thank the gentlelady.

Lake City Army Ammunition Plant is in Jackson County, edge

of Independence, Missouri, near my district. For 52 years, the chief

civilian employee, though a lieutenant colonel was always technically in charge—the chief civilian employee was a man by the

name of Dale Pollard.

And Dale Pollard treated every contract—because it was a GOCO

plant, a government-owned, company-operated plant—treated

every contract as if it were his dollars. And he was one of the most

frugal persons I had ever known. His home was my home town of

Lexington, Missouri.

And out of all this today, some people may get the idea that we

are riddled with corruption out there. But there are Dale Pollards

in this world.

And to them, let’s tell them through your actions, through our

actions here in Congress, to keep doing a good job. Keep setting an

example. Those that sully their name or the process by which we

support our troops should come to light and be dealt with.

So we thank you for your efforts in culling those bad apples out,

but in the meantime let’s keep in mind and be grateful to those

who do their job, never ask for anything except an honest day’s

sleep.

So with that, we thank you for a revealing, sad hearing, but it

is one that we needed to have. So you continue to do your job, and

we will do our best to do ours. Thank you.

[Whereupon, at 1:39 p.m., the committee was adjourned.]

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SEPTEMBER 20, 2007

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