[Senate Hearing 110-891]
[From the U.S. Government Publishing Office]
S. Hrg. 110-891
FEDERAL ACQUISITION: WAYS TO STRENGTHEN COMPETITION AND ACCOUNTABILITY
=======================================================================
HEARING
before the
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
JULY 17, 2007
__________
Available via http://www.access.gpo.gov/congress/senate
Printed for the use of the
Committee on Homeland Security and Governmental Affairs
37-359 WASHINGTON : 2009
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii TED STEVENS, Alaska
THOMAS R. CARPER, Delaware GEORGE V. VOINOVICH, Ohio
MARK L. PRYOR, Arkansas NORM COLEMAN, Minnesota
MARY L. LANDRIEU, Louisiana TOM COBURN, Oklahoma
BARACK OBAMA, Illinois PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri JOHN WARNER, Virginia
JON TESTER, Montana JOHN E. SUNUNU, New Hampshire
Michael L. Alexander, Staff Director
Troy H. Cribb, Counsel
Brandon L. Milhorn, Minority Staff Director and Chief Counsel
Amy L. Hall, Minority Director for Governmental Affairs
Trina Driessnack Tyrer, Chief Clerk
U.S. GOVERNMENT PRINTING OFFICE
C O N T E N T S
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Opening statements:
Page
Senator Lieberman............................................ 1
Senator Collins.............................................. 4
Senator Akaka................................................ 7
Senator Carper............................................... 8
WITNESSES
Tuesday, July 17, 2007
Hon. David M. Walker, Comptroller General of the United States... 12
Marcia G. Madsen, Chair, Acquisition Advisory Panel.............. 14
Stan Soloway, President, Professional Services Council........... 18
Alphabetical List of Witnesses
Madsen, Marcia G.:
Testimony.................................................... 14
Prepared statement with an attachment........................ 71
Soloway, Stan:
Testimony.................................................... 18
Prepared statement........................................... 91
Walker, Hon. David M.:
Testimony.................................................... 12
Prepared statement........................................... 45
APPENDIX
Barry M. Cullen, President, Contract Services Association, letter
dated July 17, 2007............................................ 103
Questions and responses for the Record from:
Mr. Walker................................................... 105
Ms. Madsen................................................... 106
Mr. Soloway.................................................. 109
FEDERAL ACQUISITION:
WAYS TO STRENGTHEN COMPETITION
AND ACCOUNTABILITY
----------
TUESDAY, JULY 17, 2007
U.S. Senate,
Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 10:05 a.m., in
room SD-342, Dirksen Senate Office Building, Hon. Joseph I.
Lieberman, Chairman of the Committee, presiding.
Present: Senators Lieberman, Akaka, Carper, and Collins.
OPENING STATEMENT OF CHAIRMAN LIEBERMAN
Chairman Lieberman. Good morning and welcome to this
hearing. This morning the Committee is going to focus on one of
the most important parts of our oversight jurisdiction, and
that is the acquisition of goods and services by the Federal
Government.
The fact is that the U.S. Government is the largest buyer
of goods and services in the world by far.
The numbers are stunning and demand our attention.
Government spending on contracts has exploded, while the
trained workforce that oversees Federal contracting has shrunk.
This has already contributed to widely publicized--and I would
have to say infuriating--examples of waste, and the problem
will only worsen in the years ahead if we do not act together
to better protect the expenditure of taxpayer dollars for
Federal contracting.
Let me give you some of the numbers. Between 2000 and 2006,
spending on government contracts has grown from almost $219
billion a year to $415 billion. That is an astounding 89-
percent increase in the past 6 years.
Yet, the number of Federal acquisition specialists who help
write and negotiate and oversee these contracts has remained
pretty much constant over that same period of time, and that
follows a significant downsizing of the acquisition workforce
during the 1990s. The numbers are particularly striking at the
Department of Defense, where the workforce has declined by
almost 50 percent since the mid-1990s. Government-wide, the
workforce is about to shrink even further if nothing is done
because roughly half the current acquisition workforce is
eligible to retire within the next 4 years.
So it is imperative we attract fresh new talent into this
critically important public service profession because the work
is crucial to the effective and efficient use of taxpayers
dollars.
I want to point out something that I have been educated to
better understand, which is that a successful system for buying
goods and services is more than just selecting the right vendor
and signing a contract. Successful purchasing requires, in the
Federal Government and the private sector, careful planning and
negotiation of the contract before the contract is signed, and
then followed by rigorous oversight throughout the life of the
contract. It requires that government agencies have the
competence to know what they need and understand how to work
with the private sector to meet those objectives. And it
requires government officials whose only allegiance is clearly
to the taxpayer, and not in any way to contractors who might
become their future employers.
If you dig into the causes of some of the most dramatic
examples of wasteful spending through contracting that we have
seen in recent years, you can see a very sad story of a system
breaking down with very bad consequences for the taxpayers.
For example, TSA's contract for recruiting airline
screeners grew from an original estimate of $104 million to a
final settlement with the contractor of $741 million. That
contract was for the recruiting of airline screeners. Auditors
identified nearly $300 million in questionable costs submitted
by the contractor. And TSA itself helped drive up the costs by
changing the scope of the contract after it was signed, without
sufficient regard to what those changes would cost.
The FBI's Trilogy project is very well known, painfully
known. The project to upgrade the FBI's IT systems grew from
$380 million to $537 million, due in part to poorly designed
contract requirements, unrealistic scheduling, and weak
oversight. GAO also identified over $10 million in questionable
costs submitted by the contractor. As we know, in 2004 the FBI
scaled back the project and determined that key elements were
absolutely unfeasible as originally planned.
The U.S. Coast Guard turned too much of its decisionmaking
for the Deepwater Project over to its contractors, with very
bad results. The costs for the first two National Security
Cutters alone are expected to increase by more than $300
million, and that does not include the additional hundreds of
millions of dollars required for structural redesigns to those
two ships and future cutters. So what we are talking about
really matters.
Insufficient competition in awarding government contracts
is a trend that is also troubling. Since 2000, the dollar value
of contracts awarded without full and open competition has more
than tripled, from $67.5 billion to almost $207 billion.
Recently, the Office of Federal Procurement Policy reviewed
awards at major contracting agencies and found that 36 percent,
more than one-third, of the money spent on contracts last year
was awarded without full competition.
The Department of Defense, which is, of course, the largest
spender on contracts, averaged about 37 percent awarded without
full and open competition. NASA let half of their contracts
without full and open competition, and the Department of
Homeland Security slightly more than 50 percent.
The Federal Government is also increasingly using contracts
not just to buy goods, which is how we think of as contracting
conventionally, but to provide services to an array of
agencies. Now, I understand that this can provide government
with increased flexibility to meet urgent or unforeseen needs,
and it also can provide access to expertise that might not be
resident within the government agency. But the amount of
contracting for services does raise questions as to whether our
Federal Government has retained sufficient in-house capacity to
effectively manage and oversee contracts and whether the
Federal Government is ensuring that contractors do not perform
what is inherently, and ought to remain, a government function.
Expanding the role of contractors providing services has
created separate management challenges, and there is an irony,
at least to me, to the fact that contractors are now being
hired to oversee other contractors and to assist agencies with
the process of awarding contracts.
We have actually even heard recent examples of contractors
being retained to write Federal regulations, which, of course,
we think of as an inherently Federal Government responsibility,
therefore to be performed by full-time employees.
Looking back, in the 1990s Congress enacted a series of
reforms to Federal procurement law to streamline the
government's purchasing and to encourage the purchase of goods
and services that are readily available in the marketplace.
While I would say that these reforms have given our Federal
Government greater flexibility as a purchaser, the level of
inefficiency and waste definitely is still unacceptable, and
for that reason I am pleased to join with Senator Collins who
has taken the lead in drafting legislation to address some of
these procurement problems. The proposal is known as the
Accountability in Government Contracting Act of 2007, S. 680.
I think that the evidence is so strong that there is a lot
that ails Federal contracting procedures today that I intend to
do everything I can as Chairman of this Committee to make sure
that we do not just oversee and investigate, but that we
legislate in this area to try to improve the status quo. And I
think S. 680 is a good place to start.
Over the past 2 years, the Committee has held numerous
hearings that have addressed contracting challenges, for
instance, in rebuilding the Gulf Coast, executing
reconstruction contracts in Iraq and Afghanistan, and acquiring
services to protect the Nation from acts of terror or to
facilitate recovery from natural disaster. All of those
efforts, unfortunately, have been marred by some wasteful, and
occasionally fraudulent, contracting practices.
Contractors are essential to the functioning of our
government. No one expects the government, for instance, to
produce its own computers or build its own fighter planes or
perform services that are better provided by the private
sector. But with billions and billions of dollars of taxpayers'
money at stake, both the government and contractors have a
responsibility to do a better job than we are now at seeing to
it that the taxpayers are getting their money's worth. And that
will be the focus of this Committee and this hearing and
beyond.
Senator Collins.
OPENING STATEMENT OF SENATOR COLLINS
Senator Collins. Thank you, Mr. Chairman, and thank you for
holding this important hearing this morning.
As you have mentioned, the challenge of overseeing Federal
contracting has grown over the years. Spending under Federal
contracts now exceeds $400 billion a year. As you pointed out,
Mr. Chairman, that makes the U.S. Government by far the world's
largest purchaser, and the government purchases a huge variety
of goods and services, ranging from staplers to studies to
satellites.
During the past two decades, Federal purchasing has
undergone several waves of reform. As a Senate staffer many
years ago, I helped to draft the Competition in Contracting Act
of 1984, and I look out at the audience today and I see many of
the people who were on the Committee staff at the same time
that I was. Who would ever have guessed that I would be here
today and that we would be working together once again on
contracting reforms? As you mentioned, Mr. Chairman, there were
other major procurement reform laws enacted in 1994, 1996, and
2003, on and on.
Unfortunately, many of the problems that we have sought to
correct over the years are still with us, like a drug-resistant
virus that defies a doctor's best efforts.
This Committee firsthand has heard truly alarming reports
on acquisition problems, particularly in the response to
Hurricane Katrina and also in the reconstruction efforts in
Iraq and Afghanistan. But it is not just the big emergency
projects that run into acquisition problems. Oftentimes even
routine Federal acquisition projects are rife with troubles. I
want to mention just three examples to supplement some of the
ones that the Chairman noted.
The Special Inspector General for Iraq Reconstruction found
that the Department of Defense's management of $7.3 million in
contracts relating to the Babylon Police Academy had numerous
deficiencies, including $1.3 million wasted on duplicate
construction and unneeded equipment, $2 million in
unaccountable spending, and, indeed, examples of outright
fraud.
FEMA, in a well-publicized case, spent more than $900
million to buy manufactured homes for the victims of Hurricanes
Katrina and Rita that was largely wasted. More than 2,000 of
the units did not fit FEMA's size specifications, and FEMA's
own floodplain rules prevented the large-scale deployment of
these manufactured homes in the most heavily damaged areas of
Louisiana and Mississippi. This was an example where literally
the left hand did not know what the right hand was doing within
the same agency.
The Department of Energy contracted with Bechtel to build a
$4.3 billion waste treatment plant at the contaminated Federal
nuclear facility in Washington State. GAO has reported this
year that the cost estimate now exceeds $12 billion and that
completion is likely to be 8 years later than originally
scheduled.
Mr. Chairman, I do not cite these examples to question the
goals or the importance of these programs and these contracts.
Instead, I cite them precisely because they are important for
advancing our national interests, for enhancing the
capabilities of our armed forces, for protecting our citizens.
And that is why, beyond the concern for wasted dollars and
delayed deliveries, it is so troubling that the contract
management functions at Defense, DHS, and the Department of
Energy, are all on the GAO's high-risk list.
We know that just as the problems are varied, so are the
causes. They include a severe and growing shortage of qualified
acquisition professionals, an overreliance on sole-source
contracts, inadequate specification of requirements and
delivery dates, too many award fees in the face of poor
performance, a lack of transparency in the process, deficient
monitoring and evaluation, and, sadly, in some cases
decisionmaking corrupted by individuals accepting gifts or
seeking future private employment.
That is why you, Mr. Chairman, along with Senators Coleman,
Carper, and McCaskill, and I have introduced S. 680, the
Accountability in Government Contracting Act of 2007. This is a
strong, bipartisan package of reforms that would tackle many of
the problems we have seen in the Federal acquisition process.
It would help to strengthen the acquisition workforce, improve
oversight of contracts, and promote more competition and better
transparency.
Mr. Chairman, the rest of my statement goes into many of
the provisions of the bill. In the interest of time, I am just
going to focus on one, and that is a growing practice of
contracting officers awarding what are called ``undefinitized
contracts,'' and by that I mean contracts that are actually
missing key terms, such as the price or the scope or the
schedule. This practice is out of control, and it creates
considerable problems. So the legislation that we have
introduced would help mitigate the award of those kinds of
contracts by requiring the contracting officer to unilaterally
determine the missing terms within 180 days if it cannot be
worked out. But, obviously, those kinds of contracts, which are
missing such key elements, pose great risks.
I also want to just briefly focus on the shortfalls in the
rank of Federal acquisition professionals. This may not be the
most glamorous of issues, but, arguably, they are the most
important provisions of this bill, because no matter how we
tighten up the law, if we do not have well-trained
professionals in adequate numbers administering these
contracts, then all of the legal reforms will be in vain.
I am eager to hear the ideas from our witnesses for making
our bill even more comprehensive and effective. You have
invited, Mr. Chairman, a superb panel today. This is a vitally
important subject for the Committee. Delays and defects in
procuring goods and services frustrate our goals and can
actually endanger the lives of our citizens and our soldiers.
And every dollar that is lost to waste, fraud, abuse, or
mismanagement is a dollar denied to some other worthy
objective.
Thank you, Mr. Chairman.
[The prepared statement of Senator Collins follows:]
PREPARED STATEMENT OF SENATOR COLLINS
The challenge of overseeing Federal contracting has grown over the
years. Spending under Federal contracts now exceeds $400 billion a
year, making the U.S. government by far the world's largest purchaser
of goods and services, from staplers to studies to satellites.
During the past two decades, Federal purchasing has undergone
several waves of reform. As a Senate staffer years ago, I helped draft
the Competition in Contracting Act of 1984. More recent reform efforts
were enacted in 1994, 1996, and 2003.
Unfortunately, many of the problems we sought to correct over the
years are still with us, like a drug-resistant virus that defies a
doctor's best efforts.
This Committee has heard truly alarming reports on acquisition
problems such as arose in the response to Hurricane Katrina and in the
reconstruction efforts in Iraq and Afghanistan. But even routine
Federal acquisition projects are often rife with problems.
I will mention three examples from a regrettably long list of
candidates:
The Special Inspector General for Iraq Reconstruction
found that the Department of Defense's management of $7.3 million in
contracts relating to the Babylon Police Academy had numerous
deficiencies, including $1.3 million wasted on duplicate construction
and unneeded equipment, $2 million in unaccountable spending, and
possible fraud.
FEMA spent $915 million to buy manufactured homes for
victims of Hurricanes Katrina and Rita that was largely wasted. More
than 2,000 of the units exceeded FEMA's size specifications, and FEMA's
flood-plain rules prevented large-scale deployment in the most heavily
damaged areas of Louisiana and Mississippi.
The Department of Energy contracted with Bechtel to build
a $4.3 billion waste-treatment plant at the contaminated Federal
nuclear facility in Hanford, Washington. GAO reported this year that
the cost estimate now exceeds $12 billion, and that completion will
likely be in 2019 or later, 8 years later than originally scheduled.
GAO points to contractor performance, DOE management and oversight, and
technical issues as problems.
Mr. Chairman, I don't cite these examples to question the goals or
importance of the programs. I cite these programs precisely because
they are important for advancing our national interests, for enhancing
the capabilities of our armed forces, and for protecting our citizens.
That is why, beyond the concern for wasted dollars and delayed
deliveries, it is so troubling that the contract-management functions
at Defense, DHS, and the Department of Energy, are all on GAO's high-
risk list.
We know that just as the problems are varied, so are the causes.
They include a severe and growing shortage of qualified acquisition
professionals, an over-reliance on sole-source contracts, inadequate
specification of requirements and delivery dates, too many award fees
in the face of poor performance, a lack of transparency in the process,
deficient monitoring and evaluation, and even decision-making corrupted
by individuals accepting gifts or seeking future private employment.
That is why I, along with Chairman Lieberman and Senators Coleman,
Carper and McCaskill, introduced S. 680, the Accountability in
Government Contracting Act of 2007, earlier this year.
This strong, bipartisan package of reforms would tackle many of the
problems we have seen in Federal acquisition. It would help to
strengthen the acquisition workforce, improve oversight of contracts,
and promote competition and transparency.
Among other reforms, S. 680 would mandate competition for task or
delivery orders that are currently not subject to competition. To
increase the quality of competitive bids and bring additional
transparency to task or delivery order competitions, the bill
establishes the right to post-award debriefings for unsuccessful
bidders on orders valued over $5 million. This will help vendors shape
better offers for the future and sharpen competition.
S. 680 also lessens the risks inherent in sole-source contracts by
requiring prompt, on-line publication of notices of all sole-source
task or delivery orders above the Simplified Acquisition Threshold.
The bill would mitigate the practice of awarding contracts missing
key terms, such as price, scope or schedule--that is, ``undefinitized
contracts''--by requiring the contracting officer to unilaterally
determine missing terms within 180 days or a specified completion
percentage.
Equally important, several measures in S. 680 would address the
shortfalls in the ranks of Federal acquisition professionals.
Mechanisms include an acquisition internship program and a government-
industry exchange program; an Acquisition Fellowship Program offering
scholarships in exchange for a commitment to Federal service,
requirements for human-capital strategic plans by chief acquisition
officers, and a new senior-executive-level position in the Office of
Federal Procurement Policy to manage this initiative.
I am eager to hear ideas from our witnesses for making our bill
even more comprehensive and effective. As Comptroller General, Mr.
Walker has performed a great service to the country by overseeing GAO's
numerous and insightful reports on government programs, and in
publicizing the high-risk list. Ms. Madsen's legal background in
contracting and her service with the SARA Panel establish her as a
particularly acute diagnostician in this area. And Mr. Soloway's
government experience in earlier reform programs and his private-sector
expertise will give us valuable insights in how we can improve the
contracting process while taking into account legitimate business
concerns.
This is a vitally important subject for the Committee. Delays and
defects in procuring goods and services frustrate our goals, and can
endanger the lives of our citizens and our soldiers. And every dollar
lost to waste, fraud, or abuse is a dollar denied to some other worthy
objective.
Chairman Lieberman. Thank you very much, Senator Collins,
for an excellent statement and for your leadership in putting
forth legislation on this subject.
Normally we would go to the witnesses now, but I would ask
Senator Akaka and Senator Carper if either wants to make a
brief opening statement.
OPENING STATEMENT OF SENATOR AKAKA
Senator Akaka. Mr. Chairman, I want to thank you very much
for holding this hearing. Acquisition management has become a
huge challenge for the government, as you pointed out so well
in your statement, due in large part to the increasing use of
contracting that has gone on. Many of the problems in
acquisition management stem from an understaffed acquisition
workforce, and that is something that we need to work on.
I have a statement here, and in the interest of time, I
will ask that it be placed in the record.
[The prepared statement of Senator Akaka follows:]
PREPARED STATEMENT OF SENATOR AKAKA
Thank you, Mr. Chairman, for holding this hearing. Government
acquisition is a very important subject, which I have followed closely
in my role as Chairman of the Subcommittee on Oversight of Government
Management.
Over the past 6 years, the use of contracts has ballooned. In 2006,
the Federal Government spent over $400 billion taxpayer dollars on
procuring goods and services--double what was purchased in 2000. At the
Department of Homeland Security alone, procurement spending has tripled
since its creation in 2003. Senator Voinovich and I held a hearing on
DHS acquisition management just last month where we heard about
progress made in contract management and lessons learned from past
problems.
One of these problems, which unfortunately illustrates what happens
when contracts do not receive enough oversight, is the Coast Guard's
Deepwater contract for fleet modernization. Due to inadequate oversight
after awarding the contract, costs soared and deliverables did not meet
the Coast Guard requirements. The entire contract had to be overhauled,
showing that the government cannot always rely on contracted support to
oversee major acquisitions.
Many of the problems in acquisition management stem from an
understaffed acquisition workforce. While contract spending has
doubled, our acquisition workforce has remained steady at around 55,000
government employees. As a result, contractors are being used to
supplement the acquisition workforce. Sometimes contractors are even
hired to study whether or not certain government activities should be
contracted out. One may wonder, are the foxes guarding the henhouse?
The terms and requirements of contracts are also too vague. In some
cases, the government issues requests for proposals that are too broad
with few specific requirements. Agencies then rely on a contractor to
tell them what it is the agency needs to achieve its mission. The
SBInet program relied heavily on such broad terms, and this contract
must be continually monitored to ensure it is not mismanaged.
The increasing reliance on certain types of contracts is also a
serious problem. Cost-plus contracts, in which the government pays for
the costs of a good or service, plus a percentage, can lead to abuse
and waste. With these terms, there is little incentive to find the
lowest cost solutions. The more an item costs, the bigger the
commission for the contractor. These contracts can also include an
additional award fee, which is routinely awarded nearly in full, even
if there was admittedly poor performance, as we have seen with several
contracts in Iraq.
Most troubling is the reliance on no-bid and limited competition
contracts. While time is of the essence for many acquisitions, no-bid
and limited competition contracts are not always responsible
procurement options. Such contracts are only meant to be used sparingly
when there is clearly a single provider of the needed service. However,
it is more often the case that we ask for so much in umbrella
contracts; bloated requests for services so large that only a handful
of companies can deliver. Better planning and a bigger workforce could
allow government agencies to create manageable contracts that can be
opened up for more competition which saves the government money.
Again, thank you Mr. Chairman for holding this hearing. This is a
very important issue. I hope to work with you, the Ranking Member, and
Members of this Committee to find meaningful solutions that can improve
acquisition management. I look forward to hearing from our witnesses
today, who will offer their expertise as we move forward.
Chairman Lieberman. Thanks, Senator Akaka.
The record should note that Senator Akaka, in partnership
with Senator Voinovich, has been really persistent in pursuit
of what Senator Collins quite correctly called the
``unglamorous'' questions associated with human capital
management for the Federal Government, including the workforce
and the acquisition workforce. So I thank you.
Senator Carper.
OPENING STATEMENT OF SENATOR CARPER
Senator Carper. Thanks, Mr. Chairman.
It ought to be clear to anyone who has been paying
attention to the news in recent years that our Federal
Government has serious problems with the way that we manage our
contractors and the way we manage our contracts. The U.S.
Government is the biggest buyer in the world. I am told we
purchased over the last 7 years or so nearly a half trillion
dollars' worth of goods and services. That is an increase of
almost 90 percent. This enormous increase has been triggered, I
think at least in part, to our support for efforts in Iraq and
Afghanistan.
Unfortunately, auditors and investigators have exposed
extensive waste, fraud, and abuse involving a number of
government agencies and contractors. In fact, many of the
contracts involving our government during the past 4 years in
Iraq and Afghanistan have resulted in profound waste and
mismanagement, some of which we visited 4 weeks ago. Senator
McCaskill and I were over there on a mission to look into some
of it.
Most of those contracts have been awarded on a no-bid or
cost-plus basis. As a result, billions of taxpayers' dollars
have unfortunately been wasted. I just want us to consider two
examples over the past 2 years alone.
Last year, the Defense Contract Audit Agency identified
about $263 million as ``potentially excessive or unjustified''
costs charged by Kellogg, Brown & Root, known as KBR--the
government contracting firm formerly under Halliburton--under a
no-bid contract known as ``Restore Iraqi Oil.'' Yet the
Department of Defense chose to pay $253 million of the disputed
costs, despite the auditors' objections.
This past May, according to an audit by our own Special
Inspector General of Iraq, we learned that KBR did not keep
accurate records of gasoline distribution, put its employees in
living spaces larger than necessary, and served meals that cost
$4.5 million more than necessary under its contract to perform
work in Iraq.
As I said earlier, Senator McCaskill and I were over there
about a month ago, and we learned firsthand, when we visited
Iraq, some of this information. The oversight that our
congressional delegation performed in both Iraq and Kuwait--
over contractors operating there and the contracts they
ostensibly oversee--was very constructive.
Mr. Walker, I was briefed, prior to my trip, by a couple of
people from your shop, and I think Carole Coffey was one and
Bill Solis was the other, and they did really an excellent job.
We thank you and them.
According to the Department of Defense, there are more than
127,000 contractors in both countries supporting our war
effort. These contractors do everything from doing the laundry,
serving meals, driving convoy trucks, repairing trucks and
vehicles that have been blown up, and you name it. They
protected us while we were there.
The oversight, though, of the contractors who support the
deployed forces has been a longstanding problem, which GAO has
reported on since, I guess, 1997. Last December, the GAO argued
the Department of Defense continues to have inadequate
contractor oversight personnel in deployed locations, which
makes it nearly impossible for the Department of Defense to
receive assurances that contractors are meeting contract
requirements efficiently and effectively at each location.
Similarly, the GAO noted commanders and other military
personnel--integral players in contractor oversight--receive
little or no training on the use of contractors as part of
their predeployment training or their professional military
education.
This week, I am offering an amendment to the Defense
Authorization bill to correct that, an amendment that I hope
Senator McCaskill will join me in offering. Our amendment will
help ensure military personnel understand the scope and the
scale of the contractor support they have in contingency
operations and prepare them for their roles and
responsibilities for oversight and contingency contracting.
Over the past 5 months, Congress has started to pressure
the Executive Branch to end bad contracting practices, and not
a moment too soon, I might add. However, many problems do
persist, and the key is to stay on it. We must remain vigilant
in our congressional oversight of Federal taxpayer dollars
going to pay contractors, whether it is in Iraq or Afghanistan
or some other place around the world.
The questions I hope will be addressed today are these:
One, how do we make the Federal acquisition process more
efficient, more effective, transparent, and accountable?
Two, how do we establish a capable acquisition workforce
and hold it accountable?
Three, how can the Congress play a constructive role in the
path forward?
Federal agencies, particularly the Departments of Homeland
Security and Defense, have critically important missions--to
protect and secure our homeland. Waste and mismanagement
undermine their missions. Anything that weakens our
government's quick and effective response to the real threats
our country continues to face here and abroad is just too much.
As elected Members of Congress, our greatest stakeholders
are the American people. We have an obligation to ensure their
dollars are being used as effectively as possible. That is why
I am also proud to be an original cosponsor of the legislation
Senator Collins has offered, along with Senator Lieberman, to
ensure proper oversight and accountability in Federal
contracting.
Last, let me just conclude by saying congressional
oversight is imperative to make sure that Federal agencies like
the Department of Homeland Security and like the Department of
Defense step up to the plate, confronting the waste of precious
taxpayer dollars and taking immediate, corrective action so we
protect Americans and our interests abroad as well as the
nearly 300 million Americans at home.
I look forward to hearing from each of you. We welcome our
witnesses and we look forward to continuing to work with our
colleagues on this Committee and others to provide the
oversight that ensures these agencies do not shy away from
their duty to forcefully confront waste and mismanagement.
Welcome. Thank you for coming.
PREPARED STATEMENT OF SENATOR CARPER
It should be clear to anyone paying attention to the news in recent
years that our Federal Government has serious problems with the way it
manages contractors and contracts.
The U.S. government is the biggest buyer in the world, purchasing
nearly half a trillion dollars in goods and services over the past 7
years--an increase of almost 89 percent. This enormous increase has
been triggered, in part, to support our war efforts in Iraq and
Afghanistan.
Unfortunately, auditors and investigators have exposed extensive
waste, fraud, and abuse involving a number of government agencies and
contractors. In fact, many of the contracts involving our government
during the past 4 years in Iraq and Afghanistan have resulted in
profound waste and mismanagement. Most of those contracts have been
awarded on a no-bid or cost-plus basis. As a result, billions of
taxpayers' dollars have been wasted. Consider just a few examples over
the past 2 years alone:
Last year, the Defense Contract Audit Agency (DCAA)
identified about $263 million as ``potentially excessive or
unjustified'' costs charged by Kellogg, Brown & Root (KBR)--the
government contracting firm formerly under Halliburton--under a no-bid
contract known as ``Restore Iraqi Oil.'' Yet the Department of Defense
chose to pay $253 million of the disputed costs, despite the auditors'
strong objections.
This past May, according to an audit by our Special
Inspector General of Iraq, we learned that KBR did not keep accurate
records of gasoline distribution, put its employees in living spaces
larger than necessary and served meals that cost $4.5 million more than
necessary under its contract to perform work in Iraq.
We have also learned the California-based Parsons
Corporation, which has received $186 million over the past 3 years for
a healthcare center project, has completed construction on only 15 of
142 planned health care centers. Of those 15 centers, only six are open
to the public.
I learned this first-hand when I visited Iraq last month. The
oversight our congressional delegation performed in Iraq and Kuwait--
over contractors operating there and the contracts they ostensibly
oversee--was very constructive.
According to the Department of Defense, there are more than 127,000
contractors in both countries supporting our war effort. These
contractors do everything--prepare meals, do laundry, drive hundreds of
trucks thousands of miles to re-supply U.S. and Iraqi forces, repair
damaged vehicles, and, even provide protection to congressional
delegations that come to Iraq on an almost weekly basis.
Oversight of contractors who support deployed forces has been a
long-standing problem, which the General Accountability Office (GAO)
has reported on since 1997. Last December, the GAO argued the
Department of Defense continues to have inadequate contractor oversight
personnel in deployed locations, which makes it nearly impossible for
the Department to receive assurances that contractors are meeting
contract requirements efficiently and effectively at each location.
Similarly, the GAO noted commanders and other military personnel--
integral players in contractor oversight--receive little or no training
on the use of contractors as part of their pre-deployment training or
their professional military education.
This week, I am offering an amendment to the Defense Authorization
bill to correct this. My amendment will require training for all
military personnel outside the acquisition workforce, including
operational field commanders and officers performing key staff
functions for operational field commanders expected to have acquisition
responsibility and oversight of contracts and contractors. My amendment
will help ensure military personnel understand the scope and scale of
the contractor support they have in contingency operations and prepare
them for their roles and responsibilities for oversight and contingency
contracting.
Over the past 5 months, Congress has started to pressure the
Executive Branch to end bad contracting practices. Slowly, bad
contracting practices are disappearing and will, with our continued
oversight, be replaced with fixed-price contracts and competitive
bidding.
For example, the Defense Department, which spent $151 billion on
service contracts in fiscal 2006, has made some effort to increase
oversight. However, many problems persist. The key is to stay on it. We
must remain vigilant in our congressional oversight of Federal taxpayer
dollars going to pay contractors in Iraq and Afghanistan.
The questions I hope will be addressed today are:
How do we make the Federal acquisition process more
efficient, effective, transparent and accountable?
How do we establish a capable acquisition workforce and
hold it accountable?
What tools do our Federal agencies need to accomplish
those objectives?
How can the Congress play a constructive role in the path
forward?
Federal agencies, particularly the Departments of Homeland Security
and Defense have critically important missions--to protect and secure
our homeland. Waste and mismanagement undermine their missions.
Anything that weakens our government's quick and effective response to
the real threats our country continues faces here and abroad is too
much.
As elected Members of Congress, our greatest stakeholders are the
American people. We have an obligation to ensure their dollars are
being used as efficiently and effectively as possible. This is why I am
also proud to be an original cosponsor of the bipartisan bill--
introduced by Senators Lieberman and Collins--ensuring proper oversight
and accountability in Federal contracting.
To date, the war in Iraq has cost us just over half a trillion
dollars. The deficit this year is forecast at just over $200 billion.
This is not a time to be wasteful with our citizen's hard-earned money.
In fact, there is never a time to be frivolous with the hard earned
money of the American people.
Congressional oversight is imperative to make sure Federal agencies
like the Department of Homeland Security and the Department of Defense
step up to the plate, confronting the waste of precious taxpayer
dollars, and taking immediate, corrective action so we protect
Americans and our interests abroad as well as the nearly 300 million
Americans at home.
I look forward to hearing from each of you. And I look forward to
continuing to work with our witnesses and my colleagues on this
Committee to provide the oversight that ensures these agencies do not
shy away from their duty to forcefully confront waste and
mismanagement.
Chairman Lieberman. Thanks, Senator Carper.
I am very grateful to the three witnesses. This is an
excellent panel that brings a lot of expertise and experience
to the table that will help us in our desire to legislate
effectively here.
We will begin with David Walker, obviously the Comptroller
General of the United States since November 1998. GAO's body of
work related to government procurement has been invaluable to
this Committee and to Congress in helping us understand both
the weaknesses in the system and the means of addressing those
weaknesses.
Mr. Walker, I thank you for your really exemplary service
to our government, to our country, and I welcome your testimony
now.
TESTIMONY OF HON. DAVID M. WALKER,\1\ COMPTROLLER GENERAL OF
THE UNITED STATES
Mr. Walker. Chairman Lieberman, Senator Collins, other
Members of the Senate Homeland Security and Governmental
Affairs Committee, first, thank you very much for holding this
hearing. It is a very important topic, clearly worthy of your
time. And, second, thank you very much for inviting me to
testify at this hearing.
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\1\ The prepared statement of Mr. Walker appears in the Appendix on
page 45.
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The U.S. Federal Government is the single largest buyer in
the world, obligating over $400 billion in fiscal year 2006
alone. While acquisitions are made throughout government, the
majority are concentrated in just a few agencies: The
Department of Defense represents 71 percent, and the top five
agencies represent 86 percent of all Federal acquisitions.
GAO's work extending back over many years has demonstrated
that agencies face a number of recurring and systemic
challenges in their acquisition of goods and services. Let me
make it clear. A vast majority of Federal employees do a good
job, and a vast majority of Federal contractors do a good job.
I think that is important to note. But in examining our defense
work in particular, which is where 71 percent of contracting
dollars were done last year, we have observed 15 systemic and
longstanding acquisition challenges which I have included as
Appendix I, and I would commend it to you and your key staff.
These have been there for years. Many of these require action
by Executive Branch officials. Some might require legislation.
All require additional oversight by the Congress.
For example, not only have we identified contract
management as a high-risk area for DOD, but also for the
Department of Energy and NASA, as has been mentioned.
Furthermore, we have identified interagency contracting as a
new government-wide high-risk area.
Let me be clear. These systemic challenges and high-risk
areas cost the taxpayers billions of dollars every year. In my
testimony, I highlight these acquisition challenges, and I
categorize them into four areas:
First, the importance of separating unlimited wants from
true value and risk-based needs.
Second, establishing and supporting realistic program
requirements and sticking with them.
Third, using contractors in appropriate circumstances and
contracts as an effective management tool.
And, fourth, creating a capable workforce in the
acquisitions area and holding it accountable for results.
Separating wants from needs in an affordable and
sustainable manner will be critical to improving management
within our current fiscal environment. No less important is the
need for clearly defined program requirements and to stick with
those requirements over time. It is also important to use
appropriate contract types as well as effective oversight, both
by the Executive and Legislative Branch.
Contract management challenges can jeopardize successful
acquisition outcomes in normal times, but they take on
heightened significance in contingency operations such as Iraq,
Afghanistan, and Katrina. A significant part of our challenge
relates to the evolving and enlarging role of contractors in
acquisitions, particularly through service contracts, which
accounted for nearly 60 percent of all government contract
obligations for fiscal year 2006. This raises the basic
question of which type of work should be done by contractors
versus government personnel. This is a major issue that is a
growing concern and is in need of serious attention by both the
Executive Branch and the Congress.
In addition, an accountable and capable workforce underlies
the Federal Government's ability to strategically plan, to
effectively manage, and to properly oversee whatever
contracting activities are done. Tackling these and other
systemic challenges will be fundamental to helping achieve
better value for money and reducing but not eliminating waste.
Let's face it. The Federal Government is the largest, the most
complex, and, arguably, the most important entity on the face
of the Earth. We should have zero tolerance for fraud, waste,
abuse, and mismanagement. It will never be zero, but we can do
a lot better than we are doing now.
And in that regard, let me offer a definition of ``waste''
because I think we need to keep in mind waste is where the
money is.
Waste involves the taxpayers in the aggregate not receiving
reasonable value for money in connection with any government-
funded activities due to an inappropriate act or omission by
players with control over or access to government resources.
That is noted in Appendix II of my testimony, and I might note
that waste can be caused by either the Executive Branch or the
Legislative Branch, and there are specific examples that are
noted therein.
In closing, I would like to re-emphasize why it is
important, in fact, imperative that we address these
longstanding and systemic acquisition and contracting
challenges. Given our current and projected financial
condition, we should have zero tolerance for waste. We need to
make some tough decisions. Some will have to be made by the
Executive Branch, others by the Legislative Branch, but it is
important that we do it sooner rather than later. The failure
to do so will cost American taxpayers billions of dollars each
year.
Last, but certainly not least, let me make some comments
about the Accountability in Government Contracting Act of 2007,
S. 680. Let me commend Chairman Lieberman, Senator Collins, and
others who are sponsors of this legislation. The act addresses
a number of areas of concern that GAO has had over the years.
In the aggregate, we believe that it has a number of
meritorious provisions, and we are broadly supportive of this
legislation. As I mentioned to Senator Collins, we have a few
suggestions for improvement, and she is open to those
suggestions. I am sure the other Members of the Committee are
as well, and I promise you that you will have those this week,
possibly as early as today, because I think it is important
that we try to work together in a constructive fashion. I know
you have put a lot of time and effort in the legislation, and I
want to thank all of you for your efforts in this regard.
Thank you very much.
Chairman Lieberman. Thanks very much, Mr. Walker, and we do
look forward to those suggestions that you have about the
legislation. You are a critical participant in this, and we
wanted to come at it in a constructive way.
As our second witness today, we are very grateful to have
Marcia Madsen appearing before us in her capacity as Chair of
the Acquisition Advisory Panel, which was established by the
Services Acquisition Reform Act of 2003 to examine this
complicated area of law and make recommendations to Congress.
Ms. Madsen is a partner and expert in this area in the law
firms of Mayer Brown. It is a happy coincidence, I suppose,
that the Government Printing Office has just within the past
few days produced a hard copy of the panel's report that came
out in January. And it is both hard and heavy, I might add, and
each of the Members has a copy at their desk before them.
Ms. Madsen, we look forward to hearing your testimony on
the panel's recommendations. On behalf of the entire Committee,
I want to thank you, the other panel members, and the panel
staff for your hard work to produce this report, which will be
a real help to us as we go forward with both our oversight
responsibility and our desire and commitment to legislate.
Thank you very much. We look forward to your testimony now.
TESTIMONY OF MARCIA G. MADSEN,\1\ CHAIR, ACQUISITION ADVISORY
PANEL
Ms. Madsen. Mr. Chairman, Senator Collins, thank you very
much for holding the hearing and for inviting me to testify in
my capacity as Chair of the Acquisition Advisory Panel. I am
very happy to be here to talk about the panel's work product,
and as Senator Lieberman mentioned, I am also very happy--and
greatly relieved, I might add--to see that GPO has finally
printed the document. I am not sure that without the impetus of
this hearing we would have gotten it. But we have it, and we
are very grateful to have it.
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\1\ The prepared statement of Ms. Madsen with an attachment appears
in the Appendix on page 71.
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Just so you know, you have some of the first copies of the
report. The report has actually been officially transmitted to
OFPP, and it is in the process today of being distributed to
all Members of Congress and senior government officials by GPO.
And we will be posting the report on the Web. It may take a
couple of weeks, but it will be on the panel's Web page as
well.\2\
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\2\ The document can be accessed on the Web at https://
www.acquisition.gov/comp/aap/24102__GSA.pdf.
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I just want to note that accompanying me today are Ty
Hughes and Roger Waldron, sitting in back of me, each of whom
co-chaired panel working groups and who wrote substantial
portions of this report. And also accompanying me is Laura
Auletta, the panel's Executive Director and solo permanent
staff person. She was really the backbone of our efforts, and
we are very grateful to her.
I would also like to acknowledge Panel Member David
Drabkin, who has changed hats here. He is sitting behind you,
Senator Collins. David also co-chaired two panel working groups
and contributed to this report.
The Committee's interest in our report is greatly
appreciated. We have been following S. 680--I have--and noted
the inclusion of many of the panel's ideas and concepts in the
legislation.
At this point I would like to request that my full
statement be included in the record, and I will just summarize
some of the key points.
Chairman Lieberman. Without objection.
Ms. Madsen. Thank you. There is no way I could talk about
the whole thing.
Section 1423 identified key topics for the panel as
commercial practices, performance-based contracting, and the
use of government-wide contracts, or interagency contracts as
we know it. The panel was sworn in February 2005. It consisted
of 13 members balanced between government and the private
sector.
The panel tried very hard to use an evidence-based
policymaking process. We did our best to ground our findings
and recommendations in research and in data. We heard testimony
from more than 100 witnesses representing government and public
interest organizations. We held more than 30 public meetings.
We adopted over 100 findings and 80 recommendations. Obviously,
they can only be touched on here.
The panel was subject to the Federal Advisory Commission
Act (FACA), so this was a very open and transparent process.
Congressman Davis, who I was talking to the other day, after he
listened to the statistics, said, ``That is a lot of Diet
Coke.'' [Laughter.]
And both Comptroller General Walker and my friend Stan
Soloway here both testified in front of the panel.
The panel was very well aware that with Federal spending
approaching, at the time we were working, $400 billion and
serious and competing demands on the taxpayer dollars that an
accountable and transparent acquisition system that delivers
innovative and high-quality goods and services was absolutely
critical to our national interests.
I will talk a little bit about some of the subjects in the
panel's work. Because of the emphasis in the legislation
regarding appropriate use of commercial practices, and because
performance-based acquisition is a commercial practice, the
panel spent significant efforts on the subject of commercial
practices. One of the first things we did was reach out to
large commercial buyers of services, and the private sector
consultants who support them. And they talked to the panel
about current commercial practices and services acquisition,
and I want to note here that the panel focused on services
acquisition, but we did not do it to the exclusion of all
acquisition.
We also took testimony from many government buyers and
users of services, both DOD and civilian agencies, and we heard
from many government contractors as well as watchdog groups.
As detailed at length in our report, there is a large and
robust private sector market for services, particularly IT and
IT-related services. Commercial companies are acquiring
billions of dollars in services, and they have well-developed
acquisition and contracting procedures, and we set out to find
out what those were.
The large commercial buyers who testified before the panel
identified requirements development--what are your needs, just
as Comptroller General Walker has talked about--and competition
as the keys to successful service contracting. These companies
told us that they make large up-front investments in defining
requirements, typically on an outcome basis. This investment
makes vigorous competition possible. It facilitates the use of
performance-based contracts as well as fixed-price contracts.
Requirements development is to the commercial sector the most
basic and fundamental building block of services acquisition.
One of our witnesses told us if you do not know what you
are going to buy, perhaps you should not buy anything at all.
They were a little astonished, some of our private sector
witnesses, at some of the government practices.
Government practice, our observation based on our work, on
the other hand, is driven by the need to get to award quickly
to meet mission needs and obligate funds. And we recognize that
inadequate requirements definition is not a new topic. It has
been an issue at least for every group that has looked at these
issues for 30 years. But the problem in the services context is
that poor requirements definition results in reduced
competition, the inability to use performance-based contracts,
the inability to make use of fixed-price contracts, and
ultimately it results in increased costs.
The panel's commercial practices recommendations focus on
improving competition. The recommendations recognize that
competition fuels innovation, drives fair prices, and
disciplines the responsible and effective use of streamlined
acquisition vehicles and improves opportunities for small
businesses.
The panel worked hard to develop data using FPDS-NG on the
extent to which government acquisition is competitive. We
noted, as has been observed here already, that government
spending on services accounted for 60 percent of procurement
dollars in 2004 and 2005, including at DOD. So DOD is not
spending most of its money on weapons systems. It is spending
it on services. The details are in our report, but in fiscal
year 2004, one-third of the government's procurement dollars
were awarded non-competitively. This is based on our analysis
of FPDS data. And even when competed, the percent of dollars
awarded, when only one offer was received, has more than
doubled from about 9 percent in 2000 to 20 percent in 2005. And
we fear that the amount of non-competitive awards may be
understated. Although we tried for months and months, we could
not obtain reliable data on competition for orders under
multiple award contracts available for interagency use. We do
know that in 2004, $142 billion, or 40 percent of procurement
spending in that year, went through interagency vehicles.
Our recommendations, I guess many of which have been picked
up in the bill, focus on requirements development through use
of Centers of Excellence and requiring that the program manager
and the contracting officer be responsible for requirements
regardless of the acquisition vehicle that they use.
With respect to interagency contracts, our recommendations
try to achieve a balance between recognizing that these
vehicles are necessary to allow for streamlined acquisition of
what we call ``bite-sized'' requirements for repetitive needs
and with the fact that a significant proportion of large
orders, single transactions in excess of $5 million each is
flowing through these vehicles.
For example, we found that in 2004, $66.7 billion of that
$142 billion was awarded in orders for single transactions that
exceeded $5 million in value. These are single orders. We could
not get data that showed what the award with options was, so
those are single orders in those years.
For interagency contracts, we recommended making the
requirements of Section 803 of the 2002 DOD bill applicable
government-wide for orders over $100,000, and we recommended
some other things as well, for example, requiring a synopsis
post-award for sole-source orders, something that is picked up
in the bill. For orders over $5 million, we recommended more
formalized competitive procedures that are outlined in the
report. We also recommended post-award debriefings, and we
recommended, after quite a bit of debate and discussion,
allowing protests on orders of over $5 million. And I am happy
to talk about that more if the Committee would like later.
On interagency contracting, we recommended that those
contracts need to be better managed. Among other things, our
findings recognized that the government does not know how many
of those contracts it has, so our findings start with
identifying where those contracts are, who is using them, and
OFPP, I am happy to say, already started down that path early
in the panel's work.
On the workforce, the panel determined that there is a
significant mismatch between demands placed on the workforce
and the personnel and skills available within that workforce to
meet the demands. The problem that the panel encountered was
that there was just not reliable information about the size,
composition, and the competencies of the Federal acquisition
workforce.
The procurement panel that was empaneled in 1972 to look at
these issues had the same problem, and we did the same thing
they did. We commissioned our own study of the Federal
acquisition workforce. This is the executive summary of our
study. It actually consists of nine volumes. We are happy to
provide it to the Committee. I will leave this copy with the
staff today of the summary.\1\ But the problem that we
identified is clearly identifying where the workforce is, what
the competencies are. The data just is not available. And based
on what we heard from the commercial sector, our perception is
that this just is not an issue of numbers, it is an issue of
skills, it is an issue of resources, it is an issue of people
with the right mix of skills to do the kinds of acquisition
that are required in a heavily services-dependent environment.
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\1\ The copy of the executive summary is retained in the files of
the Committee.
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We also looked at the challenges of the blended workforce.
That was a topic that we encountered later, and I think we have
scoped those issues. I do not think we have all the answers to
those issues. But we start, I think, with the premise that with
60 percent of the government's money being based on going to
services, that agencies need to have a better sense of what
they are buying.
In the A-76 area, where the inherently governmental rules
apply, there is some discipline to the acquisition of services
and what skills and what activities those workers are
performing.
Outside of that environment, where agencies are buying
services, there is no definition really of what are the core
government competencies that the government needs to maintain.
And it is that area that our recommendations focused on.
With that, I will close and am happy to answer any
questions that you may have.
Chairman Lieberman. Thank you very much. Excellent
testimony. A very interesting point that you conclude that we
do not have enough data about the acquisition workforce to make
informed judgments about what it lacks. So I will come back to
that in the question period. Thank you.
Our final witness is Stan Soloway, who is President of the
Professional Services Council (PSC), a leading trade
association of companies that provide professional and
technical services to the government. Prior to joining PSC, Mr.
Soloway served as the Deputy Under Secretary of Defense for
Acquisition Reform, and concurrently as Director of the
Secretary of Defense's Defense Reform Initiative. The record
shows that he, like Senator Collins, is a graduate of the
William Cohen School of Public Service, a very fine school with
a great mentor, a former member of this Committee.
Mr. Soloway, thanks for being here, and we look forward to
your testimony now.
TESTIMONY OF STAN SOLOWAY,\1\ PRESIDENT, PROFESSIONAL SERVICES
COUNCIL
Mr. Soloway. Thank you, Mr. Chairman, Senator Collins, and
Senator Akaka. I want to thank you for the invitation and the
opportunity to provide our views on S. 680, and generally the
whole area of government procurement. This is a very important
discussion, as my colleagues on the panel have suggested. We
all recognize that, given the centrality of acquisition to the
functioning of government, we have a shared responsibility to
most effectively and efficiently utilize taxpayer dollars.
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\1\ The prepared statement of Mr. Soloway appears in the Appendix
on page 91.
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I will note that the other great value and benefit not only
of the legislation but of this hearing is the opportunity to
have a serious discussion about solutions. In too many other
forums we spend an awful lot of time pointing fingers and
operating in a somewhat context-free zone, and I really
appreciate the opportunity to have that broader substantive
discussion.
Whether it is assisting citizens seeking compensation for
radiation sickness, providing support to our military men and
women stationed at home or abroad, or developing scientific
analyses to better protect sensitive wildlife habitats, PSC's
members are among the leading small, mid-tier, and large
companies providing the full range of professional services to
virtually every Federal agency. In fact, our 220 member
companies employ hundreds of thousands of people across the
country in virtually every region and State.
As you have noted, over the last decade the government's
missions have evolved rapidly, increased in complexity, and
required new technologies, resulting in both growing challenges
for the government itself and its workforce and a substantial
increase in the reliance on contractors. The evidence suggests
that these challenges and trends will continue well into the
future.
In fact, the July 2007 report of the Partnership for Public
Service highlighted very clearly that the Federal Government
will need nearly 200,000 ``mission critical'' new hires over
just the next 2 years to keep pace with the rising requirements
to meet our national security and evolving agency needs and the
expected Federal workforce retirements. That does not even
begin to account for the thousands of positions across
government, including in the acquisition workforce, which are
today vacant and which the government is struggling to fill.
S. 680 represents a valuable starting point for discussing
how to ensure that the Federal procurement process fully
protects how the government spends taxpayer dollars while also
enabling the government to acquire the full array of necessary
resources and support. When viewed in its totality, and despite
its evident problems, the Federal acquisition system actually
functions better than it might seem, and in most cases, quite
well. As my colleague, the Comptroller General, pointed out,
the vast majority of procurements are well constructed and the
vast majority of contractors perform well.
At the same time, improvement is clearly needed and we look
forward to an ongoing dialogue about solutions that will
deliver real value and improvement.
Before I comment on specific aspects of the bill, let me
just step back for a minute and offer a little bit of context
and in some cases perhaps challenge some common myths that have
surrounded this debate that all too often fail to recognize the
complexities and nuances of this giant process we are dealing
with.
It is true that since September 11, 2001, Federal
procurement spending on both goods and services has grown
dramatically. But this should not come as a surprise. Among
other things, September 11, 2001, significantly changed many of
the government's missions and created requirements for new
technology and innovative solutions to secure the homeland and
fight the global war on terror. Today, more than ever, the
government finds itself competing for people and capabilities
in the broader economy, in which the availability of those very
skills is in short supply.
This contracting growth did not happen in a vacuum. During
that same period, the overall discretionary budget of the
government has grown nearly two-thirds. Thus, while
significant, spending on service contracts has actually
increased as a proportion of the government's operations about
15 percent, from 21 to 24 percent of the discretionary budget.
This is significant, clearly, but it is hardly the
unconstrained rush others have suggested.
Similarly, we continue to see claims that the so-called
``shadow'' contractor workforce supporting the government now
numbers over 8 million--making it more than four times the size
of the Federal workforce. Simply put, by any meaningful
measure, that figure is wildly overstated and based on faulty
premises and is mathematically impossible.
We also have a lot of confusion around the issue of
competition and, Mr. Chairman, I agree with you fully that
competition must be a core value of Federal procurement. It is
a core value among our members and we strongly support an open
and competitive process in every possible way.
However, some suggest that the amount of competition for
government work today may, in fact, be less than it used to be.
But when looked at proportionally, it is not clear that is the
case, that it may, in fact, be relatively consistent. Some of
the confusion in this area does come down to the unique
terminology in government contracting.
Many contracts are highly competitive even if they are not
technically awarded through what we call ``full and open
competition,'' which is a term with special meaning in Federal
acquisition. For example, current law provides a 23 percent
government-wide goal for small business and other preference
programs, such as Section 8(a) firms, firms owned by women,
service-disabled veterans, HUBZone firms, and so forth. None of
these awards are coded in the database as ``full and open
competition'' because they are only available to qualified
companies. It is not full and open.
Similarly, with multiple award contracts, where there is
typically a competition through which companies vie for a
position on the contract--those companies that win a position
on the contract, they then compete for incremental, as Ms.
Madsen pointed out, bite-sized pieces of performance. Those
awards themselves may be competitive, but they are not full and
open because they, too, are only available to those who won a
position on the initial contract.
This is not to say we should be satisfied with the degree
of competition. As Ms. Madsen pointed out, Congress addressed
this for the Defense Department in 2003. S. 680 appropriately
extends the rules that were applied to the Defense Department
at that time across the government and we support doing so in
the same manner that was done for DOD. I do think it is
important, as we have that discussion, to understand the
definitions and the context clearly.
We also need to be very clear that the bipartisan
objectives of the acquisition reforms of the 1990s were not
about procurement for speed's sake. The goal was to rationalize
and modernize an almost comically cumbersome process--a
process, for example, through which the government dictated to
cookie makers how many chocolate chips could go into a cookie
made for the military; a process that was so arcane that large
segments of the commercial sector simply refused to
participate. The goal was to move from the rigid, rule-based
process that was in part responsible for those dysfunctions to
one based on critical thinking, business judgment, and smart
decisionmaking.
Far from simplifying the life of Federal acquisition
professionals, many of those reforms actually made the
acquisition process more demanding, and as you have pointed out
and the Acquisition Advisory Panel and GAO and others have
pointed out, the investment in that workforce and their
training and development has simply not kept pace.
The private sector believes that the best customer is smart
and well prepared and that is why 5 years ago PSC recommended
to Congress the creation of what is now known as the Federal
Acquisition Workforce Training Fund. Although the fund is
growing, it is far from adequate.
Which brings me to the legislation before us. Through S.
680, you recognize--and, Senator Collins and Chairman
Lieberman, you made clear in your opening comments--that the
greatest returns and improvements in the acquisition process
will be found in an aggressive focus on the Federal acquisition
workforce and the ways in which they are supported, developed,
and resourced. That focus is long overdue and has never been
more critical.
It is also vital to recognize that the acquisition
workforce is not just contracting people. It is a broad range
of functional responsibilities, whether it be engineering,
program management, financial and cost analysis, and so forth
that must be included in any discussion of that workforce.
The legislation contains important provisions that we
support that we believe will help and enhance the acquisition
workforce. But we also believe that more can be done. In fact,
we believe that today we need a kind of workforce Marshall Plan
that aggressively addresses the hiring, retention, training,
reward, and development of the workforce we are asking to
manage 40 percent of the discretionary budget. It is standard
commercial practice for companies to develop, reward, and
otherwise foster their core workforces differently than they do
other elements of the company. Unfortunately, such is not the
case in government, and it is time to change that paradigm.
We also believe this initiative should include a special
focus on emergency and contingency contracting. As an
alternative to further restrictions or rules that could collide
with mission realities, we propose that Congress direct the
creation of a government-wide Contingency Contracting Corps.
This corps would be drawn from across the government
contracting workforce, be given special training in emergency
and contingency contracting, and be deployable when the need
arises.
My written testimony contains more detailed comments on a
number of other key provisions, and in some cases, while we
recognize and support the underlying concerns that drove the
recommendations in the bill, we also believe those provisions
could be modified or improved upon. This would include the
sections on limits on task orders, the use of fixed-price
versus cost-type contracts, the tiering of subcontracts and
debarment. Each of these is important, and I will be happy at
any time to discuss our perspectives in more detail.
We also share your belief, as reflected in Section 123,
that interagency contracting remains an area worthy of further
study and we support the intent of the provision. I will add
that among our members, 65 percent of which are small or mid-
tier firms, the mix and structure of the Federal contract
landscape has enormous implications for the long-term
competitiveness and diversity of the services industry. Thus,
we recommend that Section 123 require a broader analysis of the
relative role and balance of interagency and enterprise
contracting and how best to ensure that whatever we do fosters
continued diversity and competitiveness in the marketplace.
We do have particular concerns, which we can discuss in a
few moments, with Section 114 that would allow the filing of
protests on task order awards. This might be one area in which
the views of industry are perhaps the most relevant, because if
there is concern about the government adherence to the rules of
fair play, it is the companies that will be the first to call
for more opportunities for redress. Yet, across industry, there
is a resounding consensus that adding protests to task order
awards is unnecessarily costly and time-consuming.
There are also other bills before this Committee and in
other committees about which we have very grave concerns and
which we believe will have a very deleterious effect on the
environment, do little or nothing to improve actual acquisition
or mission performance, and potentially have a significant
negative effect on the long-term competitiveness of the
marketplace. Given your leadership and your jurisdiction, we
hope you will not hesitate to engage on those other bills and
demand of them the same kind of rigor you are applying to your
own legislation.
Let me once again thank you for your leadership on these
crucial issues and for your nonpartisan approach and openness
to dialogue. This concludes my opening statement. I would be
happy to answer any questions you might have.
Chairman Lieberman. Thanks very much, Mr. Soloway.
Normally, it is the Committee Members that give the witnesses
static. [Laughter.]
I apologize that we are all going to have to put up with
that static, but we are trying to stop it. Thanks for excellent
testimony. We are going to do 8-minute rounds of questions for
each of the Senators.
Ms. Madsen, I wanted to start with you. I thought that you
had a very interesting comparison of private sector acquisition
practices as compared to the governmental sector, and the
differences are really striking, particularly in terms of the
planning going into the contract as well as the negotiation.
The government seems to do too little planning. The private
sector does a lot of it and also monitors the carrying out of
the contract better than the government does.
I wonder if you have any thoughts about the causes of that
difference in what might be called acquisition cultures.
Ms. Madsen. I do have some thoughts. The panel, I think,
heard quite a bit of testimony from the private sector because
they are buying--private companies are buying services at a
phenomenal pace, and they are buying them because they see the
ability, particularly where they are technology-related
services, to reduce their costs. So we were very interested in
the techniques that they were using and the kinds of skills
that they involved.
The things that they told us, the first place they start is
really aggressive and rigorous requirements development. They
get the user, the vice president or the executive vice
president whose substantive area of responsibility that is, and
the acquisition people in the same room, and they have to
agree. They have to buy in. They have to agree.
Our acquisition system in the government is a little
stovepiped. We do not necessarily view acquisition in those
terms, in terms of getting sign-off from particularly the user
at the program community. So that is one of the things that
struck us. It is also the investment they make. They will bring
in--private sector companies will bring in, if they need to, a
consulting firm, and they will spend some time and resources
actually getting their requirements rounded up and defined on
an outcomes basis, typically on a performance basis. And they
do it with very complex services and with very complex
missions. So we know it can be done, but it takes a lot of
planning on the front end.
I think the other piece probably--and this is a tougher
issue for the government--is funding. The private companies are
not worrying about spending their money in 12 months or 9
months or 8 months, as the case may be. So they have a little
more luxury in terms of knowing the funds are going to be
available, but at the same time, I think the planning things
that they do are a valuable lesson because those can be done
regardless of when you know you are going to get your funding.
Chairman Lieberman. How much of it is because of the
current shortage of acquisition specialists in the government?
Or does that shortage merely exacerbate the existing difference
in cultures?
Ms. Madsen. The private companies we talked to--and I think
many of them would be happy to come and talk to you, if you
wanted them to--told us that they just have a different model.
They use typically a smaller group of people who are very
sophisticated in doing large sourcing transactions. Folks who
not only have acquisition expertise, but who understand what it
is that they are buying, and they put those skills together. I
think what we are lacking in the government side maybe is
putting those skills together. We are asking--and Mr. Soloway
mentioned this--government acquisition people to be good
commercial buyers, to know that market, to know the
government's rules, and to know the government's special
missions. And that is a lot to put on their plate, and they are
not really necessarily being given the tools and the training
to do that all at one time.
So part of it, I think, goes to the acquisition people, but
part of it goes to the skill set and the way the function is
organized.
The commercial firms told us that they conduct extensive
market research up front, so they do not just run a competition
and they do not just define their needs. They also do market
research, and they pinpoint who are the best potential
competitors for this work. And that is something else
government is not doing a very rigorous job of.
One of our recommendations--and it looks, I think, to some
people a little soft, but we think it is very important--is to
actually establish a market research function in the GSA to do
this kind of work. The government has a lot of data about what
it buys, what it paid for it last year, what it paid for it
last month. But the data is not pulled together in a way that
is meaningful for conducting market research.
Chairman Lieberman. I thank you for that. That is a helpful
answer. I want to, before my time is up, ask Mr. Walker a
question.
You have noted your concern that Federal acquisition
employees rotate too frequently between government and
industry, and I know that GAO has ongoing work in this area. We
have pending before our Committee a bill authored by
Congressman Waxman, H.R. 1362, which comes to us from the
House, which would enact new restrictions on former and current
procurement officials.
I wonder if you are prepared to offer us, first, a
description of the extent to which you think this is a problem,
and then, second, if you have any recommendations to make about
how we might fairly and constructively legislate in this area.
Mr. Walker. Two things, Chairman Lieberman. First, with
regard to the question you asked previously, the items in
Appendix I are based on commercial best practices. So if we
look at the items in Appendix I, they are based on our
commercial best practices work.
Second, there are two issues with regard to rotations. One
issue is the rotation of government personnel too frequently
such that you do not have appropriate, clearly defined
responsibility and accountability.
Chairman Lieberman. Within the acquisition----
Mr. Walker. Within the government.
Chairman Lieberman. So they stay in the Federal Government
but just keep moving around.
Mr. Walker. For example, where the Defense Department may
have a policy that you are assigned to serve as a senior
program official for 2 years and then you rotate off rather
than until you hit a major milestone. Waiting until a major
milestone would facilitate a more effective and accountable
transition. So that is the first type.
The second type is what you touched on, which is a rotation
between government and the private sector, the so-called
revolving door. We do have concerns there. There are issues
there. What I would like to do is look at that specific
provision and then provide you something for the record, if
that is possible.
Chairman Lieberman. OK. Ms. Madsen, did the Advisory Panel
examine the revolving-door issue or would you care at this time
to offer any views on it?
Ms. Madsen. Mr. Chairman, we did not really look at the
revolving-door issue per se. We did try to get a sense of the
number of people working in the Federal workforce. We just did
not have good data on the number of contractors supporting the
Federal workforce. The data is just not available. It is among
our recommendations that we get data, but we did not look
specifically at people rotating in and out.
Chairman Lieberman. Mr. Soloway, how about your reaction to
this? I believe that the current law is that for one year after
leaving government service, Federal procurement officials are
prohibited from working for contractors to whom they awarded
contracts. Is this a problem and one we should legislate on?
Mr. Soloway. The answer is we have a very clear standard
out there. When I left government, although I did not have
responsibility for specific procurements, all of us leaving the
last administration had very clear guidance from our ethics
officers of what we were allowed and not allowed to do, who we
could talk to and who we could not talk to and so forth.
I do not think the problem is the need to change the law as
it is making certain that everybody who is affected by it has
the clarity of guidance that they need. Unfortunately--and I do
not use this in any way as an excuse--in the few cases that we
have seen the people admitted they knew exactly what they were
doing when they did it. And I am not sure adding another year
of restrictions would have changed their behavior.
The other issue is the so-called blended workforce, and how
you are now getting lots of closer, different kinds of
relationships, is something we have been working on, looking at
with the National Academy of Public Administration and others,
because this is the new face of government and we do have some
management issues we need to look at in this area.
Chairman Lieberman. Take a moment--and I am over my time--
just to say for the record what is a blended workforce and what
are the problems we are worried about?
Mr. Soloway. You very often now will look in a government
agency, and you have much more of an integrated workforce than
you used to have, where there are contractors and government
employees working side by side in offices. It is a much greater
preponderance today than it was in the past. As I said,
although it is not massive to the extent that some people might
think, it is clearly a growing trend. And that raises
interesting questions about how you manage that workforce and
how you incentivize. For companies, frankly, it is a big
challenge: How do I drive any institutional loyalty amongst my
own employees? What are the incentive and pay and other
performance challenges when I have people doing effectively
this same job?
It is the new face of government. It is an area that we
have been looking at and talking about internally and with
external groups like the National Academy and others to think
about what are all of those issues.
As Ms. Madsen said, there are a number of them, and they
have solutions, but we have not thought about this new face of
government. I believe the Volcker Commission at one point said
that we have a 21st Century challenge and a 19th or 20th
Century government structure. In many ways, I think that
applies to this as well.
Chairman Lieberman. Well said. That was helpful. You are
absolutely right. People not involved in contracting, when they
hear about contracting with the Federal Government, will
naturally assume that the work is contracted out to a business
that does it somewhere else. But there is increasingly a very
blended workforce, including as all of us who have been to Iraq
and Afghanistan know, a quite remarkable blending of full-time
Federal employees, including, most importantly, the military,
and a lot of contract employees. And how they work together
raises important questions.
Mr. Soloway. Would it be appropriate to add--I am sorry to
interrupt you, Mr. Chairman.
Chairman Lieberman. No. Go ahead.
Mr. Soloway. I would add one thing to Ms. Madsen's answer
to your first question, which I thought was a very important
one. As I listened to her comments and the Comptroller
General's, when you think about the difference in cultures
between the commercial side and the government side, there are
two things that we hear a lot. One is that the commercial side
operates very much at a partnership level. They get very
closely engaged with their contractors. Years ago, when we had
the hearings about the Federal Acquisition Streamlining Act,
one of the witnesses said that in the private sector the mark
of excellence is the degree of communications and close
cooperation between customer and supplier, and in the
government that gets you thrown in jail. So we have cultural
differences there in terms of how much we communicate, but it
also gets to the investment in the people.
So when we talk about the elements of commercial practice
that Marcia set forth, those are absolutely consistent with
what we tried to do in the Federal Acquisition Streamlining Act
or the Clinger-Cohen Act, or I suppose here I should call it
the Cohen-Clinger Act of 1996, and other reforms. But where we
have really fallen down is in that investment in people that
she spoke to, the recognition that they are a core, vital
element of the management and leadership team, not just a
support workforce.
Chairman Lieberman. Thank you. Time is up. Senator Collins.
Senator Collins. Thank you, Mr. Chairman.
One of the purposes of S. 680 is to decrease the reliance
on sole-source contracts to strengthen the competitive process.
When this Committee investigated the contracts awarded in the
wake of Hurricane Katrina, we saw that contracting officers
frequently invoked the exception to competition, that is, the
urgent and compelling exception. And, clearly, in many cases
that was warranted in order to get the contract awarded very
quickly. The problem, however, was then the follow-on contract
for the same kind of service or goods--debris removal comes to
mind--also became a sole-source contract.
So one of the provisions of our bill says, fine, there are
times when you have to use the urgent and compelling exception,
but when you are doing the follow-on contract, it should be
competitive, and there should be a limit for how long the
initial sole-source contract can be in place.
Now we chose 150 days, which may be too short. It may not
be long enough. Perhaps it is too long. I am not certain. I
would like to get the views of each of you on the concept that
I have outlined of requiring the follow-on contract to be
competitive and to limit the amount of time that a sole-source
contract using the urgent and compelling justification can be
in place.
I will start with you, Mr. Soloway, and then just work down
the panel.
Mr. Soloway. Senator, we fully agree with you that the
emergency contracting provisions need to be used only in the
correct circumstances, and there clearly have been some cases
where they at least apparently have been used beyond the time
or size intended by law, and in Hurricane Katrina there
certainly appear to be some cases. I would make two quick
comments.
I believe that the Contingency Contracting Corps concept
that is in our testimony would greatly help to alleviate the
problem because you would have a corps of people who were
specially trained in emergency contracting.
One of the things we saw--and I was down in the Gulf Coast
4 days after the storm--there was nobody home, as we know.
There was a complete infrastructure meltdown because of this
storm. Two weeks later it was a different story, 4 weeks, 6
weeks, as things began to come to life. But what we did know is
FEMA had very few contracting folks available, and people--some
being deployed or to support it--had no experience in emergency
contracting.
So I believe the Contingency Contracting Corps will help go
a long way towards alleviating further cases in which the
contracting authorities may be used incorrectly.
The only caution I would add to your question: Is 150 days
the right time or the wrong time? Is it 180? Is it 240? Is it
30 days?
As a general proposition, our concern with putting a firm
timeline like that into statute is it could collide with
certain mission realities. Again, generally 150 or 180 days may
be more than enough time, but I can imagine in some cases it
might not be. For instance, in Iraq today we are still in many
areas still engaged in very heavy warfare, a great deal of
uncertainty. Emergencies arise.
So I don't know that putting in statute a time definite
limit makes the most sense, but we certainly agree with you
that we want to make sure that these contracts are used
appropriately.
Senator Collins. Thank you. Ms. Madsen.
Ms. Madsen. Senator Collins, we did not speak directly to
follow-ons to non-competitive contracts, but our
recommendations do emphasize the importance and the recognition
that on occasion agencies may need to do something on a sole-
source or non-competitive basis. But I think where we come out,
the panel report comes out, is do what you need to do, but then
behind that get the people involved who can help you define
your requirements in such a way that the next time you can do
competition.
One of the things that your bill would do by putting a time
frame, even if you do not make it mandatory--and I share some
of Mr. Soloway's concerns in terms of making it, a hard stop.
But if there is a time frame in there where people need to be
attentive to, OK, it is time to look at doing something else,
then they have got the incentive to begin right away looking at
what their requirements are, because they will learn from that
experience that they have with the sole-source contract that
will inform them about how to get competition the next time and
how to set their requirements so that they can get competition.
So I would agree. I do not know that you need a hard stop
in the statute, but I think you need an incentive in the
statute for people to focus on how to do it competitively the
next time.
Senator Collins. Thank you. Mr. Walker.
Mr. Walker. Three things. Yes, first, I agree that follow-
on contracts should be competitive.
Second, I think there is a concern with regard to the
duration of the initial non-competitive contract. We have some
concerns about whether 150 days is realistic in some
circumstances.
And, third, I think there is another issue that we need to
focus on. Contingencies happen. Wars happen. Natural disasters
happen. And, quite frankly, in addition to these very
worthwhile things that you are addressing through your
legislation, I think there needs to be more advanced planning,
whereas FEMA, for example, recognizes that hurricanes are going
to happen, earthquakes are going to happen, and floods are
going to happen. We ought to anticipate what type of needs we
might have in the event of such events. We ought to be entering
into contingency contracts that we can draw upon if and when
those events happen. We need to have competition and we need to
be able to draw on task orders in an appropriate circumstances.
But there may need to be some changes in law because of how the
obligation rules work. So we would like to work with you on
that.
So it is not just the issue of making sure that follow-ons
are competitive. They should be. It is not just an issue of
having some limitation on the initial award. It is also making
sure that these departments and agencies are doing appropriate
planning, entering into appropriate contingency contracts so
that they can draw upon them when and if that event happens.
Senator Collins. Thank you. I look forward to hearing from
all of your specific recommendations on that.
Let me turn to another issue, Ms. Madsen. Mr. Soloway in
his comments expressed some concerns about the expansion of bid
protest rights for unsuccessful bidders on large task orders
under multiple-award contracts that are included in this bill.
And I want to give you an opportunity to talk about this
provision because we took it from the SARA panel's
recommendations.
I am a little surprised that Mr. Soloway has concerns about
that because our goal is to help smaller businesses, and
medium-sized businesses who feel that they could have competed
and were shut out, and to give them an affordable, fast,
reliable remedy at GAO.
So I would like to ask you to give us a little more
background on why the panel recommended these provisions.
Ms. Madsen. Thank you, Senator. The first thing I would say
to you, although not of the stature of this body, our panel was
a very deliberative process, a very deliberative body, and this
is an issue we talked about a lot. As it was adopted, it was
adopted, I think, only with one dissenting vote despite the
balanced nature of the panel.
The things that the panel found to be of concern were the
amount of dollars flowing through interagency contracts--$142
billion in 2004; the size of the orders. We found, looking at
FPDS data, almost $67 billion of that was in single orders over
$5 million. And we know that number is low because it only
reflects the single order; it does not reflect the base year
plus options.
We looked at agencies using--when they get above about $5
million, they are using evaluation criteria, they provide a
statement of work evaluate criteria. They do best value trade-
off. In other words, it looks very much like a standard best
value negotiated procurement, but it is in a regime where it is
not transparent and people cannot object to the way the
evaluation process worked.
We recognized, we think, in our recommendation that there
needs to be some flexibility for the government to get bite-
sized repetitive needs satisfied in an environment that has
lesser constraints posed on it, and we thought $5 million was
the right number based on the data we saw.
I think one of the things that became apparent to the panel
is nobody expected these task--at the time the legislation was
enacted in the mid-1990s--people just did not expect these task
orders to get as big as they have. We are seeing task orders
that--I mean, we are talking about $5 and $10 million task
orders, but we are seeing task orders that are $50, $60, $100
million and that last for 4 or 5 years. And it is when you get
to that size and they start to look like traditional negotiated
procurements, you wonder why they are under the task order
regime and they are not under a more traditional procurement
regime.
Senator Collins. Thank you.
Ms. Madsen. I just have one more point, Senator Collins. I
apologize. I do not want to leave out that under the GSA
schedule, any order of any size can be protested, and that is
something that the panel also noted.
Senator Collins. I am going to ask both of our other
panelists to come back to this issue in our second round.
Chairman Lieberman. Do you want to do it now?
Senator Collins. Is it all right?
Chairman Lieberman. You can do it now.
Senator Collins. OK. Mr. Walker, since it is GAO that would
be doing the work, do you have the ability to take this on? And
what is your view of the merits of this approach?
Mr. Walker. We support expanding the bid protest in this
regard. We think for cost/benefit reasons there needs to be
some threshold. We do not believe it should be any lower than
$5 million. Our preliminary analysis says $5 million seems
reasonable. We clearly do not think it should be lower than
that, potentially higher than that. We are continuing to do
analysis.
The reason we believe it is for transparency and
accountability purposes. We have not seen a big clamor of a
problem here, but there is clearly a movement for more of this
type of activity to occur, and for transparency and
accountability reasons, we believe it ought to be there.
We do have some concerns about the express option provision
as to what type of burdens that might end up imposing, not on
us because we already have an expedited process but on the
departments and agencies. And that would be an area that we
would like to work with your staff of.
Senator Collins. Thank you. Mr. Soloway.
Mr. Soloway. Senator, I think there is a certain irony here
that in some ways people view protests as a redress for the
companies, and it is the company side that is saying, well, we
do not want that redress as if we do not care.
Senator Collins. That is why it surprises me.
Mr. Soloway. I think you have to recognize a couple of
things. First of all, for the multiple-award contract under
which these task orders are awarded, that multiple-award
contract award is fully protestable. In addition, there are
aspects of task order awards, particularly regarding scope of
the contract, if it is not consistent with the original
formation of the multiple-award contract, it is protestable. So
it is not as if there are no means for redress in some areas.
We support other elements of this bill that we think
actually would do more to help transparency and the process and
the protests, such as the debriefing provisions where you
require debriefings, such as publicly posting--I believe the
panel recommended publicly posting task order awards so that
everybody, especially on that contract or outside, knows what
is going on.
But there is a huge difference between a multiple-award
contract such as we are talking about here and in the
schedules--the schedules do not have a competitive construct up
front that is a protestable process.
Transparency is important. We support it. The greatest
concern from smaller and mid-tier firms is that $5 million is
not a small amount of money; it is a very significant amount of
money. In the pantheon of Federal contracting, it is a fairly
routine amount, and you could be adding costly litigation that
is very burdensome on smaller and mid-tier firms especially, a
burden that they do not particularly savor taking on.
So if we wanted to have a discussion about higher
thresholds where we get to that point, as Ms. Madsen said, of
$75 million, we are really talking about large contracts that,
if they are going to be under a task order, really look a lot
like the old negotiated one-off procurement, that is a separate
discussion. But $5 million, as much money as it is, is a
relatively routine procurement, and this is, in fact, not
necessarily a fast process and it is a very expensive
litigative process. That is a lot of the concern that the
companies have.
Senator Collins. Thank you. Thank you, Mr. Chairman.
Chairman Lieberman. Thanks, Senator Collins. Important
questions. Senator Akaka.
Senator Akaka. Thank you very much, Mr. Chairman.
Ms. Madsen, and to all of the panel, I would like to focus
on the workforce. Many of the recommendations in the
Acquisition Advisory Panel's report focus on enhancing the
acquisition workforce. Acquisition management is a very
specialized function in the Federal Government.
What kind of skill sets should the government be looking
for in recruiting Federal acquisition personnel?
Ms. Madsen. Thank you, Senator. I think we talked about
this a little bit when we were in front of your Subcommittee. I
think the panel's view and concern actually was that the skill
sets that one needs to acquire services are different. They are
skill sets that involve knowledge of the market, the relevant
market, access to market data, the ability to understand how
the services work, not just buying labor hours but really
understanding how complex IT projects are structured, and how
that marketplace works. And part of that is understanding what
the requirements are.
So while our traditional model is you have the acquisition
people here and you have the program people here, it may be
that traditional model in the services context does not work
the way we need it to for the 21st Century, where we have such
a focus on services acquisition.
The private sector buyers told us that they combine those
skill sets. They have people who understand what the buyer
needs at a substantive level, what the requirements are. They
help define them themselves. And they do the acquisition work.
So they do it all together.
Senator Akaka. Comptroller General Walker, as I mentioned
earlier, many of the problems in acquisition management stem
from an understaffed acquisition workforce. As a result,
contractors are being used to supplement the acquisition
workforce, and sometimes contractors are even hired to study
whether or not certain government activities should be
contracted out. One may wonder are the foxes guarding the
henhouse?
I am concerned, Comptroller General Walker, about the
increasing reliance on contractors to manage and oversee
acquisitions at the agencies. Should we rely so heavily on
contract personnel to manage agency procurement?
Mr. Walker. Well, Senator Akaka, this comes to a point that
I made earlier. I think that to a great extent we need to be
relying upon contractors in certain circumstances, but we are
relying upon contractors in other circumstances that may not
make sense and may not be in the government's, as well as the
taxpayers', overall interest.
Let me give you some examples. In my view, we should never
contract in the determination of government policy, in the
exercise of enforcement or adjudicatory power, or in conducting
certain critical oversight responsibilities that need to be
done.
On the other hand, we surely should contract for non-core
support services, non-recurring surge and contingency needs,
and critical skills and knowledge where the government, because
of its hiring practices or because of its classification and
compensation systems, we cannot hire the people.
My concern is we have defaulted to the contracting option
with recurring frequency in circumstances where it may not be
appropriate, where there may be conflicts, where we may be
asking for contractors to do things that civil servants ought
to be doing. And one of the things that we need to do is we
need to do a much better job on workforce planning, on
understanding what kind of skills and knowledge are necessary.
We need to understand what are the problems with the Federal
recruiting classification and compensation systems. And we need
to solve the root-cause problems rather than defaulting to a
contracting option because it is the easy and quick thing to
do.
Senator Akaka. Thank you very much for your response,
Comptroller General Walker.
I would like to ask this to both Ms. Madsen and Mr.
Soloway. Congress has provided funding, most recently at DHS,
to increase their acquisition workforce. DHS recently testified
before my Subcommittee that these positions have not been
filled.
Do we need to implement more programs to attract, recruit,
and retain the workforce? Do agencies need additional hiring
flexibilities? Or is there just a lack of individuals with
necessary skills? Ms. Madsen.
Ms. Madsen. Senator, I think it may be all of those things.
I know that in our work we find--and even in working with the
panel, getting enough people who have the right understanding
of all of the rules was difficult. So I think there is
definitely something to that point.
We make a number of recommendations for more flexibility in
recruiting and training in our report. We make recommendations
for a government-wide internship program. We make
recommendations for training. And a number of our
recommendations go to enhanced human capital planning so that
agencies, I think, have a better understanding--not only do
they just need contracting people, but what kinds of skills do
they need so that the training matches the people.
Mr. Soloway. Senator, I think you have touched on a number
of problem areas on which we all agree. If I could just harken
back a little bit to my experience at the Defense Department
where I had responsibility for the acquisition workforce. We
did at that time, at Congress' direction, try to implement a
program with special hiring authorities, pay flexibilities, and
so forth, as part of our effort to bring in more people. Many
thanks to this Committee and the Armed Services Committee in
those days. We were also doing battle with your colleagues
across the Hill who were trying to reduce the number of so-
called shoppers at DOD and recognizing that not everybody was a
shopper.
The challenge, I think, is not just do we have enough money
or do we have the positions. This is an area the government
should compete well for. There are people out there who do
procurement. Government procurement is not only the largest but
it is also the most complicated type of procurement and it
includes acquisition management, not just contracting. This
should be a relatively competitive area for the government, so
you pose the right question: Why are we not getting them in?
Given my experience in the Defense Department, it comes back to
our basic personnel structure. Both Ms. Madsen and Mr. Walker
have spoken to the fact that we really need to focus on this
and think about what it is going to take to get the right
people in, because it is not going to go away. We may make
modifications and some mid-course corrections, but this
challenge exists.
But it does raise all these questions about basic personnel
policies, the ability to focus, as I said earlier, kind of a
Marshall-like focus on this workforce, and do what the best
commercial companies do. The reason they get the people is
because they identify those folks who are core to their
mission, and they develop, resource, pay, incentivize, and
otherwise support those folks differently, perhaps, than other
elements of their workforce, which I realize is in many ways
anathema to our structure of the civil service. I think that is
not a small part of the issue.
The last point I will make is we cannot underestimate
today--and this has been building for a number of years--the
morale of the current acquisition workforce and in many ways
the disincentive to people coming into government procurement
despite the complexity and challenge of the work.
In the late 1990s, when we were facing some challenges from
the House side around cutting the acquisition workforce. We had
people who did not want to be defined as being a member of that
workforce because they were under the axe, if you will.
Today, given the tenor of the discussion and our relative
intolerance for mistakes and for error--I think the Comptroller
General spoke to this when he said these things are going to
happen. Those may be the toughest times, but the most important
times to stand up and support our civil servants who are out
there by and large trying to do good work, often with
inadequate tools and training. They do feel, as I said in my
written submission, somewhat assaulted and unsupported. And if
we want to incentivize people to come into that workforce, we
collectively need to support them more visibly as well as
substantively.
Senator Akaka. Thank you so much for all of your valuable
responses. Thank you, Mr. Chairman.
Chairman Lieberman. Thank you, Senator Akaka, for your good
questions. Let's do a second round of 6 minutes each, if the
Members would like to ask questions.
I wanted to go for a moment to something that Mr. Walker
mentioned before, which is, how do we try to develop a workable
definition of what services the Federal Government ought
appropriately to be able to contract for and those that they
should not? I find using a phrase, ``inherently governmental
work,'' I think that may come at some level from existing
Federal Acquisition Regulations. But is there a workable
definition of it?
For instance, we have heard recently that both the IRS and
the Department of Homeland Security have contracted out for
assistance in writing regulations. Now, my first reaction to
that is, hey, wait a second, that is really inherently
governmental work. Maybe not. Maybe they do not have an ongoing
pool of people who are skilled at doing that. Maybe it is
better that they hire somebody from outside.
Is there a workable definition of what is open to
contracting and what is not? And I am thinking about services
here. Mr. Walker.
Mr. Walker. Well, the term that you use, ``inherently
governmental,'' is a term that has some legal significance now.
I want to suggest for the record--the need to dust off the 2002
Commercial Activities Panel report, of which Stan was a member
and I had the opportunity to chair. I would ask you to take a
look at this again, and your capable staff, to take a look at
the recommendations we made.
I think we need to relook at when and under what
circumstances is it appropriate to be contracting out and when
is it not, because we are in a very different situation today,
and we are likely to continue to have to rely on contractors of
the so-called total force in order to accomplish government's
mission. But I think that a lot has happened since those
definitions were determined, and I think they need to be
relooked at.
Let me mention one other thing that I wanted to get on the
record. It is one thing to talk about economy, efficiency,
effectiveness, ethics, and equity. Those are all important
things. There is another dimension that you need to be aware of
that I am concerned about with the total force. With increasing
frequency, you can go to meetings, whether it is the Pentagon
or elsewhere in government, and you do not have any idea which
one is a civil servant and which one is a contractor. With
increasing frequency, we are relying upon contractors to
perform various functions. In some cases it makes sense. In
other cases it does not.
But we have started to see circumstances in which we at
GAO, and potentially the Congress and others, may be denied or
restricted access to certain information where we actually have
contractors doing the work. To me, that is an oxymoron. If you
have a contractor doing work, then GAO, Inspectors General, and
the Congress should have an automatic right to that
information, subject to appropriate security clearances, if you
will.
So this is a new dimension that I am starting to see emerge
that I think is going to be an increasing issue that we all
need to be concerned about.
Chairman Lieberman. Good point.
Ms. Madsen, are there certain kinds of governmental
activities that ought never to be contracted out that are
definable?
Ms. Madsen. Senator, I think that the panel would agree
with the definition of ``inherently governmental,'' and I think
there is something called the ``Inherently Governmental A
List'' that we talked about.
Chairman Lieberman. What is the definition?
Ms. Madsen. ``Inherently governmental,'' it is necessary to
be performed by a Federal employee and in the interests of the
government. But the piece that is missing--and I probably did
not phrase this very articulately earlier--is when you are
operating in this environment under A-76, people look at those
definitions. Otherwise, when agencies are just buying services
every day, they are not looking at those definitions.
So our very first recommendation when we talk about the
blended workforce is that the agencies, consistent with their
mission, need to define what their core needs are for
government employees in their agency. And we believe that the
definitions under A-76 of ``inherently governmental'' are the
right place for them to start, but they may be different for an
agency depending on its mission. And the agencies should think
about that, not just when it does an outsourcing under A-76,
but when it buys services, because they are buying services in
such large quantities.
Chairman Lieberman. Right.
Mr. Soloway, this is an odd question to ask you since you
are representing contractors, but is there any category of
services that the Federal Government should never contract out?
Mr. Soloway. Absolutely. And I think I agree with the
Comptroller General, having served on the Commercial Activities
Panel under his leadership, that we do have a definition in
regulation that talks to the commitment of government funds,
adjudication, law enforcement, and so forth. You asked a very
important question, and that is, if I understand, that somebody
is involved in the writing of regulations, is that or is that
not inherently governmental. What is their role? Are they doing
a kind of economic analysis to support a regulatory process?
Are they doing scientific analysis? Is that analysis really
inherently governmental, or is it the decision and the
policymaking that is actually the inherently governmental
focus?
I think you would find relative unanimity on this panel
about it. How to go about the periodic reviews of the current
regulation is probably always appropriate. Ultimately it does
get down to a very specific agency mission focus and agency
need that will sometimes vary from agency to agency.
The other piece to recognize is not only, as the
Comptroller General said, have we seen a growth in service
contracting in the last number of years, much of it in the
post-September 11 environment for obvious reasons in terms of
skill sets and requirements, but we have, in fact, seen the
government challenged more and more in trying to hire, even for
positions it has open, getting those skills in and the agencies
having to have certain kinds of information and expertise. That
has not created questions about crossing the line, but it
caused us to step back and say, OK, what part of regulation
development is or is not inherently governmental.
The last point I would make--and Ms. Madsen referenced the
A-76 process--which is all about how the government outsources
services that are currently being performed by a civil servant.
Under the law that has been in place for a number of years,
every agency of the government publishes an annual inventory of
every position within that agency being performed, and it
identifies the position as either inherently governmental or
commercial, or commercial but not available for contracting. It
is that third category where the discussion always is relevant.
We know if it is clearly inherently governmental; we also
probably can identify what is clearly commercial. But there is
that in-between area, and that is where the change has taken
place.
Chairman Lieberman. Thank you. Senator Collins.
Senator Collins. Thank you, Mr. Chairman.
In fiscal year 2005, more than half of all dollars
obligated were for task and delivery orders issued under IDIQ
contracts. A provision of our legislation--and, again, this is
our attempt to decrease the amount of non-competitive
contracting--would prohibit the award of IDIQ contracts over
$100 million on a sole-source basis. Instead, it says that
agencies would be required to award contracts valued over $100
million to a minimum of two contractors, who would then compete
for the various task orders under the contract.
Now, there is a waiver provision in extraordinary
circumstances when a sole-source contract is the only feasible
option. But I would like to get the views of the panel on this
provision given the fact that increasingly we are using this
kind of contract. Mr. Soloway.
Mr. Soloway. Senator, again the concern that we have here
is not with the intent, which I know is to drive greater
competition. After all, I may have one member company that
benefits and 220 that do not benefit, so their interest is in a
competitive marketplace because that is how they grow and
access new customers. Again, thresholds in statute, what is the
right number and what are the circumstances?
I recall the Chairman very eloquently, in the aftermath of
Hurricane Katrina, talking about his disappointment that FEMA
did not have in place enough prepositioned contracts to deal
with a natural disaster. In many cases, those prepositioned
contracts by definition of the work being requested, which is--
I need someone who is capable of doing certain functions in the
entire Southeast Region. Given almost any circumstance, the
contracts are going to be IDIQ by definition because we do not
know when the disaster will hit, and they may well be single-
award because I need instant response. I need to be able to
pick up a phone and then the next day the water is going, or
whatever it might be.
So there are circumstances in which that is actually the
smartest way for the government to contract because, otherwise,
you may not have capability.
Again, the real issue here is whether the $100 million is
the right threshold, and I come back to--as we looked at this
and recognized that there are concerns about too much--in your
eyes, your concern that there are too many large individual
task orders, that a lot of that could be dealt with through our
concept of the Contingency Contracting Corps, that folks who
have the training to create and then implement in an emergency
environment, which is where you see this kind of dynamic most
often. In our view that might help achieve the same goal
without putting into statute some hard and fast stops.
Senator Collins. Ms. Madsen.
Ms. Madsen. Senator Collins, I agree with Mr. Soloway, I
think periodically you need some flexibility in a disaster or
wartime context. But I think the way you have drafted the bill
with the waiver provision may well provide that flexibility.
But setting aside the disaster context, certainly both our
panel's focus on competition and your focus on competition
would suggest that a sole-source award of that magnitude on an
IDIQ where the requirements are really not defined is really
kind of out of the basket.
It is kind of perverse in a sense, and it is one of the
things we noticed with the IDIQ contracts, and it is one of the
reasons for our recommendations about heightened attention to
the competitive process for the orders--is that in many ways
that kind of vehicle is antithetical to good requirements
definition.
So I think your sense of putting some restraints on it are
proper, as long as there is room for an emergency. But I do not
think we should approach the problem with the assumption that
we are starting with the emergency.
Senator Collins. Thank you. Mr. Walker.
Mr. Walker. I think it is reasonable; I think it is
appropriate. I think you need to have an exception for
extraordinary circumstances, which you are trying to do. But I
come back to what I said before. I think we need to understand
that certain types of contingencies will happen, and we should
be doing more to plan for those, anticipate those, and to
engage in competitive contracting that one can be able to draw
task orders on when the contingency occurs, not if the
contingency occurs.
Mr. Soloway. Senator, may I mention just one last thought
for your consideration as you are thinking about the provision
further?
Senator Collins. Yes.
Mr. Soloway. I think it would be very helpful--and I have
not seen this, and your staff or the Chairman's staff may have
this data--to pull some data to look at from a trend
perspective how many single-award IDIQ contracts--in other
words, an IDIQ contract awarded to one company, which then gets
the sole-source task orders--and how much volume is flowing
through competitive multiple-award contracts. There are two
different kinds of IDIQ vehicles. I do not know and I have not
seen any data that tells me that we have actually seen a
substantial growth outside of the emergency environment--we
certainly had a couple of major contingency events in the last
few years--outside of that environment, if that contract type
has actually grown, the so-called sole source. I think we ought
to look at some of that data.
Senator Collins. I think the data is pretty clear that it
has.
Mr. Walker. I think one of the things you need to be
concerned about as well, Senator Collins, is whatever threshold
you set, what types of mechanisms will be in place to prevent
unbundling to get under the threshold?
Senator Collins. Good point. Thank you. Thank you, Mr.
Chairman.
Chairman Lieberman. Thank you, Senator Collins. Senator
Akaka.
Senator Akaka. Thank you very much, Mr. Chairman.
Mr. Soloway, at a hearing last month in my Subcommittee, we
heard that contract award fees are often awarded almost in
full. Even those with poor performance, such as Lockheed and
Northrop, which ran the Deepwater program, received over 80
percent of available award fees.
Do service providers generally expect to receive most
available award fees regardless of their performance?
Mr. Soloway. The question is very fair, Senator Akaka, and
I am not in any way trying to be cute about this. It really
depends on the contract itself. Sometimes award fees are
structured by the government as a reward for performance. Other
times it is a mix. An 80-percent award fee in many contracts
actually reflects relatively poor performance. There is very
little consistency in their application very often.
The issue here is to understand--and I do not have the
visibility into those individual contracts, and sometimes for
all of us it is difficult to get--what is it that led the
government to determine that the contractor deserved some, all,
or most of their award fee. Were the problems on the program
driven by government, whether it is requirement stability,
funding issues, or what have you? There are a variety of
factors there, and it is certainly an area worth discussing.
But I would not accept at face value that an 80-percent award
fee from a company perspective is a victory. Very often there
is very little relationship between the percentage and how it
works. It is a stepping process.
So an area definitely worth discussion. There is a lot of
confusion about it, often, and something that we would be more
than happy to talk to you about more in the future.
Senator Akaka. Comptroller General Walker, can you share
your thoughts?
Mr. Walker. Senator Akaka, as you know, GAO has done a fair
amount of work in this area. Like in most of the problems in
acquisition and contracting, it is a shared responsibility
between the government and the contractor, but the relative
allocation of responsibility varies.
My personal view is that one of the reasons that we have
seen so many incentive and award fees paid in circumstances
which do not pass the straight-faced test--meaning taxpayers
are not getting value for money and we are not paying for
positive outcomes, therefore, I think by definition it meets
the definition of ``waste'' that I talked about before. Part of
it is because of the systemic problems that I mentioned
earlier. The government many times does not do a very good job
of being very clear about what we are asking the contractor to
do. It is not very clear with regard to the requirements, or it
keeps on changing the requirements and, therefore, you are
moving the bar; and, therefore, we have seen circumstances in
which, because the contractor is doing their best, they have a
positive attitude, they are doing the best that they can,
trying to hit a moving target that many times the government
will award an incentive and award fee because of their attitude
and effort and recognition of the fact that the government
keeps moving the bar.
So I think many of these challenges are interrelated, and
we need to address them in a comprehensive and integrated
fashion.
Senator Akaka. Ms. Madsen, would you also comment on this
issue?
Ms. Madsen. I would agree with Comptroller General Walker.
We did not look at the award fee issue in particular in the
panel, but the issue we saw with requirements development we
believe is persuasive. That is why we made such a focus on it.
Award fee is a sort of performance-based contract, and if
you cannot define the baseline such that people understand what
they are performing to, then it is very hard to deal with the
performance measures on the back end and do it in a way that is
fair. And I agree, I think in many instances where there are
changes, where the requirements were not properly defined in
the first place, and the contractor is kind of caught in the
middle, the contractor and the agency try to do the best they
can with where they find themselves, despite the fact that they
did not have a good baseline to start with.
That is why we emphasized--that is our first
recommendation--get your requirements right first.
Senator Akaka. Thank you all for your responses.
Mr. Soloway, contract employees work side-by-side with
Federal employees, though they are not subject to all
government ethics rules, such as the Ethics in Government Act.
Does your organization try to promote ethical practices among
contractors working for Federal agencies?
Mr. Soloway. Senator, we try to do a lot. First of all, as
a term of membership, companies must validate or certify that
they have an ethics program in place. We have, in fact,
conducted training, particularly for smaller and mid-tier
firms. I think you will find--I believe it was GAO, but I do
not want to put words in the Comptroller General's mouth--that
most of the large companies have very formal, well-developed
ethics and compliance programs. We try to help our smaller and
mid-tier firms figure out how they can also do that to make
sure that they have the right culture in place. We are strong
believers that when you are dealing with the public dollar and
public trust, you have to have an ethical culture and an
appropriate culture in place.
With regard to the issues that do arise relative to
different ethical standards, let's not make a mistake. Contract
employees are subject to a variety of ethics requirements. They
may not be entirely the same as the government employees, but
they themselves also have legal requirements they have to meet.
So we, as an organization, ask our companies--as a term of
membership, they must adhere to a basic code of conduct. And we
have also done a number of programs to help them review or
reflect on or make sure they have the right ethics program in
place.
Senator Akaka. Again, I want to thank the panelists very
much for your excellent responses. Thank you, Mr. Chairman.
Chairman Lieberman. Thank you, Senator Akaka.
And the wind-up now. Senator Carper.
Senator Carper. Thank you, sir. I have been referred to in
less complimentary terms than the ``wind-up,'' even today.
Thank you for this.
Chairman Lieberman. I hope things get better.
Senator Carper. It has actually been a pretty good day.
Chairman Lieberman. Good.
Senator Carper. To our witnesses, thank you for joining us
and for your testimony and for your willingness to respond to
our questions and comments here.
Let me just start off by asking, When might sole-source
contracts, no-bid contracts, cost-plus contracts be
appropriate? There are instances when they are, but what might
those instances be?
Mr. Walker. I think there is a difference between no-bid
and cost-plus. In no-bid, where you are doing a sole source
contract, if you have an emergency situation, you have a
critical need that could not have reasonably been anticipated,
then there may be circumstances in which it may be appropriate,
at least for the initial contract award. Coming back to what
Senator Collins and Senator Lieberman, you and others are
trying to address through legislation, that does not mean
indefinitely. It may mean you need to do another contract award
that should be competitively bid after the initial award.
As to cost-plus, it really is a circumstance where you are
trying to contract for something where it is virtually
impossible to define with any degree of specificity the related
requirements. But, quite frankly, there are not that many that
are----
Senator Carper. Could you give us an example of that?
Mr. Walker. If you are trying to--maybe when we were
deciding that we were going to go to the Moon and John F.
Kennedy set the goal for the United States to land a man on the
Moon and return him in the 1960s, there were probably aspects
of that that we needed to do some type of cost-plus. But as
things moved along and we got more definitive, what we were
looking for and as technology started to be developed or
whatever, then we should have been able to move potentially
past that in certain circumstances. But that would just be a
thought.
Senator Carper. The next time we have on the drawing boards
proposals to send another mission to the Moon, it will be
interesting to see, first of all, how we bid that one out and
what it cost compared to what we spent the last time.
Ms. Madsen. Senator, could I comment, sir?
Senator Carper. Please.
Ms. Madsen. I think there is a tendency to sort of lump
both terms together, and I agree with Comptroller General
Walker, there is a big difference between what kind of
competitive process you use and what kind of contract you
award.
Certainly for sophisticated technology-type procurements,
very often a cost-type contract on the front end where the
government and the contractor are trying to figure out what is
this--it has got a research component to it, it has got a
development component to it. You see this all the time in
weapons system development where the first stage is
frequently--they are usually competitive, almost always
competitive, but they are for cost-type contracts.
The second stage is for production. There may be a down-
select, and those contracts may----
Senator Carper. When you say a ``down-select,'' what does
that mean?
Ms. Madsen. A competition between two or three solutions
for who will do the next stage and make that next stage fixed-
price because now everybody knows what the requirements are,
they have been developed.
There seems to be a tendency in the discussion lately to
talk about cost-type contracts as though they are some sort of
evil. I think they certainly have their place. There are a lot
of controls in terms of rules and regulations that govern what
kinds of costs can be charged. The trick is to use them
appropriately and, when you do not need them anymore, to move
onto the next stage.
I think part of the problem here is when people start to
talk about acquisition of things that are more commercial and
maybe services are more in the commercial marketplace, that is
where requirements definition makes such a difference, because
if you have something that is definable that you do not define,
you end up with a cost-type contract maybe where you did not
need it because you did not get your requirements right in the
first place. That is why our panel report emphasizes
requirements development so significantly because it is hard to
do a competition if you did not do your requirements on the
front end.
Senator Carper. Mr. Soloway.
Mr. Soloway. Thank you, sir. A couple of quick comments.
Philosophically, most businesses, certainly most of our
members, would prefer a firm fixed-price contract over a cost-
type contract. It is a preferred way of doing business. I
believe Ms. Madsen would probably agree that in the commercial
world, in the investigations that the panel did, that is the
preferred method of doing business.
What it often comes back to is, with all due respect to the
Comptroller General, not just something as elegant as going to
the Moon, but the difficulty the government has not only in
defining requirements but providing adequate insight and
information into its own processes, its own systems, the entire
breadth and scope of networks and so forth, so that a
contractor with some confidence can develop a fixed-price bid,
because, of course, that is a high-risk proposal for the
contractor. So it is not just philosophically. Philosophically
we agree where you would want to have cost-type versus fixed-
price. It is also the practical implementation and the
government's ability to be able to answer those critical
questions.
On the sole-source question, there are in regulations a
whole set of circumstances under which sole-source contracts
would be appropriate, not just in emergency circumstances but
for logical follow-on to existing work.
One of the big issues that GAO and others have identified
that has been interpreted as assuming we are doing too much
sole-sourcing is that the government, frankly, is not doing a
very good job or does not have a very good system for keeping
track of the paperwork to determine when a sole-source
determination was made and why. So the Comptroller General's
team or an IG team or an audit team comes in, and they do not
even have access to records, because they do not exist, to say,
well, why did you do this as a sole source. So part of it is
also a recordkeeping issue.
But we have pretty clear guidance in law and regulation as
to when a sole-source contract is appropriate.
Senator Carper. Thanks.
Mr. Chairman, my time has expired. I just want to mention
two questions. I am not asking necessarily for answers now.
Senator Collins has left, but I suspect there was some
discussion about the legislation that she has introduced and
that Senator Lieberman and I and others have cosponsored. I
have been off to other hearings, but did you talk about some
improvements that might be made to that legislation? So those
are on the record? Good.
Mr. Walker. We did, Senator Carper. But the other thing is
that I committed to provide this week some specific
recommendations from GAO to try to improve the bill.
Mr. Soloway. We also have been working with both Senator
Collins' and Senator Lieberman's staffs on some additional
details, and some of it is contained in my testimony.
Senator Carper. Thanks. The last one is Senator McCaskill
and I were over in Kuwait and Iraq about 4 weeks ago, and we
had a chance to talk to Mr. Walker a little bit about it. We
will have hopefully a chance to talk some more later today.
One of the things that we heard when we were over there is
that we learned a lesson about procurement in Kosovo 10 years
ago, and we forgot those lessons, and we have to relearn them
again in Iraq and Kuwait. Somewhere down the line,
unfortunately, there will be another Kosovo, another Iraq, and
the question is: Are we going to have to relearn those same
lessons again and go through 2, 3, 4, or 5 years of just
wasting money in too many instances before we finally say, oh,
didn't we already learn this 10, 20, or 30 years ago?
What are some thoughts that you might have? When I was in
the Navy, we used to have a pass-down log. Our squadron would
be deployed for a half a year, and we would come home, and we
would have a pass-down log, and we would give it to the
squadron that was relieving us on duty wherever we were around
the world.
But how do we provide for a pass-down log in this
particular arena?
Mr. Soloway. Senator, your reference to Kosovo made me
smile only because I remember going to the Balkans in 1999 when
I was in the Administration, and so many of the issues--not as
much with the contractor, but just the deployment of the force
and how this all was working, it was so evident then on a much
smaller scale than they are in Iraq. And at the Professional
Services Council, we did a ``lessons learned'' study in
partnership with the Army in 2004, and when we presented the
results to the Army leadership, the General said, ``This is
terrific, but let's not call it `lessons learned' because we
have not learned a darn thing.''
There are certainly a lot of lessons, and our ability to
share knowledge and share history and also maintain a focus on
something that, when it gets out of the limelight, tends not to
get the continued leadership focus it needs. It is really the
biggest challenge here. Whether it was contingency contracting
in 1999 and again in this century, or the acquisition
workforce, which is a focus for all of us now, but 3 years from
now will we have maintained that focus is really one of the
biggest challenges we have.
Senator Carper. Mr. Walker.
Mr. Walker. I will give you one example, and that has to do
with LOGCAP, for example, where you might enter into an IDIQ
under a cost-plus arrangement, where you have not really
defined what you are looking for, where you are putting the
contractor in a situation where they can decide what you need,
they can decide what quantities you need, they can decide a lot
of things, and in many circumstances they may be doing it in
good faith and best efforts, but in some circumstances they may
be providing you more than you really need. And the incentives
are to do that.
So I come back to what I said before. There are a number of
recurring systemic challenges that exist that get repeated over
and over again. And most of it has to do with execution in the
Executive Branch. Some of it may require legislation, but most
of it is just execution, and most of it is just
institutionalizing that knowledge, providing the right type of
processes, having the right type of people, and making sure
that the lessons learned or whatever you want to call them get
passed down to people who have the responsibility and the
authority down the road.
The other thing is that people need to be held accountable
when they make the same mistakes over and over again. If there
are no consequences, then why change? And all too frequently,
there have been no consequences.
Senator Carper. Last word, Ms. Madsen.
Ms. Madsen. I hope not the last word, but just really a
comment. I think as we looked at the workforce issues sometime
in the next 5 to 10 years, basically almost all of the current
expertise in terms of agent experience and the acquisition
workforce and the rest of it is going to retire. So there is a
huge challenge here for people in acquisition to move down a
generation in terms of the kinds of knowledge that you are
talking about, and we think our recommendations address that,
but it may need to be done in a way that is different than has
been done in the past.
Senator Carper. Good. Thanks. Thank you all very much.
Thanks, Mr. Chairman, for being so generous with the time.
Chairman Lieberman. Thanks, Senator Carper. Thanks for
those goods questions.
My thanks to the witnesses. It has been a very thoughtful,
I would say constructive exchange here. I repeat what I believe
most people think, which is that we have a problem. The scope
of contracting is growing dramatically, it is costly, and not
all of it is being well managed. And I suppose it is fair to
say, as you said at the beginning, Mr. Walker, that most of it
is being well managed, and we also ought to say that. But the
part that is not being well managed is costing taxpayers a lot
of money that they should not have to spend.
So we are going to legislate here, and we invite your help
in assisting us to do that in a way that is informed and
constructive. The testimony today has been extremely helpful,
and I thank you for it.
We are going to keep the hearing record open for 15 days if
you want to submit any statements for the record afterward, and
we may have some questions that we want to direct to you. But
in the meantime, I thank you again, and the hearing is
adjourned.
[Whereupon, at 12:12 p.m., the Committee was adjourned.]
A P P E N D I X
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