[Senate Hearing 110-530]
[From the U.S. Government Publishing Office]
S. Hrg. 110-530
IS THE DEPARTMENT OF HOMELAND SECURITY TOO DEPENDENT ON CONTRACTORS TO
DO THE GOVERNMENT'S WORK?
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HEARING
before the
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
OCTOBER 17, 2007
__________
Available via http://www.access.gpo.gov/congress/senate
Printed for the use of the
Committee on Homeland Security and Governmental Affairs
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38-851 PDF WASHINGTON DC: 2008
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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
David A. Drabkin, Minority GSA Detailee
Trina Driessnack Tyrer, Chief Clerk
C O N T E N T S
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Opening statements:
Page
Senator Lieberman............................................ 1
Senator Collins.............................................. 3
Senator McCaskill............................................ 18
WITNESSES
Wednesday, October 17, 2007
John P. Hutton, Director, Acquisition and Sourcing Management
Team, U.S. Government Accountability Office.................... 5
Elaine Duke, Chief Procurement Officer, U.S. Department of
Homeland Security.............................................. 8
Steven L. Schooner, Co-Director, Government Procurement Law
Program, the George Washington University Law School........... 11
Alphabetical List of Witnesses
Duke, Elaine:
Testimony.................................................... 8
Prepared statement........................................... 45
Hutton, John P.:
Testimony.................................................... 5
Prepared statement........................................... 29
Schooner, Steven L.:
Testimony.................................................... 11
Prepared statement........................................... 58
APPENDIX
Responses to Post-Hearing Questions for the Record from:
Ms. Duke..................................................... 69
Mr. Schooner................................................. 82
GAO Report submitted for the Record by Mr. Hutton, GAO-07-990,
``Department of Homeland Security--Improved Assessment and
Oversight Needed to Manage Risk of Contracting for Selected
Services,'' dated September 2007............................... 84
IS THE DEPARTMENT OF HOMELAND SECURITY TOO DEPENDENT ON CONTRACTORS TO
DO THE GOVERNMENT'S WORK?
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WEDNESDAY, OCTOBER 17, 2007
U.S. Senate,
Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 10:34 a.m., in
Room SD-342, Dirksen Senate Office Building, Hon. Joseph I.
Lieberman, Chairman of the Committee, presiding.
Present: Senators Lieberman, McCaskill, and Collins.
OPENING STATEMENT OF CHAIRMAN LIEBERMAN
Chairman Lieberman. Good morning, and thank you for being
here this morning. I appreciate your indulgence. I just had the
honor of introducing Judge Mukasey at his hearing before the
Judiciary Committee.
This morning in this Committee, we are going to examine the
extent to which the Department of Homeland Security (DHS)
relies on contractors to carry out its crucial mission to
secure our homeland from terrorism and natural disaster.
Plainly put, we will ask who is in charge at the Department of
Homeland Security--its public managers and workers or its
private contractors?
Today this Committee is releasing the Government
Accountability Office's (GAO) report, which we requested, in
which GAO calls on the Department of Homeland Security to
improve its oversight of contractors and better manage the
risks associated with relying on contractors. The fact is that
the GAO, in its report, expresses profound concern that there
is inadequate oversight now of contractors and that there is a
serious need to better manage the risks associated with relying
on contractors.
GAO examined 117 statements of work for the Department of
Homeland Security service contracts and found that over half of
those contracts were for services that closely support
inherently governmental functions. GAO then examined nine of
those contracts in detail.
While GAO did not make any conclusions on whether DHS
improperly allowed contractors to perform inherently
governmental work, it did find that: First, DHS has not
revisited its original justification for relying on
contractors--which was the need of this new Department to stand
programs up quickly--and has not conducted a comprehensive
assessment of the appropriate mix of Federal employees and
contractors.
Second, DHS did not assess the risk that its decisions may
be influenced by, rather than independent from, contractors.
Third, most of the contract officials and program managers
interviewed by GAO were unaware that Federal procurement policy
requires heightened oversight when contractors perform these
types of services.
Fourth, six of the nine contracts called for the contractor
to perform a very broad range of services or lacked detail.
Without clearly specifying requirements for the contractor, the
Department exposed itself, according to GAO, to waste, fraud,
and abuse.
And, fifth, none of the oversight plans reviewed by GAO
contained specific measures for assessing contractor
performance.
Now, to bring this down to real-life examples, let me
mention a few of the questionable uses of contractors that were
uncovered by GAO.
The Coast Guard hired a contractor to help manage its
competitive sourcing program, meaning that it hired a
contractor to help determine whether existing Coast Guard jobs
should be contracted out.
One $42.4 million contract to support the Department's
Information Analysis and Infrastructure Protection Directorate
was so broad that it covered 58 different and distinct tasks.
This very large, all-encompassing umbrella of a contract
covered such disparate items as acquisition support,
intelligence analysis, budget formulation, and information
technology planning. And how many DHS employees were assigned
to help the contracting officer provide technical oversight of
this enormous job? Just one.
Another example: The contractor supporting TSA's employee
relations office provided advice to TSA managers on dealing
with personnel issues, including what disciplinary actions to
take--the very same function that TSA employees were already
being paid to perform themselves in that very office.
GAO says that the Department of Homeland Security's
reliance on contractors during the days when the Department was
first being stood up post-September 11 was understandable, but
they question whether it is now.
Now, let me mention the Federal Acquisition Regulation
(FAR), which governs procurement for Federal agencies,
prohibits inherently governmental work from being performed by
contractors. FAR allows contractors to perform work that
``closely supports inherently governmental work,'' but does not
allow contractors to perform ``inherently governmental'' work
itself. The line between those two is, admittedly, hard to draw
and something that perhaps this Committee and the Office of
Management and Budget and separate departments like DHS should
take a fresh look at. But the FAR says specifically, for
example, that the government itself is supposed to determine
agency policy, including regulations, not private contractors,
and that the government itself must make, quite naturally, its
own governmental contract arrangements.
But GAO's report leads us to question whether DHS is in
control of all the activities occurring at the Department or
whether in too many cases the Department may be rubber-stamping
decisions made by contractors.
In fiscal year 2006, DHS spent $15.7 billion on goods and
services. Of this, $5 billion, almost one-third, went to
contractors providing professional and management support--
often sitting side by side with Federal employees performing
similar work, if not the same work. This heavy reliance on
contractors certainly suggests the requirements of the FAR are
being ignored, and I want to raise two questions that come off
of that.
First, is the risk that the Department is not creating the
institutional knowledge within itself that is needed to be able
to judge whether contractors are performing as they should.
That could mean vulnerability to overcharges and other forms of
fraud and abuse.
Second is, of course, the risk that the Department may lose
control of some of its own decisionmaking. The danger is that
the Department may become so dependent on private contractors
that it simply does not anymore have the in-house ability to
evaluate the solutions its private contractors propose or to
develop options on its own accord. In that sense, the
Department may lose some of the critical capability to think
and act on its own for we the people of the United States.
So these are serious questions, and GAO has done a
critically important report, and we have an excellent group of
witnesses to discuss that report.
Senator Collins.
OPENING STATEMENT OF SENATOR COLLINS
Senator Collins. Thank you, Mr. Chairman.
The theme of today's hearing is captured quite well in a
handbook published by the Office of Personnel Management. It
reads as follows: ``Managers need to keep in mind that when
they contract out . . . they are contracting out the work, not
the accountability.''
That handbook, ``Getting Results Through Learning,'' was
released in 1997. To judge from the GAO's report this morning,
the government has yet to embrace that important lesson.
The Department of Homeland Security offers a useful case
study in the benefits--and the risks--of government contracting
for services.
There are many legitimate reasons for contracting work out:
For example, helping with stand-up requirements, meeting
intermittent or surge demands, and keeping agency staff focused
on core responsibilities. The GAO report notes that DHS has
faced many of these challenges over its short life, leading to
the use of contracts to cover needed services. But GAO also
notes, ``Four years later, the Department continues to rely
heavily on contractors to fulfill its mission with little
emphasis on assessing the risk and ensuring management control
and accountability.''
Despite OPM's admonition a decade ago, DHS has failed in
numerous instances to ensure appropriate accountability for
service contracts. GAO's report provides troubling evidence
that DHS has not routinely evaluated risks in acquiring
services by contract and has not properly monitored services
that are closely related to ``inherently governmental
functions.'' These examples of inadequate oversight are
particularly troubling given the billions of taxpayer dollars
that DHS used last year to procure professional and management-
support services.
Some of GAO's findings are especially disconcerting:
First, without sufficient oversight, contractors were
preparing budgets, managing employee relations, and developing
regulations at the Office of Procurement Operations, TSA, and
the Coast Guard. As the Chairman has pointed out, these seem to
be inherently governmental functions that should not be
contracted out.
Second, some DHS program officials were unaware that a
long-standing Federal policy requires an assessment of the
risks that government decisions may be influenced by a
contractor's actions. Worse, even when informed of this policy,
some DHS officials said they did not see the need for enhanced
oversight.
Third, in six of the nine cases studied by GAO, statements
of work lacked measurable outcomes, making it difficult to hold
contractors accountable for the results of their work.
And, fourth, DHS has not assessed whether its contracting
could lead to a loss of control and accountability for mission-
related decisions, nor has it explored ways to mitigate such
risks.
These concerns are very similar to many raised by the DHS
Inspector General, who identified instances of poorly defined
contract requirements, inadequate oversight, unsatisfactory
results, and unnecessary costs. I would note that I think it is
a very positive sign that DHS has brought an experienced
procurement official, Elaine Duke, to the Department to try to
improve its processes. But it is troubling that we are finding
this pattern of problems.
To address the reports of contracting failures like those
identified in this and other GAO reports--and these failures
are found in agencies other than DHS--Senator Lieberman and I
introduced S. 680, the Accountability in Government Contracting
Act of 2007, along with several of our colleagues, earlier this
year. The bill was unanimously reported by this Committee at
the beginning of August, and it would reform contracting
practices; strengthen the procurement workforce; introduce new
safeguards against waste, fraud, and abuse; and provide
increased oversight and transparency in the Federal
Government's dealings with its contractors.
I want to highlight one other provision of the bill that I
think is particularly important and would apply to some of the
problems we found in DHS, and that is the bill would also limit
the duration of non-competitive contracts. This has been a
problem identified by GAO in this report, as many DHS service
contracts were extended well beyond the original period of
need.
The GAO report that is being released today delivers a
troubling judgment, especially when so much of DHS service
contracting seems to come very close--and in some cases crosses
the line--to the performance of ``inherently government
functions.''
So, Mr. Chairman, I appreciate your holding this hearing
today and assembling a distinguished group of experts.
Chairman Lieberman. Thanks very much, Senator Collins.
Thanks for mentioning the legislation that we have cosponsored,
the Accountability in Government Contracting Act, and just to
say briefly, the focus today is on the GAO report on the
Department of Homeland Security, which is troubling. But it
raises questions that obviously go beyond the Department more
broadly in our government.
At this moment, there is much attention both from Congress
and the public, the media, on the use of private security
guards in Iraq and Afghanistan, which is understandable, apart
from the rights or wrongs of those particular contracts and the
contractors and their employees who are carrying them out. That
is a separate question.
It does raise exactly the same questions as raised here.
What are ``inherently governmental responsibilities'' that
ought to be carried out by public employees? Second, do we have
sufficient public employees to carry out those
responsibilities? And if we do not and, therefore, we determine
that to get the job done to fulfill the responsibility that
Congress has given an agency circumstances require that they
have to use private contractors, then is the oversight
adequate? And I think all of these questions that we will be
discussing today about DHS have applicability broadly
throughout the Federal Government, including in the particular
case of private security guards in Iraq and Afghanistan. Of
course, we hope that our legislation will help answer those
questions in the right way in all of these cases.
Our first witness today is John Hutton, Director of the GAO
Acquisition and Sourcing Management Team. Mr. Hutton has had a
wonderful career at GAO dating back to 1978 and has been
instrumental in many of the reports that the office has
prepared for this Committee on contracting issues, for which we
are grateful. The report being issued today is one in a series
that GAO is conducting for this Committee--it is not the last
one--on contracting by the Department of Homeland Security,
which, after all, is a major responsibility of oversight for
this Committee as the Homeland Security Committee. Last fall,
GAO reported to us on the Department's use of interagency
contracts, and still to come are reports on performance-based
contracting and on the acquisition workforce.
Mr. Hutton, we thank you and your team for the
extraordinary work that you have done for this Committee,
indeed, for the public, and I now welcome your testimony about
your latest report.\1\
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\1\ The GAO Report submitted by Mr. Hutton, GAO-07-990,
``Department of Homeland Security--Improved Assessment and Oversight
Needed to Manage Risk of Contracting for Selected Services,'' dated
September 2007 appears in the Appendix on page 84.
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TESTIMONY OF JOHN P. HUTTON,\1\ DIRECTOR, ACQUISITION AND
SOURCING MANAGEMENT TEAM, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Hutton. Thank you very much. Chairman Lieberman,
Senator Collins, and Members of the Committee, thank you for
inviting me here to discuss our report today on work done for
this Committee, as you note, on the Department of Homeland
Security's reliance on contractors that perform mission-related
services. As you know, when DHS was established over 4 years
ago, it faced enormous challenges in setting up offices and
programs that would provide a wide range of activities that are
very important to this country's national security. And to help
address this challenge, as we know, the Department relied on
contractors, many for professional management support, and
these are services that increase the risk of contractors'
unduly influencing the government's control over programs and
accountability for actions. And for this reason, longstanding
Federal policy requires attention to this very risk.
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\1\ The prepared statement of Mr. Hutton appears in the Appendix on
page 29.
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And I would like to point out also that the scope of this
work was really focused on those activities that are closely
supporting inherently governmental functions. We did not
address specifically inherently governmental functions that may
be performed by contractors. And that is a key point here
because for services that closely support, you are getting real
close to government decisionmaking, and that is where the
decisions ought to be made--in the government.
But my testimony today will highlight our key findings.
First, I want to describe the types of professional management
support services for which DHS has contracted and the
associated risks. And, second, I will then discuss DHS'
consideration and management of risk when contracting for such
services. And, Senator Lieberman, I must say you did a nice job
summarizing our methodology, so I will move on to some of our
key points.
DHS contractors performed a broad range of activities under
the four types of professional management services that we
reviewed, and most of the statements of work we reviewed
requested contractors to support policy development,
reorganization and planning, and acquisitions. And, again,
these are services that closely support inherently governmental
functions.
For example, the Transportation Security Administration
acquired contractor support for such activities as assisting
the development of acquisition plans and hands-on assistance to
program officers to prepare acquisition documents.
The Office of Procurement Operation's Human Capital
Services Order provided for a full range of professional and
staffing services to support DHS headquarters offices,
including writing position descriptions, assigning official
offer letters, and meeting new employees at DHS headquarters
for the first day of work.
Now, as we drill down further into our case studies, we
gained additional insights into the types of services being
performed and the circumstances that drove DHS' contracting
decisions. Many of the program officials we spoke with said
that contracting for services was necessary because they were
under pressure to get these programs and offices up and running
quickly, and they did not have enough time to hire staff with
the right expertise through the Federal hiring process.
Given the decision that contractors were to be used, we
then looked at DHS' consideration and management of the risk
when contracting for such services. Federal acquisition
guidance highlights the risk inherent in these services, and
Federal internal control standards require assessment of risks.
Now, in our nine case studies, while contracting officers
and program officials generally acknowledged that such support
services closely support inherently governmental functions,
none assessed whether these contracts could result in a loss of
control and accountability for policy and program decisions.
Also, none were aware of the Federal requirements for enhanced
oversight in such cases, and most did not believe enhanced
oversight was need.
Our nine case studies provided examples of conditions that
needed to be carefully monitored to help ensure the government
does not lose this control and accountability. For example, in
seven of the nine cases, contractors provided services integral
to an agency's mission and comparable to those provided by
government employees. To illustrate, one contractor provided
acquisition advice and support while working alongside Federal
employees and performing the same tasks.
In each of the nine case studies, the contractor provided
ongoing support for more than 1 year. In some cases, the
original justification for contracting had changed, but the DHS
components extended or re-competed services without examining
whether it would be more appropriate for Federal employees to
perform the service.
Third, in four of the case studies, the statements of work
contained broadly defined requirements lacking specific details
about activities that closely support inherently governmental
functions. And, in fact, several program officials noted that
the statements of work did not accurately reflect the program's
needs or the work the contractor actually performed.
Moreover, Federal Acquisition Regulations and policies
state that when contracting for services, particularly for the
ones we are speaking of, a sufficient number of qualified
government employees are needed to plan the acquisition and to
oversee the activities to maintain that control and
accountability over their decisions.
We found some cases in which the contracting officer's
technical representative lacked the capacity to oversee
contractor performance due to limited expertise and workload
demands. For example, one technical representative was assigned
to oversee 58 tasks ranging from acquisition support to
intelligence analysis to budget formulation and planning, and
these were across multiple offices and locations. Similarly,
another technical representative assigned to oversee a
contractor provide an extensive range of personnel and staffing
services lacked technical expertise which the program manager
believed affected the quality of oversight provided.
Now, in prior work, GAO has noted that agencies facing
these workforce challenges, such as lack of critical expertise,
have used strategic human capital planning to develop these
long-term strategies to achieve programmatic goals. While DHS'
human capital strategic plan notes that the Department has
identified some core mission-critical occupations and seeks to
reduce these skill gaps, it has not assessed the total
workforce deployment across the Department to guide decisions
on contracting for selected services.
We have noted the importance of focusing greater attention
on which types of functions and activities should be contracted
out and which ones should not while considering other reasons
for using contractors, such as a limited number of Federal
employees.
In closing, until the Department provides greater scrutiny
and enhanced management oversight of contracts for selected
services--as required by the Federal guidance--it will continue
to risk transferring government responsibility to contractors.
To improve the Department's ability to manage this risk and
help ensure government control, the report we are releasing
today recommends that the Secretary of Homeland Security take
several actions. These actions include: Establishing a
strategic level guidance for determining the appropriate mix of
government and contractor employees; assessing the risk of
using contractors for selected services during the acquisition
planning process; again, more clearly defining contract
requirements, acquisition planning is of note there; and
assessing the ability of the government workforce to provide
sufficient oversight when using services.
Mr. Chairman, this concludes my statement, and I will be
happy to answer any questions you will have.
Chairman Lieberman. Thanks very much, Mr. Hutton. We
certainly have questions for you.
We will next go to Elaine Duke, who is the Chief
Procurement Officer at the Department of Homeland Security. Ms.
Duke brings considerable experience with her to this position,
having previously served as Deputy Chief Procurement Officer at
DHS, Deputy Assistant Administrator for TSA, and for many years
before that held a series of acquisition-related positions with
the U.S. Navy.
Since being appointed Chief Procurement Officer last year,
2006, Ms. Duke has undertaken a number of initiatives to
strengthen acquisition practices at the Department, which we on
this Committee appreciate. But obviously, having heard Mr.
Hutton and having read his report, I am sure you recognize that
you have a tremendous challenge that you have found to improve
acquisition management in a Department where the procurement
needs are so vast and so complex.
So, with that, we thank you for being here and welcome your
testimony now.
TESTIMONY OF ELAINE DUKE,\1\ CHIEF PROCUREMENT OFFICER, U.S.
DEPARTMENT OF HOMELAND SECURITY
Ms. Duke. Thank you, Mr. Chairman, Ranking Member Collins,
and Members of the Committee. I really appreciate the
opportunity to be here this morning before your Committee for
the first time.
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\1\ The prepared statement of Ms. Duke appears in the Appendix on
page 45.
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Since it is my first time before you, I wanted to take a
moment to talk about the priorities we are working on within
the procurement program within DHS, and then I will
specifically address the GAO report.
We have three procurement priorities within the Department
of Homeland Security. They are all essential for our
stewardship of the taxpayers' dollars: The first is to build
the acquisition workforce; the second is to make good business
deals; and the third is to perform effective contract
administration. I share these priorities with the heads of
contracts in each of the components within DHS.
Within the first priority, building the acquisition
workforce, some of the initiatives we have undertaken over the
last year include a Centralized Hiring Initiative, where we at
the corporate level are recruiting and hiring for key
acquisition positions throughout the Department of Homeland
Security. We used direct hire authority extensively for this.
As the Committee knows, the direct hire authority has expired,
and we appreciate that being part of your proposed bill to
renew that hiring authority. That is something we have used for
well over 100 people just in the last 8 months, and we
appreciate your efforts to reinstate that.
We have in the President's budget for fiscal year 2008 a
new centralized Acquisition Intern Program. We will essentially
manage and fund interns for a 3-year period, rotating them
throughout DHS to provide that continuity in one DHS field.
This is a program that we think will bring a new workforce into
the Department of Homeland Security and are very much looking
forward to starting that in this fiscal year.
We also in the President's budget have a centralized
Acquisition Workforce Training Fund. We have partnerships with
the Federal Acquisition Institute and the Defense Acquisition
University to use for delivering these central training skills
throughout DHS.
Under the second priority, make good business deals, we
have several policy and oversight initiatives in this area. We
have a Homeland Security Acquisition Manual that addresses key
aspects of a good business deal, including competition,
acquisition planning, small business, contractor
responsibility, lead systems integrator issues, and
organizational conflicts of interest. This past June we issued
DHS' first Guide to Source Selection to try to institute a
culture of good source selection, best values throughout the
Department.
We recently received an actual kudos in a GAO report on
Alaska Native use, and it said that DHS was one of the leaders
in having good oversight policy and proper use of Alaska Native
corporations. And this fiscal year, initial numbers have
greatly increased our level of competition going from about 50
percent in fiscal year 2006 to about 65 percent in fiscal year
2007--still much room to improve, but a great improvement over
1 year.
Additionally, we are on the Office of Federal Procurement
Policy working groups for some of the Federal initiatives,
including how to do interagency agreements better and how to
improve the use of performance-based service contracts--one of
the focuses of the GAO report.
Under the third priority, effective contract
administration, we are working heavily with Defense Contract
Management Agency and Defense Contract Audit Agency to augment
with Federal employees DHS' workforce in these key areas.
We have had a series of Excellence in Contracting workshops
done by persons on my staff to target certain areas, such as
government property management, COTR functions in many of the
key areas.
We also have cross-cutting initiatives that really cover
all three of the priorities. I would like to specifically
mention the achievements of my Office of Small and
Disadvantaged Business Utilization. We were one of the few
Federal agencies to receive a green in the Small Business
Administration's first annual scorecard. During fiscal year
2007, we conducted our first major on-site acquisition reviews.
We reviewed FLETC, Office of Procurement Operations, FEMA, and
U.S. Citizenship and Immigration Services in a comprehensive
review, in addition to a number of targeted specialized
reviews.
One of the areas that I would like to distinguish that we
are doing is expanding the authority and responsibility of my
office from procurement to acquisition, and that may sound like
a semantics issue, but it is not. Some of the issues we are
talking about here, and as the GAO report identifies, we have
to start with a good requirement, and that starts in the
program office. And to wait until the end of the process, the
end result, the procurement, is really just Band-aiding in or
inspecting in a solution. So we are working with expanding both
at my office and within the components to make sure we have the
full range of acquisition competencies and people in place to
manage these programs. I have selected a Senior Executive
Service program manager that will lead this effort in my
office, and we have the full support of the Under Secretary of
Management, as you know, in this initiative.
Now I would specifically like to address the GAO report,
and it addresses the government's increasing reliance on
government services. It has already been said that this is not
just a DHS issue. It is a Federal problem. I think that was
most evidenced by the Services Acquisition Reform Act, the SARA
Acquisition Advisory Panel results, who devoted a whole chapter
to this and made some recommendations, which we and OFPP are
looking at to see what is the best answer for the Federal
Government.
I think there are two issues raised by the report. One of
them is: Is DHS contracting out inherently governmental
services? And the second, is it properly managing the service
contracts that it has?
We agree with the recommendations of the report. There is a
risk in reliance on government contractors. We do agree that we
have much more to do, but we do not agree that we have not done
anything to start managing this risk.
To keep in mind perspective, Mr. Chairman, you brought up
the fact that we are building and executing at the same time in
DHS. One other point to bring up is we are actually growing, to
add another dimension of complication. Just a few years ago, we
had about $2 billion worth of contracts. Last year, if you
include interagency agreements our contracting officers had to
execute, we had well over $17 billion worth of responsibility
in contracting.
So what are some of the things we have done to address the
concerns of the GAO report? I issued a memorandum to all the
component heads talking about DHS service contracting best
practices, risks, things to look out for and enforce in the
contracting. We brought to the attention of Defense Acquisition
University, who does the COTR training for all the Federal
agencies, the importance of the OFPP Letter 93-1 that was
mentioned in the GAO report to make sure that the COTR training
is modified to include the specific risk areas.
We are focusing heavily on the requirements piece, as I
said earlier. We really think that is the true solution, to
have good requirements so that we can increase our use of
performance-based contracting, decrease the risk. We are doing
work in the areas of organizational conflicts of interest, both
in awareness and training, to ensure that when we have a
blended workforce, as was stated earlier, a contractor sitting
next to a government employee, that the risks and the nuances
between that is recognized and managed.
And we are addressing staffing, and that is a big thing. At
least in the near future, we will continue to have what is
classified as nearly inherently governmental services necessary
to accomplish our mission, but we have to make sure that we
have the in-house government forces in the program office as
COTRs and in the contracting officers to make sure we
adequately manage that risk.
We are currently looking at all our major programs under a
``Quick Look'' review to assess risk of those programs, and
then we are going to prioritize and target the programs for
what we are calling ``deep dives'' based on those Quick Look
reviews and an assessment of risk. And that has started now,
and we are about halfway through our Quick Look reviews.
We are increasing the certification of program managers. We
have acquisition career certification standards for
contracting, COTRs, and program managers. And we currently have
about 250 certified program managers. They are not all in the
right jobs, though, and that is another thing we are working
on.
So these are some of the efforts we are working on within
the Department. I would also like to point out that seven of
the nine most troubling acquisitions in the GAO report are no
longer active contracts, so we are working in the right
direction in that regard, too.
Mr. Chairman, Ranking Member Collins, I really thank you
for the opportunity to address this important issue and look
forward to your questions.
Chairman Lieberman. Thanks very much, Ms. Duke. We will
obviously have questions for you.
The third witness, who we welcome now, is Professor Steven
Schooner, Senior Associate Dean for Academic Affairs, Associate
Professor of Law--that is quite a title.
Mr. Schooner. Too many titles.
Chairman Lieberman. You are a busy man. And Co-Director of
the Government Procurement Law Program at the George Washington
University School of Law. Before joining the faculty at GW, Mr.
Schooner was the Associate Administrator for Procurement Law
and Legislation at the Office of Federal Procurement Policy at
the Office of Management and Budget. So he is extremely well
qualified to offer expert testimony this morning, which we now
welcome.
TESTIMONY OF STEVEN L. SCHOONER,\1\ CO-DIRECTOR, GOVERNMENT
PROCUREMENT LAW PROGRAM, THE GEORGE WASHINGTON UNIVERSITY LAW
SCHOOL
Mr. Schooner. Chairman Lieberman, Ranking Member Collins,
and Members of the Committee, I commend this Committee for its
focus on improving the procurement process, and I support many
of the initiatives in the current version of S. 680,
particularly the Acquisition Workforce Human Capital Succession
Plan. I concur with the GAO report, and I echo the three
priorities that Ms. Duke articulated for her organization.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Schooner appears in the Appendix
on page 58.
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You asked me to comment on the benefits, challenges, and
risks of DHS' increased reliance on contractors, so let me
begin by saying the key benefit is that using contractors
avoids failure where the government lacks the ability and the
resources to perform its mission. Contractors also provide
surge capacity. They can add resources quickly, efficiently,
and effectively, and contractors also permit agencies to
quickly employ superior technology and better talent.
But I do not suggest and I take issue with those who do
suggest that a primary benefit of reliance on contractors is
merely the potential for cost savings.
Of course, extensive contractor reliance creates
significant challenges. To use contractors well, agencies have
to plan, which means they need to understand what outcome they
want and accurately describe that to the private sector. They
need to select appropriate qualified contractors in a timely
fashion. They need to negotiate cost-effective agreements,
draft contracts that contain effective incentives in order to
maximize contractor performance. Agencies then must manage
those relationships to ensure that the government gets value
for its money.
Against that backdrop, the risks of relying on contractors
are constrained only by your imagination. If a contractor
fails, the agency can fail. Contractor failures, just like
government failures, can result in harm being inflicted upon
the public, the government, or others. Of course, also at risk
is loss of confidence in the government and always excessive
expenditure of scarce public funds.
Now, you also asked me to comment on the adequacy of
current laws and regulations concerning the acquisition
process. There is always room for improvement, but the legal
and regulatory regime generally is adequate. The lion's share
of DHS' and the government's acquisition difficulties result
from implementation of the laws, regulations, and policies, and
the root cause of that is an inadequate acquisition workforce.
Now, let me digress. One area where the legal regime is not
adequate is the government's rather chaotic reliance upon
private security. As recent events involving Blackwater make
clear, the risks in this area are particularly grave. The
existing legal and regulatory regimes are inadequate to address
them, and the government has waited far too long to address
them in a thoughtful and responsible manner.
Now, as my testimony suggests, I think it oversimplifies
the problem to suggest that DHS currently is too dependent on
contractors. It is distinctly possible that under different
circumstances, an outsourced and privatized DHS might best
serve the government's interest, but that debate--how much we
should outsource--is simply irrelevant here. We rely on the
private sector because we have restricted the size of
government and, more specifically, the number of government
employees. It is true that the Bush Administration did not mask
its preference for outsourcing, but that initiative is a
statistically insignificant percentage of the new service
contracts we see.
We have no short-term choice but to rely on contractors for
every conceivable task that the government is understaffed to
fulfill. For example, in Iraq, the military relies on
contractors not only for transportation, shelter, and food, but
unprecedented levels of battlefield and weaponry operations
support and maintenance. DHS cannot simply consolidate its
mission, jettison a number of the tasks, start terminating
contracts, and take on only the missions that it is
appropriately staffed to perform. Nor can it wait as it embarks
upon an aggressive program to identify, recruit, hire, and
retain an extraordinary number of civil servants. And, frankly,
it is quite unclear whether there is political will to grow the
Federal workforce as we need to do. It is going to take years
for DHS to have a significantly larger and, most importantly,
cohesive organization.
So, accordingly, DHS has to acknowledge that it is,
frankly, a hollow agency and do its best to achieve its mission
with the resources available. One oft-criticized practice, the
use of Lead Systems Integrators--one of the most relevant
examples here was Deepwater--is a direct result of the human
capital gap. Similarly, contractors will continue to perform
what historically has been perceived as inherently governmental
functions. That is acquisition support, engineering and
technical services, intelligence services, policy development,
and reorganization and planning.
All of which brings us to the inescapable conclusion that
the government must devote more resources to acquisition. This
is urgent following a bipartisan 1990s congressionally mandated
acquisition workforce reduction. No empirical evidence
supported the reductions, and the sustained reductions and
subsequent failure to replenish them created a full
generational void and devastated procurement personnel morale.
Simultaneously, the government skimped on training, and
contracting officers were facing increasingly complex
contractual challenges. In addition--and this is critical--
despite the explosive growth in the reliance on service
contracts, no emphasis was placed on retaining or obtaining
skilled professionals to plan for, compete, award, or manage
sophisticated long-term service contracts.
The dramatic and now sustained increase in procurement
spending since the September 11, 2001, attacks exacerbated an
already simmering workforce crisis. Congress has been quick to
call for more auditors and inspector generals to scrutinize
contracting, and that is responsible. But the corresponding
call for more contracting experts to proactively avoid the
problems has been both delayed and muted. The workforce today,
understaffed, underresourced, and underappreciated, desperately
requires a dramatic recapitalization.
We not only have too few people to do the work, many of the
people we have lack the necessary qualifications. We need
business-savvy professionals to promptly and accurately
describe what the government wants to buy, identify and select
quality suppliers, ensure fair prices, structure contracts with
appropriate monetary incentives for good performance, and then
manage and evaluate the contractors' performance.
The Acquisition Advisory Panel report appropriately
acknowledged, while the private sector invests substantially in
a core of highly sophisticated, credentialed, and trained
business managers, the government does not make comparable
investments. It is a mistake. But acquiring that talent is not
going to be easy. Senior procurement officials today
increasingly bemoan that no young person in his or her right
mind would enter government contracting as a career today.
Let me wrap up with a symptom of the current acquisition
crisis: The increased reliance on personal services contracts.
Now, DHS already enjoys greater authorities than most
agencies in that regard, but the longstanding prohibitions
against personal services contracting have become dead letter.
We have witnessed an explosive growth in what we refer to as
``body shop'' or ``employee augmentation arrangements.'' As the
name implies, the government uses these contracts to hire
contractor personnel to replace or supplement civil servants or
members of the military. This is the antithesis of the
government's preferred approach, known as ``performance-based
service contracting.''
The worst-case scenario is where contractors work under
open-ended contracts without guidance or management from a
responsible government official, typically facilitated by an
interagency contracting vehicle. Civil servants work alongside
and at times for contractor employees who sit in seats
previously occupied by civil servants. Unfortunately, no one
ever stopped to train the government how to operate in such an
environment, which we commonly refer to as a ``blended
workplace.'' In addition to the potential conflicts of
interest, the other human capital issue is that if we are going
to try to attract and retain a qualified workforce, DHS may
find it increasingly difficult to articulate why an individual
should come and work for DHS rather than its contractors. This
is particularly problematic where contractors use incentives,
such as raises, bonuses, training opportunities, travel and
entertainment, to reward their top talent. This is particularly
troubling now that the market for talent is increasingly
global, and we see, for example, a global shortage of
engineers. Serious, long-term, far-reaching personnel reforms
are needed to reverse the trend.
So let me conclude by saying I agree with many of GAO's
recommendations, but I am not optimistic that DHS can fully
implement them. Yes, there is no higher priority for heavily
outsourced agencies such as DHS than to assess program office
staff and expertise necessary to provide sufficient oversight
of its service contracts. DHS should assess the risks of
relying on contractors as part of the acquisition process. And
while DHS may have no choice but to rely on those contractors,
the discipline will help control the risks. Surely, any
additional energy devoted to acquisition planning will pay
dividends during contract performance.
But, in closing, let me be clear. More than 15 years of
ill-conceived underinvestment in the acquisition workforce
followed by a governmentwide failure to respond to a dramatic
increase in procurement activity has led to a triage-type focus
on buying with insufficient resources available for contract
administration, management, or oversight. The old adage we all
learned in kindergarten--``An ounce of prevention is worth a
pound of cure''--rings true. A prospective investment in
upgrading the number, skills, and morale of government
purchasing officials would reap huge dividends for the
taxpayers.
I thank you for this opportunity, and I would be pleased to
answer any questions.
Chairman Lieberman. Thanks, Mr. Schooner. I have a very un-
senatorial response to your testimony, which is, ``Bingo.''
[Laughter.]
You have made the case very well. I serve, as other Members
of this Committee do, on the Armed Services Committee. I
happened to have the privilege over the last several years of
being either chair or ranking member of the Airland
Subcommittee. The U.S. Air Force has had terrible acquisition
problems, some cases of fraud--and, of course, some people have
gone to jail--and also cases of waste and illogical judgments
made. And you just come back to the fact that as the demand for
acquisition went up, the acquisition workforce at the Air Force
went down, and we are paying for it. So I think you state the
case very well on that ultimate point, and I thank you for it.
Do you think we are contracting out too many professional
and management services in DHS or in the Federal Government
generally?
Mr. Schooner. In the short term, no, I honestly do not
believe we have a choice. In terms of the long-term best
approach for government, I do not think that there is any way
for the government to maintain the institutional knowledge
necessary for the government to make good long-term decisions
if we, in fact, cede all of this authority to the private
sector.
Chairman Lieberman. Understood. And you say in the short
term, no, and generally speaking--I presume that you are not in
a position to comment on every private contract let out.
Generally speaking, you think the private contractors are
actually carrying out responsibilities that the various
departments have to carry out.
Mr. Schooner. Absolutely. I think it is just a common
reflection of the fact that we have hollowed out the
government, particularly among the most knowledgeable, skilled,
and talented people that we need to rely on the most.
Chairman Lieberman. And you said quickly in your testimony,
but it is relevant here, that you do not believe that cost
savings is a justification for private contracting. And I take
it you meant that not only in the broader sense of
institutional knowledge, but you are skeptical that we actually
save money when we private contract out. Am I right?
Mr. Schooner. I think the latter part of that is more
accurate. What I was trying to communicate is I do not believe
the primary justification for relying on the private sector
should be cost savings alone. It troubles me when I hear people
say that all that matters is the marginal dollar. The most
compelling arguments for relying on the private sector are if
you need surge capacity, if you need quality or talent that is
not available to the government in the short term. The private
sector can make the government better, more flexible, and more
potent, but chasing only the marginal dollar, worrying about
whether it is cheaper, does not make sense.
Can I offer you a brief analogy or an example? If we look
at the reliance on private contractors providing support for
the military in Iraq, we could focus on whether it costs more
or less than what the Army used to spend to take care of the
people in the military.
Chairman Lieberman. Right.
Mr. Schooner. But the bottom line is if you bring in a
contractor who can more quickly provide hot meals, showers,
clothing, and a general quality of life to our troops, I am
willing to pay more for that, and I believe the public is, too.
So the marginal dollar is not the issue. The question is can
they effectively provide a service that the government cannot
do as presently constituted?
Chairman Lieberman. OK. Then notwithstanding that, let me
turn to you, Ms. Duke, and ask: Just looking at all of the
contracts that Mr. Hutton has cited in his report on DHS, and
actually noting that you have said that seven of the nine
troublesome, inadequate, questionable contracts that the GAO
report cites are no longer in existence, don't you think that
the Department of Homeland Security is contracting out too many
services now?
Ms. Duke. I think it is an issue that we are looking at, to
be honest. I think that you have inherently governmental
services, and if you look at what is inherently governmental
and what is commercial, they are very similar. One is deciding
on the budget; the other is assisting with budget development.
And so we are systematically looking through the numbers,
contract renewal by contract renewal, to make sure that we do
have those core competencies within the Department of Homeland
Security. So when we do execute this inherently governmental
function, such as signing a document, we have the knowledge to
know what we are signing. It is not an administrative exercise.
I think that is very important.
Chairman Lieberman. OK. But I take it from your opening
statement that you do believe--and you have come in relatively
recently as the CPO--that the Department of Homeland Security
is not exercising adequate oversight of these contracts,
including particularly, if I heard you correctly, the initial
requirements decision. In other words, is this something we
want to contract out?
Ms. Duke. I think that deciding if we are going to contract
it out and clearly defining the requirement are the two up-
front actions that we need to focus on to manage risk. After it
is awarded, what we need to focus on is making sure that the
right COTRs, who are the ones that accept the services and
monitor the services, that the right people are in place in the
right numbers, in addition to the contracting officers. So I
think there are actions on both ends of the timeline.
Chairman Lieberman. Let me ask you finally in this round
about competition for the contracts. In OMB's latest review of
major agencies, the Department of Homeland Security actually
ranks first--or last, depending on your point of view--in terms
of the percentage of contracts entered without full and open
competition. That means you are No. 1 in most of them. In fact,
51 percent of DHS' contracts last year were awarded without
full and open competition.
I noted in your opening statement you cited fiscal year
2007 numbers that put that number down to 35 percent--I believe
that is correct--and that is an improvement, which I
appreciate. But it still says that more than a third of the
contracts, which involve billions of dollars, are being awarded
without open competition. And, of course, this not only creates
the risk that the Department does not get the best value for
the taxpayers' money, but the perception and possible danger of
a coziness between the Department and the contractors that will
undermine confidence, both here in Congress and in the public,
in the Department's work.
So are you concerned about the questions that I have just
raised? And if so, what steps are you taking to increase
competition hopefully to as close to 100 percent as you can get
it for contracts at DHS?
Ms. Duke. I am always concerned about competition. That is
one that, regardless of how high we get, we are not done yet.
Competition clearly is the basis of our economy, and it works.
Some of the steps we are taking is, I think, better
defining the requirements, like I said earlier. We have
instituted competition advocates with each of the components
that are reviewing all the sole-source actions within the
operating components of DHS so that we can look at these one by
one. We have bolstered our acquisition planning so we get
reports up front what people are planning on doing in the next
fiscal year in addressing those.
The other thing I think we have to do is systematically
look at urgency. One of the things Mr. Schooner mentioned is we
should not singularly look at cost. I really think that you
have cost, you have schedule, and you have performance. And if
any one of them is out of balance, then you really are going to
get a poor result. And I think that because of the urgency in
which DHS was started and then when Hurricane Katrina hit mid-
time between our beginning and current, an overreliance on the
impact of schedule, which in essence minimizes the importance
of competition, and so we have to get that back in balance.
Chairman Lieberman. OK. My time is up. I take your answer
to be that 51 percent of contracts awarded without full and
open competition was unacceptable to you.
Ms. Duke. Yes
Chairman Lieberman. You got it to 35 percent, and I take it
that your goal is to get it as close to zero percent as you
can.
Ms. Duke. Yes, sir.
Chairman Lieberman. Thank you. Senator Collins.
Senator Collins. Thank you, Mr. Chairman.
Ms. Duke, let me pick up exactly where the Chairman left
off because I, too, am very concerned about the Department's
reliance on other than full and open competition.
After Hurricane Katrina hit, the Department awarded four
noncompetitive contracts to help with installing temporary
housing throughout the Gulf Coast. Originally, each of these
contracts had a ceiling of $500 million.
Now, there may have been an initial justification to award
noncompetitive contracts using the urgent and compelling
exception under the Competition in Contracting Act. So I am not
questioning that initial decision. What I am questioning is
why, instead of competing the contracts later, they were, in
fact, just extended. The ceiling for one of the contracts went
from $500 million to, I think it was, $1.4 billion.
Do you think that the Department should take a look at the
duration of noncompetitive contracts when the urgent and
compelling exception to competition is employed?
Ms. Duke. Yes, I think the duration is important. With the
specific Hurricane Katrina circumstance, the issue was there
were many actions. We were not prepared in a contracting
response in general, so those contracts were one of many
problems where we had urgent issues, and so it did take longer
to recompete those than it should have. But I do support having
some restrictions on the length of an initial urgency
justification in situations like the one you are speaking of.
Senator Collins. And that is a provision of our bill as
well.
When I look at the Department, in addition to the FEMA
contracts and the problems there, the other area that troubles
me greatly is the Coast Guard's Deepwater contracts. I am such
a strong supporter of the Deepwater program, I know firsthand
of the need to recapitalize the assets of the Coast Guard. But
there is no doubt that the entire acquisition procurement
process for the Deepwater program was a disaster. And it led to
cutters having to be scrapped. It led to the waste of millions
of dollars, dollars that the Coast Guard desperately needs for
new cutters that work and for new helicopters.
Could you give us your analysis of what went wrong with the
Deepwater program and what is being done now to get it back on
track? It seems to me a fundamental thing that went wrong is
that the Coast Guard just lost control of the program by
putting too much responsibility on the contractors.
Ms. Duke. The commandant, Admiral Allen, and I are aligned
on many things. One of them is the accountability that we have
when we are appropriated funds, and we believe that we maintain
the accountability for that. We do believe in partnership with
the contractor, but that means an effective working
relationship. It does not mean transferring responsibility or
accountability. And that is the primary function and the
cultural change that is going to improve the continued
administration of the Deepwater program.
Some of the things that have been done is the blueprint for
acquisition reform; we have put some key senior executives in
those programs and flag officers that have significant
shipbuilding experience. We moved a senior executive from my
office to head contracts for the Coast Guard, who has a
significant career with Naval Sea Systems Command to see that
expertise. She does have to build a staff with the same
expertise, but that is key. A senior executive for the
Deepwater program has been selected, as well as one to be a
deputy to Admiral Blore.
Those key positions are important, especially on the
civilian side, to make sure that this attitudinal change
continues into the future and does not change with change of
military members.
I think the other area that we have improved the Deepwater
is the alternatives analysis that is ongoing. It is a pause
point for the Coast Guard to reassess. It had a major change in
mission post-September 11. This is a pause point to really look
at the mission need and do a true look at the alternatives and
what major assets are needed to fulfill the Coast Guard's
mission in the future.
Senator Collins. Thank you.
Chairman Lieberman. Thanks very much, Senator Collins.
Senator McCaskill, good morning.
OPENING STATEMENT OF SENATOR MCCASKILL
Senator McCaskill. Good morning. Thank you, Mr. Chairman.
Mr. Hutton, when you all were there--did you have any sense
of how many of these contracts are definitized in terms of an
appropriate level of the standards at GAO in terms of what is
being asked? What percentage of these things are like a LOGCAP
where we said, hey, tell us what we need and when we need it,
and by the way, it is cost-plus so you tell us how much it is
going to cost? How much of that is at DHS similar to what we
have seen in----
Mr. Hutton. I think of the ones that we drilled down in,
there were several that were basically off of the GSA
schedules. There are others like the Information Analysis and
Infrastructure Protection Directorate contract. That was one
that started with a fairly narrow scope. I think that was
probably back in 2002 or 2003, but it was off of VA--they
provided assistance, and they went off of GSA's schedule. But
in that issue, you found that the requirements just expanded.
Initially, I think the contractor had expectations to do a few
things, but over time more and more things were added to their
areas of services to be provided.
But in terms of undefinitized contract actions, I could
look at that for you, but I do not recall that being an issue,
say, such as what work we might have done in Iraq where you saw
that happening a lot.
Senator McCaskill. Right.
Ms. Duke, are there more contractors working at DHS now or
at this time last year?
Ms. Duke. I do not have information about the specific
number of contractor employees, but in terms of percentage of
dollars, there are slightly more in our current 2007 numbers
than were in 2006.
Senator McCaskill. Well, that is what I am really worried
about. Because I think that we had a great excuse to take a
short cut, because you all were stood up as a new Department
and everyone understood the need for urgency and quick movement
and everyone understood that you did not have the people on
staff, a Federal employee workforce was not available for some
of these functions.
But the problem is that was at the beginning. Well, we are
not at the beginning anymore, and it seems to me, what I have
looked at, it just keeps growing, that there is absolutely no
attempt, particularly in the area of overseeing the overseers.
You have a number of contractors that have oversight
responsibility, and the ones that bother me are the contractors
that are overseeing companies that they work for. So it is
incestuous.
You have Booz Allen Hamilton who works for Boeing, who is
now overseeing Boeing on the Secure Borders Initiative
(SBInet). And when you have overseers that are supposed to be
providing the government assurances that the work is being
done, and the people they are checking on are also the people
they work for, that is not a good business practice. I mean,
that is an audit finding, is what that is.
Can you speak to this phenomenon that you have where you
are hiring people to perform the oversight function and they
are overseeing people that they need in business relationships?
Ms. Duke. Well, I think the core issue, again, is keeping
inherently governmental the true oversight in Federal
employees. That is clear and that is the way we have to go.
In terms of some of the measures we have taken, for
instance, in our EAGLE contract, which is our big DHS IT
contract that we expect to probably have about $6 billion worth
of work a year anticipated, we have a separate group, and if
you are going to be doing independent verification and
validation, meaning giving a third-party objective look, if you
are in that category of EAGLE, you cannot bid on any actual
work performance. So that is making a clear line. It is not
leaving potential organizational conflicts of interest up to
individual legal interpretations. It is saying if you are doing
this, you are not doing performance.
In the specific area of the SBInet, I did look into that
because it was brought to my attention, and from a purely legal
standpoint, Booz Allen is not overseeing. They are supporting
the contract office. But I do understand, Senator, the issue
that you bring in terms of appearance to not only our oversight
but to the American people, and that is something we are
looking at.
So I really think what we have to do is we have to go
program by program--I do not think there is a ratio. I do not
think it is one in four. But we have to program by program look
at the risk and make sure we have the right number with the
right skills of government people dedicated to overseeing these
contracts and manage them.
Senator McCaskill. Well, the trend needs to go the other
way than the way it is going, and I just want to close. I have
some questions I want to ask on the record that I will have to
submit, but I want some response on the DHS data breaches and
the problem that is a very large contract. And I am concerned
about these DHS data breaches, particularly because of the
Chinese connection.
But as my time is slipping away, I want to mention a
comment from the DHS officials about this issue of the use of
contractors. And one of the things is tightening acquisition
training and requirements on contractors. The DHS spokesman
said that part would be very difficult to achieve. Now, let's
think about that--tightening acquisition training and
requirements on contractors. There should be no uncertainty
about our appreciation to be a good steward of taxpayer
dollars, but this objective will be very difficult to achieve,
and it is far too early to place a progress or a timeline on
completion.
Acquisition training and requirements on contractors, that
is such a difficult goal that we cannot even talk about when we
might be able to get it done? I think that is what makes the
taxpayers shake their head and kind of go, ``Huh?'' How can we
not accept that tightening requirements on contractors and
acquisition training? I would like the Department to take
another run at that as to what steps they are taking and can
take immediately. I mean, we are not talking about completely
changing out your workforce. We are talking about a core
competency of government. And the idea that we cannot even put
a timeline on completing it--when I read that in the paper this
morning, I kind of went, well, that is a problem.
So I would like someone to take another look at whether or
not we cannot tighten acquisition training and requirements on
contractors at some time without saying we have no idea when we
would be able to do that. Thank you.
Chairman Lieberman. Thanks, Senator McCaskill.
Mr. Hutton, let me go to one of the examples that we cite
just to elucidate our discussion with a little detail. I am
speaking of the $42.4 million task order to support the DHS
Information Analysis and Infrastructure Protection Directorate.
The order included 58 tasks for the contractor to perform and
support for over 15 program offices and 10 separate
Directorate-wide administrative efforts. It was big. And as I
indicated in my opening statement, there was only one DHS
employee to serve as a technical representative to provide
oversight.
So let me ask you to step back and tell the Committee what
in that case, in the best of all professional worlds, should
DHS have done differently.
Mr. Hutton. OK. That is a great question because the way I
look at it, first of all--we have all been talking that there
are times when there may be no way to meet an urgent mission
need with existing resources, maybe even across the enterprise,
and a decision is to go with a contractor.
At that point, though, as part of the acquisition planning
process, I think one would want to start thinking about, OK,
what specifically do we need this contractor to do? What types
of activities? How do those activities translate to types of
services that closely support inherently governmental?
If they do, what kind of oversight do we need, what kind of
expertise do we need to ensure that the contractor is not
performing inappropriate activities and that the government is
able to maintain their independence and their decisionmaking?
I think, Senator McCaskill and Senator Collins, you
mentioned as well about urgent and compelling and the nature of
that. I would argue that if that is the justification, at that
point you probably already need to be starting to think ahead.
What are you going to do? Because the initial contract will not
go on forever. And yet I think you need to start thinking about
where do we want to go with this? Do we want to continue to use
a contractor? If we do and we feel we have to, then what kind
of process are we going to put in place to make sure that we
have a competition because competition is a bedrock, I think,
ultimately to get the best possible service.
I would just say that, to me, a lot of it is the front-end
acquisition planning.
Chairman Lieberman. Would you say that just self-evidently
it was too big a contract? Or might there have been
justification for having an umbrella contract that large?
Mr. Hutton. Well, Senator, it is a hard thing because, as I
mentioned earlier, it appeared that the types of activities
that the contractor undertook kind of evolved over time. And so
that was not an intended outcome, I do not believe, at the
outset. That again, I believe, takes you back to more
strategically where do we want to go with a contractor for
providing these types of services.
Chairman Lieberman. How about the oversight that should
have been there from the Department in the best of all worlds?
Let us assume that the contract was executed as it was.
Presumably, one employee was not enough.
Mr. Hutton. No, sir, and this is an issue that is just
across government. Mr. Walker has been up here talking about
systemic acquisition issues.
Chairman Lieberman. Right.
Mr. Hutton. And the policies require, what expertise do we
need? If you assess the risk and you think about the
vulnerabilities to the government decisionmaking, that is when
you start thinking, what is the expertise of folks we need to
ensure that the contractor is performing as required and that
we are protecting the government's interests? It may be several
people. It may be six people. But you have to go through that
calculus, that thought process.
Chairman Lieberman. Let me ask you to speak for just a
moment or two in response to the general questions that I asked
the two other witnesses in the first round. You are the GAO
expert here. Why is there so much more contracting for services
now than before? Is there too much? And if so, why?
Mr. Hutton. To say whether it is too much, we do not really
have criteria for that. You would have to look at it on a case-
by-case basis. But I do point out, Senator, that GAO has done
some work looking at service contracting in a broad sense. And
in that report we talked about the need to look at it from a
strategic level, the enterprise-wide level, as well as the
transactional level. And I think a lot of the things that we
are talking about today were more at the transactional level,
individual decisionmaking on a particular need, how do you meet
that requirement.
But when you loop back up to the strategic level, you need
to have certain processes. You really need to know what you are
buying, what kind of services are you buying, what are the
contractors doing, and you have got to start thinking about
where do I want to end up 5, 10 years from now. Do I want to
have these types of services provided by contractors, or do I
want to have a different mix? And how do I get there?
Chairman Lieberman. Is it fair to assume that you agree
with what Mr. Schooner said about the urgent need to improve
and expand the Federal Government's acquisition workforce?
Mr. Hutton. That is an issue that the SARA panel brought
up. As you mentioned yourself, we are looking at it for DHS. I
do not have any information that would be able to make that
generalization, but I do point out there are even fundamental
issues as to what do we mean by acquisition officials. There
are different definitions out there. So how do you get a handle
on that across all the different government agencies? And I
think you would find it is probably a case-by-case situation.
There may be some agencies that will not cross the line and use
a contractor for a certain type of acquisition support, while
others may. And I think that is where, again, the agency focus
on what they are buying with these services and do they want to
have the contractor perform certain ones or not.
Chairman Lieberman. Generally, do you reach a judgment on
the question of whether we save money when we contract out
professional management services as opposed to spending more
money than we would if the Federal employees did it?
Mr. Hutton. That would be a hard generalization to make
because, again, it is just case by case.
Chairman Lieberman. OK. My time is up in this round.
Senator Collins.
Senator Collins. Thank you.
Professor, you raised an interesting point, which I am
going to ask Mr. Hutton about shortly, about whether there are
shortages not just in the procurement workforce, which I think
is widely accepted as being at risk right now, but generally
across the Federal Government causing us to rely on private
security firms in Iraq, to use your example, but also raising
questions about inherently governmental functions being
contracted out.
Based on what you have seen, if we were to strictly enforce
the inherently governmental requirement, would we see a massive
expansion in the Federal workforce? Is it even possible to do
that?
Mr. Schooner. Let me take that on in two parts.
First, you would have to experience a massive increase in
the size of government if we are only doing government
personnel head count, or you would have to restrain the
ambition and the commitments of the Federal Government. You
cannot really do both.
I find it remarkable--and, again, this has been a
bipartisan move. The public is very enamored with the concept
of small government, and it is one of the reasons why I think
Paul Light's work on shadow government is so important. It has
been consistently represented in the annual budgets that the
government is small, the line I always like, ``the smallest
administration since the Kennedy administration.'' But we all
know that government's reach is expanding, the amount of
expenditure is expanding, the tasks that government takes on,
the services that it hopes to provide for the public.
Government has grown, but we have artificially constrained the
size of the government. Maybe today there is no more example of
how acute this problem is than the troop strengths we have
placed on the military, and it has a direct result being that
we have more contractors supporting the military in Iraq right
now than we have members of the military and, more
specifically, we have an extremely disconcerting number of
arms-bearing contractors in the operational theater that do not
necessarily work for the government, do not necessarily speak
the same language, and, frankly, do not like each other. And
that has to concern you not only if you are a member of the
public but if you have any military experience whatsoever.
Senator Collins. Mr. Hutton, based on the work that you
have done generally, are agencies and departments essentially
winking at the requirement that they are not supposed to
contract out inherently governmental functions?
Mr. Hutton. We do not have any indication, even in our
drill downs. To be able to actually demonstrate that a
contractor is performing an inherently governmental function
oftentimes means that you have to show that the contractor
actually made the decision and that the government really did
not have any knowledge, did not have any understanding of the
issues, and basically rubber-stamped. That is a very hard thing
to do.
To say that there is perhaps a winking at it, we did not
get any indication of that case, but we do have serious
concerns because, as we have all been talking here, there are
more and more service contracts in government and they are
performing many more services than they may have done in the
past, perhaps for some of the reasons that Mr. Schooner
mentions. But the key is, though, is this just happening or is
it a managed outcome. I think it is just happening. And I think
through some of the work that we have done in the service
contracting more broadly, where we are advocating looking at it
from a strategic as well as a transactional standpoint, is one
vehicle and one way to help agencies get a better handle on
what it is that they are actually requiring and what is the
best way to fill that need.
Senator Collins. Professor, I want to go back to the issue
of the enormous noncompetitive contracts that were awarded in
the wake of Hurricane Katrina. Do you think it is possible for
DHS to plan for the unexpected--in other words, to have on-the-
shelf contracts that would be pre-negotiated, that if a storm
hits, DHS could take those contracts, fill in the terms, make
them specific? Is there a way around awarding huge
noncompetitive contracts every time a disaster strikes? It
seems like there ought to be. Even if you cannot define
precisely where the storm is going to hit or how much
assistance is going to be needed, isn't there a way to prepare
contracts in advance?
Mr. Schooner. I think the short answer is it is
unequivocally feasible to create contingency contracts for
almost any conceivable or even the inconceivable contingency.
So you can plan for things. You can have a contractor in
reserve ready to provide whatever it is you need--water, body
bags, portable housing.
But I think that the important thing to keep in mind is
once the realm of what is feasible grows and you begin planning
for contingencies past a certain point, the risk you run is
that by pre-purchasing surge capacity, you are going to end up
paying a very high premium for that. And, again, we get into
some extremely complex economic arguments as to how many
supplies need to be pre-positioned, what the capacity needs to
be on hold, and what you have available because that costs the
private sector money. And if we want it, we have to pay for it.
Senator Collins. Ms. Duke, do you have any comments on this
issue?
Ms. Duke. I think it is not only possible, but it is
necessary. And we have done a lot of work with FEMA since
Hurricane Katrina in having pre-positioned contracts.
The pre-positioned contracts or the in-place contracts are
often national and large. I do think it is important to, as
soon as possible, move to local contracts under the Stafford
Act to revitalize the economy. But I do think that is
important, and we have done a lot of work in that area.
I also think the people issue and knowing how to deal with
contingency operations--I know your proposed bill has an issue
in it about contingency contracting officers, and we started
that under the Office of Federal Procurement Policy Working
Group that I co-chair. I think that is important to have the
people that know how to use these pre-positioned instruments.
Senator Collins. Thank you. I think having, as our bill
proposes, a contingency corps of contracting officers who can
be brought together from different agencies to help in an
emergency would greatly increase the quality of contracts and
allow for this surge approach. So I appreciate your comments on
that as well.
Thank you, Mr. Chairman.
Chairman Lieberman. Thanks, Senator Collins. This hearing
is not about the Blackwater situation or private security
contractors, but while I have this expertise in front of the
Committee, I do want to ask a couple of questions that will be
immediately helpful, but also will guide us as to whether there
is a constructive role this Committee can play in oversight,
investigation, etc.
Professor Schooner, let me start with you. You said,
generally speaking, that you thought with regard to procurement
that current laws were adequate, but their implementation was
not, but that you did believe, if I heard you correctly, that
some of the laws in the area of the government's use of private
security contractors are insufficient. And I wanted to ask you
to elaborate on that, if you would, and indicate whether you
have specific areas of concern that you believe the Committee
might constructively assess.
Mr. Schooner. The short answer is yes, and if you will
indulge me for just a moment, let me begin first with the legal
regime, which is, at best, confusing and, at worst, inadequate.
Chairman Lieberman. By legal regime here, what do you mean?
Mr. Schooner. I am including the fundamental laws that we
know, for example, the Uniform Code of Military Justice (UCMJ);
Military Extraterritorial Jurisdiction Act (MEJA); the
conventional approach that we take on these matters, which is a
Status of Forces Agreement (SOFA); and then, of course, we also
have the General Order 17 in Iraq, which complicates this all
the more. But the bottom line is many of our arms-bearing
contractors in Iraq fall into a vacuum, and to the extent that
Congress has now repeatedly attempted to fix the legislative
vacuum, we do not have the precedent and we surely do not have
the regulatory structure in place to ensure that those legal
regimes are going to work.
A very important issue here is that there is a tremendous
amount of expertise in terms of dealing with contractors in
varying industries, but the government did not have that
expertise in place at September 11, 2001. No one planned for
the dramatic increased reliance on arms-bearing contractors.
And we simply do not have sufficiently sophisticated
regulations or policy in place for them.
That process has begun, but, for example, the private
security industry has been screaming for years, I think
appropriately, begging to be regulated, begging to have quality
standards in place. We should have an ISO that specifically
indicates what we expect the credentials and qualifications of
private military to be. Now, once we set those standards, we
may be disappointed to find that many of the contractors we are
relying on do not meet them.
Then the last point on this--and I think this is the
inherently obvious part of it--is that to the extent that we
are using private military, all of the other acquisition
workforce problems come to bear. We did not have the time to
write the best possible contracts, and, therefore, the
government has not always clearly communicated to the
contractors what is particularly important and how they want
their behavior to be constrained. And then the next part of
that is we do not have sufficient people in place, in theater,
to manage those contractors effectively once the contracts have
been awarded.
Chairman Lieberman. Let me ask you the prior question in a
way, the baseline question, and I know you had experience in
the military as well as your extensive procurement experience.
And let me ask it with an edge to it. Isn't it an inherently
governmental responsibility to provide arms-bearing security
personnel in a war zone? In other words, is it appropriate to
contract out such services?
Mr. Schooner. It is a little bit more complicated, but let
me give you what I believe the easiest answer first. I am very
comfortable with a doctrine that says that government shall
have a monopoly over the use of force. But as we all know from
our experiences, there is any number of static security
functions that contractors can do. Whether you want to call
people rent-a-cops or the kind of people that provide security
at the gates to military installations, that is all fine. But
we used to be quite confident or comfortable with a doctrine
that said private contractors do not engage the enemy in
combat. And that is the line that is blurred. And where we see
it as an extremely complicated issue is when we have a fuzzy
battle area, where it is not so clear where the lines are
drawn.
Put yourself in the shoes of the military commander on the
ground in Iraq, knowing that there are tens of thousands of
people who are theoretically on our side, bearing weapons, who,
first, do not necessarily work for the military commanders and
do not even necessarily work for the military commanders'
agencies or do not even work for the government because the
largest population of arms-bearing contractors in Iraq are
contractors that work for other contractors and do not even
have a contract with the government.
Chairman Lieberman. Right. In other words, the contractor
providing food, for instance, or servicing of vehicles will
retain private security guards to protect his personnel.
Mr. Schooner. Absolutely.
Chairman Lieberman. There is a story in the papers today,
attributed to Secretary Gates, suggesting that he may have
raised the question of whether all the private security
personnel in military theater should come under Department of
Defense control or oversight. What do you think about that?
Mr. Schooner. I think that it is a solution. I do not think
that it is a satisfactory solution, and I am not convinced it
can be implemented in the short term. Let me just give you a
simple explanation on that.
I am very comfortable that anyone in uniform over there
would much rather have all of the contractors under the thumb
of the military because, again, it empowers the military
commander.
Now put yourself in the shoes of the State Department. One
of the reasons that Blackwater is so exposed and has so raised
the ire of the Iraqi people is they are not providing static
security. They are guarding the most attractive targets that we
have placed in the most dense urban environment, which is also
the hottest area on the ground there. I am quite confident----
Chairman Lieberman. Right, our State Department personnel
and visitors, for example.
Mr. Schooner. Sure, and the Ambassador and folks like
yourselves. But I am quite confident the State Department does
not want to be told by the military when they can and cannot
move the Ambassador, where they can hold meetings, and the
like. It is perfectly reasonable for the military to say, ``If
we keep the Ambassador inside the protected area, he or she
will not be harmed.'' Well, that is not the way the State
Department operates.
Chairman Lieberman. I am just going to take a quick moment
on this. I am interested, Mr. Hutton, based on your extensive
work experience in contracting oversight, whether you have
anything to add to this discussion from a GAO historical
perspective of the oversight of private security contractors in
war zones.
Mr. Hutton. Well, GAO has done work on oversight of
contractors 10 years ago, back in the Balkans, but also more
recently in Iraq, but Iraq is where you really see the heavy
use of private security contractors. But in doing that work, we
pointed out back in 2005 that there were obvious coordination
problems between the military and the private security
contractors, particularly in the early stages where a lot of
those contractors were working more as it relates to the
reconstruction and the civilian side of things. And so
coordination was a big issue.
Also, we looked at the fact that when units were going
over, they were not getting insight and training and
understanding or guidance as to how you work with the PSC, and
that was pointed out as a particular issue.
We are looking at private security contractors right now.
We have some work just getting underway. And, one, we are
looking at are the PSCs properly trained and vetted. We are
looking at what are the processes in place to ensure that there
is accountability over the actions of the employees. And we are
looking at some cost issues as well. But it is a very
interesting question.
Chairman Lieberman. I appreciate it, and Senator Collins
and I are going to be talking about whether there is a
constructive role for a hearing or some oversight on this
specific question of private sector security contractors in war
zones.
Senator Collins, do you have other questions or final
comments?
Senator Collins. No. Thank you.
Chairman Lieberman. I want to thank the witnesses. I want
to thank you, Mr. Hutton, for another excellent report.
Ms. Duke, it is obvious that this is a tough report and it
is a critical report about DHS. You have the benefit of coming
to this Chief Procurement Officer position relatively recently.
Senator Collins and I never want to play a ``gotcha'' game
here. We really believe in the Department, and we want to work
together with the personnel of the Department to make it work.
This report is troublesome, and I hope you will respond to
it with the attitude that I saw here today, which is that you
have some work to do as the Chief Procurement Officer to make
this situation of contracting at the Department of Homeland
Security a lot better, more competitive, and with more
oversight than exists today. Thank you very much.
The hearing record will remain open for 15 days for
additional questions or comments from the witnesses. Again, I
thank you.
The hearing is adjourned.
[Whereupon, at 12:05 p.m., the Committee was adjourned.]
A P P E N D I X
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