Attributable To: Defense Official
Subject: Demilitarizing Equipment
Q: Perhaps a little tutorial on the ground rules of how one might use Defense Reutilization and Marketing. You know, what the parameters are and things of that nature.
A: I'd be happy to.
One of our functional areas is to set policies on how we dispose of equipment. And when we say dispose of equipment, we're also talking about demilitarizing equipment.
We have inventory control points that manage the roughly ten million items that are in the defense inventory. Those inventory control points make a lot of engineering decisions, and one of the decisions they have to make is, is the particular item in question the type of item that ought to be demilitarized, that is cut up in some way, when we finally make a decision to dispose of it.
All of the items in our inventory have a demilitarization code. There are nine different demil codes. I'll keep this simple because it's easier for me to talk about it that way. You basically have a condition code, a demilitarization code A which means this item does not need to be demilitarized. These chairs we're sitting on would be an example of those items that are coded demilitarization code A.
There are items coded B that mean the items do not have to be demilitarized, but there are certain controls that have to be placed on them with regard to exporting them.
Then there are other codes beginning with C and running through whatever the rest of the nine would be, that say the item does need to be demilitarized because it has some application to a weapon system, and the various codes simply indicate what kind of demilitarization is necessary -- crushing, burning, cutting, removing classified material, that sort of thing.
So as I say, all of the items in our inventory get these codes. They're in our central system, and when a decision is made to send an item from a user or a supply warehouse to our disposal point, the documentation that accompanies that equipment has that code on it. The people in our disposal system receive that item, take a look at it, and if they see that it is an item that needs to be demilitarized, they either demilitarize it themselves, or they have a contractor demilitarize it as a condition of the sale, meaning that we go ahead and ask for bids. Whoever gives us the highest bid in order to buy that item understands that as a condition of the contract, they have to demilitarize the item under government supervision. That's essentially the process.
Q: Material then is turned over to the highest bidder and the highest bidder promises to demilitarize it. You said with government supervision. What's the strength of that government supervision?
A: He demilitarizes it on site. On the government's property.
There are occasions when he is permitted to remove that, but there are controls on the removal of that equipment and we watch them to make sure that he takes it to where he's supposed to take it and that he, indeed, does demilitarize it.
Q: Since a lot of the equipment we're probably talking about are guns of some various sort, can you give me some examples of how you demilitarize a gun or a rifle or...
A: They're cut. A welding torch is taken and cuts are made at various points in the weapon. We have a demilitarization manual which instructs people on how to cut up these various kinds of weapons.
Q: So in that case, do they become non-functional and then why would anybody want to have them?
A: If it's done correctly they're completely non- functional. The reason people would buy them would be just for the scrap materials.
Q: It's up to the highest bidder to contract out to have this done. A lot of times a bidder may not have the capability to do the demil. It's up to the bidder to have it contracted out?
A: We would sell to the highest bidder and we would require that bidder to demilitarize. Now whether he does it himself with his own workmen or if he would have to hire somebody to come onto our facility and have the item demilitarized, probably isn't relevant to us.
Q: Is there still a question, then, whether some of these weapons were sold to the Chinese or to militia groups? Or are you saying that no, we have a system where that can't happen?
A: We sell to the highest bidders and those bidders are people who are not on our debarred list. People get on our debarred list if they've done illegal things.
Q: Like what?
A: When we do make a sale we check the debarred bidder's list,and if it's the ABC Company and we have no history of any problems with them, we go ahead and make a sale.
Q: Can a foreign agent be on the list? Be on the approved bidder's list?
A: I'm not sure.
Q: Isn't that part of the problem, that some of these weapons and parts were sold to foreign agents? Then turned around and sold...
A: They may well be sold to U.S. citizens who may be exporting them overseas or making them available for export by someone else.
Q: Is that okay, or is there some prohibition...
A: If it's a demilitarization code A item, an item that doesn't require demilitarization, not a problem. If it's an item that requires demilitarization, we demilitarize it.
Q: As you've described the process, it doesn't seem that complicated or difficult to follow, but obviously that hasn't been the case. What is the problem with the coding and following up and following the rules?
A: There's probably three things that would lead to problems. Number one, it's a fairly complex process, and an item simply... There are so many of them that even a small percentage of our entire inventory would still be thousands of items that could be miscoded.
Q: So have you found that thousands have been miscoded?
Q: Is the coding done by machine or by a person?
A: No, it's done by a person.
Q: Why do you think they've been miscoded?
A: Probably human error or a difference of opinion about whether an item actually needs to be demilitarized or not. Another factor in the so-called miscoding is whether an item ought to be demilitarized by burning or removing certain pieces of it. It could be a matter of how it ought to be demilitarized, which would be considered an "error". But it could be... I mentioned the three possibilities that I can think of. A simple mistake in coding when the codes are first developed, simple inattention when the time is turned over to our disposal facility, either by the organization turning it into our disposal facility or by our disposal facility simply missing that code and selling it when they shouldn't have. A third possibility, and one that exists any time, I guess, is the possibility of just some criminal activity. Somebody gets paid to not demilitarize when something in fact should have been demilitarized.
Q: Have there been any IG investigations or looks into the criminal aspect? Have any people within your organization ever been apprehended, tried, or convinced for anything like that?
A: I believe there have been, although I don't have any of the specific details or knowledge of that. But over the years with the large number of items, I believe there have been people who have been arrested and probably convicted.
Q: Are you familiar with any ongoing investigations?
A: No, I'm not. And up here we normally wouldn't be aware of this.
Q: You said you look at your debarred list when you get the highest bidder and if they're not on the debarred list they're okay. Is any sort of background investigation done into the contractors? Or is it just if you're not on a list you can take the job?
A: I don't think there is... To become just a routine bidder, there is no background investigation. In other words, any one of us could fill out the simple application form and be notified of sales, and then we could go ahead and make a bid.
Q: What about follow-up on end user? Does the government check to see if material is transferred from the highest bidder to somebody else? Or do you leave that upon the bidder to explain to you...
A: On items that are sold overseas, they're sold with a so- called end use certificate where the high bidder says here's what I plan to do with the thing I'm buying, and then checks are made from time to time to ensure that that use us actually carried out. I think one of the problems is just lack of resources prohibit us from really doing a thorough and constant checking up of people who fill out these end use certificates.
Q: Is it done like ten percent of the time or 50 percent of the time you double check, or one every million items?
A: I don't know. I really don't know.
Q: So there's no end use certificate requirement for items that are sold to U.S. citizens or people in the U.S.?
A: That's correct.
Q: So they are not, therefore, prohibited from turning around and reselling even a demilitarized tank to a foreign government or foreign...
A: If it's demilitarized, you basically are talking about something that's useful only as scrap.
Q: Are there cases, though, where something is demilitarized in such a way when it could be remilitarized, if you will?
A: I'd say yes. We've had occasions when we've been aware that the level of demilitarization that we thought was adequate turned out not to be adequate and people were able to cleverly put things back together. So we just raise the level of demil requirements.
Q: The story here is that some of these were sold to China and to militia groups. Do you know that that in fact is true?
A: No, I don't. I mean it's certainly possible, but I have no personal knowledge of that.
Q: Do you have any idea what the value of some of the equipment that was supposed to be, or not value, but the quantity of equipment that was supposed to be made into rendered harmless or demilitarized but wasn't, do you have any idea what the quantity of that is in any given period of time? To get a handle on how big this problem was, someone had to say last year we found X number of tanks that had...
A: I don't know. This is just coming up, just occurring, and at least I have no information on that.
Q: Did the 1993 report that Ken Bacon referred to in the press conference, presumably that was a report that also identified a problem. Is that right?
A: There was a DOD/IG report going back several years. It may have been '93, it may have been earlier than that, and probably was earlier than that since we kicked off a study in '93, that said on the order of, I'm going on memory here, like 40 to 45 percent of the items that we have in our inventory are not correctly coded. But what that essentially meant was that the items that we have coded for demilitarization, the DOD/IG thought ought to be demilitarized in one way and we had a different code in there -- still calling for demil, but in a different way. That was considered the equivalent of an error in coding.
The big concern would be to code items as not requiring demil when in fact they should have been demilled and the reverse. There's where a real error and real concern would arise. But I don't know what that figure would be.
Q: Are there clusters of decoding where you have, in a particular area of the country you have lots of decoding problems, whereas in another area in your reuse, you have no errors? Or is it pretty much across the board?
A: I would say it's probably across the board. I'm not aware of any particular location where this is a prevalent problem.
Q: Did you find that some of the problem light have been with military employees who were looking to make more money for the government, basically, and didn't demilitarize equipment that they should have because they can get more money for it?
A: Again, I'm not aware of such a thing. I suppose it could happen, but as a matter of routine business, I would say it's unlikely.
Q: Has your office launched an inquiry into the end use that's been alleged in the news release that I have here, that is that some of these things were sold to China or Russian organized crime?
A: We haven't. We thought we were going to learn all about this two weeks ago and the story never came off, so we're not exactly sure what the problem is. Whatever 60 Minutes or U.S. News is going to say, we're as eager to find out as anybody else.
Q: Is there a follow-up... Ken Bacon led us to believe, at least I inferred this from what he said, that when the '93 report came out, there was an attempt to correct the situation but it had not all been corrected. So has there been since '93 some reevaluation of your progress, something that your department did? That the IG did?
A: I know the DOD/IG is doing an audit of whether or not our demil coding is better or not, but they haven't issued a report yet.
Q: Do you know how many coders you have, how many people are involved in this process?
A: No, I don't know. We have about 17 inventory control points...
Q: Can you say that...
A: ...handful in each ICP, so the number of people actually initially assigning the code would be relatively small.
Q: Can you give us a sense of like how many items does one person see in a year or a month or a day? Are these things coming by in a conveyor belt at 30 miles an hour, or do they do one piece of equipment every week?
A: The averages vary pretty greatly on the number of items a particular manager would be responsible for, from several dozen up to several thousand, depending on whether they're simple to manage or complicated to manage.
In terms of new items that have to be coded or codes that need to be reviewed, it's probably several thousand a year at each inventory control point.
Q: Is there another word... What is an inventory control point? Is that like a depot?
A: It's an organization that is responsible for buying and deciding where we ought to stock items of equipment that are assigned to them to manage. For example, we have an inventory control point that buys military clothing that's located in Philadelphia. They make decisions on who many pairs of boots we're going to buy and how many items of combat clothing we're going to buy and where it ought to be located. Each of the commodities that we have has an inventory control point that's totally responsible for the management of those commodities.
Q: But if this was quite widespread, wouldn't reports be coming back to you that U.S. weapons are showing up in the Chinese military, they're showing up in militia groups, what's going on, why aren't you guys stopping this?
A: I would say we would not be getting routine reports. We're hearing the possibility of this being reported on Sunday, on 60 Minutes. But if it were a big problem and the investigators chose to inform us, obviously we'd be taking some action. But we just haven't been approached by any of the DoD investigators that this is some serious problem.
Q: A base commander that's got 50 chairs that he wants to get rid of, he ships them to an inventory control point?
A: He ships them to a defense disposal yard.
Q: And is it at that point that a code is assigned?
A: No, the code is on that item when that commander got the item in the first place. In other words, any time we allow an item to be a part of our inventory, one of the things that it has assigned at that point is this demilitarization code. So we buy an item and it goes into, say, one of our distribution depots and is subsequently requisitioned by some military customer somewhere. When he gets that, that item already has had a code assigned to it by the inventory control point who acts as a wholesale organization in the commercial world. They've bought it, they've stocked it and they've sold it to basically what is a customer. But the base commander is not involved in assigning these demilitarization codes. This is done centrally by our inventory control points.
Q: The news release that we all have seen, I think, says that Pentagon officials conceded that the surplus weapon sales system is in need of reform. Is that true? And can you tell us why it's in need of reform?
A: If we've got the same high percentage of miscoded items that were reported back in the early '90s, I guess, yeah, I'd say it's in need of reform.
Q: But a coded item is done when the chair is made at the factory and bought by the Pentagon, correct? That's when the code is done.
Q: So the process for coding goes way back to the very birth of a piece of equipment.
A: When we decide that we need a piece of equipment and we want it in our inventory, that's correct. It's right at the very beginning.
Q: Who's responsible for the beginning coding?
A: the inventory control point.
Q: Which is under your organization?
A: Yes. That's one of the areas that we have responsibility for.
Q: You said if we've got the same high percentage of miscoded items. Do you have the same high percentage?
A: As I say, I think the IG is still doing the report on that but they haven't issued it. If and when they issue their report if it shows that we haven't made any improvements, and we went through a big review in '93 looking at millions of items to see if we, indeed, got the right codes on those things, a number of items were recoded, and I hope that the DOD/IG report will say that things have improved. If they have not, then we've got to look at it again to figure out what's wrong.
Q: Do you know when the report's due out?
A: No, I don't. I would say probably in the next six months or less. Probably less than that.
Q: Is the IG, some preliminary findings of theirs going to be part of the 60 Minutes report since that's... They got Pentagon officials to concede that the system needs to be reformed. I'm not sure on what basis.
A: I don't know. I don't know exactly what that means, "Pentagon officials concede reform is necessary." I guess one could make a stretch and say even if we made only modest improvements in our coding, we'd still have a lot of items miscoded.
Q: The IG audit notwithstanding, what is your own internal assessment of how well you've done since the '93 review?
A: We haven't really done an assessment. A lot of items were looked at in '93. Maybe one-fourth of them were recoded. I don't know whether that has improved matters or not. By the tone of what might be coming up on the 60 Minutes thing, it's hard for me to tell, just sitting here, given the little bit that we know today, whether or not we've got a serious problem with the codes themselves, or do we have a serious problem in people simply ignoring those codes for whatever reason.
Q: Does each part have a code, or do you have a Howitzer and that has one code, or do you have a code for the gun barrel, a code for the axle, a code for the trigger, a code for the wheels?
A: All of it. Each part has a code. Each, what we call national stock number, each item that makes up a weapon has a code.
Q: Mr. Bacon during the news conference gave us a figure of $302.3 million in monies received for the sale of some of this equipment, but he didn't have the figure for the value of the equipment that is given away. Is that part of your shop too, and can you...
A: Yeah. When we sell equipment, and I'm talking about everything we sell -- anywhere from the chairs in this room to demilitarized Howitzers -- the total amount of money DoD earned in FY95, I guess, was on the order of $300 million, right?
Q: Uh huh.
A: But prior to sale we go through a fairly elaborate screening process to see if there are other requirements for the item, either within DoD or within other federal agencies or within the state, and we do have some rough figures on how much was transferred there.
Q: Is your office also responsible for the excess weapons program where you give weapons free to countries overseas in some cases?
A: No, we're not involved in that part of it.
Q: Museums and...
A: We get involved in museum operations. I mean we have oversight responsibility there as well.
Q: Are you aware of any instances where hardware may have been given to museums or to private foundations, to non-profits, whatever, and they may have rolled over and ended up in someone else's hands?
A: We've heard that that's happened, yes.
Q: Do you have any examples of that happening?
A: I don't know of any personally, although I understand that that has happened, that museums under legislation that allows them to get equipment have traded that equipment, and again, they're authorized by law to do that. So they get a piece of military equipment, and then make a trade, and what they receive in return are items of historical interest to that military department, things that can be displayed in an Army museum, for example. They get something, they give something. The person to whom they have given a piece of equipment can choose to sell it or do whatever is appropriate with it.
Q: So once the transfer is authorized then it's up to the party to do with it what they will. If you give a museum outside of Brussels a Sherman tank, they can then do with it whatever they...
A: No. Again, the demil rules require that those tanks be demilitarized. If we're giving away items, if the museums are giving away items, trading items that need to be demilled, then they must be demilled. If the recipient of those items plan simply to receive the item and display it and they want to display it as a thing that looks like a Sherman tank, then there are limited demil steps. In other words, we don't cut it up into 80 pieces, but...
Q: ....condition and plug the tube...
Q: So nothing that leaves your hands is supposed to be functional as a weapon.
A: That's the rule. Yes.
Q: So what happens? This is possibilities, but that's what's so hard to understand here, that you have this whole system and fairly tightly controlled to make sure that that doesn't happen, and yet as you said, it's possible that it did happen. So what goes wrong? And are you really saying that it's possible that lethal weapons, things that were tanks, guns, lethal weapons that were supposed to be broken up were not broken up, but instead wound up being sold to China and militia...
A: I would say that clearly... Things that are clearly weapons in the sense you've just described like tanks and guns, the chances of a mistake being made there where they go out because a guy didn't know any better are pretty slim. I think where the real problem lies is in the piece parts, of which there are so many, and it's very hard to recognize, just by looking at one, that this is some crucial part, important to the operation of some weapon system. So people who are selling that item, if they're not aware that this is some crucial part and they're not paying close attention to the demil codes, it's certainly possible they can sell it when they shouldn't have.
Q: Can you give me some example of a common part that might fit into the category you've just described?
A: I'm straining here to think because I'm not sure that I can come up with a really good example. But some part that is essential to... Say a transmission that operates one of our tanks. That item would be coded for demilitarization, and it's possible, just by looking at it, you didn't recognize that it was a transmission for a tank, and it was sold without demilitarization because, number one, the person didn't recognize it; number two, they didn't look at the paperwork very carefully to see that it had a demilitarization code on it.
Q: How widespread is this? Do you have some sense of the scope or the scale that we're talking about?
A: I don't know. I'm hopeful that it is not widespread, although I can see where there might be a number of instances where it could happen, but hopefully it is not a problem across the board. It seems like our policy on it is pretty solid, and if it's being carried out correctly, we have to have a relatively small amount of this kind of a problem. But again, it's a big organization, a lot of people are involved, and if inattention is paid, then certainly items can get out.
Q: I'm sorry for missing the top of this, but again, I heard the reference to China and U.S. arms being in the hands of the Chinese military. Are you familiar with...
A: I'm not familiar with it, and I guess I can't even imagine how this is happening.
A2: ________________ is not here to comment on the allegations that were made in the 60 Minutes release.