MAJOR GENERAL TONY CUCULO (chief of Army Public Affairs): Good afternoon, ladies and gentlemen. I'm Major General Tony Cuculo, chief of Army Public Affairs.
And this morning the Army formally received the independent report by the Commission on Army Acquisition and Program Management in Expeditionary Operations. We have all six members of the distinguished panel here with us today and who will tell you more about their comprehensive review of Army contracting. And many of you here today know the commission's chairman, Dr. Jacques Gansler, who was the undersecretary of Defense, Acquisition, Technology and Logistics. He will introduce the other commission members momentarily.
But first, I'd like to introduce the secretary of the Army, Mr. Pete Geren, who will put these contracting efforts in context and perspective.
SEC. GEREN: Thank you, General Cuculo, and thank all of you for being here today.
You're here to receive the report from the independent commission chaired by Dr. Gansler, but I'd like to make a few brief comments before turning the podium over to Dr. Gansler.
First, I'd like to thank Dr. Gansler, David Berteau, Dave Maddox, Dave Oliver, Lee Salomon and George Singley for your outstanding work. All these distinguished gentlemen have day jobs, but they recognized the importance of this matter to the United States Army and to the Department of Defense, and they committed hundreds of hours of personal time to this effort. And I want to thank them for that great effort and the work product that they have produced. I also want to acknowledge the fine work of Colonel George Sears and his staff that supported the commission over these last two months. Many thanks to all of them.
In August when I chartered this commission, I made it clear that I wanted a blunt, no holds barred and comprehensive look at Army contracting, and that's what we got, and I thank the commission for their work.
Our Army is a learning and adaptive organization. Every war poses new challenges and teaches us important lessons, and this war is no different. It has exposed seams in our health care, support to families and now contracting, to name a few of the most salient challenges among the many that our Army is addressing in a comprehensive way.
The work of this commission provides us a clear way ahead on contracting reform that offers detailed analysis and recommendations both large and small. I was briefed this morning and received a copy of the report. I'm studying it carefully, and we'll move out quickly on its recommendations.
This initiative was prompted by the contracting problems we identified largely in Kuwait, but the report is not limited to Kuwait nor just to the Army, as you will soon hear. Regarding the problems in Kuwait, at the same time as I established this commission, I also created a task force headed by Lieutenant General Thompson, who's the military deputy in the Acquisition, Logistics & Technology Department of the Army, and Kathy Condon, who is the executive deputy for Army Materiel Command. I asked them to move out immediately to shore up the contracting operations in Kuwait, ensure that we had the people and resources as fast as possible in place to correct the problems in Kuwait, and also to look back at all preexisting contracts to identify and address any waste, fraud and abuse issues that may exist with those old contracts. They have done so. General Thompson and Ms. Condon have accomplished a great deal, and I believe they briefed you previously on their efforts.
In summary, the Gansler Commission offers comprehensive reform. General Thompson and Ms. Condon's job is to stop the bleeding from old contracts and to prevent any further bleeding by inadequately resourced or staffed contracting operations from this point going forward. Both the commission and the task force have done great work.
Let me close with one final point. The Army CID, the Army Auditing Agency and others have identified criminal conduct as well as waste, fraud and abuse. These problems, and those identified by the Gansler Commission and the Thompson Task Force, are serious. They should not however be seen as an indictment of the entire Army acquisition and contracting community.
The overwhelming majority of our contracting professionals, both military and civilian, are doing and outstanding job under extraordinary circumstances. But they're handicapped by a system that is not properly organized nor adequately resourced for the demands of this conflict. We are an Army at war, and they are working night and day with integrity to support our soldiers. They are dedicated and selfless public servants who feel outrage at those who have violated the public trust. And they will embrace fully the efforts of this reform.
I will now turn the podium over to Dr. Gansler. And again Dr. Gansler and your commission members and staff, thank you for your excellent work.
MR. GANSLER: The one thing that the secretary didn't mention was that we had this in a 45-day time period. And for that reason, we didn't have time to make a short briefing. So we're going to go through with you the actual presentation that we went through yesterday with the secretary of Defense and deputy secretary, vice chairman, and also that we went through today with the secretary of the Army and the main leaders of the Army as well.
We will be giving you afterwards a CD with all of this material on it, with all the slides as well as the report. And we'll also give you a copy of the report, which covers all the slides as well.
So, based on that, I feel I can go through them relatively quickly, try to hit some of the highlights and then take your questions after that.
With that, let me start out. Can I have the first slide?
The main point of this slide that I want to make sure you understand is this was an independent commission. As I said, after our survey and study, we then briefed the secretary of Defense yesterday, the secretary of the Army today. They had not been involved in this. This was a totally independent, objective assessment.
And the other thing I guess I want to highlight is what we didn't look at, because there were other activities, as the secretary just said. Ross Thompson was looking at the current broad issues. We have the IG looking at the equipment accountability issues. And there's a separate effort under Ambassador Kennedy looking at the private security contracts. So we are looking at how to prevent it next time. That's our charter. We want to make sure that institutionally there are significant changes so this doesn't happen again.
Next slide, please.
This are the commission membership. As you can see, we went to a great deal of effort to get people representing, in the case of General Maddox, the operational side; in the case of General Salomon, the acquisition side; in the case of Admiral Oliver, alternate service representation; and then two very senior experienced civilians in Dave Berteau and George Singley.
Next slide, please.
We interviewed over a hundred people. We went through a great deal of effort to try to separate them out so we got a wide variety of different views. For example, in our two days in Iraq -- which was done by video, not travel, because we didn't have enough time -- but we interviewed the two-star, and then we went to the middle level, and then we went to the worker level, all in the absence of (their overseer ?), so that we were able to get objective, independent assessment. And you'll see that from the comments that you're going to receive.
We had general agreement on all of the issues, in terms of what the issues are, what the direction for change is and the absolute need for change.
The answers that we're going to come back to at the end -- there are four areas that need to be addressed. Most important is the personnel side -- stature, quality, quantity, military and civilian, especially for these expeditionary operations. And I should tell you that we defined "expeditionary" as not only outside of continental United States, but also emergency conditions inside of continental United States. There are very great similarities in terms of the responsiveness to those. Second area was organization and link of responsibility to that, and then training and the tools development, and finally legislative, regulatory and policy. And we have briefed today both the House Armed Services and the Senate Armed Services and other committees associated with that.
Major findings. This is a systemic issue within the Army and within the DOD. It is not an individual organization or individual person. Even the operational side, which has moved to expeditionary, is on much more of a war footing but still gets involved in the acquisition side through the requirements process, defining requirements and so forth. And of course the institutional Army, which is the support for the operational Army, there are major changes that they have not adopted to the expeditionary operation, and I'm going to cover each of these: financial, personnel, contracting, doctrine, training.
I should emphasize that our assessment was that the Army should be but is not currently a core competent contracting operation. Core competency should be a major part of the Army, it should be accepted by the whole Army, not just the acquisition community, and we have to emphasize that.
By contrast, I would emphasize the point that the secretary made: namely, we have an extremely skilled and an extremely dedicated corps of people that are out there now. The problem is, they are, as noted here, understaffed, overworked -- and you'll see that data in a few minutes -- undertrained, undersupported and, I would argue, most important, undervalued. And that's what we're going to try and change.
In terms of problem areas, as I said, core competency, in terms of contracting, it has to be treated as both an operational and an institutional issue. We even had some trouble finding some data in terms of how many people there are on which functions and so forth. We think that's clearly an indication of a priority shortcoming.
When you go to war, you want your military leaders to be out front. You need people in uniform in expeditionary operations. Contracting is a key part of that. The Army currently only has 3 percent of its contracting personnel in active-duty military. So we need to beef that up, and you'll see that.
There has been a huge increase in workload. I'm going to show you that data in a minute -- like seven times the increase -- and yet we have not increased the contracting on the military or the civilian side to match that.
And only about 50 percent of the people who are doing their jobs are actually certified for those jobs. And when you go over to Iraq and Kuwait, you're going to see that even about 36 percent of them are certified for those jobs. It's difficult to get people certified and in those positions.
The civilian personnel policies are very outdated. I would point out that to you, why we need some dramatic changes there.
And there's no longer any Army general officers. And I'll cover that data as well. And clearly that's the career ladder; as secretary said, that's very important. You heard that from the secretary of Defense earlier, when he briefed you.
The lack of planning for the expeditionary operations -- namely, when people are going to go to war, and 50 percent of their force are going to be contractors -- then you want to make sure that they have prepared for that, trained for it, and that the warfighters are trained and prepared for that. And that's what they have now, with 50 percent of the force in Iraq are contractors, but they haven't exercised or prepared for that. The civilians have not been pre- volunteered for that. The leadership courses don't include it for the military across the board, and the exercises don't include it. Those are the areas of our focus, and you'll see that as I go through the charts.
This is the overall Department of Defense. In terms of the red line here, that's been the budget for the procurement account.
The blue line are the workforce to handle that -- the overall acquisition workforce in the Department of Defense, across the board.
What you also notice: at this point, Congress legislated that we shall reduce the workforce by 25 percent. And we haven't increased it since then, even though the budget has gone up dramatically since 9/11.
This is the same thing for the Army. Here you see the Army increases, particularly since 9/11, over 600 percent growth in action, over 300 percent growth in dollars, and the people in the field are in the tens -- 30 people, 40 people, that kinds of numbers -- for handling these hundreds of thousands of actions.
This is the Army Materiel Command. You see the same phenomenon -- dollars going up by over 300 percent, actions going up by over 300 percent and personnel going down by 53 percent. It's a mismatch.
This is the general officers. In 1990, there were five Army general officers beginning at the two-star and then being reduced to one-star and then disappeared in the '90s. In the joint commands, the same thing. There were four joint command flag officers. All of those have disappeared as well, and we have one temporary position, which is the joint command over in Iraq, being filled now by an Air Force officer.
Next slide, please.
We did a comparison between the Air Force and the Army. You don't -- want to get a feeling for the differences, but you also want to recognize that the Air Force recognizes they also are not keeping up in the acquisition area. They have acknowledged that to us as well. It's across the board, not just in the Army. But the differences are quite obvious in terms of the number of officers in the Army versus in the Air Force, the number of civilians are comparable, and you'll notice the procurement actions are dramatically higher -- 400,000 for the Army, 60,000 for the Air Force.
The Army has 3 percent active-duty military; the Air Force is 37 percent. The Air Force begins their career as second lieutenants. The Army begins their career midway through their career, but after seven years they're then commissioned in the acquisition side of the Army. And as I said, there are no current Army general officers, where there are in the Air Force, and the Army civilian policy needs to be rather dramatically changed. The Air Force does put their contracting squadrons together for expeditionary wings.
When we look at the executive agent role in Iraq and Afghanistan for the Army, what we find is that -- what we learned was the Army was not able to fill those positions. They've been filling them with Air Force positions; 67 percent of those in the workforce over there are Air Force. And in fact, they told us that the major -- difficult jobs, and these are very difficult. These are service contracting. It's much more difficult than buying a weapons system, and those are almost all being done by the Air Force, some of the more difficult ones.
Now, this is a procurement fraud. This is as of 9/24. We've gotten probably more recent data, but this is the data that we got from Johns Hopkins. And what we find interesting and important to point out to you is that while the Air Force has 70 percent of the jobs in Iraq and Kuwait, only one of the open fraud investigations is Air Force.
The Army has 28 percent of the personnel and has 77 out of the 78 open fraud investigations. Probably more than a coincidence is the conclusion we reached. We think it's much more due to leadership and training, and that's one of the reasons why we stressed leadership and training in our briefing.
Now, you'll notice something else important, that most of these -- the majority of them -- are not contracting officers that are committing these fraud actions; it is in this "other" category, which are actually operators who are in other positions like source selection and things of that sort. And of course, it does go across the board from active, reserve, National Guard and retired.
Next point I really want to emphasize here is that the warfighters are very much involved in the contracting process. This is not simply signing a piece of paper as a contract. It's a very complicated process. It goes from the requirements process all the way through the contract post-award management, which is the key part of it. And the warfighter community, as well as the finance community, are very much involved in this. It's not just all the contracting. But this post-award is very critical, and that's one of the areas we've fallen down in dramatically.
You can see this quote on the top here, and I'll read it to you: "In Iraq, contract management for non-LOGCAP was a pickup game, and when done at all -- and we found many cases where it wasn't being done -- it was only a secondary function." That's from an Army general officer. It is absolutely essential that this not be a pickup game.
It's a complicated function. There are a lot of different functions involved with it. The people need to be trained and identified before deployment, not learn on the job when they're over there in the warzone. And there is not enough of this being done today, the post-award contract management. I'll come back and talk about how we think that can be fixed.
There is an organization -- the Defense Contract Management Agency -- which we feel can fill in this gap. It is in thier name. It is the role that they should be playing, we think. But on the other hand, their normal functions have not included the sort of service functions that go with the base camp post station functions. They are performing some functions outside of CONUS in the LOGCAP, but very few others. And we think they should pick up all the in-theater activity.
They are currently not staffed to do this. And in fact, they have said it's really not their function to do it currently, and we agree the mission has to be much more clearly identified.
And then they need the adequate resources to be able to do it, and they ought to be able to do it by training here and then doing it over there. And they -- while there are a number of military people in DCMA, the issue here is military leadership on expeditionary operations, and we need senior military leadership within DCMA. It used to be, it isn't now.
This is their workforce curve. They've gone down by about 60 percent in terms of staffing to handle the job. Congress has begun to address this question -- as you note here, recently in the FY '08 Appropriations Committee hearings in the House -- they pointed out the fact there are insufficient numbers of contract oversight personnel involved.
These are some quotes that I thought you'd find interesting from people in the field. These are just brilliant people who are going to speak up, we don't identify any of them -- we promised them anonymity. This is a major who said that I'm a field grade command, but I have no experience. My first job, in acquisition. But I really need to learn that job before I do it next time. I'm as qualified as a -- more of a lieutenant.
Can't get Army people -- I mentioned that 38 percent of these are certified in the field. I think this is an important statement. The indication is that the people in Washington don't understand the urgency, and you have to be there and understand the urgency and do the contracting there. The fact that an Army general officer has pointed out we're training as we fight, we're not preparing for the expeditionary operations with the 50 percent of the people that are there being private sector contractors. And we had no pricing, no contract closeouts. So you could see the rest of these.
I found this one particularly interesting; next time I go overseas, I don't want it to be ad hoc. An Army general officer shouldn't have to say that. We have to support the men and women who are fighting over there. Next slide.
This is a broad institutional issue. It covers finance as well as contracting. You'll find this statistic kind of interesting. On the LOGCAP Program, in one year, there were 141 incremental funding contract modifications. That means you have to redo the contract 141 times just because the money wasn't being doled out. That's just not the way to run a business in a wartime environment. We have to be able to provide the money to them to run that operation, and we'll give you a suggestion for a way to do that.
And of course, as I pointed out, they are not trained to handle this. There is no manual that tells you what all the asterisks are in the federal acquisition regulation that say under wartime and emergency conditions, you can do different things. We need to train them with special provisions of the acquisition regulation so they do them legally, they do them fast, they do them properly, but it's the special provisions for a wartime environment that are so important.
We need reachback where necessary. We need pricing people. Now, all the way down, we do not have visibility into a lot of these people. We were told there's nobody there now, not enough people to do contract closeouts. So naturally that's a temptation to stretch it out, which we don't need to do. And of course, again, the Army civilian personnel system is 30 to 40 years old and it needs to be rather dramatically changed for this kind of an environment, in many areas like this when we're still in a Cold War environment.
General Casey, when he was there, sent back a list of 10 things he thought absolutely had to be done, and very little has happened in those areas. We need to have those pushed. Some of them will require congressional action, such as exempting the civilians -- the DOD civilians from taxes when they're deployed in the war zone. There's a lot of these benefits like the taxes and major medical and life insurance, for example. Why would you want to go overseas if your life insurance isn't valid if you're killed in war? You know, you ought to have a provision, and Congress can legislate those in advance so there's standby legislation. And then the people are more likely to volunteer to do this, because these are volunteers, these government civilians that are doing it.
We think what we're seeing is a wake-up call. It's a tipping point, if you will, for the Army to make these changes. It usually takes a crisis to make change; we have a crisis, we can make those changes, we believe.
There is now diffused responsibility. We have something called the Joint Contracting Command, but in fact all these other organizations that I show here are on the chart are also there and not under the Joint Contracting Command. We need an integrated activity. We've been here for five years in Operation Iraqi Freedom, and these deficiencies, we think, still exist. They need to be corrected, and it's an overall Army issue.
There's no question in our minds that future operations will be expeditionary, they will be joint, and they're likely to be multi- agency -- political/military events. We should be prepared for those. They'll be different -- each one of them is different -- but they're all going to be heavily contractor-supported. And what's really important is that we hit the ground running, and that means you are trained and exercised in the way you're going to be fighting. And we have to do that so that we can hit the ground running.
The institutional Army does not now currently do that. It is not sufficiently recognizing the importance of this activity. It is slow to respond, it hasn't prepared itself to meet these expeditionary needs, and in fact there's a lot of variety in terms of activities that are not synchronized.
I should emphasize that we believe adding more auditors is not the solution; that between the three auditing organizations already there, there actually are more auditors in the field than there are government contract personnel in the field. The solution that came up last time when we had problems of this sort with the -- (inaudible) -- and the high priced toilet seats and so forth, to add another 6,000 auditors simply was not the solution that we need here. We need a structural solution, an institutional solution.
So our general solutions -- and that's the one I'm going to end on by going through these four areas of recommendations -- are in the personnel area --
(To staff.) You want to put that back?
-- personnel area, the organizational responsibility, the training and the tools, and the legislative/regulatory.
First and most critical are the people. We think that the stature, the quality, the quantity of these people, and particularly a career development, is essential in order to be able to make this a professional and expeditionary operation. Increase in Army military personnel and civilians, increased of the Army personnel to support -- that would be basically the ones contributing to the DCMA billets.
By the way, 500 sounds like a large number, but that's out of 10,000. It's a small percent increase, but we need that kind of numbers. And if DCMA's going to do work for the Navy and Air Force, there are going to be some additional personnel there as well.
The personnel here can come from not only the general officers but also the warrant officers, the NCOs. And their principal job is going to be the difficult one of the services, not of the major weapon systems that they're providing over there in the field. And of course, we need price analysts to keep it so that the prices are correct.
This is a overall, Army-wide career development activity. The vice chief said the term cradle to grave is what we really need for a career path for these people to be excellent in their field. That's for both the civilian and military, we need to have career planning.
And in the case of the military, we need to change the officer track. We actually believe that what they should do is sign up when they come in as second lieutenants to this career path, then spend two years or more in a different combat branch. So they get to understand the Army. They get mud on their boots; they really understand how the Army operates. And then they go through a variety of acquisition tasks, including their advanced course being the one that's offered as defense acquisition diversity.
And then we think for the enlisted, which is a key part of this force, they will start out also as they directly enter.
Next slide. We talked about having to go back to where we were in 1990 in terms of the number of general officers, as I mentioned earlier. That would mean five general officers in the Army, but we think it's very important that they be fenced off so that they don't disappear when the Army needs some general officers someplace else. We would like these to be add-ons and fenced.
We think the same thing is true of the five joint there, including this one three-star billet for the DCMA. Defense Contract Management Agency was the Defense Contract Management Command. It was a two-star; now, it's an agency. All the other agencies are three- stars. We think it should be a three-star. And we're giving them a lot more responsibility, so it makes sense to do that.
However we don't want to replace the civilians with the general officers. We want to keep these high-level civilians. They're very important; they're very critical. They have the memory and the intelligence to back it up. And we're advising them to add one new one, which I'll show you where that goes.
We need a separate promotion board, similar to what we have in the medical board, so that these people can have a career path leading up to being general officers. And we want a group that will understand how to convert a requirement when the general says, tomorrow, I need three meals a day here. What does that mean? Does that mean lobsters, steak? Does it mean hamburgers? How do I convert that into a contract that we can translate rapidly?
That is a key part of the requirements and the contracting process. And then, again, urgently we need to change the civil service policies to those -- to go to the field, have it ready before they go, pre- committed to go.
This is the current Army organization. I'm not going to dwell on it, but I thought it was important to point out there's a lot of pieces to it. There's base operations. There's major systems. There's a lot of miscellaneous very important items here not attached to anything kind of, and then the joint JCCT activity.
What we think is needed is a single Army contract command, responsible for making contracting a core competence -- a high-quality core competence -- in the Army. That can be initiated right away. It's obviously going to take time to develop. We think you can see actual actions in a relatively short time within the first year.
The organization we're proposing would have a two-star general at the policy level, right at the assistant secretary of the Army, and then have a two-star Army contracting command, which would be overall implementation side of this contracting activity. And they would have -- this person would have expeditionary operation, which the Army has started now with their contracting support brigades. And that would be complemented by people that could come from these shaded areas on this chart as needed when they went overseas in an expeditionary operation. This person would have the directive authority to pull them when needed to join these expeditionary operations.
You might ask why a two-star contracting command? We think there has to be a single focal point, somebody you can clearly point to for doing this. And this command would be, in fact, the center of excellence, and would be responsible for the training, readiness and expeditionary preparations associated with it, and would have directive authority over others to pull people as needed.
So that, we feel, should be a major general position with two BGs, and I want to point out one additional BG that we feel would be appropriate in the Corps of Engineers for contracting activity. This is a major activity also over there. And then the five joint positions that I mentioned.
From an organization responsibility area, the key one perhaps is -- besides the one I just went through -- is DCMA, giving them the full -- this is -- their name is Defense Contract Management Agency. They need to do that for all contracts, including the expeditionary operation and the base camp and station operations. And because of its size and importance, and as a full agency, we think this should be a three-star billet. All services would be eligible for those billets. Has to be adequately resourced. And if DCMA doesn't do it, the services are going to have to do it, and they're going to have to be resourced for it.
Next slide. Next slide, please.
This is the question in the training area of teaching the operational people about the importance of contracting and going through the exercises, but also going through every leadership course that they go through having a portion of it having to understand how important 50 percent of your force is when you go to war. And when they include that in the exercises -- by the way, that is in the manual, they're just not doing it, and we think a three-year practice would make a lot of sense here and a readiness report would also. I should point out that SOCOM does this because SOCOM is geared towards expeditionary operations. They embed their contracting people right along with it.
Lastly, the legislative and regulatory area. In terms of legislative assistance, we clearly need these general officer billets and we need them to be fenced in. And we've given this presentation, as I said, to the House and Senate today as well. And then when the Army supplies one to a general officer, that needs to have a backfill capability as well.
The Army contracting personnel probably is not that significant relative to the total people, even including the DCMA fill-in, and I think an absolutely essential area is in the civilian personnel, where we talked about -- the government civilian personnel, their tax (rate ?), their life insurance covering wartime, their long-term medical coverage and even the pay cap removal, which has been done for Iraq but is not available for the next time, and it should be a standby provision.
And going into the other standby provision, the funding, I mentioned about the fact that they have these constant doling out of little pieces of money. We want to have a provision which the Congress approved for the Balkans and has not yet approved for Iraq, and yet even in the case of the Balkans, they didn't fully fund it, so it wasn't very valuable to have the law unless you fund the law. So we feel this is important, and we did emphasize that to them.
And then the other thing is being able to waive the buy-America, , which again in Iraq they have done because you've got to be able to buy stuff while you're there right away. But on the other hand, there should be a standby provision for doing the same thing the next place we go. And we'll need provisions built into the law to do that.
We have a similar set of recommendations in the joint arena. Clearly, the activities are going to be joint. They need to be focused particularly in the contracting area on this joint activity -- JCC activities wherever it is with pre-volunteered civilians. I think it's equally important that they be trained for expeditionary operations in the Defense Acquisition University. And even in OSD when I was undersecretary, the contracting community reported directly to me; now there's someone in between. That should be changed. And I talked to John Young about doing that.
And it's very clear that the biggest hurdle is the multi-agency activity. And here I hope that the AFRICOM will be a trial position where the -- as it's planned now, the State Department will be the number two in that command, and so we can start to work more closely with State, AID and DOD working together in these environments.
They are going to be political/military operations. So to end, the four areas -- contracting personnel, organizational responsibility, training and tools, and legislative/regulatory.
I thought this is important for you to read. This is a plea that we received from the field, from a general officer, saying essentially the areas we're looking at are the critical ones -- in other words, don't count on Washington, listen to the field commanders; that the problem is pervasive across the DOD and it could easily lead to the kind of problems we found in terms of scandal; that the civilian personnel system must be revised for expeditionary operations, which is what we're going to be seeing in the future; and that you've got to get some military people in charge of the contracting operation so that there's a career field and so that they can, in fact, go with the forces and do the things that are necessary in the field when these operations take place.
So my last slide. It takes a crisis to bring about change. Read any of the books about change management. The other thing it takes is leadership. We have to have the military and secretariat leadership both in DOD, OSD, and of course in the Army. The Army has taken the lead. We're really pleased that the Army secretary jumped out and took the lead in this area. It's very important. It's obvious that the Army needs this improvement. So it's going to be more than just the Army, as the secretary said, but it's also going to be a good place to start within the Army. These changes are required, in our opinion, to make a world-class core competence in the Army. We think there may be some concern about if we don't get some supplementals or the budget doesn't rise and so forth, but then there'll be even more pressure for priorities. And we have to make sure we maintain this priority, no matter what happens.
These changes are absolutely essential, and we're recommending to the secretary that a special task force for implementation be chartered, be set up to look across both the Army and then the Defense secretary looking across the overall department. And they have to come up with a quick sort of action plan that can be implemented rapidly, first 30 to 90 days, and we've even threatened to come back after a year and review it and make sure that they are, in fact, implementing it.
And we're going to try and do it more on a quarterly basis to get an update on how they're doing in implementation.
There's an opportunity here because this is a time when people know there is a crisis; something has to be done. The -- (inaudible) -- are obvious -- you saw those. It's now appropriate, I think, to take action, and that's what we're recommending be done. I think the secretary sees that -- I think the secretary of Defense sees that -- and we're optimistic it can be done.
So with that, questions?
Q How do you explain that -- how many of the personnel involved in -- (off mike) -- for 70 percent of the contracting? What did you find --
MR. GANSLER: The point I was trying to make about the importance of the training, the development and the leadership -- that there is a difference in the culture in terms of the importance of this.
Now this -- the Air Force has been losing some of that, but this -- takes time to build up, and it has a lot of inertia in it. And the Air Force has had these officers, they've had the training that starts right from the time they're 2nd lieutenants, they go through the exercise, they have their contracting people embedded in their expeditionary operations. So it's something that has built up as part of the Air Force, and we think something of that sort needs to be built up in the Army.
We think it's more than a coincidence that -- the distribution that you're looking at.
Q (Off mike) -- type of fraud. Was it mostly kickbacks, bribes --
MR. GANSLER: We stay out of that totally. We were not looking at the past, we're looking only at the future. General Thompson's looking at the past, we stay out of that completely.
That chart he gave us, and we thought it related to what we were doing. And that's the reason I brought it in.
Q (Off mike) -- traced all of these problems back to the '90s. But to what extent are Iraq and Afghanistan responsible for exacerbating all of this and turning it from a problem to a crisis?
MR. GANSLER: Well, you could see the very steep slopes in the increase in actions, the steep slope in the increase in the dollars since 9/11 in effect, but also the fact that so many of the people that we had to send over there were civilians and they were volunteers, and they weren't adequately trained -- you notice only 38 percent of the people were certified in those positions.
It's really hard to get someone to volunteer to get shot at when your life insurance policy expires, you're leaving your family at home, when you don't have the major medical coverage after that. It's hard to get the top volunteers that you'd like to have. And that's why we think it's so critical that we address this. We've got wonderful men and women over there fighting, and we've got to support them.
Q Mr. Gansler, how many of the recommendations will be implemented now in Iraq and Afghanistan?
MR. GANSLER: Well, our approach here is not for Iraq and Afghanistan. Clearly, if one immediately starts to take actions, you'll see some of the impact, depending upon how long we're there. But much more important is the next event.
I mean, it's very likely that whatever we do is going to be of an expeditionary nature. And we want to be in a position to be able to help that. Some of it will, obviously, in terms of Iraq, immediately, some of it -- I mean, I feel really badly for the civilian government workers that are over there and not getting these benefits. If they put those benefits in now, I think not only would they benefit from it, but I think you'd have other volunteers that would fill those gaps that are already there.
Q Do you think this should be -- (inaudible)?
MR. GANSLER: Tomorrow afternoon. I mean I'd be happy. Now, Congress doesn't move quite that fast. On the other hand, I think there are opportunities when they could make some of these actions. And we would like to see an immediate plan and then an early implementation.
Q Can I follow on that? It looks like your recommendations set the stage for a pretty massive increase in contracting personnel, that once Congress gets to it will come right the time when the number of contracts might be winding down as the major military effort in Iraq winds down. Is that wrong? Am I not seeing that correctly?
MR. GANSLER: Two things that I think you've missed. One is that it's not a really dramatic increase in the numbers, because the numbers are already pretty large and we're asking relatively small numbers. But, for example, four or five officers makes a huge difference when you're talking about general officers. So it's very small numbers but really has a significant impact.
The return on investment for the kind of investments we're talking about here to add some people to things is huge relative to not only the fraud part, but just better contracting. You're going to save a lot of money just from the better contracting. The fact that the dollars may start to fall off in time, what worries me is that will cause some people to look at other priorities that they have, how to continue to buy equipment, for example. And now you have to say, well, how can I afford this if I want to do that? And so what we think is very important is for the secretary of Defense, secretary of the Army to maintain this as a priority activity regardless of the dollars.
Q Sir? With the problems that you did uncover, did you find in talking with any of these folks in the field that it had a negative effect on operations? Did anything suffer? Were people's lives put in danger at all?
MR. GANSLER: We didn't get any feeling about people's lives being put in danger. Clearly, in terms of the operation suffering, I think you could see that if you can't do something because you don't have the money, it's not free-flowing. For example, if you have to hold up or you have to go through some process that isn't appropriate, that things slow down, that does affect your operations.
But I think it's much more of concern to us to do it well than -- and I think the whole idea here is, we have to support the men and women who are fighting, and the kind of performance we see here isn't supporting that. And that's the focus we want to place on it. We don't want to mess up any of the operations. We want to complement and support them strongly.
Q As someone who's spent your career overseeing -- or part of your career overseeing the spending of billions of dollars of government funds, what surprised you the most, when you started to look at this, about how the system has worked in Iraq and Afghanistan, particularly on the service contracts, which, as you said, is sort of a new -- a relatively new --
MR. GANSLER: New and more difficult. The service contracting area is extremely difficult, particularly under the conditions in which they're operating, where there's people shooting at them, and where they had a time constraint, great urgency. You know, the general says, "I want it tomorrow," and now they've got to do it. "And I don't care how you get it done." Well, they do care. They want it done legally and properly and procedurally, but on the other hand, get it done, you know. So their conditions are really very different than when, say, I was there and we were buying weapons systems in the United States, you know, where you have the time, you have the opportunity to go through all the regular processes. What you don't want is to have the system break down and become illegal or improper. You want to be able to have regulated systems, but one that responds rapidly and effectively. And I think that's what the -- this wartime environment is the thing that we should be practicing, not wait until the war comes and then see what happens.
Q A couple of quick things. You have mentioned you were forward-looking and not looking per se at the specifics, but you mentioned a number of ongoing investigations and said crime, fraud and waste were things that you uncovered. Bearing in mind that you don't want to talk about those specifically, are there any examples or general characterizations of things that had an impact that you're now setting to correct?
MR. GANSLER: Well, let me -- the -- as I said, we did not ask for examples, and we didn't look for examples. Every so often someone would throw up an example, like there's the general who ordered a truck -- or -- I'm sorry. He wanted transportation, and he didn't say what he meant by that. And that's what I meant by defining the requirements, you know. So somebody got them -- got him some vehicles, and he said, "No, I didn't want that. I meant this." He says, "Go back and get me a different truck," you know.
So there were some delays, and that goes to this question about, you know, how effective it was. But we really were not looking at specific examples of either abuse or fraud.
I mean, I think you can clearly say that if you don't do it well, there's going to be abuse. That doesn't necessarily mean it is illegal. Often -- a lot of people tend to think waste, fraud and abuse is a single word. It's not. You know, there's a very significant difference between illegal actions and waste and abuse.
And what we are hoping to do is to be able to not only eliminate the fraud by having the professionalism, but greatly reduce the waste and abuse as well.
Q And real quick, you mentioned the -- how does these proposed recommendations affect things like the Rapid Equipping Force with respect to urgently needed wartime gear and equipment? And when do you see the Army Contracting Command stood up?
MR. GANSLER: The Rapid Equipping Force is clearly the kind of thing we're talking about here, where you have to be able to respond quickly to urgent needs that come in from the field. And some of you have probably heard the story about, you know, trying to armor the humvees and all the problems that they ran into in trying to do that, partly because of some of the legislative and regulatory barriers that existed that we should be able to overcome.
To answer your second question about when we think this can be stood up, we think we can start to take some actions very quickly. And that's really important. I mean, I think this is the time for doing it, for taking actions.
Q You said that fraud and abuse are an issue of professionalism. But I think -- I mean, I would imagine, presumably, that that's also a conscious decision on the part of the person who engaged in that, and also the criminal conduct that the secretary spoke about.
I mean, how is it that -- are you blaming personnel shortages on people's conscious decisions to engage in these illegal activities?
MR. GANSLER: No. Well, first of all, the fact that you have laws doesn't mean people won't violate them. That's why we have jails. I mean, if we didn't have -- if people were following the law, we wouldn't need jails. There are going to be some people who try to take advantage.
What you need, though, is the oversight and the management and the leadership and the training to be able to make sure that they at least know what they're doing. In many cases, as we pointed out in terms of who committed some of these actions, these were not contracting people that were committing those actions. These were people who were tapped because they happened to be around and they said, "Oh, we need a contract manager. Oh, as your secondary function, would you handle that?"
Well, you know, they're not trained to do it. They're not used to doing it. And it's a little bit hard when someone hands them a bag of money and says, you know, "Manage this." Some of it might fall out. And so in a well-organized, well-trained, well-disciplined operation with the proper leadership, you're much less likely to find that. I'm not saying it might not happen once or twice. That's why we have jails here. But I think it's much less likely to happen.
Q Sir, I want to clarify something on this, on the personnel shortage. What drove the shortage? Was it that it was culturally seen as a pickup game in the Army, as (was ?) said, or was it simply the fact that, in the case of trying to provide for that general officer, the Army simply couldn't do it because they didn't have the resources because they were engaged?
MR. GANSLER: No, they needed those general officers someplace else to run a war, and so they just took them. And they were limited in the number of general officers they could have. So instead of putting them in the contracting area, they took them and put them in the tank area or the artillery or something. That's clearly a priority question, and that's the reason we want to fence them, so that that can't be done.
Now, clearly this was a period in which dramatic change was taking place. You know, you saw that from the -- (inaudible) -- since 9/11. And so there was a shortage of people to do things. Now, that doesn't relate, however, still to the problem of trying to get people who volunteer. Remember, there was only 3 percent of the contracting workforce that was in uniform. Ninety-seven percent were civilians that we had to get to volunteer to go to a war zone without all the benefits that we were talking about here we'd like to give them. So they're not enthused about it.
So you have two problems compounding. One is the total aggregate number of people wasn't being increased because they were being increased elsewhere. And then, secondly, you wanted them to go to war and volunteer to go to war and don't get any of the benefits of that. And that's not what they felt they wanted to do or were trained to do.
Q In the briefings you've given so far here and on the Hill, have any of the recommendations -- has anybody looked at some of the recommendations and said, "No, that's not going to happen"?
MR. GANSLER: We are pleased so far that has not been the case, either from the secretary of Defense and his staff or the secretary of the Army and his staff or the House or the Senate that we've given so far. And these are all just within the last two days.
Q Have you been able to pinpoint any kind of a cost for implementing all these things -- the new people, the --
MR. GANSLER: No, this is what the follow-on action -- you know, you develop an action plan and the costs for doing it. I would emphasize that the return on investment is huge, because the amount of dollars we're talking about here is in the millions, and the savings are in the billions. But I don't have a number for you. We didn't attempt to do that in our 45 days.
Q Could you give us an example -- you mentioned that -- (inaudible). Could you give us an example of what could be done by prioritizing existing funds versus needing to get future appropriations?
MR. GANSLER: Well, we can do -- a lot of the staffing approvals, as contrasted to the rapid staffing -- we take time to get people. But in terms of the reorganization, for example, that can be done relatively rapidly. The making of the approved five extra general officers for the Army, that could be done by the Congress relatively quickly, and assuming the Army advocates it and the Congress approves it.
The benefits for the personnel, for the civilian government personnel, we'd like to see that done very rapidly because those people are actually there working and not getting the benefit of doing it, and that's not fair to them. We really want to support those men and women over there as much as we can.
Q On page 22, you're talking about the wake-up call -- (inaudible). Iraq has illuminated numerous major problems. And then you get into a lot of these processing type things -- diffuse responsibility of leadership; fairly elliptical. What I don't see here is that it led to a propensity for waste -- potential fraud and abuse of contracting.
Was that a major problem, an issue? (Inaudible) -- processes?
MR. GANSLER: No, it's not processing when you have fraud. I mean, the solution -- we had one chart in which we said, "Let's not look at the symptoms; let's look at the cause." So, yes, it is process-oriented. The causes are what we're trying to address.
This is an institutional restructuring, truly. I mean, it's almost a cultural change that we're advocating in order to have better symptoms come out at the end. They're not going to change over a day. You can't do something like this by putting out a memo. You know, it won't be done.
It has to actually make a significant structural change in order to recognize that this area -- contracting, contract monitoring, requirement specifying -- all of the functions that go associated with the overall contracting activities are a major part now of the Army. And if you're 50 percent of your force are going to be related to these contractors, and that's probably going to be the future as well, because these functions can be done well by these contractors in a competitive environment and so forth. We just have to learn that we operate that way. We have to train that way, exercise that way, have provisions in our regulations to deal with it, and then accept that as a culture of change for us.
Q (Inaudible.) Duncan Hunter, the chairman at the time, in the mid '90s, was a pusher of the legislation to reduce workforce. He called them "shoppers," as I recall.
MR. GANSLER: Right.
Q He's also a big pusher in terms of the buy America and the specialty metals provisions that you need to find (relief ?). He's also running for president, actually. Have you touched base with him on this? And is he going to relent on some of these buy America and specialty metals provisions?
MR. GANSLER: Well they have relinquished a lot of that for Iraq in the Iraq first provision. And I think if you -- and I think, frankly, in my dealings with Duncan Hunter in the past, he does want to support the troops. And you've got to support the troops. I know they don't vote necessarily in San Diego, but that's not the point. What's really important here is that I think he really wants to support those troops.
And I think when you look at some of the stories -- for example, trying to armor the humvee -- and you're having to say, "Well, you've got to get specialty metals from the United States," if you can't go down the street and get it and armor these Humvees quickly, that's wrong.
And so I think we have to be able to educate all of them to the importance of the expeditionary operation requiring a very different op tempo. It has to be fast-responding, has to take stuff right off the -- live off the fields, you know. And that's a different environment than what we have here in the continental United States.
This isn't waiving all these requirements for the United States. This is waiving the requirements for the men and women that are fighting and need that stuff right away and, where it's appropriate, getting it right off the field.
Q (Inaudible.) Did the Army apprise you of the family of tactical vehicles issue, where they had to hold off delivery of something like 1,500 because of specialty metals issues that came from House Armed Services Committee provisions? I mean, is that an example of what you're talking about here, to get away from?
MR. GANSLER: If it's something that you need rapidly. We weren't addressing so much stuff that comes from the United States getting over there. We were really addressing stuff that you can get right there while you're there and being able to buy it rapidly in the field. And that standby provision needs to be there.
Someone back there. Yeah.
Q One of the reasons for the tremendous growth in contracting that you pointed out in your chart is because a lot of activities that used to be done by people in uniform are now done by contractors. Do you -- is it your sense at all, has that process gone too far?
MR. GANSLER: No, I don't really think that's the problem. I honestly don't. I mean, I've seen lots of studies that show competitive sourcing, which is what you're talking about, in terms of running a dining hall or setting up tents or delivering water or things like that, where these things have been competed. The empirical data are overwhelming that you get better performance at lower cost by on average savings of 30 percent.
That, I don't think, is honestly the problem. In fact, I personally think that the people in uniform ought to be doing the war fighting, which is what they're really trained for and what their main function is and which they want to do, as contrasted to "Go get me the water." You know, I think that we can get contractors, but those contractors ought to be held responsible for their performance and for their cost. And that's good contracting. That's what we want them to do. And I think you'll get that if it's done properly, well done, and at lower cost.
MR. CUCOLO: Doctor, with your permission, this will be the last question.
MR. GANSLER: Sure.
Q You mentioned during your remarks the need for improved postwar contract management. Can you identify some of the problems or elaborate on some of the problems you found there and how some of the policies that might come forward might not hold up or complicate the delivery of services or goods to soldiers?
MR. GANSLER: Pardon me?
MR. GANSLER: Yeah, well, close-outs is an obvious one. I mentioned the fact that we have enough people that we were told by the people in the field today that they didn't have enough people to be able to close out contracts. Well, if contracts cannot continue to go on, that's not a very effective way to run a business.
I would argue that, in fact, there's lots of other examples where, once you started up the program and you don't continue to monitor it, you know, it's going to get out of control, either in terms of performance or cost, or both, which is what you're really trying to do. And when you're trying to rotate people through that job with people who have never been trained in it and are just on their second function, if you will, as available to do that function, you need to monitor them.
I mean, you've probably built a house yourself sometime. You don't just say, "Build me a house" and go on a vacation for six months and come back and see what you get. You know, you really have to be responsible for monitoring that contract. And that's what we're asking for, people who are caring and knowledgeable and can monitor that program, and then close it out, as they pointed out.
MR. CUCOLO: Sir, thank you very much.
MR. GANSLER: Thank you.
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