Hearing Of The Government Management, Organization And Procurement Subcommittee Of The House Oversight And Government Reform Committee - The State Of Federal Contracting: Opportunities And Challenges For Strengthening Government Procurement And Acquisitio

Statement

Hearing Of The Government Management, Organization And Procurement Subcommittee Of The House Oversight And Government Reform Committee
- The State Of Federal Contracting: Opportunities And Challenges For Strengthening Government Procurement And Acquisition Policies

Chaired By: Rep. Diane Watson

Witnesses: William Gormley, Chairman, The Coalition For Government Procurement; David Drabkin, Acting Chief Acquisition Officer, General Services Administration; John Mcnerney, General Counsel, Mechanical Contractors Association Of America; Scott Amey, General Counsel, Project On Government Oversight; Kara Sacilotto, Wiley Rein Llp.; Karen Manos, Gibson, Dunn And Crutcher Llp.; Shay Assad, Acting Deputy Under Secretary For Acquisition And Technology, Department Of Defense

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REP. DIANE E. WATSON: (In progress) -- Mr. Cuellar.

REP. HENRY CUELLAR: Thank you Madame Chair again thank you for holding this important meeting. I also am disappointed that they couldn't send somebody -- I know they could have sent somebody I'm sure they have a higher upper that could have come here at least at least to be up here and give limited testimony. I strongly disagree when an agency does that. When the legislators are calling for oversight and they don't even have the courtesy of sending someone to provide at least to supply some limited information. I hope that when arises in the future we can huddle up a little before and talk about some steps to see that doesn't happen again. I'm sure they are going to send someone next time, but there is always someone that they can send even if it is for limited testimony.

REP. WATSON: Well noted Mr. Cuellar.

REP. CUELLAR: Thank you. Madam Chair, this is an important meeting, because I think as the members have said this procurement has become very complex, has become very costly when you look at the services part of it. There's always the question what is government supposed to be doing, what's the private sector, who's doing what. I think that it's about 60 percent of the procurement might be in services, so there's a lot of questions. But one of the things we certainly like is to see what SARUM, the Acquisition Advisory Board and I think GAO have also come up with is significant policy recommendations. I'm one of those, I don't like to see the reports, but if there is some good recommendations I hope we could implement some of those recommendations because I know the GAO and the other folk do a lot of work and some of those recommendations might not work, but a lot of them are good recommendations and I hope we can have a follow-up on some recommendations with them. Otherwise Madame Chair I want you to know I appreciate all you are doing.

REP. WATSON: I just want to explain to the Members and the audience this is the beginning of a series of hearings on competitiveness, procurement, etc. It is a broad span of information through all the agencies and departments of government. This is just the beginning but we do hope to gather enough information where we can make recommendations to the full committee, to set up a policy, standards by which each department must follow and I can't emphasize enough, this is just the beginning of a series of hearings. We will notify you in plenty of time when we have our next hearing and I do appreciate the Members that are here.

If there are no additional opening statements and I see no other Members from either side of the Subcommittee we will now receive testimony from the witnesses before us today. We will now turn to our first panel. And it is the policy of the Committee on Oversight and Government Reform to swear in all witnesses before they testify and I would like to ask that you both stand and raise your right hand. Do you solemnly swear to tell the truth, the whole truth and nothing but the truth?

Okay. Let the record reflect that the witnesses answered in the affirmative. Thank you. I'll now introduce our panel: Mr. Shay Assad is the Acting Deputy Undersecretary for Defense for Acquisitions and Technology at the Department of Defense. There he is responsible for all acquisition and procurement policies including acquisition and procurement strategies for all major weapons systems programs, major automated information systems programs and services acquisitions. Welcome. Mr. David Drabkin, is the Acting Chief Acquisitions Officer at the General Services Administration. He is responsible for developing and reviewing acquisition policies, procedures and related training for the GSA and federal acquisition professionals through the federal acquisitions institute, civilian acquisition advisory committee, federal acquisition regulations and GAO's acquisition material and training program.

I ask that each of the witnesses now give a brief summary of your testimony and to keep this summary under five minutes in duration if possible. Your complete written statement will be included in the hearing record. So, Mr. Assad, please proceed.

MR. ASSAD: Thank you Madame Chairwoman. Madame Chairwoman and Ranking Member Bilbray and Members of the Subcommittee, my name is Shay Assad. I am Director of Defense Procurement and I also serve as the Acting Deputy Undersecretary of Defense for Acquisition and Technology. Thank you very much for providing me the opportunity to participate in this hearing today.

In January 2007 I testified before the Readiness and Management Support Subcommittee of the Senate Armed Services Committee at that hearing I was asked to comment on the then recently completed work of the SARA Panel or the Acquisitions Advisory Panel authorized by Section 1423 of the Service Acquisition Reform Act of 2003.

At that time I testified that I agreed with most of the Panel's recommendations and that we would be busy addressing the recommendations of their report. Today's hearing provides an excellent opportunity to provide an account of here we are in respect to the panel's recommendations and how we will move forward in light of the present circumstances. In fact the Congress is taking up many of the panel's recommendations.

Adopted into law being the National Defense Authorizations Acts of 2008 and '09. The panel's thoughtful report continues to provide a framework for improvement and to inform on-going initiatives related to commercial practices, performance based acquisition, small business utilization, the acquisition work force and the role of support contractors in the use of federal procurement data.

On April 6, 2009 the Secretary of Defense announced his intention to significantly improve the capability and capacity of the defense acquisition workforce by increasing the size of the workforce by 20,000 employees through fiscal year 2015. This will restore the organic acquisition workforce to its approximate 1998 levels of 147,000 people and address long-standing shortfalls in the defense acquisition workforce. It is the first significant growth since the military build-up in the 1980s and the downsizing that occurred during the 1990s. The Secretary's initiative is the overarching human capitol strategy to revitalize the acquisition workforce. The department's growth strategy directly supports the President's March 4, 2009 memorandum's objective, to ensure that the acquisition workforce has the capacity and the ability to develop, manage and oversee acquisitions appropriately. The defense acquisition workforce is critical for improving acquisition outcomes for the nation's 1.6 trillion dollar investment in major weapons systems. The objective is straightforward: to ensure DoD has the right acquisition capability and capacity to produce the best value for the American taxpayer and for the soldiers, sailors, airmen and marines who depend on weapons, products and services that we buy.

Additionally, as you all know, the department is aggressively pursuing major reforms to our acquisition system. These efforts have been given a high priority by President Obama and Secretary Gates and have recently been complimented by the strong bipartisan commitment to reform registered by Congress via the Weapons Systems Acquisitions Reform Act. Let me take a moment to mention some of the reforms that both the Secretary and Deputy Secretary Lynn have articulated.

First, to improve the discipline of the acquisition process. Each major program will be subject to a mandatory process entry point, the material development decision prior to milestone A. This will ensure the programs are based on approved requirements and rigorous assessment of alternatives.

To reduce technical risk. We will refine program requirements and reform our cost estimates. Our practice will be to conduct competitive prototyping and complete preliminary design reviews before we enter milestone B engineering management and development. We will employ independent technical reviews to certify the majority of program technologies before we will permit a program to progress to the costly stages of development.

And finally, we will complete independent cost estimates at each decision point in the acquisition process to ensure programs are adequately funded and to reduce the risk of costs spiraling out of control.

To align profitability with performance we have taken up several initiatives. Contract fee structures will be tied to contractor performance. We will eliminate the use of unpriced contractual actions whenever possible and we will ensure that the use of multi- year contracts is limited to circumstances when real, substantial savings are accrued to the taxpayer. To prevent programs from ballooning in cost and stretching in schedule we will use more fixed- price development contracts. We will also institute new mechanisms to prevent endless requirements creep in which the desire for the ever- elusive perfect system can result in no system being delivered at all.

Of course none of these reforms will work unless we are prepared to reform or cancel weapons programs that are not on track to provide our war fighters what they need, when they need it at a fair and reasonable price to our taxpayers. Those hard decisions are reflected in the proposed budget for next year, In summary, the Department is determined to improved the effectiveness of our overall acquisition system. As Secretary Gates and Deputy Secretary Lynn have mentioned, being tough minded on acquisition reform is part of being serious about a strong defense. Every dollar we save through acquisition reform is another dollar we can devote to the capability of our troops' needs today and tomorrow. This is what the taxpayers expect and what our war fighters deserve.

Thanks you Madame Chairwoman.

REP. WATSON: Mr. Drabkin.

MR. DRABKIN: Thank you Madame Chairwoman

REP. : Pull that mike up closer.

MR. DRABKIN: I'll even turn it on.

REP. WATSON: OK

MR. DRABKIN: Again, thank you Madame Chairwoman, Ranking Member Bilbray and Members of the Subcommittee. Since you have placed my statement in the record I would like to address three of the issues in the five minutes you've allotted me that I think merit your attention as they do mine every day.

Those three issues deal with our acquisitions workforce, the tools available to that acquisitions workforce and then three separate policy considerations that ought to guide everything we do in federal acquisitions.

As far as GSA's acquisitions workforce I'm pleased to report to the committee that we are working on a succession plan that will help us address exactly how many people we need to do the work that we are given each year and to make sure that we recruit and retain those people through the life of a standard federal career. Currently, we suffered from a deficit in the competencies and skills and in certain year groups. This is a principle result of the fact that during the 1990s we choose not to hire people as part of our attempt to reduce the size of the government workforce. I'm not critizing that decision, but the result of that decision is that now as we look for people between their tenth and twentieth year of service don't have very many.

And as we look at the folks in between their twentieth and thirtieth year of service we are facing the possibility of almost 50 percent of our workforce retiring by the year 2012, The only that has kept our retirements down, I believe, is the current state of the economy. Our workforce is our key way we get jobs done.

I mean when you talk about oversight, when you talk about writing good contracts, when you talk about getting best value for the taxpayer, it's not done by a machine, it's not done by a policy, it's done by an individual who's trained and equipped to sit down at the table, not only negotiate a contract that represents the best value for the government, but who has the time and the ability to manage that contract to a successful conclusion. Today, most of our contracting officers are measured on how many contracts they award and as soon as they award one they have to move onto awarding the next and don't have the time they would like to devote to making sure the effort they put into negotiating a good contact results in a good result for the taxpayer when the contract is concluded.

We expect to complete our succession plan sometime by the end of this fiscal year and in accordance with the direction Congress has given all federal agencies to address succession planning.

The second issue I think we need to talk about is tools. Despite the fact that this is an IT rich environment, despite the fact that we buy IT for everybody else, the acquisition community lacks the kind of IT tools it needs to leverage the existing work force and to help them avoid making simple mistakes. In a hearing I testified in before the full Committee not terribly long ago on EPLS, the question was, "Why did you award contracts to individuals who were on the EPLS about 30 times over five years?"

And the answer was, "Somebody made a mistake". But had they had the proper tool in place the opportunity to make that mistake, to check automatically the EPLS would have been reduced. Not impossible that the mistake would have occurred, but would have reduced it. And so we are looking in GSA at adopting and acquiring a tool which may be a single solution or a system of systems that will allow us to automate the entire process thus leveraging the workforce we have and ensuring that mistakes that can be avoided by the use of a transparent tool will be avoided.

Finally the issue of policy is important to look at. The President has done something I think quite unusual in the last several months or the first several months of his Presidency he has talked about acquisition a number times including issuing on March 4th a guidance document to the federal government on acquisition. And in that document he talked about two key principles: competition and transparency. These are not new principles, these are not principles that we were not aware of and didn't work with before, but it is essential that we understand competition in today's changing environment and that we spend our efforts and time making competition a reality.

And, by the way, Madame Chairman, in your opening statement you said that competition had been reduced , actually as a percentage of the whole, our statistics show that competition has not be reduced. It's about the same it was and has been over the last decade, but because of the size of the dollars we're spending the gross number of dollars that have been awarded in a other than full and open competition have increased. But the percentage of dollars, that has stayed relatively the same.

Transparency is important. I would simply mention to the Committee even though my time is up, that the United States is the most transparent acquisition system in world. I just recently concluded a meeting with my colleagues from Taiwan, Korea, Italy and Canada and they are amazed at the amount of information we provide the taxpayers and the citizens on government procurement. You can literally find out every contract we award anytime of the day or night. And finally, integrity, which goes to Mr. Bilbray's comment about oversight. We would like to do more oversight, but unfortunately because of a decision made many years ago all of our internal auditors, which public companies have under Sarbanes/Oxley have been taken away and made part of the IG's office, so as a manager I have no internal audit function to assist me in providing oversight on a regular basis as any good manager would.

I can certainly talk for much longer, but I appreciate the Committee's indulgence in my exceeding my allotted time. Thank you Ma'am.

REP. WATSON: Thank you too to both of the witnesses. You have given us a lot of food for thought and our Members this morning will be raising the questions that will extend your time.

We are very concerned about the oversight and so what we are trying to do here is take a cursory look and so I will raise some questions, I think both of you have probably answered them, but in a format so that we can really hear the changes and recommendations that you make, stated as a result of your statements, I am just going to go through them again, because a response to President Obama's March 4, 2009 memo on Directives for Agencies to report back on improving the floor and the agency specific supplements, what types, you have mentioned some, but let's get into format a number of recommendations or changes your agencies' making and would you repeat, Mr. Assad, I did hear several.

MR. ASSAD: Yes, Madame Chair, specifically some of the things that we're doing these days, it was mentioned by one of the Members that we are spending a tremendous amount of money on acquisition, on services, we now spend more money on services within the Department than we do on major weapons systems. And last year it exceeded 200 billion dollars. And what we are now doing, is we have implemented a series of things called "independent management reviews" where every procurement over a billion dollars is given significant oversight, not only prior to the award of the contract but during the performance of that contract, contract, Congress mandated that we do that in the NDAA '08 and we now have that in place, but we have expanded on Congress's intent, that this not just be a services contract over a billion dollars, but in fact every contract, irrespective of what it's for goes through an independent management review.

And so we look at it before we issue the RFP, while the evaluation is going on to ensure that in fact we are having a proper evaluation and then lastly, once the contract or the decision to award the contract is made and then every year we review that contract to see that in fact the taxpayers are getting what they, what they paid for. That process was put into play about seven months ago, we have reviewed about 40 programs to date and are in process to reviewing them. This is an ongoing thing, it requires the participation of senior executive service and/or general officers and flag officers to participate in these reviews whenever we can it includes contracts managers, engineers, program managers, auditors, as well as the General Counsel's Office and the whole idea here is to ensure that we are in fact utilizing best practices across the department and secondly, that are adhering to the regulations as we proceed with these procurements so that we can ensure the taxpayers that they're getting a fair deal and the war fighters are getting what they need.

REP. WATSON: Is this information up on line?

MR. ASSAD: We are working on it now with OMB to discuss how we could in fact put parts of this information up on line. Many of these procurements are competitive and are soft selection in nature, so there are certain aspects of it that we can't put on line, but certainly the results of it and the general finds, we are in process of doing that right now.

REP. WATSON: I think we were asleep at the switch last Administration and the oversight wasn't what it should have been. The public is very leery, and so they're talking about the debt we are in and, and the next generation to come and those yet unborn and so on. I think we have to try to in some ways, weed out the information that is not classified and put the information where people, the tax payers, can see what we're doing. It takes money in these conflicts and to protect our military and to win, it's costly. Everyone has to sacrifice but we need to give them a reason for feeling they have to sacrifice

MR. ASSAD: Yes, Ma'am.

MR. DRABKIN: In GSA we've instituted a procurement management review process. Actually we instituted that process over five years ago now, and in that process we visit all of our major contracting facilities once a year, we randomly select contracts, we review those contracts and we provide feedback to our colleagues on the quality of the contract file, the contracting, the acquisition plan, and their management of that contract. In addition, just recently, beginning last September, we added the A123 reviews which is OMB Circular, which primarily used to focus just on the financial side and now we've added an additional layer of review. We've added individuals to our team to do those kinds of reviews. In addition to the reviews themselves, we bring in colleagues from other offices so that they can bring their experiences to the review process and they can share their experiences with their colleagues and so that they can also take lessons home to their own offices to their colleagues about things that were being done differently or uniquely somewhere else. The result of this process we believe will be validated quite shortly when the DoD IG completes its review of GSA next year. We believe that

REP. WATSON: Speak right into the mike.

MR. DRABNIK: We believe that review -- I think someone turned down the sound so it wouldn't get the feedback -- I believe that review will validate the fact that not only have we been getting it right, but we continue to get it right every day.

REP. WATSON: My time is up. But I have one more question and I'll give myself an additional minute. Are any specific changes addressing the use of multi-award schedules going to be included in your submissions, both of you. I'd like both of you to respond.

MR. ASSAD: Madame Chair, we are moving forward to reduce the number of multiple award contracts that we have. These can be terrific tools for our people to use, but one of the things we want to make sure of is that they are in fact promoting competition. And they are not used as a mechanism to simply obligate funds. And so we are looking very hard at the practices we're using to ensure we provide fair opportunity. We're specifically looking at where we have small business who have been awarded multiple award contracts and who are capable of doing the work, that that work is properly set aside for small businesses to compete on and so what you'll see is a number of actions being taken by the department to improve our competitive posture. Last year we've actually set a record with the department in the most hours and the largest single percentage that we've ever competed. Having said that it's not anywhere near enough and we know that we need to improve and one of the areas that we can in fact improve upon is in award of delivery and task orders under multiple award contracts and you'll be seeing a number of policy statements come out as well as changes in our policy guidance and information of the DEFARS with regard to improving competitive opportunities in award multiple award contracts.

REP. WATSON: Mr. Drabkin?

MR. DRABNIK: Madame Chairwoman, I would first like to make a distinction between schedules which is a program and run by the Administrator of the GSA and multiple award IDIQ contracts which we all have authority to run. GSA's schedule program has always required competition. Our customers, compliance with that rule has on occasion been a little spotty. AS you probably are aware it was five years ago we developed a program called EBUY an electronic method so that all members, all contractors holding a schedule can be selected. DoD is required to use EBUY when they use the schedule's program and the number of bids or quotes they have received has increased to an average of between three and six per competition. But they solicit from all schedule holders.

On IDIQ contracts, there has always been a requirement for fair opportunity; it's a question of administration of that requirement that has been put at issues. But I think the real issue is what Shay touched on Madame Chairman and that is to what we addressed. I served as a member of the Sour Panel and later you'll hear from our Chairperson Marsha Madsen is that we probably have way too many IDIQ contracts in the government and it costs us money to award those contracts and to administer them. It costs industry money to compete for them and I'm not sure it contributes to competition or better pricing overall. In the last Congress there was direction to OMB to begin a process to manage the number of IDIQ contracts governmentwide and I believe once a new administrator is appointed in OMB and OFPP that that process will begin and we will see some success in reducing the overall number of IDIQ contracts.

REP. WATSON: Thank you -- our ranking member -- I'll give an extra minute Mr. Bilbray.

REP. BILBRAY: No problem, Madame Chair. Thank you. I think your question was quite appropriate and served the entire process and this committee.

Mr. Drabkin, I appreciate your pointing out -- I think when we get into this we've got to look at our success, and we are the most transparent system in the world. We just forget that outside of Mexico we're the only place where we don't follow the British god- forsaken parliamentary system to where the winner takes all and that the administration is nothing but an arm of the lower house. So I think as Americans we always talk about other countries and think they're in our system. We have a very unique system and it works. And that's why this relationship between the executive branch and the legislative branch and the process of oversight is so important and needs to be not just cooperated with but embraced.

I guess, gentlemen, what I first want to talk about is we really are in crisis on this issue. And what I worry about -- when you look at how much of the budget cannot be accounted for in so many ways at a time that we now are looking at almost another trillion dollars that we don't know how we're going to account for is this crisis, and the problem is with crises is that we always look -- talk about tactical issues during crisis and we ignore the opportunity to really now kind of learn from our mistakes and our challenges and look at the strategic, and I'd like to sort of back off a second and take a look at the strategic.

The question over at DOD, we have interns that come in and participate in a training program basically, don't we? What percentage of those interns do we actually end up hiring after they've gone through the intern system?

MR. DRABKIN: We actually do very well in terms of hiring the interns. The real question is can we retain them and I would say that it's not unusual in our intern programs to see turnover of 30 to 40 percent. Now, your question is, well, where are they going? Well, to some degree they go to my brothers and sisters in the rest of federal government, and while we hate to lose them out of the Department of Defense, that in and of itself is not a bad thing, but in fact we do lose a number of them to industry because we happen to have the finest training system in the world in terms of training people in acquisition and in procurement at the Defense Acquisition University. It's without peer.

And so folks know when they get somebody, especially an intern through our training program, that they have been well trained, and so what we're doing is that we are taking a number of steps and to a certain degree, Mr. Congressman, this is all about leadership. It's -- we're getting our leaders actively engaged in ensuring that they communicate with the work force on an ongoing basis in terms of their value and I think the Secretary and Deputy Secretary have stood -- has stood tall and basically said we're going to make a significant change in the size and capacity of our work force and that has gone a tremendous way in terms of almost overnight in significantly improving the moral of the work force because we see help on the way.

REP. BILBRAY: So -- we basically absorb all our interns and then it's just a revolving door?

MR. DRABKIN: Yes, sir.

REP. BILBRAY: They come in. They get a job, and then they end up getting a better offer either in another department or outside --

MR. DRABKIN: Yeah. I'd say about 30 to 35 percent of them do that, yes, sir.

REP. BILBRAY: And --

(Cross talk.)

MR. DRABKIN: We retain about two-thirds of them.

REP. BILBRAY: What percentage never get a job, do you think?

MR. DRABKIN: A very small number. You know we do -- there are some folks who just -- your -- they decide that this isn't for me or we decide they're just never going to hack it. That's a very small percentage of them --

(Cross talk.)

REP. BILBRAY: Yeah, I'll tell you, I know that the gentleman from Fairfax County may get concerned, but it's too bad we don't have the type of contract or arrangement with our civilian employees that we have with our military basically saying if we're going to spend this much time training you as a naval aviator, we expect you to sign on for this long, and you know, that kind of arrangement somewhere down the line may be a radical concept now, but as I think we get in these challenges, we should be looking a lot.

I guess the issue comes down to retention though too, as a lot of the institutional mindset. I think this administration ran a campaign that really should be setting the example of maybe how this administration should be looking at the modification of the federal bureaucracy, and that is this administration captured young people and captured the potential for not only the young people but the technology that they are so comfortable with, and I guess the issue there of retaining more of these young bright stars is how we can change our internal operation, you know, section by section to not only allow these young stars to use their new tools that they have but to embrace it and be brave enough.

I know all of us here, you know, that are on the front row here may be less than comfortable with the technology and approaches that the people will find behind you or behind us, you know, not only are comfortable with but embrace and integrate into their day to day life and my question to you is how can we modify the system to be more open to the junior members who are coming up with their mindset and with their new savvy and direct them to be the next generation of oversight?

MR. : Mr. Congressman, we're making a number of changes in that regard and frankly it's not just the younger of those less experienced or those more comfortable in the information technology age. The fact of the matter is we need to do a much better job within the department and across federal government in sharing information and knowledge about the business deals that we have. How do we do business with different contractors?

It is not unusual to have certain products being bought from organizations with the Army, Navy, and Air Force, and having never had them talk to one another about doing business with the very same company that sells to all three.

So what we're doing is we're about to make a remarkable change in how we collect and disseminate especially business information. DCMA is going to become a cost analysis center for us and so that our young employees will be able to log on, immediately go in a web-based tool into that DCMA database, get the information they need quickly, and then be able to process that so that they can understand what are the terms of the business deal that they're getting.

The fact of the matter is is that we are as capable as a number of organizations in terms of being able to share that information, but we are getting there, and I think you'll see a significant change over the next couple of years, especially in the way we share information.

REP. BILBRAY: Well, Mr. Drabkin, my biggest concern is that there are those of us that are in the position to make decisions and almost as if -- you know, I grew up along the border and the one thing I've learned very quickly is no matter how much you learn a language, it's not the same as growing up with it. You think certain ways and I think our generation, if I may expand our -- the relationship will always have a blind spot that we need to do translation to understand what these kids are up to and with their technology and their approach, only because they grew up with it. This is their primary way of thinking.

How do we figure out how to tap into that? It's almost like man's first experiment with fire or with nuclear power. We may -- you know, first of all it intimidates us to some degree and we may not understand it, but boy the potential is huge. How do us old guys able to develop a system and actually embrace these kids and their technology while still directing it even though we may not speak the language as our primary source?

MR. DAVID DRABKIN: Actually I'm very lucky to be at GSA because at GSA we have a culture that has adopted and continues to adopt the changes in the IT world and in the way we approach our business. We are able to attract folks right out of college. We use collaborative tools. We're into cloud computing. We're on the edge. We have -- our people have the most current and up to date electronic devices and access to them. We have a process. Because of the problem of the hiring in the '90s, we're advancing people now that would never be being advanced at this stage in their career.

We don't have a choice. We've got to have people to do the work and so somebody who has between five and ten years experience is now getting a chance to do things that they never would have gotten a chance to do if we had had a complete cadre of people with that kind of experience.

It kind of reminds me of what the Army was like when I came in in 1978 at the end of the Vietnam War as a young Captain who never tried a case in my life. I showed up and was made the Chief of Military Justice. I mean, those kinds of opportunities exist today and we're able to take advantage those and leverage those in GSA.

We're a much smaller agency than DOD, but I think you'll find if you talk to any of your -- our young people who come in in the intern program that we have that they will tell you that GSA is taking advantage and knows how to talk to them. We -- they're using the social websites and the social -- all these other tools, not only to attract people to come and work with us, but to keep them interested while they are working with us. I would like to point out just one point --

(Cross talk.)

REP. DIANE E. WATSON: Mr. --

Mr. Bilbray, will you yield?

REP. BILBRAY: Yes.

REP. WATSON: You said in your opening statement that one of the problems you suffered from was the lack of being able to hire well- trained, well-skilled, well-educated people.

Do we see within your budget the opportunity to bring on the people with the skill sets that are needed, and I'm listening very carefully because I know there has been much debate in our House about our budget deficit and endangering the future lives and so on.

Mr. Bilbray brings a very thoughtful point and that is we're in a culture of technology and used the example of President Barack Obama. He used technology to its highest level and that's how he surprised a nation and won. There's a lot of talent up there -- out there. Are we going to be able to capture that? Will you have the budget? Will you be able to bring on the kinds of people that you know can advance the agency?

MR. DRABKIN: Well, first of all, in our career field, in the acquisition career field --

REP. WATSON: Right.

MR. DRABKIN: -- there are very few people in the private sector who we can hire and put to work immediately. Because of the very nature of government procurement, all of our rules, all of our processes -- which are unique. You don't find them in the private sector. Even the County of Fairfax or -- doesn't have the same level -- I used to be a resident of the county. It doesn't have the same level of regulation and process that we provide in the federal government.

So when we hire somebody, typically we have got to train them.

REP. WATSON: Yeah.

MR. DRABKIN: And that training process takes somewhere between one and a half to two years before we can even put them out on their own to begin doing the kind of work that we need to do --

(Cross talk.)

REP. WATSON: Are we in that process?

MR. DRABKIN: We are in the process of hiring them. In GSA -- and we're different from other agencies, because as you know Congress appropriates very little -- no money for the operation of our federal acquisition service and very little money for the operation of our public building service. We earn through revenue through sales to other agencies the money we then use to reinvest in our work force and our tools.

We in GSA have the flexibility to acquire more people. If you talk to my colleagues in the other civilian agencies, I think you would hear a different story. They require an appropriated budget in order to crease -- increase the number of FDE full-time equivalents they need in the acquisition work force. But I'm not sure that the question is really increase the acquisition work force so much --

Well, I'm sure you have to increase the acquisition work force, but I don't know that the answer is that we have to increase the work force as a whole and I can't speak for other people, but I certainly think we ought to have a business process that looks at where are the competencies and skills that we need to have in-house to do our work and those people we should hire and where are the competencies and skills that we can buy from the private sector to get our work done and are not essential to the government's performance of its mission and those we can buy and those are the kinds of decisions that I know are difficult.

I know that this committee and others will be discussing. I realize they also have issues relevant to political party platforms. I'm a career civil servant. I don't get in those discussions. What I'm concerned about is making sure that we have enough people to manage the $556 billion worth of contracts we awarded last year.

By the way, in 1991 we had 33,700 1102's in the whole federal government. An 1102 is a contract specialist. It's a person we hire and train to award contracts. Last year we had 28,700 1102's. In 1990 we awarded $150 billion worth of contracts. Last year we awarded $556 billion worth of contracts. Do the math.

REP. BILBRAY: Mr. Drabkin, in other words what happened was we did -- and all of us were participating. except from the gentleman from Fairfax, that reduction during the '90s and then we hit the crisis of 9-11 and all at once we saw a huge ratcheting up of contracting. The question I really get to is that we're approaching a -- you know, we're in a crisis mode now and there's opportunity obviously in the crisis.

Just as the military during tough times traditionally has always had the ability to cherry pick for that level of employee and the training and the different entry level. We actually are in a unique situation right now, at least indications from -- coming out of the universities, is that you now have people that -- especially in IT -- that normally would not be available for government service now are looking to government service for that stability.

That never was considered for a long time, you know, going back to, I guess, to '79 was the closest time we've seen and even then it might not be. So right now the word is that as these kids are coming out in June, they're looking to come to Washington. They're looking to work for government now, and now is the opportunity for us to go do the cherry picking and be very aggressive at grabbing these kids while we can and get them into the system and hopefully we'll be able to lock them into a career before they start -- you know, the economy starts recovering and they start seeing opportunity other places.

REP. WATSON: Yes, Mr. -- I'm going to go to our next member, Mr. Connolly, and then if you want to respond to Mr. Bilbray's comment, you can do it along with answering his questions.

REP. GERRY CONNOLLY : I thank the Chairlady.

And I want to invite my colleague, my friend from California. I'm so glad he began by asking about the internship program, because it's a concern I've got based on testimony we've heard in previous hearings before the subcommittee and the full committee and I'm going to be introducing some legislation and I'd welcome sharing that in draft form with my colleagues to see if there is some interest in them, that would try to systematize an internship program and look at reporting in terms of outcome so we have a better handle on that and certain elements, -- mentoring, rotation, evaluation, streamlining so that we make it easier if you are an intern it's easier to get into the federal service as we move on to the future.

So I would welcome sharing that draft legislation with my colleagues to get their reaction, but I do think we have to do something to encourage model programs of internship, because we've heard both the good and the bad about internship programs, and it seems to me that if somebody is -- wants to be an intern with the federal government they ought to leave highly motivated to want to continue to serve in federal service.

There may be lots of reasons why one elects not to, but I would hope one of those reasons is never because there was a negative experience and we've heard stories where in some agencies that is unfortunately the case.

Let me go back to acquisition because I think, Mr. Drabkin, you were giving some great numbers there, and I think clearly what you showed was while the value of large acquisition contracts were going up, the number of qualified contract officers in the federal government were going down and so when you, as you said do the math, you know, we actually saw a significant loss of skill sets in the federal government in just sheer numbers, but even if you go behind those numbers, what I'm concerned about having watched it from the other side is that it's not just the actual numbers. It's also the skills set.

We increasingly face a challenge in the federal government of do we have the requisite skill sets to manage very large, complex technological contracts that are multi-year. That's number one and I'd like both of you to address that.

Secondly, what about all the internal processes? I mean we talk about cost overruns, but frankly sometimes we, the federal government, we're responsible for those cost overruns because we change in effect the scope of the original work. I can think of one contract I'm familiar with where over the life of a two or three-year contract we had -- this particular contractor had 14 federal project managers -- contract managers, each of whom formally or informally had his or -- own view of the scope or what could or should be added and by the end of the contract it looked a lot different, unfortunately, than what originally was agreed to and the contractor was in a tough spot in trying to deal with the client, and so is the rotational system we've got within the federal government part of the problem? Can it, should it be changed?

MR. : Let me first talk to the work force itself, Mr. Congressman. We went through -- and I know some of the other federal agencies had done some competency modeling, but we've gone through what we consider to be the most comprehensive competency modeling of the contracting work force, frankly not only within the federal government, but probably across industry.

We had approximately 18,000 employees participate voluntary in a competency modeling that examined their competencies in a very detailed and specific way. So we understand not only by every particular organization, but across each department, -- Army, Navy, Air Force, as well as the other defense agencies -- what our capability gaps are and we understand what it is we have to do about it.

In terms of our growth and our work force, we're specifically going to hire about 5,300 contracting officers, about 2,500 defense contract management agency personnel, 700 auditors, 800 pricing people, 300 procurement and acquisition lawyers, -- so we understand very well what our capability gaps are and we're very focused on improving those.

With regard to the competency modeling itself, I think that's a tool that everybody needs to use. I know GSA has -- Dave and his team have a very good system that they use over at GSA, and -- but we really do need to institute that over across the department in a very significant way so we can understand our capabilities across the work force.

In terms of rotations, rotations can be a positive thing because you get a specific degree of experience across a wide variety of resources, but having said that one of the things that we're doing now is we're requiring our program managers to sign term agreements to say that they're going to stay on for a specific period of time because as you know, given your past experience, when you have major weapons systems, it's not unusual for that to take seven, eight, nine years from initiation to absolute fielding and you might have two or three major program managers participating in a program along the way and sometimes a program manager inherits decisions that weren't his to make and so we're looking very seriously about that about extending the terms of program managers, especially in our major programs and I think that with our term agreements with our program managers, it's going to go a long way to do that.

MR. DRABKIN: Let me begin with, I think, one of the last things you talked about but which is the most important thing for any acquisition and that is the requirement, and I believe you're absolutely correct that in many cases when you look at why a contract changed over time or why a program changed over time, you will find that at least in part it was attributable to requirements creep, we call it.

The requirements started out as being an automobile and before you finished it's a jet aircraft, and by the way if you start out to buy an automobile you're going to get a lousy jet aircraft when you're done.

But our community -- the acquisition community does not control the requirement side of the House. We respond to it. The second most important thing is what we do once we get that requirement and that is the acquisition planning process, which has been codified and institutionalized for many, many years, but which still today because of a lack of time, because of a lack of people, and because of a lack of management, direction or over -- or interest the acquisition planning process in many cases across the government gets left out.

But it's that -- during that process where you look at the requirements again, you make sure you redefine the requirements. You do your best to make sure it's nailed down and all the changes you can anticipate are taken care of and then how you decide to satisfy those requirements through the acquisition process including justifying what kind of contract you're going to write based upon the nature of those requirements or how you're going to define the competition because all requirements don't compete equally in the marketplace.

When you get to rotational assignments, I do agree that there is a problem with the fact that we have both contracting officers and project managers, who during the course of their career change jobs. And GSA we don't have the ability to direct someone not to go somewhere else. We can avoid internal management reassignments, but if they get an opportunity to work for another department, if they decided they've had enough and don't want to work for the federal government anymore, we have no ability to keep them in one place although we are looking at ways to retain them, things that we can do to incentivise them to stay in one place and complete a project till its very end, although some of our projects are quite long, not as long as my colleague has in the Department of Defense, but when you're building a major courthouse you don't do it in twelve months and making sure you hold the team together to get that courthouse done, and GSA builds a lot of courthouses, is something we're looking at.

Finally, the level of competency and difficulty has changed in what we buy and it's different than what most state and local governments do in terms of buying. In the federal government, we decided back in the 1990s we would buy best value, we would stop buying low price. It was Secretary Perry who was then the Secretary of Defense who came to this body and said -- and reported to this body that it was costing the Department of Defense a fortune to buy low price because you buy something that was the lowest price and it would wear out sooner than something else and you'd have to go out and re- buy it and there were costs associated with all of it.

In addition we were buying from companies that weren't performing well, and so we went to best value and best value requires a level of competency and skill, which is different than picking the low price.

REP. (?): And judgment.

MR. DRABKIN: That's part of the competency and skill, and the ability not only to figure out what best value is but then because of our system and because of our requirements of transparency to be able to describe what that best value is so that my grandmother in Northwest Alabama will understand what best value means, and believe me that's hard to do, and that requirement has changed and has made it more difficult for our work force.

And if you don't mind, I'd like to address just a couple of other things that Mr. Bilbray said.

First of all, we don't need people to come to Washington. They can work from other places, and one of the great things about GSA is we can hire people all over the country and they can work for us from wherever they are and we are looking at those kinds of opportunities because by the way once this economic situation resolves itself --

REP. CONNOLLY: Mr. Drabkin --

(Cross talk.)

MR. : -- coming to Washington --

REP. CONNOLLY: I have to reclaim my time, Madam Chairman, because I have to be on the floor shortly, so if I may --

Forgive me Mr. Drabkin --

(Cross talk.)

MR. DRABKIN: Yes, sir.

REP. CONNOLLY: -- but I know Mr. Bilbray will have another opportunity.

I take your points about rotation. Certainly there's a positive aspect to that and keeping somebody fresh, wanting new challenges, you don't want people to get stale and you certainly want once in a while a fresh look at a contract. No question about that, but on the other hand, if you have say not an eight or ten or twenty year project, but you've got a two or three year project that has a clear beginning and a clear end with, I hope, a clear mission, clear objectives, there is something not only satisfying but desirable it seems to me for someone to take that on as his or her project, I'm going to see it through to the end, and it's incumbent, it seems to me, on federal managers to create an environment and a system of incentives that allows for that.

I think both of you would agree that if you're looking at say a three or four year contract with fourteen project managers, that's a recipe for discontinuity and frankly disfunctionality in outcomes.

MR. : I agree with you, Mr. Congressman, and that is a function of -- in most cases capacity and people and that's why we're increasing of that 20,000 folks approximately 10,000 of them will be program managers, system engineers, logistics managers, because we realize that not only do we have to increase the capability of that particular side of the work force, but there's got to be steadying capacity to deal with our programs.

REP. WATSON: With this, I want to conclude the testimony for this panel and I thank you very, very much. We will be back with you. I think that your statements have given us, as I said, a lot of food for thought. So you may -- and I do have follow-up questions but we'll probably get them to you in writing, and so with that you may be excused, and thank you so much for your testimony.

MR. DRABKIN: Thank you.

REP. WATSON: Uh-huh.

I --

REP. CONNOLLY: We're just sad that Mr. Drabkin apparently is no longer with Fairfax County.

MR. DRABKIN: Yes, I'm now Ms. Norton's constituent.

REP. WATSON: I'd now like to invite our second panel of witnesses to come forward, please.

(Off mike.)

REP. WATSON: Well, as all of you understand this is the policy of the Committee on Oversight and Government Reform, and we swear in all witnesses before they testify, and I'd like all of you to -- and you're on your foot -- feet, so that's great, raise your right hand. Okay. Do you solemnly swear to tell the truth, the whole truth, and nothing but the truth?

MS. : I do.

REP. WATSON: Alright. Let the record show that the witnesses answered in the affirmative. I'll now take a moment to introduce our distinguished panelists. First, we have Mister William Gormley who serves as the Chairman of the Coalition for Government Procurement and as President and Chief Executive Officer of the Washington Management Group. Prior to his current post, he served as the Assistant Commissioner for the Office of Acquisition, Federal Supply Service at the General Services Administration. Next we have Mister Phillip Bond, the president of TechAmerica.

Mister Bond is also President of the World Information Technology and Services Alliance, a network of industry associations representing seven high tech trade groups around the world. And previously Mister Bond served as the Undersecretary of the U.S. Department of Commerce for Technology, and from 2002 to 2003, he served concurrently as Chief of Staff to Commerce Secretary Donald Evans. Mister John McNerney served as the General Counsel for the Mechanical Contractors Association of America. There, he worked on numerous labor management relations issues along with issues associated with the legislation advocacy, public procurement and a variety of other private and public contracting policy issues.

Ms. Karen L. Manos is the Chair Elect of the Procurement Planning Committee of the National Defense Industrial Association and is a partner with the law firm of Gibson, Dunn & Crutcher, LLP, where she is Co-Chair of the firm's Government and Commercial Contracts Practice Group. Next, Ms. Kara M. Sacilotto -- say it again?

MS. KARA M. SACILOTTO: Sacilotto.

REP. WATSON: Sacilotto.

Is a partner with the law firm Wiley Rein, LLP. There she focuses on litigation matters relating to government contracts and has represented government contracts clients in both protest claims litigation, prime contractors disputes and trade secret misappropriation litigation. Then Ms. Marcia Madsen is a partner with the law firm of Mayer Brown, LLP. There she focuses on multiple issues associated with government contracts and litigation. She also served as the Chair of the Acquisition Advisory Panel authorized under the Service Acquisition Reform Act of 2003, which provided 89 specific reforms to federal procurement laws and regulations.

And finally, Mister Scott Amey is the General Counsel for the Project on Government Oversight. There he directs POGO's contract oversight investigations including reviews of federal spending on goods and services, the responsibility of top federal contractors and conflicts of interest and ethics concerns that have led to questionable contract awards. And I will ask that each one of the witnesses just give a very, very brief introduction of yourself and what you do and we're going to cut the time. I'm hoping that other members will come, but we want to finish by 11:00 so we're going to go very quickly. I'd like Mister Gormley to please proceed. Do be sure that your mike is on.

MR. WILLIAM GORMLEY: I think we have it on now, thank you.

REP. WATSON: Okay, there you are.

MR. GORMLEY: Thank you Madame Chair, ranking member and members of the committee. I think in listening to the dialogue that you had with Mister Drabkin and Shay Assad, I think I'm one of those rare birds. I actually spent 30 years in government acquisitions, so, maybe we could talk about what it takes to stay in during the course, or, as we have more time today. But I hope my experience will be of value to the committee. The Coalition for Government Procurement's members represent the, I think we would view it as the commercial sector of services and supplies and they interact with the federal government. I had prepared five minute remarks. I will honor the request to shorten that and come back to it at we have time. Thank you.

REP. WATSON: Thank you. Mister Bond.

MR. PHILLIP BOND: It's a tough act to follow, Madame Chair. That was a very brief, and ranking member Bilbray, a pleasure to be here and congratulations on launching what I think is a vitally important series of hearings. On behalf of the technology industry I'll try to summarize quickly and give you our view. I think one is that we understand and appreciate the fact that this Congress and this administration get technology. All you have to do is look at the Stimulus Bill to see that. We are concerned that we don't, in the name of reform, have some unintended consequences that would end up chasing away small, medium or even large companies from the government marketplace and thereby undermine competition, innovation and small business contracts.

Unfortunately there are some proposals that may have that impact. The stimulus dollars do come with strings, reporting requirements. They apply the rules even to commercial, off the shelf contract items which we think is perhaps counterproductive. Contractors will be required to report on subcontracts which may chase away some subcontractors. They require public disclosure of information that goes beyond freedom of information act or other requirements. And they grant GAO the authority to interview individual employees without, as far as we can see, any rules around the rights of those individual employees.

So all this makes companies stop, pause and rethink whether they want to be in this marketplace. And obviously we embrace competition. I represent 1500 companies, hundreds of which sell to the government and so we certainly embrace competition. The president's memorandum on contracting also has some rhetoric that sometimes raises eyebrows in our community. However, it targets and identifies very laudable things including eliminating wasteful, inefficient contracts on, well, it shows a clear preference for fixed price contracts which I'll talk about in a minute. They also talk about the appropriate times for government to outsource services.

The industry embraces that. We would benefit from a clear definition of when to outsource and some clarity around the fixed price contracts versus others. However we do believe that sometimes national security or the ability for a national industrial base in some critical area may call for some flexibility in contracting and not always, always fixed price. We do believe that the administration is right to look at these and we just ask that they do so with an eye toward flexibility, again, in the name of national security and industrial base issues. And we hope that Congress will help the administration move along this path a little bit before changing the rules.

I want to rattle off a few others, very quickly, Madame Chair, on the insourcing issue. Fundamentally we believe in a blended workforce that is going to take advantage of the skill sets in government, the best of the public sector with the best of the private sector. The workforce that Mister Connolly and Mister Bilbray raised, there are too few professionals with too little experience writing contracts that are very big and complex. And with billions coming in recovery funds, that problem potentially is going to get a whole lot worse. Transparency has been referenced, especially the great examples that were shown by the Obama campaign for president.

We certainly embrace that and we think that, for instance, OPM has to write some rules that will tell employees what they can and cannot use in terms of some of the new social networking capabilities and we want to make sure that as we pursue transparency we don't require companies to file information that would unfairly give advantage to their competitors overseas or would go beyond the Freedom of Information Act. In conclusion, the committee has launched an important series of hearings. The goal of the administration is laid out for a participatory democracy, greater access, openness, transparency, all of those will demand modernization and we hope that the committee will consider ways to reform the policies, remove barriers and encourage more innovation. And we remain confident that together the best of the public sector, and the best of the private sector, that we can meet the mission for both the government and the taxpayers. Thank you.

REP. WATSON: Thank you. Mister McNerney, you can proceed. (Inaudible) -- Is that mike on?

MR. JOHN MCNERNEY: There it is. Madame Chairwoman, I'm representing here today five construction trade associations, The Mechanical Contractors Association, The Sheet Metal and Air Conditioning Contractors National Association, The Association of Union Constructors, The International Counsel of Employers of Bricklayers and Allied Craftworkers and the Finishing Contractors Association. Madame Chairwoman, our committees have come up with 10 construction procurement recommendations that respond in one way or another to the various aspects of the discussion today. And in the interest of time, I'm just going to rattle them off by name.

Our number one priority is we think the committee, even though this is a fiscal committee matter, that this committee, we would respectfully submit, should take cognizance of this new 3 percent withholding tax which is going to affect public contracts in 2012. But the agencies are going to have to start spending their procurement resources to gear up for this, probably next fiscal year. DOD has estimated it will cost their procurement budget $17 billion over five years to change their payment programming systems, personnel and to add the financing cost in their contracts for that measure. So, we would ask respectfully, Madame Chairwoman that the committee take cognizance of that and see what impact it might have on the procurement agencies, excuse me.

Overall if tax delinquency is a problem for public contractors, then we think the rapid deployment of the contractor legal compliance database is a better way to keep tax delinquents out of the procurement programs. We would also submit that, because this raises payment issues, and if the tax goes into effect, extending the federal prompt payment law to federally assisted contracts will become all the more important. If there's going to be added withholding, then we certainly want to ensure that the payment of the amounts of the invoices due, is given more rapidly. We also would submit that the regulators are going to have to be very careful that that 3 percent withholding tax doesn't go down the contracting chain to subcontractors.

IRS agrees with that, but we think the regs will have to be very careful. Some of our other procurement reforms, we think you should look at bid listing on low bid direct federal construction contracts. We've heard a lot of talk here today about negotiated selection and other aspects of the contractor selection procedure.

We think a close look at the trends in procurement methods probably warrants now reconsideration of the idea that prime contractors ought to list their major subcontractors on low bid awards. We think you improve the quality of both the level and quality of competition if the federal market if you did that.

We're supporters of the Obama administration's initiative on allowing consideration by agencies, both direct federal and federally assisted of the use of project labor agreements on major construction projects. There's a lot of flexibility in that order, even now, OMB and DOL are considering ways to shape that and we would urge this committee to take some cognizance of that and see if you can help the agency find a way to use the benefits. We represent union signatory specialty contractors. We have an interest in project labor agreements, and we also know that they work very well and that taxpayers are well served by them when they are used.

And finally, back to the low bid, we would like this committee to consider enacting again, proposing again to outlaw or reverse our auction, internet reverse auction for construction procurement. Now, that was a bad idea when it was proposed. The U.S. Army Corps of Engineers roundly condemned it and we would hope Congress would enact the Corps' recommendation and legislate against it in federal procurement. Some agencies still do it. And, finally, we would like you to consider and protect, especially the construction industry.

The federal government, over the next 20 years is going to make all its facilities and buildings stock net zero energy carbon neutral over 20 years. That's going to require a tremendous amount of building operations, maintenance, commissioning, energy service contracting, energy auditing. And we think we would like to suggest that we protect that and continue to outsource that and not bring that work that is not inherently governmental back in-house in an insourcing review. So, thank you Madame Chairwoman. That concludes my remarks.

REP. WATSON: Thank you very much. Ms. Manos, you may proceed.

MS. KAREN L. MANOS: Thank you, Madame Chairwoman. Madame Chairwoman, members of the committee, thank you very much for the opportunity to appear before you and I applaud your efforts in launching this important series of hearings. I'm here both in my personal capacity and as representing the National Defense Industrial Association. I've been practicing in this area for 28 years, since I graduate from the Air Force Academy and I hope I offer a balanced perspective. I spent 14 years on active duty in the Air Force as a contract negotiator and then a judge advocate, and for the last 14 years, have represented mostly major defense contractors.

My entire professional life has been spent in the area of government contracting and I have a deep and abiding personal and professional interest in it. I think if we step back, though, and look at what we've done, since, beginning with the Regan administration and then picking up greater steam during the Clinton administration, which is the, there was this bipartisan effort to kind of unwind federal procurement and get rid of a lot of the, what had grown up over the years that was like barnacles. And it just made it very, very expensive to do anything. Unfortunately, as part of the quid pro quo for doing that, we also cut the acquisition workforce dramatically. I think in hindsight that was the mistake, but I'm concerned that Congress, by reacting to things, may layer on additional layers of statutes and regulations that just add to the burdens that we had in the past.

And if you think back to President Clinton's signing statement, when he signed the Federal Acquisitions Streamlining Act, and he mentioned the fact that during Desert Storm we couldn't buy the Motorola two-way radios that we needed for our troops and we had to turn to the Japanese to buy them for us and to give them to us. We wrap ourselves up into knots and there's a cost in doing that and I'm concerned that if you don't have that perspective and we react to the crisis of the day or the scandal of the day and we just add these layers, that it's really misguided oversight. And what I've highlighted in my written testimony are three areas where I think that are sort of intractable problems, from my perspective.

The first is, the Defense Contract Audit Agency, which I think has completely lost its path. It's lost its understanding of what Congress directed it to do, the statutes that it's directed to do, and it's focusing on areas that really just bollocks up the procurement system with no good end. It's adding costs but it's not really bringing any value to the taxpayer. The second is the acquisition workforce, which is a huge problem. The acquisition, you need to have trained, motivated contracting officers in order to make the acquisition process work. Unfortunately we've lost that balance. We've lost the training. They're not motivated. They're certainly not appreciated and now with the Defense Contract Audit Agency we have them intimidating them.

And then the final area is the contract disputes process which was intended by Congress with the enactment of the Contract Disputes Act to be a quick, effective way of resolving disputes and it's turned out not to be that at all. It's a very laborious, time consuming process that's not good for the government, it's not good for contractors. And those are three areas where I think the Congress really could do some good to weigh in and to try to resolve things. Thank you for the opportunity to appear.

REP. WATSON: Thank you. You may proceed, Ms. Sacilotto.

MS. KARA M. SACILOTTO: Is it on?

REP. WATSON: Uh-huh.

MS. SACILOTTO: Okay. Thank you very much for this opportunity.

REP. WATSON: Turn it around towards you if you can.

MS. SACILOTTO: Thank you very much for this opportunity to present my testimony here today. As you mentioned, Chairwoman Watson, I am an attorney in private practice but I'm also an Adjunct Professor of Government Contracts Law at George Mason University School of Law. My written testimony details my views and in the interest of keeping it short I'll try to do so. This morning we heard about the, from Mister Drabkin and from ranking member Bilbray that our procurement system is already a model for many other countries. It's an open procurement system.

There are certainly regulatory controls in place today that are effective tools for regulating our procurement community, so, as this subcommittee continues on with its efforts to investigate ways of strengthening our procurement system, one option is to consider whether instead of additional regulation, what we need is a renewed focus on execution of existing regulations and oversight mechanisms that are in place, and whether our existing regulatory system can respond to the policy challenges that are being indentified today. One, two that come to mind are cost reimbursement contracting and sole source contracting that were mentioned in President Obama's memorandum on government contracting.

Today we have an existing regulatory scheme in place that counsels when to use cost reimbursement contracts and fixed price contracts. There's a place for both in our procurement systems and one size does not fit all. Likewise, there are also tools in our existing federal regulations system for promoting full and open competition and requiring justification when full and open competition is not used and also, addressing those exigent circumstances that the president identified in his memorandum when full and open competition might not be what serves the interest of the government best.

So, I would, one recommendation is to focus our attention on executing, better execution of our existing regulations which is entirely consistent with the testimony we heard today about increasing our acquisition workforce, so that we can better apply our regulations, better define requirements, and therefore, exercise oversight in that manner. My second recommendation is simply ask, if additional regulation is recommended, that we do so in a coordinated fashion so that we maintain, to the extent possible and practical, uniformity in our regulatory system and not proceed down various different paths or continually, by death of a thousand cuts, add to the regulatory system. Coordinated regulation, uniformity are hallmarks that scholars recognize of a strong procurement system.

Lastly, my final point is, is somewhat related to my first, in that as this committee goes through and tries to gather information about what is effective for strengthening our procurement system, one of the data points that will be very valuable is experience under the recently enacted regulatory and legislative reform initiatives. Many of those initiatives have just been passed into law. Some of them have only recently been put into regulation.

Some have not even been put into regulation yet. None of them really has the kind of track record that we can see whether or not they have been effective and the costs and benefits have worked out positively. So, as Congress and this subcommittee thinks about ways to improve our system, it should wait and let the efforts that it has already initiated, see if they bear fruit before determining that additional regulation is required. Thank you very much.

REP. WATSON: Thank you. Ms. Madsen.

MS. MARCIA G. MADSEN: Madame Chairwoman, Congressman Bilbray, I appreciate the opportunity to be here today to update you on the progress in implementing the recommendations of the Acquisition Advisory Panel. It's terrific to be on this side of this effort, I might add. The panel's objective as it was described in our report was to provide meaningful improvements to the acquisition system that would allow agencies to obtain the benefit of commercial practices to better achieve their mission and with recognition that a balance is necessary to achieve transparency and accountability necessary for the expenditure of public funds.

The panel's report was focused on giving the government and its acquisition workforce improved capability to make wise decisions about expenditure of the taxpayers' money. Many of the panel's recommendation have now been adopted in legislation and regulations, about 37, I think, depending on how you count the bits and pieces. And I should note that the panel attempted to provide recommendations that could principally be implemented through regulation although Congress has picked up a number of those and put them in legislation as well. I just want to talk about a couple of key areas and maybe a couple of gaps. The panel really put an emphasis on the importance of competition. There was some discussion earlier about, with Mister Drabkin about whether the federal government actually is doing less competition than it was. I agree with him based on the research that we did that the percentage of competition has been relatively consistent.

However, the panel looked at what best commercial practice was for competition and determined that the government's competitive practices didn't really measure up. We didn't have any good data on orders under large IDIQ, multiple work contracts, and about a third of the contracts awarded data we did have were awarded noncompetitively. The private sector does much better, particularly in services and IT procurements than that. And we still don't today have good data on the amount of competition that is actually used in awarding orders under task and delivery order contracts. And that's something that needs to be corrected very soon.

Our panel expressed very strong views on the need for greater emphasis on requirements development and acquisition planning. And I think, I still believe that's a gap. You see this thread in the presidential memorandum and in the discussion of cost reimbursement contracting about maybe restrictions on cost reimbursement contracting but in order to make this system work, to reduce costs, whether you're using cost type contracts or whether to make it possible to use more fixed price contracts, the bottom of that is requirements development. And it's what the private sector spends their money on and it's what the government needs to do a better job on.

We made some suggestions about putting teeth in the requirements process and those suggestions actually haven't been picked up yet and I'd be happy to talk to the committee more about them. And, as I said, a number of our competition suggestions have been enacted and they're in my testimony and I won't go through them. Something else we proposed was, much better management of interagency contracts and Section 865 of the 2009 NDAA picks up on that. With respect to the workforce, again, we recognize there was a significant mismatch between the demands on the workforce and the skills and competency of the workforce. I was struck, I was looking at the same executive order, I think, Ms. Manos was looking at, the implementation of FASA just last week and I was struck by the president's emphasis in that, President Clinton's emphasis in that memo of cutting 275,000 federal jobs.

And obviously there's recovery here that needs to take place with respect to the workforce. It's not just numbers and I won't go through them, but if you look in the panel's report, one of the things that you'll see and I think this is a gap, is that we recommended a consistent definition of the federal workforce and a consistent measurement and also a single database for the federal acquisition workforce so we can tell what the federal acquisition workforce is. There's at least three different counts that are used today and they produce wildly varying numbers, so, it's not only numbers, it's a definition, it's also getting the skills and the competencies correct as Mister Assad testified.

I'd be happy to respond also regarding blended workforce issues. The panel, I think, was the first to point out some of the complications associated there. And I would like to make one final observation to the committee. As I said, our panel was focused on giving the government the tools to do a better job, make wise decisions. But there appears to have been developing, in the last two years, what may be piling on to enact a sort of investigative provision. And many of these are overlapping. They're burdensome and they really intrude on the ability of the government to manage its business. And I'd like to encourage the subcommittee to undertake a review of these provisions and to assess where there is duplication and what the collective burden is that these provisions impose on the workforce.

Do we really need three new whistleblower provisions that do the same thing? Should contractors who make a mandatory disclosure under the mandatory disclosure also be subject to a qui tam suit for making that disclosure? There's a lot of overlap here and I think it would be worth looking at whether it's needed to check that and make some rationalization --

REP. WATSON: Just keep in mind, all the panelists, this is a work in progress.

MS. MADSEN: Right. Right.

REP. WATSON: We have all of your written statements, and we will look at your recommendations in a very sincere way. Mister Amey, you may proceed.

MR. SCOTT AMEY: Thank you for inviting me to testify and I hope to meet your deadline here. I am a General Counsel of the Project on Government Oversight, also known as POGO. Throughout its 20 year, 28 year history, POGO has worked to remedy ways for abuse in government spending in order to achieve, accountable, open and ethical federal government. POGO has a keen interest in government contracting matters and I'm pleased to share my abbreviated thoughts with you this morning. Many contracting experts and government officials have blamed the inadequate size and training of the acquisition workforce for today's contracting problems. The workforce reductions are a major problem, but, we believe, additional problems deserve equal attention.

These problems are: inadequate competition, deficient accountability, lack of transparency and risky contracting vehicles including some that have already been mentioned today, sole source contracts, commercial item contracts, cost reimbursement contracts and time and material labor hour contracts. In the, to be as abbreviated as I can, I just want to provide you with one example that kind of hits all four of those subject areas and in my full testimony I provide 22 recommendations that we think can be implemented to help improve the contracting process, but this is a 2006 IG report from the Department of Defense on a commercial contract for noncompetitive spare parts. It was an $860 million contract and this is just the abbreviated result section.

The Air Force negotiating team used questionable commercial item determination that exempted the contractor, I won't name him, because I don't want to, you know, call them out on this, it's an internal problem, but, from the requirement of submitting cost or pricing data on a $860 million commercial item contract for noncompetitive spare parts used by department's weapon systems. As a result, the Air Force negotiating team classified basically all contractors' non-competitive spare parts as exempt items.

It goes on to conclude that contractor refused to negotiate catalog prices for commercial items based on price analyses of previous cost-based prices, refused to provide DOA contracting officers with uncertified cost or pricing data for commercial catalog items and terminated government access to the contractor's cost history system.

When Ranking Member Bilbray opened his opening remarks using the term "An Adversarial System", I think it goes past what's going on necessarily between offices within the federal government.

But this is also a problem with the government. The government doesn't have the tools necessary to get fair reasonable prices in certain circumstances.

Thank you, again, for having and allowing me to testify. I'm more than happy to work with the subcommittee and the full committee as we proceed.

REP. WATSON: I want to thank all of you for your testimony and we'll now move to the question period. I'll start it off and then I will recognize our Ranking Member, Mr. Bilbray. In response to the comments offered from our first panel, are there particular issues discussed that you believe deserve specific emphasis or added amendments? And let's start with Mr. Gormley, please. And then we'll move down the panel.

MR. WILLIAM GORMLEY: Yes, in regards to resources, and if I had time I would then go through mine, but resources is the key here. I listened to Dave Drabkin, we interfaced with GSA quite often through the association coalition and they have a tremendous number of vacancies there that for some reason the personnel process takes quite a long time to bring folks into government.

Three weeks ago I had the opportunity to go and visit the VA Acquisition Academy up in Frederick, Maryland. I don't know if you're aware of there or not, but VA has stood up a VA Acquisition Academy. It's a three year program. There was about 27 interns at this program and I think the committee would do well by taking a trip up there or getting a chance to go over the committee. It would be a very good opportunity for you all to see some of the excitement in the acquisition field and I think VA's a leader in that.

REP. WATSON: Mr. Bond?

MR. PHILIP BOND: Yes, I wanted to, I think, to draw attention to one of the subcommittee members and that was Mr. Connolly who brings a really unique combination of experience as a leader in both government and at a leading contracting company and I would hope that the subcommittee and the committee, indeed all of Congress, would use him as a valuable sounding board.

And secondly, Mr. Bilbray really, I think, hit a key point that there is a lot of thought and that is how to attract, retain younger workers, making sure they have the modern tools. Government wrestled for a long time with how to deal with email. Can you communicate with people outside the government? Is it personal? Is it business? We need the same thing for the social networking, other web 2.0 technologies.

MR. JOHN MCNERNEY: (Off mike) -- that I was at a Construction User Roundtable meeting the other day and a lot of the big design/engineering/procurement companies are having a lot of layoffs these days and the fellow, the procurement guy that was there from DoD and recruited a lot of people for his workforce there for the Construction Project Management program. So, there's some workforce availability in trained people transferring over to the government now.

In terms of broader issues, we think some of our contracting reforms would raise the level of competition and the type of performers that come into your construction programs and we think, ultimately, that would help the agency.

MS. KAREN L. MANOS: Madame Chair, I would like to suggest that one thing that DoD could do a much better job of -- Mr. Shay mentioned, for example, using the Defense Contract Management Agency as their cost analysis group -- I think it would send a much stronger message.

They've currently gone from having a three-star flight officer, or general officer, in charge of the Defense Contract Management Agency to having a civilian. The message that sends to DoD is "we don't care about this. This is a backwater. It's not where we going to put our best and brightest people". Is to restore that, so it's a three-star or a four-star billet and to show that you really do care about government contracting and the Defense Contract Management Agency's exactly where we need really bright people to be working.

MS. KARA M. SACILOTTO: Two aspects of the testimony this morning struck me. Obviously, the need to augment the acquisition workforce. Whatever tools, whatever regulations you have in place, you cannot replace people with regulation and so, that is a key requirement that definitely needs emphasis.

And then the second was Mr. Drabkin and Mr. Assad both mentioned the need to adhere rigorously to requirements. And, whether you have a cost reimbursement contract or a fixed price contract, getting the requirements development process right, is critical to that and so there are efforts in way to ensure that that is done and those are efforts that should continue. Thank you.

MS. MARCIA G. MADSEN: Two things. One, I'd like to echo requirements. I think those of us who worked in this area for a long time realize that there's a lot of talk about it, but there is a real skill set that's involved in doing it right and it may need some encouragement from the committee and the subcommittee and some help to the agencies to understand that that's priority and they need to put technical resources at that issue.

The second one is we didn't get a chance to talk about inherently governmental. There's going to be an effort underway -- Perception 321 of '09 NDAA and the President's Memorandum -- to define what's inherently governmental and if you look at the panel's report, I think we were concerned that that not be a one size fits all endeavor, but rather the agencies be allowed to define what is their core mission and where they need people and to make reasonable discretionary choices about where to contract and where to bring work in house. Thank you.

REP. WATSON: Mr. Amey.

MR. AMEY: I agree with my panelists. I would also say as far as increasing competition, we should look at de-bundling contracts. These multiple services and multiple goods all compounded into one contract is problematic. That would not only increase competition, but it will also remove this layer of subcontracting that we're seeing where we're down to three layers, four layers in the subcontracting world.

I'd also like to see better tools in acquisition workforce's hands as far as cost or pricing data to make better pre-award and post-award decisions and also enhancing U.S.A. spending. I know there was some talk with Mr. Drabkin this morning about databases that are out there, but we're starting to see Congress create databases and POGO was behind one for the responsibility and performance database. But, now we have an excluded parties list. We have U.S.A spending, that we need to somehow consolidate those into like a one-stop shop for federal contracting where you can get all information for members of the acquisition workforce as well as the public.

REP. WATSON: Thank you. I'd like now to yield to our ranking member, Mr. Bilbray.

REP. BRIAN BILBRAY (R-CA): Yes, Madame Chair. You know, to sort of reflect your last comment about the bundling, you know, and the nonprofit contracts that were left in Afghanistan. We found that not only were they bundled, but then the winner of the bid went back and negotiated with the competitors that they had beaten for doing the subcontract work and that's something we'll have to look into.

And I guess, Mr. Bond, I appreciate you identifying some of the challenges we have. I remember getting here in '95 and coming from local government in California and we're both Californians, so we try not to flaunt this too much, especially with a state our state is in right now, but I was just blown out that you couldn't email between congressional offices at a time that buckets of ice were being delivered to our offices, you know, 50 years after the invention of refrigeration, and we were burning coal to generate the power for this facility. I mean in California you go to prison for burning coal, but that was a whole culture shock.

I guess one of the things I want to identify is some of these challenges that we arrange in our procedures. The parts issue is one of those things that sort of hits me. I ran the trolley system for San Diego and we had to negotiate the parts with Siemens-Duewag.

Now, you've got to go to Siemens-Duewag to get parts for Siemens- Duewag at least most of the time. And the challenge we had was how do you competitively negotiate with a company that, you know, has a monopoly on the parts that you need to operate?

And I guess the innovative way we did in government was that we ordered so many cars, took a look at the parts, and basically a lot of time the sales of the hardware is a loss leader in the parts department is where these guys make their money. We ended up doing is figuring out we're going to order more cars than we needed and then ask them how much assembly costs, ask them to deduct the cost of assembly, and just send us the cars unassembled. Now that's the kind of thing that you have to do when you have a monopoly, but how often does a government bureaucracy able to do that?

And so, the challenge there is I would ask you is that when we talk about these things like the parts, what kind of innovative approaches can we go when we look at that? Or can we look at the fact that when we buy the units and we go out to a bid -- and let me clarify. There was a comment about local government doesn't have to operate at a certain level. All I know in California, we're required to take the lowest responsible bid and so there is a preference given to the lowest bidder, but then you disqualify those who are not responsible bidders and then move up the chain. At least there's a process that you follow there rather than a wish list of "Oh well, this guys got it".

So as we go these challenges, how do we integrate into our system and I guess this is where the new, young, hotshots can pull up IT information to be able to look at not just the unit price, but also the life expectancy maintenance cost, because parts are then included into that life cycle cost. Do we have the technology and do we have the process to be able to integrate that in when a bid comes in? Did I get too far out in left field on this one? Go ahead.

MR. GORMLEY: Basically, what you're approaching on there is a life cycle cost and, one of the panel members earlier commented, there's an art to this and I think regardless of the age of the contracting officer, someone does need time to understand the government's needs, what the life cycle is. They need to understand the industry they're buying from. And so it's not, point, click and buy here and I think the need to have a growing workforce and for Congress to continue to support the acquisition community such as today is fantastic. The government needs this kind of oversight and action to come out of this committee. But, on the other hand, the government has barriers up in OPM to bring these people in.

But to your point, it's life cycle costing. The government back in the '80s was very high on life cycle costing and in some cases gotten away from it, to your point.

MR. BOND: I think implicit in your question, too, is whether or not we have the ability to tap all these different databases and pull them together in an intelligent way so you can make a decision. The answer to that is "Yes" with a caveat, that the federal government is the largest enterprise that we know of in terms of business function, larger than any private company and so the task would be vast if you were going to try to encompass the entire federal government and every aspect of it in that. But, pulling multiple databases together into what's usually called a Business Intelligence Module at the top so you can see what's going on and compare roll-up costs, and so forth, that is done in private and public sector settings today.

REP. BILBRAY: Well, you know, I guess I shouldn't say this, but the fact is one of the big determining factors of the success of Toyota has been that the life cycle cost of owning this vehicle is much lower than vehicles that people have been familiar with: Basically, much lower cost, much longer life span and everything else. So, the initial cost was not the issue that we had before. It used to be that imports were cheaper to buy upfront but overall and what happened was Toyota totally destroyed that perception and all at once it became the deal that here's a car you buy and you drive until you're a grandma and pass it on to your grandchildren.

That may not be a reality, but it's a perception that has really driven the success of the Toyota model. And that's one of those formulas that consumers make all the time, but does the bureaucracy to do that and do we have the incentive to do it? That's always a tough part about when we talk about the comparison between the private sector and its inherent efficiency as opposed to the public sector is that vested interest in the decision making.

MR. BOND: If I might. So, Toyota in that case has created real value and so in the government contracting setting, I think the fact that you can look for the best value is somewhat corresponding to that concern. I think that you talked about whether or not we have the incentive and I think there that the subcommittee might think about some creative approaches and we'd love to engage with the staff and members on that, but one disincentive that you have right now is kind of the use it or lose it spending habit with the annual appropriations and so forth. There is no real incentive to save some money on a really high value so that you might use that for something else.

It may be a cross-cutting initiative. For instance, one idea we suggested, that if you really save some money on something because you went the extra mile and got the best value, you can use that saved money. It doesn't die. You can use it on cross-cutting federal agency initiatives or it perhaps could go into extraordinary compensation for really good contracting officers. A really good contracting officer in the private sector, if they executed a multi- billion dollar successful contract, would get a much larger bonus than anybody in the public sector would realize.

REP. BILBRAY: You know, it's funny you say that, Mr. Bond, because my father passed away when I was a sophomore in High School, but I always remember. He was a lifer mustang in the Navy and he always says Communism would never work. Eventually it would fail. But, his explanation was because countries don't have fan tails to throw the hams overboard as you come into port. And that's based on the old concept that if it was in your inventory when you got into port, you didn't get that the next time out. I guess you really hit on there is that's inherently a challenge we have in the public sector that we've got to figure out how to address. And I appreciate that and I think it's one of those things that we need to go back and I yield back, Madame Chair.

REP. WATSON: Because of time, I want to thank all the witnesses. We have your statements, but we're going to mail out to you a series of questions and we'll try to categorize them with your background of experience in mind and we would appreciate the answers back, if you can, within 10 days. We will be suggesting to the full committee certain policy changes and I think the kind of testimony that you have offered today will be very, very helpful. So, if you will answer. We have a series of questions that would keep us here until three o'clock this afternoon, but we can't do that. So, I would appreciate you responding to us within 10 days of receipt of the questions and thank you very much and this panel may be relieved and the meeting is adjourned.

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