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Senate Armed Services Subcommittee on Readiness and Management Support Holds Hearing on FY2004 Defense Authorization

Location: Washington, DC


    Thank you. Mr. Chairman, I appreciate that.

    Let me just ask generally about sourcing. And let me tell you my philosophy, the way I look at it. And I want you to tell me if you agree or disagree and educate me on why you might disagree.

    When it comes to the Department of Defense, it seems to me that you have three factors that you consider. One, and the first factor, should always be: does it make military sense? Does it make military sense where we're getting -- what our sources are?

    Secondly, does it make fiscal sense? And third, does it make philosophical sense?

    And the reason I say that is because I think there is a temptation for people who want to see more privatization and people who want to see no privatization almost is the philosophical sometimes overrides the fiscal considerations and also overrides the military considerations. So it seems to me that those should be our priorities, in that order.

    Does it make military sense? Does it make fiscal sense? And third, should it make philosophical sense?

    Can I hear what you all think about that?


    Let me start off and then maybe weigh in later. The process, as I described before, is for the military commander at a facility to look at his workforce. And he or she understands the mission they have to perform -- be it a depot or a maintenance facility or anywhere that has a significant number of in-house employees. What is my mission? What am I here to do?

    In some cases, that's warfighting. And we look at the individual job and say: does this job -- is it essential for this job to be performed to contribute to my warfighting ability or to my maintenance ability or so forth? And do I need this job inside the government? Or can that job be performed outside the government. Whether or not it's performed at the facility or not, can it be done?

    And then, they go look, job by job, and they identify what those functions are. And I believe, if I was a commander, I would take all these factors into account.

    Now you don't know the fiscal answer until you compete because normally what happens is the government that's being performed, they think of a new and better way to perform that function at less cost than they are performing it now. We find that to be, as I mentioned before, almost a truism for every competition. It gets performed at lesser cost -- at significantly lesser cost.


    Within the government?


    Within the government, even if the government wins. Or if the contractor wins, it also gets performed at lesser cost. So you don't know that answer until you've kind of gone through: is this job essential? Does it make sense to compete this job? And maybe a little philosophical factors go in. But you don't know the answer until later, until you compete it.
    But in most cases, it's pretty obvious to the commanders, knowing they've done this before, they will get a better product out of this competition.


    Mr. Walker?


    First, let me acknowledge for the record that your father, the senior senator from Arkansas, was a member of the panel and very ably contributed to our efforts. And so please pass on...


    I will, thank you.


    There is a strong resemblance. But I would say, on all decision making, I look at it from two primary factors: one, value and risk. What is the value that is added? And how do you manage the risk?

    Commenting on your specific criteria, mission is number one. And tied to mission would be the objectives. In other words, what are we all about? What are we trying to achieve? How does this fit into that?

    I would say fiscal would come after that. But equal to that, I would say, would be the people dimension. I think you have to consider the people dimension. I think that's critically important. And I would say that that's equal to the fiscal dimension.

    I would not say philosophical because I would hope that this wouldn't be philosophical. And the last thing that I would say is feasibility because there are certain things that -- you know, for example, we might like to be able to perform certain functions or have certain capabilities in the federal government, but if our compensation policies are such that we can't attract and retain an adequate number of people to do that, then the market may force us to look to a private sector alternative.

    Or if we're looking for a certain type of technology that, quite frankly, the federal government doesn't have or hasn't had the ability to develop and sustain over time, then we may have to look to the private sector. But I also believe that we need to keep in mind that this is a sourcing strategy. So it's not just outsourcing. It could be insourcing when things fail, in appropriate circumstances.

    And more likely than not, there is going to be co-sourcing a lot of things. And there has to be adequate oversight and management even if you do outsource it. So that's what I would say.


    Thank you. Ms. Styles?


    I'd like to emphasize that there is nothing that is critical to the mission of any agency that would ever even be contemplated for public-private competition. We are at a point where we are simply asking agencies to compete some pretty obvious things. And I'll give you a couple of examples, just so you know how far we are from mission critical requirements.

    The Department of the Navy has 500 people that make eyeglasses. We have thousands of people at VA that do laundry, that serve food and hang drywall. We have lifeguards at the Department of Interior.

    These are very, very basic commercial services that we are simply asking to be competed and to figure out if we can perform it cheaper with the private sector or with the public sector or we can get better value from one sector or the other. Without the pressure of competition, we're going to continue not knowing. We're going to continue not managing these functions as well.


    Yes, actually, I think that there are a whole range of things that are good candidates to be outsourced. And let me give you one example of that. And I'm about out of time here, so we can talk to it very briefly.

    A friend of mine was in the Gulf War 12 years ago. And he gets to Kuwait and the food service has been contracted with some locals there.

    Well, you know, the U.S. Army, the GIs did not feel that comfortable with a bunch of Kuwaitis, et cetera, serving them food. And so you get into that, is that mission critical? Well certainly, if the food supply is tainted and if we don't have the proper safeguards built in, then that certainly very much is mission critical.

    But you know, they're in Kuwait. Apparently, the safeguards were there. And the contracts were done. And everything was fine. There was no problem at all, whatsoever.

    So we have to balance that. And again, it has to make good military sense to do it.

    I will note this, Mr. Chairman, before I step aside here, is that "Fortune" magazine, in this most recent issue, had a story about sourcing -- I know we don't want to use the word "outsourcing" -- about sourcing and contracting. And it said that in the Gulf War, for every 100 soldiers, there was one contractor. And today, for every 100 soldiers, there are 10 contractors.
    And so I would just ask you all to help us work through evaluating whether we are being most efficient with our dollars and evaluating the effectiveness of what we're trying to do here.


    I think that part of that has to do with the sophistication of our weapons systems and our technologies -- and it goes back to what I said before -- when you look at the people dimension and when you look at the market dimension, being able to have the type of skills and knowledge in the requisite numbers to be able to deliver on mission and to achieve the objectives. So I think there is a...


    I agree with that. I think things have become so high- tech, so advanced, so technically critical that, obviously, our needs on that will grow. And again, we're contracting out more laundry services, more grass cutting, more things like that. And a lot of that makes sense.

    But at the end of the day, we need to look at it, in my view: is the military purpose being served? And secondly, fiscally, does it make sense? Does it make sense to have all these contractors do this?

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