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Hearing of the Subcommittee on Federal Financial Management, Government Information, Federal Services - Financial Management/Department of Defense


Location: Washington, DC

Hearing of the Subcommittee on Federal Financial Management, Government Information, Federal Services - Financial Management/Department of Defense


SEN. TOM COBURN (R-OK): Senator Carper, thank you for having this hearing.

It's our biggest expenditure, the Department of Defense. It's where we have the most money. I was glad you alluded to former Secretary Rumsfeld's statements. I'm anxious to hear how things have changed since then. As I've studied and prepared for this hearing, I'm not sure large quantities of measurable change have, in fact, happened.

My primary concern pertaining to DOD's financial management is the goal for DOD to become audit-capable. Whether they pass or fail the audit, you have to become audit-capable first. And the fact that we're not anywhere closer to that now than we were when I came to the Senate is simply unacceptable.

DOD continues to play the key role, with 15 programs or activities on GAO's 2007 high-risk list. Six of them have been on the list for at least 10 years, some dating as far back as 1990. DOD contracting continues to be unaccountable. I want to restate that word -- unaccountable, "unmeasurable," not manageable. It still is unaccountable. It's plagued with long-standing problems and it has been on the high-risk list for 15 years -- 15 years, almost three administrations.

There have been numerous initiatives and strategies that have been implemented. But there still hasn't been any demonstrative progress in the key areas. Or there haven't been any significant metrics that I am aware of -- or benchmarks to gauge the progress of new standards and guidelines.

And I'm almost to the point where I agree with David Walker on that there ought to be a permanent position of the DOD called the chief management officer. I know that's not in the framework. I know it's not there. But I'm wondering how long, six years from now will we continue to sit at a hearing like this and still have 15, 20 programs on the high-risk list, still not have metrics and still not measure things?

And this is not meant to reflect on any of you gentlemen. I'm not talking about you personally. I'm talking about the leadership above you that has to be there to make this happen. And the efforts have to be held accountable. And that's part of the reason that we're having this hearing.

I hope that there are clear milestones and firm commitments in both planning -- financial planning as well as purchasing planning -- that I haven't seen. What I'm hoping that will come out of this hearing is that -- is a commitment from the Defense Department to sit down with this subcommittee and the GAO on a regular basis to try to hash some of this out.

To me, I think we're kind of like we're on a paddle boat and we're going against the current. And we haven't lost any, but I'm not sure we've made any headway. And as we continue to change things and change techniques and change strategies, I'm not sure we're any closer to the goal. So I look forward to hearing that.

I want to thank Comptroller Walker for his work and analysis.

And I thank each of you all for the input and the effort that you -- this is a daunting task. If it was easy you would have already fixed it, I'm sure. But the fact is the frustration level and the financial consequences to not having an audited financial statement, to not having procurement under control -- is in fact costing lives. And more importantly, it's costing the future of the next two generations of Americans, because this is the largest expenditure that we have. And if we can't get this right, we can't get any of it right.

So I look forward to your testimony. I'm hopeful that we can start a dialogue with both Chairman Carper and myself and really get some benchmarks for you all in terms of the implementation of this.

The other thing that I worry about -- and as your staff and you so ably pointed out and I know you're going to bring it up -- is there's going to be an administration change coming up in 2009. Are we going to see another great big setback or are we going to start all over again? And I want some insurance today that the things that are in place are going to continue to move forward rather than we're going to change it again and change the goal.

What are we, at 2016 now, I believe, is when we said we can have an auditable financial statement? That's not acceptable anywhere else in this country and it shouldn't be acceptable here.

Thank you.


SEN. COBURN: Thank you.

I'll just go back for a minute.

General Walker, last year's appropriation had $9 billion in earmarks in the Defense Department -- something like 12,000, which we're trying to get a handle on now with the Defense Department on how the money was spent.

You're talking about progress that's being made. I just want to make -- is there any interference in the progress of managing the Defense Department when we have 12,000 earmarks out there laid out for things that they have to do that are noncompetitively bid that have to happen?

MR. WALKER: I think earmarks are a problem. I think not all earmarks are equal. You know, some earmarks frankly represent waste.

I recently had a -- was asked by the House to come up with a definition of waste and some examples. And my definition was basically on the following lines: When the taxpayers as a whole do not receive reasonable value for money because of an inappropriate act or omission by a party that has discretion over government resources, that's waste.

And that can happen by executive branch officials, by legislative branch officials, by contractors or grantees. And one example I gave was inappropriate earmarks that are not based upon value and risk -- where we would not be doing it but for the earmark.

But as you know, Dr. Coburn, an earmark by itself doesn't increase government spending. But if you've got constrained resources, the fact that you're telling somebody how to spend the money when you're going to have tighter and tighter budgets causes other problems and it serves to, I think, undercut the integrity of the process and the credibility of the Congress in the eyes of the American people.

SEN. COBURN: And General Patterson, you went from two to seven. You expect to be nine entities in 2009. How many total entities are there in the Defense Department?

MR. PATTERSON: There are roughly 15.

SEN. COBURN: Fifteen? Okay.

MR. PATTERSON: Including services.

SEN. COBURN: And in your report -- this report, the pre-report -- you list the DOD reporting entities. It's 15 percent of assents, 49 percent of liabilities. What percentage of net operating expenditures is that?

MR. PATTERSON: We don't audit net operating expenditures. That is an appropriation, and we don't audit -- and as I understand it, we are not -- we don't intend to audit net operating expenditures.

SEN. COBURN: What percentage of the Defense Department is it, then?

MR. PATTERSON: Well it's about -- you know, it's $152 billion in O&M, which is operations and maintenance of a roughly $460 billion.

SEN. COBURN: So it's about 30 percent?

MR. PATTERSON: Yes, sir.

SEN. COBURN: Okay. So we've got 30 percent of the Pentagon or the DOD now auditable, correct?

MR. PATTERSON: That's correct.


MR. PATTERSON: But sir, if I could --


MR. PATTERSON: -- explain. I don't want to leave the wrong impression.

Within the O&M accounts, you have a number of other things -- civilian personnel, you have contractors, you have services, maintenance, depot maintenance. We have a variety of things within, all of which are accountable line items in a budget. Those are the things that -- within the services and the various agencies, that we would look at for auditing.

SEN. COBURN: Okay, okay.

But as a percentage of the DOD -- that's what my point is, is we're up to about 30 percent, where we were at 5 percent before.

MR. PATTERSON: I -- I couldn't attest to that, sir. What -- I mean --

SEN. COBURN: Well, it's about 30 percent of the DOD budget.

MR. PATTERSON: Yes, sir.

SEN. COBURN: Okay. That's my point.

But none of the -- the Army isn't in there, right?

MR. PATTERSON: Yes, sir. It is.

SEN. COBURN: The Army's in the --

MR. PATTERSON: The Army's in operating and maintenance account.

They have a --

SEN. COBURN: We're talking about auditing.

MR. PATTERSON: Oh, I'm sorry, yeah.


MR. PATTERSON: No, no. They --

SEN. COBURN: The Army isn't in there, the Air Force isn't in there, the Marines or Navy are not in there.

MR. PATTERSON: That's correct.

SEN. COBURN: So this 70 percent would include the services.

MR. PATTERSON: The 90 percent in liabilities and 40 percent in assets would include, when we get to that point, the Marine Corps, it would include the Corps of Engineers in the Army, it would include the Defense Information Systems Agency, and it would include the Medicare fund that we have.

SEN. COBURN: When you get there.

MR. PATTERSON: When we get there in -- right, correct.


MR. WALKER: Dr. Coburn, the answer to you question, I think, is yes. The 70 percent of net operating costs that have not been audited yet include the services.

SEN. COBURN: Yeah, okay.

Paul, you're in an appointed position, correct?

So unless you're reappointed, everything you're doing now at the Business Transformation Agency is going to have a jumpstart with the next administration.

MR. BRINKLEY: We have staffed a SES-level director of the BTA that reports to my office. My office is a political appointment -- a non-Senate-confirmed political appointment that supports the deputy secretary of Defense's business transformation objectives.

My role will be replaced no later -- no earlier, maybe no later than January 20th, 2009.

SEN. COBURN: Okay. And so understanding the political nature of this, if you were asked to serve no matter what the next administration, would you give that a consideration?

We're not going to hold you to that -- (laughter) --

MR. BRINKLEY: Yeah, don't want to be on the spot here.

SEN. COBURN: This is a great point. Look at our problem. We've got somebody fairly effective, or highly effective at what they're doing now, and because we're going to have an election, we're going to gut that.

That's the whole point. The point is we don't have the ability to put great managers in and keep them there. Go to the point of David Walker, or Dov Zakheim.

Give me -- Dov, if you will, give me some examples of where the military or DOD could have used a higher reprogramming, or some examples where we were wasting or not being able to effectively do things because we have so much -- such a limitation on reprogramming.

MR. ZAKHEIM: Well, you're asking me to think back, you know, three or four years.

We've had cases, as I recall, where we needed to move money into faster-spending accounts. I'll give you an example of where it would have been nice to be able to reprogram a lot of money quickly: up- armored humvees -- okay? We moved the money eventually. We had to move mountains on the Hill to make that happen. That shouldn't have been anything requiring that kind of work. There were kids out there getting killed.

And it's that sort of thing -- or the body armor -- where it needs to be left to the discretion of the managers. I mean, again, as you've heard from Dave Patterson and Paul Brinkley, we know generally where the money is. And nobody is running off to the Swiss banks with the DOD budget.

The real question is, do the managers of that budget today, who are executing the budget, have the ability to move money around to where it needs to be spent urgently? And the answer is, 99 percent of the time, no. And that just makes no sense in any context, including the government.

SEN. COBURN: So your position is if you had a 5 percent limit, still reportable --


SEN. COBURN: -- still had to come and get clearance --

MR. ZAKHEIM: Absolutely.

SEN. COBURN: -- that that would give the flexibility.

MR. ZAKHEIM: Sure, because any --

SEN. COBURN: What kind of resistance, when you talk to appropriators, do you get on that?

MR. ZAKHEIM: Well, it's not just the appropriators. I mean, you know, we have to get the authorizers to agree and you have to get the intelligence committees when it's their budgets as well.

The staffers feel that this is the way they control. And I can understand that. I mean, Congress needs to maintain oversight.

But it seems to me that as long as you still have the prior approval requirement, you're maintaining that control.

SEN. COBURN: Do you think there is adequate oversight in Congress of the Department of Defense?

MR. ZAKHEIM: Well, very often, the Congress seems to be looking for the key under the lamp, or under the lamppost, because you get oversight that verges on or actually is like micromanagement. And in other cases, you don't get it at all.

And it seems to me that what you really need is a dialogue between responsible leaders on both ends of this -- both sides of the river, where -- you know, both sides have the country's interest at heart.

But there just hasn't been that kind of a dialogue to say, "Look, how do we straighten this out?" We're still functioning, certainly in the realm of financial management and budgeting, as if we were living in the 1960s.

And if you permit me to give you an anecdote about this, around the time I took over as comptroller, I bumped into Robert McNamara. And we got to talking about the planning, programming and budgeting process because there wasn't execution, even as part of that.

And McNamara said to me, "You've got to be kidding; this is what I was dealing with 40 years ago."

Now, think about that. We are still functioning, in many ways, because of the interplay between Congress and the Pentagon, at the same way we were at the height of the Cold War. Something's got to give here.

SEN. COBURN: Earlier, you alluded to the fact that there -- you or maybe Mr. Brinkley, I don't know which -- is that you have a management structure and that you have -- in the private sector, we have a business plan, we have auditing, we have financial controls, we have benchmarks, we have metrics and we have reassessment all the time -- what we're doing.

And the point was made is that -- their primary thing is to defend the country, and so therefore this is second. I would put forward to you is you can't defend the country unless you have the other first.

MR. ZAKHEIM: I don't disagree. I'm just saying that there is a culture here that exists, and, you know, when you think about it these are folks who are laying their lives on the line and -- every day -- and many of them coming home pretty badly beaten up if they come home alive. And so naturally when the requirement comes, "Well, I want to pull some people off to do some of this other stuff," the military's going to say, "Well, wait a minute, I'm short of people out in the field."

So you have this tremendous tension there. It's not just money resources; it's human resources, maybe even more so human resources. And it's very understandable and that's why I think you can't really start pointing fingers at anybody and blaming. We have a system that just needs to be revisited.

SEN. COBURN: All right, thank you, Mr. Chairman.


SEN. COBURN: Well, we'll start again if we may.

General Patterson, in 2006, the DOD spent 300 billion (dollars) on contracts -- 71 percent of the entire federal government's contract work. Many of these contracts were time and materials, one of the riskiest contracts types for the government because they could be awarded quickly, and labor or categories can be adjusted if the requirements are unclear or if the funding is uncertain. DOD's management of contracts have been on the GAO's high-risk list since 1992, 15 years. Why in contracting has this not been resolved in 15 years?

MR. PATTERSON: Well, I can't account for the years prior to my coming to the Department of Defense, but I can --

SEN. COBURN: Well, what are your thoughts about it?

MR. PATTERSON: Well, I think that we use too many time and materials contracts. When I first -- within two weeks of my taking the job, I came in and found out that the logistics management program had a $1.3 billion time and materials contract that looked as though it had no end, and we simply refused to fund it because that's ridiculous. And I'd have a very -- I have a very negative reaction to people who use time and materials contracts because they can't figure out how to justify the individual elements of what they want to do.

And they're not -- we have to get to a point where we apply structure and discipline to the way in which we use the taxpayers' dollars. And to simply go in and say well, I don't know exactly what I want to do, so I guess a time and materials or an IDIQ contract is the way I should go. And particularly odious to us has been the interagency contracting, and we have gone a long way to eliminate the abuses that have taken place.

SEN. COBURN: Can you explain what that is, interagency?

MR. PATTERSON: Yeah, as you know, we have a variety -- you have GSA and the -- NASA, the Treasury -- they all have open contracts, IDIQ contracts. They all have -- well, when something is very urgent and there is an open contract that is open in that category, it's perfectly reasonable to sign a MIPR over to another agency because you need to get something very quickly.

Well, what we found was that wasn't the case at all. People were having MIPR's signed over to GSA or the Department of the Interior that said things like "office equipment." Well, I can't tell whether that's urgent or not. And the -- so consequently, we've taken very strong steps to eliminate that as a potential area for fraud, waste and abuse.

We have identified -- I take that back. The Department of Defense IG has identified 640 what we would refer to as potential ADAs. Of those, we have done a cursory review and found that effectively, it's people using the wrong appropriation or doing something else, simply an administrative error. But there are some we are taking action on, and 90 of those are now for official review by the Department of Defense general counsel.

SEN. COBURN: Well, what percentage of contracts at DOD are fixed price?

MR. PATTERSON: I couldn't tell you right of the top of my head.

SEN. COBURN: Would that seem to be an important number for us as we look at this?

MR. PATTERSON: I'm not sure that it is because the exigencies of what you want to purchase drive you to make a determination as to whether or not you'll use a fixed-price contract or a cost-plus contract. And if you know very clearly what the bounds are of what you want to buy and how long you're going to purchase it for and the cost of that is very well known, then a fixed price is perfectly reasonable.

SEN. COBURN: Well, let me give you a little example. We had the Air Force in here and Lockheed on the C-5 problems and the Nunn- McCurdy breach that was just filed about the time we were having that hearing. You can have all sorts of fixed-price contracts in the private sector where you say if we buy this many it's this price, if we buy this many over this time it's this price, buy this many over extended period of time it's this price.

I guess what I'm going towards is it seems like we're not sharing some of the risk with the suppliers of the Defense Department.

All the risk is being placed on the American public because we go cost-plus (for ?) a limited fixed-price contract. What's wrong with contracting the way the private sector does it? How many contracts are you aware of that the private sector does that are tremendous -- that are -- 70 percent are cost-plus?

Paul, would you want to answer that?

MR. BRINKLEY: I think the motive in that, and I'm not sure it's applicable anymore given all the consolidation that's taken place, but I think the desire for cost-plus and the motives that drove that and continue to drive that, in the private sector, you can always find another customer. In government, you win a big government contract you do cost-plus. In the event that you lose that contract, you have the ability to ramp down your cost structure as opposed to just instantly facing a bankruptcy situation.

So I think the structural definition of why we got into cost-plus was lended to that. Now, whether in a globalized defense environment that's still a motive or not I think may be worth looking at in terms of whether that structure and those motives that drove the creation of that still make sense.

MR. ZAKHEIM: There's something else, too. If you look at shipbuilding, in the 1970s, there were huge cost overruns on fixed- price contracts. So the decision was made we'll go to cost-plus because that way you've got a lot of front-end research. I mean, you don't have R&D accounts as much in the shipbuilding account, but it's basically front-end for the first ship. It's very, very difficult to predict the fixed price on research and development so they moved to cost-plus. Then there was a swing back to fixed-price because they weren't happy with cost-plus. Then they realized why they had gone away from fixed-price in the first place.

So you -- so to some extent because -- it's what Paul's talking about -- because of the peculiar nature of a lot of, you know, of a monopsony environment, there's only one buyer here, it's much more difficult to say there's a, you know, a cookie-cutter answer whether it's for, you know, cost-plus or fixed price. Or, for that matter, as Dave Patterson said, in some cases, time and material also is legitimate.

I think maybe having a better sense of what is the most appropriate, you know, we have some distance to go there, but I don't think you can just have a meat ax approach to a particular kind of contract.

MR. WALKER: Yeah --

SEN. COBURN: David, I'm going to go to you in just a second because I think a lot of our problems with these contracts is a lack of oversight in the contracts. In other words, the contract's out there and we don't have the oversight in it.

It brings me up to another problem, which I'd like both Mr. Brinkley and Mr. -- General Patterson to address.

It's my understanding that we have a real shortage of contract purchase managers, and what are we doing to address that? What are we doing to train for that? What are we doing to get those people in, get them the experience so that we have them on board?

MR. PATTERSON: Well, I think there's something that we can do in the near term, and we are, and that is to train people within the individual units on very rudimentary statement of work, purchase order. A lot of the problems that we have are at the very lowest level and they don't amount to a great deal of money, but there's -- they continue to be problems.

And we have a dearth of qualified contracting officers, that's true. And I would attribute that to the zeal at which we reduced the number of professional government employees in the '90s. We went from 550(,000) -- in acquisition, 550,000 in the acquisition world down to something less than 300,000 in a matter of seven years. We basically took the very guts out of the talented pool of professionals that did this kind of thing.

Now, I'm not saying that if we got them all back that everything would be wonderful again, but at least it is symptomatic, I think, of what you're getting at, and that is a lack of contracting officials to do the --

SEN. COBURN: Are there certain regulations that should be waived in terms of hiring to help solve this problem?

MR. PATTERSON: I think there just needs to be a very strong, enthusiastic management emphasis on bringing back qualified and skilled government employees.

SEN. COBURN: Where do you get those?

MR. PATTERSON: You get them from the private sector. I would start out -- we have -- the Congress gave us the authority to bring back IPAs and highly qualified experts. We need to use that authority more liberally.

SEN. COBURN: General Walker.

MR. WALKER: Well, first, I think training clearly is an issue, especially -- including for our deployed forces. They need to have more training with regard to some of the basic issues of contracting that they are responsible for executing and they don't necessarily have that type of training.

Secondly, you know, look, cost-plus contracts are a problem to the extent that they are used in circumstances where they shouldn't be, but they're only one of many challenges that we have. And I come back to Page 40 and 41 of my testimony where I lay out a number of them. I mean, you know, part of the problem is is that we know we have a want. The want may or may not be a need. We may or not have defined it clearly enough, and then we ask a contractor to go out and try to work on a want or even if it's a need that's not clearly defined, and we do it on a cost-plus basis with inadequate training, with inadequate risk sharing, you know, between the taxpayer and the contractor, with inadequate oversight; you get a combination and a compounding of problems of which cost-plus is only one element.

MR. PATTERSON: And to follow up on what Dr. Zakheim said, I think that what we're missing here is we're missing a set of clear standards that drive you to make decisions on whether or not you're going to use a cost-plus, incentive fee, fixed price. We just -- we don't have those kinds of standards whereby we would be driven one place or the other. We also live in a world of extraordinary vagaries in terms of what the next year will bring in terms of budgetary authority.

SEN. COBURN: I'm going to go back to the Lockheed.


SEN. COBURN: Let me spend a minute setting this up.


SEN. COBURN: We have a contract that is by the Air Force's assessment has a Nunn-McCurdy breach because it looks like the costs are going to be. Why accept that contract in the first place? Why not say Lockheed, if you want this business, you're going to have to share a good portion of the risk and here's what we'll commit to? And you take based on what an appropriations plan is and an authorization plan is and the only out for Lockheed would be is that we're not going to ever fund this again and ask Lockheed to quote on the basis of those parameters.

We don't do that. We say well, here's the way it works and so therefore that's the only way we're going to contract. Well, the fact is is we could change to a different paradigm in defense contracting if we said look, you get a bunch of gravy but you're going to take a bunch of risk. We have a defense contracting business, I believe, in this country that doesn't have much risk. We have conditioned them to low risk, and they make billions of dollars off the federal government every year. And it's time that their contracting reflected them taking some of the risk.

So I'm asking why can't you change the paradigm under which you buy? And maybe shipbuilding is an exception, but in Lockheed, we did all the steps. Now, the question is is -- the real question is is does the Air Force want the C-5 or not? That's the real question. It's not whether or not we're going to buy it or whether or not there's going to be a contract. It's whether or not the generals really want it.

MR. PATTERSON: Well, aside from that, your last question, the fact is is that you're exactly right. We can modify contracts. We can write contracts to get the very best advantage for the government, but we are also responsible for getting cost schedule and performance.

And what I believe and what I think we found when we did the Defense Acquisition Performance Assessment a couple, three years ago is that what we're missing here is stability in programs. The C-5 program, for example, starts in 2007 and doesn't finish until 2021 for 108 airplanes. In the '50s, we bought 535 Boeing 707s for air refueling. That price I guarantee you stayed fairly consistent over the five years in which those airplanes were purchased.

What we need to understand, and to your point, we need to revamp the way in which we consider contracts. They can't be what I refer to -- and it's unfair, I realize that -- but it appears as though what we say is we need it faster, better, cheaper. The contractors say, "Outstanding, we can make it faster, better, cheaper no matter how long it takes or how much it costs," and we say, "Where do we sign?"

We have to change that fundamental way of thinking in order to get a better deal for the American taxpayer. And I can guarantee you that we are committed to doing that.

SEN. COBURN: Well, I think General Walker's point is the reason we have trouble bidding contracts on research is because we oftentimes know what we want.

MR. PATTERSON: (No idea ?).

SEN. COBURN: And so why are we letting contracts when we don't know what we want? That's management. That's the thing that Paul Brinkley has brought to this is, you know, this has to be clarified. What is your intent, what is your need, and is it a real need? And that's where upper management has to make those decisions.

And we don't, you know, where are the standards for cost-plus versus fixed-price contracting in the Pentagon? Is there a set of standards that the people have to follow? In other words, here's what the secretary says. Here's when you'll make a decision fixed-price versus cost-plus. Are there standards within the Pentagon or is there just freedom to do whichever -- whatever you want?

MR. PATTERSON: Well, I think that the -- to your immediate question, and I'm somewhat embarrassed, I have not seen them. I have not seen those standards.

SEN. COBURN: So why not? Where are the standards that should drive the management of purchasing things that say here are the circumstances which it should be correct to use a cost-plus contract, here's the circumstances when it's not? Where's the management tool?


MR. WALKER: Well, first, there is something in the Federal Acquisition Regulations, the FAR, that lays out guidance. The question is, to what extent has that been communicated and to what extent is that being followed --

SEN. COBURN: And where's the follow-up to see if it's correct?

MR. WALKER: Correct.

MR. PATTERSON: But I think to General Walker's point that it's guidance, and there's nothing that tells us if these conditions, A, B, C, exist, then you have the conditions necessary for a fixed-price contract. If other conditions exist, then you will choose some other way of contracting. I think that those can -- that very specificity needs to be part of the way we do our business in the Department of Defense.

There may have been in the past people, as I mentioned, who knew this stuff intuitively and it wasn't necessary to come to this, what I refer to as the rules of acquisition. But in the absence of that skilled labor, I'm coming to the point where I believe we need a strong set of rules.

SEN. COBURN: Is that in the planning? It is?

MR. PATTERSON: Planning. I provided what I considered to be a reasonable set of rules to the acquisition community. But it's a process, and we'll talk about it and we'll come to some accommodation because, quite frankly, I mean, as much as I'd like to think so, I don't have the inside track on everything that takes place. But I do know from my experience, both in government and in the corporate world, that you need discipline and structure if you're ever going to achieve cost, schedule and performance in -- as you expect to have it.

SEN. COBURN: It's called line management. Here's your area of accountability. You step up to it. You step over, you're in trouble, but if you don't come up to it, you're in trouble. And that's the kind of management techniques that we need.

Mr. Brinkley, do you have any comment on that?

MR. BRINKLEY: I just want to reinforce, I mean, Federal Acquisition Regulations and to be DAWIA-certified as an acquisition professional requires you to learn those guidelines and they are guidelines. I have witnessed myself courageous contracting and acquisition professionals put in place fix firm price agreements for large programs that almost immediately then went off the rails and the pressures then that they felt because now their whole program was at risk, given all the issues that General Walker pointed out in terms of the upfront requirements definition that was not well crafted. And so I know that the pressure on a contracting professional or an acquisition professional is to use the most flexible vehicle possible in the absence of that upfront requirements definition discipline that exists.

SEN. COBURN: That makes a lot of sense.

When was the last time the Pentagon sued a contractor for nonperformance based on a fixed-price contract? (No audible reply.)

There's the problem. There's the problem. The fact is is if we haven't, that means we've been contracting poorly. And there should have been people taking enough risk that some didn't perform and we aren't holding them accountable. These are very -- most of these are very wealthy companies that do the big contractors -- big contracts for the Pentagon. And so, you know, with risk comes reward, and no problem with them making a lot of money off our purchasing, but they also ought to have to carry a lot of risk. And I don't see that risk in our contracting, and that's a big problem and one of the reasons the costs are so great. And if it's off -- if it goes off the rails, why isn't the contractor on the hook? And that's my point. You know, we're on the hook, you and I as taxpayers, not the contractor.

Mr. Chairman.


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