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Hearing of the House Armed Services Committee - Managing Service Contracts: What Works and What Doesn't?


Location: Washington, DC

Hearing of the House Armed Services Committee - Managing Service Contracts: What Works and What Doesn't?

Defense Acquisition Reform Panel Chairman Rob Andrews
Opening Statement
Hearing on Managing Service Contracts:
What Works and What Doesn't?

"Welcome everyone to today's hearing on Managing Service Contracts: What Works and What Doesn't? Our witnesses today are: Brigadier General Wendy Masiello, Air Force Program Executive Officer for Combat and Mission Support, United States Air Force; Mr. Jeffrey P. Parsons, Executive Director, Army Contracting Command, US Army Materiel Command United States Army; and Mr. Jerome F. Punderson, Naval Sea Systems Command, United States Navy.

"In April, the panel held its first hearing focused on service contracting. That hearing addressed the issue of measuring value in service contracting. That is an important consideration since the Department of Defense spends approximately $200 billion for contractor supported services, more than double the amount spent on such services a decade ago. The Department now devotes more of its acquisition budget to buying services - approximately 52 percent -- than to buying products.

"At that hearing, the Panel heard from our witnesses that in service contracting, knowledge of the marketplace and robust performance assessment were critical to success. Notably, that means that one of the essential keys to success in contracting for services is in the government being equipped to do its job properly in selecting the right contractor, assigning the right work, and then overseeing how the work is done. So for today's hearing, we start with the simple hypothesis that the government's success in contracting for services will be largely determined by whether it properly staffs, manages, and administers the contract. We'll test this hypothesis by hearing from today's capable witnesses about specific service contracts of their service and what has and hasn't worked.

"Congress has attempted to provide some guidance over service contracts in recent defense authorization acts. In FY2002, we required a management structure for the procurement of services that is comparable to that established for the procurement of products. , the Air Force has established a Program Executive Officer for Combat and Mission Support who is responsible for management and oversight of high dollar value service contracts for the Air Force. And our Air Force witness this morning, General Masiello, now heads that office and will discuss several Air Force service contracts.

"The Navy's SeaPort is a multiple award contract, which initially encountered criticism because of concern over its potential negative impact on the ability of small businesses to compete for future Navy contracts. An enhanced SeaPort contract appears to have addressed many of the concerns. But it would be helpful to understand why the Navy decided this contract type was in the best interests of the taxpayer, and what safeguards have been put in place to measure outcomes and achievement of performance objectives, along with any contracting challenges the Navy may continue to face.

"Both the Air Force and Army have opted for logistics augmentation contracts that provide contractor support as a force multiplier for operations anywhere in the world. According to the General Accountability Office, results of the Air Force Contract Augmentation Program, or AFCAP, have been mixed. AFCAP was the first of these contracts to move to a multiple vendor structure, and GAO found that guidance requiring well-defined statements of work was generally followed. Yet, oversight of AFCAP suffers from the lack of trained personnel.

"The more widely known, highly scrutinized and more troubling program has been the Army's Logistics Civil Augmentation Program, or LOGCAP. The original LOGCAP contract was awarded to a single vendor in 1992 for work in Bosnia and the surrounding region. Use of LOGCAP in Iraq is the largest effort under this contract, both in number of troops supported and in land mass covered. Unfortunately, from the outset, neither the contractor nor the Department was prepared for the size of the effort, which was made more difficult by the hostile environment. In fact, LOGCAP is as large as many major procurement programs, yet it was never viewed as a "program" but simply as a "run of the mill" service contract. However, in a 2005 report, GAO noted that high level DOD coordination was needed to improve the management of LOGCAP.

"This leads to me to repeat the question in our hearing title - what works and what doesn't work in managing service contracts? For service contracts of the size and effort of a LOGCAP, should a formal "program office" be established along similar lines as those established for major procurement programs, with well-defined performance metrics? What makes a SeaPort multiple award contract a seeming success and a LOGCAP such a dismal failure? And, are we learning from our mistakes to make mid-course corrections as well as be better prepared for the future?

"With service contracts accounting for more than 50 percent of DOD's acquisition budget, these questions, and a host of others, must be answered.

"I thank our witnesses in advance for their excellent testimony and their willingness to join us at this early hour. I now turn to Mr. Conaway for any remarks he may wish to make."

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