Who's Minding the Subcontractors?

On July 26 the Commission on Wartime Contracting held a hearing on an important but long unexplored and underappreciated topic; the role of subcontractors. Kudos to the CWC for focusing on this.

One can find links to witness statements and the hearing transcript here.

What follows are some excerpts from both the statements and the Q&A of the hearing that strike me as particularly telling.

Joint Statement of Christopher Shays and Michael Thibault, Co-Chairs, The Commission on Wartime Contracting in Iraq and Afghanistan

This hearing concerns subcontracting in war zones. For most people, that topic conjures up about as much excitement as a talk on oral hygiene. True, it involves obscure points of contract law, arcane passages in the Federal Acquisition Regulation, and often baffling layers of business agreements. But as we have delved into the byways and back alleys of contracting, it has become clear that subcontracting also involves --for good or ill--big money, vital tasks, the safety of Americans in war zones, and U.S. policy objectives.
Let me make it clear at the outset that we are not here to condemn subcontracting. It is a common and necessary business practice, and there are good reasons for using subcontractors.
Business economists tell us that subcontracting can help businesses tap into specialized skills, configure their organization to meet changing needs, and adjust to shifts in demand. If your renovation project includes a mural in the dining room or custom windows for an office, you may find that your contractor has subcontracted the job rather than keep an artist or window maker on payroll full-time. It makes sense.
But what makes sense for a renovation project in Connecticut or Maryland can create some unique risks when the contractor is hiring subcontractors in a combat zone half a world away.
My co-workers on the Commission's legal staff have trained us to understand that the federal government lacks "privity of contract" with subcontractors. In other words, the government's contractual relationship is with the prime contractor, not with the subcontractors.
So the government has limited visibility into subcontractor affairs, and limited ability to influence their actions. This fact can present a challenge to transparency and accountability for the use of taxpayers' dollars.
From an abstract point of view, the lack of privity of contract is not a big issue. After all, federal law makes prime contractors responsible for their subcontractors. The law also gives government officials authority to make primes accountable for managing their subcontractors so that the primes' contractual requirements are met in a timely and cost-effective manner. Depending on circumstances, federal officials may have power of consent on subcontracting, approval authority over the prime's subcontracting plan, the right to require certain clauses in subcontracts, and the ability to look into contracts for unreasonable, unsupported, or fraudulent costs that could be passed through the prime to the government.
From a practical point of view, however, this neat description often leads to disappointment. Contractors with inadequate business systems, for example, may not be purchasing goods or services from their subcontractors at fair and reasonable prices. In fact, two of the three prime contractors for the Army's multi-billion-dollar LOGCAP IV
logistics contract are operating with purchasing systems not approved by the Defense Contract Management Agency (DCMA).
Contractors' ability to manage subcontracting can also be complicated by mandates such as small-business preferences and hearts-and-wallets initiatives like the Afghan First program for hiring host-country labor. Excessive tiering or layering of subcontractors can
result in costs being passed upward to the prime with a mark-up at each hand-off, leading to excessive charges to the government. And some subcontractors have been involved in schemes that involved inflated charges and faked invoices.
Weakness, mistakes, or misconduct in subcontracting relationships can be aggravated by weakness in the federal machinery for contract management and oversight. This Commission has documented and repeatedly warned, as have others, about inadequate numbers and training of civilian and military contracting officers, contracting officer's representatives, subject-matter experts, and auditors. We have learned that poor requirements definition and loose statements of work by the government have weakened accountability and led to waste and abuse.
We have noted that Department of Defense contract management has been on the Government Accountability Office's high-risk program list since 1992. And we demonstrated at a previous hearing that DCMA contract managers and Defense Contract Audit Agency (DCAA) overseers often disagreed on assessments of contractor business systems, but had no systematic procedure for resolving the disagreements. All of these problems within government flow into problems of subcontracting.
These problems, on both the government and the prime-contractor sides of the relationship, are even more troubling when contracting must provide vital support for contingency operations such as those in Iraq and Afghanistan. Besides the risks of a changing, wartime environment, there can be issues with the use of low-skilled and often illiterate workers, human-rights abuses and human trafficking, a culture where bribes and kick-backs are commonplace, and where subcontractors may be improperly hiring private security companies whose armed employees may get involved in violent incidents that reflect upon the United States. These are serious concerns, and they are not hypothetical. For example:
...
§ In July 2009, the owner of a Houston food export company pled guilty to conspiring to defraud the government by making and concealing overcharges to a prime contractor supplying billions of dollars' worth of food to U.S. personnel in Iraq.
...
Concerns about the subcontracting process, however, are not simply about money. Poorly conceived, poorly structured, poorly conducted, and poorly monitored subcontracting can lead to poor choices in security measures and damage to U.S. foreign-policy
objectives, among other problems.

Testimony of Patrick J. Fitzgerald, Director, Defense Contract Audit Agency:

DCAA is responsible for providing Iraq/Kuwait/Afghanistan-related contract audit services to both DoD and other Government organizations for about 120 contractors. These contractors hold more than 300 prime contracts with contract ceiling amounts of $93.2 billion and funding to date of about $77.2 billion. Under LOGCAP III and IV alone, approximately $44 billion has been awarded through July 2010.

...
To date (June 30) for FY 2010, DCAA has performed 349 audits covering $19.5 billion
in proposed or claimed contractor costs relating to Overseas Contingency Operations Contracts (OCO) contracts. These audits recommended reductions in proposed or billed costs of $1.1 billion or roughly 5.6 percent (referred to as questioned costs), and $3.6 billion or roughly 18 percent in estimated costs where the contractor did not provide sufficient information to explain the basis of the estimated amounts (referred to as unsupported costs). Since inception, DCAA has reported total exceptions of $21 billion (questioned costs of $10 billion plus unsupported costs of $11 billion) related to our oversight efforts of in-theater contracts.
...
As we have previously shared with the Commission, we continue to assess and increase
our presence in the theater of operations as needed. Since opening the Iraq Branch Office (IBO) in May of 2003 we have covered the work in Iraq, Afghanistan and Kuwait with roughly 17 to 23 auditors all reporting through the IBO. As noted in the Commission's June 2009 interim report, DCAA had 4 auditors supporting our work in Afghanistan in the spring of 2009. We realized that the 4 auditors were insufficient to meet the increasing demands associated with the Afghanistan buildup and began to gradually increase our staffing levels to where they are today at 17 auditors.
...
As I previously mentioned, DCAA has reported total exceptions of $21 billion related to our oversight efforts of in-theater contracts. Although an exact number is not known, a significant portion of the total audit exceptions relate to proposed and incurred subcontract costs.
Under the LOGCAP contract we estimate that subcontract costs represent anywhere from 30 to 50 percent of the total costs incurred by the three LOGCAP IV performance contractors. Under the LOGCAP contract, subcontractors provide a wide range of products and services from Dining facilities (DFAC) operations and waste management to construction and repair work.
...
Based on audit risk, DCAA conducts audits of contractor estimating systems at all major contractors on a periodic basis. As part of that audit, we review the prime contractor's policies and procedures for ensuring the proposed subcontract costs are fair and reasonable. With respect to the three LOGCAP IV performance contractors, DCAA has reported all the estimating systems as inadequate and cited their estimating practices as being deficient for ensuring fair and reasonable subcontract prices.

STATEMENT BY Cathy Read, Department of State, Office of Acquisition Management:

I've seen our contracting activity grow from $1.8 billion in 2001 to over $6 billion in 2009. Most of these additional dollars are for programs in Iraq and Afghanistan. The Department of State has stepped up to meet this workload under difficult circumstances. At this time, the Department has 12 significant service or construction contracts in Iraq or Afghanistan, with approximately 102 subcontracts. Our subcontracted services include food, maintenance and repair, janitorial services, construction, medical support, and logistics.

Statement Of Cheryl K. Ritondale, Global Director. Procurement And Supply Management, KBR:

Under the LOGCAP III contract alone; KBR has managed roughly 1,700 subcontractors and in excess of 11,000 subcontract awards.

TESTIMONY-BY: NORM POWELL, ACQUISITION EXECUTIVE, FLUOR:

Fluor was awarded one of three LOGCAP IV contracts in July 2007. Fluor's 1st award was Task Order 2 in September 2008 for the expansion of the Afghanistan Regional Command (RC) East which consisted of the establishment and continuing life support for four Forward Operating Bases (FOBs). This was followed by Task Order 3 in October 2008 for calibration and repair services for military equipment in Iraq and Afghanistan. Task Order 4 awarded in December 2008 is for construction, expansion, and continuing life support of 8 FOB's in Afghanistan RC South. Task Order 4 is being transitioned to DynCorp and is scheduled to be complete this month. Fluor was awarded Task Order 5 in July 2009 for base life support and theater transportation functions for United States and coalition forces for the Afghanistan North Area of Responsibility (AOR). The total value of this task order is over $ 7 billion dollars over five years including one base year with four one year option extensions. Last month we completed the transition from KBR and are performing full services at Bagram and 57 FOB's.

STATEMENT BY JOHN SUPINA, SENIOR VICE PRESIDENT, BUSINESS SYSTEMS DYNCORP INTERNATIONAL LLC

DynCorp International supports U.S. government agencies on a number of contracts in Afghanistan and Iraq. Our largest five contracts in each country are:

In Iraq:
1. Department of State Civilian Police (INL CIVPOL Iraq Civilian Advisor Support
Task Order);
2. Department of State Worldwide Protective Services (WPPS);
3. Department of State INL Air Wing;
4. U.S Army CENTCOM MNSTC-I Advisors;
5. U.S. Army Life Cycle Contractor Logistics Support (LCCS)

In Afghanistan:
1. U.S. Army LOGCAP IV (AOR South Task Order);
2. Department of State Civilian Police (INL CIVPOL Afghanistan Civilian Advisor
Support task order);
3. Department of State INL Air Wing;
4. U.S. Army Corps of Engineers Construction;
5. Department of State Weapons Removal and Abatement (WRA)
...
As the Commission looks to improve subcontracting in Iraq, Afghanistan and other
conflict zones, we have several thoughts for consideration:

The key distinguishing factor in contingency warzone contracting is the government's requirement for rapid response. When changes to existing Federal Acquisition Regulation (FAR) guidelines are considered, the immediacy of on-the-ground needs must be of paramount concern. In addition, many contract and subcontract performance problems stem from procurement systems that treat war-zone contracting with a peacetime mentality. As oversight agencies audit warzone contracting, they must recognize that they are evaluating a "cold file," distant from the heat or urgency operative during the time of the placement.

Contingency contracting authorities should take into consideration the following:

• There is very limited time to develop acquisition documentation.
• Subcontractors that are able to respond to requests for proposals in time and are willing to work in combat zones are limited and difficult to vet.

• Expedited subcontract consent processes are needed to avoid delays in obtaining the services and supplies needed by commanders on the ground.
• Indigenous subcontractors typically do not have approved or even recognized business systems that are auditable for cost accounting, estimating and pricing, billing or invoicing.

STATEMENT OF CHRIS TAYLOR, CHIEF EXECUTIVE OFFICER, MISSION ESSENTIAL PERSONNEL, LLC

Because of the nature of their work, most of our linguists serve side-by-side with Marines and Soldiers patrolling villages, exposed to the same risks and, tragically, in too many cases making the ultimate sacrifice in the service of that mission. To date, 200 MEP professionals have been injured, and 50 have been killed. Just last week, five members of the MEP family were lost in a violent mortar attack in Kandahar, Afghanistan where a number of U.S. solders were also killed.
Our linguists have been repeatedly commended for their work and their heroism. This includes commendations for linguists who have provided instrumental translation services in the tracking and locating of top al Qaida operatives, and linguists who have literally sacrificed themselves, stepping in front of bullets to protect the servicemen and women with whom they serve. And, it isn't just Afghanistan where our brave professionals are adding tremendous value and performing above and beyond the call of duty. For example, when Somali pirates hijacked the Maersk vessel, Alabama last April and took the ship's Captain and crew hostage, it was an MEP interpreter, Mohamed Mohamoud Abdi, who was serving alongside the U.S. Navy SEAL team and he was absolutely integral to the process that led to that successful rescue mission.

...
As mentioned many times before this Commission, expanding the government's acquisition workforce is a necessary reform to ensure better service and prevent fraud, waste, and abuse.

Statement Perry Dalby (U.S. Army, Retired) General Manager Tamimi Global Company, Ltd.:

...

As this Commission is well aware, the wartime environment presents unique challenges. Tamimi Global is almost always called upon to provide support 24 hours a day, 7 days a week, including holidays, with minimal advance notice as to changes in the U.S. Government's requirements.

Subcontractors sometimes receive conflicting or no guidance from prime contractors and U.S. Government representatives. Additionally, the ability of local military commanders to utilize their chain of command is sometimes complicated by communication problems between Government representatives and prime contractors, and between prime contractors and their subcontractors.

C. Recommendations

Some of the problems referred to above are inevitable consequences of the contingency environment. Others are problems that we believe can be remedied if the U.S. Government, prime contractors and subcontractors cooperate to resolve them. We make the following recommendations.

First, there must be frequent and open communication between the U.S. Government and prime contractors, and between prime contractors and their subcontractors. Government employees responsible for interfacing in the field with prime and subcontractors should be available to promptly resolve the inevitable questions about detailed contract requirements and contract administration issues. Similarly, representatives of prime contractors and subcontractors should be available to one another and to the U.S. Government. Communication is key. In a high-risk environment, circumstances often make it impossible to schedule meetings in advance. Circumstances may change repeatedly, even hourly. The availability of individual employees to answer quick questions and provide constructive guidance is central to success.

Second, the transportation of equipment, supplies and personnel is complicated when we are not provided with appropriate security. If provided with better security along transportation routes, both the risk to subcontractors and the cost of their subcontracts would be reduced.

Third, funding for the prime contract often is delayed while the Government and the prime contractors are definitizing task orders. Meanwhile the subcontractor has to continue to perform. In many cases this lag in funding requires Tamimi Global to finance the Government procurement and perform for 3 - 6 months without being paid. We face enormous financial risk with fixed price subcontracts in a contingency environment. This reality often is not fully appreciated from the perspective of a cost- reimbursable prime contractor or the U.S. Government.

Fourth, there should be standardized pre-qualifications for subcontractors. The Government's goal of promoting competition for contracts in order to obtain the best prices is understandable. However, the Government and prime contracts have sometimes awarded work to companies that have little or no past experience in the food service industry. At a minimum, pre- qualification should be required to ensure that standard of quality and performance will be met.

CWC Commissioner Thibault:

But the point I really wanted to make throughout this process Mr. Fitzgerald, and I tip my hat to you, is in your statement you outline--and for me that's the centerpiece of this entire hearing--you outline that there are $93.2 billion of costs, contract costs, that have been awarded in theater, Iraq and Afghanistan, and that DCAA, your auditors, you know, understaffed and in a really challenged environment, have taken exceptions to $21 billion: 93 billion in contracts, 21 billion in exceptions.
If you think about that, that's quite a bit of money. If you think about the relationship between 93 billion and 21 billion, what's going on here? We're not talking about a few million here and a few million there that someone could say, that's the price of doing that much work.
(p. 17)

CWC Commissioner SCHINASI:

And I find it very disturbing that all three LOGCAP IV contractors have been found--you've determined that their estimating systems are not adequate and also that it's been determined that their purchasing systems are not adequate.
These are three pretty large, apparently sophisticated companies, and I just don't understand how companies can run their businesses without understanding, you know, what their cost structure is and how they purchase goods and services, and let alone how they pick their subcontractors, and can assure the government that those subcontractors are performing the functions that we're paying them to do.

(p. 18)

CWC Commissioner ZAKHEIM:

Are you aware of the fraudulent actions of the USPI [US Protection and Investigations] subcontractor to Louis Berger under the Rehabilitation of Economic Facilities Program?


LUTEN: [Drew Luten, acting assistant administrator for management, United States Agency for International Development.]

This is the firm where the principals were suspended?

ZAKHEIM:
Yes.

LUTEN:
Yes.

ZAKHEIM:
OK.

LUTEN:
I mean, generally aware of it. I don' t . . .

ZAKHEIM:
Did you review Louis Berger's purchasing systems? And Berger's been doing this business, I know, in Afghanistan since late 2001. Did you review their business systems?

LUTEN:
I don't know if there was a review of the purchasing system. There should have been a specific request to approve the subcontract and approval of the subcontract by the contracting officer.

ZAKHEIM:
What's your assessment of their business systems right now?

LUTEN:
I don't have that system assessment.

ZAKHEIM:
You don't have an assessment of a prime contractor that's been working for you for nine years?

LUTEN:
I would have to check with my staff and . . .

ZAKHEIM:
That's an awful long time. I mean, if somebody was working on my house for nine years and I didn't have any assessment of them, somebody would confine me somewhere.

(pp. 29-30)

CWC Commissioner Green:

In your testimony you talked about subcontractors, but I heard very little about your concerns and the difficulties that you face. That being said, I'd like you to focus on an issue that I think is terribly important, a subject of a recent special report that was put out by this commission. And that is the transition in Iraq.
As you know as well as anybody in that building, this is a huge undertaking for the State Department. And with the increase in contractors and subcontractors that you will no doubt have to engage, I think there are opportunities for many difficulties, and I use that word kindly. I would like you to talk about what the department's plans are to support this huge increase, which will occur in a very, very short time.
Even if the requests to the Department of Defense are partially approved, how will you
provide that kind of oversight to contractors and subcontractors, plans for how you would deploy this people. Are they going to continue to work out of Washington and Frankfurt? What are you going to do to provide. How will you recruit them? How will you train them? And will you use contractors to oversee contractors?

...
READ: [director, Acquisition Management, Department of State]

From the contracting side, we are all involved at various levels with our program offices--diplomatic security, INL, OBO, and the massive LOGCAP contract. What happens to all the property? How is that accounted for? How would that move from DoD books back to the Department of State? What's valued as appropriate to move? What is still in workforce? And then the millions of contractors that reside with DoD on their roles and what work is needed to continue.
That being said, each program office we're relying on, just like we stood up the mission in Iraq many years ago--let's take a look at what DoD has. Let's take a look at what is needed, figure out how we're going to do oversight, and then let's put it in play. The NEA [Near Eastern Affairs] bureau has dedicated resources on transition. Under Secretary Kennedy it's also actively involved in discussions with DoD.
That being said, Mr. Green, it is a huge undertaking. I do not have adequate personnel to take it on right now.

(pp. 31-32]

CWC Commissioner Tiefer:

Your statement cites $21 billion, and Mr. Thibault noted that as well, in DCAA exceptions for in-theater contracts. You have a technical term for it. I would call it contractor waste or potential waste. I know you have more technical words. And you also point out that LOGCAP has 30 to 50 percent in subcontractors.
Now, if I were permitted--and I am permitted to do the math this way, because I'm not under the auditing standards you are--but even the lower end of that range would be that today we are talking about $6 billion in what DCAA has found in subcontractor-related waste. Can you give us some sense of what the scale of subcontractor-related issues is in money terms?

FITZGERALD:
Well, Mr. Commissioner, on the one instance we talk about in my written testimony with respect to the DynCorp proposal, when you look at that, it was a proposal of about $800 million.
Our audit showed that about 500 of that, 500 million of that 800 million were costs associated with subcontractors.

TIEFER:
Only 500 million?

FITZGERALD:
Five hundred of the . . .

TIEFER:
Five-hundred million.

FITZGERALD:
Five-hundred of the 800 million, yes.

TIEFER:
OK. All right. Well that's half. You're halfway to real money at that point. Let's take that as the first instance. I was looking through your statement for when foreign subcontractors, which are a particular interest of mine, perhaps of ours, the one you just mentioned is the first one, the foreign subcontractors of DynCorp.
And I'm going to tick the rest of them off and then see whether we have a big enough problem to require new authority. You mentioned that KBR has, this is on page 7, that KBR has $48 million in unsupported costs for what I believe are many, if not most, foreign subcontractors.
That's two down.
Your testimony page 12 talks about $6 million suspended. You mentioned that earlier. I found in a Form 1, and check me if I'm wrong that in that instance/ the subcontractor, Al-Shora, was quoted as saying, "Al-Shora has denied the auditors access to its records. Al-Shora stated it previously never had to provide data for audit, nor is it required to, per Kuwaiti law." So that seems to be the background we're facing.
Let me finish off the last two and then ask you what we need here. One was Fluor for change orders. You mentioned that. Subcontractors didn't give the needed data. And the last was Supreme Foods. And the DCAA had suspended payments of Fluor's. I understand that to be Supreme Foods.
Do we have a big problem with getting access to the records of foreign subcontractors? And if we do, what do we need in order to tackle the problem?

FITZGERALD:
Mr. Commissioner, when the prime contractor doesn't do the cost and pricing analysis that's needed to be done, and that breaks down, it puts us in a very tough position to try to get access to determine what is the fair and reasonable price associated with those subcontract costs.
We use it at the back end when we're looking at the billings and the invoices. If we still don't have the documentation or support that those costs are reasonable, fair and reasonable then we use the suspended-cost tool to try to bring that information to the table.
So I guess what I would say is we'd like the system to work as designed and have the prime contractors do what they need to do to make sure the subcontractors' costs are fair and reasonable. But when that does break down, we could benefit by having some access to some contractors' cost data.

(pp. 34-35)

CWC Commissioner Green:

Prime contractors are paid to provide oversight over their subs. I think all of you agree with that.
Everybody nods. Let the record reflect that.
We heard earlier from Mr. Fitzgerald that--and these are my words--that he didn't think that primes in general were doing a very good job of overseeing their subs. In a line of questioning that continues on with what Commissioner Schinasi started earlier, a FAR clause related to trafficking in persons must be incorporated into all contracts at all tiers.

For Ms. Ritondale, how does your company, how does KBR monitor whether primes are
ensuring that their subs are complying with the trafficking clauses?

RITONDALE: [Global Director. Procurement And Supply Management, KBR]

Yes, sir. Thank you, Mr. Green. We do have a very robust program to monitor the trafficking-of-persons flowed-down requirement to our subcontractors. Again, we utilize a cross-functional team of safety professionals, quality professionals, subcontracting professionals, and environmental professionals to do the inspections of the man camps, to track performance at various levels, very detailed checklist.
All of that information is provided back to program management on site and in headquarters, so we can identify any problems, document them, work for mitigation plans with the subcontractors.

GREEN:
Well, I'm not talking about performance. I'm talking about trafficking. You say you have a robust plan. Let me read a couple of examples here to you, if I might.
There's a company called Moonlight Consulting, a Nepalese company. Moonlight took a large fee from a number of Nepalese men and transferred them to a company called Morningstar, a Jordanian job-brokerage company. Morningstar in turn transferred the men to a KBR subcontractor, Daoud & Partners, for a substantial profit.
The men relinquished their passports. While they waited for work, Daoud treated these men as inventory, not employees. They were held in a dark, windowless room. During the time the men were also informed that they would be getting about three-quarters of the pay that had been promised to them. When they finally were sent to Iraq, they traveled in an unprotected caravan on a highway from Amman to Baghdad.
From here the story of the Nepalese men departs from the norm. The caravan was hijacked, and 12 of the Nepalese man were kidnapped by a Sunni insurgent group and publicly executed. That's number one.
Let me give you another one. KBR subcontractor First Kuwaiti General Trading and
Contracting Company handed a group of Indian men plane tickets that said Dubai and promptly flew them to Iraq. Another group of Nepalese men brought to Jordan were transferred to a KBR subcontractor, the same one, and driven to Iraq. Their passports were taken, and the burden of a large recruiting fee hanging over their heads, they had little or no choice other than to go.
The last one, and I've got more if you want to hear them, a group of Sri Lankan men brought to Kuwait protested and refused to travel to Iraq. Their employer, First Kuwaiti, gave them an ultimatum: agree to travel to Iraq and get more food and water, refuse and get nothing, be put out on the street in Kuwait City and find your way home. Their response: we could not go back; we didn't have a ticket, a passport or money.
Would you comment on those?

RITONDALE:
Sir, I'm not familiar with the specifics on all of those cases, but I will tell you that as part of the trafficking-in-persons inspections today and even into the past, monitoring that the fact that those employees are each holding their passport and that those passports are not being withheld from those employees is an important element of the inspections that we do and as is tracked every single time we . . .

GREEN:
These must have been just exceptions, then, I gather.

RITONDALE:
I believe these may be older instances, but I can check and get that information back to the commission.

GREEN:
I wish you would.

RITONDALE:
I will do that.

ZAKHEIM:
Grant, could you yield for a sec, please?

GREEN:
Sure.

ZAKHEIM:
These companies that Commissioner Green just mentioned, are you still doing business with any of them?

RITONDALE:
I'm not sure about the First Kuwaiti. I do not believe so. And the other one that was
referenced, Daoud & Partners, I will have to check. I think we still have a few contracts with them.

ZAKHEIM:
And if you do, I'd like an explanation as to why they haven't been terminated in light of what Commissioner Green just highlighted for the record for both--for all of us. Thank you.

GREEN:
To me, I don't think you have a robust plan. But we can talk about that later. Obviously, if you did, things like this wouldn't be happening. I think this whole area is one where oversight is extremely weak. You know, DCAA and DCMA, they get into business systems and so forth. But who's looking at this? Any of you know? Who looks at this?

(pp. 101-104)

CWC Commissioner SHAYS:

Thank you.
Mr. Taylor, you caught my attention when you said you are more comfortable with a cost-plus audit, I mean, excuse me, a cost-plus contract. And why shouldn't I be surprised with that? In other words you're cost-plus, correct? You're also not having to compete for the contract, correct?

TAYLOR:
I'm sorry. I don't understand the second part of the question.

SHAYS:
Well, you have been given contracts by INSCOM [Intelligence and Security Command] that are set-asides. You get the contract, correct?

TAYLOR:
In the course of our contract, INSCOM can issue a delivery order, an additional delivery order requirement within the confines of our large contract.

SHAYS:
So the answer is yes.

TAYLOR:
Yes.

SHAYS:
Yes. And then you've had really no audits, really, up to this point. So I'm just curious. How does the government know we're getting our money's worth? You don't have to compete for it, and you, whatever your costs are, you get something plus, and you haven't had any audits. I mean, that got my attention. Are you surprised that that would?

TAYLOR:
Absolutely not, Mr. Chairman.

(pp. 116-117)