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+ - [H.A.S.C. No. 114-121] EVALUATING DEPARTMENT OF DEFENSE INVESTMENTS: CASE STUDIES IN AFGHANISTAN INITIATIVES AND U.S. WEAPONS SUSTAINMENT
+
+[House Hearing, 114 Congress]
+[From the U.S. Government Publishing Office]
+
+
+
+
+
+
+ [H.A.S.C. No. 114-121]
+
+ EVALUATING DEPARTMENT OF DEFENSE
+
+ INVESTMENTS: CASE STUDIES IN
+
+ AFGHANISTAN INITIATIVES AND
+
+ U.S. WEAPONS SUSTAINMENT
+
+ __________
+
+ HEARING
+
+ BEFORE THE
+
+ SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
+
+ OF THE
+
+ COMMITTEE ON ARMED SERVICES
+
+ HOUSE OF REPRESENTATIVES
+
+ ONE HUNDRED FOURTEENTH CONGRESS
+
+ SECOND SESSION
+
+ __________
+
+ HEARING HELD
+
+ APRIL 15, 2016
+
+
+ [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+
+
+
+
+
+
+
+ ______
+
+ U.S. GOVERNMENT PUBLISHING OFFICE
+
+20-081 WASHINGTON : 2017
+-----------------------------------------------------------------------
+ For sale by the Superintendent of Documents, U.S. Government Publishing
+ Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
+ DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
+ Washington, DC 20402-0001
+
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+ SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
+
+ VICKY HARTZLER, Missouri, Chairwoman
+
+JEFF MILLER, Florida JACKIE SPEIER, California
+K. MICHAEL CONAWAY, Texas JIM COOPER, Tennessee
+JOSEPH J. HECK, Nevada HENRY C. ``HANK'' JOHNSON, Jr.,
+AUSTIN SCOTT, Georgia Georgia
+MARTHA McSALLY, Arizona GWEN GRAHAM, Florida
+ Heath Bope, Professional Staff Member
+ Katy Quinn, Professional Staff Member
+ Mike Gancio, Clerk
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+ C O N T E N T S
+
+ ----------
+ Page
+
+ STATEMENTS PRESENTED BY MEMBERS OF CONGRESS
+
+Hartzler, Hon. Vicky, a Representative from Missouri, Chairwoman,
+ Subcommittee on Oversight and Investigations................... 1
+Speier, Hon. Jackie, a Representative from California, Ranking
+ Member, Subcommittee on Oversight and Investigations........... 3
+
+ WITNESSES
+
+Lilli, Charlie, Deputy Commander, DLA Aviation, Department of
+ Defense........................................................ 8
+Sopko, Hon. John F., Special Inspector General for Afghanistan
+ Reconstruction................................................. 5
+Wicecarver, Jacqueline L., Acting Deputy Inspector General for
+ Auditing, Department of Defense................................ 6
+
+ APPENDIX
+
+Prepared Statements:
+
+ Lilli, Charlie............................................... 102
+ Hartzler, Hon. Vicky......................................... 35
+ Sopko, Hon. John F........................................... 39
+ Speier, Hon. Jackie.......................................... 37
+ Wicecarver, Jacqueline L..................................... 93
+
+Documents Submitted for the Record:
+
+ Letter from the Department of Defense Inspector General
+ office regarding sampling methodology...................... 126
+ Testimony of Brian P. McKeon, Principal Deputy Under
+ Secretary of Defense for Policy............................ 111
+
+Witness Responses to Questions Asked During the Hearing:
+
+ Mr. Conaway.................................................. 131
+ Ms. McSally.................................................. 131
+ Ms. Speier................................................... 131
+
+Questions Submitted by Members Post Hearing:
+
+ [There were no Questions submitted post hearing.]
+
+
+
+
+
+
+
+
+ EVALUATING DEPARTMENT OF DEFENSE INVESTMENTS: CASE STUDIES IN
+ AFGHANISTAN INITIATIVES AND U.S. WEAPONS SUSTAINMENT
+
+ ----------
+
+ House of Representatives,
+ Committee on Armed Services,
+ Subcommittee on Oversight and Investigations,
+ Washington, DC, Friday, April 15, 2016.
+ The subcommittee met, pursuant to call, at 9:02 a.m., in
+room 2212, Rayburn House Office Building, Hon. Vicky Hartzler
+(chairwoman of the subcommittee) presiding.
+
+OPENING STATEMENT OF HON. VICKY HARTZLER, A REPRESENTATIVE FROM
+ MISSOURI, CHAIRWOMAN, SUBCOMMITTEE ON OVERSIGHT AND
+ INVESTIGATIONS
+
+ Mrs. Hartzler. Welcome. I am delighted to convene this
+hearing. Overseeing the investment of taxpayer dollars is
+extremely important. It is one of the core responsibilities we
+assume as representatives of the people. I know Ranking Member
+Speier and others of this committee all find this obligation
+equally significant.
+ In the year since September 11, 2001, the Department of
+Defense has been in a fight against emboldened terrorists.
+Congress met the increased national security demands by
+significantly enhancing the Department's base budget and
+overseas contingency operations fund to address new threats and
+meet new requirements.
+ Since 2010, Congress has slashed defense spending by $1.3
+trillion, however. And today we are realizing significant
+negative impacts within the Department of Defense based on
+those decisions.
+ Readiness of all of our Armed Forces is at an all-time low.
+Our Air Force is smaller and older than when it was conceived
+in 1947. Our Navy has fewer ships to meet an ever-increasing
+operations tempo. Our ground and amphibious forces of the Army
+and Marine Corps still have yet to recapitalize and reset from
+past years of combat operations. And most unfortunate is that
+our standing among our partners and allies leaves many
+questioning U.S. commitment and resolve to navigate through the
+multitude of emerging security challenges we face as a nation
+and leader of the free world.
+ China is rising. Russia is resurging, emboldened by a lack
+of checking its power. Iran is beginning to flourish militarily
+from the good deal they got from our nuclear negotiations.
+North Korea consistently acts out from some form of provocation
+against its neighbors as it tries to achieve nuclear
+capability, and extremist ideologies are spreading through the
+Middle East and other parts of the world at alarming rates.
+ In addition to my service on this committee, I am also
+privileged to serve on the House Budget Committee and I am the
+only member of my party to sit on both. Many other members of
+the Budget Committee and I are concerned about the combination
+of these emerging threats and the desperately low levels of
+funding we are devoting to defense against these current and
+developing national security threats. The picture is clear.
+These threats cannot go unaddressed and our national defense is
+in need of more resources to ensure our national security and
+the common defense is secure.
+ At the same time, it would be very difficult for anyone in
+this room to dismiss our country's current $19 trillion in
+debt, and as representatives of those who are ultimately on the
+hook for that debt, the taxpayers, we would be neglectful not
+to investigate and scrutinize how their tax dollars are being
+spent. We need to be able to look our colleagues and our
+constituents in the eye to sincerely assure them we are doing
+everything we can to oversee wise investments.
+ That brings us to the heart of our hearing today. We are
+here to examine a number of cases coming from the later stages
+of operations in Iraq and Afghanistan to investigate how
+taxpayer dollars were spent and determine what if any changes
+need to be made going forward to assure the people their tax
+dollars are being spent responsibly. Nation building is not a
+core responsibility of the Department of Defense. Yet, as major
+combat operations of Iraq and Afghanistan began to subside in
+2010, the Department shouldered much of the post-hostility
+responsibility, primarily because it is large enough and has
+the ability to provide immediate resources and capabilities.
+ Consequently, the Department of Defense established the
+Task Force for Business Stability Operations, first in Iraq,
+and then again in Afghanistan in 2010, with similar and
+parallel goals to support the transition away from war, what is
+known as phase 4 and phase 5 efforts. The task force case
+studies we plan to discuss today include the Afghan compressed
+natural gas infrastructure project, the Italian cashmere goat
+import project, and the housing and security accommodations
+that task force personnel utilize while deployed in
+Afghanistan.
+ But not all imprudent spending decisions occur during
+contingency operations. For example, as the Department of
+Defense Inspector General previously reported, there have been
+some problems with the aviation spare parts supply chain of the
+Defense Logistics Agency. While it is extremely important that
+we scrutinize the Department's purchases to ensure they are
+smart and reasonable, it is just as important that we use all
+means necessary to get our taxpayers' money back or exchange
+parts from vendors that may have supplied parts that did not
+meet contractual requirements or technical specifications. In
+other words, if our airmen receive the wrong or defective
+parts, we must make it right by the taxpayer.
+ Again, I reiterate the importance of hearings such as this
+one. We live in a world of vast and expanding threats that
+require a robust and full response. If we are going to use
+hard-earned tax dollars to fulfill our obligation to provide
+for the common defense, we owe it to those taxpayers to
+rigorously scrutinize how those dollars are spent and the
+qualifications of those making spending decisions.
+ I look forward to exploring and learning more about these
+certain high-profile case studies which, as Department of
+Defense investigators have recently reported, may have
+benefitted from more exacting standards of how those
+investments were made.
+ And so before I introduce the witnesses, I turn to the
+Oversight and Investigation Subcommittee ranking member for any
+opening remarks she wishes to make.
+ [The prepared statement of Mrs. Hartzler can be found in
+the Appendix on page 35.]
+
+ STATEMENT OF HON. JACKIE SPEIER, A REPRESENTATIVE FROM
+ CALIFORNIA, RANKING MEMBER, SUBCOMMITTEE ON OVERSIGHT AND
+ INVESTIGATIONS
+
+ Ms. Speier. Thank you, Madam Chair, and I thank our
+witnesses for being here today. I want to especially thank Mr.
+Sopko and Ms. Wicecarver for the service that you provide to
+our country and to the taxpayers of this country.
+ Today's hearing includes discussing a herd of cashmere
+goats; yes, goats. DOD [Department of Defense] spent millions
+of dollars on a project involving shipping male Italian goats
+to Afghanistan to be mated with female Afghan goats in order to
+make cashmere. Too bad many of the female goats were already
+infected with a disease that could have wiped out the entire
+herd. Too bad that only two of those fancy Italian goats are
+still usable in the project.
+ I think we can safely say that manufacturing warm, fluffy
+sweaters are not the key to economic recovery in Afghanistan;
+nor, is it in DOD's expertise. But that is not all. DOD also
+wasted money on an unused coal storage facility, an
+unsustainable business incubator, and one of the most expensive
+gas stations in the world.
+ The Special Inspector General for Afghan[istan]
+Reconstruction [SIGAR] estimates the gas station alone cost $43
+million. Now, we can quibble about how much it really cost, but
+in the end, it costs over $43 million. And a gas station in
+Pakistan, similar to the gas station in Afghanistan, cost only
+$200,000.
+ Today we are going to discuss two dysfunctional DOD
+programs that are desperately in need of oversight and
+budgetary common sense. The first is DOD's ill-conceived and
+badly executed USAID [U.S. Agency for International
+Development] knockoff, the Task Force for Business and
+Stability Operations, TFBSO for short. Starting in Afghanistan
+in 2010, TFBSO was supposed to catalyze economic development in
+support of the military. But according to SIGAR, they have
+received more complaints, more complaints about fraud, waste,
+and abuse over the last 2 years than any other organization
+operating in Afghanistan. Even compared with the old
+boondoggles in Afghanistan, the shortsightedness and sheer
+absurdity of these projects is mind-boggling.
+ These projects are tailor-made ammunition for critics of
+our nation-building misadventure here. We will also discuss
+poor practices at the Defense Logistics Agency [DLA] which put
+our service men and women at risk. At the core of this hearing
+is, what do we have to show for our money? For TFBSO, I can say
+that the answer to this question is not much.
+ Here is what we got for the nearly $1 billion, nearly $1
+billion spent at TFBSO activities: a defunct cashmere goat
+farm; private villas for TFBSO staff; and an outrageously
+expensive gas station. Is that it? We don't know, since the
+Pentagon apparently no longer possesses the expertise to
+address the question. Were there any successes or sustainable
+accomplishments from TFBSO, or should we have just left
+economic development to USAID and the State Department, instead
+of using the military as untrained aid workers? As IG
+[Inspector General] Sopko recently said, tasking DOD to do
+development is, quote, ``like giving the Postal Service the
+mission to run our drones in Afghanistan.'' Unquote.
+ The DODIG's [Department of Defense Inspector General]
+report is equally damning on DLA Aviation and the problems
+associated with defective parts. For example, the DODIG found
+that defective tie-down straps used to attach oxygen hoses to
+pilots' helmets remained in the inventory even after the Air
+Force reported that they should be recalled. The flaw was
+severe. The ties did not hold the oxygen hose to the mask which
+could have caused the loss of oxygen to aircrew members during
+flight. The frightening part is, these defective ties may still
+be in DLA inventory.
+ This and other poor oversight and procedures are projected
+to have cost taxpayers $12.3 million in unrecovered funds over
+just 6 months. Unfortunately, this is old news. Past DODIG and
+GAO [Government Accountability Office] reports have found that
+the DLA has regularly overpaid for spare parts and badly
+manages their bloated inventory.
+ Today I would like to know what the DOD has learned from
+the SIGAR and DODIG reports. Has oversight coordination and
+accountability been improved or will it be improved as a
+result? Or does the DOD intend to go on wasting taxpayer moneys
+on Italian goats and defective spare parts?
+ We have to remember that we have many competing uses for
+funding, and wasted funds hurt our troops and their readiness.
+This is the kind of stuff that belongs on Last Week Tonight
+with John Oliver, not as a subject of a congressional hearing.
+On behalf of the Department of Defense, I apologize to the
+American taxpayers for the wasteful spending that has gone on,
+and with that, I yield back.
+ [The prepared statement of Ms. Speier can be found in the
+Appendix on page 37.]
+ Mrs. Hartzler. Thank you, Ms. Speier. I am pleased to
+recognize our witnesses. I want to thank them for making the
+time to be with us. Today we have Mr. John Sopko, the Special
+Inspector General for Afghanistan Reconstruction; Ms.
+Jacqueline Wicecarver, the Acting Deputy Inspector General for
+Auditing from the Department of Defense; and Mr. Charlie Lilli,
+the Deputy Director of Aviation and Head of Aviation
+Contracting Activity from the Defense Logistics Agency. So
+thank you all for being with us here today.
+ So we will begin now with your opening statements. Mr.
+Sopko.
+
+STATEMENT OF HON. JOHN F. SOPKO, SPECIAL INSPECTOR GENERAL FOR
+ AFGHANISTAN RECONSTRUCTION
+
+ Mr. Sopko. Thank you very much. Chairwoman Hartzler,
+Ranking Member Speier, and members of the subcommittee, I am
+very pleased to be here again to discuss SIGAR's activities in
+Afghanistan, and particularly, our review of DOD's Task Force
+for Business Stability Operations, commonly known as TFBSO, and
+three specific aspects of that operation that the chairwoman
+asked me to look at or to comment on.
+ The first one dealt with the construction of a compressed
+natural gas program in Afghanistan. TFBSO spent approximately
+$43 million to construct such a gas filling station in
+Sheberghan, Afghanistan. The project was intended to take
+advantage of Afghanistan's natural gas reserves and reduce the
+country's reliance on expensive imported gas. However, SIGAR
+has been unable to find any evidence that TFBSO considered the
+myriad of potential obstacles to the success of the project,
+including the lack of a natural gas transmission and
+distribution infrastructure, the cost of converting gas-powered
+cars to run on compressed natural gas, as well as the lack of a
+market. As a result, the project failed.
+ The second project you wished us to discuss has to do with
+TFBSO's spending of $150 million or approximately 20 percent of
+their overall budget on providing private villas and security
+for their staff while in Afghanistan. To date, again, SIGAR, as
+well as the Office of the Secretary of Defense Policy shop,
+have been unable to find any evidence that TFBSO conducted a
+cost-benefit analysis of quote-unquote ``living on the
+economy'' rather than in U.S. Government facilities in
+Afghanistan. In fact, in a memo from June 2011, then TFBSO
+Director Paul Brinkley directed all TFBSO personnel in
+Afghanistan to move back to U.S. military bases by August of
+that year. It remains unclear to this day as to why Mr.
+Brinkley's directive went unimplemented for another 2 years.
+ The third issue you wished us to address has to deal with
+goats. And as I think Ranking Member Speier and the
+Congresswoman has mentioned, you may wonder why I am talking
+about goats in the Armed Services Committee and not the
+Agriculture Committee. But TFBSO spent millions of dollars to
+bolster Afghanistan's cashmere industry. The purpose of the
+program was to breed lighter-haired Afghan goats which would
+yield a higher price on the international market. To do so,
+TFBSO paid to have 9 Italian goats and 10 Tajik goats imported
+to Afghanistan. Ultimately, this program also failed because it
+was overly ambitious, poorly staffed, poorly managed by TFBSO,
+and in essence, what they tried to do in a couple of years
+would normally have taken decades. It also, as I said, was a
+failure.
+ TFBSO in these three instances apparently lacked effective
+oversight, project development, and execution. In addition, our
+comprehensive review of TFBSO's operations in Afghanistan have
+identified three broader challenges. TFBSO did not have a clear
+strategy. Secondly, it lacked a focused and consistent
+management and leadership team. And lastly, it did not
+coordinate its efforts with the other U.S. agencies.
+ Now, one may ask, why does any of this matter now? TFBSO
+has closed its doors. The money has been spent. And to be quite
+honest with you, I doubt if we will recover any of that nearly
+$1 billion. However, you have to remember there is $12 billion
+still in the pipeline. This is money that has been authorized
+and appropriated to be spent in Afghanistan. We have also
+promised a decade of support at $6- to $8 billion a year in
+Afghanistan. So despite these commitments, the management
+available to oversee these massive efforts has decreased. This
+means that learning from past experiences is more important
+than ever if we are to protect future taxpayer dollars.
+ Before the U.S. contemplates similar endeavors, either in
+Afghanistan or elsewhere, several questions must be answered.
+And the most fundamental being, should DOD be tasked with
+economic development operations during future contingency
+operations? SIGAR will continue to do its part to help answer
+these questions about the task force as well as other questions
+about our operations in Afghanistan. And I am happy to answer
+any questions at your pleasure.
+ [The prepared statement of Mr. Sopko can be found in the
+Appendix on page 39.]
+ Mrs. Hartzler. Thank you, Mr. Sopko. Ms. Wicecarver.
+
+STATEMENT OF JACQUELINE L. WICECARVER, ACTING DEPUTY INSPECTOR
+ GENERAL FOR AUDITING, DEPARTMENT OF DEFENSE
+
+ Ms. Wicecarver. Thank you and good morning. Chairwoman
+Hartzler, Ranking Member Speier, and distinguished members of
+the subcommittee, thank you for the opportunity to appear
+before you to discuss our audit of the Defense Logistics Agency
+Aviation process to obtain restitution for contractors that
+provided defective spare parts.
+ We audited DLA's product quality deficiency reporting
+process. A product quality deficiency report identifies
+problems in parts design, workmanship, specifications,
+material, and other nonconforming conditions. Our first two
+audits focused on the DLA Aviation supply chain. An ongoing
+audit is on the DLA Land and Maritime supply chain. Today I
+will discuss the second report on DLA Aviation's processes to
+obtain restitution from contractors for defective parts. I
+request the report be submitted for the record.
+ [The information referred to is retained in the committee
+files and can be viewed upon request.]
+ Ms. Wicecarver. Based on the results of our finding for 65
+sample items, we projected for 269 stock numbers, contractor
+supplied defective parts, and DLA did not recover at least
+$12.3 million in restitution for those defective parts. We
+found that DLA Aviation missed opportunities to hold poor-
+performing contractors accountable and for DOD to receive the
+appropriate restitution. DLA shortcomings in pursuing and
+obtaining restitution left defective parts unaccounted for in
+DOD inventory, negatively impacting warfighter, and safety and
+readiness.
+ To pursue and obtain appropriate contractor restitution the
+DLA needs to complete four steps either independently or with
+assistance from other designated personnel such as users or
+Defense Contract Management Agency.
+ Let me go into further detail. DLA did not ensure that
+contractors responsible for defective parts were contacted and
+that restitution was pursued. DLA did not adequately search DOD
+inventory to remove and to identify and remove defective parts.
+While DLA usually searched its own depots for defective parts,
+it rarely notified DOD customers to search their inventory for
+defective parts.
+ DLA did not always return defective parts to responsible
+contractors to receive replacements or provide instructions to
+DOD customers or DLA depot holding defective parts, and did not
+follow up to ensure that the instructions provided were
+properly implemented.
+ Finally, DLA did not properly track and maintain oversight
+of defective parts, return to contractors to ensure that
+appropriate restitution was received. In most cases the failure
+to successfully complete any one of these steps prevented or
+limited DLA's ability to pursue and obtain appropriate
+restitution for the defective parts.
+ I would like to share two examples, one which Congresswoman
+Speier already talked about where the readiness and safety of
+our warfighters were jeopardized. First, the 412th Maintenance
+Squadron at Edwards Air Force Base California issued a
+deficiency report on tie-down straps stating that the straps
+broke causing loss of oxygen to aircrew member during flight.
+These tie-down straps valued at $1 per hundred straps were
+considered critical application items and were used to attach
+oxygen hoses to pilots' helmets. DLA investigated the
+deficiency report and determined that the contractor was
+responsible for the defect. The contractor had delivered 52,314
+tie-down straps on the contract. In response, DLA searched its
+depots and located 16,701 of the defective tie-down straps. The
+remaining 36,613 of the tie-down straps were unaccounted for in
+the supply system.
+ The second example. We reviewed a deficiency report
+investigation for the C-5 aircraft that had defective copilot
+control wheels valued at about $36,000 each. The 436
+Maintenance Squadron, at Dover Air Force Base in Delaware,
+initiated this deficiency report and stated that the improperly
+manufactured parts prevented the control wheel assembly from
+being properly installed. The deficiency report further stated
+that continuously changing the component caused a work
+stoppage, hampering the ability to complete the required
+maintenance. The deficiency report investigation determined
+that the contractor had provided 30 defective control wheels.
+The contractor replaced three control wheels and agreed to
+replace the other 27 upon receipt. Although DLA instructed its
+depot to ship the control wheels to contractor, it could not
+produce any evidence, when asked, that the control wheels were
+ever shipped or the restitution was received.
+ For both examples, DLA did not notify other customers who
+purchased the remaining defective parts and request a search
+for DOD inventory.
+ We made five recommendations, in our report to DLA, to
+address the deficiencies identified during this audit. The
+director of DLA agreed with the recommendations and stated DLA
+would complete corrective actions by March 31, 2016. We did not
+receive formal written response outlining the status of the
+corrective actions. However, a DLA official informed us that
+several actions were either planned or in progress.
+ This concludes my statement and I would be happy to answer
+any questions you may have regarding this audit.
+ [The prepared statement of Ms. Wicecarver can be found in
+the Appendix on page 93.]
+ Mrs. Hartzler. Thank you, Ms. Wicecarver. Mr. Lilli.
+
+ STATEMENT OF CHARLIE LILLI, DEPUTY DIRECTOR OF
+ AVIATION AND HEAD OF AVIATION CONTRACTING ACTIVITY, DEFENSE
+LOGISTICS AGENCY, DEPARTMENT OF DEFENSE *** OR *** deg.DEPUTY
+ COMMANDER, DLA AVIATION, DEPARTMENT OF DEFENSE
+
+ Mr. Lilli. Good morning Chairwoman Hartzler, Ranking Member
+Speier, distinguished members of the subcommittee. I am Charlie
+Lilli, the deputy commander of the Defense Logistics Agency
+Aviation headquartered in Richmond, Virginia.
+ DLA Aviation is a field activity of the Defense Logistics
+Agency of the Department of Defense's Combat Logistics Support
+Agency. DLA's mission is to provide effective and efficient
+global solutions to warfighters and our other valued customers.
+We are a global enterprise which manages nearly 5.1 million
+lines through 9 supply chains which provide virtually every
+consumable item to our military forces required, including
+food, fuel, medical supplies, uniform items, and weapon systems
+repair parts.
+ DLA Aviation is the lead for more than 1,340 aviation
+platforms and systems and acts as the U.S. military's
+integrated material manager for more than 1.2 million national
+stock numbered items. Last year we delivered repair parts
+valued at roughly $4.2 billion, procuring those items from more
+than 4,500 unique suppliers. On average, we receive about 2,400
+deficiency reports annually. And of those, about 20 percent or
+480 reports represent defective material. We take very
+seriously our responsibilities to identify and prevent
+defective parts from entering into the supply chain and to
+ensure we are good stewards of the taxpayer dollars.
+ We appreciate this opportunity to discuss the findings of
+the February 23, 2016, DODIG report and inform you of the
+actions we have taken and will take to improve our processes to
+obtain restitution from contractors that provide deficient
+spare parts. We recognize the issues identified in the report
+and concur with the recommendations. We agree that the
+oversight and management control of this program needs to be
+strengthened and have taken aggressive action.
+ Our first priority was to ensure that defective parts are
+removed from the supply chain to mitigate any impact on our
+warfighters and readiness safety. To that end, we immediately
+reviewed the entire population of product deficiency reports
+received at DLA Aviation over the last 24 months and have taken
+the necessary action to segregate and freeze the defective
+stock until proper disposition can be determined.
+ In addition we alerted the customers about the potential
+for defective parts and provided them with disposition
+instruction. As a result of the findings documented in the
+draft report published in October, we updated our desktop
+guides based on best practices across DLA enterprise. These
+guides provide step-by-step procedures to ensure that material
+is dispositioned as required. We conducted training with all
+personnel involved in the proper processing of deficiency
+reports and the new procedure is implemented in the updated
+guides. We developed a plan to pursue restitution of any
+material or funds the government is entitled to and will
+execute that plan over the next 6 months.
+ Finally, we are establishing both first-line and senior
+level oversight procedures, corporate metrics, and a
+surveillance program to enable us to more effectively manage
+this program in the future. As an enterprise, the Director of
+Logistics Operations initiated a review of all DLA supply chain
+deficiency reports discovered since January of 2014 to validate
+the removal of deficient items from inventories.
+ In addition, DLA has established an enterprise-wide
+supplier restitution working group consisting of cross-
+functional team members who will thoroughly evaluate the
+requirements for enhanced oversight of the PQDR [product
+quality deficiency reporting] process, examining from a process
+and systems perspective what changes would be required to
+improve visibility and facilitate the resolution of these
+cases.
+ Madam Chairwoman, distinguished committee members, we have
+gained a valuable insight from the DODIG and we appreciate any
+feedback that improves our support to our warfighter and
+strengthens our management controls. As a retired Navy flight
+officer, as the father of two daughters, both naval officers,
+one currently deployed in the Middle East, and the father-in-
+law of a Marine Corps V-22 pilot also deployed to the Middle
+East, I assure you that no one takes this issue more seriously
+than I do.
+ Thank you for the opportunity to testify today, and I
+welcome your questions.
+ [The prepared statement of Mr. Lilli can be found in the
+Appendix on page 102.]
+ Mrs. Hartzler. Thank you to all of the witnesses for your
+testimony. This is very, very important to not only our
+national security, but certainly to the lives of our service
+members.
+ I want to start with Ms. Wicecarver and Mr. Lilli because
+we are talking about two separate instances of potential waste
+or inefficiencies in the Department of Defense that we want to
+look at so that we can address and get better. One was from the
+past, as Mr. Sopko indicated. The program dealing with
+Afghanistan reconstruction has ended but we have a lot of
+lessons learned there so we want to talk about that for the
+future.
+ But I want to start with you because this something that is
+currently going on right now as we have pilots in the air and
+we have planes flying, we want to make sure that the parts that
+are in those planes are up to the specifications they need to
+be and no warfighter is in danger.
+ So Ms. Wicecarver, it is apparent the defective parts DLA
+received from its vendors made it into the service's supply
+chain. Did your team find any instances in which any of the
+defective parts were installed in any end items as replacement
+parts for repair or return to service?
+ Ms. Wicecarver. Madam Chairwoman, we did not find as a
+result of this, but we do know they are in the supply chain
+because they left 36,000-plus straps in the supply chain and we
+know that they are there. We don't though if they have been on
+a flight--put in, customers were not notified, but I believe
+that they are in the supply chain and should be pulled.
+ Mrs. Hartzler. Yeah. So Mr. Lilli, what are you doing to
+try to find these 36,000 parts that are potentially still out
+there in pilots' helmets.
+ Mr. Lilli. The way that we go about identifying and finding
+parts that are in the customer's inventory is to provide what
+we call a supply alert. Each service has a screening activity
+which is then responsible for working with their individual
+service customers to alert them to the deficiencies of the--
+potential deficiencies of the parts and then work to have them
+notified and then coordinate the return of those materials to
+our defense depots.
+ So as a result of the audit, when we were alerted to this
+incident, we went back and ensured that that notification was
+sent and we sent an additional notification to once again
+reinforce the fact that we had this potential. It will be
+dependent now though and we will continue to work with the
+services to try and identify parts that are in the inventory
+and pull them back.
+ In addition to all of this, in 2008, this particular--they
+call it a tie strap, but it is a zip tie, a small about 2-inch
+piece of plastic zip tie that you put on to hold that hose to
+the helmet. So those zip ties were identified with several
+other sizes of zip tie in 2008 as a potential problem. And in
+2008 the inventory that is in DLA warehouses was the frozen and
+has been frozen since that time. And in 2008 those particular
+zip ties were included in a larger suspension where our
+customers were notified.
+ So back in 2008--and those by the way, those particular
+products have remained in litigation since 2008. That
+litigation was finally cleared in 2014. The result of that
+litigation was that the customer representative that faced the
+Department of Defense for that company was disbarred. He is no
+longer available or allowed to do business with us. And we
+fined that company and we received $400,000 back for the
+deficient material.
+ Mrs. Hartzler. Well, that is good. Now, didn't you just
+complete your audit fairly recently, Ms. Wicecarver?
+ Ms. Wicecarver. Yes, ma'am, in February 2015--I am sorry,
+2016.
+ Mrs. Hartzler. Okay. So we have in April of 2016. You just
+released this in February. So I understand, Mr. Lilli, you have
+only had a couple of months to start making corrective actions.
+And we appreciate your, you know, commitment to doing that and
+the steps you have already taken.
+ What procedures will you follow to track this 36,000 ties
+that are out there that are defective? So you have sent the
+alert. How will you know whether they have turned them back in,
+they have recovered them, is there a checklist, or how will you
+have assurance that this has been taken care of?
+ Mr. Lilli. As a result of the audit, we have taken several
+steps to improve and strengthen our processes. One of the steps
+we have established is the creation of a position we call the
+product deficiency report coordinator. We have now assigned one
+person, an individual who is going to be responsible for
+monitoring PQDRs, from the day that they are established in the
+system until the day that the materials actually is returned
+back to the system as repaired or refunded to us.
+ And so this person will be responsible in this particular
+case for now picking up that tracking to ensure that number
+one, any material that is identified in the inventory system is
+returned to us, and that we then send it--well, in this case,
+because of the low dollar value and the inability of a
+manufacturer to repair the ties, they will be destroyed and we
+will get a refund for those.
+ Mrs. Hartzler. Now, I understand you have only had 2 months
+to get started on this.
+ Mr. Lilli. Uh-huh.
+ Mrs. Hartzler. But how much of the $12.3 billion--million
+dollars.
+ Mr. Lilli. Million.
+ Mrs. Hartzler. Okay, $12.3 million estimated worth of
+restitution that is recoverable from defective parts, how much
+of that do you anticipate that we will be able to get and how
+will we know as Members of Congress how much of that has been
+recovered?
+ Mr. Lilli. We are conducting the comprehensive review of
+all of the PQDRs that we have in file. Currently, we have
+gotten through half of them, of their 1,077 total over that
+time period. We have gotten through half of them and have
+determined that for those PQDRs, we have recovered $3.5 million
+as a part of our normal process. So those are things that have
+been recovered before the audit.
+ That is not to say that there is a lot of material out
+there. We completely agree on that. Where our process broke
+down was after the alert, we didn't have a good mechanism to
+track as has been pointed out in the hearing, the follow-on
+return to the supply system and then back to the vendor.
+ So we have 500 now PQDRs that we are working as a result of
+our comprehensive review. We have a line-by-line, step-by-step
+procedure to go and take for each one of those 500 we have
+inventory in the system. What it will require for us is to
+discuss with the suppliers that provided them a restitution
+plan, whether that be, that we will ship those 500 items back
+to the supplier for repair and then return to us, whether they
+will pay us to fix them internally in our organic depots, or
+whether they will just provide us credit back. We intend to
+complete that process of those 500 PQDRs by August of this
+summer.
+ Mrs. Hartzler. Okay, very good. And I know I have other
+questions for all of you, Mr. Sopko, but I am going to let my
+colleagues ask their questions and move on. And then we will
+come back to another round.
+ Ms. Speier, ranking member.
+ Ms. Speier. Thank you, Madam Chair. Deputy Inspector
+General Wicecarver, this is not the first report that has been
+done on DLA to suggest that they are not doing their job is it?
+ Ms. Wicecarver. No, ma'am, we have issued several reports.
+ Ms. Speier. How many?
+ Ms. Wicecarver. We have 16 reports that we issued over a
+number of years on the parts and inventory area.
+ Ms. Speier. And in your estimation has DLA been responsive
+to these reports?
+ Ms. Wicecarver. They have tried in the most part, yes.
+ Ms. Speier. In your review this time, you looked at just a
+few parts. Wasn't it just about 65 parts that you arbitrarily
+picked out of the 5 million?
+ Ms. Wicecarver. We actually did a statistical sampling and
+came up with 65. That is so that we could get our arms around,
+if you will, what we are going to audit. We try to do them in a
+timely manner and so we do statistical sampling so we can
+project across the whole of the parts.
+ Ms. Speier. So 5 million lines of parts, you took 65. And
+of those 65, you were able to determine that at least one in
+particular was so defective that it could put at risk those
+pilots flying planes because this part had been determined to
+be defective when, these straps?
+ Ms. Wicecarver. I don't recall. I would have to take that
+for the record exactly when the Edwards Air Force Base
+maintenance group found it. I would have to take that back.
+ [The information referred to can be found in the Appendix
+on page 131.]
+ Ms. Speier. Was it, I mean, a year ago, do you think, 3
+years ago?
+ Mr. Lilli. In 2012.
+ Ms. Wicecarver. In 2012, Mr. Charlie says, so----
+ Ms. Speier. Okay. So 2012 we were made aware that this is a
+defective part; that it could place our pilots at risk. And by
+happenstance, Deputy Inspector General Wicecarver does the
+statistical sample which includes these straps, finds out it is
+still in the supply chain. That, to me, is frightening. How
+long have you been in your post, Mr. Lilli?
+ Mr. Lilli. Three years.
+ Ms. Speier. Three years.
+ Mr. Lilli. Yes, ma'am.
+ Ms. Speir. So certainly, it was already deemed defective
+when you came into your post. Correct?
+ Mr. Lilli. Correct.
+ Ms. Speier. And nothing had happened relative to this item
+until the inspector general did a report and now you are taking
+steps. Do we need a report from the inspector general to get
+the Department of Defense DLA to take defective parts out of
+the supply chain?
+ Mr. Lilli. No, ma'am. We have procedures in place.
+ Ms. Speir. Well, why didn't these get removed?
+ Mr. Lilli. As I stated, we--in 2008, all of these parts
+were frozen in inventory.
+ Ms. Speir. What does frozen mean?
+ Mr. Lilli. It means that we code them. It is a code in our
+distribution system computers that prevents any issuing of that
+material so if a customer requisitions it, it is from DLA
+stock. It is not allowed to be issued. It prevents it. There is
+no way it could happen.
+ So what I mentioned earlier was that in 2008, this part
+along with several other parts manufactured by that same
+company, was frozen in stock. There were 16,000 of those straps
+issued before the first quality deficiency report was received.
+Those were in the customer inventory. We alerted in 2008 all
+supply customers of the fact that these straps and other sizes,
+in addition, were potential defective parts. And at that time
+that material was screened and the materials should have been
+returned back.
+ If a sailor, or a soldier, or an airman had some stock in
+their bin and missed the lot screening, that is possible. Maybe
+that material stayed in the supply system. But once again, as a
+result of the audit, we reissued those notifications to ensure
+that, and asked our service partners to go and search their
+inventory to ensure that nothing--this material would be
+removed, if possible.
+ Ms. Speier. Mr. Lilli, I don't have a lot of confidence in
+DLA's response, generally. I think the fact that the inspector
+general has done all of these reports and there are still
+problems, should make us all pause. As it relates to the $12.3
+million that is due the taxpayers in restitution for these
+faulty parts, I would like for you to report back to this
+committee on a regular basis until we know confidently that
+restitution has been sought and received for all of these
+defective parts.
+ Inspector General Sopko, you said in previous congressional
+testimony that data was missing from the hard drive provided by
+DOD and forensic accountants were reviewing to determine if the
+data had been manipulated. Has that review been concluded?
+ Mr. Sopko. Yes, it has. And although we can't tell if it
+was manipulated, we think we don't have all of the data. And it
+could just be that the records are so poor at TFBSO that they
+just don't have the data.
+ Ms. Speier. When the TFBSO program wasn't doing well for a
+number of years, and yet, it was on autopilot, it seems to me
+based on your report, from your perspective, how do we prevent
+the wasteful spending of almost a $1 billion on a program like
+TFBSO, when, you know, a quarter of the way through, half of
+the way through, it is clear that it is not working?
+ Mr. Sopko. You know, that is a very good question, and I
+don't have a great answer for it. Reports were filed with
+Congress. I am not certain that those reports were accurate and
+were truthful and really reflected what was going on. And I am
+certain, having worked in Congress myself as a staffer, you are
+inundated with reports. I don't even know if anybody even noted
+those reports.
+ I think a critical problem you had with TFBSO was it was a
+new mission for the Department of Defense and nobody planned
+for having extra oversight over that new mission. And it was
+almost like a perfect storm. That program reported to the
+Secretary of Defense's office.
+ Now, the Secretary of Defense has many things on his plate,
+but operating a $1 billion program is usually not something he
+is going to focus or she is going to focus on. Later they moved
+it down to the Deputy Secretary of Defense for reporting.
+Again, he doesn't really run day-to-day operations. So it was
+reporting to the wrong spot in DOD. Lastly, they moved it down
+to report to the policy shop, the Under Secretary of Defense
+for Policy. Again, maybe very good in policy, but normally the
+policy shop does not oversee day-to-day operations of an
+agency. And I think that was one of the critical problems.
+ And nobody really read the reports and the warning signs. I
+know somebody--I mean I know the House Armed Services Committee
+raised some concerns about this program early on, and then some
+of the legislation raised those concerns. But apparently, it
+fell through the cracks.
+ Ms. Speier. Well, we somehow sometimes think that we are
+doing our job when we put report language in, and then they
+don't report to us, and nothing transpires.
+ This gas station that cost $43 million, the one in Pakistan
+cost between $200,000 and $300,000, we then actually equipped
+some Afghan vehicles so that they could take CNG [compressed
+natural gas]. Is that correct?
+ Mr. Sopko. That is correct, ma'am.
+ Ms. Speier. But what a harebrained idea when to retrofit
+these vehicles is equivalent to the salary for an Afghani for a
+year.
+ Mr. Sopko. That is correct, ma'am. And again, it goes back
+to common sense.
+ Ms. Speier. Which this program didn't have.
+ Mr. Sopko. Do a cost-benefit analysis. I am sorry, but do a
+cost-benefit analysis. And it doesn't seem like anyone did a
+real cost-benefit analysis on this program. You would have seen
+there were inherent problems. Everyone had written, you have to
+have an infrastructure in place. There is no infrastructure in
+Afghanistan. You have to have a market. There is no market. And
+that is just repetition we have seen through almost all of the
+TFBSO programs.
+ Ms. Speier. My last question. In your comments you said
+this is one of the worst programs that you have investigated in
+Afghanistan. I believe you said, the most waste, the most
+fraud, when were you first made aware of it?
+ Mr. Sopko. I think I started to hear complaints almost when
+I started the job 4 years ago, but it was a relatively small
+program in comparison. Remember, we have spent $113 billion
+here. So we had put it on our audit schedule a couple of years
+ago and we came out with our first audit, I believe, on the
+mineral section and we did two audits on that. So it has been
+in our view for at least 2 or 3 years.
+ Ms. Speier. Again, thank you both, Inspector General Sopko
+and Deputy Inspector General Wicecarver, for your great
+service. I yield back.
+ Mrs. Hartzler. Thank you. Mr. Scott.
+ Mr. Scott. Thank you, Madam Chair. Mr. Lilli, thank you for
+straightening out what I was discussing with Mr. Conaway over
+here, and that at a penny apiece, it sure sounded like a zip
+tie to me, something that most of us probably have. You could
+walk down to Walmart or a CVS, or pretty much certainly any
+hardware store would have them.
+ So $523.14 worth of zip ties, by my calculation, 52,314 at
+a penny apiece. I am sorry that you are getting browbeaten over
+a zip tie or 52,000 of them, to be honest with you. I just
+wonder how much money--this has gone on over these zip ties
+since 2008. Is that right?
+ Mr. Lilli. Correct, sir.
+ Mr. Scott. We have five Members of Congress, staff, we have
+three of you here and we are talking about zip ties. I mean, if
+I put one on something and it breaks, I would simply put two of
+them on the next time if it wouldn't hold. I mean, the people
+that I know that work in the Air Force, that are pilots, that
+get our men and women and aviators ready to roll, they are
+smart enough to know if one zip tie won't work, maybe you use
+two. Maybe you use a different size one. How much money--is it
+possible to calculate how much money the government has spent,
+the taxpayers have spent over $523 worth of zip ties in trying
+to find them?
+ Mr. Lilli. Oh, I can't answer that. We could probably come
+up with an estimate. It is a lot of money.
+ Mr. Scott. Would you agree with me that you could buy a zip
+tie at any hardware store out there?
+ Mr. Lilli. Well, sir, you can get those zip ties at any
+hardware store, but because of the regulations in our FAR
+[Federal Acquisition Regulation] and the processes we have to
+do to ensure that we buy them from qualified sources, we
+probably wouldn't go to Lowe's. We would have to follow the
+FAR. But you are right. It is the same type of zip tie that is
+out there.
+ Mr. Scott. And I just wonder, you know, how much--as a
+private business owner, I would never spend $10,000, or
+$100,000 or however much money has been spent from 2008 to 2014
+over $523 worth of zip ties. I am somewhat taken back that we
+are even discussing zip ties here.
+ Anyway, Mr. Sopko, the full financial audit for TFBSO
+activities has it begun, and if so, when can we expect that
+audit to be complete? And is it going to go so far that it is
+going to identify parts that are a penny apiece and maybe how
+much money was spent trying to find zip ties?
+ Mr. Sopko. Well, I don't think we are going to be looking
+at zip ties. The full financial audit is----
+ Mr. Scott. Would you agree, obviously, someone has spent an
+awful lot of money, more money has been spent searching for the
+zip ties than the zip ties cost.
+ Mr. Sopko. It appears that way, sir. Remember, I am not
+doing the zip tie investigation.
+ Mr. Scott. I am glad to know that.
+ Mr. Sopko. On TFBSO, we were asked by Senator Ayotte on the
+Senate side to conduct a financial audit as well as a program
+audit. The program audit, I believe, we are putting that
+together and if it hasn't started it is about ready to start.
+ And then we are going to just, you know, a program audit is
+a little different than a financial audit. The financial audit,
+I don't believe we have started that yet. We have also been
+joined or asked by Senator Grassley to conduct both of those.
+So there is a lot of interest on the other side.
+ Mr. Scott. Well, I look forward to seeing that and I will
+yield the remainder of my time. I am under a minute.
+ Mrs. Hartzler. Thank you, gentlemen. Now we go to Ms.
+Graham.
+ Ms. Graham. Thank you, Madam Chairwoman. Thank you all very
+much for being here today. My question is in the category of
+lessons learned.
+ Inspector General Sopko, you mentioned in your written
+testimony that a major source of TFBSO's issues in Afghanistan,
+is that it didn't implement any changes based on the experience
+in Iraq.
+ Mr. Sopko. That is correct.
+ Ms. Graham. Is there now a formal system for capturing
+lessons learned and what are your recommendations for ensuring
+that they are incorporated into future protocol?
+ Mr. Sopko. Some agencies of the government have a formal
+structure to capture lessons learned. The Department of Defense
+is probably the best one for doing that, and the various
+agencies of the Department of Defense, so the Air Force, the
+Army, the Marines, will be doing their lessons learned and
+hopefully those will be applied.
+ The biggest problem we see, Congresswoman, is that there is
+no whole-of-government approach to lessons learned. If one
+thing we learned in Afghanistan and Iraq, it is not only that
+DOD is going to be there, State Department is going to be
+there, AID is going to be there, and our allies. And no one is
+doing that.
+ And actually, we are doing that at the recommendation of
+General Allen. I remember him coming over and saying, laying
+that out to me. He says, DOD will do a pretty good job, but the
+next time we do this, when you are going to a provincial
+reconstruction team, there will be spots for AID and State and
+all of the other government entities, but nobody has that
+jurisdiction. We are stovepiped. DOD will do their lessons
+learned, but nobody is doing the whole of government. So we are
+actually embarking upon that at the suggestion of General Allen
+and other people. And we are hoping to do that.
+ The other thing I would seriously consider is neither State
+or AID have the system of doing lessons learned in their budget
+as well as the staffing to do it like DOD does. And that is
+going to be an inherent problem.
+ Ms. Graham. I would agree with you. In every facet of life,
+you need to learn from the past and do better in the future.
+Well, thank you, I guess.
+ Mr. Lilli, I would ask the same question of you. It is not
+your fault, by the way. I understand the inspector general. Is
+there a formal process by which DLA has incorporated lessons
+learned into its processes and procedures?
+ Mr. Lilli. As a result of our audit, we learned a lot, and
+so we have five recommendations that we have been--that we are
+implementing. As I mentioned earlier, in DLA Aviation, we have
+taken and reviewed all the PQDRs to make sure that we recover
+all the money, and we will report back as we were asked. We
+have also frozen and made sure that that stock is frozen and so
+it can't be issued, and alerted our customers. But we have also
+established some new procedures as a result of that.
+ So what we will be doing is creating a position called a
+PQDR coordinator in our supply center that will then track from
+the beginning to the end every time we receive one to ensure
+that we, number one, alert our customers as fast as possible,
+but then ensure that material is received and sent back to the
+suppliers for restitution.
+ We have also established some first-line supervisor and
+senior leader oversight to include checklists that will have to
+be signed as we go to ensure that that process is done
+correctly. In addition to that, we have some corporate metrics
+now that we track the opening and closure of each one, the
+total number, and the total age of those PQDRs. That report is
+provided by the coordinator to myself and the commanding
+general once a week. So we will be tracking that to ensure that
+never happens again.
+ On a broader scale, those lessons that we have learned as a
+result of this audit and this review have been provided to the
+DLA headquarters. And as I have mentioned earlier in testimony,
+the DLA director has established a working group to take a look
+at the entire process across DLA. And through that working
+group, we will take the lessons we learned and incorporate them
+into the overall review and then come up with a revision of the
+process that will hopefully be better, and will allow us to
+have tighter control, and to execute our responsibilities for
+stewardship in a better manner.
+ Ms. Graham. Thank you for that.
+ I hope, Mr. Inspector General, that we can learn from these
+lessons, and we need to be working together so we don't repeat
+the mistakes of the past. I don't know where to start with
+putting that in place, but seems to me that when we are
+working--as the United States of America is working overseas in
+various countries, all aspects of our country need to be
+working together to make sure we are doing it efficiently and
+effectively. So I am out of time, but if you want to respond.
+ Mr. Sopko. I agree wholeheartedly with you, and hopefully
+our Lessons Learned Program will help in that process. But
+remember, there is a difference between lessons observed and
+lessons learned. There are lot of reports on the shelves, but
+very few people sometimes read them, and they are not put into
+doctrine and put into the training. And before somebody goes
+back out to Afghanistan, whether he is a Foreign Service
+officer, an AID officer, or a captain in the Marines, he should
+be given a document which tells him what have we learned from
+Afghanistan before, what have we learned from Iraq, what have
+we learned from other experiences. And that is what people keep
+coming back to me.
+ I mean, we do these audits. We do these reports, and I have
+been approached by many people in the administration and on the
+Hill saying, so what does it mean, and how do we do it? And I
+understand that frustration, and that is why we have this
+Lessons Learned Program we have put together, brought in some
+very bright people, and trying to get buy-in from the various
+agencies. That is what General Allen encouraged us to do, and
+so we are following on his guidance. Hopefully it will help.
+ Ms. Graham. Great. I remain ever hopeful. I appreciate it.
+Thank you. I yield back what time I do not have anymore.
+ Mrs. Hartzler. The lady's time is expired. And that is one
+of the reasons we are having the hearing as well today, Mr.
+Sopko, is so that we can flush out the concerns that we have
+had and learn as we go forward.
+ Now Mr. Conaway from Texas.
+ Mr. Conaway. Well, thank you. Just to make sure, I am a CPA
+[certified public accountant] and my license is still current,
+so I am one election from being back in public practice. I
+spent a lot of years auditing.
+ Mr. Sopko, when you come to a circumstance like this
+filling station, gas station, it just absolutely makes no sense
+in hindsight. Did you have access to the documents that were
+prepared and put in place and the decisionmaking processes that
+were there to come to these conclusions? I mean, when you have
+a circumstance that makes no sense, we typically don't have all
+the facts available to figure out how the decision makers who,
+unless you want to project malfeasance on them, were working to
+try to do the right thing. And did you look at how they got
+there, what their rationale was for it?
+ Mr. Sopko. To be honest with you, Congressman, we did not
+have full access to the records.
+ Mr. Conaway. Okay. So the billion dollars spent, all of it
+was wasted? Is that your conclusion?
+ Mr. Sopko. No, not all of it.
+ Mr. Conaway. So 50 percent?
+ Mr. Sopko. I mean, you know, we did build a gas station.
+ Mr. Conaway. Well, that is a waste.
+ Mr. Sopko. Yeah.
+ Mr. Conaway. That is a waste.
+ Mr. Sopko. But it was built, and there are----
+ Mr. Conaway. Okay. How well is it functioning today?
+ Mr. Sopko. Well, the--oh, I am sorry.
+ Mr. Conaway. I am just trying to figure out there was 100
+percent error. Great. Got that.
+ Mr. Sopko. Yeah.
+ Mr. Conaway. But were there--did you find any successes
+whatsoever in the deal?
+ Mr. Sopko. We found a few successes.
+ Mr. Conaway. Okay.
+ Mr. Sopko. But the problem is, you know, we measure inputs,
+outputs, and outcomes. The output was you got a gas station.
+The output was you actually got 400 taxi drivers, I believe
+about 400, got their cars converted at----
+ Mr. Conaway. Okay.
+ Mr. Sopko [continuing]. U.S. taxpayer expense. They are
+very happy.
+ Mr. Conaway. I am not trying to defend this deal.
+ Mr. Sopko. Yeah.
+ Mr. Conaway. I am just trying to make that sure we
+understand the circumstance.
+ Ms. Wicecarver, total dollars spent over your audit, not
+you personally, but your auditing, how much money spent by DLA
+over those 16 audits that you made reference to, total dollars
+spent? Trillions?
+ Ms. Wicecarver. Not a trillion, no, sir. We had about
+$300,000.
+ Mr. Conaway. Just for example, my--dust off old audit stats
+stuff. You do a statistical sample in order to project the
+error rate across the bigger piece.
+ Ms. Wicecarver. Yes, sir.
+ Mr. Conaway. So you found the error with the zip ties. Your
+overall conclusions on your statistical sample, what was the
+error rate throughout the entire universe of what you were
+auditing?
+ Ms. Wicecarver. 90 to 95 percent, sir.
+ Mr. Conaway. So 95 percent of what DLA spent, they spent
+wrong?
+ Ms. Wicecarver. Of the sample that we collected.
+ Mr. Conaway. So did you expand your sample?
+ Ms. Wicecarver. No, sir.
+ Mr. Conaway. Why not?
+ Ms. Wicecarver. Because we had enough, we thought----
+ Mr. Conaway. So 90--make sure I get the record straight
+here. They spent half a billion dollars?
+ Ms. Wicecarver. Not on these parts, sir.
+ Mr. Conaway. No, no, no. Why would you do a statistical
+sample if you are not trying to extrapolate that over the
+bigger--you are not going to look at all 5 million parts? Is
+that what you said? How many parts were in your universe,
+ma'am?
+ Ms. Wicecarver. 269.
+ Mr. Conaway. And you audited 65 of it?
+ Ms. Wicecarver. Yes, sir.
+ Mr. Conaway. Okay. And of that, you are saying that of
+those 269 parts that you audited, 95 percent of the money spent
+was spent incorrectly?
+ Ms. Wicecarver. We weren't talking about the dollars spent.
+We looked at actually the product deficiency reports that we
+were reporting and how it all equals dollars and cents. I
+understand that. But I would have to get back to the record
+specifically what it is we are talking about. We just projected
+because----
+ Mr. Conaway. So of the 269 parts, your conclusion would be
+that 95 percent of those parts were deficient?
+ Ms. Wicecarver. No, sir. We had a 95 percent confidence
+rate on our sampling, is what I am saying.
+ Mr. Conaway. No, ma'am. That is not what you said. My
+question was, what was the overall projected error rate within
+the overall universe, and you said it was 95 percent. I
+understand the 95 percent confidence, that your 65 percent is
+representative of the whole. What I am asking, of the 65
+percent that was wrong, that you found wrong, how much of that
+do you say is in the full universe of 269 parts? Of the 65 that
+you audited, how many of those had problems?
+ Ms. Wicecarver. I am sorry. How many of those had?
+ Mr. Conaway. Had audit deficiencies that rose to this
+conclusion that the zip ties were out of whack?
+ Ms. Wicecarver. Well, we had many examples in our report
+and in our audit.
+ Mr. Conaway. I don't----
+ Ms. Wicecarver. I will have to take it for the record. I
+guess I don't understand all of that one.
+ [The information referred to can be found in the Appendix
+on page 131.]
+ Mr. Conaway. Are you an auditor yourself?
+ Ms. Wicecarver. Yes, I am.
+ Mr. Conaway. Okay. Why would you use a statistical sample
+of the universe? What is the purpose of statistically sampling
+rather than looking at the whole universe?
+ Ms. Wicecarver. Timeliness of the report so we can get the
+evidence out to the agency.
+ Mr. Conaway. Isn't it to look at a small sample, if you
+don't have any errors in that small sample, you are 95 percent
+confident that the rest of the universe is okay? Isn't that a
+better explanation of why you statistically sample something?
+And you statistically sampled 65, you picked 65 on a
+statistically sound basis so that you can say, all right, we
+are going to look at these 65 so we don't have to look at all
+269. We looked at the 65, and the error rates or whatever you
+want to call them, in this 65 leads us to believe that the
+universe of 269 is either good or bad.
+ So what I am trying to figure out is you found the error
+with this one part, however insignificant it might be, but
+because it was statistically picked, it has a greater
+significance to the overall conclusions. Because if you can't
+get the little things right, you are not going to get the big
+things right. So you looked at the 65. You got at least one,
+zip ties, that you had a problem with. What else did you find
+among the 65 that you then projected to the greater inventory?
+ Ms. Wicecarver. As I said, we found many of the 69 that had
+problems.
+ Mr. Conaway. Okay. I don't have a clue--I don't have a clue
+of what the word ``many'' means. I am asking you, of the 65, we
+have got a discrete universe of items you looked at. For the
+record, would you please get back to us with a better
+explanation on what the value of the statistical sample was?
+Because if you are not going to use it from a statistical
+sampling basis, why would you pick the top 10 most expensive
+parts and look at those as opposed to picking zip ties? You
+only picked zip ties because you are trying to get a--all
+right.
+ [The information referred to can be found in the Appendix
+on page 131.]
+ Mr. Conaway. On the failure of the zip ties--and I know I
+am past my time. Mr. Lilli, did the zip ties fail when it was
+snugged up against the--when did it fail, and what did that
+failure result in? Because when we use the words ``warfighters
+are put at risk,'' those are pretty inflammatory words. Those
+are words we ought to pay attention to.
+ Help us put in context. There is an air hose coming off the
+helmet going to somewhere in the cockpit. You snug it up with a
+zip tie. What was the point of failure, that first snip--
+somewhere in the life of the zip tie being on there?
+ Mr. Lilli. No, sir. Actually, the failure was discovered as
+they were putting the zip ties on the hose itself. So in the
+routine maintenance--I read the PQDR that was submitted, and in
+the routine maintenance of replacing the----
+ Mr. Conaway. All right. So the point of failure is known
+before the helmet goes on the pilot's head----
+ Mr. Lilli. Yes.
+ Mr. Conaway [continuing]. And before he takes off the
+ground?
+ Mr. Lilli. In the case of this particular PQDR, exactly
+right.
+ Mr. Conaway. Okay. Well, if we can't use--from a
+statistically valid standpoint, Ms. Wicecarver, if you can't
+project that audit of that zip tie to a greater use than what
+appears to be the case, then I would have to agree with my
+colleague that we may have missed the boat. I would rather you
+look at the top 10 most expensive parts of your 269, rather
+than--and I yield back. I am sorry. I am a little frustrated. I
+yield back.
+ Mrs. Hartzler. The gentleman's time has expired.
+ Ms. McSally.
+ Ms. McSally. Thank you, Madam Chairwoman. And let me just
+follow up on the previous line of discussion. I was in the
+military for 26 years, and I often would call them lessons
+identified, not lessons learned. And when you say the military
+is the best at it, we have some significant shortcomings.
+ You know, we are good at having conferences and maybe
+writing things down, but because of some of the things that
+were identified even in here because of high turnover and, you
+know, motivated people trying to bring their own bright ideas
+in the new assignment in, we are reinventing the wheel all the
+time in the military. When I read the testimony, when we look
+into the details of these failures, it is just infuriating to
+me, honestly.
+ My last assignment was at U.S. Africa Command. We were
+intended to try and have a whole-of-government combatant
+command. We had members of USAID and Office of Foreign Disaster
+Assistance with us on the staff. We would often see how we in
+the military, we want to just, you know, go in there and just
+fix everything, whether it is a disaster, even though we have
+no idea what we are doing. Our job is to fight and win
+America's wars, to kill people and break things, and somehow we
+find ourselves in these situations where we are doing things
+totally outside of our core competencies for a variety of
+different reasons. And it is infuriating to see that, after all
+we have learned over these years, we are still doing stupid
+things like this.
+ And the waste of taxpayers' money at a time when our
+military right now, our readiness, our force structure, our
+personnel, it is infuriating to see that this much money was
+wasted in the Department of Defense for bright ideas that are
+just absolutely failed. So what I don't even understand,
+because I think about my time in Africa Command, it isn't about
+lessons learned. It is about we are stovepiped on the front
+end. We don't have the same chain of command. We don't have the
+same funding lines. And so we can have a little love fest as we
+are coordinating things, but in reality, we don't report to--
+you know, we don't have the same title and lines of funding.
+And so I don't even get like what the authorities were that
+allowed them to do this.
+ Can you just explain to me how the Pentagon thought this
+was a good idea and under what authorities they had to do this,
+as opposed to letting the lead Federal agencies and those that
+are experts in these areas taking the lead?
+ Mr. Sopko. Congresswoman, I experience and feel your anger
+in the absurdity of some of these things.
+ Ms. McSally. Yeah.
+ Mr. Sopko. If it wasn't the fact that we lost nearly 2,300
+lives in Afghanistan, most of what we have found could probably
+appear on Comedy Central. I mean, I cannot believe some of the
+things I have uncovered, and I am outraged too.
+ Ms. McSally. Yeah.
+ Mr. Sopko. And I worked on the Hill for 15 years for Sam
+Nunn, and I thought I saw some really boneheaded moves. But
+this----
+ Ms. McSally. This is the ultimate bonehead.
+ Mr. Sopko. This is the ultimate.
+ Ms. McSally. Yeah.
+ Mr. Sopko. I wish I could answer your question on the
+authority because the authority is kind of mixed on the TFBSO.
+It started in Iraq as really not to do contracting, just to
+sort of fix things with the industry. Then it sort of morphed
+into actually a contracting role. And initially, the Secretary
+of Defense's general counsel's office raised concerns that this
+whole thing was illegal.
+ Ms. McSally. What is the funding stream? Is this OCO money?
+ Mr. Sopko. I believe it was OCO money.
+ Ms. McSally. How are we using OCO money to build villas and
+gas stations? This is----
+ Mr. Sopko. We are trying to find it. We still haven't
+found, there is a memo issued by the Office of the Secretary of
+Defense--and this is why I am so frustrated and your colleague
+has hit the frustration point. This program didn't disappear in
+1944. This isn't like something that Harry Truman ran. This
+program went out of existence less than a year ago, and I could
+not find a soul in the Department of Defense who could explain
+any of these questions.
+ I call this a rare case of amnesia in the Department of
+Defense. I had to fight to get those records which
+Congresswoman Speier has asked me about. The amount of records
+I got for TFBSO, fewer than one of my staff has on her cell
+phone, the gigabytes.
+ Ms. McSally. Right.
+ Mr. Sopko. So this is the most bizarre investigation I have
+done, and I have gotten so much pushback----
+ Ms. McSally. Yeah.
+ Mr. Sopko [continuing]. From the Defense Department on this
+$1 billion program.
+ Now, we have looked at some of the major parts of it, but I
+follow the lead of your colleague. You know, there is many more
+billions of dollars that have been wasted and at stake. So we
+did not want to focus on TFBSO. I did not want to turn this
+SIGAR into the TFBSO inspector general. There is many more
+problems out there. But every time we open a rock or uncover a
+rock, something crawls out which just sort of you can't
+understand. This is a mystery to me how this program got into
+action and why it survived.
+ Ms. McSally. So if there were no authorities for spending
+this money, what accountability is happening? I mean, if
+somebody is illegally spending taxpayers' money, where is the
+accountability on that?
+ Mr. Sopko. Well, it was added to, if I am not mistaken, to
+the Authorization Act. So it was authorized at one time.
+Initially, it came from OCO, and I think it was--and I don't
+want to misspeak. I would have to ask my colleagues.
+ Fiscal year 2011 I am told it was authorized in the NDAA
+[National Defense Authorization Act], prior to that. And it is
+interesting is that in fiscal year 2011, that is when the head
+of the organization basically says we ought to shut the thing
+down, it can't operate, and that was ignored.
+ Ms. McSally. Right. And then they are spending more. I know
+I am out of time. But how do we make sure here, and we can
+follow up for the record, that something like this never
+happens again, never, ever, ever happens again? Everybody needs
+to stay in their lanes. Fight and win America's wars, military.
+USAID does development and economic stuff. We have got to make
+sure this never happens again. So we would love to follow up on
+that. And I am out of time.
+ [The information referred to can be found in the Appendix
+on page 131.]
+ Mr. Sopko. We will try.
+ Ms. McSally. Thank you, Madam Chair.
+ Mrs. Hartzler. Thank you. I want to talk about that a
+little bit, authority. There was a Brian McKeon, the Principal
+Deputy Under Secretary of Defense for Policy, who was invited
+to attend today, and due to a family prearranged activity, he
+wasn't able to be here. I believe he appeared before the Senate
+Armed Services Committee, but he did submit his testimony,
+which I have read.
+ [The testimony from Mr. McKeon can be found in the Appendix
+on page 111.]
+ And in there it talks about how in fiscal year 2014,
+Congress made an amendment to a law, you know, authorizing for
+this program to continue. So I think Congress has a role in
+this as well. So we, you know, need to, certainly as Members of
+Congress, in the future have a very important role in deciding
+whether we do something like this again or how we apply these
+lessons learned. But that is one reason we are having this
+hearing today, to go back and say, hey, you know, did it work?
+Is it wise, and should we ever do that again?
+ I did want to also ask you, Mr. Sopko, about the amount of
+money spent. Because in Mr. McKeon's testimony that I have read
+here, he says that there was $800 million that were obligated,
+$600 million that were disbursed. So I would assume the
+Department of Defense would say that they spent around $600
+million on this rather than the $1 billion that is being thrown
+around today in this hearing. So which is it? How much would
+you say is more accurate for how much was spent on the program?
+ Mr. Sopko. It is not a billion. I know that.
+ Mrs. Hartzler. $800 million was obligated, but only $600-
+was--I say only. That is still a lot of money.
+ Mr. Sopko. Our review was, as you said, $822 million was
+authorized, and $759 million was obligated.
+ Mrs. Hartzler. How much was disbursed of that, actually
+spent?
+ Mr. Sopko. We are actually doing the audit. We don't have
+that number.
+ Mrs. Hartzler. Okay. So that is just something for us to be
+aware of. But that is still a tremendous amount of money.
+ Secondly, we haven't talked about the villas, and I wanted
+to ask you about that. Your testimony states that the TFBSO
+spent $150 million to reside and operate out of the villas. And
+you have brought a picture of those here for us today. Did the
+TFBSO use funding to build the villas, or did another
+government agency do the construction?
+ Mr. Sopko. No. The villas were not built by us. These are
+all rentals. We rented the villas from Afghans.
+ Mrs. Hartzler. Okay. What time period does the $150 million
+cost cover?
+ Mr. Sopko. Well, for almost as long as they were there. As
+soon as they came over from Iraq, they pursued using, living on
+the economy like that, and until--although Director Brinkley
+said to bring them back in August of 2011, they continued in
+the villas till, I believe, the end of the program, which would
+have been the end of 2014, if I am not mistaken.
+ Mrs. Hartzler. It seems like I read, perhaps in Mr.
+McKeon's testimony, was it 3 years?
+ Mr. Sopko. That would be about right.
+ Mrs. Hartzler. About right. So $50 million a year, and that
+included the security as well as you talk about a lot of the
+amenities that were in there, which is a 27-inch flat screen
+TV, a queen-size bed, menus for the catering of two entrees
+every night, options, and options on site. So, you know,
+certainly not what I would think our soldiers would be eating
+and how they would be living over there, and I know it is not
+quite the same.
+ How do you account for Paul Brinkley, the first director,
+saying that the task force should move back into our military
+facilities and not continue living in the rentals, and yet that
+was ignored?
+ Mr. Sopko. We are trying to get to the bottom of that. We
+don't have an answer. We have his memorandum, which he says
+because of security reasons and also because of management
+problems, he wants to bring everybody back, and he orders them,
+I think by August of 2011, everyone will move back onto
+military bases. But we have no further information as to why
+that was ignored, and that is again a problem we have with
+TFBSO. The records are so abysmal. It is hard to figure out
+what they did and why they did it.
+ Mrs. Hartzler. Okay. Regarding the natural gas facility,
+the gas station, you just said a minute ago you have to have a
+market, and there is no market. And I think those are very wise
+words, is before you do any of these projects, there needs to
+be a marketing analysis done, and it wasn't done. And you look
+at the list of the projects that were done there. And the
+average businessman or woman here in Missouri--well, here in
+the United States or from my State, Missouri, would just
+probably say, no, this isn't wise that we invest here; we move
+forward.
+ I wanted to mention, since Mr. McKeon isn't here, in his
+testimony he does say on page 11, to be sure the average Afghan
+does not own a vehicle. So I think the Department of Defense
+also is, you know, bringing up that point.
+ Now, he does say in there, though, that you had a question
+to the Department of Defense about whether the station was
+still operating. And he says: My staff contacted the operator
+of the CNG station by email on November 15th of last year. The
+operator indicated that the station was working normally, that
+230 cars had been converted, and that every day approximately
+160 cars obtained fuel from the station.
+ Do you think that is accurate? It is still open; it is
+operating; there are some cars that the taxpayer here in
+America paid for that are using it?
+ Mr. Sopko. It would make sense that they would use it. I
+mean, we gave them a free conversion kit. We converted their
+car for free. And using the compressed natural gas is cheaper
+than using gasoline in Afghanistan. The question is, is it
+sustainable? I mean, those are happy taxi drivers, just like
+there are happy goats in Afghanistan. But is any of this
+sustainable?
+ The purpose of this program wasn't to make a bunch of taxi
+drivers in Sheberghan rich at U.S. taxpayers' expense. You have
+got to go back to the documents, and we do have some of the
+documents as to what the purpose was, and they didn't attain
+it.
+ So I go back to it. The input, we know how much was spent.
+The output was they did do a gas station, they did convert
+cars. But the outcome was to create a market all over northern
+Afghanistan, and that never occurred, and the reason is because
+no one ever looked. There was no infrastructure.
+ Mrs. Hartzler. Okay. So I just wanted to clarify because
+earlier in this hearing you said the project failed, in your
+opening comments. But yet you would not say--I mean, it is
+operating. So you are just using that terminology just based
+on----
+ Mr. Sopko. What it was supposed to accomplish, you know.
+ Mrs. Hartzler. Okay. That is all. For the record, we
+should, you know, due diligence, clarify it.
+ And I wanted to get into the testimony of the Department of
+Defense that was submitted regarding the cost because I know
+you and the Department of Defense have been disagreeing on
+that. The number, $43 million cost of the compressed natural
+gas station, you know, has been used. So did the gas station
+itself cost $43 million alone, or was that the cost of the
+entire compressed natural gas station infrastructure project
+that also included refurbishing the existing pipeline,
+purchasing new pipeline for installation, for funding?
+ I will say that in Mr. McKeon's testimony here that he
+submitted, he says the cost for the entire project was $5.1
+million, and that is for actually the infrastructure. And then
+he alleges that you extrapolated the consulting costs over the
+entire country and projected all those overhead, the $30
+million overhead costs for that, on to you. And I may be, you
+know, not adequately summarizing what he is saying there. But I
+would like for you to kind of share what your thoughts were on
+how you arrived at the $43 million cost. Is that really
+accurate? And how do you disagree or not with what the
+Department of Defense alleges it only cost?
+ Mr. Sopko. Well, I haven't seen Mr. McKeon's testimony, but
+I remember testifying with him before. The approximately $43
+million number is not SIGAR's number. We did not compile that.
+We found that in the records we uncovered, and it was records
+prepared by a contractor for TFBSO. We spoke to the contractor.
+He prepared an economic impact assessment for TFBSO, was paid
+$2 million by TFBSO to do it.
+ In his report when we interviewed him, he is the one who
+gave us the number. He broke the number down by direct costs,
+indirect costs, subject matter, expert costs, overhead costs.
+Those were his numbers that he got from TFBSO. So first of all,
+those are the Department of Defense's numbers, not ours.
+Secondly, when we interviewed him, he said and gave us records
+about a back and forth between his office and TFBSO over the
+preparing of the economic impact assessment.
+ Many times that assessment was reviewed and approved by
+TFBSO way before we came in to do the audit. As a matter of
+fact, the director of TFBSO approved those numbers. The
+director actually changed other numbers related to the gas
+price, but never changed that $43 million number. This is the
+best number we have. We acknowledge that the records kept by
+TFBSO are abysmal. We actually interviewed a comptroller
+employee who Mr. McKeon sent over to try to review the records.
+And he said he thought the number was wrong, but he couldn't
+come up with a better number either because the records are in
+such poor shape.
+ So we are stuck with this number, but ultimately the
+taxpayer paid, U.S. taxpayer paid $43 million. Whether it
+included that gas station, whether the overhead numbers are
+correct or not, it is the best number we can come up with. If
+we can find a better number, we will report it.
+ Ms. Hartzler. Right.
+ Mr. Sopko. But so far, no one has given us a better number.
+ Mrs. Hartzler. Okay. Thank you for that explanation.
+ Ranking Member Speier.
+ Ms. Speier. Thank you, Madam Chairman. I am not interested
+in quibbling over whether it was $10 million or $43 million,
+when we know in Pakistan they built it for $200- or $300,000.
+The real question is, does TFBSO belong in the Department of
+Defense? Should the Department of Defense be engaged in doing
+economic development? And I think the examples that Mr. Sopko
+has provided us make it clear that we should not be in this
+business within DOD. It is not part of their expertise.
+ Now, I do want to point out, I think that Brian McKeon
+tries his darnedest to try and defend the program, but in the
+end he does say, and I will quote, ``I am skeptical that the
+Department of Defense is the natural home for this mission of
+promoting economic development.'' So regardless of why he goes
+about trying to defend it, he comes to the conclusion that we
+shouldn't be doing that.
+ And Mr. Sopko as our Inspector General on Afghanistan
+Reconstruction has done an extraordinary job, I think, over
+these number of years pointing out where we fail. And to
+everyone's point that has been made here, just pointing out is
+not good enough. We have got to clean it up. And my concern is
+that we see a problem, we have enough evidence, and we don't
+shut it down. It continues to operate on auto pilot.
+ Now, to Mr. Scott's comments and also to others, I think in
+fairness to Ms. Wicecarver, it wasn't just the zip ties that
+they looked at. And in her report she talks about the defective
+copilot control wheels for the C-5 aircraft valued at $35,000
+each. The investigation determined that all 30 parts provided
+on the contract were defective and that the contractor was at
+fault. DLA Aviation searched the DLA distribution depot
+inventory in March 2014 and identified that 23 of the remaining
+defective control wheels were being stored at the DLA
+distribution depot in Warner Robins, Georgia. DLA instructs the
+DLA distribution depot to ship the parts back to the
+contractor. However, DLA Aviation officials did not respond to
+our inquiries about the 23 control wheels, and DLA transaction
+data showed that the defective control wheels were never
+shipped from the DLA distribution depot in Warner Robins.
+ According to DLA Aviation, could not produce any evidence
+that it received restitution for 23 of the 27 defective parts
+valued at $825,000. In addition, DLA Aviation did not notify
+the other customers who purchased the remaining 4 of the 27
+defective control wheels. So it wasn't just zip ties. We were
+looking at more expensive equipment. And there is a problem
+with defective parts not being returned to the contractor and
+that restitution is not recovered.
+ Now, Ms. Wicecarver, this is just one area within DLA.
+Isn't it true that you are now working in another area as well,
+and could you tell us about that?
+ Ms. Wicecarver. Yes, ma'am. We have some ongoing audits on
+price reasonableness. We have some on inventory. Both those
+areas we have worked in the past, and we are working in the
+future on.
+ Ms. Speier. Isn't there one you are doing about marine
+parts that is underway?
+ Ms. Wicecarver. We are looking at the land and maritime
+area in DLA, the same type audit, if you will, just on a
+different area, land and marine maritime.
+ Ms. Speier. Besides zip ties and these wheels, are there
+other examples of parts that were in the chain, the supply
+chain, that restitution was not sought and that were continuing
+to reside within the supply chain?
+ Ms. Wicecarver. Yes, ma'am. We had about six other examples
+in the report, switch and bracket parts, and the other one
+was--there are several of them. We have pictures, and that is
+in the full report that I put for the record.
+ Ms. Speier. I yield back.
+ Mrs. Hartzler. Thank you.
+ Mr. Scott.
+ Mr. Scott. Thank you, Madam Chair.
+ Sir, you testified on the zip tie issue that they were
+identified prior to being put in flight, so no crews ever lost
+oxygen or anything along those lines from those zip ties?
+ Mr. Lilli. That is correct, sir.
+ Mr. Scott. The report that I have before me reads: causing
+loss of oxygen to air crew members during flight. It doesn't
+say could have potentially. It says: causing loss of oxygen to
+air crew members during flight.
+ I ran up to my office. This is a zip tie. This is what we
+are talking about. It is a single-use item. When you do any
+type of work on the helmet, you would cut the old zip tie off,
+I would assume, and replace it with a new one. And if the new
+one didn't hold, you would grab another one from the bin and
+put another one on it. Is that pretty much the way?
+ Mr. Lilli. Yes, sir, that is the way.
+ Mr. Scott. And I think the problem is, when you--one is I
+think your people should be commended for identifying the
+problem prior to putting it in flight. So thank you for that.
+And I know you have got a lot of family in the military, and if
+I am not mistaken, spent some time yourself there, and I am
+glad to have you in the position you are in.
+ I will tell you, the idea that this is--that 36,000 of
+these are specialized aviation parts is ridiculous. And I hope
+you don't spend any time or waste any time looking for them. I
+hope you just get rid of them if they don't work, and you can
+go buy some more somewhere. You have got to have the
+flexibility in anything that you do to discard things that are
+just not worth more than a penny. It doesn't make sense to
+spend dollars tracking them down. No private business would do
+that.
+ The other thing I will tell you is I will get the facts on
+the C-5 wheel. I know those people well. Robins Air Force Base
+is in my district. And those are very skilled people that work
+at that facility, and I have no doubt that if a part needed a
+minor modification, that they have not only the tools, but they
+have the talent to make a minor modification to anything that
+may have come in. And I will seek that out and find that
+myself.
+ But I would like to know this, ma'am, when you--the zip
+ties, you identified that as 36,000 potential problems. Are the
+36,000 zip ties identified as 36,000 individual potential
+problems?
+ Ms. Wicecarver. No, sir. What I said was they were left in
+the inventory.
+ Mr. Scott. Well, I will yield the remainder of my time. But
+I think that disposable parts, disposable parts that are worth
+a penny apiece shouldn't be part of--what did you say?
+ Ms. Speier. I said they should be able to buy them at
+Lowe's too.
+ Mr. Scott. I prefer Home Depot, Home Depot being a Georgia
+company. But I agree with you. I mean, the reason it costs so
+much to do anything for the government is because we
+micromanage every aspect of what the people at the DLA do. With
+that, I yield the remainder of my time.
+ Mrs. Hartzler. Thank you, gentleman. I think we have had a
+very, very good productive discussion today where our job is
+oversight and investigate how the taxpayer dollars are used.
+And we want to, while we are advocating for more money to our
+national defense because we see all the threats in the world,
+and we see the needs, and we see the cuts that have occurred
+and our readiness in jeopardy and modernization not where it
+needs to be, at the same time we need to make sure every dollar
+that is spent and authorized from this committee to the
+Department of Defense is spent wisely. And we need to make sure
+that our men and women in uniform are safe.
+ And so I appreciate your work, Mr. Sopko. I appreciate, you
+know, the lessons learned that we are learning. And I agree
+with my colleagues as well as the gentleman, Mr. McKeon, from
+the Department of Defense. And I was going to bring up that
+same quote in my closing statement here, that we need to
+question whether the Department of Defense should do this
+again, should take on this mission, because there clearly was
+perhaps some mistakes made over there and some money that was
+spent that could have been spent more wisely. And so thank you
+for your work there.
+ And thank you as well, Ms. Wicecarver and Mr. Lilli, for
+what you do. We want to make sure that parts--I am familiar
+with farm equipment business, and there is parts and service,
+and it is important when there is a defective part, if it is
+something that--I appreciate my colleagues' comments about zip
+ties. I think there is a lot of wisdom in that too. We ought to
+have common sense mixed in here. But if there are major parts
+that could endanger our warfighters, we need to make sure that
+they are not only returned, make sure they are not put back on
+to the airplanes or whatever the equipment is, but also that
+restitution is made. If there is a warranty, we need to turn it
+in. Get that money back for the taxpayer. Or if it is a
+defective part that is of major consequence where we could have
+it replaced, it needs to be followed through.
+ So thank you, Mr. Lilli, for the efforts you are going to
+make. And I look forward to the reports that Ms. Speier
+requested and I agree with to keep us apprised of how this is
+going. So thank you all very much for participating. This
+hearing is adjourned.
+ [Whereupon, at 10:35 a.m., the subcommittee was adjourned.]
+
+
+=======================================================================
+
+
+
+
+ A P P E N D I X
+
+ April 15, 2016
+
+=======================================================================
+
+
+ PREPARED STATEMENTS SUBMITTED FOR THE RECORD
+
+ April 15, 2016
+
+=======================================================================
+
+
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+
+
+
+
+=======================================================================
+
+
+ DOCUMENTS SUBMITTED FOR THE RECORD
+
+ April 15, 2016
+
+=======================================================================
+
+
+
+ [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+
+
+
+=======================================================================
+
+
+ WITNESS RESPONSES TO QUESTIONS ASKED DURING
+
+ THE HEARING
+
+ April 15, 2016
+
+=======================================================================
+
+
+
+ RESPONSE TO QUESTION SUBMITTED BY MS. SPEIER
+
+ Ms. Wicecarver. The sampled product quality deficiency report was
+submitted by the Edwards Air Force Base maintenance group in September
+2012 and was one of several deficiency reports submitted by Air Force
+customers for the defective tie down straps delivered on the contract.
+The DLA product quality deficiency report investigation was completed
+and closed in January 2014. Our audit found that the DLA product
+quality deficiency report investigation did not account for all
+defective tie down straps in the DOD inventory. [See page 12.]
+ ______
+
+ RESPONSES TO QUESTIONS SUBMITTED BY MR. CONAWAY
+ Ms. Wicecarver. The answer to the question, ``What I'm asking, of
+the 65 percent that was wrong, that you found wrong, how much of that
+do you say is in the full universe of 269 parts? Of the 65 that you
+audited, how many of those had problems?'' is as follows. Specifically,
+of the 65 sampled stock numbers, there were 57 that had problems. These
+problems resulted in DLA Aviation receiving less than appropriate
+restitution. This projected to 269 of 312 stock numbers with problems
+in the population. [See page 19.]
+ Ms. Wicecarver. Overall, we determined that DLA Aviation did not
+adequately perform the steps needed to obtain appropriate contractor
+restitution for 57 of the 65 sample items and resulted in DLA Aviation
+receiving less than appropriate restitution. We calculated the
+difference between the restitution that DLA Aviation should have
+received versus what they actually received for the defective parts.
+The value of the defective parts associated with the 65 sample items
+was $4,180,479 and DLA Aviation only provided evidence that it received
+$287,330 in restitution. The OIG DOD's analyst projected the audit
+findings to the population of defective parts and concluded that DLA
+Aviation did not recover at least $12.3 million in restitution for 269
+of the 312 stock numbers that it identified contractors supplied
+defective parts. [See page 20.]
+ ______
+
+ RESPONSE TO QUESTION SUBMITTED BY MS. McSALLY
+ Mr. Sopko. As cited in SIGAR's written testimony \1\ before the
+subcommittee, ``TFBSO [Task Force for Business Stability Operations]
+was originally created in 2006 by the Deputy Secretary of Defense to
+help revive the post-invasion economy of Iraq. The Task Force reported
+to the Office of the Secretary of Defense. At its inception, TFBSO was
+not envisioned to execute projects and programs, but rather to advise
+Department of Defense (DOD) entities on ways to improve contracting
+processes and procedures. The memorandum establishing the Task Force
+stated,
+---------------------------------------------------------------------------
+ \1\ SIGAR Testimony before the House Committee on Armed Services
+Subcommittee on Oversight and Investigations titled ``DOD Task Force
+for Business and Stability Operations in Afghanistan: Review of
+Selected Expenditures Highlights Serious Management and Oversight
+Problems.''--Statement of John F. Sopko, Special Inspector General for
+Afghanistan Reconstruction, April 15, 2016 (SIGAR 16-29-TY).
+---------------------------------------------------------------------------
+ ``The Task Force will not be responsible for contracting, but will
+advise existing DOD contracting offices on improved contracting
+processes and associated systems solutions consistent with applicable
+statutory and regulatory requirements as a means to create economic
+opportunity.'' \2\
+---------------------------------------------------------------------------
+ \2\ Memorandum from Deputy Secretary of Defense Gordon England to
+the Secretaries of the Military Departments, et.al. June 22, 2006.
+---------------------------------------------------------------------------
+ Over time, TFBSO evolved to take a larger role in identifying
+economic development needs in Iraq and directly executed programs and
+projects in response to those needs. In 2009, the Secretary of Defense
+formalized a new TFBSO mission and called on the Task Force to leverage
+economic development in Iraq as a strategic and operational tool.\3\
+Late in 2009, TFBSO was redirected to Afghanistan, and it began
+operations there in early 2010.'' \4\
+---------------------------------------------------------------------------
+ \3\ Memorandum from Secretary of Defense Robert Gates to the
+Secretaries of the Military Departments, et al., March 11, 2009.
+ \4\ See, Robert M. Gates, Secretary of Defense, Continuation of
+Task Force for Business and Stability Operations, March 25, 2010; GAO,
+DOD Task Force for Business and Stability Operations: Actions Needed to
+Establish Project Management Guidelines and Enhance Information
+Sharing, GAO-11-715, July 29, 2011.
+---------------------------------------------------------------------------
+ As referenced in Principal Deputy Under Secretary for Defense for
+Policy Brian McKeon's written statement to the subcommittee,
+ ``Later [in 2010], some uncertainty about the status of the Task
+Force arose with the Office of General Counsel cast doubt on the legal
+authority of the Department of Defense to conduct economic development
+activities in a foreign country, as they appeared to be inconsistent
+with the Department's authorities. Many activities of the Task Force
+were suspended. Congress clarified the situation in the FY 2011
+National Defense Authorization Act, providing statutory authority for
+activities of the Task Force in Afghanistan.'' \5\
+---------------------------------------------------------------------------
+ \5\ Statement of Brian P. McKeon, Principal Deputy Under Secretary
+of Defense For Policy, Submitted to the House Armed Services
+Subcommittee on Oversight and Investigations, April 15, 2016.
+---------------------------------------------------------------------------
+ TFBSO was authorized in section 1535 of the National Defense
+Authorization Act for Fiscal Year 2011 (P.L. 111-383) and reauthorized
+in subsequent fiscal years. The National Defense Authorization Act for
+Fiscal Year 2014 (P.L. 113-66) extended TFBSO's authorization through
+December 31, 2014, at which time the Task Force ended its programs in
+Afghanistan, and ceased all operations on March 31, 2015.
+ In regard to Representative McSally's question about preventing
+similar circumstances in the future, I would point to Principal Deputy
+Under Secretary McKeon's statement to the subcommittee on the
+``overarching question'' for policy makers about promoting economic
+development during a contingency operation. ``I am skeptical that the
+Department of Defense is the natural home for that mission,'' he
+said.\6\
+---------------------------------------------------------------------------
+ \6\ McKeon, Ibid.
+---------------------------------------------------------------------------
+ While I am hesitant to suggest legislative actions to the committee
+which authorized TFBSO, I would highlight two points. First, between
+2006 and the DOD General Counsel's 2010 opinion, DOD was using internal
+funds for TFBSO operations. Increased congressional oversight, or
+legislation prohibiting DOD from undertaking similar economic
+development missions in the future without congressional authorization,
+may be warranted. However, if the committee determines, as it did
+between 2010 and 2014, that it supports DOD engaging in economic
+development in a contingency environment, then it should consider
+providing statutory authority as it did for TFBSO in Afghanistan. Such
+authority should include provisions providing for rigorous oversight,
+creating stringent project requirements, ensuring that qualified staff
+with regional and subject matter expertise are hired, mandating cost-
+benefit analyses, and requiring thorough record keeping.
+ Finally, SIGAR recently initiated performance and financial audits
+of TFBSO's activities in Afghanistan. These audits will provide
+additional insight into how the Task Force operated in Afghanistan and
+used U.S. taxpayer resources. We expect to issue these audits in late
+2016 or early 2017 and we will report our findings to this committee.
+[See page 23.]
+
+ [all]
+