Washington, DC - Senator Hillary Rodham Clinton, at today's Senate Armed Services Committee hearing, pressed Bush Pentagon officials on the Administration's lax and inadequate oversight of contractors in Iraq, which has cost taxpayers billions in over payments, fraud and waste. Senator Clinton cited specific examples of contractors openly defying Pentagon attempts to control costs and limit spending but failing to be held accountable. Senator Clinton also questioned Army officials about their efforts to develop monitoring of contractors and when monitoring would be in place - none were able to reply.

Following her questioning, Senator Clinton emphasized that "we just cannot let this go on. It's not fair to the people in the field; it's not fair to the people in the Defense Department, who are frankly outmanned." Senator Clinton emphasized that currently "the contractors have so much more capacity to be able to manipulate the system, and the end loser is the soldier in the field and frankly all the rest of us."

The following is a transcript of Senator Clinton's questioning at today's Senate Armed Services Committee hearing:

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Senator Clinton: It is especially important to get to the bottom of the questions that we are asking today. And Mr. Chairman, I would respectfully request that you perhaps consider either charging one of our existing subcommittees or creating a special subcommittee to delve more deeply into the issues that are being raised here. The seriousness of these allegations and frankly the waste and fraud that is so evident from so much of the what we've heard merits that, but in addition we've to got to figure out what we're going to do going forward. We cannot afford to continue this.

Over the last four years, we have paid KBR $20 billion to provide logistic support in Iraq. I thought when we enter into a contract we were in charge of telling the contractor what to do, but some of the reports that we have seen on this committee make it sound as though the contractor's in charge of telling the United States military, the United States government what to do.

Here are a few excerpts from some of the DoD documents from July 2005:

• There were concerns as to "the contractors' reluctance to down-size the labor force after the transfer or support missions to the sustainment contractor."

• Also, July 2005, "The use of self-directed work added additional cost to the task order with no visible benefit to the government."

• March 2006, "There was no effort to coordinate with the contracting officer to de-scope changes based on the reduction requirements and to establish a new definite price."

• April 2006, "Command personnel advised us that the contractor wouldn't move idle personnel or equipment assigned from one task order to another task order to accomplish needed work. When we brought this situation to the attention of top contractor operational personnel, they informed us this was a company policy."

Secretary Bolton, why is the contractor permitted to be reluctant to down-size the labor force? Why are they adding self-directed work to the contract? Why aren't they coordinating with government officials in order to reduce requirements and costs? And how can they have a company policy that requires the United States tax payer to pay for idle workers? Who's in charge of this contract, DoD or the contractor?

Secretary Claude M. Bolton, Jr., Assistant Secretary of the Army for Acquisition, Logistics and Technology: Well, I would hope that the DoD is, Senator Clinton. In response to allegations such as those, what we've done is put together several panels run by the government, run by the Army. One is to look at requirements. These are requirements that come on a regular basis from the commanders to make sure that the commander is getting what he or she really wants. Sometimes those requirements are inflated. We also have a group whose job it is, once we have those requirements, to actually figure out how much it's going to cost and then negotiate that with the contractor who's already put in a bid. And many times those bids are a lot larger and higher than we'd like them to be, so we put people in place to correct some of the things that you've just mentioned. Are we there yet? Are we perfect yet? No. I'll take your allegations and anybody else's that I get from the auditors here, which we've done over the years and we will correct those. I think we're getting better, but we are not there yet.

Senator Clinton: Well, of course one of the problems has been the extraordinary increase in the outsourcing of government functions to private contractors. I think the latest figures I saw is that we now have three times more private contract employees then we do military and civilian employees. There is no evidence that these contract employees perform better than government employees or that they do it more cost-effectively. And there has been no database or system of accountability to keep track of all of these contractors. Now in October 2005, DoD issued DoD instruction 302.42, which included the requirement that DoD develop or designate a joint database to maintain by name accountability of contractors deploying with the force and a summary of the services or capabilities they provide. GAO report 0714 entitled, "Military Operations High Level DoD Action Needed to Address Longstanding Problems with Management and Oversight of Contractors Supporting Deployed Forces," provides great detail on these DoD instructions and the importance of having full accountability. May I ask, just starting with Secretary Bolton for a yes or no answer, if any of you have reviewed the GAO report 0714? Secretary Bolton?

Secretary Bolton: Only at the summary level.

Senator Clinton: Next please.

William H. Reed, Director, Defense Contract Audit Agency (DCAA): No.

Senator Clinton: Next.

Keith D. Ernst, Acting Director, Defense Contract Management Agency: Yes Ma'am.

Patrick Fitzgerald, Auditor General of the U.S. Army: Yes Senator.

Major General Jerome Johnson, Commanding General, U.S. Army Sustainment Command: Yes Senator.

Senator Clinton: Okay. And the GAO report concluded that the Army was still in the process of implementing the database and that is uncertain when the process will be completed. So, this has been going on for now, two and a half years. I guess a little less than that. And we still don't have it. Does anyone know when the process will be completed? Can any witness answer that? Does anyone know when our deployed senior leaders and commanders will have a grasp of the accountability problem with all these contractors?

I'll let the record show that to both questions, all the witnesses shook their heads "no."

Chairman Levin: The record will indicate that, unless the witnesses indicate right now otherwise.

Secretary Bolton: Only to talk about the database. We do have a SPOT report that we provide to commanders. That's still in the emergency database. That does account for the contractors. The problem that the commander has is more than just the people that I have on contract. Since that commander is responsible for the entire battle space, it's not only my contractors, it's the contractors from the coalition forces, it's the contractor from private companies, but he also has to be concerned. The database that you referenced earlier, is still maturing; that's at the DoD level, we're part of that. I cannot answer your question in terms of when it will be complete and how we'll keep it updated.

Senator Clinton: Secretary Bolton, which Army staff agency is responsible for the implementation of this database?

Secretary Bolton: That will fall under me. If we're talking about contracting and contractors, once I have that, I'll issue a policy on that.

Senator Clinton: Well, there was a disagreement reported in the GAO report as to whether this falls under logistics or personnel. Has that disagreement been resolved?

Secretary Bolton: I don't know if it's been resolved yet or not. General Johnson?

General Johnson: No, it has not been resolved. I'm a bit reluctant in answering this because I don't know the current status. I'm in the field now versus the building. There was a system and a team established as we moved into the war fight. We called it Triple C, which is Contract Control Cell. It was established by the Army material command, operated under my command, to make an effort to contract to account for contractors on the battle field. Frankly, it was bigger than us. That's when we got the help of DoD, the logistics management readiness crew, and they came up with a SPOT report. We have taken that to the field commanders. They have looked at it. In many cases it does not provide some of data points that they want so that they can manage these contractors and it's going to require some [inaudible] procedures as Mr. Bolton has outlined, that we currently just don't have. We have--so in some cases--we have some accountability. We don't have what we need.

LOGCAP's a bit different. We probably have pretty close to, I'd be, in the 90 percent range confident that I know how many LOGCAP contractors I have on the battle field and where. But, when we open up the scope to all the contractors on the battle field, we have contractors who perform what we call field service representatives, who follow particular systems that are in the field that require contractor repair and we have numerous other contractors, supporting contractors. So, that's kind of the complexity of the problem. Doesn't answer and doesn't give an excuse for not having the capability. We're working very hard at it, but we're just not there yet.

Secretary Bolton: Senator Clinton, if I could just add--on the note that I was handed--on the SPOT that stands for Synchronized Pre-deployment Operational Tracker. That's the tracking of the contractors. That is in the office of Secretary of Defense Business Transformation office and it's still under development.

Senator Clinton: Well Mr. Chairman, I think that the issues that this hearing has raised are such serious ones. This whole question about contracting out services where the chain of command either doesn't exist or it's essentially outsourced as well to the contractor, or whether it's certainly confused, and where people cannot be held accountable. The failure to have adequate databases, and that's on top of the testimony from our colleague Senator Dorgan, about just outright fraud and abuse and just heartbreaking waste in the system. So, I think that this certainly is an issue that demands our attention and perhaps an effort to try to sort out all of these various problems of accountability. Trying to get a better handle on what should or shouldn't be outsourced and I hope that this committee can take lead on trying to establish a strong foundation similar to what our colleague Senator McCaskill referred to with the groundbreaking work of then-Senator Truman, because we just cannot let this go on. It's not fair to the people in the field; it's not fair to the people in the Defense Department, who are frankly outmanned. They have inadequate databases. It's like sending them into a battle with a pop gun against heavy artillery because the contractors have so much more capacity to be able to manipulate the system, and the end loser is the soldier in the field and frankly all the rest of us.

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Read more statements by Senator Clinton concerning the war in Iraq.

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