Gary Palmer Asks Witnesses How DoD’s Mishandling Of Major Projects Leads To Wasteful Spending

7 months ago

During a House Oversight Committee hearing on Tuesday, Rep. Gary Palmer (R-AL) questioned witnesses about wasteful spending within the Department of Defense.

Transcript

00:00Now move to the distinguished gentleman, the young chairman from Alabama, Mr. Palmer.

00:05You're recognized, sir.

00:07Thank you, Mr. Chairman.

00:08I'm going to direct my questions a little bit differently, and I wanted to participate in this hearing

00:14because I've been looking at some of these issues for quite a while.

00:18And I realize this is focused predominantly on fraud risk management.

00:23But one of the things that I think creates an opportunity for fraud and mismanagement is how we handle big projects at the Department of Defense,

00:35whether it's a construction project or a new weapon system.

00:38And I just want to ask each of you to comment on this if you think you're able to do that.

00:47I think a lot of times when Congress approves a major weapons system or a major construction project,

00:57and this is particularly problematic on construction projects overseas,

01:01there's a tendency on the part of the Department of Defense to start those projects before the design is complete,

01:10and it results in a huge amount in change orders.

01:13I'm working on some ideas on how to mitigate that from the congressional side in terms of ensuring that the money will be there

01:22so that they don't feel the pressure to start these construction projects or other projects or weapon systems before the design is ready.

01:31But would you comment on how that, when your design is not complete, you're issuing lots of change orders,

01:38how that opens us up to mismanagement and potential fraud?

01:46Me, sir?

01:47I wouldn't be able to discuss that, but in a different sphere,

01:54I would submit that what you're talking about, large procurements of weapon systems,

01:59they are really hybrids for fraud because of, like you said, the complex nature of the,

02:11and when they come online, and then the other parts come online.

02:15So we do have a lot of worry about large weapon systems,

02:21and we have a lot of fraud work in the past and now in those kinds of things when they're in that phase.

02:29So that's what would be my feedback to you.

02:32Mr. Bagdorian?

02:33Yeah, I would fully agree with Mr. Mayo's comments.

02:37I mean, this is an element of hyper-complexity, basically.

02:41You have a big system.

02:42It has, you know, the prime contractor, I assume, leading the effort,

02:46and then the whole army of subcontractors, which is a key element of risk here.

02:52I'm not a procurement expert by any means,

02:54but I do believe that that element of complexity, uncertainty, long lead times,

02:59all kinds of different things add to heightened risk, definitely.

03:04And when you add to that just a myriad of change orders.

03:09That's right.

03:09Which I think is problematic.

03:14And then when you start talking about construction projects,

03:17and particularly in remote locations,

03:19I think it makes it very difficult for inventory management.

03:26And again, if the design is not complete and you're making all these changes,

03:32isn't that an area where we need to really bear down?

03:35And, Mr. Chairman, I've been given quite a bit of thought to this,

03:39and I've actually been thinking about this for six or eight years,

03:42about how we appropriate for major defense programs,

03:48and maybe thinking about saying that if a program design,

03:54if the project design or the weapon system design is not ready,

03:57that we carry the funding over into the next fiscal year,

04:05so that we give the Department of Defense time to get the design right.

04:10And I think that will reduce a lot of the fraud and mismanagement

04:14and save us a lot of money on that area, in those areas.

04:19And Mr. Mayo, Mr. Bogdoyan, you can comment on that.

04:25And you may have already commented sufficiently.

04:27But that's one of the areas where I really want to focus, Mr. Chairman,

04:30in terms of trying to reduce the amount of waste that we have in our defense procurement programs.

04:37That I'll be happy to yield back.

04:39If I may answer Mr. Palmer's question, Mr. Chairman,

04:43each element of complexity in a program, as I alluded to in my opening remarks,

04:48that's one of the key drivers of fraud risk in federal programs,

04:52is their complex configuration, what someone can do, can't do, and so on.

04:58So it's almost like risk is built in.

05:01And if you add multiple layers in a big, complex program of DOD,

05:06then that really exacerbates risk.

05:11So trying to control for that as part of the upfront due diligence, for example,

05:16would be an important step.

05:19I thank the witnesses.

05:20Thank you, Mr. Chairman.

Gary Palmer Asks Witnesses How DoD’s Mishandling Of Major Projects Leads To Wasteful Spending

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