<DOC>
[107th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:87385.wais]
IMPACT OF POTENTIAL RESTRICTIONS ON ANTI-DRUG MEDIA CAMPAIGN
CONTRACTORS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON CRIMINAL JUSTICE,
DRUG POLICY AND HUMAN RESOURCES
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
JULY 26, 2002
__________
Serial No. 107-218
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
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COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida EDOLPHUS TOWNS, New York
JOHN M. McHUGH, New York PAUL E. KANJORSKI, Pennsylvania
STEPHEN HORN, California PATSY T. MINK, Hawaii
JOHN L. MICA, Florida CAROLYN B. MALONEY, New York
THOMAS M. DAVIS, Virginia ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
BOB BARR, Georgia DENNIS J. KUCINICH, Ohio
DAN MILLER, Florida ROD R. BLAGOJEVICH, Illinois
DOUG OSE, California DANNY K. DAVIS, Illinois
RON LEWIS, Kentucky JOHN F. TIERNEY, Massachusetts
JO ANN DAVIS, Virginia JIM TURNER, Texas
TODD RUSSELL PLATTS, Pennsylvania THOMAS H. ALLEN, Maine
DAVE WELDON, Florida JANICE D. SCHAKOWSKY, Illinois
CHRIS CANNON, Utah WM. LACY CLAY, Missouri
ADAM H. PUTNAM, Florida DIANE E. WATSON, California
C.L. ``BUTCH'' OTTER, Idaho STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia ------
JOHN J. DUNCAN, Jr., Tennessee BERNARD SANDERS, Vermont
JOHN SULLIVAN, Oklahoma (Independent)
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
James C. Wilson, Chief Counsel
Robert A. Briggs, Chief Clerk
Phil Schiliro, Minority Staff Director
Subcommittee on Criminal Justice, Drug Policy and Human Resources
MARK E. SOUDER, Indiana, Chairman
BENJAMIN A. GILMAN, New York ELIJAH E. CUMMINGS, Maryland
ILEANA ROS-LEHTINEN, Florida ROD R. BLAGOJEVICH, Illinois
JOHN L. MICA, Florida, BERNARD SANDERS, Vermont
BOB BARR, Georgia DANNY K. DAVIS, Illinois
DAN MILLER, Florida JIM TURNER, Texas
DOUG OSE, California THOMAS H. ALLEN, Maine
JO ANN DAVIS, Virginia JANICE D. SCHAKOWKY, Illinois
DAVE WELDON, Florida
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
Christopher Donesa, Staff Director and Chief Counsel
Sharon Pinkerton, Professional Staff Member and Counsel
Conn Carroll, Clerk
Julian A. Haywood, Minority Counsel
C O N T E N T S
----------
Page
Hearing held on July 26, 2002.................................... 1
Statement of:
Jaggard, Michael, Executive Director for Acquisition and
Business Management, Office of the Assistant Secretary of
the Navy for Research, Development and Acquisition,
Department of the Navy..................................... 13
Marston, Christopher, Deputy Chief of Staff, Office of
National Drug Control Policy............................... 7
Martin, Al, president, A.J. Martin and Associates, Ltd....... 18
Letters, statements, etc., submitted for the record by:
Jaggard, Michael, Executive Director for Acquisition and
Business Management, Office of the Assistant Secretary of
the Navy for Research, Development and Acquisition,
Department of the Navy, prepared statement of.............. 15
Marston, Christopher, Deputy Chief of Staff, Office of
National Drug Control Policy, prepared statement of........ 8
Martin, Al, president, A.J. Martin and Associates, Ltd.,
prepared statement of...................................... 21
IMPACT OF POTENTIAL RESTRICTIONS ON ANTI-DRUG MEDIA CAMPAIGN
CONTRACTORS
----------
FRIDAY, JULY 26, 2002
House of Representatives,
Subcommittee on Criminal Justice, Drug Policy and
Human Resources,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:39 a.m., in
room 2203, Rayburn House Office Building, Hon. Mark E. Souder
(chairman of the subcommittee) presiding.
Present: Representatives Souder, Barr, Mica, Davis of
Virginia, and Cummings.
Staff present: Chris Donesa, staff director and chief
counsel; Sharon Pinkerton and Nick Coleman, counsels; Jim
Rendon, professional staff member; Conn Carroll, clerk; Tony
Haywood, minority counsel; Earley Green, minority assistant
clerk; and Teresa Coufal, minority staff assistant.
Mr. Souder. Earlier this week, the House adopted an
amendment offered by our colleague, Congressman Barr, to the
Treasury-Postal Appropriations Bill. The amendment would
prohibit funding for the contract recently awarded for the
National Youth Anti-Drug Media Campaign. I scheduled this
hearing on short notice to examine the potential ramifications
of this amendment, or whatever similar provision may emerge
from the conference on the appropriations bill.
I do not intend for this to be a general hearing on the
operation or focus of the Media Campaign, the bidding process,
or the contractor irregularities which gave rise to the
legislative provision in question. These are all matters that I
intend for the subcommittee to consider carefully and
deliberately as part of the reauthorization process, and in due
time we will hold hearings that allow for full testimony and
consideration of each of these issues.
Today's hearing is intended to consider only the potential
ramifications of contractor restrictions on the operation of
the Media Campaign.
My primary and overriding concern with respect to this
issue is to ensure the continued functioning of the Media
Campaign, which is one of the most important tools at our
disposal and in the President's strategy to reduce illegal drug
use. I am also concerned, however, about the questions of
contractor integrity which gave rise to this amendment.
Particularly as we pay increasing public attention to corporate
responsibility and ethics, we must ensure the accountability
and effectiveness of public contractors.
The Media Campaign cannot be forced to halt or be further
disrupted. It is too important a tool in preventing drug
addiction as well as in meeting the President's strategy to
meet specific targets in reducing youth drug abuse. Almost
20,000 Americans will die this year of drug induced causes. If
the campaign can help keep even a tiny fraction of this number
from starting drug use, it morally will be a worthwhile effort.
The Office of National Drug Control Policy has taken the
position that the amendment would effectively cause the
campaign to go dark. Other information available to the
subcommittee suggests that the situation is not so dire. In any
event, however, it is clear that significant logistical,
administrative and contracting issues have not and must be
fully reviewed prior to taking the step proposed in this
amendment or one like it. Today's hearing is to review those
issues and the practical ramifications of potential legislative
restrictions. We have assembled excellent witnesses to do so on
short notice.
From the Office of National Drug Control Policy, we will
hear from Mr. Chris Marston, the Deputy Chief of Staff for
Director Walters. From the Department of the Navy, which is
currently the contracting officer for the Media Campaign, we
have Mr. Michael Jaggard. Finally, we have Mr. Al Martin, who
is an expert in transitions between advertising agencies.
I would now like to yield to the distinguished ranking
member for any opening statement.
Mr. Cummings. Thank you, Mr. Chairman. As the ranking
minority member of the subcommittee, and as a Member of the
House who represented a district which has been ravaged by
drugs, and as a parent, I believe that the National Youth Anti-
Drug Media Campaign is a necessary part of our national drug
control strategy, and I believe that it is vital that we keep
the campaign alive.
We have seen anti-drug messaging work in the past to reduce
drug use among children and teens. In many places across the
country it appears to be working now. Even while recent
evaluations of the Media Campaign have not shown the campaign
causing reductions in marijuana usage as we'd like to see, the
same evaluations do show that anti-drug ads are being seen and
remembered by parents and youth. Moreover, ads targeting
parents have been effective in getting parents to engage their
children on the issue of drugs.
In the city of Baltimore alone, there are 60,000 addicts,
most of whom began to use drugs during their early teens. I
firmly believe that if parents had talked to their children
about drugs and drug usage, there would be a lot fewer than
60,000. I think many of my colleagues would agree with this
conclusion. I think most of my colleagues want to see the
campaign survive and reach its potential to reach as many
children and parents as possible.
Today, the campaign is at a critical crossroads. I have
pledged my commitment to working with Mr. Portman of Ohio to
develop reauthorization legislation that will extend and
improve the campaign, and I remain committed to work with you,
Mr. Chairman, the other members of the Drug Policy
Subcommittee, our counterparts in the Senate and ONDCP Director
Walters to work through the areas of the campaign that need
fixing with the single aim of making it as effective and
efficient as it can be.
Most of us are on the same page. But the amendment by our
colleague Mr. Barr, adopted during consideration of the
Treasury and General Government Appropriations Act of Fiscal
Year 2003 suggests that we're not all on the same page. Mr.
Barr's provision would prohibit ONDCP from expending funds to
pay Ogilvy & Mather under a new contract awarded on July the
3rd.
Mr. Barr has given assurances that his intent is not to
cripple or kill the campaign. But that may well unfortunately
be the effect. ONDCP tells us that if Mr. Barr's provision
becomes law it will effectively shut down the youth media drug
campaign before a new contractor could be selected and get up
to speed. There would be no activity for nearly 75 percent of
the program. The Advertising Council would lose nearly 50
percent of pro bono match and the Partnership for a Drug-Free
America and ONDCP will lose an additional match of $23 million.
Additionally, the campaign would also be required to
eliminate all local market and State-by-State media activity.
By March 2003, simply stated, the campaign would go dark. I
know that Mr. Barr disputes these representations, but if these
consequences were to occur, they would be devastating to the
campaign and they would be irreversible.
We are all familiar with the mistakes that Ogilvy made in
the past and, to be quite frank with you, I am very concerned,
and we have all heard ample testimony in the subcommittee about
Ogilvy's extensive efforts to reform its billing and accounting
procedures and the clean bill of health Ogilvy has received
from the Navy.
The Navy, with all the facts before it, selected only
Ogilvy to continue in its role as primary contractor. Some of
us may wish that the contracting process had produced another
result. But there is no indication that it was conducted
unfairly or improperly. At this critical time, we should be
focused on figuring out what we can do to improve the campaign.
I believe that the amendment by Mr. Barr is simply not
constructive toward this end and should not be enacted.
While it may make some members feel good to go after an
easy political target in Ogilvy, the bottom line we should all
be concerned about is that it will not improve the campaign. It
will cause more problems, problems we may not be able to
surmount.
I appreciate our witnesses being here to discuss the impact
of the Barr amendment from their various perspectives. Let me
say this, that I think that whenever there is an agency, a
company that does criminal activity or is alleged to have done
criminal activity, I think we need to look at that very
seriously. My constituents pay taxes, as all of our
constituents do, and they want to make sure that when
government spends money, that money is being spent properly.
And the thought that a campaign is being conducted with
government money and that government money is not being spent
the way we intend it, I think flies in the face of our
constituents and it also does damage to their hopes and their
dreams that they will have an additional tool in helping them
to address the drug issues with regard to their children.
And so, Mr. Chairman, I certainly understand Mr. Barr's
concern. I have had an opportunity to talk to him extensively.
My concern is that it's the bottom line, and the bottom line
being I want to make sure the campaign continues. Thank you
very much.
Mr. Souder. Mr. Barr.
Mr. Barr. Thank you, Mr. Chairman. I don't know quite where
to start. This is a highly unusual hearing. I was not aware
that this is a hearing on the Barr amendment. That would be
even more unusual than this hearing appears to be. I have to
express some disappointment today we have a company that
despite on the record evidence of fraud, it has admitted to
irregularities, there's a continuing, apparently a continuing
criminal probe of this company, and in an effort to simply
secure a vehicle whereby the Congress as stewards of taxpayer
money, in this case up to in excess of $700 million, could
exert proper oversight at a critical point, that is in the
appropriations process, the reaction of some in ONDCP is to fan
out on Capitol Hill, claiming that the sky is falling, saying
that a program will go dark, which is absolutely ludicrous.
The funding that we are talking about in the appropriations
bill and through the so-called Barr amendment, it is not a Barr
amendment. It was adopted by a voice vote. If the distinguished
gentleman on the other side had such objections to it he should
have voted against it, demanded a roll call vote and voted
against it. The leadership on his side supported it. The
reaction of some in this committee is to try and undercut what
we are trying to do. It is to rally around the bureaucrats and,
while I hope that is not the case, the comments of the
gentleman on the other side indicating that this is an effort
to stop the Barr amendment leads me to conclude that it may
very well be the case. I remain open to assurances that it's
not.
No program in this government is so important that we ought
to overlook violations of the law, and I'm amazed that a Member
of Congress would take that attitude. I have assured the
gentleman on the other side, and the reason that he approached
me was I thought that he would accept my assurances, his
comments indicate apparently not and I'm sorry that there's
something that I didn't say to him that makes it more clear. It
is not my intention to stop this program. The amendment that
was adopted by the full House will not stop this program. And I
resent the fact that ONDCP is running around up here on the
Hill and probably will sit here today and claim that the sky is
falling, that a program which we all support, including myself,
Mr. Cummings, will cease and we will lose the drug war if we
simply stand up and say that a company that has defrauded the
government of this country the people of this country and to
which ONDCP is turning a blind eye should continue to receive
hundreds of millions of dollars in taxpayer moneys.
The only purpose for the amendment is to make a statement
to the taxpayers, to go on record as a Congress and to give us
a vehicle to take a close look at this whole issue. And why in
heaven's name you all are fighting me on this, to simply
address this issue, why ONDCP is fighting us on this issue is
beyond me. What I am trying to do is to bring honesty and
integrity to this process, the anti-drug media campaign, so
that it works better, for heaven's sake. Why do you all object
to that? I don't know why you all object to that.
Now, I've heard rumors that there are sweetheart deals out
there. I certainly hope that's not true. But we don't have the
witnesses here today, Mr. Chairman, that can answer these
questions. These questions need to be answered at the same
level that we posed the questions earlier, in earlier hearings
at the top levels of ONDCP.
Sending up a Deputy Chief of Staff, and I have great regard
for Mr. Marston, he's not in a policy or legal position to
answer the questions that we have. Sending up an Executive
Director for an office over at the Department of Navy, and I
have great regard for Mr. Jaggard, he's not going to be able to
answer the questions that we need.
So I go back, I'm not quite sure what the purpose of this
hearing is. Very serious questions have been raised on the
record by this subcommittee and by the full committee. And I
just hope that there's not some effort out there to sweep all
this under the rug, because I consider this very, very serious.
Something is going on here that doesn't smell right, and I
think it's going to take the very program, Mr. Cummings, that
you and I both support.
I am not trying to kill the program. I'm trying to make it
better, for heaven's sake. I don't know why you all don't
believe me. There is demonstrated fraud that has been
perpetrated by this company. All we are saying is that company
at this point in time should not continue to benefit from
taxpayer dollars, and there are other companies out there that
can step into the breach if we need that. We're looking at 2003
fiscal year, not 2002.
I yield back.
Mr. Souder. Mr. Mica, do you have an opening?
Mr. Mica. Thank you, Mr. Chairman, distinguished ranking
member and my colleagues. I had the opportunity to chair this
subcommittee when we initiated this program. And if we review
for just a second the history of all this, I proposed early on
that we increase the television media, public interest
contribution originally and introduced legislation to that
effect. But the Clinton administration wanted to use taxpayer
dollars. The compromise we reached was a program to combine
donated time and services with taxpayer contribution and $1
billion plus program. I think you all will recall that the
whole program got off to a rocky start. We had the former
Director of ONDCP, Barry McCaffery, step forward and tell us in
the beginning they sat around and tried to figure out what to
do and finally decided to let a large number of contracts out.
Unfortunately, the contracting out got out of hand on the
contractors, it got out of hand. They chose Ogilvy & Mather.
And we monitored the program to some extent, like you recall. I
was dismayed after some time when we had a whistleblower come
to us with information that astounded me that there were
overbilling, fraudulent practices going on with Oglivy & Mather
in this whole program, and I believe worked with the IG and
others who did the initial investigation and since then we have
found fraud, we have pending criminal investigation. We've had
a settlement, I believe admitting wrongdoing.
I'm also concerned, like my colleague Mr. Barr, about
what's gone on. I was floored when the contract was reawarded
to Ogilvy & Mather given the circumstances and problems that we
had seen with the contract. We have not only the unique role of
being the authorizers of this program but also government
reform oversight responsibilities to look at how this is
operating. So it's fitting that we do see how this has come
about.
I share Mr. Barr's concern that we need to know everything
is above the board, that--and I think all of us don't want the
program to go dark. That would be--that's not our intention.
But we must find out what's taking place with this program. And
this contract, as I understand it, could end up being almost
three quarters of a billion with all the add-ons. So we need to
know, we need to get some answers, we need to keep the campaign
going and I support that. But we must protect taxpayers'
interest and move the program forward.
I look forward to working with you in that regard. I yield
back.
Mr. Souder. We're going to recess for this vote. But let me
make it clear we're not going to accept point blank the word of
ONDCP that the program would go dark nor would we accept the
word of Mr. Barr that it's not going to go dark. The point of
this hearing and future hearings is to figure out what actually
would happen. I believe the witnesses before us today will
provide enlightenment. We'll work through it. Because of Mr.
Barr's aggressive efforts we are pursuing this. If he and Mr.
Mica and others of us hadn't been persistent, we could have
easily just gone on and said, well, we're going to accept this.
But if we don't accept it we have to figure out how we're going
to do the transition. We need to figure out whether ONDCP is
preparing for any transition from the advertising community,
and that is a first step in that process. Because we can't just
make assertions, we have to look for the facts.
With that, we stand in recess.
[Recess.]
Mr. Souder. Before proceeding I would like to take care of
a couple of procedural matters first. I ask unanimous consent
that all Members have 5 legislative days to submit written
statements and questions and that any answers to written
questions provided by the witnesses also be included in the
record. Without objection, so ordered.
Second, I ask unanimous consent that all exhibits,
documents and other materials referred to by Members and the
witnesses may be included in the hearing record, and all
Members be permitted to revise and extend their remarks.
Without objection, it is so ordered.
I would like to ask the panel to come forward. Mr.
Christopher Marston, Mr. Michael Jaggard, and Mr. Al Martin. If
you will stand, raise your right hands, I will administer the
oath.
[Witnesses sworn.]
Mr. Souder. Let the record show that the witnesses each
have answered in the affirmative.
The witnesses will now be recognized for opening
statements. I ask you to summarize your testimony in 5 minutes.
Any fuller statement you may wish to make will be included in
the record. Mr. Marston will begin as the representative of the
ONDCP, who is a former staff member of the subcommittee, now
back in his role as deputy chief of staff. So you know how the
routine goes. We welcome you in a different capacity, and we
look forward to hearing your testimony.
STATEMENT OF CHRISTOPHER MARSTON, DEPUTY CHIEF OF STAFF, OFFICE
OF NATIONAL DRUG CONTROL POLICY
Mr. Marston. Thank you, Mr. Chairman.
Mr. Chairman, Mr. Cummings, members of the subcommittee, it
is a pleasure to be here. I have to admit after the opening
statements that I like my old seat behind the dais better. But
I appreciate your commitment to this issue and the support you
have given, and everyone has acknowledged today the media
campaign and its importance to the President's national drug
control strategy.
I appreciate in particular, Mr. Barr, your commitment to
work in conference to make sure that the campaign doesn't stop.
We all are committed to that goal. And I hope that you won't
take any of my representations today as a Chicken Little, sky
is falling commentary. We are committed to working very hard to
make sure that the campaign continues.
Our concern is over the contracting process and the
difficulty in securing a new contractor and the potential
liability involved in not having--in continuing this contact.
I, of course, am not a contracting expert, and I am pleased
that Mr. Jaggard is here representing the Navy, which does the
contracting work for the media campaign at this point. So we
rely on the Navy because ONDCP, as you know, is a small office
principally involved in policy work, and we have a fairly small
team for our media campaign and don't have the infrastructure
to support a contract this large in-house. So that is why we
rely on the Navy.
I have prepared a substantial statement for the record, Mr.
Chairman. I appreciate you allowing us to introduce it.
So just to summarize our concern, it is a difficulty in
transition, and I understand people have different opinions
about how long a transition would take and the steps. It is the
contracting activity that we are principally concerned about.
The recompetition that resulted in the current contract
award took 9 months. That is not necessarily how long another
competition would take or the only means to secure advertising
services. But our indications are that 6 to 9 months is not
atypical to have a contractor in place. So that is our
principal concern.
I will be delighted to answer further questions about the
potential impact of an interruption of service after the other
witnesses have given opening statements. Thank you.
Mr. Souder. Thank you.
[The prepared statement of Mr. Marston follows:]
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Mr. Souder. Mr. Jaggard.
STATEMENT OF MICHAEL JAGGARD, EXECUTIVE DIRECTOR FOR
ACQUISITION AND BUSINESS MANAGEMENT, OFFICE OF THE ASSISTANT
SECRETARY OF THE NAVY FOR RESEARCH, DEVELOPMENT AND
ACQUISITION, DEPARTMENT OF THE NAVY
Mr. Jaggard. Good morning, Mr. Chairman and Mr. Cummings,
members of the subcommittee. I am Mike Jaggard, the Navy's
Executive Director For Acquisition and Business Management. And
I am pleased to be here this morning to discuss with you this
contract for the antidrug media services for the Office of
National Drug Control Policy, including the contracting
implications of certain potential restrictions on funding for
the program.
The Navy first got involved in this project in November
2000 when we assumed responsibility for the prior contract.
Based on a report that was issued by the General Accounting
Office, the Navy contracting officer issued a referral to our
Procurement Integrity Office in July 2001 because of the
alleged improper charges and possible violations of civil fraud
by the incumbent contractor, Ogilvy.
At the request of the customer, in August 2001, the Navy
decided that we would not exercise the next option in that
particular contract and would conduct a new procurement. We
issued a new solicitation in December 2001. We went through an
extensive source selection process and selected Ogilvy and
Mather for award of the new contract on July 3rd of this year.
On January 29, 2002, the Department of Justice entered into
a settlement agreement with Ogilvy regarding the alleged civil
fraud allegations. Under the terms of that settlement
agreement, there was no admittance by Ogilvy of any misconduct.
On April 5th of this year, the Navy's debarring official and
Ogilvy entered into an administrative agreement, the purpose of
which was to demonstrate that the contractor's past performance
problems have been identified, constructive measures
implemented, and to provide assurances that the contractor's
future conduct will comply with the higher standards of
business ethics and integrity that we expect from those that we
contract with for the Federal Government.
The decision to award the contract to Ogilvy was made in
accordance with all current law and regulation. I have reviewed
the contracting officer's determination of responsibility with
respect to Ogilvy, and I concur with it.
Regarding the impact of the proposed legislation on the
program, of course that will ultimately depend on the final
form of such legislation. However, based on what has been
approved by the House this week, the first step would probably
be to dispose of the existing contract.
The most likely outcome if the legislation is enacted is
that the Navy would have to terminate the existing contract for
convenience of the government. A termination for convenience
carries with it the potential for substantial liability to the
government for termination costs. The government would also
have to award a new con-
tract which could require the government to start the whole
process over again.
Thank you, Mr. Chairman, for this opportunity to
participate in today's hearings, and I look forward to your
questions.
Mr. Souder. Thank you.
[The prepared statement of Mr. Jaggard follows:]
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Mr. Souder. Mr. Martin.
STATEMENT OF AL MARTIN, PRESIDENT, A.J. MARTIN AND ASSOCIATES,
LTD.
Mr. Martin. Good morning, Mr. Chairman.
Mr. Chairman, the ranking member, members of the committee,
it is a pleasure to be here today to discuss the implications
of certain potential restrictions on funding for the national
youth antidrug media campaign, which I will call the media
campaign from here on in.
Thank you for the invitation, Mr. Chairman. I have been
asked to give my opinion regarding the likelihood that such
funding restrictions would cause serious disruption to the
campaign's impact against its target audience, that is youth 9
to 18 years old, their parents, and other adults who may
influence them.
By way of introduction, I think I should point out that I
am a marketing and advertising consultant with over 30 years of
experience, including 16 years managing my own consulting
business. That business focuses primarily on advertising and
advertising agency management issues. I have worked both on the
client side of the advertising business, and on the agency
side, as an employee on the client side, and the agency side as
well.
I have been a senior executive in both the commercial and
government sectors. My government service was as Director of
Accession Policy in the Office of the Secretary of Defense, in
effect working as the senior-most DOD marketing and advertising
executive supporting the voluntary acquisition of all military
manpower. I served in that position for the better part of a
decade.
As a consultant working with some of industry's leading
advertising agencies, I have been involved with many
transitions as clients have changed advertising agencies. A few
examples of those that I have been involved with are such
large-scale and complex accounts, as Dell Computer, AT&T,
BellSouth, Federal Express, Texaco, M&M Mars, Bayer Aspirin,
Pizza Hut, the recruiting accounts for the U.S. Air Force and
the Navy, and I am currently heavily involved with the Daimler
Chrysler account, the largest advertising account in the world.
The issue, if I can restate it, is assuming if the
incumbent advertising agency is barred from continuing to
service the media campaign account, beginning on the 1st of
October 2002, will the campaign's impact in the marketplace be
seriously disrupted? Simply put, in the language that has been
used here, will the campaign go dark or be seriously dimmed?
I believe with the vendor funding restriction, as I
understand it, and I am not a contract expert, there is very
little chance of any serious disruption to the media campaign.
The hardest working part of the campaign is the core working
media. This includes television, radio, print, out-of home,
online advertising. This is what delivers the message
impactfully to the target audience, and it is what the
managerial focus must be on if the campaign's message is to be
sustained against the eyes and ears of the people we are trying
to reach and influence with the message.
The creative and media planning work, I am told, has been
done that will carry the program well in to fiscal year 2003.
That is, the planning work and the creative is available, and
there is a creative available to carry the program well into
fiscal year 2003.
Two things must happen if any potential disruption to the
media campaign is to be minimized or eliminated. First, a new
advertising agency must be selected and awarded the contract.
Second, there must be an effective transition to that new
agency. The former requires aggressive management by ONDCP and
its contract support. The latter requires an aggressive
transition plan managed also by ONDCP with the full cooperation
of the outgoing incumbent agency working with the newly
selected agency.
Let's take the easy one first, transition. In the real
world--let's talk about how it happens in the real world--the
transition to the new agency is the relatively easier of the
tasks that we are facing. Agency turnover is frequent in the
private sector. Agencies turn over all of the time. All top-
tier advertising agencies, and all of the ones that we are
dealing with here are top-tier advertising agencies, know very
well what is involved in such a transition.
Most highly complex account transitions in the private
sector are accomplished in under 30 days. With the right focus
on working media, this media campaign situation should be
little different than that in the private sector.
The harder task is getting a new agency selected at light
speed. Based on my government experience and my knowledge of
the advertising agency selection process, I believe it is
possible to expedite and shorten the process so as to have a
new agency before the start of fiscal year 2003. Now, that
would take some serious, focused, aggressive hard work in
bending some of the constrictions that you have on contracting,
and I have a couple of suggestions as to how you might do that.
In a worst case, if I am overestimating the ability of
ONDCP and its contract support to get this critical task
accomplished, I would find a way to extend the incumbent
agency's contract for a short period and somehow fund it with
fiscal year 2002 money. And you have to understand that the
whole budget for this media campaign is not the revenue that
the advertising agency gets. In order to accomplish that, or
let us say for 3 months if you wanted to extend it, the
agency's revenue is--I don't know exactly what is it, the
contracting people can tell you that, but I would guess that it
is probably 8 to 10 percent of the total amount of media
spending that is going on in the account. So that means for
maybe a million, a million two, a million and a half per month,
for 3 months you can keep the agency on board if you can find
2002 money that you can obligate now and keep them working.
My recommendations, Mr. Chairman, this program is clearly
an important national public policy program. We all certainly
agree to that. It should not be disrupted because of this
administrative circumstance.
To ensure that it does not have a net detrimental impact,
ONDCP must manage the situation aggressively with the oversight
and support of the Congress. Specifically, I recommend that a
new advertising agency be selected on an expedited basis. For
both speed and effectiveness, I would consider the other four
finalists in the recent solicitation for this account as a
selected set of prequalified vendors and select one of them.
They are all highly capable advertising agencies. I believe
there are four of them. If that were not possible, I would
create a shortened, truncated solicitation process, possibly
starting with agencies already on the GSA schedule to get a
qualified agency on board in the next 45 days.
Now, there are people that would say that this guy Martin
is nuts, you can't do that in the government in that short
period of time. Well, this guy Martin has worked in the Federal
Government and in the private sector, and I understand both
sides of it, and if it were my job to get it done, I would get
it done.
While the agency selection process is ongoing, I would have
ONDCP and the incumbent agency prepare a comprehensive and
efficient transition plan to be kicked off the day the new
agency is identified. Last, I would keep the management focus
on the hardest-working elements of the campaign; that is, the
working media.
Now, I am not questioning the fact that if you did not have
an advertising agency, that this would be disruptive. The issue
here is, how do you get the resources you need to keep the
campaign running? I believe with effective and aggressive and
focused management of the media campaign, that there is little
risk of serious disruption to the campaign. The creative is not
a problem, you have it. In the worst case you might have to use
some of it that you have used before.
The creative is not a problem. The media is planned well
into fiscal year 2003. The support from the Partnership for a
Drug-Free America is rock solid. The ONDCP staff is in place.
The incumbent agency is a highly competent firm who surely will
aid in the transition. You even have a preselected set of
potential agencies. The program is key to the Nation. All that
is required is focused hard work by everybody concerned and the
will to get it done, to get the support resources you need to
keep the program running.
Mr. Chairman and members of the committee, thank you for
this opportunity to discuss this really important program.
[The prepared statement of Mr. Martin follows:]
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Mr. Souder. Possibly the most significant thing in your
testimony, in a joking way, is that you said incumbent agency
is--there is a typo--it says surly rather than surely.
Mr. Martin. That is a typo. I didn't say that.
Mr. Souder. You said it correctly.
A couple of things. First, for Mr. Marston, that one thing
we understand is that Ogilvy may have already purchased time
for this fall and into 2003. Is that true?
Mr. Marston. Mr. Chairman, they have, in what is called the
up-front buying season, made reservations for the whole buying
season, which is a July to June season. Those reservations have
not all been funded. At this point only the first quarter of
that period, so July through September has been committed and
funded. Those reservations would have to be funded for the
subsequent quarter, would need to be funded on August 30 to get
September through December, and then succeeding dates through
the year. So we have only actually purchased time for the first
quarter of that buying season.
Mr. Souder. You are talking about the first quarter of the
buying season out of the government funding?
Mr. Marston. That is correct.
Mr. Souder. Do you have 2002 funds such that can purchase
into 2003?
Mr. Marston. We don't believe that we could purchase into
2003--the fiscal year 2003, yes, but not into calendar 2003.
Mr. Souder. We have a different understanding from Ogilvy.
Our understanding is that when Ogilvy says that they have
purchased into January, you are saying that they have committed
for the time, but they have not paid for the time. Is that your
understanding?
Mr. Marston. That is correct, they have reserved the time.
Commitment is when you actually pay for it. So they have made
those reservations.
Mr. Souder. Having been in the private sector advertising,
I know there is that difference in the public sector. We can't
do that. It is cash on the barrelhead.
Mr. Martin, you have--you had an interesting statement. In
your statement you said that your--I forget the exact. You said
creative and media plan work, I am told that--have you heard
anything about this particular question, whether it is
reserved?
Mr. Martin. The obligation of the funds versus the media
availability?
Mr. Souder. Yes.
Mr. Martin. To me the important word in my testimony is
``plan.'' What you do is have as the advertising agency plan
for you how to expend your resources against target, and so
they create that plan. When they create that plan, they are
looking to reserve that time for the things that they have in
the particular vehicles that they want to fund in the plan.
It is my experience in the private sector is that one is
really planning forward and in a sense committing current money
to that, currently budgeted money to that plan.
You would have to ask the contracting folks exactly what
they are doing with their fiscal year 2002 money. My suspicion
would be that you obligate 2002 money in, let's say the--the
current quarter, and that money would be used then to actually
buy the time and space in--in the first quarter.
I think that is what was meant by the fact that we can sort
of cover the first quarter. I think if you can cover the first
quarter, that is what I meant by----
Mr. Souder. First quarter being October to December?
Mr. Martin. Yes. Of 2003. That would allow you, in my view,
plenty of time.
Mr. Souder. Mr. Jaggard, is that your understanding, that
the fiscal year 2002 can cover the buy for the first quarter?
Mr. Jaggard. The $37 million that we obligated at contract
award was intended to cover the commitments and obligations of
the contractor during the remainder of this fiscal year. If
those include buying of the time for the next quarter, then,
yes, that would be correct, but I don't know that for a fact
myself. I would ask if Mr. Marston did.
Mr. Souder. Do you know?
Mr. Marston. There is a question as to what other purposes
we may have to use the funds for. If we were to terminate the
contract for convenience, there would be termination costs and
we would be unable to use 2003 funds to pay those costs. So we
would have to use some the money--fiscal year 2002 money that
is currently allocated. For termination costs, I am not sure
how much would be available and how far into the October-
December we could buy. Our estimate is that we would be able to
fund through late October or possibly early November.
Mr. Souder. So if I understood--let me make sure I
understand what you are saying. Is that, yes, the funds would
normally be used to pay out of 2002 for October and December,
but--because if there is a termination charge, you would have
to use some of those funds you would have paid for for October
to December, unless, of course, Congress gave you additional
funds to cover the termination?
Mr. Marston. That is correct.
Mr. Souder. So theoretically do you know a case like that,
Mr. Martin, where there would have been--do you know of any
case, by the way, when there is a termination--did you have any
case when you were at the Department of Defense where there was
termination and there were lawsuits or termination costs?
Mr. Martin. To my knowledge, on the major accounts there
has never been such a situation.
Mr. Souder. Mr. Jaggard, you said we could be exposed. Is
that something that is automatic in the contracting process, or
is that something that would be the discretion of whether
Ogilvy chose to pursue? And if an ad agency chose to pursue, of
course, there may be different attitudes for future
contracting. Would that not be a detriment for somebody seeking
that, unless it is mandatory?
Mr. Jaggard. Mr. Chairman, the terms and conditions of
contract specify the termination procedure. There is a clause
in the contract that specifically lays out those costs that the
contractor is entitled to claim in the event that the
government terminates the contract.
Mr. Souder. Do you know what that is in this case?
Mr. Jaggard. No, sir. The process would be for us to first
notify the contractor that we had terminated. We would also
have to notify any subcontractors. Then he would have to
prepare a proposal and submit it to us, and it would include
the proposals from the subcontractors as well. To try to
estimate that in advance would be a difficult thing to do.
Mr. Souder. Well, I want to ask one other supplement with
that. Did--in the Navy's consideration of the bidding, did they
at all factor in that this 5-year contract, that--that Congress
might choose to abrogate that contract, which could expose the
terminations costs? Do those things get considered in the
bidding process?
Mr. Jaggard. It is not part of the actual source selection
process, Mr. Chairman, because we normally don't go into the
source selection assuming the possibility that this kind of
action might occur. We do structure the contract, however, with
base periods and options so that we have some protection on the
liability of the government. The contract also contains a
clause called the limitation of funds clause, which limits the
government's liability to the total amount currently obligated
on the contract.
Mr. Souder. Mr. Cummings.
Mr. Cummings. Mr. Martin, is this an unusual situation
where you have a contract, but a situation where the funding
might not be there because of congressional action?
Mr. Martin. I think it is unusual, yes, sir.
Mr. Cummings. And the--in listening to what you had to say
about a substantial portion of the funds in the contract going
to--to go to the purchase of the media; is that correct?
Mr. Martin. Yes, sir. If I can explain that.
Mr. Cummings. Let me just put a little tail on that so that
you can answer me completely.
So I would imagine if one were to look at damages, one
would have to conclude that damages would certainly not include
money that would be normally spent for the purchase of the
advertising?
Mr. Martin. That would be a surprise for me.
Mr. Cummings. So I am trying to see--to see how limited the
liability would be, do you follow me, if any?
Mr. Martin. Yes, sir. I don't know the terms of the
termination clause in the contract. I can tell you what is the
typical situation in the private sector. On a big contract such
as this, agencies have--there is a termination clause, and the
termination clause is usually 90 days to--if it were liberally
agreed to, maybe 6 months where the agency continues to get
paid its revenue for performing that service.
The reason that is done is because human beings are
involved here. It is a personal service business. We have
staffed up, and you terminate the contract, you have people
that are affected by that. Agencies want to cover some risk--
they want to cover the risk of the harm to those folks.
Mr. Cummings. I take it that 3-month period is like a wind-
down?
Mr. Martin. Yes, sir. That is the way it is done in the
private sector. I really don't know about the termination in
this contract, what the clause is.
Mr. Cummings. Could you comment on that, Mr. Jaggard?
Mr. Jaggard. Yes, sir, I would. The normal process of
terminating a government contract, we first notify the
contractor, and you ask him to take all action necessary to
preclude incurring any additional costs. That is to the best of
his ability. And then we give him a 30-day period to prepare
and submit to us a termination proposal.
We then go through the process of evaluating and
negotiating the proposal and come up with a settlement. And I
would emphasize again that our liability, the government's
liability, is limited to the money that is actually obligated
on the contract.
Mr. Cummings. Now, when we have a situation where--when you
all were looking at the bids, is it illegal for you all to take
into consideration--I am trying to figure out how we got here.
Is it illegal for you all to look at allegations or possible
settlements or whatever criminal--regarding criminal activity
when you are looking at the bids themselves?
Mr. Jaggard. It is not only not illegal, but it is actually
required, and we did do so in this situation.
Mr. Cummings. Now, if you--if I have got five, six
companies, and assuming all of them are on somewhat of an equal
plane, does the fact that there are pending investigations or
things that look like it is imminent that you are going to have
some kind of settlement involving criminal activity, does that
take away points from the--that contract?
Mr. Jaggard. In the case of the ongoing criminal
investigation, no, sir. We are not allowed to consider that in
the source selection process. We did consider the settlement
agreement regarding the civil fraud allegations as part of our
evaluation of the proposal, but we have no information
whatsoever regarding the criminal investigation.
Mr. Cummings. Now, let's go back to the fraud. You can
imagine what it sounds like to my constituents when someone
says that somebody has entered into an agreement, and these are
companies--Ogilvy is a company with high-powered lawyers, and
they have got all kinds of resources. And my constituents will
conclude that if they--if there was not a problem here, they
probably would not be entering into a settlement. And so I am
trying to figure out, how does that look? I mean, you follow
what I am saying? It is just--for me to explain that would be
incredible.
And I can understand where Mr. Barr is coming from, because
when our constituents see this kind of thing, they say, well,
what about all of those honest guys? We are talking about
fraud. You can call it criminal. Call it whatever you want to
call it. Fraud is fraud.
I mean, how does that--I mean, how do you jive that,
because that is basically, I think, pretty much why we are
here.
Mr. Jaggard. Yes, sir. The Justice Department settlement
agreement specifically specifies that Ogilvy did not admit to
any wrongdoing. Under the terms of the settlement agreement,
they agreed to settle for a certain sum and to take other
actions to correct the deficiencies, but did not agree to admit
to any wrongdoing. The primary reason that they entered into
the settlement agreement was to avoid the costs and other
issues associated with extended litigation of the issues.
Mr. Cummings. But also--but could one of those reasons be
to make sure that they were able to get this contract?
Mr. Jaggard. At the time that they were entering into the
settlement agreement, I do not know, since I was not party to
the discussions. I don't know if that came into consideration,
but clearly they were working very hard with both the Navy and
the Office of Drug Control Policy to try and fix the problems
that had been identified from 1999 and 2000.
Mr. Cummings. Last question. The fact that they had the
contract already, did that have a bearing?
Mr. Jaggard. Only with respect to the fact that it was
considered in part of the source selection process; i.e., we
considered their performance under the prior contract in the
awarding decision to award the new contract to them.
Mr. Cummings. Thank you, Mr. Chairman.
Mr. Souder. When the new restrictions require you to file
accurate time cards because you weren't, that is an admission
of wrongdoing. I know the legal difference.
Mr. Mica.
Mr. Mica. Thank you, Mr. Chairman.
There were five bidders?
Mr. Jaggard. Yes, sir.
Mr. Mica. Has the subcommittee gotten copies of their
offers?
Mr. Jaggard. Yes, sir. We have responded to the chairman's
request for all of the documentation concerning the source
selection process.
Mr. Mica. And did any of them indicate that they could
provide the same services within the same cost range, on, say,
an immediate basis?
Mr. Jaggard. All of the offerers proposed to provide the
services at a cost that was within the price range, but it was
higher.
Mr. Mica. What about the time? If something happens here,
and Ogilvy and Mather are excluded, my concern is how long
would it take someone to assume the contract and move forward.
Mr. Jaggard. Sir, that presents a couple of issues to me.
One is the fact that----
Mr. Mica. You would have to rebid?
Mr. Jaggard. Well, in February of this year, we notified
the Office of National Drug Control Policy that the Navy was
not going to be providing their contracting support beyond this
fiscal year. We did that because we need to devote our
resources in the Navy for fighting the war on terrorism and
supporting our sailors and marines.
So there is a period of transition that needs to occur to a
new contracting organization. It is my understanding that the--
--
Mr. Mica. Well, the problem is--well, I guess you could
pass the baton, but you sort of started this. And I guess my
followup question would be, you don't think that you could
finish the reawarding?
Mr. Jaggard. I don't believe it could be done in the
timeframe that Mr. Martin described. One, it assumes that
cooperation by Ogilvy and Mather to turn over the
responsibilities; and, two, we would face the possibility if we
tried to contract with somebody else that Ogilvy and Mather
might consider protesting the issue before the General
Accounting Office, which would bring us to all stop.
Mr. Mica. Mr. Martin, what is your opinion about the
ability to move forward on the basis of----
Mr. Martin. Well, I said in my testimony that I would look
for some way, in the worst case--and some of this information I
didn't have about the change in contract organizations, for
example, which is another complexity that I guess if it were my
responsibility, what I would do is I would say, look, I need an
advertising agency. And I would--since I can't use 2003 money,
for that small portion of this funding that is the agency's
revenue--you have to keep that in mind that they only get a
small amount of money here--I would look for some money in the
program or someplace or from Congress. I would reprogram some
money if I had to to extend them for a quarter, and I would
rebid the damn thing, doing that, take advantage of that time,
and get a new person on board.
If you believed that there was no other way to do it, I
would do it in an extremely truncated and expedited fashion.
And I know that causes the people that work in the government,
who are good folks and who have got a lot of constraints, to
operate under a lot of concern.
But if it were my responsibility, I would get this done. I
would get a new contractor on board. I would use 2002 money if
the language in the amendment didn't let me use 2003 money. I
would use that time to run another solicitation, and you could
do that very expeditiously because you have already--you could
cut down how difficult this RFP was, which it was a very
difficult RFF for the agencies to respond to. There are ways to
do it in which you could really speed it up.
Certainly I am absolutely confident that if you had another
quarter in which Ogilvy was sitting there and funded, that you
would have absolutely no problem in that period of time; if you
focused your management skills on it, and got the right people
to tell you how to do it, that you could have it surely done in
the first quarter of fiscal year 2003.
Mr. Mica. Mr. Marston, given the nature of the situation we
find ourselves in, does ONDCP have a plan B? And I understand
there is also an urgency clause in the contract. What is--what
is your back-up plan? Do you have the discretion to move
forward to keep the--to keep the ad program on, and, if not,
what would it take? Do you have to come back to Congress? Do
you have to reprogram? What is your--someone has to be thinking
about plan B. Tell us what that is.
Mr. Marston. Absolutely, sir. We are committed to doing
everything we can to keep the program running. The concern that
we have is with being able to have a new contractor in place
before Ogilvy ceases performance.
The problem with Mr. Martin's scenario, though I appreciate
his suggestions, is that it requires the cooperation of Ogilvy.
At the point at which they know that they are going to be
terminated and entitled to termination fees, their incentive to
work hard on a transition with us is not going to be very
strong. I can't speak to what they would do, but there is the
possibility that they would have an action for breach against
the government and a number of other complications. So I just--
I can't be sure that they are likely to continue performance at
all during the transition period or resolicitation.
Mr. Mica. So what about plans? Do you have discretion to
use other funds; can you use another part of these funds,
assign the contract, a new contract, to somebody else while
that dispute is being settled?
Mr. Marston. We can certainly attempt to do so. We are
transferring contracting office responsibilities to the
Department of Interior, some Franchise Fund, Govworks. We will
work with them on any kind of contracting option that we can
develop.
Mr. Mica. Has that already been transferred?
Mr. Marston. We are finalizing the interagency agreement to
do that right now.
Mr. Mica. Do you have to come back for reprogramming? Do
you have enough discretion, or do you need discretion in one of
these appropriations measures to use funds to keep things going
if this program or arrangement--program arrangement with Ogilvy
and Mathers turns south?
Mr. Marston. At this point the only funds that we have
available are those that have been appropriated for the media
campaign. We will use whatever funds aren't required for
Ogilvy's performance or termination costs to fund another
contract if there is money available.
Mr. Mica. Thank you, Mr. Chairman.
Mr. Souder. I apologize. They don't have an agreement to
roll votes on the floor, so we are having to go over here in
between, and we will be back shortly and reconvene with Mr.
Barr's questions. We stand in recess.
[Recess.]
Mr. Souder. We now come to order. I now recognize Mr. Barr.
Mr. Barr. Thank you.
Mr. Marston, who is the new contract administrator?
Mr. Marston. We are in the process of arranging an
interagency agreement with the Department of the Interior's
Franchise Fund, Gov.Works.
Mr. Barr. When did that process start?
Mr. Marston. We started looking for a new contracting
officer when Navy notified us, I believe in April.
Mr. Barr. You have been in negotiations actively with the
Department of the Interior since February?
Mr. Marston. We contacted them then, and they indicated
their willingness to proceed. We don't need to have them in
place until the end of the fiscal year when Navy stops
performing.
Mr. Barr. But, wouldn't you want to have everything ready
so you co have a seamless transition?
Mr. Marston. Absolutely. I anticipate we will sign the
interagency agreement early next week.
Mr. Barr. Does it normally take 6 months to do that? The
Navy notified ONDCP in February that they would no longer
administer the contract?
Mr. Marston. That is correct.
Mr. Barr. Since February?
Mr. Marston. That is correct.
Mr. Barr. Is that standard operating procedure? Is that how
long it takes?
Mr. Marston. I have no experience with replacing
contracting offices, but since we don't have to have them in
place until the beginning of fiscal year 2003, in fact, they
can't start earlier than that. Navy continues to that date. We
didn't see any need to expedite that process.
Mr. Barr. Isn't there a need to expedite every aspect of
this?
Mr. Marston. In light of the current situation, absolutely.
Mr. Barr. This isn't a current situation that just cropped
up. This has been going on for 3 years now.
Mr. Marston. The Navy was in place to do the contract award
for this current contract, and the new contracting office
wouldn't have had a role in that, so we didn't see the need to
expedite that particular part of the process.
Mr. Barr. Is it ONDCP's position that Ogilvy Mather has
committed fraud against the government?
Mr. Marston. We don't have a position on it. The Department
of Justice represents the government in those matters.
Mr. Barr. You don't have a position on it?
Mr. Marston. Well, the Department of Justice reached a
settlement with Ogilvy by which the government is bound.
Mr. Barr. I know. ONDCP does not have a position on whether
or not a company that has entered into a settlement agreement,
as to which there is an ongoing criminal investigation--the
terms of the settlement agreement are such that it is the
position of the U.S. Government that Ogilvy did submit,
knowingly submit, false claims and unjustly enriched itself,
committed negligent misrepresentations and so forth. That is in
the document, and ONDCP doesn't have a position on it?
Mr. Marston. We fully support the settlement agreement.
Mr. Barr. In other words, it is the position of ONDCP that
Ogilvy has and did knowingly submit false claims to the U.S.
Government in connection with this contract?
Mr. Marston. Yes.
Mr. Barr. Then why in heaven's name wouldn't you be doing
absolutely everything in your power to ensure that they don't
enrich themselves $1 more at the taxpayers' expense?
Mr. Marston. The decision was made last year in August that
we would not want to exercise the option on the Ogilvy
contract, because we were concerned about contract
administration issues. We worked with the Navy to conduct a
fair and open, competitive process. There was nothing that
barred Ogilvy from competing in that process, and we didn't
have any basis on which to exclude them from participating in
the competition.
Mr. Barr. How about the fact that in the opinion of the
Government, based on evidence, they have knowingly submitted
false claims? That is not a reason?
Mr. Marston. The Federal Acquisition Regulation doesn't
provide for taking any action based on a settlement.
Mr. Barr. I am not saying taking any action based on a
settlement, but this settlement is based on something. That
something is evidence that the company has, in fact, unjustly
enriched itself, knowingly submitted false claims.
Mr. Marston. Respectfully I suggest that Mr. Jaggard would
be in a better position to answer. That was part of the source
selection process.
Mr. Barr. Is ONDCP comfortable dealing with this company?
Mr. Marston. We believe that we have an obligation to use
the fair and open acquisition process and abide by its results.
Mr. Barr. What is it that a company would have to commit in
order for ONDCP to feel uncomfortable with dealing with them?
Mr. Marston. Certainly any action that would lead to a
disbarment or suspension of the contract.
Mr. Barr. Why don't you be aggressive instead of being a
bunch of pussycats? Why doesn't the government take a position
that this is a bad egg, this is a bad company, they have
knowingly submitted false claims, they unjustly enriched
themselves, they have basically--to use an old legal term--
ripped off the taxpayers of this country? Why doesn't the
government take the position, particularly on a contract that
deals with legal issues, that we are not going deal with this
company; if you don't like it, sue us? Isn't it the position of
the government, Mr. Jaggard, that these are not the sort of
things that we would want in a company as to which is receiving
benefit of millions if not hundreds of millions of dollars of
taxpayers' money?
Mr. Jaggard. If I understand that----
Mr. Barr. Does it bother the Navy?
Mr. Jaggard. It bothered the Navy. That is why we conducted
an investigation of the matter.
Mr. Barr. Is that why you awarded up to an additional $762
million contract to them, because it bothered you so much?
Mr. Jaggard. No, sir.
Mr. Barr. What was the basis on which that contract was
awarded then?
Mr. Jaggard. The basis of the contract award is that Ogilvy
submitted the proposal which represented the best value to the
government.
Mr. Barr. Is the best value to the government represented
by dealing with a company that knowingly submits false claims,
unjustly enriches itself, and negligently misrepresents itself
to the government?
Mr. Jaggard. No, sir. In the evaluation process we took
into consideration the Justice Department's settlements of
those allegations and the contractor's efforts to put in place
a system of controls that will prevent it from happening in the
future.
Mr. Barr. Are you aware of the fact that they still are
under criminal investigation?
Mr. Jaggard. I am aware that there is an investigation, but
I have no details of the nature of the investigation.
Mr. Barr. I mean, none of us do, but that--does that bother
ONDCP?
Mr. Marston. We can't take action on the basis of
investigations. Certainly should there be an indictment, we
would refer that to the debarring official. But just knowing
that there is on ongoing investigation is not something that we
can take action on. It wouldn't be proper under the Federal
acquisition regulations.
Mr. Barr. Define substantial evidence to me, Mr. Marston.
Let me define it for you. Substantial evidence in 48 CFR,
Chapter 1 means information sufficient to support a reasonable
belief that a particular act or omission has occurred.
Do you not think that there has been substantial evidence
that this company has submitted false claims, for example?
Mr. Marston. Certainly the settlement suggests that is the
case.
Mr. Barr. Well, then, why wouldn't it be the position of
ONDCP that according to the Federal regulations, that is, in
fact, a basis on which not to deal with a company----
Mr. Marston. As I understand it----
Mr. Barr [continuing]. And then let them come in and prove
that they haven't done all of these things?
Mr. Marston. I believe that was the information that was
submitted to the debarring official at Navy who conducted a
full investigation and decided that debarment was not
warranted, and rather entered into an agreement that would
ensure that such actions would not continue in the future.
Mr. Barr. Well, I mean, to me the sooner we can get the
Navy out of this, the better. This is ridiculous. This really
worried me about the Navy. Now they are turning all of their
attention to all of those other matters. Do they take the same
approach with regard to these other matters, Mr. Jaggard, that
it is OK to deal with companies that knowingly submit false
claims, engage in negligent misrepresentations and unjustly
enrich themselves?
Mr. Jaggard. No, sir. We follow the process and procedures
for suspension and debarment that are based on the assumption
that one is innocent until proven guilty and that if we had----
Mr. Barr. No. No. No. No. This is not a criminal
proceeding. No, that is not the standard for awarding
government contracts, and I hope you're not maintaining that it
is. Are you?
Mr. Jaggard. No, sir. If----
Mr. Barr. Let's not muddy the waters. The standard is
substantial evidence, is it not? If there is substantial
evidence that a company has committed fraud or engaged in
misrepresentations that is a proper basis on which to nullify
or stop payment or contract, is it not?
Mr. Jaggard. It's the basis for a referral to the
Procurement Integrity Office for investigation and resolution
of potential suspension and debarment.
Mr. Barr. I don't want to take all the time, Mr. Chairman.
I have other questions but I certainly want to defer to the
chairman, and if we have additional time I do have some other
things I'd like to go into.
Mr. Souder. We'll have a second round. Let me ask Mr.
Jaggard, under the--what are the options under the current
contract that would allow for rebidding? Is there an urgency
clause that would enable that to be expedited?
Mr. Jaggard. There's nothing in the current contract that
would address the issue of rebidding, Mr. Chairman. There are
provisions within the Federal Acquisition Regulations which
would provide for various alternatives to conducting either a
new competition or in some cases a sole source contract award.
There are exceptions to the Competitions and Contracting Act,
and there are a total of seven of them, one of which is on the
basis of an urgent and compelling national need that you could
skip some of the otherwise statutory required steps in the
procurement process.
Mr. Souder. Is there--one of the things that was discussed
would be to award it to one of the other people who had
previously bid. In your opinion, is that--would that be the
sole source clause or would that be a rebid? How would you do
that? You have that flexibility?
Mr. Jaggard. The flexibility is there theoretically to do
either of those. Given the fact that we just completed the
competition and we have four other interested offers, the most
sound approach would be to conduct some kind of limited
competition among those four offers, and those provisions of
the exceptions to the Competition and Contracting Act could
provide the basis or the foundation for doing such an action.
Mr. Souder. Is--Mr. Martin, if you could comment on this,
but let me ask Mr. Jaggard first, I assume the bidding was
sealed. I know that Ogilvy's bid has been made. Isn't it
possible that one of the other bidders would match that bid?
Mr. Jaggard. The original competition was on the basis of
best value. It wasn't a sealed bid. However, Ogilvy's awarded
amount is the only dollar value that has been made public and
will be made public. The other bidders now know what that
number is. It is completely feasible that, you know, based on
that they could sharpen their pencil and beat it.
Mr. Souder. What's your reaction to that, Mr. Martin, and
what do you think the likelihood would be in a situation like
that?
Mr. Martin. I would assume that the other four advertising
agencies very much would like to have this account. They've
already made a significant investment to get to the point that
they've gotten to in terms of effort. I think that in my
testimony I said that, you know, look at them as a selected
source and you've already done all this work. I agree with what
Mr. Jaggard said, just give them a very defined task, something
that doesn't take 6 months to figure out, give them a little
test. It's no different in my mind than a best and final offer.
And give them--you know, a task and that's why I said in my
testimony that I thought you could get this done by the first
of October. Now, that's what I'd prefer to do as opposed to--if
it were my business to run, as opposed to extending the
contract because that sort of runs contrary to what the intent
of the legislation is under consideration.
Mr. Souder. I apologize for not knowing this because I
can't remember, it's always dangerous to ask a question that
you don't at least have some range of the answer. But are you
allowed to say who the other four contract bidders are?
Mr. Jaggard. Yes, sir.
Mr. Souder. Can you say who they were? Were they major
advertising agencies?
Mr. Jaggard. Yes, they were four major advertising
agencies. I have the list of names here with me if you'll bear
with me a minute.
Mr. Souder. In other words, we're not--Ogilvy, I would
argue, is one of the most distinguished names in the
advertising business regardless of what's happened with this
particular contracting, but that we're not arguing that it's a
choice between Ogilvy--I mean, one of the earlier things we had
heard in an earlier hearing was Ogilvy has the clout of being a
national advertising agency, they have a tremendous reputation
in the industry, all of which is true, but my understanding was
the other bidders also did.
Mr. Jaggard. The other competitors were McCann-Erickson,
Foote Cone & Belding, Bates, and Sacci & Sacci.
Mr. Souder. Which are four of the largest names in the
world of advertising. Certainly would be able to bring large
clout by having other clients that they could leverage--I mean,
those were arguments that we had heard in previous hearings as
we've looked at the ad campaign. But as far as placement
they're all going to have similar buying power. Would that be
true, Mr. Martin?
Mr. Martin. Absolutely. Those four advertising agencies are
four of the finest advertising agencies in the country. And
without knowing anything about the specifics of their bid, you
would assume that they would all be capable of this. It's hard
to distinguish them from Ogilvy in a general sense.
Mr. Souder. Mr. Marston, I'm sure one of the arguments on
best value has to do with experience with the campaign,
creative working with this issue. Do you know whether off the
top of your head any of these other four agencies have had
representatives in the past involved with partnership or other
anti-drug efforts that would suggest that they actually have
some experience as well in the anti-drug field?
Mr. Marston. I do not know off the top of my head, but I
would imagine given their prominence that they have at some
point been involved with the Partnership.
Mr. Souder. When you looked at best value, Mr. Jaggard,
what would be the, other than cost, the other main things you
were looking at?
Mr. Jaggard. In this acquisition the other two evaluation
factors were their technical capability and the their past
performance, and cost was the third and least important of the
three factors.
Mr. Souder. And by the--if cost is third, past performance
was one of the first two, are you saying there's an edge given
to the person that had the previous contract?
Mr. Jaggard. No, sir. What I'm saying is that in order of
precedence in the evaluation the three factors were technical
capability, past performance and then cost. That was just an
order of precedence. That was not to imply anything else.
Mr. Souder. And past performance is not including that they
would have had a settlement for altering--not charging enough,
to try to adjust the amount that they received?
Mr. Jaggard. Past performance evaluation was conducted by
the contracting officer and it's an assessment of prospective
risk of the performance of the new contract. He did in fact
take into consideration the settlement agreement by the
Department of Justice and the administrative agreement from the
Navy's barring official, but he also weighed those against the
actions the company took to correct the problems and the ethics
program they put in place and the contract, the cost accounting
system that they re-established and had certified by the
auditors to preclude recurrence of those kind of problems on
the future contract, which is what he's looking at for the
evaluation process.
Mr. Souder. If you had five major advertising firms and one
had had past problems even though now they have procedures to
fully correct that, would that not put them in the weakest
position in the five in the past performance category at least
if that is the second biggest criteria?
Mr. Jaggard. Not necessarily because during the--the past
performance evaluation includes the past performance of other
relevant types of contracts, not just any one particular
contract. It would be viewed as a negative or a portion of the
past performance but not the overall.
Mr. Souder. Mr. Barr.
Mr. Barr. Thank you, Mr. Chairman. Just for the record, I'd
like each of witnesses to indicate whether they're here
representing Ogilvy Mather. Are any of you all representing
Ogilvy Mather?
Mr. Marston. No, sir.
Mr. Jaggard. No, sir.
Mr. Martin. No, sir.
Mr. Barr. Let the record reflect all three have indicated
no.
Therefore, in the questions I'm going to ask, I'm not
interested in the explanation of Ogilvy Mather or their defense
or their position. Let me tell you something that still bothers
me greatly about what we're looking at here. It seems to me
that the government, and this is what--I'm not quite sure why,
but this is what doesn't smell good--it seems to me that the
government has gone out of its way to deal with this company. I
don't know whether it's because of its past dealings with the
DNC and, you know, the huge amounts of money that it got and
its relationship with the DNC or something else, some other
sweetheart deal we've heard about. But these are certainly
things that will be looked into.
We have a company as to which our government believes
knowingly submitted false claims, knowingly submitted false
claims. We have a company that the United States believes that
it has a case, a cause of action against that company for
breach of contract, unjust enrichment, negligent
misrepresentation, and so on and so forth. These are statements
representing the government's position in the settlement
agreement. And yet the government has gone to this company and
given them the opportunity which may very well prejudice our
ability to go after them.
In the agreement between the Department of the Navy and
Ogilvy Mather, for example, it goes on at great length about
the company setting up a written code of ethics. I mean, this
is just great. You have a company that the government believes
has done all of these things and then we go to them, we go out
of our way to go to them and give them an opportunity to get
themselves off the hook and we can't even get ONDCP to say that
bothers them. That bothers me.
Mr. Chairman, I'd like unanimous consent to include in the
record the settlement agreement as to which we've been
referring, dated, I believe, January 30th--whatever the date
is. The document itself is not dated, but the settlement
agreement between the United States of America and Ogilvy
Mather North America and the agreement between the Department
of the Navy and Ogilvy Mather of North America.
Mr. Souder. Fine. Hearing no objection, so ordered.
Mr. Barr. That just really bothers me. Maybe we ought to
just let bygones be bygones. But as a former prosecutor that
sticks in my craw. I wish it stuck in the craw of the
Department of the Navy and ONDCP and it bothers the heck out of
me that it doesn't.
Mr. Martin has testified from probably about as objective a
viewpoint as there is in all this, certainly more objective
than mine because I think something very wrong is happening
here and smells to high heavens and I'm going to pursue it. But
he has indicated that there is, Mr. Marston, some very
reasonable and workable ways to get us out of this problem. It
may take a little hard work on the part of ONDCP, it may take
some imaginative thinking on the part of ONDCP, it may take
some legal positions that represent the government and not
Oglivy Mather. But it seems to me that there is a way out of
this if the government has the will, and that I think was the
key word in Mr. Martin's testimony, the will to do it.
Does ONDCP have the will to clean this business up, get rid
of Ogilvy Mather and get this program back on track with a
company that the U.S. Government doesn't believe knowingly
submitted false claims and engaged in all these other things?
Mr. Marston. Sir, we're not adverse to hard work and we'll
do whatever we have to keep the campaign going. And that's in
everyone's best interest and we will do so. If a law is passed
prohibiting us from obligating funds to Ogilvy we will
certainly not obligate funds to Ogilvy and do what we can to
keep the campaign going. However, we have no present plans to
take action on our own to terminate the current contract that
was just awarded.
Mr. Barr. So the will is not there.
Mr. Marston. We don't believe at this point we have a legal
basis to terminate the contract.
Mr. Barr. What constitutes a legal basis? What in the
heck--what are your lawyers telling you? You have a document
here, a legal document that states that it is the position of
the U.S. Government, of which ONDCP last time I checked into is
a part, clearly stating that it is the position of the U.S.
Government that Ogilvy Mather knowingly submitted false claims
and that the United States of America believes that it has a
competent civil cause of action against this company for these
things and as to which there apparently is an ongoing criminal
investigation. What more does it take?
Mr. Marston. That document also settles all claims arising
under those allegations. And so the FAR is not a tool for
further punitive action. So we don't see that provides us a
basis to terminate the contract.
Mr. Barr. Mr. Martin, help me out here. Is there any hope
at all with that kind of attitude to resolving this?
Mr. Martin. I think that you've got to get yourself into a
position where you select from the other advertising agencies
that are out there and that you've already preselected in my
view.
Mr. Barr. But ONDCP has just told us they're not interested
in that. They see no problem with this company.
Mr. Martin. Well, I think the management----
Mr. Barr. I don't mean to put words in your mouth Mr.
Marston. If you disagree with anything I'm saying, speak up.
Mr. Marston. Thank you, sir.
Mr. Martin. I think the focus should be on--in all of my
testimony when I'm talking about aggressive management and
focusing on the media aspects of the program and not--what I
mean by that is don't worry about ancillary elements of the
thing that you could let slip a little, focus on keeping the
media out there in front of the eyes and ears of the people out
there and aggressive management is required on the part of
ONDCP.
Mr. Barr. Which is not there at this point. Apparently, Mr.
Chairman, I think we're at the point where probably if anything
is going to be done it has to be Congress that does it. And the
language that we included at my request and which was adopted
by voice vote a couple of days ago as part of the Treasury-
Postal Appropriations Bill we crafted and then recrafted it, as
you know, Mr. Chairman, to try and make it appropriate language
not subject to a point of order. If, in fact, in light
particularly of what Mr. Martin has said this morning as an
expert in this area, there is a way that we can modify that
language to ensure that there is--that there is or are or will
be adequate funds to create a seamless transition here, I
certainly think that we ought to do that. I certainly have no
problem doing that if that is what it takes to light a fire
under ONDCP.
I can't tell you how disappointed I am in ONDCP that they
see nothing wrong in dealing with this company. But in light of
Mr. Marston's statement that they--and I'm glad to hear this--
that they certainly will abide by the law if we pass a law
requiring them to deal with another company, I think that the
government is in a very strong position here, Mr. Chairman, to
go to another company or companies. I am willing to pay what
seems to be a reasonable or minimum price for that, and that is
to make sure that funds are available into at least the
beginning of fiscal year 2003 to ensure that we have funds to
assure a transition.
But I really think in light of ONDCP's attitude, Mr.
Chairman, that the ball really is in the Congress' court. I
appreciate very much your holding this hearing today to begin
the inquiry into looking for a solution. I think that it is
important that Justice pursue these matters. I intend to
insofar as I am able to. But I do appreciate your beginning to
look into finding a way out of this. I think it's very clear
based on the testimony today, and there really is only one way
out and that is through some congressional action. I appreciate
your leadership in that regard and like forward to working with
you.
Mr. Souder. If the panel will hold for one more time, Mr.
Cummings actually debated on the last amendment. Let me check
with him to see if he has any other questions. I have just a
couple on the technical, and then we'll adjourn. But for right
now the hearing is suspended.
[Recess.]
Mr. Souder. I thank you for your patience as we go through
all this. I couldn't find Mr. Cummings, so I'm going to ask a
couple of questions and if he doesn't come we'll go ahead and
adjourn and submit any additional questions.
Reconvene the hearing. I had a couple of questions I wanted
to ask about some of the technical aspects. That was criteria
No. 1, I understand, in contracting that are there--I assume
the terrorism ads are continuing, Mr. Marston, for the rest of
this year?
Mr. Marston. That's correct. We actually are in the process
of developing a second flight of drugs and terror ads that
would carry through the rest of the year.
Mr. Souder. So the creative basically will be done by the
end of August?
Mr. Marston. That's our hope.
Mr. Souder. That would, then, be for the first quarter of
the next fiscal year?
Mr. Marston. That would be part of the campaign that was
running. That wouldn't be the whole campaign. We also have some
plans to run some ads related to marijuana.
Mr. Souder. Are the----
Mr. Marston. Those are also in development.
Mr. Souder. The creative, then, that would be first quarter
would predominantly be for the second quarter of the fiscal
year?
Mr. Marston. Oh, yes, sir.
Mr. Souder. In the new contract of 2003 funds that were
awarded the creative question is predominantly for the second
quarter of the fiscal year?
Mr. Marston. Yes, sir. The creative is primarily done, as
you know, by the Partnership for a Drug-Free America. And what
the advertising contractor does is supplement what they do. So
for instance, if they do television and radio, then the
advertising contractor supplements that with print and Internet
advertising. So that's the part that the contractor would
perform.
Mr. Souder. So theoretically, there are multiple options
here as far as how could you cover creative in a short term
vacuum. In other words, you wouldn't necessarily go dark if the
Partnership which did the creative on the TV was willing to do
the creative on the print in an interim situation.
Mr. Marston. Correct. Our largest concern is not about the
production of the creative but the actual mechanics of getting
the creative distributed to networks to play on TV. And the
process is much more complicated than what I understand of
trafficking advertising, they call it, kind of ironic given the
subjects that we're advertising on. But it's their expertise in
that and linking up between the creative provider of the
partnership and all the networks that are going to play the ads
through the buying process.
Mr. Souder. You had also I believe in the written testimony
raised here will not be able to conduct copy test research.
Mr. Marston. Right. As you know, we were disappointed in
the results of our evaluation, particularly as they pertained
to youth ads. One of the solutions that Director Walters has
proposed is to implement more rigorous testing for all
advertising. We'd like to be able to test all of our
advertising before it goes on the air, and the testing is done
by our advertising contractor.
Mr. Souder. Mr. Martin, let me ask you because one of the
key questions, you said you worked with transition, is let's
assume, and I think it's a fairly safe assumption, that at a
minimum there's going to be some kind of adjustment in this
contract. The will of the House was pretty clear the other day,
I understand the will of the Senate is strong, so it now
becomes more--which is why we're doing this hearing--more of a
technical question of do you have a short term, at what point
do we option it, what are the potential liabilities, how do we
cover those liabilities? But we want to make sure that the
technical hand-off procedures are covered as well.
And let me ask you a couple of those. This is a national
campaign with a, ``trafficking,'' to use that term, placement
of the ads and just the logistics of moving them is more
complicated than usually anything that I've certainly dealt
with, which would be mostly regional, and is a problem but is
basically not that hard to hire. How hard do you think that is?
In other words, if you had a major agency take that over----
Mr. Martin. It would be very hard for a lot of people that
didn't know anything about it but it's routine for advertising.
Mr. Souder. Because they have people in each market area
around the country?
Mr. Martin. Of course. That's what they do. They're experts
in doing that. In my testimony when I said that transition is
not the most important element of this, it's the contract,
agencies know how to do transitions. And transitioning this
account is not dramatically different. I'm speaking now as a
guy who's worked in the government a lot, worked on both sides,
there's a lot of people who will contend that a government
contract is a lot more complicated. But if you focus on the
things that matter, I have difficultly seeing why this would be
difficult to transition.
Mr. Souder. And if in fact Ogilvy went from surely to
surly--I'm not going to let you away from that, but let's say
they weren't as cooperative, that the trafficking part, the
placement part of this is actually public record, it's
information they've already placed already for the fall--I mean
they've reserved the time.
Mr. Martin. First of all, you're way ahead of the game by
virtue of work that's already been accomplished by Ogilvy. This
has to be handed off to the new agency and the hand-off is a
relatively routine agency function that the outgoing and the
incoming agencies know how to do very well. There was some
concern expressed earlier that you might not get full
cooperation from Ogilvy. Ogilvy, and from everything I know
about them, and putting aside the issues here of fraud, from
the standpoint of people who can perform advertising agency
functions, Ogilvy is one of the finest advertising agencies,
most professional, most competent, to do those functions in the
country.
And in addition, I would be shocked if it were not seen at
Ogilvy as in their best interest to be fully cooperative in
whatever transitioning process was to take place here. They're
interested in their image in their marketplace. And I'm sure
that they will do everything they can to minimize the negative
impact of this, having this contract, and surely they would be
nothing less than stupid not to be fully cooperative with every
step of the transition. What they don't want to see are
headlines that Ogilvy has been recalcitrant or surly with
respect to that. And because what they care about is their
image in the minds of other potential advertisers who read the
advertising publications like Advertising Age and Ad Week, they
don't want to see headlines that say Ogilvy is not cooperative
in the transition. My heaven's.
Mr. Barr. Would you yield, Mr. Chairman? I wish I could
share your optimism. I think with the cozy relationship that
Ogilvy Mather has worked out with the government here I can't
see them doing anything other than fighting tooth and nail to,
you know, keep this contract and keep the money. I mean the
whole basis may very well have been for what's gone on here is
contained in testimony that we had in October 2000, evidence
that Bill Gray then and now the President of Ogilvy Mather,
``held a meeting with the most senior account staff and
complained about the lack of revenue with this contract,'' this
contract being this contract that we're talking about here. And
then you see the altered time sheets, the additional time
sheets and so forth. Apparently the most important thing to
this company is not reputation, it's certainly not the
taxpayers of this country, it's money, it's getting revenue
from these accounts.
I enter into this thing at the point we are now presuming
that Ogilvy Mather will not cooperate. So what I have in mind,
what I anticipate is trying to move forward to remove a bad
company, get this program back on track with more integrity and
improve its chances for success, notwithstanding the fact that
we're probably going to have to fight the company. But what I
would love to see on the part of the government is a proactive
stance, not, you know, this sort of just caving in to this. I'd
like to see some backbone on the part of ONDCP.
And I know that this subcommittee and hopefully the full
committee stands behind that and certainly believes likewise.
But I think this boils down to revenue. And that's what Ogilvy
Mather needs. That's what they want. I think that's what gave
rise to the problems here.
Mr. Martin. My only comment to that would be I'm just
viewing revenue in a different way than you are. I'm viewing
their future revenue from the perspective of other clients as
very important to them. I agree that revenue----
Mr. Barr. Do they have other clients as to which they stand
to--and I know all that $700 million is not money that goes to
the company, but a contract of that size, that's a pretty hefty
contract.
Mr. Martin. It is a sizable contract in the advertising
industry. It is by no means in the category of the top 10
percent of the largest account.
Mr. Souder. Where would you place this contract? Roughly.
Mr. Martin. I think would you find in the publicly
available information that it's on the order of something like
$2.1 billion per year as opposed to this $150 million per year.
Mr. Barr. So it's a lot more than that. That's in the
contract itself. The value of the contract is 762.
Mr. Martin. That's over 5 years. My point, Mr. Barr, is
that I agree that Ogilvy is concerned about revenue and return
to their stockholders. My emphasis or my conclusion would have
to be based on my experience in the advertising industry that
they would be very concerned about their future business
opportunities as a function of taking an image hit, a further
image hit with respect to how they behaved with the rest of
this program. I would be shocked if they did not cooperate
because it's in their best interest from a long term revenue
point of view to do so.
Mr. Barr. Could I ask just one other question of Mr.
Marston, Mr. Chairman?
Mr. Souder. Yes, and then I'll conclude.
Mr. Barr. Who's Alan Levitt?
Mr. Marston. Alan Levitt is the Program Manager for the
Media Campaign.
Mr. Barr. And how long has he been with ONDCP?
Mr. Marston. I don't have the answer to that, sir, but I'd
be happy to followup.
Mr. Barr. It goes back to the previous administration?
Mr. Marston. Yes, it does, sir.
Mr. Barr. Does he have also have a relationship with the
DNC?
Mr. Marston. Not to my knowledge.
Mr. Barr. Would you check into that because we believe
otherwise?
Mr. Marston. Yes, sir.
Mr. Barr. And apparently he's a key person in this whole
scenario, is he not?
Mr. Marston. As the Program Manager he's involved in all
aspects.
Mr. Barr. Is he providing some of the legal advice that
astounds me today?
Mr. Marston. He does not provide legal advice. Our General
Counsel's Office does that.
Mr. Barr. I thought he was with the Counsel's Office.
Mr. Marston. No, he's the Program Manager of the Media
Campaign at ONDCP.
Mr. Barr. But isn't he also--isn't he with the Counsel's
Office?
Mr. Marston. No, sir, he's not.
Mr. Barr. He's not. OK. I thought he was. OK. Well, we
certainly will look forward to hearing from Mr. Levitt as well.
Thank you.
Thank you, Mr. Chairman.
Mr. Souder. Was he on the Review Committee?
Mr. Marston. He was on the--one of the three panels for the
review of past performance, yes, sir.
Mr. Souder. Could you explain----
Mr. Jaggard. He was an alternate member of the Technical
Evaluation Board.
Mr. Souder. So he didn't have an input into the decision?
Mr. Jaggard. No, sir.
Mr. Souder. We may have some followup questions with that.
Because one of the--could you explain who made--the Navy
doesn't actually make the decision, is that correct?
Mr. Jaggard. No, sir. The Navy Contracting Officer was the
deciding official of the award of the contract.
Mr. Souder. And so multiple people input into the deciding
official?
Mr. Jaggard. Yes, sir. He received separate inputs from the
Technical Evaluation Board that was chaired by Maple from ONDCP
and he received the past performance evaluation with himself
and one of his contract specialists and then he had the Defense
Contract Audit Agency do audit reports on all of the cost
proposals.
Mr. Souder. For determining who could do the technical side
best, were there outside opinions other than ONDCP?
Mr. Jaggard. The Contracting Officer did hire an
advertising consultant to serve as an advisor to the Technical
Evaluation Board from outside ONDCP.
Mr. Souder. And did that person ever work with ONDCP
before?
Mr. Jaggard. Not to my knowledge, no, sir.
Mr. Souder. I'd like to just conclude with a couple other
things for Mr. Martin. Just so I have it in my head, that one
of the things those of us who are supportive of the program are
very concerned about are some of the recent research which
suggested that at least in some categories there were problems
of sustaining the successes of the ad campaign. And we've had a
hearing on showing that. And that's a part of the reason that
we've looked at the pretest question and testing the ads before
they go up. And I have some concerns that sometimes advertising
agencies are asked to do one thing and then measured on
another. For example, we may be very successful in this current
campaign identifying drugs with terrorism, but that doesn't
necessarily mean that drug use would drop just because somebody
made the assumption. If you asked an ad campaign to identify it
with terrorism, you haven't precisely asked the question to ask
them in their opinion what reduces drugs. That's one of the
problems with getting the measurements is sometimes there's a
setup before a final.
Do you believe that if there is a transfer that--and I
would also like to think that this is more likely or because of
future business concerns to be not necessarily a friendly
transfer but that Ogilvy understands the advantage of a
transfer--that we would have much of a setback in the copy
research, the transition of market research data? As someone
who's worked in transition programs, that does concern me that
some of the creative loss could be the understanding of the
data they've been working and some of the past experiences or
some of the market research.
How serious a problem has that been in your experience?
Mr. Martin. In my experience it varies by individual case,
as you would expect. But again, the ability to do that kind of
work, the research component of the contract is relatively
routine work for all of these agencies. And I don't see that
this would be in any way a particularly more difficult thing to
do. And you also have the advantage, the huge advantage that
hasn't been talked about much here, of the brain power and the
resources and the willingness of the Partnership for a Drug-
Free America to help you with these things.
Mr. Souder. Which is a coalition of ad agencies?
Mr. Martin. Yes.
Mr. Souder. So they're not inexperienced?
Mr. Martin. They are not inexperienced at all.
Mr. Souder. One last question on reprogramming dollars,
that one possibility would be presumably to transfer some from
strategic planning over to help cover some of the cost for the
placement. But one of the things I believe you said in your
testimony is that you felt that the most important part of what
an ad agency performs is to some degree the strategic planning.
Mr. Martin. The strategic planning is important. But what
we're really talking about here is if this administrative
problem will lesson our effectiveness in the marketplace. Even
if it were a mild disruption, which I don't think it will be,
you're only talking about a relatively short period of time
that would be a problem. This is not as if you were going to
turn everything off, you're not going to shut the lights out
and go away for a generation and then come back and try to
start it over again. This is kind of a bump in the road. And if
it is aggressively managed by the client, that's ONDCP, that
bump ought to be either very small or eliminated in my view.
Mr. Souder. And wouldn't the bump likely be more like if
the Partnership has multiple ads in the can, it's just the bump
would be not that we would go dark, that we might not----
Mr. Martin. You might have to use some ads that you used
previously.
Mr. Souder. Or one that you didn't retest, bottom line?
Mr. Martin. I wouldn't even say that. I mean, you could I'm
sure--I haven't talked to anybody at the Partnership about this
but I know what their general capabilities are. I mean, there
are many ways to skin a cat. The cat doesn't like any of them,
but there are many ways to skin this. And having pretesting
done of the ads, yes, it's an important thing and it should be
done but it certainly can be done. And I thought that Mr.
Barr's comment earlier about we need some innovative looking at
this as to how to get this thing accomplished creatively--not
creative advertising but creatively from a managerial point of
view, is right on. I mean, if I had to get the copy testing
done and I didn't have an agency tomorrow, I'd go to the
Partnership and say, hey, help me with this, how do we get this
done, and they'd stand up and help you for a short period of
time if you had a serious issue.
I'm at a loss to understand even why that's a serious issue
because I've got advertising sitting on the shelf that in the
interim might not be optimum but it's already been tested, I
can pick the ones that have worked well and run them for a
little while.
Mr. Souder. I know from the written testimony that the
ONDCP believes it's more difficult than that. But I would
encourage you during this period to be coming up with an
alternative plan because clearly something is going to happen
with this and I, from the beginning, have had some doubts about
how difficult it is to do the transition; in other words, I
think that in fact if there's a will that we can try to make
this happen and we at the very least need ONDCP to be preparing
for it, not knowing the end of the day outcome.
Mr. Barr, do you have any comment?
Mr. Barr. No. Again I appreciate the hearing. I think we've
laid some good ground work. I think it's very clear where we
stand and I look forward to moving forward to again strengthen
the program by removing a company that has engaged in highly
improper activities and the government knows that it has done
this.
Mr. Souder. I thank you each for your testimony. This is a
very difficult issue to work through. I appreciate the time
that you spent here. We may have some additional written
questions. And do any of you have any closing comments you'd
like to make?
Mr. Marston. Mr. Chairman, if I could respond briefly to
your last statement. We certainly have the will to make this
work and are going to work diligently both now and when the
final outcome of this is known. But in the interest of giving
you a full picture of the transition, which I think you're
looking for, there are a couple of complicating issues. They
certainly aren't things that can't be overcome but unlike a lot
of other contracts this one has some unique issues. One of
those is our work with the Partnership for a Drug Free America
and the Ad Council, who are our key partners. So it's not a
single client relationship with some campaigns.
We had planned a 3-month transition period as part of
Ogilvy's old contract should a new contractor receive this
award. I'm sure we can compress that time scale. And we'll do
everything we can to do so. But that was the sort of parameter
we were looking at. Additionally, the up-front buying period,
Ogilvy negotiated that and that's part of a total package for
all their clients that they negotiated, including the part they
negotiated to have pro bono to match everything that we would
pay for. That negotiation is something that, the results are
something that belongs to Ogilvy. So that would go away in a
transition period. And we'd have to negotiate those again,
which would likely result there in increased cost for
purchasing the time and space.
Again, it's not an issue that can't be overcome, but I
wanted you to be aware of it as part of the transition issue.
Mr. Souder. We may ask some followup questions, but I
assume--I mean, the implied assumption would be that in the--I
mean, I understand the technical part of what you just stated;
in other words, Oglivy in the--and Mr. Martin, you correct me
if I misstate, but in my basic understanding of advertising if
you had a negotiated and complete package and Ogilvy negotiated
a comp time in effect with that, whoever is the next placement
agency is also going to have a large combination and even if in
the transition period it was--let's just hypothetically say it
was a partnership representing all the major advertising firms,
it's unlikely that NBC or whoever they were placing with or
regional market station is suddenly going to say we take back
what we had negotiated with because the people they're in
effect dealing with are going to make future placement
decisions there. It's a public service related to the ad
campaign. We're likely to call them on the carpet and in here
immediately all if of a sudden they pulled back. So I
understand there are risks involved with that but the
likelihood of losing the match time unless we took either a
really tiny company, or they thought we weren't going to call
them in here the second they tried to take back their comp
time, I just don't think that's a real threat.
I understand that there is some risk to Ogilvy in that if
that in fact in the full package had helped them, but I think
that's unlikely too. Ogilvy is a huge company and that's what
we were establishing earlier. These are big contracts, but
they're a small part of their big contracts. And all four of
the other bidders are also huge companies. So I understand
those are there, but that's why I say just on the face of it as
somebody who basically had--I mean, I wasn't a management major
but marketing in depth, dealt with our furniture store and lots
of different media campaigns and politics as well as our own
retail business, there are some of the things that I just--I
think that they're easier than have been let out to be and I
think actually some of these smaller parts other than the other
media buys are more complicated.
At the same time that Congress has shown that we're more
skeptical about the other parts of the Media Campaign and
believe that lots of money has been in effect, diverted from
the original intent of what Congress wanted to do, and I think
we'll see in this reauthorization, we saw it already in the
appropriations bill, that we believe there needs to be an
advertising threshold that gets enough frequency to the target
market. And that when we start worrying about product placement
over here, running around with a magazine over here, some
concert over here, some group over here, pretty soon your
frequency goes down even if your reach is there, and then we
get a study back that says, oh, we're not having as much
effect. And we believe that's because of some of what has
happened in the campaign.
So speaking as someone who was chair of this committee, I
would not be crushed if I was told well, some of the tangential
media was lost in this process and we took those dollars
instead and put that into the main TV buy. That's kind of what
we just voted on the other day anyway. Appropriators feel that
way, the authorizers feel that way, and that makes--and I do
believe and it's clear in your written testimony, too, that's
what ONDCP probably legitimately feels is the highest risk, is
not the major TV buys but all the tangential.
Mr. Barr. Thank you, Mr. Chairman.
Mr. Marston, I think there are two basic type of
decisionmakers. One is the decisionmaker that you go to to
solve a problem and it gives you 10 reasons why he can't solve
it. The other is a person that looks at the problem and looks
for a reason and a way to solve it. What I've heard today is
that ONDCP falls into the former category. I'd like to see at
least with regard to this problem, this is not just about an
advertising company, it's about lives of 20,000, more than
20,000 of the last figure we had was 3 years old in 19,648 drug
induced deaths in the United States. Let's not be bureaucratic
about this.
Let's stop worrying about Ogilvy Mather and let's worry
about America, the anti-drug war that we're trying to fight,
and work with us to find a way to solve this, not constantly
come up with reasons why it's difficult, reasons why it can't
be done. There are ways that it can be done. You've heard them
here today. Maybe there are others. That's the attitude that I
hope we see on the part of ONDCP.
Thank you.
Mr. Souder. Thanks again to each of you, and with that this
hearing stands adjourned.
[Whereupon, at 1:20 p.m., the subcommittee was adjourned.]
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