Statement of Rep. Tom Davis

Ranking Republican Member

Thank you, Chairman Waxman, for holding this hearing. 

Last Friday’s indictment of AEY officials certainly justifies the Committee’s decision to pursue questions about how and why a small, inexperienced company was awarded federal contracts worth hundreds of millions of dollars.  Obvious evidence of consistently shoddy performance was somehow missed or ignored as substandard or illegally-obtained munitions were apparently being sent to Afghanistan.  The system eventually caught up with AEY, but it took too long and cost too much.

The failure to root out AEY sooner highlights the difficulties that can arise in trying to capture and use information on contractors’ past performance.   That such a bad actor could continue to receive federal contracts only strengthens my belief that a well maintained database of current information on prior violations and other relevant information could be a valuable tool for contracting officers.  Such a database was proposed in H.R. 3033, and we appreciate Chairman Waxman and the bill’s sponsor, Representative Carolyn Maloney, working with us to improve the latest version of the bill.   It still needs some work, but with derogatory information on performance issues available only to acquisition officials, the database could provide the tool the government needs to root out the rotten apples before they can spoil even more valuable barrels.  Perhaps if we had acted faster to put such a system in place, we wouldn’t be having this hearing today.

But other gaps in the contracting system also appear to have played a role in the AEY fiasco.  It’s one thing to have the appropriate information on past performance available; quite another to be able to use it effectively.  In interviews with various contracting officials involved in the AEY transactions, the impact of the Small Business Administration’s Certificate of Competency (COC) process surfaced several times. Under that statutory scheme, contracting officials are prohibited from rejecting an offer from small businesses, such as AEY, only on the basis the company is not a “responsible” prospective contractor due to negative or marginal past performance.  Instead, the matter must be referred to the Small Business Administration (SBA) which decides whether the firm is eligible for award. 

While I understand this program was designed for the protection of legitimate small business firms, it might be useful, in light of this case, to take a careful look at the impact of this process.  We should ask whether it has an intimidating impact on contracting officials who might otherwise reject a firm as “non-responsible” for reasons such as bad past performance but are reluctant to do so because of the delay and extra paperwork required by the SBA referral process.

This case seems to speak volumes about what’s wrong with the military contracting process today.  Yet again we see poor decision making by overworked and undertrained Army acquisition officials.  Over the course of awarding and monitoring 29 contracts worth more than $200 million, someone somewhere should have heard an alarm bell and looked more closely at what this small company was doing with an implausibly large set of tasks. 

But we should take care before extrapolating the specific – hopefully unique – facts of AEY into any broad conclusions about the entire acquisition system.   This is a sordid tale of greed and ineptitude involving repackaged Chinese ammunitions, alleged kickbacks to an Albanian government official, and phantom plane crashes.   There is little indication the United States routinely purchases ammunition for vintage Soviet weapons from 22-year old arms dealers.  So we should ask what needs fixing while keeping an eye on what needs to keep working in the vast majority of contract transactions so taxpayer dollars are spent efficiently and wisely.  Meaningful reforms are based on data, not anecdotes, even sensational ones.

Today’s testimony should add important information to the public record about the mistakes and waste at the heart of the AEY debacle and we welcome the witnesses.