REAR ADM. JOHN KIRBY: Good morning, everybody, and welcome. I'm going to turn the podium over here to the secretary of the Navy, the Honorable Ray Mabus, who, as you know, will be talking to you today about contracting issues and some reforms and initiatives that the Navy Department is executing. We also have with us, after the secretary -- he'll have a brief statement and then take some questions from you.

 

After that, if you want to stick around, we've got two other subject matter experts that will be happy to come to the podium and speak to you. One is Rear Admiral John Yuen, who is the commander of the Naval Supply Systems Command, and Mr. Elliott Branch, who is the deputy assistant secretary of the Navy for acquisition and procurement. And they will be happy to take any further, more detailed questions you might have.

 

With that, Secretary Mabus?

 

NAVY SECRETARY RAY MABUS: Good morning. First, I want to apologize for my voice. I've caught something, and people have suggested it was because I stood out for six hours in the freezing rain at Army-Navy, but I'm pretty sure that wasn't the reason it happened.

 

As John Kirby said, I'm going to make a few remarks and then take questions. And he noted that Admiral Yuen and Mr. Branch are here for -- if you have -- if you want to go into greater detail or greater length.

 

Prevention, identification and action against fraud against the government has been a focus of mine since I first entered public service as state auditor of Mississippi. And I have continued putting attention and action on acquisition integrity and preventing contracting fraud as secretary.

 

Now, lately, our efforts to go after contracting fraud have produced some headlines. And while we're obviously not pleased about the alleged misconduct of those involved in the Glenn Defense Marine Asia (GDMA) case, I do believe that the discovery and disposition of those allegations are indications that our efforts are working.

 

I haven't spoken publicly about Glenn Defense Marine or this case before, and I'm still restricted in what I can say now because of the ongoing prosecution by the United States attorney's office in San Diego and the Department of Justice Criminal Division in Washington. And I want to say that both of those offices have done a tremendous job with a difficult case, and I want to express my thanks on behalf of Navy for their work and for their public support of what Navy and NCIS has done.

 

However, it's important that the public and the people in the Department of the Navy know the role that Navy played in discovering the suspicious activity, in developing the case, and in working closely with other agencies to address it.

 

The Naval Criminal Investigative Service, NCIS, along with the Defense Criminal Investigative Service, and the Defense Contract Audit Agency did and is doing incredibly impressive work to ferret out the alleged fraud and corruption carried out by GDMA and, yes, allegations against naval personnel, as well.

 

NCIS opened this investigation in May of 2010 against GDMA based on suspicious claims and invoices the company submitted to the Navy, claims that internal processes Navy had set up helped reveal. During this investigation, NCIS uncovered critical evidence that connected one of their own agents to suspicious activity, and NCIS deliberately planted bogus information in NCIS reports in order to protect this investigation, and did so without any leaks outside the investigation.

 

Information gathered during this investigation was eventually turned over to government prosecutors and led to the recent charges filed in federal court. According to the U.S. attorney's office, shortly after NCIS filed a false report to mislead the agent suspected of involvement, and this report said that the investigations against GDMA and its owner, Leonard Francis, were about to be closed, Francis traveled from Singapore to San Diego for a meeting with Navy officials, which allowed law enforcement officials to arrest him.

 

I was briefed for several months before this case became public. By necessity, the number of people who knew of the investigation was kept very small. Throughout this period, I repeatedly instructed NCIS agents to take the investigation wherever it led.

 

Although the criminal investigation was and is being conducted independently by law enforcement, I understand that they have pulled no punches and will continue to pursue any and all leads. And it was NCIS that announced the first arrest in this case, but this occurred on September 16th, the day of the Washington Navy Yard shootings.

 

Some have questioned why GDMA won contracts after NCIS opened an investigation. And I think the answers are very straightforward. First, the information about the investigation was restricted primarily to law enforcement personnel with a few exceptions to prevent leaks. And as I've noted, even that precaution was not enough for a time, because an NCIS agent was actively obstructing the investigation by helping Leonard Francis avoid detection.

 

Second, contracting officers certainly were not told because that could have compromised the investigation. And finally, if the Navy suspends a company's ability to compete for contracts or refuses to award a contract to a low bidder, we are required by federal law to give that contractor a reason. In this case, a notification would have tipped off GDMA that something was wrong.

 

This is a very serious case, and it's a serious issue. And I'm making sure that Navy leaders everywhere understand just how deeply concerned I and the Navy am about it. And I've already spoken with the chief of naval operations, our fleet commanders, and our component commanders, and three- and four-star admirals stationed around the world reiterating these points.

 

But I think the public discussion to date has sometimes missed the fact that the concerns about Glenn Defense Marine were first raised by people inside the Navy, that the Navy acted on these suspicions by building a case against the company, its owners, and implicated Navy officials, and that the Navy partnered with government prosecutors at the Department of Justice to make the arrest and assist in the current prosecution. Without the Navy and Navy's actions, there would almost certainly be no story today.

 

The conduct and the behavior alleged to have occurred in connection with this case is absolutely incompatible with the standards we require from our Navy officers and civilians. So if, as a result of this investigation, criminal prosecutors decide not to pursue criminal charges, but instead refer cases to the Navy for disposition, I'm announcing that those cases will be reviewed and resolved through a consolidated disposition authority (CDA).

 

This CDA will be a four-star admiral and a team of professionals, all of whom have been fully vetted to have had no part in this case. This CDA will ensure that, if allegations are substantiated, individuals will be held appropriately accountable.

 

Now, that's GDMA to date. I want to talk briefly about efforts this department has taken to prevent -- to prevent or act against contract fraud. Soon after I took office, I made several changes to our acquisition procedures to crack down on company and individuals who attempt to defraud the government.

 

Some examples. We have dramatically increased suspension and debarment proceedings to address misconduct and poor performance by Navy contractors. Since 2009, Navy has suspended 252 contractors and debarred 400. And where the seriousness of the misconduct warranted it, more than 120 of these debarments were for periods longer than the three-year default period.

 

To improve accountability, we now require Navy commands to refer terminations for default to our Acquisition Integrity Office, which in fiscal year '13 resulted in the referral of about 11 contract terminations.

 

Next, if there's an illegal gratuity or bribery under a government contract, there's a special statute to terminate those contracts and assess punitive damages regardless of whether a criminal conviction has condition. In 2011, I directed a change that established detailed procedures for cases involving this type of criminal activity, and GDMA may be the first case to use those new procedures.

 

Finally, as an example, I've also provided detailed guidance to assist the contracting officers to determine whether a contract award is appropriate and to do so beyond checking just to see if a contractor had been suspended or debarred. The Government Accountability Office graded Navy as having one of the top acquisition fraud programs in government. But it's also apparent that we need to do even more to prevent fraud and corruption in our contracting process.

 

So I'm announcing a series of additional initiatives and policies. First, in September, I directed Assistant Secretary of the Navy for Research, Development and Acquisition Sean Stackley to review acquisition strategies for husbanding and similar contracts worldwide. We now have the preliminary results of this review, and based on those, we're taking some immediate steps.

 

A so-called red team of experts from across the fleets and from Navy Supply System Command has been formed to scrutinize the husbanding contractor process from end-to-end and to recommend changes to correct deficiencies in those procedures and to provide maximum effective oversight of the process. When their work is done -- and based on that work -- Assistant Secretary Stackley will issue a revised acquisition strategy that will be used on all husbanding contracts globally.

 

Second, we will further standardize requirements, further standardize contract vehicles, further standardize administration, and increase oversight of husbanding contracts and contractors. One way we're going to do this is to increase the use of firm fixed-price line items and minimize the use and improve the oversight of unpriced line items.

 

Third, we will remove pay functions to husbanding service providers from ships and provide better guidance on requirements and more contracting support ship COs going overseas (inaudible).

 

Fourth, we will incorporate standardized requisition processes fleet-wide.

 

And, fifth, the auditor general of the Navy is conducting a special audit of husbanding and port services contracts, with the final report due in June of next year, to identify improvements in internal controls. We'll also continue implementing the reforms we've already made, and we'll keep looking for additional ways to strengthen anti- fraud provisions.

 

As long as we are aggressively pursuing allegations in the GDMA investigation, I expect we will continue to see headlines resulting from the discovery and disposition of these cases. The Navy has a long tradition of transparency when we uncovered allegations of misconduct, particularly against high-ranking officers, because not only can the spotlight act as a deterrent, but mostly because it's the right thing to do. I would rather get bad headlines than let bad people get away. But fraud prevention is only part of the problem. I want to very briefly mention that we're also radically changing the way we manage all service contracts, which consume an increasing percentage of our top line.

 

In closing, I want to stress three points. First, the Navy is a leader in combating procurement fraud, and we are seeing the results as the allegations in GDMA demonstrate. But the job isn't done.

 

So, second, we will continue, as we have done since I came into this office, to identify ways to protect our acquisition processes against those who would criminally or otherwise take dollars away from our warfighters and those warfighters' ability to protect our nation.

 

And, last, I think it's vital that we don't let the alleged misconduct and criminal behavior of a few stain the reputation of the many Navy sailors and civilians who are ethical and honorable and who strive every day to keep our Navy the strongest, most credible force on the seas.

 

I am very proud of them and of their families. And as long as I am secretary, I will continue to do everything I can to preserve the integrity of the institution we serve and we love.

 

REAR ADM. KIRBY: Okay, folks, I'll be calling on you. And if you could just identify yourself before you ask your question.

 

Q: Dave Martin with CBS. Two questions. You alluded to it in your statement that -- do you expect further arrests of U.S. -- serving U.S. Navy officers in this case? And, second, you mentioned these figures that, since 2009, you suspended 250 and debarred 400 contractors. I assume those are cases where it's not just a billing dispute, but the Navy feels it was ripped off. I mean, that's a large number. Is the Navy just such a soft target?

 

SEC. MABUS: Number one, I think it's fair to say that there will be more disclosures coming in GDMA. What kind of disclosures those are, I'm not at liberty to say. But I certainly don't think we've seen the end of it.

 

Second, I think that the numbers that I've put out there actually speak to the exact -- to the opposite conclusion, that we go after people. We have set up procedures to try to prevent fraud, but any time -- any time you've got this kind of money, there are going to be people trying to steal, people trying to defraud the government.

 

And you can do two things. And I think we've done both of those things. The first is, you can set up procedures to try to prevent it. And, second -- but that's always a race, because every time you set up a rule, somebody tries to figure out a way around it.

 

But the second one is to hold people accountable, to go after people very aggressively, and that's not just for defrauding the government. That's also for not performing, for signing a contract and just not performing on that. And I see that as -- as an example of the transparency that we need, because we publish these things when we do these, these suspensions and these debarments, that we are actively taking a look at everything we do to make sure that the taxpayers' money is being used well.

 

REAR ADM. KIRBY: Craig?

 

Q: Mr. Secretary, Craig Whitlock with the Post. I think one striking thing about this case may be the public isn't that surprised that a contractor might try and take advantage of the government, but there have been six Navy officers implicated in one way or another in this case, plus a senior NCIS agent. How much of this is a contracting problem with oversight? And how much of it is an ethics problem with senior officers in the Navy?

 

SEC. MABUS: Well, I think at least part of it is a contracting issue and is making sure that we do that. But I also think that -- and I'm going to go back to what I said -- it's very important to note that people inside the Navy were the first people to raise the suspicions. People inside the Navy went after this case and built this case. And when naval personnel were involved, they went after those naval personnel. And we announced it. And we do that with COs all the time.

 

I have spoken to our fleet commanders, our component commanders, to make sure that they are personally interested in it. But this not only goes against all the ethics rules that we have, these few people that are alleged to have done these things. This goes against everything you should have learned at home, everything that -- I mean, everybody knows it's wrong to take a bribe. Everybody knows it's wrong to get paid to give a contract.

 

And that's why I said the thing I did at the end. We have a third of our fleet forward-deployed today in ports all over the world. We have Navy officers and civilians contracting for those ships to go into port. The vast, vast majority are doing it honestly, honorably, ethically. And I don't want the actions of a few who -- it's not just ethics, it's -- in some cases, I mean, it's criminal -- to tarnish the actions of the many.

 

But we're not going to stop. And as I said, I told NCIS when I was being briefed on this case, the one consistent thing I told them, every single time we met, was, "Take this investigation wherever it leads. It doesn't matter. Take it wherever it leads."

 

Q: Sir, you noted that any time you've got this amount of money involved, there might be a problem. Do you have an estimate? How much -- how much money are you talking about with GDMA? How much do you think may have been defrauded?

 

SEC. MABUS: I don't, or not one I can -- I can say anything about, because it's in prosecution right now.

 

REAR ADM. KIRBY: Chris?

 

Q: Chris Drew with New York Times. Mr. Secretary, so if you step back from, you know, the bribery and that case and you look at Inchcape and MLS, and the whole husbanding process, can you talk a little bit more about why the Navy seems in the way it structures these contracts and polices them -- seems to leave itself open to steadily rising charges and -- and fraud? And why the -- you know, the supply guy on the ship has been sort of left to go into court and deal with these husbanding agents and having them negotiate deals on the fly to get a ship out of port?

 

SEC. MABUS: Well, number one, there are rules we have to follow. For example, because one employee leaves one company and goes to another one, it doesn't mean we can take action against that second company. If we do, or if we say we're going to -- we're going to pull all the contracts, start over here, a couple things are going to happen. Number one, we're going to get sued, real fast. And they're probably going to win. It's like if we had taken this contract away from GDMA before the investigation was finished and did not have enough evidence to prove it, GDMA would have gotten the contract back.

 

Second, we are global, and we do have a lot of these contracts out there. And I think right now, there are 14 regional contracts that were all done by bid. The -- but the thing I will keep going back to is, the tripwires that we have set up, the procedures that we have set up are the things that are leading to these discoveries. And, again, I would rather have some of the headlines that I get because we are actively doing these things, because we're pursuing these, than not be here today because there's no story, because you or I or anybody else doesn't know about these things that are going on.

 

Q: Can I follow up (OFF-MIC) can you talk a little bit more -- you mentioned in your remarks changes in the -- in the contracting, in the husbanding, changing in the supply officer role, more fixed-price -- more fixed-price on these. I mean, all -- a lot of that was recommended in that 2007 study that we referenced this morning, and the idea is that, you know, you have a certain number of fixed items, and if the ship shows up and the husbanding guy says, "I don't have that size barge," or, "I don't have that size forklift, but I can give you this other thing for way more money," you know, your supply officer stopped buying (inaudible), nobody's really monitoring that, and there's not the kind of centralized ordering that you see in the commercial shipping world.

 

Can you talk a little bit more about how vulnerable that made you and why it's taken this long to sort of change the basic approach in the contracting?

 

SEC. MABUS: Well, number one, I do think there were gaps in the contracting. We did set up in -- several years ago a standardized list of fixed-price line items. And the estimate was that they -- that unpriced line items should account for about 1 percent of contracts, because ships tend to need the same thing going into port over and over again.

 

One of the things that you just pointed out is that the -- that sometimes the husbanding agent would come in and say, "We don't have that. We don't have whatever it is that's a fixed line item. We've got this, but it costs -- it costs more." We didn't have the centralized ability to tell the contracting officer on the ship, "Don't do this."

 

Now, it's allowed us to chase down overpayments in a lot of these cases, but that's one of the reasons that we are doing much more in terms of centralization in these contracts and in the way that we -- the way that we're going to centralize the oversight to not put the commanding officer or the supply officer in these things.

 

I mean, I'll give you another just very simple example. One of the things that these husbanding agents do is take waste off ships, particularly wastewater, off ships. And one of the things that we were noticing after I came in here was that there was often a big dispute between what the contractor said they had taken off and what the CO thought they should have taken off. And it was always the contractor thought they had taken way more and were charging way more.

 

So we put in flow meters worldwide. I mean, it's not a very stunning thing to do, but now we know how much that's done. One of the ways you find out about things like this is you see sort of aberrations and you take action to correct it.

 

And that's why I think we've done a lot, but I think we've still got a good bit more to do in doing these things, because we are worldwide, we are operating everywhere in the world, and we've got to have a more centralized, more standard procedure so that we don't put commanding officers, supply officers on ships in the position of having to make these decisions on the fly, as you put it.

 

REAR ADM. KIRBY: We've got time for just one more. Bobby, you had your hand up?

 

Q: Mr. Secretary, Otto Kreisher from Seapower magazine. You know, the Navy's been out and about doing these kind of things for 200 years. You know, we've been dependent on overseas resupplying and that sort of thing. It seems, you know, troubling that we ran into these kind of problems. Isn't there any -- do you have a system -- or should you have had a system to screen the husbanding agents so that when -- even if they come in with a low bid, you can say -- you can disqualify them because of nefarious performance in the past or any other problems with them?

 

SEC. MABUS: Well, a little history. Before 1999, there were scores of husbanding agents that we would contract with around the world. And that got to be such a problem because of performance issues, because of fraud issues, because of all sorts of things, that Navy in '99 went to this regional approach so that we would have fewer husbandings to deal with, so that there would be, hopefully, competition among companies big enough to do these things, and so that we would begin to have a history of how companies did, because a lot of the smaller companies in one port were -- they'd be here one day and not there the next.

 

And they -- we set up procedures, and I strengthened those procedures to do exactly what you said. Before I came into this office, the only thing a contracting officer had to do was check to see if somebody had been suspended or debarred. Now they have to go a lot deeper to say if this person has performed, has performed adequately, has performed on time, has had any sort of questions raised about it.

 

Now, in the case of -- I'll go back to GDMA -- in the case of GDMA, if during this investigation a contracting officer had asked those questions, nothing would have come up, because we were holding the investigation and the information coming out of that investigation so closely because we wanted to make sure that we did the investigation right, so that we made sure that we followed it to wherever it went, to make sure that we didn't just end one contract, but if there was a systemic problem here or a problem with a company or an individual, that we addressed that more globally, more universally.

 

Q: Thank you, Mr. Secretary.

 

SEC. MABUS: Thank you all.

 

REAR ADM. KIRBY: Guys, you still want the two other folks who can talk to you? Admiral, did you have something you wanted to open with? Okay, so opening statements. We'll just keep going. Okay?

 

Q: I'm still struck by this number of suspensions and debarments since 2009. So put that in perspective for me -- 250 contractors suspended, 400 -- I assume that's another 400 debarred. Out of what kind of universe? How many -- how many contractors are we talking about total? And how much money is -- is at stake in all of these contracts?

 

DEPUTY ASSISTANT SECRETARY OF THE NAVY ELLIOTT BRANCH: I can't give you a specific number about how many contractors we're talking about total, but let me put this in perspective, in terms of Navy acquisition system. So in any given year, we obligate somewhere between about $75 billion and $95 billion a year, over roughly 350,000 transactions. So when I look at the numbers that the secretary has cited over the time period he cited them, I see that as a good news story. What that tells me is that, for the most part, we're dealing with honest, ethical contractors who spend a great deal of our money over a great number of transactions.

 

Q: I mean, it's safe to say that the number of contractors is in the thousands, tens of thousands?

 

SEC. BRANCH: It's easier to say it's in the numbers -- I would say probably tens of thousands. For example, we have one contract where we primarily buy our CONUS services. I know we have at least 3,000 contractors simply holding one of those vehicles alone. So we're probably talking tens of thousands of people in our industrial base.

 

REAR ADM. KIRBY: Dave?

 

Q: Thanks. David Alexander from Reuters. I wonder if you could talk a little bit about the contracting process, because it seems like these contracts are sort of large open-ended contracts for a certain amount of money that they won't get unless business is taken to them. So it kind of encourages them to seek out that business, and I wonder if that is part of the problem with the contracts. So could you talk a little bit about how the contracts works?

 

SEC. BRANCH: So it all starts with the requirements. So when a ship pulls into port, one of the things that the secretary mentions is that we're trying to look for standardization, so we know the size of the destroyer, we know the size of the certain ship. And we know then basically what services are required, the -- on the pier side, how much CHT, the sewage that has to come off, the water taxis that may have to take -- ferry people in and out if they're out moored, the fenders and things like that.

 

So we understand the requirements, and we can understand those requirements, and we know what ports we're going into. We work to standardize that process. And then we're always looking in our -- an ability to improve the competition and improve our base so we have those requirements known. And in that way, we can get better competition when we have these meetings with industries and we can tell them on the whole, when we pull into port, these are the basic services. We do work very hard to get these as priced items, as the secretary mentioned.

 

Bottom line, though, is we want to make sure that our -- that we understand our requirements, that the contracted services that we require are the contracted services we receive.

 

Q: Mike McCarthy, Defense Daily. Getting back to the amount of money involved, I mean, does the Navy have an estimate of actually -- or a number or an estimate of how much is involved every year in fraudulent contracts, how much it costs maybe every year, or since -- and since 2009, with the debarments and the suspensions that the secretary mentioned earlier?

 

SEC. BRANCH: Well, let me talk to the two questions I think I heard. First of all, I don't think the Navy could tell you -- I don't think any federal agency could tell you how much money was involved in, I guess, fraudulent contracting, you know, every year. If we could, it would mean we would have caught them all. And as diligently as we pursue people who don't do business with us ethically, I can't stand here and stay that we have detected every single incidence of fraud in Navy contracting.

 

But I think, you know, to your other point, you know, when we look at that system as a whole, what you have to understand about the suspension and debarment process is that it covers a range of things. So it covers everything from what we call, if you will, kind of de facto debarments, where we have a court case, where somebody's been convicted of either, say, tax evasion or a situation where there has been fraud with a government contract, to cases where we have accuracy developed a record and said, you know, we believe because of this particular act under these set of contracts that you have seriously impaired our confidence in doing business with you to things as -- I guess as interesting, I would put it, as putting false labels that say made in the USA in proffered products.

 

So there's a wide range of things that we debar people for, because we've lost confidence in our ability to do business with people who have overall business integrity. So I wouldn't want to point at all debarments and say they're all a result of this kind of act.

 

REAR ADM. KIRBY: Craig? 

 

Q: Admiral, I understand the Navy terminated its contracts with GDMA back in September. According to the Justice Department, GDMA had pretty much a monopoly or stranglehold on port services in a lot of ports, particularly in Southeast Asia and Malaysia, Thailand, places like this. Has this affected the Navy's ability to get husbanding services for its ships in certain ports in Asia?

 

REAR ADM. JONATHAN YUEN: Sir, because we do know our requirements, we have done some surveys, site surveys. We have alternates, alternatives. And so although it's been difficult putting new contracts in place, there were competitors out there, and we put replacement contracts in place to support our presence forward.

 

Q: Has this prevented the Navy from visiting certain ports, though, that it had previously made calls at?

 

REAR ADM. YUEN: I don't know, to answer that question, if it's prevented us. I mean, I think we've supported everything that we've been asked to do.

 

SEC. BRANCH: Yeah, if I could just add something, I'd like to recognize the very, very hard work of Admiral Yuen's staff in this regard, so I want to put this in perspective for you. When GDMA broke, Admiral Yuen was the newly arriving commander of the Naval Supply Systems Command. We had just shut down the government. We were in the process of bringing people home because we had no travel money, no training money, and those sorts of things.

 

But Admiral Yuen's folks found a way to get boots on the ground in Asia to support Navy ships deployed with those -- with those port visits.

 

REAR ADM. KIRBY: Chris?

 

Q: Admiral, can -- I'm still trying to understand a little more the contracting process. And, you know, for everything we hear, you know, the contractors bid on -- essentially on the fixed- price items, and whoever bids the lowest for all those gets the contract.

 

So not only was Leonard low-balling his bid substantially -- I mean, in one case, he bid a third of the price of the other companies -- you know, MLS, other -- particularly was also bidding way lower. And people in industry say the game's pretty simple, is to bid really low on the fixed-price contracts and then, you know, say you didn't have certain equipment and negotiate and hold people up for a much higher price, you know, try to sell the Navy extras.

 

And so these numbers you quote for the contract levels, the price levels are just sort of an entry position. The real cost, you know, keeps escalating. Can you talk a little bit about why you've stayed with that kind of strategy so long?

 

REAR ADM. YUEN: So I guess what I would tell you is that as we -- we defined our requirements to the period in time, and we were able to price those, but the bottom line is to get to the requirements, have standardization, communicate those requirements to the KOs, and how that -- where we had planning in advance so we could identify those requirements. I think that's where we were -- we were making headway.

 

I think the secretary made the point that the alleged conduct and misbehavior is incompatible with our Navy standards, and our KOs, both military and civilians, identified some of these things through our processes. So when we do these contracts, we were looking at prices, we were looking at ports, comparing prices at different places.

 

So I think there were -- there were some measures that were implemented to ensure that we did get what we paid for, and when things were done offline or whatever, that they would be brought forward, and then renegotiated, if we could understand the pricings.

 

But we had -- we have had the capability to start now looking at the data at different ports and collect data and compare data for different ports, for different services, and understand, in all that we do, how things cost.

 

Q: Can you talk a little bit more on the monitoring side? I mean, I know we mentioned in the story this morning the number of your contracting officers has dropped greatly since the mid-'90s. But you look at -- I mean, after a ship goes into a port and the supply officer orders whatever he needs, I mean, how long is it that -- where your people are monitoring that? If you look at that -- that Leonard case, where they were making up, you know, invoices from fake suppliers and turning in the same one with the same date on it repeatedly months at a time, I mean, how does the system not catch some of that sort of stuff faster as it's happening?

 

SEC. BRANCH: Let me talk to a couple of things. Number one, to kind of go back to some of your earlier points, I think it's very important to understand that there's two pieces to this process. One is strategy, and the other is execution. And I want to underscore what the secretary has said this morning. We are going to focus on both of those pieces, so we're going to revisit our strategy on what those business models around the world, you know, can be.

 

You know, there are going to be some ports -- you know, we are not -- we are not commercial shippers. So there are some austere environments in where we go where you may have no port services, you have to mobilize and bring in, you know, port services, or you may be in a sole source.

 

What we understand now, through this journey of continuous improvement that we've been on, is that there are certain business risks that come from that, so we're going to sit down and look at the data and determine what those risks are, and come up with factors to mitigate those risks. That's number one. We're going to look at our strategy. So we'll go to multiple competitive strategies where we can, and we'll put in strategies to mitigate risk where we can.

 

But the second piece is execution, and the secretary talked to that, as well. We need to make sure that ship supply officers, as well as ship COs and XOs, are better tied to our contracting officers, that they're more informed about what services that they're entitled to in a standard method.

 

If I can draw an analogy, this would be like us going on a business trip and going to the rental car counter, and this happens to me all the time, because I get a government rental car, it's an economy car, I don't fit. So what if the rental agent said, well, I can upgrade that to you, and you simply upgraded without asking the price of that upgrade? Unfortunately, that's what happened in some cases, and it happened because we have people out there who are focused on the mission and we ask them to focus on the mission. We're now asking them to focus more closely on the business.

 

REAR ADM. KIRBY: We got time for just one more. Richard?

 

Q: Mr. Branch, could you -- could you explain some more about these figures that you mentioned initially -- 350,000 transactions, $75 billion to $95 billion a year?

 

SEC. BRANCH: Yes.

 

Q: What -- is that the entire Navy universe?

 

SEC. BRANCH: That's the entire Navy universe.

 

Q: ... $75 billion to - okay, all right. So that's the universe, $75 billion to $95 billion. What -- how much of that is for husbanding?

 

SEC. BRANCH: I can't give you a specific figure for how much of that's for husbanding, but in that universe, that number doesn't stand out as being very high. To put this in perspective for you, the things that make us a Navy, ships, aircraft, ordnance on target compromise most of that number. But even in that number, we're spread over a huge, huge number of transactions, and every one of those transactions is an opportunity for both a really good deal for the taxpayer and some risk. So we take monitoring the system as a whole very seriously.

 

Q: Can we get that for the record, what the husbanding contracts alone amount to?

 

REAR ADM. KIRBY: Sure.

 

SEC. BRANCH: Yeah, we'll get you that for the record.

 

REAR ADM. KIRBY: Okay, thanks, everybody. Appreciate you all coming.