Transcripts For CSPAN Key Capitol Hill Hearings 20150219

Is it working right now . Awesome. Again, i kind of skipped over the we are doing three competitions every single day. How many people actually still use fine use vine . Like six of you. Tomorrow we will be doing another one maybe around instagram and maybe one around twitter. Keep your eyes peeled for that. Lots of really cool prizes. I have to be up here in advance for a long time without very much to say. Does anyone have questions . No . Ok. Why is it so cold . Excellent question. The first is that there are a billion bodies in here, and if we did not make it cold, you would complain the other way. No . That is not true . I have been in the district with a busted ac and you guys were mad, like mad mad. So you guys would like to be warmer . Ok, i will spend my time during negotiating and see what i can do and i will come back and let you know what i get with the ac. Do you guys have an optimal temperature . 75, 73 . No . 75 is summer. I will aim for 75. We will get that sorted out asap. Lets focus on these investors. Do you want to her the names again . No . Yeah . Susan said yes. Omar from sequoia. Aileen lee from cowboy adventures. James flapavitt from greylock. [applause] all right. My microphone is live this time. That is great. Ok guys are lets talk about some stuff. First of all welcome to the stage, everybody. You know what i am going to do . Lets do this a little bit. That way i can see everybody. So, one of the things we could talk about, one of the things that is really interesting right now, the issue that we have with hiring engineers in the valley. It is becoming so easy i use easy in quotations because it is a grade. It is becoming so easy for people to get funded, get money start their own thing. The tools are there, the money is readily available in general. So what happens when it is easier to start a company and get funding than it is to hire an engineer . I will take it. Look, i think the one paradoxical but important approach for a ceo running a company in this environment is you have to recognize the people who are working for you the best people who will work for you probably will at some point want to start the company, so you have to actually be focused on how you help them to a college their goals as opposed to just filling a role in your company. Recently i was on the board of a company and the ceo asked me to give a talk to his engineering and product team about how to start a company. The initial thought on how to come in and do that to your team is basically like asking someone to come train your girlfriend how to meet guys in a bar. The paradoxical part of it is if you want to attract and keep awesome people who are really entrepreneurial, you have to make them feel and backup that you are going to support what they want to a cop in the want to a college in their careers. What do you think the dream job for an engineer is right now . You can answer one of your portfolio companies, but if you had to pick one, what would it be . Where is the right place for an engineer who wants to work at a company, not start their own thing yet, where would that be . I think it depends on what the engineering is looking for. A lot of the jobs of the venture capitalists is to be a recruiter and to be a headhunter, and i think in many Different Cases it depends on how early and how much responsibility the engineer wants, and are they going to be thinking about having more of a specific role in a more mature company, or do they want to have a more not impactful but more defining role in terms of the culture by joining an earlier company. If you are joining a company right now like fp right now, it is different than good acts. You are going to have different priorities that are invested in what you are doing. Left shift topics a little bit. Based on the founders of companies acting like little mini tyrants, sometimes they same things that they say things that are insensitive or can be deemed insensitive, or they have a complex about the way they handle their business side that is very mercenary and out there and forward. So these kind of founders, does that matter when you are talking to an investor whether or not you choose to put your money there . Do you see this as a problem down the road, or it doesnt matter because we want somebody who runs a Company First . The person you are investing with, the teams that you are looking to invest in is one of the key factors in making a decision because this is not just a state of you are trying to put your money somewhere and walk away and lets see what happens five years later. You are joining a team and partnering with the company and trying to work with this person, so there demeanor that so there but their demeanor, whether they will come was the goals, whether you think they are driven, all those things factor in a lot. They are primary topics of conversation. I think there is a distinction between someone might someone who might be difficult to work with or someone you might perceive as difficult to work with at certain times and someone who is unethical. I think many great entrepreneurs can be difficult to work with, have this incredible conviction and i am fine working with people who can be challenging to work with. The other sort of quality to look for is, can you say were they successful since they started, but actually someone who is selfaware, is open to feedback and learning, and if they will have a compounded daily, weekly, monthly learning rate, that is the entrepreneurs scale. I think that is an area where investors on the board can help where a lot of these companies especially companies for a long time do not have a head of hr. So some of the bad behavior may be because they are not getting kochi getting coaching, and coaches or investors, members of the board, are not giving them input on the kind of environment that they should be running, the professional that will attract the best talent. That is probably a good thing for the Investor Community to give input and select dictations for what is the best ray the best way to run a company. I think you can create a situation where someone who is not even difficult to work with like, g, maybe i should be more of a jerk. I need to be more aggressive and more rude. It really is not hard to just be a decent leader and a decent person, and i think we should all kind of hope to look for that. There are some people who are harder than others, but in general i think it is important as an idea. Continuing on the culture front, when it comes time to invest in a company, do you consider social good component of a company, whether it contributes back to some of the populace or whether it has a positive impact on Carbon Footprint or Something Like that . Do you count that as a factor . Is it one of your major checkpoints when you are considering investing in a company . I will start with that. I guess what we have come to realize is that actually from a generational standpoint we are seeing that millennials expect a social commitment, and are looking for businesses that have social responsibility being integral to their Business Model to actually be interested in the businesses. So i guess what we would say is we do not see them as being mutually exclusive, but actually the businesses that have social responsibility as art of the Business Models are likely as part of the Business Models are likely i think the reason why it has hit a nerve is because the customer wants to be able to help that maker make their vocation their career. As their bastion as the passion becomes their vocation, we are seeing it with farmers and with creators, backed by fans. I suspect that this question will become less relevant over time and is just going to be part of these Business Models. So if you are talking about cultural things in the valley, there is something we need to talk about. There seems to be an overwhelming abundance of mail founders versus female founders. I do not think we need to belabor that. It is pretty much a fact. We do not need to talk about whether that is true, but the important question is, how do you make the environment more inviting . What is responsible for that disparity, and how do we change that . Fixing the thing onstage here, it would be nice if you could do that, but it is important to think about why. Do you have any ideas about how that might be fixed . I think there are a number of issues that contribute to it. Fundamentally, it starts with Education Around Technology and engineering and other things you care about in the valley. It also has to do with framing of the problem. A lot of times the problem is framed as we do this good thing by bringing more women in. As opposed to something that is actually necessary, because we will all benefit from it. There are actual business outcomes that happen that are negative by net having there is a whole segment of society brought to the ecosystem, and having a real problem, as opposed to a favorite, it will change the perception of people and what they are willing to do to fix it. I think there is a Broad Spectrum of stuff happening in companies from things at the extreme harassment and gender pay gap, which are illegal. I think some people do not realize that those things are actually illegal and that put your company at legal risk. And there are stuff there is stuff that is softer on the spectrum and the culture and people feeling like they are not supported or favoritism or things that people say that our unintended consequences of just feeling uncomfortable or not knowing what are the right things to say. I feel there is probably an opportunity for some kind of a Training Program for something to go into companies to both help them kind of audit where they are in terms of do they have a fair environment, and how do they unpack some of the biased stuff that goes on every day that creates a more uncomfortable environment for people who are not like the majority of employees. I feel like you do not really have the tools yet that we need, but i am hoping that stuff that is coming out every day feels like a new article or a new study or a new example of people who are as the Community Comes together to figure out tools that makes us that that makes a systemic change, the ice bucket challenge, that sort of thing, that will bring awareness but the change but doesnt change the only thing i was going to say to that point to the point of sort of auditing, we do a regular audit of how many of 140 companies that we have have women as leaders or founders . We are at 15 , which is actually surprisingly high, but it is a massive issue. So what we it is further amplified by if you look at my portfolio, most of my customers are women. So there is this massive disconnect. Part of it is obviously thinking ok, can we find a partner that obviously could complement the work that we are doing, and obviously there are a lot of characteristics that make it harder for that something. The other is creating, using those founders to support new founders and new entrepreneurs. It is clearly something that has to be increasingly addressed. One observation inside greylock we have been around as a firm for 50 years, a long time. If you look at the partnership of greylock, several decades ago it was mostly white protestant men in blue blazers. If you look at how the Tech Industry has evolved, over the last couple of decades, most of my partners are now asian indian, and jewish, which mirrors what has happened but still male. We talked about this issue internally. The proportion of women who are founders and ceos, and a portion that are venture capitalists, these two are inextricably linked. The point that danny touched on, having a generation of companies that are women ceos and founders that have large successful outcomes, which is very much coming with a higher percentage, i think will help. There are a lot of factors. I hope james is right. Announcing two female gp not just one but two. I hope that will happen in the next two or three years. I think they will basically get the most attention and the most kudos for making the biggest change sooner rather than later. I think we fixed all that, so it should be all good for tomorrow. So if you how do you tell somebody they are not a good founder . Somebody walks in, they give you their pitch, you hear them out, and they leave and you think to yourself they are not the right person. They did the idea is good, but you are not a good founder. It is a sensitive situation. How do you tell them, dont do this, this is not right for you . I feel like you would be good at this. I would be good at delivering that message . [laughter] i would say that typically what we see is that the most successful founders are product oriented and very instinctual around the Market Opportunity we are going after. So you think about Tim Westergren from pandora playing the piano bar while he is developing this music experience on the side. From a founders experience, a company can emanate from the product. That is a potential disconnect. That said, there are companies that started by folks who on paper do not look like they are out of central casting who ended up being really successful. Several of the folks you are here invest in marketplace businesses. If you look at some of the most successful marketplace businesses, they have founders who are not guys who have done it before, not out of central casting, but they are incredibly resilient, scrappy, aggressive, really running at it and making it happen. It is really hard to spin things and get liquidity. Once you do, it can be hard to kill your business. Our reflex is there are plenty of exceptions and we cannot like i believe this person is scrappy enough to do this, but i would tell them know about this product. But i would like them so much, i want them in my fold. I am saying, you can back somebody who has a great domain expertise and product orientation, or you see situations where someone is not out of central casting but they are working. Maybe the person is better than they appear on the surface and they have the right grit and determination and focus to make a business work. First of all, a couple of things. You should be able to tell someone you are meeting with, who is the founder, and they are not a good founder in the meeting, you do not have to do a good followup. If you cannot tell in the meeting, there is something wrong. The second one that gets difficult is that in a lot of ways, in my case and probably in other folks cases, you are looking for people who are crazy enough to go after their life possibly with an entrepreneurial venture that has the most chances to not succeed. So it is really difficult to find the pattern recognition. But if they are not clearly going to be successful as a founder, then it is quite obvious pretty quickly, and the idea is not enough to actually make a business succeed. So all of a sudden my, clearly of high caliber and intellect but not a founder, i am going back to my headhunting database of all the companies that i am through and pitching them yeah, maybe you need a little more experience working with another company. Maybe you would like to do that before you start on this because here are the five reasons why it is not a great idea or you are not ready to start the company. I think it is dangerous to be that categorical to think that someone is not a good founder. Ideas change, people change. From my own experience, i probably was not a good founder in my first, second, or third. By the fifth one, that worked out. But if someone along the way told me i was not a good founder on the second one, maybe i would have stopped trying. You might want to say, not now. Maybe one more job. Im trying to think of a founder who has not had bumps in the road. The board and the investors should have a relationship with the founder to be able to build so that it is not out of the blue. Where you walk in and say you were doing a bad job. It has to be a constant dialogue of how you are doing, where do you feel you might have blind spots . Do you have a good enough team to accomplish all the stuff you do not want to spend time on or are not good at . How will you help them develop . There are lots of examples of folks i have worked with who do not seem to be great founders, but they wound up building Great Companies. It does not just happen miraculously. You have to work on it. Really quickly what are the top two most Interesting Companies not currently invested in . I would say you bird is definitely one of them. I would have to think about i would say uber is definitely one of them. I would have to think about the second one. Uber and cyranos uber and theranos. Know me. I would probably say another one. Got another one from a . Very good. Thank you all very much. I appreciate it. [applause] i have breaking news, a super important announcement. The ac has been turned down. [applause] i know. I went back there with an iron fist and i said, guys, my audience is really serious about this. We are walking a daily get we are walking a delicate line right now. Quick announcement there are 400 startups out there, and that is just today. They are super important. They are all really cool, and you have the opportunity to vote on who can be plucked and actually participate in our battlefield this afternoon. Voting closes at 3 00, so i encourage you guys during lunch during break if you want to take a walk, check them out, figure out who is your favorite and vote. The website is really long and there is a good chance i will mess it up, but we will have it up on the screens. I dont know why they gave me this to memorize. There should be a short url or something. Our next guest is Elizabeth Holmes from theranos. Please give her a warm welcome. All right, i will call. Thanks. Hey, everybody. I am john schuberthieber. Elizabeth holmes we will have a first round here in which i will get my blood drawn live on stage right now so you can all see what the theranos process will be. We have a licensed phlebotomist who is about to come out and take my blood. If anyone here is squeamish, i urge you to look away while the magic happens. If the magic happens. Come on out, and we will get this taken care of. So move that up here. Get that right there. Im sorry, we will get to the meat of the interview in a couple of seconds. What does this entail . All right. There are files that are coming out for those of you who cannot see what is happening. In a traditional process, i would be rolling up my sleeve, and people would be tapping my veins. There would be all sorts of process, and there would be a big needle. This involves no needle, but a little sort of warming packet that i am getting. I am sorry i am giving you the playbyplay, but this seems to be the best way to go about it. How many times have you had this done to you . Only tens of thousands of times. So when was the first time you did it . I understand from the fortune interview that you were a little squeamish about blood yourself so you might be the first team afloat to start a billiondollar blood is this or multibilliondollar blood business. How did you prep for that mentally . You are exactly right. Needles are the only thing i have ever been really scared of, so i figured the first time i did it, i had to do it in front of a group of clients and investors so that no matter what it would look payment is because i would have to make it be painless. And i did. It is psychological. Once you do this stick the first time, you learn it does not hurt. And exactly what youre doing here is, process to replace traditional phlebotomy or getting blood from the arm with these tiny nano trainers, which collect just a few drops. Ok, we all already that we are all ready. Ok, we are all ready. Good god no, it hasnt started yet. It was done, quick and painless. I have had more pain preparing for this interview than i have had getting my blood drawn right now. So there we go. I appreciate it. You were in stealth mode for 11 years. How did no one leak . How did no word get out about what you all were doing, and how did you retain fluid over the course of that period of time while you are doing all this development and you cannot say anything . We had a lot of work to do. This was a very big mission and a very big goal. We wanted to build out the solution, and as a result we did not the clients we did have were on nondisclosure, so we did not have to talk about what we were working on before we finished it. So for about 10 years there was no press release, nothing in the medium and last fall when we reached a point where we began to make the structure accessible to individuals and clinicians directly, we didnt begin to talk about it, but it was very simple. Do not talk about it. The first rule of theranos is dont talk about theranos . When you approach customers while in stealth mode and tried to tell them about your vision and your business, first of all is that it . Fantastic. Can i see . So this is the amount of blood needed to draw to do a test on whatever i have. Thank you so much. I appreciate it. So again, you are in stealth mode, trying to get all these customers. How do you get them to sort of commit. Sight unseen to a technology that essentially you are all still developing . It is at a point now where people as an alternative to having a needles stuck in her arms, stuck in their arms the approach we took was to have people try it out, see how it performs and if it performs well, work with us. A lot of pharmaceutical companies there are not that many, so as we build those relationships, we had the opportunity to deploy our systems and continue to build our infrastructure to get to this point. You have raised 400 million. You have a 9 million valuation. How much revenue are you generating, or did you start generating as the money was coming in . When did the first cash come in, and where are you now as far as profitability with the need for Additional Capital . We have been growing cash operations for some time. We first started generating cash operations through our work for pharmaceutical companies a you or two at a year or two after we became a company. That has been the platform on which we became a business trying to get away early from the equity on the local court where you are generating revenue from the equity umbilical cord where you are generating avenue. We are a private company, so we have not disclosed our revenues. Well, you can talk a little bit about it. Give me a ballpark. 9 billiondollar valuation . We will get to that. So Many Companies are trying to drive down the cost of testing and making it more accessible. How have you all managed to do it . What is it about the process . My blood was just drawn. Lets say i wanted to be tested for a panoply of different ailments you think i may have because i am paranoid about all that stuff . What happens next in the process . Can you walk me through what my blood would go through as it gets tested in your lab . Absolutely. We have redeveloped the Laboratory Infrastructure from end to end to make things possible. One element is the tiny sample. Another element is the cost. The infrastructure we have built , we have now begun opening what we call our Wellness Centers, which are locations that are located inside walgreens pharmacies. We have announced our National Partnership with walgreens in the context of our expansion across the u. S. When someone comes into our wellness center, we will scan their interest we will scan their insurance card and their identification. We have built an electronic infrastructure for realtime eligibility for the lab on the front end. When you come in, you know how much it will cost you and what your deductible is. How much is the typical test . For a normal array of blood work, how much would that cost for someone to do now . From your lab . When we announced our infrastructure last year, we began pricing our tests at 50 off of medicare reimbursement thresholds to just exactly change the cost in terms of testing costs. Since then we have begun to further reduce the rates at which we make those tests available all the way down to, in many cases, 90 off medicare reimbursement rates. 90 off medicare reimbursement. What does that mean for someone at a minimum wage job or someone who does not have insurance or might have the bare minimum of insurance . It means you can get a test done for a dollar 99. For 1. 99. And that is now . That is today. Pretty cool. I think that is a technical term for what you all are doing it is pretty cool. I jumped ahead. That is the insurance component the pricing component of it. On the back end with the lab what is happening to the miniscule amount of blood that is enabling you to come up with a full range of results . By the time you are in the wellness center, once the price point has been identified for someone so that they know even if they have a deductible how much it will cost them and they can decide upfront whether they want to purchase that service as opposed to getting a bill in the mail three months later with some unknown amount the little nanotainer has a barcode on it that tracks the sample. When the samples get to our labs we develop all the chemistry associated with running these tests on traditional platforms to make it possible to run any Laboratory Test from a tiny droplet of mud. From a tiny droplet of love. From a tiny droplet of blood. Traditional instrumentation requires much larger tubes of blood, and the data will be electronically sent to the ordering physician and integrated into their emr system s, for example. You mentioned you had done some work with the military. What are the applications there and how do you see sort of the business extending beyond the Wellness Centers at a walgreens . I do not think that is the end goal for you. There is a huge opportunity in the context of decentralizing the testing infrastructure to be able to make comprehensive Laboratory Information, and Laboratory Information is important because it drives 70 to 80 of clinicians accessible at the time it matters. So in the trauma context, the ability to get close to Realtime Data in the context of being able to stabilize someone in the field, for example, that can make a difference in terms of lives saved. Equally in the context of rural or remote areas where there is no centralized Laboratory Infrastructure. The ability to put in place and decentralize infrastructure leapfrogging over the lack of conventional infrastructure, similar to what cell phones did to land lines in china is significant. If you can put the decentralize Laboratory Infrastructure in place, you can then lay the foundation for decentralizing care delivery because you have the information you need. So the remote consultations on top of remote testing, you have the ability to provide health care who any health care to anyone who needs it. We have built in software around the infrastructure. We were talking before this about one of our favorite quotes software will eat the world. There is a communications peace and we are a laboratory company. We generate the Laboratory Data and make it accessible to the time and place that matters. There is the time to link into care deliveries. Have you talked to some of the folks doing remote care delivery now . By the way, we will give you five cents every time someone who says it is only fair. Back to what we were talking about. Have you been in conversation with some of the folks doing this type of Remote Access and remote consultation already . We have been in contact with people attempting to provide care in rural, decentralized areas who were really struggling because they do not have access to any kind of comprehensive Laboratory Data to provide the kind of care that is needed. That is going to be an important area of the future. You have what is perhaps the most accomplished board i have ever seen. Sam not, former senator sam nunn, former senator. Bill frist, former senator. You also have an admiral. You also have david as your lawyer. Why stack the deck so much with so many people . And kissinger is on your board, to throw that in there. What is it about the industry that makes you sort of collect Civil Servants of the highest caliber . We have never thought about it as stacking the deck, but we do believe that technology has an incredible role to play in enabling resolution of policy issues. In health care, the ability to use technology for example, what we are doing in just pricing, the way we are for medicare and medicaid, is saving medicare and medicaid hundreds of billions of dollars on an annual basis. With the opportunity to leverage what this country does so well in terms of creativity and innovation, to facilitate policy change, we have been very lucky to be able to get people who really understand what it means to be able to make a systemic change in the world and to be able to advise us as we worked in reducing healthcare care costs and changing outcomes. You and i both spent time in china, and china is very big on a fiveyear plan. When you look out at the next five years for theranos, where do you see the company . What is the goal for the next five years . Where are you all going to be . The goal is access for every person, no matter how much money they have or where they live. Access for us in part means these tiny samples because 40 to 60 of people in our country do not get tested because they are unable to afford it. Or they are scared of needles. It also means operating in locations that are closest to where people live or where they get care. That is both in our country as well as other places throughout the world. So do you start selling the technology to people or licensing it out to set up these centers anywhere, or do you yourself man and operate the senator at 8 and operate the centers at a low cost . Right now were operating inside walgreens at the u. S. In the u. S. It depends on where you are. We are looking at that systematically, based on which location we go first and what local infrastructure is already in place for whether we need to develop that infrastructure ourselves. Are there any other partners besides walgreens that you are going to market with . We have announced relationships with other systems. That is important with regard to being able to change the infrastructure process associated with the amount of blood that people have taken in normal hospital settings. As the hospitals become increasingly more Accountable Care organizations, the need to the need to save money. That is something we are very focused on, our retail work. What is the biggest obstacle to adoption of all of this stuff . When you think about all of the problems that you have scaling what worries you the most . I think as we build our company, making sure that we have the right people is what it is all about. As we get the right people, we can make sure that the service we provide, person by person, is excellent. We have extremely longterm mindset with return to the opportunity to realize this mission. What we hear most about is literally person by person, have we created a wonderful experience . And pacing our growth around that, so that people are excellent in service. I think we are out of time. Thank you very much. Thank you. All right. How are we feeling about the temperature . A little better . All right. Now that we have solved your first realworld problems, we will bring up someone who has solve realworld problems. She is going to explain some news to us. Welcome to the stage, elizabeth gore, and our moderator. Thanks. Hey, everybody. Thanks to everybody for coming out. Thank you for making your announcement here today. Absolutely. Hi, everybody. First of all, she is not related to our gore, so stop asking if her dad created the internet. What have you been working on . It has been amazing with the united nations. I have been working with all of you to understand how your Companies Save lives and whether they would be profitable solutions, social solutions, and the u. N. Will open for business and talk innovation, scale innovation. My favorite is what is going on with emerging economies disrupting everything. That will be a huge area for startups. Facebook announced there are 100 million users in africa. Everyone is trying to work on ignition everyone is trying to work on these initiatives. You are going to be working on something new. Elizabeth is announcing that she is the new entrepreneur and resident at dell computer. That is right. Good for you. [applause] so what the hell does that mean . I will have a baby and then go figure that out. We are really excited. My first conversation with michael dell was that technology is really the only force that is positively enhancing human potential. So the u. N. And dell are not that far apart when it comes to understanding that if we do not advance technology and make it accessible for all and i mean everyone that we are not going to succeed. In the second area, with all of u. S. As entrepreneurs, we need 500 million jobs by 2020 by the eligible workforce. 70 of jobs are coming from entrepreneurs globally, 90 in the emerging economy. We will collectively push for the policies needed to support entrepreneurs. Why would dell want your help with those kinds of things . Why did you pick dell . We picked each other, i have to be honest. We were proud as michael dell became the advocates for the u. N. We understood that if we do not work with entrepreneurs globally to give them capital, to help them access technology, that talent, reduce regulations, we are not going to get the job creation that we need, not going to get the policies that we need. I think we stood on Common Ground there pretty quickly. You talk about Global Solutions, the water of those . It seems like a buzzword straight out of the enterprise world. What does it mean . What is an example of a Global Solution . If all of you look down at your phone we have more funds than people by the end of the year we have more phones than people by the end of the year. If you look at how we use it for data collection, to reduce the retraction of disease, for example with ebola happening right now, there is no way without the technology that we have, to track and compartmentalize that to try to stop it. It can also be something completely innovative. There are some Great Companies out here. One company is such a bad name but we are using them for dissemination of vaccines and a lot of very positive things in the world. Solutions can be very profitable and save lives. Silicon valleys system gets a bad rap as being a bunch of people working to make money to make themselves rich. What have you learned during their time at the u. N. . You worked with bill and melinda gates, and they decided to give away most of their money in their lifetime. What about the average tech worker, well off but not super rich . What can they do . What we should be expecting these ranks of tech workers to be able to the to be able to donate and help . All of you can quickly look at your triple bottom line. The day you start your company you can understand how it is going to be profitable but how it impacts the people and the planet. Most entrepreneurs, he will be a long time before they can write a check, but their technology might have an application that can save a life, that can advance the work of a Community Around them, whether it is San Francisco or a refugee camp. You would be surprised about all the solutions, from unicef to the reference to the refugee agency. It is not just about writing checks, it is about understanding how the technology can save lives. Sometimes there seems to be a tradeoff. Are you trying to make a difference or not when you allocate resources . Answer to shareholders do i want to be you have to be assertive. How do you make howdy you find that balance as an entrepreneur . I think entrepreneurs are looking for it the day they open their business. Consumers want that from companies they are investing in, that they are looking at the world around them. The reason i was so attracted to dell is they are private public, private again, but we have all they have always maintained the commitment to entrepreneurship sustainability, profitability. But most of all, they have provided their enterpriselevel solutions to companies whether they were 10 people or if it was a multibillion dollar company. That type of thinking that we need to support everyone for job creation, or the policies that we need, that is going to fuel all of these businesses to be successful. Personally, i hope the investors step up and start to say we are a social return d. C. Forum, and this is something that matters to us. A lot of profit is what we want but more social good than just profit. I would love the d. C. Board to come talk about that, because i think you will have a harder time when it comes to dell, there are a lot of humanitarian efforts but there is a lot of talk about when is it ok to make money saving a life . How does dell handle that . How do they decide what their margins are . Do we make more money or save more lives . I hope for everyone that it can be operable and save lives that that idea actually dies. Because you can be a Profitable Company and look at the technology you are using. Multiple examples, look what dell is saying. There are thousands of units of data, when they are looking at kids with cancer and trying to make lifesaving decisions. They are using their cloud and data and everything in analytics , from the year down to the minute. I dont care if that is profitable as long as my little girl is having her life saved. Most entrepreneurs, 90 or so in emerging and developing countries, are solving problems with their profitable companies. They will be around a long they will be around a lot longer. It is fine to be profitable and stabilized. There is more funding and not there is more funding of nonprofit companies. I really like some of the other companies or this one that will educate families in india about how to care for people who are in the hospital, how to give them home medical care. They fund that by teaching richer west and families how to be able to do that same care at home and they are able to give that service away for free in the developing world. That is a great example. It kind of sounds like a cushy job for may. A cushy job for me. What are you trying to accomplish . I feel like i have a lot of pressure on. I am actually do this afternoon so we have to wrap this up. Dell is an incredible company, and the pressure i feel is that michael dell and the whole company has made a huge commitment to entrepreneurs. They are providing technology but also working on policy objectives that will help create 500 million jobs through the entrepreneurs they work with. That is a lot of work. I do not think there is any question of that at all. But i am committed to it, we are excited about it. If technology is the fabric that binds all of us, i think it is a good company to work for. I am glad to have somebody whos target is so aligned with the world. Thank you for your commitment to that effort. Amber is coming in with a big announcement here. Thank you. Cspans three nights of tech conclude tonight with cisco chair John Chambers. He talks about working with World Leaders to create Digital Infrastructure and staying ahead of competition. Here is a preview. What you are about to see think about this, 500 million devices where this will go the challenge is how do you get the right information at the right point in time to the right device for the right person to make a right decision. That is about architectures and transporting the business process. You will have to change health care, turn it on its head. How countries are run is about to change. When you see industry leaders, you have to have the instincts for something to fundamentally change. When you talk to President Park of south korea she helps the economy. It is unfair because she is an engineer. The role that this next generation, how did it transform each segment as business yak and you do the same thing in germany, in france, in the u. K. Suddenly they get it these are very smart people. All of John Chambers remarks can be seen tonight at 7 00 eastern, and programs the past two nights. This from politico president obama tapped Joseph Clancy to be the head of the secret service. He served as the agencies acting director as the agencys acting director until jay johnson. Some Congressional Republicans immediately criticized the pic, saying an administration insider is not what the agency needs. Jason chaffetz suggests the reform committee. The panel made it Crystal Clear that only a director from outside the agency would meet the needs of the agency today. Someone with a fresh perspective, free from allegiances and ties to what is described as a good Old Boys Network. You hear that from political from politico today. In november we covered a hearing where he testified before the judiciary committee. Here is his Opening Statement from that hearing. Good morning. Let me begin by recognizing the tremendous support this committee has given the secret service over many years, and acknowledge your staff with both the past and present. To cybercrime targeting our nations banks and financial institutions. 44 days ago i am part on my greatest endeavor of my financial life, the privilege of leading the dedicated and selfsacrificing employees of the secret service through a challenging time in the agencys storied history. While returning to Public Service after beginning a second career in the private sector was not easy, the call to restore Operational Excellence to the secret service was too urgent to ignore. I did not come expecting this hearing to be easy, but i hope in the next several hours we will yield productive discussions about the state of the secret service. Without question, the agency is been severely damaged in recent years by failures ranging from disgraceful misconduct on the part of some employees to operational breakdowns that undermined the trust and confidence that previous generations worked so hard to establish. One of those operational breakdowns was the white i understand the committee was briefed last week on the departments review of the incident. I read the report and found the findings devastating. What hits the hardest is the range of shortcomings that allowed Omar Gonzalez to enter the white house practically unencumbered. I openly acknowledged the failure of this magnitude especially in light of recent and students, acquires immediate especially in light of recent incidents, requires immediate reform. Documented confusion to address this issue, i will continue to oversee the integrated training for White House Uniform Division offices and tactical teams initiated after the september 19 incident. This training involves dynamic scenariobased exercises. My goal is richer that 100 of all officers received this training by the end of the calendar year. If someone does attempt to scale the white house fence, i want to insure their meds with immediate and forceful resistance. I also view the fence itself as a needed deterrent. The secret service has long held that prevention is the linchpin. Were looking at potential changes that would assist in the detection and delay of any person attending to scale the white house fence. Thanks to additional funding provided by congress in fiscal year 2014, secret service was able triple the number of hires over the last two years combined. Hope to surpass that number and continue our work to achieve Staffing Levels commensurate with mission requirements. However, i recognize that staffing challenges are not remedies overnight. The recruiting process takes approximately 12 months. I have taken immediate steps to improve the flow of quality of communication at all levels within the agency. An integral part of why i agreed to serve as acting director is troubling reports. That is unsustainable in any organization. While i have the utmost respect of employees right to report and confidential matter without fear of reprisal, i see in urgent need to restore one of the basic tenets of the well functioning workplace. Trust your boss to stand up and do the right thing. One of the first actions i took was to foster Better Communications between the rank and file and the leadership. I conducted town hall style meetings. I personally joined officers and agents during their daily rollcall. I instructed the secret service to establish a mechanism of elevating employee concerned strictly to the review board for resolution. I make clear the importance of full accountability. The core values of the secret service, justice duty, loyalty have guided the agency. Now more than ever, it is critically important for us to recognize that in the midst of all this drama this turmoil. Failure can be an integral part of success. Whether that refers to an agency or to an individual. We are confident we can fill our mission with honor and the store the secret Services Place as the most respected Protection Service in the world. Chairman and Ranking Members this concludes my opening reports. I look for to a good discussion and were happy to answer your questions during both open and closed portions of todays hearing as corporate appropriate. That hearing back in november. And last week, the House Oversight Committee Heard from members of that review panel made up of former obama and his ministration officials to talk about their findings and recommendations concerning the agencys culture and leadership. Jason chaffetz chairs the committee. Good morning. The chair is authorized to declare a recess at any time. I am pleased to be holding this hearing with Ranking Member cummings, reforming and restoring the United States secret service is not a partisan issue, a united front with mr. Cummings and i have presented presented have driven change within the agency. Together, we have sent letters and attended closed door meetings and briefings with the secret service and asked for change. This morning in a bipartisan way, we went and visited the secret Service Headquarters and appreciate their accommodations in the tour of the facility. The management facility there. Today, the Senior Leadership of the secret service looks much different than it did when we began examining the agency. In fact, we originally planned to have both the acting director and the Deputy Director appear before us today on a second panel, but with the recent announcement of the Deputy Directors departure from the agency, we agreed to postpone the agencys appearance before the committee for another day. We want to thank acting director chancy and secretary jeh johnson for being consistently available to us. They have been very accessible and we are very appreciative of that. We also applaud secretary jeh johnson for assembling a panel which we will hear from today to examine the secret service. The panels port did not mince words, did not skirt the issues and provided serious recommendations. According to the panels findings, the secret service, is starved for leadership. And lacks a culture of accountability. The panel recommended the next secret Service Director appointed by the president come from outside the agency. The panels report states, and i happen to agree that, at this time in the agencys history, the need for secret Service Experience is outweighed by what the Service Needs today. Dynamic leadership that can move the service forward in a new era and driven and drive change in the organization. The report goes on to say, only a director from outside the service removed from organizational tradition and personal relationships will be able to do the honest top to bottom reassessment. Dealing with what is necessary inside the agency. Alarmingly, the panel found that no one inside the secret service has ever taken time to sit down and figure out what exactly what it costs to protect the president. In fact, the panel found no one has really looked at how much the mission done right actually costs. This is simply unacceptable. Combined with other limitations, like insufficient training, Antiquated Technology and insular attitude, these factors have all contributed to the recent Security Breaches. The fact that the panel made these findings is not surprising. But i will tell you personally, its very refreshing to have a panel take such a deep, serious look into the agency and provide some very candid results and perspective. And you did it in a very swift manner and for that we are very, very thankful. Over the past several years, the series of Security Breaches have raised a number of questions about the effectiveness of the agency. 2011, a man fired a highpowered rifle at the white house while president obamas daughter was inside the residence. The secret service was unable to confirm that shots had been fired at the white house until a housekeeper found broken glass four days later. The shooter eluded capture for five days, traveling all the way up to all the way to pennsylvania where he was eventually apprehended by state police. On september 19 of last year, with the partially amputated foot and a limp, wearing crocs, a man was able to jump the white house fence. Contrary to initial reports from the secret service, this man made it all the way into the green room, armed with a 3. 5 inch knife that was serrated. The same month, an Armed Security contractor was allowed on an elevator with the president , unbeknownst to the secret service and in violation of protocol. We still dont know where the breakdown was that enabled this to happen. Last month, the gunman fired shots near the Vice President s residence in delaware. Security cameras were unable to capture video of the gunman. To this day, we still dont know who fired those shots. This was very close to active secret Service Agents at the residence. Just two weeks ago, a drone crashed into a tree on the white house lawn, highlighting a security vulnerability that we must shore up immediately. By examining these Security Breaches, we can find out what went wrong and we can Work Together to fix it. Together with Ranking Member cummings, this committee has and will continue examine issues surrounding leadership, culture, budget, training, technology and protocol. Congress needs to know why the secret service has one of the lowest levels of employee morale in all of federal government. We have some of the finest men and women serving in the secret service. These are wonderful, caring, patriotic hard working, talented people. We love these people. We thank them for their service. But the system and the bureaucracy, the leadership has been failing them and it has to change. We have to get this right. We have to get it right now. The panel made a number of recommendations, put main priority was clear. The first step to success within the secret service is new leadership from outside the agency. I look forward to discussing the panels good work today and hearing how recommendations were developed and now like to i would like to recognize the Ranking Member, mr. Cummings for his statement. Thank you very much, mr. Chairman. I thank you for agreeing to hold todays hearing and for working with us in a bipartisan way. And i also thank you for doing Something Else that is, i noticed that you have consistently given our federal employees credit for what they do. Every time i speak before a group of federal employees, they say this often, they hear just negative things about them and i know that youve said it in private and now youre saying it in public about the secret service, that we have a phenomenal number of great dedicated secret Service Agents and i really appreciate that and i know they do, too. You sought the input from our side and our participation and i believe our efforts will be more effective as a result of that, but more significantly, you have shown respect for us. We are holding todays hearing because the independent panel has done a thorough review of the secret service and we want to hear directly from them before taking our next steps. To the panel, i want to thank you for what youve done. Youve done an outstanding job in a short period of time. They met with more than 170 people from inside and outside the secret service. They made numerous recommendations. And now, the upper managers of the agency have been removed. The chairman and i both strongly agree that the independent panels work was excellent. We have also discussed the panels classified report. We believe it was tough, it was thorough and crucial to bringing about real change at the agency. Again, we thank all the members of the panel. You i but i want to make two key points today. First, i completely agree with the panel that the question of leadership is most important. Although previous director has left and top managers have been removed the job is only half done. As the panel concluded a strong group of new leaders must now be identified. And that responsible responsibility rests with the executive branch. Second, i also agree with the panel that these changes, and i get, require quote, require strong leadership, but they will also require resources. That is our job. Thats the job of the congress. Their report makes clear that the secret service is stretched too thin. The status quo in long shifts, forced overtime, inadequate training and too little rest. I would like to read briefly from the report describing this problem. It says this, and i quote, the strains are manifest throughout the agency. The service has been forced to pull firearms instructors from its Training Academy and uniform officers guarding Foreign Missions to work protective details. The attrition has caused alarm. Its all smoke and mirrors, says a plain clothes agent. We are like a giant ship teetering on toothpick, waiting to collapse says another. Our protective mission is our is in crisis. That was from a press report in 2002, more than a decade ago. Let me read another quote. While the threat of terrorism looms large over the white house complex, one of the most insidious threats of our National Security actually comes from within, with the creation of the department of Homeland Security and the fallout from the Hurricane Katrina disaster the secret Service Overall has suffered much in terms of budget or perhaps more appropriately, the lack thereof. We were informed last year that our budget had been cut and that the secret service was going to have to make some changes to cut costs and save money. That quote was from 2007. It was from a letter sent internally to the secret Service Leadership by a former Uniformed Division officer and we have obtained a copy. Last week, the federal Law Enforcement Officers Association wrote the committee saying this, and i quote, a lack of resources and funding is the core reason the agency has suffered its news worthy deficits. Its moments of honesty, even media reports have restated what is well known in the service and was highlighted by the protective Mission Review panel that the secret service has been outstretched and underfunded since 9 11 attacks and continues to be. Let me make one last thing clear. Im not saying we should throw money at the problem, that more money is a Silver Bullet that inadequate funding is an excuse for failure or any other similar strawman argument. I agree with the independent panel that the secret service has atrophied. It needs more funding and it is our job in congress to get it to them. The panel recommended as a first step adding 200 officers and 85 agents and said many more may be necessary once the new Management Team assesses the agency needs. We have heard from others inside and outside the secret service that they are down by at least 500 positions. Dhs funding dhs funding bill would start to restore some of this funding but unfortunately it is being held up by our republican friends who oppose the president s actions on immigration. We have only two weeks left before the department shuts down. If it happens, the secret Service Employees will be required to continue working without bay. This is no way to treat the secret Service Agents, officers. They should not be Collateral Damage in this political fight. The fact is that federal workers across the board have been hammered over the past four years. They have sacrificed nearly 140 billion as a result of a threeyear bay pay freeze and pay cuts in the form of increased retirement contributions for newly hired employees. They have endured sequestration cuts and furloughs and elimination of jobs for the last three years it is time to recognize that these actions take a toll. Finally, mr. Chairman, i would like to take a moment address working on the committee. I completely agree that we must reform this agency. Its mission is just too critical. I have the greatest admiration for the president and the last thing i want is for something to happen to him or the other people that the secret service is responsible for protecting. So i commit to working with you to the best of my apit and in ability and in good faith. In return, i ask that we focus aggressively on the reforms that are needed, that we avoid spending valuable time reinvestigating issues that others have already investigated, and that we continue working closely together as we have been to conduct our investigation in a responsible way that does no harm to the agency or the mission. And with that, i yield back. Thank the gentleman. I will hold the record open for five legislative days for any members who would like to submit a written statement. We will now recognize our panel of witnesses. And first, let me say, thank you so much for your time and dedication in making the effort to and coming out carving out time in your schedules to be here. We do appreciate that. The honorable today we have the hop rabble honorable mark filip, the honorable danielle gray, the honorable joseph w. Hagin, and the honorable thomas perrelli. We do appreciate you being here. Pursuant to committee rules, all witnesses will be sworn before they testify. So, if you please rise and raise your right hands. Do you solemnly swear or affirm that the testimony you are about to give will be the truth, the whole truth and nothing you the truth . Thank you. Let the record reflect that all witnesses answered in the affirmative and you may be seated. Um, my understanding is youre going to give one joint statement as opposed to four individual statements. Im not sure which youre going to give it mr. Perrelli . Okay. Thank you. Youre now recognized. Thank you, mr. Chairman Ranking Member cummings and members of the committee. Im tom perrelli, one of the members of the secret Service Protection Mission Panel and the panel asked me to make brief opening remarks today. At the outset, we want to express echoing both the chairman and the Ranking Member our appreciation for their extraordinary work and dedication of the men and women of the secret service. They work long hours in a mission that has no tolerance for error and do so without desire for fame or fortune. They deserve all of our thanks and support. The secretary of the department of Homeland Security asked the panel to do a review of the secret Services Protection of the white house following the events of september 19, 2014. We did not focus solely on that event but looked more broadly at concerns about the service that had been raised by this committee and others. From october to when we were commissioned to the issuance of our report on december 15th, the panel talked to dozens of members of the service from all levels as well as more than 100 experts from the federal protective services, local Law Enforcement, the National Laboratory and the defense and intelligence communities. We thought it was important to hear perspectives about the service about the protective function, about technology, from both inside and outside the service. We also reviewed thousands of pages of documents. Our report and recommendations were completed on december 15th. The report contains substantial Sensitive Information as well as classified information and recommendations. We have had the opportunity to brief the chairman and the Ranking Member and many staff of this and other committees in a classified setting and we will tread carefully on subjects related to operations, tactics and particular threats in this setting. It is in the interest of the United States that much of the Services Work be secret because they are tasked with the singularly important job of protecting the commander in and chief and other protecties in the white house. We did release an unclassified summary that lays out our conclusions and recommendations in a number of areas including training staffing, technology and leadership. That summary is incorporated in our written testimony to this committee. As we described in that executive sum rush the panel concluded that training had fallen below acceptable levels, in no small part because personnel at the service were stretched too far. We provide recommendations about increased training as well as increased staffing. We describe our recommendation for 200 additional Uniformed Division officers and 85 Additional Specialized agents as a down payment we make now so the service can train and perform at the level that all of us believe is necessary. Many of our Technology Recommendations are classified but i note our concern that the Service Needs to be more engaged with federal partners who are using or developing technologies that would assist the service in protecting the white house. Finally, we focused a great deal of attention, as the chairman said, on leadership, including that the Service Needs dynamic leadership that is unafraid to make change, clearly ar articulates the services mission, pursues resources needed to fulfill that mission and demonstrates to the work forces that rules will be applied evenhanded labor day the evenhanded and the best of the best will be promoted to lead the organization into the future. More detail in our conclusion and recommendations are in our testimony and we would be happy to anticipate questions. Thank you, mr. Chairman. Thank you. And again, i appreciate all four of you. Now i recognize myself for five minutes. The report says, more resources would help but what we really need is leadership. In fact, you went on to say only a director from outside, removed from the organizational tradition and personal relationships will be able to do the honest top to bottom reassessment this will require. Maybe, i dont know who to address this to, you yes, mr. Filip . We gave a lot of attention to leadership and believe that will be a critical issue going forward. We fully respect that the choice of the secret Service Director is that of the president and theres a unique relationship there and that maybe uniquely amongst appointments in the federal system that individuals responsible for the personal safety of the president and the first family. So, we respect our role in that regard. But can he did and do think that all things equal would be useful to have outside perspectives. The reasons for that, i think, are even more important than the conclusion. Pause they animate a because they animate a lot of our views on a number of things. We think its essential for reform that there be a full look at the activities of the secret service through the lens of the core priority of protecting the president and the white house. And that the activities and budgeting align with those core activities. We think that the Innovation Associated with the secret Services Activities also be aligned with those core priorities. And that the new director, whoever that is, is prepared to make tough choices about personnel, independent of any sort of Old Boys Network or friendships or alliances and that was part of the reason we thought, all things equal, easier for an outsider to make those assessments as opposed to someone who is presently with the service. And we also think it is important that there be engagement with the broader Intelligence Community and a consistent set of disciplinary rules, independent of prior friendships or allegiances or experiences and finally, also, an infusion of outside expertise in budgetary areas, for example, Human Resources, congressional affairs, things of that sort. So, we thought it was more likely that that person would be an outsider, but obviously, we respect that its the president s choice and to the extent we can be a resource, whoever the next director is, we would proudly be available to try to help them. Thank you. One of the questions that tends to float around here is whether or not we should separate out the investigation side of did you look at that and what sort of assessment did you give that . We did. And our views on that are that theres certainly some benefits to be gained from the investigative mission, to some extent. Now, theres a continuum in those investigative activities. To the extent, for example, that cyber investigations involve the safety of the first family, of the president , thats probably gonna be part of the core mission of the secret service. To the extent that cyber involves looking at whether a movie studio has been hacked or a Health Insurance company or a multinational retailtype entity, that might be further afield in other parts of the federal government that are involved in cyber activities might be better positioned to handle the lead on that. Again all through the core play. Of prism of what the main mission of the secret service is. So we had a couple months to look at this, we dont purport to have the final answers but we think the guide post on this will be what is the core mission of the secret service and does this particular activity, whatever it is, further that mission or distract from it . Okay. One last thing i want to and i know other members want to ask about this, you put up the slide please on the training . You know, one of the things that we are deeply concerned about this is these are the Training Numbers that we see here. If you look from 2008 to 2013, we were doing roughly special agent basic classes, eight per year, eight eight eight, eight, eight, then go down to five, then we go down to zero then we go to one. Why why did that happen . How do we prevent that from happening . What is your assessment of that . If you can move that microphone. There you go. You know, training was we actually our analysis really began with training, you know, as mr. Perrelli indicated, we viewed this as sort of key and animate many of the other decision that the secret service has to think about from staffing to management of overtime and the like. As your chart is consistent with what we found in our findings, that training has fallen below acceptable levels. There have been a number of reasons that were advanced to us in the course of our review to explain why that is so, from the increased activities of the secret service and missions, the number of protected visits that secret Service Members are staffing and the like, reductions in staffing and the forced overtime issues much issues. Regardless of those different causes, i think we all are in agreement that the levels are unacceptably low. The number in our report we emphasize looking at tis cal year 13 data, the average agent the fiscal year 2013 data, the average agent trained about 46 hours in fiscal year 13. The average Uniformed Division officer trained 25 minutes on average. For the year . For the year. And so, by any account, those numbers are unacceptably low and we need to do better. Compare that against large Police Forces or other yeah, you know, we spoke to a number of large metropolitan Police Forces and also spoke to other federal agencies that conduct protective nation are akin to what the secret service is doing. Nothing about is an exact applestoapples comparison, but the training levels that we heard for those agencies ranged anywhere from 5 a year to 25 a year of time spent doing training and that that type of training is managed in different ways, you know, some Police Forces or protective security agencies focus training at set times of years, others integrate it more naturally, month to month. But, however its done, the sort of levels that we heard from others range from between 5 to 25 which are obviously significantly higher. Thank you. I recognize the Ranking Member, mr. Cummings. Thank you very much, mr. Chairman. Mr. Per rely, i want to go back to something that you said and you said that the secret Service Needs an additional 85 agents and 200 officers and then i said something that i want you to explain. You said as a down payment. What does that mean . We when we looked at data provided by the secret service and try to assess, with the current workforce, paced on what based on what we can discern what it would take to how many additional personnel would they need to get to the training levels that we think are the bare necessity, which as we indicated in the report is a true fourth shift or 20 to 25 of training for the president s protective detail and at least 10 of their Time Training for the Uniformed Division. Paced on based on the information that we were able to obtain from the service, that led to our recommendation for immediately the need for 200 additional Uniformed Division uniformed officers and 85 Additional Special agents. But i think a couple of things that caused the panel to believe once a full analysis is done by new director, more resources are going to be needed. One is as the chairman said, there really hasnt opinion a true analysis of how much it takes to protect the president and other protecties in the white house. The services internal systems are not well designed to do this. Mr. Hagin and i sat with secret Service Agents and watched them put in their time in a dosbased system with a green blinking cursor and those systems dont reflect the actual hours that people worked. So that once you factor in the excessive amounts of overtime that we think agents, both anecdotally told us and we saw ourselves, once you bring try to bring some of those overtime numbers down, we think that you will discover that more resources are needed. As we said in our report, we think that a new director, a critical function of a new director is to have a zero based budget, start from the beginning and define the mission and explain to the congress and the executive branch how much it takes to do this. We think it is going to be more money, more agents and more Uniformed Divisions you also but we also think that a new director might decide to shed or trim Certain Missions so that its not all new money. We are able to pass the dhs budget, it will be able to hire the 85 agents and 200 officers. Let me ask you, with regard to going back to training. Theres a lot of talk about the fourth shift and, you know, i want to go back to what the chairman was asking about. Youre saying that getting 25 minutes, i hope the Committee Hears this, 25 minutes a year, is that what you said . Thats for the Uniformed Division. 25 minute of training . And what would be acceptable . So, the we sort of thought about this in two ways, so, for the ppd, president ial protective division, that is where the fourth shift concept originated , and so historically, particularly in the 1980s and 1990s and our understanding from speaking to past directors and past special agents, that the fourth shift concept was a very real concept in the service and the idea was agents would spend, you know, two weeks on a daytime shift, two weeks on a night time shift, two weeks on a midnight shift and then two weeks in training. Now, thats not to say sort of all 14 of those days in that two weeks are spent training, obviously, the agents time was managed in a way to provide Surge Capacity if they needed to support unexpected trips or missions, but that this concept of striving for roughly spending about 25 of the year in training for the agents and the ppd was very different. That fourth shift has never really been applicable to the Uniformed Division and its been difficult to get sort of reliable Historical Data on this, so we dont actually have a very good benchmark for the uniform division but i think what we do , know is that the sort of average that you saw in fiscal year 13 that we fresh to the 25 referred to the 25 minutes is unacceptably low. One of the things that has me concerned, sure the chairman i am sure the chairman as well, definitely concerns me and im wondering how you got into this and what your conclusions what i have been. We have agents who felt more comfortable coming to the congress and telling us about their concerns than telling the higher ups at the secret service. And i have said it many times, i think for this for this kind of organization, thats not good. So, what did you all see as the did you find that to be the case . What conclusions did you come to and how do you remedy that . I think that goes toward the culture and leadership attitudes of the Organization Going forward. Any row must Robust Organization has to be honest with itself and open to the fact that if we are gonna be a continually improving organization, we have to accept and objectively evaluate criticisms about how things are operating and so i think youve put your finger on something critically important. I think we all do. And thats something that the agency and its new leadership is gonna have to get much better at. Because no organization is perfect. It is not a weakness to accept the idea that theres problems face them honestly and objectively and work forward to improve. So youre right, thats something important for the new era of the service and for the new director. Thank you, mr. Chairman. Thank you. Now recognized gentleman from tennessee, mr. Duncan, for five minutes. Thank you, mr. Chairman and youre sure getting off to a great start chairing this committee and calling all these hearings. Let me first of all say that i appreciate this panel and how theyve come in from the outside to take a look at this but i do have to tell you that certainly no criticism of each of you, you im very sceptical about some of this and i will tell you why. I have been here 26 years. Ive served on four different committees. I have read reports from all the coast. Every time some federal agency messes up, the first thing they say, they say they are underfunded. And the second thing they say is their technologys out of date. And they have got more money than any company in the private sector and more Extensive Technology than any company in the private sector yet they , yet they always come up with those same excuses. In that time that ive opinion in congress when i first came here, the National Debt was less than 3 trillion. Now, its 18 trillion. The federal budget was not anywhere close to what it is now. All of the federal agencies, all of the federal departments and agencies, if you look at the last two or three or four years, we have been doing a better job Holding Funding reasonably at a level rate. But if you look over the last 20 or 25 years, federal spending has done bay up and all the federal Law Enforcement agencies have greatly expanded over that time and their budgets have done way up. I dont have the figures here. I came here a little unprepared for this hearing, because i didnt know until late yesterday that we were going to have this hearing and thats my fault. But i had the figures a few years ago that five or six years ago, the bibb had tripled in budget had tripled in size over the years theyve been there in numbers of personnel and in their budgets. And i just am very sceptical that the secret service doesnt have enough funding. And then secondly, i remember i first came here, a hearing on the aviation subcommittee and one of the main things, they talked the low morale of air Traffic Controllers and thats another thing i have heard a lot of times from federal employees about their morale. Well, i can tell you, it seems to me the less people have to do on their job, the more they complain. I almost have never got an complaint from a shortorder cook at a waffle house. I can tell you that i can tell you if these secret Service People have low morale, they dont realize how lucky they have to have these jobs and ive got nothing against anybody in the secret service. Im sure they are all nice people and fine people you they need to but they need to realize they are very lucky to have their jobs. When i first ran for congress, they had an ad signed every member, 3 or 400 members of the Knoxville Police department, every single one but seven signed an ad endorsing me. Office criminal court judge. I was considered very pro Law Enforcement. I will tell that you our federal Law Enforcement people are our highest paid Law Enforcement people in this country. The lowest paid people are the local Law Enforcement people thought fighting the real crime daily, day to day that everybody wants to fight. I tell you when i hear about low morale in the secret service, i think they ought to be ashamed, anybody that feels that way, they lucky to have their job and the high pay that they get. Thank you very much, mr. Chairman. Gentleman yields back, now recognize the gentle woman from the district of columbia, ms. Norton. Thank you very much. I think we are very fortunate to have the secret service take the risks they pay. And when it comes to their pay, these are the people who sequester and have not received increases in pay. We value them very highly and value your report, which is very thoughtful. I have been concerned, by the way, with the really quite shocking underfunding of the secret service, something i think that would shock the American People, because they already always assume the protection for the American People was the First Priority because he is a symbol of the United States itself. I was concerned about the physical barriers because that is the most obvious and common sense way to approach this problem and i have distrouble is he putted distributed to the members and to you a copy of a picture that was taken outside right after right after the most notorious of the fence jumping incidents. And im asking this question because you indicate that there are some physical barriers that have been added. Are you talking about these barriers that are normally used simply for crowd control . Or are you talking about actual structural, physical barriers . That we recommend adding . You say that the the we understand that there have been some physical barriers that have been added. Im asking you if there have been any physical barriers added since the incident since our hearing in september and since the fence jumping that was the basis for that hearing. The bike rack thats shown in the photo you distributed is new since the fence jumping incident. You know, if thats by the way, i could i consider this quite outrageous. What this says to the public this is a First Amendment space, Lafayette Park is right there across from the white house because the framers intended the white house a place people could go this is hardly a barrier. In fact, its very ugly and there are two pictures here that show what are really quite temporary they are not really barriers. They are not used as barriers, they are not meant as barriers. They are meant to be movable because they are crowd control. Is that all that has happened since the fence jumping . We have not investigated just recently as far as you know, thats all thats happened . We have clearly recommended that a permanent solution be designed and adopted as quickly as possible. Indeed, i appreciate you have recommended the fence, the fence itself, consistent with its historic its historic basis be raised. Have you put any timeframe on it . Of all the things that it seems to me could have happened by this time, it does seem me, at least the plans for that could have been made. Will the gentlewoman i yields . You cannot receive a classified briefing that. I mr. Cummings and i participated in a meeting where the details the time willing was laid out. And i would if any member would like to have that briefing happy to arrange another one. But that was not something this panel looked at other than making a general recommendation but to get a secret Service Briefing on what they are doing, a, was pretty impressive and b is certainly in order. I appreciate it, mr. Chairman, i must say i consider it highly classified for the terrorists and other fence jumpers to know that theres going to be a fence thats gonna be raised. I dont consider that very classified information much. I want to say, given your report which i think was timely, i am disappointed that the we have no information and i will seek that information in the way the chairman suggests. The only disappointment in your report was there was no mention, as i recall of the public space and of the tradition that this has been a public space and barriers and security for the president can be improved without, for example, a magnetometer in the street, that would mean even though you are outdoors, you would have to go through the magnetometer before you can get to where the public still with can get, by the way, and why you did not consider the access to the public, considering it is one of the great First Amendment spaces in the nations capital. It is not just a tourist site. There are people there every day , on every issue, trying to express their point of view. Thank you for the question. And i and i do i do think it was of consideration to the panel about the historic nature of the white house as well as the spaces around the white house. I think perhaps what is most telling is the absence of recommendations from this panel to do things like close off the park or those kinds of things that one could consider as appropriate security measures but that would be inconsistent with the history of those spaces. So perhaps i think we answer your question by not having recommendations that would have gone the other way. Well, i so thank you for that, mr. Perrelli, pause that because that is what im going to cite. Im going to say that the panel said that by not recommending by not recommending, that the public be excluded and meant to meant to say that the public should have access to that space as it has always had. Thank the gentlewoman. Now recognize the gentleman from arizona, mr. Gozar. Thank you, mr. Chairman and thank you, panel, for the report. Im going to quote a couple snippets here, four snippets, kind of make a summary and then ask some questions for that, if thats okay. The first one, the secret service is stretched to and in many ways, cases beyond its limits. Special agents and Uniformed Division personnel protecting the white house work in unsustainable number of hours. Second snippet, rather than invest in systems to manage the organization more effectively, and accurately predict its need, the service simply adds more overtime for existing personnel. Third snippet. Goes on to say that the secret Service Needs more agents and officers, even beyond the levels required to allow for training. The president and other protecties cannot receive the best possible protection when agents and officers are deployed for longer and longer hours or fewer and fewer days off. Number four. The service has to increase the number of agents and to an even greater extent, increase the size of the Uniformed Division to ensure protection of the white house. Now, i understand the Uniformed Division officers told the panel that they do not know whether they are working one day to the next or if they are even required to work overtime. The staffing failures within the Uniformed Division are so bad that the special agents are flown in from field offices around the country to detail them for weeklong shifts to the white house supplementing the Uniformed Division due to the dramatic losses in staffing it has seen. These arrangements result in special agents unfamiliar with the white house complex being in charge or defending it. So my questions, giving that the report found the special agents in the Uniformed Division officers work an unsustainable and unpredictable number of hours, what must the service do better to manage that workload . I think there are a couple of thing, congressman. One, as we talked about, the Service Really hasnt had the kind of workforce planning model to make sensible personnel decisions about how many people are needed and control the number of hours that people are working. The chart the chairman put up earlier showed, you have rather than continuing to hire people and having more officers and more agents, what ended up happening was you just had the existing workforce work longer and longer hours, i think we recommended one, a more robust bork force workforce planning model so they can make good judgments about what is needed and how to deploy those resources. As indicated, we do think they need more personnel, if nothing else to ensure that the personnel they have get adequate training. So i think those are, i think, core aspects of this. But as, you know, one of our larger recommendations is that i think the new leadership needs to take a step back and really define and then come to the executive branch and congress with a clear plan that articulate articulates, this is what it takes to protect the white house and this is why we need the personnel that we think we need. And i know you cant go into certain technology. Im being a businessman, i mean, technology, we can tract patients going through a system, knowing exactly where they are every time, every point of the day. Is that something being entertained in regards to the work force for the secret service . I think on the Technology Question as i think the events of september 19th indicated, there are real shortcomings, both on training and Communications Technology with respect to the Services Current equipment as well as their training on that equipment thats something we think needs to be addressed and all those things need to be integrated together, because i think you are right congressman, that you , need to know where your personnel are if youre going to be able to spend to an incident. When you look at it all overall, your evaluation, you dont have systems to even evaluate, how hard was it to come up with the recommendations . You have to look pack and look at your blast past in order to be able to go forward. I think we wanted to be able to provide more specific recommendations in certain air. Because i as i think we laid out in the report, pause the data we were working from on the special agent side, its clear that they do not report all the hours that they work, work many more hours that show up in the personnel system and on the Uniformed Division side, the data really doesnt come from the services own systems, but comes from federal pay records about overtime which may not be the most precise way to kind of do planning thats needed. One last question, so we have a commander in chief, the head of all our military and stuff. It should be the highest honor to serve in that capacity to protect the president. So, why wouldnt the requirements be the same for that detail for secret service as, like, say the navy s. E. A. L. S or the rangers . I mean, it should be that protective an aspect, does it not . And the chart that went up there sis disgraceful, see the application not being the type of application. Do you agree . I think the panel agrees that we need the best of the best in this role and that that has been historically the culture and belief of the service and i think we hope our recommendations will help them return to that point. Yield back. Thank you, mr. Chairman. Thank you. We will now recognize the gentlewoman from new jersey, ms. Watson coleman. Thank you, mr. Chairman. Good morning to you. And thank you so very much for the work that youve done. I did take the opportunity to read the briefing that i had last night and it was quite extensive and a little bit scary. Um, for the record, i just want to ask a question. Is this a part of the fence that was compromised . For the life of me, i cant see how you scale a fence that is skinny like this and this long. The fence in the pack ground background of the photo, not the fence in the foreground. Its i know its not this. Its actually were able to scale this . They were able to scale the fence thats in the background of the photo. The bike rack, what they call bike rack in the foreground was not there at that time. Seems to me interesting they could even scale that. So, are are any of the recommendations proposing additional surveillance over these areas that could possibly be points of access to this to the white house . We feel that they should continue to modernize technology. Interoperability of communication . We believe the technology plays an integral part in this multilayer defense of the facility and that it must be continually upgraded and receive a lot of additional focus. Do this is something that i heard in the five weeks i have been here in some briefing. That the the were on staff at the time of the fence jumping incident, were and i dont know what time of the night that was. Can you tell me early evening. Early evening . Yeah. The staff was predominantly low seniority . Is there something to a staffing pattern that your seniority gives you a better staff shift, and is there an assurance that then or now, that there are people who have more seniority and experience, that are there all the time . As i think many on the committee know, there was a prior report that focused on september 19th done by the deputy secretary of dhs, that focused on the very specific issues of that night. And did find that the personnel on staff tended to be junior that evening. And i think this goes back, again, to the staffing and Planning Issues as well as the force overtime issues that, you know, ensuring that the personnel you have, the right chain of command, you have the right mix of seniority and junior personnel as well as the right training so that people understand and know the compound is something that, if the service implements some reforms and new systems, theyll be able to ensure in the future to not have that problem on any given night. Did you look at their organizational staffing requests right now . Would they be where they need to be . Because youre asking for 85 and 200. Does that recognize that their staffing is not complete right now . Or is that in addition did they have it, and thats in addition to what they have . We were heartened to see there was additional sums sought in the president s budget. And were very supportive of getting the service to the 85 and 200. I think others may be able to do the calculation as to whether the precise amounts sought match up with that. But its our understanding that, you know the some of the additional request is intended to try to reach those levels. On the incident on the elevator, was there an explanation how someone of that nature got on the elevator with the president . Our panel did not look at the elevator incident. It wasnt part of our mandate. Okay. Im very supportive and very respectful of the secret service, and i think of it being without parallel. The protection for the president , and other people that is uncompromised and incomparable. These number of incidences have been tremendously disappointing to me. I want to go on record as saying, i dont think that were talking about wasteful spending, and i dont think were talking about asking for something that we dont need. If were going to look to where were going to save money, we need to make sure that we are applying that to areas that dont have the kind of sensitivity. Protecting the president of the United States and those like him, that is the most important thing that we need to be doing as it relates to our secret service. And i for one support the Homeland Security, and its need for a clean funding bill. And for the secret service to have new leadership and all the things that youve identified that it needs. And i thank you for your report and your work. And i thank you, mr. Chairman, for the opportunity to speak. Thank you. I do appreciate it. Well now recognize the gentleman from tennessee for five minutes. Thank you, mr. Chairman. Just to follow up on a question that mr. Wahlberg had asked, and whoever wants to take this question, feel free. How many new hire Training Classes do the secret service have funding for each year . In general, they have tried to do eight classes per year. Funding has been different over different years. But eight classes per year has been a more consistent norm. I think that showed in the early years in the chairmans chart. Is that what you did in the Previous Year . You did eight . I have to go back and look. I think in 09, 10, 11, and heres the chart, so you see special agent classes and uniform division classes, eight was the norm for the special agents, and then for the uniform division, you know, the numbers range a bit. Although something between 10 and 11 would be more the norm. Okay. Thank you. Your review found that in 2013 the service changed its hiring process, and this resulted in more applicants, but a less effective process at identifying strong candidates. In fact, more than half the applicants failed the routine polygraph that occurs during screening. Do you know who was responsible for this decision . We didnt identify a specific individual. I think our focus was our concern was on that that that process took a very long amount of time, only to have many of the candidates drop out. So it took a lot of resources and did not yield enough qualified candidates at the end. That experience as well as a number of other things that we found are one reason why we think the Service Really needs to professionalize its Human Resource function and in the hiring and retention strategies led by experts in that field. Any other downfalls at all that you can identify . Okay. What does the secret service plan to do to fix the hiring process to better identify potential candidates . So, the service has is changing its has already changed its hiring process and is using our understanding is theyre using accepted service authority. And has reordered aspects of its process so that it is less likely to spend a lot of time on candidates that are going to fall out of the process. But again, we think that over the long haul, having Human Resources professionals in charge of that process is going to be more likely to get good outcomes. You note that many of the recommendations in the report are not new. These recommendations go back to the 1964 warren commission. Some are identified to the 1995 White House Security review. And others track internal recommendations. What were those recommendations . I think there have been many recommendations, certainly over the years, but there are number of things we found in our report that i think have been seen over time, certainly questions about investment in the Uniformed Division and the importance of giving focus to the uniform division and deciding its role. Those issues have been there certainly issues related to excess overtime and insufficient personnel have been identified over time. There are a number of issues we raised in the classified aspects of our reports, ones that have been noted in the past