PAGENO="0001" ECONOMY ~N GOVERNMENT HEARINGS BEFORE THE JOINT ECONOMIC COMMITTEE CONGRESS OF THE UNITED STATES NINETIETH CONGRESS FIRST SESSION PART 2 Supplementary Materials Printed for the use of the Joint Economic Oommittee GOVERNMEI\JT DEPOSITORY PROPERTY OF RUTGERS, THE S~TATE UNIVERSITy COLLEGE OF SOUTH JERSEY LIBRARY CAMDEN, N. J. 08102 JUL 17 1967 U.S. GOVERNMENT PRINTING OFFICE 79-4590 WASHINGTON: 1967 For sale by the Superintendent of Documents, U.S. Government Printing Office )Q(j ~ Washington, D.C. 20402- Price 50 cents :~ /c!=~/ -i~ *~\ PAGENO="0002" JOINT ECONOMIC COMMITTEE (Created pursuant to sec. 5(a) of Public Law 304, 79th Cong.) WILLIAM PROXMIRE, Wisconsin, Chairman WRIGHT PATMAN, Texas, Vice Chairman HOUSE OF REPRESENTATIVES RICHARD BOLLING, Missouri HALE BOGGS, Louisiana HENRY S. REtJSS, Wisconsin MARTHA W. GRIFFITHS, Michigan WILLIAM S. MOORHEAD, Pennsylvania THOMAS B. CURTIS, Missouri WILLIAM B. WIDNALL, New Jersey DONALD RUMSFELD, IiliflOi5 W. B. BROCK 3D, Tennessee JoHN R. STARK, E~vecutive Director JAMES W. KNOWLES, Director of Re8earch ECONOMISTS WILLIAM H. MoORE GEORGE H. IDEN JOHN B. HENDERSON DANIEL J. EDWARDS DONALD A. WEBSTER (Minority) SUBCOMMITTEE ON ECONOMY IN GOVERNMENT WILLIAM PROXMIRE, Wisconsin, Chairman HOUSE OF REPRESENTATIVES WRIGHT PATMAN, Texas MARTHA W. GRIFFITHS, Michigan WILLIAM S. MOORHEAD, Pennsylvania THOMAS B. CURTIS, Missouri DONALD RUMSFELD, Illinois SENATE JOHN SPARKMAN, Alabama J. W. FULBRIGHT, Arkansas HERMAN E. TALMADGE, Georgia STUART SYMINGTON, Missouri ABRAHAM RIBICOFF, Connecticut JACOB K. JAVITS, New York JACK MILLER, Iowa LEN B. JORDAN, Idaho CHARLES H. PERCY, Illinois SENATE JOHN SPARKMAN, Alabama STUART SYMINGTON, Missouri LEN B. JORDAN, Idaho CHARLES H. PERCY, Illinois II RAY WARD, Economic Conaultant PAGENO="0003" CONTENTS APPENDIX I Questions and answers: Page General Accounting Office 257 Department of Defense 259 Relationship of Norfolk and Oakland NSC's to DSA and GSA.. - 266 GAO report pending 266 Extent of short-shelf-life item disposal 267 Program under Budget Circular A-76 268 Naval Academy dairy 269 General Services Administration 270 Questions from Chairman William Proxmire to GSA 271 Questions from Representative Martha W. Griffiths to GsA.. - - - 274 Bureau of the Budget 281 APPENDIX II Correspondence relating to Buy American Act: R. J. Velepec Company, Inc., Rochester, N.Y 288 Upson Bros., Inc., Rochester, N.Y 289 Vichek Tool Co., Cleveland, Ohio 289 Dictaphone Corp., Rye, N.Y 290 Wyatt, Hon. Wendell, Member of Congress, Oregon 292 Reed & Prince Manufacturing Co., Worcester, Mass 293 Donohue, Hon. Harold D., Member of Congress, Massachusetts 293 Conte, Hon. Silvio 0., Member of Congress, Massachusetts 294 Service Tools Institute, New York, N.Y 295 Lausche, Hon. Frank J., U.S. Senator, Ohio 296 S-K Wayne Tool Co., Chicago, Ill 297 Bolton, Hon. Frances P., Member of Congress, Ohio 298 Milbar Corp., Cleveland, Ohio 298 Ayres, Hon. William H., Member of Congress, Ohio 299 Wright Tool & Forge Co., Barberton, Ohio 300 Morse, Hon. Wayne, U.S. Senator, Oregon 300 P. & C. Tool Co., Portland, Oregon 300 Proto Tool Co., Jamestown N.Y 301 Pendleton Tool Industries, ~[nc., Los Angeles, Calif 302 Langen, Hon. Odin, Member of Congress, Minnesota 303 Owatonna Tool Co., Owatonna, Minn 303 Pryor, Hon. David, Member of Congress, Arkansas 304 Duplex Manufacturing Corp., Fort Smith, Ark 304 Hutchinson, Hon. Edward, Member of Congress, Michigan 305 Midwest Tool and Cutlery, Co., Inc., Sturgis, Mich 305 APPENDIX III Government in business: National Retail Merchants Association 306 Mathias, Hon. Charles McC., Jr., Member of Congress, Maryland.~ - 306 R. D. Marshall & Co., Inc., Albany, N.Y 307 APPENDIX IV Improved management of Federal real property: Materials supplied by Representative Thomas B. Curtis, Missouri, member of the subcommittee 308 m PAGENO="0004" IV CONTENTS APPENDIX V Followup action on GAO report on cost of sales of surplus property and Page disposition of proceeds 311 Letter: Assistant Secretary of Defense, Paul R. Ignatius, to Hon. Elmer B. Staats, Comptroller General 311 Letter: C. M. Bailey, Acting Director, Defense Accounting and Auditing Division, General Accounting Office, to Assistant Secretary Ignatius 313 Letters: J. L. Brewer, Jr. (for George W. Bergquist, Deputy Assistant Secretary of Defense) to Representative Curtis 314 Paul H. Riley, Deputy Assistant Secretary of Defense (Supply and Services) to C. M. Bailey 314 J. L. Brewer, Jr., to Representative Curtis 315 Representative Curtis to Elmer Staats 315 Paul H. Riley to C. M. Bailey 315 APPENDIX VI GAO report on various methods of financing agency programs by the Comp- troller General of the United States, May 1967 317 APPENDIX VII Additional views on procurement of typewriters: G. L. Snider, director of Federal marketing, Royal Typewriter Co., Inc., to Chairman Proxmire 401 Lawson B. Knott, Jr., Administrator, GSA, to Chairman Proxmire - - 403 APPENDIX VIII Executive program to improve management of automatic data processing equipment (ADPE): Letter: Budget Director Charles L. Schultze, to GSA Administrator Lawson B. Knott, Jr 404 Policy guida~ice to the General Services Administration in the imple- mentation of Public Law 89-306 404 Letter: Budget Director Charles L. Schultze to GSA Administrator Lawson B. Knott, Jr 407 Letter: Phiffip S. Hughes, Acting Director, Bureau of the Budget, to Hon. John T. Connor, Secretary of Commerce 407 Policy guidance to the Department of Commerce (National Bureau of Standards) in the implementation of Public Law 89-306 408 White House memorandum for heads of departments and agencies, June 28, 1966 410 Bureau of the Budget progress report on use and management of elec- tronic computers 413 Bureau of the Budget Circular No. A-83 415 Bureau of the Budget: ADP management information system, attach- ments 418 PAGENO="0005" ECONOMY IN GOVERNMENT-SUPPLEMENTARY MATERIALS Appendix I QUESTIONS AND ANSWERS (The following letter was sent to Comptroller General Staats sub- sequent to the hearings which concluded May 16, 1967:) MAY 23, 1967. Hon. ELMER B. STAATS, Comptroller General of the United States, Washington, D:C1. DxAn MR. STAATS: At the conclusion of the hearings of the Subcommittee on Economy in Government of the Joint Economic Committee on May 16, 1967, permission was granted to the members to submit additional questions to the witnesses so the answers might be placed in the official printed hearings. The following questions have been directed to your agency. May we have the answers for the record by May 31, 1967. Sincerely, WILLIAM PROxMIRE, Chairman. QuEsTIoNs FOR GENERAL ACCOUNTING OFFICE From: Chairman William Proxmire. During field investigations, staff noted that the. DCAS is having difficulty with discount vouchers. Some companies state "1/2% discount-lO days" on in- voices which causes DOAS in some cases to spend what seems to be excessive overtime pay to try to meet this condition. Could GAO work with DCAS on this to arrive at a practical solution? It was also noted that contract administration officials found that the lack of standardization in contract forms and conditions eause excessive work and expense by both the Government and the contractors. Whose responsibility is this? (Response by Comptroller General Staats to the foregoing follows:) COMPTROLLER GENERAL OF THE UNITED STATES, Washington,~ D.C., June 2, 1967. Hon. WILLIAM PROXMIRE, Chairman, Subcommittee on Eeoiiomy in Government, Joint Economic Committee. DEAR Mn. CHAIRMAN: Reference is made to your letter dated May 23, 1967, requesting answers to two questions for inclusion in the official printed hearings of the Subcommittee on Economy in Government of the Joint Economic Committee. The first question is whether the General Accounting Office could work with the Defense Contract Administration Services to arrive at a practical solution relating to excessive overtime costs in trying to pay contractor invoices offering one-half percent discount-1O days. The General Accounting Office will make every effort to assist the Defense Contract Administration Services to resolve this matter. In our recent report to your Subcommittee on the Survey of the Defense Con- tract Administration Services (B-161328, May 8, 1967), we noted the need for improvement in the payment of contractors' invoices. We said that there were indications that delays were being experienced in paying invoices and that cash 257 PAGENO="0006" 258 ECONOMY IN GOVERNMENT discounts available to the Government were not being taken. We also reported that the Defense Supply Agency's internal auditors planned to complete reviews of cash discounts in all regional offices by the fall of 1967. We agree that if contractors are specifying minor discounts for short discount periods, efforts by the paying offices to take such discounts may result in unneces- sary expenditures being incurred by the Government. It is our position that efforts should be made by the paying offices to take discounts offered by the con- tractors. However, where discounts are offered for payment of contractors' invoices, the costs incurred by the Government, such as overtime, should be care- fully considered so they do not outweigh the benefits of such discounts to the Government. The Armed Services Procurement Regulation Committee is currently con- sidering various revisions to regulations on the payment of contractors' invoices. One of the revisions concerns the establishment of more realistic discount periods for consideration in bid evaluations. Such revision may reduce the number of minor short period discounts offered by contractors for prompt payment of invoices. The second question relates to whose responsibility it is to standardize contract forms and conditions so that excessive work and expense by both the Govern- ment and contractors may be eliminated. The Assistant Secretary of Defense (Installations and Logistics), Department of Defense, is responsible for the standardization of Department of Defense con- tract forms and conditions. Currently, the Armed Services Procurement Com- mittee in his organization .is considering requiring that clauses be included in contracts by direct reference to the standard clauses in the Armed Services Pro- curement Regulation and by using prescribed numbers for each clause. It appears that, if such requirement is provided, it could eliminate the lack of contract uni- formity. Standard contract forms and conditions required for Government-wide use are the respoi~sibility of the General Services Administration. Sincerely yours, ELMER B. STAATS, Comptroller General of the United States. (The letters which follow were sent by Chairman Proxmire to Secretary Ignatius:) MAY 17, 1967. Hon. PAUL R. IGNATIU5, Assistant Secretary of D efen~se, Department of Defense, Washington, D.C. Da~n Mn. SECRETARY: The members of the Subcommittee on Economy in Gov- ernment has been given permission to submit additional questions to the wit- nesses who appeared before our Subcommittee on May 8, 9, 10, and 16, 1967. These will be available for distribution within a few days. It occurs to me that you might wish to make an additional statement for inclusion in the hearings as to your reactions to any reports of the Comptroller General that you feel you or your staff had not reviewed sufficiently before your appearance on May 9. Should you have such a statement, please submit it within the next week or ten days so we may refer it to the Comptroller General for comments before placing it in the printed hearings. Sincerely, WILLIAM PROXMIRE, Chairman. MAY 23, 1967. Hon. PAUL R. IGNATIUS, Assistant Secretary of Defense, Installations and Logistics, Washington, D.C. DEAR MR. IGNATIUS: At the conclusion of the hearings of the Subcommittee on Economy in Government of the Joint Economic Committee on May 16, 1967, permission was granted to the members to submit additional questions to the witnesses so the answers might be placed in the official printed hearings. The following questions have been directed to your agency. May we have the answers for the record by May 31, 1961. sincerely, WILLIAM PR0xMILE, Chairn~an. PAGENO="0007" ECONOMY IN GOVERNMENT 259 QUESTIONS FOR DEPARTMENT OF DEFENSE From: Chairman William Proxmire. For some items, the Navy buys wholesale from DSA and GSA, then ware- houses the supplies in their facilities at Norfolk and Oakland from where they supply the ships. Could not this overlap be eliminated or reduced? What was the cost of short-shelf-life material destroyed, or declared surplus by DOD for this fiscal year ending 6/30/66? Describe the DOD program under A-76 for the current calendar year? What is the current status of the Nav~y Dairy farm at Gambrills, Maryland? (The reply from Assistant Secretary of Defense Ignatius appears below:) ASSISTANT SECRnrARY OF DEFENSE, (INSTALLATIoNS AND LOGISTICS), Washington, D.C., Jnne 3, 1967. Hon. WILLIAM PROXMIRE, Chairman, Joint Eeo;wmic Committee, Congress of the United States, Washington, D.C. DEAR MR. CHAIRMAN: We appreciate the opportunity provided in your letter of May 17 to comment upon draft reports of the Comptroller General and the other subjects discussed during the recent hearing of your Committee. The attached material, presented for your consideration and inclusion in the record, is responsive to the questions forwarded with your letter of May 23 and contains our observations on subjects discussed during the hearings. Sincerely, PAUL R. Iç~NATIUs. SURVEY OF PROCUREMENT OF AERONAUTICAL SPARE PARTS IN THE DEPARTMENT OF DEFENSE The issues presented in the report on Aeronautical Spare Parts are under study by the Defense Department, and comments will be furnished to GAO in the near future. However, we do wish to comment on the matters raised in the report on our competitive procurement statistics, particularly in the light of the extensive questioning and testimony on this subject. We believe it is essential that this aspect of the report be placed in proper perspective. The GAO survey pointed out that some negotiated purchases of aeronautical spare parts of $2,500 or more in value were being reported .as competitive under circumstances that led the GAO to believe that effective competition in fact was not present. In particular, GAO believed that in instances where only one offer was received, although more than one offerer was solicited, the procurements in question should have been reported as competitive. We have considered whether or not we should revise our regulations to elim- inate from our statistics on competition all instances wherein one bid is actually received, notwithstanding the fact that several companies may have been solicit- ed. In considering the question, we recognized that the rule must apply to pro- curements placed by formal advertising as well as by negotiation. Procurement by formal advertising should never be employed in the first place unless a competitive environment exists and there is the likelihood of receipt of competitive proposals. This threat of competition is the controlling factor in the receipt of a competitive price, notwithstanding the receipt in a few instances of only one bid. We do not believe that either the GAO or the Committee would sug- gest a change in this area. Accordingly, we do not feel it is either necessary or desirable to change our present rules with respect to formal advertising. In our judgment, the same circumstances are present in the area of competitive negotiation, although, admittedly, the situation is not as clear-cut as in the case of formal advertising. Certainly, for example, if there has been realistic price competition in prior procurements of a military item, the fact that only one offer is received on a subsequent procurement does not render the latter noncompeti- tive-providing, of course, all competitors were given an opportunity to respond to the Government's solicitation. The critical point is whether a company sub- mits its offer under competitive pressure; that is under the assumption that com- petitors will respond to the solicitation. This is the basis of our present reporting rule. PAGENO="0008" 260 ECONOMY IN GOVERNMENT The GAO report does not challenge the reporting rule in all contract awards where. oniy one offer is received. Specifically, the GAO recommends that the criteria and the format for reporting negotiated contracts on the basis of price competitiion should be revised. The revision should consider the elimination of the criteria that price competition can be determned solely by the number of com- panies sollcited. The GAO recommends that additional guidance should be pro- vided to contracting officers for evaluating the extent of price competition and the competitive conditions under which contracts are awarded, such as the num- ber and content of responses, the procurement history of the items procured and other relevant information which indicate the conditions of the procurement. We will undertake a reappraisal of our reporting rules, giving particular atten- tion to the circumstances under negotiated procurement where more than one offerer is solicited but only one offer is received. The Department of Defense is as anxious as the Committee and the GAO to insure that its reported data on competitive procurement is acdurate and complete. The views expressed by Com- mittee Members and the report of the GAO have been helpful to us in calling attention to areas that may require changes in present reporting procedures. The GAO survey at four military installations also reflects that: Some nego- tiated purchases under $2,500 each were improperly classified as competitive be- cause the system of accumulating and reporting small purchase information authorized these purchases to be recorded as competitive. The GAO report recommended that competitive and noncompetitive procure- ments under $2,500 be identified and reported separately in an appropriately revised reporting format. The accumulation of management statistics for any opertaion involves a choice from among several alternatives. Since 1959 the Department of Defense has fol- lowed the practice of reporting all procurements under $2,500 as competitive. We could have treated these small purchase transactions in other ways. For example, all of them could have been reported as noncompetitive. If this had been done, we would have understated the extent of competition actually achieved. Another alternative would have been to automatically exclude all transactions under $2,500 from the base used to determine the percent of competition. If this alternative had been followed over the past six years, the results would have been as shown in the following table: Price competit ken ea~cluding snvafl purchases - [Dollar amounts in millions] Fiscal year Published reports including small purchases Excluding small purchases Total procurement . Price competition Amount Percent Small purchases Total procurement Price competition Amount Percent 1961 1962 1963 1964 1965 1966 $24, 703.4 28,099.0 29,032.3 28,234.3 27, 384.6 37, 228.6 $8, 128.9 10,003.2 10,763. 5 11,029.0 11,883.9 16, 538.9 32.9 35. 6 37. 1 39.1 43.4 44.4 $918.7 1,069.4 1,280.3 1,337.7 1,393.0 1, 704. 9 $23, 784. 7 27, 029.6 27, 752.0 26,896.6 25,991.6 35, 523. 7 $7, 210.2 8,933.8 9,483.2 9, 691.3 10,490.9 14,834.0 30.3 33.1 34.2 36.1 40.4 41.8 The above figures show that the total defense procurement which was price competitive increased by 11.5 percentage points from 1961 to 1966, whether the figures include or exclude small purchases. With small purchases included, the 1961 base figure is 32.9%, with them excluded this base figure is 30.3%. In either case, the change from 1961 to 1966 is an 11.5 percentage point increase, reflecting the great emphasis the Military Departments have placed on increasing com- petitive procurement. Still another alternative would have been to invest in the manhours necessary to classify each of the millions of transactions involved in this category as either competitive or noncompetitive. This may have been feasible at some of the large central buying offices such as the inventory control points where the GAO per- formed its surveys. However, most of the Defense small purchase activity takes place at smaller field buying offices in support of posts, camps and stations. These activities typically purchase commercial-type items from local wholesale PAGENO="0009" ECONOMY IN GOVERNMENT 261 and retail outlets. Our regulations are formulated to require these open market purchases to be made in a manner which approximates commercial business practice, seeking competition to the extent that it is necessary and appropriate and, at the same time, minimizing the paperwork burden for ourselves and for the local businessman. The Defense Department decided that of the several alternatives available to it, the most reasonable one under the circumstances was to report all pro- curements under $2,500 as competitive. This appeared to be a businesslike course of action and one which, if consistently followed (as has been done) would in no way misrepresent the increase that has occurred in the amount of our pro- curement placed competitively. Notwithstanding this, in view of the questions raised by the Committee and the GAO, we will take another look at our reporting procedures. It may well be that we should consider different treatment for purchases of $250 and under, as opposed to those in the $250 to $2,500 category. In the latter category, in- dividual transaction reporting may be administratively feasible, particularly at our larger procurement offices of the type visited by GAO in the course of its survey. Government-owned property in possession of cant~actors We are anxious to make any improvements that may be required in the con- trol over Government-owned property in possession of Defense contractors. Al- though considerable progress has been made in Department of Defense property management, additional actions are underway. We are addressing ourselves to the immediate problems and also initiating action to obtain some permanent and far-reaching improvements. Four actions are in progress. First, a Department of Defense Task Group was established to review the GAO report in detail, and to develop a responsive program. The Group will con- tinue surveillance over the implementation of an improved property management program. Second, we have asked the Military Departments and the Defense Supply Agency to investigate and act on those deficiencies reported by the GAO. Among the matters to be investigated by the Departments and reported to this office are the circumstances surrounding any unauthorized use of industrial plant equipment and the status of recovery actions where money may be due the Gov- ernnient. We will initiate action to recover any monies owed the Government for such unauthorized use. Third, we are staffing a new Defense Procurement Circular on Property Man- agement. It will focus on improved compliance with existing DoD directives. Finally, we are publishing some major changes to the Armed Services Pro- curement Regulation. These changes were developed in cooperation with the GAO to tighten up controls over Government-owned property in possession of Defense contractors. We will continue the close coordination with GAO and close internal surveillance until these problems are solved. Defense Contract Administration Services At the time of the hearing we* had not had an opportunity to review the GAO's comments of May 1967 regarding Defense Contract Administration Serv- ices, Defense Supply Agency. We have now reviewed the report and action is underway to effect improvement in the areas cited. An official response is in preparation. We were very pleased to note that the report recognized the many accomplishments made by the Defense Supply Agency in the very short time that Defense Contract Administration Services has been in operation. Since the re- port, improvements have continued. The percentage of delinquent contracts and the number of unpaid contractor invoices have been reduced considerably. We intend to continue this type of progress in all areas. Public Law 87-653 I would like to comment briefly on the DoD implementation of P.L. 87-653- the "Truth in Negotiation Law." As I stated in my testimony, we are of the opinion that we are in compliance with the basic elements of this law. First, we are requiring contractors to submit cost or pricing data necessary to do an effective cost and price analysis. This data is being audited. It is being analyzed by functional specialists and by contracting officers as a basis for negotiating fair and reasonable contract prices, which is the primary purpose of getting this data in the first place. Second, we are requiring and obtaining certificates of cost or pricing data from contractors. Third, we are including clauses in PAGENO="0010" 262 ECONOMY IN GOVERNMENT contracts which give us the contractual right to request price adjustments from contractors in cases where it is subsequently determined that they did not fur- nish accurate, current and complete data. What the Comptroller General apparently is concerned with, and I am refer- ring to his report, is that our people have not left an adequate descriptive record of exactly what cost or pricing data was reviewed and relied upon. This cost or pricing data is not the contract cost or the contractor's cost estimates. It consists of such items as the contractor's historical cost experience on other contracts, or current quotations from suppliers for this contract, which formed the basis upon which the future costs were estimated. It is not the estimates or the pricing decisions which are at issue. In summary, it appears to me that the issue is not- whether cost data is being obtained for pricing purposes; whether this data is being ar~alyzed and used; whether the contract price is being fairly and reasonably negotiated consistent with the Government interest; whether the cost and pricing certificates are being obtained; or whether adjustment clauses are being included in the contract. These things are being done. In my opinion, the issue is: (1) What data is considered adequate for proper implementation of Public Law 87-653 to permit a later judgment as to whether or not action should be initiated against the contractor under the certificate, and (2) Whether our contracting officers and the Defense contractors have de- scribed the underlying data in their file memoranda so that it may be readily identified if and when future questions of reliance upon it are raised. The documentation that is necessary to show the linkage between the amount and kind of data that was submitted by the contractor and relied upon by the negotiator is necessarily a matter of judgment. Basic source accounting docu- ments are not submitted to substantiate the elements of a contractor's price, such as time cards for direct labor. Negotiation and bargaining takes place on the basis of summary data and price analysis, with audit review of the contrac- tor's detailed accounting records to establish the validity and relevance of the cost elements submitted in the proposal. This environment, not fully understood by many, is set forth in more detail in our letter to the GAO, dated 17 December 1964, which is quoted below. What constitutes the amount of documentation necessary to permit others later to follow the essential elements of the decision is, and must continue to be, a matter of judgment. It is possible that GAO and DOD are using di~erent standards as to what constitutes adequate documentation. Accordingly, it seems clear that a better understanding is required as to what these standards should be. Toward this end, we intend to hold discussions with the Comptroller General at an early date. We are very desirous of evolving a realistic and practical reso- lution of this issue. DECEMBER 17, 1964. Hon. JOSEPH C. CAMPBELL, Comptroller General of the United States, General Accounting Office, Washington, D.C. DEAR MR. CAMPBELL: Certain recent statements of the General Accounting Of- fice raise a basic question about price negotiation techniques in Defense con- tracting: Should we negotiate fixed-price type contracts to obtain separate agree- ments on each individual cost element and profit element that may be involved in the price rather than one agreement on the total contract price? Thus, your report B-118663, submitted to the Congress last June stated "Because the total price negotiated is only as sound and equitable as the individual cost elements that make up the total price, we believe that this case illustrates the need for adequate records evidencing the agreements which were reached by the parties with respect to the elements of the negotiations." Again, your Defense Accounting and Audit Division's draft report of 3 Sep- tember 1964 on Contract AF 04 (647)-714, with the Boeing Company, states that the Government's interests are not protected where price negotiation "is con- cluded on a total price basis and questions on significant elements of cost are unresolved * * ~`." The implication is that contract prices should always be supported by specific agreements on each "~igiiificant'7 eo~t dement, as though we were negotiating dozens of separate prices rather than a single price. We strongly disagree. PAGENO="0011" ECONOMY IN GOVEBNMENI2 263 We are convinced that it would often be impossible to negotiate on the basis you suggest and that contract negotiations on a total price basis will, in most cases, far better protect the Government's interests than would insistence on separate agreements on individual cost elements. For reasons that will be shown below, negotiation of a meaningful separate agreement on each significant cost element would often be impractical and almost always be uneconomical. More- over, contract prices will generally tend to be lower if negotiated on a total price basis, since total price negotiation results in one over-all contingency factor and avoids contractor insistence on a separate contingency allowance for each cost element. Although it is impossible in any particular case to prove absolutely that total price negotiation resulted in a lower price, since there is no way of estab- lishing that a price negotiated on one basis would have been different if it had been negotiated on another basis, it is the judgment of our most able negotiators and-we believe-that of experienced price negotiators and purchasing agents in other agencies and private industry that insistence on separate agreements on individual cost elements would generally lead to significantly higher prices. Not infrequently, contractors have agreed to very substantial over-all reductions in their "last best offers" even though adamant that their cost estimates and projections on each cost element were at rock bottom. To put the matter in perspective, consider the nature of the negotiation process in pricing fixed-price type contracts where neither adequate price competition nor an established catalog or market price is available and the negotiation must be largely based on cost or pricing data. Insofar as costs are concerned, both the buyer and the seller start from their separate understandings of two things: first, cost experience (i.e., relevant data showing what it has cost in the past to accomplish tasks comparable to the contract work), and second, forecasts of what it should cost to perform the contract, the forecasts generally being based in large part on projections of the relevant cost data in the light of contingen- cies which may affect future costs. The first is essentially factual and is nor- mally based on the contractor's cost or pricing data, which is required to be current, accurate, and complete. The second is essentially a matter of applying judgment to the possibility of various contingencies occurring and involves rec- ognizing the degree to which these contingencies will be within the control of the buyer, the seller, or neither. The first depends heavily, in most cases, on the contractor's books and accounting records, which reflect past costs by individual cost elements; whether the books and records accurately reflect costs in a way that will not mislead is the proper concern of accountants and auditors. The second depends not only on cost trends and projections based on past costs, which again are of concern to accounts and auditors, but also on assessments of how risks should best be distributed between seller and buyer, how much potential there is for reducing costs by controlling contingencies, and how pricing can best be used to exploit this potential-assessments that call for judgments out- side the normal sphere of accountants and auditors on matters that cut across individual cost elements and may be entirely unrelated to any specific cost element. Insofar as cost experience is involved in price negotiations, we expect our negotiators and the contractor to reach a mutual understanding as to facts on each significant cost element. In this area, as noted above, we are concerned with facts rather than judgment. There is no intrinsic reason for the parties to differ on what costs have been experienced or on how these costs should be dis- tributed to individual cost elements. Insofar as forecasts of what it should cost to perform the contract are concerned, the situation is very different. We are here concerned with judgment-not facts. There are intrinsic reasons for the parties to differ on how to provide for contingencies-reasons as valid as they are elementary. On the one hand, we expect our negotiators to work toward a negotiation objective which would require maximum effort by the contractor to earn a fair profit; our negotiators will tend to minimize contingencies. On the other hand, the contractor will tend to maximize contingencies and work toward a negotiation objective that reflects his fear that most, if not all, unfavorable contingencies will become realities before contract performance is complete. Thus, we do not expect our negotiators to agree with the contractor's forecasts, nor him with ours, but rather that both forecasts will be founded on the same factual basis and that~ both parties will bargain in the understanding that the total of all forecasts is a sum of possibilities-not certainties-and that compro- mise of extremes may be necessary to a fair settlement. Viewed in the perspective outlined above, as it should be, it becomes clear that the negotiation of fixed-price type contracts would be severely hampered if we PAGENO="0012" 264 ECONOMY IN GOVERNMENT insisted on separate agreements on each cost element. Separate agreements would be deterimental to the interests of the Government in the following respects: 1. In practice, even if not in theory, separate agreements would usually be consecutive rather than concurrent, making it extremely difficult to give proper weight to those contingencies that cut across cost elements. Further, negoti- ators would tend to lose sight of important relationships between cost elements; for instance, manufacturing costs and subcontracting costs may be so inter- related that it would be unreasonable to agree to one without simultaneously agreeing to the other. We wish to avoid the wasteful and time-consuming process of agreeing on cost element "A" only to find in negotiating cost element "B" that there are factors which cause us to try to re-open "A" and then, having agreed to "A" and "B," find in negotiating "C" that we must again re-open "A" and also "B," and so forth through dozens of "significant" elements. 2. A requirement for separate agreements would frequently involve sub- stantial delays in negotiations, in addition to those just indicated, in that separate bargaining impasses on a number of separate cost elements would be likely to result. Reasonable trade-offs would be discouraged, with contractors insisting on contingency allowances for each cost element rather than a reasonable con- tingency factor applicable to alL We tend to lose our bargaining power in areas w-here the contractor is unyielding if we have already agreed on those where he is relatively acquiescent. 3. Separate agreements on individual cost elements would prevent us from reaching a proper balance of all the other elements of the contract pricing agree- ment-type of contract, profit, ceiling, and sharing arrangement-all of which are interrelated and each of which is also related to the total cost estimate. The balancing of all elements is necessary to sound prices. 4. Separate agreements would be apt to lead to bad pricing. The end result would be a seductively flawless package of discrete cost elements with the cost experience and cost forecast factors (including contingencies) in each element precisely defined. All that is needed is addition of a profit element, and the price is complete. Herein lies the seduction: everything adds up so precisely that there is no apparent need for the powerful negotiating leverage which price analysis and total price negotiation so often provide. The fact is that the sum of cost esti- mates and profit, no matter how carefully drawn and analyzed, may widely miss being a sound and equitable price. This is shown time after time when we manage to introduce competition (either direct price competition or indirect competition between different but comparable products) into a previously sole source situa- tion. Analysis of value and cost effectiveness, as opposed to cost anlysis, can lead to over-all price objectives which are substantially lower than those indi- cated simply by adding up the separate cost and contingency elements. A tech- nique of negotiating separate agreements on each cost element, with its attendant forced compartmentalization of contingencies, points in the opposite direction. Against the foregoing detriments of requiring agreements on individual cost elements, what benefits should be considered? Apparently, the only "benefits" are those suggested by ~the following excerpt from your Defense Accounting and Audit Division's recent draft report on the pricing of Contract A? 04 (~47)-714: "Where * * negotiation of a ~ price is concluded on a total price basis and questions on significant elements of cost are unresolved, the Air Force may believe that the reduction negotiated from the contractor's proposed price per- tained to specific individual elements of cost which it had questioned. However, the contractor may have understood that the negotiations were concluded on an entirely different basis. Subsequently, when an adjustment to the price becomes necessary because the contractor's cost estimates were overstated, the amount of cost originally included in the price for the area of contract per- formance to be adjusted is indeterminable." Thus, it is suggested that separate agreements on individual cost elements are necessary so that accurate adjustments in the contract price can be made if it is later discovered that a part of the contractor's cost data was overstated. Even if the separate cost element agreement technique would greatly facilitate price adjustments determinations in the event that cost data overstatements were later discovered, this benefit would be far outweighed by the detriments out- lined above. Certainly it is important that we should make proper price adjust- ments in such cases, but we should not become ~o pre-occupied with simplifying price adjustments as to deny to ourselves those negotiation techniques best cal- culated to achieve a sound price when the contract is first agreed to. It is far more important that the contract price be the lowest reasonable price which can PAGENO="0013" ECONOMY IN GOVERNMENT 265 be obtained than that possible d~terminations of future adju~tments (which will almost `always involve but a small fraction of the total price) be made as easy as possible to compute. We should not surrender our total price bargaining power, and therefore agree to higher over-all prices, merely to simplify possible price adjustments for which the need may never arise. Separate agreements on each significant cost element Would not, however, re- solve the `problem of how `to determine the proper price adjustment when `a cost data overstatement is discovered. This becomes clear upon close examination of the nature of the problem. Price adjustments should be made Where-in the words of Public Law 87-G53-the "price was increased because the contrac- tor * * * furnished cost or pricing data which * * was inaccurate, incomplete, or noncurrent ." (Emphasis added.) Accordingly, if an overstatement of cost data is discovered, the first question is: Did the overstatement cause an in- crease in the contract price? And the second question: If so, how much? Separate agreements on each significan~t cost element would not normally provide answers to these questions. To illustrate, suppose that a contractor furnishes us cost data showing that his experienced costs on a given vendor item have been running at $100 per unit for six monlhs prior to the price negotiations. Assuming that we are attempting to negotiate to agreement on each individual cost element, the next step is to reach agreement on the contingency factor for this element. The contractor may press for an additional $25, citing-for instance-rising materials cost trends or wage trends in the vendor's industry. The Government will bargain downward, citing- perhaps-learning curves or price trends for different but functionally com- parable items. Eventually, a deal is struck for $105. Sometime later, after the contract is executed, it is~discovered that the contractor had actually bought the vendor item for $90 per unit during the irnith7tlriorto~price negotiation-a cost data overstatement of $10 per unit. Then the questions arise: Did the overstate- inent cause an increase in the contract price? If so, how much? The important point here is that the answers may be any~thing but obvious, even though the separate cost element agreement technique was used. It may be that we would have agreed to $105 even if the $90 price bad been known. Under some circum- stances, what an item has coSt in the past is but a poor guide to what it should cost in the future, and it is the latter that counts in forward pricing. The con- tractcr might have had reasons for not agreeing to less than $105 that were as good, in his view, regardless of whether his cost experience was $100 or $90. The Government's maximum of $105 may have derived from an analysis which did not depend on the experienced costs for the item. Or the $90 price might not have had any real significance for the future-as in the case of an extraordinary distress sale. In short, the separate agreement on this cost element involved an implied understanding that the contingency factor was $5 so long as the coSt ex- perience factor was assumed to be $100, but this understanding did not and could not necessarily imply that the $5 contingency factor would hold good if the cost experience factor had been $90 or some other amount, since the contingency factor in forward pricing is the result of bargaining rather than the product of a inathernat~ical calculation. To fix correctly the effect, if any, that an overstatement of cost data had on a contract price, it is necessary for the Government's price negotiator to determine to what extent-in his best judgment-the agreed price would have been different if the cost data had been properly disclosed. We do not suggest that negotiation of separate cost element agreements, if otherwise practicable and consistent with the Government's interests, would not simplify the difficulties of making such de- terminations in some cases. We simply point out that the separate agreement technique would not eliminate these difficulties and that-as shown above-it is generally impracticable and inconsistent with the Government's interests. In conclusion, let us reiterate that the right to price adjustments to compensate for defects in contractor cost data is important; we have every intention of exer- cising it fully whenever it arises. But this does not mean that we should try to force price negotiations into rigidly separate cost-element agreements for the sole purpose of making it easier to invoke the right to price adjustment if defects should later appear. It would be equally wrong to deny ourselves use of our most effective negotiating techniques simply to facilitate after-the-fact audit. The re- quirements for accurate, complete, and current cost or pricing data and for price adjustment provisions were intended to aid sound pricing techniques-not to stifle them. Sincerely, GRAEME C. BANNEEMAN Deputy Assistant Fiecretary of Defense (Procurement). PAGENO="0014" 266 ECONOMY Th~ GOVERNMENT Depot inventories We agree that inventory control is one of our most important functions. Aqcu- racy of stock records and physical inventories have an impact on the accuracy with which we are able to compute our requirements. The Department of Defense will continue to emphasize its review of this important function. We always welcome the suggestions of the Comptroller General. In many instances in the past his conclusions and recommendations have confirmed our own earlier fi~nd- ings and the improvement actions which we had already initiated. We shall make a full and detailed response to the Comptroller General within the 60-day review period. We feel that one point especially in the Comptroller General's statement before your Committee gives a misleading impression of depot inventory management, and thus unfairly criticizes the performance of DOD supply managers. His state- ment referred to an average gross annual inventory adjustment of $2.4 billion. This figure apparently comes from a statement on page 38 of the GAO draft re- port which shows gross adjustments of $3 billion in 1965, and $1.8 billion in 1966, for an average annual gross adjustment of $2.4 billion. However, this table simi- larly shows that the net adjustments were only $100 million in 1905 and $166 million in 1966, or an average annual net adjustment of $133 million, which is about 1% of the inventory sampled by the GAO staff. Private industry generally uses a net rather than a gross inventory adjustment fignre in accounting for its materiaL Most of the large chain department stores have annual net inventory adjustments of from one to three percent. The GAO analysis show-s that the De- partment of Defense net adjustment has been averaging only about 1%. This com- pares very favorably with the record of private industry. We intend to continue strong efforts to reduce the amount of required adjustments insofar as possible. It must be recognized that it would be virtually impossible to achieve perfection in this area but we do intend to seek to continue ~ record of performance that equals or excels that of private industry. (The following pages contain answers to the questions forwarded by Chairman Proxmire on May 23, 1967:) RELATIONSHIP OF NORFOLK AND OAKLAND N5C'S TO DSA AND G5A Question. For some items, the Navy buys wholesale from the Defense Supply Agency (DSA) and the General Services Administration (GSA), then ware- houses the supplies in their facilities at Norfolk and Oakland from where they supply the ships. Could not this overlap be eliminated or reduced? Answer. The question mistakenly assumes that DSA and GSA commodities are managed identically at Navy Supply Centers (NSCs). They are not. DSA items are pre-positioned at the NSCs by the Defense Supply Centers (DSCs) which are integrated materiel managers for the Department of Defense (DoD). The stocks so positioned are carried on the books of the DSC, and have the same force and effect as if they were located at the Principal Distribution Depots (PDDs) of DSA. In DSA's distribution system, the NSCs are identified as Specialized Sup- port Depots (SSDs). The operation of the SSD differs from the operation of the PDD in the important respect that while issues from PDDs are centrally directed from the DSCs, issues from SSDs may either be centrally directed from the DSC or may be released on requisitions submitted by customers directly to the NSC. By contrast, the relationship between the NSCs and GSA is that of buyer- seller. Navy's requirements for GSA material are requisitioned from GSA, and ownership passes to Navy. GSA, as inventory manager, does not continue cog- nizance over the material and thus lacks "visibility" as to the current asset and demand position. This is the same relationship that exists between any wholesale and retail/supply system. GAO REPORT PENDING The GSA/Navy relationship, is the subject of a current GAO letter report, "Navy's Practice of Stocking, for Further Distribution, Common-Use Material Managed, and also Stocked by the General Services Administration," (OSD case #2588). This case has not been thoroughly reviewed and no final position can be taken at this time. PAGENO="0015" ECONOMY IN GOVERNMENT 67 EXTENT OF SHORT-5HELF-L]~j ITEM DISPOSAL Question. What was the cost of short shelf-life materiel destroyed, or declared surplus, by DoD for this fiscal year ending June 30, 1966? Answer. For the calendar year 1966, $9.8 million of shelf-like property, or one percent of the shelf-like item inventory, was earmarked for disposal. We do not have data on shelf-life property that was destroyed. Its lack at this time is a manifestation of a procedural weakness we are correcting in the new system prescribed in DoD Instruction 4140.27 dated November 18, 1966, subject: "Identi- fication, Control, and Utilization of Shelf-Life Items." As indicated in my state- ment, we expect to have this system and its controls installed by November 1, 1967. In the meantime we have taken all possible practical steps to acquire informa- tion about our shelf-life inventory. In view of the interest of the Subcommittee in the shelf-life area, I would like to take this opportunity to introduce the following material into the record: Analysis of DoD's current shelf-life inventory The total shelf-life inventory, excluding ammunition, petroleum products, and subsistence items, numbers 40,913 items, distributed among 262 classes, with an extended evaluation of over $990 million. This total value is considerably higher than last year's-whjch was estimated to be $770 million-because of an expan- sion of inventory to meet the anticipated needs of SEA. There may be another reason for the increase-the inventory reporting system introduced for this report has made a more complete and reliable accounting possible. This ~was probably as good a report as we could get until the new system is fully imple- mented. Of the total, 11,949 (or 29.2%) of the items are classified as "reparables." These are value at $685.6 million, or about 70% of the value of the total inventory. The classification of reparables as shelf-life items is open to question. Perhaps they should not be counted in the shelf-life inventory. There are two major reasons for doubt: 1. Reparable items (for the most part mechanical assemblies) are susceptible to restorative actions which in most instances serve to extend the shelf-life-in some cases almost indefinitely. The assigned shelf-life in these cases refers only to the time between tests or the restorative procedures and not to the maximum storage-life of the item. 2. A large part of the reparable inventory is classified shelf-life only because the item contains parts or components which are deteriorative-say, a rubber seal or an "0" ring. Replacement of those parts permits the restoration of the full shelf-life of the larger assembly. In computing the value of the DoD shelf-life inventory, the total value of the assembly-not just the cost of its deteriorative parts-has been included. Without a doubt, this procedure has led to a vastly overstated inventory value. The alternative-computing only the cost of deteriorative jarts and the labor required to replace them-presents so many difficulties for inventory managers that the present system is to be preferred and has, therefore, been continued. While the inventory is large, the losses in the reparable category are small, for the reasons just cited. Any problem~ that exists in shelf-like management is centered in the remaining 30% of the shelf-life inventory where current value is approximately $300 million. Some other key indicators drawn from our shelf-life profile may be of interest to the Subcommittee: (a) Involvement in shelf-life item management breaks out as follows: Items Navy 18, 357 DSA 9 960 Army 7, 732 Air Force 4, 604 Marine Corps 260 (b) The Navy manages 9,863 or 53.7% of its shelf-life items as reparable, Air Force is second with 1,369 or 29.7%. (o) 1,160 items generate 90% of total issues. (d) Two items (propellers and parachutes) generate 30% of the total issues. PAGENO="0016" 268 ECONOMY IN GOVERNMENT (e) 40% of the total range of items is concentrated in five classes: 5330-Packing and gasket materials. 1650-Aircraft hydraulic vacuum and deicing system components. 2915-Engine fuel system components. 4720-Hose and tubing, flexible. 6750-Photographic supplies. (f) The largest class, 5330, with 15% of the item range makes up only .3 of 1% of the inventory value. (g) 1,549 or 3.8% of the items are valued at less than $10 each, but 16,714 or 40% are valued at over $500 each. (it) 484 or 1.2% of the items have shelf-life of less than one year; by contrast, 10,134 or 25% have shelf-life exceeding five years. Observations concern;ing tit e in an.agenzent of sit elf-life materiel We are now able to say with confidence that we are in a good position to assure control of our shelf-life inventory in a way that will minimize losses which have in the past been found "attributable to deficient supply manage- inent practices," and to the absence of coordination among the several Federal Agencies concerned. Our experience in gaining this posture has been a learning process. We have learned that not all of the losses in this sort of inventory can be attributed to wasteful or inefficient mnaagement practices. A good share is the result of circumstances over which there are no reasonable practical controls for application in the military environment. Some examples of this kind of "at- trition" are: Technological advances.-The improvement of all items in the supply in- ventory is a constant and desirable thing. DoD Instruction 4140.27 directs that improved items should be phased into the supply system in such a way that remaining stock of the item being replaced will be issued first. This is not always possible or desirable, however, and we are prepared to make ex- ceptions to the general policy. For example, we would not deny our fighting forces an improved product affecting health, safety or fighting effectiveness. Against a big gain of that type, to say nothing of the effect on morale of the troops, the cost involved in disposal of the remaining stock of obsolete items is not unreasonable price to pay. Cost effective losses.-Technological improvements can also create a situa- tion in which it is lessexpensive, from a long-range cost perspective, to dispose of an obsolete inventory than to continue using it. Of course, we would never expect total losses, and would hope that somewhere within the Government a cost effective use of the obsolete equipment could be found during the screening process that precedes any disposition of materiel. service vnique itcrns.-Our analysis shows that many of the items in the shelf-life inventory are used by only one military service. This, of course, re- stricts our opportunities for transferring excess items to other use, and corre- spondingly the potential for use anywhere in the Federal Government is ap- preciably reduced. This condition quite effectively leads to higher disposal rates than is experienced on the inventory taken as a whole and makes all the more necessary that "before-use" actions-cataloging, standardization, shelf-life cod- ing, requirements determination, storage, and physical inventory be accurately performed. To sum up this exposition of the shelf-life problem, let me repeat that, in response to the guidance and urging of the Subcommittee and the GAO, we have taken responsible action to establish control. We know more about our shelf-life inventory than ever before, and have established procedures that will permit close monitoring. PROGRAM UNDER BUDGET OIRCIJLAR A-TO Question. Describe the DOD program under A-76 for the current calendar year. Answer. The basic organizational arrangements for carrying out the policies and procedures provided in BOB Circular No. A-76 have been established in the Office of the Secretary of Defense and in each of the Military Services. The Secretary of Defense has assigned overall responsibility for assuring that the guidelines are correctly applied to the Assistant Secretary of Defense (Installa- tions and Logistics) and responsibility for implementing these guidelines is assigned to the Secretaries of the Military Departments and Directors of Defense PAGENO="0017" ECONOMY IN GOVERNMENT 269 Agencies. The Assistant Secretary of Defense (Installations and Logistics) is also responsible for control of "New Starts" in accordance with the Circular and for approving any exceptions which are proposed under Section 7. c. (1) of the Circular. Each of the Secretaries of the Military Departments and Directors of Defense Agencies has assigned overall responsibility for this program to his Assistant Secretary (Installations and Logistics) or to an official of equivalent rank. We anticipate no important changes in these organizational arrangements. In order to proceed systematically with the reviews of existing commercial and industrial activities which are required by the Circular, we have divided them into 53 functional areas. A schedule for completion of the reviews has been established which provides that reviews for 28 of these functional areas should be completed by December 31, 1967. This group includes guard services, packing and crating operations, repair of electrical and miscellaneous equipment and furniture, janitorial services, etc. Other functional areas are scheduled to be completed during the remainder of FY 1968. Reviews are under way for more than 200 installations. The Military Departments and Defense Agencies are now accelerating the rate at which reviews are being conducted. We have made no changes in the schedule for completion of the reviews but we plan to reexamine this phase of the program soon when the Navy's inventory is completed. A substantial amount of our effort since the Circular was issued has been devoted to resolution of long-standing issues involving specific commercial and industrial activities in which various elements of industry and the Congress have expressed interest. These have included administrative telephone systems and other communications facilities, production of liquid oxygen, operation of track- ing ships for the space program, loading and unloading of ships at military installations and a wide variety of contract technical services involving not only the provisions of Circular No. A-76, but also the Civil Service laws and regula- tions. We are also cooperating with task forces assigned from the General Accounting Office to study the Circular as it is being applied in the Department of Defense, and with staff of the Bureau of the Budget who are studying various proposed amendments to the Circular. We anticipate that these types of specific problems will continue to constitute a significant part of our work in this area. * NAVAL ACADEMY DAIRY Question. What is the status of the Naval Academy Dairy? Answer. Last fall, Chairman Rivers and the House Armed Services Committee approved a subcommittee report recommending retention and Chairman Dawson of the House Government Operations Committee requested a current cost anal- ysis and raised a number of questions about the Naval Academy Dairy. Chair- man Dawson also asked the Navy to defer action on the proposed closure until after his Committee had had an opportunity to hold hearings and make a report to the 90th Congress. Thereafter, it was agreed that no significant actions leading toward closure would be taken until the Department had had an opportunity to evaluate the report to be submitted by the Government Operations Committee as well as all other factors bearing on the continued operation of the Daiyy. The situation remains the same today. (The letter of Chairman Proxmire to Administrator Knott of the General Services Administration follows:) CONGRESS OF THE UNITED STATES, JOINT ECONOMIC COMMITTEE, May 23, 1967. Hon. LAWSON B. KNOTT, Jr., Administrator, General Services Administration, Washington, D.C. DEAR Mn. KNOTT: At the conclusion of the hearings of the Subcommittee on Economy in Government of the Joint Economic Committee on May 16, 1967, permission was granted to the members to submit additional questions to the witnesses so the answers might be placed in the official printed hearings. The following questions have been directed to your agency. May we have the answers for the record by May 31, 1967. Sincerely, WILLIAM PROXMIRE, Chairman. 79-459 O-67---pt. 2-2 PAGENO="0018" 270 ECONOMY IN GOVERNMENT QuEsTIoNs FOR GENERAL SmwIcEs ADMINLSTBATION From: Chairman William Proxmire. What results has GSA obtained when it actively participated in rate cases before regulatory bodies as compared to negotiation for* rates with the utilities? Does GSA have any authority to survey the real property holdings of execu- tive agencies and report to Congress or the President as to the extent of use of the property and recommendations for improvements? Does GSA maintain listings of all Federal real properties by States or other political sub-divisions? Explain. What will be the role of GSA under the new Budget circular A-2? What criteria does GSA use for direct delivery purchases: for storage and issue; for use of open-end supply schedules? With respect to the charge that Government agencies fail to distinguish properly between "price" and "cost", will you supply figures showing all ele- ments of cost for GSA "storage and issue" of common type supplies, i.e., pur- chasing, transportation, warehousing, losses from various causes, packaging, disposals, etc. etc. In previous years there was agreement between DOD and GSA witnesses that Small Business fared better under advertised competitive bidding than under negotiated buying. Do your statistics still bear this out? Roughly what do they reveal? We also found that when items are standardized as to specifications that it helped competitive bidding and hence Small Business. Is this right? What progress has been made in developing Federal Specs this past year? What are future goals? I am also of the opinion that Small Business obtains greater participation when buying is decentralized and hence is procured in smalier quantities. Is this correct? Do you have any statistics on this? From: Represent~tive Nartha W. Griffiths. Senator Metcalf mentioned in his testimony the extraordinarily high rate of return (11.32%) of Houston Lighting and Power, which serves a major NASA facility. What has GSA done to reduce electricity costs to the Federal Govern- ment in the area served by Houston Lighting and Power? Does GSA consider the effect of excess residential rates on Federal employee salaries? How many formal utility rate cases has GSA been a party to since 1960? Please furnish the Subcommittee with the name of the utility involved, year in which action by GSA was initiated, and the outcome of the case; What formal rate cases is the GSA a party to at this time? Which utilities is GSA currently negotiating with for rate decreases? Please list by type of utility--communications, electric, gas, sewage, steam. Which other Federal agencies are w-orking with you toward reduction of costs of utility services? In each case, please indicate what utility or state commission the agency is negotiating with, and also indicate whether the agency is a party in a formal rate case. What is the annual electricity bill paid by the Federal Government to each of the Class A and B electric utilities? What is the annual communications bill paid by the Federal Government to the American Telephone and Telegraph Company and each of its subsidiaries? (The following was submitted by the General Services Administra- tion in response to the foregoing:) GENERAL SERVICES ADMINIsTRATION, Was hingt on~ D.C., June 1, 1967. Hon. WILLIAM PROxMIRE, Chairman, Joint Economic Committee, Congress of the United ~ta.tes, Washington, D.C. DEAR MR. CHAIRMAN: As requested in your letter of May 23, 1967, we are pleased to provide the attached answers to the additional questions submitted at the conclusion of the hearings of the Subcommittee on Economy in Govern- ment of the Joint Committee on May 16, 1967. If we can be of further service, please advise. Sincerely yours, LAWSON B. KNOTT, Jr., Administrator. PAGENO="0019" ECONOMY IN GOVERNME~~ 271 QUESTIONS FROM CHAIRMAN WILLIAM PROXMIRE Question. What results has GSA obtained when it actively participated in rate cases before regulatory bodies as compared to negotiation for rates with utilities? Answer. Specific results obtained from active participation in cases before regulatory bodies are listed in the response to the 3rd question asked by Repre- sentative Griffiths. Comparison of these results with the results of negotiaitons for rates with utilities shows that both negotiations and cases before regulatory bodies in which GSA has actively participated have resulted in significant economies. Expressed in terms of total dollars, the GSA negotiation and repre- sentation effort has resulted in annual savings of approximateJy $11,500,000 during the 196O-19q7 period. The outcome of rate cases entered before regulatory bodies during that period represents approximately two-thirds of this total. The negotiation and representation effort is a coordinated one, with each phase contributing to the success of the other. As a matter of policy, GSA prefers the negotiated approach with resort to litigation only where negotiation efforts have been exhausted without satisfactory results. Question. Does GSA have any authority to survey the real property holdings of executive agencies and report to Congress or the President as to the extent of use of the property and recommendations for improvements? Answer. Section 202(b) of the Federal Property and Administrative Services Act of 1949, as amended, 40 U.S.C. 483, imposes upon each executive agency (not the General Services Administration) the responsibility to survey its property continuously to determine which is excess to its needs and to promptly report any such excess to the Administrator of General Services. It should be noted that if GSA were required to undertake the task of survey- ing the real property holdings of the other Federal agencies, it would require asubstantial increase both in appropriations and personnel. Question. Does GSA maintain listings of all Federal real properties by States or other political sub-divisions? Explain. Answer. GSA maintains an inventory of Federal real property throughout the world. The real property inventory was established primarily to serve as a ready reference within the Federal Government to all of the Government's holdings. As a byproduct, copies of the worldwide detailed inventory listings, ar- ranged both geographically and by reporting agency, are on file and available for public inspection (except classified data on Department of Defense military installations) in the central office of the General Services Administration in Washington, D.C. Copies are also available in each GSA regional office. Copies of the worldwide detailed inventory listings are also furnished to the Senate and House Committees on Appropriations and the Senate and House Committees on Government Operations, Bureau of the Budget, General Accounting Office, and each of the contributing Federal agencies. Question. What will be the role of GSA under the new Budget Circular A-2? Answer. The General Services Administration will make an annual survey and report of the real property holdings under its jurisdiction as presecribed by BOB Circular A-2 and will transmit its report and the reports of other agencies to the Bureau of the Budget. Question. What criteria does GSA use for direct delivery purchases: for stor- age and issue; for use of open-end supply schedules? Answer. Criteria for direct delivery purchases: (a) The items shall be equipment or supply items of such a character that it is feasible to forecast requirements for delivery to specific use points; and (b) Conditions exist where any of the following factors requires purchas- ing of such items for direct delivery to use points- (1) Where greatest price advantage, both direct and indirect costs considered, is obtainable through large definite quantity purchasing; (2) Where an item is of special manufacture or design and is not readily available from commercial sources; (3) Where contracts for production quantities are necessary to secure timely deliveries and advantageous prices; and (4) Where the quantity is large enough to assure lowest transporta- tion costs or, conversely, where transportation costs for small quantity redistribution are so excessive that it is not feasible to store and issue the items. PAGENO="0020" 272 ECONOMY IN GOVERNMENT Criteria for storage and issue: (a) The item shall be physically adaptable to storage and issue and of such a character that it is feasible to forecast overall requirements of the use points served with reasonable accuracy; (b) Rate of use and frequency of ordering at use points shall be suf- ficient to warrant storage and issue; (c) The rate of deterioration or obsolescence shall be sufficiently low to avoid unnecessary loss; and (a) Conditions exist where any of the following factors require supply through storage and issue (except that dangerous commodities of high weight and density, or commodities highly susceptible to damage normally should not be considered for supply through storage and issue unless one or more of such factors are determined to be of overriding importance)- (1) Where price advantage through bulk buying is sufficient to render storage and issue more economical, all costs, both direct and indirect, considered; (2) Where close inspection or testing is necessary to secure quality, or where repetitive inspection and test of,small lots are prohibitive from the standpoint of cost or potential urgency of need; (3) Where advance purchase and storage are necessitated by long procurement leadtime; (4) Where an item is of special manufacture or design and is not readily available from commercial sources; (5) Where an adequate industry distribution system does not exist to assure availability at use point; (6) Where volume purchases are necessary to secure timely deliveries and advantageous prices; (7) Where market conditions are such that supply through storage and issue is required to assure adequate supply; and (8) Where stocking of supplies and equipment necessary for imple- mentation of emergency plans is required for an indefinite period. Criteria for use of open-end supply schedules: (a) The items shall be such a character that- (1) Handling on a storage and issue basis is not economically sound; (2) Rate of use and frequency of ordering at use points is estimated to be sufficient to warrant the making of indefinite quantity require- ment contracts; and (3) It is either not feasible to forecast definite requirements for delivery to specific use points (as in the case of new items initially being introduced into a supply system), or no advantage accrues from doing so ; and (b) Industry distribution facilities are adequate properly to serve the use points involved; and (c) Conditions exist where any of the following factors requires the main- taining of indefinite quantity requirements contracts- (1) Advantage to the Government is greater than would be secured by definite quantity procurements by individual offices or agencies (the de- termining consideration being one of overall economy to the Govern- ment, rather than one of direct comparison of unit prices of individual items obtained through other methods of supply); or no known pro- curement economies would be effected but the requirements of offices or agencies can best be served by indefinite quantity requirements con- tracts; (2) Acute competive bidding problems exist because of highly techni- cal matters which can best be met on a centralized contracting basis; and (3) The item is proprietary or so complex in design, function, or operation as to be noncompetitive and- procurement can best be per- formed on a centralized contracting basis. Question. With respect to the charge that Government agencies fail to dis- tinguish properly between "price" and "cost", will you supply figures showing all elements of cost for GSA "storage and issue" of common type supplies, i.e., PAGENO="0021" ECONOMY IN GOVERNMENT 273 purchasing, transportation, warehousing, losses from various causes, packaging, disposals, etc., etc. Answer. Elements of cost to GSA during FY66 for storage and issue of common type supplies per $100 of sales totaled $9.57 or about 9~/2% and break down into categories as follows: Per $100 sales Procurement and inventory management $1.75 Distribution including warehouse space costs 6. 05 Inspection testing and contract administration . 73 Administrative operations (accounting, legal, etc.) 1. 04 Total 9. 57 In addition out bound transportation which is included in on selling prices amounts to $4.30 per $100 of sales and inventory losses from all causes amounted to slightly more than 1/2% of 1% of sales. Question. In previous years there was agreement between DOD and GSA witnesses that Small Business fared better under advertised competitive bidding than under negotiated buying. Do your statistics still bear this out? Roughly what do they reveal? Answer. Since 83 percent of the procurement dollars expended by GSA were expended on a publicly advertised competitive bid basis we are unable to support statistically our strong conviction that Small Business fares better under adver- tised competitive bidding than under negotiated buying. Question. We also found that when items are standardized as to specifications that it helped competitive bidding and hence Small Business. Is this right? Answer. The use of Federal Specifications and standards, broadens the base of competition and is, in our view, advantageous to Small Business concerns, since they are able to determine in advance what is required and prepare accurate cost estimates on which to base their bids or offers. This is particularly advan- tageous when a Small Business manufacturer is entering a new product area or considering bidding on a product which varies from their normal production. Question. What progress has been made in developing Federal Specs this past year? What are future goals? Answer. We now have about 5,000 specifications indexed with new ones being added each year. Specification actions during FY 66 and those planned for FY67 and FY68 are: Fiscal year 1966 Fiscal year 1967 Fiscal year 1968 New 487 Revisions 685 Total 1,172 560 974 493 830 1,543 1,323 Our future plans include a 3-year cylic review of specifications and standards in use which will nearly double our current output. We expect to achieve these increased goals in this highly significant area as rapidly as resources permit. Question. I am also of the opinion that Small Business obtains greater par- ticipation when buying is decentralized and hence is procured in smaller quan- tities. Is this correct? Do you have any statistics on this? Answer. Under GSA's operating supply programs "centralization" and "de- centralization" of procurement are not absolute alternatives. Total procure- ments made through GSA's supply support programs involve the purchase of over $2 billion per year. Of this volume, approximately 80 percent is delivered directly from the producers or distributors to the using agencies without being physically handled by GSA. Of the 80 percent, the majority of the deliveries are PAGENO="0022" 274 ECONOMY fl~ GOVERNMENT made under Federal Supply Schedule contracts, where the ordering process is completely "decentralized." While national Federal Supply Schedule contracts represent a form of cen- tralized contracting, many national schedule contractors distribute through local jobbers and dealers, and in all cases the product moves directly from industry outlets to the point of use. Completely centralized procurement methods are limited to a small number of commodities, where requirements are consolidated and purchased in definite quantities at a single point. Delivery is made direct to the point of use by the contractor. We also contract centrally for many items required to replenish our stores stock system where more advantageous prices can be expected from production sources. Every effort consistent with industry practice is made in all such pro- curements to award contracts on a zone basis. This is particularly advantageous to Small Business suppliers who do not have national distribution. It is our policy to select the right methods of supply and to maximize Small Business advantages and minimize any disadvantages under that method. Buy- ing activities give maxiniuni consideration to Small Business interests, in the drafting of invitations for bids, and the possibilities of set-asides are always considered. When valid supply considerations such as standardization, uniformity, and availability, can be met through each regional GSA office procuring its own requirements, we normally will authorize such purchase. However, uncoordi- nated regional procurement is frequently not in the best interest of Small Business Manufacturers, since requirements are split into less than economical production runs, or reasonable lots, and thus do not meet the criteria for Small Business set-asides. Small Business set-asides, when they can be made, insure the award of a contract for the product of a Small Business manufacturer. QUESTIONS FROM REPRESENTATIVE MARTHA W. GRIFFITHS Question. Senator Metcalf mentioned in his testimony the extraordinarily high rate of return (11.32%) of Houston Lighting and Power, which serves a major NASA facility. What has GSA done to reduce electricity costs to the Federal Government in the area served by Houston Lighting and Power? Answer. GSA has just recently assisted the National Aeronautics and Space Administration in a negotiation with the Houston Lighting and Power Company. Completion of the negotiation resulted in an estimated savings of $125,000 per year plus a one-time credit of $18,000. Later, conversations with NASA staff members at the Houston Manned Space Craft Center indicate that the actual annual savings will be substantially higher than is shown above due to related operational savings made possible by the provisions of the new contract. Also pending are two additional negotiations with this Company referred to in the answer to the sixth question. Question. Does GSA consider the effect of excess residential rates on Federal employee salaries? Answer. GSA has neither authority nor responsibility in the area of residential utility rates, and therefore cannot and does not consider the effect of such rates on Federal employees salaries. Under the Federal property and Administrative Services Act of 1949, as amended, the Administrator of General Services is authorized to represent Executive agencies in negotiations with utilities and in proceedings before Federal and State regulatory bodies only with respect to utility services for the use of such agencies. Question. How many formal utility rate cases has GSA been a party to since 1960? Please furnish the Subcommittee with the name of the utility involved, year in which action by GSA was initiated, and the outcome of the case. PAGENO="0023" Answer. ECONOMY IN GOVERNMENT 275 UTILITIES CASES Entered F.Y. 1961 (July 1, 1960-June 30, 1961) VEPCO, N.C. Utilities Commission No. E-22, Sub. 46. Montana Power Co., Montana PSC No. 4997_~ F.Y. 1962 (July 1, 1961-June 30, 1962) Application of Great Falls Gas Co. for au- thority to increase its rates and charges for Natural Gas Service, Montana P50 Dkt. 5085. Washington Gas Light Co., submission of new schedule "I"--Interruptible rate-Large Volume, D.C. PUC No. 3675, Formal Case 480. Application of Idaho Power Co., for approval of rates, rules, and regulations comprising proposed tariff No. 101, Idaho PUC No. 14 and Idaho PUC No. U-1006-42 Proposed rates for special contract customers. Application of Utah Power & Light Co. for a change 0 depreciation and approval of its proposed electric rate schedules, and elec- tric service regulations, Utah PSC No. 5129. Alabama-Tennessee Natural Gas Co. (FPC Dkts. Nos. G-5471, G-17218 and G-19984 and G-11982. F.Y. 1963 (July 1, 1962-June 30, 1963) Puget Sound Power & Light Co., Wash. Utili- ties & Transportation Commission Cause No. U-9423. Investment Tax Credit under 1962 amend- ment to Internal Revenue Code; Account- ing Treatment by Public Utilities, Licen- sees, and Natural Gas Companies, FPC Dkt. No. R-232. F.Y. 1964 (July 1, 1963-June 30, 1964): Consolidated Edison Co. of N.Y., Inc., NY PSC Case No. 22815 (Electric rates). Potomac Electric Power Company, D.C. PUC No. 3477/4, Formal Case No. 491. Utah Power & Light Company, Idaho PUC No. U-1009-32. Consolidated Edison Company of N.Y., Inc., NY PSC Case No. 22992 (Gas rates). F.Y. 1965 (July 1, 1964-June 30, 1965) Uniform Systems of Accounts for Public Utili- ties, Licensees and Natural Gas Pipeline Companies and Aunual Report Forms, FPC Dkt. No. R-264. Florida Power & Light Co., Florida PUC Dkt. No. 7759-EU. F.Y. 1966 (July 1, 1065-June 30, 1966) Potomac Electric Power Co., application for a determination of its authorized rate of return, D.C. P50 No. 511. F.Y. 1967 (July 1, 1966-May 31; 1967) None $160,000 annual savings. Rates to Great Falls Gas Co. held subject to approval (See Docket 5085 below). $81,500 annual savings. No change. $91,500 annual savings. $54,000 annual savings. Flow through of tax savings from liberalized deprecia- tion ordered. $6,930 annual savings. Initial year flow through of tax reduction ordered by FPC; order rendered moot by Revenue Act of 1964. No change. Do. $6,033 annual savings. No change. Pending. $860,900 annual reduction. No change. Outcome PAGENO="0024" 276 ECONOMY IN GOVERNMENT COMMUNICATIONS CASES F.Y. 1961: tLS. v. American Telephone & Telegraph Co__ Western Union Increases, FCC AT&T (Farmers Mutual, Lynden, Wash.), FCC. AT&T (General Tel. Co. of Iowa), FCC AT&T (Peninsula Tel. & Tel.), FCC No. 13781. Pacific Tel. & TeL Co., Calif. PUC No. 6950~~ AT&T (United Tel. Co. of Ohio), FCC AT&T (Assembly Delay Tariff), FCC Home Tel. Co. of Condon, Oregon, FCC Interstate SAGE, FCC AT&T Tariff FCC No. 250, TELPAK, FCC 14251. F.Y. 1962: The New York Telephone Company, N.Y., PSC Case No. 21984. Domestic Telegraph Service, FCC, Dkt. No. 14650. F.Y. 1963: Western Union Telegraph Co. proposed new and increased rates for Telegraph messages of tieline customers, FCC Dkt. 14754. Pacific Telephone & Telegraph Co., Calif. PUC Case 7409. Class A, B, and C Telephone Companies; Ra- * diotelegraph Carriers; Wire-Telegraph and Ocean-Cable Carriers, FCC Dkt. No. 14850. The New York Telephone Co., N.Y. PSC Case No. 22626 (CENTREX Service). In the Matter of Amer. Tel. & Tel., Co., Regu- lation and charges for developmental line switched service, FCC 14154 (WADS) and Amer. Tel. & Tel. Co., (TWX) FCC Dkt. 15011. Western Union Tel Co., Tariff FCC No. 232, FCC. Mountain States Tel. & TeJ. Co. before Mon- tanaPSC (SAGE). F.Y. 1964: In the Matter of Overseas Leased Circuits, FCC. C. & P. Tel. Co. Application, D.C. PUC No. 3718, Formal Case 494. C. & P. Tel. Co., Md. PSC Cases Nos. 5902 and 5904. Southwestern Bell Tel Co., Kansas State Corp. Commission Dkt. No. 73,268-U. Amer. Tel. & Tel. Co., FCC (Dollars and Cents Tariffs). F.Y. 1965: Southern Bell Tel. & Tel. Co., Fla. PUC Dkt. No. 7756-TP. Amer. Tel. & Tel. FCC Dkt. 16072 (Service Point Case). F.Y. 1966: FCC 16058, ComSat Authorized User FCC 16258, Bell System Interstate & Foreign Service. Calif. PUC 8169 and 8176, WATS Entered Outcome $35,000 reparations payment to the Govarnment. $62,000 annual savings. No change. $756 annual saving. No change. Do. Do. Do. Do. Pending. Do. $60,000 annual savings. Pending. $62,500 annual savings. $840,000 annual savings.. Flow through accounting or- dered for investment tax credit savings; order ren- dered moot by Revenue Act of 1964. No change. $330,000 annual savings. No change. Pending. Do. $4,366,000 annual savings. $15,000 annual savings. No change. Pending. $400,000 annual savings. Pending. Pending. Do. $190,000 annual savings. PAGENO="0025" ECONOMY IN GOVERNMENT 277 CoMMuNICATIoNs OASES-Continued Entered Pending F.Y. 1967 (to May 31, 1967) FCC 16979, Computer & Communications Pending. Service. P.T. & T., Cal. PUC 8608, Application Do. No. 49142. Question. What formal rate cases is the GSA a party to at this time? Answer. UTILITIES Accounting for Liberalized Depreciation-FPC Docket No. R-264. General Investigation of Rates, Charges and Earnings-Florida Power and Light Company (Fla. PUC Docket No. 7759-EU). COMMUNICATIONS Pacific Telephone and Telegraph Co. (Cal. P.TJ.C. Case No. 8608; Application No. 49142) Investigation of AT&T Data Transmission Rates-FCC Docket No. 12194 Investigation of AT&T Common User Group Rates-FCC Docket No. 13514 United States v. American Telephone and Telegraph Company, et al, Docket No. 14040 AT&T TELPAK Services and Channels, FCC Docket No. 14251 Domestic Telegraph Service-FCC Docket No. 14650 (Western Union and AT&T) Communications Satellite Corp. (COMSAT), FCC Docket No. 16058 AT&T Interstate and Foreign Services (FCC Docket No. 16258) FCC Docket No. 15011. Petition for Declaratory Ruling (AT&T Interstate SAGE) Mountain States Tel. and Tel. Co. AT&T Tariff FCC No. 134, 20th Revised Page 18 (FCC Docket No. 16072) Interdependent use of Computers and Oommunications Services and facilities. FCC Docket No. 16979 Question. Which utilities is GSA currently negotiating with for rate decreases? Please list by type of utility-communications, electric, gas, sewage, steam. Answer. The General Services Administration is currently engaged in negotia- tions with the following listed utilities with respect to rates of facilities costs. Where the negotiation involves only one other Agency of the Government we have identified the Agency. Electric service Potomac Electric Power Company (three items). Virginia Electric Power Company. Baltimore Gas & Electric Company. Public Service Co. of Colorado (for GSA, Air Force and Atomic Energy Commission). City of Ketchikan, Alaska. Alaska Light and Power Company. Golden Valley Electric Cooperative. Puget Sound Power and Light Company. Dayton Power and Light Company. Minnesota Power & Light Co. or Northern Electric Cooperative (for Bureau of Mines). Pennsylvania Power Company. Potomac Edison Company of Pennsylvania. West Penn Power Company. City of Lakeland, Florida. Menard Electric Cooperative. Gas service Washington Gas Light Company (two items). Wisconsin Gas Company (for Veterans Administration). Citizens Utilities Company (for Veterans Administration) Iron Ranges Natural Gas Company (for Bureau of Mines). PAGENO="0026" 278 ECONOMY IN GOVERNMENT Water and/or sewer service Washington Suburban Sanitary Commission (three items). County of Fairfax, Virginia. Port of Tillamook Bay, Oregon (for Bureau of Land Management). Question. Which other Federal agencies are working with you toward reduc' tion of costs of utility services? In each case, please indicate what utility or stat commission the agency is negotiating with, and also indicate whether the agenc~ is a party in a formal rate case. Answer. In addition to direct negotiations, GSA is frequently requested b. other agencies to assist in negotiations with utilities in an advisory or consultiv capacity. The following are currently in process: Electric service Atomic Energy Commission with Duquesne Light Company. Coast Guard with the City of Alameda, California. National Aeronautics & Space Administration with Southern California Edison Company. Atomic Energy Oonimission with Commonwealth Edison Company. National Aeronautics & Space Administration with Houston Lighting & Power COmpany (two items). Gas serv~ice Coast Guard with Pacific Gas and Electric Company. Sewer service Forest Service with the County of Madera, California. DELEGATED Application of Arizona Public Service Company for Increased Gas and Electric Rates, Arizona Corporation Commission Docket No. U-1345. In the 1~Iatter of Southern Bell Telephone and Telegraph Company, Louisiana Public Service Commission Docket No. 8875 (Centrex Service). Application of Cities Service Gas Company for Increased Gas Rates, FPC Docket No. RP64-9. In the Matter of the Issuance of a Show Cause Order Concerning Certain Pipe- line Companies, Kansas State Corporation Commission Docket No. 73,100. In the Matter of RCA Communications, Inc., Tariff F.C.C. No. 77, Original Page 12. In the Matter of RCA Communications, Inc., Tariff FCC No. 67, 1st Revised Page 100. In the Matter of Hawaiian Telephone Company, Tariff FCC No. 4, 5th Revised Page 1OD. In the Matter of Investigation of American Telephone and Telegraph Company, Tariff FCC No. 135, Revised Page 23CC. In Re General Investigation of the Rates, Charges, and Earnings of Florida Power Corporation, Docket No. 7767-EU. Electric and Communications Public Utilities' Extension Rules and Aesthetics and Economics of Facilities (Case No. 8209). Question. What is the annual electricity bill paid by the Federal Government to each of the Class A and B electric utilities? Answer. GSA does not have current data on the annual electricity bill paid by the Federal Government to each of the 215 Class A and B electric utilities. GSA electric utility rate reviews and its negotiation and representation effort em- phasize areas of significant Federal interest and in the course of this activity we have developed approximate annual billing figures from 137 electric utilities. A tabulation of these utilities and the estimated Federal bills is attached. In gen- eral, these amounts are conservative since they do not include billings below $5,000 per year. PAGENO="0027" ECONOMY IN GOVERNMENT 279 APPROXIMATE ANNUAL GOVERNMENT BILLINGS FOR ELECTRIC SERVICE Utility Billing laska Electric Light & Power Company $37, 000 rizona Public Service Company 1, 098, 000 Tucson Gas & Electric Company 980, 000 Southern California Edison Company 7, 110,000 United Illuminating Company 263, 000 Delmarva Power & Light Company 20, 000 Potomac Electric Power Company 18, 200, 000 Florida Power Corporation 838, 000 Florida Power & Light Company 6, 500, 000 Gulf Power Company 2,458, 000 Tampa Electric Company 513, 000 Georgia Power Company 3, 835, 000 Savannah Electric & Power Company 398, 000 Hawaiian Electric Company 4, 633, 000 Hilo Electric Light Company - 96, 000 Kauai Electric Company 161, 000 Idaho Power Company 1, 521,000 Central Illinois Light Company 698, 000 Central Illinois Light Company 164, 000 Illinois Power Company 803, 000 Indiana & Michigan Electric Company 88, 000 Indianapolis Power & Light Company 688, 000 Northern Indiana Public Service Company 96, 000 Public Service Company of Indiana 825, 000 Southern Indiana Gas & Electric Company 11, 000 Interstate Power Company 7, 000 Iowa Electric Light & Power Company 192, 000 Iowa-Illinois Gas & Electric Company. 70, 000 Iowa Power & Light Company 195,000 Iowa Public Service Company 210, 000 Iowa Southern Utilities Company 36, 000 Kansas Gas & Electric Company 509, 000 Kansas Power & Light Company 2, 153, 000 Western Power & Gas Company 74,000 Kentucky Power Company 41, 000 Kentucky Utilities Company 349, 000 Louisville Gas & Electric Company 1, 422, 000 Central Louisiana Electric Company 105, 000 Louisiana Power & Light Company 814, 000 New Orleans Public Service Company 1, 471,000 Central Maine Power Company 26, 000 Maine Public Service Company 249,000 Delmarva Power & Light Company of Maryland 6,000 Potomac Edison Company 615,000 Susquehanna Electric Company 270,000 Boston Edison Company 2,261,000 Brockton Edison Company 57,000 Cambridge Electric Light Company 20,000 Cape & Vineyard Electric Company 027,000 Fall River Electric Light Company 7,000 Massachusetts Electric Company 238, 000 New Bedford Gas & Light Company 59, 000 New England Power Company 441,000 Western Massachusetts Electric Company 364, 000 Consumers Power Company 966, 000 tipper Peninsula Power Company 80, 000 Minnesota Power & Light Company 310,000 Northern States Power Company 1, 127,000 Mississippi Power Company 1,279,000 Mississippi Power & Light Company 482,000 Empire District Electric Company 11,000 Kansas City Power & Light Company 2,280,000 PAGENO="0028" 280 ECONOMY IN GOVERNMENT APPROXIMATE ANNUAL GOVERNMENT BILLINGS FOR ELECTRIC SERVICE-contjnued Utility Billing Missouri Power & Light Company $.38~ 00 Missouri Public Service Company 629,00 St. Joseph Light & Power Company 24,00 Montana Power Company 412, Nevada Power Company 1,030, 00 Sierra Pacific Power Company 307, Concord Electric Company_ 6, Granite State Electric Company 60, 00 Public Service Company of New Hampshire 814, 00 Atlantic City Electric Company 552, 00 Jersey Central Power & Light Company 1, 679, 000 New Jersey Power & Light Company 205, 000 Public Service Electric & Gas Company 1, 744, 000 Rockland Electric Company 33, 000 Public Service Company of New Mexico 133, 000 Central Hudson Gas & Electric Company 41,000 Long Island Lighting Company 555, 000 N.Y.. State Electric & Gas Corporation 281, 000 Orange & Rockland Utilities, Inc. 248, 000 Rochester Gas & Electric Corporation 85, 000 Carolina Power & Light Company 4,380,000 Duke Power Company 261, 000 Nantahala Power & Light Company 27, 000 Montana-Dakota Utilities Company 177, 000 Ottertail Power Company 64, 000 Cleveland Electric Illuminating Company 527,000 Columbus & Southern Ohio Electric Company 487,000 Dayton Power & Light Company 2,078,000 Ohio Edison Company 581, 000 Ohio Power Company 238, 000 Toledo Edison Company 70, 000 Oklahoma Gas & Electric Company 1, 753, 000 Public Service Company of Oklahoma 358, 000 California-Pacific Utilities Company 135, 000 Pacific Power & Light Company 437, 000 Portland General Electric Company 146, 000 Pennsylvania Electric Company 172, 000 Pennsylvania Power Company 14, 000 Potomac Edison Company of Pennsylvania 438, 000 West Penn Power Company 224, 000 Blackstone Valley Electric Company 10, 000 Narragansett Electric Company 568, 000 Newport Electric Corporation 1, 122, 000 South Carolina Electric & Gas Company 1,403, 000 Black Hills Power & Light Company 233, 000 Northwestern Public Service Company 13, 000 Kingsport Power Company 14, 000 Central Power & Light Company 1, 528, 000 Community Public Service Company 28,000 Dallas Power & Light Company- 337, 000 El Paso Electric Company 2, 321, 000 Gulf States Utilities Company 144, 000 Southwestern Electric Power Company 621, 000 Southwestern Electric Service Company 39, 000 Southwestern Public Service Company 1, 590, 000 Texas Electric Service Company 1, 617, 000 Texas Power & Light Company 1, 638, 000 West Texas Utilities Company 679, 000 Utah Power & Light Company 1,327,000 Central Vermont Public Service Corporation 57, 000 Green Mountain Power Corporation 32, 000 Delmarva Power & Light Company of Virginia 309, 000 Potomac Electric Power Company of Virginia 1, 809, 000 Virginia Electric & Power Company 8, 565, 000 PAGENO="0029" EGONOMY IN GOVERNMEN~ 281 APPROXIMATE ANNUAL GOVERNMENT BILLINGS FOR ELECTRIO SERvICE-cOntinUed Utility Billing Puget Sound Power & Light Oompa~y $710, 000 Washington Water Power Company 277, 000 Appalachian Power Company 276, 000 Monongahela Power Company 166, 000 Potomac Edison Company of West Virginia 47, 000 Wheeling Electric Company 12, 000 Madison Gas & Electric Company 263, 000 Northern States Power Company of Wisconsin 78, 000 Wisconsin-Michigan Power Company 37, 000 Wisconsin Power & Light Company 75, 000 Wisconsin Public Service Corporation 108, 000 Question. What is the annual communications bill paid by the Federal Govern- ment to the American Telephone and Telegraph Company and each of its subsidiaries? Answer. The total annual communications bill paid to the American Telephone and Telegraph Company and each of its subsidiaries is approximately $356,000,000. (The letter and questions which follow were directed to the Bureau of the Budget by Chairman Proxmire:) MAY 22, 1067. Hon. CHARLES L. SCHULTZE, Director, Bureau of the Budget, TVashington, DXI. DEAR CHARLIE: At the conclusion of the hearings of the Subcommittee on Econ- omy in Government of the Joint Economic Committee on May 16, 1967, permis- sion was granted to the members to submit additional questions to the witnesses so the answers might be placed in the official printed hearings. The following questions have been directed to your agency. May we have the answers for the record by May 31, 1907. Sincerely, WILLIAM PROXMIRE, Chairman. QUESTIONS FOR BUREAU OF THE BUDGET From: Chairman William Proxmire. Progress is reported in reducing the amount of short-shelf-life supplies de- stroyed, made excess and surplus, donated, sold, etc. Can this be shown statisti- cally? For example, how did the FY 1966 figures compare with those of FY 1965? The subcommittee has long been interested in coordinating common activities in the Government when practicable as a means of eliminating overlapping, duplication and waste. But first we must identify common activities. Secretary McNamara has special authority to organize and operate common supply and service activities. Some notable achievements have been made in the DOD. It would seem that a similar effort should be made government wide in many areas-poverty programs, construction, conservation, communications, hospital management, lending activities, health programs, aging, geodetic and other sur- veys, etc. The GAO has recently reported on military recruiting, timber apprais- als, and on some types of construction. Has the BOB attempted to identify and analyze the many common-type activ- ities in the Government? Do you have a listing of these? If so supply. In developing the National Supply System, we are advised that the procure- ment of certain items will be transferred from civilian procurement to the DOD and vice versa. When this is done will the differential policy under the Buy American Act of the transferor or transferee agency be utilized? With respect to the use of differentials under the Buy American Act, is the Budget Bureau's primary concern about "balance of payments" or "balancing the budget"? From: Representative Thomas B. Curtis. Last year we had a discussion as to the use of the `pumpkin fund' in the DOD to finance sales operations. Under authority in the DOD Appropriation Act, the receipts from sales of surplus property are used to finance sales and preparation PAGENO="0030" 282 ECONOMY Th~ GOVERNMENT of sales. Since that authority was granted a number of years ago the cost of DOD sales has gone up and up and now use 77.2% of sales receipts. What control does BOB exert over the use of these receipts? We asked the GAO to give us some idea of the various kinds and the scope of program financing arrangements other than through direct appropriations that are in use. A draft report gives a list that is impressive though not all-inclusive. Does the BOB have standards or criteria as to when special methods of pro- gram financing should or should not be used-use of sales receipts, revolving funds, use of custom receipts, proceeds from fees, etc. etc.? (The Bureau of the Budget responded as follows:) EXECUTIVE OVEICE OF THE PRESIDENT, BUREAU OF THE BUDGET, Washington, D.C., May 31, 1967. Hon. WILLIAM PROXMIBE, Chairman, Subcommittee on Economy in Government, Joint Economic Com~mit- tee, Congress of the United States, Washington, D.C. DEAR Mn. CHAIRMAN: This is in response to your letters dated May 22 and May 24, 1967, to the Director requesting answers to additional questons from members of the Subcommittee on Economy in Government of the Joint Economic Com- mittee following the hearings on May 16, 1q67. Answers to each of the questions included in your two letters are covered in the attachment. Sincerely, PHILLIP S. HUGHES, Depnty Director. ANSWERS OF THE BUREAU OF THE BUDGET TO QUESTIONS OF THE SUBCOMMITTEE ON ECONOMY IN GOVERNMENT, JOINT ECONOMIC COMMITTEE Question. We `asked the GAO to give us some idea of the various kinds and the scope of program financing arrangements other than through direct appropriations that are in use. A draft report gives a list that is impressive though not all-inclusive. Does the BOB have standards or criteria as to when special methods of program financing should or should not be used . . . use of sales receipts, revolv- ing funds, use of custom receipts, proceeds from fees, etc., etc.? Answer. The Bureau of the Budget has criteria to be followed in determining the advisability of special methods of program financing such as revolving funds, use of sales receipts, and proceeds from sales of property. In general, the presumption is that receipts should go to the general fund, unearmarked, and that programs should be financed through regular appropriations. Proposals for special financing are approved in budget examination and legislative clearance only when there is a clear and convincing demonstration that such earmarking is decidedly in the public interest. (It should be noted that special funding arrangements may, but need not, remove a program from budget review and control.) Earmarking of receipts generally The following general criteria are used in determining that earmarking of receipts would be in the public interest, and weighed against the considerations of budgetary control and policy evaluation: 1. The need for expenditures fluctuates directly with variations in a highly unpredictable volume of receipts. It is difficult for general fund appropriations to provide adequately for unpredictable requirements. 2. Lump sum expenditures are to be made in a fixed proportion to receipts. Where a percentage of receipts from a given source is to be paid to the States in lump sum payments, there is no particular need for annual appropriation action by Congress, since the payments of shared revenue are relatively uncontrollable. 3. The work involved, somewhat beyond the normal functions of the Govern- ment, is an appropriate undertaking on a user charges basis. It may be ap- propriate for the Government to carry on an activity as a convenience to a special group, to be paid for by those benefiting. 4. Earmarking is necessary to preserve equity among certain groups of citi- zens. This may be a factor in earmarking receipts from the sale of personal property which is being replaced. PAGENO="0031" ECONOMY IN GOVERNMENT 283 5. Earmarking of receipts will bring in a greater income in relation to expendi- tures. Where general fund expenditures are based on carrying out a service at a level in excess of that for which those benefited are willing to pay, the substitution of earmarking for general fund appropriations may bring about a reduction in expenditures and a net saving. 6. It is important to demonstrate to a payer that his payment is being used for a particular purpose. This may be necessary if the Government is either acting as an agent or is engaged in a cooperative arrangement with States, etc. Public enterprise funds All revolving funds involve the earmarking of receipts; generally the receipts are available without further action by Congress. The primary characteristic of a public enterprise fund is that certain receipts from the public for products or services are used to finance the related costs of a commercial-type activity or some other cycle of operations. Proposals for new public enterprise revolving funds generally should provide for annual appropriation review, subject to such limitations and allowances for flexibility as are deemed appropriate. When the arguments for a public enterprise fund are stronger than the disadvantages of earmarking, and when all or part of the following criteria are applicable, the establishment of a public enterprise revolving fund may be advisable. 1. There is a continuing cycle of operations in which expenditures generate receipts. 2. The fund is substantially self-sustaining. 3. The program involves many transactions of a business nature. When this criterion is applicable, the enterprise may qualify for a revolving fund even though it is not self-sustaining. A program for loan guarantees may properly be handled as a revolving fund even if not self-sustaining, because it involves transactions such as the forfeiture of collateral, the management o properties, and sales of property. 4. A systematic disclosure of the relationship between revenue and expense and the subsidy, if any, supplied by the Government is desirable. This criterion is applicable only when revenues are substantial in relation to expenses. Where revenues generate expenses only incidentally or vice versa, there is usually no need for refined data on the relationship between revenues and expenses. 5. There is substantial need for flexibility to meet unforeseen requirements. A significant advantage of a revolving fund is its flexibility, since an unforeseen and necessary increase in expenses is related to business volume and the related revenue increase ordinarily can finance the in~rë WkI~ad~without going - back to Congress for a deficiency appro~riation. The need for flexibility, however, is not a sufficient reason in itself to create a revolving ~ Intragovcrnmental revolving funds The criteria involved in determining the advisability of creating an intra- governmental revolving fund are quite different from those considered in the creation of a public enterprise revolving fund. An intragovernmental revolving fund, whether primarily for use within an agency or for use between agencies, has no receipts from the public or such receipts are only incidental; hence the question of earmarking receipts from the public is not pertinent. Rather, the questions are closely connected to problems of appropriation pattern and struc- ture: To what agency should the appropriation be made to pay for a particular activity? What should be the scope of each appropriation item? How can the volume of an activity best be controlled through the budget process? The follow- ing primary criteria are considered: 1. Accurate distribution of the costs of a common operation among two or more appropriations is desirable and significant. Most intragovernmental revolv- ing funds involve the joint use of inventory or common services that can be ad- ministered more economically and effectively by one unit for an entire depart- ment or several functions, with the costs charged to the respective benefiting appropriations or organization units. This criterion is not applicable where there is only one appropriation with which the fund will deal. 2. It is important to place responsibility for justifying costs on the officials who benefit therefrom. Consideration should be given to the respective respon- sibilities of the officials who conduct the operation and those who benefit from it particularly with respect to justifying the proposed operating volume. 3. It is desirable to indicate clearly whether the pricing policies used for in- teragency charges are on a cost or profit basis. An intragovernmental revolv- PAGENO="0032" 284 ECONOMY IN GOVERNMENT ing fund, with a systematic display of its profit or loss, discloses overpricing or underpricing in a manner which is impossible under the appropriation reim- bursement method. 4. Flexibility in the time purchases are made is desirable. A revolving fund permits more economical procurement through use of the fund's working capital to purchase in volume and at a time when prices are favorable. Question. In developing the National Supply System, we are advised that the procurement of certain items will be transferred from civilian procurement to the DOD and vice versa. When this is done will the differential policy under the Buy American Act of the transferor or transferee agency be utilized? With respect to the use of differentials under the Buy American Act, is the Budget Bureau's primary concern about "balance of payments" or "balancing the budget"? How much additional cost under the Buy American Act has each agency of the Government incurred over the last years? Answer. Items that are transferred from one agency to another under the National Supply System will be purchased under the Buy American regulations and differential policy of the agency doing the purchasing. With respect to the use of differentials under the Buy American Act, the Bureau of the Budget's primary concern is an attempt to balance off the budgetary costs, possible savings in the balance of payments, and the U.S. objective of promoting liberal trade policies throughout the world. There is no information readily available to answer the question. We have asked the Defense Department and GSA for information on this subject. We will also be examining the other principal agencies involved. The results of this study will be available to the Committee. Question. Has the BOB attempted to identify and analyze the many common- type activities in the Government? Do you have a listing of these? If so, supply. Answer. The operation of the budgetary process is the Bureau of the Buget's principal means of identifying, analyzing, and providing for coordina- tion of common-type activities in the Federal Government. Information on some of the more significant common activities of Federal agencies is published an- nually in the Special Analyses, Budget of the United States. Your attention is invited particularly to the following special analyses which identify and describe major Federal programs: Special Analysis E on Federal Credit Programs Special Analysis F on Federal Activities in Public Works Special Analysis H on Federal Health Programs Special Analysis I on Federal Research, Development, and Related Pro- grams Special Analysis K on Federal Statistical Programs The Bureau of the Budget's directive system includes Bureau Circulars which are employed to communicate various instructions of a continuing nature to executive departments and establishments. These Circulars provide agencies with specific direction in carrying out various aspects of the budgetary process and the Bureau's management improvement program. They are used also as a means of promulgating regulatory material derived from the Bureau's various statutory responsibilities. Of the 83 Circulars in effect currently the following provide policy guidance to agencies in areas of common activities: A-2. Utilization, retention, and acquisition of Federal real property A-7. Standardized Government Travel Regulations A-16. Coordination of surveying and mapping activities A-18. Policies on construction of family housing A-22. Limousines, heavy sedans, and medium sedans in agencies of the executive branch A-25. User charges A-27. Policies and responsibilities on the sharing of electronic computer time and services in the executive branch A-29. General policy covering the furnishing of quarters, subsistence, and laundry services to civilian employees of the Federal Government in Federal hospitals and domicillary homes A-30. Federal Employees Uniform Allowance Act A-45. Policies governing charges for rental quarters and related facilities A-54. Policies on selection and acquisition of automatic data processing (ADP) equipment PAGENO="0033" ECONOMY IN GOVERNMENT 285 A-56. Regulations governing payment of travel and transportation ex- penses of civilian officers and employees of the United States A-57. Review of proposed construction or acquisition of Federal hospitals and domiciliary homes A-61. Guidelines for appraising agency practices in the management of automatic data processing (ADP) equipment in Federal agencies A-62. Policies and procedures for the coordination of Federal meteoro- logical services A-68. Establishment of central supporting service facilities in headquar- ters and field service locations A-71. Responsibilities for the administration and management of auto- matic data processing activities A-76. Policies for acquiring commercial or industrial products and serv- ices for Government use In furtherance of the goals of its management improvement program the Bureau becomes involved in detailed review and analysis of specific areas of common activity from time to time. For example, the Bureau issued instruc- tions to all agencies inviting their sustained cooperation in the establishment and operation of the Federal Telecommunications System. Also Bureau staff are currently conducting a preliminary analysis of land acquisition organizatibn and practices in the executive branch. The Bureau reviews specific programs under Circular A-68 to provide centralized administrative support services to agencies. GSA has the primary responsibility for furnishing specific operating guidelines for establishment of these support services which include such com- mon activities as: office and storage space; self-service supply stores; transportation services; health units; and printing and duplicating plants. Finally, the grouping of common-type activities in logical organizational set- tings has been a prime consideration in the Bureau's participation in the Presi- dent's programs for improving the organization of the executive branch. This is illustrated by reorganizations which resulted in the creation of the Environ- mental Science Services Administration within the Commerce Department, the creation of the Department of Transportation, the transfer of Community Rela- tions Service from the Commerce Department to the Department of Justice, and the transfer of the Federal Water Pollution Control Administration from the Department of Health, Education, and Welfare to the Department of the Interior. Question. Last year we had a discussion as to the use of the "punkin fund" in the DOD to finance sales operations. Under authority in the DOD Appropriation Act, the receipts from sales of surplus property are used to finance sales and preparation of sales. Since that authority was granted a number of years ago the cost of DOD sales has gone up and now use 77.2% of sales receipts. What control does BOB exert over the use of these receipts? Answer. With respect to receipts from sales of DOD surplus personal prop- erty, these operations are subject to the normal financial and manpower controls applicable to Defense activities generally. No special controls are applied by the Bureau. Bureau staff have, however, worked with personnel of the Department of Defense in connection with the management problems in this area. Tighter management and cost controls will be placed in effect with greater responsibili- ties to be assumed by the Defense Supply Agency for central direction of the program. It should be recognized that disposal proceeds and the costs chargeable there- to are not directly comparable. For example, in fiscal year 1966, a total of $6.4 billion (acquisition cost) of personal property moved through DOD utilization and disposal programs. Administrative and handling expenses in connection with all this property are charged to disposal proceeds. However, over $2.7 billion of this property (acquisition cost) was transferred within the Federal Govern- ment or donated, with no revenue resulting. Less than $3.7 billion worth of property (at acquisition cost) was sold, and most of this is scrap. The volume of reutilization, which produces no revenue in this account, has nearly doubled in recent years, while the volume of property available for sale has steadily decreased. 79-459 0-67-pt. 2-3 PAGENO="0034" 286 ECONOMY IN GOVERNMENT Question. How much surplus personal property has the Government disposed of in the last 10 years? What was its cost value, and how much did the Govern- ment receive at the time of sale? Answer. The General Services Administration accumulates statistics reflecting the volume of surplus personal property donated, sold, or otherwise disposed of and the amount of proceeds from sales. The following table shows this data for the past 10 years. Disposal of surplus property Fiscal year Acquisition cost In millions of dollars Proceeds in millions of dollars Donated Sold Abandoned or destroyed Expended to scrap Proceeds from sales (other than scrap) Proceeds from sales of scrap Total proceeds 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 212.8 289.0 361.0 412.8 387.7 350. 7 343.8 392.5 407. 8 429.2 1,098.6 1,918.8 2,114.0 2,055.4 1,560.4 1,027. 7 706.9 768.9 787.4 608.3 39. 6 52.9 84.8 50. 6 45.4 38. 7 67.9 107. 1 117.3 106. 4 (1) (1) (1) (1) (1) (1) 2,076.8 3,369. 8 2,542.5 2,212. 6 84.0 91.4 99.6 105.0 88.4 68.8 45. 6 45. 0 50. 6 61.3 61.4 48.4 66.0 62.2 57.1 43.9 29.6 38.0 47.4 44. 1 145.4 139.8 16.5.6 167.2 145.5 112. 7 74.2 83 0 98. 0 105.4 1 StatIstics not accumulated prior to fiscal year 1963. Question. Progress is reported in reducing the amount of short-shelf-life sup- plies destroyed, made excess and surplus, donated, sold, etc. Can this be shown statistically? For example, how did the FY 1966 figures compare with those of FY 1965? Answer. Statistics are not available for comparing the total volume of short- shelf-life supplies disposed of in FY 1965 and FY 1966. The short-shelf-life problem arose primarily because items of supply having limited shelf life were not sufficiently identified to prevent loss through deterioration before issue. Since these items were not specifically designated as short-shelf-life supplies, data were not separately collected for FY 1965 and FY 1966 with respect to their disposition. We understand that in response to the Subcommittee's request the DOD is submitting information with respect to some short-shelf-life supplies. Data for FY 1965 and FY 1966, however, are available with respect to the civilian defense medical stockpile inventory. The following data, prepared by the General Services Administration, indicates progress in the utilization and destruction of the civilian defense medical stockpile inventory: Utilization and destruction of civil defense medical stockpile by Federal agencies [Millions of dollars] Fiscal years 1965 1966 1967 I. UTILIZATION ACTION (a) Loaned to Federal agencies: DOD VA PHS AID Totalloaned (b) Excess utilized or referred: DOD AID Various agencies (United States and States) Total utilized or referred (c) Total utilization by fiscal year II. DESTRUCTION Property identified as being unfit for use and destroyed 0.8 0 0 0 5.7 .2 .3 .2 1.5 0 .05 .15 .8 6.4 1.7 0 0 0 0 0 1.9 12 .3 0 0 1.9 12.3 .8 .3 8.3 6.8 14 17.5 PAGENO="0035" EOONOMY IN GOVERNMENT 287 III. PLANNED UTILIZATION The civilian defense medical stockpile inventory has been reviewed and 186 items with a value of $42.5 million, have been identified as having a shelf life which will expire on or before December 31, 1968. These items have been referred to DOD and VA for utilization by rotation to the extent those agencies have requirements prior to the expiration of the useful life of the inventory items. The GSA and the DOD have worked together to resolve the short life problem and have agreed on and issued comparable prooedures for the identification, designation of useful life, and establishment of controls for shelf-life items to minimize loss and insure maximum use prior to deterioration. The data which will be gathered under these procedures will be carefully reviewed as a measure of the effectiveness of the actions which are being taken to obtain maximum utilization of short-shelf-life supplies. PAGENO="0036" Appendix II Bu~ AMERICAN ACT (Correspondence relating to the Buy American Act follows:) CONGRESS OF THE UNITED STATES, HOUSE OF REPRESENTATIVES, Wasliingtcm, D.C., Aprt~ 10, 1967. Hon. WILLIAM PROXMIRE, Chairman, Joint Economic Committee, New Senate Office Building, Washington, D.C. DEAR Sin: In behalf of my constituent, who is identified in the attached letter copy, I should like to request your consideration of this matter. Thank, you for whatever information and assistance you can provide. I look forward to your reply. With kindest personal regards, I am Sincerely, FRANK HORTON, Member of Congress. (An identical copy of the following letter was also sent to Repre- sentative Horton by Douglas R.. \Telepec, executive vice president, R. J. Velepec Company, Inc., Rochester, N.Y.:) UPSON BROS., INC., Rochester, N.Y., April 6, 1967. Subject: Improper application of Buy American Act in Government purchasing. Hon. FRANK J. HORTON, House of Representatives, Washington, D.C. DEAR CONGRESSMAN HORTON: In behalf of this company and its employees, we respectfully request and urge that you take immediate steps to correct a grossly improper application of the Buy American Act by the Bureau of the Budget in the case of two Government departments, namely, General Services Administration and the Department of Defense. We refer specifically to the Hand Tool buying policy of the Department of Defense which permits a 50% differential in favor of American manufacturers while the General Services Administration is allowed to use a 6% differential on the same items. Because of this policy, foreign bidders are obtaining awards from GSA with its 6% differential, which would not be possible if the procure- ment were made by DOD. In' other words, the American producer gets the award if Agency A (DOD) does the buying, but loses it if Agency B (GSA) is the purchaser for the same type program. Obviously, if this lack of policy continues, the already substantial loss of business by American Hand Tool manu- facturers which results will continue to increase. It is, of course, obvious that the GSA differential in favor of American manufacturers should be 50%, the same as that of the Department of Defense. Will you please, therefore, contact at once all members of the Joint Economic Committee and urge them to take immediate steps to correct this inconsistent policy. Also, please contact Charles L. Schultze, Director of the Bureau of the Budget, expressing concern over this matter and inquiring why the Budget Bureau has ignored the recommendation of the Sub-Committee on Federal Procurement (now the Sub-Committee on Economy in Government) as con- 288 PAGENO="0037" ECONOMY IN GOVERNMENT 289 tamed on Page 188 of its report of Hearing held in Washington, D.C. on March 24, 1966. The welfare of this company and the jobs of our employees are at stake. Your immediate assistance will be greatly appreciated. Yours sincerely, H. H. VELEPEC, Executive Vice President. APRIL 14, 1967. Hon. FRANK HORTON, House of Representatives, Congress of the United states, Washington, D.C. DEAR FRANK: Reference is made to your letter of April 10, 1967 concerning the lack of uniformity in the application of differentials by the Department of Defense and the General Services Administration under the Buy American Act. This problem will be considered by the Subcommittee on Economy in Gov- ernment of this Joint Economic Committee at hearings scheduled for May 8-15, 1967. If your constituent has no objection we will place his letter in the record. Please let me know. With best wishes, WILLIAM PROXMIRE, Chairman. UPSON BRos., INC., Rochester, N.Y., May 1, 1967. Hon. FRANK HORTON, House of Representatives, Washington, D.C. DEAR Mn. HORTON: It is a great satisfaction to know we have a Representa- tive in Congress who follows through for his constituents. Thank you for the attention given to the matter of preferential differentials used in purchasing by GSA and DOD. Referring to last paragraph of letter addressed to you from Chairman William Proxmire, we have no objections to having our correspondence placed in the Record. Sincerely, H. H. VELEPEC, Executive Vice President. APRIL 10, 1967. Mr. E. F. HOWARD, President, Vlchek Tool Co., Cleveland, Ohio. DEAR MR. HOWARD: Senator Lausche has requested me to acknowledge your letter of April 6th concerning the improper application of the Buy American Act in government purchasing. The contents of your letter were carefully noted, and the Senator has asked me to tell you that he appreciates your writing to him concerning this matter. He will make inquiry of the Joint Economic Committee as well as the several government agencies involved and when he has received information on the sub- ject, we will correspond with you further. Please be assured that your letter was welcome. Sincerely yours, RAY M. WHITE, Administrative Assistant to senator Frank J. Lausche. (Copy of Mr. Howard's letter to Senator Lausehe follows:) VLCHEK TOOL Co., Cleveland, Ohio, April 6, 1967. Subject: Improper application of Buy American Act in Government purchasing. Hon. FRANK J. LATJSCHE, ~Senate Office Building, Washington, D.C. DEAR SENATOR LAtrSCHE: In behalf of this company and its employees, we respectfully request and urge that you take immediate steps to correct a grossly improper application of the Buy American Act by the Bureau of the Budget PAGENO="0038" 290 ECONOMY IN GOVERNMENT in the case of two Government departments, namely, General Services Adminis- tration and the Department of Defense. We refer specifically to the Hand Tool buying policy of the Department of Defense which permits a 50% differential in favor of American manufacturers while the General Services Administration is allowed to use only a 6% dif- ferential on the same items. Because of this policy, foreign bidders are obtain- ing awards from GSA with its 6% differential, which would not be possible if the procurement were made by DOD. In other words, the American producer gets the award if Agency A (DOD) does the buying, but loses it if Agency B (GSA) is the purchaser for the same type program. Obviously, if this lack of policy continues, the already substantial loss of business by American Hand Tool manufacturers which results will continue to increase. It is, of course, obvious that the GSA differential in favor of American manufacturers should be 50%, the same as that of the Department of Defense. Will you please, therefore, contact at once all members of the Joint Economic Committee and urge them to take immediate steps to correct this inconsistent policy. Also, please contact Charles L. Schultze, Director of the Bureau of the Budget, expressing concern over this matter and inquiring why the Budget Bureau has ignored the recommendation of the subcommittee on Federal Pro- curement (now the subcommittee on Economy in Government) as contained on page 188 of its report of hearing held in Wahsington, D.C. on March 24, 1966. Vlchek Tool Company was the second lowest bidder on a very substantial volume of GSA requirements. The business was awarded to imported tool sup- pliers-with the resultant reduction in jobs in our plants in 1966. Current studies of competitive bidding would indicate a further reduction in 1967. Therefore, the welfare of this company and the jobs of our employees are at stake. Your immediate assistance will be greatly appreciated. Yours very truly, E. F. HOWARD, Presicleivt. APRIL 14, 1967. Hon. FRANK J. LAUSOHE, tT.~. Senate, Washington, D.C. DEAR FRANK: Reference is made to your letter of April 10, 1967 concerning the lack of uniformity in the application of differentials by the Department of De- fense and the General Services Administration under the Buy American Act. This problem will be considered by the Subcommittee on Economy in Govern- ment of this Joint Economic Committee at hearings scheduled for May 8-15, 1967. If your constituent has no objection we will place his letter in the record. Please let me know. With best wishes, Wn~I~IAM PROXMIRE, Chairman. MAY 12, 1967. Mr. LouIs J. DUBUQUE III, Vice president, Sales, Dictap Ii one Corp., Rye, N.Y. DEAn Mn. DUBUQUE: I am in receipt of your letter of May 3, 1967, concerning the variation in the use of differentials under the Buy American Act by GSA an~l DOD as it applies to the procurement of various items required by the Gov- ernment. Chairman ProKnrire of the Subcommittee on Economy in Government, of which I am a member, assures me that this subject will be under discussion when the GSA and BOB appear before the Subcommittee on May 16, 1967, 10:00 a.m., Room AE-1 (S-407), The Capitol. It is my hope and expectation that procedures lchding to uniformity in the use of the differentials will evolve from these hearings. I am asking the Chairman to insert your letter in the printed hearings. Sincerely, WRIGHT PATMAN. PAGENO="0039" ECONOMY IN GOVERNMENT 291 Mr. Dubuque's letter follows: DICTAPHONE CORP., Rye, N.Y., May 3, 1967. Subject: Improper application of Buy American Act in G~vernment purchasing- GSA. Hon. WRIGHT PATMAN, T7ice Chairman, Joint Economic Committee, Subcommittee on Economy in Gov- ernment, New Senate Office Building, Washington, D.C. DEAR MR. PATMAN: On behalf of this Company and its employees, we respect- fully request and urge that you take immediate steps to correct a grossly im- proper application of Buy American Act by the Bureau of the Budget in the case of two Government Departments, namely, General Services Adniinistration and the Department of Defense. We refer specifically to the dictating maéhine buying policy of the Department of Defense, which permits 50% differential in favor of American manufacturers, while the G.S.A. is allowed to use only 6% differential on the same items. Because of this policy, foreign bidders are obtaining awards from G.S.A. with its 6% dif- ferential which would not be possible if the procurement were made by D.O.D. In other words, the American producer gets the award if Agency A (D.O.D.) does the buying but loses it if Agency B (G.S.A.) is the purchaser for the same type program. If the Bureau of the Budget continues this inconsistent policy, the already substantial loss of business by the domestic dictating machine industry as evi- denced by the enclosed figures, will continue to increase. II is imperative to the industry and beneficial to our country's balance of payments that the G.S.A. dif- ferential in favor of American manufacturers should be 50%, the same as that of the Department of Defense. As a matter of interest, recently the G.S.A. did extend this 50% differential to overseas buying, but still applies the 6% level here in the United States, which is unreasonable and inequitable. We would be most appreciative if you would, when you have the opportunity, point out to members of the Joint Economic Committee, The Bureau of the Budget, and the Government Operations Committee ,this inconsistent policy. Your assistance would be greatly appreciated. With best regards, Louis J. DUBUQUE III, Vice President, Sales. Dictating machine industry, U.S.A., units shipped 1953, 1963-66 U.S.A-Made machine Foreign- made machine Total Foreign as percent of total 1966 1965 1964 1963 1953 `130,000 1 125,000 121, 723 130,147 99,099 1 100,000 81, 727 68,851 4~,768 230,000 206, 727 190,574 173,915 99,099 43.5 39.5 36.1 25.2 0 `Estimated. Source: U.S.A-made machines series M35R, Department of Commerce Reports on Office Computing and Accounting Machines; foreign-made machines, Department of Commerce FT125 and Journal of Import Bulletin Data. PAGENO="0040" 292 ECONOMY IN GOVERNMENT (The preceding letter was also sent to Senator Sparkman, whose response follows:) MAY 17, 1967. Mr. Louis J. DUBUQUE III, Vice President of Sales, Dictaphone Corp., Rye, N.Y. DEAR MR. DUBUQUE: With reference to your letter of May 3, 1967, I am sure that you are aware of the fact that the Subcommittee on Economy in Govern- ment of the Joint Economic Committee spent considerable time discussing this subject of differential under the Buy American Act with witnesses from the GSA and BOB on May 16, 1967. The Subcommittee hearings should be available for distribution in the near future, and also the report thereon. Sincerely, Joni~ SPARKMAN, U.S. Senator. CoNGRESS OF THE UNITED STATES, HousE OF REPRESENTATIVES, Washington, D.C., April 2~, 1967. Hon. WILLIAM E. PnoxMmE, Chairman, Subcommittee on Economy in Government, Joint Economic Committee, New Senate Office Buil~ing, Washington, D.C. DEAR SENATOR PROXMIRE: In connection with hearings your Subcommittee will be holding on May 8, 9, 10 and 16 on government procurement, I would appreciate my following statement being considered by your Subcommittee. American hand tool manufacturers are threatened by a very substantial loss of business because the General Services Administration in its purchases for the various Federal Agencies is allowed to use only a 6% differential in favor of American manufacturers. As you know, the hand tool buying policy of the De- partment of Defense permits a 50% differential in favor of American manufac- turers. To me, it is vital, in the best interests of the United States, that we main- tain and preserve the strong American hand tool manufacturing industry. This industry deserves and should receive from the General Services Administration the same treatment afforded American suppliers by the Department of Defense, namely, a 50% differential in favor of American manufacturers. As you undoubt- edly know, foreign bidders are obtaining awards from the General Services Ad- ministration when the same tools, bid at the same price, would not have been accepted by the Department of Defense. This inconsistency is working a real and severe hardship on our American hand tool manufacturers who are hard put enough as it is to compete with cheaply produced foreign manufactured tools. I urge with all the power at my command that your Committee recommend ap- proval of legislation to remedy this situation. Thank you for your cooperation. Sincerely yours, WENDELL WYATT, Member of Congress. APRIL 28, 1967. Hon. WENDELL WYATT, U.S. House of Representatives, Congress of the United States, Washington, D.C. DEAR CONGRESSMAN WYATT: Thank you for your letter of April 24 concerning inconsistent government purchasing policies under the Buy American Act. We will certainly consider your statement during our May hearings, and I will make sure that your letter is included in the hearing record. Sincerely yours, WILLIAM PROXMIRE, Chairman. PAGENO="0041" ECONOMY IN GOVERNMENT 293 CONGRESS OF THE UNITED STATES, HOUSE OF REPRESENTATIVES, Washington, D.C. April 10, 1967. Hon. WILLIAM PROXMIRE, Chairman, Joint Economic Committee, New Senate Office Building, Washington, D.C. DEAR SENATOR PROXMIRE: I am enclosing a copy of the Self-explanatory letter sent to me by Vice President James F. Convery of the Reed & Prince Manufactur- ing Company in my home city of Worcester, alleging improper application of the Buy American Act. I shall very deeply appreciate your comments on the contents of Mr. Convery's correspondence and any other advice or recommendations you may feel warranted in the matter from your Committee experience. Many thanks for your courtesy and best personal wishes. Sincerely, HAROLD D. DON0rnm. REED & PRINCE MANUFACTURING Co., Worcester, Mass., April 6, 1967. Subject: Improper application of Buy American Act in Government purchasing. Hon. HAROLD D. DONOHUE, House of Representatives, Washington, D.C. -~ DEAR CONGRESSMAN D0N0HUR: In behalf ~ we respectfully request and urge that you take immediate steps to correct a grossly improper application of the Buy American Act by the Bureau of the Budget in the case of two Government departments, namely, General Services Administration and the Department of Defense. We refer specifically to the Hand Tool buying policy of the Department of Defense which permits a 50% differential in favor of American manufacturers while the General Services Administration is allowed to use only a 6% differ- ential on the same items. Because of this policy, foreign bidders are obtaining awards from GSA with its 6% differential, which would not be possible if the procurement were made by DOD. In other words, the American producer gets the award if Agency A (DOD) does the buying, but loses it if Agency B (GSA) is the purchaser for the same type program. Obviously, if this lack of policy continues, the already substantial loss of business by American Hand Pool manufacturers which results will continue to increase. It is, of course, obvious that the GSA differential in favor of American manufacturers should be 50%, the same as that of the Department of Defense. Will you please, therefore, contact at once all members of the Joint Economic Committee and urge them to take immediate steps to correct this inconsistent policy. Also, please contact Charles L. Schultze, Director of the Bureau of the Budget, expressing concern over this matter and inquiring why the Budget Bureau has ignored the recommendation of the Sub-Committee on Federal Pro- curement (now the Sub-Committee on Economy in Government) as contained on Page 188 of its report of Hearing held in Washington, D.C. on March 24, 1966. The welfare of this company and the jobs of our employees are at stake. Your immediate assistance will be greatly appreciated. Yours sincerely, JAMES F. CONvERY, Vice President, Sales'. PAGENO="0042" 294 ECONOMY LN GOVERNMENT APRIL 18, 1967. Hon. HAROLD D. DoNoHuE, House 01 Representatives, Congress of' the United States, Washington, D.C. DEAR HAROLD: The attached (1966) hearing and report of the Subcommittee on Federal Procurement and Regulation contain considerable information on the question of differentials under the Buy American Act which is the concern of your letter of April 10, 1967. The Subcommittee on Economy in Government of which I am Chairman will pursue this matter with the Budget Bureau and General Services Administration at hearings scheduled for May 15, 1967. I am requesting our staff Consultant, Mr. Ray Ward, to discuss this matter with you further in case you wish to submit a statement for the hearing. Sincerely yours, WILLIAM PROXMIRE, Chairman. CONGRESS OF THE UNrrxn STATES, HOUSE OF REPRESENTATIVES, W~ishington, D.C., May 3, 1967. JOINT Ecoxo~iIc COMMIrrEE, Subcommittee on Federal Procurement and Regulations, U.S. Congress, Washington, D.C. DEAR CoLLEAGuEs: I have followed closely and have been very interested in the question of the application of the Buy American Act to the hand tool industry in this country. As you are aware there presently exists a substantial difference between the protection provided to the domestic hand tool manufacturers under the regula- tions of the General Services Administration and that which would be afforded to them under the regulations of the Department of Defense. In 1964 the general procurement of hand tools after much discussion was transferred from the De- fense Department to GSA where it remains today. GSA procurement results in a six percent preference for American produced hand tool items as well as other American products with a maximum of twelve percent under certain conditions. The formula adopted by the Department of De- fense, because of the balance-of-payments problems we have been experiencing, permits a fifty percent differential in favor of American manufactured products. The inconsistency of a policy, where one government agency has one standard for procurement under the Buy American Act while a second government agency has another standard, is obvious on its face and creates serious and significant government procurement problems. The importance of eliminating this incongruous situation has been appar~nt to your Subcommittee on Federal Procurement for some time now. At hearings held on March 23 and 24, 1966 this question was considered and the Subcomrnit tee's conclusions were set forth in your report entitled "Economic Impact of Fed- eral Procurement-1966" dated May1966. It was "strongly recommended" in the Report that the Bureau of the Budget take steps to apply uniform differentials under the Buy American Act for tl~ same items regardless of which federal agency does the buying for the gov- ernment. In spite of this clear mandate from your Subcommittee the Bureau of the Budget made no move to rectify the situation and in the first week of November. 1966 both Representative Curtis, a member of your Subcommittee and myself wrote to the Bureau of the Budget urging, in accordance with your recommenda- tion, the development of uniform standards and procedures to be applied in a~ ministering the Buy American Act. The Bureau of the Budget rejected this position stating that they did not feel it was in our interest for agencies to change their procurement practices at this time. It is my understanding that hearings will be held shortly by your Subcommit- tee at which this matter may again be considered. We are still hampered today by inequitable procurement procedures because of the failure of the Bureau of the Budget to take appropriate action. Your renort pointed out that to the extent that GSA takes a different course from the Defense Department in making awards to foreign producers, the bal- PAGENO="0043" ECONOMY IN GOVERNMENT 295 ance of payments program of the Defense Department is being undermined. Of further significance to this problem is a trade agreement entered into last fall with Japan, a leading competitor in the hand tool industry, which provides for reductions in tariffs on hand tools. This will result in more difficulty for our domestic industry in competing with foreign producers and therefore in even less effectiveness for Defense's balance of payment program as long as the GSA regulations remain in force. Because of the importance of this matter. the recommendations of your Sub- committee last year, and the basic need to eliminate an unjust and inconsistent policy I strongly urge that your Subcommittee take all steps within its power to bring about the adoption of uniform standards and procedures under the Buy American Act and to eliminate the difference in hand tool industry pro- tection which exists today only because procurement for hand tools was switched from the Defense Department to GSA in 1964. With my warm regards, I am Cordially yours, SILvIo 0. CONTE, Member of Congress. MAY 5, 1967. Hon. SILvI0 0. CONTE, House of Representatives, Washington, D.C. DEAR Siixio: I am in receipt of your letter of May 3, 1967, concerning the inconsistencies in the use of differentials under the Buy American Act. This* letter will be brought to the attention of the Subcommittee on Economy in Gov- ernment of the Joint Economic Committee at hearings beginning May 8, l96-7~--~------ and will also be placed in the printed hearings. Sincerely, WILLIAM PROXMIRE, Chairman. SERVICE TOOLS INSTITUTE, New York, N.Y., April 12, 1967. Subject: Improper application of Buy American Act in Government purchasing. Hon. WILLIAM PROXMIRE, Chairman, Joint Economic Committee, New Senate Office Building, Washing- ton, D.C. DEAR SENATOR PROXMIRE: Representing the domestic manufacturers of hand tools, including those in the State of Wisconsin, we respectfully request and urge that your Committee take immediate steps to correct a grossly improper ap- plication of the Buy American Act by the Bureau of the Budget, in the case of two Government departments, namely, General Services Administration and the Department of Defense. We refer to the hand tool buying policy of the Department of Defense which permits a 50 percent differential in favor of American manufacturers while the General Services Administration is allowed to use only a 6 percent differential on the same items. Because of this policy, foreign bidders are obtaining awards from GSA with its 6 percent differential, which would not be possible if the pro- curement were made by DOD. Obviously, if this policy continues, the already substantial loss of business by American hand tool manufacturers will continue to increase and the USA balance of payments will worsen further. It is, of course, obvious that the GSA differential in favor of American manufacturers should be 50 percent, the same as the Department of Defense. We would also like to bring to your attention the attached article from the Wall Street Journal of Monday, Apr11 10, 1967 announcing the adoption of a 50 percent purchasing differential in favor of American manufacturers on purchases - of goods and services for Government civilian installations abroad, but not on purchases for shipment to U.S. Depots. S This announcement raises the question as to why the GSA cannot also be permitted to allow the same 50 percent differential on purchases for shipment to 11.5. Depots. This correction, when made, would eliminate the unfair advantage now given foreign manufacturers of low-wage cost tools under the present 6 per- cent GSA differential referred to above. May we also remind you that after a Hearing of the subcommittee on Federal Procurement and Regulation (now the Subcommittee on Economy in Govern- PAGENO="0044" 296 ECONOMY IN GOVERNMENT ment) on March 24, 1966, the following report and recommendation was for- warded by that Subcommittee to the Bureau of the Budget. "The testimony given to the Subcommittee was to the effect that DOD was using a 50 percent differential to help the balance-of-payments problem by award- ing business to American producers at an added cost through fiscal 1965 of $67.5 million. To the extent that GSA takes a different course and makes awards to foreign producers, the DOD Balance of Payments program is underminded as is any existing trade agreement. "Recommendation-The Subcommittee strongly recommends that, the Bureau of the Budget take steps to apply uniform differentials under the Buy American Act for the same items regardless of which Federal Agency does the buying for the Government." It is our understanding that to date no action of any kind has been taken by the Bureau of the Budget on this recommendation. We shall appreciate your including this letter in the record of the next Hearing of your Subcommittee on Economy in Government which we understand will be held in the early part of May, 1967. Respectfully submitted on behalf of our Member Companies. Yours sincerely, GEORGE P. BYRNE, Jr., Secret acy. GSA MovEs To ENSURE THAT AGENCIES ABROAD FAvOR U.S. PRODUCTS {From the Wall Street Journal] WA5HINGT0N.-The U.S. Government is moving to strengthen its policy of giv- ing American businesses an advantage over foreign competitors in supplying goods and services to Government civilian installations abroad. The General Services Administration, the Government's housekeeping agency, announced it will assume responsibility for ensuring that U.S. agencies don't contract with a foreign concern unless the foreign price is at least 50% lower than the price quoted by a domestic concern. In announcing the move, which changes procedure rather than policy, GSA said it hopes to ease the U.S. balance-of-payments drain and also to aid small businesses in this country. The Agency for International Development and the Defense Department, both of w-hich follow "Buy American" policies, won't be affected by the GSA changes. it was stated. APRIL 20, 1967. Mr. GEORGE P. BYRNE, Secretary and Legal Counsel, Service Tools Institute, New Yorh, N.Y. DEAR MR. BYRNE: I am in receipt of your letter of April 12, 1967 concerning the Buy American Act with the clipping from the Wall Street Journal attached. Both will be placed in the hearings of the Subcommittee on Economy in Govern- ment which are scheduled for May 8, 9, 10 and 16, 1967. At that time we will endeavor to determine the status of the application of differentials under the Buy American Act, the scope and trend in making awards to foreign bidders and related matters. It is suggested that representatives of the Service Tools Institute be present at the hearings particularly on the 16th for your information and in case addi- tional data may be required by the Subcommittee. Sincerely yours, WIr.LIAM PR0xMIRE, Chairman. CONGRESS OF THE UNITED STATES, Jon~~ EcoNoMIc COMMITTEE. April14, 1967. Hon. FRANK J. LAUSOHE, U.S. Senate, Washington, D.C. Dn~&a FRANK: Reference is made to your letter of April 10, 1967 concerning the lack of uniformity in the application of differentials by the Department of Defense and the General Services Administration under the Buy American Act. PAGENO="0045" ECONOMY IN GOVERNMENT 297 This problem will be considered by the Subcommittee on Economy in Govern- ment of this Joint Economic Committee at hearings scheduled for May 8-15 1967. If your constituent has no objection we will place his letter in the record. Please let me know. With best wishes, WILLIAM PROXMIRE, Chairm,an. U.S. SENATE, COMMITTEE ON FOREIGN RELATIONS, April 24, 1967. Hon. WILLIAM PROXMIRE, Chairman, Joint Economic Committee, New Senate Office Building, Washington, D.C. DEAR BILL: Thanks very much for your letter of April 14th, a copy of which is attached, concerning the application of the Buy American Act. I have contacted my constituents in Ohio concerning your proposal to place their letters in the record of the forthcoming hearings and have received their consent to do so. I am enclosing copies of their letters for this purpose. In addition, I am enclosing copies of letters which I have received from other interested parties on this same subject and request that these also~beJncJuUed in the record. Your prompt reply to my inquiry of April 10th and your cooperation are deeply appreciated. With best regards. Sincerely yours, FRANK J. LATJ5OHE. APRIL 26, 1967. Hon. FRANK J. LAUSCHE, U. S. Senate, Washington, D.C. DEAR FRANK: This is to acknowledge and thank you for your letter of April 24 enclosing letters from your constituents for the record. These will be included in the record of our hearings on defense procurment which begin on May 8. We are very pleased to have these submissions. Best regards. Sincerely, WILLIAM PROXMIRE, Chairman. S-K WAYNE TOOL Co., Chicago, Ill., April 11, 1967. Subject: Misapplication of Buy American Act in Government procurement Hon. FRANK J. LATJSOHE, Senate Office Building, Washington, D.C. Dz1u~ SENATOR LAUSOHE: On behalf of our Company and its employees, we respectfully urge you to take prompt action to correct an improper application of the Buy American Act by the Bureau of the Budget involving two Federal agencies: the Department of Defense and General Services Administration. Specifically, in the procurement of hand tools G.S.A. is authorized to use only a 6% differential in favor of American manufacturers whereas the D.O.D. per- mits a 50% differential on the same items. As a result, foreign bidders are obtain- ing awards from G.S.A. which they would not obtain if the D.O.D. was the pro- curing agency. In other words, the American producer gets the business if Agency A (D.O.D.) does the buying, but loses it if Agency B (G.S.A) purchases. If this inconsistent practice continues the already substantial loss of business by American manufacturers will be compounded, and a domestic industry vital to our Defense Establishment will be even more seriously weakened. Will you please contact immediately all members of the Joint Economic Com- mittee and urge immediate steps to correct this inconsistency. Also, please in- quire of Charles L. Schultze why his Budget Bureau has chosen to ignore the recommendation of the Sub-Committee on Federal Procurement on Page 188 of its Report of Hearing held in Washington March 24, 1966. Your prompt assistance will be much appreciated. Sincerely, R. W. SHERWOOD, Vice President. PAGENO="0046" 298 ECONOMY IN GOVERNMENT CONGRESS OF THE 1JNITED STATES, HOUSE OF REPRESENTATIVES, Washin~gton, D.C., April 14, 1967. Hon. WILLIAM PRORMIRE, Chairnuzn, Joint Economic Committee, New Senate Office Building. Sm: The attached communication is sent for your consideration. Please in- vestigate the statements contained therein and forward me the necessary infor- mation for reply, returning the enclosed correspondence with your answer. Yours truly, FRANCES P. BOLTON, Member of Congress. Enclosure.-Letter from Mr. J. A. Bares, president, Milbar Corp., 2800 East 116th Street. Cleveland, Ohio, relative to application of Buy American Act in certain purchases by GSA and Defense. APRIL 18, 1967. Hon. FRANCES P. BOLTON, Howse of Representatives, Congress of the United. States, Washington, D.C. DEAR MRs. BOLTON: The attached (1966) hearing and report of the Subcom- mittee on Federal Procurement and Regulation contain considerable information on the question of differentials under the Buy American Act which is the concern of your constituent's letter of April 14. The Subcommittee on Economy in Government of which I am Chairman will pursue this matter with the Budget Bureau and General Services Administra- tion at hearings scheduled for May 15, 1987. If your constituent has no objection we will place his letter in the Record. Please let me know. With best wishes, WILLIAM PROXMIRE, Chairman. (The following letter was sent to both Senator Lausche and Repre- sentative Bolton:) MILBAR Cony., Cleveland, Ohio, April 11, 1967. Re improper application of Buy American Act in Government purchasing. Hon. Fn.&N~ J. LAUSCEE, Senator Office Bvilding, Washington, D.C. DRAB Mn. LAUSCHE: In behalf of this company and its employees, we respect- fully request and urge that you take immediate steps to correct a grossly im-. proper application of the Buy American Act by the Bureau of the Budget in the case of two Government departments, namely, General Services Administra- tion and the Department of Defense. We refer specifically to the Hand Tool buying policy of the Department of Defense which permits a 50% differential in favor of American manufacturers while the General Services Administration is allowed to use only a 6% differen- tial on the same items. Because of this policy, foreign bidders are obtaining awards from GSA with its 6% differential, which would not be possible if the procurement were made by DOD. In other words, the American producer gets the award if Agency A (DOD) does the buying, but loses it if Agency B (GSA) is the purchaser for the same type program. Obviously, if this lack of policy continues, the already substantial loss of business by American Hand Tool manu- facturers which results will continue to increase. It is, of course, obvious that the GSA differential in favor of American manufacturers should be 50%, the same as that of the Department of Defense. Will you please, therefore, contact at once all members of the Joint Economic Committee and urge them to take immediate steps to correct this inconsistent policy. Also, please contact Charles L. Schultze, Director of the Bureau of the PAGENO="0047" ECONOMY IN GOVERNMENT 299 Budget, expressing concern over this matter and inquiring why the Budget Bureau has ignored the recommendation of the Sub-Committee on Federal Pro- curement (now the Sub-Committee on Economy in Government) as contained on Page 188 of its report of Hearing held in Washington, D.C. on March 24, 19&~. The welfare of this company and the jobs of our employees are at stake. Your immediate assistance will be greatly appreciated. Very truly years, ~F. A. BARES, President. CONGRESS OF THE UNITED STATES, HOUSE OF REPRESENTATIVES, Washington, D.C., April 25, 1967. Hon. WILLIAM PR0xMIaE, Chairman, Joint Economic Committee, New Senate Office Building, Washington, D.C. DEAR SENATOR PROXMIRE: The enclosed letter from my Constituent is for- warded to your Committee with my request for any information that may be helpful. Thanks for anything you can do. Sincerely yours, WILLIAM H. AYRES. (The letter which follows was sent to Senator Lausche and Repre- sentative Ayres:) WRIGHT TooL & FORGE Co., Barberton, Ohio, April 30, 1967. Subject: Improper application of Buy American Act in Government purchasing. Senator FRANK J. LAUSCHE, New Senate Office Building, Washington, D.C. Dn~n SENATOR LAUSOHE: In behalf of this company and its employees, we re- spectfully request and urge that you take immediate steps to correct a grossly improper application of the Buy American ~Ac by~the~Bjireau of the Budget in the case of two Government departments, namely, General Services~Kdminis- tration and the Department of Defense. We refer specifically to the Hand Tool buying policy of the Department of Defense which permits a 50% differential in favor of American manufacturers while the General Services Administration is allowed to use only a 6% differ- ential on the same items. Because of this policy, foreign bidders are obtaining awards from GSA with its 6% differential, which would not be possible if the procurement were made by DOD. In other words, the American producer gets the award if Agency A (DOD) does the buying, but loses it if Agency B (GSA) is the purchaser for the same type program. Obviously, if this lack of policy continues, the already substantial loss of business by American Hand Tool manu- facturers which results will continue to increase. It is, of course, obvious that the GSA differential in favor of American manufacturers should be 50%, the same as that of the Department of Defense. Will you please, therefore, contact at once all members of the Joint Economic Committee and urge them to take immediate steps to correct this inconsistent policy. Also, please contact Charles L. Schultze, Director of the Bureau of the Budget, expressing concern over this matter and inquiring why the Budget Bureau has ignored the recommendation of the Sub-Committee on Federal Pro- curement (now the Sub-Committee on Economy in Government) as contained on Page 188 of its report of Hearing held in Washington, D.C. on March 24, 1966. The welfare of this company and the jobs of our employees are at stake. Your immediate assistance will be greatly appreciated. Yours sincerely, W. M. NONNAMAKER, Assistant to the President. PAGENO="0048" 300 ECONOMY IN GOVERNMENT APRIL 27, 1967. Hon. WILLIAM H. AYRES, U.S. House of Representatives, Washington, D.C. DEAR CONGRESSMAN AYBES: In reference to the letter from Mr. W. M. Non- namaker concerning discriminatory government purchasing under the Buy Ameri- can Act, I have written to advise him that the Subcommittee on Economy in Gov- ernment, of which I am Chairman, will be considering this problem in hearings next month. I will also be happy to see that your constituent's letter is placed in the hear- ing record. Sincerely yours, WILLIAM PROXMIRE, Chairman. APRIL 28, 1967. Mr. W. M. NONNAMAKER, Assis~tant to the President, Wright Tool c~ Forge Co., Barberton, Ohio. DEAR MR. NONNAMAKER: Congressman Ayres has contacted me about your let- ter of April 20 regarding improper application of the Buy American Act in gov- ernment purchasing. The Subcommittee on Economy in Government of the Joint Economic Commit- tee, of which I am Chairman, will be considering this problem during hearings scheduled for May 8,9,10 and 16. I will be pleased to see that your letter is included in the hearing record. Sincerely yours, WILLIAM PB0xMIRE, Chairman. UNITED STATES SENATE, Washington, D.C., April 20, 1967. Hon. WILLIAM PROXMIRE, Vice Chairman, Joint Econo~'nio Committee, U. S. Senate, Washington., D.C. DEAR SENAT0n: Enclosed is a letter which I have received from Mr. B. H. McClain on a matter recently studied by the Joint Economic Committee. Mr. McClain requests that I contact your committee for comments on this matter and I would appreciate any report you might be able to give me, suitable for transmittal to Mr. McClain. With kindest regards. Sincerely, WAYNE MORSE. APRiL 20, 1967. Mr. B. H. MCCLAIN, President, P. c~ C. Tool Co., Portland, Oreg. DEAR Mn. MCCLAIN: Thank you very much for your letter of April 17 concern- ing what you feel is an improper application of the "Buy American Act" by the Bureau of the Budget. In an effort to be of assistance I am communicating with the appropriate Fed- eral officials and am asking that they give this matter serious prompt consideration. I am also asking for a complete report with specific reference to the points outlined in your letter. As soon as I receive this report I shall write to you again. In the meantime, I send kindest regards, Sincerely, WAYNE MORSE. Re Improper application of Buy American Act in Government purchasing. Hon. WAYNE MORSE, U.S.Senate, Washington, D.C. DEAR SENATOR MORSE: We urge your consideration of what appears to us to be a grossly improper application of the "Buy American Act" by the Bureau of the Budget in the case of two government departments, namely General Services Administration and the Department of Defense. PAGENO="0049" ECONOMY IN GOVERNMENT 301 At present the hand tool buying policy of the Department of Defense permits a 50% differential in favor of American manufacturers. The General Services Administration, on the other hand, is allowed to use only a 6% differential on the same items. As a result, foreign bidders are obtaining awards for GSA with its 6% dif- ferential which would not be possible if the procurement was made by the Department of Defense. You can appreciate that this lack of policy poses a real problem to American hand tool manufacturers, and we recommend that the GSA differential in favor of American manufacturers be resolved to 50%, the same as with the Department of Defense. This matter was considered by the Joint Economic Committee, and on page 188 of this committee's report of hearing held on March 24, 1966 in Washington, D.C., a recommendation was made to the Bureau of the Budget in this matter. We would appreciate your contacting members of the Joint Economic Com- mittee, recommending immediate steps to correct this inconsistent policy. We would also appreciate contact being made with Mr. Charles L. Schultze, Director of the Bureau of the Budget, regarding the recommendation of the Joint Economic Committee which has not been followed. Your assistance in this matter will be greatly appreciated by our company and by our employees whose jobs are at stake. Yours sincerely, P. & C. TooL Co., B. H. MCCLAIN, President. APRIL 24, 1967. Hon. WAYNE MORSE, U.S. Senate, Washington, D.C. DEAlt WAYNE: In reference to the letter from Mr. B. H. McClain concerning government purchasing under the Buy American Act, this problem will be con- sidered by our Subcommittee on Economy in Government of which I am Chair- man at hearings scheduled for May 8-15. I will see that your constituent's letter is placed in the hearing record. With rest wishes, WILLIAM PROXMIRE, Chairman. APRIL 24, 1987. Mr. H. S. TULLOCH, Vice President and Division Manager, Proto Tool Co., Jamestown, N.Y. DEAR Mn. TULLOCH: Congressman Patman has asked me* to respond to your letter of April 18th concerning government purchasing under the Buy American Act. This problem will be considered by the Subcommittee on Economy in Govern- ment of the Joint Economic Committee at hearings scheduled for May 8-15. I will be pleased to see that your letter is included in the hearing record. Sincerely yours, JOHN P. STARK, Ea,ecutive Director. PROTO TOOL Co., Jamestown, N.Y., April18, 1967. Hon. WRIGHT PATMAN, The House of Representatives, Washington, DE. DEAR MR. PATMAN: In behalf of the employees of this company, the company, and the community, we respectfully request your co-operation in taking prompt action to correct a grossly improper application of the Buy American Act by the Bureau of the Budget in the case of two government departments, namely, Gen- eral Services Administration and the Department of Defense. Specifically, we are referring to the Hand Tool buying policy presently in exist- ence. The Hand Tool buying policy of the Department of Defense permits a 50% difference in favor of American manufacturers, while the General Services Ad- ministration is allowed to use only a 6% differential on the same items. 79-459 0-67-pt. 2-4 PAGENO="0050" 302 ECONOMY IN GOVERNMENT Due to this policy, foreign manufacturers are receiving awards from General Services Administration due to the 6% differential, which would not be possible if the procurement were made by the Department of Defense. Stated otherwise, an American producer would receive the award if the Department of Defense is doing the buying, but would lose it if General Services Administration is the purchaser for the same type item. Without question, if this lack of policy con- tinues, the substantial loss of business already as suffered by American Hand Tool Manufacturers will continue to increase substantially. Our recommendation is that the General Services Administration differential in favor of American manufacturers should be 50% which is the same policy as that used by the De- partment of Defense. We request and urge you to please contact immediately all Joint Economic Committee members and urge them to take immediate action to correct this incon- sistent policy. Would you also please contact Charles L. Schultze, Director of the Bureau of the Budget explaining concern over this matter and inquiring why the Budget Bureau has ignored the recommendations of the Sub-Committee of Federal Procurement as contained on Page 188 of its report of Hearing held in Washington, D.C. on March 24, 1966. Your immediate assistance will be greatly appreciated as the welfare of this company, the employees, and the community are at stake. Very truly yours, H. S. TULLOCH, Vice President and Division Manager. CONGRESS OF THE UNIr~n STATES, JOINT ECONOMIC COMMITTEE, Aprit 27, 1967. Mr. MoRRIs B. PENDLETON, President, Pendleton Tool Industries, Inc., Los Angeles, Calif. DEAR MR. PENDLETON: Congressman Patman has asked me to respond to. your letter of April 18th concerning inconsistent government purchasing policies under the Buy American Act. The Subcommittee on Economy in Government of the Joint Economic Com- mittee has scheduled hearings for May 8, 9, 10, and 16, at which time this prob- lem will be considered. I will be pleased to see that your letter is included in the hearing record. Sincerely yours, JOHN H. STARK, Ewecutive Director. PENDLETON TOOL INDUSTRIES, INC., Los Angeles, Calif., April 18, 1967. Subject: Inconsistent policies of Buy American Act in Government purchasing. Hon WRIGHT PATMAN, Joint Economic Committee, House Office Building, Washington, D.C. GREETINGS: It is our understanding that the 1967 Joint Economic Committee (JEC) Hearing of the Sub Committee on Economy in Government, is expected to be held sometime in May 1967. In 1966, Hearings before the Subcommittee on Federal Procurement and Regulation of the JEC were held on January 24; March 23 and 24, 1966. A Report of the findings and recommendations was issued on May 27, 1966. As a manufacturer and supplier of hand tools to the Government, we are specifically concerned with the hand tool buying policy of the Department of Defense which permits a 50% differential in favor of American manufacturers, while the General Services Administration is allowed to use only a 6% differ- ential on the same items. We respectfully refer you to pages 9 and 10 of the May 1966 Report wherein it states: "The subcommittee strongly recommends that the Bureau of the Budget take steps to apply uniform differentials under the Buy American Act for the same items regardless of which Federal agency does the buying for the Government." It is our understanding that the Bureau of the Budget does not PAGENO="0051" ECONOMY IN GOVERNMENT 303 intend to take any early action to adopt uniform hand tool differentials resolving this inequity. We are most concerned that the Bureau of the Budget has apparently ignored your subcommittee's recommendation. In the past year, we have not been awarded some items on General Services Administration contracts because of what has been determined by the 3EC to be a grossly improper application of the Buy An~erican Act. Since the welfare of this company and the jobs of our employees are at stake, your immediate assistance that will result in prompt action by the Bureau of the Budget will be greatly appreciated. Respectfully, MORRIS B. PENDLETON, President. MAY 12, 1967. Hon. ODIN LANGEN, House of Representatives, Washington, D.C. DEAR ODIN: I am in receipt of your letter of April 21, 1967, with a copy of a letter from Mr. W. G. Eggers, Manager, Owatonna Tool Company, Owatonna, Minnesota. Mr. Eggers' letter concerns the apparent inconsistencies in the appli- cation of differentials under the Buy American Act. We expect to review this subject with witnesses of the General Services Ad- ministration and the Bureau of the Budget at hearings of the Subcommittee on Economy in Government on May 16, 1967, Room AE-1 (S-407), The Capitol, at 10:00 a.m. A copy of Mr. Eggers' letter will be placed in the printed hearings of our proceedings. Sincerely, WILLIAM PBOXMIBE, Chairman. CONGBESS OF THE UNITED STATES, HOUSE OF REPRESENTATIVES, Washington, D.C., April 21, 1967. Hon. WILLIAM E. PBOXMIRE, Chairman, Joint Economic Committee, U.S. Senate, Washington, D.C. DEAR MR. CHAIRMAN :This office is in receipt of a letter from the Owatonna Tool Company of Owatonna, Minnesota, registering concern regarding applica- tion of the Buy American Act. Copy of their letter is enclosed for the information and consideration of your Committee. With kindest personal regards, Sincerely, ODIN LANGEN, Member of Congress. OWATONNA TOOL Co., Owatonna, Minn., April 18, 1967. Subject: Improper application of Buy American Act in Government purchasing. Hon. ODIN LANGEN, House of Representatives, Washington, D.C. DEAR CONGRESSMAN IJANGEN: In behalf of this company and its employees, we respectfully request and urge that you take immediate steps to correct a grossly improper application of the Buy American Act by the Bureau of the Budget in the case of two government departments; namely, General Services Adminis- tration and the Department of Defense. Specifically we refer to the hand tool buying policy of the Department of Defense which permits a 50% differential in favor of American Manufacturers while the General Services Administration is allowed to use only a 6% differen- tial on the same items. Because of this policy, foreign bidders are obtaining awards from GSA with its 6% differential which would not be possible if a procurement were made by DOD. For example, the American producer gets the PAGENO="0052" 304 ECONOMY IN GOVERNMENT award if Agency A (DOD) does the buying, but loses it if Agency B (GSA) is the purchaser for the same item. A substantial loss of business by American hand tool manufacturers has already occurred and obviously if this lack of policy continues, it will become much larger. Will you please, therefore, contact at once all members of the Joint Economic Committee and urge them to take immediate steps to correct this inconsistent policy. Mr. Charles L. Schultze, Director of the Bureau of the Budget, should also be contacted, expressing concern over this matter and inquiring why the Budget Bureau has ignored the recommendation of the Sub-Committee on Fed- eral Procurement (now the Sub-Committee on Economy in Government) as contained on page 188 of its report of hearing held in Washington, D.C. on March 24, 1900. The welfare of this company, which is considered a small business by Govern- ment Procurement Agencies, and the jobs of our employees are at stake. Your immediate assistance will be greatly appreciated. Sincerely yours, W. G. EGGER5, Manager, Government Sales. MAY 5, 1~7. Hon. DAVID PRYOR, U.S. Honse of Representatives, Washington, D.C. DEAR CONGRESSMAN PRYOR: In reference to the letter from Mr. C. E. Dawes concerning inconsistent application of the Buy American Act, our Subcommittee on Economy in Government, of which I am Chairman, will be considering this problem in hearings scheduled for May 8, 9, 10, and 10. I will be happy to see that your constituent's letter is placed in the hearing record. Sincerely, WILLIAM PROXMIRE, Chairman. CONGRESS OF THE UNITED STATES, HOUSE OF REPRESENTATIVES, Washington, D.C., April 25, 1967. Hon. WILLIAM PROXMIRE, Chairma?v, Joint Economic Committee, New Senate Office Building, Washington, D.C. DEAR SENATOR: The attached communication which I recently received from Mr. C. E. Dawes of the Duplex Manufacturing Corporation, Fort Smith, Ar- kansas, is self-explanatory. I would appreciate your providing me with information which will be helpful in properly responding to the writer. With kindest regards, Sincerely yours, DAVID PRYOR, Member of Congress. DUPLEX MANUFACTURING CoEP., Fort Smith, Ark., April 20, 1967. Hon. DAVID PRYOR, U.S. House of Representatives, Washington, D.C.: In behalf of our company and its employees I feel it appropriate to call to your attention an inconsistency in the application of the Buy American Act. The Department of Defense applies a 50% differential in favor of Americall manufacturers in its Hand Tool Procurement Program. In contrast the General Services Administration is limited in practice to only a 0% differential. AS a result foreign bidders are obtaining awards from GSA that they would not get if the Department of Defense were buying. As a result a greater and greater amount of the Hand Tool business is being lost to American manufacturers who support higher wages for employees plus a substantial portion of the tax load. PAGENO="0053" ECONOMY IN GOVERNME~T 305 I urge you to contact the Joint Economic Committee and insist that they take immediate steps to correct the inconsistency and to favor American manufac- turers as the Department of Defense is doing. Over a hundred Duplex employees will be grateful for your positive action. Sincerely, C. E. DAWES, President. CONGRESS OF THE UNITED STATES, HOUSE OF REPRESENTATIVES, Washingtom, D.C., April 25, 1967. Hon. WILLIAM PROXMIRE, U.S. Senate, Washin~jton, D.C. DEAR SENATOR PROx~f IRE: Thank you for your letter of April 13th with regards the inquiry of my constituent, Mr. Peter K. Jackson, of Sturgis, Michigan, con- cerning the lack of uniformity in the application of differentials by the Depart- ment of Defense and the GSA under the Buy American Act. I will appreciate the inclusion of Mr. Jackson's letter in the printed hearings of the Subcommittee, as suggested in your letter. With my thanks for your courtesy and consideration, Sincerely, EDWARD HUTCHINSON. MIDWEST TOOL & CUTLERY Co., INC., Sturgi~, Mich., April 7, 1967. Hon. EDWARD HUTCHINSON, Hoi~se of Representatives, Wa~shin~jtoi~, D.C. DEAR CONGRESSMAN HUTCHINSON: On behalf of this company and its employees, I ask that you take immediate steps to correct an improper application of the Buy American Act by the Bureau of the Budget in the case of two Government departments-G.S.A. and the Department of Defense. I refer to the Hand Tool buying policy of the D. 0. D. which permits a 50% differential in favor of the American manufacturer, while G.S.A. is allowed to use only a 6% differential on the same items. Because of this policy, foreign bid- ders are obtaining awards from G.S.A. with its 6% differential which would not be possi~ble if the procurement were made `by DOD. In other words, the American producer gets the award if DOD does the buying, but loses it if GSA does the buying. If this lack of unified policy continues, the present substantial loss of business by American hand tool manufacturers can only grow greater. Obviously, the GSA differential should )je 50%-the same as that of the DOD. Too, this would be in line with our National policy of reducing our unfavorable balance of trade. Please contact all members of the Joint Economic Committee at once ~nd urge them to take immediate steps to correct this inconsistant policy. Also, please contact Charles L. Schultze, Director of the Bureau of the Budget, and ask him to explain why the Bureau has ignored the recommendation of the Sub-Com- mittee of Federal Procurement (now the Sub-Committee on Economy in Gov- ernment) as contained on Page 188 of its report of Hearing held in Washington on March 24, 1966. I am deeply concerned, as the welfare of this company and the jobs of our employees are at stake. Your help will be greatly appreciated. Sincerely, PETER K. JACKSON, Vice President. PAGENO="0054" Appendix III GovN3nr~wr IN BusINEss (The following correspondence was received for the record relative to the subject of the Government in business:) NATIoNAi~ RETAIL MERCHANTS ASSOCIATION, March 7, 1967. Senator Wu.LIAM PROXMIRE, 4327 New Senate Office Building, Washington, D.C. DEAR SENATOR PROXMIRE: I have noted your comments in regard to your concern over the commercial activities of government agencies. The retail industry has, for many years, tried to induce the military establish- ment to reduce the size of the military stores operations. Initially, PX's were designed to provide articles of "convenience and necessity" for members of the armed forces. However, in recent years, these operations have grown at a rapid rate not only in the lines of merchandise handled, but in volume. The National Industrial Conference Board two years ago revealed that sales at military stores had gone above the $1 billion figure. It should be ml~de clear that retailers feel that an adequate PX is necessary, but the highly promotional aspects of the modern military store presents un- healthy competition for nearby tax-paying retail stores. Recently the military stores have secured contracts from apparel producers for prices equal to those of the largest retail buyers. While it may not be practical to try to scale down these operations to where they were prior to World War II, we do believe that efforts should be made to prevent further expansion as to the lines of merchandise handled and to curtail operations near adequate shopping areas. Respectfully yours, JOHN C. HAZEN, Vice President, Government. APRIL 18, 1967. Hon. CHARLES McC. MATHIAS, Jr., House of Representatives, Congress of the United States, Washington, D.C. DEAR MAC: With reference to your letter of March 28, 1967, our plans have now materialized to the point where scheduled hearings of the Subcommittee on Economy in Government are firm. Comptroller General Staats and his staff will testify on May 8, 1967 (hearing room to be announced) and we will discuss the President's program on Govern- ment Competition with Business and the related problem of the release of unneeded Government properties to the tax rolls. The General Accounting Office report on the Navy Academy Dairy at Gambrills, Maryland will be considered at that time and your statement will be welcomed. Sincerely yours, WILLIAM PROxMIRE, Chairman. 306 PAGENO="0055" ECONOMY IN GOVERNMENT 307 CONGRESS OF THE UNITED STATES, HOUSE OF REPRESENTATIVES, Washington, D.C., March 28, 1967. Hon. WILLIAM PROXMIBE, Chairman,, Joint Econcnnio Committee, New Senate Office Building, Washington, D.C. DEAR SENATOR: Thank you very much for your letter of March 14th about the hearings on Government properties and operations to be held in May by the Sub- committee on Economy. I would like to submit a statement during the hearings, and would appreciate being notified when the Naval Academy Dairy Farm will be under consideration. With high regard. Sincerely, CHARLES McC. MATHIAS, Jr. (NOTE: Representative Mathias appeared as a witness on the open- ing day of the hearings, Monday, May 8, 1967.) R. D. MARSHALL & Co., INC., Albany, N.Y., May 12, 1967. Congressman THOMAS B. CURTIS, House Office Building, Washington, D.C. DEAR CONGRESSMAN CURTIS: Permit me to say. again how much we appreciated the opportunity to testify in our capacity as Chairman of the Board of the National Association of Wholesalers before the Subcommittee on Economy in Government of the Joint Economic Committee in Washington on May 10. One point occurred to me during the hearing, but the opportunity to bring it up did not appear, but I should like to pass it on to you at this time. We were discussing the savings to be realized by our government if the existing inventories in the hands of wholesalers in every state were to be drawn upon by the government for those commercially available items stocked by the various commodity line wholesalers. We are certain that this savings in cost is large as our testimony documented. The other side of the coin is attractive, too, for gov- ernment purchasing at the local level is bound to stimulate the economy of that area. It is not hard to recall federal programs for local assistance which are an outright drain on the national budget, but this simple plan to have governmental agencies buy commercially available items from local suppliers would result not only in a savings for the national budget but would improve local economies. This is a point which we believe has not been sufficiently emphasized and we are grateful for the opport~inity of presenting it to you for your consideration. Very sincerely yours, R. DOUGLAS MARSHALL, Chairman of the Board, National Assoctation of TVholesalers. PAGENO="0056" Appendix IV IMPROVED MANAGEMENT OF FEDERAL REAL PROPERTY (The materials included herein were supplied by Representative Thomas B. Curtis, ranking minority member of the committee:) OCTOBER 11, 1966. Mr. LAWSON B. KNOTT, Jr., GeKeral Services Ad'ininistration, Washington~ D.C. DEAR MR. KNOTT: Enclosed is a tearsheet from the Congressional Record of October 10. I would appreciate learning from you what action, if any, has been taken concerning the Subcommittee's recommendation of last May, as I wish to pursue this matter at some length during the next session of Congress. Sincerely, THOMAS B. CuRTIs. (The following is reprinted from the Congressional Record-Ap- pendix, Oct. 10, 1966;, pp. A5202, A5203:) FEDERAL PROPERTY HOLDINGS SHOULD BEAR LOCAL PROPERTY TAX EXTENSION OF REMARKS OF HON. THOMAS B. CURTIS, OF MISSOURI, IN THE HOUSE 01' REPRESENTATIVES, MONDAY, OCTOBER 10, 1966 Mr. CURTIS. Mr. Speaker, throughout the country there is a great deal of fed- erally owned property being improperly used and causing unnecessary hardship 011 Various local and State governments. These Federal landholdings often cause economic problems in the locale in which they are situated because they erode the tax base of the area. On the other side of the coin, precisely because these Federal landholdings are not subjected to the economic discipline of local gov- ernmental taxation, they are often not utilized to their highest potential. Last May the Subcommittee on Federal Procurement and Regulation, of the Joint Economic Committee, issued a report calling attention to this problem and recommending the appointment of a high level commission or committee to iden- tify such Federal properties and to recommend their proper utilization. Today I am inserting in the RECORD an excellent editorial which appeared in the Wash- ington Star of September 21, entitled "Boiling's Future" pointing out under- utilization of the Bolling-Anacostia area. I wrote to the editor of the Star com- mending him on the editorial and suggesting further thoughts for his considera- tion. The editorial and my letter follow: {From the Washington (D.C.) Star, Sept. 21, 1966] BOILING'S FUTURE The language in the new military construction act prohibiting any use of the Bolling-Anacostia area for urban renewal purposes until 1971 is a senseless, capricious restriction, which Congress should never have approved. But the provision was enacted, leaving President Johnson the choice of accepting it or vetoing the entire billion-dollar construction measure. Faced with this decision, the President found a third way out. He has made plain, in signing the bill, that he does not share the narrow view of Representative Rivers, the House Armed Services Committee chairman, that the military should retain control over land clearly excess to its needs. He in- structed that urban renewal planning for the area proceed as rapidly a~ po~ible 308 PAGENO="0057" ECONOMY IN GOVERNMENT 309 in order to determine the land's "best use." And if that use cannot be carried out within the limits of River's restriction, he said, "I shall not hesitate to request and work for a change in the law." Well, there is no doubt that the President will be called upon to do just that. The military, as it happens, is in complete agreement with the city's planners that a substantial portion of the old airfield should be developed, in accordance with an urban renewal plan, primarily as a residential community. The absence of a completed plan, however, has proved to be a severe detri- ment in trying to sell that sound idea. While pleading with Congress to reject the Rivers ban, for example, Washington's official and civic leaders were handi- capped by their inability to say precisely what the plan would provide. More- over, some civil rights leaders, perhaps for purposes of simplification, have spoken of the re-use broadly in terms of "public housing." That is not~ the idea at all. The premise on which the planners are proceeding is that the new community will provide a broad range of various types of housing, and possible major public uses as well. There is a danger now, in view of the moratorium, that the planning effort may relax. It must not. Even given the normal problems and inepitudes of the planning process in Washington, there is no reason why a definite plan for the area should not be in hand within a year. The aim should be to present it to the next Congress-accompanj(~J by the President's promised request for a change in the law. EDIToR, The Washington star, Washington, D.C. DEAR Sin: Your excellent editorial of September 21, 1966, entitled "Bolling's Future" renders a distinct public service in highlighting an acute and growing economic problem facing local and state bodies. These bodies suffer fiscal difficul- ties aggravated in part by the erosion of the tax base by the Federal government which holds numerous poorly utilized pieces of potentially valuable real property throughout the nation. The Subcommittee on Federal Procurement and Regulation of the Joint Eco- nomic Comimttee, on which I serve under the Chairmanship of Senator Paul H. Douglas of Illinois, issued a report in May, 1966, calling attention to this prob- lem, and recommending that a high level committee or commission be appointed, first to identify all such federal properties, and, second, to recommend their high- est public use under current circumstances. Undoubtedly the tax base can be greatly helped by this recommendation, federal expenditures reduced and the general economy strengthened. A further thought worthy of serious consideration would be to make Federal properties subject to local taxation as was done under the RFC Act in order to help local bodies which render police, water and other services to Federal agen- cies. But perhaps more importantly to exert a fiscal pressure to insure that unneeded Federal properties be declared excess. Sincerely, THOMAS B. CURTIS. EXECUTIVE OFFICE OF THE PRESIDENT, BUREAU OF THE BUDGET, Washington, D.C., April 17, L967. lion. THOMAS B. CURTIS, House of Representatives, 1336 Longworth House Office Building, Washington, D.C. DEAR MR. CURTIS: Thank you for your letter of October 11, 1966, enclosing a tearsheet from the Congressional Record of October 10 containing your views on the need to improve the management of Federal real property. You may recall from the Bureau's testimony last year before the Subcommittee on Federal Procurement and Regulation of the Joint Economic Committee, we shared your concern in the need to assure a stronger sustained effort to achieve better utilization of real property and to speed the return to local tax rolls of un- needed properties. At the time of the hearings we advised that we were studying the problem and were discussing recommendations for improvement of our pro- PAGENO="0058" 310 ECONOMY IN GOVERNMENT cedures with the agencies. Our studies have been completed and the Bureau has recently issued guidelines to the heads of Federal agencies which we believe will improve the management of Federal real property. Enclosed for your information is a copy of Bureau of the Budget Circular No. A-2, Revised, dated April 5, 1067, which contains the Government's policy on the utilization, retention, and acquisition of Federal real property. This directive replaces one originally issued in October 1955 which was limited to providing guidelines for the identification of excess real property. Federal agencies are required, by the new directive, to develop criteria to achieve effective and economical use of their real property to meet the needs of each of their programs. The Circular prescribes systematic reviews of agencies' holdings in accordance with guidelines in the Circular and criteria established by the agency. The new Circular provides that before agencies acquire new property they must determine that the best use is being made of their existing holdings and attempt to fulfill their needs by using property under their jurisdiction. If the need cannot be met by using existing holdings, efforts must be made to determine if other satisfactory existing Federal holdings are available. Procedures are pro- vided for notifying General Services Administration and the Bureau of Land Management, Department of the Interior, as appropriate, to ascertain if excess, surplus, or unreserved public domain lands are available which might fill the need. When none of these are available, agencies then must consider the possi- bility of joint use of real property held by other agencies before action can be instituted to condemn, purchase, construct, or lease. Each agency is required to report on the results of its annual review. This new requirement in the regulation will enable us to keep currently informed of the effectiveness of agencies' reviews and will alert us to the need for initiating follow-up action. We appreciate your interest in the program to improve the management of Federal real property. Sincerely, PHILLIP S. HUGHES, Deputy Director. APRIL 20, 1967. Hon. CHARLES L. SCHULTZE, Director, Bureau of rtlie Biufget, Eccecutive Office Buildiny, Washington, D.C. DEAR CHARLIE: This will acknowledge Mr. Hughes' letter of April 17, 1967, enclosing BOB Revised Circular A-2 of 4-4--G7, on the Utilization, Retention and Acquisition of Federal Real Property. I am pleased to receive this material and will wish to discuss it at considerable depth at the time you appear before the subcommittee on Economy in Govern- ment, which I understand will be May 1G, 1967. From a quick reading of the Circular, I feel that some progress will follow its implementation. However, I believe one of the principal features of the Subcom- mittee's recommendation on page 12 of the May 1966 Report should have been followed, namely: the establishment of a high level economic policy committee to review agency holdings. I will also want to discuss with you the idea of imposing some form of taxes on industrial type property and perhaps others to provide assistance to local governments and act as a leverage against unneeded retention of the properties. Sincerely, THOMAS B. CURTIS. (For full text of Bureau of the Budget Revised Circular A-2, April 4, 1967, see pt. 1 of these hearings, p. 234.) PAGENO="0059" Appendix V Fou~owtrr ACTION ON GAO REPORT ON COST OF SALES OF SURPLUS PROPERTY AND DISPOSITION OF PROCEEDS ASSISTANT SECRETARY OF DEFENSE, INSTALLATIONS AND LOGISTICS, WasMngtom, D.C., June 17,1966. B-140389. Hon. ELMER B. STAATS, Comptroller General of the United States, General Accounting Ojylce. DEAR ELMER: Reference is made to your letter dated March 18, 1966, which transmitted copies of your report to Congressman Thomas B. Curtis on Cost of Sales of Surplus Property and Disposition of Proceeds (OSD Case #2430). The survey on which you reported was directed toward the use of sales proceeds to reimburse the Military Departments and the Defense Supply Agency (DSA) for expenses incurred in disposal operations and to determine whether proceeds have been diverted for nonauthorized purposes. Your report indicated that approximately $1 million was not available for return to the Treasury at the end of Fiscal Year 1965 because of alleged improper withholding of disposal proceeds and/or improper reimbursement of disposal ex- penses. Most of the specifics cited in the report were based on the opinion that the actions taken were contrary to DoD policy as expressed in applicable Direc- tives and Instructions. Your report has been reviewed by the Military Departments and the Office, Secretary of Defense and it has been concluded that most of the actions cited in the report were fully in accord with established DoD policy. Specific explana- tions follow: 1. Withholding of sales proceeds by Navy industrial fund.-The repOrt cited the improper withholding from the deposit fund of $329,000 in sales proceeds, which represented about 50 percent of the transactions tested. Your conclusion was based on the interpretation that DoD Instruction 7310.1 requires that prop- erty must be "owned" by an industrial fund before proceeds from disposal sale can be withheld from the deposit fund and credited to the industrial fund. This is not the case. Both DoD Instructions 7310.1 and 5410.4 use the term "generated" by industrial funds, not "owned" by industrial funds. The intent of both of these Instructions is that proceeds from the sale of scrap generated in the course of rebuild, modification, or overhaul should be offset against the cost of doing the work, thereby resulting in reduced billings to the customer. With prior ap- proval, this same procedure is authorized for nonindustrial fund activities by subpararaph VI3 of DoD Instruction 7310.1. The DoD position is that the Navy policy on this matter and the specific actions taken are in agreement with DoD policy. 2. Improper reimbursement for disposal expense.- (a) Reimbursement of costs for processing industrial fund scrap.-Your re- port cites as improper the reimbursement to the Norfolk Naval Shipyard, for disposal expenses on the basis that the Shipyard also received the proceeds from the sale. DoD policy is that an industrial fund should receive all proceeds from sale if it bears the cost of disposal and only the net proceeds from the sale, i.e., gross proceeds less all expense of disposal, if it does not bear the costs of disposal. Since it is impractical to determine disposal expense for each transaction, the DoD uses an estimated amount of 10 percent of gross proceeds as representing the costs of disposal. In the case cited, the Norfolk Naval Shipyard did not bear the costs of dis- posal since the work was performed under a reimbursable service order. Accord- ingly, the industrial fund was entitled to only the "net" proceeds, which would 311 PAGENO="0060" 312 ECONOMY IN GOVERN~NT amount to 90 percent of the gross proceeds. The report does not bring out the fact that the industrial fund received credit for only 90 percent of the gross proceeds with the remain~ng 10 percent being credited to the DSA deposit fund to cover the estimatect disposal costs. Assuming that the 10 percent did represent the actual disposal costs, then the final effect of the transactions was that the industrial fund received only `net" proceeds from sale, which is in agreement with DoD policy. (b) Reclamation and modification of usable items.-Your report cited, as improper, the reimbursement for costs of removing parts from end-items on the basis that this action was not essential to the disposal process, as required by DoD Instruction 7310.1. The point of contention appears to hinge on the inter- pretation of the word "essential." It is true that the items cited could have been disposed of without removing the parts. However, since it is the policy of the Department of Defense to remove all required parts from end-items before dis- position, it is "essential" to the disposal process that these parts be removed. This is the interpretation that was intended by DoD Instruction 7310.1 and, accord- ingly, the specific actions cited are considered to be in accord with DoD policy. Your report also cited two cases where work performed at the Yorktown Naval Weapons Station and at the Tooele Army Depot was related to modification of ammunition and not disposal. To the extent that these installations received reimbursement for modification work, an adjustment will be made because such actions would be contrary to DoD criteria. (c) Costs related to transfer of excess material to property disposal offices.- Your report cites inconsistent practices of Military Departments pertaining to the practice of reimbursing for predisposal costs, implying that disposal costs incurred prior to the delivery of such material to the property disposal office should not be reimbursed. Department of Defense Instruction 7310.1 intended to make all disposal costs reimbursable. Specifically, the instruction provides that such costs as reporting excess personal property to the Defense Supply Agency (DSA) and to the General Services Administration (GSA), and utilization screening functions performed by DSA are reimbusable. Also, the instruction specifically cites the cost of packing, handling and crating excess and surplus materials as being reimbursable. It is the intent of DoD Instruction 7310.1 that the types of costs being reimbursed to the Navy were to be reimbursable. To the extent that Army, Air Force, and DSA practices are at variance with DoD policy, appropriate corrective action will be taken. * * * * * * 0 Your report also stated that there is a need for improving (1) the identification of disposal costs, (2) the reporting of disposal operations, and (3) the review of disposal activities by internal auditors. As a result of your report, a Defense-wide audit of disposal activities has been initiated. This audit will cover, in depth, the issues raised in your report and will provide a basis for taking corrective action as required. You suggested four measures for improving disposal operations, i.e., strengthen- ing of DSA's supervisory role, implementing a uniform cost accounting system, establishing an improved reporting system, and validating the propriety of dis- posal expenses through internal audit. With regard to the first suggested measure, DSA's role as the property disposal program manager was strengthened by Deputy Secretary of Defense memorandum dated November 27, 1964, subject: "Implementation of Secretary of Defense Project 26 as it Relates to the Manage- ment of the Department of Defense Property Disposal Program" was was further strengthened by the December 9, 1965 revision of DSA's basic charter (DoD Directive 5105.22, subject: "Defense Supply Agency"). It is believed that sufficient guidance has been provided to enable DSA to manage and control the disposal program. With regard to your other suggestions, it is considered desirable to await the results of the Defense-wide audit before determining the extent of corrective measures required and initiating specific actions. We will be happy to advise you of the results of our audit and of the additional actions we will take, about the end of the year. Sincerely, PAui~ R. IGNATIUS. PAGENO="0061" ECONOMY IN GOVERNMEI~I' 313 U.S. GENERAL ACCOUNTING OFFICE, DEERNSE ACCOUNTING AND AuI~ITING DivIsioN, Washington, D.C., December 8, 1966. Hon. PAUL R. IGNATIUS, Assistant Secretary of Defense, installations and Logistics. - DEAR Mn. IGNATIus: Reference is made to your letter of June 17, 1966, com- menting on our report to Congressman Thomas B. Curtis on the cost of sales of surplus property and disposition of proceeds (OSD Case #2430). We were pleased to learn that as a result of our report you have initiated a Defense-wide audit of disposal activities which will cover in depth the issues raised in the report and provide a basis for corrective action as required. We will appreciate being advised of the results of your audit and of the corrective actions you take. On August 31 and September 1, 1966, we discussed with representatives from your office and the Office of the Assistant Secretary of Defense (Comptroller) the matters covered in the report and commented on in your letter. These discus- sions were very helpful towards a mutual understanding of the presentations made in both the report and in the letter. As a result of these meetings, several practices in connection with the accounting for surplus sales proceeds and the reimbursing of disposal expenses should be brought to your attention for further consideration when corrective actions in the disposal area are being prescribed. The two principal matters that have been discussed involve the withholding of scrap sales proceeds from the Deposit Fund Account by the Norfolk Naval Ship- yard and the reimbursing from the Deposit Fund Account of scrap processing costs incurred by the shipyard. Regarding the withholding of proceeds, we, as well as the Disposal Program Manager (DSA), interpreted that portion of DOD Directive 7410.4 which states that-"Proceeds from sale of scrap shall be de- posited to the industrial fund when such property is held in the industrial fund"-to mean that proceeds from "rip-out" materiel removed from vessels undergoing overhaul should be remitted to the Deposit Fund rather than to the Shipyard Industrial Fund. However, your letter and the recent discussions with Defense representatives indicated that such proceeds should be offset against specific customer orders to provide a more realistic determination of the costs of end-items and programs. The Norfolk Naval Shipyard did not follow this practice. Scrap sales proceeds are used to reduce general overhead charges applied to all types of shipyard work. Defense officials at our meetings indicated that such practice is not in accord with DOD policy. We understand that when "rip-out" materiel cannot be identified to specific customer orders, it is permissive to use the proceeds to reduce overhead expenses. It would seem, though, that this latter practice would be followed only in cases where minor quantities of "rip-out" materiels are involved instead of the in- stances we reported. We believe that with the intimate knowledge that the Ship- yard must have as to what must be done to accomplish specific work assignments, it is feasible for the Shipyard to identify and estimate the extent of "rip-out" materiel that will be generated, and estimate the corresponding cost reductions that can be made to customer orders. Therefore, we suggest that you consider having the Norfolk Naval Shipyard revise its curent practice of routinely treat- ing the sales proceeds from "rip-out" materiel as a reduction in general overhead costs of the shipyard. With regard to reimbursing the Shipyard from the Deposit Fund for cost of processing scrap materiel for which sales proceeds were retained by the Ship- yard, we understand from our recent meetings with Defense officials that it is DOD policy to have the Industrial Fund bear an equitable portion of the total cost incurred in realizing scrap sales proceeds. This is the position expressed in our report. The Shipyard, while retaining net proceeds from scrap sales of more than $657,000 during fiscal year 1965, did not bear any of the scrap preparation costs which totaled more than $325,000. The 10 percent retained from sales proceeds by the Defense Surplus Sales Office for the Deposit Fund covers only the estimated selling expenses of that organization rather than the scrap prepara- tion costs of the Shipyard. Since we have learned that the Shipyard Industrial Fund is permitted to re- tain proceeds from "rip-out" materiel for the purpose of crediting customer ac- PAGENO="0062" 314 ECONOMY IN GOVERNMENT counts, we believe scrap processing costs incurred in this connection should be borne by the Industrial Fund rather than the Deposit Fund. Therefore, we are revising our estimate of reimbursed expenses which should have been borne by the Industrial Fund from $52,000, which excluded "rip-out" scrap, to $237,000 based on the relationship of the weight of Industrial Fund scrap to the weight of all scrap received for processing during 1965. We suggest that you consider actions that should be taken to prevent further reimbursements from the Deposit Fund of scrap processing costs incurred by the Industrial Fund. We trust that these additional comments will assist you in clarifying policy matters and effecting corrective action as may be required. If we can be of fur- ther assistance, please advise. Sincerely yours, C. M. BAn~Y, Acting Director. OFFICE OF THE ASsIsTANT SECRETARY OF DEFENSE, Washington, D.C., February 14, 1967. Hon. THOMAS B. CURTIS, House of Representatives. DEAR Mn. CURTIS: Enclosed, on behalf of the Secretary of Defense, are two copies of the letter that has been sent to GAO concerning the Comptroller Gen- eral's report of March 18, 1966 to the Congress on "Sales of surplus property and disposition of proceeds," B-140389 (OSD Case #2430). Copies of any supplemental comments, which are sent to GAO concerning this report, will also be sent to you. Sincerely, J. L. BREWER, J~r. (For George W. Bergquist, Deputy Assistant Secretary of Defense). ASSISTANT SECRTrARY OF DEFENSE, INsTALLATIONS AND LOGISTICS, Washington, D.C., February 8, 1967. Mr. C. M. BAILEY, Acting Director, Defense Accounting and Auditing Division, General Accovnting Office, Washington, D.C. DEAR Mn. BAILEY: Reference is made to your letter of December 8, 1966 in which you furnished additional comments and suggestions concerning items contained in your report dated March 18, 1966 to Congressman Thomas B. Curtis on the cost of sales of surplus property and disposition of proceeds, and our reply thereto dated June 17, 1966 (OSD Case #2430). The Defense-wide audit of disposal activities, which we initiated as a result of your report, was completed the latter part of December 1966. The audit findings are currently being reviewed within the Department of Defense. We will advise you of the findings and our actions pertaining thereto at the earliest possible date. In regard to the two suggestions presented in your December 8, 1966 letter, the following comments are furnished: 1. Application of proceeds from sale of "rip-out" material to reduce general overhead costs of indv~trial-fu.nd activities.-We are in accord that the proceeds from the sale of "rip-out" scrap generated by industrial-fund activities should be applied, wherever possible, as a reduction in the cost of specific customer orders. The Navy will be advised to take appropriate action to assure com- pliance with the overall DoD policy in this area. 2. Prevention of reimbursement frcnn the deposit fund account of scrap proc- essing costs incurred by industrial-f unã activities.-It is our understanding that this suggestion primarily concerns the scrap processing costs which are incurred by disposal activities reimbursed from the Deposit Fund Account. It appears that the problem concerns the equitability of the current policy of withholding ten percent of sales proceeds to offset processing costs incurred by disposal and sales activities. We are considering a proposal whereby the Defense Supply Agency will be assigned the responsibility for determining the equitable per- centages or percentages to be withheld from proceeds as the expense of disposal in all enses where total proceeds are not credited to the Deposit Fund. In addi- PAGENO="0063" ECONOMY IN GOVERNMENT 315 tion, we are in the process of implementing an improved cost accounting and reporting system for all disposal activities. This system will assist DSA in per- forming the above mentioned responsibility. We appreciate your concern in the above matters and are grateful for your assistance in their resolution. Sincerely, PAUL H. RILEY Deputy Assistant Secretary of Defense (Supply and Services). OFFICE OF THE ASSISTANT SECRETABY OF DEFENSE, Washington, D.C., February 14, 1967. Hon. THOMAS B. CUBTIS, House of Representativeu. DE&a MR. CURTIS: Enclosed, on behalf of the Secretary of Defense, are two copies of the letter that has been sent to GAO concerning the Comptroller Gen- eral's report of March 18, 1966 to the Congress on "Sales of surplus property and disposition of proceeds," B-140389 (OSD Case #2430). Copies of any supplemental comments, which are sent to GAO concerning this report, will also be sent to you. Sincerely, J. L. BREwER, Jr. (For George W. Bergquist, Deputy Assistant Secretary of Defense). OCTOBER 21, 1966. Hon. ELMER B. STAATS, Comptroller General of the United States, General Accounting Office Building, Washington, D.C. DEAR ELMER: I am very much interested in your excellent Report on Cost of Sales of Surplus Property and Disposition of Proceeds-Department of Defense (B-140389, dated 3-18-66). To my mind this report indicates a situation which appears to be growing whereby an agency is permitted to create its own appropriation through the disposition of federal receipts which should be deposited to the general fund and then appropriated by regular process. The instant case, so-called "Punkin" fund merely illustrates a rather widespread situation. In order that we may take a broader look at the problem at the next session of Congress as a part of the work of the Subcommittee on Procurement and Regulation, I would appreciate it if your office could compile for me a complete list of programs under which agencies utilize receipts to create working capital funds. Included in this listing would be stock funds, industrial funds, so-called Section 32 funds, etc. I recall there was a listing some years ago of so-called "back-door" financing which should be included in your general listing also. I would suggest that this information be made available to me by February 15, 1967. With best wishes, Sincerely, THOMAS B. CURTIS. ASSISTANT SECREFARE OF DEFENSE, Washington, D.C., May 5, 1967. Mr. 0. M. BAILEY, Associate Director, Defense Accounting and Auditing Division, General Acc&unting Office, Washington, D.C. DEAR Mn. BAILEY: Reference is made to our letter of February 8, 1D67 in which we stated we would advise you of the results of the Defense-wide audit of per- sonal property disposal activities and of any actions pertaining thereto (OSD Case #2430). PAGENO="0064" 316 ECONOMY n~ GOVERN1~NT The report of the audit review contained findings indicating a need for: (1) improving the identification and reporting of disposal expenses; (2) conducting periodic audits of expenses charged to the disposal fund at all locations where expenses are incurred; (3) establishing a more meaningful method of measuring cost effectiveness and efficiency of the disposal operations; (4) specifying ex- penses to be withheld for disposal of special types of property (industrial fund scrap, Military Assistance Program (MAP) and exchange/sale property) and centralizing disbursement of the net proceeds from the sale of such property; (5) considering the establishment of a single manager to administer the dis- posal program, including the control over all iresources; and (0) initiating at the Office of the Secretary of Defense (OSD) level the positive management of the military services' lumber and timber programs. You will recall that in our letter of February 8 we mentioned that we were in the process of implementing an improved cost accounting and reporting sys- tem for all disposal activities. This new system, which has a July 1, 1907 target date for implementation, was developed after special consdieration of the find- ings and recommendations reflected in both your report of March 18, 1066 and the DoD audit review report. Specifically, the new system will establish a uni- form cost accounting structure and provide uniform procedures for accumulating and reporting cost and performance data pertaining to all disposal operations. The new cost definitions will provide more detailed descriptions of expenses authorized for reimbursement than existed previously. We believe that this new system of accounting and reporting, once imple- mented, will provide the basis and means for improving the management and efficiency of the disposal operation within the DoD. For instance, this new report- ing system, in providing more detailed definitions of reimbursable expenses, will allow all management levels, and particularly the Defense Supply Agency (DSA), the program administrator, to compare and appraise financial data in sufficient detail to permit a meaningful evaluation of program operations. Such evaluation will tend to ensure the financing of only those functions which are properly chargeable, and to focus attention to those activities requiring increased management attention. The finding that the financial and fiscal aspects of disposal operations should be audited periodically will be implemented. With reference to the finding con- cerning the management of lumber and timber programs, an office has been es- tablished within this organization for the specific purpose of managing this program. In general, we believe that most of the past deficiencies in this program have been operational and procedural rather than of a policy nature, and that the new system will enable us to remedy them. We also believe that DSA can effec- tively administer the program under the authority it now possesses, and with the additional and more specific guidance which will be provided by the new cost accounting system. Your continuing interest in the surplus personal property disposal program is appreciated. Sincerely, PAUL H. RILEY, Deputy Assistant Secretary of Defense (Supply and Services). PAGENO="0065" Appendix VI GAO REPORT ON VARIOUS METHODS OF FINANCING AGENCY PROGRAMS 317 79-459 O-67-pt. 2-5 PAGENO="0066" PAGENO="0067" REPORT ON VARIOUS METHODS OF FINANCING AGENCY PROGRAMS BY THE COMPTROLLER GENERAL OF THE UNITED STATES MAY 1967 319 PAGENO="0068" 320 . .~ ECONOMY IN GOVER~fENT COMPTROLLER GENERAL OF THE UNITED STATES WASHINGTON. D.C. 20546 B- 140389 Dear Mr. Curtis: In accordance with your request of October 21, 1966, we have de- veloped a list of Federal agency programs which are classified into various categories. The listing was compiled from publications and records of the Bureau of the Budget, the Treasury Department, and other Government agencies and through discussions with various Fed- eral officials, Time did not permit the inclusion in our listing of all programs; however, we believe that our report covers most programs of significant dollar amounts, On December 5, 1966, we met with Mr. Ray Ward, Economic Con- sultant to the Subcommittee on Economy in Government of the Joint Economic Committee, to reach agreement on the various types of pro.. grams to be listed in our report. Our listing is divided into program categories which reflect the specific items mentioned in your letter and those programs discussed with Mr. Ward. In your letter, you requested that we include in our report a list- ing of `back-door" financing that you recalled seeing some years ago. We discussed the identification of this listing with Mr. Ward who in- dicated that it may have been presented by Congressman Thomas M. Pelly during hearings on the Area Redevelopment Bill. In our research, we found only one such listing that we could attribute to Congressman Pelly. That listing is presented below and is also shown on page 2626 of the Congressional Record of February 23, 1961. Emergency Housing Act Export- Import Bank Lending Authority Small Business Investments Community Facilities Depressed Areas Mineral Subsidy Airport Grants Housing Act of 1958 Navaho-Hopi Rehabilitation PAGENO="0069" ECONOMY IN GOVERNMENT 321 B~ 140389 Highway Act of 1958 Education Bill Writeoff of Losses Under Defense Production Act Borrowing Authority Direct Veterans Loans TVA Borrowing Authority Capitol Power Plant Construction Maritime Academy Act of 1958 Bretton Woods Agreement Act Housing Act of 1959 Highway Act of 1959 College Housing Loans Public Facilities Loans Highway Act of 1960 The above programs are substantially identified in the enclosures to this letter, which provide information for each of the program cäte.~ gories on which we are reporting. Although your letter did not specifically request the program dollar amounts, we have included them upon the request of Mr, Ward. The addition of the dollar figures to the listed programs will give you some impression of their magnitude. We have not verified the accuracy of dollar figures or of narrative descriptions which appear in the en~ closures, nor have we performed an evaluation of the merits of the various financing methods. A brief description of the various program categories follows, with details on specific agency programs contained in the respective enclosures. AUTHORIZATION TO SPEND DEBT RECEIPTS This method of financing is also known as `Treasury borrowing." It first came into use in 1932 to finance the Reconstruction Finance Corporation and has since been used numerous times to finance various other Government programs. As of June 30, 1966, Federal agencies had PAGENO="0070" 322 ECONOMY IN GOVERNMENT B- 140389 available over $29 billion of unused borrowing authority. A more de- tailed explanation of this method of financing is presented in enclosure I. REVOLVING FUNDS Revolving funds are authorized by specific provisions of law to finance a continuing cycle of operations in which expenditures generate receipts arid the receipts are available for expenditure, As of June 30, 1966, the Treasury Department showed 117 such funds with cash an~ fund balances of over $11 billion investments in securities of over $2 billion, and budgetary authorizations of abouti billin~ The budgetary autho- rizations include balances of authority to expend from public debt or corporate debt receipts and unfunded contract authorizations. Informa- tion on selected revolving funds is given in enclosure II. CONTRACT AUTHORIZATIONS Contract authorizations represent grants of authority by the Con.. gress to incur obligations prior to the enactment of appropriations. A contract authorization does not, in itself, permit the spending of money, It must be followed by an appropriation to permit payment of the obliga- tions incurred thereunder. As of June 30, 1966, unfunded contract autho- rizations of over $5 billion were outstanding in the administrative budget accounts, At the same point in time, trust fund accounts had unfunded contract authorizations of nearly ~11 billion, More detailed information concerning this method of financing is shown in enclosure III, SPECIAL FUND RECEIPTS AND APPROPRIATIONS Special funds are those which are established to account for re- ceipts that are earmarked by law for a specific purpose, Some special funds are subject to annual appropriation by Congress while others are automatically available under the laws which create the funds, Dur- ing fiscal year 1966, special fund receipts were $606 million and special fund appropriations were $548 million, Detailed information on special funds is given in enclosure IV. PAGENO="0071" ECONOMY IN GOVERNMENT . 323 B- 140389 USER CHARGES PROGRAM Statutory authority for the user charges program was provided with the enactment of title V of the Independent Offices Appropriation Act of 1952 (5 U.S.C. 140) which itemized numerous types of activities that the Congress believed should be "self..sustaining to the full extent possible." The general rule is that collections made for these services are deposited into the general fund of the Treasury as miscellaneous receipts. However, with proper legal authority, agencies may deposit user charges receipts to trust funds, revolving funds, or appropriations which finance the activities involved. During fiscal year 1965, about $1.4 billion was collected under the various user charges programs of which $0.6 billion was deposited to other than miscellaneous receipts. Additional details concerning user charges are contained in enclosure V. GOVERNMENT CORPORATIONS There are a number of Federal organi~tio~Whtch~takethe~form- of corporations. As such, they operate in a manner similar to that of commercial enterprises in that they have governing bodies in the form of boards of directors which have broad powers to take action. More detailed information on corporations is given in ~ PERMANENT APPROPRIATIONS A permanent appropriation is one which is automatically renewed each fiscal year over a period of time, by virtue of standing legislation, without annual action by the Congress. Payment of interest on the public debt which amounted to $12 billion in fiscal year 1966 accounts for the bulk of money expended under permanent appropriations. One of the major programs financed by permanent appropriations is the Removal of Surplus Agricultural Commodities (section 32 funds) which you spe~ cifically mentioned in your letter of October 21, 1966. Examples of permanent appropriations are presented in enclosure VII. FOREIGN CURRENCY PROGRAMS Foreign assistance programs of the United States result in the acquisition of substantial amounts of foreign currencies. There are a PAGENO="0072" 324 ECONOMY nc GOVERNMENT B- 140389 number of laws pertaining to the utilization of these currencies by the United States. A description of foreign currency transactions is given in enclosure VIII. ECONOMY ACT TRANSACTIONS The phrase "Economy Act Transactions" refers to interagency supply of goods and services. The authority of an agency head to deal with other Government agencies is provided for in section 601 of the Economy Act (June 30, 1932, 31 U.S.C. 686). This section provides that, if funds are available and if it is determined to be in the interest of the Government to do so, a Government agency may place orders with any other Federal agency for materials, supplies, equipment, work, or services. As agreed with Mr. Ward, we merely point out that agencies deal with each other in transacting business. We would like, also, to call your attention to Senate Document 73, Eighty-ninth Congress, first session, entitled "Legislation Authorizing Appropriations and Establishing Revolving Funds." This document con- tains listings of legislation authorizing appropriations and establishing stock funds classified by agency. As such information is related to the subject matter of this report, we furnished Mr~ Ward with a copy of the document. We trust that this letter contains the required information. We plan to make no further distribution of this report unless copies are specifically requested, and then copies will be distributed only after your approval has been obtained or public announcement has been made by you concerning the contents of this report. Sincerely yours, Comptroller General of the United States Enclosures- -8 The Honorable Thomas B. Curtis House of Representatives PAGENO="0073" ECONOMY IN GOVERNMENT 325 AUTHORIZATION TO SPEND DEBT RECEIPTS The "authority to expend from public debt receipts" is a term identified with legislative authorizations to use, for specific purposes, Government funds realized from the sale of public debt securities. This method of funding agency activities came into use in 1932 to finance the Recon-. struction Finance Corporation, and has since been used numerous times to finance various Governnient programs. Authority to expend from debt receipts requires approval by the Congress. When contained in appropriation legislation, consideration is given by the Committees on Appropriations; when included in substantive legislation, consideration is given by those committees having jurisdic- tion over the particular area of law involved. Legislation containing this authority has the same force and effect as an appropriation and is so treated in Treasury accounts and reports and in the annual Budget Document. Generally, authority to borrow from the Treasury is without fiscal year limitation; however, a limitation is usually provided as to the maximum amount of borrowings repayable to the Treasury that can be out- standing at any one time. The amount so authorized, together with col- lections and earnings realized under the program, remains available to the agency for an indefinite period. The amounts of borrowings are gen- erally credited by the Treasury to a revolving fund account for the bor- rowing agency; repayments of borrowings reduce the agency's operating funds and restore the authorization for additional borrowings. However, some repayments are nonrestoring and thus act to reduce the agency's bor- rowing authority. From 1932 through June 30, 1966, the Congress, through numerous acts, authorized borrowing authority of $107.6 billion for agencies and also reduced borrowing authority by $35.5 billion. Appropria~tions Committees handled $13.3 billion of the authorizations and $4.2 billion of the de- creases. Other congressional committees handled $94.3 billion of the au- thorizations and $31.3 billion of the decreases. Agency monrestoring pay- ments since 1932 amount to $8.4 billion. Annual agency borrowing from the Treasury since fiscal year 1960 has ranged from $7.2 billion to $9 billion. During this same period, annual repayments by the agencies to the Trea- sury, which served to restore borrowing authority, have ranged from $5.5 billion to $10.1 billion. As of June 30, 1966, agencies had unused borrowing authority of $29.5 billion and owed the Treasury $34.2 billion. The following table presents an agency breakdown of the unused borrowing authority and amounts due the Treasury as of June 30, 1966. PAGENO="0074" 326 ECONOMY IN GOVERNMENT Status of Agency Borrowing Authority June 30, 1966 Unused Borrowings borrowing due authority Treasury (millions) Funds appropriated to the President $ 5,991 $ 2,713 Department of Agriculture 3,961 17,438 Commerce - 7 Defense 10 - Housing and Urban Develop- ment 8,630 4,609 Department " the Interior 11 43 Veterans Administration 205 1,730 Export-Import Bank of Washington 5,822 178 Federal Deposit Insurance Corporation 3,000 - Home Loan Banks 1,000 - Savings and Loan Insurance Corpo- ration 750 - Saint Lawrence Seaway Development Corpo- ration 15 125 Smithsonian Institution 15 - Tennessee Valley Authority 50 100 United States Information Agency 6 22 District of Columbia Stadium Sinking Fund - 1 Capital stock subscriptions: Export-Import Bank 999 Federal National Mortgage Association 142 International Bank for Reconstruction and Development 635 International Finance Corporation 35 International Monetary Fund 2,325 Foreign loan credit to the United Kingdom 3,149 Total ~29467a ~34249a aDetails do not add due to rounding. PAGENO="0075" ECONOMY IN GOVERNMENT 327 REVOLVING FUNDS Revolving funds are authorized by specific provisions of law to fi- nance a continuing cycle of operations in which expenditures generate re- ceipts, and the receipts are available for expenditure. As of June 30, 1966, the Treasury Department classified 117 Federal agency funds as `re- volving and management funds." Summary financial data pertaining to these 117 funds follow. Revolving and Management Funds Fund and Obligation Status June 30. 1966 (Millions of dollars) Unexpended balances: Cash and fund balances $11,661 Investments in public debt and guaranteed securities 2'426a Budgetary authorizations 22.829 Total $36,916 Obligation status: Net obligations outstanding $18,511 Unobligated balances 18,405 Total aBudgetary authorizations, include balances of authority to expend from~üb~~~ lic debt or corporate debt receipts and unfunded contract authorizations. Information on selected revolving and management funds is given below. LEGISLATIVE BRANCH Government Printing Office Revolving Fund The Government Printing Office executes orders for printing, binding, and blankbook work, placed by the Congress and the various agencies of the Federal Government, and furnishes, on order, blank paper, inks, and similar supplies. Operations are subject to the authority of the Joint Committee on Printing (44 U.S.C. 63). The fund is reimbursed by the customer agen- cies, and net operating income is retained for reuse by the fund. The sale of publications program of the Superintendent of Documents also is financed through the revolving fund, and receipts from sales of publications are deposited therein. All profits accruing from these trans- actions are transferred to the general fund of the Treasury. PAGENO="0076" 328 ECONOMY IN GOVER~ENT Government Printing Office Revolving Fund Financial Condition, June 30, 1966 (Millions of dollars) Assets: Treasury balance $ 8 Accounts receivable 22 Work in process 29 Commodities for sale 6 Supplies, etc. 11 Fixed assets 12 Total Liabilities and Government equity Accounts payable $19 Capital 44 Retained earnings Total FUNDS APPROPRIATED TO THE PRESIDENT Alliance for Progress Development Loans Fund The Alliance for Progress was established in 1962 as a cooperative ef- fort of the United States and Latin American countries to promote the eco- nomic and social development of Latin America through development loans. Fiscal year 1966 obligations were $524 million, and new obligational au- thority of $435 million was received. Alliance for Progress Development Loans Financial Condition June ~Q,j~966 (Nillions of dollars) Assets: Treasury balance $1,056 Loans receivable, net 799 Other II Total Government equity: Capital, start of year $1,417 Appropriations 435 Retained earnings Total Development Loans--Revolving Fund The Foreign Assistance Act of 1961, as amended, authorized an 8-year $8.8 billion program of development loans to be administered by the Agency PAGENO="0077" ECONOMY IN GOVERNMENT 329 for International Development. Loans are made to promote the economic de- velopment of less-developed countries and areas, usually to assist in f i- nancing long-range development plans and programs. Development Loans Revolving Fund Financial Condition June 30, 1966 (Millions of dollars) Assets: Treasury balance $1,826 Loans receivable 2,273 Other ___z Total Government equity: Non-interest-bearing capital: Start of year $3,447 Appropriations 618 Other 6 Retained earnings 35 Total $~,l06 Foreign Investment Guarantee Fund Under sections 221 through 224 of the Foreign Assistance Act of 1961, as amended, the Congress has authorized three investment guarantee pro- grams. 1. Specific political risks against (a) inconvertibility of foreign currency, (b) loss by expropriation or confiscation, and (c) loss due to war, revolution, or insurrection. 2. Extended risk guarantees which cover up to 75 percent of both po- litical and business risks. 3. Extended risk guarantees up to 100 percent of losses on certain housing projects. Foreign Investment Guarantee Fund Financial Condition June 30, 1966 (Millions of dollars) Assets: Treasury balance Government equity Non_interest-bearing capital $58 Retained earnings Total $22 PAGENO="0078" 330 ECONOMY IN GOVERNIVIENT Foreign Military Sales Fund, Executive This revolving fund was established under the authority of section 201 of the Foreign Assistance Act of 1965. The fund directly finances the sales of defense articles and defense services to foreign countries and in- ternational organizations on cash or credit terms, guarantees public and private credit for sales of defense articles and defense services, and ab- sorbs gains and losses resulting from sales of defense articles and defense services under fixed-price negotiations. The capital of the fund is provided by transfer of loans outstanding and appropriations from the military assistance appropriation, as autho- rized by the Foreign Assistance Acts of 1965 and 1966 (22 U.S.C. 2316). Foreign Military Sales Fund Financial Condition June 30, 1966 (Millions of dollars) Assets: Treasury balance $164 Loans receivable 135 Portion financed by Export-Import Bank Total Liabilities and Government equity: Deferred credits $ 23 Government equity 184 Total $207 Defense Production Act Revolving Fund Under the Defense Production Act of 1950, as amended, designated agen- cies are authorized, with Presidential approval, to incur obligations and make expenditures to expand production of critical materials for programs certified by the Office of Emergency Planning as essential to the national defense. The program is conducted primarily through a revolving fund f i- nanced by borrowing from the Treasury. The amount borrowed may not ex- ceed $2.1 billion outstanding at any one time. PAGENO="0079" ECONOMY IN GOVERNMENT 331 Defense Production Act Revolving Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 121,143 Accounts receivable, net 26,531 Advances 2 Deferred charges 68 Commodities for sale 1,181,580 Loans receivable, net 2,918 Land, structures, and equipment, net 101 Total $1,332,343 Liabilities and Government equity: Accrued interest payable $ 203,250 Accounts payable and accrued liabilities 247 Deferred credit 1,122 Interest-bearing capital 2,023,241 Non-interest-bearing capital 515 Deficit -896,033 Total aDetails do not add due to rounding. PAGENO="0080" 332 ECONOMY IN GOVERNMENT DEPARTMENT OF COMMERCE Maritime Administration, Vessel Operations Revolving Fund This fund finances direct operation and charter of cargo vessels for transport of military and Government impelled cargo. It is also used for the operation of Government-owned experimental vessels (46 U.S.C. 1205). Vessel Operations Revolving Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 5,264 Accounts receivable 20,253 Other 11,743 Total $37,260 Liabilities and Government equity: Liabilities $19,215 Equity 18,045 Total $37 L2~Q National Bureau of Standards Working Capital Fund This fund finances all operations of the National Bureau of Stan- dards, except major construction projects, from advances and reimburse- ments. National Bureau of Standards Working Capital Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 13,719 Accounts receivable 15,153 Fixed assets 157,290 Other 5,979 Total Liabilities and Government equity: Current liabilities $ 26,286 Equity 165,855 $192,141 Total PAGENO="0081" ECONOMY IN GOVERNMENT 333 DEPARTMENT OF DEFENSE Industrial funds Department of Defense industrial funds, which were established pur- suant to the National Security Act of 1947, as amended in 1949, finance industrial and commercial types of activities on a reimbursable basis (10 U.S.C. 2208). Since the industrial funds were established, a total of $1,113 million has been received for working capital. This capital has been provided by the transfer, with congressional approval, of the unex- pended balances of appropriations within the military departments. Since July 1, 1949, cash capital no longer required by the industrial funds in the amount of $357 million has been returned to the United States Treasury and $406.9 million has been transferred, with congressional approval, to other appropriations of the Department of Defense. Industrial fund programs are supported by orders citing the customers' appropriations. Costs are initially financed by the industrial funds' working capital and subsequently billed to customers' appropriations. The Army industrial fund is currently used to finance 20 activities engaged in research, development, test, engineering, transportation and traffic man- agement, limIted q.~iantity_production and major overhaul of weapons, muni- tions, missiles, and other military equipment. The Navy industrial fund finances 9 shipyards, 34 printing plants, 6 ordnance plants, 7 aircraft overhaul and repair facilities, 7 public works centers, 3 research activi- ties, and the Military Sea Transportation S~ervice. The Air Force indus- trial fund currently finances 10 printing plants, 37 laundries, and the Military Airlift Command. The Defense industrial fund finances the De- fense Clothing and Textile Supply Center and the communications services activity. The following statement shows the combined position of Depart- ment of Defense industrial funds. Department of Defense Industrial Funds Financial Condition June 30, 1966 (Millions of dollars) Assets: cash--available Treasury balance $1,990.1 Accounts receivable 355.1 Inventories 288.2 Other assets 50.4 Total $2.683.8 Liabilities: Accounts payable $ 186.7 Accrued expense 353.9 Prepayments from customers 1,766.9 Other liabilities and reserves 48.5 Total Capital of the fund: Appropriations and reappropriations 349.2 Assets capitalized less liabilities -38.0 Accumulated operating results 16.6 Total capital of the fund 327.8 Total liabilities and capital $2,683.8 79-459 0 - 67 - pt. 2 - 6 PAGENO="0082" 334 ECONOMY IN GOVERNMENT The relative size of the individual funds is shown by the following breakdown of combined assets. Department of Defense Industrial Funds Assets June 30, 1966 (Millions of dollars) Army $ 655.2 Navy 1,825.6 Air Force 142.3 Defense 60.8 Total ~26838a aDetails do not add due to rounding. Stock funds The Department of Defense stock funds, which were established pur- suant to the National Security Act of 1947, as amended in 1949, finance the acquisition of *inventories of material and supplies for resale and mobilization (10 U.S.C. 2208). These inventories are stocked and sold at designated defense activities worldwide. To reimburse the several stock funds for purchases made by customers, the DOD charges their various ap- propriation accounts or funds. The following statement shows the combined position of Department of Defense stock funds. p~artmentof Defense Stock Funds Financial Condition June 30, 1966 (Millions of dollars) Assets: Available Treasury cash balance $ 547.1 Accounts receivable 596.5 Inventories 5,850.0 Undistributed charges/credits (net) 280.0 Other assets 75.0 Total assets Liabilities and capital: Accounts payable $ 790.2 Other liabilities 6.7 Total liabilities 796.9 Capital of the fund 6,551.7 Total liabilities and capital $7,348.6 PAGENO="0083" ECONOMY IN GOVERNMENT 335 The following table summarizes the value of the reimbursable issues of each stock fund for the past 4 fiscal years. Department of Defense Stock Funds Reimbursable Issues Defense Fiscal Combined Marine Air stock Army Na~ ~ fund (millions) 1963 $6,108 $1,768 $1,252 $124 $1,325 $1,639 1964 6,311 1,882 1,228 128 1,335 1,738 1965 6,822 2,271 1,198 135 1,344 1,874 1966 9,125 3,198 1,391 193 1,423 2,920 Defense Production Guarantees The Defense Production Guarantees Program is financed by a public en- terprise type of fund. Guarantees are given on loans made by public and private financing institutions by the Army, Navy, Air Force, and Defense Supply Agency to facilitate performance of defense production contracts. When necessary, loans may be purchased by the Government. Administrative expenses are financed from guarantee fees and interest on loans receiv- able. Funds in excess of program requirements may be transferred to mis- cellaneous receipts of the Treasury. Net earnings are retained to pur- chase loans when required under guarantee commitments and to cover pos- sible future losses (50 U.S.C. app. 2091). Defense Production Guarantees Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $17,535 Loans receivable, net Total $32730a Government equity: Retained earnings $32,730 aDetails do not add due to rounding. PAGENO="0084" 336 ECONOMY IN GOVERNMENT Naval Academy laundry service The Naval Academy laundry is operated for the benefit of midshipmen and other military personnel of the Naval Academy. The charges collected for laundry service are available for operating expenses (10 U.s.c. 6971(b)). Naval Academy Laundry Service Fund Financial condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $122 Accounts receivable, net 55 Fixed assets, net 161 Total $338 Liabilities and Government equity: current liabilities $ 58 Retained earnings 280 Total $338 Civil Defense Procurement Fund This fund finances the central procurement of civil defense materials toward which contributions to the States are authorized on a matching fund basis. The fund is reimbursed for purchases from Office of civil Defense appropriations and from funds provided by the States (65 Stat. 61). civil Defense Procurement Fund Financial condition June 30, l96~ (Thousands of dollars) Assets: Treasury balance $1,499 Accounts receivable, net 1 Total Government equity: Capital PAGENO="0085" ECONOMY IN GOVERNMENT . 337 Army Management Fund This fund was created to simplify the financing and accounting for operations supported by two or more appropriations (10 U.S.C. 2209). Ac- tivities presently financed through the fund are (I) Defense telephone service, Washington, D.C., (2) transportation services, and (3) construc- tion activity, Europe. Army Manag~ment Fund Programs and Financi~g Fiscal Year 1966 (Thousands of dollars) Program obligations: Defense telephone service, Washington, D.C., $ 10,658 Transportation services 445,847 Construction activity, Europe 2,377 Total Financing: Unobligated balance, start of year $ 2,197 Receipts from administrative budget accounts 459,148 Receipts from non-Federal sources 194 Available funds 461,539 Unobligated balance, end of year -2,657 Total Navy Management Fund This fund was created to facilitate the financing of operations sup- ported by two or more appropriations (10 U.S.C. 2209). The principal ac- tivity financed through the fund is the Polaris ballistic missile program. Reimbursable orders for the Polaris program are issued to the fund from Navy appropriations for Procurement; Operations and Maintenance; and Re- search, Development, Test, and Evaluation. PAGENO="0086" 338 ECONOMY IN GOVERNMENT Navy Managemept Fund Programs and Fina~gjI1g Fiscal Year 1966 (Thousands of dolla) Program obligations: Special projects $ 539,708 Transportation of things 388,992 Inspection of naval material 8,650 Incentive awards 1,362 Departmental administrative services 492 Armed Services Board of Contract Appeals 639 Total Financing: Unobligated balance, start of year $ 946,923 Receipts from administrative budget accounts 470,194 Receipts from trust funds 17 Available funds 1,417,134 Unobligated balance lapsing -3,931 Unobligated balance, end of year -473,362 Total aDetails do not add due to rounding. Air Force Management Fund This fund was created to facilitate the financing of activities sup- ported by two or more appropriations (10 U.S.C. 2209). The corpus of the fund is $1 million which is being retained to provide the means for f i- nancing appropriate activities in the future. There were no program obli- gations made in fiscal year 1966. Naval ~ This fund represents advances received for goods or services fur- nished to foreign governments and private parties (31 U.S.C. 643). Au- thorized individuals and organizations requesting goods or services are required to advance amounts to cover the estimated value to this fund. These advances are then used to reimburse the Operation and Maintenance, Navy appropriation for the value of goods provided or services rendered. PAGENO="0087" ECONOMY IN GOVERNMENT 339 Naval Working Fund ~~gram Obligations and Finan~j~g Fiscal Year 1966 (Thousands of dollars) Program obligations Financing: Unobligated balance, start of the year $ 4,496 Receipts from administrative budget accounts 359 Receipts from non-Federal sources ______ Available funds 18,786 Unobligated balance, end of year -4,510 Total $14,276 Revolving Fund, Corps of Engineers This fund provides for the acquisition, operation, and maintenance of floating and land-based plant and equipment used in civil works func- tions; for temporary financing of services finally chargeable to civil works appropriations; and for the furnishing of facilities and services for the military functions of the Department of the Army and other govern- mental agencies and private persons (67 Stat. 199). Initial capital of the fund was provided by assumption of the assets, liabilities, and obli- gations of the plant accounts as carried on the records of the Corps of Engineers, Civil, at June 30, 1953, and by an appropriation from the gen- eral fund of $100. Capital (Government equity) of the fund amounted to $140.9 million at June 30, 1966, and is limited to $149 million by the Public Works Appropriation Act of 1967. Revolving Fund, Corps of Engineers Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 27,381 Accounts receivable 34,913 Inventories 8,039 Deferred and undistributed items 3,838 Plant, properties, and equipment, net Total $215 $475 Liabilities and Government equity: Current liabilities $ 57.120 Unfunded liability f or annual leave 14,006 Reserve for self-insurance 3,647 Capital 117,040 Retained earnings Total $fl5647a aDetails do not add due to rounding. PAGENO="0088" 340 ECONOMY IN GOVERNMENT DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE Revolving Fund for Certification and Other Services, Food and Drug Administration The Food and Drug Administration tests and certifies batches of anti- biotics, insulin, and color additives for use in food, drugs, or cosmet- ics; it also establishes tolerances for residues of pesticide chemicals in or on raw agricultural products and for color additives in foods, drugs, and cosmetics. These services are financed wholly by fees paid by the in- dustries for which the tests are conducted (77 Stat. 229). Revolving Fund for Certification and Other Services Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $2,020 Accounts receivable 36 Equipment Total $~,i~4 Liabilities and Government equity: Current liabilities $ 435 Customer advances 314 Retained earnings Total Service and Supply Fund Public Health Service This fund finances medical supply and service operations of the Pub- lic Health Service (PHS). It is reimbursed from the appropriations sup- porting the programs benefited. The principal activities of the fund are carried out at (1) the Supply Service Center at Perry Point, Maryland, which maintains inventories of medical stock and supplies to meet, in whole or in part, the requirements of PHS and requisitions of other Gov- ernment organizations, (2) the National Institutes of Health, Bethesda, Maryland, which maintains a central supply of scientific and general-use materials, supplies, and special equipment and also provides services such as animal production, statistical processing, and instrumentation for the Institutes, and (3) the Division of Finance, Washington, D.C., which fi- nances accounting, auditing, and data processing services for bureaus and PAGENO="0089" ECONOMY IN GOVERNMENT 341 divisions of PHS. Earnings are retained to meet possible future losses (42 U.S.C. 231). Service and Supply Fund Public Health Service Financial condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $1,955 Accounts receivable 951 Commodities for sale 2,072 Other 181 Total $5~.l59 Liabilities and Government equity: Current liabilities S2,078 Capital 2,549 Retained earnings Total PAGENO="0090" 342 ECONOMY IN GOVERNMENT DEPARTMENT OF THE INTERIOR Fisheries Loan Fund This fund is used for making loans to segments of the fishing indus- try unable to obtain commercial loans on reasonable terms for financing or refinancing the cost of purchasing, constructing, equipping, maintaining, repairing, or operating new or used commercial fishing vessels or gear. Appropriations of $13 million provide capital for the fund. Additional financing is provided from repayments and interest on outstanding loans. Fisheries Loan Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 6,847 Loans receivable 5,876 Other 89 Total Liabilities and Government equity: Current liabilities $ 16 Capital 13,000 Deficit -204 Total $l2~]~ Upper Colorado River Storage Project This fund, financed by appropriations, defrays the cost of advance planning, construction, operation, and maintenance of the Colorado River storage project and participating projects (43 U.S.C. 620d). PAGENO="0091" ECONOMY IN GOVERNMENT 343 U~pp~~plorado River Storage Project Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 7,038 Accounts receivable 1,423 Fixed assets 637,820 Other 8,085 Total $~_~_~_ Liabilities and Government equity: Current liabilities $ 6,147 Capital, start of year 598,347 Appropriations 45,312 Other equity anounts 4,690 Deficit -130 Total $654,366 DEPARTMENT OF LABOR Advances to Employment Security Administration Account, Unemployment Trust Fund This fund established by the Employment Security Act of 1960 (74 Stat. 970) makes advances without fiscal-year limitation to the Em- ployrnent Security Administration Account in the Unemployment Trust Fund. The purpose of this fund is to finance the Federal and State administra- tive costs of the employment security programs on a repayable basis from the beginning of the fiscal year until the Federal employment tax receipts become available in February of the same fiscal year. Advances to Employment Security Administration Account Unemployment Trust Fund Financial Condition June 30. 1966 (Thousands of dollars) Assets: Treasury balance $305,096 Government equity: Capital $288,000 Retained earnings 17 .096 $305,096 Total PAGENO="0092" 344 ECONOMY IN GOVERNMENT POST OFFICE DEPARTMENT Postal Fund The revenues of the Department are deposited in the Postal Fund, which was established as a revolving fund in 1950 (39 U.S.C. 2202). The aggre- gate of postal revenues is less than the obligations authorized for payment from the Postal Fund. An appropriation is made from the general fund. of the Treasury to make up the difference. Postal Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 547,309 Accounts receivable 95,034 Fixed assets 809,383 Other 53,399 Total S________ Liabilities and Government equity: Liabilities $ 711,112 Equity 794,013 Total $1,505,125 DEPARTMENT OF STATE Working Capital Fund The Working Capital Fund was established pursuant to the provisions of the United States Code (5 U.S.C. 170(u)) which provided for transfer of properties and other assets to the fund for the purpose of providing cap- ital. The act provided also that, in addition to receipts for services performed, the fund be credited with receipts from sale or exchange of property or from payment for loss or damage to property held by the fund. The act provided further that there be transferred into the Treasury as miscellaneous receipts, as of the close of each fiscal year, earnings which the Secretary determines to be excess to the needs of the fund. A limitation of $750,000 was established for the net assets to be transferred to the fund for the purpose of providing capital. The fund finances, on a reimbursable basis, certain common services, including duplicating, editorial, microfilming, telephone, motorpool, laborers, supply, and dispatch. The fund is used for the financing of the PAGENO="0093" ECONOMY IN GOVERNMENT 345 procurement of certain representational furnishings, both initial and replacement. Department of State Working Capital Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 82 Accounts receivable 1,911 Inventories 438 Fixed assets 259 Total $~_,_~_~ Liabilities and Government equity: Liabilities $2,049 Equity - Total TREASURY DEPARTMENT Bureau of Epg~ying and Printing Fund The Bureau of Engraving and Printing Fund is a revolving fund and is used to pay the expenses incurred in the manufacture of United States cur- rency, Federal Reserve notes, various public debt instruments, and most of the other evidences of a financial character issued by the Federal Govern.. ment, such as postage, internal revenue, and saving stamps. The fund's ma- jor source of income is from the sale of engraving and printing items (31 U.S.C. l8la). PAGENO="0094" 346 ECONOMY IN GOVERN~NT Bureau of Engraving and Printing Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 6,587 Accounts receivable, net 1,855 Commodities for sale 5,728 Supplies and prepaid expenses 1,216 Deferred charges 114 Fixed assets, net 16,365 Total $31,865 Liabilities and Government equity: Current liabilities $ 6,689 Capital 25,251 Deficit -75 Total DEPARTMENT OF TRANSPORTATION Coast Guard Supply Fund The Coast Guard Supply Fund is a revolving fund which finances, on a reimbursable cost basis, the procurement of uniform clothing, commissary provisions, general stores, and technical materials (14 U.S.C. 650). Coast Guard Supply Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 3,419 Accounts receivable, net 2,229 Advances 8 Clothing for sale 763 Commissary supplies 1,503 General stores 4,591 Total $12,513 Liabilities and Government equity: Current liabilities $ 3,532 Capital 8,981 Total $12,513 PAGENO="0095" ECONOMY IN GOVERNMENT 347 Coast Guard Yard Fund The Coast Guard Yard Fund, a revolving fund, finances all direct and indirect costs of industrial operations at the Coast Guard Yard, Curtis Bay, Maryland. The fund is financed by advances or reimbursements re- ceived principally from Coast Guard appropriations and also from other Government agencies and non-Government sources (14 U.S.C. 648). Coast Guard Yard Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $12,434 Accounts receivable, net 1,323 Finished goods 154 Raw materials 2,247 Fixed assets, net 7,515 Total $23~~73 Liabilities and Government equity: Accounts payable and accrued liabilities $14,273 Deferred credits 61 Capital 9,301 Retained earnings 38 Total $~,673 Alaska Railroad Revolving Fund The Alaska Railroad is authorized to perform generally all the usual duties of a common carrier by railroad so as to best aid in the develop- ment of agricultural, mineral, and other resources of Alaska (48 U.S.C. 301-308). PAGENO="0096" 348 ECONOMY IN GOVERNMENT Alaska Railroad Revolving Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 7,282 Accounts receivable 3,034 Selected assets 3,743 Long-term receivables 1,178 Clearing accounts 482 Undistributed charges 9,276 Deferred assets 27 Fixed assets 115,818 Total $140,840 Liabilities and Government equity: Current liabilities $ 3,777 Capital, start of year 134,892 Appropriation 4,100 Donated assets, net 45 Write-off of disaster losses, depreciable fixed property 407 Write-off of disaster losses, non depreciable fixed property -59 Write-off of disaster restoration costs -165 Retained earnings Total $140,840 GENERAL SERVICES AD~4INISTRATI0N Buildings Management Fund This fund finances, on a reimbursable basis, building management ac- tivities consisting of management, rental, operation, and protection of Government owned and leased space in and outside the District of Columbia for housing Federal agencies; modernization and recurring repairs to Government-owned space under jurisdiction of General Services Administra- tion; protection and maintenance of excess and surplus properties; mainte- nance of~ sites acquired for future construction of Federal buildings; uni- forms and uniform allowances; and other related building services (40 U.S.C. 490). Earnings resulting from operations, after making provision for prior year losses, if any, are paid into the Treasury as miscellaneous receipts. PAGENO="0097" ECONOMY IN GOVERNMENT 349 Buildings Management F~nci Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 14,913 Accounts receivable, net 17,628 Advances 2 Work in process 130,644 Inventories, supplies 3,698 Deferred charges 433 Fixed assets, net - L,7l8_ Total _______ Liabilities and Government equity: Current liabilities $160,944 Unfunded leave liability 8,675 Non-interest-bearing capital 7,884 Capitalization of assets 3,398 Provision for unfunded leave liability -8,004 Retained earnings 2,139 Total $17 5~036 General Supply Fund This fund finances, on a reimbursable basis, a national supply depot system and a system of ordering supplies for direct delivery to agencies. Supplies or services, are sold from the fund at cost to other agencies and the District of Columbia. Related operating expenses are provided for un- der the appropriation "Operating Expenses, Federal Supply Service." Also financed by the fund and reimbursed by using agencies are the operations of interagency motor pools established in areas of high vehicle density, the rehabilitation and repair of furniture and equipment, and administra- tive equipment used in the General Services Administration services and staff offices (5 U.S.C. 63Og). Surplus earnings, after making provision for prior year losses, if any, are paid into the Treasury as miscellaneous receipts. 79-4590-67-pt. 2-7 PAGENO="0098" 350 ECONOMY IN GOVERNMENT General S~pply Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 83,794 Accounts receivable, net 146,256 Advances 3,207 Commodities for sale 190,935 Supplies, deferred charges 948 Fixed assets 76,041 Total $501,181 Liabilities and Government equity: Current liabilities $205,264 Unfunded leave liability 141 Capital 292,586 Retained earnings 3,190 Total PAGENO="0099" ECONOMY IN GOVERNMENT 351 DEPARTMENT OF HOUS INC AND URBAN DEVELOPMENT Operations, College Housing Loan Fund This revolving fund finances loans to public or private nonprofit colleges and public or private nonprofit hospitals to finance the con- struction of housing and other educational facilities for students and faculties. The fund is financed by an authorization to borrow from the Treasury (12 U.S.C. 1749). Operations, College Housing Loan Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 88,334 Accounts receivable, net 18,427 Loans receivable 2,241,625 Total $2,348,386 Liabilities and Government equity: Current liabilities $ 37,845 Interest-bearing capital 2,304,581 Retained earnings 5,960 Total $2,348,386 Housing for the elderly or Handicapped Fund This revolving fund finances loans to private nonprofit corporations and consumer cooperatives for the construction of rental housing and re- lated facilities for elderly persons as authorized by the Housing Act of 1959, as amended (12 U.S.C. l7Olq et seq.). The fund is financed by di- rect appropriations. PAGENO="0100" 352 ECONOMY IN GOVERNMENT Housing for the Elderly or Handicapped Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $180,183 Accounts receivable 1,651 Loans receivable, net 145,983 Total Liabilities and Government equity: Accounts payable and accrued lia- bilities $ 243 Non-interest-bearing capital 325,000 Retained earnings 2,575 Total $327817a aDetails do not add due to rounding. Public facility loans This is a public enterprise type of fund which finances loans to mu- nicipalities and other subdivisions and instrumentalities of States and Indian tribes for construction of public facilities (42 U.S.C. 1492). Public Facilities Loans Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 39,270 Accounts receivable, net 2,557 Loans receivable, net 206,322 Total Liabilities and Government equity: Accounts payable and other ac- crued liabilities $ 4,984 Interest-bearing capital 253,568 Deficit -10,404 Total aDetails do not add due to rounding. PAGENO="0101" ECONOMY IN GOVERNMENT 353 Urban Renewal Fund The Urban Renewal Fund is a revolving fund financed through Treasury borrowings. The fund provides local municipalities with interim financ- ing until permanent project funds are provided (42 U.s.c. 1452). Program and financing data relating to the capital grants portion of the Urban Renewal Program are shown in the following table. Urban Renewal Fund, capital Grants Programs and Financing Fiscal Year 1966 (Thousands of dollars) Program obligations: capital outlay (grants): Projects $ 306,798 code enforcement 337 All other 13,249 Subtotal 320,384 changes in selected resources 450,125 Total $ 770,509 Financing: Unobligated balance available, start of year: contract authorization (reserved) $1,588,686 (unreserved) 185,968 contract authorization (new obligation au- thority) 675,000 Available obligation authority 2,449,654 Unobligated balance available, end of year: contract authorization (reserved) . -1,548,906 (unreserved) -130,239 $ 770,509 Program and financing data relating to the loans and planning ad- vances portion of the Urban Renewal Program are shown in the following table. PAGENO="0102" 354 ECONOMY IN GOVERNMENT Urban Renewal Fund, Loans and Planning Adv~pce~ Prograns and Financiflg Fiscal Year 1966 (Thousands of dollars) Program obligations: Planning advances $ 32,957 Temporary loans 251,965 Subtotal 284,922 Change in selected resources 89,911 Total capital outlay--obliga- tions 374,833 Operating costs, funded: Interest on borrowings 8,470 Site representation and audit expense 3,539 Total obligations $386,842 Financing: Unobligated balance available, start of year: Authorization to spend public debt re- ceipts $424,760 Fund balance 43,657 Receipts and reimbursements from non-Federal sources: Planning advance repayments 22,705 Temporary loan repayments 235,745 Definitive loan repayments 3 Revenue 8,874 Site representation and audit fees 3,539 Appropriation 13,745 Available financial authority 753,028 Unobligated balance available, end of year: Authorization to spend public debt re- ceipts -352,441 Comparative transfer to other accounts -13,745 $386,842 Total PAGENO="0103" ECONOMY IN GOVERNMENT 355 VETERANS ADMINISTRATION Direct Loan Revolving Fund The Direct Loan Revolving Fund was established by Public Law 475, Eighty-first Congress. The purpose of the direct loan program is to pro- vide credit assistance to qualified veterans for the purchase of homes or farms in rural areas where private capital is unavailable for Veterans Administration (VA) guaranteed loans. The Veterans Readjustment Benef its Act of 1966 (38 U.S.C. 1818) extended direct loan availability to eligible veterans who served in the Armed Forces after January 31, 1955. From the beginning of the direct loan program in 1950 through June 30, 1966, about $1.73 billion has been advanced by the Treasury, of which about $3 million has been returned to the Treasury as miscellaneous receipts and about $306 million has been transferred to the Loan Guaranty Revolving Fund. Direct Loan Revolving Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $1,002,271 Accounts receivable--regular, net 6,724 Interest collections óñ deposit 5,939 Equity in loans receivable 478,574 Principal collections in escrow 6,467 Equity in real property 4,687 Total $1,504,662 Liabilities and Government equity: Accrued interest payable $ 9,135 Accounts payable and accrued liabilities 35,013 Deferred credits 197 Interest-bearing capital 1,424,360 Retained earnings, end of year 35,957 Total $1,504,662 Loan Guaranty Revolving Fund The Loan Guaranty Revolving Fund was established on July 1, 1961, by Public Law 86-665. The fund is used to pay the guaranty or insurance claims of holders of defaulted guaranteed loans and to pay for the ac- quisition of properties which were the security for defaulted loans. PAGENO="0104" 356 ECONOMY IN GOVERNMENT Expenses incurred in the maintenance, management, and selling of acquired properties are also paid fron this fund, as are all other expenses (except administrative expenses) incidental to operations, such as payment of real estate taxes and the repurchase of loans previously sold. Initial funding was obtained through capitalization of funds and property of the already existing loan guaranty program. Loan Guaranty Revolving Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $182,750 Accounts receivable, regular, net 3,633 Equity in loans receivable 534,084 Principal collections in escrow 702 Advances for bidding at public sales 100 Claims receivable, net 6,300 Equity in real property 148,223 Total $875,792 Liabilities and Government equity: Accounts payable and accrued liabilities $ 16,633 Deferred credits 139 Non-interest-bearing capital 955,206 Deficit -96,186 Total $875,792 Supply Fund The VA Supply Fund was created by the act of July 6, 1953, Public Law 149, Eighty-third Congress, for the operation and maintenance of a supply system for the VA including procurement of supplies, equipment, and services, to be used by all VA operating departments. The initial financing of the fund was accomplished by the capitalization of inven- tories on hand at June 30, 1953. PAGENO="0105" ECONOMY IN GOVERNMENT 357 Veterans Administration Supply Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 3,086 Accounts receivable, net 4,915 Advances 2,520 Commodities for sale 34,939 Fixed assets, net 525 Total $45,985 Liabilities and Government equity: Current liabilities $ 6,652 Non-interest-bearing capital 39,986 Decapitalization of inventories -762 Retained earnings 110 Total ~45985a aDetails do not add due to rounding. CIVIL SERVICE COMMISSION Investigations Revolving Fund This fund finances full field personnel security investigations. Federal agencies reimburse the fund for investigations made at rates es- timated by the Civil Service Commission to be adequate to recover the expenses of operations (66 Stat. 43). PAGENO="0106" 358 ECONOMY IN GOVERNMENT Investigations Revolving Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $2,242 Accounts receivable, net 1,536 Unfilled customers' orders 1,575 Advances 50 Equipment, net Total ~ Liabilities and Government equity: Current liabilities $1,593 Non-interest-bearing capital 4,000 Retained earnings Total SM~ALL BUSINESS ADMINISTRATION Revolving Fund This fund financed business and disaster loans and prime contract- ing activities as authorized by the Small Business Act, as amended (15 U.S.C. 631 et seq.). Public Law 89-409, approved May 2, 1966, pro- vided for the establishment of two separate revolving funds to replace this fund: (1) a Disaster Loan Fund and (2) a Business Loan and Invest- ment Fund. The financial condition as of June 30, 1966, of the Revolv- ing Fund follows. PAGENO="0107" ECONOMY IN GOVERNMEW2 359 Small Business Administration Revolving Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 718,201 Accounts receivable, net 18,998 Interest collections on deposit 3,517 Deferred charges 352 Equity in loans receivable 875,994 Investments in small business investment companies, net 29,906 Acquired security and collateral, net 4,288 Judgments, notes, and other receivables, net 3,521 Total $1,654,777 Liabilities and Government equity: Current liabilities $ 73,652 Interest-bearing capital 891,313 Non-interest-bearing capital 908,687 Accountability for RFC loans 3,043 Deficit 22l,9l8 Total $1,654,777 UNITED STATES INFORNATION AGENCY Informational Madia Guarantee Fund This fund operates under the authority of section lOll of the United States Information and Education Exchange Act of 1948, as anended (Public Law 80-402). The Informational Media Guaranty Program makes it possible for commercial exporters of selected American books, periodicals, motion pictures, recordings, etc., to sell their materials in certain soft- currency countries. The fund is financed primarily by Treasury borrowing. PAGENO="0108" 360 ECONOMY IN GOVERNMENT Informational Media Guarantee Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 317 Foreign currency obtained from operations 268 Total $ 585 Liabilities and Government equity: Current liabilities $ 147 Interest-bearing capital 22,056 Deficit -21,618 Total $ 585 DEPART~NT OF AGRICULTURE Farmers Home Administration Emergency Credit Revolving Fund This fund is authorized by subtitle C of the Consolidated Farmers Home Administration Act of 1961 to finance emergency loans in areas where agricultural credit is not readily available because of natural disasters. Emergency Credit Revolving Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 27,440 Accounts receivable, net 3,622 Loans receivable, net 100,830 Acquired security or collateral 133 Judgments, net 192 Total $l32~2l7 Liabilities and Government equity: Current liabilities $ 158 Non-interest-bearing capital 235,858 Deficit -103,799 Total $l32~2i7 PAGENO="0109" ECONOMY IN GOVERNMENT 361 Farmers Home Administration Direct Loan Account This account was established on October 16, 1961, pursuant to sec- tion 338(c) of the Consolidated Farmers Home Administration Act of 1961. The program provides real estate and operating loans to farmers, ranchers, and agricultural associations unable to obtain credit from other sources at reasonable rates. Direct Loan Account Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 115,340 Accounts receivable, net 39,285 Loans receivable, net 1,010,909 Property acquired through foreclosure 473 Land and improvements 38 Judgments, net 632 Total Government equity: Interest-bearing capital $ 597,959 Non-interest-bearing capital 484,326 Retained earnings 84,392 Total $L,166.677 Forest Service Working Capital Fund This fund is a self-sustaining revolving fund which provides ser- vices to national forests; to experimental stations; to other Federal agencies, when necessary; and, as provided by law, to State and private agencies which cooperate with the Forest Service in fire control and other programs. Fund receipts are derived primarily from administrative budget accounts. PAGENO="0110" 362 ECONOMY IN GOVERNMENT Forest Service Working Capital Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 8,119 Accounts receivable, net 2,442 Advances 3 Deferred charges 9 Inventories 5,349 Fixed assets, net 26,091 Total $42,013 Liabilities and Government equity: Current liabilities $ 4,333 Capital 29,993 Retained earnings 7,687 Total $42,013 PAGENO="0111" ECONOMY IN GOVERNMENT 363 CONTRACT AUTHORIZATIONS Contract authorizations represent grants of authority by the Congress to incur obligations prior to the enactment of appropriations. A contract authorization does not, in itself; permit the spending of money. It must be followed by an ap~5ropriation to permit payment of the obligations in- curred thereunder. The extent of this method of financing in the adminis- trative budget accounts during fiscal year 1966 is shown in the following table. Administrative Budget Accounts Contract Authorizations, Fiscal Year 1966 (Millions of dollars) Unfunded contract authorizations, June 30, 1965 $5,397 Authorizations - 2,283 Rescissions, cancellations, adjust- ments -31 Appropriations to liquidate Unfunded contract authorizations, June 30, 1966 A breakdown by agency of the unfunded contract authorizations as of June 30, 1966, follows: (Millions of dollars) Legislative branch $ 7 Department of Agriculture 1,167 Department of Commerce 198 Department of Defense 383 Department of the Interior 116 Department of Health, Education, and Welfare 100 Department of Housing and Urban Development Total The extent of contract authorization activity reflected in trust fund accounts for fiscal year 1966 is as follows: PAGENO="0112" 364 ECONOMY IN GOVERNMENT Trust Fund Accounts Contract Authorizations, Fiscal Year 1966 (Millions of dollars) Unfunded contract authorizations, June 30, 1965 $ 9,982 Authorizations 5,439 Rescissions, cancellations, adjust- ments -25 Appropriations to liquidate -4,613 Unfunded contract authorizations, June 30, 1966 $10,783 A breakdown of the unfunded contract authorizations existing for trust fund programs as of June 30, 1966, follows: (Thousands of dollars) Advances, foreign assistance, executive $ 1,974,160 Bureau of Public Roads: Federal-aid highways 8,800,577 Cooperative work, forest highways 49 Advances from Alaska 400 Equipment for cooperating countries 4,475 Technical assistance, U.S. dollars advanced from foreign governments 3,064 Total $&,7 82,725 PAGENO="0113" ECONOMY IN GOVERNMENT 365 SPECIAL FUND RECEIPTS AND APPROPRIATIONS Special funds are those which are established to account for re- ceipts that are earmarked by law for a specific purpose. Some special funds are subject to annual appropriation by Congress while others are automatically available under the laws which created the funds. The ex- tent to which agency activities are financed through special funds is shown by the following table. Administrative Budget Accounts Status of Special Fund Receipts June 30, 1966 (Thousands of dollars) Balance, June 30, 1965 $ 472,553 Receipts, fiscal year 1966 605.717 Total $1,078,270 Appropriations, fiscal year 1966 -547,887 Adjustments 6.099 Balance, June 30, 1966 $ 536,482 Brief descriptions of special fund programs follow. It is to be noted that, in some cases, dollar amounts do not total due to rounding. LEGISLATIVE BRANCH Contributions and Interest, Oliver Wendell Holmes Devise Fund The fund was established to (1) prepare a history of the Supreme Court of the United States, and, if deemed advisable, (2) finance am annual lecture or series of lectures, and (3) publish a memorial volume of Justice Holmes' writings (69 Stat. 533). The fund is financed from contributions and from interest on the principal of the fund. The unobligated fund balance as of June 30, 1965, was $219,000. The fiscal year 1966 appropriation was $11,000 and obligations were $19,000. The unobligated fund balance as of June 30, 1966, was $211,000. THE JUDICIARY Referees' Salary and Expense Fund Salaries and expenses of bankruptcy referees are paid from a special fund in the Treasury to which are deposited payments of fees and charges by parties to bankruptcy proceedings (11 U.S.C. 68). 79-459 0 - 67 - pt. 2 - 8 PAGENO="0114" 366 ECONOMY IN GOVERNMENT The unappropriated receipts balance as of June 30, 1965, was $10.7 million. The fiscal year 1966 receipts were $9.9 million and appropria- tions were $10.9 million. The unappropriated balance as of June 30, 1966, was $10 million. DEPARTMENT OF DEFENSE Wildlife Conservation, etc., Military Reservations Proceeds from the sale of fishing and hunting permits on military reservations are used to carry out a program of development, conserva- tion, and rehabilitation of fish and wildlife on military reservations (63 Stat. 759 and 74 Stat. 1053). The unobligated fund balance as of June 30, 1965, was $158,000. The fiscal year 1966 appropriation was $198,000 and obligations were $158,000. The unobligated fund balance as of June 30, 1966, was $198,000. Corps of Engineers, Payments to States, Flood Control Act of 1954 Three fourths of the money received from lease of Federal land ac- quired for flood control, navigation, and allied purposes is paid to the State in which such property is situated to be used for public schools, roads, or other expenses of county government (33 U.S.C. 701c-3). The unobligated fund balance as of June 30, 1965, was $2 million. The fiscal year 1966 appropriation was $2.4 million and obligations were $2 million. The unobligated fund balance as of June 30, 1966, was $2.4 million. Corps of Engin~ars. Civil Special Expense Funds Fees paid by mine operators in the Sacramento and San Joaquin Basins for depositing mine debris in restraining works are used for maintenance (33 U.S.C. 683). License fees are levied by the Federal Power Commission for private construction, operation, and maintenance of dams, conduits, and reservoirs. Half the fees collected are used for maintenance and operation of Federal dams and other navigation structures and for im- provement of navigable water (31 U.S.C. 725c). The unobligated fund balance as of June 30, 1965, was $154,000. The fiscal year 1966 appropriation was $3.2 million and obligations were $172,000. The unobligated fund balance as of June 30, 1966, was $3.2 mil- lion. PAGENO="0115" ECONOMY IN GOVERNMENT 367 Department of the Air Force. Receipts, Alaska Communication System The Department of Defense Appropriation Act, 1963, provided in part that "*** in addition, not to exceed 15 per centum of the current fiscal year receipts of the. Alaska Communication System may be merged with and used for the purposes of this appropriation and charges for station agent agreements may be paid from receipts of the Alaska Communication System." The unappropriated receipts balance of the account "Receipts, Alaska communication system" as of June 30, 1965, was $24.7 million. The fiscal year 1966 receipts were $10 million and there was no appropriation. The account balance as of June 30, 1966,was $34.7 million. ~~RTMENT OF THE INTERIOR Receipts, Reclamation Fund, Special Fund This fund is derived from repayments and other revenue from irriga- tion and power facilities, together with certain receipts from sales, leases, and rentals of Federal lands in the 17 western States and is available for expenditure pursuant to authorization contained in appro- priation acts (43 U.S.C. 391). The unappropriated receipts fund balance as of June 30, 1965, was $150.4 million. The fiscal year 1966 receipts were $160.6 million, $0.8 million of unobligated balances was returned to unappropriated re- ceipts, and appropriations were $143.2 million. The unappropriated re- ceipts fund balance as of June 30, 1966, was $168.7 million. Bureau of Land Management. Permanent Appropriations Permanent appropriations arise from receipts of (1) timber sales, (2) grazing land leases, (3) oil and gas royalties, (4) Coos Bay Wagon Road grant lands, (5) Oregon and California land-grant funds, (6) sale of public land and public land products, (7) bonuses, royalties, and rentals resulting from development of mineral resources, and (8) forfeiture-of-timber-purchases bonds. The receipts are used to (1) cover cost of sales, (2) manage grazing lands, (3) make payments to States and counties, (4) improve forests, and (5) maintain roads. (41 Stat. 202, 53 Stat. 1196; 43 U.S.C. 315m; 43 U.S.C. 315i; 44 Stat. 740; 53 Stat. 753-754; 39 Stat. 218, 50 Stat. 876; 43 U.S.C. 315j; 31 U.S.C. 711; 43 U.S.C. 315b; 43 U.S.C. 315; 30 U.S.C. 191; 30 U.S.C. 285; 7 U.S.C. 1012; 74 Stat. 507-508). The unobligated balances relating to the above programs as of June 30, 1965, totaled $1 million. The fiscal year 1966 appropriations amounted to $69 million and obligations were $69.3 million. The un- obligated balances as of June 30, 1966, totaled $0.8 million, PAGENO="0116" * 368 ECONOMY IN GOVERNMENT Land and Water Conservation Fund Receipts from fees charged for entrance to and use of recreation facilities, motorboat fuel taxes, and sale of surplus real property are used for acquisition and development of State and Federal recreation areas. Funds allocated to States must be equally matched by States. The unobligated fund balance as of June 30, 1965, was $14.3 million. The fiscal year 1966 appropriation was $122.1 million and obligations were $29.1 million. The unobligated fund balance as of June 30, 1966, was $107.1 million. Office of the Territories Internal Revenue Collections for Virgin Islands The local revenue collected annually by the Government of the Virgin Islands is matched by a payment from the annual internal revenue taxes collected by the United States on Virgin Island products transported to the United States (26 U.S.C. 7652(b) (3)). The fiscal year 1966 payment was $10.4 million. Federal Aid in Wildlife Restoration Assistance is given to States, Puerto Rico, Guam, and the Virgin Islands by appropriation of funds equal to revenue from the 11 percent excise tax on the manufacture of firearms and ammunition (16 U.S.C. 669- 669j). The unobligated fund balance as of June 30, 1965, was $5.1 million. The fiscal year 1966 appropriation was $20.2 million and obligations were $18.1 million. The unobligated fund balance as of June 30, 1966, was $7.2 million. Pribilof Island Fund This fund is derived from sales of fur sealskins and other wildlife products of the Pribilof Islands and is available for appropriation for administration of the Pribilof Islands and payment to Alaska from Pribilof Islands receipts as required by law (72 Stat. 339). The unappropriated receipts fund balance as of June 30, 1965, was $1.8 million. The fiscal year 1966 receipts were $2.8 million and appro- priations were $2.5 million. The unappropriated receipts fund balance as of June 30, 1966, was $2.2 million. Migatory Bird Conservation Account Receipts from the sale of Federal hunting stamps are set aside in the migratory bird conservation fund (16 U.S.C. 718). PAGENO="0117" ECONOMY IN GOVERNMENT 369 The account balance as of June 30, 1965, was $1.6 million. The fiscal year 1966 appropriations were $12.2 million, $0.9 million of prior year obligations was recovered, and obligations were $14.1 million. The account balance as of June 30, 1966, was $0.5 million. Southwestern Power Administration Continuing Fund This fund, accumulated from sales of power, is available permanently for emergency expenses and to insure continuity of service. It is also available in such amounts as may be approved annually in appropriation acts to cover costs in connection with the purchase of electric power and the rentals of facilities for transmission and distribution of power (16 U.S.C. 825s-l). The unobligated fund balance as of June 30, 1965, was $0.3 million. The fiscal year 1966 appropriation was $4 million and obligations were $1.8 million. During fiscal year 1966, program authority of $2.3 million lapsed. The unobligated fund balance as of June 30, 1966, was $0.3 mil- lion. Bonneville Power Administration Continuing Fund A continuing fund of $500,000, maintained from power receipts, is used to defray expenses incurred under emergency conditions and to in- sure continuous operation of the Bonneville Power Administration trans- mission system (16 U.S.C. 832). The unobligated fund balance as of June 30, 1965, was $515,000. The fiscal year 1966 obligations were $15,000 and no money was appro- priated. The unobligated fund balance as of June 30, 1966, was $500,000. Colorado River Dam Fund Boulder Canyon Project Revenue from Boulder Canyon project operations is placed in this fund. The fund is available for annual appropriation for payment of ex- penses of operation and maintenance of the project. It is available without further appropriations for payment of interest on amounts ad- vanced from the Treasury for annual payments of $300,000 each to Arizona and Nevada and for repayment of advances from the Treasury for construc- tion or other purposes (43 U.S.C. 617a). The unappropriated receipts fund balance as of June 30, l965,was $1.8 million. The fiscal year 1966 net receipts were $5 million and appropriations were $5 million. The fund balance as of June 30, 1966, was $1.9 million. PAGENO="0118" 370 ECONOMY IN GOVERNMENT Colorado River Development Fund This fund is also derived from revenue of the Boulder Canyon project and is available for appropriation for general investigations (43 U.S.C. 618a). The fund balance as of June 30, 1965, was $16,000. The fiscal year 1966 receipts and appropriations were $500,000. The fund balance as of June 30, 1966, was $16,000. Payment from Proceeds, Sale of Water, Mineral Leasing Act of 1920 When lessees or operators drilling for oil and gas on public lands strike water, water wells may be developed by the Department from pro- ceeds from the sale of water from existing wells (30 U.S.C. 221-229). The unobligated balance available as of June 30, 1965, was $17,000. No obligations were incurred during fiscal year 1966 and the year-end un- obligated balance available was $17,000. National Park Service, Miscellaneous Permanent Appropriations 1. Revenues received from the collection of park visitor fees are used to provide educational facilities to dependents of park personnel (62 Stat. 338). 2. Park visitor fees are used to compensate the State of Wyoming for tax losses on Grand Teton National Park lands (64 Stat. 851). 3. Some of the buildings on lands acquired for establishment of Independence National Historical Park, Philadelphia, Pennsylvania, were rented pending their conversion to park purposes or demolition. Some of the cleared sites are being used temporarily as parking lots from which income is also realized. The income is used for management and mainte- nance of the rental properties and for demolition of buildings (65 Stat. 644). The unobligated balance available for the above programs as of June 30, 1965, was $86,000. The fiscal year 1966 appropriation was $26,000 and obligations were $107,000. The unobligated fund balance as of June 30, 1966, was $4,000. Bureau of Indian Affairs Miscellaneous Permanent Appropriations 1. Acquisition of lands and loans to Indians in Oklahoma, act of June 26, 1936--Revenues derived from mineral deposits underlying certain PAGENO="0119" ECONOMY IN GOVERNMENT 371 lands purchased in Oklahoma are used for the acquisition of lands and loans to individual Indians, associations, or corporate groups of Indians, residing in. Oklahoma (25 u.s.c. 507). 2. Indian arts and crafts--Fees charged for use of Government trade- marks attesting to genuineness and quality of Indian products are used to stimulate sales of Indian arts and crafts (25 u.s.c. 305 a, c). 3. Operation and maintenance, Indian irrigation systems--Revenues derived from charges for operation and maintenance of Indian irrigation projects are used to defray in part the cost of operating and maintain- ing these projects (60 Stat. 895). 4. Power systems, Indian irrigation systems--Revenues collected from the sale of electric power by the colorado River, Flathead, and San carlos power systems are used to operate and maintain these systems (60 Stat. 895; 65 Stat. 254). The unobligated balances available for the above activities as of June 30, 1965, totaled $3.8 million. The fiscal year 1966 appropriation was $6.8 million and obligations were $6.6 million. The unobligated balances available as of June 30, 1966, were $4 million. DEPARTMENT OF STATE Educational Exchange Permanent Appropriations Payments by Finland on its World War I debt are used to finance pro- grams authorized by the Mutual Educational and cultural Exchange Act of 1961 in relation to Finland and the people of Finland (75 Stat. 532). The unobligated balance available as of June 30, 1965, was $154,000. The fiscal year 1966 appropriation was $353,000 and $4,000 of prior year's obligations was recovered. Obligations were $409,000. The unobligated balance available as of June 30, 1966, was $102,000. Replacement of Passenger Vehicles Sold Abroad Proceeds from sales abroad of passenger motor vehicles of the For- eign Service are available for the replacement of such vehicles (40 u.s.c. 481 (c)). Beginning in 1967, this appropriation account is being dis- continued and the proceeds will be credited to salaries and expenses. Fiscal year 1966 program expenditures were $395,000. TREASURY DEPARTMENT Bureau of the Mint Permanent Appropriations The coinage profit fund and silver profit fund are used to cover the costs of (1) alloy metal used in making 900 fine subsidiary silver PAGENO="0120" 372 ECONOMY IN GOYERN~IENT coins, (2) wastage and recoinage losses, and (3) distribution of coins. The funds are financed from a portion of the gains resulting from manu- facturing coins. The unobligated balances available for the above activities as of June 30, 1965, totaled $2.5 million. The fiscal year 1966 appropriation was $455,000 and obligations were $1.8 million. The unobligated balances as of June 30, 1966, were $78,000. Obligational authority of $1.1 mil- lion lapsed during fiscal year 1966. Internal Revenue Collections for Puerto Rico Taxes collected under the internal revenue laws of the United States on articles produced in Puerto Rico and either transported to the United States or consumed on the island are paid to Puerto Rico (26 U.S.C. 7652). Fiscal year 1966 collections and the corresponding appropriation totaled $51.7 million. Miscellaneous, Permanent Appropriations 1. Expenses of administration of settlement of War Claims Act of 1928--Funds from the German Deposit Fund are deposited in a receipt ac- count and appropriated for a portion of the administrative expenses in- curred in paying awards under the settlement of the War Claims Act of 1928 (50 U.S.C. App. 9 note). 2. Federal control of transportation systems--Expenditures are for compensation payments to former employees (or survivors) of the railroads who were injured during the period of Federal control in World War I (41 Stat. 468 (e)). The unobligated balance available for the two programs above as of June 30, 1965, was $36,000. The fiscal year 1966 appropriations were $15,000 and obligations were $37,000. The unobligated balance as of June 30, 1966, was $14,000. PAGENO="0121" ECONOMY IN GOVERNMENT 373 GENERAL SERVICES ADMINISTRATION Expenses, Disposal of Surplus Real and Related Personal Property Section 204(b) of the Federal Property and Adninistrative Services Act of 1949, as amended (40 U.S.C. 485), requires that proceeds from GSA's dispositions of surplus real and related personal property be set aside in a special fund in the Treasury. GSA may receive from this fund an amount, to be determined by the Director, Bureau of the Budget, to pay appraisers' fees, auctioneers' fees, realty brokers' fees, advertising costs, and surveying costs. Excess funds beyond current operating needs must then be transferred from the special fund to miscellaneous receipts. The fiscal year 1966 appropriation and corresponding program obliga- tions for the above expenses were $989,000. FEDERAL POWER CONMISSION ~yments to States Under Federal Power Act The States receive 37.5 percent of the receipts from licenses is- sued by the Federal Power Commission for occupancy and use of national forests and public lands within their boundaries (16 U.S.C. 810). The fiscal year 1966 payments to States amounted to $71,000. DEPARTMENT OF AGRICULTURE Payments to States, National Forest Fund With minor exceptions, 25 percent of the money received from the na- tional forests is paid to the States for public schools and roads of the county in which such forests are situated (16 U.S.C. 500). Fiscal year 1966 payments were $35.5 million. Roads and Trails for States, National Forest Fund Ten percent of all money received from the national forests during each fiscal year is available at year-end to be expended by the Secretary of Agriculture for the construction and maintenance of roads and trails within the national forests in the States from which such proceeds are de- rived (16 U.S.C. 501). Fiscal year 1966 program expenditures were $14.2 million. PAGENO="0122" 374 ECONOMY IN GOVERNMENT Expenses, Brush Disposal Purchasers of national-forest timber may be required by the Secre- tary of Agriculture to deposit the estimated cost to the United States of disposing of brush and other debris resulting from their cutting opera- tions--such deposits to be covered into the Treasury in a special fund, which is appropriated and available until expended (16 U.S.C. 490). The unobligated fund balance as of June 30, 1965, was $10 million. The fiscal year 1966 appropriation was $10.2 million and obligations were $9 million. The unobligated balance as of June 30, 1966, was $11.2 mil- lion. Payments to Counties, National Grasslands Of the revenues received from the use of national grasslands, 25 percent is paid to the counties in which such land is situated for school and road purposes (7 U.S.C. 1012). Fiscal year 1966 payments were $429,000. Payment to Minnesota At the close of each fiscal year, the State of Minnesota is paid 0.75 percent of the appraised value of certain Superior National Forest lands (16 U.S.C. 577g). The fiscal year 1966 payments were $141,000. Restoration of Forest Lands and Ipprovements Funds received from settlement of claims involving damage to lands or improvements and from forfeiture of deposits and bonds by permittees and timber purchasers are used for the restoration made necessary by the action which led to the settlement or forfeiture (16 U.S.C. 579c). The fiscal year 1966 program obligations were $24,000. Forest Fire Prevention Fees for the use of the character "Smokey Bear" by private enter- prises are collected and are available for furthering the nationwide forest fire prevention campaign (18 U.S.C. 711). The fiscal year 1966 program obligations were $24,000. PAGENO="0123" ECONOMY IN GOVERNMENT :375 USER CHARGES PROGRAMS Among the numerous services performed by the Federal Government in the public interest, many provide an added special benefit to individuals or groups. The Government is extensively engaged in the sale and leasing of Government-owned resources and property. Executive agencies have es- tablished a system of fees and charges designed to recover all or a part of the costs, or fair market value in the case of property, of providing these special benefits. Statutory authority for the user charges program was provided with the enactment of title V of the Independent Offices Appropriation Act of 1952 (5 U.S.C. 140) which itemized numerous types of activities that the Congress believed should be "self-sustaining to the full extent possible." With respect to collections made under the user charges program, the general rule is that the monies go into the general fund of the Treasury as miscellaneous receipts. However, exceptions are made where: 1. It is intended that an agency or program be operated on a substantially self-sustaining basis from receipts for services per- formed or from the sale of products or use of Government-owned re- sources or property. 2. The agency can show that the initiation or increase of fees or charges is not feasible without earmarking of receipts. 3. The receipts are in payment of the cost of authorized spe- cial benefits for which the demand is irregular or unpredictable, such as inspections performedupon request outside-the regular d~t-y---~~~ hours. Under the above exceptions, which must be supported by legal author- ity, user charges receipts may be deposited to trust funds and revolving funds or may be used to reimburse the appropriations which finance the activities involved. A tabulation of the amounts and disposition of user charges receipts as contained in the May l~66 "User Charges, Annual Pro- gress Report" published by the Bureau of the Budget follows: Fiscal years 1963 1964 1965 (millions) Miscellaneous Beceipts $1,076.5 $ 728.9 $ 805.0 Revolving Funds 325.4 350.3 378.8 Trust Funds 30.1 53.0 63.4 Appropriations 158.7 139.1 161.4 Total $1,590.7 $]~,~7l.3 PAGENO="0124" 376 ECONOMY IN GOVERNMENT A departmental breakdown of fiscal year 1965 deposits to revolving funds, trust funds, and appropriations follows: Agency Revolving Funds Trust Funds Appropriations (millions) Agriculture $ 5.1 $56.1 $ 24.9 Commerce 10.3 4.1 .6 Defense 28.2 - 48.6 HEW 7.4 .5 21.7 Interior 25.3 2.0 2.5 Justice - - 1.8 Labor 1.0 .1 .7 Post Office 245.0 - Treasury - 12.8 AEC - 45.5 GSA 1.7 .4 - HUB 37.2 - - VA 1.3 - 2.3 All Other 16.3 .2 (a) Total $378.8 $63.4 $161.4 aLess than $50,000. Examples of user charges in effect during fiscal year 1965 are given below. Activity Agency Charge Grazing cattle and horses Agriculture $0.42 per animal month Grazing sheep and goats do. $0.0975 per animal month Approval for departure of a U.S. vessel Commerce $25 per application Barber and beauty shop con- Health, Education, 21 percent of gross cession and Welfare receipts License to construct, use, and maintain wharf Interior $20 to $75 each Permit to transfer petition for naturalization Justice $5 per application Use of Government cabins Interior $99 per year PAGENO="0125" ECONOMY IN GOVERNMENT 377 Activity Agency Charg~ Use of Government camp quarters Interior $1.30 to $2.50 per day School tuition Air Force $283.65 to $480.00 per student per school year Do. Army $371.36 to $441.00 per student per school year Do. Navy $330 to $868 per stu- dent per school year Import-export inspection and quarantine Agriculture $6.60 per hour overtime Testing of dry cells and General Services $81 to $657 per test batteries Administration Photocopies Labor $0.50 per page Technical literature searches Commerce $11 per hour Inpatient care Veterans $42 per day at general Administration medical and surgical hospitals;$l5.50 per day at neuropsychiatric hospitals Do. Health, Education, $42 per day for foreign and Welfare seamen and other non- beneficiaries; $9.74 per day for D.C. resi- dents and prisoners at Saint Elizabeths Hospital Do. Defense $27 per day for bene- ficiaries of other Fed- eral agencies; $42 per day for nonbeneficia- ries at military hos- pitals Rental of land for farming National Aero- $91 per acre per year purposes nautics and Space Administration PAGENO="0126" 378 ECONO~ IN GOVER~E~ Activity Computer usage Lease of spent mat~ria1s test reactor fuel elements Rental of vessels Sale of timber Sale of photographs and publications Subscription to "Passenger Travel Reports via Sea and Air" Maintenance of vehicles, European bases Railroad service, operation and maintenance Stevedoring Analysis of specific materials and compounds Cyclotron irradiation service Establishing a Customs bonded warehouse Examination of insured sav- ings and loan association Guest meals Agency Health, Education, and Welfare Atomic Energy Com- mission Army Navy Treasury Justice Army Interior Navy Atomic Energy Commission Atomic Energy Commission Treasury Federal Home Loan Bank Board Veterans Adminis- tration Charge $45 per hour IBM 1401; $95 per hour IBM 7010 $100 per year or frac- tion thereof for each fuel element $3 to $85 per hour $38.68 per thousand board feet of saw logs; $18.98 per thou- sand board feet of hardwood; $7.26 per cord of pulpwood $1.50 to $45.00 each $25 per year $1.67 per man-hour $4.53 per thousand gross ton miles $7.80 to $15.20 per man-hour $14 per hour $140 per hour $80 each $78 per man-day $0.95 for breakfast; $1.10 for lunch and dinner PAGENO="0127" ECONOMY IN GOVERNMENT 379 GOVERNMENT CORPORATIONS There are a number of Federal organizations which take the form of corporations. As such, they operate in a manner similar to that of commer- cial enterprises in that they have governing bodies in the form of boards of directors which have broad powers to take action. Information on pro- grams and financial conditions of Government corporations is shown below. EXPORT-IMPORT BANK OF WASHINGTON The Export-Import Bank of Washington was organized in 1934 and its existing programs were authorized under the Export-Import Bank Act of 1945, as amended. The purpose of the Bank is to aid in financing United States exports. The major types of financing are loans to foreign borrowers, dis- count loans to commercial banks, and guarantees to commercial banks (61 Stat. 130). By Public Law 88-101, the life of the Bank was extended to June 30, 1968, the lending authority was increased to $9 billion, and the amount of guarantees and insurance outstanding at any time was established at $2 bil- lion. Capital stock of $1 billion has been purchased by the Treasury. In addition, the Bank is authorized to borrow, up to $6 billion from the Trea- sury. The Bank's net income for fiscal year 1966 was $114.2 million. Export-Import Bank of Washington Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 1,112 Accounts receivable 49,275 Loans receivable 2,226,786 Other 148 Total $2,277,321 Liabilities and Government equity: Current liabilities $ 41,402 Interest-bearing capital 177,800 Non-interest-bearing capital 1,000,000 Retained earnings 1.058.119 Total $2,277,321 PAGENO="0128" 380 ECONOMY IN GOVERNMENT COMMODITY CREDIT CORPORATION The Commodity Credit Corporation was created to stabilize, support, and protect farm income and prices, help maintain the balance and adeq-uacy of supplies of agricultural commodities, and help in their orderly distri- bution (15 U.S.C. 714-714p). During fiscal year 1966, the Corporation's net loss for price support and related programs was $2,447 million; the net operating loss for special activities was $1,914 million. Following is an abbreviated statement of financial condition of the Corporation. Commodity Credit Corporation Financial Condition June 30, 1966 (Millions of dollars) Assets: Treasury balance $ 45.6 Accounts receivable 416.7 Agricultural commodities for sale 2,454.4 Interest due 453.4 Price support and storage facil- ity loans receivable 1,143.8 Other 115.0 Total $ 4,628.9 Liabilities and Government equity: Current liabilities $ 1,298.7 Capital 12,057.9 Deficit -8,727.7 Total $ 4.628.9 FEDERAL CROP INSURANCE CORPORATION The Federal Crop Insurance Corporation was created on February 16, 1938 (7 U.S.C. 1501-1519), to carry out the provisions of the Federal Crop Insurance Act. The purpose of this act is to promote the national welfare by improving the economic stability of agriculture through a sound system of crop insurance and by providing the means for the research and experi- ence helpful in devising and establishing such insurance. The Corporation provides all-risks insurance protection to farmers against loss from un- avoidable causes. Capital stock of $100 million is authorized to be sub- scribed by the United States. As of June 30, 1966, the Secretary of the Treasury held receipts for $40 million of the authorized stock, leaving $60 million unissued. PAGENO="0129" ECONOMY IN GOVERNMENT 381 During fiscal year 1966, the Corporation experienced a loss of $10.4 million. Federal Crop Insurance Corporation Financial Condition June 30, 1966 (Millions of dollars) Assets: Treasury balance $30.9 Accounts receivable, net 17.4 Total $48.3 Liabilities and Government equity: Accounts payable and accrued lLabilities $ 0.6 Deferred credits Provision for surety losses 0.1 Capital 40.0 Deficit Total FEDERAL NATIONAL MORTGAGE ASSOCIATION The Association, operating under the Federal National Mortgage Asso- ciation Charter Act (12 U.S~C. 1716, et seq.), (1) purchases, manages, and sells residential mortgages or loans which are insured by the Federal Hous- ing Administration, guaranteed by the Veterans Administration, or insured by the Farmers 1-Tome Administration, (2) makes short-term bank-type loans which are secured by those types of mortgages and loans, (3) manages and sells certain noninsured or nonguaranteed mortgages or other obligations which have been or may be acquired from authorized sources, and (4) sells to private investors beneficial interests, or participations,in mortgages or other types of obligations in which certain departments or agencies of the Federal Government have a financial interest. The Association's func- tions are carried out through three programs for which separate account- ability is required by statute. These programs are secondary market op- erations, special assistance functions, and management and liquidating functions. Secondary Market Operations Funds Total program obligations during fiscal year 1966 were $1.8 billion. As of June 30, 1966, the unobligated balance available (authorization to spend public debt receipts) was $2.3 billion. 79-459 0 - 67 - Pt. 2 - 9 PAGENO="0130" 382 ECONOMY IX GOVERNMENT ~pecia1 Assistance Functions During fiscal year 1966, new obligational authority of $100 million (authorization to spend public debt receipts) was granted. Total program obligations during 6he year were $281 million. As of June 30, 1966, the unobligated balance available (authorization to spend debt receipts) was $2.3 billion. ~pecial Assistance Functions Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 1,870 U.S. securities 1,636 Excess interest collections on deposit 14,423 Accounts receivable, net 13,758 Equity in loans receivable 806,438 Selected assets 2,025 Total $840149a Liabilities and Government equity: Accounts payable and accrued liabilities $ 39,048 Deferred credits 123 Capital 699,460 Retained earnings 101,518 Total $840,149 aDetails do not add due to rounding. Mana~gement and Liquidating Functions Fund Program functions are financed principally by Treasury borrowings and portfolio liquidations, and all the benefits and burdens of the program ac- crue solely to the Treasury. Net repayments to the Treasury were $114.8 million in 1966. Net income amounted to $3.3 million in 1966. PAGENO="0131" ECONOMY IN GOVERNMENT / 383 Management and Liquidating Functions Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 2,624 U.S. securities 4 Accounts receivable, net 10,444 Deferred charges 369 Excess interest collections on deposit 1,863 Equity in mortgages 827,540 Investments in DHC loans 8,753 Mortgage loans purchased 46,693 Fixed assets 278 Total $898,568 Liabilities and Government equity: Accounts payable and accrued liabilities $ 33,244 Deferred credit 30 Capital 766,370 Retained earnings 98,924 Total $898,568 HOUSING ASSISTANCE ADMINISTRATION The United States Housing Act of 1937, as amended, authorizes a pro- gram of assistance for low-rent public housing under which local govern- ments, pursuant to State enabling legislation, establish independent legal entities, known as local housing authorities (LHAs), to develop, own, and operate low-rent public housing projects. Section 3(a) of the original act, approved September 1, 1937, created the United States Housing Authority, as a wholly owned Government corpora- tion, to carry out the program of assistance for low-rent public housing. The act also provided in section 17 that the Authority have a capital stock of $1 million, subscribed by the United States and paid for by the Secre- tary of the Treasury. Since 1937, the activities of the corporation have been administered by various successive agencies. The corporate activities are currently being administered by the Housing Assistance Administration (HAA), a constitutent agency of the Department of Housing and Urban De- velopment. HAA provides financial and technical assistance to the LHAs in the de- velopment of low-rent housing projects and reviews the administration of the projects after construction is completed to ensure that the projects are operated and maintained in a manner to promote serviceability, PAGENO="0132" 384 ECONOMY IN GOVERNMENT efficiency, economy, and stability and that their low-rent character is maintained. During fiscal year 1966, program obligations were $704.5 million. As of June 30, 1966, the Low-rent Public Housing Fund had an unobligated bal- ance of $365.4 million (authorization to spend debt receipts). Low-rent Public Housing Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 68,573 U.S. securities 21,000 Accounts receivable, net 1,526 Advances 149 Supplies, etc. 67 Loans receivable, net 56,602 Land, structures, equipment, net 703 Total Liabilities and Government equity: Accounts payable and accrued liabilities $ 91,468 Deferred credits 1,031 Capital 247,357 Deficit -191,236 Total PAGENO="0133" ECONOMY IN GOVERNMENT 385 FEDERAL PRISON INDUSTRIES, INCORPORATED The corporation is authorized, under the Attorney General, to estab- lish and operate industries in Federal penal and correctional institutions and disciplinary barracks (18 U.S.C. 4121-4128). Its purposes are to pro- vide employment for inmates, to provide maximum vocational training for qualified inmates in connection with regular institutional and industrial activities, and to operate a placement service to assist released inmates to secure jobs. During fiscal year 1966, the corporation's net income for the year was $8.8 million. Federal Prison Industries Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 6,184 Accounts receivable, net 5,155 Commodities for sale 13,394 Supplies, etc. 345 Buildings and equipment, net 19,077 Total $44,155 Liabilities and Government equity: Current liabilities $ 2,943 Capital 6,286 Retained earnings 34,926 Total $44,155 FEDERAL DEPOSIT INSURANCE CORPORATION The Federal Deposit Insurance Corporation (FDIC) is an independent Government agency which was created in 1933 by the Banking Act of 1933. The corporation insures deposits in banks qualified for deposit insurance, in the maximum amount of $15,000 for each depositor. National banks which are chartered by the Comptroller of the Currency and all State banks that are members of the Federal Reserve System are required to be insured (48 Stat. 168 as amended). The FDIC does not receive appropriated funds nor is its annual budget subject to review by the Congress. Funds for its activities are obtained primarily from assessments paid by the insured banks and from income de- rived from its investment in United States Government securities. PAGENO="0134" ECONOMY IN GOVERNMENT 386 FDIC is authorized to borrow up to $3 billion from the United States Treasury when, in the judgment of the Board of Directors, such funds are required for insurance purposes. This borrowing authority has never been used. Calendar year 1965 income was $214.7 million and expenses were $23.0 million. Federal Deposit Insurance Corporation Financial Condition December 31, 1965 (Thousands of dollars) Assets: Cash $ 3,754 U.S. Government obligations 3,190,208 Assets acquired in receivership and deposit assumption transactions 9,579 Miscellaneous assets 151 Land and office building 8,041 a Total $3,211,732 Liabilities and Deposit Insurance Fund (note b): Accounts payable and accrued liabili- ties $ 1,101 Earnest money and escrow funds 209 Accrued annual leave of employees 1,269 Due insured banks 172,050 Net insured balances of depositors in closed insured banks 777 Deposit Insurance Fund, net income ac- cumulated since inception (note c) 3,036,326 Total $3,211,732 aTotals do not add due to rounding. bCapital stock was retired bypayme'its to the United States Treasury. CThe Deposit Insurance Fund represents the accumulated net income of the Corporation and is available for insuring deposits and payment of ex- penses. PAGENO="0135" ECONOMY IN GOVERNMENT 387 PANAMA CANAL COMPANY The Panama Canal Company is a wholly owned Government corporation whose primary purpose is maintaining and operating the interoceanic canal at the Isthmus of Panama and other necessary supporting operations. The administration of the Company is fritegrated with that of the Canal Zone Government, an independent agency initially financed by appro- priations. The Company is expected to be self-sustaining and is required to reimburse the United States Treasury for the net cost of the Canal Zone Government, for the cost of interest on the net direct investment of the United States in the Company, and for annuity payments made by the United States to the Republic of Panama pursuant to the treaty of 1903, as amended in 1936 (62 Stat. 1076 as amended). Net income for fiscal year 1966 was $5.6 million. Panama Canal Company Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 10,537 Accounts receivable 8,689 Properties, plant, and equipment 481,894 Other 12,959 Total $514,079 Liabilities and Government equity: Liabilities $ 23,857 Reserves 496 Equity 489,726 Total $514,079 SAINT LAWRENCE SEAWAY DEVELOPMENT CORPORATION The Saint Lawrence Seaway Development Corporation, a wholly Government-owned enterprise, is responsible for the construction, opera- tion, and maintenance of that part of the St. Lawrence Seaway within the territorial limits of the United States. The Corporation is "self- supporting" through tolls assessed shippers using seaway facilities. All operating costs are paid from toll revenues and net operating income re- turned to the Treasury in payment of interest and principal (33 U.S.C. 981). PAGENO="0136" 388 ECONOMY IN GOVERNMENT The Corporation's net loss for fiscal year 1966 was $1,999,000. Saint Lawrence Seaway Development Corporation Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 129 Accounts receivable 337 Tolls receivable 200 Supplies 101 Fixed assets 121,851 Total $122,618 Liabilities and Government equity: Liabilities S 2,793 Interest-bearing capital 141,019 Deficit -21,194 Total ______ TENNESSEE VALLEY CORPORATION The Congress created the Tennessee Valley Authority (TVA) in 1933 for the unified development of a river basin comprising parts of seven States. TVA is a corporation wholly owned by the Federal Government (48 Stat. 58). During the fiscal year 1966, the net income from the authority's power program was $47.9 million, while nonpower programs experienced ex- penses of $21.2 million in excess of revenue. PAGENO="0137" ECONOMY IN GOVERNMENT 389 Tennessee Valley Authority Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 45,438 Current receivables 32,619 Inventories 38,179 Deferred charges 2,484 Fixed assets 2,630,757 Total ~L~ZL~ZL Liabilities and Government equity: Current liabilities 52,702 Interest-bearing capital 100,000 Non-interest-bearing capital 1,982,297 Contributions in aid of construction 740 Borrowings from the public 285,000 Retained earnings, power operations 650,745 Deficit, nonpower programs -322,007 Total $2,749,477 FEDERAL HOUSING ADMINISTRATION The Federal Housing Administration (FHA), created by the National Housing Act of 1934, is a noncorporate business-type agency which was brought under the Government Corporation Control Act by the Housing Act of 1948. The principal purposes of FHA are to improve home financing prac- tices, to encourage, improved housing standards and conditions, to further home ownership, and to stabilize the mortgage market. These objectives are achieved through the insurance of loans for financing the production, purchase, repair and improvement of residential properties. FHA loan insurance is now administered through 26 different active programs. In addition, maintenance and settlement work continue under nine programs for which the authority to insure additional loans has ex- pired. For financial purposes, FHA programs are grouped under three sepa- rate insurance funds and accounts established by statute. FHA's financial statements show that it received $323.9 million in fiscal year 1966 from other than the regular appropriation process. PAGENO="0138" 390 ECONOMY IN GOVERNMENT Federal Housing Administration Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 90,611 U.S. securities: Treasury issuances 494,543 Other agency issuances 89,198 Accounts receivable 167,249 Mortgage notes and sales contracts, net 123,269 Acquired properties: Properties 512,539 Mortgages 301,293 Defaulted notes 9,208 Furniture and equipment, net 3,681 Stock in rental housing corporations 296 Total ~1791~a Liabilities and Government equity: Accounts payable and accrued liabilities $ 96,883 Deferred credits 52,576 Debentures authorized and in process 56,898 Debentures outstanding 441,356 Reserve for foreclosure costs 4,566 Capital 10,000 Retained earnings: Statutory reserve-participating reserve 132,790 General surplus reserve for future ex- penses and losses 996,817 Total $1,791,886 aDetails do not add due to roundings. PAGENO="0139" ECONOMY IN GOVERNMENT 391 FEDERAL HOME LOAN BANK BOARD AND CORPORATIONS SUPERVISED The Federal Home Loan Bank Board was created as an independent agency in 1932 by the Federal Home Loan Bank Act (47 Stat. 725; 12 U.S.C. 1421). The activities of the Board consist principally of (1) establishing policies, issuing regulations, and supervising the operations of the 12 Federal home loan banks, (2) directing the operation of the Federal Savings and Loan Insurance Corporation, (3) chartering Federal savings and loan associations, (4) regulating Federal and insured State-chartered sav- ings and loan associations, and (5) examining the Federal hone loan banks, Federal and insured State-chartered savings and loan institutions, insti- tutions applying for insurance of accounts or for conversion from State to Federal charter, and noninsured member institutions of the Federal Home Loan Bank System in States where examinations are not provided under State law. Program obligations incurred by the Federal Home Loan Bank Board Re- volving Fund during fiscal year 1966 were $16.8 million. Federal Home Loan Bank Board Revolving Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 986 Accounts receivable, net 1,553 Supplies 25 Fixed assets, net Total Liabilities and Government equity: Current liabilities $2,902 Retained earnings Total ~ Federal home loan banks The 12 Federal home loan banks are corporations chartered under the Federal Home Loan Bank Act, approved July 22, 1932 (47 Stat. 725; 12 U.S.C. 1421). The banks were created for the purpose of providing re- serve banking facilities to their member institutions, which may comprise savings and loan institutions, savings banks, and insurance companies, and to certain nonmember borrowers. PAGENO="0140" 392 ECONOMY IN GOVERNMENT The banks do not receive appropriated funds to carry out their activ- ities nor are their annual budgets subject to review by Congress. Funds for the Federal home loan banks are obtained principally from (1) the sale of their obligations, (2) interest on advances (loans) to members, (3) in- terest on investments, (4) sale of capital stock, and (5) deposits of mem- ber institutions. In addition, the banks' funds are supplemented through the redemption and sale of investments and by the repayment of advances by member institutions. Authority to borrow from the Treasury in the amount of $1 billion is provided in the United States Code (12 U.S.C. 1431); how- ever, no borrowings have been made to date. Federal Savings and Loan Insurance Corporation The Federal Savings and Loan Insurance Corporation is authorized un- der title IV of the National Housing Act (12 U.S.C. 1724 et seq.) to in- sure savings in all Federal savings and loan associations and in State- chartered institutions of the savings and loan type which apply and qiial- ify for insurance. The protection thus afforded, which insures savers in member associations against finencial loss up to a statutory limit of $15,000, may be provided through the prevention of default or the payment of insurance to savings account holders in the event of liquidation. Although the Corporation does not receive appropriated funds to carry out its activities, congressional limitations are placed on the amount that may be expended annually by the Corporation for administrative ex- penses. The Corporation derives its income principally from annual in- surance premiums received from insured institutions, interest earned on investments, and interest, rentals, etc., received on assets acquired from insured institutions. In addition, the Corporation's income is sup- plemented by the redemption and sale of securities, the realization on assets acquired from insured institutions, such as mortgages and real estate, and the prepayment of insurance premiums by insured institutions. The Corporation is authorized to borrow up to $750 million from the United States Treasury, but this authority has never been used. Net income for fiscal year 1966, as shown by the Corporation's reve- nue and expense statement, was $85.3 million. PAGENO="0141" ECONOMY IN GOVERNMENT 393 Federal Savings and Loan Insurance Corporation Fund Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance Cash with banks U.S. securities Accounts receivable, net Assets acquired from insured institutions: Loans Other Subrogated and insured accounts Loans to insured institutions Supplies and deferred charges Furniture, fixtures, and equipment Liabilities and Government equity: Current liabilities Deferred credits Government equity: Primary reserve Secondary reserve Reserve for unpaid additional premiums Reserve for return on additional premiums __________ FARM CREDIT ADMINISTRATION AND CORPORATIONS SUPERVISED The Administration supervises a coordinated agricultural credit sys- tem of farm credit banks and associations which make credit available to farmers and their cooperatives. Banks for cooperatives The banks for cooperatives, of which there are 13, are under the general supervision of the Farm Credit Administration (12 U.S.C. 1134). They finance the operations of farmers' cooperatives. During fiscal year 1966, the banks extended credit totaling $1.6 billion. The funds to fi- nance these loans are obtained from (1) sales of debentures to the public, (2) notes payable, and (3) their own capital. The Farm Credit Act of 1955 provides for eventual ownership of the banks by farmers' cooperatives and the retirement of the United States Government's investment. $ 59,310 1 1,516,701 41,226 87,128 18, 810 64,763 15,000 29 21 Total $1,802,989 $ 4,891 44,191 775,296 ~95~8~ 4,865 14,308 Total PAGENO="0142" 394 ECONOMY n~ GOVERNMENT During fiscal year 1966, the revenue of the banks was $56.6 million and the net income was $11.1 million. Banks for Cooperatives Financial Condition June 30, 1966 (Thousands of dollars) Assets: Cash with Treasury and in banks $ 13,385 U.S. securities 47,492 Loans receivable, net 1,094,785 Accounts receivable, net 16,787 Acquired security 573 Fixed assets, net 1,143 Deferred charges 377 Other current assets 80 Total Liabilities and equity: Debentures outstanding $ 844,074 Notes payable 36,775 Accounts payable and accrued liabilities 25,303 Privately owned equity 203,134 Government equity 65,336 Total $Lj74,622 Federal intermediate credit banks The Federal intermediate credit banks, of which there are 12, are un- der th~ general supervision of the Farm Credit Administration (12 U.S.C. 1021). They serve as sources of funds for farmers and stockmen by dis- counting paper for and making loans to certain credit institutions. The banks' lending funds are obtained primarily from the sale of debentures to the public and from their own capital funds. The banks were originally wholly owned Government corporations; however, the Farm Credit Act of 1956 provides for the eventual ownership of the banks by production credit as- sociations and the gradual retirement of the Government's investment. During fiscal year 1966, the banks extended credit totaling $5.8 bil- lion and reported a net income of $16.6 million. PAGENO="0143" ECONOMY IN GOVERNMENT 395 Federal Intermediate Credit Banks Financial Condition June 30, 1966 (Thousands of dollars) Assets: Treasury balance $ 11,099 U.S. securities 109,297 Loans and discounts 3,068,781 Accounts and notes receivable 59,053 Fixed assets, net 1,485 Deferred charges 1,344 Other current assets 164 Total $~251~223 Liabilities and equity: Debentures outstanding $2,853,375 Notes payable 39,450 Accounts payable and accrued liabilities 62,222 Privately owned equity 131,578 Government equity 164,598 Total $~,i5l,223 PAGENO="0144" 396 ECONOMY IN GOVERNMENT PERMANENT APPROPRIATIONS A permanent appropriation is one which, by virtue of standing legis- lation, is automatically renewed each fiscal year over a period of time without annual action by the Congress. Payment of interest ($12 billion in fiscal year 1966) on the public debt accounts for the bulk of money ex- pended under permanent appropriations. Examples of permanent appropria- tions are presented below. SECTION 32 FUNDS--RE~4OVAL OF SURPLUS AGRICULTURAL COMMODITIES Under section 32 of the act of August 24, 1935, as amended (7 U.S.C. 6l2c), an amount equal to 30 percent of customs receipts collected during each calendar year (except for an amount equal to 30 percent of such re- ceipts collected on fishery products, which is transferred to the Depart- ment of the Interior to encourage the distribution of such products), plus unused balances of up to $300 million, is available for expanding domestic and foreign market outlets for farm commodities. As provided for in recent appropriation acts, transfers have been made from this fund primarily to the school lunch program for the purchase and distribution of agricultural commodities and the special milk program to partially cover the cost of milk served to school children. Section 32 funds are also authorized for the administration of marketing agreements and orders. A table showing sources and applications of section 32 funds follows. Section 32 Appropriation Program ObligatIon Data Fiscal Year 1966 (Millions of dollars) tources of funds: Unniligated balance available, start of year $298.8 Permanent apprr)pridtion (307, of customs receipts collected during each calendar year) . Thtal $701.3 Applications of funds: consumer and Marketing Service, Department of Agriculture: Commodity program payments: Direct purchases $140.2 Export payments .1 School lunch program 45.0 Operat im2 expenses 3.4 Market inc agreements and on-mrs 2.2 Change in selected resources -23.4 Fund transfers: Agricultural Rcsearch Service, Department of Agriculture 18.0 fureen of Commercial Fisheries, Department of Interior 6.6 Foreign Agricultural Service, Department of Agriculture 3.1 Cooperative State lesearch Service, Department of Agriculture .4 Subtotal 195.6 Urmobigated balance lapaing 208.7 Unobligated balance available, end of year 300.0 Total $704.3 PAGENO="0145" ECONOMY IN GOVERNMENT 397 COMMODITY CREDIT CORPORATION NATIONAL WOOL ACT Under the National Wool Act of 1954, as amended, incentive payments are being used to encourage the annual domestic production of about 300 million pounds Qf shorn wool. Funds of the Commodity Credit Corpora- tion are used to carry on this program. For the purpose of reimbursing the Corporation, section 705 of the act provides for the appropriation each fiscal year of an amount equal to amounts expended by the Corporation during the preceding year and equal to amounts expended in prior fiscal years not previously reimbursed, but not to exceed 70 percent of the gross receipts of duties on wool and certain wool products imported during the preceding calendar year. The fiscal year 1966 appropriation was $22.6 million. OFFICE OF EDUCATION DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE COLLEGES FOR AGRICULTURE AND THE MECHANIC ARTS Each State and Puerto Rico receives $50,000 for college instruction, including facilities, in agriculture, the mechanic arts, and related fields and for training teachers in these fields (7 U.S.C. 301-308, 321-328). The fiscal year 1966 appropriation was $2.55 million. PROMOTION OF VOCATIONAL EDUCATION, ACT OF FEBRUARY 23, 1917 Grants are made to the States on a dollar-for-dollar matching basis for the purpose of cooperating with the States in paying for the salaries of teachers of agriculture, trade, home economics, and industrial subjects and for the training of teachers in these subjects (74 Stat. 412; 20 U.S.C. 11-18). The fiscal year 1966 appropriation was $7.2 million. BUREAU OF INDIAN AFFAIRS CLAIMS AND TREATY OBLIGATIONS Payments are made to fulfill treaty obligations with Indian tribes and are made for the benefit o.f Sioux Indians as authorized by law (4 Stat. 442, 7 Stat. 46, 11 Stat. 729, 25 Stat. 895,and 27 Stat. 649). The fiscal year 1966 appropriation was $161,000. FEDERAL AID IN FISH RESTORATION AND MANAGFI4ENT Assistance is given to the States, Puerto Rico, Guam, and the Virgin Islands by appropriation of funds equal to revenue of the 10 percent excise tax on sport fishing tackle (16 U.S.C. 777a-k). The fiscal year 1966 ap- propriation was $7.4 million. 79-459 0-67-pt. 2-10 PAGENO="0146" 398 ECONOMY IN GOVERN~NT INTEREST ON UNINVESTED FUNDS TREASURY DEPARTMENT Under conditions of the law creating each trust, interest accruing and payable from the general fund of the Treasury is appropriated for transfer to the proper trust fund receipt accounts (31 U.S.C. 725s; 2 U.S.C. 158; 20 U.S.C. 54-55, 74a, 101; 24 U.S.C. 46; and 69 Stat. 533 and various trea- ties). The fiscal year 1966 appropriation was $14 million. REFUNDING INTERNAL REVENUE COLLECTIONS, INTEREST Under certain circumstances (as provided in 26 U.S.C. 6611), interest is paid at 6 percent per annum on internal revenue collections which must be refunded. The fiscal year 1966 appropriation was $103.9 million. GRANTS-IN-AID FOR AIRPORTS FEDERAL AVIATION ADMINISTRATION Grants are made to public agencies to aid the development and improve- ment of public airports. These grants generally cover 50 percent of the project costs and are limited to facilities deemed essential for safe oper- ation of aircraft at airports (Federal Airport Act, as amended by Public Laws 88-280, 88-507, and 89-128). The fiscal year 1966 appropriation was $75 million. REPAYABLE ADVANCES TO THE DISTRICT OF COLUMBIA GENERAL FUND Temporary advances are made to the District of Columbia by the United States Treasury during periods of low revenue collections (47 D.C. Code 5501). The fiscal year 1966 appropriation was $42 million. INTEREST ON THE PUBLIC DEBT Such amounts as may be necessary are appropriated to pay the interest each year on the public debt (31 U.S.C. 711(2), 732). The fiscal year 1966 appropriation was $12 billion. PAGENO="0147" ECONOMY IN GOVERNMENT 399 FOREIGN CURRENCY Many agencies of the Government are engaged in activities throughout the world which involve payments in foreign currencies. From some govern- mental activities, particularly those concerning the sale of surplus agri- cultural commodities, the Government acquires foreign currencies without spending United States dollars. Most currencies accrue to the credit of the United States because of past or current international agreements primarily dealing with (1) sales of commodities (usually surplus agricultural items) to foreign purchasers for local currencies or (2) loans of dollars or foreign currencies which may be repaid in the currency of the borrower. Sales of commodities for foreign currency are expected to be phased out over the next few years. A large part of the foreign currencies owned by the United States is committed by the terms of the international agreements under which the cur- rencies were received. They must be used on a loan or grant basis for mu- tually beneficial purposes in the host country and are therefore called "country-use" currencies. Currencies available for the purposes of United States agencies are called "United States-use" currencies. COUNTRY-USE CURRENCIES A large amount of foreign currency is used outside of the appropria- tion process, as summarized in the following table, for loans `9nd grants for common defense and economic development in the host country. Sunsuary of Foreign Currency fnrCn:yy~r'U9r Fiscal Year 1966 (ilillioms of dollar ~valent) SuSanne'; brought forsord 61,386 Collections: Public Law 480 sales (note) 789 Foreign assistance program 2 Net transfer from U.S. uses ___22: Total available 62,20 Expendi tures: Public Law 480 country loans and grants S 736 Public Law 480 loans to private enterprise 37 Other foreign asciocaccr pro grams 12 Adjustments due to changes in eochongn ratec 409 Balance carried forward to fiscal year 1967 Total Note: Under the foreign assistance pro~ramestab1is~:ed by Public Las 480, 83d Cong., the United States accepts foreign currnncy in peyoemt for agricultural cnmnodities and their products. Sal ns are made to countries unuble to empand ncnunernial purchases becausenf a lacb of dollar ncnhange. koreigncerrecci es received are deposited to thn account of the iS. Treasury and cam be used noSy as stated in section 104 of Public Las 480. As set forth in title 1 of Public Lan 480, forcig:: nurre::cy proceeds accruing from salen are used, ci thcut appropriation. For enampie, section 104(c) of Public Las 480 permits the use of for- ci gc currencies for tho "conennn defence" aithout appropriation. Tl:rse fundu are nontrnlled by thn Dnpart- oemt of Defense and the Bureau of the Budget. Other sections of nbc law permit the use of foreign currency by the Agency for Intersational Development without apprnpriutinn. PAGENO="0148" 400 ECONOMY IN GOVERNMENT UNITED STATES-USE CURRENCIES `United States-use" currencies may be divided into two categories: excess currencies and nonexcess currencies. Excess currencies are the currencies of countries for which the Trea- sury Department determines that the supply is great enough to more than cover our requirements for the next 2 or 3 years. Separate appropriations for special foreign currency programs which are limited to the use of ex- cess currencies have been provided for several years. In fiscal year 1966, such appropriations totaled $34 million. Nonexcess currencies are those of all countries for which the supply is not designated as "excess." In many of these countries, the supply of currencies is far below United States needs and it is necessary to pur- chase currencies commercially to meet United States requirements. Al- though it is estimated that the United States will have about $2.2 billion available for its programs in fiscal year 1968, less than $500 million will be in nonexcess currencies. This indicates a need to purchase about $1.7 billion in foreign currencies to meet total requirements. The following tabl~ summarizes fiscal year 1966 transactions of United States-use foreign currencies. Summary of Foreign Currency Transactions for United States Use Fiscal Year 1966 (Millions of dollar ~q~Jva lent s) Cash balances brought forward: Excess currencies $1,345 Nonexcess currencies 91 Collections: Public Law 480 sales 158 Foreign assistance programs 116 Interest on public deposits 26 Other nonloan collections 55 Loan repayments 252 Net transfer to country use -27 Total available Expenditures: Foreign currency expenditure authorization $ 13 With dollar credits to: Foreign assistance programs 113 Miscellaneous receipts of general fund 136 Commodity Credit Corporation 133 Other 15 Deposits for replacement currencies -3 Adjustments due to changes in exchange rate 325 Cash balances carried forward to fiscal year 1967 Total $~ç~7a aDetails do not total due to rounding. PAGENO="0149" Appendix VU ADDITIONAL VIEWS ON PROCtJREMENT OF TYPEWRITERS RoYAL TYPEWRITER COMPANY, INC., Washington, D.C., May 23, 1967. Hon. WILLIAM PBOXMIRE, Chairman, Subcommittee, Economy in Government, G-133 New Senate Office Building, Washington, D.C. DEAR Mn. CHAIRMAN: This company appreciates the opportunity to present its views on the recent hearings by the Joint Economic Committee (Subcommittee on Economy in Government) primarily addressing our remarks to GSA's posi- tion expressed in testimony concerning Cost Reduction by Messrs. Knott and Abersfeller. We refer in this instance to typewriters since the Commissioner of the Federal Supply Service himself used them as an example of the "savings" to be realized by advertised procurement, i.e., bidding. We are in complete agreement with Cost Reduction in government. Our com- pany has taken significant steps to assure that the government gets "a dollar's value for a dol1ai~ spent." We have- 1. Established quantity discounts; 2. Consented to Consolidated Purchase Agreements with every major agency saving up to 29.8% over the major supplier; 3. Established and maintained a one year warranty on the full product line. Ninety days is offered by our competitors; 4. Established a training budget for technical training of government employees at no cost to the government, in addition to our own heavy train- ing costs; 5. Established a substantial budget for administrative and sales training for our own employees who in turn spend a major portion of their time and effort indoctrinating government employees in maximum utilization of Cost Reduction techniques under presently established criteria; 0. Offered substantial trade-in incentives to government agencies through Federal Supply Service; 7. Continue to make available, at no cost loan typewriters which have been especially helpful to many agencies during recent expansion; 8. Tremendous inventory and distribution costs are being borne by this company in order to maintain local supply, thereby relieving the govern- ment of all costs of stocking, warehousing and shipping this equipment; and 9. Heavy expenditure for research and development of products and manu- facturing techniques to provide products and services which fully meet current requirements for "identifiable cost savings." Mr. Chairman, we offer as substantiation of this a full sized, full featured electric typewriter at a price of $8.50 less than on the Federal Supply Schedule in Fiscal Year 194~-50. This accomplishment becomes all the more significant when during the same period the cost of living index has risen 38.1% and average weekly wages are up 109% according to the Bureau of Labor Statistics. In view of the foregoing we cannot agree with testimony submitted by Com- missioner Abersfeller that "advertised procurement is the most desirable vehicle for government savings." By lowering the M.O.L. to an unrealistic level, GSA eliminates the effectiveness of multiple award contracts and deprive agencies of the flexibility needed to meet their complex requirements of office communications. An analysis of bids for domestic use this year reveals the following: GSA solicited bids on behalf of the Veterans Administration and Post Office Depart- ment. Foreign concerns received awards for both of these agencies. As a matter of fact of four bids for domestic use electric typewriters, three were awarded 401 PAGENO="0150" 402 ECONOMY IN GOVERN~NT to foreign firms and one was awarded to IBM at no discount and at the highest price on the Federal Supply Schedule. Of four bids for domestic use manual typewriters, three of these were awarded to foreign firms. The utilization of foreign products for major government requirements at this time does not appear in the best interest of either the U.S. Government or American labor. A. There is no duty on importation of typewriters. B. There is no import quota. If GSA is allowed to continue its emphasis on advertised procurement of typewriters, and if present trends in awards to foreign firms continue or in- crease, then American manufacturers, in order to compete in the government market, must press for establishment of an effective differential as prescribed through the Buy America Act, or resort to their own foreign plants as a source of supply. The significance of the latter alternative as it affects the many thou- sand domestic employees should not be lost on the Committee. The conclusion that we have drawn is that the unilateral action by GSA in reducing the M.O.L. on typewriters is not based on objective judgment. 1. Agencies which have conscientiously applied the present criteria and now have effective cost reduction programs w-ill find them either eliminated or more costly. 2. No incentive to industry to consider lower prices. There has never been a request or inquiry to this company from GSA/FSS as to our reactions to a higher M.O.L., i.e., lower prices for higher volume orders. 3. The intent of present criteria appears to have been ignored by many activities including GSA: (a) Department of Agriculture procurement which cost the taxpayer more than $600,000 over other available equipment with tacit approval of Federal Supply Service. (b) Federal Supply Service procurement of the most expensive models for its own use. (c) Procurement by GSA for the Department of Defense on a non-bid non-schedule basis of almost 200 of the most expensive machines. Mr. Chairman, this Committee has been led to believe that substantial sav- ings can only result by bidding. We submit that this is not correct. We are willing to negotiate greater discounts on the Federal Supply Schedule for a higher M.O.L. If GSA would sincerely explore this course of action and enforce the pres- ently established criteria, we are confident that prices of typewriters to the gov- ernment can be reduced even further than under the current M.O.L. We are con- fident that Cost Reduction Programs in Office Machine Procurement in such agencies as HEW, IRS, Department of Agriculture, Department of Interior, and others, can be expanded and can be a guide to other agencies. We are confident that the share of market enjoyed by the most expensive typewriter will continue to decrease under the pressure of more favorable prices from other companies, and at a faster rate than heretofore. We have proof of this trend even under the current Maximum Order Limitation. I submit that Royal Typewriter Company's technology and programs has done the job-that American industry is competitive and that there can be no significant life cost savings on the procurement of (electric) typewriters by the bidding process in spite of the testimony given May 16 by Commissioner Abersfeller. Clearly the government's annual purchase of almost 30 million in typewriter products and services deserve objective evaluation. I believe careful study and analysis by your Committee will substantiate our position. Very truly yours, G. L. Sxinna, Director 01 Federal Marketing. PAGENO="0151" ECONOMY IN GOVE~RNMENT 403 GENERAL SERVICES ADMINISTRATION, Washington, D.C., June 1, 1967. Hon. WU~LIAM PROXMIRE, Chairman~ Subcommittee on Economy in Government, Joint Economic Commit- tee, Washington, D.C. DEAR MR. CHAIRMAN: This will acknowledge your letter of May 25, 1967, in which you enclosed a letter dated May 23 from G. L. Snider, Director, Federal Marketing, Royal Typewriter Company, Inc. The basic purpose of Mr. Snider's letter is to question the desirability of the reduction of the Maximum Order Limitation on typewriters contracted for under the Federal Supply Schedule Program. The Maximum Order Limitation contained in the Solicitation for Offers for the new contract period effective July 1, 1967, is $10,000 for Electric Typewriters and $5,000 for Manual Type- writers. This compares with the MOL under the current contracts which is $25,000 for both electric and manual typewriters. Our basis for reducing the MOL on both electric and manual typewriters was predicated on savings effected through definite quantity procurement in excess of the current $25,000 MOL. Our study revealed that on definite quantity procurements during fiscal year 1966 our average savings was 21.3% per machine. This savings was over and above the lowest priced machine, elecrtic and manual, under the quantity dis- count structure of the Fedreal Supply Schedule contract. In one procurement covering 684 electric sypewriters (which was in excess of the current MOL) the successful bidder was the Royal Typewriter Company at a savings of 33.3% above their lowest schedule quantity price. This represented a total savings on this procurement of $84,006.32. Since the typewriters procured under Federal Supply Schedule contracts are identical to those available to the commercial trade, the savings realized through definite quantity procurements above the $25,000 MOL dictated the establishment of a lower MOL in order to obtain the demonstrated lower prices on a greater portion of typewriter requirements. Fiscal Year 1966 purchases of typewriters reported by Federal Supply Schedule contractors totaled $23.6 mil- lion. Only $1.1 million was purchased on a definite quantity basis over the MOL of $25,000. We anticipate a substantial increase in definite quantity purchases at lower prices as a result of the lower MOL. We do not believe that the reduced MOL's are unrealistically low. An order- ing activity will be able to purchase under any single contract about 27 manual or electric typewriters which will provide adequate flexibility to meet . their immediate needs. The Royal letter infers that higher discounts might be offered under increased MOL's. We had no reason to expect such action since no greater discounts were offered prior to 1963 when the MOL was $75,000. However, during a meeting with FSS representatives on May 8, 1967, Messrs. Lampley and Fabrizio of Royal were invited to submit such an offer for consideration. No such offer has been received to date. It is true that in some cases foreign typewriters have been purchased under definite quantity procurements. However, awards were made for foreign ma- chines only after the differentials established in Executive Order. 10582, which implements the Buy-American Act, were applied in favor of domestic bidders. We have no basis for avoiding a more advantageous method of purchase because of the possibility that foreign products may be offered at low prices. It is our sincere belief that our decision to reduce the MOL's in order to obtain lower prices through definite quantity procurements was a proper course of action and will result in substantial savings to the Government. If further information is desired, please let us know. Sincerely yours, LAwsoN B. KNoTT, Jr., Administrator. PAGENO="0152" Appendix VIII EXECUTIVE PROGRAM To IMPROVE MANAGEMENT OF AUTOMATIC DATA PROCESSING EQUIPMENT (ADPE) MAY 4, 1966. Hon. LAWSON B. KNOTT, Jr. Administrator, General Services Administration, Washington, D.C. - DEAL Mn. KNOTT: Your letter of February 1, 1966, requested an early meeting to discuss the implementation of PL 89-306, and enclosed a background paper to be used in such discussions. Subsequent telephone conversations between you and Mr. Harold Seidman satisfied the immediate need for that meeting and it was agreed that our respective staffs should continue their joint efforts to develop a policy guidance paper that would set the direction of GSA's efforts under the legislation. The completed policy guidance paper, which has been agreed to at the staff levels, is enclosed. It has my approval. The paper establishes the basic premise that major changes will be based upon a careful evaluation of alternative courses of action. That evaluation will explicitly weigh the benefits obtained from each alternative (including cost reduction and avoidance) against the costs incurred. Further, implementation of approved actions should take maximum advantage of existing capabilities in lieu of creating new capabilities. We regard the relationship between equipment hardware and software as a major obstacle to improving the effective use of automatic data processing equipment in the Federal Government and therefore request that priority attention be given to *this matter. We recognize that as the computer technology, sales practices, pricing struc- tures, and user interests change, the problem related to effective ADP manage- ment also change. It is therefore necessary that this policy guidance document remain under constant review by our staffs so that necessary adjustments to the programs are made as required. The complexities and interrelationships among these problems also require that all actions taken by the General Services Administration, National Bureau of Standards and the Bureau of the Budget be closely coordinated and include full consideration of the viewpoints of the using agencies. The Federal APP Council sponsored by the Bureau of the Budget will serve as a principal means for obtaining these views. We are confident that these cooperative relationships will result in an effective action program to achieve improved APP management. Sincerely, OHARLES S. SCHULTZE, Director. POLICY GUIDANCE TO THE GENERAL SERVICES ADMINISTRATION IN THE IMPLEMENTATION OF P.L. 89-306 Basic policy.-The provisions of P.L. 89-306 will be administered in a manner that is consistent with the prime objective of encouraging the use of APP by Government agencies to achieve~ greater productivity and reduced costs in the discharge of their program responsibilities. P.L. 89-306 provides for three major changes in the existing ADP program. First, to improve the Government's bargaining position it provides, through GSA, for advancement of the central-purchaser concept in acquiring APP equip- ment and related services. Second, it provides for APP service centers to pro- mote joint use, now limited to the sharing-exchange program. Third, it provides, through a revolving fund, a financial mechanism for conducting the program, including procurement and joint-use arrangements 404 PAGENO="0153" ECONOMY IN GOVERNMENT 405 The implementation of these changes will be preceded by a careful study of alternative sources of action, and an evaluation of the potential impact which the selected action might have upon the prime objective stated above. These actions will recognize the specific responsibilities placed upon the using agen- cies by P.L. 89-306 for the determination of their ADP equipment requirements. Further, the Report on the Management of Automatic Data Processing in the Federal Government, approved by the President on March 2, 1965, provided a definitive blueprint for appropriate action in management and technological matters. This blueprint will remain under constant review and be updated to give effect to changing circumstances. Existing capabilities should be used to the maximum in accomplishing ap- proved actions, even though such facilities may exist in agencies not specifically identified in J?.L. 89-306. For example, since the ADP inventory data for the Department of Defense represents about two-thirds of the total Government volume, consideration should be given to the possibility of using DOD's process- ing facilities to satisfy the information requirements of the General Services Administration, Bureau of the Budget, and other agencies. Likewise, the equip- ment selection office at Hanscom Air Force Base might be used for the selection of equipment for other agencies as it is now doing for a Commerce (Weather Bureau) computer. Procedures and reimbursement arrangements would be mu-j tually agreed upon. The interrelationship among using agencies and the central management agencies identified in P.L. 89-306, coupled with the dynamic nature of the ADP technology, require that a special effort be made to expedite policy develop- ment, modification, coordination and implementation. To provide a mechanism for this effort we plan to use the "Federal ADP Council." The Council will be used for consideration of certain proposed actions prior to implementation. Initial gu~deUnes.-Initial guidlines for specific actions to be taken in certain areas are set forth herein. A. ADP revolving fund The ADP revolving fund authorized by P.L. 89-306 shall be used to promote and facilitate the financing of arragements for the joint use of ADP equipment *and related services. GSA will however, explore various possibilities for enabling agencies to obtain needed data processing equipment and/or services at a reduced cost, which may lead to further uses of the fund. Among the possibilities to he studied are: 1. The establishment, operation, or monitoring the operation of ADP Service Centers in metropolitan areas or in areas where a concentration of ADP re- quirements exists. 2. The provision of central Government-wide system services in functional activities which are common to many or all Government agencies, such as legal retrieval systems. 3. The provision of equipment support services on a centralized or regional basis, such as maintenance, tape testing, cleaning and restoration; punch card and tape acquisition. 4. The establishment of central multiple-access computer facilities (or utili- ties), building upon the research and evaluation findings of the National Bureau of Standards, Department of Defense, and other agencies on the effectiveness of such systems. 5. The financing of procurements from the fund to take advantage of price reductions which have time limitations inconsistent with normal funding cycles. The studies will include a discussion of the management and economic advan- tages and disadvantages expected to result from adoption of the recommendation. Studies will identify all related supporting costs. B. Review of the ADP procurement process 1. GSA will evaluate the procurement processes currently employed by the Federal Government in acquiring data processing equipment or services, to determine the areas in which revised techniques, methods or practices will offer greater efficiency and economy in acquiring the end product. This evaluation will cover, among other things: (a) A determination of the appropriateness of continuing the annual negotiation of schedules for lease, purchase and maintenance of equip- ment and services. (b) A more precise definition of the software which the contractor agrees to supply and more specific penalty provisions for failure to deliver the prom- ised software. PAGENO="0154" 406 ECONOMY IN GOVERNMENT (C) The possibility of procuring ADP equipment and ADP software as separate and distinct items, not necessariiy from the same suppliers. (d) The possibility that additional sources of procurement should be cul- tivated to serve as competitive alternatives to procuring equipment or serv- ices directly from the supplier. (e) The advantages and possibilities of consolidated or other purchase arrangements for equipment to be selected by the agencies. 2. GSA will undertake a program to assist individual Federal agencies in ne- gotiating the procurement of equipment and systems support, assuring that- (~) The Government profits in each succeeding acquisition from the ex- perience of prior procurements and strives to acquire the data processing equipment and accompanying software, training, etc., at the mininium cost. (b) The agency determines its ADP equipment requirements, including development of systems specifications. (c) The agency determines the final selection of equipment. (d) A basis is established and maintained for continuing relationships be- tween agency and supplier after equipment is acquired. (e) Equipment available or expected to become available for redistribu- tion is considered by agencies prior to instituting action to select new equip- ment. 3. In collaboration with the scientific and technological research and evalua- tion capabilities of NBS, GSA will develop procurement techniques which would focus upon "total system performance" in lieu of product capability. C. Redistribution of ewcess eqwtpni,ent 1. Although excess ADP equipment will be used to the maximum extent in meeting legitimate approved agency needs, computers should not be used by agen- cies for work that is not essential to the agency mission. The Bureau of tlth Budget will require that the same criteria are used in acquiring "excess" equip- ment that apply to new equipment. 2. GSA will extend and intensify its program to effect the redistribution of excess equipment within the Government (including its cost-type contractors) whenever practicable. In particular, GSA will (a) review existing processes for obtaining and circularizing information regarding equipment availability and institute improvements as necessary, (b) seek and evaluate reasons why equip- ments are unclaimed by agencies, as a basis for improving the effectiveness of the redistribution program, (c) initiate and cultivate working contacts with agencies to assist them in arranging for the use of suitable excess equipment in lieu of acquiring additional equipment wherever economicaliy feasible, and (d) initiate steps to assist agencies in achieving economies by substituting excess owned equipment for similar equipment being rented or leased. 3. GSA will maintain a continuous review of potential excesses in various cate- gories of Government-owned equipment, and will inform agencies when such excesses are sufficiently imminent (a) to be considered in determining the need for soliciting industry or (b) to warrant only the temporary rental of additional equipment (in lieu of purchase) until the excess equipment is available for re- distribution. D. Source data ant om~ation GSA, through the National Archives and Records Service, will continue its program for developing and encouraging the use of source data automation tech- niques by Government agencies. E. Information ,systems Work has been in progress within the Bureau of the Budget to develop an in- formation system which will meet the requirements of central agencies, agency or sub-agency management and the operating activities. The central agencies and the principal using agencies will participate in an evaluation and critique of the initial draft of this system (preferably through the Federal ADP Council) and the development of the framework of the final system. Thereafter, GSA will pro- vide full time staff members to assist in the detailed design of the system, and such personnel as may be required to program, operate and maintain the system. As an interim measure BOB Circular A-55 is being revised to provide, among other things, a December 31, 1965 inventory. From this interim action it willbe possible to determine agency plans for acquisition of additional computers dur- ing the remainder of F.Y. 66 and 67. PAGENO="0155" ECONOMY IN GOVERNMENT 407 EXECUTIVE OFFICE OF THE PRESIDENT, BUREAU OF THE BUDGET, Washington, D.C., July 9, 1967. Hon. LAWSON B. KNOTT, Jr., Administrator, General S~ervices Administration, Washington, D.C. DEAR LAWSON: This letter amends the policy guidance for the implementation of Public Law 89-306 that was provided to the General Services Administration by my letter of May 4, 1966. It confirms understandings reached by representa- tives of the Bureau of the Budget and the General Services Administration on this subject. The purpose of the amendment, which adds a paragraph 4. to section B., is to provide specific guidance for purchase leaseback contractual arrange- ments for automatic data processing equipment. "B. Review of the ADP Procurement Process" * 0 * * * "4. GSA will develop and monitor a program for the use of purchase leaseback arrangements with commercial leasing firms if it is determined that such arrange- ments are in the best interests of the Government. Consideration should be given to such factors as (a) overall costs compared with other methods of procurement, (b). adaquacy of maintenance and support services, (c) the availability of equip- inent modifications, and (d) termination at the Government's option. When the Government chooses to lease installed equipment from a leasing firm instead of from the equipment supplier, it may be necessary for the leasing firm to acquire the installed equipment at commercial purchase prices in order to continue the Government's current right to purchase equipment at prices more favorable than commercial prices. The use of commercial leasing firms should permit Federal agencies to save substantial sums in the cost of leasing that equipment which it does not intend to buy." Sincerely, CHARLES L. SCHULTZE, Director. EXECUTIVE OFFICE OF THE PRESIDENT, BUREAU OF THE BUDGET, Washington, D.C., December 15, 1966. Hon. JOHN T. CONNOR, secretary of Commerce, Washington, D.C. DEAR JACK: Under the terms of Public Law 89-306 (the Brooks bill) the au- thority vested in the Secretary of Commerce is made subject to "direction by the President and to fiscal and policy control by the Bureau of the Budget" (Section 111(g)). Accordingly, our respective staffs have collaborated in the development of a policy guidance paper for the Department of Commerce (National Bureau of Standards) efforts under the legislation. The policy guidance paper, which has been agreed to at the staff levels, is enclosed. It has my approval. It is widely recognized that major hindrances to improving the use of ADP are the absence of: (a) standardization in character sets, input-output media, and interfaces which provide for compatible interchange of information and Interoperation of systems and equipment, (b) standardization of computer pro- graming languages, and (c) yardsticks for evaluating software and its effect upon the performance of the computer system. The Department should concen- trate on actions which will overcome these deficiencies. We recognize that as the computer technology evolves and as user interests and needs change, the problems related to effective ADP management will accord- ingly change. It is therefore necessary that this policy guidance document be subject to continuing review. The complexities and interrelationships among these problems also require that all actions taken by the Department of Commerce, General Services Administra- tion, and the Bureau of the Budget be closely coordinated and also include full consideration of the yiewpoints of the using agencies. The Federal ADP Advis- ory Council and the Interagency Committee on ADP will serve as principal means for obtaining the views of the using agencies. We are confident that these cooperative efforts will result in an effective action program to achieve improved ADP management. Sincerely, PHILLIP S. HUGHES, Acting Director. PAGENO="0156" 408 ECONOMY IN GOVERNMENT PoLICY GuIDANcE TO THE DEPARTMENT OF COMMERCE (NATIONAL Btua~Au OF STANDARDS) IN THE IMPLEMENTAnEOX OF PUBLIC LAW 89-306 Basic Polioy.-The provisions of P.L. 89-306 will be administered in a manner that is consistent with the prime objective of encouraging the use of ADP by Government agencies to achieve greater productivity and reduced costs in the discharge of their respective agency program responsibilities. P.L. 89-306 provides that the Secretary of Commerce is authorized (1) to provide agencies, and the Administrator of General Services in the exercise of the authority delegated, with scientific and technological advisory services relat- ing to automatic data processing and related systems, and (2) to make appro- priate recommendations to the President relating to the establishment of uni- form Federal automatic data processing standards. The Secretary of Commerce is authorized to undertake the necessary research in the sciences and technolo- gies of automatic data processing computers and related systems as may be required. Responsibility for carrying out these functions for the Secretary has been assigned to the Center for Computer Sciences and Technology, an organization within the Institute for Applied Technology, National Bureau of Standards. In carrying out its responsibilities, the Center should maximize the utilization of existing capabilities and facilities even when they reside in agencies not spe- cifically identified in P.L. 89-306. The interrelationships among the central management agencies identified in P.L. 89-306 and the using agencies, coupled with the dynamic nature of the ADP technology, require that a special effort be made to expedite policy develop- ment and implementation. Therefore, direct working relationships will be main- tained among the Center, the ADP Management Branch of the Bureau of the Budget, and the Office of Automated Data Management Services of the General Services Administration. Among the means to be employed for extensive co- ordination with the using agencies are the Federal ADP Advisory Council and the Interagency Committee on ADP. InitiaZ Gvidelines.-Initial guidelines for specific actions to be taken in certain areas are: A. Advisory and consu'ting services The Center will provide scientific and technological advisory and consulting services to executive agencies on automatic data processing. Upon request of Federal agencies, the Center will, to the extent possible, provide direct assistance on specific projects and monitor the technical performance of commercial con- sulting contracts. In addition, the Center will- (1) Provide guidelines for use by agencies in conducting systems studies, including consideration of systems interrelationships; (2) Provide guidelines and methods for monitoring the performance of systems studies and for implementing the results of such studies; (3) Provide criteria to assist in evaluating software and hardware de- velopments that may be considered during the systems studies; (4) Provide technical guidelines for preparing solicitations of proposals, including the specification of system requirements; (5) Provide guidelines, criteria and techniques for evaluating and select- ing equipment and related software, giving priority emphasis to criteria for measuring the effectiveness and efficiency of software. Data on this sub- ject will also be furnished to GSA for consideration in the procurement of computers; (6) Maintain a reference index of computer programs to minimize the need for the development of programs already developed, tested and in use elsewhere; and (7) Provide guidellnes for evaluating installation and systems performance on a continuing basis. The Center will keep abreast of the state-of-the-art developments in ADP equipment, techniques and languages and will evaluate these developments in terms of their current or potential impact upon the Government's use of equip- ment and software and its ADP management policies. Findings in this regard will be made known promptly to the Bureau of the Budget. It is essential for NBS staff who are consulting with agencies in system design to be fully aware of on-going system developments, whether performed in-house or under contract for other Government agencies. In this connection, a study should be made and reported to the Bureau of the Budget soon after January 1, 1967 to explore the feasibility of developing a system by which each PAGENO="0157" ECONOMY IN GOVERNMENT 409 Federal agency would keep the NBS informed of all APP system design study projects. In addition to the possibility of NBS maintaining a current index of projects in progress, consideration should be given to requiring agencies to provide to NBS, for a central reference file, copies of the reports of such infor- mation systems studies. - B. `Developnient of volv~nta'ry commercial standards The Center will provide day-to-day guidance and mouitorsliip of an executive branch program to promote the development and testing of voluntary commercial standards for automatic data processing equipment, techniques and computer languages. This responsibility currently excludes standards for data elements and codes. In this role, the Center will- (1) Participate in activities of the X3 Committee on Information Proc- essing of the United States of America Standards Institute, its subcommittees and task forces, and in activities of the International Standards Organiza- tion as requested by the USASI; (2) Arrange and insure appropriate representation and active participa- tion from other Federal agencies on the X3 Committee, subcommittees and task forces to complement the Center's participation with additional expertise from the operating environments of the Government; and (3) Monitor and coordinate all such participation by all Federal agencies to assure its consistency with the Federal Government's objectives. Prior to casting an official ballot on proposals under consideration by the X3 Committee, the Center will consider the views of interested Federal agencies, assuring that the probable impact of the subject standard is properly explored and understood. In its research and development activities, the Center will make available to the ~iarious X3 groups its findings and conclusions f or use in their deliberations'. Care will be exercised to insure that all Government representatives participat- ing in such X3 deliberations are kept currently informed of related standardiza- tion activities so that they may reflect so far as practicable known Government requirements. C. Recommendations for uniform Federal standards The Center will undertake to increase compatibility in automatic data proc- essing in the Federal Government by recommending Federal standards related to automatic data processing equipment, techniques and computer languages. This responsibility currently excludes standards for data elements and codes, but the Center will provide technical advice and assistance upon request to groups devel- oping recommendations for such standards. In fulfilling this role, the Center will- (1) Immediately begin to develop, issue and maintain a statement of the Federal Government's standardization objectives and needs. The statement is intended to guide the orderly and logical pursuit of standardization in ways that are compatible with identified Federal interests. (2) Survey and keep abreast of ADP standardization activities within the Federal Government, the USASI, and elsewhere, and initiate and promote activities as necessary to achieve the Government's objectives. (3) Study and provide recommendations for Federal ADP standards. (4) Study and provide recommendations on the use within the Federal Government of each appropriate United States Standard approved by the United States of America Standards Institute in the area of ADP equipment, computer languages and techniques (excluding data elements and codes). (5) To the extent feasible and desirable, develop and recommend means for measuring compliance with Federal standards. (6) Provide for technical maintenance of Federal ADP standards. (7) Recommend procedures to be used in the Federal Government for adopting Federal standards and developing and implementing plans therefor. Recommendations for Federal standards will be transmitted through the Secretary of Commerce to the Bureau of the Budget. Such communications will include (1) a statement of purposes to be served by the standard, (2) an assess- ment of its probable economic and technological impacts, (3) a' summary of agency and industry comments that were considered in the formulation of the recommendation, (4) a reference to applicable methods for measuring compliance with the standards, (5) areas for recommended application, and (6) planning guidance for development of implementation schedules in each agency. PAGENO="0158" 410 ~coico~ IN GOVERNMENT In the development of Federal standards, the Center will communicate and work closely with all Federal agencies (and with manufacturers, private indus- try, and State and local governments when required and advantageous) to assure proper consideration of their needs and views and to obtain their cooperation in the development process. D. Research rn ccnnputer sciences and techniques The Center will sponsor, monitor and undertake research and development activities in the computer and information sciences and technologies, including system design, oriented primarily toward Government applications. The Center will maintain current awareness of on-goingbasic and applied re- search and development activities conducted by other agencies, by Federally- sponsored contractors and grantees, and by the private sector of the economy. The Center will also develop means for making such activities known and the results, including appropriate evaluations, available to Federal agencies for their benefit. In carrying out the necessary research and development as required in support of statutory responsibilities for providing scientific and technièal advis- ory services to other agencies and for developing Federal automatic data proc- essing standards and preferred conventions of common practice, the Center will obviously refrain from duplicating or interfering with the research of user agen- cies. However, the Center will collaborate in the research and development pro- grams of other agencies as appropriate, upon request. Research activities of the Center will be directed primarily toward areas that give promise of satisfying widespread needs within the Federal Government and that offer prospects for significant improvements over existing capabilities. In particular, research and development activities will be sponsored or undertaken by the Center, as appropriate, for the following purposes: 1. To supplement agency research efforts when necessary to meet Government- wide requirements or to provide solutions to prOblems of concern to several differ- ent agencies. 2. To initiate efforts to solve large-scale and difficult problems sufficiently unique to special needs of Government that outside interests are not likely to undertake vigorous and timely action. 3. To evaluate and apply advanced concepts to the development, organization and implementation of automatic data processing, computer and related systems, including the innovation or extension of techniques needed for improved cost effectiveness in the conduct of agency programs through the use of computers and related techniques. 4. To conduct exploratory research in order to provide the technological bases for future standardization activities and to maintain the competence of the tech- nical staff engaged in technical advisory services, testing and evaluation, and standardization activities. 5. To identify continuing research and development requirements for use by the Center, other agencies, academic and other organizations and industry in planning and coordiating H and D programs in the area of the computer and information sciences and technology. An annual review of the accomplishments of and programs for research in computer sciences and techniques should be conducted with the Bureau of the Budget, Office of Science and Technology, and other Government agencies en- gaged in or sponsoring research in computer sciences to assess accomplishments and to provide guidance for programs. E. Corn putiug services The Center will operate a cOmputer service activity to meet the needs of the National Bureau of Standards and upon request to furnish services including problem diagnosis, systems design, programing and related support activities to Federal agencies on a reimbursable basis. THE WHITE HousE, OFFICE OF THE WHFrE HOUSE PREss SECRETARY, June 28, 1966. MEMORANDUM FOR HEARs OF DEPARTMENTS AND AGENCIES I want the head of every Federal agency to explore and apply all possible means to- use the electronic computer to do a better job; manage computer activity at the lowest possible cost. PAGENO="0159" ECONOMY IN GOVE~RNMENT 411 I want my administration to give priority emphasis to both of these objec- tives-nothing less will suffice. The electronic computer is having a greater impact on what the Government does and how it does it than any other product of modern technology. The computer is making it possible to- send men and satellites into space; make significant strides in medical research; add several billions of dollars to our revenue through improved tax administration; administer the huge and complex social security and medicare programs; manage a multibillion dollar defense logistics system; speed the issuance of G.I. insurance dividends, at much less cost; save lives through better search and rescue operations; harness atomic energy for peaceful uses; and design better but less costly highways and structures. In short, computers are enabling us to achieve progress and benefits which a decade ago were beyond our grasp. The technology is available. Its potential for good has been amply demon- strated, but it remains to be tapped in fuller measure. I am determined that we take advantage of this technology by using it imaginatively to accomplish worthwhile purposes. I, therefore, want every agency head to give thorough study to new ways in which the electronic computer might be used to- provide better service to the public; improve agency performance; and reduce costs. But, as we use computers to achieve these benefits, I want these activities managed at the lowest possible cost. At the present time, the Federal Government- uses 2,600 computers; employs 71,000 people in this activity; and spends over $2 billion annually to acquire and operate this equipment, including special military type computers. Clearly, we must devote our best efforts to managing this large investment wisely and with the least cost. I approved a blueprint for action when I approved the Bureau of the Budget "Report on Management of ADP in the Government." The Congress recognized this need when it enacted Public Law 89-306 (the Brooks Bill) last October. This legislation provided specific authorities to- the General Services Administration, for the procurement, utilization and disposition of automatic data processing equipment; the Department of Commerce, for the development of data processing standards and the provision of assistance to agencies in designing computer- based systems; and the Bureau of the Budget, for exercising policy and fiscal control over the implementation of these authorities. These agencies are seeking actively to put into effect ways for improving and reducing the cost of this huge and complex operation. In my Budget Message for 1967 I told the Congress of my intent to make sure that this huge investment is managed efficiently. The Federal Government must give priority attention to- establishing better and more effective procurement methods; making fuller use of existing facilities through sharing and joint-use arrangements before acquiring additional equipment; reutilizing excess equipment whenever feasible; and achieving, with industry cooperation, greater compatibility of equipment. I expect all agencies to cooperate fully with the Bureau of the Budget, the General Services Administration, and the Department of Commerce in accom- plishing these objectives. I want the Director of the Bureau of the Budget to report to be on December 31, 1966, and every six months thereafter, on the progress that is being made throughout the Federal Government in improving the management of this very important technology. LYNDON B. JOHNSON. PAGENO="0160" 412 ECONOMY IN GOVERNMENT EXECUTIVE OFFICE OF THE PRESIDENT, BURn~u OF THE BUDGET, Washington, D~C., February 23, 1967. Charles L. Schultze, Director of the Bureau of the Budget, today issued the first of the semiannual reports on the use and management of electronic computers in the Federal Government. The report was prepared in response to the Presi- dent's memorandum of June 28, 1960, in which he directed Federal agencies to seek new and better ways for using the Federal Government's computers. The report highlights areas in which the computer has been used to accomplish w-ork not previously feasible, achieve greater efficiency and reduce operating costs. The report states that the President's program for managing the Govern- ment's large investment in computers has resulted in- the redistribution within the Government of equipment valued at $70 million, thereby avoiding expenditures for new equipment;. a saving of $26 million by using time available on Government computers at locations other than where the requirement existed, rather than acquiring additional equipment; and avoidance of approximately $200 million in annual rental costs by the selective purchase of computers, many of which were bought within the past three years and have already been amortized. The Congress made a signicant contribution to the Government's management efforts by enacting P.L. 89-306 in October 1965, legislation sponsored by Congress- man Jack Brooks, longtime congressional advocate of an expanded management program. The legislation strengthened the authority of the General Services Administration and the Department of Commerce in the areas of procurement, utilization, standards and research in computer sciences. It also provided for the establishment of an Automatic Data Processing Revolving Fund to facilitate financial arrangements for more economical procurement practices and for the joint utilization of equipment and services. Ten million dollars for the initial capitalization of this fund have been requested in the FY 1968 budget. The Government uses about 2,600 computers in a wide variety of Government activities, ranging from the tracking of space satellites to the issuance of Social Security check and the processing of supply transactions. Approximately $1.2 billion is spent annually for the acquisition and operation of these computers, excluding military operational and other classified activities. Among the examples of computer uses that are cited in the report is the rapid and comprehensive analysis of aircraft accident data, which now permits corrective safety recommendations to be made within weeks instead of months. The computational capability of the computer has also been put to work to improve the national plan for assigning television broadcast channels. The result has been to make 24 additional channels available in areas where they were badly needed. The report also states that the computer has contributed to greater efficiency and a reduction in operating costs. The recent Census of Agriculture, covering 3 million farms, was completed with a $2 million dollar saving over the cost of the previous, more limited, Census. Punched card equipment was replaced with computers in one of the military services, thus saving over one million dollars a year with the more efficient operation. The report concludes: "This record of accomplishments is impressive and encouraging. But there is much more that can and must be done to- "Make computer systems more effective; "Improve further the utilization and methods of procurement; "Achieve greater compatibility among equipment and systems; and "Develop appropriate standards of performance. "To assist all agencies in their management and uses of automatic data proc- essing equipment, the initial phases of a Government-wide information system have been designed and will become operational early in calendar year 1967. "While significant progress has been made, all agencies will continue to give major attention to achieving the goals set forth in the President's memorandum to all department and agency heads on June 28, 1966." PAGENO="0161" ECONOMY IN GOVE~RNMENT 413 PROGRESS REPORT ON USE AND MANAGEMENT OF ELECTRONIC COMPUTERS This report covers the following: Summary highlights of new computer applications. Reduction in costs and improved efficiency through the use of computers Improvements in the management of computer activities. New computer applications The search for new and better ways to use computers to improve the public service has extended to virtually every governmental activity and has produced results. Examples include- Improvements in air travel safety through the more rapid and compre- hensive computer analysis of aircraft accident data. Recommendations for corrective action are being made within weeks instead of months; Detection of previously unknown adverse health hazards which may accompany the beneficial uses of modern drugs. This is being accomplished through a computer drug monitoring system; Overcoming a serious threat to the Columbia River salmon industry. This was accomplished through a computer based system that automatically determined the flow of reservoir releases needed to combat fish-killing conditions in the river; An improved UHF television channel assignment system. Computers were used to identify channels in areas where they were needed badly; Simplification in the scheduling, validation and scoring of nationwide writ- ten examinations for the approximately 750,000 people who annually seek Federal jobs; and Improved information on the funds expended by the Federal activities in the War on Poverty. This information assists Federal, State, and local officials in assessing programs and assigning priorities. The computer has been applied to achieve significant results which would not have otherwise been feasible. Examples include: The use of computers on the Lunar Orbiter spacecraft at every stage of its lunar picture-taking mission. These uses run all the way from computations of trajectories to improving the quality of the pictures themselves. Collection of critical weather information data and dissemination of this data to air operational units. The currency of the data has been considerably improved by the use of computers. Increased productivity and the more effective use of scarce engineering skills by the application of computers to engineering design and survey operations by many agencies. These applications are compressing time, pro- vidling greater precision in design, with a result in savings in construction costs. Application of basic research to the solution of problems in a wide range of environmental sciences. Among the significant areas which vitally affect future human welfare and safety are those concerning the long-range be- havior of the atmosphere and the seas and the dispersion of pollutants. Reduced costs and improved efficiency The introduction or extension of computer techniques and the standardization of systems has in many cases reduced costs and improved the efficiency of opera- tions. Examples include: Completion of the recent Census of Agriculture, covering 3 million farms. This was accomplished with a net saving of approximately $2 million, in- cluding 700,000 man-hours-an overall reduction of over 7 percent from the cost of the previous, more limited, Census. The reading of over 20 million earnings items per quarter from employer tax reports. This is now done through the use of optical scanning techniques. This new method has greatly increased the efficiency of the operation of eaiffier punched card procedures, and will lead to substantial operating savings. The processing of dividend payments to about 4.6 million veterans insur- ance policyholders. By the use of computer procedures, the cost of dividend payments per unit has been reduced from 27 cents to 4 cents in five years. 79-4~9 0-67-pt. 2-l1 PAGENO="0162" 414 ECONOMY IN GOVERNMENT Analysis of delinquent taxpayers' accounts and preparation of delinquency notices. These operations are now being handled by the use of computers with a saving of approximately $600,000. This is a 2 percent reduction in cost over previous methods. Appraisals of property involving 600,000 mortgage insurance requests each year. As a result of the use of computers, the appraisals are processed faster and a broader base is provided on which to compare property values. The receipt and issuance of supplies throughout the military establishment have been significantly improved by the introduction of a computer based system. The system now in use replaces 16 different manual or mechanical systems. Calculation and selection of freight charges on Federal Supply Service outbound shipments are now handled through a computer system. This method has saved over $3 million in freight charges in the last fiscal year alone. The replacement of punched card equipment with more efficient computers in one of the military services. This has saved over a $1 million a year and also achieved desirable standardization of administrative systems. Improved management of computer activities To achieve the kinds of results cited above requires substantial investments in computer systems and operations. This makes it mandatory that we manage these large investments in the most efficient and economical manner known. Public Law 89-306 provides the basic authority for improving our procurement practices and for achieving greater utilization of computers and compatibility among them. To minimize costs, major emphasis is being given to using existing equipment capacity whenever and wherever possible, using excess equipment instead of acquiring new equipment, and employing more economical procurement methods. In this connection-i--- The nationwide sharing program has resulted in extensive joint use of existing computer facilities and services among agencies. The sharing serv- ices amounted to $26 million in fiscal year 1966; Excess equipments valued at about $70 million were redistributed among Federal agencies for extended use in fiscal year 1966; A pilot test of a new concept of leasing has resulted in an annual saving of $69,000. That amount represents a reduction of about 24 percent in the total rental cost of those equipments included in the test. Accordingly, this method will now be used more extensively; Rental expenditures estimated at $200 million per year have been avoided by the prudent purchase of computers; Improved terms and conditions of use advantageous to the Government have been negotiated with manufacturers under the Federal Supply Schedule. Additionally, negotiations leading to bulk procurement actions have resulted in substantial savings; and Numerous consolidations of small computer facilities into a lesser number of larger, more powerful facilities have been accomplished with savings in both operating costs and manpower. The attainment of greater compatibility among equipments and systems con- tinues to be a prime objective. Tothis end- The Federal Government is expanding its participation and support of efforts to establish equipment and software standards. Seventeen such stand- ards have been announced so far; and Work is in progress on a program to establish standards in a broad range of data elements and related codes. This is to facilitate the automated ex- change and summation of data within the Government, and with industry and the public. Summary This record of accomplishments is impressive and encouraging. But there is much more that can and must be done to- Make computer systems more effective; Improve further the utilization and methods of procurement; Achieve greater compatibility among equipment and systems; and Develop appropriate standards of performance. PAGENO="0163" ECONOMY IN GOVERNMENT 415 To assist all agencies in their management and uses of automatic data proc- essing equipment, the initial phases of a Government-wide information system have been designed and will become operational early in calendar year 1967. While significant progress has been made, all agencies will continue to give major attention to achieving the goals set forth in the President's memorandum to all department and agency heads on June 28, 1966. EXECUTIVE OFFICE OF THE PRESIDENT, BUREAU OF THE BUDGET, Washington, D.C., April 20, 1967. CIRCULAR No. A-83 To: The Heads of Executive Departments and Establishments. Subject: ADP management information system. 1. Purpose.-This Circular prescribes the establishment and maintenance of an integrated system to provide information for the management of automatic data processing activities in the Federal Government. This System carries out certain of the recommendations in the Bureau of the Budget Report to the President on the Management of Automatic Data Processing in the Federal Government (Senate Document No. 15, 89th Congress), and will materially assist in meeting the requirements of Public Law 89-306, approved October 30, 1965, for the economic and efficient purchase, lease, maintenance, operation, and utilization of automatic data processing equipment by Federal departments and agencies. The System will- (a) provide to the Bureau of the Budget, the Department of Commerce, and the General Services Administration timely and comprehensive informa- tion to assist these agencies in the discharge of their responsibilities under Public Law 89-306, (b) provide assistance to agency heads in the administration and man- agement of their automatic data processing activities, (o) provide a comprehensive and perpetual inventory of electronic data processing equipment, and (d) provide integrated subsystems for inventory, utilization, manpower, cost and acquisition history. Additional subsystems concerning selected in- formation on program plans, budget requirements, equipment and software performance, applications, and personnel requirements will be considered for development and subsequent integration into an advanced management information system for ADP. Circular No. A-55, Revised, dated November 15, 1963, Subject: "Annual re- ports on the utilization of automatic data processing equipment in the executive branch" and Transmittal Memorandums No. 1 and 2 are hereby rescinded. 2. Use of Management Information System.-The Management Information System has been developed to facilitate and improve the management of the Government-wide ADP program and the ADP program within and between agencies: (a) This System is also designed to produce specific information for a variety of management levels which will be useful in- (1) determining the scope, nature and cost -of ADP activities on an ac- tivity, installation, agency-wide and Government-wide basis; (2) shaping ADP management policies and evaluating the effects of such policies; (3) providing broad indications of effectiveness and efficiency in ADP operations; (4) negotiating improved terms and conditions for Federal Supply Sched- ule contracts, based on a more comprehensive picture of current and pro- jected ADP operations; (5) planning and effecting the redistribution of intra- and interagency excess ADP equipment; - (6) operating Sharing Exchanges and Data Processing Centers and ar- ranging for joint use of ADP equipment and services; (7) exchanging information and experiences among ADP installations and agencies having common applications and problems; PAGENO="0164" 416 ECONOMY IN GOVERNMENT (8) assessing the need for, and the potential impact of APP standardiza- tion and research activities, based on a more comprehensive picture of cur- rent and projected APP operations; (9) providing comprehensive and timely data to facilitate internal man- agement decisions; and (10) establishing and maintaining a perpetual inventory data bank for electronic data processing equipment at the General Services Administration for Government-wide use and at agency level for data appropriate for in- ternal use. 3. Scope.-This Circular is applicable to certain organizations and equipment as follows: (a) Organization8.-Inputs to the APP Management Information System are required from all Federal agencies having organizations or ADP units which- (1) use or plan to use ADP equipment; (2) acquire or plan to acquire APP services (i.e., services for machine tIme, operations, and maintenance; systems analysis and design; program- ming; training; and studies or advice on equipment acquisition, selection and use) from Government or other sources; (3) have organizational components which perform ADP functions such as coordinating APP programs and activities; developing, programming, and implementing systems; reviewing, recommending, or selecting APP equip- ment; approving the acquisition of APP equipment or services; or provid- ing APP services on a consulting or project basis for agency APP units; (4) have Government contractors, including educational institutions and other not-for-profit contractors or organizations, who operate APP equip- ment in the performance of work under cost reimbursement-type contracts or subcontraets when- - (a) equipment is leased and the total cost of leasing is to be reim- bursed under one or more cost reimbursement-type contracts; or (b) equipment is purchased by the contractor for the account of the Government or title will pass to the Government; or (c) the equipment is furnished to the contractor by the Government; or (ci) the equipment in installed in Government-owned, contractor-op- erated facilities. (b) Contractor cognizance.-Information required on APP equipment owned or leased by a contractor wifi be reported by the agency having primary con- tract administration cognizance or, in the absence of an assignment of primary cognizance, by the agency having the preponderance of business with the con- tractor in terms of dollar value of contract sales. (c) Automatic Data Processing equipment (ADPE) .-This includes general purpose electronic data processing equipment (EPPE) and punch card account- ing machines (POAM or EAM) irrespective of use, application, or source of funding and includes ADPE built to Government specifications. These are defined as follows: (1) EDPE-A machine or groups of interconnected machines consisting of in- put, arithmetic, storage, output and control devices which use electronic cir- cuitry, operate on discrete data, and perform computations and logical operations automatically by means of internally stored or externally controlled programmed instructions. All peripheral or off-line data processing equipment in support of EPPE, except PCAM as defined below, is included in the electronic data processing equipment category. (2) POAM-Machines and equipment primarily electro-mechanical in opera- tion using punched cards as input-output media to record, verify, sort, list, tabulate, select, collate, merge, interpret, and total data. 4. Coverage.-The APP Management Information System requires recurring inputs on APPE Inventory, EPPE Utilization, Summary APP Manpower and Cost, and EPPE Acquisition History from all Federal agencies which meet the criteria specified in this Circular but recognizes that electronic data process- ing equipment operates under a wide variety of environmental conditions and that valid reasons exist to establish management classifications for certain cate- gories of computers. These categories do not limit the implementation or manage- ment of Government-wide programs concerning the improved management of data processing. These classifications provide partial or full reporting exemptions as follows: PAGENO="0165" ECONOMY IN GOV~1RNMENT 417 (a) Pa'rtial ea~emptions- (1) Control Systems Equipment.-EDPE which is an integral part of a total facility or larger complex of equipment and has the primary purpose of controlling, monitoring, analyzing, or measuring a process or other equip- ment is exempt from EDPE Utilization reporting and Summary ADP Man- power and Cost reporting. (2) Classified System Equipment.-EDPE, the physical location of which is classified, is exempt from EDPE Utilization reporting and Summary ADP Manpower and Cost reporting. In other reporting (ADP Unit Identifica- tion) location information which is unclassified should be used. (3) Mobile Systems Equipment.-Mobile EDPE installations on ships, planes, or vans are exempt from EDPE Utilization reporting only. This ex- emption includes EDPE installed with military units which are deployed or subject to deployment in areas of active military operations against an enemy force. (4) Reutilization Equipment-Government-owned EDPE acquired through Government reutilization programs is excluded from EDPE Acquisi- tion History reporting only. (b) Full ez~emption.s- (1) Analog computers are exempt from the provision of this Circular. (2) EDPE which is built or modified to special Government design specifi- cations and is integral to a weapons system is exempt from the provisions of this Circular. 5. Reporting frequency and due dates.-In order to assist agencies to effect an orderly transition to the machine readable inputs and frequencies specified in, this Circular, the effective date of the Management Information System reporting requirements is established at June 30, 1967. Reports are required as of that date for the periods specified in attachments hereto and are due at the Management Information System Central Processing Point, Inventory and Requirements Analysis Branch (FTII) General Services Administration, 7th & D Streets, S.W., Washington, D.C. 20407, as set forth in the following schedule: MIS reports Report Frequency Due date at MIS processing point ADPE inventory Projected EDPE gains/losses~~ Actual EDPE gains/losses (per- petual inventory inputs). EDPE utilization EDPE acquisition history Summary ADP manpower and cost. Each June 30 Each June30 and Dec. 31 `Upon installation or release - - Each June 30 and Dec. 31 - - - - After performance period and acceptance of EDPE. Each June30 30 days after end of applicable period. Do. 10 days after installation or release. 30 days after end of applicable period. 30 days after end of performance period and acceptance of EDPE. 45 days after end of applicable period. 0. Reporting formats.-All inputs required by this Circular will be transmitted to the MIS Central Processing Point in machine readable media and in the sequence specified in the attachments hereto. It is anticipated that a limited number of agencies and units will not have the ADPE capabilities to respond to the requirements for machine readable inputs and in such cases these agencies may submit data on a punch card transcription sheet which can be obtained from the MIS Central Processing Point. 7. Transmission-In order to maintain comprehensive and timely information and exploit the processing capabilities of the prescribed mechanized data, it is suggested that agencies explore and determine the most economical and efficient method of preparation and transmission necessary to meet the established due dates. 8. Effective Date-The provisions of this Circular are effective immediately. CHARLES L. SCHTJLTzE, Director. PAGENO="0166" PAGENO="0167" ADP MANAGEMENT INFORMATION SYSTEM AT'PACHMENTS EXECUTIVE OFFICE OF `THE PRESIDENT BUREAU OF THE BUDGET 419 PAGENO="0168" 420 ECONOMY IN GOVERNMENT CONTENTS Attachment ADP Unit Identification . .. ... .... A ADPE Inventory ................ B Projected EDPE Gains/Losses .... .. B Actual EDPE Gains/Losses ............... B EDPE Utilization C EDPE Acquisition History D Surmnary ADP ~npower and Cost ...... . E Federal Agency Codes F ADPE ~nufacturer Code G ADPE Cc~nponent Class Code H Geographical Codes I Edit Criteria .,................. J General Instructions K PAGENO="0169" ECONOMY IN GOVERNMENT 421 BB No. 80-R172 AT~AC}Th~E~T A Form Approved Circular No. A-83 AD? UNIT ID~jT~iFICATION (CARD FORMATS A AND B) The purpose of Card Formats A and B is to provide specific identi- fication of each AD? Unit. This format will be provided as header' information for the initial submission of reports by agencies and AD? Units. Subsequent "header" information will be submitted as agencies and AD? Units are added, deleted, or changed. AD?E, the physical location of which is classified, will only be identified by Agency Code and AD? Unit Number. The following information is required in Card Format A: Card Column Item and Descriptiqp 1 Card Code: ?unch "A in this column. 2-3 Agency Code: See Attachment F for appropriate code. 4-7 AD? Unit Number: A specific number assigned by each agency to each of its organizations that accomplish any of those ADP functions outlined in the scope of this Circular. Duplicate AD? Unit Numbers will not be used. 8 Classified ?hysicalJ~ocatiQX~ ?unch "C" if the physical locat~q~rl of the ADP Unit is classified and only Agency Code and AD? Unit Number are provided. Otherwise leave blank. 9-38 Off ice/Command/BureA~: Title of the organization ii~2~ ~ the agency level that has management responsibility over the AD? Unit(s). Examples: Office of Administration, Naval Material Command, Internal Revenue Service, Office of Comptroller, DCS for Logistics, Department of Data Management, Bureau of Accounts. PAGENO="0170" 422 ECONOMY IN GOVERNMENT A~i~T~/COfltractor: The name of an activity or contractor. ~ctivi-t~y refers to a field activity woich is headed a commanding officer, adminis- trator, or cthcr to~ management official. Activity also refers ~o an organization in the agency neadquarters which accomplishes any of those ADP functions outlined in the scope of this Circular. Examples - field activities: Robins Air Force Base, Boston Naval Shipyard, Fort Benning, Camp Lejeune, Goddard Space Flight Center, `USS Proteus, Southwest Regional Office, Veterans Hospital, Dugway Proving Ground, Defense General Supply Center. Examples - agency headquarters: Office of Data Processing, Management Information Systems Division, ADP Management Branch, Data Processing Staff. Examples - contractors: Bendix Aviation Corp., Rand Corp., Duke University, General Electric Co. 79 Reserved: Do not punch. 83 Transaction Code: Enter one of the following codes: 1. Initial submission as of June 33, 1967 2. New ADP Unit - add to file 3. Discontinuance of ADP Unit - delete from file The following information is required in Card Format B: Card Code: Punch YT5?! in this column. 2-3 Agenpy Code: Same as columns 2-3, above. 4-7 ~DP Unit Number: Same as columns 4-?, above. PAGENO="0171" ECONOMY IN GOVERNMENT 423 Type of ADP Unit: Enter one of the following codes which best describes the ADP Unit: 1. Has PCAM only. 2. Has EDFE only. 3. Has EDPE and PCAM (ADPE). Primary purpose is to perform systems analysis/ design, programming, equipment selection, management, consulting, or coordinating functions for one or more ADP Units or organizations and has: 4. No ADP 5. Some ADPE 9 ADP Unit Operated By: Enter one of the following codes: 1. A Federal agency. 2. A contractor in a Government-owned facility. 3. A contractor in a non_Government-owned facility. 4. A State, city, or local government. 5. Other. Telephone Number of ADP Unit Manager: (Do not provide telephone numbers for ADP Units outside of the 50 States and District of Columbia.) 10-12 Area Code 13-19 Commercial Telephone Number Examples: 9625748, RE42635, S069782 20-27 IDS Code and Telephone Extension Examples: 183-4336, 13-27052, 169-786 28-49 City/Post Office: The city, town, or post office (U.S. or foreign) in or nearest to which the ADP Unit is located. Punch full name to the extent field size permits. Do not abbreviate. Do not provide FF0 or APO numbers. 53-51 StateJCoun~y~ The State or foreign country in which the ADP Unit is located. Use the appropriate code contained in Attachment I. PAGENO="0172" 424 ECONOMY IN GOVERNMENT ~ Any information made available to the public concerning ADPE overseas or on ships will only show the location as Overseas." 52-56 ZIP Code: Enter the Postal ZIP Code used by APP Units. 79 Reserved: Do not punch. 80 Transaction Code: Enter one of the following codes: 1. Initial submission as of June 30, l967~ 2. New ADP Unit - add to file. 3. Discontinuance of ADP Unit - delete from fileS PAGENO="0173" ECONOMY IN GOVERNMENT 425 BB No. 80-R172 ATTACHMENT B Form Approved Circular No; A-83 ADPE INVENTORY (CARD FORMAT C) Required ADPE Inventory reports are, as follows: a. ADPE Inventory. A complete inventory of all installed EDPE and PCAM will be prepared once each year. Inventories are required at the component level. Components are individual machines which are acquired to operate independently or as an integrated group or system. Although variation in terminology exists among manufaç- turers, individual machines are generally identified by type and model numbers. GSA Federal Supply Schedules should be used as a guide for type and model numbers. Examples: RCA 441-1 (Magnetic Tape Unit), RCA 304 (Processor); BUR 9211 (Card Punch), BUR 9372-2 (Disk File); UNI 3013-13 (Processor), UNI 0755-05 (Printer); IBM 026-2 (Card Punch), IBM 729-3 (Magnetic Tape Unit), IBM 407-E4 (Accounting Machine). Special features, accessories, or machine capacity increases which are installed on EDPE components or PCAM should not be reported. When installation of these items changes the type and model number of EDPE components or PCAM, the new type and model number should be indicated. Tne inventory of installed EDPE and PCAM will be prepared as of June 33 of each year. ADPE inventories will be prepared in accordance with Card Format C. b. Projected EDPE Gains/Losse~ Projected EDPE gains/losses (G/L) will be prepared as of each December 31 and June 30 as follows: Decembe~3j~ Report all EDPE G/L that are projected during the remainder of the current fiscal year and during the budget year. June ~3Q~ Report all EDPE G/L that are projected during the budget year (which starts the first day of tne new fiscal year after the "as of date"). Projected G/L reports will normally be prepared at component level in accordance with Card Format C, ~ovided all components of an EDPE System are known. If a~ component of a projected gain of an EDPE System is unknown at the reporting "as of date", prepare one Card Format C for the central processing unit only. When an EDPE PAGENO="0174" 426 ECONOMY IN GOVERNMENT System is unknown, or the selection has not been approved, prepare one Card Format C for the central processing unit and enter "U" in the ADPE Manufacturer and EDPE System fields. Examples: HON 120,200,2200; CDC l6OA, 1604 3600, tJNI 494, 105DB, 10041; DUE 5500, 2500, ElOl; RCA 70/35, 501, 301; GEL 205, 225, 635, I~ 7094 II, 363/60. C. Actual EDPE Gains/Losses. Actual EDPE G/L will be reported immediately after an EDPE System is installed or released. Actual GIL reports will be prepared in accordance with Card Format C and will include all components that are installed or removed with. the EDPE System. CARD FORM~AT C Card Column Item and Description Card Code: Punch "C" in tois column. 2-3 A~ency Code: See Attachment F for apyropriate Code. 4-7 ADP unit Number: A specific number assigned by each agency to each of its organizations that accomplish any of those ADP functions outlined in the scope of this Circular. Duplicate ADP Unit Numbers will not be used. ADPE Manufacturer: See Attachment G for appropriate abbreviation. Enter a "U" if this is a Projected EDPE Gain and the EDPE selection has not been approved or is not known. Leave blank if built to special Government design specifications and enter name or number of the EDPE in EDPE System. 11-17 EDPE System: The number or name and model used by a manufacturer to designate an EDFE system. Leave blank for PCAM and other Digital Data Preparation/ Recording Equipment. If this is a Projected EDPE Gain and the EDPE ~stem is unknown or has not been approved, enter a "U." PAGENO="0175" ECONOMY IN GOVERNMENT 427 18-19 EDPE System Identificetion Number: A unique number sequentially assigned by each ADP Unit to each EDPE System installed or projected to be installed. This number will be included in all cards for EDPE components assigned to the system. 20 Partial Exemption Code: Refer to basic Circular for authorized partial exemptions. Enter one of the following codes if authorized: 1. Control Systems EDPE 2. Classified Systems EDPE 3. Mobile Systems EDPE 4. Reutilization EDPE 5. Control Systems and Reutilized EDPE 21-24 Component Type: The type or other number used by a manufacturer to designate types of EDPE components or PCAM. 25-28 Component Model: The number or letter used to indicate different models of EDPE components or PCAM. EXAMPLES Component Component Manufacturer EDPE System Type Model HON 2203 2201 1 IBM 36060 2060 3 UNI 1050111 0858 16 RCA 7055 55 H GEL 415 415 CDC 6000 626 IBM 407 R2 29-31 Component Manufacturer: If the manufacturer of the EDPE component is different than the EDPE System manufacturer (columns 11-17) enter the abbreviation of the component manufacturer. See Attachment G. Otherwise leave blank. 32-33 Component Class Code: See Attachment H. Enter the code which generally describes the type of EDPE component or PCAM. PAGENO="0176" 428 ECONOMY IN GOVERNMENT 34-37 flhstallation Date: The date (year and month) the ADPE was installed and ready for use (the date rental charges began or purchase payment authorized). If this is a Projected EDPE Gain, enter the projected installation date. 38-41 Release Date: Enter a date (year and month) for all installed or projected ADPE which will be released within five years following the reporting `as of date.' Enter a "U" if the ADPE will be released after this five year period. 42-45 ActuallProjected Purchase Date: Year and month. 46-50 Purchase Price (nearest hundreds of dollarsi: If purchased, enter the net purchase price. Include the cost of any features installed on and purchased with the EDPE component or PCPM. If rented, include the net purchase price as of the end of the reporting period. 51-54 Maintenance Costs (in dollars): Monthly contract maintenance cost for the ADPE. Include maintenance charges for leased ~4DPE when such charges are not included in base rental. 55 Ownership Code: Enter one of the following codes: 1. Government Owned 2. Government Leased 3. Contractor Owned 4. Contractor Leased 56-61 Total Rental Cost (in dollars): In addition to base monthly rental, include rental for average monthly extra-use and rental of all features installed on the EDPE component or PCAM. This rental data is also required for all purchased EDPE components and PCAM. If this data is not contained in Federal Supply Schedules, enter 2% of the purchase cost as the estimated rental cost. Leave blank if the manufacturer's policy precluded rental at time of purchase. PAGENO="0177" ECONOMY IN GOVERNMENT 429 62 Acquisition Code: Enter one of the following codes which best indicates the source from which the ADPE was acquired. 1. Inter-agency transfer 2. Intra-agency transfer 3. Equipment manufacturer 4. Leasing company (not a manufacturer) 5. Built in-house 6. Government furnished to non-Government organization 7. Provided to Government without cost 8. Other 63 Disposition Code: Enter one of the following codes which best indicates the disposition of the ADPE when it was released by the reporting ADP Unit. 0. Inter-agency transfer 1. Intra-agency transfer 2. Returned to manufacturer 3. Returned to leasing company (not manufacturer) 4. Exchange sale 5. Place in storage 6. Donation 7. Surplus sale 8. Awaiting advice 9. Other 64 Maintenance Code: Enter one of the following codes which - best indicates how and by whom the ADPE (purchased or leased) maintenance is accomplished. 1. Manufacturer - contract maintenance 2. Government personnel - in-house maintenance 3. Manufacturer - parts and/or labor only 4. Other - parts and/or labor only 5. Other - contract maintenance Central Processin~Unit: Indicate: 65-68 Internal Memor~ Size: Number of addressable units to the nearest thousand. 69 Addressable Unit of Memory: Byte - enter B Character - enter C Word - enter W 73-72 Reserved: Do not punch. 79-459 0 - 67 - pt. 2 - 12 PAGENO="0178" 430 ECONOMY IN GOVERNMENT 73-78 Date of Report: Year, month, and day on which report was prepared. 79 Reserved: L~ not punch. 80 Transaction Code: Enter one of the following codes: 1. Installed EDPE and PCAM (as of June 30 of each year). 2. Projected EDPE Gain (as of June 30 and December 31 of each year). 3. Projected EDPE Loss (as of June 30 and December 31 of each year). 4. Actual EDPE Gain. 5. Actual EDPE Loss. PAGENO="0179" ECONOMY IN GOVERNMENT 431 BB No. 80-Rl72 A~FJ~ACHMENT C Form Approved Circular No. A-83 EDPE UTILIZATION (CARD FORMAT D) Utilization datawill be provided as of December 31 and June 30 of each year for all computers in place on these dates or projected for installation during the appropriate current fiscal year and budget year. Utilization data will be prepared on the basis of average monthly utilization of each central processor during the preceding six months or portion thereof. For projected EDPE System gains, only provide that utilization data required by columns 62-73. Card ~Q~umn Item and Description 1 Card Code: Punch "D." 2-3 Agency Code: See Attachment F for appropriate code. 4-7 ADP Unit Number: A specific number assigned by each agency to each of its organizations that accom- plished any of those ADP functions outlined in the scope of this Circular. Duplicate ADP Unit Numbers will not be used. 8-13 ADPE Manufacturer: See Attachment G for appropriate abbreviation. Enter a "U" if this is a Projected EDPE Gain and the computer selection has not been approved or is not known. Leave blank if built to special Government design specifications and enter name or number of computer in EDPE System. 11-17 EDPE System: The number or name and model used by a manu- facturer to designate an EDPE System. If this is a projected EDPE gain and the EUPE System is unknown or has not been approved, enter a "U.' 18-19 EDPE System Identification Number: A unique number sequentially assigned by each ADP Unit to each EDPE System installed or projected to be installed. ~urs Out of Service: PAGENO="0180" 432 ECONOMY IN GOVERNMENT 20-22 Preventive Maintenance: Average monthly hours used for scheduled preventive maintenance. 23-25 Remedial Maintenance: Average monthly hours used for non-scheduled repairs, including tine awaiting repairs. 26-28 Q~ther Dewntime: Average monthly hours lost due to failure of electricity, air conditioning, humidity, projected environmental downtime for maintenance or modification of physical facilities, EDPE field engineerirg changes, etc. Hours in Service: 29-31 Set-up: Average monthly hours not available due to loading or unloading EDPE with cards, paper, tapes, etc. Provide estimated set-up time when not available from the normal system for recording EDPE utilization. 32-33 Rerun-Manufacturer: Average monthly hours used in reruns due to machine error or software error for which manufacturer is contractually responsible. Rerun time in excess of 99 hours will be shown as "99?? 34-35 Rerun-Other: Average monthly hours used in reruns due to data, operator, program, tape, or other error for which the manufacturer is - not responsible. Rerun time in excess of 99 hours will be shown as "99," 36-38 Prog~an Development: Average monthly hours used in program development and modification. 39-41 Effective Production: Average monthly hours of operational use time excluding Rerun-Other and Program Development. (Includes hours provided to others). Hours not Available: 42-44 Hours not Available: Average monthly hours not for use by other organizations. PAGENO="0181" ECONOMY IN GOVERNMENT 433 45 Reason for Nonevailability: Indicate primary reason why hours could not be made available to other organizations. 1. Workload contingencies 2. Real-time system 3. Reserved for mobilization 4. Time fragmented - not available in period greater than one hour 5. Other (e.g., intermittent availability) 46 Numbers of Shifts: Number of 8-hour shifts per day the EDPE is scheduled on a five day week basis. Hours Provided to Others: Average monthly hours provided to any organizations (whether or not in the same Federal agency), and the hours provided are not a part of the assigned mission, and are not included in the funding and staffing of the providing ADP Unit. 47-49 Reimbursable Hours: 50-52 Nonreimburseble Hours: Hours Obtained From Others: Average monthly hours obtained from any other Government AD? Unit (whether or not in the same Federal agency), or commercial source. 53-55 Reimbursable Hours: 56-58 Nonreimbursable Hours: 59-61 Commercial Source Hours: Projected Utilization - Current Fiscal Year: 6?-64 Hours in Service: Estimated average monthly hours in service for remainder of current fiscal year. (Leave blank when reporting date is "as of" June 30). 65-67 Hours Available: Estimated average monthly hours available to other organizations for remainder of current fiscal year. (Leave blank when reporting date is "as of" June 30). PAGENO="0182" 434 ECONOMY IN GOVERNMENT NOTE: June 30 is the last day of the current fiscal year. 68-73 Hours pbtained From Commercial Sources: Estimate average monthly hours to be obtained from commercial sources. (Leave blank when reporting `as of" date is June 30). Projected Utilization - Budget Year: 71-73 Hours in Service: Estimated average monthly hours in service during the budget year. 74-76 Hours Available: Estimated average monthly hours available to other organizations during the budget year. NOTE: Budget year is the fiscal year following the current fiscal year. 79 Reserved: t~ not punch. 80 Transaction Code: Enter one of the following codes. 1. Report as of June 30 of each year. 2. Report as of December 31 of each year. 3. Add to file. 4. Delete from file. PAGENO="0183" ECONOMY IN GOVERNMENP 435 BB No. 80-R172 A~TAc~M9D A-83 Form Approved ~~PE ACQUISITION HISTORY (CARD FORMAT E) EDPE Acquisition History data will be prepared within 30 days following the performance period and acceptance of EDPE acquired from EDPE suppliers. No EDPE Acquisition History reports are required for EDPE which completed the performance period and was accepted prior to July 1, 1967. Government-owned EDPE acquired through Government reutilization programs is excluded from EDPE Acquisition History reporting. The following information is required: Card Column Item and Description 1 Card Code: Punch "E" in this column. 2-3 ~g~ncy Code: See Attachment F for appropriate code. 4-7 ADP Unit Number: A specific number assigned by each agency to each of its organizations that accom- plish any of those AD? functions outlined in the scope of this Circular. Duplicate AD? Unit Numbers will not be used. 8-10 ADPE Manufacturer: See Attachment G for appropriate abbreviation. Leave blank if built to special Government design specifications and enter name or number of computer in EDPE System. 11-17 EDPE System: The number or name and model used by a manufacturer to designate an EDPE System. 18-19 EDPE System Identification Number: A unique number sequentially assigned by each AD? Unit to each EDPE System installed or planned to be installed. 23 Procurement Code: Enter one of the following codes that indicates method used. 1. Competitive bids requested from all qualified suppliers and evaluated. 2. Noncompetitive, sole source, bids not requested from all qualified suppliers. 21-26 Date EDFE Selection Approved: Year, month, and day that equipment selection was approved by the highest level of review required for the particular selection. PAGENO="0184" 436 ECONOMY IN GOVERNMENT 27-32 Date EDPE Delivei~y Required: Year, month, and day specified in contract or purchase order and accepted by the vendor as the required delivery date. Punch an "A" if date was specified for `as soon as available. 33-38 Date EDPE Delivered: Year, month, and day the EDPE was delivered to the using ADP Unit or activity. 39-44 Date EDPE Installation Required: Year, month, and day specified in contract or purchase order and accepted by the vendor as the required installation date (ready for use). Punch "A" if date specified was for "as soon as available." 45-50 Date EDPE Installed: Year, month, and day the EDPE was installed and ready for use. (The date rental charges began or purchase payment authorized). 51-56 Date Software De1ivery~ Required: Year, month, and day specified in the contract or purchase order as the required delivery date for the last increment of software. Punch an "A" if specified date was for "as soon as available." 57-62 Date Software Accepted or Delivered: Year, month, and day last increment of software was accepted or delivered. If software is not delivered within 30 days after hardware acceptance, enter estimated delivery date. 63-65 Average EDPE Effectiveness Level: Calculate average effectiveness level for the performance period in accordance with GSA Federal Supply Schedules, or specific requirements of your contract or purchase order. 73-78 Date of_Report: Year, month, and day on which report was prepared. 79 Reserved: Do not punch. 80 Transaction Code: Enter one of the following codes: 1. Add to file. 2. Delete from file. PAGENO="0185" ECONOMY IN GOVERNMENT 437 BB No. 80-Rrr2 API!ACHMENT E Form Approved Circular No. A-83 SU?~1ARY ADP MANPOWER AND COST (CARD FORMATS F-K) Summary ADP Manpower and Cost data will be prepared by each organization or ADP Unit performing any of the ADP functions outlined in the scope of this Circular. Reports will be prepared as of June 30 of each year for the ~ and current fiscal years, and the budget year. All cost data will be rounded to the nearest thousands of dollars. Manyears and cost data will be provided for all personnel who, as their principal duty, are directly identified with ADP functions. Card Formats F and G will be used for reporting Summary ADP Manpower and Cost data for the ..p.s.a~. fiscal year. Card Formats H and I will be used for the current fiscal year, and Card Formats J and K will be used for the budget year. The following information is required in Card Formats~i~, H. and J: Card Column Item and Description 1 ~.~Code: Punch one of the following codes: "F' - when this information is for the past fiscal year (FY 1966 for the initial report as of June 30, 1967). "H" - when this information is for the current fiscal year (ending with the June 30 "as of date"). "J" - when this information is for the budget year. (starting the first day of the new fiscal year beginning after the June 30 "as of date"). 2-3 Agency Cg~~j See Attachment F for appropriate code. 4-7 ADP Unit Number: A specific number assigned by each agency to each of its organizations that accom- plish any of those ADP functions outlined in the scope of this Circular. Duplicate ADP Unit Numbers will not be used. PAGENO="0186" 438 ECONOMY IN GOVERNMENT Total Manyears: 8-10 Civilian Mariyears: The total manyear equivalent of all civilian personnel assigned to the ADP Unit. 11-13 Military Manyears: The total manyear equivalent of all military personnel assigned to the ADP Unit. Mariyears by Function: (Note: will not necessarily equal total manyears) 14-16 systems Analysis/Design Manyears: 17-19 EDPE Progranniing Manyears: 20-22 ADPE In-House Maintenance Mariyears: 23-25 KeypunchingjVerifying Operation Manyears: 26-28 Other ADPE Operation Manyears: 29-31 ADPE Selection Manyears: Capital Costs: 32-36 EDPE Purchases: Cost of all EDPE, including all supporting peripheral or off-line equipment purchased (except PCAM). 37-39 PCAM Purchases: Cost of all PCAM purchased. 40-42 Other Equipment Purchases~ Cost of other equipment which is unique to the support of data processing operations (e.g. bursters, tape files, etc.) 43-45 Site Preparation: Cost of site construction, modification, or alteration for installing ADPE. PAGENO="0187" ECONOMY IN GOVE.RNMEN~I' : 439 Operating Costs - In-House 46-49 Civilian Salaries and Overtime: Salaries, including overtime. Do not include Government contri- butions to retirement fund, health plans, etc., in behalf of employees. 50-53 Military Base Pay and Allowances~ 54-58 EDPE Rentals: Rentals for all EDPE in place during the year, including supporting peripheral or off-line equipment (except PCAM). 59-61 PC~M Rental~. Rentals for all PCAM in place during the year. 62-b4 Magnetic Tapes and Disk Packs: 65-67 Parts for In-House Maintenance of Purchased ADPE: 68-70 Supplies: Cost accrued for paper, cards, ribbons, etc. 71-74 Other: Other operating costs not specifically identified above. 79 Reserved: Do not punch. 83 Transaction Code: Enter one of the following codes: 1 - Add to file. 2 - Delete from file. PAGENO="0188" 440. . ~:. ECONOMY IN GOVERNMENT The following information is required in Card Formats G. I. and K: 1 Card Code: Punch one of the following codes: - when this is a continuation of information for the ~ fiscal year. "I' - when this is a continuation of information for the current fiscal year. "K' - when this is a continuation of information for the budget year. 2-3 Agency_Code: See Attachment F for appropriate code. 4-7 ADP Unit Number: Same as previous card formats, columns 4-7. Operating Costs - Contractual and Reimbursable Services: Contractual Services: The cost of the following contractual ADP services which supplement the workload of ADP Units or organizations, and are obtained from other than Government sources. 8-10 ADPE Time and Related Services: 11-14 Sj~stems Analysis/Design and Programming Services: 15-17 ADPE Maintenance: 18-20 KeypunchthgJVerifying Services: 21-23 Other: Costs of contractual services not specifically identified above (cost of studies or advice on ADPE acqui- sition, selection, and use, etc.) Reimbursable Services: The cost of the following ADP services which supplement the workload of ADP Units or organizations, and are obtained from any Government ADP Unit (whether or not in the same Federal agency). PAGENO="0189" ECONOMY IN GOVERNMENT 441 24-26 ADPE Time and Related Services~ 27-29 Systems Analysis/Design and Prograi~thg Services: 33-32 Keypunching/Verifying Services: 33-35 Other: Costs of reimbursable services not specifically identified above (equip- ment evaluation and selection services, etc.). 36-40 Gross Cost of ADP Unit: Total of capital and operating costs. LESS: Reimbursable Services Provided to Others: Reimbursements for the following services provided to other ADP Units or organizations. 41-43 ADPE Time and Related Services: 44-46 ~stems Analysis/Design and Programming Services: 47-49 Keypunching/Verifying Services: 50-52 Other: Reimbursements for services provided to others which are not specifically identified above. 53-57 Net Cost of ADP Unit: Gross cost minus Reimbursable Services Provided to Others. 75-76 Date of Report: Year and month. 79 Reserved: Do not punch. 83 Transaction Code: Enter one of the following codes: 1 - Add to file. 2 - Delete from file. PAGENO="0190" 442 ECONOMY IN GOVERNMENT ATI'ACHMENT F C1~cu1ar No. A-83 FEDERAL AGENCY CODES agency Agency Code Legislative Branch General Accounting Office GO Government Printing Office GP Library of Congress LI Judicial Branch Administrative Office of the U. S. Courts AO The Supreme Court of the U. S. SI Executive Branch American Battle ?~onuments Commission AC Appalachian Regional Commission AR Atomic Energy Commission Al Bureau of the Budget BO Canal Zone Government CV Central Intelligence Agency CL Civil Aeronautics Board CC Commission of Fine Arts CI Council of Economic Advisers CF Delaware River Basin Commission RE Depa.rtment of Agriculture AL Department of Commerce CO Department of Defense Office, Secretary of Defense (includes Defense Agencies not indicated below) DD Department of Army DA Department of Navy DN Department of Air Force DF Defense Supply Agency DS Defense Atomic Support Agency DH Defense Communications Agency DK Department of Health, Education, & Welfare HH Department of Housing and Urban Development HU Department of Interior IN Department of Justice JU Department of Labor LA Department of State SU Agency for International Development SV Peace Corps SW PAGENO="0191" ECONOMY IN GOVERNMENT 443 Department of Transportation TO Department of Treasury TR District of Columbia Government CZ Export-Import Bank of Washington El Farm Credit Administration PC Federal Aviation Agency FA Federal Coal Mine Safety Board FG Federal Communications Commission FE Federal Deposit Insurance Corporation FK Federal Home Loan Bank Board FM Federal Maritime Commission FO Federal Mediation and Conciliation Service FQ Federal Power Commission FS Federal Reserve System FU Federal Trade Commission FW Foreign Claims Settlement Commission Fl General Services Administration GS Indian Claims Commission 1K Interstate Commerce Commission IC National Aeronautics and Space Administration NC National Aeronautics and Space Council NP National Capital Housing Authority NH National Foundation on Arts and Humanities AU National Labor Relations Board NI National Mediation Board NM National Security Council NO National Science Foundation NS Office of Economic Opportunity OE Office of Emergency Planning OH Office of Science and Technology OS Office of Special Representative for Trade Negotiations TU Panama Canal Company PC Post Office Department PG Railroad Retirement Board RR Renegotiation Board RE Saint Lawrence Seaway Development Corporation SX Securities and Exchange Commission SL Selective Service System SR Small Business Administration SF Smithsonian Institution SO Subversive Activities Control Board SC Tax Court of the United States TC Tennessee Valley Authority TX U. S. Arms Control and Disarmanent Agency AF U. S. Civil Service Commission CR PAGENO="0192" 444 ECONOMY IN GOVERNMENT U. S. Information Agency US U. S. Tariff Coirmission 13W Veterans Administration VA Virgin Islands Corporation -~ -- VI PAGENO="0193" ECONOMY IN GOVERNMENT 445 ATPACEMENT G Circular No. A-.83 ~ cop~ This is a partial list of ADPE manufacturers. To obtain codes for manufacturers not listed, call: 1DB Code l3~34820 Area Code 202, 963-4820 Manufacturer Abbreviation Adage, Inc. ADG Addo-X, Inc. ADX Addressograph Multigraph Corporation AMTJ Advanced Scientific Instruments, Division of Electro-Mechanical Research, Inc. ASI Ampex Corporation~ AMP Anelex Corporation ANL Astrodata, Inc. AST Autonetics, Division of North American Aviation, Inc. AUT Beckman Instruments, Inc. BEC Benson-Lehner Gorporation BEL Bryant Computer Products, Division of Ex-Cell-O Corporation BRY Bunicer-Ramo Corporation BRA Burroughs Corporation BUR California Co~iiputer Products CAL Clary Corporation CLA Collins Radio Company COL Control Data Corporation CDC Cubic Corporation CUB Cybetronics, Inc. CYB Dartex, Inc. DAR Data Systems Corporation DSC Decision Control, Inc. DCI Digital Electronics, Inc. DEL Digital Equipment Corporation DE~ Digitronics Corporation DIE Dura Corporation DUR Electronic Associates, Inc. EAI El-Tronics, Inc. ELT Farrington Electronics, Inc. FAR Friden, Inc. FRI General Dynamics GDY General Electric Company GEL General Precision, Inc. GNP Geo Space Corporation GEO 79-459 0 - 67 - pt. 2 - 13 PAGENO="0194" 446 ECONOMY IN GOVERNMENT Giannini Controls Corporation ucC Hewlett-Packard Company HPC Honeywell, Inc. HON Houston Instrument Corporation HIC Hughes Aircraft Company HUA Information Displays, Inc. INI) International Business Machines Corporation I~M International Telephone and Telegraph Corp. ITT Invac Corporation INV Litton Industries, Inc. LIT Lockheed Aircraft Corporation LOC Milgo Electronic Corporation MIL Mohawk Data Sciences Corporation MOH Motorola, Inc. MOT National Cash Register Company NCR Olivetti Underwood Corporation OLU Optical Scanning Corporation OSC Pacific Data Systems, Ific. PDS Philco Corporation PHI Potter Instrument Company POT Radio Corporation of America RCA Ray1theon~ Computer RAY Recognition Equipment, Inc. REC Rixon Electronics, Inc. RIX Sanders Associates, Inc. SAN Scientific Control Systems, Inc. SOS Scientific Data Systems SDS Soroban Engineering, Inc. SOR Stromberg-Carlson, subsidiary of General Dynamics Corporation STC Sylvania Electric Products, Inc. SYL Systems Engineering Laboratories, mc. SEL Tasker Instruments Corporation TAS Teletype Corporation, subsidiary of Bell Telephone System TEL Texas Instruments, Inc. TEX Univac Division, Sperry Rand Corporation UNI Westinghouse Electric Corporation VIES PAGENO="0195" ECONOMY IN GOVERNMENT 447 A1L~ACHMENT H Circular No. A-83 ADPE COI~ONENT CLASS CODE Central Processing Units. Storage and Related Controls Class Code Central Processing Unit 01 Magnetic Tape Unit 02 Magnetic Core Unit 03 Magnetic Drum Unit 04 Magnetic Disk Unit 05 Other Storage Units (Magnetic Strip, Card, Chip, etc.) 06 Multipurpose Control 07 EDPE System Input/Output and Related Controls Card Reader and/or Punch 20 Paper Tape Reader and/or Punch 21 Optical Character Recognition Unit 22 Magnetic Data Recording Unit (e. g. Mohawk 1105) 23 Magnetic Ink Character Recognition Unit 24 Data Converter (Analog to Digital, Digital to Analog) 25 Media Converter (Card to Tape, Tape to Card, etc.) 26 Plotter 27 Printer 28 Image Handling Unit 29 Display Unit 30 Operator Consoles and Inquiry Stations 31 Control for multiple I/O Channels; Multiplexor and Channel Selector 32 Other system I/O and related controls 33 Communication Terminals and Related Units Card Terminal 50 Magnetic Tape Terminal 51 Paper Tape Terminal 52 Printer Terminal 53 Input Console 54 Multiplexor, Control, Distributor, Buffer, Adaptor 55 Other Terminals and related units 56 EDPE not categorized above 60 PAGENO="0196" 448 ECONOMY IN GOVERNMENT PCAM and Other Digital Data Preparation/Recording Equipment Class Code Card Punch 70 Card Verifier 71 Tape Punch/Verifier 72 Sorter 73 Collator 74 Reproducer and Gang Punch 75 Interpreter 76 Accounting Machine 77 Media Converter (Card-to-tape, Tape-to-Card, etc.) 78 Other PCAM and Data Preparation/Recording Equipment 79 PAGENO="0197" ECONOMY IN GOVERNMENT 449 ATTACHMENT I Circular No. A-83 GEOGRAPHICAL CODES State/Country Code State/Country Code Alabama 01 North Dakota 38 Alaska 02 Ohio 39 American Samoa 03 Oklahoma 40 Arizona 04 Oregon 41 Arkansas 05 Pennsylvania 42 California 06 Puerto Rico 43 Canal Zone 07 Rhode Island 44 Colorado 08 South Carolina 45 Connecticut 09 South Dakota -~--- ----46- Delaware 10 Tennessee 47 District of Columbia 11 Texas 48 Florida 12 Utah 49 Georgia 13 Vermont 50 Guam 14 Virginia 51 Hawaii 15 Virgin Islands 52 Idaho 16 Washington 53 Illinois 17 West Virginia 54 Indiana 18 Wisconsin 55 Iowa 19 Wyoming 56 Kansas 20 Argentina 57 Kentucky 21 Australia 58 Louisiana 22 Belgium 59 Maine 23 Brazil 60 Maryland 24 Canada 61 Massachusetts 25 England 62 Michigan 26 France 63 Minnesota 27 Germany 64 Mississippi 28 Greenland 65 Missouri 29 Italy 66 Montana 30 Japan 67 Nebraska 31 Midway Island 68 Nevada 32 Spain 69 New Hampshire 33 Sweden 70 New Jersey 34 Turkey 71 New Mexico 35 Viet Nan 72 New York 36 All Other Overseas 73 North Carolina 37 Note: Information provided to the public from this system will not indicate the location of ADPE in foreign countries or on snips. Location of such ADPE will be shown as "Overseas." PAGENO="0198" 450 ECONOMY IN GOVERNMENT ATTACHNENT J Circular No. A-83 EDIT CRITERIA CARD FORMAT `A' __________________ ______ Criteria Must contain an "A". Must contain two alpha charac- ters. L~_7 Must contain numeric characters. Right justify, zero fill. 1 8 Must contain a "C" or be Blank. 30 9-38 Must contain data, unless c.c. 8 contains a "C". Left justify, space fin. 30 39-68 Must contain data, unless c.c. 8 contains a "C". Left justify, space fill. 1 79 Must be Blank. 1 80 Must contain one numeric character (1, 2, or 3). CARD FORMAT "B" 1 Must contain a "B". 2-3 Must contain t~ alpha characters. ~-7 Must contain numeric characters. Right justify, zero fill. 1 8 Must contain one numeric character (1, 2, 3, ~, or 5). Field Size 1 2 Card Column 1 2-3 Field Description Card Code Agency Code ADP Unit Number Classified Physical Location Office/Command! Bureau Activity/Contractor Reserved Transaction Code Card Code Agency Code ADP Unit Number 1 2 Type of ADP Unit PAGENO="0199" ECONOMY IN GOVERNMENT 451 CARD FO~AAT "B" CONT'D. Field Card Field Description Size Column Criteria ADP Unit Operated 1 9 Must contain one numeric cherec- By ter (1, 2, 3, 4, or 5). Area Code 3 10-12 Must contain three numeric char- acters, unless c.c. 50-51 contains 03, 07, 14, 43, 52, or 57-73. Must be Blank if c.c. 8, Card Format A contains a "C". Left justify,*space fill. Commercial 7 13-19 Must contain data, unless c.c. Telephone Number 50-51 contains 03, 07, 14, 43, 52, or 57-73. Must be Blank if c.c. 8, Card Format A contains a "C". Left justify, space fill. IDS Code and 8 20-27 If data is in this field, a Dash Telephone Extension (-) must separate IDS Code from Telephone Extension. Must be Blank if c.c. 8, Card Format A contains a "C". Left justify, space fill. City/Post Office 22 28-49 Must contain data unless c.c. 8, Format A contains a "C". Left justify, space fill. State/Country 2 50-51 Must contain two numeric charac- ters unless c.c. 8, Card Format A contains a "C". ZIP Code 5 52-56 Must contain five numeric characters, unless c.c. 8, Card Format A contains a "C". Reserved 1 79 Must be Blank. Transaction Code 1 80 Must contain one numeric char- acter (1, 2, or 3). PAGENO="0200" 452 ECONOMY IN GOVERNMENT CARD FORMAT "C' Field Card Size Column 1 1 2 2-3 4 4-7 3 8-10 7 11-17 Must contain a "C". Must contain two alpha characters. Must contain numeric characters. Right justify, zero fill. Left justify, space fill if data is entered. Must contain data, unless c.c. 32.~33 contains codes 70-79. Left justify, space fill. 2 18-19 Must contain two numeric char- acters if data is entered in c.c. 11-17. Right justify, zero fill. 20 Must contain one numeric char- acter (1, 2, 3, 4, or 5~ or be Blank. Left justify, space fill if data is entered. Left justify, space fill if data is entered. Must contain three alpha characters if data is entered. Must contain two numeric charac- ters. Right justify, zero fill. Must contain four numeric characters (e.g., "6701" for January 1967). Field Description Card Code Agency Code AD? Unit Number ADPE Manufacturer EDPE System EDPE System Iden- tification Number Partial Exemption Code Component Type Component Model Component Manufacturer Component Class Code Installation Date 4 21-24 4 25-28 3 29-31 2 32-33 4 34-37 PAGENO="0201" ECONOMY IN GOVERNMENT 453 GARD FORMAT "C" CONT'D. Field Card Field Description Size Column - Criteria Release Date 4 38-41 Must contain four numeric char.. acters (e.g., "6612" for December 1966), or a "U". Left justify, space fill if a "U" is entered. Actual/Projected 4 42-45 Must contain four numeric char- Purchase Date acters (e.g., "6409" for September 1964) if data is entered. Purchase Price 5 46-50 Must contain numeric characters. Right justify, zero fill. Maintenance Cost 4 51-54 Must contain numeric characters if data is entered. Right justify, zero fill. Ownership Code 1 55 Must contain one numeric character (1, 2, 3, or 4). Total Rental Cost 6 56-61 Must contain numeric characters if data is entered. Right justify, zero fill. Acquisition Code 1 62 Must contain one numeric char- acter (1-8). Disposition Code 1 63 Must contain one numeric char- acter (0-9) if data is entered. Maintenance Code 1 64 Must contain one numeric char- acter (1, 2, 3, 4, or 5). Internal Memory Size 4 65-68 Must contain numeric characters if code"Ol" is entered in c.c. 32-33. Right justify, zero fill. Addressable Unit of 1 69 Must contain one alpha character Memory (B, C, or w) if data is entered in c.c. 65-68. PAGENO="0202" 454 ECONOMY IN GOVERNMENT Field Description Reserved Date of Report Reserved Transaction Code Card Code Agency Code ADP Unit Number ADPE Manufacturer EDPE System EDPE System Identification Number Refer to Card Format "D" CARD FORMAT "C" CONT'D. Field Card Size Column 3 70-72 6 73-78 ______ Criteria Must be Blank. Must contain six numeric charac- ters (e.g., 670702 for July 2, 1967). 1 79 Must be Blank. 1 80 Must contain one numeric charac- ter (1, 2, 3, 4, or 5). CARD FORMAT "D" 1 1 Must contain a 2 2-3 Must contain t~o alpha charac- ters. 4 4-7 Must contain numeric characters. Right justify, zero fill. 3 8-10 Left justify, space fill if data is entered. 7 11-17 Must contain data. Left justify, space fill. 2 18-19 Must contain two numeric charac- ters. Right justify, zero fill. 20-41 Must contain numeric characters if data is entered in any field. Right justify, zero fill. PAGENO="0203" ECONOMY IN GOVERNMENT 455 CARD FO1~4AT "D" CONT'D. Field Card Size Column Criteria 3 42~1~4 Must contain numeric characters if data is entered. Right justify, zero fill. 1 ~5 Must contain one numeric char- acter (1, 2, 3, 1~, or 5) if data is entered in c.c. l42~44. 1 1~6 Must contain one numeric character. Z~7-6l Must contain numeric characters if data is entered in any field. Right justify, zero fill. 3 62-64 Must contain numeric characters if code "2" is entered in c.c. 80. Right justify, zero fill. 3 65-67 Must contain numeric characters if data is entered. Right justify, zero fill. 3 68-70 Must contain numeric characters if data is entered. Right justify, zero fill. 3 71-73 Must contain numeric characters. Right justify, zero fill. 3 74-76 Must contain numeric characters if data is entered. Right justify, zero fill. 1 79 Must be Blank. Field Description Hours not Available Reason for Non- availability Number of Shifts Refer to Card Format "D" Projected Hours in Service (cy) Projected Hours Available (cy) Projected Hours Corinnercial Sources (cy) Projected Hours in Service (BY) Projected Hours Available (BY) Reserved Transaction Code 1 80 Must contain one numeric char- acter (1, 2, 3, or 4). PAGENO="0204" 456 ECONOMY IN GOVERNMENT CARD FORMAT "E" Field Card Field Description Size Column __________ Card Code 1 1 Must contain an "E". Agency Code 2 2-3 Must contain two alpha charac- ters. ADP Unit Number 1~-7 Must contain numeric characters. Right justify, zero fill. ~ADPE Manufacturer 3 8-10 Left justify, space fill if data is entered. EDPE System 7 11-17 Must contain data. Left jus- tify, space fill. EDPE System 2 18-19 Must contain two numeric charac- Identification Number ters. Right justify, zero fill. Procurement Code 1 20 Must contain one numeric charac- ter (1 or 2). Date EDPE Selection 6 21-26 Must contain six numeric Approved characters (e.g., "661110" for November 10, 1966). Date E])PE Delivery 6 27-32 Must contain six numeric charac- Required ters (e.g., "670608" for June 8, 1967), or an "A". Left justify, space fill, if "A" is entered. Date EDPE Delivered 6 33-38 Must contain six numeric charac- ters (e.g., "670510" for May 10, 1967). Date EDPE Installa- 6 39_14~ Must contain six numeric charac- tion Required ters (e.g., "670601" for June 1, 1967), or an "A". Left justify, space fill if "A" is entered. PAGENO="0205" ECONOMY IN GOVERNMENT 457 CARD FORMAT "E" CONT'D. Field Card Field Descri~~p~ Size Column Criteria Date EDPE 6 1~5..5o Must contain six numeric Installed characters (e.g., "670529" f~z~ May 29, 1967). Date Software 6 51-56 Must contain six numeric Delivery Required characters (e.g., "670601" for June 1, 1967), or an "A". Left justify, space fill if an "A" is entered. Date Software 6 57-62 Must contain six numeric Accepted or characters (e.g., "670707" for Delivered July 7, 1967). Average EDPE 3 63-65 Must contain numeric characters. Effectiveness Right justify, zero fill. Level Date of Report 6 73-78 Must contain six numeric characters (e.g., "670720" for July 20, 1967). Reserved 1 79 Must be Blank. Transaction Code 1 80 Must contain one numeric character (1 or 2). CARD B'OIa.1ATS ~ "II" .AI~1) ~ Card Code 1 1 Must contain one alpha charac- ter (F, H, or J). F denotes past year, H denotes current year, J denotes budget year. Agency Code 2 2-3 Must contain two alpha characters. ADP Unit Number ~-7 Must contain numeric characters. Right justify, zero fill. PAGENO="0206" 458 ECONOMY Th~ GOVERNMENT CARD FO1~AATS "F", "H" AND "3" C~NT'D. Field Card Field Description Size Column Criteria Refer to Card 8-74 Must contain numeric characters Formats "F", "H", if date is entered in any field. and "J" Right justify, zero fill. Reserved 1 79 Must be Blank. Transection Code 1 80 Must contain one numeric character (1 or 2). CARD FOI~.(ATS "G'~, "It, AND "K" Card Code 1 1 Must contain one alpha charac- ter (G, I, or K). G denotes past year, I denotes current year, K denotes budget year. Agency Code 2 2-3 Must contain two alpha charac.~ ters. Right justify, zero fill. ADP Unit Number 4 4-7 Must contain numeric characters. Right justify, zero fill. Refer to Card 8-35 Must contain numeric characters Formats "G", "I", if data is entered in any field. and "K" Right justify, zero fill. Cross Cost of ADP 5 36-40 Must contain numeric characters Unit equaling the totals of c.c. 32- 74, Card Formats `G", "H", and "3", end c.c. 8-35 of these formats. Right justify, zero fill. Refer to Card 41-52 Must contain numeric characters Formats "G", "I", if date is entered in any field. and "K" Right justify, zero fill. Net Cost of 5 53-57 Must contain- numeric characters ADP Unit equaling the difference between c.c. 36-40 and the total of c.c. 41-52. Right justify, zero fill. PAGENO="0207" ECONOMY IN GOVERNMENT 459 CARD FORMA~ "G'~, "1", AR]) K" CONT'D. Field Card Field Description Size Column Criteria Date of Report 1~ 75-78 Must contain four numeric char- acters (e.g., "6706" for June 1967). Reserved 1 79 Must be Blank. Transaction Code 1 80 Must contain one numeric character (i or 2). PAGENO="0208" 460 ECONOMY IN GOVERNMENT ATTACHMENT K Circular No. A-83 GENERAL INSTRUCTIONS 1. Punch cards and questions concerning the preparation or processing of data should be submitted to: Management Information System Central Processing Point (FTII) General Services Administration 7th and D Streets, S * W. Washington, D. C. 20407 IDS Code: l3-3~482O Area Code: 202, 963-4820 2. MIS Punch Card Transcript Sheets may be obtained by contacting the MIS Central Processing Point. These forms should be used ~then sub- mitting data for organizations without access to keypunching facilities. 3. Punch cards should be securely packed and should be identified with Agency name, and box number, i.e., Box 1 of 2, Box 2 of 2, etc. 4. A card-by-card listing will be submitted in the following format: a. Sequenced by "Agency Code", "Al)P Unit Number", and "Card Code". b. Totals by "ADP Unit Number" of (1) number. of cards and (2) number of "EDPE Systems". c. Totals by "Agency Code" of (1) number of cards, (2) number of "EDPE Systems", (3) number of ADP Units, (4) total of "Civilian Manyears" and "Military Manyears", and (5) "Net Cost of ADP Unit". 0