The GAO Review, Winter 1971

Published by the Government Accountability Office on 1971-01-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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                                    WINTER 4971
Contents                                                          e$-i;%-L7
Potentials for Management Improvement                        ,
    By ELMER B, STAATS..        ..... ...............................
                                                        . . .
Formal Advertising Versus Negotiation                             ,-
    By J. EDWARD WELCH..            ....................................
                                                                 .                   .         ,.
The Legislative Reorganization Act of 1970                                  (2 clLX-L.5-
    By L. FRED THOMPSON..                ........................                :.... ........
                                                                                 .      . .     ;                                    241
Evaluating Agency Management                                      I     ,&L&&4
                                                                          ~,                                            ,

    By GREGORY J. AHART..                ..........................
                                                                .                        ..
                                                                                              1 . .
Let’s Recognize Depreciation in Government Operations
   By WILLIAM A. PATON..            ....................................                                                             38
The Role of GAO in the Seventies and What GAO Is Iloing To
 Prepare for It
                                      I ’ , .
                                              . . : @9CS-L13
                                    ....................................                                                             4,s
Educational Program in Systems Analysis                               . ,  c- 9 G e L 2
    By MORTON A. MYERS..            .............................                               i       ........                     53
Problems in Estimating Costs for Acquiring New Weapons                                                              i/      (7G CCd /’
    By CARL F. BOGAR..     ..............................                                     -., . .
                                                                                          .-.........               I
                                                                                                                         - ,
Planning, Doing, and Reviewing-All                   in Three Weeks , O’7P%6c’
    By ROBERT R. LINDEMUTI-I and LEE M. STEVENS..                                ..........
                                                                                      . .                               c
                                                                                                                               .’    66
The Time-sharing Computer Terminal as a Modern Audit T%o$cg s-q
    By DONALD INGRAM..          .......-....- ..... ...........
                                                       . .
                                                                                              .L..              .....                71
The Work of the Youth                        Advisory      Committee                             to                     the
 Comptroller General                                              09ce5y   .
                                                                  ,     ,
                              .........- ..
                                                            - ’

                                                                   .:. .: . .: .......
                                                                                                    I       ,

    By JAMES R. RHODES.         m   rn                                                                                               77
From GAO Speeches .........................................                                                                          83
News and Notes. ..............................     .&v&)<<s.?.   ...                                                                 87
                                                                      ,-     -           .
Hearings and Legislation. ...........................   , . ,.......                                                                 93
Automatic Data Processing. ............................      :.....                                                                  96
Systems Analysis.............................................                                                                       99
GAO Staff Changes ...........................................                                                                       101
Professional Activities........................................                                                                     123
New Staff Members ...........................................                                                                       135
Readings of Interest ..........................................                                                                     137

               Published quarterly for the professional staffs of the
                         U.S. General Accounting Ofice
Potentials for Management Improvement
By Elmer B. Staats

Comptroller General of the United States

             This article is based on the address given by the Comp-
             troller General at the Federal Management Improvement
             Conference sponsored by the Office of Management and
             Budget on September 21, 1970.

   The term “management” in a broad that reliable information insures sensi-
sense involves the marshaling of three ble decisions, because often this is not
primary resources-people,         money, the case. But the proposition that the
and physical assets-so as to achieve a overall effectiveness of the manager can
specific objective o r set of objectives. be strengthened by improving the ade-
   Management implies, action ; re- quacy of the information upon which
quires affirmative attention by the he must make his judgments cannot be
manager; and cannot succeed for long questioned seriously.
if a manager plays a passive role. Ac-        As a corollary, in making decisions
tion by a manager must be based on         managers  must have the ability to ob-
available information-reliable     o r un- tain and use effectively the best infor-
reliable, complete or incomplete-con-      mation available. A manager, chosen
cerning the resources at his command for this ability, must be convinced of
and their utilization, concerning the the worth of the objectives sought,
environment within which he must put must believe that he plays an important
these resources to the task of meeting part in their achievement, and must
desired objectives, and concerning the know that he will be rewarded through
extent to which the objectives, have been appropriate recognition commensurate
 or are being met.                         with his success in using efficiently the
    It may be a truism to say that the resources at hand to accomplish the
manager must assess this information objectives sought.
 and act in the manner which will do          These propositions apply at all man-
 the job most effectively and efficiently. agement levels in every type of en-
    However, I cannot stress too much deavor. Where do we, in the Federal
 that complete and reliable information Government: stand in relation to giving
 is a key to sound management. I will them full effect? Where are the areas
 not sBaythat management decisions can- in which we must do a better job?
 not be better than the information on        I would like to discuss two broad
 which they are based, because this areas of management-management for
 anomaly does happen. Nor will I say program objectives and management

of resources-and        to suggest some          Productivity Measurement
m ~ t h o d sor terhniques which seem to            Productivity measurement is an es-
warrant partirular ronsideration.                sential management tool. It should be
                                                 used as a positive tool, not a negative
Managenlent for Program                          one. Productivity is an index of prog-
O bjertives                                      ress in the way resources and efforts
   A sharp and precise statement of              are organized. ITsed in conjunction with
ohjertives is essential to effective man-        other improved management tech-
agement of any program. This state-              niques, it can contribute substantially
ment is the basic device by which the            to the general upgrading of manage-
manager coniinunicates his ideas and             ment.
thoughts to the staffs that are to do the           Needless to say, Government activ-
wnrk. It wts ohjectives whirh the staffs         ities are conducted because there is a
must strive to fulfill.                          need for whatever they provide or ac-
   Those ohjertives must he well                 complish ; i.e.. outputs. The productiv-
thought out and clearly stated. If not,          ity of those activities is, therefore, a
the staffs may not d o the work which            prime management concern. Thus
the manager intended. Tt is as simple as         measures for productivity must be
that. Worse yet, they may pursue en-             developed.
tirely different end results. Vagueness             The productivity actually accom-
or a m h i p i t y in the statement of the       plished mus,t also be evaluated. How
ohjerti\-en can result in indecision and         does it compare with the goal, if one
frustration. Staffs cannot he expected           has been established, or with the re-
to perform satisfactorily without a clear        sults last month, or last year, or with
understanding of their purpose or goal.          the performance of a similar activity
   .4 clear understanding of objectives          at another location? Of course, you
is also necessary for the manager him-           can’t always realistically determine
self, so he can design the activity to           what the productivity should be. Obvi-
accomplish the desired result. He must           ously it is generally desirable to estab-
also create an organization. develop             lish goals. Even if they are somewhat
 policy guidacce for the conduct of              imperfect a t first, they will tend to
activities, and assign responsibilities          become more realistic with experience
to the operating staffs.                         and evaluation of results. There is fre-
   The manager must also provide the             quently a tendency to give u p on the
system and mechanics for monitoring              use of productivity measurements and
the performance of the organization              goals because of their lack of perfec-
and individuals concerned and their              tion. However, good management can-
                                                 not abandon its basic responsibility to
success or progress toward the objec-
                                                 monitor the productivity of its assigned
tives. In essence, this requires a con-
tinuing measurement of their perform-
ance to see how they are progressing             Management of Resources
toward their established goals and                  Government aotivities require exten-
benchmarks.                                      sive use of such resources as personnel,


property, and funds. Management has          and normally to a financial plan. The
the responsibility of caring for those re-   use of operating budgets is a classical
sources and using them in an economi-        use of a plan for financial control over
cal manner. It must see that:                the use of resources. Both techniques
  -Personnel       resources are not         need to be considered fully- and used
    wasted.                                  where possible, Obviously, mere con-
  -Property is not used inefficiently        formance to a financial plan without
    or lost.                                 consideration of the productivity de-
  -Money is not spent needlessly.            rived under that plan does not effec-
  -Revenues or benefits which should         tively d i s c h a r g e management’s
    be derived from the activity are in      responsibility.
     fact obtained.                              lnformation Systems
  -Controls are maintained over the
    liabilities inscurred-liabilities for           Effective management requires sys-
     which the Government must make              tematic reporting on the results ac-
     payment.                                    complished and resources used-prei-
                                                 erably compared with established goals
   One of the most important resources
                                                 o r standards of performance. Those
used is personnel. It is also probably
                                                 goals or standards could be the number
the most difficult to manage effectively
                                                 of units produced, conformity with a
and efficiently. Personnel costs are
                                                 financial plan, pounds of scrap per
high; also they are an extremely im-
                                                 widget produced, tons of coal consumed
portant element in the control over and
                                                 per unit of production-any     one of an
effective use of all other resources de-
                                                 almost endless variety of measures. The
voted to the activity. For this reason,
                                                 information system should measure
top management must try to get the ac-
                                                 both productivity and efficiency and
tive participation of employees all up
                                                 should be designed to flag the exception
and down the line in the “management”
                                                 or departure from acceptable perform-
                                                 ance-to identify the problem areas in
   The familiarity of the employees
                                                 need of attention, the drop in efficiency
with what actually goes on enables them
                                                 or productivity-or whatever aspect of
to contribute to management as well as
                                                 the activity that should be of concern
to exercise their ingenuity and initia-
                                                 to management.
tive to promote effective management.
                                                    Computers afford tremendous oppor-
One of the tasks of the manager today
is to provide maximum incentives for             tunities for sophisticated and useful
the employees to work for better man-            management information systems.
agement-through       recognition of the         Accounting Systems
contribution they make as both individ-
uals and groups and through reward for             A sound accounting system is also
their contribution by giving them in-            essential to effective management. As
creased responsibility.                          Comptroller General, 1 ani directed by
   Consumption of resources, if pos-             law to prescribe the principles, stand-
sible, should be relatcd to productivity         ards, and related requirements for ac-


counting to be followed by all executive        the agency management which is basi-
agencies. We at GAO also have a dutv            cally responsible for agemy activities.
to cooperate with the agencies in devel-        To discharge that responsibility, the
oping their systems and to approve              agency needs an effective internal audit.
them when we consider them satisfac-            To be effective, the internal audit:
tory. Further we must review them in
                                                  --Must be independent of the activi-
operation from time to time.
                                                     ties examined.
   Reliable accounting- systems      make
                                                  --Must be broad in the scope of its
possible good financial reports-an es-
                                                     review and be directed particularly
sential ingredient of effective manage--             to known or potential problem
ment. ReliabIe accounting makes it
possible to pinpoint costs, identify weak
                                                  -Findings must be given proper at-
and wasteful operations, provide com-
                                                     tention by top management.
parative costs, and relate costs to pro-
gram activities. It should measure the             It is important that operating offi-
effectiveness of management and the             cials have a proper attitude toward the
effects of corrective actions, flag areas       internal review activity. There is a cor-
requiring concentrated attention, and           responding need for the internal re-
help in many other ways to promote              viewers to be fair and objective in their
better and more economical operations.          examinations so that they will have the
   Better Federal agency accounting is          respect and cooperation of the operat-
one of GAO’s important objectives-              ing people. Operating people do not al-
one that we have to keep working to-            ways wholeheartedly accept the pres-
ward throughout the Federal estab-              ence of internal reviewers. This attitude
lishment. It requires overcoming such           can seriously impair the internal review
obstacles as resistance to change, lack         function as well as the ease with which
of personnel with the needed skills: and        it is carried out. Top management has
lack of managerial sophistication in the        the right to expect, and should insist,
use of cost and financial information as        that both the reviewer and the reviewee
an instrument of control.                       fully support the common objective of
                                                promoting the best and most productive
Pnternul Audit
                                                operation possible.
   Internal audit or internal review-or
whatever name it carries-is also an in-         Phning-Programming-
valuable tool to management. We have
urged the strengthening of the internal            No discussion concerning manage-
audit function in the Federal agencies          ment would be complete without men-
over the years. The expansion in recent         tioning planning, programming, and
years of internal auditing in the ageri-        budgeting. This concept, which had
cies is due, in part, to our strong en-         worked well in the Department of De-
dorsement of this function. Our advo-           fense, was prescribed by the President
cacy is based on the precept-recog-             in August 1965 for use in all major
nized by the Congress itself-that it is         Federal agencies.


  It was to be used for three essential      port. These things are more readily
purposes:                                    quantifiable. For example, planners
  -To define national goals and iden-        can evaluate whether a given quantity
     tify those considered most urgent.      of airplanes, weighing a given tonnage,
  -To determine alternative ways of          and costing a specific amount to pro-
     attaining those goals and the prob-     duce and support, can fly a given dis-
     able costs.                             tance in a specific time and penetrate
  -To improve performance by attain-         enemy defenses with a specific number
     ing the best possible program re-       and tonnage of bombs. The planners
     turn for each dollar spent.             can also evaluate the same kind of in-
                                             formation about the cost and capability
  Stated another way : PPB is a method
                                             of one or more missiles to do the same
for analyzing and deciding on programs
                                             job. They can then compare the relative
in terms of measured results related to
                                             effectiveness with the related cost of
costs. It is a system :
                                             bombers vs. missiles and thus furnish
  -For dealing with difficult problems        our top military commapd with bases
     of choice by considering alterna-       and data for rational decisions about
     tive objectives and programs.            force structure.
   -For     defining programs, outputs,          In many cases: the solution of these
      and resource requirements with in-      and other difficult problems, such as the
      creased precision.                      evaluation of alternative goals and the
   -For developing multiyear planning         identification of the best means of
      of desired objectives in relation to    achieving the goal selected, will take
      systems costs.                          time. But the problems must be ad-
   -For carefully considering the bene-       dressed, and the big contribution of
      fits and costs of existing programs     PPB is to bring these problems to the
      and for comparing alternative           surface and set in motion the required
      courses of action.                      chain of problem-solving events.
   Since 1965, installation of PPB sys-          A note of caution on the PPB sys-
tems has moved steadily forward under         tem is needed, however. There is noth-
the direction of the Director of the Bu-      ing magic or self-executing about this
reau of the Budget-more recently the          or any other management system. PPB
Office of Management and Budget.              must be applied carefully and properly,
   In some agencies the system has con-        recognizing that experience and judg-
tributed to more effective management         ment must play a vital, if not decisive,
and more efficient program operations.         role in decisionmaking. It is a tool-
In others, it appears more a promise           nothing more-to supply the facts and
than a reality. As indicated earlier, the      the discipline for analyses essential to
Defense Department has been in the            more effective program decisions.
vanguard in applying the new analytical           However, the potential, significant
techniques involved in PPB. There the          improvements in the allocation of re-
classic application of these problem-          sources associated with PPB make it es-
solving approaches has focused on the          sential that we take whatever steps are
complexities of force structure and sup-       necessary to have the trained employees


 availahlr and to develop the improved             annually in buying and using coin-
 analytiral techniques.                            puters. and the end is not in sight.
     Certain Members of the Congress               Computers have made possible many
 have indicated an interest in making              significant technological advancements.
 fuller utilization of PPR in the review           However, a high percentage of com-
 of annual appropriations.                         puter installations have been found
     There is no way that you can develop          seriously lacking in important respects.
 a system such as PPE, in my opinion.                 Feasibility studies have been inad-
 thal will resolve the basic priorities            equate; capability has been overpro-
 among different broad purposes of                 cured: output utilization has, in some
 Government. In terms of spwific pro-              cases, been scant; necessary interface
 grains and specific objectives. how-              of systems and programs has been ne-
 ever. PPI3 can play an important role.            glected ; and cost-effectiveness calcula-
 It can help you to select proper alter-           tions have been slanted by the siren
natix-es and to develop an analysis                lure of sophistication. These and other
which will project for you the long-               problems of computer management
term consequences of those alterna-                must he addressed if our society is to
t i w s in terms of achieving the great-           obtain maximum benefit from these
est output. Whether we continue to call           highly sophisticated creations.
it PPB or program budgeting, or what                  On July 1' 1970: I spoke before the
have you, this basic type of analysis             Subcommittee on Economy in Govern-
is essential to appraising alternative            ment, Joint Economic Committee, con-
ways of attaining national goals.                 cerning the need for procurement pro-
                                                  vedures which would afford free and
GAO Views on Potential                            full competition to all qualified poten-
Management lmprooement                            tial bidders. including the small man-
Areas in Governnzent Artioities                   ufacturers of peripheral equipment.
   I can't give you an overall evaluation            The reviews we have made support
of management practices within the                the committee's recommendation that
Government, or even within one de-               the Ceneral Services Administration
partment or agency. But I will try to            should make it possible for smaller
give you some views on particular a r -           manufacturers of ADP equipment to
tivities within the Government where.            furnish part of the Government's re-
we believe, there is a great potential           quirements. Specifications should not
for improvement.                                 be designed around specific products
                                                 with the effect of eliminating competi-
Computer Problems
                                                 tion and stifling the incentives of smal-
  The managers of today are fortu-               ler manufacturers. Our studies of the
nate in being able to obtain needed in-          potential savings available by the ac-
formation on a timely basis by the use           quisition of peripheral equipment from
of electronic equipinent. Its speed and          independent manufacturers showed
accuracy-with      proper programming            that. if compatible components were
and inpiit-are amazing.                          rent.ed from independent manufactur-
  1,iterally hillions of dollars are slwnt       ers rather thsn from systems manu-


facturers, annual savings would amount          the current disdain for our materialistic
to at least $6.5 million. We estimated          society, good financial management is
that, if such components were to be             essential.
purchased, they could be purchased                 It is the means of directing our re-
for $23 million less from the compon-           sources to the objectives determined
ent manufacturers than from the sys-            to have the highest priority; the safe-
tems manufacturers.                             guarding of those resources to prevent
   Executive agencies have been and             their loss, theft, or waste; the stretch-
are now required to submit informa-             ing of those resources to do the most
tion on their computer resources in             good-in essence, the technique of get-
accordance with Bureau of the Budget            ting the most out of what we put in.
Circulars A-5.5 and A-83. Our reviews           It includes identification of what is to
have shown, however, that the report-           be done, what we have to do it with,
ing system does not produce the accu-           and what more is needed, as well as
rate, complete, and useful idormation           monitoring of the use made of those
needed for proper management deci-              resources and their productivity.
sions on procurement, utilization, and             A good financial management sys-
reutilization of ADP resources. More            tem will provide the information
realistic and timely projections of ac-         needed for the manager to function.
quisitions and releases of equipment            He must recognize its value and know
are needed to improve reutilization and         how to use it. Those responsible for
Government-wide contract negotiations           the system must see that it provides
and to prevent: unneeded purchases.             this service.
More information on software and its
                                                The Importance of
use in Government operations is needed          Work Measurement Development
to reduce duplication of effort and un-         to Financial Management
 necessary costs.
                                                   As previously stated, financial data
Financial Management Problems                   becomes much more useful when it is
   Some operating managers tend to              associated with appropriate nonfinan-
look upon financial management as               cial data. How meaningful is it to know
just another “thorn in the side:” inter-        that a given organizational unit cost
                                                $300,000 this year compared with the
fering with their day-to-day operating
                                                cost of $350,000 last year for an organi-
responsibilities. It is too bad, perhaps,
                                                zational unit with the same title? The
that we must worry about money-it
                                                two units may be alike in title only, for
would be great if we had so much that           there may be different workloads and
it wasn’t a concern in or a limitation          different objectives. However, when
on reaching our objectives. But the             comparable work measurement units
competing needs for our limited re-             are used to express financial data in
sources make it essential that we put           terms of unit costs, real meaning is
money to the best use and stretch it            brought to the financial data.
as far as possible. That’s what financial          Our experiences in the Department
management is all about, and, despite           of Defense with Project PRIME are a


I   rase in point. This financial manage-         individual State and local governments.
    ment system was well conceived, and              A major problem facing Federal man-
    it is producing quantities of financial       agers is the need to strengthen the audit
    data-more than some levels of man-            function at State and local levels. Some
    agement can use effectively. Manage-          States have developed good audit pro-
    ment cannot fully use the data until it       grams which serve to assist in the man-
    is possible to align the financial data       agement of State government operations
    with meaningful work measurement              and at the same time provide an exten-
    units.                                        sion of the Federal audit effort which
                                                  benefits the Federal manager. Some
    Control of Federal
                                                  States have audit programs which are in
    Grant-in-Aid Programs
                                                  a developmental status. However, others
       It would be hard to find an area of        are still making primarily voucher-type
    Government activity today with prob-           audits, which are helpful but which do
    lems of financial management more             not provide appraisals of efficiency of
    pressing or more difficult than Federal        operation or of extent of compliance
    grants-in-aid. From rather modest be-          with prescribed requirements.
    ginnings, quite a long time ago, this             Many public accountants, who per-
    means of assisting the financing of serv-      form the bulk of the work for cities and
    ices provided by State and local g-overn-      counties, see their responsibilities as
    ments has reached gigantic proportions.        being related only to the fairness of
       This growth is the result of political      financial statements. Most do not per-
    decisions made in response to problems        form operational or management audits,
    brought on by technological, economic,         nor are they urged by their clients to
    and sociological changes in society. In        do so.
     1968 Federal grants-in-aid amounted to           In October 1969, under an agree-
     about $18 billion a year, an increase         ment with the Bureau of the Budget,
    of about $13 billion in the 10-year            the General Accounting Office assumed
    period from the beginning of 1959.             responsibility for a project of directing
     Federal grants-in-aid are now running         the organization and operation of an
     over $27 billion a year, or over 13 per-      interagency working group to develop
     cent of the total Federal budget, and         standards and guidelines for the audit
     represent an increase of over $9 billion      of Federal assistance programs.
     in the last 2 years. Apparently this form        The long-range objective of this effort
     of assistance will continue to grow, un-      is to improve program operations
     less major changes are made in our            through improved auditing by Federal,
     system of financial services to be per-       State, local, and outside agencies and
     formed by governmental bodies.                through effective coordination between
        The Federal Government has been            them.
     drawn into the picture because of its            Management problems similar to
     financial resources and concern for the       those in the Federal grants-in-aid to
     general welfare of the residents of all       State and local governments are also
     States, as well as the fact that certain      present in programs where U.S. aid
     problems transcend the jurisdiction of        funds are turned over to international


organizations and lending institutions.        Our work in the manpower area has
  Federal assistance programs prob-         demonstrated the significance of man-
ably will increase in the future, and       power factors in program management.
there will be a corresponding need for      We are convinced that there is a con-
more effective management of these          stant need for more emphasis on man-
programs.                                   power training as an essential part of
                                            an agency’s overall management.
Measuring Human Productivity
                                               Some factors affecting manpower are
   Much of our recent work has in-          within the control and authority of op-
dicated to us that managers everywhere      erational managers. Others are con-
are developing new or increased aware-      trolled from the outside or from higher
ness of the importance of human effort      levels. One of the most obvious of the
as a critical resource. As one Defense      controls beyond the discretion of man-
official recently observed, so much at-     agers is the ultimate limit on resources
tention has been given to money as a        which can be made available. The most
resource that the term “financial man-      familiar is personnel ceilings or limita-
agement” and its concepts are well          tions or, more recently, the hiring lim-
defined and are widely accepted, but        itation imposed by the Revenue and
comparatively little attention has been     Expenditures Control Act of 1968.
given to manpower as a resource. We         There is also the overall limit on money
agree that the time is ripe to build        which comes down to the managers
some “manpower management” con-             through budgetary processes.
cepts.                                         Availability of skills within our total
   This is not meant to imply that noth-    national manpower resources is also an
ing is now being done. Many projects        important limitation. This scarcity
have been undertaken that appear to be      causes competition for services in which
solid groundwork for a new direction.       compensation, mobility, fringe benefits,
There are many indications that agency      and job challenges are important
management is giving intensified atten-     considerations. This critical resource re-
tion to such matters as staffing stand-     quires management’s close and contin-
ards, performance appraisals, per-          uing attention.
formance goals, and personnel training
                                            Cost Reduction-value
and development. These are needed for       Engineering Problems
better manpower management.
                                               Recently we were asked for our ob-
   However, most of these concepts and
                                            servations and suggestions concerning
techniques have been in the area of         statements to the Chairman, President’s
measures of productivity of people in       Advisory Council on Management Im-
physical operations. Little has been ac-    provements, relative to the results of
complished in measuring productivity        Congressman Larry Winn, Jr.’s survey
of people engaged in administrative         of the effectiveness of cost reduction
work. This problem has, to date, not        programs and on the current degree of
been resolved and constitutes a real        utilization of value analysis-engineer-
challenge for management.                   ing within the Federal Government. We


share Congressman Winn’s view that                specific programs that are most suscep-
more can he done to promote cost re-              tible to value engineering and will sug-
duction-value engineering programs                gest to contractors that they concentrate
within Government agencies.                       their efforts on these programs.
   Because of the significance and the               Value analysis-engineering and cost
long-range nature of the cost reduction           reduction programs are needed to in-
program, we reviewed the operation of             sure that opportunities to reduce costs
the program in five departments and               are identified and implemented.
agencies. Our objective was to consider
                                                  Defense Procurement Problems
possibilities for improving the program.
We concluded that a cost reduction pro-               During past and present GAO
gram is a useful tool of management in            examinations in the research and de-
developing cost consciousness in em-              velopment areas, we have found
ployees and in motivating the develop-            Opportunities for improvement in the
ment of cost saving ideas and tech-               management of the development and
niques. Ere noted that in some                    procurement of Department of Defense
departments and agencies the program              weapon systems. Improvement is needed
had been aggressively implemented hut              ( 1) in the generation and approval of
that in others little effort had heen made        specific performance, schedule, and cost
to use the program forcefully for the              requirements for the end items and (2)
purposes intended.                                in the commitment of material to pro-
   In 1969 we furnished to the Congress           duction and use prior to the completion
our observations on opportunities for             of development, as evidenced by satis-
increased savings hy improving the                factory results obtained in all neces-
management of value engineering per-              sary tests.
formed by Department of Defense con-                 The first of these problem areas is
tractors. The Department had reported             more simply termed “requirements de-
value engineering cost reductions of              termination.” The second of these areas
about $170 million for the 5 fiscal years         is commonly referred to as concurrent
through 1968. Many contracts under                development and production, or con-
which value engineering effort was vol-           currency. These two problem areas are
untary, however, had not produced the             regarded as the basic causes for most
desired results. The contractors had not          of the substandard performance, sched-
been stimulated to develop proposals to           ule slippages, and cost overruns which
reduce costs of design and manufacture            have occurred and continue to occur on
of products even though they would                major weapon systems.
share in the cost savings.                            Deputy Secretary of Defense David
   We believe that new techniques are             Packard emphasized these problems in
needed to stimulate the interest and par-         a memorandum in July 1969 to the
ticipation of contractors in value engi-          Secretaries of the three military depart-
neering. For example, improvements in             ments. He pinpointed three areas of im-
the value engineering performance of              mediate concern: (1) cost growth, (2)
contractors can be achieved if Depart-            a need for increasing insistence on
ment of Defense officials wilI identify           hardware demonstration with Iess de-


pendence on “paper analysis,” and ( 3 ) ment Procurement to conduct broad
widespread deficiency in the amount of studies of the Government’s current
test evaluation of weapon systems prior procurement statutes, regulations, poli-
to the commitment of significant re- cies, and procedures.
sources to production.                      In our opinion, Government procure-
   Mr. Packard further emphasized the ment is so burdened with complex stat-
need for improved management in his utes and regulations and is so interre-
address to the Armed Forces Manage- lated with other governmental, social,
ment Association in Los Angeles in Au- and economic programs and policies
gust 1970. The major thrust of his mes- that substantial improvements can be
sage was that:                             made which would benefit both Govern-
   -Defense      should be buying only ment and business. We believe that the
       what it actually needs-not what problems have grown out of the follow-
       industry or anyone else thinks it ing factors.
       can develop.                          -In general, the piecemeal evolution
   -The Department has been overly              of Federa! procurement law was
       optimistic on cost estimates and         designed to solve or alleviate spe-
       overly demanding in its require-         cific, and sometimes narrow, prob-
       ments.                                   lems as they arose.
   -Industry has been unrealistic in its     -Federal procurement statutes are
       promises with respect to perform-        chiefly con,cerned with procure-
       ance and cost.                           ment authority and procedures and
    -If the Department and industry do          do not contain clear expressions of
       not take needed steps, the Congress      Government procurement policies.
       will try to take them-probably         -Implementing      procurement regu-
       by inflexible rules that wouldn’t        lations are voluminous, exceed-
       necessarily provide the best solu-       ingly complex, and at times
                                                 difficult to apply, and they have
    We have emphasized examinations              great impact on the rights and ob-
 of the problem areas since early 1967,         ligations of contractors.
 and the results of this work have been       -The level of spending for Govern-
 given extensive coverage in congres-
                                                 ment procurement is high. For fis-
 sional hearings and in discussions on
                                                 cal year 1968 the Department of
 the floor of the Congress. The receptiv-
                                                 Defense alone awarded contracis
 ity of the Department of Defense to the
 results of this work has been excellent.        totaling about $43 billion for sup-
    We shall continue to emphasize man-          plies and services which repre-
 agement improvement opportunities in            sented about 80 percent of total
 our reviews of Defense procurements.            Government procurement expen-
Commission on Government
Procurement                                      We will give our full cooperation and
   In November 1969 the Congress es-          assistance to the Commission during its
tablished the Commission on Govern-           study.


Concluding Remnrks                         urgently needed. They are basically
                                           your responsibility as managers. We in
  I have attempted to outline, in gen-
                                           GAO will do all we can to help by exam-
eral terms, some of the potentials for
                                           ining into problem areas and assist-
improvement in the management of
Government activities today. Much of       ing in finding solutions. Experience has
what I have said is not new. But I have    demonstrated that we can be helpful in
dealt with areas which, I believe, are     the difficult task of managing Govern-
fundamental and need underscoring          ment operations. But the major burden
and emphasis.                              of identifying and corracting manage-
  These and other improvements are         ment problems is yours.

 Formal Advertising Versus Negotiation
Due to a printer’s error, the authw of the article
“Formal Advertising Versus Negotiation” (p. 15) i n
this iscuz i s incorrectly shown as Elmer B. Staats
rather than J. Edward Welch, fomcr Deputy General.                                 ”-
Corns&!. cf the General Accounting Office.

                     vertising is the preferred method because it is con.
                     sidered to be the method best designed to obtain the
                     most advantageous contract for the Government and tu
                     give all interested parties an oppnrtunity to compete for
                     the Government’s business on an equal basis.
                     In the following article, the author analyzes these methods
                     of procurement and presents the case for preferring
                     formal advertising in Government procurement. The
                     article is adapted from a speech presented before the
                     Washington, D.C., Chapter of the National Contract
                     Management Association on September 16, 1970, on
                     “The Proper Role of Formal Advertising in Securing
                     Competition.” Mr. Welch was Deputy General Counsel of
                     the General Accounting Office until his retirement on
                     January 9, 1971 (see p. 101). However, the opinions
                     expressed in this article do not necessarily represent the
                     official views of GAO.

    The Armed Services Procurement                  The Office believes that method is best
 Act of 1947, as amended, now codified              designed to obtain the most advanta-
 in Title 10, United States Code,’ pro-             geous contract for the Government and
 vides that purchases of and contracts              io give all interested parties an equal op-
 for property or services covered by the            portunity to compete for the Govern-
 act shall be made by formal advertising            ment’s business on an equal basis. The
 in all cases in which the use of such              Comptroller General, EZrner B. Stuats,
 method is feasible and practicable un-             testified to this effect on April 15, 1969,
 der existing conditions and circum-                before Congressman Holifield’s Sub-
 stances.’ Is this an appropriate and nec-          committee at the hearings on the bill,
 essary requirement? The answer has to              H.R. 474. “TO Establish a Commission
 be “yes.” The General Accounting Of-               on Government Procurement.”
 fice has traditionally taken the view                 GAO’s preference for the formal ad-
 that, as a general proposition, formal             vertising over the negotiation method
 advertising should be the preferred                is sound. It is based on the obvious dif-
 method of Government procurement.                     3 Hearings Before the Military Operations Sobcom.
                                                    mittee of the Committee o n Government Operations,
      10 U.S.C. 2301, et s e q . (Chap. 137).       House of Representatives, on Government Procurement
  2   10 U.S.C. 2301.                               a n d Contracting, 91st Cong., P a r t 3, p. 685.


ferences between the two methods: also     benefit and protection of bidders as well
on the Office’s many years experience in   as the Government. Heginning with the
auditing Government contracts made         €amous Scannoell decision of Febru-
under both methods and in handling the     ary 13, 1070.’ the courts now take the
many bid protest cases (about 600 an-      same view. That decision reversed a
nually) submitted to the Comptroller       lonpstanding rule in holding that ag-
General for decision.                      grieved bidders for Government con-
                                           tracts have standing to sue in the
Formal Advertising Procedure               Federal Courts and further that they
   The elements of the formally ad- may sue directly without first protesting
vertised procedure are clearly and pre- to GAO.
cisely set out in the act. They are: I           In his testimony on the Procurement
                                           Commission bill the Comptroller Gen-
      1. “The adbertisement shall be
                                           eral said that GAO realizes that formal
   made a sufficient time before the pur-
                                           advertising is not “feasible and practi-
   chase or contract.”
      2. “The specifications and invita- cable” in a substantial portion of de-
   tions for bids shall permit such free fense and space procurement and in
   and full competition as is consistent certain other types of procurement.
   with the procurement of the property Furthermore. he said GAO would be the
   and services needed.”                    first to concede that, if the Government
      3. “The specifications in invita- negotiation procedure were used on the
   tions for bids must contain the neces- basis of including full discussions with
   sary language and attachments, and all offerors within a competitive range
   must be sufficiently descriptive in together with disclosure and comparison
   language and attachments, to permit of prices and the terms offered by the
   full and free competition.” otherwise, interested competitors, such procedure
   “the invitation is invalid and no could he expected to result in more ad-
   award may be made.”
                                            vantageous contracts for the Govern-
      4. “Bids shall he opened publicly
                                            ment. He then pointed out that the
   at the time and place stated in the
                                            negotiation procedure as set forth in the
      5. “Awards shall be made with Armed Services Procurement Act and
   reasonable promptness by giving prescribed by the Armed Services Pro-
   written notice to thp responsihle ])id- curement Regulation nevertheless falls
    der whose bid conforms to the in- far short of being that kind of negotia-
   vitation and will be the most ad- tion.
    vantageous to the United States.”
                                               :I Scnrttcdl Lohorororras. Inc. v. Thomas, C.A.D.C..
       6. “All bids may he rejected if the k‘i.1, 13. 1 9 i U (424 F. 2d 8591.
                                               0 ,ZSPR 3.101 et seq. Although this article refers
    head of the agency determines that
                                            s p ~ c i f ially
                                                          <   t o the Armrd Senices Procurement Act
    rejection is in the piihlic interest.“  a l ~ l ~ I I P . 4 r n ~ < l St r l i ~ f ~~ o ~urrment
                                                                                             r       Rpgulation
                                                           (AhF‘l<I. Titlr 111 of the F d e r a l Propcity and Ad.
  As indicated, GAO has always con-                        mmistrail\e     S r r \ i , w .4ct, 41 U.S.C. 251, e t w q . ,
sidered these provisions to he for the                     together with the Federal Procurement Regulations
                                                           ( F P R ) , prwide similar procurement procedures to be
   1   10 U . > . C 2305.                                  followed by the civilian agencies of the Government.

                                       F O R M A L A D V E R T I S I N G S’S. N E G O T I A T I O N

Negotiation Procedure                        is quite similar to formal advertising.
                                             Yet it i s unaccompanied by the usual
   To understand why this is the case
                                             safeguards required in formal adver-
one naturally has to look to the statu-
                                             tising, such as the requirements for
tory and regulatory provisions which
                                              ( 1 ) public advertising for bids, (2)
prescribe and limit the negotiation
                                             conducting a public opening where
procedure. Under those provisions.
                                             bidders are free to examine the bids
price proposals are required to be
                                             of their competitors, (31 furnishing
solicited in “all negotiated procure-
                                             bidders complete and definite specifi-
ments in excess of $2:500 ” ” “ in
                                             cations under which they and the Gov-
which time of delivery will permit” and
                                             ernment can be assured of competi-
“written or oral discussions shall be
                                             tion on an equal basis, and (4) award
conducted with all responsible offerors
                                             to a responsible bidder only 011 the
who submit proposals within a competi-
                                             basis of the most advantageous bid
tive range, price, and other factors
                                              which is responsive to the advertised
considered.” However, there is an
important statutory exception to this
latter requirement for discussions con-
                                                  It should also be pointed out that in
                                              using this procedure not only are the
tained in the same section of the act.
                                              Government and potential contractors
The exception applies when the con-
                                             deprived of the benefits and safeguards
tracting officer determines that, based
                                              of formal advertising, but the usual
upon the existence of adequate com-
                                              negotiation procedures are not required
petition or accurate prior cost experi-
ence. acceptance of an initial proposal to be followed either. Under the initial-
without discussions would result in 2, proposal method the requirement for
fair and reasonable price, and the re- written or oral discussions and the re-
quest for proposals notifies all offerors quirement for obtaining cost and pric-
in advance of the possibility that award ing data are not applicable and may
might be made without discussions. be disregardedP The Comptroller Gen-
Thus, no negotiations of any kind are eral said in his testimony on the Pro-
 required to be conducte’d in many cases. curement Commission bill that, in
 In fact, it i s understood that the Defense GAQ’s view, these are serious deficien-
Department considers the so-called cies in using this method of so-called
negotiation procedure under which in- negotiation.
itial proposals may be accepted with-             It is interesting to note from the l e g
 out holding discussions to be a pre- islative history of the Truth In Kegoti-
ferred procedure which should be used ations Act, which amended the Armed
 whenever possible by the military con- Services Procurement Act, that the De-
tracting agencies and that, as a result, partment of Defense requested the au-
 the procedure is used extensively.           thority to make an award without dis-
   Although the initial-proposal pro- cussions to the lowest initial offeror
 cedure is referred to as negotiation, it otl the grout& that such procedure is

   10 U.S.C. ?304(g).                            8   ASPR 3.805-1(0)(5) : ASPR 3.80;-3(a)(4).

       415-933-71---!2                     17
F O R M A L A D V E R T I S I N G 7:s. N E G O T I A T I O N

necessary to irlduce offerors to submit                 compete on an equal basis. As an ex-
their best price proposals, exclusive of                ample, without the benefit of adequate
contingencies, at the outset. GAO rec-                  and definite specifications for a pas-
ommended strongly against including                     senger vehicle one offeror might quote
this authority in the act but the De-                   on a high-priced station wagon and his
fense Department prevailed.9                            competitor might quote on a low-priced
   Obviously, in the absence of a public                automobile. Therefore, it would gen-
exigency, any authority o r attempt to                  erally be against the interests of the
avoid discussions would be inconsist-                   Government and the other offerors to
ent with the nature and purpose of                      accept the lowest initial proposal on
negotiation. Negotiation is authorized                  the assumption it is truly competitive
when it is determined that formal ad-                   and quotes the offeror's best price on
vertising is not feasible and practicable.              what the Government really needs.
It would seem that unless an emer-                         Additionally, it is hardly reasonable
gency or the need to make a sole source                 to expect an offeror to submit his best
procurement exists, the only situations                 price initially if he has no assurance
in which formal advertising would not                   that negotiations will not be conducted.
be feasihle and practicable would be                    The request for proposals is required
those where competition could not be                    to inform offerors that award might
obtained on an equal basis but then it                  be made on the basis of the lowest
would necessarily follow that the Gov-                  initial proposal without discussions as
ernment's and contractors' interests                    a prerequisite to using that procedure
would require that discussions be con-                  but it does not and properly could not
ducted with all offerors within a com-                  advise them that there will not be any
petitive range.                                         discussions if the procedure is not
   Furthermore' how can the contract-                   used.'O Moreover, it appears to be com-
ing agency accept an initial offer with-                mon knowledge that price leaks are
out discussions with any reasonable as-                 not unusual in negotiated procure-
surance that the lowest price quoted                    ments. Complaints concerning price
is fair and does not include any con-                   and technical data leaks are so num-
tingencies if the solicitation was not                  erous it would be naive indeed to as-
accompanied by specifications suffi-                    sume that they do not occur rather
cient to enable offerors to quote on an                 frequently in negotiated procurement.
equal basis? As indicated. ahsent an                    Because of this situation and the fact
exigency situation or the need to make                  that offerors can never be certain dis-
a sole source procurement, the only                     cussions will not be conducted, it is
justification for not advertising would                 quite likely that many sophisticated
be the lack of adequate specifications.                 offerors consider they cannot take the
Rut, if adequate specifications are not                 risk of submitting their best prices
available to advertise, offerors cannot                 initially.
                                                           Another question presents itself. If
                                                        the procurement is such that it can

                                                           I" 10   U.S.C. 1 3 0 5 ( g ) a n d ASPR 3.805-1(a) ( 5 ) .

                                               FORMAL ADVERTISING VS. NEGOTIATION

properly be conducted on the basis of              there are no general guidelines as to
accepting the lowest initial offer with-           what constitutes competitive range.
out negotiation, how can the contract-             When the contracting agency makes the
ing agency properly make the deter-                award the only information of any
mination required by the act that it               significance it is required to announce
would not be feasible and practicable              is the name of the contractor and the
to formally advertise? The concept that            amount of the contract.15 An unsuc-
a low initial offer may be accepted                cessful offeror can request and prob-
presupposes full and free competition              ably obtain at some later date a debrief-
on an equal basis. Consequently, the               ing, that is, additional information why
authority to do so is in direct conflict           his offer was not accepted, but, since
with the requirement that formal ad-               this cannot take place until after the
vertising must be used when that                   award has already been made, he is
method is feasible and practicable.                virtually precluded from filing a timely
   Other equally serious defects in the            protest.
Government’s negotiation procedure
are that in using the procedure the                   Admiral Rickover’s Testimony
contracting agency can limit the num-
                                                     Admiral Hyman G. Rickover in testi-
ber of potential offerors to be so-
                                                   mony of May 13, 1970, before the
licited.ll The agency is not only free
                                                   Subcommittee on the Department of
to operate in secrecy, the procurement
                                                   Defense, House Committee on Appro-
regulations require it to do so. The
agency is precluded by the procurement             priations, made several observations
regulations from using auction tech-               which conform generally with the views
niques,12 that is, it cannot disclose pric-        here expressed. He said:
ing or technical information or the                   The real problem is the Defense Depart-
number or identity of any competing                ment’s unwillingness to face up to the lack
                                                   of competition in defense procurement and
offer or^.^^ In a great number of negoti-          take the necessary steps to protect itself and
ated procurements it is solely within              the public against overcharging. In 1969 the
the agency’s discretion whether to con-            Department of Defense spent over $40 billion
duct written or oral discussions. The              for military procurement. Of this, $36 billion
agency is free to decide that it does              was spent in negotiated procurement. Nego-
                                                   tiated procurement means that the bidding
not have to hold discussions on the                is limited to a very small number of firms-
basis that it has prior accurate cost              often only one. More than half the $36 billion
experience or has obtained adequate                was sole source procurement.
competition. If the agency decides to                 The Department of Defense categorizes
conduct written or oral discussions it             nearly all the rest of its negotiated procure-
                                                   ments a s “competitive-negotiated” contracts.
is free to limit the number of offerors            I n competitive-negotiated procurements, the
it considers to be within a competitive            Department of Defense can select which firms
range and therefore will be privileged             may bid on the contract, and then award the
to participate in the                  but         contract based on the bids received, as if it
                                                   were a formally advertised procurement.
 l1 ASPR 3.802-2.                                     Competitive-negotiated procurements en-
 l2 ASPR 3.805-1(b).
    ASPR 3.507-2 and ASPR 3.805-1(a) ( 5 ) .
 l4 ASPR 3.805-1 ( a ) .                               %   ASPR 3.50&3.


joy tlir *iniplirity of formally ativrrtixcd pro-            an assistant director of GAO’s Defense
rnrtwitmt\ \\itliout hcivinp to 1)otlicr with                A u d i t Division. The article dealt with
t l i v scifrgiiartls that I i r i i t r c t thi. C;o\ernincnt
                                                             thik same prohlem area. It was entitled
in niJii-eoiupetiti\e proi.urriiirmt\. 1;iir i’x-
nmplc, contractors nnilcr the competiti\e-                   “The     Armed Services Procurement Act
ncgotiated prorrilure., (11) not h a w to provide            of 1947 Should Be Reformed” and was
cost and priving data rrquired by the l‘ruth-                published in the Spring 1969 issue of
in-Nrgotiatiims Act. There are virtually no                  the Natiorial Contract Management
pricing safrguaril* in these procnrements.
                                                             journal. It received additional publicity
   True ciimpetition in defense procurement
i5 the exception. not the rule. * ‘ *                        and considerable acclaim.lG Neverthe-
   1)rspite t h i 5 situation, d e f ~ n wprocnreinrnt       less, for the reasons already apparent
reprilationi nrr primarily orientril toward                  and hereinafter explained, the con-
treating most defense procurements as com-                   clusions and implications set out in
petitive, * + :: I believe the rules for nnn-
                                                             the article are for the most part im-
conipetitivc procurement should he applied to
all contracts t l l a t are nut formally a d v e r t i ~ d .
                                                             practical if not unsound.
                                                                The article concedes that formal ad-
    It is apparent that the Admiral, who vertising is very efficient in its proper
is in a position to have firsthand knowl-
                                                             area but, in glaring contradiction, it
edge concerning military procurement
                                                             says that there is “a fetish” for formal
procedures, would agree that negotia-
                                                             advertising and that “formally adver-
tion as used by the military agencies, is
                                                             tised procurement is out of touch with
not a competitive procedure in any real
                                                             the real world.” Its overall theme seems
sense of the word. From the foregoin?,
                                                             to he that formal advertising is an anti-
it also seems apparent that negotiation
                                                             quated, outmoded, and impractical
does not afford interested parties an
                                                             technique which today has little, if any,
equal opportunity to share in the Gov-
                                                             justifiable application to defense and
ernment’s business on an equal Lasis;
                                                             space procurement and should not
can be almost any procedure the con-
                                                             therefore be stated in law as the pre-
tracting agency chooses to make it; is
                                                              ferred method. In the same vein it rec-
conducted in secrecy and is based on
                                                              ommends) that the act should be
subjective, discretionary determina-
                                                             “modernized” to make negotiation the
tions; does not in many cases protect
                                                              rule rather than the exception and to
the Government against unreasonably
                                                              recognize what are said to be the “more
h i r h prices; and is provided for hy
                                                              relevant methods” of procurement,
statutory provisions and regulations
                                                              such as, according to the article, com-
 which are so loosely drawn that the
                                                             petitive negotiation and single source
 usual safeguards for the protection of
 the Government and those interested in
                                                                 The article attempts to support its
 competing for Government contracts
                                                             position in favor of negotiation as
 may he disregarded.
                                                              against formal advertising by quoting a
 Views in Previously Published                                statement from a paper presented at
Article Questioned
                                                                        10   Hrprintrd         i n the Spring 1969 issue of the G.40
                                                                      K v g~         at d~ 111 tllc M n v 27, 1969, Congressional Record,
  This brings into question an article                                         ~

                                                                      1). hs68i. Kr\irwrcl fo\oralrly ~n Letter to Editor pob-
written hy Robert E . Hall, Jr., who is                               I l i h c ~ l 111 tlrc Fa11 1969 NCAIA Joernnl.

                                                   FORMAL ADVERTISING VS. NEGOTIATION

the 1959 Hearings on S. 500 by an of- but the overall effect of the act would
ficial of Western Electric Company, remain the same.
Inc.“ The official said that “the solu-        The article states that the act as now
tion for business was not to retain an drafted discriminates against the “more
outmoded and impractical technique relevant methods’’ of procurement “by
such as advertised bidding-but to im- loading on unnecessarily burdensome
prove the negotiation process.” The         (and ineffectual) requirements.” Ap-
clear implication is that the same solu- parently the requirements referred to
tion would be appropriate for the Gov- are ( 1 ) the requirement that in negoti-
ernment as well as business. However, ating certain types of contracts the
this overlooks one all-important factor. prime or any suhcontractor shall be re-
The Government through rigid restric- quired to submit cost or pricing data
tions unnecessarily self-imposed, rnen- and certify it to he accurate, complete.
tioned above, has precluded itself from and current *’ and (2) the requirement
using meaningful negotiation proce- that contracting agencies make deter-
dures. Also, the act in its present form minations and findings to support cer-
may make formal advertising the pre- tain types of actions in the negotiation
 ferred procedure but it does not make process.?O
negotiation an exceptional procedure.          As to the requirement for furnishing
 It devotes more coverage to negotiation cost or pricing data in negotiating con-
 than to formal advertising. It authorizes tract prices one needs only to rememher
 negotiation in 17 different clauses        the numerous over-pricing audit reports
 which collectively are sufficiently broad released by GAO which resulted in the
 to cover any conceivable method of pro- enactment of the Truth in Negotiations
 curement, including competitive nego- Act to understand that the need and
 tiation and sole sour,ce mentioned i n justification for the requirement out-
 the article.                               weigh to a considerable extent any ad-
     This exception objection is a red her- ditional burden resulting from imposi-
 ring anyway. If there is a problem it is tion of the requirement.“
 one of form not substance. Suppose the         &o, considering that the purpose
 act were amended to provide that con- of the requirement for determinations
 tracts shall be made by negotiation ex- and findings is to assure that contract-
 cept where it is feasible and practical ing agencies make a conscientious effort
 t o formally advertise. So far as the lan- to justify the actions they propose to
 guage of the act would be concerned,
 that would make negotiation the rule            10 U.S.C. 2306.
                                              20 10 U.S.C. 2310.
 and formal advertising the exception         21 See testimony of t h e Comptroller General a t t h e
                                                                 Hearings before t h e Procurement Subcommittee of t h e
  17 Introduced  b y Senator Saltonstall. I t would have         Senate Committee on Armed Services, 86th Cong., 2d
amended Title 10 of t h e United States Code with respect        sess., p. 146. S e e also two GAO reports t o t h e Congress:
t o procurement procedures of t h e Armed Forces.                “Examination o f Selected Department of the Navy
Although hearings were held, t h e hill never received           Contracts and Subcontracts,” B-132942, July 14, 1959;
any action. See statement by J. Edward Welch, Deputy             and “Review of Extent to Which Military Procurement
General Counsel, U.S. General Accounting Office, a t             Agencies and Prime Contractors Have Obtained Certifi.
Hearings hefore a Special Subcommittee of t h e Senate           cations as to t h e Accuracy and Completeness of Cost
Committee o n Armed Services, 86th Cong., 1st sess.              Data Used in Negotiation of Contract Prices,” B-125050,
   18 10 U.S.C. 2301(a) (1)-(17).                                Oct. 4, 1962.


take, the value of and necessity for this                                        able extent by the contracting agencies
requirement is apparent even though                                              as intended by Congress.
it too might impose an added burden                                                 It must be concluded further that the
on the agencies.                                                                statutory authority to accept an initial
                                                                                 proposal without discussions in the ne-
 Summary and                                                                     gotiation process should be eliminated
 Recorn mendations                                                              immediately by an appropriate amend-
    Summarizing then; while formal ad-                                          ment to the Armed Services Procure-
vertising may not be a perfect system,                                           ment Act. Finally, some way must
it is the best yet established when it ap-                                      be found to broaden and relax the
 propriately can be used. Ample support                                         restraints now imposed on the negotia-
for this may be found in the fact that                                          tion process by the procurement regula-
the procurement laws of all of our 50                                           tions so as to better protect the Govern-
States and the District of Columbia re-                                         ment’s and contractors’ interests.
 quire competitive or sealed bid proce-                                            The act itself does not need to be
                                                                                amended to accomplish these reforms,
 dures in making their public procure-
                                                                                except for the purpose of withdrawing
ments, with exceptions being authorized
                                                                                the authority to accept a low initial pro-
for negotiation in the usual situations
                                                                                posal. Otherwise, the problem lies with
 such as emergencies and small pur-
                                                                                the regulations which implement the
chases.22In view of the defects inherent                                        act, not with the act itself. The regula-
in the initial proposal authority and re-                                       tions impose the procedural restrictions
strictions on the negotiation procedure                                        which make it impossible to conduct
as authorized for use by the Federal                                            true negotiations.
Government, formal advertising is the                                              This whole problem is one of great
only procedure thus far devised under                                          magnitude and is an extremely serious
which real competition in Government                                           one. It is inherently involved in the pro-
procurement can be obtained. There-                                            cedure used in “negotiating” almost $40
fore, the requirement to formally adver-                                       billion worth of Government contracts
tise i n appropriate cases should be re-                                       a year. That is a great amount of tax-
tained in the procurement statutes, and                                        payers’ dollars and makes a great num-
application and use of forma1 advertis-                                        ber of Government contracts. It is there-
ing should be expanded to every reason-                                        fore imperative that solutions be found
                                                                               if at all possible in the interest of sound
   ?? Tiir Biqle a n d Prote=tc Cnrnmittw of t h r S r r t i o n               Government procurement. The Comp-
of Public            Contract Law, American Bar Association.
undertook a “ S u r r ~ y of Statc Procurement a n d Protest
                                                                               troller General recognized this in his
Froccdurrs” a5 i t 5 1969-TO project. The survey results                       testimony on the Procurement Commis-
are set forth in R r p o r t of the Committee on B ~ d sand
Protests. J u n e 1970. IP the conduct of t h e survey,                        sion bill. He said that:
41 States responded “Yes” t o the question “Must sealed
                                                                                 .,. ...
                                                                                 I.   I.   %

bid procedures he used,” one S t a t e replied “No.” and
                                                                                         the obvious problems which result

eight S l a t c s d i J not partiLipnte i n the survey. An                     from the authorization to accept the lowest
indrpendPnt check of the procurement laws of the one                           proposals without negotiations or discussions
State which .~n.rvricd “No” and t h e eight nonpartici.
                                                                               and from the complete prohibition against
pating Stat,.                 lewd 11>.11 a l l iime of t1iC.w Q I A ~ P S
a l w r c q i i i r e c ninl,ctitive Liil p r u c ~ ~ l u r evilli
                                                             s     nccptiuns
                                                                               the use of “auction techniques” deserve thor-
for negotiation ~n the usual situations.                                       ough study and consideration with the view

                                                    F O R M A L A D V E R T I S I N G VS. N E G O T I A T I O N

to determining satisfactory solutions to these               against cutthroat competition, the prob-
problems.                                                    lem would be substantially solved. In
   The right to accept a low initial pro-                    any event, the Procurement Commis-
posal and the prohibition against auc-                       sion which has now been established 23
tion techniques are the main roots of                        and is now in operation hopefully will
the problem. If that right were abol-                        be able to find the solutions and to come
ished a n d if i t w e r e possible t o e l i m i n a t e    f o r w a r d w i t h r e c o m m e n d a t i o n s for ap-
the auction-technique prohibition and                        propriate corrective actions.
at the same time establish some kind
                                                                 2 Public   Law 91-129,   approved Nov. 26, 1969, 83
 of safeguards to protect contractors                        Stat. 269.

The Legislative Reorganization Act of                              1970
By L. Fred Thompson

             This important act, passed by the 9lst Congress, is 65
             closely- packrd pages long. Many provisions refer to or
             affect the operations of tlir General Accounting Office.
             This article provides a lirnitrd review of major provisions
             of the act.

   Examination of the Legislative Reor-      will content himself with a simple dis-
ganization Act of 1970 by Memhers            cussion of some of the act’s major pro-
and congressional staffs and other in-       visions as they appear in Public Law
terested people has resulted, it seems,      91-510 and, briefly, its history.
in opinions of its true effect as diverse
as those which the six blind men of              History
Indostan ex1)ressed after examining the             Not of premature birth, the Legisla-
elephant. Some say its principal sig-            tive Reorganization Act of 1970 would
nificance is its place in history as the         have been known as the Legislative Re-
first congressional reform bill in 25            organization Act of 1966 if it had ar-
years. Others, equally sincere, say that,        rived as planned. The act was first eon-
when put into practice. many of the              ceived by the Joint Committee on the
hill‘s seemin Fly mild provisions will           Organization of Congress after most
have startling effects on the legislative        extensive hearings during the 89th Con-
process. Some say the process will be            gress. The Joint Committee’s bill, the
slowed almost to a halt: others believe          major characteristics of which are em-
the process will be quickened and: most          bodied in the bill finally enacted as the
of all, enlightened. Somewhere. en-              1970 Act, was introduced as S. 3848
thusiasm could be found for almost               arid H.R. 17873 on September 21,1966,
every provision but so could despair, or         too late in the session for consideration
at least disdain.                                and for passage.
   By the time this is printed, the 92nd            S. 355, an identical bill, was intro-
Congress will have convened under its            duced in the Senate early in the next
new rules and these diverse opinions             Congress and, after 1 7 days of debate,
of the skeptics and the enthusiasts will         31 rollcall votes, and the adoption of 40
have begun to be tested in the cruci-            amendments, it passed the Senate 75
hles of practice and time. Wary of spec-         to 9 on March 7, 1967. Referred in the
illation in such matters. the writer here        House to the Committee on Rules, which

Mr. Thompson is a legislative attorney in the Office of Legislative Liaison.

                                 LEGISLATIVE REORGANIZATION ACT O F 1 9 7 0

held one hearing on the bill on April 10, seeins to thrust in at least one of two
1967, the bill never moved any further directions:
during the 90th Congress.                     1. Toward reform of the commit-
    In the 91st Congress, the Senate Gov-          tee system.
ernment Operations Committee again            2. Toward providing hetter informa-
took the lead and reported out another             tion on which to base legislative
bill, S. 844, incorporating virtually all          decisions.
the provisions of S. 355, the major omis-     Of these. the General Accounting Of-
sion being a title dealing with the reg- fice would appear to be affected most
ulation of lobbying. Meanwhile, in both by the latter, but. as part of the legisla-
the Senate and the House various re- tive branch. the Office has more than an
form measures were introduced from idle interest in the committee system
time to time but no action was taken and changes in those procedures. Hence,
directly on any of these bills, includ- some discussion seems in order.
 ing S. 844 in the Senate.                  Committee System Improvements
    Instead, the House Committee on
                                              Readers of the act will note with
 Rules, perhaps in atonement for hav-
                                            some distraction thal most provisions
 ing been somewhat negative in its atti-
                                            are stated twice in similar, if not identi-
 tude toward reform up to that time, cal, terms-once             relating to House
 began in the 91st Congress to develop committees and once relating to Senate
 its own bill. An ad hoc subcommittee committees. Comity recognizes the un-
 under the chairmanship of Congress- qualified right of each body to make its
 man Sisk of California was appointed own rules and, therefore. all the provi-
 and, in time, reported out H.R. 17654. sions of Title I ( a s well as certain
 Contrary to the predictions of many ob- others) were enacted as an exercise of
 servers at the time, Congressman Sisk the rulemakin? powers of both Houses,
 successfully guided the bill through and thus, are stated in each body’s own
 lively floor debates extending over terms and format. All of them concern
 several weeks and the House passed it. procedures, authority. or responsihility
 with several amendments. on Septem- of committees including, in some
                                            respect. the Committee of the Whole
 ber 17, 1970.
                                            House, which is another way of saying
    The Senate. after amending the bill
                                            the House of Representatives while in
 to incorporate provisions pertaining
                                            session to vote on legislation (for ex-
  solely to its own operations, passed H.R. ample, sec. 119 permitting, after debate
  17654 on October 6. The bill became is closed. 10 minutes debate on amend-
  Public Law 91-510 with the signature ments previously printed in the Con-
 of President Nixon on October 26, 1970. gressional Record ) .
                                               I t would he an invitation to argument
  Aims of the Act
                                            to attempt a classification of ihe provi-
     Except for Title IV, which affects sions affecting rules chanFes as to their
  only certain internal and housekeeping relative importance. Disclaiming any
  functions, each provision of the bill attempt at such a classification, a list of


some of the more significant changes             overcome by the committee for good
would include :                                  cause.
                                                    Sec. 112. Requires all committee
     Sec. 102. Permits any three mem-
                                                 hearings (excluding those of the
  bers of a standing committee to
                                                 Senate Appropriations Committee‘)
  demand and obtain a special meeting
                                                 to be open to the public except that
  of the committee even over the ob-
                                                 in certain cases the committee by
  jections of the chairman or: for that
                                                 majority vote could determine other-
  matter, a majority of the members.
                                                 wise. In view of the fact that, by and
     Sec. 104. Requires record and
                                                 large, most other hearings have been
  rollcall votes in committee to be
                                                 open to the public, perhaps the great-
  made public.
                                                 est effect of this section will be to
     Sec. 106. Prohibits general proxy
                                                 open up the hearings of the House
  votes in committee. Under present
                                                 Appropriations Committee which
  practice, a member may by proxy
                                                 have traditionally been closed. Of
  permit his vote to be cast at the hold-
                                                 course, the committee itself may
  er’s discretion in the absence of the
                                                 “determine otherwise,” in which
  member. Sec. 106 permits proxies
                                                 case: it would seem that this section
   (except on reporting measures by
                                                 wTould merely serve to preclude an
  Senate committees) but requires
                                                 arhitrary decision by a committee
  each one to be in writing, specifying          chairman to close any hearing to the
  the single measure or matter for               puhlic.
  which it is given.                                Sec. 114. Gives to the minority
     Sec. 108. Prohibits floor con-              the right to call witnesses of its choice
  sideration of any bill until printed           to testify during at least one day of
  hearings and committee reports have            hearings on any measure or matter
  heen available for at least three days         under consideration by a committee.
   (Saturday, Sunday, and legal holi-            Will this preclude reporting a con-
  days excluded). A similar provision            troversial majority-sponsored bill
  in the 1946 Act applied only to House          after “quickie” one-day hearings or
   general appropriations bills.                 even without hearings? It would seem
      Sec. 110. Grants the minority              so.
  party the right to not less than one-            Sec. 115. Provides (for the House
                                                 only) that a point of order made by
   third of the committee’s funds for
                                                 a member of a committee will lie with
   staff of its own choosing. (Applies
                                                 respect to any measure reported by
   to the House only but section 302
                                                 that committee on the ground that
   provides for the minority to appoint
                                                 sections 111,112.113, and 114 above
   two of six professional staff members         were not complied with in the hear-
   authorized for committees of both             ings. This is true, however, only if
   the House and Senate.)                        the member made the point in com-
      Sec. 111. Requires at least a              mittee in a timely manner and it was
   week’s advance public notice of               “improperly overruled or not
   hearings. This requirement can he             properly considered.” Section 115,

                                 LEGISLATIVE REORGANIZATION ACT O F 1 9 7 0

  insofar as the House is concerned, is         for additional reforms through other
  the enforcer of the new rules on hear-        means: for example. the caucuses of
  ings procedures because, as the               both majority and minority parties.
  House Committee on Rules stated in            With the beginning of the 92nd Con-
  its report accompanying H.R. 17654,           gress, a strong effort will be made in
  it is unlikely “that, upon the proper         caucus to change the rules for electing
  and timely raising of a question of           chairmen of committees-the        much-
  order: any committee would continue           maligned seniority system-a      change
  in an improper manner and risk the            which, if made, could have greater total
  question of order being raised on the         effect on the committee system than all
  floor.”                                       the provisions of the Legislative Reor-
     Sec. 118. Places greater emphasis          ganization Act of 1970.
  than the 1946 Act did on the respon-          The Search for Information
  sibilities of legislative committees for
  “oversight,” that is, the review and             Without doubt, the major thrust of
  study on a continuing basis of the ap-        the 1970 Act is toward providing bet-
  plication, administration, and execu-         ter information on which to base legis-
  tion of those laws within their juris-        lative decisions. Although only Title I11
  diction. New with the 1970 Act is a           is specifically labelled “Sources of In-
  requirement that each such commit-            formation,” all of “Title 11-Fiscal
  tee submit to its respective body at or       Controls” may be said to aim in the
  after the end of each Congress a for-         same direction. In fact, much of Title I
  mal report on its oversight activities        relating to the committee system, as can
  during the past 2 years. Depending            be seen from the earlier discussion,
  on the vigor of its implementation,           seems to be designed to contribute in
  this section could have an accelerat-         one way or another to serving the need
  ing effect on some committees’ ac-            for knowledge and facilitating its use
  tivities and might result in greater          in the legislative process. The commit-
  use of reviews and reports of the Gen-        tee system provides the refinery
  eral Accounting Office by legislative         through which must pass much of the
  committees.                                   fiscal and budget data and other infor-
                                                mation dealt with in Titles I1 and 111.
   Other provisions of the act deal also           Titles I1 and 111, taken together, call
with the Committee system and some of           upon various resources in the executive
those may prove in time to have more            branch, the General Accounting Office,
far-reaching consequences than those            the Library of Congress, and the staffs
specifically mentioned here.                    o i the standing committees of Congress
   To many of the outspoken critics of          for greater input to the information-
the committee system, the 1970 Act              gathering and evaluating process.
probably represents only a small step              From the executive branch, an auto-
forward. However, an act such as this           mated, integrated, and standardized
is not the only means of congressional          data processing system provided for in
reform. Those who believe the 1970 Act          the act will bring a steady flow of budget
is not enough are continning to work            and fiscal data to serve all the Govern-

mclit‘s n w d i .   in dud in^
                            those of the                 ments. struc,turing thnse elements in stand-
                                                         ,ird r l a s 4 c a t i o n i applicable, insofar as pos-
Congress. The ba1ani.e o f Titles I1 and
                                                         \il)lr, to all Fetlpral agmcy activities, provid-
111. hesidw aulhorizitig artu.‘I 1 increasrs
                                                         ing for a rt.giilar flow of data pertinent to
in coninlittee staffs, supplements those                 tliow clasiificatinnc. and manipulating the
staffs by mobilizing certain r e s o u r c e s of        whole hy               automatic data processing
the General Accounting Office for that                   techniques.
                                                            This system, it is hoped, will ultimately
purpose and revamping the Legislative
                                                         ashist the executive branch in making more
Reference Service of the Library of                      m ~ a n i n g f n lcomparisons between the costs
Congress into a new semiautonomous                       of Federal programs and their benefits. More-
organization to be known as the Con-                     oxcr. it \sill permit the extraction of many
gressional Research Service.                             other types of specialized information about
                                                         the fiscal aspects of Federal activities.
Budget and Fiscal Datu From tlre                            Properly constructed, this project can
E.recrcti tie Branch--.4 11 tornat ion                   make incalculable contributions to congres-
                                                         sional knowledge of the fiscal operations of
   The Secretary of the Treasury and                     tlir Government and enormously enhance the
the Director of the Oflice of Manage-                    ability of Congress to analyze those opera-
ment and Budget. in roo1)eration with                    tions. I t i\, therefore, vitally important to the
                                                         Ii@slati\e brarich that those who evolve the
the Comptroller Ceneral as the agent
                                                         system make adequate provision for congres-
of the Congress, are required hy section                 cional needs and applications.
201 to “develop, establish, and main-                       To assure that result, sections 201 and 202
tain insofar as practicable, for use by                  involve the Comptroller General, in effect as
all the Federal agencies. a standardized                 an agent of Congress, in the development,
                                                         establishment, and maintenance of the sys-
information and data processing sys-
                                                         trni. And section 202 instructs the respon-
tem for budgetary and fiscal data.”                      d l e officials to go about their tasks in a
Section 202 requires the same three                      manner that will mert the needs not only of
officials in the same manner to develop                  tlir executive hranch hiit of all the branches
standard classifications of programs,                    of the Government.
sctivities. receipts. and expenditures                     Apparently. to bridge the gap in time
and requires an annual report by Treas-                  before the automatic system is ready
ury and OMR (ivith wrhatever c o m -                     and to provide an auxiliary source of
ments the Comptroller General chooses                    available program and fiscal data,
to make I on their progress. The initial                 section 2O:3 requires, Treasury and
classifications are to he established by                 OMB to be ready upon request to
Decetnber 31. 1971.                                      identify what is available, where it can
   Concerning this system and the                        be obtained and, to the extent feasible,
Comptroller General‘s role, the report                   prepare r e p l a r summaries of such
of the House Connnittee on Itules on                     data.
H.R. 17654<says on page 11:                              The Committee Stags and CAO
  During the past half decade the executive                 In a recent New York Times Maga-
1)ranch has heen developing a system for
collrcting and anal)-zing l~udgetdata which
                                                         zine article, a prominent congressional
proniivs to im~irovr its ability to prepare              staff member is quoted as saying:
and to evaluatr the Budget. In brief, the                   There is a heartfelt need by members of
syctem involves identifying hacic budget ele-            all other parliamentary bodies-in Germany,

                                    L E G I S L A T I V E R E O R G A N I Z A T I O N A C T O F 19 70

France, England-for what exists only in the                (1) in analyzing cost henefit       studies
Congress of the United States. Those bodies             furnished hy any Federal agency       to such
are ruhber stamps. If a memher is with the              committee or joint committee; or
Government, he votes for the Government’s                  ( 2 ) in ronducting coqt henefit   studies
legislation. If he isn’t, he doesn’t. They              of programs under the jurisdiction    of such
would like to make contributions of their               committee or joint committee.
own. They can‘t because they don’t have
staffs. The US. has-in     a way that hasn’t             Although the House committee re-
been recognized anywhere i n print that I             port refers to Section 204 as “new statu-
know of-responded     correctly to what is a n        tory authority,” GAO has not con-
absolute necessity for a technological age: a         sidered that it lacked authority to
competent staff.
                                                      undertake reviews to determine whether
   The House Rules Committee report                   on-going programs and activities are
likewise lays great emphasis on the im-               achieving the results intended by Con-
portance of strengthening committee                   gress. In fact, in the past few years it
staffs to enable the standing commit-                 has undertaken such reviews in in-
tees (1) to better perform the vital                  creasing numbers including. in some
function of keeping watch over the way                instances, reviews of programs involv-
the laws are administered and author-                 ing administration by more than one
ized programs are executed and ( 2 ) to               agency. The most ambitious undertak-
intelligently determine the advisability              ing of this nature was a review of the
of enacting legislative proposals and                 Federal antipoverty program which the
to evaluate the probable results of such              Congress expressly directed GA’O to do
proposals, and alternatives.                          by statute. Although ordinarily GAO
  Of major importanre to GAO in this                  would not undertake a task of such
regard are the provisions of section                  magnitude on its own because of the
204, as follows:                                      enormous staff effort required, it is
                                                      reasonable t o assume that the express
   Sec. 204. (a) The Comptroller General
shall review and analyze the results of Gov-
                                                      authority contained in section 204, will
ernment programs and activities carried on            stimulate GAO to intensify its program
under existing law, including the making of           evaluation work.
cost benefit studies, when ordered hy either             Two other provisions of the act
House of Congress, or upon his own initiative,        which may become of considerable im-
o r when requested by any committee of the
                                                      portance to GAO and the committees
House of Representatives or the Senate, or
any joint committee of the two Houses, hav-           are contained in Title 11. Section 236,
ing jurisdiction over such programs and               which was incorporated in the act as
activities.                                            a result of a Senate amendment, re-
    ( b ) The Comptroller General shall have           quires the head of each Federal agency
available in the General Accounting Office
employees who are expert in analyzing and
                                                       to report the actions taken on recom-
conducting cost benefit studies of Govern-             mendations included in GAO reports.
ment programs. Upon request of any com-                He must file with the Senate and House
mittee of either House or any joint commit-            Committees on Government Operations
tee of the two Houses, the Comptroller                 within 60 days after the date of the
General shall assist such committee or joint
committee, o r the staff of such committee or
                                                       report a written statement of the actions
joint committee.                                       taken by the agency on the recom-


 mendations. In addition. the agency                   legislation, including requests for
head must file a similar statement with                appropriations, or in reviewing
the Appropriations Committees with                     agency programs and activities.
any request for appropriations submit-                    Sec. 232 requires that copies of
ted after 60 days from the date of the                GAO reports to the Congress be fur-
report.                                               nished to the Appropriations and
   Section 252 requires committee re-                 Government Operations Committees,
ports accompanying bills or joint reso-               and to other committees who have
lutions to contain:                                   requested information on any pro-
   ( 1 ) an estimate, made Iiy such committee,        gram or activity of any Federal
of the co+ whiah would be incurred in                 agency.
carrying out surh bill or joint resolution in            Under sections 233 and 234, copies
the fiscal year in which it is reported and
                                                      of reports must he furnished to any
in each of the five fiscal years following such
fiscal )-ear lor for the authorized duration          committee or joint committee or
of any program authorized hy such hill or             Member on request.
joint resolution. if less than five years). ex-
                                                      Section 234 creates a new reporting
rept that, in the case of measures affecting
the revenues. such reports shall require only      responsibility in requiring the Comp-
an estimate of the gain or loss in revenues        troller General to furnish once a
for a one-year period : and                        month to all committees and Members
   ( 2 ) a comparison of the estimate of costs     of the House and Senate a list of re-
described in subparagraph (1) of thiq para-
                                                   ports issued and a cumulative list
graph made by such committee with any
estimate of surh costs made hy any Gov-            annually.
ernment agencj- and suhmittetl to such                In summary, certainly the emphasis
committee.                                         the Congress has placed on GAQ’s PO-
  This requirement could have con-                 tential in Title I1 for assisting the com-
 siderable impact on GAO if the com-               mittees in their legislative and review
 mittees. lacking perhaps the in-house             functions is likely to stimulate greater
capability to devise such cost estimates,          demand for such assistance.
turn to GAO for assistance in preparing            Congressional Research Service
the estimates and comparisons. Con-
sidering the accounting and fiscal ex-                Section 321 redesignates the Legisla-
pertise lodged in GAO, it seems logical            tive Reference Service of the Library
that this can be expected frequently.              of Congress as the Congressional Re-
   Several provisions of Title 11 merely           search Service and comprehensively re-
write into law practices GAO has fol-              defines its duties and relationships with
                                                   the Congress and with the Library of
lowed in its relations with committees
and Members of Congress for many                   Congress.
years hut they represent actions which                The new duties of the Congressional
ran materially assist the staffs:                  Research Service are spelled out in con-
                                                   siderable detail but may be summarized
     Sec. 231 requires discussion of
  GAO reports with committees by the               as follows:
  Comptroller General to assist the                  -Assisting committees in analyzing
  Committees in considering proposed                   and evaluating the advisability of

                             LEGISLATIVE REORGANIZATION ACT O F 19 7 0

   enacting legislative proposals sub-        matters ullon which committee
   mitted to the Congress by the ex-          hearings are to be held.
   ecutive branch, and in estimating         There may be occasional instances
   the probable results of the pro-       where the new Congressional Research
   posals and alternatives thereto.       Service and the GAO will be doing
--Informing committees of programs        work in the same area. This should not
   and activities scheduled to expire     be a problem, however, since the two
   in the current Congress.               agencies will be arranging to coordinate
-Providing committees with lists of       their work in carrying out their respec-
   subjects and policy areas suitable     tive duties. This CRS-GAO cooperation
   for analysis in depth.                 is set forth clearly in the House report
-Making studies having a bearing          on the bill.
    on legislation, and providing in-
    formation, research, and services     Effective Date
    to committees and Members.               The provisions of the Legislative Re-
 -Preparing summaries and digests         organization Act relating to the Gen-
    of bills.                             eral Accounting Office and the Congres-
 -Preparing,    upon request, memo-       sional Research Service are effective
    randa with respect to legislative     January 3, 1971.

E v a Iu at ing Agency M a nageme nt
By Gregory J. Ahart

              In this article the author addresses himself to the sub-
              jrct of evaluating agency management from the per-
              spective of bir background in the GAO and the role the
              GAO p l q s in the Federal scheme. The article is based
              on presentations made by Mr. Ahart on September 21-22,
              1970, at the Frderal Management Improvement Confer-
              ence sponsored by thr Ofice of Management and Budget
              in Washington, D.C.

   The GAO. now in its 50th year, has           GAO’s Role
a very broad charter to operate in the
arena which is the subject of this dis-            Being in the legislative branch, and
cussion. This charter, embodied in the          clearly independent of executive branch
Budget and Accounting Act, 1921, is             agencies, it is easy to distinguish GAO’s
to ‘.investigate i t it ++ all matters re-      role from that of agency management.
 lating to the receipt, disbursement. and       ,4lso, although our modes of operation
 application of public funds” and to            are often quite similar, it is easy to dis-
 “make recommendations loolting to              tinguish our role from that of the ex-
 greater economy and efficiency in pub-         ecutive agencies’ internal audit, inspec-
lic expenditures.”                              tion, or other management evaluation
    Because the essential mission of            organizations. From our perspective,
 agency manageliient is the effective           such organizations, set up by agency
and eficient marshaling and utilization         management to be directly responsive
of public resources-monetary           re-      to its needs, constitute part of the
sources and the physical and personnel          agencies’ management systems and are
resources acquired therewith-toward             subject to our evaluation as such.
the acconiplishment of puhlic objec-               Our role is more analogous to that
tives, our job iri the (3.40 clearly in-        of the outside public accountant who
volves evaluating agency management             is brought in by the corporate board
and making suggestions and recom-               of directors to examine into and render
mendations for its improvement.                 a report on the arcountability of cor-

Mr. Ahart, drputy dirrrtor of t l w Civil Division sinrc April 1967, joined that division
inn 1957 following graduation from (:rrighton University. Mr. Ahart is a CPA
  (Nebraska) and a member of the bar (Virginia). He received GAO’s Meritorious
 Srrvicc. Award in 1961, it* (:arerr Development Awiird in 1967, and the Arthur S.
 Hemming Award a s one of the Ten Outstanding Young Men in the Federal Govern-
ment in 1969.

                                            EVALUATING AGENCY M A N A G E M E N T

porate management. As we define our gets aggregating approximately $200
role, however, it goes beyond “fiscal        billion, are engaged in the full spectrum
accountability;” relating to the quality of Federal activity.
of accounting practices and the integ-          Our work is carried out not only at
rity of financial reporting, which is        the   departments and agencies them-
often the principal focus of the outside     selves.  but at those organizations with
 accountant’s service. Our role extends      which    they  have contractual or other
to what may be called “management relationships. These organizations are
accountability.” relating to the effi- of inany types and are engaged in a
ciency with which resources are used, great variety of activities in support of
 and “program accountability,” relat- Federal or federally assisted programs.
 ing to the effectiveness of program op- They include:
 erations in accomplishing objectives.          -Private contractors performing re-
     I n essence, our job is to serve the          search, development, and/or pro-
 Congress by assisting it in the exercise          duction operations in support of
 of its constitutional responsibility for           defense, space, nuclear energy, and
 overseeing the use of public resources.            other programs.
 The fact that our prime responsibility         -The many units of State and local
 is to the Congress does not, however,              government through which Fed-
 mean that we cannot, should not, or do             eral funds are applied to a great
 not serve agency management, anymore               number of purposes, such as trans-
 than the fact that an internal audit or-           portation, housing, health, educa-
 ganization’s prime responsibility may              tion, and the alleviation of
 be to the head of a department or                  thc plight of our low income
  agency means that it cannot, should               population.
 not, or does not serve lower manage-            -A great variety of educational in-
 ment echelons. We play different roles,            stitutions, standing both as recipi-
 but we have a common objective-to                  ents of Federal funds in aid of
  endeavor to see that the objectives es-           educational goals and as per-
  tablished through our democratic PO-              formers in support of many other
  litical processes are achieved and that           types of programs.
  they are achieved as efficiently and eco-      -Health care institutions, such a s
  nomically as possible.                            hospitals and nursing homes,
                                                    which provide care to eligible per-
  Application of Resources                          sons under a number of programs.
      At the present time, the GAO has a The list could go on.
  professional staff of about 2,700, located      The preceding perspective of the
  in Washington, D.C., in field offices scope of our job is important to what
   throughout ihe country, and in several is meant by “evaluating agency man-
  offices overseas. Our audit responsibility agement” from GAO’s standpoint. With
  extends to each of the 12 departments rather limited resources, we obviously
  and numerous independent agencies in cannot, even over a long period of time,
  the executive branch, which, with bud- evaluate agency management in any

       419-933-71-8                        33

  total wnw. WJe have to lbe selective in       ihe Congress or by the executive hranch
 our approach.                                 to govern the manner in which the pro-
    In fact. you might call us opportunists    gram or activity is to be conducted. We
 because, to the extent that we can, we        have to know the organizational frame-
 deliberately apply our efforts where we       work and the assignments of respon-
 judge we have the greatest opportunity        sibility and authority. And we need to
 to stimulate improvements. Our judg-          know what mechanisms management
 ments in this regard are based on             has established to assure that the pro-
 several factors, incIutIing, of course,       gram or activity is carried out as in-
 indications of weaknesses in program          tended and to inform itself as to what is
management or a low level of program           being accomplished.
effectiymess; our past experience with            Lack of clarity in or inconsistencies
the agerlcy concerned or with the pro-        among stated objectives or policies, or
gram or type of program invol\ied; the        questions as to their relevance to cur-
degree of congressional and public in-        rent conditions; fuzziness in lines of
terest in the area; the amount of Fed-        authority and responsibility; gaps or
eral money involved or other measure          indicated weaknesses in the manage-
of significance; and, by no means the         ment control system; or the absence of
least important factor, the attention         reliable information concerning the
which has been given to the area by           utilization of resources or program ac-
others, including the agency’s internal       complishnlents-each of these is a clue
audit organization.                           io where productive efforts can be
Management Evaluation
Process                                       Estublishing Credentials
   The process of management evalua-              For the evaluator, the process of
tion is not easy to define. As I’ve in-        gathering and assessing information,
 dicated, we start with a general assess-      identifying his evaluation objectives,
ment o f a program area or an activity         and proceeding to make his contribu-
from the standpoint of the likelihood of       tion is not an easy task. He must, if he
our having an opportunity to make a            is to do his job well, educate himself
significant contribution. From that            in what is often an unfamiliar program
point on, the process involves gathering       area-in    a very real sense he must
and assessing information to more             create his own credentials. He must
specifically define just what opportuni-      learn enough to be able to identify a
ties are present and which should be          problem area, to judge its significance
pursued.                                      in terms of either economy and effi-
   At this stage of the game. we try to       ciency of operation or program effec-
keep a broad viewpoint. We have to            tiveness, and to reach some conclusion
gain a good undervtanding of what the         as to what might be done, and by whom,
program or activity is intended to ac-        to correct the situation. He must do his
complish. We have to get a good knowl-        job well enough to convince agency
edge of the policies established either by    management, or often the Congress,

                                              EVALUATING AGENCY MANAGEMENT

first, that the problem exists, and sec-      under which they operate. It’s natura1
ond, that it is important enough to war-      that they tend to be a little defensive of
rant attention and action. It is his skill    the way they run their operation.
in doing this type of analysis and               It used to be said, and perhaps still
demonstration, together with his in-          ist that the two biggest lies in the world
dependent viewpoint, which he brings          are told when the GAO auditor has his
to the scene.                                 first meeting with the agency manager.
                                              The first lie is when the GAO type tells
Psychological Aspects oj                      the manager that he is there to help
Management Evaluation
                                              him. The second is when the manager
   References sometimes made to the           replies that he is glad to have him.
“defensive management syndrome” and              I hope that these “lies” are becoming
to the “prosecuting audit syndrome”           closer to truth; I feel sure that the
bring in the psychological aspects of         trend is in that direction. The independ-
management evaluation. I don’t think          ent evaluator: whether he be GAO or
either syndrome should have a place in        internal audit, has a valid and useful
the Federal Government today, and I           role to play. He looks at things from a
would hope that they are going out of         different vantage point and can and
style. But that the syndromes might ex-       does see things which have been over-
ist in some degree is not hard to under-      looked by agency management.
stand. The evaluator or auditor gets             The manager, at whatever level, must
his satisfaction out of successfully          recognize this and strive to use the
stimulating an improvement. To do this        evaluator’s input to the greatest ad-
he must demonstrate that something is         vantage from the standpoint of the pub-
not as it should be-that        something     lic good, which of course operates in
needs improving. It’s somewhat natural        his own best interest as well. Actually,
in this circumstance for someone to           the best defense against the auditor’s
perceive the evaluator’s job as one of        findings-if      defense is the proper
getting the goods on somebody, utiliz-        word-is to consider the findings as ob-
ing the so-called killer instinct.            jectively as possible and do everything
   The manager, on the other hand, in          possible to effect corrective action
whose domain the evaluator is working,        where indicated.
tends to be somewhat apprehensive, not            The evaluator’s best approach, it
knowing just what the evaluation will         seems to me, is to recognize that the
disclose and to what extent his per-          greater the extent to which he can
formance might be criticized, not so           achieve management’s respect and co-
much by the auditor but by higher              operation through a constructive and
echelons of management or by some             fair attitude, avoiding anything which
congressional committee. I’m sure most        might be viewed as vindictive, the
managers think that they are doing a           greater his opportunity to successfully
good job, and I’m equally sure froin           do his job. Management at any level, as
my experience that, on balance, most of        you may know, can make the auditor’s
 them do a good job given the conditions       job pretty tough if it wants to.

Need for Efiertive                            contents of our draft reports should
Communication                                 come as no great surprise to these
                                              parties. Our staff is expected to discuss
    The proper relationship is enhanced       tentative findings and their significance
through real communication between            with responsible people in the entities
the evaluator and the evaluatee, and at       being audited, both during the review
the appropriate organizational level.         and, upon completion of the review, in
The manager, if he is to appreciate the       a formal exit conference. At the latter
evaluator's effort. has to know what the      point. our thinking as to what action
objectives are and has to have a timely       seems to be in order should be fairly
opportunity t o react to and take action      well firmed up. Ideally, these discus-
on the evaluator's findings. The evalua-      sions should be held at the manage-
tor, on the other hand, needs to pick         ment level that is in a position to take
management's brain. so to speak. some-        action for the agency, if action is nec-
times rather extensively. to assist in his    essary. or in any case to respond au-
determination as to whether he is 011         thoritatively for the agency or other
the right track and whether his ideas         entity.
for improvement have real merit and               This practice has great advantages,
 are workable. He has to realize that.        both to the evaluator and to the agency.
just as the outsider brings a fresh and       The evaluator has the opportunity to
 independent point of view to the situa-       modify his thinking where the agency
 tion, there are often factors known to        or other organization offers informa-
agency management which are not so             tion not previously considered or, per-
 obvious to the outsider and which may         haps, points out where information has
 have a critical bearing on his case.           not heen considered in the proper light.
     When we in GAO propose to issue a         The agency or other organization in
 report to the Congress or, often, when        turn has the opportunity to act in a
 we propose to issue one to a depart-          timely manner on the information and
 ment or agency head, we follow the            suggestions brought forward by the
 practice of furnishing a draft of the         evaluators.
 report to the agency concerned for its
 review and comment. This practice            Importance of Validation
 gives the agency a chance to critically        The importance of validation in the
  review the findings and conclusions
                                              process of evaluating agency manage-
 presented in the draft and to officially
                                              ment also must be considered. The vari-
  respond to the recommendations for
                                              ous echelons of management, in the
  actions by the agency itself or comment
                                              agency, in the executive branch gen-
  on recommendations to others, such as
  the Congress. In fact. every organiza-      erally, and in the Congress itself, need
  tion that might be affected directly by     to have a reasonable degree of assur-
   the report is generally afforded this      ance that the information upon which
   opportunity. including State and local     they act is reliable.
   agencies. contractors. and so on.             Often we think of the function of
     If our job has been done right' the      validation in the context of the classi-

                                              EVALUATING AGENCY MANAGEMENT

cal financial audit, which has as its ob-              Or, perhaps. does the legislation
jective the rendering of an opinion on                 and other relevant ex])ressions of
the financial statements of an enter-                  intent provide adequate guidance
prise. The financial audit is important                to the agency as to the objectives
and we engage in it quite extensively,                 of the program and the manner in
although principally in connection with                which it is to be conducted?
government corporations and other                   -1s the program or activity being
business-type government enterprises.                   conducted and are expenditures
   The validity or reliability of other                being made in compliance wilh re-
information-particularly    information                 quirements o€ applicable laws and
as to what is actually being accom-                    regulations ?
plished as a result of a program or                 -Will the intended results be ac-
activity-is just as important and often,               complished within the costs antici-
perhaps, more so. Often, we in the GAO                  pated a t th.e time the legislation
find that the case is not so much one                  was enacted?
of misinformation being used by man-                 -Does     top management have the
 agement but, rather, a case of informa-               essential information to exercise
tion on some important aspect of its                   supervision and control and to as-
activities not being available. The mis-               certain direction o l trends?
sion of the evaluator in this case is               -Have clear lines of authority and
 usually one of simply pointing out that               responsibility heen established?
 some class of information is not avail-            -Does management have adequate
 able and demonstrating why it is im-                  internal review or audit facilities
portant to the management of the                        to monitor program operations,
 operation.                                            identify shortfalls, and assure
Questions T o Be Answered                            -Are    there opportunities to i n -
   In conclusion, I’d like to briefly sum-              prove economic efficiency?
marize the types of questions the GAO                -Are there overlappings of jurisdic-
tries to answer in its work in evaluat-                 tion and duplications of effort
ing agency management.                                  which serve no useful purpose?
   -1s  the program accomplishing the                These are questions which I think all
     results intended as spelled out in           of us should try to answer in conneciion
     the governing legislation, the legis-        with our work, whether we are agency
     lative history, or the implementing          managers, internal auditors, or audi-
     directives of the executive agency?          tors from the GAO.

Let's Recognize Depreciation in
Government Operations
By William A. Paton

              A renowned teacher and author in the fields of account-
              ing and economics, and a former consultant to the
              Comptroller General, turns his attention to the knotty
              question of accounting for depreciation in government

   Depreciation accounting has devel-                organizations, there is a strong pre-
oped largely in the area of private busi-            suinption in favor of accounting and
ness. including the public utilities and             reporting on substantially the same
other enterprises subject to govern-                 basis as is standard practice for private
ment regulation. Systematic recognition              companies. I n other words, for such
of accruing depreciation is still widely             government operations it seems quite
neglected in the accounting of govern-               clear that there should be periodic com-
mental entities-local.     State, and Fed-           parisons of revenue received or earned
eral. The writer believes. however, that             with the total cost incurred in acquiring
this state of affairs is not fully justified,        the revenue. and where depreciable
even when it is admitted that govern-                plant is required this means the recog-
ment operations often have characteris-              nition of depreciation-plant capacity
tics which set them apart from the                   consumed-as a n element of such total
typical private business concern.                    cost. This position is sound even where
   Where Fovernment is engaged in an                 the financing of replacements is in full
ordinary, revenue-producinF activity,                o r in part taken care of by funds ac-
such as the production of electric power             quired from other sources than custom-
for sale to individuals, other govern-               ers. It is also true where the price
mental agencies, or private business                 charged some or all of the customers is

Dr. Paton is Professor Emeritus of Accounting and of Economics, University of
Michigan. A teacher for over 45 years, hc has also authored numerous books and
articles on accounting and economic subjects. He has lectured frequently before
professional and educational groups and business organizations, has been a con-
sultant on valuation and income measurement problems, and an expert witness on
many occasions before courts, Federal and State commissions, arbitration hearings,
and congressional committees. Dr. Paton holds a Ph. D. degree from the University
of Michigan, is a certified public accountant, a past president of the American
Accounting Association, and has been active in other professional societies. He was
elected to the Ohio State University Accounting Hall of Fame in 1950.

                                    DEPRECIATION IN GOVERNMENT OPERATIONS

not strictly comparable with the price           tion cost--plant capacity consumed-
being charged in the same market area            does not vary as between private opera-
by private producers (generally an un-           tion and government activity, and that
desirable condition). Those in charge            the technical accounting procedure for
of government business, like the man-            recognizing depreciation that is appro-
agers of their counterparts in private           priate in the private business area is
enterprise, want to know what the costs          generally applicable in the government
of production are from period t c period         sector.
for purposes of determining net earn-
ings, developing internal operating con-         Service Life
trols, comparing results with those                 There is some tendency in govern-
achieved by private companies, and               ment economic activity to ignore or
formulating and reviewing general                minimize the risk factor, particularly
policies.                                        with respect to the probable service lives
    Where government activities provide          of government plants and installations.
services or functions for which no               This tendency is fostered by the monop-
charges are regularly made to those              olistic and relatively sheltered status
benefiting from the operations (except           of many government operations. Those
in the form of taxes, which may be               in charge of such operations not only
levied with little or no relation to bene-       don’t always feel a strong pressure in
fits received), the case for complete            the direction of efficient performance
cost accounting is not as obvious. In            but they also often have a feeling of rel-
these situations, however, it is still rea-      ative freedom from the impact of the
sonable to assume that good administra-          technical and economic developments
tion and efficient use of resources are          that force private managements to
 objectives, and that accordingly it is          change their methods and replace exist-
 desirable to determine periodically the         ing facilities with more modern struc-
 full costs of production, by operating          tures and equipment. There is also the
 departments and for the responsible             fact that in the case of some govern-
 government agency as a whole. As will           ment activities. notably water resource
 be emphasized later, the view that,             projects, an installation can reasonably
 where the activity is not expe,cted to pay       be expected to have a long physical life.

 its way, it doesn’t matter what the costs        Thus a structure such as a dam may
 are is not acceptable.                           well be built to last a century or more
    The subject of depreciation is usually
                                                  as far as the material condition of the
 discussed primarily in terms of the
                                                  property is concerned, and it is a temp-
 business enterprise engaged in produc-
                                                  tation in such cases to shift from a fi-
 ing and selling a product on the market,
 with the overall expectation that rev-           nancial to an engineering point of view
 enues will be sufficient to cover all costs      in dealing with the problem of service
 incurred and provide a level of earnings         life in the determination of periodic
 sufficient to attract capital to the partic-     depreciation.
 ular undertaking. It may be insisted,               The fact is that “property“ in general
 however, that the nature of deprecia-            is an economic. not a molecular, con-

c ~ p t It
        . is true that physiral cleteriora-    true even when we a r e considering such
tion has a bearing on economic service         a property as a well-built dam on a
life in many cases. hut the process of de-     river. No one knows how long such a
preciation is the expiring of the capac-       struclure will render service. a n d it is
ity to render servi,ce. not the using u p      surely dangerous to treat it as having
of the material of which the asset is          a n indefinite life. Population shifts, new
composed. It is not the brick wall as          technical developments. changing re-
such that we are concerned with but thp        gional weather patterns-these           and
function or servire that the wall can          other factors are likely to result i n loss
render in a certain setting. And when          of capacity to render service long be-
conditions make i t impossible for the         fore the structure has suffered serious
wall to continue to render service it is       physical decay. Who would have pre-
100 perrent depreciated (ignoring a            dicted 30 years ago, for example, the
possible net salvage1 regardless of phys-      great improvement in the efficiency
iral condition. In other words. the            of coal-burning electric generating
brick wall is nothing hut hard dirt.           plants-an    improvement so marked as
usually in the way. when it no longer          to make such plants, even in many
has economic usefulness.                       areas where water power is available,
   Tt is also a n incontestable fact that      superior to typical hydroelectric instal-
in American hasiness operation through         lations? And now we a r e seeing the be-
the past 50 years the impart of “wear          ginnings of a still more striking d e v d -
and tear” has been a minor factor in t h r     opment, with a tremendous potential,
derisions made to retire the old and           in the form of nuclear powerplants.
install the new. especially in the area of        No rigid rule can be laid down for
substantially built structures. Every          all cases. hut I can see no justification
time 1visit Kew York or any other large        for estimating the effective service
city 1 see buildings of relatively modern      lives of dams or other qovernment
type. of reinforced concrete ,construc-        structures o r plants in excess of 40-50
tion. being torn down to make way for          years, at the most. Assuming longer
larger a n d still more inodern buildings.     lives is equivalent to ignoring the risks
often adapted to new uses. Jndeecl it is       of change inherent in the situation.
rather amazing, in view of the actual          Past experience in this country sup-
developments of recent decades. to find        ports a conservative position in this
so many people whose thinking regard-          matter. and recent amazing scientific
ing service life is still dominated by the     progress suggests that we may see even
physical rondition conception.                 more rapid changes in the future. Pro-
   The essential point is that govern-         ductive efficiency in either private or
ment activity is not iinniune ( o r cer-       government operation appears to b e
tainly should not he regarded as im-           depending more and more on keeping
inune) from the im1)art of chanping            abreast of technological and other de-
condilions ihnt a r e so fully manifested      velopments. And the moral i n measur-
in the history of clepreriable assets in       ing depreciation is: avoid nonconserva-
the private I~iisinessfield. And this is       live estimates of service life in both

                               D E P R E C I A T I O N IhT G O V E R N M E N T OPERATIONS

government and private sectors. Above               forms of the “interest method.”
all let’s not make the silly mistake of             This approach has never been
assuming that government can be ex-                 popular in practice.
pected to continue to make enormolls             4. A fluctuating charge in terms of
investmenis in depreciable structures               periodic activity ( for example.
and equipment, with no pressure on                  spreading the depreciation OI
those in charge to operate efficiently              a truck in proportion to ton-mile
and keep in step with the technological             performance).
advance. This is acutely dangerous                Those in charge of government activ-
philosophy in the military area; and           ity, like private managements, should
it represents poor administration of           give careful attention to this subject,
our economic resources in any other            and there is no good reason for assum-
field of government operation.                 ing that a method which can be demon-
                                               strated to be sound and realistic in
Methods of Spreading
                                               private business should be taboo in
                                               government operation. It should be
   With respect to the spreading of the        borne in mind, however, that since
total depreciable amount over an esti-         government enterprises are not in gen-
mated service life there is very little        eral subject to income taxation, gov-
that need be said here. This subject           ernment managers are free from the
has been discussed at great length-            anxieties and compulsions of the tax
and somewhat fruitlessly-in     account-       structure which press heavily on pri-
ing and financial circles for many years.      vate business managements.
In general there are only four main               On the whole the simple straight-
types of procedures, as follows:               line procedure, with service life con-
  1. Spreading strictly in terms of            servatively estimated, seems LO be
     elapsed time from date of instal-         generally acceptable in government
     lation-the well-known “straight-          activity .
     line method.”
                                               Cost Accounting i n
  2. Spreading on a decreasing-charge          Government Enterprises
     basis (heavy charges in the ear-
     lier years with a gradual taper-             In the above discussion it has been
     ing off as the property becomes           indicated at several points that there
     older). There are several systemat-       is good reason for periodic determina-
     ic plans that have been pro-              tion of the full cost of carrying on gov-
     posed, and this approach has re-          ernment activities, including those
     ceived increasing attention since         operations which are not dominantly
     it has been explicitly recog-             revenue-producing enterprises. This
     nized-in    some forms-in       the       subject is of such importance, and so
     Internal Revenue Code.                    controversial, that it deserves some
  3. Spreading on an increasing-charge         further emphasis.
     basis-as   provided by various               In the case of projects which are


intended to he self-sustaining, like a                                               charge of such an operation may argue
typical private business enterprise. the                                             that it is rather silly to go to the trouble
case for complete cost determination,                                                of computing periodic depreciation on
including depreciation (plant capacity                                               the assets committed, since there are
consumed), is very strong and need                                                   no revenues against which to charge
not be further stressed. Many govern-                                                costs, and no earning power, and hence
ment commercial enterprises, it is true,                                             no possibility of providing funds for
are not fully comparable with private                                                current operations. or for replacement
concerns, due to pricing products be-                                                and expansion, otherwise than from
low competitive market level, partial                                                governmental grants. However, this
financing through government appro-                                                 point of view, although not surprising
priations, “civil service” employment                                               under the circumstances, is not jus-
conditions, ability to issue bonds with                                              tified and should not be permitted to
interest tax free, and so on. On the                                                 dominate the thinking of either project
other hand there are examples of gov-                                                officials or legislative and other inter-
ernmental “authority” activities, par-                                               ested government bodies.
ticularly at the non-Federal levels, that                                                The fact is that full cost determina-
are self-supporting, with respect to both                                            tion becomes of special importance in
initial and subsequent financing, to                                                 a non-revenue-producing operation.
which the terms, classifications, and                                               Whether it is wise for the service pro-
procedures that are used in private                                                  vided by the operation to be furnished
accounting are quite clearly applicahle.                                            free to the persons, enterprises, or area
In any event it may be permissible at                                               interests in a position to take advan-
this stage to assume that the case for                                               tage of it may well be a moot point.
systematic recognition of depreciation                                               But certainly it can’t reasonably be
and full costing is sound and essential                                             assumed that in providing “free” serv-
in all government activities in which                                                ices of one kind or another we are
a dominant characteristic is the pro-                                               going to throw overboard all consid-
duction and sale of some commodity                                                   erations of maximizing the usefulness
or service.’                                                                         of the scarce funds committed to the
   Let’s turn. then: to the case of                                                 undertaking. The United States is not
activities that either produce no ex-                                               blest with such an abundance of sav-
plicit revenues or in which the revenues                                            ings-as current high levels of interest
are nominal or incidental. A dam                                                    rates make very plain-that the coun-
built with Federal funds (that is, funds                                            try can afford to throw money around,
raised by the Federal Government)                                                   in huge amounts, on projects that are
solely for flood control or recreational                                            never subject to review or financial
purposes is an illustration. Those in                                               evaluation. “Effective utilization” and
                                                                                    ‘&first-class performance” are goals that
   1   It slrollhl liardly bc necessary t o pomt out that
q i a t ~ ~ i i e n tus f   operation of g o , r m m e n t   entcrprisev re.        should never be ignored where a sub-
p r t + x , l to Irgisl~tivpbodie3 or other ~ n t e r m t e d parties
                                                                                    stantial amount of productive resources
s h r d l a \ o i d the use nf . w h capllons nq “nrt i n .
c ~ m r ”t i n l v ~.ill
                     ~ sianifirant r o ~ t < .inrlodmg depreria-                     (including current operating funds)
tinn. arc i n fnrt ilrductrd              iii   nrriving a t the net rrsults
of <,,“T“tll,n.
                                                                                    is required. Some may question this

                                 DEPRECIATION IN GOVERNMENT OPERATIONS

position but it is hard to see how it         is much to be said for periodic compu-
can be ignored as a matter of public          tations of the amounts by which the
policy in a world of scarce resources,        explicit costs of operating the activity
with competitive pressures from the           would be increased if the effect of such
outside bearing down heavily, and in-         concealed advantages were taken into
creasingly, on our economy at almost          account. This point applies, of course,
every point.                                  to both non-revenue- and revenue-pro-
   The simple fact is that where a proj-      ducing operations, and is especially im-
ect is not specifically revenue produc-       portant in the latter type of case.
ing and is entirely free from the pres-
sures and controls afforded by the            lmpact of inflation on
market, there is an especial need for         Computation of Depreciation
accurate, complete cost determination.
                                                 The significance of replacement cost
For such projects the only available
                                              and the problem of measuring the
financial measure, for the purpose of
                                              “actual cost” of plant capacity con-
judging performance or providing a
                                              sumed under inflation conditions also
basis for periodic review and appraisal
                                              deserves attention. In the writer’s opin-
to legislative and executive branches
                                              ion there is a particularly strong case
of government, is the cost of the proj-
                                              in government operation for conversion
ect. Moreover, it is not sufficient to
                                              of recorded plant costs to current dol-
determine such cost haphazardly. oc-
                                              lars in the process of measuring depre-
casionally, or carelessly. What is needed
                                              ciation expense. From a management
is regular, complete cost determination,
                                              standpoint, including the broad ques-
at the least on an annual basis.
                                              tion of effective allocation and utiliza-
    It may also be noted that good cost
                                              tion of available resources, the true
accounting for a nonrevenue project
                                              cost of plant capacity can be ascertained
 requires much the same type of cost
                                              only by expressing such cost in current
classification that is generally useful in
                                              dollars, the prevailing monetary unit,
 revenue-producing operations, public
                                              and the yardstick in which the other
 or private. Only by observatioii of well-
                                              costs of operation-employee      services,
classified costs, as compiled from period
                                              materials, and supplies, etc.-are      ex-
 to period, is it possible to test the per-   pressed. Failure to adopt some form of
 formances of particular persons and          conversion procedure, during a period
 operating functions and departments,.        of severe and persistent increase in the
    There is another phase of cost meas-      price level, means that depreciation
 urement pertinent to government opera-       cost, and hence total operating cost, is
 tion that might be mentioned. Where          understated.
 such an operation is free from taxes,            In governmental enterprise there is
 acquires funds at an interest rate mate-     special reason for stressing the man-
 rially less than the prevailing rate in       agerial point of view, particularly in
 government financing (as in the rather       those activities that are not primarily
 notorious REA case), or enjoys other         revenue producing. Where an enterprise
 indirect advantages and subsidies, there      is selling a product on the market on a

competitive commercial basis. the             current dollar. Here the difference be-
prices determined hy the interaction of       tween the purchasing power of the
market forces furnihh a considerable          monetary unit in effect when a dam-
measnre of guidance to those in charge        for example-is constructed and the
of operation as well as a means of ap-        monetary yardstick in effect many years
praising the degree of success achieved       later is likely to be very substantial. A
from year to year. Tn government enter-       dollar invested in the building of a dam
prise the thermostat of the market is         in 1940. for example. represents more
generally either entirely inapplicable        than twice the economic significance of
or is present in an impaired form, and        a “dollar” so invested in 1970. In con-
hence--as     previously stressed-the         trast, the error made in the conven-
data of cost of production hecome espe-       tional computation of depreciation in
cially important for control and evalua-      the case of short-lived depreciable assets
tion purposes. I t may also be noticed        is much less serious.
again that since government enterprises          In the field of government operation
are in general not suhjert to income          and cost determination. to repeat, there
tau. the 1)eople in charge of hiich op-       is a great opportunity to set the pace
erations ;don’t need to worry ahoul           in sound financial measurements. as
restrictive tax rules in setting u p their    opposed to the prevailing policy of am-
accounting systems and in measuring
                                              hling on behind, and rather reluctantly
costs. In other words, in government
                                              at that, the practices found in private
tax-free operation there is every oppor-
                                              business enterprises. A notable example
tunity to move in the direction of the
                                              of this opportunity exists in the area of
highest possible standards of manage-
rial financial measurement.                   depreciation measurement under in-
   In the case of relatively long-lived       flation conditions. The TJnited States at
government planis. such as are charac-        present is the only important industrial
teristic of water resource projects,          country in which there has to date been
there is a very special reason for recog-     an almost complete failure to adopt ap-
nizing the basic impropriety of comput-       propriate procedures for taking into ac-
ing depreciation cost in terms of origi-      count the change in the value of the
nally recorded dollars without conver-        monetary unit in determining true plant
sion to the common denominator of the         cost and periodic depreciation,

    The Role of        GAO in the Seventies
    and W h a t       GAO Is Doing To Prepare                            for It
    By Harold H. Rubin
                 This article is based on an address made by the author
                 on May 8, 1970, before the Quad-Cities Chapter of the
                 Federal Government Accountants Association, Rock
                 Island, 1,lI.

       It is impossible to begin to assess the        programs which did not exist in 1960:
    role of the General Accounting Office in          or for programs which have undergone
    the seventies without taking a moment             rapid expansion during the last 10
    to reflect on the period which preceded           years. In 1960, we had j u s t orbited our
    them-the     decade of the sixties. Un-           first artificial satellites, yet only 10
    precedented growth, both in population            years later four men have walked on the
    and in the economy; rapid technologi-             moon.
    cal advances; and new social awareness               The price of social conscience has
    and reforms keynote the major trends              been high. Ten years ago the Model
    of the past decade and provide a key to           Cities program and the Ofice of Eco-
    what lies before us during the seventies.         nomic Opportunity did not even exist
    Throughout the past decade the role               and the term “antipoverty” was little
    that the Government plays in the life             known. In 1961, the Department of
    of an individual and in the foreign               Ilealtli, Education, and Welfare admin-
    arena has increased.                              istered about 100 programs with an-
                                                      nual outlays of $16.2 billion. This De-
    The 1960 Decade                                   partment now administers some 275
       In order to provide services for a             programs involving about $46.8 billion
    population which has increased from               annually-approxirnately       a triple in-
    180 million in 1960 to Over 205 million           crease! Similar increases have occurred
    in 1970, the Government’s fiscal budget           in the Department of Housing and LTr-
    has doubled from its $101 billion level           ban Developlnent; and Federal aid to
    in 1960 to $200 billion for the present           State and lo’calgovernments. which rose
    fiscal year. Much of this increase is for         from $7 billion in 19G0 to $25 hillion

    Mr. Rubin is the associate director of the Defense Division responsible for GAO
    work on research and development programs and activities. Prior to his assignment
    to the Washington office, he served as regional manager in St. Paul, Minn., and in
    Dayton, Ohio. He is a CPA (Illinois) and has been with the General Accounting
    Office since 1936.

in 1970$ is eupecletl to triple during         tions U f C,,40. particulaily as they af-
this decade.                                   fect its future activities. Two of the
                                               principal responsibilities of the Office
Today’s Problems and                           are to make independent audits and re-
the Budget                                     views of the executive branch and to

    Probably the most vital probleni to-       provide assistance to the Congress. Our
 day involves pollution: that is, trying       activities in both of these areas have
 to live in the ravaged environment            been changing rapidly and are likely
 which we, through our affluence and           to continue to change.
 wasteful extravagance, have created.              Our approach in conducting audits
 People are becorning increasingly             and reviews has changed materially
 aware of the fact that plentiful supplies     since I began with the Office many,
 of clean air and water, which we pre-         many years ago. And, although these
 viously took for granted, are commodi-        changes have been accompanied by out-
 ties that are becoming increasingly           cries that we are intruding into areas
short in supply, and they are demanding        outside our competence and jurisdic-
that action be taken to protect those          tion, there has been eventual recogni-
 areas of the United States which are          tion that the new audit approach is
still clean and to clean up those areas        desirable.
which have been ruined through the                Thus, when we embarked on a re-
neglect of both the Government and the         view some 15 years ago into how the
private sector. Government expendi-            Air Force computed its needs for air-
tures for air and water pollution con-         craft engines, we ran into general re-
trol were over $1.2 billion during the         sistance on the basis that this was an
sixties; the future costs of combating         area requiring expertise beyond the
water pollution alone are unbelievably         capabilities of an auditor. However, as
huge.                                          our audit revealed the need for im-
    There has been a growing awareness        provement in the management of the
of these problems and a recognition of         requirement computation process and
the need to spend a substantial part of       led to savings of vast sums of money,
our resources to overcome them. How-          it became evident that this was an area
ever, other governmental costs have           which probably should have been ex-
also continued to rise. Thus the need to      plored earlier. At any rate, the audit
devote a greater portion of the national      of material requirement computations
resources to essential nondefense pro-         has become a recognized area for in-
grams has to a great degree stimulated        ternal as well as external audit.
the extreme concern over the size of the          I cite this case to illustrate the evo-
Defense budget and its mission and            lutionary nature of the GAO audit. Our
goals.                                        audit used to be more of a fiscal nature,
                                              primarily designed to account for the
Evolution of the GAO Audit
                                              money spent rather than to be con-
  These various changes have had a            cerned with the merits of the expendi-
very significant impact on the opera-         ture. Now the audit is directed more to-

                                                       ROLE O F GAO IN T H E SEVENTIES

ward evaluation of the effectiveness of                agencies, such as the SAFEGUARD
the management of the program and ap-                  antiballistic missile program.
praisal as to whether it is achieving                      In addition, there are many related
the planned program results. It is quite               activities that must operate cohesively
clear, from the events of the last sev-                in order for the research and develop-
eral years, that this shift in audit em-               ment effort to be useful and for the re-
phasis will continue-and                   probably    sults to be properly used. Of course,
will a c c e l e r a t e d u r i n g this decade.      appropriate organizational arrange-
                                                       ments and well-stated policies and pro-
Reorganization of Defense                              cedures are needed, as is true for any
Division                                                operation. But, in addition, because
                                                        R&D is expensive not only moneywise
   Let me illustrate by describing the
                                                        but also in the use of scarce talents, it is
changes that occurred in our Defense
                                                       essential that there be some means of
Division in its reorganization in June
                                                        coordination of the many studies going
1966-about 4 years ago. Prior to this
                                                        on simultaneously so as to avoid un-
change, the Division was organized on
                                                        necessary duplication of effort.
a departmental basis-Army,            Navy,
                                                            Consequently, in order to develop
Air Force, and DOD. In order to permit
                                                       some expertise in this area and at the
a more penetrating analysis into cer-
                                                        same time to produce some worthwhile
tain areas on a Defense-wide basis, par-
                                                        results, we have delved into various as-
ticularly those areas which had received
                                                        pects of the R&D spectrum. Some of
relatively little audit attention, the Divi-
                                                        our studies have been of a somewhat
sion was reorganized along functional
                                                        traditional nature, such as reviewing
                                                        the utilization of laboratory equipment.
   Of the seven functional groups that
                                                        Other studies have required a more rad-
were established, I had the good for-
                                                        ical approach. It is the latter type of
tune to be given the responsibility for
                                                        audit activity which I believe is likely
directing a very challenging one-and
                                                        to expand during this decade.
also a very frustrating one-namely, re-
                                                            As I mentioned earlier, two of our
search and development. Four years
                                                        principal responsibilities are to make
later we are still conducting research
and development into how we can be                      independent audits and reviews of the
 most useful in this nebulous area.                     executive branch and to provide assist-
                                                        ance to the Congress. These responsi-
 Approach to the Audit                                  bilities are closely related inasmuch as
 of R&D                                                  an essential objective in our independ-
                                                         ent audits and reviews is to provide as-
    The term, “research and develop-
 ment” covers a multitude of diverse                     sistance to the Congress. Thus, we bring
 projects, ranging from a relatively in-                 to the attention of the Congress the re-
 expensive scholarly study at the univer-                sults of our self-initiated work which
 sity level to a multibillion dollar con-                we believe merit consideration, and we
 glomerate involving a myriad structure                  also provide service to the Congress in
 of industrial giants and Government                     response to specific requests.

   T n o actual case> uill help to clarify     nest step was to find out why the prob-
 how we conduc,t these roles.                  lem ocrurred and what could be done
                                              to preclude recurrence of such prob-
 The Sheridan Reconnnissnnre                  lems, This phase of the audit required
 Vehicle                                      extensive work in many locations.
                                                  I n the meantime. the staff of the
    The first case concerns the Sheridan
                                               House Committee on Armed Services
  Reconnaissance Vehicle which was de-
                                              had hevome aware of the imbalance in
 veloped under the direction of a project
                                              the Sheridan program and had asked
 manager stationed at the Army Weap-
                                              us for information on this matter. Con-
 ons Command in Hock Island. This
                                              sequently, shortly after our draft re-
 audit involved some very fine and
                                              port was sent to the Secretary of De-
 imaginative work on the part of two
                                              fense for comment in February 1969,
 GAO auditors. Lee S'trveris and Kay
                                              a special subcommittee began hearings
 Hautnla. stationed at Rock Island.
                                              which continued into April 1969. W e
    Shortly after the survey bzgan, our
                                              testified at these hearings and, pursu-
 staff noted that the Sheridan vehicles
                                              ant to requests, provided assistance to
 were ]wing placed in storage after pro-
                                              the subcommittee staff in preparation
 duction because of the lack of accepta-
                                              for testimony by Army representatives.
 ble ammunition. We also noted that
the M-60 tanks were being modified
                                              Main Battle Tank (MBT-70)
 to use the same turret and ammunition
as that Iilanned for the Sheridan. It           Thus. in this case, an audit initiated
seemed to us somewhat illogical and           h y GAO led to a major congressional

 unnecessarily expensive to continue to       review. This then i d to a congressional
produce the Sheridans and to modify           request for a speci 1 GAO review of the
the M-60 tanks when there appeared to         Main Battle Tan , 1970 program, a
he insurmountable problems in devel-          cooperative tank evelopment plan con-
oping safe and suitable ainmunition.          ducted jointly by the United States and
We niet with the Vice Chief of Staff          the Federal Republic of Germany.
of the Army and with oflicials of the            The request for a special GAO re-
OfLce o f the Secretary of Defense t o dis-   view of the MBT-70 program aroze
cuss this situation and werc informed         duriny the heated debate on the Senate
i t would be given thorough considera-        floor on the fiscal year 1970 authoriza-
tion. W e then wrote to the Secretary of      tion hill for defense. The MRT-70 pro-
Defense and were informed in reply            gram costs had been rising sharply and
that programmed quantities had been           the planned production date had been
reduced o r canceled.                         set back several times. Consequently,
    U p to this point we merely had deter-    n S m a t o r proposed that the program
mined that a problem e x i s t 4 and had      be suspended for 5 months while GAO
alertrd top managPment offkials to the        looked into the reasons for the cost
need to consider this problem and to          increases and delays and determined
take apl)roliriate corrective steps. Our      whether there was a need in modern
                     ROLE O F GAO IN THE SEVENTIES

412-933--T1-4   49

warfare for such programs as this tank       Changing Trend in GAO
program.                                     Reporting
   This proposal was followed by a v i r
                                                We were asked to report as to
orous discussion as to whether it was
                                             whether there were any other feasible
appropriate or feasible for GAO to
                                             alternatives to development of the
make such a study. One Senator com-
                                             MBT-’TO program and, if so. to eval-
mented that GAO had made a very
                                             uate the cost feasibility of each alter-
useful review of the Sheridan/M-60
                                             native. This obviously is quite different
program and that requesting GAO to
                                             in nature from the traditional type of
make a special inquiry into the MRT-
                                             audit assignment. Many studies assess-
70 program would be a test of its            ing major programs had been made
ability to serve the Congress. A com-        within the Department of Defense and
promise was reached whereby the bill         the military services, and we were able
suspending the program was withdrawn         to obtain access to these studies in this
by its sponsor on condition that GAO         particular case. From our analyses of
be directed to conduct a study into          these studies, we were able to report
the MRT-70 program and suhmit a              alternative ways of achieving the mil-
report within 3 weeks. The report was        itary goals of the MBT-70. In addition,
to show the reasons for the cost in-         we listed six feasible alternative pro-
creases and whether there were any           cedures relative to the funding of this
other feasible alternatives to develop-      program. This reporting approach has
ment of this program. GAO was also           received favorable comment in con-
requested to evaluate the cost feasibil-     gressional hearings on the future role
ity of each alternative suggested.           of GAO.
                                                This case illustrates the type of in-
   Needless to say, it was extremely
                                             formation that the Congress is begin-
difficult to do this job within the time
                                             ning to expect and to demand from
limitation. Apart from the tremendous
                                             us. More and more we are being asked
technical problems involved, it was
                                             such questions as: Is this program
necessary to cancel vacations and up-        really effective? 1s it meeting the goals
set all other Office priorities to meet      that the Congress intended? I believe
the deadline. However. we had ex-            that an increasing proportion of our
tremely good cooperation from the De.        future work, in this decade and beyond.
partment of Defense and the Army,            will be directed toward such evaluations
including personal discussions with          of program results.
the Deputy Secretary of D,efense. Our           Much work has already been done
report, consisting of 66 classified pages    in this area. I have mentioned two
and a &page unclassified digest: was         cases from my own group that I am
delivered on schedu1e.l                      quite familiar with. Other recent re-
                                             ports prepared elsewhere in GAO also
                                             show this trend toward program eval-
                                             uation. These reports involve such
                                             varied subjects as a method of maximiz-

                                                 ROLE O F GAO I N THE SEVENTIES

ing procurement competition through             major field of concentration has heen
greater use of parallel development pro-        in areas other than accounting or
grams, an evaluation of the antipoverty         auditing. At June 30, 1970, our pro-
programs, the usefulness to decision-           fessional staff included 398 members
makers of information on the status             trained in other fields-an increase of
of major weapons systems, the effec-            328 since 1965. Two hundred and
tiveness of construction-grant programs         eighty-five were recruited at the uni-
to assist State and local governments           versity level, and they therefore repre-
to meet water pollution control needs,          sent mainly potential for the future.
countrywide reviews of U S . assistance            In addition, in order to more rapidly
programs, and the readiness of de-               develop expertise in these other dis-
ployed forces.                                  ciplines in our upper level positions,
                                                we have added during the past 2 years
GAO Preparation for the                         56 staff members in such disciplines
Seventies                                       as economics, engineering, computer
                                                sciences, and systems analysis.
   In discussing what I believe the role
                                                   A considerable amount of effort and
 of GAO will be in the seventies, it is
                                                expense is also being devoted to in-
 obvious that we cannot just decide to
                                                creasing the capability of our staff
 change our approach-we        must pre-
                                                through internal and external career
pare for such a change. What have we
                                                development programs. Internal train-
 done recently and what are we doing
                                                ing seminars and workshops are con-
now to be able to meet the demands
                                                ducted in such fields as systems
of the Congress for reports which will
                                                analysis, automatic data processing
 be more helpful in determining the             techniques, and report development.
future course of our Government                 External training is provided in such
activities?                                     subjects as management information
   To begin with, we have broadened             systems; logistics management; re-
our recruiting objectives. When Elmer           search and development management;
Staats was appointed Comptroller Gen-           operations research ; procurement tech-
eral 4 years ago, our professional staff        niques; economic analysis; planning,
consisted almost entirely of trained            programming, and budgeting; statisti-
accountants. I n order to provide an            cal sciences; and manpower utilization.
interdisciplinary approach in our man-             Although the employment of per-
agement audits, we began to expand              sonnel trained in various fields and the
our recruiting efforts to include other         exposing of existing personnel to
professional fields, such as systems an-        new approaches will undoubtedly
alysis, computer technology, actuarial          streligthen our ability to make useful
science, economics, business adininis-          evaluatiuris, we recognize that there
tration, mathematics, and engineering.          are areas where special expertise will
   During the past 5 years, there has           be needed. Consequently, expert con-
been a substantial increase in the seg-         sultants are used to provide necessary
ment of our professional staff whose            expertise where required. Their advice


has proved vrry helpful in rFviews of        vide a real challenge to GAO, in that
the effectiveness of the antilmverty pro-    useful. meaningful evaluations will be
grams and the water pcllution control        es1)ectecl by the Congress to assist it
programs, and consultants are presently      in a l l o ~ ~ ~ the
                                                              t i i ilimited
                                                                      ~      resources of
being used in a study as to possible         this Kation to meet its growing needs.
proliferation of missile systems. Tin-       We believe that our recent efforts have
doubtedly we will make increasing use        been moving in this direction, and we
of consultants as we mnve into new           hope to improve throagh continued
areas.                                       education of our staff and cross-fertil-
  We helieve that the seventies will pro-    ization from other professions.

Educational Program in Systems Analysis
By Morton A. Myers

            This article discusses the training received by GAO staff
            members who attend the Educational Program in Systems

    The Federal Government has used         trative and analytical ahilities of Fed-
long-term training (courses of more         eral personnel. One of the long-term
than 120 days duration) for many            training programs designed to close
years. Prior to 1958, s,uch use usually     this gap is the Educational Program in
took the form of university courses of      Systems Analysis (EPSA).
study for very specific scientific occn-       According to the Civil Service
pations. With the passage of the Gov-       Commission, which in cooperation with
ernment Employees Training Act in           the Office of Management and Budget
1958, the use of this particular method     of the Executive Office of the President
to improve competence in the Federal        administers EPSA, the primary pur-
system increased, until. in fiscal year     pose of the program is to train ana-
 1969, about 2,050 people participated      lysts.' EPSA offers Federal agencies an
in long-term training programs.             opportunity to develop systems analy-
    Not until the 1960'2, however, did      sis capability for public program
the Federal Government begin to utilize     analysis. In general, the program in-
 universities to help develop the ad-       cludes intensive work in a variety of
ministrative and analytical abilities of    subjects with application to emerging
 jts future managers and executives. Al-    issues of public policy and management.
 though the number of students cur-            Typical subject matter includes
rently enrolled in such programs is         courses and seminars in microeco-
 relatively small-about   10 percent of      nomics, quantitative methods, public
all long-term training participants-in      expenditure theory, and operations re-
 the past few years there has been a
                                                  1 Description of the Educntionnl Program i n Systems
 moderate increase in the investment of         Analysis wns drawn from publicntions of the U.S. Civil
 resources to help develop the adminis-         Service Commission.

Mr. Myers is a member of the Systems Analysis Group of the Office of Policy and
Special Studies and a previous contributor to the GAQ Review. During the 1969-70
academic year he participated in the Educational Program in Systems Analysis
at the University of California. He is a member of the Association for Public Program
Analysis and the Federal Government Accountants Association.


search. In addition, workshops and            Congress to be supplied with more in-
seminars are offered which have a             formation which would assist Members
specific substantive focus. These include     in determining the relative benefits and
such fields as transportation, education,     costs of Federal programs. More and
and natural resources. The universities       more Members of Congress are calling
participating in the program are:             for GAO to provide this kind of
  -University of California at Irvine,
                                                 In line also with the desirability of
  --Harvard Llniversity,
                                              the GAO playing a larger part in
  --University of Maryland,
                                              monitoring, analyzing, and reporting on
  -Massachusetts   Institute of Tech-
                                              progress and problems arising in the
     nology, and
                                              carrying out of existing programs or
  -Stanford University.
                                              analyzing and reporting on proposals
Persons attend these participating in-        under consideration by the Congress,
stitutions in groups of seven to 15 f o r     the Comptroller General has used the
one academic year.                            training afforded under EPSA as one
   Persons nominated must have a              means of increasing GAO staff capabil-
bachelor's degree and meet the admis-         ity of performing such work. During
sion requirements of the universities         the 1969-70 academic year three GAO
they attend. Universities believe that        staff members participated as EPSA
ability to utilize what they have to offer    Fellours at the University of California
is indicated by previously demonstrated       at Irvine IUCI) . Eight GAO staff mem-
capacity for academic achievement.            bers had participated in EPSA previ-
Generally speaking, universities expect       ously (at UCI and elsewhere) and two
candidates to have a previous academic        GAO men are enrolled in the program
record of at least B and to have taken        for the present academic year.
the Graduate Record Examination, the
Miller Analogies Test, or the Admission
                                                  University of California
                                                  ~t Zrvine
Test for Graduate Study in Business.
Normally the program is open to career           While particular variation or em-
officials between the ages of 25 and 30       phasis may exist in the educational
with at least 3 years of civilian experi-     formats of the universities participating
ence with the Federal Government. In          in EPSA, the overall EPSA objective-
general, those who participate are in         to develop administrative and analyti-
the grade-level range of GS-9 to GS-13.       cal capability-is  reasonably pursued
                                              in a common manner by each of the
GAO Interest i n E P S A
                                              universities. For instance, the UCI-
  I n addition to GAO's interest in the       RAND Educational Program in Sys-
improvement and overall quality of the        tems Analysis is conducted by UCI's
analytical capability of Federal depart-      Graduate School of Administration to-
ments and agencies, it has been apparent      gether with the RAND Corporation of
that there is a growing need for the          Santa Monica, and is administered by

                                          EDUCATIONAL PROGRAM                        IN SYSTEMS ANALYSIS

UCI’s Public Policy Research Organi-                            The unique feature of the UCI program
zation. According to UCI, the purpose                           is the inclusion of actual research ex-
of the program, simply stated, is to de-                        perience at the RAND Corporation.
velop the capabilities of each individ-
ual to enable him to make a stronger                            Student Participants
impact on public policy through the use                           The complement of students who par-
of analysis. There is particular stress                        ticipated in the UCI-RAND program
on training in quantitative methods                            during the 1969-70 academic year
based on the assumption that many Gov-                         totaled 15-12 Federal employees and
ernment officials are not familiar with                        three employees from the State govern-
modern quantitative methods and that                           ment of California. The number of par-
some rather simple tools, from opera-                          ticipants listed in accordance with their
tions research and economics partic-                           organizational affiliation were as
 ularly, would be of great value to them.                      follows:

                                               Organization                                                   Number

Civil Service Commission. . . . . . . . . . . . . . . . . . . .                .... . . . . . . . . . . . . .           1
Department of Defense. . . . . . . . . . . . . . . . . . . . . . . . . . . . .    .................                     3
General Accounting Office.. . . . . . . . . . . . . . . . . .           . .          ............                       3
Department of Health, Education, and Welfare.. , , .                                       .........                    3
Department of Housing and Urban Development. . . . . . .                             ..............                     1
Department of Labor.. ...............................                             .................                    1
State of California Department of Mental Health.. . . . . . . . . . . . . . . . .                                      2
State of California Highway Patrol.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  1

Through personal association and inter-                        cluded in the curriculum of the mathe-
action, the diversity in the backgrounds                       matics institute were aspects of ad-
of the students added to the educational                       vanced algebra, analytical geometry,
experience of the academic year.                               and statistics. This portion of the pro-
                                                               gram boiled down to long hours and
Study Program                                                  hard work with many of the students
                                                               suffering from fatigue as well as cul-
   The program began in August with                            tural shock. Tutelage during this period
a 6-week intensive institute in mathe-                         was provided by six university in-
matics, which was designed to provide                          structors, the use of three assigned
the students with a background in prob-                        mathematics texts, and 12-hour periods
ability theory and calculus to prepare                         of formal instruction given 5 days per
them for the analytical topics covered                         week.
during the academic year. Also in-                                Below are listed the UCI-RAND

mathematics institute “range” of grades           nier of 1969. Test 1 refers to the score
and the “mean” scores i n algehra. c d -          at the 1)eginning of the 6-week course.
culus. and 1)rol)ability for all students         and Test 2 is at the conclusion of the
attending the institute during the sum-           course.

Range.. . .            ..           13-93         .E0-98   0-25    18-53   15-52     35-90
Mean.   . . . ..   . ....             55            71       8       37      33        63

Despite the short duration of the in-             model building; the simplex algorithm,
stitute the change brtween the group              duality with economical interpretation:
scores in the two tests is consistently           and transportation and optimal assign-
positive and of high magnitude.                   ment problems. Other topics in opera-
   During the academic year the core              tions research covered during the year
courses of the UCI-RAND program                   included sequential decisions, stochas-
consisted of aronomics. statistics. and           tic processes, dynamic programming,
operations research. There uere two               inventory and queuing problems, and
courses in economics-one         involving        maximum flow in networks.
microeconomic theory and the other                   The courses in statistics-as those in
public finance.                                   operations research-continued      during
   The course in microeconomic theory             the entire year. Among the areas of em-
had two components : ( 11 ahstract eco-           phasis in statistics were preferences and
nomic analysis of our economy’s inirro-           utility. Bayesian decision theory, point
structure (producing firms and con-               and interval estimation, analysis of
suming publics, and the market mech-              variance, regression analysis, nonpara-
anisms that interrelate them) and 12 1            metric methods. sampling techniques,
the application of microeconomic anal-            and the gathering and use of data.
ysis to issues of governmental policy                A one-quarter course in decision
and decisionmaking. The course in pub-            analysis was also given. Although much
lic finance examined major issues in              time in this course was spent on the
the theory of public revenue. Topics              techniques of profit-motivated invest-
covered included analysis of alterna-             ment decisions, classes were also de-
tives, cost-henefit analysis, program             voted to the study of management in-
budgeting, taxation policies. and cri-            formation systems and planning, pro-
teria for public expenditure.                     gramming, and budgeting systems.
   I n the area of operations research: an        However, as a complete change of pace,
entire scholastic quarter was devoted             LTCI also provided the EPSA students
to linear programming. Specific topics            with a guest lecture series during the
included problem formulation and                  winter and spring quarters. The follow-

                                    EDUCATIONAL P R O G R A M I N SYSTEMS ANALYSIS

ing is a list of the topics presented dur-                 Only three of the students chose re-
ing the lecture series:                                  search projects at ihe workshop. Re-
  -Population and Population Growth                      search at the RAND Corporation or
     in the U.S.                                         participation in the workshop at UCI
  -The Function of the Imiversity.                       provided students with the o p p o r t ~ ~ n i t y
  -Competitive      and Cooperative                      for the practical application of tech-
     Societies.                                          niques of systems analysis. The effort
   -Black    Stuchs-What    and Why                      of student research was expected to
     It Is.                                              result in the publication of individual
  -High Leverage Education in Rural                      research papers or contributions to
     Liberia.                                            group research papers. Examples of
  -Operations Research.                                  student research papers with which
  -Some Research in the Area of Job                      GAO participants were involved during
                                                         the 1969-70 EPSA program follow:
  -Virtues and Vices of Bureaucracy.
  --What the Strike Is All About.2                           -“The     Effects of Transportation
  -Some Theoretical Problems in the                             System Changes on Housing”
     Analysis of Organizations.                                 (group effort).
                                                             --“Federal Agencies Involved with
In keeping with the intent of the lecture
                                                                Accident Statistics on Household
series, the wide diversity of subject
                                                                Hazai-ds” (individual effort 1 .
matter to which the students were ex-
posed is evident upon scanning the list                     Additional information on the above
of topics.                                               studies may be obtained from the GAO
                                                         Systems Analysis Group, Ofice of
The RAND Corporation                                     Policy and Special Studies.
   During the first quarter of the pro-                  Participants’ Evaluation of
gram, the students were introduced to                    EPSA
the RAND Corporation and became
acquainted with some of the research                        At the conclusion of the academic
projects that were being conducted                       year, the Civil Service Commission sent
there. The emphasis of this portion of                   questionnaires to the student par-
the program was on problem formula-                      ticipants. The purpose of the ques-
tion and application of analytical tech-                 tionnaire was to help provide a meas-
niques. Students werc given the choice                   ure of the b a l u e of each university’s
to participate in research at the RAND                   program. as well as of EPSA in general.
Corporation or to pursue research at                     One portion of ihe questionnaire re-
the, UCI Graduate School of Adminis-                     quested participants to list the skills
tration Workshop in Administrative                       which were taught at their university,
Problem-Solving.                                         indicate numerically the quality of the
                                                         training received, and estimate (if 110s-
   This discimion dealt a i t h thc UCI stiidcnt body    siblei the frequency of use on their joh
strike i n prutect toUnited Statcs involrement i n
Caiiihodia during 1970.                                  of that skill. Information obtained h y


the Civil Service Commission relating                                        and the on-the-job frequency of the
to the quality of the teaching of skills                                     use of skills is presented below.

                                              Qiinhty of teaching skills                                On-the-job frequency of use
           Shlll                 Timrs                                                         Timrs
                                  men-   Bad                                 Excellent          men-    Never             Constantly
                                tionrd      0       1       2        3         4,    5         tioned     0     1    2    3 4      5

Operations research. .            16     .... 2...                   7            5       2        14      2    2   4      4 1 1
Statistics and
  probability-.. . . . .          14          .. 3 1                 5            s....            12      2    1 3        3 2 1
Economic analysis. . .            13     . . .              1        3            5       4        I2      2    4 2        1 3...
Computer pro-
  gramming.. . . . .               8           1......     1                  6       .    .        7   2.... 1         l . . . 3
Cost-benefit analysis.             3         ... 1 . .     1                      1       1         4    1 . . . . 1 1 1...
Systematic analysis. .             4         ... 1 . . . . .                      1       2         4    1 1. . . . . . . . . 2
Decision theory. . . .             4     .         .....             .            I       3         4   2. . . . . . . . . 1 1
Probability. . . . . . .           3     . . . . .                   3        ......                3    1. . . . . . . 2 . . . . .
Policy analysis. . . . .           3     . . . . . . .               2            .        1        3 .... 1 . . . . . . . . 2
Algebra and calriilus .            2         . . . . .               1            1        .        2   2. . . . . . . . . . . . .
Model building. . . . .            9
                                   “             .   .                   .        1        1        1 ................. 1
Other. . . . . . . . . . . .       7     .              .       1    1            1        4        7 .... 3 . . 2 . . . 2

        Totals. . . . . . . .     80           1    7 3 24 27                             18       73    15 12 11 14 8 13

   The data shown in this schedule rep-                                  dents as “near-excellent’’ and “excel-
resent responses from about 50 percent                                   lent” (columns 4 and 5 on the quality
of the students participating in EPSA.3                                  scale). This contrasts sharply to the 10
Included in the data are 11 responses                                    percent rating of ‘‘bad” and “near-
from UCI-RAND participants, five                                         bad” training received (columns 0 and
from participants at the Massachusetts                                   1 on the quality scale). The particular
Institute of Technology, and seven from                                  skill identified most often in the area
the University of Maryland. One ques-                                    of excellent training received (col-
tionnaire each received from Stanford                                    umn 5 \ was economic analysis, whereas
University and Harvard University did                                    the only skill associated with bad train-
not include information on the skills                                    ing (column 0) was computer program-
taught.                                                                  ming. Also of interest is the fact that
   A rapid analysis of the responses per-                                the skills mentioned most frequently by
taining to the quality of the training                                   the students-operations research, sta-
shows that almost 54 percent of the                                      tistics and probability, and economic
training received was rated by the stu-                                  analysis-and the high quality ratings
                                                                         associated with these skills would seem
                                                                         to be in line with achieving the overall
                                                                         objective of EPSA to train analysts.
                                                                            The data pertaining to the frequency
                                                                         of use of the skills-as    a group and


for individual skills-contain a much             -Participation in GAO work for the
lower degree of variability than the               Senate Armed Services Committee
data on the quality of training. One               in reviewing cost-effectiveness as-
possible reason for this could involve             pects of air-to-ground missiles.
the amount of definitive information             -Participation   in GAO's examina-
that the respondents to the question-              tion into the effectiveness of the
naire had in regard to their jobs at the           construction grant program for
time the questionnaire was answered.               abating, controlling, and prevent-
                                                   ing water pollution.
Closing Remarks                                  -Participation in work at the re-
                                                   quest of the House Committee on
  At the conclusion of EPSA training
                                                   Ways and Means to monitor a spe-
GAO participants are assigned to the
                                                   cial review of the program under
Systems Analysis Group, Office of Pol-
                                                   which aid is provided to families
icy and Special Studies, at GAO head-
                                                   with dependent children in New
quarters in Washington, D.C. Work
                                                   York City.
of the Systems Analysis Group affords
individuals ample opportunity to apply         Other duties of the Systems Analysis
systems analysis techniques. The Sys-       Group involve direct consultation and
tems Analysis Group is responsible for:     technical assistance to operating divi-
                                            sion audit sites. This work includes par-
  -Making      or reviewing special
                                            ticipation in planning approaches and
    studies of Federal programs, pol-
                                            strategies to GAO reviews and identi-
    icies, and activities which involve
                                            fying potential areas for the appliea-
    the application of systems analysis
                                            tion of systems analysis techniques. The
    concepts and techniques.
                                            Systems Analysis Group also assists the
  -Providing    consulting advice and
                                            Ofice of Personnel Management in de-
    assistance in this area to congres-
                                            veloping and conducting in-house
     sional committees, Members of
                                            training in systems analysis for GAO
     Congress, and Federal agency offi-
                                            professional personnel. About 160 GAO
    cials, and other GAO staffs as re-
                                            staff members have received this train-
                                            ing since the spring of 1969 when this
  Examples of assistance to the Con-        program was undertaken by the GAO.
gress during fiscal year 1969 included:     This training effort is a continuing one.
  --Participation in work on a request         In summary, participation in EPSA
     from Members of Congress which         leads to increased capability and under-
     required calculations related to       standing of systems analysis concepts
     comparisons of the net Govern-         and techniques in GAO, and to this
     ment costs under two Department        end GAO has gained from its partici-
     of Housing and Urban Develop-          pation in EPSA.
     ment programs for college hous-
     ing-one,    a direct loan program,
     and the other, an interest subsidy           The Systems Analysis Group of the Office
     program.                                   of Policy and Special Studies has 12 mem-

Problems in Estimating Costs for
Acquiring N e w Weapons
By Carl F. Bogar
                Great congressional concern has developed in the past
                few years about the problems of accurately estimating
                the cost of acquiring major new weapon systems. This
                article discusses some of these problems.

   Public scrutiny is being focused on                  known costs, overly optimistic esti-
military spending more intensely now                    mates of costs, and lack of program
than at any time in our country’s his-                  definition. This cost growth in weapon
tory. As a result, the Department of                    systems, of course, is attributable only
Defense is facing strong pressure to                    in part to poor cost estimates. Examples
reduce personnel strengths and spend-                   of other factors contributing to the
ing. A significant portion of the De-                   growth are changes in quantity and
fense budget is spent on acquiring new                  changes in specifications.
weapon systems, and since July 1969
GAO has been examining this acquisi-                        Recognition of the Problem
tion process.                                                  Congress is aware of the importance
   During our reviews, we have found                        of valid cost estimates and has been
a need for the Department of Defense
                                                            paying incr.eased attention to them dur-
to improve its cost estimates for acquir-                   ing authorization and appropriation
ing major weapon systems. We found,                         hearings. In fiscal year 1969 the cost
for instance, that the current estimates                    of purchasing specified weapon sys-
for the acquisition of 38 weapon sys-                       tems grew so substantially from the
tems were $21 billion (about 50 per-                        original estimated cost that the House
cent) higher than the original planning                     Appropriations Committee character-
e5timates.l The original estimates often                    ized it as the “Year of the Cost
lacked validity due to omission of                          Overrun.”
                                                               During fiscal year 1970 budget hear-
  1 See Comptroller General’s Report to the Congress
                                                            ings, the Secretary of Defense testified
“Status of the Acquisition of Selected Major Weapon
Systems,” B-163058, Feb. 6 . 1970.                          before the House Appropriations Corn-

Mr. Bogar is a supervisory auditor in the Major .4rquisitions Group of the Defense
Division. He is a graduate of Susquehanna University (B.S. in accounting) and has
been with GAO for 7 years. He has also worked several years with the Internal Audit
Division of the Small Business Administration.


mittee that cost increases for certain                                      modified, or stopped. Cost estimating
specified w-eapon systems totaled $16                                       must support this decisionmaking proc-
hillion o17er a period of several years.                                    ess by providing estimates that are
The major reason given for the cost                                         credible and valid.
increases was identified as poor esti-                                         Key decision points in the acquisi-
mates, accounting for 49.2 percent of                                       tion cycle occur during these phases.
the identified cost growth.’ In other                                          1. Conceptual Phase-This      is the
words, poor estimates resulted in 49.2                                      first phase in the weapon system life
percent of the net increase from the                                        cycle. During this phase, the technical,
original planning estimates to the more                                     military, and economic bases for an
accurate current estimates to complete                                      acquisition program are established
the total acquisition of weapon systems.                                    through comprehensive system studies
   Industry is also well aware of this                                      and experimental hardware develop-
problem. The Blue Ribbon Defense                                            ment and evaluation. The conceptual
Panel and the National Security In-                                         phase is highly iterative. Its stages
dustrial Association * issued reports in                                    overlap rather than occur sequentially;
July 1970 citing unrealistic cost esti-                                     however, flowing from interacting in-
mates as a major problem in acquiring                                       puts of operational need and technol-
weapon systems.                                                             ogy, generally the following stages
The Role of cost Estimating
                                                                                 Identification and definition of
in Acquiring Major Weapons
                                                                                 conceptual systems.
   Estimates of costs for acquiring                                              Analysis (threat. mission, feasibil-
major weapon systems serve several                                               ity. risk, cost, trade-offs, etc.) .
different purposes. Some of these pur-                                           Experimentation and test (of oper-
poses are to continuously reflect the                                            ational requirements, key com-
probable cost of the system as it moves                                          ponents, critical subsystems, and
through the acquisition cycle. to sup-                                           marginal technology) .
port congressional authorization and
                                                                               The outputs of the conceptual phase
appropriation requests. and to control                                      are alternative proposals for systems
the physical work.
                                                                            (including a preferred system) and
   The process of acquiring major
                                                                            their costs. schedules and operational
weapon systems has key points of
                                                                            parameters. After reviewing these al-
decisionmaking that must provide a
                                                                            ternatives, a selection is made and the
reliable hasis for evaluating the prog-
                                                                            selected program proceeds to the next
ress being made to determine whether
                                                                            phase. The cost estimate developed
the program should be continued,
                                                                            during concept formulation is in most
   2 H.R. Rept. 91-69R. “ D p p a r t m r n t of Defense Appro.             cases considered to be the initial pro-
priation Bill, 19in.”
   3 Report t o tlir Presidcirt and the SI.,          rrlnry of De.         gram estimate for acquiring a system.
f e n w on ttir nrpartrnrnt of n e f v n s e I>\ t l w Blur Rlhhon
DefPnse Pnn~l.J u l v 1, 19iO.
                                                                              2. Validation Phase-This       is the
   4 National S r r o n t v Iniliidrial A + w r u t i o n . “Drfcnsr        phase in which the major program
Acquisition Studv,” July 1. 19iO ( S e e “Rradings of
lnterrst ” p. 137. f i r a rmivn uf this rvport )
                                                                            characteristics. (technical: cost, and

                        E S T I M A T I N G COSTS FOR A C Q U I R I N G NEW WEAPONS

schedule) are validated by the con-              the time when a new program is “sold’.
tractors who will do the full-scale de-          within the Department of Defense and
velopment. The validation is in the              to the Congress. The initial planning
form of commitments that contractors             estimate tends to become “cast in
are willing to make (i.e., contracts they        brass” and is used as a baseline for
will sign) on these major program                measuring the monetary success for
characteristics. The cost estimates de-          acquiring a particular weapon. Despite
veloped during this phase play a vital           the need for realistic cost estimates,
role in determining whether the system           they tend to be inaccurate (most often
should proceed into full-scale de-               on the low side) for many reasons.
v-elopment or whether alternatives, such         Some of the more important ones are
as canceling the program or de-                  lack of adequate program definition,
veloping high-risk components, should            overoptimism of the technical person-
be pursued.                                      nel, the long length of time to complete
   3. Full-Smle Development Phase-               an acquisition, and Competition for a
During this phase, the weapon system             limited amount of funds.
including all of the items necessary for            The requirements for a new weapon
its support (training equipment, main-           stipulate the performance needed to
tenance equipment, handbooks for                 counter a given threat, the degree to
operation and maintenance, etc.) is              which ihe state-of-the-art must be ad-
designed, fabricated, and tested. The            vanced, and the resources required io
intended output is a hardware model              satisfy these requirements. It is diffi-
and the documentation needed to pro-             cult to anticipate and place a price tag
duce the item. An essential product of           on the technical problems which might
this phase again is a meaningful esti-           be encountered in converting these
inate of how much it will cost to pro-           requirements from paper to a workable
duce the item. At the conclusion of              weapon system. The degree of realism
this phase, the Secretary of Defense             is related to how precisely the new sys-
decides whether to produce the item              tem can be defined and to the skills and
                                                 techniques available for converting this
for operational use, the initial quantity
                                                 definition into a cost estimate.
to be produced, and the plans for
                                                    Technical personnel, recognizing
future production.
                                                 that management may defer or refuse
   4. Production Phase-This        is the
                                                 authorization of a project if it appears
phase in which the weapon system is
                                                 too costly, are inclined to minimize the
produced for operational use. Periodic
                                                 difficulties as a means for getting ap-
cost estimates are necessary during this
                                                 proval of a project. In other words, the
phase to insure the program is on track.
                                                 pressure to reduce the Defense budget
                                                 encourages submission of the maxi-
Discussion of the Problem
                                                 mum program at the minimum cost.
   The need for realistic cost estimating        Hence, contingencies and real predicted
is the greatest in the initial stage of          costs are often cut from estimates. Like-
the acquisition process because that is          wise the most favorable scenario is pre-

dicted h y a service to ohtain approval            engineering approach) for weapons for
of a 1 ) r o ~ r a mor by Defense reviewers        which the design is complete and firm,
~ C Jenforce economy.                              hut for proposed new weapons too
    The tlifficuliy in making an accurate          much reliance has, often been placed on
initial estimale is, compounded h y the            informed guesses. While the judgment
length of the acquisition cycle. I t can           of high level, experienced engineers
take from 10 to 15 years to complete               must he used, there are decisionmaking
the acquisition of a new weapon.                   aids which have been in development
During this period many factors                    for the past decade and can reduce
come into play. For instance, the                  much overoptimism in engineers’
complicated factor of inflation has to             guesses.
he reckoned with and the acquisition                  One of these aids. called the para-
process reacts to shifting requirements,           metric approach to cost estimating,
technological breakthroiighs, and a                uses cost relationships derived from his-
changing social, political, and economic           tories of prior programs for acquiring
environment. All these factors must be             similar conmodities. The parametric
considered.                                        approach has demonstrated so much
    Competition for military contracts,             promise for improving, the depend-
fostered hy the desire to maintain or              ability of cost estimates for the work
increase husiness growth and backlog,              to be done during the early stages of
has resulted in a pattern of ovrrselling           acquisition that the Blue Ribbon (Fitz-
hy contractors. The original planning              liugh) Defense Panel recommended that
estimate has a great influence on con-             the Department increase its me. This
tractors‘ bids. They are warp of chal-             approach is particularly suited to mak-
lenging the estimate hecause of com-               ing estimates based on limited physical
petitive pressures. This leads to pro-             and performance information. The his-
 ])osala which tend to support the                 torical systerns used as a basis for the
 original cost estimates rather than take          parametric estimate will have experi-
 into account the possible effectL on costs        enced the uncertainties and ass>ociated
 of the inherent uncertainties.                    setbacks characteristic of high perform-
                                                   ance hardware development. Later,
Possible Solutions                                 when detailed contractor proposals are
   First, recognition must he given to             being prepared, the more definitive en-
the fact that original cost estimates for          gineering approach can he applied via
sophisticated new weapon systems will              the firm statements of system and
continue to he “guesses.” I t is impos-            subsystem zharacteristics which are
sible to accurately estimate the cost of           required.
a new effort which contains many un-                  A new environment must be created
knowns. Nevertheless. methods of mak-              within industry and Government to en-
ing estimates can be improved.                     courage realistic estimates. Presently,
   Generally, cost estimates for acquir-           the budgetary process by which new
ing weapon systems are based on                    weapon programs are initiated, consid-
detailed, grassroots calculations (the             ered, and sent to the Congress for ap-


proval encourages overoptimism. Per-                     process can be improved. It is apparent
haps this entire process needs revamp-                   that there is room for improvement.
ing. Some of the revisions now under                     However, by its very nature, cost esti-
consideration in the Department of De-                   mating for major weapon systems will
fense reflect an awareness of that need.                 continue to be a difficult task, particu-
  The Deputy Secretary of Defense ad-                    larly during the early phases of the ac-
dressed this problem in July 1969. He                    quisition process. Estimates during
suggested several ways of improving                      these early phases are based on broad
cost estimates :                                         parameters. As a weapon proceeds
     Impress upon Defense contractors                    through the acquisition cycle, cost esti-
     the need for cost realism in their                  mates become more precise through
     proposals and make this a major                     increased identification of the design
     factor in source selection.                          details.
                                                             The Department of Defense is now
     Make a distinct improvement in the
                                                         actively engaged in improving its cost
     Department’s cost estimating and
                                                         estimating practices and procedures
     validating capability and insure
                                                         These improvements will be given at-
     that this capability is fully and ef-
                                                          teEtion during our review.
     fectively applied by the source se-
                                                             Unrealistic cost estimates are just
     lection authority.
                                                          one of the problems that show up as
     Establish an independent capabil-                    cost growth on a weapon system. Ex-
     ity in the Office of the Secretary of                cessive numbers of contract changes,
     Defense to validate cost estimates.;                 buying-in, failure to identify risks, and
                                                          poor system identification are among
Concluding Remarks
                                                          other problems which must be ad-
  GAO is currently engaged in a study                      dressed. It appears that in order to
to determine how the cost estimating                      make significant improvements in cost
                                                          estimates, a concerted effort is needed
  6 Memorandum from the Deputy Secretary of Defense
                                                          to improve the weapon acquisition
to the Military Servicea. July 31, 1969, Subject: Im-
provement i n Weapon System Acquisition.                   process as a whole.

        412-933-71-5                                    65
Planning, Doing, a n d Reviewing-
All   in Three W e e k s
By Robert    R. Lindemuth and Lee M. Stevens
             One of GAO’s primary functions is to be responsive to h e
             requests of the Congress. In this article the authors de-
             scribe the expedited response to a congressional request
             for a study of a complex major weapon system in which
             they were involved.

   On September 2, 1969. a GG-page re-          Services, requested GAO to perform a
port. classified secret with an unclas-         study of the Main Battle Tank, 1970
sified &?est. was issued to the chair-          (MBT-70) program. The MBT-70 pro-
man. Senate Committee on Artned Serv-           gram was a joint cooperative tank de-
ices. entitled “Study of the MBT-70             velopment plan between the United
Program.’’                                      States and the Federal Republic of Ger-
   The report was the result of about           many. The chairman requested that the
3 weeks of roncentrated effort during           study be available for coininittee con-
u-hirh time a review was performed and          sideration by no later than September 2,
R report written, referenced. processed,        1969, which required that it be done on
and issued. Of course. the normal \rap          an expedited basis (in about 3 weeks).
of doing husiness was not followed.                The chairman requested answers to
                                                the following questions:
Request for the Study
                                                     Why the research and develop-
  Followitig debatr on the Senate floor              ment cost estimates for the MBT-
on August G. 1969, on Amendment No.                  70 program had to be revised
E6 to Senate bill 2546 (the Military                 steadily upwards since 1965?
Procurement Authorization Act), the                  What other feasible alternatives
rhairman. Senate Committee on Armed                  there were, if any, to the develop-

Mr. Linclrmutli is a supervisory auditor in the Resrarch and Development Group,
Defense Division. He is a graduate of Susquehanna University (B.S. in accounting)
and has been with 6 4 0 since 1962. He received a Meritorious Service Award in
1970 and is a CPA in the State of Maryland.
Mr. Stevens is a supervisory auditor in the Chicago Regional Office. He is a graduate
of Eastern New Mexico University (B.B.A. degree in accounting and finance) and
has been with GAO since 1961. He received a Meritorious Service Award in 1969.
He is an active member of the Federal Government Accountants Association.

                                                  PLANNING, DOING, AND REVIEWING

      ment of the MBT-’IO, and the !cost          Development Group of the Defense Di-
      feasibility of each alternative?            vision. Assistance was requested from
                                                  the Chicago, Detroit, and New York
Capability of GAO Questioned                      Regional Offices. These re,’vions were se-
                                                  lected because Chicago had just com-
  Much of the debate on the Senate
                                                  pleted a detailed review of the Sheridan
Roar concerned not the MET-70 but
                                                  Weapon System,’ which has the same
whether GAO had the capability or the
                                                  main armament as the MBT-70. De-
expertise to review a complex program
                                                  troit had performed some earlier work
such as the MBT-70. For example, the
                                                  on the MBT-70 at Warren, Mich. And
question was raised as to whether it was
                                                  the ammunition to be used on the
GAO’s function to answer a question,
                                                  MBT-70 was being developed at a lo-
such as whether the MBT-70, consider-
                                                  cation within the New York re,‘mion.
ing its revised estimated production
costs, would be the most effective weap-              Unlimited Overtime Approved
on to meet the contingency for which
it was originally planned.                           It was recognized at the beginning of
   One of the proponents for requesting           the review that the job could not be
GAO to perform the study, Senator                 done if the staff worked the normal 40-
Thomas F. Eagleton of Missouri, stated            hour week. Therefore, unlimited over-
that the GAO is more than just a book-            time was approved and the staff worked
keeper’s oflice.                                  day and night, including weekends. In
It is composed of talented people whn are         addition. several staff members had to
analysts, who have the expertise and talents      postpone their vacations.
to go beyond the printed word, beyond the
diagrams, beyond the schedules, beyond the            Planning the Study
figures, and to get into mFhat we may call the
area of substance and the area of theory.               At the outset of the study, it was
  It was also stated by Senator Eagle-                agreed that in order to meet the time
ton that he was asking GAO to give                    requirement. an audit program would
Congress the benefit of its talent, which             have to be written which could be used
he knew it possessed, because of the                  as the report outline. It was mandatory
“magnificent work” it had done on the                 that this “program” be reviewed and
Sheridan Tank program.                                approved by all levels of management
   After the request was made, it was                 in GAO so that when the draft of the
a matter of the utmost importance to                  report was given for review the inevita-
make a satisfactory study in the time                 ble questions of “why didn’t you do
required. The Comptroller General di-                 this?” could be avoided.
rected that this assignment have priority                In addition to the “program,” a mile-
over all other GAO assignments.                       stone schedule was prepared, The

Responsibility for the Study                               EDITOR’SKOTE:
                                                          A brief description of this review is included in tlw
  The responsibility for conducting                   article by Harold H. Ruhin on “The Role of GAO i n
                                                      the Seventies and What GAO Is Doing To Prepare for
the study was given to the Research and               It.” p. 45.


schedule was broken down into daily         effectiveness and cost-benefit analyses.
major accomplishment segments which         Their services were of great value.
permitted us to gauge our progress in
meeting the reporting deadline.             Reviewing the Report

                                               After the report was prepared and
Doing the Study
                                             referenced, copies were forwarded one
   There were two questions which had        afternoon to the GAO directors in-
to be resolved:                              volved in processing reports. The next
                                            morning, a meeting was conducted in
   1. Why the cost estimates had been
                                             the Comptroller General’s conference
      revised steadily upwards?
                                            room with the Comptroller General, the
   2. What other feasible alternatives
                                            responsible directors, the General Coun-
     there were, if any, to the develop-
                                            sel, and the audit staff in attendance.
     ment of the MBT-70?
                                               The report was reviewed sentence by
    In order to perform the study in the    sentence with agreed upon changes
 time allowed, the responsibilities were    being made immediately before con-
 divided ; the Detroit Regional Office      tinuing to the next paragraph. The at-
was given the first question and the        mosphere was one of “speak now or
 Washington staff with the assistance       forever hold your peace.” Some good
of the Chicago Region was given the         points were raised and the report was
second. The necessary audit work was        improved.
accomplished in 1 week.                        The meeting lasted about 7 hours and
   We had the full cooperation of the       the agreement among all parties was
Department of Defense (DOD) , espe-         that the report as changed was satisfac-
cially the MBT-70 Project Manager           tory, that some additional work was
                                            necessary for support purposes, and
and his staff. Records and reports were
made available upon request, including      that the report should be issued.
certain types of documents which in the The Report
past had not been available to us. We
had immediate access to the MBT-70            The report showed that the estimated
Project Manager and his staff. Our costs for development of the MBT-70
many questions and requests received had increased 525 percent since incep-
prompt attention.                        tion. These cost increases were attribu-
   Due to the short time available, the  table    to ( 1 ) the lack of sound bases
study was confined necessarily to vari-  for    original   estimates, (2) unantici-
ous studies and program decision docu- pated dual development of subsystems,
ments plus discussions with knowledge- ( 3 ) problems in administering a joint
able DOD and Army officials.             development program with a foreign
   The advantage of having special in-   government,       (4) need for additional
house expertise was demonstrated by      testing    of guns   and ammunition, and
the participation of the GAO Systems      ( S ) inflationary   factors.
Analysis Staff who evaluated DOD cost-       As background information, so that



    the committee could get a better feel                A s u g p t e d GAO approilch pre-
    for the role of a tank, the report con-           sented 11y Senator Ribicoff at the hear-
    tained inforniation dealing with the              ings w-as:
     ( 1 ) role of tanks in modern warfare,           If t h t ? 1G1101 gi\e you the alternativc, they
I   including tank operations and future              make the analysis and list the alternatives
    roles of the tank. ( 2 ) tank threat to           without making the judgment as to which
    U.S.,/Allird tanks, ( 3 ) U.S. antitank           altrrnatives should be taken, then, of course,
    weapons, and (, 1 Soviet antitank                 it is up to Congress to choose the alterna-
    weapons.                                          tivrs. I think as to questions of policy they
        The report listed alternatives for the        rannot suhstitute their opinion for yours or
                                                                ],ut :: ::. :: they should have the alter-
    MBT-70 program as it was then being
                                                      natives for 115 so that we can make our own
    performed. These alternatives ranged
                                                      jutlgmrnts as to which onps s e prefer?
    from continuing the program pendinF
    an analysis being performed at the re-            Conclusions
    quest of the Deputy Secretary of De-
    fense to terminating the program com-              The MBT-70 study showed that
    pletely and devoting research and                 GAO has the capability and expertise
    development efforts to other alterna-             to review the management of the de-
    tives.                                            velopment of a major weapon system.
                                                         The study also showed that GAO
    Cornmenis Relating to
                                                      can issue meaningful and useful reports
    the R Q ~ O ~ E
                                                      in a timely manner to congressional
       Within 2 weeks after issuance of the           committees. In this study, the authors
    report, hearings \vere held by the Sen-           were greatly pleased that during the
    ate Committee on Government Opera-                entire study the usual “I don’t like this,
    tions pertaining to the capability of
                                                      improve it” attitude was not accepted
    GAO to analyze and audit defense ex-
                                                      since it was expected that if one didn’t
    penditures. During the hearings which
                                                      like something, he was to improve it or
    were conducted by Senator Abraham
                                                      keep quiet. The authors would like to
    Ribicoff of Connecticut, the only report
    referred to in discussion on GAO capa-            think that a happy medium can be
    hilities to analyze and audit clefease            achieved between the extremes of this
    expenditures was that on the MBT-70.              report and the conventional auditing
    It was suggested that the report could            process which requires a time frame a
    serve as a prototype for similar reports          good deal longer from initiation of an
    on military and rivilian programs.                audit to final reporting.

The Time-Sharing Computer Terminal
as a M o d e r n Audit Tool
By Donald Ingram

             On October 1. 1969, the Denver Regional Office installed
             a time-sharing computer terminal. This article describes
             some of the decisions leading to the installation, some
             experiences with time sharing, and some views on the
             potential of the terminal in GAQ audits.

    Time sharing is a relatively new con-  ing terminal. we had t o admit to our-
cept in which many users are connected     ?elves that we really didn’t know very
through terminals and telephone lines      much about this tool. Several of us had
to one central computer. Each user         taken brief courses on the use of time-
processes his programs without any no-     sharing terminals, but we were not yet
ticeable delays or indications that other  fully aware of how we could apply
users are concurrently using the same      time sharing to our work. Therefore,
computer. This procedure gives each        we felt it best to study the situation.
user access to a powerful computer with    We compared the many facets of our
access times of one microsecond and        audit work with the many possibilities
storage capacity of 320,000 characters.    of the computer. There were many
The costs of buying such a computer        things that we were doing manually
 (about $1.5 million) would be prohibi-    which could be handled nicely on the
 tive to the small user. By distributing   computer.
 the costs on the basis of actual use         There was no question whether we
 among many users, it becomes feasible      could realize significant time savings.
 and economical for both the users and      How about costs of using the computer?
 the owner.                                 This was a difficult question to answer.
                                            The costs per minute of terminal con-
Feasibility Study
                                            nect time and the costs per second of
  When we first begin consideration of      computer  run time were easily obtain-
the feasibility of installing a time-shar-  able. However,   the potential time sav-

Mr. Ingram is a supervisory auditor with the Denver Regional Office. He joined
the General Accounting Office in 1957. Prior to that he worked in the field of public
accounting. He holds a B.S. degree from New Mexico State College. Mr. Ingram is
a member of the Federal Government Accountants Association and the Data
Processing Management Association.


ings were difficult to correlate with the        grasp of the fundamentals in the 2-day
actual computer costs. The problem was           course. To provide as wide an exposure
that we had no historical data on how            as possible, we had most of our super-
long it would take an auditor to obtain a        visors and audit managers attend this
random sample manually, how long for             course.
a regression analysis problem, how long             The course was provided at no cost
for doing the mathematical coniputa-             to our office other than the salaries
tions on a 14-column working paper               of the students. Several staff members
using a desk calculator, etc.                    became interested in the BASIC lan-
   We decided that: since we could pre-          guage and continued their studies
pare no valid cost-benefit analysis, the         through the more advanced applica-
ultimate test would depend on how                tions. As a result of this training pro-
much we actually used the terminal.              gram, we have several people who can
The assumption was that any valid ap-            write very complex programs for a
plication run on the computer was ob-            variety of situations as well as a general
viously going to save the auditors’ time.        awareness among the staff about the
The costs of the computer for each of            potential of the terminal. This was ac-
these jobs would be considerably less            complished at minimum cost.
than the costs of doing the work                    With the installation of the terminal
manually.                                        our education really began. We found
   By this time we had one final ques-           quickly that the classroom applications
tion. Would the time savings on each             were nice but in actual use things were
job and the potential number of coni-            not quite so jolly. For one thing, we
puter applications be adequate to amor-
                                                 learned that absolute accuracy is nec-
tize the monthly fixed costs of about
                                                 essary when entering programs and data
$85? Analysis of our past and expected
                                                 into the computer. A comma instead of
statistical sampling requirements con-
                                                 a period is adequate to stop the whole
vinced us that we could probably amor-
tize the fixed costs just by obtaining           show. An “x” instead of an “”” to
random numbers from the computer.                show multiplication will get you noth-
                                                 ing but an error messtage. We also
Training ~f Staff                                learned that the steps in accessing the
                                                 computer and giving it commands are
   Then came the matter of training.
                                                 very precise. A correct command given
Who should be trained to write pro-
                                                 in the wrong sequence can cause the
grams for the coinputer? Should we
                                                 computer to reject your problem.
have more than one person trained?
The company whose computer we were               Utilization of a Terminal
using provided a 2-day course in ter-
minal applications and programming                 Once the operators achieved the nec-
in beginners all-purpose symbolic in-            essary respect for absolute accuracy,
struction code (BASIC). This, pro-               we proceeded to find out what this tool
gramming language is relatively easy             could really do for us. We found that
to learn and it is possible to get a good        we could have site staffs telephone us

                                       TIME-SHARING COMPUTER TERMINAL

The author, Donald Ingram, at the time-sharing computer terminal in the Denver
                               Regional Office.

information on the universe, the low         solve manually can be processed
number, the high number, and the             through the computer in a few min-
quantity of random numbers needed.           utes. In all cases the terminal generates
With this information we could furnish       a printout of the answer and any inter-
a printed list of the random numbers in      vening computations required.
random sequence and in ascending or-            We have found that we can write
der i n a few minutes. This selection and    programs that will print out columnar
organization had been taking from 1          headings and tabular data in the for-
to 3 hours in the past.                      mat desired by the audit manager o r
  We found that problems requiring           site supervisor. This product becomes
repeated calculations to arrive at the       a working paper with several advan-
needed answer could be processed             tages. The printout is more legible than
through the computer in a few min-           those working papers prepared manu-
utes. The computer can sort data very        ally. Arcuracy (assuming the program
quickly on the basis of numeric or al-       is correct) should not normally be sub-
phabetic fields. Regression analysis         ject to detailed review and verification
problems that would be very difficult to     by the supervisor.


E x a m p l e of Usage                                  1))- the number of years they have
                                                        heen in service.
   An example of an actual problem                 2.   For each investment the remain-
and the solution will give the reader an                ing amortization period was con-
idea of the potential of the terminal.                  sidered to be 100 years less the
A Federal agency involved in the                        period it has been in service. For
production and transmission of electric                 example, the last year’s investment
power amortizes each year’s investment                  would have 99 years remaining.
in power facilities over 50 years. In-             3.   The interest subsidy was assumed
terest is computed annually on the un-                  to be 3 percent, the approximate
amortized investment. I t has been 26                   current difference between the in-
years since the initial investment and                  terest rate used and the cost of
additions t o the investment have been                  Treasury borrowing.
made in each of the 26 years. In effect,           4.   No additional investments will be
the agency now has 26 investments,                      made. That is, the computation of
each with a different remaining life for                additional interest subsidy will be
amortization purposes.                                  based only on the plant now in
   Revenues to date, after deductions for               service.
interest, have not been sufficient to              5.   Revenues will be just sufficient to
cover the scheduled amortization. The                   cover the interest and amortiza-
unamortized balance of the investment                   tion. In other words, none of the
is, therefore, substantially larger than                investment will he paid off in
if the amortization schedule had been                   advance.
met. This, of course, has increased and          Approach
is still increasing the computed interest
payments.                                           If we had obtained an answer manu-
   The interest rate used by the agency          ally, our approach would have been
                                                 as follows:
in computing interest on the unanior-
                                                    1. Prorate the current unamortized
tized investment is currently less than
                                                       investment to the 26 annual in-
the cost to the Treasury of borrowing
                                                       vestments (78 calculations) .
money, and an interest “subsidy” to
                                                    2. Using the equation for the sum
the project is the result.
                                                       of an arithmetic progression-
ProbIem                                                S=n/2 ( 2 ( x 1 ) f ( n - 1 ) d ) -
   If the amortization, or “pay out”                   compute the total interest pay-
period were now changed from 50 years                  ments for each of the 26 invest-
to 100 years, what would be the total                  ments for the time remaining on a
additional interest subsidy required?                  50-year schedule and the time re-
                                                       maining on a 100-year schedule
Assumptions                                            (52 calculations, considering each
  1. The deficit to date in amortiza-                  application of the equation as a
     tion was prorated to each of the                  single calculation) .
     26 annual investments, weighted                3. Before using the equation in (2),

                                            TIME-SHARING COMPUTER TERMINAL

     it is necessary to determine the            printouts. This represents about $4.75
     annual change in interest (the “d”          in computer costs.
     in the equation) for each invest-
     ment, both on a 50-year basis               Cost and Time-Saving Benefits
     and a 100-year basis (52                       The question has been raised repeat-
     calculations) .                             edly concerning how long it may take
  4. Add the total interest payments             to obtain answers once the problem has
     computed in ( 2 ) on a 100-year             been transmitted from the site to the
     basis. Add the total interest pay-          regional office and the terminal. On the
     ments on a 50-year basis and sub-           basis of our tests, we believe we can
     tract the latter sum from the               consistently provide a 5-day turnaround
     former (three calculations).                time. In some cases we can provide an-
    Since most of the annual investments         swers immediately and relay them to
 were in the tens of millions, it can be         the auditor while he is still on the
 seen that the foregoing calculations            telephone.
 would take some time with a desk cal-              Our costs for the terminal have been
culator. Since we did not obtain the             averaging about $300 a month. This
 solution manually we do not know how            includes the fixed cost of $85 for the
 much time would be required.                    terminal and the telephone line. It is
   I n putting this problem on the time-         apparent to us that this cost is easily
 sharing computer, we could have used            offset by the time saved by our audi-
                                                 tors. This, in effect, allows them to
 the same approach as outlined above.
In view of the speed of the computer,            spend more time on other important
                                                 and demanding aspects of our work.
however, the number of calculations to
                                                    Time-sharing service is now comrner-
be made is of little importance. We,
                                                 cially available in all major cities. The
therefore, used a year-by-year ap-
                                                 General Services Administration is op-
proach, calculating the amortization, in-
                                                 erating a Government-owned time-
terest, and new unamortized balance for
                                                 sharing service in Atlanta, Ga. The
each year in turn. This was done for
                                                 Environmental Science Services Admin-
the 49 remaining years of the 50-year            istration (now the National Oceanic
basis and for the 99 remaining years of          and Atmospheric Administration) has
the 100-year basis. By using this ap-            time-sharing capabilities on their
proach we were able to get a printout            computer located at Boulder, Colo. I
for each basis showing for each year             believe that we will soon have Govern-
the amortization, the unamortized bal-           ment-owned time-sharing services avail-
ance, the interest subsidy for the year,         able to auditors anywhere in the
and the ,cumulativeinterest subsidy.             country.
   The time required to obtain our solu-            Experience is showing that the con-
tion, plus the two detailed printouts and        cept of auditors using time sharing is
exclusive of programming time, was               sound. Local offices of the Defense Con-
about 25 seconds of computer time and            tract Audit Agency and the Air Force
26 minutes of terminal time for the              Auditor General have installed time-


sharing computer terminals. Officials at    tool. As we develop more applications
these offices tell us that they are en-     for our terminal, it will take on even
thusiastic about the current and poten-     greater importance as an extension of
tial uses of the terminal as an audit       the auditors’ capabilities.

    The W o r k of the Youth Advisory Committee
    to the Comptroller General
    By James   R. Rhodes
                This article describes the Youth Advisory Committee to
                the Comptroller General and its purpose and work dur-
                ing its first year of existence. The comments expressed
                in this article are those of the author and are not in-
                tended to be construed as representing those of the entire

       The President of the United States       (4) line managers and supervisors who
    issued a memorandum to the heads of         have worked with career trainees.
    all Government departments and agen-           The President suggested four ques-
    cies on 0,ctober 10,1968, expressing his    tions for initial exploration by each
    personal interest in improving agency       department and agency youth advisory
    management efforts to attract and de-       committee. These were:
    velop talented young people for Fed-           1. Through what channels did the
    eral service. The President asked each            agency insure that the ideas and
    department and agency to create a com-            suggestions of young employees
    mittee through which young trainees               were solicited and considered by
    representing various disciplines and              the managers with authority to
    programs could review and evaluate all            act?
    aspects of the systems through which           2. To what extent did career trainees
    the trainees become part of the Federal           participate directly in the design
    work force. The President further                 of their training programs and in
    stated that each such departmental and            the structure and content of their
'   agency committee should include rep-              work assignments?
    resentatives from (1) present and re-          3. To what extent could young people
     cent past career trainees, (2) imme-             working in the Federal Govern-
     diate staff, (3) personnel office, and           ment serve as a link between the

    Mr. Rhodes is a supervisory auditor assigned to the South Asia Country Programs
    Group of the International Division. He holds a B.S. degree i n accounting from
    Aquinas College and attended the graduate management program at Wayne State
    University. Mr. Rhodes served in the Detroit Regional Office from 1960 to 1963
    and in the European Branch from 1963 to 1966. He is a member of the National
    Association of Accountants and the Federal Government Accountants Association.


     Government and the student               Norfolk
     community?                                 John Payne
  4. How could minority group par-              John Ratliffe
     ticipation in career trainee pro-        Philadelphia
     grams be increased?                        Robert Meahl
                                              San Francisco
Formation of Youth Committee                    John Williams
   The Comptroller General imple-             Washington
mented the President's request in               Mark Heatwole
Feliruary 1969 by creating the Youth            Richard Nygaard
Advisory Committee to the Comptroller
                                           Qualifications for Membership
General under the auspices of the Di-
rector, Office of Personnel Management.       In determining who should be se-
The committee membership evolved to        lected to serve on the committee, it was
'consist of the following professional     decided that the qualifications outlined
staff members.                             by the President would be the primary
                                           governing factors. However, to the
Civil Division                             President's qualifications were added
  Anthony Assia                            the qualifications that a committee
  Louis Coons                              member should ( 1 ) be under 35 years
  Jane Davis                               of age, ( 2 ) be in a grade between GS-
  John 01s                                 7 and GS-13, and ( 3 ) be nominated by
  Kenneth Shuman                           a division director or a regional man-
  Lawrence Zenker                          ager of the office to which the member
Defense Division                           is assigned.
  Marvin Brown                             Committee Objectives
  Patricia Koczur
International Division                        The committee members, during
                                           their first meeting in March 1969, es-
   James Rhodes
                                           tablished the following committee ob-
Transportation Division
  Donald Friedman
                                              To provide a direct method for career staff
Regional Ofices                            members to inform top management of their
  Detroit                                  idpas for improving or implementing prac-
                                           tices for accomplishing the purposes inherent
    Robert Rogers                          in nur system [the General Accounting Of-
  Kansas City                              fice system1 for recruiting, selecting, placing,
    Jerry Pennington                       training, and utilizing career staff members.

  Los Angeles                                 In subsequent meetings it was estab-
    Thomas Schulz                          lished that the committee, in pursuing
  New York                                 its objective, was not to assume an in-
    Joan McCabe                            ternal audit function; that is. there was

                              WORK OF T H E YOUTH ADVISORY COMMITTEE
                                            \   I

to be no formal audit work for gather-              other key staff members who might be
ing of information to supplement the                responsible for counseling; that is, su-
conclusions of committee members re-                pervisors, managers, directors, and
sulting from informal, ongoing sur-                 others. In many instances, career
veys of the opinions of other staff                 counseling committees were not func-
members.                                            tioning as intended since they were not
                                                    composed of s.upervisors, professional
Committee Accomplishments                           development coordinators, and regional
                                                    managers or directors or their author-
   During its first year, the committee
                                                    ized representatives.
met on five occasions to identify and
                                                       The General Accounting Office uses
discuss problems which concerned the
                                                    the Professional and Career Develop-
young professional staff members of the
                                                    men1 Planning Form (GAO Form 344)
Office. Three areas most frequently
                                                    to provide staff members a basis for
brought to the attention of the corn-
                                                    formulating their professional and ca-
mittee were selected for study. These
                                                    reer development objectives and a sys-
areas were career counseling, promo-
                                                    tematic means for reporting periodi-
tion, and recruiting. Although informa-
                                                    cally on their progress in attaining
tion relative to each of these areas was
                                                    those objectives. The committee’s re-
carefully studied, the committee was
                                                     port to the Comptroller General pointed
limited in making a comprehensive
                                                     out that the form was not acceptable to
analysis of each area due to the limited
                                                     some of the professional staff members,
scope, authority, and time initially in-
                                                     generally because it tended to be a
vested in the studies.
                                                     stereotyped, and perhaps biased, data
   The results of the committee’s studies
                                                     collection form rather than being an
were incorporated into a report sub-
                                                     action-generating form to assist an in-
mitted to the Comptroller General on
                                                     dividual in best achieving his goals by
March 3,1970. A summary of the ccrn-
                                                     integrating them with the objectives of
mittee’s report is presented below.
                                                     the Office. In addition, the report stated
Career Counseling                                    that other staff members were of the
                                                     opinion that the present system of only
   I n the area of career counseling, the
                                                     periodically rating performance and ap-
report discussed the inconsistencies
                                                     praising promotion potential fostered a
found within the Office in the admin-
                                                     lack of coordination of the counseling
istration of the professional develop-
ment coordinator program. This pro-                  by the professional development coor-
gram must be effectively implemented                 dinators and the day-to-day, on-the-job
if it is to be a valuable asset to the Of-           counseling by supervisors.
fice. The committee found that some                     To overcome these inconsistencies
offices and divisions did not have a pro-             and improve the administration of the
fessional development program or co-                  counseling program, the committee
ordinator. In others, some professional               suggested that management officials
development coordinators were not co-                 consider:
 ordinating their counseling effort with                1. Taking the necessary steps to bring

       all meinhers of the career counsel-      Promotion
       ing committee into the counseling           The committee’s report on the Office’s
       process.                                 promotion system concluded that com-
  2.   Providing adequate guidance to           munication between management and
       establish professional develop-          the professional staff regarding the pro-
       ment programs in those offices and       motion system of the Office and promo-
       divisions where none presently           tion criteria appeared to be a problem.
       exist.                                   On the basis of a poll of a limited
  3.   Appointing qualified professional        number of staff members (although it
       development coordinators and             was considered a representative sam-
       granting them sufficient time to         pling), the committee concluded that a
       provide more comprehensive and           high percentage of the professional
       meaningful counseling to individ-        staff members in grades GS-9 through
       ual staff members in all areas of        GS-13 did not consider themselves
       professional development.                sufficiently informed on the Office’s pro-
  4.   Abolishing the existing Profes-          motion program. Moreover, some pro-
       sional and Career Development            iessional staff members believed that
       Planning Form (GAO Form 344)             the process of the annual rating of
       and replacing it with a data-            promotion potential and the career
       reporting system that would ade-         counseling program should be more
       quately reflect the training needs       effectively coordinated.
       and goals of the professional staff         Accordingly, the Committee sug-
       members, attuned to the objec-           gested that responsible management
       tives of the Office.                     officials consider steps which would
  5.   Reexamining the present forms of         insure that all staff members are suffi-
       career and supervisory counseling        ciently informed of the Office’s promo-
       to develop a workable system for         tion process, policies, and criteria. Such
       providing timely attention to the        steps, in the committee’s opinion,
                                                should include a thorough discussion
       professional development of staff
                                                with each staff member of his Appraisal
                                                for Promotion Potential (GAO Form
   The committee concluded that there           268A 1.
was still much to be done in the area of
career counseling. It was the com-              Recruiting
mittee’s hope that, by identifying or              The committee believed that the
suggesting ways to improve and better           Office’s recruiting program was essen-
coordinate supervisory and career coun-         tially successful. It was the feeling of
seling, it could objectively assist man-        the committee that the hiring of person-
agement in finding ways to make career          nel with nonaccounting disciplines-
counseling responsive both to the aspi-         39 percent of the staff members hired
rations of the young professional staff         in 1969-was the major reason for the
member, and to the objectives of the            success of the past year’s recruiting
Office.                                         program. The committee believed, how-

                              WORK O F T H E YOUTH ADVISORY COMMITTEE

ever, that there were some areas in the      view and evaluate other aspects of the
recruiting program where further im-         system through which professional
provements could be made and sug-            young people may become a part of the
gested that:                                 work force of the General Accounting
  1. Recruiters contact as many col-         Office. Areas under consideration are:
      lege placement officials as possi-        1. Staff members’ views regarding
      ble.                                         the effectiveness of the utilization
  2. The Office of Personnel Manage-               of the professional talents of
      ment conduct more faculty semi-              young staff members.
      nars, since such seminars offer           2. Suggestions for obtaining better
      excellent publicity potential for            communication of policies, pro-
      the recruitment program.                     cedures: and ideas from the Wash-
  3. Recruiters be made aware of the               ington staff to regional office
      staffing needs of all regional and           staffs.
      Washington offices, in addition to        3. The ascertaining of some of the
      the one they represent.                      fundamental reasons and causes
   4. Recruiters reexamine the present             of staff turnover.
      language of form letters sent to
      prospective employees in order to
      provide more personal messages to      EDITOR’S
      the recipients.                          The GAO Office of Personnel Management
   5. The office   of personnel M       ~    has ~
                                                 provided~the following
                                                                  ~     information
                                             the committee’s recommendations:
                                                                                 - about
      ment continue to encourage offices
                                             Career Counseling
      and divisions within the Office to
                                               The Office of Personnel Management
       recruit staff members from minor-     (OPM) was reviewing certain aspects of the
       ity groups.                           career development program during the first
                                             year’s existence of the Youth Advisory Com-
Conclusions                                  mittee. A number of changes resulting from
                                             OPM’s review were similar to changes s u g
   During its first year in being, the       gested by thc cornmittcc. Carccr counseling
Youth Advisory Committee to the              in the career development program was made
Comptroller General demonstrated that        optional. Also the GAO Form 344 is now
it was an effective forum for the gather-    being retained by the division or office and
                                             only summary reports are heing forwarded
ing of suggestions and critiques con-
                                             to OPM. Semiannual professional develop-
cerning the range of activities involved     ment coordinators’ conferences have also been
in the training and utilization of pro-      established.
fessional members of the Office.                 Promotion
   The committee made a number of              The Office of Personnel Management now
constructive recommendations to man-         discusses the GAO merit promotion plan in
agement for improving career counsel-        the basic supervision seminar partly as a
                                             result of the committee’s report. The Office
ingY promotion policies and procedures,      is continuously reviewing the administration
and recruiting techniques. During the            the plan and changes will be made as
coming year, the committee plans to re-      needed.

      412-933-71-6                          81
X ( w uit in g                                           the coming year and will also provide recruit-
  A5   a rt-ult of suggestion5 made Iiy the              crs Tt-ith information on GAO's o\,erall staff-
coniniittrr-, t h t . Office of Pvr5onnrl M a n a g -    ing needs as uell a s on individual office and
ment and thc recruiting offireq arc. attempt-            division needs. This reemphasis is partly due
ing to convey J more pwional mrssage in                  to iuggeition- made by the committee. GAO
written communications with prospective em-              will continue with its present policy of hiring
ployecq. OPM i q reemphasizing thc need to               qualified persons regardless of race, creed,
conduct additional faculty ieminar.; during              sex. or national origin.

                                From      GAQ              Speeches
       Elmer B. Stoats, Comptroller Gen-                  ample, in the August 1970 report of the
    eral, speaking on “The Nation’s Inter-                Intergovernmental Relations Committee of
                                                          the National Legislative Conference that 43
    est in Improving State and Local Gov-                 State legislatures have now appointed coor-
    ernment” at the regional conference of                dinators to work with the National Legislative
    the American Society of Public Admin-                 Conference on Federal-State matters. The
    istration, Topeka, Icans., October 23,                Committee has now recommended that State
                                                          legislatures create permanent committees on
    1970:                                                 intergovernmental relations with supportive
       I suppose there are few periods in our na-         staff. This idea strikes me as an exceptionally
    tional history when the role of government            good one. and it could do much to promote
    has been under such serious challenge a s to          the kind of interchange and coordination so
    whether government at all levels can be made          badly needed.
    responsive and responsible for dealing with               *                  *                 *
    the Nation‘s problems. One point is clear,              Needless to say, auditors and auditing a r e
    however: government is heing called upon,             not always popular subjects. Auditors are
    and will he called upon increasingly, to per-         credited as heing people with 20-20 hind-
    form more services and a growing portion of           sight, as people who simply get in the way o i
    our national income is going to support gov-          others who try to carry out programs or who
    ernmental programs at all levels-Federal.             capture headlines by pointing out errors and
    State, and local.                                     mismanagement. The role of the auditor was
                 *        *                 *             described vividly in a little poem written by
      The heightened concern about Federal-               Professor Kenneth E. Boulding of the Uni-
    State-local relationships gave rise to the es-        versity of Colorado.
    tablishment of the Advisory Commission on             “It’s nice to be the drafter of a well-con-
    Intergovernmental Relations in the late                  structed plan
    1950’s-the establishment of which I was               For spending lots of money for the better-
    much involved with personally. This agency,              ment of man,
    although clumsily organized and not designed          But audits are a threat, for it is neither games
    to function i n a coordinating role, has made            nor fun
    a major contribution through its excellent            T o look at plans of yesteryear and ask. ‘What
    studies, focusing on the need for improvement           haye we dolie?’
    in such areas as the consolidation of grant           And learning is unpleasant when we have to
    programs, the sharing of tax revenues and tax           do it fast,
    sources, and a host of problems in programs           So it’s pleaqanter to contrniplate the future
    such as welfare, education, and health.                 than the past.”
      I would personally hope that the States
    would take advantage of the provision in the            Paul G. Dembling, General Counsel.
’   Intergovernmental Cooperation Act which               speaking on “It’s Not the Same GAO”
    permits Federal agencies to render tech-              before Town Hall of California, Los
    nical assistance to the States and local gov-
                                                          Angeles, Calif., November 17, 1970:
    ernments on a reimbursable basis. These
    and many other avenues of cooperation must               As the budgets increase, as programs pro-
    be extended. I was much interested, for ex-           liferate in complexity as well as size, as



    taxeb incrrasr, as programs vie for funds,             future. How bright depends on the pro-
    the need to place greater emphasis on re-              fession’s own performance.
    sults achieved has received a great deal of
    attention not only in the General Account-               Fred J. Shafer, deputy director,
    ing Offirr and the Congres, hut also in the            Transportation Division, speaking at
    executive hranch agencies, State and local             the convention of the Household Goods
    governments, and in private industry. We can
    no longer afford the luxury of public ex-
                                                           Forwarders Association, Palm Springs,
    penditures that are hut marginally produc-             Calif., October 9, 1970:
    tivr. It should also he noted that the Con-
                                                              Exclusive of Southeast Asia, we have over
    gress has specifically expressed its interest
                                                            250,000 Americans-many      accompanied by
    in having the General Accounting Office em-             their families-in   other points in the Pa-
    phasize reiiews of program results in the
                                                           cific and Far East. There are approximately
    Economic Opportunity -4mrndments Act of
                                                           235,000 servicemen in Germany, which-with
    1967, in the Intrrgovcrnmental (hoperation
                                                           their dependents-constitute     about 500,000
    Act of 1968. in the Manpower Development
                                                            Americans. I n terms of population this is
    and Training Act, and in the recently enacted
                                                           about 20 percent of the entire population of
    Legislative Reorganization Act of 1970.
                                                           Ireland, and almost twice as large as the
       E. H . Morse, Jr., director, Office                  entire population of Luxembourg. These huge
                                                           populations are superimposed on a foreign
    of Policy and Special Studies, speaking
                                                           economy and culture, but the American foods,
    on “Performance and Operational Au-                    clothing, furniture and automobiles and all
    diting” at the Northwest Graduate                      of the elements of the American life style
    Study Conference, Salishan Lodge,                      are transported into the foreign environment
                                                           to sustain them, to say nothing of the purely
    Oreg., ,October 22, 1970:
                                                           military items required. Not only are there
       The hallmark of the effective auditor comes         large American populations in Europe, but
     from what he accomplishes. Just heing in              within any 18 to 24 month period the entire
    operation usually has heneficial results in            population is almost completely rotated and
    that his presence or prospect of showing u p           replaced. This is a huge and continuing logis-
     tends to stimulate better performance hy the          tics problem. Yet no single DOD organiza-
    officials and employees of an organization.            tion is charged with the responsibility for
       His checks on compliance with prescribed            management o r even oversight of the through
    policies and procedures that have been                 logistics support system. We hope to de-
    adopted to promote efficient operations and            velop a technique For analyzing these move-
    conserve resources can he a valuable protec-           ments on a total systems basis, and of course,
    tive service as ivell as often pointing the way        the household goods program will be a part
    to desirable changes.                                  of that study.
       His unending searches for better, less cost-            *                          L       *
    ly, and more effrctive ways of doing things
                                                             The Joint Agency Transportation Study
    can make him a vital force in the manage-
                                                           was recently completed and the report issued
    ment of any organization that has to be ron-
                                                           under the sponsorship of the Joint Financial
    cerned with survival in the competitive
                                                           Management Improvement Program. The re-
    struggle to olitain and make the most of
                                                           port includes 58 recommendations for im-
    scarce resources.
                                                           provements in the Federal Government’s
       And finally, the auditor’s concern with pro-
                                                           transportation practices. The GAO is re-
    viding independent expert evaluations on how                                                            .
                                                           sponsible for implementation of 30 of these
    well things are going and on how better re-
    sults might be achieved if done differently
    points the way to an expanding future for                  *                                  *
    the art and the profession of auditing. I n              One significant observation of the study is
    this direction, I think it has a very bright           that the GAO role as a transportation rate

                                                                     FROM GAO SPEECHES

auditor should change progressively to that        spection of court records.” In December 1968,
of checking on the adequacy of agency audit        the Director and the Comptroller General
activities and agency controls over payments.      reached such an agreement.
This contemplates that ultimately the GAO             On October 8, 1970, we issued a report to
will relinquish its role as a central voucher      the Congress on our findings. This report is
auditor to an agency audit concept using           aimed at assisting and furthering the efforts
computerized audits where possible. Thus,          of the Judicial Conference for improved ad.
at some future date, the audit of your pay-        ministration of the courts.
ments will probably be performed in the               We found that there were opportunities to
agencies for which you are performing the          reduce the number of prospective jurors sum-
services. Indeed, there is a strong school of      moned to appear at district courts but not se.
thought within GAO itself which suggests           lected to serve. For example, in one district,
that the need for us to become actively in-        over 8,000 prospective jurors reported for
volved in the framing of the rate and service      jury duty during calendar year 1968. How-
tender provision because of our voucher audit      ever. about 60 percent or almost 5,000 were
responsibilities, causes a dilution of our ob-     not impaneled or challenged. In another dis-
jectivity in reviewing the effectiveness with      trict, about 40 percent of the prospective
which DOD manages its household goods              jurors summoned did not serve.
program.                                              We recognize that the courts must have
                                                   more prospective jurors available than will be
   Max A . Neuwirth, associate director,           impaneled to allow for the uncertainty of the
Civil Division, speaking about opportu-            number of prospective jurors to be excused
nities for improving the administrative            and challenged. However, we believe that the
and financial operations in the U.S.               substantial number of prospective jurors
District Courts, at the meeting of the             summoned but not selected to serve indi-
                                                   cates that opportunities exist to reduce the
Chief Judges of the U.S. Court of Ap-
                                                   number summoned. This reduction would re-
peals, Federal Judicial Center, October            sult not only in substantial financial savings
28,1970:                                           but would significantly reduce the number of
                                                   persons inconvenienced. In his recent re-
   Until very recently, our work in the ju-
                                                   marks on the State of the Federal Judiciary
dicial branch consisted of examining, at the
                                                   before the American Bar Association, Chief
Administrative Office in Washington, various
                                                   Justice Warren E. Burger stated:
documents concerning financial transactions
furnished by the clerks of courts, generally             “Countless citizens serving as jurors have
for the purpose of settling accountable offi-         been irritated with the inefficiencies of the
cers’ accounts. However, as had been the case         courts because they find themselves watch-
in the executive branch, we believed our ef-          ing TV in the Jurors’ Lounge rather than
forts would be much more useful to every-             hearing cases in court.”
one concerned, including the judicial branch,         In order to reduce costs and improve the
if we carried out our work at the sites of         relationship between the courts and the pub-
operations.                                        lic, we are suggesting that consideration be
   In August 1968, the Comptroller General         given to (1) consolidating requirements for
explored this situation with the Judicial Con-     prospective jurors when two or more judges
ference’s Committee on Court Administration        are selecting juries, (2) coordinatin,o. court
in order to seek a mutually satisfactory agree-    calendars so that, whenever possible, judges
ment under which the GAO could perform re-         will be selecting juries on the same day, and
views at the various court sites.                   (3) varying impanelment starting times on
   At its September 1968 proceedings, the Ju-      the days when jurors are being selected so
dicial Conference approved the Committee           that the prospective jurors rhallenged or ex-
on Court Administration’s recommendation           cused in one courtroom would be available for
that the Director, Administrative Office, enter    selection in another courtroom.
into an agreement with GAO for “onsite in-            In reviewing the deposits of registry ac-


count funds, we found that, during fisral           the districts, these procedures involved the
year 1969, therr was an average monthly bal-         manual preparation of ahout 44,500 cards foi
anrP of $56 million of regiqtry arrount funds       the initial j u r y wheel drawing and the man
of which $30 million was on depoqit in nim-         ual issuance of over 33,000 questionnaires.
interest-bearing accounts in commercial                 We are suggesting that the districts that
hank=. We eitimate that the Government              meet the Administrative Office's criteria be
r o u l d have realized savings of about $1.8       enronraged to implement the automation of
million in interest cost during fiscal year 1969    juror selection procedures in the interest of
if the fnndi had been deposited with the             rfficirncy and eronomy.
Trrasnrer of thP United States in Fedrral               In our report, we also discussed the advisa-
Reserve banks.                                      bility of strengthening the role of the Ad-
    Of the 93 di.tricts. 63 user1 coninirrrial      ministrative Office and consolidating certain
hank., 12 used hoth commercial and Federal          court locations which we believe are worthy
Reserve banks, and 18 used Federal Reserve          of ronsideration.
hanks rxclusively without hindering their               The principal objective of our review was
operations.                                         the identification of potential improvements
   %'e are sugge\ting that a policy lie estab-      to hring about more efficient and economical
lished to llrposit registry account funds in        administration of court activities and to re-
Federal Reserve banks and to transfer rrg-          duce the judges' administrative Imrdens so as
istry arrount funds now on deposit in coin-
                                                    to permit the judges t o devote a greater por-
mercial hanks to Federal Rrserve hanks, SO
                                                    tion of their time to judicial matters. We be-
that the resultant benefits would a c t m e to
                                                    lieve that improvements in the administration
the Government.
   Our review of jury seleriion procedures          of court affairs would bring about better re-
divlosed that the three di.;trirts inrluded         lationships between the courts and the public
in our rthkiew were using time-consuming            and would enhance the position of the
manual systems in selecting juries. I n one of      judiciary.

Broadening the Focus                          holism has been hidden and denied for
of GAO Work                                   so long that no one really knows how
                                              many people are suffering froin it. Data
   There has been considerable discus-        was not available on the number of
sion in the Congress recently concern-        Federal civilian employees suffering
ing additional ways in which GAO              from the illness or on the resultant
could better fulfill its obligations to the   cost to the Federal Government in terms
legislative branch. Many Members of           of lowered worker efficiency and mo-
Congress are of the view that one of          rale, absenteeism, bad decisions, early
the ways to make GAO’s work more              retirements, and related loss areas.
meaningful and useful would be to                Therefore, in conducting its study,
focus such work upon new proposals.           GAO relied on information provided by
   Illustrative of the broadening focus       individuals in Federal agencies, State
of GAO’s work to include legislative          Governments, and industry, and by
proposals under active consideration by
                                              others who have studied the problem
the Congress is its recent study to deter-
                                              of alcoholisnl to arrive at the following
mine the savings that might be brought
                                              estimatm of the prevalence of alcohol-
about for the Federal Government
                                              ism in the Federal Government, the
through programs assisting its civilian
employees in the prevention and treat-        employer costs incurred as a result
ment of alcoholism.                           thereof, and the cost savings that might
   This study was made by a two-man           result from an effective Government-
task force of the Civil Division consist-     wide alcoholism program.
ing of associate director Philip Charam           At assumed rates of prevalence of alcohol-
and supervisory auditor Irving T. Boker        ism ranging from 4 to 8 percent of the
who have provided the following de-            work force of 2.8 million civilian employees
                                               a t June 30, 1970. it was estimated that be-
scriptive commentary about the study.
                                               tween 112,000 and 994,000 employees were
   The study was made in response to           suffering from alcoholism.
a request of Senator Harold E.                    Using a factor of about 95 percent of the
Hughes, chairman, Special Subcommit-           average annual salary ($9,800) of civilian
tee on Alcoholism and Narcotics, Sen-          employees, GAO estimated that the annual
                                               cost to the Federal Government, because of
ate Committee on Labor and Public              alcoholism among its civilian employees, was
Welfare. The Comptroller General’s re-         between $275 million and $550 million
port was issued to the subcommittee in         annually.
September 1970. A bill providing a                An alcoholism program for Federal civilian
                                               e m p l o y e e s t h a t would involve informing all
comprehensive Federal program for the          employees concerning the illness, training
 prevention and treatment of alcohol           supervisors i n identifying alcoholics and
abuse and alcoholism for all people,           problem drinkers, and counseling and re.
                                               ferring employees to treatment facilities-was
 including Federal civil servants, passed
                                                estimated to cost about $15 million a year.
 the Senate on August 10, 1970.                    About 54 of every 100 alcoholic employees
   GAO’s report pointed out that alco-         would be likely to recover as a result of an


empluyrr's alcoholism program. l'hcrefore, the        4: :i; * It is   privile,-e to announce to
employer custs I x k g incurred hy the Gov-       tlic Srnate thc issuance of a milestone report
ernment because of alcoholism among its           I)y the Comptroller General of the United
employees ($275 million to $550 million),         States which points the way to very sub-
might be reduced by over SO percent hy the        stantial improvement in the efficiency and
estahlishment of an effective alcoholism pro-     economy of the Federal Government opera-
gram.                                             tion. * * * this report * * * is a break-
  Thus, by inlesting about $15 million a          through revelation of the tremendous savings
year in an alcoholism program, the Federal        in human and economic resources that can
Government could realize a net employer           he achieved by the institution of profes-
cost savings ranging from about $135 million      sional, tested methods for controlling alco-
to $280 million annually.                         holism and problem drinking that cost very
                                                   little by comparison with their potential
    In line with GAO's widening interest
 in the social aspects of Government                  It is our expectation that the report will
 programs, the report pointed out that            be of great interest not only to the Congress
 an effective Government-wide alcohol-            when seeking information on this subject, but
 ism program would not only bring                 also to State and local officials seeking an
                                                  answer to the problems of alcoholism.
 about substantial employer cost sav-
                                                     Thc Special Subcommittee on Alcoholism
 ings, but also, by helping reduce the            and Narcotics will give careful consideration
 number of alcoholics in the total popu-          to this repurt in the hope that it may con-
 lation, would contribute to the economic         tribute to the economic and social benefits
 and social benefits which the Federal            of the Federal Government and the citizens
                                                  of our country.
 Government and society as a whole
 would obtain from alcoholism pro-           Comments received by the Comptrol-
 grams in general. Such benefits would    ler General on the study report include
 take the form of reductions in, for ex-  the  following:
 ample, traffic accidents, crime, and the From the National Council on
 need for welfare and medical services Alcoholism, Znc.
 attributable to the misuse of alcohol.     The completed repoit reflects a degree of
    In conclusion, GAO's report ex- objectivity and competent professionalism
pressed the view that a program aimed which merits our most sincere appreciation
 at salvaging the alcoholic Federal em- and commendation.
ployee would attend to a part of one From a firm in private industry
of the Nation's major health problems       Efforts of this kind to establish cost/bene-
and, at the same time, would give a fit estimates are very valuable in furthering
group of sick Federal employees a a long-neglected area of human resources
greater chance to recover and live de- loss reduction.
cent lives.
                                          Qualifications of Public
   The following excerpts from state-
                                          Accountants Making Audits of
ments made by the chairman of the Federally Chartered, Financed,
Senate Special Subcommittee on Alco- or Regulated Organizations
holism and Narcotics attest to the sig-
nificance and usefulness of the GAO         New GAO policy on this subject as
study report in serving the interests of  announced by the Comptroller Gen-
the Congress and the public as a whole. eral in a circular letter to Federal

                                                                    NEWS AND NOTES

agency heads on May 12, 1970, and              change took place on March 12, 1970,
noted in the Summer 1970 issue of the          between Representative Minshall of
GAO Review (p. 60) ,was further modi-          Ohio and Captain W. Oller, SC, Di-
fied on August 10. The additional              rector, Office of Information Systems
change provides that public accountants        Planning and Development:
licensed as of January 1, 1971, would              Mr. Minshall. The committee has a GAO
be considered as qualifying for such           report on the installation of a computer a t
                                               t h e Naval Postgraduate School in Monterey.
audit work.
                                               It is not a very good report, to say the least.
   The policy as now revised provides:         Among other things, the report points out
    1. The audits shall be conducted :         that the computer ( 1 ) will not be fully util-
         -By independent CPAs or               ized, ( 2 ) requirements were not properly
                                               planned. (3) cost was more than estimated,
         -By      independent public ac-
                                               and (4) after installation did not meet
            countants who are not certi-        specifications.
            fied but who are licensed on           It seem3 that quite a bit has gone wrong
            or before December 31,              here. Can you give us the story about what
             1970.                              the Navy is doing about it?
                                                    Captain Oller. All these allegations are
    2. Until December 31, 1975, such
                                                true. (Captain Oller then provided a lengthy
       audits may also be performed:            explanation of strengthened procedures for
         -By       uncertified public ac-       correcting this situation and preventing
            countants licensed after De-        recurrences.)
             cember 31,1970, and                    Mr. Minshall. I think you are to be com-
          -By public accountants who            mended. You are the first naval officer I ever
                                                heard admit before the committee that the
            are neither licensed nor certi-     GAO was right and the Navy is wrong.
             fied but who are considered
            by the Federal agency con-          (Hearings, Part 3, Operation and Main-
             cerned as meeting the stand-      tenance, p. 363)
             ards of education and experi-
                                               HQW TQ Be a Great Boss
             ence representative of the
             highest prescribed by those         From the Los Angeles Regional
             States who provide for the        Office newsletter for October 1970
             continuing licensing of pub-      (basic source not identified) :
             lic accountants.                    The secret is learning to be a “tough nice
    Under the revised policy, the head of      guy.” Seldom do executives realize it. The
 the Federal agency concerned may pre-         best way to do this is through actions which
                                               identify them as tough but fair. Most mana-
 scribe even higher qualification stand-       gers and executives are aggressive, s t r o n g
 ards than those of the States if he deems     willed people; that is one of the reasons why
 it necessary in the public interest.          they are in management positions.
                                                 To be an effective manager requires much
 The Navy Way?                                 more than the ability to be personally pro-
                                               ductive. I t involves delegating responsibility
                                               and motivating the employees to make maxi-
   During the House Appropriations
                                               mum use of their abilities. The best way to
 Committee hearings on appropriations          obtain maximum productiveness from em-
 for the Navy for 1971, the following ex-      ployees is very simply to treat them like peo-


    IIIP: arc'oi (1 thrm reslitrt't. courtt-iy ant1 (lie-    to the vronoiiiir well-being of all Americans
    nity. ~ 4 tthe ~,niit.timr an effwtivr rxrriiti>i.       r a n he greatly enhanced by the actions of a
    innst have t h e roiiragr to IIW' rlici~i~ilinr~
                                                   whrw       ignroiis congressional watchdog agency.

    a situation tltwinnds it.                                  For my own part, I am delighted that the
                                                             legislative branch of the Government now
    Trilmee to Thomas D . Morris                             has the services of Tom Morris. He is to he
                                                             congratulated for choosing this avenue of
       At the time of the appointment of Mr.                 service, and Comptroller General Elmer B.
    Morris as Special Assistant to the                       Staats should be praised for having the fore-
                                                             sight and initiative to bring Tom Morris back
    Comptroller General, the following
                                                             to Cknernment service. Only the country can
    tribute was paid to him by Senator Wil-                  benefit.
    liam Proxmire of Wisconsin and pre-
    sented in the Congressional Record                           Enaironment of the
     (Sept. 30,1970) :                                           Procurement Oficial
       Mr. Proxniirc. Mr. Presidmt, over the paqt
    derade and a half, one of the moct hartl-
                                                                The following brief description of
    working and dedicated puhlic wr\antq hili                this environment was given by Philip
    h w n Thomas D. Morris. He is esperially                 N. Whittaker, Assistant Secretary of the
    known for hi. wnrk at thr Departmrnt nf                  Air Force (Installations and Logistics) ,
    Defense. where he served as Aszi.;tant h r e -
    tary of Defense for Installations and Logiqtics
                                                             during hearings on September 30.1970,
    and, later. as A 4 s t a n t Secretary of Defenze        before the Military Operatioiis Subcom-
    for Manpower.                                            mittee of the House Committec on Gov-
       Numerous innovations and efficiencies fol-            ernment Operations on policy changes
    lowed from Thomas D. Morris' stewardship,
    especially the establishment of the Defense              in weapon system procurement.
    Supply Agency when knocking heads together                     The environment in which these procure-
    was absolutely vital i n snhstituting a single               ment officials work is a demanding one. They
    agency for a proliferation of individual service             are ohliged to conform to a significant num-
    supply agencies which duplicated one another.                her of statutes, executive orders, and a great
       He was also responsible for the prompt and
                                                                 hndy nf other policy and procedur.11 guidance.
    vigorouq artion which the Defense Depart-
                                                                 This niaterial, it should be emphasized, is in
    ment. in the 1960's, tnok on General Account-
                                                                 a fairly constant state of change, so that it
    ing Office criticism and reports: for the vastly
    improved procediires and large savings in the                represents something of a moving target.
    disposal of exress and snrplns property; and                 Coupled w i t h this is the possibility of com-
    for the reduction of "gold plating" in the pro-              manders, auditors, service inspectors, the
    ciircment of dPfrnse itcnii.                                 CA%O,and, perhaps, a congressional com-
       Everyone 1 know gives thr highest marks                   mittce lonking over their dioulders on an
    to Thomai D. llorris for his work a t the                    after-the-fact lmsis; plus tlie pressure of the
    Pentagon in t h r area of supply and logistics.              ever-present military requirement which
    He filled one of thr t o u p l ~ r ~jobs
                                           t   in the            must he satisfied-not to mention a number
    Government.                                                  of possibly sophisticatcd and almost cer-
       Now he joins tlie Gmeral .I\rrounting Office              tainly hungry suppliers, only one of whom
    as a Special .4-i+tant to the Cnmptroller Gen-               will win the award. This, perhaps, provides
    rra1. He is doing this in a pcriod whrn the                  the heginning of an understanding of the
    work of thr C,AO in the area of defenqe cfi-                 environment confronting the individual
    rienry has taken on a new importonre and a                   huyer. These people perform a tough, de-
    new meaning. The rontrihutions to our na-                    manding task with-in          my judgment-a
    tional defense; the seruritp of the country, and             generally high level of competence.

                                                                           NEWS AND NOTES

What Is a Grant?                                     cal subdivisions as full reimbursement for the
                                                     costs incurred in paying benefits o r furnish-
   The 1971 Federal budget includes                  ing services to persons cntitled thercto under
something like $27 billion-about     13              Federal laws (as defined in the Intergovern-
                                                     mental Cooperation Act of 1968).
percent of the total budget-for grants
io State and local governments for a                 De jense Management Use of
variety of purposes. With such a sub-                Cost Data
stantial amount involved, it is well to
know just what a grant is. Fortunately,                 On April 12, 1968, the Comptroller
the Intergovernmental Cooperation Act                General submitted to the Congress a
of 1968 provides an authoritative state-             report on the GAO review of the imple-
ment of what the term means and what                 mentation of the accrual accounting sys-
it does not mean. This “definition,”                 tem for operations in the Department of
which is restated in Bureau of the Bud-              Defense { €3-159797). This report was
get Circular No. A-98 of June 5, 1970,               brought up for discussion by members
is as follows:                                       of the House Appropriations Committee
  .  . . money, or property provided in lieu         during hearings in March 1970 on
oE money, paid or furnished by the United            Defense appropriations for 3 971. The
States under a fixed annual or aggregate             following discussion between Repre-
authorization-(A)      to a State; or (B) to a       sentative Minshall of Ohio and Rob-
political subdivision of a State; or (C) to          ert C. Moot, Defense Comptroller, on
a beneficiary under a plan or program, admin-
istered by a State or a political subdivision        management use of data from the new
o i a State, which is subject to approval by         system is of especial interest:
a Federal agency; if such authorization                 Mr. Minshall. Going on with the GAO
either ( i ) requires the States or political
                                                     report a little further, they point out that
subdivisions to expend non-Federal funds as
                                                     there is a distinct lack of progress in manage-
a condition for the receipt of money or prop-
                                                     ment use of the financial data generated by
erty from the United States; or (ii) specifies       this new system. What good is there in in-
directly, or establishes by means of a formula,
                                                     stalling a n expense control accounting system
the amounts which may be paid or furnished           of this type if the information gmerated is
to States or political subdivisions, or the
                                                     not being used by management?
amounts to be allotted for use in each of
the States by the States, political subdivisions,       Mr. Moot. I t is true that we are not yet at
                                                     the point where we are getting even good. no
or other beneficiaries. The term also includes
                                                     less maximum, management benefits from
money, o r property provided in lieu of money,
paid and furnished by the United States to           this system. On the other hand, 2s this corn-
any community action agency under the                mittee said, we are moving with careful and
                                                     deliberate speed in this area.
Economic Opportunity Act of 1964, as
amended. The term does not include ( 1 )               It is now necessary for us to develop
shared revenues; (2) payments of taxes; ( 3 )        another part of the system, another phase of
payments in lieu of taxes; (4) loans or re-          the system, called output measurement, so
payable advances; (5) surplus property o r           we can compare what we are getting for the
surplus agricultural commodities furnished           cost, and ultimately develop standard costs.
as such; ( 6 ) payments under research and           We are moving i n this direction.
development contracts or grants which are              Mr. Minshall. What kind of training do you
awarded directly and on similar terms to all         plan to give to get better utilization of this
qualifying organizations, whether public or          management program?
private; or (7) payments to States or politi-          Mr. Moot. We plan to develop our pro-


g a m for output nieasuremrnt hich means          From a Marine Corps general
we plan to develop indexrs and worldoad
                                                    I like the laymen’s languase approach
measures which indicate what w r are getting
for the costs that we are incurring. As we can
                                                  used. .
develop these, we can then compare instal-        From a N a v y captain
lation to installation or military service to
military seivicv in order to stimuldte hetter       The steady trend toward acciual account-
management of all of our support operations,      ing necessitates training management per-
                                                  znnnel as well as specialized accounting per-
(Hearings, Part 3 . Operation and                 sonnel a t thig command. The publication
Maintenance, p. 48)                               should be of significant assistance.

Questions About Accrual                           From a Coast Guard admiral
Accounting                                          The sullject has been extremely well
                                                  covered and I find the method of presentation
   The GAO booklet “Frequently Asked              mozt interesting. I am certain that my staff
Questions About Accrual Accounting in             and others concerned will benefit from this
the Federal Government” published in              puhlication in applying the accrual principles
August 1970 was described in the Fall             to our operations.
1970 issue of the Review. Distribution            From an Air Force colonel
of copies of this booklet by the Los
                                                     I share your view concerning the useful-
Angeles Regional Manager, H . L. Krie-            ness of the publication in improved training
ger, to Government installation officials         of my accounting and finance operating
in that region elicited acknowledgments           people. We will make good use of the pub-
such as the following:                            lication.

                          By MARGARET
                                    L. MACFARLANE
        Chief, Legal Reference Services, Ofice of the General Counsel
Reports of the House Committee                (7) commercial import program. The
on Government Operations                      subcommittee reintensified its interest
                                              in the U.S. program in Vietnam on the
   Of some 23 oversight reports issued        basis of GAO’s findings and observa-
by this committee in the second session       tions.
of the 91st Congress, a considerable              U S . Economic Assistance to Trans-
number reflect not only significant work      portation in Latin America. House Re-
efforts by the General Accounting Of-         port No. 91-1229, issued June 25,1970.
fice but the diversification of Office ac-    This report dealt primarily with U.S.
tivities and more importantly the use         aid for construction of highways, par-
that the Congress makes of GAO                ticularly in Brazil, Bolivia, and Chile.
studies.                                      GAO, in its study for the subcommittee
   These reports are as follows.               issued on March 5, 1970, concluded
  A Review of the Inequitable Mone-            that better advance planning of expen-
tary Rate of Exchange in Vietnam.              sive construction was needed and that
House Report No. 91-1228, issued               cost estimates increased because of in-
June 25, 1970. In this report acknowl-         adequate planning. The text of GAO’s
edgment was made of seven reports              study as well as comments on AID’S
made by GAO pursuant to the request            reply to the findings and conclusions
of the Foreign Operations and Govern-           are included in the committee report.
ment Information Subcommittee on                  Foreign Postal Debts Owed to the
how well any weaknesses and irregular-          United States. House Report No. 91-
ities previously reported in the Agency         1260, issued June 30, 1970. This re-
for International Development pro-              port dealt with back postal debts of 15
grams in Vietnam had been remedied.             countries totaling $12.5 million which
The GAO reports covered (1) port sit-           were the subject of a GAO report sub-
uation, (2) claims against the Govern-          mitted to Congress on August 11, 1969.
ment of Vietnam, (3) illicit practices,         GAO had recommended that greater
 (4) land reform, (5) hamlet evalua-            coordination between the Department
 tion system, ( 6 ) budgeting, control,         of State and the Post Office Department
 and release of counterpart funds, and          would enable the United States to COI-

lrct amounts owed for international         1970. This report was based on a con-
mail service. The committee strongly        tinuing study beginning in 1968 with
urged implementation of the ( ; A 0 rec-    a GAO report on Army supply activi-
ommendation that payment of U S .           ties in Vietnam. The report reflects
postal obligations be made in L1.S.-        the findings detailed by GAO in a study
owned excess foreign currencies rather      issued August 14, 1970, entitled “Need
than in U S . dollars whenever possible.    for Improving the Program for Use and
   A Review of Sted Purchased for the       Redistribution of Excess Materiel in the
Commercial Barge Construction Pro-          Pacific Area.” I n the committee report
gram in Vietnam. House Report No.           acknowledgment was made of GAO in-
91-1382, issued October 8, 1970. CAO        formation covering the major weapons
developed information concerning fail-      systems of the Department of Defense.
ure of the Agency for International De-        The Role and Effectiveness of Fed-
velopment to phase a commercial barge       eral Adtisory Committees. House Re-
construction program so that steel pur-     port No. 91-1731, issued December 11,
chased by AID at a cost of more than        1970. The committee in its recommen-
$1 million cnrild he used without delay     dation for terminating inactive and ob-
and without the resultant deterioration     solete committees stated that it was in
and loss.                                   complete agreement with the Comptrol-
   Commercial (Commodity I Import           ler General’s statement that-
Program for Vietnam iFollowup In-              One of the more significant problems is
vestigation ) . House Report No. 91-        in the danger of committees being permitted
                                            to remain in existence beyond their useful-
1583, issued October 8. 1970. This re-      ness.
port was based on GAO onsite reviews           If the continued existence of a committee
and a status report relating to the com-    serving no useful purpose involves staff and
mercial import program. The report          operating expenses, then an obvious waste
concerned foreign exchange spending.        of funds occurs. Even if continuation is in
                                            name only. involving no staff o r expenses.
licensing of importers, use of commod-      it is undesirable merely hecause of the con-
ity analysts in determining require-        fusion i t creates both in Government and in
ments, and consolidated procurements        theminds of the public.
through General Services Administra-           For this reason alone there needs to be a
tion.                                       periodic and systematic review by both the
                                            agency head and the Office of Management
   Civilian Medical Program for Viet-       and Budget as to the continued need for inter-
nam. House Report No. 91-1584, is-          agency and public advisory committees, to-
sued October 8, 1970. The field work        gether with a review of their membership and
incident to an overall evaluation of the    staff support.
civilian medical program in Vietnam
                                            GAO Report on Alcoholism
was performed by GAO and the infor-
mation assembled provided the basis           At the request of the Special Sub-
for the committee report.                   committee on Alcoholism and Narcotics
   Military Supply Systems: Lessom          of the Senate Labor and Public Wel-
from the Vietnam Experience. House          fare Committee, GAO made a study to
 Report No. 91-1586, issued October 8;      determine the savings that would re-

                                                                  H E A R I N G S A N D LEGISLATIOW

sult from the establishment of an alco-                 in accordance uith the principles and pro-
holism program for Federal civilian                     cedures applicalilt: to connnercial corporate
                                                        transactions an11 under ~ u c hrules and repu-
employees. ( F o r a further discusion of
                                                        lations a5 may I)e prescrilrd by the Conip-
this report, see p. 87.) The committee                  troller General. .4ny such audit shall be con-
had GAO‘s report printed as a commit-                   ducted at the place or placcs where accounts
tee print under the title “Substantial                  of the Corporation are normally kept. The
Cost Savings From Establishment of                      representative of the Comptroller General
                                                        shall have access to all books, accounts, rec-
Alcoholism Program for Federal Civil-                   ords, reports, files, and other papers, things,
ian Employees.” The report was re-                      or property belonging to or in use by the
ferred to in both the Senate and the                    Corporation pertaining to its financial
House during the debate on the legisla-                 transactions and necessary to facilitate the
tion enacted as the Comprehensive Al-                   audit, and they shall be afforded full facili-
                                                        ties for \erifying transactions with the bal-
cohol Abuse and Alcoholism Preven-                      ances or securities held by depositories, fiscal
tion, Treatment, and R e h a b i l i t a t i o n Act    agent>, d i d custodians. A l l such books, ac-
of 1970.                                                counts, records, reports, files, papers, and
                                                        property of the Corporation shall remain in
Legislative Reorganization Act                          possession and custody of the Corporation.
of 1970                                                     ( B ) A report of each such audit shall be
                                                        made by the Comptroller General to the
  The signing of the Legislative Reor-                  Congress. The repor: to the Congress shall
                                                        contain such comments and information as
ganization Act on October 26, 1970,                     the Comptroller General may deem necessary
Public Law 91-510, with provision for                   to inform Congress of the financial operations
greater assistance by GAO to the Con-                   and condition of the Corporation, together
gress represented a landmark piece of                   with such recommendations with respect
legislation. The provisions of this law                  thereto as he may deem advisable. The report
                                                         shall also show specifically any program, ex-
are analyzed by L. Fred Thompson                        penditure, or other financial transaction or
on page 24.                                              undertaking observed in the course of the
                                                         audit, which, i n the opinion of the Comptrol-
Rail Passenger Service Act                               ler General, has been carried on or made
of 1970                                                  without authority of law. A copy of each
                                                         report shall be furnished to the President, to
   On October 30, 1970, the President                    the Secretary, and to the Corporation at the
signed the Rail Passenger Service Act                    time submitted to the Congress.

of 1970 (Public Law 91-518). This                           Hearings on Cost Accounting
act provided for the establishment of a                     Standards Board Funds
mixed-ownership Government corpora-
tion subject to the Government Corpo-                          The Comptroller General testified on
                                                            September 24, 1970, and on November
ration Control Act. The law contained
                                                            24, 1970, before the House and Sen-
the following audit and access to rec-
                                                            ate Appropriations Subcommittees on
ords provision:
                                                            funds for the establishment of the
  (2) ( A ) The financial transactions of the               Cost Accounting Standards Board
Corporation for any fiscal year during which
                                                            created pursuant to Public Law 91-379.
Federal funds are available to finance any
portion of its operations may he audited by                 (Other participants: Messrs. Newman,
the Comptroller General of the United States                Dembling, and Cornctt.)

                                          &) ROCESSIMG
ADP for the Congress                           of the Working Group and an analysis
                                               of the information needs of the House.
  In connection with the study being
                                                Since the delivery of the first progress re-
made by the Committee on House Ad- port in October 1969, the Working Group has
ministration to determine the feasi- conducted a comprehensive survey of the in-
bility of providing a computer-based formation and analysis needs of the House.
information system for the House of There was participation by 284 Congressional
Representatives, the Office of Policy offices, including direct contributions from
                                         105 Members of Congress.
and Special Studies has provided staff      Extensive discussions have been held with
 support throughout the effort which staffs of the committees and officers of the
started in April 1969. Edward 1. House. Discussions have also been held with
Mahoney, deputy director, has been executive agencies, state legislative and ex-
serving as chairman of the Working ecutive officials, and many private organiza-
                                         tions that provide information support for the
Group estahlished by the committee to House.
carry out the committee’s studies. Rep-     Based on our detailed analyses of the stated
resentatives from the Library of Con- information needs, there are some general
gress and the Office of the Clerk of the conclusions that can he drawn about the
                                         House user problems and needs.
House also serve as members of the
                                            1. The need for evaluative and interpre-
Working Group.                           tive information is very intensely felt. Infor-
   Tn October 1970, the committee mation covering national issues and possible
adopted the Second Progress Report of alternative solutions was held out as the most
the Special Subcommittee on Electrical pressing area in need of attention. Examples
and Mechanical Office Equipment of the expressed needs follow:
                                               (a) Impact of proposed legislation on
which had been prepared by the Work-
                                            existing Federal law and programs, and
ing Group. This report provides detailed
                                            the economy in general.
information on the status of the con-
                                               ( b ) Impact of proposed legislation on
tinuing planning and research for the       Congressional districts.
development of information and analy-          (c) Impact of existing Federal pro-
sis support services for the House.         grams on each district.
   In transmitting the report to the           ( d ) Information for evaluation of Fed-
                                            eral programs.
chairman of the Special Subcommittee
                                               ( e ) Information on the availability of
on October 8, 1970, the chairman of         alternative information sources and expan-
the Working Group provided the fol-         sion of these to meet Memhers’ and com-
lowing statement regarding activities       mittees’ needs.

                                                             AUTOMATIC DATA PROCESSING

     ( f ) Expansion of independent analybis       of legislative data systems with execuiivc and
  capabilities.                                    private sector systems.
     ( g ) Identification of knowledgeable and           4                        .%

  responsible sources of information with up-         The Working Group is looking at each
  to-date names, addresses and telephone           expressed need and each potential service from
                                                   the perspective of (1) the potential users:
     ( h ) Supreme Court decisions relevant to
                                                    1.2) the manager of the service; and (3) the
  pending legislation.
                                                   systems designers, implementers, and opera-
   2. The need for procedural information          tors of the services. Consideration is being
was less intensely felt but was given the high-     given to the laws and precedents of the House,
est priority for early implementation. This         the responsibilities of existing organizations
type of information is susceptible of csonver-      and personnel and the changes made by the
sion to automatic handling more easily than         Legislative Reorganization Act of 1970.
is the broader based information on national
issues involving the evaluative and interpre-           The report also contains informalion
tive services.                                        on the Current Working Group Plan-
      ( a ) An information system to maintain         ning Phase which, with contractor sup-
   current, reliable, complete and accessible         port, is being carried out by a staff of
   information ahout the status and content           approximately 30 professionals.
   of each item of legislation before the House
   and in House committees; and to provide
                                                      Special Report on Automated
   more expeditious access to legislative his-
   tories. Summaries of the status and group-         Addressing and Mailing
   ings of measures by subject must be
   provided.                                             The committee in December 1970
       ( b ) Status of legislation affecting the      also adopted the Working Group's spe-
   congressional district.                            cial report containing recommenda-
      (c) Information about Federal grants,           tions to install an automated addressing
   projects, loans and contracts for the con-
                                                      and mailing service for Members of the
   gressional district-programs in existence,
   availability of funds, and status of indi-         House. Also adopted was a systems de-
   vidual applications by constituents.               sign plan and an implementation plan
   3. The need €or the actual content of docu-        to install this new service as rapidly as
ments is far less than for evaluative, interpre-      funding arrangements can be worked
tive and procedural information-Congress-
men and key staff are unable, in the available
time, to read all the actual documents that arc          Other GAO staff members who have
 provided to them. On the other hand, the com-        served on the Working Group are:
mittees, the offices of the House, the Legisla-
                                                        Office of Policy and Special Studies:
tive Reference Service, the General Account-
ing Office, and the Government Printing Office               Kenneth W . Hunter
 are concerned with content and historic in-                 Leslie D. Adams
formation and maintain records and files on                  Peter A. Smith
these matters.                                               James G. Villiams
   Cutting across all the information and anal-
ysis needs are the concern of Members and               Civil Division :
staff for such factors as the effect of improved             Judith L. Carrier
services on existing organizational relation-
                                                        Washington Regional Office:
ships within the legislative branch, the confi-
 dentiality of certain information, the arcuracy         Pasquale L. Esposito
and reliability of data, and the compatibility           Albert F. Johnson

       41%933-71-7                               97
Computer Conjerence                          Brooks pointed out that the computer
                                             industry must discard the price um-
    l'hc 1970 Fall Joiirt Computer Con-
                                            brella established by the lead manufac-
ference sponsoretl by the American
                                            turer and move toward true competi-
 Federation of Information Processing
                                            tion. He also stated that industry should
 Societies ( AFIPS) was held in Hous-
                                            make computers more user-oriented by
ton, Tex., on November 17-19, 1970.
                                             developing sophisticated software that
Among the 21,000 who attended were
                                            will enable users to operate their sys-
Charles R. Shinikus of the Office of
                                            tems without extensive training. Dr.
Policy and Special Studies and Robert
                                            Grosch said that the U S . Government
J . Kraus of the GAO Data Processing
                                            could force adoption of standards that
                                            would lead to more competition, lower
    Most of the numerous technical pres-
                                            prices, and more efficient use of com-
entations were published in the AFIPS
                                            puters, but at the same time it should
Conference Proceedings, Volume 37,
                                            not impede progress. Mr. Cunningham
which is available for reference by GAO
                                            reported that the Government now has
staff members in the Office of Policy
                                            5,277 computers installed.
and Special Studies.
                                               Messrs. Poppa and Putnam pointed
    The technical program included a
                                            out that unrealistic benchmark require-
panel discussion on "The Effects of
Government Requirements on the Com-         ments, complicated bidding procedures,
puter Industry." Panel members were         and payment delays by the Government
Congressman Jack Brooks (Texas),            increase costs on Federal computer pro-
Herbert Grosch of the National Bureau       curements to a point where the larger
of Standards, Joseph Cunningham of          company is forced to pass on these costs
the Office of Management and Budget,        to business and Government users and
James Poppa of Honeywell, and Grady         the smaller company is forced out of
Putnam of UNIVAC. Congressman               Government sales.

                                                &N A LYS I s

   The Systems Analysis Group of the        pants to write their own programs.
Office of Policy and Special Studies and    Most training courses in industry and
the Office of Personnel Management          in Government have concenlrated al-
have jointly developed a training course    most exclusively on either computers
in systems analysis concepts and tech-      and computer concepts or on analytical
niques that is unique in Government         techniques. This GAO course focuses
training courses. Since the spring of       attention on the use of both computers
1969 a total of 141 GAO supervisors         and techniques.
and audit managers have participated            The second unique feature is the use
in this 2-week course.                      of a comprehensive GAO-oriented case
   The primary objective of the course      which requires the participants to use
is to acquaint the participnnts with a      a team approach, various analytical
variety of analytical concepts and tech-    techniques, and time-shared computers.
niques that have not been commonly          The case is hypothetical in order to
used by GAO in the past but which are       focus attention on selected analytical
becoming increasingly comnionplace in       problems and to make it possible to
Federal agency management and de-           formulate a solution within 2 weeks. It
cisionmaking. The concepts and tech-        concerns evaluations of three different
niques covered in the course will           manpower training programs that have
become increasingly important to GAO        the same objectives. The result of each
in its evaluation of agency management      team’s analysis is an evaluation of (1)
and in its reviews of the results and       certain costs, (2) the effectiveness, and
efficiency of Federal programs.              ( 3 ) alternative program approaches to
   Two features of the course make it       the hypothetical manpower training
unique. The first is the introduction to    program. On the last day of the course
and use of several time-shared com-         each team makes a presentation of its
puters to use analytical techniques to      findings to the rest of the class.
solve problems. Each participant is             The case is distributed early during
taught to operate a teletype terminal       the training course in order that the
which is connected to a computer via        various discussions can be related to the
 an office telephone. The time-shared       case by both the instructors and the
computer systems used have literally        participants. Experience to date indi-
dozens of “canned” programs which           cates that the teams require signifi-
make it unnecessary for the partici-        cantly more time to model the problem


and to identify the questions I\ hich can     0   Marginal analysis
and should be addressed analytically              Benefit-cost and cost-effective
than to make whatever calculations are            analysis
needed whether manually or on a tinie-        e   Primary and secondary benefits
shared computer. For this reason the          0   Shadow pricing and discounting
course has changed somewhat over a            e   Improvement curves
period of time to place more emphasis         0   Index numbers and time series
on the modeling aspects of program            0   Cost analysis in defense and civil
evaluation.                                       programs
   The subjects discussed during the           In order to meet the needs and in-
course, most of which are directly re-      terests of higher GAO officials, a 6-day
latable to the manpower training case,      seminar in systems analysis has been
are:                                        developed for associate and assistant
  0   Variables, models. and useful         directors. Four days are spent in con-
      model forms                           ceptual coverage of the subject matter
      Criteria selection                    taught in the 2-week course. Two days
  0   Statistical sampling                  are spent in discussions led by the
  0   Hypothesis testing                    various staff members of the Systems
  0   Analysis of variance and Chi-         Analysis Group. These discussions pro-
      Square tests                          vide up-to-the-minute knowledge of
      Regression and correlation            current applications of systems analysis
      Linear programming                    being made in GAO, and this sets the
      Inventory models                      stage for discussions about the future
      Simulation and queuing                use of systems analysis in the GAO.

                        GAQ        Staff Changes

                              J. Edward Welch

   J. Edward Welch, Deputy General Counsel, retired on January 9, 1971, after
more than 35 years of dedicated service in the General Accounting Office.
   Mr. Welch came to GAO in 1935 and served in the Audit Division until 1940
when he moved to the Claims Division in the capacity of examiner. In 1942 he
was appointed as an attorney in the Office of the General Counsel. I n 1949 he was
designated as Assistant General Counsel and in 1956 as Associate General Counsel.
In 1958 he was selected to serve in the newly created position of Deputy General
Counsel, the position that he held until his retirement.
   Mr. Welch attended Drexel Institute and received his B.A. degree in business
administration from the University of Maryland. He received his law degree from
Georgetown University in 1939. While still in law school he took the District of
Columbia bar examination and was admitted to practice before the US. District
Court for the District of Columbia in 1938.
   In the Office of the General Counsel, Mr. Welch was assigned to contract work
where his expertise was soon recognized. He represented GAO on the interagency
committees that drafted the Armed Services Procurement Regulation and the
Federal Procurement Regulations and continued to be an active participant on the
procurement committees revising and updating Government-wide contract guide-


   Mr. Welch appeared frequently before conyressional committees on behalf of
the Office to testify on p r n p s e d legislation such as the bill for the Commission on
Government Procurenient, thp bill which became the Truth in Negotiations Act,
arid on small business procurement and labor matters. He has been a frequent
contributor to legal periodicals and has authored a briefing paper on “Mistakes
in Bid.” His articles include “GAO’s Role in Patent Infringement in Government
Procurements,” which appeared in the William and Mary Law Review ; “Respon-
sibilities, Functions and Duties of a Contracting Office”; “Mistakes in Bids”;
“Subcontractors’ Claims Against the Government,” which appeared in various
issues of the Federal Bar Journal: and “Formal Advertising Versus Negotiation,”
which appears in this issue ,of the GAO Review (see p. 15).
   In 1969, Mr. Welch received the GRO Distinguishcd Service Award.
   I n announcing Mr. Welch’s retirement, Paul G. Dem bling, General Counsel,
stated: “Few men have had as great an impact in the field of Government contracts
as Jed Welch.” Not only will GAO miss Mr. Welch’s legal services but it will miss
his calm understanding. and his great kindliness is a legacy for all who have had
the good fortune of serving with and for him.

                                                          GAO STAFF CHANGES

                             Joseph   D. Comtois

   Joseph D. Comtois was designated assistant director for systems analysis in
the Office of Policy and Special Studies, effective November 1, 1970.
   Mr. Comtois served in the U S . Air Force from 1951 to 1954, and joined the
General Accounting Office in 1958 upon graduation from the University of
Connecticut where he received a B.S. degree with a major in accounting. He
attended The George Washington University Graduate School of Business. He
is a CPA (Virginia) and a member of the American Institute of CPAs, the
National Association of Accountants, the Federal Government Accountants
Association, and the Association of Public Policy Analysis.
   In 1968 he was awarded a fellowship for graduate study at the Massachusetts
Institute of Technology under the Educational Program in Systematic Analysis
sponsored by the National Institute of Public Affairs. Upon completion of study
at MIT in 1969, he was transferred from the Civil Division to the systems analysis
group in the Office of Policy and Special Studies.


                          Harold 1. D‘Ambrogia

  Harold J. D’Amhrogia was designated assistant regional manager of the San
Francisco Regional Office, affective November 1,1970.
  In 1954: Mr. D’Ambrogia received a bachelor of science degree in business
administration from the University of San Francisco. I n 1968 he attended the
Executive Program at Stanford University.
  Mr. D’Amhrogia joined the San Francisco Regional Office in 1954. He has
been assigned there since that time and was in charge of the Honolulu Suboffice
from 1963 to 1965.
  He is a CPA (California) and a member of the American Institute of Certified
Public Accountants. He is serving as a subcommittee chairman on the Management
Services Committee of the San Francisco Chapter of the California Society of
CPAs and also as second vice president of the §an Francisco Chapter of the
Federal Government Accountants Association.

                                                          GAO STAFF CHANGES

                               L. Mitchell Dick

   L. Mitchell Dick was designated as a senior attorney in the Oflice of the
General Counsel, effective November 1,1970.
   Mr. Dick joined the General Accounting Office in the Transportation Division
in 1948 and has been on the legal staff of the Office of the General Counsel since
   Mr. Dick served in the U S . Navy from 1944 to 1946. He attended Hampden-
Sydney College and received a bachelor of arts degree in economics from
Princeton University. He received an LL.B. degree from The George Washington
University and was admitted to the Virginia State Bar in 1959.
   He has been admitted to practice before the Interstate Commerce Commission,
the U.S. Court of Claims, the Virginia Supreme Court of Appeals, the Supreme
Court of the United States, and is a member of the Federal Bar Association. He
received the Meritorious Service Award in 1969.

                                Seymour Efros

   Seymour Efros was designated as a senior attorney in the Office of the General
Counsel, effective November 1,1970.
  Mr. Efros joined the General Accounting Ofice in March 1959 and was assigned
as a contract attorney in the Office of the General Counsel in 1960. He was grad.
uated from City College of New York in 1952 with a B.B.A. degree and received
his LL.B. degree in 1955 from Harvard Law School. Mr. Efros served with the
U S . Armed Forces from 1956 t o 1958.
   Mr. Efros was admitted to the New York State Bar in 1956. He is a member
of the Federal Bar Association and the N w York County Lawyers Association.

                                                        GAO STAFF CHANGES

                            Thomas    J.   Gallagher

   Thomas J. Gallagher was designated as a senior attorney in the Office of the
General Counsel, effective November 1: 1970.
   Mr. Gallagher joined the General Accounting Office in 1936 and served in the
former Audit Division as an auditor and contract examiner before entering the
military service in 1943. He served in the U S . Army Air Corps from 1943 to
1946. In 1946 he returned to the General Accounting Office and was transferred
to the Claims Division as a claims examiner. In 1948 he moved to the Office of
the General Counsel and has served there as an attorney since that date.
   Mr. Gallagher attended Columbus University Law School (now merged with
Catholic University) and received an LL.B. degree in 1941, He has been admitted
to practice before the District Court of the United States for the District of
Columbia, the U S . District Court of Appeals for the District of Columbia, and
tho Supreme Court of the United States. He is a member of the Federal Bar Asso-
ciation. In 1961, he received the Meritorious Service Award.


                                Joseph Goldman

   Joseph Goldman was designated as an assistant director in the Transportation
Division, effective November 1, 1970. In this position he shares with the associate
director for transportation and traffic management reviews responsibility for this
category of work in all agencies of the Federal Government.
   Mr. Goldman entered Government service in 1940 and served in the U S . Army
during World War 11. He attended American University and has completed the
executive program of the Graduate School of Business, Columbia University.
   Since joining the General Accounting Office in 1945, Mr. Goldman has held
positions of increasing responsibility in the various phases of transportation audit,
staff, and management activities of the Transportation Division. He is a member
of the Delta Nu Alpha Transportation Fraternity. He received the Meritorious
Service Award in 1970.

                                                       GAO S T A F F C H A N G E S

                             Rita   D. Hornyak

  Mrs. Rita D. Hornyak was designated as a senior attorney in the Office of the
General Counsel, effective November 1,1970.
  Mrs. Hornyak is a graduate of Boston Business School and the National Uni-
versity of Law from which she received her LL.B. degree. She is a member of the
bar of the District of Columbia.
  Mrs. Hornyak entered the Federal service in 1940 with the Interstate Com-
merce Commission and began her service with the General Accounting Office
in July 1943 as an adjudicator in the Claims Division. In June 1970 she was
awarded a Meritorious Service Award as an attorney-adviser in the Office of the
General Counsel.


                                Darrell L. Jones

  Darrell L. Jones was designated as a senior attorney in the Office of the General
Counsel, effective November 1,1970.
  Mr. Jones started with the General Accounting Office in 1938 as a messenger.
He served with the Army Air Corps from 1940 to 1945 and returned to the
General Accounting Office in 1945 as a transportation rate specialist in the Claims
and Transportation Divisions. In 1932 he transferred to the Office of the General
Counsel as an attorney-adviser.
  Mr. Jones was graduated with an LL.B. degree from The George Washington
University Law School in 19.50. He is a nieniber of the bar in the District of
Columbia (1950) and was admitted to practice before the Supreme Court of the
United States in 1967.

                                                        GAO STAFF CHANGES

                         ,   . _..

                                     Samuel Kleinbart

   Samuel Kleinbart has been designated as assistant regional manager of the
Los Angeles Regional Office, effective September 8, 1970.
   Mr. Kleinbart attended Northwestern University and Los Angeles City College.
He is a CPA (California) and a member of the American Institute of Certified
Public Accountants and the California Society of Certified Public Accountants.
   Since joining the General Accounting Office in 1942, Mr. Kleinbart served in
the Chicago and Los Angeles Regional Offices of the Field Operations Division
and more recently as an assistant director in the International Division. He re-
ceived a Meritorious Service Award in 1959 and a Superior Performance Award
in 1965.


                              lames   Y. Kurihara

   James Y. Kurihara was designated as an assistant director in the International
Division, effective November 1, 1970. He will be responsible for reviews of trade
and agricultural development programs and other international activities of the
Departments of Agriculture and Commerce.
   Mr. Kurihara served in the U.S. Army from 1946 to 1948. He graduated from
Michigan State University in 1952 and is a certified public accountant (Illinois).
   Prior to coming with the General Accounting Office, he was associated with
a CPA firm in Chicago. In 1357, Mr. Kurihara joined GAO in the Chicago
Regional Office and has served in the Far East Branch in Tokyo and in the Defense
and International Divisions. His Government career also includes service with
the Office of the Inspector General, Foreign Assistance, Department of State,
and the Agency for International Development.

                                                            GAO STAFF CHANGES

                                John   M. Loxton

   John M. Loxton was designated as an assistant director in the Transportation
Division, effective November 1, 1970. In this capacity he will direct the exploration
and exploitation of the use of automatic data processing to achieve greater
efficiency and economy in the activities of the Transportation Division. He will
also direct reviews of transportation-oriented ADP applications in the various
Government agencies.
   Mr. Loxton joined the General Accounting Office in 1941. He entered the
Transportation Division’s training program in 1950 and has served in that
Division since then in positions of increasing responsibility. He has been respon-
sible for designing and implementing all of the Division’s present computer
   Mr. Loxton received a bachelor of science degree from American University
in 1959 and a master of business administration froin the same school in 1963.
He was the recipient of the Career Development Award in 1969.

      412-933-71-5                      113
                            James   E. Masterson

  James E. Masterson was designated as a senior attorney in the Office of the
General Counsel, effective November 1: 1970.
  Mr. Masterson joined the Office of the General Counsel in 1956. He received
a bachelor of science degree from Berea College in 1952, a bachelor of law
degree from The George Washington University in 1956, and a master of arts
degree from American University in 1963. He is a member of the Federal Bar
Association and has been admitted to practice before the District Court of the
United States for the District of Columbia and the U.S. Court of Appeals for the
District of Columbia.

                                                       GAO STAFF CHANGES

                           Edward C. Messinger

   Edward C. Messinger was reassigned to the Civil Division as an assistant
director, effective September 20, 1970. Formerly, he was an assistant regional
manager in the Chicago Regional Office.
   Mr. Messinger served in the U.S. Army during World War 11. He graduated
with distinction from Northwestern University with a B.B.A. degree. He was a
staff accountant for several years with a national public accounting firm and
joined the Chicago Regional Office in 1957.
   Mr. Messinger is a CPA (Illinois) and a member of the American Institute
of Certified Public Accountants, the National Association of Accountants, the
American Management Association, the Society for Personnel Administration,
the American Society of Public Administration, and the Federal ADP Council.


                               J. Dexter    Peach

   J. Dexter Peach was designated as an assistant director in the Civil Division,
effective November 1, 1970. In this position, Mr. Peach is responsible for the
development and review of all reports on the results of the GAO examinations at
the Department of Agriculture.
   Mr. Peach received a bachelor of science degree with a major in business
administration from the University of South Carolina in 1960 and is presently
attending the Graduate School of The George Washington University. He is a
CPA (Virginia) and a member of the American Institute of CPAs and the
National Association of Accountants. He received the GAO Career Development
Award in 1969.

                                                         GAO STAFF CHANGES

                               Ted M. Rabun

   Ted M. Rabun was designated as assistant director for systems analysis in the
Office of Policy and Special Studies, effective November 1,1970.
   Mr. Rabun graduated cum Zaude with a bachelor of science degree from the
University of Florida in 1951 where he majored in accounting. In 1959 he earned
a master of science degree from the University of Illinois. From 1959 to 1962
he was assistant professor of accounting at the Pennsylvania State University.
   I n 1966-67 Mr. Rabun attended the Educational Program in Systems Analysis
at the University of Maryland where he studied economics and operations research.
He is a CPA (Illinois) and a member of the American Institute of CPAs, the
National Association of Accountants, the American Accounting Association, and
Beta Gamma Sigma and Beta Alpha Psi honorary fraternities. He has been with
the General Accounting Office since 1962, and in 1970 he received the GAO
Meritorious Service Award. He had prior experience with a firm of certified
public accountants. He served in the U S . Air Force from 1952-55.


                               Norton   H. Schwartz

      Norton H. Schwartz was designated as a senior attorney in the Office of the
    General Counsel, effective November 1,1970.
      Mr. Schrrartz began his service with the General Accounting Office in the
    Ofice of the General Counsel on August 1, 1955. He received the Meritorious
    Service Award in 1962,1963, and 1967.
      He has a B.A. degree from New York University and a J.D. degree cum Eade
    from the University of Miami. He has been admitted to the bar in Florida, New
    York, and the District of Columbia. He is a member of the Federal Bar

                                                           GAO STAFF CHANGES

                              Gilbert F. Stromvall

   Gilbert F. Stromvall was designated as an associate director in the International
Division, effective October 18, 1970. I n that capacity, he will be responsible for
directing reviews of foreign assistance programs. food for peace programs, trade
expansion programs, and countrywide reviews of U S . assistance to countries
in Africa, the Near East, and South Asia.
   Mr. Stromvall served in the U.S. Army from 1946 to 1949. He was graduated,
with high honors, from the University of Idaho in 19.54, where he majored in
accounting. He studied international economics at the State Department’s Foreign
Service Institute in 1968.
   Since joining the General Accounting Office in 1954, Mr. Stromvall has had a
wide variety of assignments and responsibilities in the Los Angeles Regional
Office, the Far East Branch in Tokyo, and in Washington. He has been associated
with the International Division since it was formed in 1963.
   Mr. Stromvall received a Meritorious Service Award in 1967 and a Career
Development Award in 1970. He is a member of the Federal Government
Accountants Association, the American Economic Association, and the Royal
Economic Society.


                               Harold   L. Stugart

   Harold L. Stugart was designated as an assistant director in the Civil Division,
effective November 1,1970. In this position he is responsible for GAO accounting
and auditing work in the Office of Education, Department of Health, Education,
and Welfare.
   Mr. Stugart served in the U S . Navy from June 1954 to October 1957. In 1962
he graduated from Lycoming College, Williamsport, Pa., with a bachelor of
science degree in accounting. He is a CPA (Virginia) and a member of the
American Institute of CPAs and the National Association of Accountants. He
received a Meritorious Service Award in June 1967 and the GAO Career Develop-
ment Award in June 1968.

                                                           GAO STAFF CHANGES

                               Vasil S. Vasiloff

   Vasil S. Vasiloff was designated as a senior attorney in the Office of the General
Counsel, effectiveNovember 1,1970.
   Mr. Vasiloff attended Alma College in Michigan and received a E.A. degree
from the University of Michigan in 1953. He received his LL.B. degree from the
University of Michigan Law School in 1956.
   Mr. Vasiloff served in the U.S. Army from 1956 to 1958 and began his service
with the General Accounting Office in the Office of the General Counsel as an
attorney in 1958. From 1959 to 1960, Mr. Vasiloff was associated with several
private firms and returned to the Office of the General Counsel in 1960. He has
received three Meritorious Service Awards during his service with the General
Accounting Office.
   Mr. Vasiloff has been admitted to practice before the Supreme Court of Michigan
and the U.S. Court of Claims. He is a member of the Michigan State Ear.

G A 0 S'I'A14'F C HANG 1:. S

                               Milton    E. Wertz

   Milton E. Wertz was designated as a senior attorney in the Office of the General
Counsel, effective November P7 1970.
   A h . Wertz is a graduate of the Law School of the University of Montana. He
also received postgraduate instruction at the Law School of The George
Washington University.
   He was originally appointed to a position in the former Audit Division of the
General Accounting Office in 1935. He served in various positions in that division
and in the Claims Division until he was ordered to active duty with the U S .
Army in 1941. After World War 11. he returned to the Claims Division in 1946
and was transferred to the Office of the General Counsel. He was later transferred
to the Office of the Comptroller General where he was serving as a legislative
attorney when ordered to active duty with the U.S. Army during the Korean War
in September 1951. Mr. Wertz returned to GAO in June 1967, after military
service, and was appointed as an attorney-adviser in the Office of the General
   Mr. Wertz has been admitted to practice before the Montana Supreme Court,
the U S . District Court for the District of Columbia, the U.S. Court of Military
Appeals, and the Supreme Court of the United States.

                       Professional Activities
Ofice of the Comptroller                          Joint Conference on Defense Con-
General                                       tracts Accounting sponsored by lhe
                                              New York State Society of CPAs and
  The Comptroller General, Elmer B.           the New York Chapters of the Fed-
Staats, addressed the following groups :      eral Government Accountants Asso-
      The Joint State/Federal Financial       ciation and the National Association
  Management Conference, Washing-             of Accountants, New York City, on
  ton, D.C., sponsored by the National        “Cost Accounting Standards,’’ No-
  Association of State Auditors, Comp-        vember 19.
  trollers and Treasurers; the Coun-              National Institute of Public Affairs
  cil of State Governments; and the            Conference on Federal Action and
  Joint Financial Management Im-               the People in Our Cities in Atlanta,
  provement Program on “Progress in            Ga., on “Purposes and Prospects” of
  the Financial Management of Fed-             the conference, December 8.
  eral Grant-in-Aid Programs,” Octo-               Center for the Study of Applied
  ber 9.                                       Ethics, Graduate School of Business
      Regional conference of the Ameri-        Administration, University of Vir-
  can Society of Public Administration         ginia, Charlottesville, Va., on “Are
  in Topeka, Kans., on “The Nation’s           Ethical Considerations Relevant in
   Interest in Improving State and             These Times of Changing Values?”
   Local Government,” October 23.               December 11.
      Joint meeting of the Federal EX-         The Assistant Comptroller General,
   ecutive Board and the Federal Gov-        Robert F. Keller:
   ernment Accountants Association.                Spoke before the St. Louis Chapter
   Kansas City, Mo., on “Some Recent            of the National Contract Manage-
   Efforts to Improve Management in             ment Association, St. Louis, Mo., on
   the Executive Branch,” October 23.           “GAO Activities in the ’TO’S,” Sep-
       The 17th Annual School of Busi-          tember 10.
    ness Administration Alumni Insti-              Attended the National Institute of
    tute, University of Minnesota, on           Public Affairs Industry-Government
    “Changing Priorities in Federal Pro-        Seminars on “Shaping Our National
    grams,,, November 12.                       Priorities,” October 7, and “Con.
       Executive dinner meeting of the          sumer Power-Economic and Politi-
   Department of Transportation on              cal Implications,” November 4.
    “Plans and Concepts of the GAO                 Spoke before the Machinery &
    and Impressions of the Department,”         Allied Products Institute Government
    November 17.                                Contracts Council on the Cost Ac-


  counting Standards Board. a GAO             IFilliarn A. Newman, IT., Special
  profit studj-, “Should Cost” concepts,   Assistant to the Comptroller General:
  the Government Procurement Coni-              Discussed Public Law 91-379,
  mission, and the Ribicoff Bill: Octo-      which established the Cost Account-
  ber 26.                                    ing Standards Board, at the Federal
     Was luncheon speaker at the (:on-       Audit Executives Council meeting at
  ference on Contractor Remedies and         Fort McNair, September 30.
  Costing of Claims Under State, Local          Participated in a presentation, co-
  and Federal Government Procure-            sponsored by the Central Florida
  ment, sponsored by the American            Chapter of the National Estimating        ,
  Bar Association, the Federal Bar           Society and the Orlando Chapter of
  Association, the Philadelphia Bar          the National Contract Management
  Association, and the National Con-         Association. on recent developments
  tract Management Association. Phil-        in the establishment of cost account-
  adelphia, Pa., December 8.                 ing standards for negotiated defense
  Lawrence 1. Pouieis, Assistant to the      contracts, at Orlando, Fla., Octo-
Comptroller General:                         ber 6.
     Spoke at the Federal Program               Participated in a discussion of
  Managenlent Seminar at the Execu-          current subjects of mutual concern
  tive Seminar Center. Icings Point.        to the Government and industry at
 N.Y., on October 6 on “Congression-        the Government/Aerospace Indus-
  al Oversight and the Role of the Gen-      tries Association joint sessions at the
  eral Accounting Office.”                   annual meeting of AIA Procurement
     Spoke before the Third Confer-          and Finance Council at San Fran-
  ence on Urban Affairs for Federal          cisco, Calif., October 15.
  Officials, sponsored by the National          Participated in a discussion of the
 Institute of Public Affairs, held in       legislation establishing the Cost
                                            Accounting Standards Board at the
  San Francisco on October 25.
                                            Joint Conference on Defense Con-
   Harry C . Kensky, director, Program      tracts Accounting, sponsored by the
Planning Staff, spoke before the Civil      New York State Society of Certified
Service Commission’s Legislative Op-        Public Accountants, the National
erations Roundtable for Federal Ad-         Association of Accountants, and the
ministrators at the Rayburn Building        Federal Government Accountants
on June 25. On October 6 he spoke to        Association. in New York City.
the participants in the Civil Service       November 19.
Commission’s Institute in the Legisla-
tive Function.                             Ofice of the General Counsel
   Rodney E . Espe, of the Program           Paul G . Dembling, general counsel:
Planning Staff, was awarded the de-             Spoke on the “Effect of the Scan-
gree master of arts-public   adminis-        well Decision on Government Con-
tration by the General Faculty of the        tracting” before the Western Briefing
University of Virginia.                      Conference on Government Con-

                                                      PROFESSIONAL ACTIVITIES

  tracts at San Francisco, Calif., on          Meluin E . Miller, assistant general
  October 6.                                counsel:
     Spoke on “Administrative Tech-               Spoke on the “Role of the GAO in
  niques for Challenging the Award of          Defense Procurement” beEore two
  Government Contracts” before the             Defense Procurement Management
  National Contract Management As-             Courses held on October 13 at Rock
  sociation at Mountain View, Calif.,          Island Arsenal, Ill., and on Octo-
  on October 6.                                ber 23 at Fort Lee, Va.
     Spoke before the General Services         Paul Shnitzer, deputy assistant gen-
  Administration Course on Procurz-         eral counsel:
  ment on “Contracting and Policy” on             Spoke before the General Services
  October 8.                                   Administration Course on Procure-
     Chaired the President’s Forum of          ment on “Various Aspects of Gov-
  the American Institute of Aero-              ernment Procurement” in Atlanta,
  nautics and Astronautics on “Future          Ga., on October 19.
  Contributions of Aerospace Technol-             Lectured before the Advanced
   ogy to the Development of Our               Course in Government Contracts co-
  Society” on October 22 in Houston,           sponsored by the Small Business Ad-
  Tex.                                         ministration and Louisiana State
     Appeared on KHJ-TV “Morning               University on October 30 in New
  Watch” program to discuss GAO’s              Orleans, La.
  organization, functions, and activi-            Spoke on “Handling Claims Before
  ties on November 17 in Los Angeles,          the GAO” at a seminar at The
  Calif.                                       George Washington University on
     Spoke on “It’s Not the Same GAO”          November 14.
  before Town Hall of California on               Discussed “Problems in Formal
  November 17 in Los Angeles, Calif.           Advertising” before the Defense Ad-
  J. Edward Welch, deputy general              vanced Procurement Management
counsel:                                       Course held on December 3 at Fort
    Participated as a panelist at the          Lee, Va.
  Government Construction Contract                Served as moderator ai a panel
  Conference sponsored by the Federal          discussion on “Data” in Iluntsville,
  Bar Association in cooperation with          Ala., on October 14 sponsored by the
  the Bureau of National Affairs, Inc.,        Huntsville, Ala., Chapter ol the Fed-
  held in New York City on Novem-              eral Bar Association.
  ber 19.                                      Charles P. Hovis, attorney-adviser
  Stephen P. Haycock, assistant general      (contract) :
counsel:                                          Spoke before the Baltimore Chap-
     Participated as a panelist in a dis-      ter of the National Contract Manage-
  cussion on “Performance and Pay-             ment Association at Fort Holabird,
  ment Bonds” at the Government Con-           Md., on October 29 on “Protests:
  struction Contract Conference in             Scanwell, Schoonmaker and Then
  New York City on November 19.                What?”


   The follo~rin; attorneys spoke before          Annual Meeting of the National
various Washington. D.C.. high school          Association of State Auditors, Comp-
classes in connection with the Federal         trollers and Treasurers. Louisville,
Bar Association‘s civil rights program:        Ky., November 17 on “Improving
Olizvr Easterwood, Stanley G. Fein-            Financial Management o€ the Federal
stein. Antoinette Friedman, Stasia V .         Grant-in-Aid Programs.”
Hayinan, Robert L. Higgins, Thomas                New York, Long Island, and
H . Kirkpatrick, Barney R . Putnani,           Northern New Jersey Chapters, Fed-
Jr., and Ronald Wartow.                        eral Government Accountants Asso-
                                               ciation, New York City, November 18
Ofice of Policy and Special                    on “Federal Accountants and the
Studies                                        Future.”
                                               Mr. Morse’s speech on “Recent De-
  E . H . M U T SJr..
                  ~ , director, addressed
                                            velopments and Future Trends in Gov-
the following groups :
                                            ernment Contract Accounting” at the
     Workshop on Auditing and Re-
                                            1970 Aerospace Tachnical Session in
  lated Aspects of Federally Assisted
                                            Los Angeles on May 21 has been printed
   Programs. Joint StatejFederaI Fi-
                                            in :
  nancial Management Conference.
  Washington, D.C., October 9 on                  The Federal Accountant, Septem-
  “Auditing Federal Assistance Pro-                  ber 1970.
  grams: The GAO Viewpoint.”                      The California C P A Quarterly,
     The 10th Annual Eastern Regional                December 1970.
  Conference of the Planning Execu-            Frederic H . Smith, deputy director,
  tives Institute, Washington, D.C.,        is currently serving as a member of the
  October 16 on “The Report of the          AICPA Committee on State Legislation.
  President’s Commission on Budget          He has also been appointed to the Ac-
  Concepts in Retrospect.”                  counting Principles Committee of the
     Seattle and Portland Chapters,         D.C. Institute of Certified Public Ac-
  Federal Government Accountants As-        countants and is a member of the FGAA
  sociation, October 20 and 26 on           Federal Financial Management Stand-
  “Poverty, Pollution, People Prob-         ards Board.
  lems: What Accountants Can DO.”             Edward J . Mahoney, deputy director
     Northwest Graduate Accounting          for ADP:
  Study Conference, cosponsored by              Addressed the 25th Annual Con-
  the Oregon and Washington Societies         vention of the Association for Com-
  of CPAs, Salishhn Lodge, Oreg.,             puting Machinery, New York City,
  October 22 on “Performance and              September 2. He spoke on the “Pro-
  Operational Auditing.”                      gram to Develop a Computer Based
     Montgomery-Prince Georges Chap-          Support System for the Congress.”
  ter, Maryland Association of Certi-           Spoke at the annual meeting of the
  fied Public Accountants, College            Intergovernmental (International)
  Park, Md., November 12 on “Gov-             Computer Association, Washington,
  ernment Operations and the CPA.”            D.C., on November 11. His topic was
                                                     PROFESSIONAL ACTIVITIES

  GAO’s activities in the computer        tion of Accountants for the year 1971-
  field.                                  72. If elected he will be a voting mein-
  Mr. Mahoney has also been appointed     her of the executive committee and a
to the Planning Council of the Ameri-     voting member of the International
can Management Association’s Manage-      Board of Directors. He will also repre-
ment Systems and Sciences Division.       sent the International President of
   Carl Kessler briefed the Defense In-   NAA at various chapter functions as
dicators Advisory Committee on De-        assigned and he will coordinate the ef-
cember 16 on the work being done by       forts of the international directors as-
GAO on weapons systems price indexes.     signed to him.
The committee is the vehicle for sug-         Gregory J . Ahart, deputy director-,
gestions for the improvement of the       served as a panel member at the Fed-
statistics appearing in the Department    eral Management Improvement Confer-
of Commerce monthly publication, De-      ence conducted by the Office of Man-
jense Indicators.                         agement and Budget in Washington,
                                          D.C., on September 21-22. Mr. Ahart
   Mortimer A . Dittenhofer, assistant
                                          spoke on GAO’s role in evaluating Fed-
                                          eral agency management. His paper is
      Addressed a workshop for State
                                           included in this issue of the Review
   Auditors on November 18 at the An-
                                           (page 32).
   nual Convention of the National As-
                                              M a x A . Neuwirth, associate director,
   sociation of State Auditors, Comp-
                                           addressed the Conference of Chief
   trollers and Treasurers. He spoke on
                                           Judges of the U S . Court of Appeals at
   the status of the project to develop
                                           Washington. D.C., on October 28, 1970.
   audit standards for Federal grant
                                           He spoke on “The Role of GAO in the
                                           Judicial Branch.” He was accompanied
      Spoke at a symposium on perform-
                                           by Jacob L. Glick.
   ance auditing for the staff of the
                                               Victor L. Lowe, associate director,
   Legislative Auditor of Maryland on
                                           Baltas E. Birkle, Harold L. Stugart, as-
   December 7. His subject: “The Sig-
                                           sistant directors, Frarik V . Subalusky,
   nificance of Performance Auditing
                                           Joseph W . Kegel, and Albert J.
   to the Federal Government.”
                                           DeFazio, Jr., supervisory auditors, at-
  During the meeting of the Middle tended the Urban Affairs Conference
Atlantic Actuaries Club in Annapolis, for Federal officials conducted by the
Md., on October 23, the president of National Institute of Puhlic Affairs at
the club announced that Herbert L. San Francisco, Calif., during Octo-
Feay will endeavor to organize an ac- ber 25-30.
tuarial club in the District of Columbia.     Arland A’. Berry, assistant director,
                                            attended the Federal Program Man-
Civil Division
                                            agement Seminar conducted in Icings
  A . T . Samuelsorz, director, has been Point, N.Y., by the Federal Executive
nominated to serve as an International Institute from November 30 to Decem-
Vice President of the National Associa. ber 11.

                             REGIONAL MANAGERS' CONFERENCE OCTOBER 28-30, 1970, SAN FRANCISCO, CALIF.
Seated l e f t PO right: A. T. Samuelson, Director, Civil Division; Thomas D. Morris, Special Assistant to the Comptroller General;
Paul G. DembIing, General Counsel; A. M. Clavelli, Regional Manager, San Francisco; Elmer B. Staats, Comptroller General; E. W.
Morse, Director, Office uf Policy and Special Studies; C. M. Bailey, Director, Defense Division; Lawrence J. Powers, Assistant to
the Comptroller General.
Stamling 1st row left to right: Smith Blair, Office of Legislative Liaison; Joseph Eder, Regional Manager, Boston; R. W. Gutniann,
Deputy Director, Defense Division ;W. H. Henson, Regional Manager, Norfolk ; J. €         I.
                                                                                          Rogers, Regional Manager, Philadelphia ; A.
J. Strazzullo, Regional Manager, New York ; Leo Hcrberri, Director, Office of Personnel Management; W. N. Conrardy, Regional
Manager, Seattle ; S. D. McElyea, Regional Manager, Denver ;D. L. Scantlebury, Regional Manager, Washington; Roland J. Sawyer,
Information Officer ; M. R. Wolfson, Regional Manager, Chicago ; Forrest R. Browne, Deputy Director, Field Operations Division;
C. H. Moore, Regional Manager, Detroit; D. P. Sorando, Regional Manager, Cincinnati.
Standing 2 n d row l e f t to right: R. J. Madison, Regional Manager, Atlanta; Gregory J. Ahart, Deputy Director, Civil Division;
Thomas E. Sullivan, Director, Transportation Division ; €       Mrieger, Regional Manager, Los Angeles ; H. 9. Simmons, Director,
Officeof Administrative Services ;W. H. Sheley, Regional Manager, Dallas ; John E. Thornton, Director, Field Operations Division ;
Oye V. Stovall, Director, International Division; K. L. Weary, Regional Manager, Kansas City; Harry C. Kensky, Director, Pro-
gram Planning Staff; C. H. Roman, Director, Far East Branch.
                                                        PROFESSIONAL ACTIVITIES

   Jack L. Mertz, special assistant to the   Public Affairs at Atlanta, Ga., during
director, participated in a workshop for     December 6-11.
Co-op Employers at the Virginia Poly-
technic Institute in Blacksburg, Va., on     Defense Division
October 29 and 30.                              Charles M . Bailey, direclor, was
   Allen R. Voss, associate director,        awarded a certificate of appreciation
participated in the Federal Manage-
                                             by the National Property Management
ment Improvement Conference con-
                                             Association “For personal contribution
ducted by the Office of Management           as a speaker and author at SEMINAR
and Budget in Washington, D.C., on
                                             io.” Mr. Bailey addressed the seminar
September 2 1 and 22.                        on October 1. in Dallas, Tex., on the
   Dean K. Crowther, assistant director,     GAO interest in improving the manage-
attended a Conference on Business Op-
                                             ment of Government property.
erations in New York City conducted
                                                Mr. Bailey also spoke at the annual
by the Brookings Institute from Octo-        meeting of the Electronics industries
ber 25 to ,October 30.                       Association, Government Procurement
   Brian P. Crowley, supervisory audi-       Relations Department, on November 5,
tor, attended a seminar on the Man-          at Key Biscayne. Fla. His subject was
agement of America’s Resources spon-         the Department of Defense profit policy.
sored by the Federal Executive Institute     In addition, Mr. Bailey addressed the
at Kings Point, N.Y., during Octo-           professional     military    comptroller
ber 12-23.                                   course, Air University, Maxwell Air
   Richard W. Kelley, assistant director,    Force Base, Ala.. on November 9 on
attended the Residential Program in          DOD/GAO Relationships.
Executive Education conducted by the            Hassell B. Bell, associate director,
 Federal Executive Institute in Char-        addressed a meeting in San Francisco
                                             sponsored by the Federal Bar Associa-
lottesville, Va., during July 2GSep-
                                             tion in cooperation with the Bureau of
tember 18.
                                             National Affairs on October 5 and 6.
   William D. Martin, Jr., assistant
                                             His subject was on the problems the
director, participated in the Account-       military departments have with cost
ing Forum at Lycoming College, Wil-          overruns in the acquisition of major
liamsport, Pa., on November 12. Mr.          weapon systems.
Martin spoke to students on the oppor-          Thc article by S. S. Podnos, assistant
tunities available to them in govern-        director, entitled “A Critique on
mental accounting.                           Weapon Systems Management” in the
   Dean K. Crouther, assistant director,     Spring 1970 issue of the Review was
Benny Quattrociocchi, Frank G . Toth,        reprinted in the Fall 1970 issue of the
Theodore Roman, Jr., Steven L. Keleti,       National Contract Management Jour-
and John J. Cronin, Jr., supervisory         nal, a publication of the National Con-
auditors, attended the Urban Affairs         tract Management Association.
Conference for Federal Officials con-           Sam Pines, assistant director, is serv-
ducted by the National Institute of          ing as a member of the National Sym-

      419-033 -71 -3                     1519

posium Committee of the Federal             universities throughout Lhe United
Government iaccountants Association         States. The purposes and functions of
for the 1971 fiscal year.                   GAO were discussed, with international
  Jerome H . Stolarow, assistant            activities being emphasized.
director, spoke on October 21 before           Frank M . Zappacosta, assistant
the National Contract Management            director, was named in October 1970 as
Association at Chicago, 111. Mr. Stola-     one of the Top Ten Members of the
row discussed the use of “should cost”      Year (Chapter Year 1969-70) of the
review techniques in Government pro-        Washington Chapter, National Associa-
curement.                                   tion of Accountants. This was the
                                            second successive annual citation re-
International Diuision                      ceived by Mr. Zappacosta.
                                               On October 23, Mr. Zappacosta dis-
   Oye V . Stovall, director, and H . L.
                                            cussed the activities of the International
Krieper, manager, Los Angeles Re-
                                            Division with visiting professors of
 gional Office, spoke on Tovember 2 to
                                            accounting and business subjects and
a group of students at the Thunderbird
                                            placement directors at the Washington
Graduate School of International Man-
                                            Regional Office, Falls Church, Va.
agement, Phoenix, Ariz. The theme of
                                               Joseph P . Normile, director, and
the discussion was “The Role of the
                                            Arthur M . Peterson, supervisory audi-
GAO in the International Field.” The
Thunderbird Graduate School of Inter- tor, European Branch, addressed the
national Management was chartered as participants in the Continuing Legal
a nonprofit Arizona corporation in Education Series course conducted by
April 1946 as a highly specialized the Ofice of the Judge Advocate Gen-
school to provide intensive, postgrad- eral,      u.§.  Army, Europe, Heidelberg,
uate training in foreign languages,         Germany,    on November 13. Their topic
world area studies, and international was the functions of the GAO, with
commerce and manaeement. It is affili- emphasis on legal aspects and manage-
ated with the American Management ment reviews.
Association. The Departments of De-            Edward Galey and James R. Darling-
fense and State, the Agency for Inter- ton, supervisory auditors, spoke on
national Development, the United States November 19 at the Budget and Fiscal
Information Agency, and other Gov- Officers Course conducted by the For-
ernment agencies recruit at ihe school. eign Service Institute for State Depart-
   On September 23. James A . Du#, ment personnel. They described the
associate director, and Eugene C. V o h l - role and functions of the GAO.
horn and Frank C. Conahan, assistant
directors, conducted a seminar for Field Operations Division
participants in American University’s
Washington Semester Program. Partic-           Zane Geier, audit manager, Atlanta,
ipants in the Pro,vram were govern-         and  vice president of the Southeastern
ment and political science students         Region   of FGAA, recently addressed
selected from among 200 colleges and the Huntsville, Ala., and Knoxville,

                                                      PROFESSIONAL ACTIVITIES

Tenn., FGAA Chapters on “GAO Re-           29, on “GAO Efforts in the Major
views Acquisition of Weapon Systems.”      Weapons Area.”
   James E . Ballou, assistant regional       Myrton T . Stewart, Jr., supervisory
manager, and Anthony L. Komac, audit       auditor, Cincinnati, addressed the Beta
manager, Atlanta, participated in semi-    Alpha Psi Chapter at the University of
nar portions of accounting lectures giv-   Cincinnati on October 22. His topic
en by William L. Campfield, associate      concerned “The Mission of GAO.”
director, Office of Policy and Special        D. H . Dekker, assistant regional man-
Studies, at the University of Florida      ager, Dallas, spoke before the North
 and Florida A. & M. University in         Texas Chapter of NAA on November
November.                                  19. His topic was “Management Con-
   On October 9 Myer R. Wolfson, re-       cepts in GAO.”
gional manager, Chicago, participated         Stewart D. McElyea, regional man-
in a Career Workshop sponsored by the      ager, Denver, spoke on the s.ubject “Ac-
College of Chicago Circle Campus. He       counting and the General Accounting
spoke on “The Role of GAO in Ac-           Office” to the Denver Chapter of the
counting in the Federal Government.”       American Society of Women Account-
   Orlaf B. Hylle, audit manager, and      ants in September, and to the Salt Lake
Gerald T . Kelly, supervisory auditor,     City-Ogden Chapter of FGAA in
St. Paul, participated in panel discus-    November.
sions before student groups at Man-           On December 1, Lowell Mininger,
kat0 State College on November 12.         audit manager, Detroit, spoke before
Mr. Hylle participated in a panel on       the Student Accounting Society of Cen-
Government Careers and Mr. Kelly par-      tral Michigan University on the sub-
ticipated in a panel on Accounting and     ject “The Challenging World of GAO.”
Business Careers.                             David W. Rowan, auditor, Detroit,
   Paul I . Wilson, supervisory auditor,   spoke before the Economics Club of
St. Paul, was elected as a director to     Eastern Michigan University on De-
the executive committee of the Minne-      cember 2, on the topic “The Relevance
apolis-St. Paul Chapter of FGAA.           of the Study of Economics to Reality.”
   David P. Sorando, regional manager,        Thc following Detroit staff members
Cincinnati. gave the commencement ad-      have been elected to serve as officers for
dress to the graduates of the Internal     fiscal year 1971 in the Detroit Chapter
Review Course at Fort Benjamin Har-        of FGAA: Robert J . Piscopink, presi-
rison on October 2. On November 24         dent; Curtiss G . Lovelace, treasurer;
Mr. Sorando addressed the Finance Of-      and Hiawatha H. Barber and Donald
ficers Advanced Course at Fort Ben-        R. Schmidt, directors.
jamin Harrison. The subject of his talk       H . L. Krieger, regional manager,
was “GAO and Financial Management          Los Angeles, spoke before the South
in the Army.”                              Bay Chapter of the Rational Contract
   Elmer Taylor, Jr., assistant regional   Management Association. His topic.
manager, Cincinnati, spoke before the      presented December 2, was on the
Dayton Chapter of FGAA on October          “Should Cost” concept.



       On November 4, Dominic F . Rug-            reer Conference Seminars at St. Jo-
     giero, assistant regional manager, Los       seph‘s College and La Salle College on
     Angeles, spoke on the role of GAO in         October 27 and 29, respectively.
     the Federal Government before a con-            Joseph N . Milici, supervisory audi-
     vocation of students and faculty at Cali-    tor, Philadelphia, participated in a Ca-
     fornia State College. The convocation        reer Conference Seminar at Bucks
     was sponsored by the Beta Alpha Psi          County Community College, Newtown,
     Chapter.                                     Pa., on November 17.
       Milo L. Wietstock, audit manager,            Charles F. Vincent, assistant regional
     Los Angeles, has been elected chair-         manager, San Francisco, spoke on the
    man of the FGAA National Symposium            role of GAO in the Federal Government
    Committee. The symposium is to he             before the following groups :
    held in Los Angeles in 1972.                        Combined meeting of Chico State
       On December 1, Ronald A . Bononi.            Faculty and City of Chico Civic
    audit manager, Los Angeles, spoke be-            Leaders on October 23.
    fore the Procurement Executive Re-                 Civil Service Executive Center
    fresher Course sponsored by Har-                 Seminar, Berkeley, Calif., on Oc-
    bridge House, Inc.. in Los Angeles. He          tober 26.
    spoke on GAO’s role in defense pro-                Naval Post Graduate School Con-
    curement.                                       ference. Monterey, Calif., on Oc-
       On September 11, staff members of            tober 30.
    the Internal Audit Division, Depart-               Annual State-Federal Meeting of
    ment of Finance, Government of the              Highway Engineers, Anaheim. Calif.,
    U.S. Virgin Islands, while attending a          on December 3.
    statistical sampling seminar at New                Price Analyst Seminar, Defense
    York City College, met with members             Contract Adminktrative Services
    of the New York Regional Office in-             Region, Burlingame, Calif., on De-
    cluding those who participated in the           cember 10.
    recently completed review of financial          Pilliam N . Conrardy, regional man-
    management activities in the Virgin           ager, Irwin M . D’Addario, assistant
    Islands. During the visit the operations     regional manager. and L. Neil Ruther-
    of the New York Office were explained        ford. supervisory auditor, Seattle, at-
    to the visitors and matters of common        tended the Northwest Graduate Ac-
    professional interest were discussed.        counting Study Conference held during
       Edward R. Thomas, supervisory au-         the period October 21-24 at Salishan
    ditor, Philadelphia, made a presenta-        Lodge, Oreg. They participated in panel
    tion on October 22 to representatives of     discussions generated from the subject
    the Bureau of Health Insurance, Phila-       “Performance and Operational Audit-
    delphia region, on the role of GAO in        ing” which was presented to the con-
    reviewing the results of Federal pro-        ference by E . H. Morse, Jr., director,
    grams.                                       Office of Policy and Special Studies.
       Louis W . Mangene, supervisory au-           The Northern Virginia Chapter of
    ditor, Philadelphia, participated in Ca-     FGAA has undertaken a research proj-

                                                      PROFESSIONAL ACTIVITIES

ect to identify significant books and       Building on November 23. His topic
articles on management- or perform-         was “Staff Management.’’
ance-type auditing and to determine to
what extent this subject is being taught    Transportation Division
in colleges and universities. The project      T. E . Sullivan, director, and R. E .
is headed by D. L. Scantlebury, regional    West, assistant director, attended the
manager, Washington. Other GAO
                                            meeting of the Revenue Committee of
members of the project’s directing          the Accounting Division of the Associa-
group are George Egan, Jr., assistant       tion of American Railroads in Denver,
regional manager; Robert McLoughlin,        Colo., October 19-21. Mr. Sullivan ad-
Richard Nygaard, Jerry Sconce, Clar-        dressed the committee on the recom-
ence Smith, and Charles Wolfe, super-       mendations of the Joint Agency Trans-
visory auditors, Washington; and John       portation Study Group for improvement
Carroll, supervisory auditor, Defense       in the Federal Government’s transpor-
                                            tation practices. They also discussed
   Robert W . Hanlon, assistant regional    numerous problems of mutual concern
manager, Washington, participated in a      involved in the settlement of rail car-
panel discussion concerning employ-
                                            riers’ accounts with the Government.
ment opportunities before the Univer-          Fred J . Shafer, deputy director, and
sity of Maryland’s American Market-         Paul T. Smith, assistant director, at-
ing Association, College Park, Md., on      tended the Household Goods Forward-
October 28.                                 ers Association convention at Palm
                                            Springs, Calif., October 8-10. Mr.
Ofice of Personnel
                                            ,Shafer addressed the convention on
                                            the accomplishments of both industry
   Leo Herbert, director, spoke on          and the Government in the movement
“Training for the Auditing of Manage-       of international household goods ship-
ment Systems,” on November 6 at the         ments and the proposals for future
Annual New Mexico Seminar, a meet-          improvements by the Joint Agency
ing of educators, practitioners, indus-     Transportation Study Group. Both
trialists. and government officials;        participated in general discussions of
“Training Management Systems Audi-          problems related to Government house-
tors” at the November 19 meeting of         hold goods shipments.
the Montgomery-Prince Georges Chap-            Henry W . Connor, associate direc-
ter of the FGAA; and “Opportunities         tor, CharZes C. Loomis, chief, motor
in Accounting” at the New York State        audit branch, and Arthur E . Parry,
Society of Certified Public Accountants     supervisory transportation specialist,
Career Conference in New York City          participated as guest lecturers at the
on December 12.                             Defense Advanced Traffic Management
   Harley R. Climpson, assistant direc-     Course, LT.S. Army Transportation
tor, addressed the Seminar for Audit        School, Ft. Eustis, Va., in October 1970.
Managers at the Interagency Auditor            Fred J . Shafer attended the Trans-
Training Center at the Commerce             portation Logistics Management Pro-


    gram of the University of Miami, Fla.,     the May 1970 CPA examination, 28
    November 29 through December 4.            Honorable Mention awards were also
    Elijah Watt Sells Award                       The award received by Mr. Meyers
                                               is particularly significant when con-
       The Review takes pride in recording     sideration is given to the number of
    that Wayne Z<. Meyers, of the Facilities   candidates taking the examination. In
    and Support Services Group, Defense        the May 1970 examination, 21,380
    Division, received an Honorable Men-       candidates wrote a total of 77,101 pa-
    tion Award under the Elijah Watt Sells     pers. Selection o f the award winners is
    Awards for his grades on the May 1970      made without knowledge of the iden-
    CPA examination.                           tity of the candidates. The parts of the
       The Elijah Watt Sells Awards were       examination are assigned weights as
    established by Council of the American     follows: Auditing, 5; Accounting Prac-
    Institute of CPAs in 1923 and are made     tice, 5; Theory of Accounts, 5; and
    to CPA candidates who receive the          Cominercial Law, 1.
    highest grades in all parts of the uni-       Mr. Meyers entered on duty in the
    form examination now used by the 50        General Accounting Office on June 8,
    States, the District of Columbia. Puerto   1970. He is a graduate of the Univer-
    Rico. Guam. and the Virgin Islands.        sity of Iowa with the degree of bachelor
       A gold medal is awarded for the         of business administration/account-
    highest grade and a silver medal is        ing. He sat for the CPA examination
    given for the second highest grade. For    in Iowa.

                          New Staff Members

  The following new professional staff members reported for work during
the period September 16 through December 15, 1970.
Civil Division     Balach, William J.              Yonngstow-n State University
                   Carbone. Gary W.                New Hampshire College of
                                                     Accounting and Commerce
                   Fisher, David R.                Gannon College
                   Fowler, Clifton W.              Pennsylvania State University
                   Noto, John T.                   University of Scranton
                   Tice, Barry D.                  University of Baltimore
                   Williams, Robert A.             St. Francis College

Defense Division   Flold, Donald S.                U.S. Air Force
                   Pennington, Philip W.           U S . Air Force
                   Roberts, Bentley M., Jr.        Old Dominion University
                   Scheid, Sharon L. (Miss)        College of New Rochelle

International      DeMarco, George L.              Department of the Army
Division-          Kolm, Shirley I. (Mrs.)         University of Nebraska


O&e of Policy      Dooley, Thomas E.               Management Consultant
and Special        Gorski, William                 National Science Foundation

Boston             Goulart, Edmond, Jr.            Southeastern Massachusetts
                   Graffam, Kendall C.             University of Maine

Chicago            Twining, David R.               Iowa State University

Cincinnati         Hauser, Daniel J.               Xavier University
                   Varner, Richard E.              University of Tennessee

Dallas             Ratliff, .To Ann (Miss)         Appalachian State University

Kansas City        Cornwell, Leroy E.              Vought Aeronautics Corporation

Los Angeles        Geiger, Gary D.                 California State College-Fullerton

New York           Krebs, Eric I€.                 Union College

                N e w Staff Members-Continued


San Francisco     Findlen, Edward L.          Rabson Institute of Business
                  Swanson, Richard L.         Santa Clara University
                  Wong, Bane A.               Department of the Navy

Seattle           Stuck. Dean E.              Oregon State University

                            Readings of Interest
              The reviews of books, articles, and other documents in
              this section represent the views and opinions of the
              individual reviewers, and their publication should not be
              construed as an endorsement by GAO of either the
              reviewers’ comments or the books, articles, and other
              documents reviewed.

Defense Acquisition Study                       that can be made in the acquisition
                                                process that it is hoped will lead to im-
National Security Industrial Associa-
                                                provements of such a nature that the
tion, Washington, D.C., July 1, 1970
                                                “Military-Industrial Complex” will be
    The National Security Industrial As-        viewed in a proper perspective.
sociation (NSIA) , founded in 1944, is              This study must be evaluated in
a nonprofit, nonpolitical association of        light of the action already taken, and
over three hundred American industrial          the studies in process or already com-
and research organizations represent-           pleted, by other groups interested in
ing all segments of the defense industry        this problem area. On November 26,
in the United States. Its function is the        1969, the Congress enacted Public Law
promotion of and provision for effec-            91-129, which created the Commission
tive communications between industry             on Government Procurement. A 2-year
and the Government in matters relating           study will be conducted by the Corn-
to national security.                            mission of all Government procurement
    This published study is the most re-         and recommendations will be made to
cent in a series ,of special studies and         Congress designed “to promote econ-
reports by NSIA designed to improve              omy, efficiency, and effectiveness in the
the effectiveness ,of Defense materiel           procurement of goods, services, and
support. Its stated purpose is to “sug-          facilities by and for the executive
 gest improvements in the conduct of             branch of the Federal Government.” A
 the defense acquisition process which           Blue Ribbon Defense Panel has re-
 will enable the Nation to receive more          cently concluded a study that includes
 value from the defense dollar.”                  the defense acquisition process. The
    The KSIA reports that it gave much           Industry Advisory Council, in its re-
 thought to the issue of the “Military-          ports to the Department of Defense,
  Industrial Complex” during the for-             often addresses this problem directly.
 mulation stages of this study. It was           GAO has conducted studies and issued
  decided not to address the issue directly       reports recently in areas related to this
 for two reasons: (1) the issue has be-           problem. I See, for example, “Action
 come primarily emotional rather than             Required to Improve Department of
  factual and ( 2 ) it is tied so directly to     Defense Career Program for Procure-
  the matter of national priorities which         ment Personnel,” €3-164682, Aug. 13,
  is not addressed by the study. The               1970.) The studies and reports by these
  study does point out practical changes          various groups and agencies, including


this study by the NSIA, can be expected     proper recognition. Included among
to result in improvements in the entire     these considerations are: (1) the pub-
defense acquisition process.                lic interest, (2) the nature of competi-
   In an attempt to satisfy the purpose     tion, ( 3 ) the duality of the Govern-
of the study as stated above. the NSIA      ment’s role as buyer and as monitor
surveyed the defense acquisition proc-      in the process, (4)emphasis on tach-
ess, identified significant problems and    nical innovation, (5) increased Gov-
issues, assessed what had been done in
                                            ernment control of the systems and re-
these problem areas previously, and
                                            ports of defense contractors, and (6)
tried to summarize the current views of
                                            the susceptibility to abnormal fluctua-
industry on these issues. It is not sug-
                                            tions of the demand for defense prod-
gested that the issues covered neces-
                                            ucts and services.
sarily are new or novel, or that they
                                               Each of these aspects or considera-
completely cover the entire spectrum
                                            tions causes some move away from the
of defense acquisition problems.
                                            pure economic ,concept of the free en-
   The study does not attempt to define
levels of spending for defense, purposes    terprise system and toward a system
for which the money should be spent,        not yet defined in economics. The NSIA
                                            recognizes, and trusts that it is also
or how to resolve basic questions of
                                            recognized within the Government, that
Government policy on military require-
                                            the more that can be accomplished by
ments or national priorities. Very ap-
                                            industry and Government working to-
propriately this has been recognized as
                                            gether to smooth over the problems
outside of the realm of the study and of
concern instead to the Congress, the        caused by these considerations, the
executive branch, and the electorate.       better the system will function.
   The study is reported in five major
                                            Planning: Determining Requirements
sections, expanded upon in the follow-      and System Feasibility
ing paragraphs, with the specific
points made presented in summary               The NSIA states there are no factors
form.                                       that have a greater impact on the ulti-
                                            mute cost of a deployed weapon system
The Defense Acquisition Process-            than schedule and performance require-
An Overview
                                            ments set forth in the concept formula-
   The study is based on the premise        tion package, and there is no factor
that our Sation’s requirements for          that has a greater impact on apparent
weapon systems will be fulfilled best       cost growth than the cost estimates used
throuph the operation of the profit         by the Department of Defense in obtain-
motivated free enterprise system. How-      ing initial congressional approval of a
ever, the NSIA reports that there are       program.
aspects of defense acquisition so unique       After describing the situation as it is
that Lhe operation of the free enterprise   seen from the standpoint of the study
system must be adapted to give them         group: the following recommendations

                                                          READINGS O F I N T E R E S T

are made in the area of cost, schedule          type used and fixed-price type con-
and performance realism:                        tracts should be specifically pro-
  -Defense and industry should con-             hibited.
    sult.. .beyond that currently being            Firm cost or price commitments
     accomplished, during the formu-            for any contract should be limited to
    lation of weapon system concepts            that period of time which can be as-
     and requirements . . . in order to         sessed with accuracy.
     bring greater realism to assess-              Total Package Procurement should
     ment of state-of-the-art, schedules,       be discontinued.
     costs, and attendant risks.                   Detailed risk analyses should be
  -The Office of the Secretary of De-           routinely required on competitive re-
     fense, the Military Services, and          sponses to requests for proposals cov-
     Defense Agencies should collabo-           ering new weapon systems. . .   .
    rate . . . intheimplementationof               Life-cycle time schedules .      ..
     . . . plans to perform explicit mis-       should not be permitted to dictate
     sion analysis and assess underlying        movement of the weapon system into
     technology requirements prior to           engineering and production prior to
     proceeding on any specific devel-          resolution of technical development
     opment concept paper.                      difficulties which could . . . modify
  -Defense should collect and inte-             cost estimates or degrade perform-
     grate. . . data . . . to establish and     ance.
     maintain a common baseline for                 The Department should provide
     projection of realistic ranges of          for postaward adjustment of fixed-
     cost, schedule and performance of          price contracts to cover technical un-
     major programs. Industry should            certainties . . . encountered beyond
     have access to this information.           those reasonably foreseeable at the
  -Hardware        demonstrations . . .,         time the contract was definitized.
     rather than paper studies, should          2. Technical Specijicatioizs for De-
      be used to insure technological         velopment and Production:
     feasibility of a proposed weapon
                                                   The Department should (1) make
     system prior to proceeding with
                                                cost-effectiveness a principal design
     full-scale development.
  A supporting discussion follows the
                                                parameter . . , (2) simplify and
                                                limit specification requirements . . .,
recommendations made in this area.
                                                and ( 3 ) use applicable existing in-
Buying: The Contractor Process                  dustrial standards, specifications,
                                                and hardware. . . .
  Recommendations and discussion are               The Department and industry to-
divided into the three following areas :        gether should review work statements
   1. Contracting techniques:                   and specifications prior to soliciting
     . . cost-reimbursement contracts,          bids for development and production
   with exact form tailored to the indi-        of hardware. . . .
   vidual project, should be the only              The Department and industry


   should work together to a far greater      ment and bid and proposal costs should
  degree than at present to assist in        be handled by the Government in its
  establishing realistic reliability and      dealing with the contractors in the same
  maintainability engineering and pro-        fashion as is done in all business rela-
  duction standards.                         tionships, and these costs should not be
  3. Liability:                              the subject of legislative controls.
     In order to avoid the burden of            Concerning Public Law 87-653, the
  pyramiding insurance atid contin-          Truth in Negotiations Act, the NSIA
  gency costs on its contracts, the Gov-     believes that experience under the act
  ernment in its own interest should         should be evaluated by a DOD/indus-
  self-insure risks in such areas as con-    try task group and recommendations
  sequential damages. protection of          made for more cost-effective adminis-
  Government property, and product           tration.
  warranties on specially designed mili-     Public Policy: The Role of Congress
  tary equipment.
                                                 The NSIA recommends that the
Administration: Organization,                 Armed Services Procurement Act of
Management and Control
                                             1947 be revised to reflect the unique
     The NSIA makes a total of sixteen       characteristics of today’s defense pro-
 recommendations, supported with dis-        curement. Specifically, the revisions
 cussion, in the areas of (1) organiza-      should provide for (1) formal adver-
 tion. responsibility. authority ; ( 2 )     tising where appropriate, (2) nego-
 documentation and managerial involve-       iiated competition where appropriate,
 ment: ( 3 ) subcontracting; (4) inde-        ( 3 ) sole source where most economical,
 pendent research and development; and       and ( 4 ) removal of detailed procure-
 ( 5 ) truth in negotiation. The recom-      ment procedures and methods from the
 mendations are in the nature of reduc-      law.
 tions of layers of management in the            In discussing the availability and
 Department and industry where not           evaluation of defense information, the
needed to accomplish the acquisition        NSIA recommends that Congress more
 activities, implementation of the March    clearly define its informational require-
 1968 report of the DOD-CODSIA Ad-          ments and that the Department of De-
visory Committee for Management             fense attempt to improve its communi-
Systems Control, and other such man-        cations with Congress to help restore
agement related items.                      congressional confidence in the accu-
    Recommendations are made for deal-      racy and completeness of submitted
ing with subcontractors at the Depart-      information.
ment of Defense level and at the con-           In total, 35 separate recommenda-
tractor level. These involve technical      tions are reported in this published
competence and managerial abilities         study. It appears that the National
of subcontractors and their rights to       Security Industrial Association has
appeal in case of disputes.                 done a commendable job of research
    Independent research and develop-       and has certainly presented the results

                                                         READINGS OF INTEREST

in a fashion that is easily understood       that will be a long time in implementa-
and not subject to gross misinterpre-        tion, should be placed on the list of
tation.                                      required reading.
   If one is interested in learning how               Dr. Gary A . Luorna,
he or his organization might contribute                      PROFESSOR,
to the improvement of the defense ac-                EMORYUNIVERSITY,
quisition process, then this publication,            -4ND CONSULTANT TO T H E
while at times making recommendations                GENERALACCOVNTING


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