and there have been many suggestions that MATS procure commercial airlift through established tariff rates, through discounted tariff rates, or through limited negotiations with selected carriers. Further, it has been stated that modernization of the commercial fleet is not possible under present policy. However, competitive bidding has been the practice and has resulted in low prices for the Air Force with commensurate savings to the taxpayers. To meet our national objectives, the carriers must equip themselves with modern aircraft suitable to meet military as well as commercial airlift require ments. As previously mentioned, studies are underway to determine the most desirable courses of action that should be followed. (Chart 4-7) MATS follows small-business laws, in that prior to advertising, all procurements are screened by a Small Business Administration representative. Then a determination is made with the contracting officer as to which items should be set aside for exclusive bidding of small business concerns. We feel that particular emphasis on the small business laws is not necessary in the procurement of commercial airlift, as small carriers have been very successful under our competitive type bidding. In fact, they were awarded over 90 percent of our last major procurement although only 40 percent was set aside for their exclusive bidding. Mr. RIVERS. Now, right there. General Tunner, the Small Business Administration tells you, in effect, whether a carrier is solvent, whether he is current, whether his equipment is worth a continental, and whether he can perform after he gets the contract; isn't that true? General TUNNER. Sir, after a man gets on the bidder's list and makes a bid, and if he makes a low bid, he is investigated by a procurement survey committee, which consists of personnel from MATS and Air Materiel Command as well as the FAA and the Small Business Administration. Mr. RIVERS. I see. General TUNNER. And all of them together decide whether the man is competent. Mr. RIVERS. It can't be said, then, that the small business laws make you take people to award contracts to that are not in effect sound contracts or that they have an element of risk in them. General TUNNER. No, sir. Mr. SMART. May I ask one question there? Mr. RIVERS. Yes. Mr. SMART. Under the procedure you have just stated, would it be possible for a man with a lease in his pocket for a pool airplane, and with a letter of credit from the bank-if he had been on a bidder's list and was the low bidder-would it be possible for that man to insist upon the award of such a contract to him? General TUNNER. He would have to have many things, of course. He would have to have a plane. He would have to have the guarantee of the aircraft. He would have to have the financial backing and the guarantees of it. And he would have to have a promise of the crews. He would have to have the promise of maintenance support, and then along the route he would have to have contracts with someone to give him the maintenance and other support he probably wouldn't have if he were just a mushrooming business. Mr. SMART. Then how do we understand it? It has been alleged, and maybe loosely so, that men who have—a person, that is, who has a lease on an airplane and with a telephone booth for an office, can participate in your civilian airlift business. General TUNNER. I think that is a little farfetched, sir. Mr. SMART. Well, but it has been said. And I say, if it were loosely said, now is the time to nail it down. General TUNNER. My procurement expert over here is in this business all the way and I would like him to answer it if I might. Mr. SMART. Yes, sir. Identify yourself for the record, Colonel. Colonel LESLIE. Yes, sir. Colonel George Leslie. Mr. RIVERS. Come up a little closer. Colonel LESLIE. Yes, sir. Actually, these carriers would have to be given an operating permit by FAA prior to the date of performance. They would either have to become a part 45 carrier or a supplemental carrier or a certificated carrier, as we know our larger airlines are. So that FAA-unless FAA gave them this permit prior to performance, they could not perform under the contract. Therefore, if they were awarded the contract, by saying they would be given this permit by FAA we would have to throw them into default, since they wouldn't be a carrier on the date of performance. Mr. RIVERS. Everybody to whom-in response to Mr. Smart's inquiry, everybody to whom you award a contract is a carrier under the FAA Act? Colonel LESLIE. As of the date of the performance of the contract, they would have to be, sir. Not to get on our bidders list. They may have an inactive permit at the time they are on the bidders list, but if they are a low bidder then they would reactivate their permit with FAA prior to performance, sir. Mr. RIVERS. Well, in effect, then, they are a carrier under the FAA Act? Colonel LESLIE. Yes, sir; when they perform for us, they are. Mr. RIVERS. When he cranks up and heads for his destination. Colonel LESLIE. Under one of the regulations of FAA, yes, sirthe part 45, part 41, or part 42. Mr. BECKER. Mr. Chairman, I had the occasion to check one of these paper outfits and I think that is what Mr. Smart refers to-a paper outfit that put in a bid. And I received a complaint on it. I had a check made and I found out that immediately it came to the point of entering the contract, they were discarded immediately. This group that you mentioned, General Tunner, had checked and found out that it was a paper outfit that had lined up his contractors. And he was in there and had the whole thing lined up. He had a good bid. But he was discarded immediately as not being a bona fide carrier. Is that the way it works? General TUNNER. That is the way it would work. There have been so many bids, though, in the past year, I don't remember any particular case. Mr. BECKER. I heard of this one within the past year. But it was discarded immediately. Colonel LESLIE. Sir, in fact, recently we defaulted a carrier who lost his air carrier certificate from FAA for certain violations of the Federal Aviation Act. So they have to have a current certificate of some sort with FAA to participate in our business. Mr. RIVERS. Because I had introduced a bill last year-I don't know whether you saw it or not-that MATS would be precluded from awarding any contracts to anyone that wasn't carried upon the proper situation, under the terms of the Federal Aviation Act. The reason I did it: Somebody brought me this tale that I am telling you. General TUNNER. I believe this is included in the President's recommendations, that a certain type of certificate must be in the possession of the carrier. Mr. RIVERS. Nobody can influence the FAA on the awarding of a certificate to operate an airplane. Colonel LESLIE. Right, sir. Mr. RIVERS. That is based on cold, calculated qualifications, as a condition precedent to his flying the airplane. Colonel LESLIE. Yes, sir; they are very strict. Mr. RIVERS. All right. Mr. SMART. That is right. Mr. RIVERS. I have no reason to question the FAA. I have no reason to question them. Go ahead, Mr. Smart. Colonel WILD. The next policy. MATS makes the maximum use of 1-year competitive fixed-price contracts. These contracts tend to attract the most capable carriers, and to provide stability in airlift. programs. The use of these 1-year, fixed-price contracts provides advantages to both the Government and the airlines. Generally, the Government receives lower prices and is able to schedule and provide better services to the customer. It allows the commercial operator to plan ahead and better utilize his current equipment and resources. We believe that even longer term contracts would be more beneficial and would encourage carriers to modernize their fleets. (Chart 4-9) MATS often has a need for buying commercial airlift because of unanticipated airlift requirements. Call contracts, which are standby agreements with carriers, are used to satisfy this demand. Mr. RIVERS. Let me interject right there. How long do you think they ought to have a contract? For 3 years or 4 years? Colonel WILD. Yes, sir; we are talking about 3 years in this. We will come to that in a little while. General TUNNER. Should I answer it? Mr. RIVERS. Yes. General TUNNER. One year with our option, provided there is a superior performance for 2 more years. Mr. RIVERS. Give you the discretionary power, based on satisfactory performance? General TUNNER. That is right. Mr. RIVERS. Well, would you say possibly 4 years? Mr. RIVERS. Say I had a contract with you. I say "General Tunner, I want to do a good job. I want to get myself about six or seven new planes." It will take me 4 years to liquidate my obligation. General TUNNER. I wouldn't object to having the option for 3 additional years, no, sir. Mr. RIVERS. I don't see how it could hurt. Because it would give you the incentive to weed out the least possible desirable people to do business with. (General Tunner nods.) Mr. RIVERS. Because what we want-that is, what I want, I want the best. If I can't get the best, I don't want to fool with them, myself. But they are taxpayers and some are good operators and they develop a fine relationship with the military and do a splendid job at the minimum cost over the years, possibly. That is not beyond the realm of possibility. General TUNNER. Not at all. Mr. RIVERS. So you wouldn't object to a 3-year addition? General TUNNER. I would not. Mr. RIVERS. What would that require? A change in the procurement law, Mr. Smart? Mr. SMART. No, sir. Mr. RIVERS. Go ahead, Colonel. Colonel WILD. Talking about the standby contracts. We currently have such agreements with 24 carriers. While this type of procurement is more costly, it is a valuable management tool, which is used to satisfy operational requirements. (Chart 4-10) As I have previously stated, MATS is instructed by the Department of Defense to efficiently, and economically, utilize the military aircraft of the Military Air Transport Service prior to the employment of commercial air transportation. On the other hand, the congressional appropriation acts for the last 2 years have set aside appropriated funds, with the stipulation that they be used for no other purpose than the procurement of commercial airlift. In 1959, when this set-aside was $80 million, MATS spent $70.4 million, so over $9 million were returned to the Treasury, thus denying DOD the use of these essential funds. Had we been directed to buy more civil airlift than MATS required, it would be impossible for us to economically utilize military aircraft as instructed by DOD. In view of the DOD airlift policy recently approved by the President, we believe the need for a set-aside of a specific dollar amount for commercial airlift to be unnecessary. (Chart 4-11) Now I would like to give you additional details on how civilian airline revenue from MATS has grown in recent years. In 1955, the first peacetime year after Korea, the Air Force procured $5.6 million worth of overseas commercial airlift to satisfy DOD requirements. Since MATS flies no more than necessary for war readiness training, the increasing demands for airlift by DOD agencies has resulted in increasing the dollar amounts of our contracts with the airlines. In 1959, MATS spent over $70 million for overseas commercial augmentation to the MATS military force. It is interesting to note that while the dollar figures have been climbing at a rapid rate, the cost per tonmile has decreased substantially. This is one of the tangible advantages of open competitive bidding. (Chart 4-12) We also buy special airlift in accordance with Department of Defense directives. The dollars spent on these programs cannot be applied against the $85 million reserved by Congress. At the present time, MATS has five different special airlift programs under contract for a total of $28.1 million. The Logair and Quicktrans programs are designed to provide rapid delivery of critical high priority, high value supplies and equipment to Navy and Air Force bases and aerial ports in the United States. You will note that we have not made a special logistic airlift procurement for the Army. While they do have a similar logistic system, they do it by short-term airlift procurement through the Military Traffic Management Agency. The Rocket Run supports the Air Force missile effort; the Alaskan POL contractor delivers petroleum products to remote radar sites in Alaska; and the Alaskan passenger contractor carries passengers within Alaska. We have recently received a requirement for aircraft with tail or nose loading capability to handle outsize cargo in the Logair system. This requirement cannot be carried in present commercial aircraft. We feel this will have an influence on the modernization of the Logair fleet by the airline industry. (Chart 4-13) For the year ending June 30, 1959, including the airlift procured by MATS, the Defense Department paid civil air carriers for air transportation $231.6 million. Mr. PRICE. What is that figure made up of? You say you have spent up to $80 million-no, $70.4 million for the procurement available there for MATS. Now, what is the rest of that figure made up of? General TUNNER. Mostly transportation requests here in the Zone of the Interior. And of course, a number of people, such as people in South American countries and Central American countries, where there is no MATS run, move themselves and their families to and from their stations by commercial air. Mr. PRICE. That is overall Department of Defense? General TUNNER. That is an overall Department of Defense figure. Mr. PRICE. For the air transportation of all military personnel or civilian personnel of the Department of Defense for 1 year? General TUNNER. Yes, sir. Mr. BECKER. $231 million. |