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The AEC took the position that the prime contractors had not breached contract terms, and that it would negotiate with the subcontractor. The subcontractor said there was price competition to justify its pricing.

Arrangements were completed on March 10, 1965, which will assure that AEC and its contractors will obtain certified cost data in connection with negotiated fixed-price procurements whenever such data is required by the Federal and AEC procurement regulations. Arrangements were also made for audit of data submitted by Alcoa and for the development of more detailed information when and to the extent needed by contracting officials. The recommendation that AEC audit 15 purchase orders issued to Alcoa by Bendix and ACF was not accepted because the experience in negotiating for voluntary refunds from Alcoa clearly indicated that further audit effort would be unproductive. AEC did agree to audit these orders when like items were being procured in the future. Five of the 15 orders were reviewed to date, and no action was indicated to be necessary as a result of the audits.

NAVY BULLPUP MISSILE CONTAINERS

"Unnecessary Costs Incurred in the Procurement of Reusable Metal Containers for the Bullpup Missile," B-146970, February 24,

1965.

(a) Subcommittee action. This report was examined in detail and during March 1965 the staff held several conferences with appropriate Navy personnel and examined the six contract files upon which the GAO report was based.

(b) Estimated monetary and other benefits.-The GAO reported that the Government had incurred unnecessary costs of about $556,000 because of the Navy's mismanagement of the program for the purchase of Bullpup missile containers. GAO claimed that (1) the Navy awarded contracts for containers at prices about $386,000 higher than warranted by prior costs; (2) late deliveries of containers caused costs of about $129,500 for extra handling and storage of Bullpup missiles, and (3) the Government paid $40,500 for the repair of defective containers, $22,800 of which was directly attributable to poor workmanship and improper deviation from contract paint specifications and should not have been borne by the Government.

The Navy takes the position that (1) the circumstances of this procurement were significantly different from those existing when the containers were procured by the missile prime contractor. Among the changed conditions which tended to increase prices were increased quality control responsibility on the container suppliers (this responsibility was prevously shared with the missile contractor), inclusion, for the first time, of a limited damages clause for late deliveries, and generally greater quantity requirements coupled with shorter production leadtime (these procurements were made during the Berlin crisis); (2) the Navy does not agree that resulting costs for extra handling and storage of Bullpup missiles approximated $129,500. The Navy contends the maximum cost liability for handling and storage will not exceed $23,191.50 ($6,478 already claimed by the missile prime con

tractor under his fiscal year 1963 contract and an unknown amount, calculated not to exceed $16,713,350, yet to be claimed and negotiated under the fiscal year 1962 prime missile contract). This calculation was based on examination of the missile prime contractors' records. The Navy is currently processing a liquidated damages recovery action against one of the four delinquent contractors. The late deliveries from the remaining three contractors were due primarily to necessary correction of Government design and specification deficiencies. Consequently, recovery action against these three contractors does not presently appear in order even where the exact amount of actual damages are known. Notwithstanding the foregoing, when the exact amount of actual damages under the fiscal year 1962 and fiscal year 1963 prime missile contracts are negotiated (approximately March 1966), the Navy will reexamine the cause and extent of the damages and initiate any appropriate recovery action; (3) the Navy agrees that the Government paid approximately $40,500 for the repair of defective containers. However, the Navy can find no evidence indicating the contractor is responsible for poor workmanship.

Regarding the GAO allegation that the contractor deviated from the contract paint specifications by improperly mixing two brands of phosphatizing chemicals to obtain a cleaning agent for the container surfaces, mixing of phosphatizing chemicals is not restricted by any provision of the contract and the contractor cannot be held responsible for the results of such mixing. Consequently, the Navy does not agree that the container contractor is responsible for any of these repair costs.

GOVERNMENT ACTIVITIES SUBCOMMITTEE

A total of 99 General Accounting Office reports were referred to the subcommittee between November 1, 1964, and October 31, 1966. Of these reports, 1 dealt with operations of the Civil Service Commission, 19 with the Department of Commerce, 11 with the Federal Aviation Agency, 4 with the General Services Administration, 22 with various aspects of Housing and Home Finance Agency operations, 17 with the Post Office Department, 1 with the Small Business Administration, 19 with the Veterans' Administration, and 5 with the operations of various other agencies of the Government.

Of the 19 reports on operations of the Department of Commerce, 15 referred to activities of the Area Redevelopment Administration. Several of these reports contained no recommendations which required further action by the subcommittee. The Department of Commerce has substantially complied with the recommendations contained in the remainder of the reports.

Seven of the GAO reports referred to the subcommittee dealt with automatic data processing activities. One of these was a comprehensive Government-wide report pointing out deficiencies in the Government's management of its ADP program. These deficiencies have been a matter of concern to the Comptroller General and the Committee on Government Operations for some time. On September 2, 1965, the House approved H.R. 4845, which established a management. program for the efficient and effective management of this equipment. This bill incorporated most of the recommendations made by the

Comptroller General in reports on agency mismanagement of ADP. The bill passed the Senate on October 22, 1965, and was signed by the President on October 30, 1965.

In many instances no action by the subcommittee was required. However, certain reports are being further evaluated as well as department and agency efforts to implement the recommendations they

contain.

INTERGOVERNMENTAL RELATIONS SUBCOMMITTEE

Fifty-eight General Accounting Office reports to the Congress were referred to the subcommittee. All reports received were studied by the subcommittee staff and considered in connection with the subcommittee's investigation program.

NATURAL RESOURCES AND POWER SUBCOMMITTEE

The subcommittee received a total of 32 GAO reports, of which 13 remain under study for possible further action.

FOREIGN OPERATIONS AND GOVERNMENT INFORMATION SUBCOMMITTEE

FOREIGN OPERATIONS

During the 89th Congress, 49 General Accounting Office reports were referred for action to the subcommittee. All reports received were evaluated on an individual basis and appropriate action was taken where necessary. Among the reports receiving special study

were:

1. Lack of effective action by the military services to obtain NATO cost sharing of military construction projects in Europe (B156489).

Summary of subcommittee action. The subcommittee used this report in connection with its investigation of U.S. participation in the NATO common infrastructure program. A formal report was issued detailing the results of the subcommittee's investigation.

2. Inefficient utilization of personnel to administer the military assistance program in Western European countries (B-133280). Summary of subcommittee action.-The subcommittee held hearings on this subject in Europe and is continuing to investigate the

matter.

3. Failure to effectively utilize excess U.S.-owned foreign currencies to pay international air travel ticket costs being paid in dollars (B-146749).

4. Possible dollar savings through expanded use of foreign currencies to transport personal effects abroad (B-146749).

Summary of subcommittee action. As a result of the subcommittee's expressed interest in the subject of these two reports, the Bureau of the Budget approved amendments to the Standard Government Travel Regulations.1

5. Expedited signing of certain agreements under title I of the Agriculture Trade Development and Assistance Act (B-158225). Summary of subcommittee action. After a careful review of the report and consultation with the GAO, the chairman emphasized his support of the GAO's findings in a letter to the Secretary of State.

6. Audit of loan program financial statements for fiscal years 1962, 1963, and 1964 (B-133220).

Summary of subcommittee action. The subcommittee is maintaining continuing contact with the GAO and AID regarding AID's implementation of the recommendations made in this report.

7. Survey of AID program in Vietnam (B-159451).

Summary of subcommittee action. This survey was conducted and the report issued by the GAO at the request of the chairman. It was utilized by the subcommittee in its review of the U.S. economic and military assistance programs in Vietnam. A formal report was issued detailing the results of the subcommittee's investigation.

8. Illegal obligations of expired fiscal year 1964 appropriations, Department of State (B-146703).

Summary of subcommittee action.-A subcommittee investigation based on this report was instrumental in calling to the attention of high State Department officials the need for the creation of tighter management and audit controls.

LEGAL AND MONETARY AFFAIRS SUBCOMMITTEE

The subcommittee had carried over seven GAO reports from the 88th Congress, three of which remain under consideration: (1) Review of the use of the cumulative sinking fund for retirement of public debt obligations; (2) deficiencies in customs control over unloading of bulk petroleum; and (3) audit of the FSLIC for the fiscal year ended June 30, 1963. During the 89th Congress 26 additional GAO reports were received, all of which except 3, after subcommittee action or on finding no action required, have been closed. Among those closed were the following:

1 Because of a letter from the chairman to the Secretary of State, the State Department has agreed to conduct a total review of the recommendations made in both reports.

1. Excess Inventory of Spare-Lighted-Type Buoy Bodies, U.S. Coast Guard, Treasury Department, B-114851, March 18, 1965. (a) Summary of action.-The report disclosed that the Coast Guard maintained excess buoy bodies which had a replacement cost of $900,000, and was planning to manufacture more. After subcommittee conference with GAO and communication with the Coast Guard, the Coast Guard agreed to: (1) Establish adequate guidelines for determining spare buoy requirements and provide for the maintenance of adequate records for implementing those guidelines; (2) effect a reduction in the spare buoy inventory where warranted; and (3) require that excess buoys be placed in headquarters-controlled material inventory and be used in lieu of procurement of new buoys.

(b) Estimated monetary and other benefits.-The changes effected by the Coast Guard result in direct savings of interest on the $900,000 which would be tied up in excess buoys which will now be put to use, in reduced storage costs and reduced obsolescence without adequate inventory controls. The Coast Guard could have spent up to an additional $900,000 in procuring buoys although more than enough were already on hand. The institution of more careful control requirements will result in additional savings on other items.

2. Unnecessary Costs Resulting From the Failure To Obtain Competition for the Procurement of Power-Unit Clamps, U.S. Coast Guard, Treasury Department, B-114851, March 26, 1965.

(a) Summary of action.-The GAO reported that the Coast Guard incurred unnecessary costs of aproximately $45,000 in purchases totaling $127,000 in procurement of power-unit clamps for securing batteries in lighted buoys because it failed to obtain competitive bids; and that the Coast Guard could save $174,000 in the purchase of 5,700 additional clamps. After conference with GAO and communication with the Coast Guard, the Coast Guard agreed to maximize competitive procurements when economical and practical to do so, and submitted its new directives in that regard.

(b) Estimated monetary and other benefits.-Savings in excess of 30 percent are computed to be obtainable in the future procurement of these items, and on others which the Coast Guard may not have been obtaining on a competitive basis.

3. Inadequate Rents Charged for Employee Housing, Bureau of Prisons, Department of Justice, B-133223, April 30, 1964.

(a) Summary of action.-The GAO report disclosed that the Bureau of Prisons did not charge its employees rents equivalent to those charged by other agencies for similar private housing, as specified in Bureau of the Budget Circular No. A-45, revised June 3, 1952. After GAO review the Bureau of Prisons increased its rentals by about $200,000 annually, but still used rent adjustments to compensate for working conditions. Public Law 88-459, August 20, 1964, called for the issuance of regulations by the President and the agencies on the comparability of rentals. After conference with GAO, the GAO was requested to follow up with the Bureau of Prisons after the issuance of such regulations. Circular No. A-45, as revised October 31, 1964, prohibits the reduction of rental for "so-called institutional atmosphere, hazards of the job or to the family, or other such conditions."

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