Mr. KILDAY. Let me see.

Is there a difference between the Army and the Navy in this regard? Mr. COURTNEY. The Navy follows, of course, the bureau system. Mr. KILDAY. I understand, but

Mr. COURTNEY. And the Army, the corps system. Essentially, there is no difference.

Mr. KILDAY. I don't mean those formal organization matters. The Army had stated that the Secretary had delegated his authority to the Assistant Chief of Staff for Logistics. Now it says:

In the Navy, under the Assistant Secretary of the Navy (Material), the Chief of Naval Material directs the efforts of the bureaus and offices of the Navy Department in procurement matters.

I don't quite get

Mr. VINSON. Well, they have a different system.

Now go back there

Mr. KILDAY. I know, but the procurement act delegates the authority to the head.

Now, has he formally delegated his authority, as has the Secretary of the Army?

Mr. SMART. No.

Mr. COURTNEY. Not in the same form; no.

Mr. SMART. The Assistant Secretary of the Army has made a clear delegation. The Assistant Secretary of the Navy (Material) has not. Mr. VINSON. He holds some of it in the power of the Secretary. Mr. SMART. He is still in the driver's seat.

Mr. VINSON. That is right. He is still boss.

Mr. COURTNEY. I think you could sum it up in these words: The retention by the Chief of Naval Material is the business management supervision of the contracts that are intended to be let and handled within the bureaus.

Mr. VINSON. In the Army, the whole authority was delegated.
Mr. COURTNEY. That is right.

Mr. VINSON. In the Navy, the Secretary retains certain authority, but does delegate certain authority.

Mr. COURTNEY. That is right.

Mr. VINSON. To the Assistant Secretary.

Mr. KILDAY. Well, it may all be all right, but there is a very basic difference here.

You see, under the old organization of the War Department, the Under Secretary was the procurement agency. So that there it was consolidated in the civilian side.

In the Army, although procurement has been in the civil side. rather than the military side of the Department, we find that the Secretary has delegated his entire authority.

I say that may be all right, but it is an entirely different concept. Previously, the concept was that procurement was a civilian function. Now, by delegation in the Army, it has become a military function. (See app. 3 for Navy statement.)

Mr. VINSON. All right, go ahead, now, and read these things.

You see, we procure in the Navy Department by what is known as the bureau system. And these are the jurisdictions of the differentseven bureaus to make the procurement.

Now, read them out.

Mr. COURTNEY (reading):

Bureau of Naval Weapons: Procurement of all Navy and Marine Corps aircraft, rockets, guided missiles, and naval ordnance, including major components and equipment and services related to their maintenance and repair and related research and development. This Bureau was established on December 1, 1959, through a merger of the former Bureaus of Aeronautics and Ordnance.

Bureau of Ships: Procurement of navel vessels of all types, including hulls, components, machinery, and all major electronic equipment except specialized air and fire-control electronic equipment; for research and development on such items; and for materials and appliances connected with chemical and biological warfare defense. It also procures all vessels and water craft needed by the Army and Air Force and makes ship repair contracts with private shipyards. Bureau of Yards and Docks: Procurement of services and materials related to public works, including construction and repairs at shore activities, public utilities, and transportation not otherwise assigned. The Bureau also serves as a construction agency for the Air Force.

Mr. BRAY. Just a minute there

Mr. COURTNEY. Not exclusively, I might add.

Mr. BRAY. NO. That is what I was going to say; that is, if the construction is delegated to the Navy there, then they act. If it is delegated to the Army, the Corps of Engineers acts.

Mr. VINSON. That is right.

Mr. COURTNEY. That is right.
Mr. SMART. Either way.

Mr. VINSON. All right, proceed.

Mr. COURTNEY. "Marine Corps"-which is treated as a separate bureau. [Reading:]

Procurement of all equipment, supplies, and services required by the Marine Corps, procurement responsibility for which has not been specifically assigned elsewhere.

Office of Naval Research: Procurement of basic research of a general nature, procurement for the design and development of training devices and aids, and the procurement of special research projects which augment those being conducted by the various technical bureaus.

Bureau of Naval Personnel: Procurement of services and materials incident to the recruiting, training, and welfare of naval personnel.

Bureau of Supplies and Accounts: Manages the Navy's field purchasing organization, which procures all of the replacement spares and parts, and associated consumables for the major prime items of equipment purchased by the technical bureaus as described above.

Additionally, it procures general-purpose and common-use items not assigned to one of the Defense Department's coordinating procurement offices, and perform the local purchasing at all of the Navy's field activities such as Navy purchasing offices, naval stations, naval air stations, naval supply depots, and naval shipyards. Also operating under the Bureau of Supplies and Accounts are two single manager agencies: the Military Medical Supply Agency and the Military Petroleum Supply Agency.

The Navy also has the single manager responsibility for worldwide military sea transportation of passengers and cargo. The Military Sea Transportation Service is the operating agency for this single managership, and, with respect to procurement, is responsible to the Assistant Secretary of the Navy (Material). Mr. VINSON. Now you will see, under the next column, the single department procurement.

Now, of the various single procurement for the joint departments— they are listed down there.

Mr. COURTNEY. Fourteen items.

Mr. VINSON. Fourteen items.

Now, then, the Army had no plant cognizance procurement assignments, but the Navy does.

Both the Navy and Air Force have a great responsibility. And here is a list of the plant cognizance procurement assignments.

Now, here are the plants that the Navy has jurisdiction and control

over.

And the same thing on single management procurement.
And the GSA does the same purchasing.

Now, take the Air Force.

This is very important, and entirely different from the other two, because they concentrate more in their purchases than the Army or the Navy. They have a central purchasing agency that does nearly all of their procurement.

Now, go ahead. You start off with "*** Chief of Staff" and "Deputy Chief of Staff, Materiel."

You pick up there.

Mr. COURTNEY. "In the Air Force"

Mr. VINSON. "The Assistant Secretary of the Air Force (Materiel" start there.

Mr. COURTNEY. In the Air Force, the delegation is through a materiel secretary, to the Deputy Chief of Staff, Materiel, and thereafter is, distributed through the Commander, Air Materiel Command, and four other agencies.

Mr. VINSON. Go ahead.

Mr. COURTNEY (reading):

In the Air Force, procurement authority has been delegated by the Assistant Secretary of the Air Force (Materiel) through the Chief of Staff and Deputy Chief of Staff, Materiel, to the Air Materiel Command (AMC). AMC is responsible for the Air Force's central buying program, which is its major buying function and accounts for all except the procurement of research and development and local base procurement.

The actual purchasing is performed for AMC within the Zone of the Interior by the Aeronautical Systems Center, the Ballistic Missile Center, the Electronic System Center, nine separate air materiel areas, and two depots. Oversea procurement for AMC is accomplished by two air materiel forces: one in Europe and one in the Pacific.

Now, on the left margin you will find the location of those centers, as described in this paragraph.

The procurement responsibilities of the centers, air materiel areas, and the depots are as follows

and they are listed.

The Aeronautical System Center procures all manned aircraft weapon systems and aerodynamic nonballistic missile systems including major items of equipment such as engines, airborne electronic gear, fire-control systems, bomb and navigational systems, and support equipment for specific weapons.

The Ballistic Missiles Center

which is Inglewood, Calif.

procures ballistic missiles, their guidance systems, nose cones, powerplants, and specialized ground-support equipment.

procures integrated warning and control systems for air defense and the automatic electronic data processing equipment which uses the intelligence provided from the warning radar.

Each of the air materiel areas

and they are listed below, nine in number, on the left, under AMA—

procures or arranges the support of the specific aircraft, guided missiles, ballistic missiles, and control and warning systems for which it has been assigned as the logistic support manager. This support includes procurement of replacement parts, operational support, and necessary maintenance, repair, or modification. In addition, the Rome air materiel area also procures the electronic systems for communication and control of flying operations.

The depots procure general support equipment such as refuelers, crash-fire trucks, snow-removal vehicles, and radio and radar tubes.

Procurement of research and development in the Air Force is primarily the responsibility of the Air Research and Development Command (ARDC). ARDC procures basic and applied research, as well as some equipment prototypes. It has nine purchasing officers which are responsible for the procurement of many types of research; they also procure limited development associated with specific "hardware" projects. It also has a 10th purchasing office which is the Air Force Office of Scientific Research.

The Air Force also has the single manager responsibility for worldwide military air transportation, both cargo and passenger. The Military Air Transport Service (MATS) is the operating agency for this single managership and, organizationally, is assigned directly to the Chief of Staff of the Air Force. Base procurement in the Air Force is accomplished at individual Air Force bases of all Air Force commands, throughout the world.

Mr. VINSON. Now, members of the committee, you will see the next column relates to the single department procurement and the single department procurement assignment. There is what the Air Force procures for the other services.

Now, then, you will see the responsibility, under (b), plant cognizance procurement assignments.

Now, these are the plants that the Air Force has supervision over and deals with and has connection with.

And of course the General Services Administration does the same thing in procurement in there that it does with the other branches of the service.

Now, that brings me down to page—if you will turn to my statement now?

I will deal with that briefly on page 13.

Now, you see, we first pointed out the authority to make contracts, and who makes the contracts.

Now I am going to deal with the question of the type of contracts. Now we come to the type of contracts, on page 6 of the chart.

I offer for the record a tabulation by method of compensation of the classes or types of contracts.

(The material referred to follows:)

TYPES OF CONTRACTS CLASSIFIELD BY METHOD OF
COMPENSATION

(% of dollars and % of actions—fiscal 1959)

FIXED PRICE TYPE CONTRACTS:

1. Firm Fixed-Price.-for a specified item for a specific price not subject to price adjustment. Use: Always in formal advertised, but may be used in negotiations; accounts for 32.8% of dollars and 72.4% of actions (over $10,000).

2. Fixed Price-Redeterminable.-provides for price to be redetermined on basis of actual cost at certain times during production of the items. Use: when sufficient price information not initially available. In FY 1959, accounted for 4.7% of dollars and 3.6% of actions.

3. Fixed Price-Incentive.-Initial negotiation of a target (a) cost, (b) profit, (c) ceiling price and (d) final profit formula which allows contractor to retain decrease in target costs (usually in range of 10% to 20%), and less profit if performance costs exceeds target cost; accounts for 15.3% of dollars and 5.4% of actions.

4. Fixed-Price With Escalation.1-upward or downward revision of contract price upon actual occurrence of specified contingencies (e.g., labor or material increases or decreases). Accounts for 6.3% of the dollars and 3.2% of actions resulted from this type contract. Can be used in formally advertised contracts.

COST-REIMBURSEMENT TYPE CONTRACTS:

Reimbursement of allowable cost of performance determined by ASPR Section XV (cost principles) and other terms of the contract.

These contracts are subdivided as follows:

1. No Fee.

(a) Cost Contract.-reimbursement of all allowable costs (ASPR Section XV) and the specific terms of the contract. Contractor receives no fee. (Used principally for research and development work with educational and other non-profit institutions.) Accounts (with b) for 3% of dollars and 3.6% of actions.

(b) Cost-Sharing Contract.-reimbursement of a portion of allowable costs (ASPR Section XV). Contractor receives no fee. (This type of contract recognizes that the contractor sometimes benefits substantially [apart from profit] by performing a Government contract.) Statistics merged with (a) above.

1Only types of contracts which can be used in formally advertised procurements. However, may also be used in negotiated contracts.

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