determine the acceptability of the contractor's methods of segregation of sales and allocation of costs, and other available information is evaluated to determine whether or not to assign the filing to the field. In those cases where contractors' reports show losses or clearly indicate nonexcessive profits in connection with renegotiable business, action on the case is completed at headquarters. Other cases are assigned to the regional boards for determination. This examination procedure lessens the amount of work that would otherwise be assigned to the regional offices. The screening process effects substantial savings in time and expense for both the contractor and the Government. A contractor's filing can be disposed of at headquarters for a fraction of the average cost of completing an assignment requiring the full renegotiation process in the field. As a result of examining 3,950 above the floor filings during fiscal year 1960, 2,977 cases were completed at the headquarters level by withholding from assignment. FIELD AND HEADQUARTERS EMPLOYEES Mr. THOMAS. How are your 287 jobs broken down between your regional offices and the District of Columbia? Mr. COGGESHALL. 137 at headquarters and 150 in the three regional boards, New York being the largest and Detroit next to the largest. Mr. THOMAS. 150 in the field? Mr. COGGESHALL. Yes. I am doing it by subtraction. Mr. COGGESHALL. That includes vacancies. COMPARISON OF APPROPRIATION 1961 WITH ESTIMATE 1962 Mr. THOMAS. Your supplemental was $145,000? Mr. COGGESHALL. Yes. On an exact mathematical basis it would have been $171,000. Mr. THOMAS. How much did you absorb? Mr. COGGESHALL. We absorbed $26,000. Mr. THOMAS. You absorbed $26,000? Mr. COGGESHALL. Yes. Then we had $15,000 off our appropriation. Mr. THOMAS. What about the $15,000? Mr. COGGESHALL. We would have been exactly $3,015,000 after this $145,000. When I went to the Bureau of the Budget the figure I talked about was $3,050,000. That represented a straight mathematical $171,000 added to the $2,870,000, $3,043,000. Mr. THOMAS. Your $145,000 money is not included in your base of $2,870,000 for 1961? Mr. COGGESHALL. That is right. Mr. THOMAS. But it is included in your $3 million base for 1962? Mr. COGGESHALL. Yes. And before we came to the figure of $145,000 we had $28,000 more, to be exactly mathematical. Mr. THOMAS. A little quick arithmetic gives an increase of $115,000 1962 over 1961, including the Federal Pay Act, and one less job; is that right? Mr. COGGESHALL. I do not quite follow that figure. Mr. THOMAS. Your budget if $3 million for this year? Mr. COGGESHALL. That is right. Mr. THOMAS. And you have a Pay Act increase of $145,000 to add to the base of $2,870,000? Mr. COGGESHALL. Yes. That would make $3,015,000. Mr. THOMAS. Yes, you are right. That ought to be $15,000 instead of $115,000. Mr. COGGESHALL. That is right. Of course we have some withingrade promotions going on, too. CONTRACTS SUBJECT TO RENEGOTIATION Mr. THOMAS. What is the yardstick you use in renegotiating contracts? If a contractor does not do $800,000 of business Mr. COGGESHALL. No, $1 million. We have different floors for different fiscal years. Mr. THOMAS. Since 1956 the floor has been $1 million? Mr. COGGESHALL. Yes. But that is not retroactive. Mr. THOMAS. You say in your justifications: In each case the Board's determination is based on the measure of efficiency and the application of the other factors set forth in the act, which are (1) reasonableness of costs and profits, (2) capital employed, (3) extent of risk assumed, (4) nature and extent of contribution to the defense effort, and (5) character of business. When it is all said and done, it is not a very definite yardstick, is it? Mr. COGGESHALL. That is true, but a great many precedents have been established over the years. Mr. THOMAS. You mean you have been doing a little legislating? Mr. COGGESHALL. Well, they are the same factors established during the war. Before coming with the Board I was in the banking business and was engaged in looking at loans, and those are the things a bank looks at in making determinations on loans. CONTRACTORS' REPORTS Mr. THOMAS. You point out that a contractor having renegotiable business in excess of the statutory minimum during his fiscal year must file a report no later than the first day of the fifth month after the close of his fiscal year. Mr. COGGESHALL. Yes, sir. Mr. THOMAS. But it is not mandatory that he file such a report? Mr. COGGESHALL. Not unless he has over $1 million renegotiable sales. Mr. THOMAS. It is not mandatory that he file it within the 5-month period; there is no penalty? Mr. COGGESHALL. There is no penalty, unless the failure to file is willful. Mr. THOMAS. You indicate in your justifications that if there is willful failure or refusal to file you have some action. What action can you take? Mr. COGGESHALL. Well, we reported to you last year that we have had about 1,200 that we pursued ourselves. We referred about 120, 1 out of 10, to the U.S. attorney, and there is open with the U.S. attorney today only 1 that did not satisfy us. WORK DONE BY REGIONAL OFFICES Mr. THOMAS. And the screening and allocation of cases to be investigated is done in the District of Columbia with your 137 employees, and if on the face of the return it shows that profits of less than $800,000 are involved, one of the 3 regional offices can dispose of the case in the absence of an appeal, and if the contractor wants to appeal he can appeal? Mr. COGGESHALL. Yes. Mr. THOMAS. If it is over $800,000, what happens? Mr. COGGESHALL. Well, if a tentative agreement has been reached Mг. THOMAS. The work is still done by the field office, but if over $800,000 is involved the ultimate decision is made here? Mr. COGGESHALL. Yes. They go to the Office of Review, then to the Office of Accounting, and if there is an agreement they come to us. If there is an impasse, we immediately reassign the case to ourselves and have a hearing with the contractor. Mr. JONAS. Mr. Chairman, will you yield? Mr. THOMAS. Yes. LIST OF CONTRACTS SUPPLIED BY OTHER AGENCIES Mr. JONAS. On that point, I would like the record to show the answer to this question: Do you get reports from the Defense Department, the Maritime Board, the Atomic Energy Commission, and the Space Agency that give you leads? Mr. COGGESHALL. Yes. We have a list of all the contracts. They supply that regularly. That goes to Mr. Semple. Mr. JONAS. That gives you an opportunity to know what contracts are outstanding? Mr. COGGESHALL. Yes. We do not know what work has been performed on the contracts, but upon the award of the contracts, we are so notified. Mr. THOMAS. Are you notified by receiving a copy of the contract? Mr. SEMPLE. No. We have an IBM list showing what the contracts are and the amounts. EMPLOYEES AND WORKLOADS OF REGIONAL OFFICES Mr. THOMAS. How many employees do you have in your Los Angeles, Detroit, and New York regional offices? Mr. COGGESHALL. At February 28 the New York office had on deck 73 people; Detroit had 40; and Los Angeles had 37. Mr. THOMAS. Are the workloads about commensurate with the number of employees? Mr. COGGESHALL. It is more or less in proportion. New York has close to 50 percent of the backlog at any one time. New York at February 28 had 456 open assignments; Los Angeles had 378; and Detroit had 212. Detroit went down. Los Angeles used to run about 300 open assignments. We have seen a substantial increase owing to the growth of the electronic industries on the west coast, all radiating, they tell me, around Cal.-Tech. They come out of Cal.-Tech. and set up companies of their own, these bright fellows, and we have seen a substantial increase on the west coast. We see the same thing on the east coast, particularly Massachusetts, which is electronic row. They come out of MIT. We do not see as much from the Middle West. They have always had some electronic business but no substantial growth. The growth is more on the two coasts-Massachusetts, Connecticut, New Jersey, New York, California, and Texas. There has been a great growth in your State in electronics, Mr. Chairman, and that is heavily defense business. We have seen a shift. Texas is assigned to our Los Angeles board. Mr. THOMAS. It can be said the great universities of Cal.-Tech. and MIT have been worth their weight in gold. Mr. COGGESHALL. Yes. I am looking forward to hearing Dr. DuBridge, president of the California Institute of Technology at the Cosmos Club this week. Mr. THOMAS. For your information, this committee will have the privilege of hearing Dr. DuBridge one day this week too. Mr. COGGESHALL. I have not heard him, but I am looking forward to doing so. Mr. THOMAS. He has certainly done a tremendous job. REDUCTION IN WORKLOAD Mr. THOMAS. Is your workload increasing or decreasing? I notice in the first 8 or 10 years you did about $10 billion a year in renegotiable work, and that has fallen off to about $7 or $8 billion. Mr. COGGESHALL. You see, you start with about the same figure in defense, but there have been a great many pieces of legislation that have reduced the amount coming under the renegotiation process. Mr. THOMAS. So your answer is "yes," that the amount of renegotiation work has decreased from $10 billion to about $7 or $8 billion? Mr. COGGESHALL. That is about right. Mr. EVINS. Will the chairman yield? Mr. THOMAS. Yes. Mr. EVINS. I was impressed with the figures on page 12, which bear out what our chairman has said, that in the beginning you had a larger number of filings. In 1961 you estimate over 18,000 and in 1955 it was 46,000, so in 1961 it is less than half of what it was in 1955. Mr. COGGESHALL. Yes. FILINGS AND DISPOSITION Mr. THOMAS. Let us put the table on page 12 in the record at this point. It is a good table. (Page referred to follows:) |