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them, it may be that looking downstream they may feel that they could put their own system in that wasn't the preferred solution in a subsequent step. So one of the advantages to minimizing industry's role here is that they don't grade their own papers, they don't come up with a preferred solution and then implement it. That gives an objective analysis of the problem.

Mr. WHEELER. In our example, perhaps we can clarify the responsibility relationship of these people.

If you recall, at the beginning we had some six studies. The general policy study was conducted in-house at the DOD management level. The general analyses of comparing systems and general analyses of what are capabilities of airlift systems were done by analytical and evaluation organizations within the Department of Defense assisted by not-for-profit companies, and using information supplied by the industry as to what is the state of the art and what is practical and feasible. Then the detailed studies on actual airlift systems concepts were managed and directed by the Air Force through its agencies and with a very direct interchange of information from the industry as to what is technically possible and from the industry as to what systems will be envisioned in solving the problem.

As was mentioned, however, this is of an informational nature.

It is also valuable to have the industry critique approach of Government, in terms of whether this is a practical thing and should it be instituted. The emphasis in the first step is rather heavily in the Government sector.

In the second step, the emphasis is in the Air Force management agency with industry participation, and in the third step of actually implementing the system, systems management by a contractor as directed by an agency of the Air Force.

So this relationship gradually shifts in terms of the amount of effort applied to the problem from in-house Department of Defense analyses through to more and more participation by the industry until, in systems implementation, the bulk of the work is now being performed and the bulk of the systems management responsibility performed by the industrial teams.

Mr. DENNIS. We have also indicated how these industrial teams are selected. In the systems concept definition phase, the selection is based on a request for proposals where the contractors describe their experience, their personnel and preliminary approach.

For the program definition phase, again it is based upon a request for proposals and the contractors describe their procedures, technical developments, and capability to undertake systems implementation. In the third step, system implementation, it is based on the results of the program definition phase, particularly significant technical features and cost effectiveness of the total system being included.

I would like to point out two things here: Very often contractors will be asked to participate in systems concept definition where they might have a unique technical solution but where they are not qualified to carry the program on further.

This is the contribution through the whole process where industry assists in a systems concept definition. For example, in a water pollution problem it may be that a small company has a filter that might be

a key to the solution of the problem, but the small company cannot take on the total program management to clean up a major polluted area. He will be asked to participate in the concept definition simply

to evaluate his filter.

The second point is in the program definition the contractor expresses his technical developments and capability. Recognizing that the system implementation is the phase where the contractor wants to participate, this is the end goal of the whole process, the implementation phase. Recognizing that the program definition phase is the necessary step to get to here, the competitive nature of the defense business has forced the industry to anticipate upstream the system implementation contract to the point where they begin to invest their own money in research and development in coming up with new solutions and new ideas so that during this phase they can get a competitive edge for the system implementation phase.

There has been a great deal of discussion on the application of aerospace technology to some of these other national problems and how to involve the aerospace technology. My feeling is that if this process is followed on these other national problems, and understanding that there are system implementation contracts in the future, in anticipation of these contracts the aerospace industry will start to direct their technical capability toward unique solutions to problems so they will be more competitive for the final phase. This is a way that this technology can bridge the gap from defense to these other national problems.

Mr. WHEELER. In the example, returning to the selection process, Mr. Dennis was mentioning that, in our model, 10 industries in the early phases felt they had significant technical contributions to make to this tactical airlift system problem.

Four of these in the Government's opinion had sufficient ability to make a material contribution to that evaluation process. By the time a system was actually defined, there were then only a limited number of industrial firms, five in this case, who had the preceding work, the background and the ability to go ahead and produce the system.

The number of people involved, the number of competing companies, narrowed, if you will, in a rather natural process, based upon their own assessment of their situation, their ability to proceed with the program, their ability to respond to the requirements of the Government.

From the five contractors, then, two were selected so that the Government would have two different points of view in their information, and two different approaches to a system implementation program, and two differing types of capability in actually producing the system. It was felt necessary in this system to have at least two companies in the program definition phase so the Government has the fullest amount of information about companies who are qualified to actually go ahead and produce the system.

The selection in each case is basically, in our model here, by the Air Force management agency, with the review and concurrence of the Department of Defense.

The basic responsibility rests with the Air Force to determine the capabilities of the contractors and their contributions to the program.

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Mr. DENNIS. We also indicated how these steps are funded. In the systems concept definition phase, Department of Defense operating budgets, contractural arrangements with support organizations and small study contracts with industry.

For the program definition phase, generally the contracts are with industry on a fixed price basis.

For the system implementation phase, the contracts are with industry having varying degrees of profit incentives, depending on the risks

involved.

As I pointed out earlier, the ratios here are where this is $1, the next is $10, and the third step can run from $100 to $1,000.

Mr. WHEELER. In our example the cost ratios that Mr. Dennis described were generally borne out. I find them quite interesting. Our industry would not be aware of the cost of inhouse system studies at the very beginning of the program, because those studies are initiated inhouse in the Defense Department. However, some $10 million worth of systems definition contracts were let in the first step, followed by some $50 million of program definition contracts. We didn't quite go from 10 to 100, but we are in the same general neighborhood.

Then in this example, the development program of some $700 million and the actual implementation and production program something greater than $2 billion.

In this example, it was apparent to the Government that it was appropriate to proceed with contracting for both development and production at the same time, or contracted at the same time, I should say. So the first several years of production and the development preceding it were all contracted for at the beginning of this system implementation phase.

On examination of other examples one might find that the Government would elect to go ahead with the development program and reserve decision as to final implementation of the program.

Mr. DENNIS. This is the final chart, and it is a kind of summary to pull all the factors that we have talked about together.

Again there are the three steps: Concept definition, which utilizes systems analysis techniques, which provides alternative approaches to satisfy a requirement, the relative effectiveness of each, and probable extent of Government obligations.

The second step is program definition, which utilizes systems engineering techniques. It provides a preferred systems designs with alternatives, the cost effectiveness of each, and firm plans and schedules for design and development.

The third and last step is program implementation, utilizing systems management techniques. It provides plans and costs for orderly system development, production, and operation. It provides the timing and nature of the obligations, and assurance of cost and program control.

This kind of ties up the three steps and the techniques involved.
Senator NELSON. Thank you very much, gentlemen.

I think that anyone who had the opportunity to listen to the presentation in detail would understand the system approach that was used here. What troubles me a little bit is that most people who will

be considering this problem in the Congress will not have heard this presentation in detail and I think it will be a little difficult for them. I say this only by way of asking you, Karl, this question. As I recall, in the California contracts there were four of them, one being crime and delinquency, one pollution, one transportation, and one information handling.

Would it be possible to take the pollution one, which I think was the smallest though this is very fine in the record for anyone who wants to take the time and look at the charts in the record, and they can understand that after examining it-I was wondering if it would not be possible for whichever one of the corporations-and I think it was Aerojet that did the pollution study-to take that study and do a narrative presentation.

The report, itself, is too big, detailed, too fat to go into the record. But if one of the persons who worked on that could take it so that we could submit it into the record ahead of or behind this one, it would be helpful. It would be a narrative explanation, so that the general public could understand the concept, such as you would find in a magazine, for example. Would that be possible?

Mr. HARR. Dr. Roberts is here.

Mr. ROBERTS. When you ask if it is possible, Mr. Chairman, the answer is "Yes," it is possible.

Mr. HARR. I am sure we can do that, Mr. Chairman, and will.

Senator NELSON. Maybe if we ask someone who knows too much about the subject, they can never get it simple enough for the rest of us to understand. But I have read the report, and I think you could write a narrative explanation, it seems to me, of the pollution systems analysis report that was made in California. Don't you think so? Mr. ROBERTS. We will be glad to, sir.

Senator NELSON. I think it would be very helpful. Anyone listening to this fine presentation in detail would understand it. But I think we need a simple narrative explanation. The only reason I suggested pollution is because it is one of the social problems which now has a high-level visibility and interest throughout the country.

Mr. HARR. We will certainly be glad to do that, Mr. Chairman. My only hesitancy, and I am sure it is unnecessary, is that one of the purposes of this rather full-blown examination in depth of a hybrid model study was to go beyond the phase involved in the California contract and studies and show to what depth there is an interface, a working together, and sharing of responsibilities, throughout all the way to implementation.

Senator NELSON. I think it is excellent. But there is this one other problem. If the committee finally reports a bill, it then goes to the floor of the House and the floor of the Senate. Everybody is very busy and there will be three or four people in each House who have read the hearings in detail.

Somebody is going to say, "Give me a good example." We can say, "There is a very fine example right here."

But if you can give a narrative example on a social problem, I think it would be helpful in explaining to Members of Congress what we are talking about. I think most people have not interested themselves in the idea of systems analysis and they will say, "Well, what is it?" A simple narrative explanation will help the record for the presentation to other Members of Congress.

Mr. HARR. It will be done.

Senator NELSON. I want to thank you very much. It has been an excellent presentation, and it is very valuable for the record. I appreciate your taking this time.

Mr. HARR. Thank you, Mr. Chairman.

Senator NELSON. Our next witness is Dr. E. R. Roberts, vice president, Aerojet-General Corp., El Monte, Calif.

STATEMENT OF E. R. ROBERTS, VICE PRESIDENT (DEVELOPMENT), AEROJET-GENERAL CORP., EL MONTE, CALIF.

Mr. ROBERTS. Thank you, Mr. Chairman. It is a pleasure, indeed, to testify before you on a subject which we consider to be very important.

Mr. Chairman, the gentlemen who have preceded me today have very aptly pointed out what the systems approach is and how it is used in solving problems associated with the design, development, implementation, and management of complex defense and space programs. There are, however, some fundamental differences between these problems and those of a social or socioeconomic nature. Therefore, a review of our experiences in this field might be appropriate. This is the third time that our company has had the opportunity of addressing you. In 1965 Dr. Culver, manager of our life sciences division, discussed the findings of our waste management study, and Mr. Lehan and Mr. Kuhn presented the results of our crime and delinquency study. Since then we have become engaged in two more studies of similar nature.

Today, with your permission, I would like to review our total experience from the standpoint of

(a) To what degree our talents and our methodology is translatable to solve socioeconomic problems.

(b) What kind of difficulties we have experienced.

(c) What contribution to the solution of these problems can be expected from the aerospace industry.

And finally, to what time schedules could we perform?

Let me start with the translatibility of our talents and methodology. We found that in all cases we studied, the system enigneer had no unusual difficulty understanding the problem, and with the help of systems analysts, statistician, computer scientists, and consulting experts from the particular socioeconomic field, he was capable of putting the methodology fully to use.

Indeed, Mr. Chairman, in all cases he could construct a system framework within which the problem could be logically attacked. I wish to emphasize that we had to construct a system framework, because as yet the various operations, which must contribute to the solution of the problem within a so-called socioeconomic system, do not operate in unison to accomplish a defined objective. Indeed, if we accept the simple definition of the system that it is a set of operations designed to perform a specified objective—we must say we have very few, if any, socioeconomic systems operating today. We do have a number of socioeconomic problems, which may have grown to the proportion in which they exist today, exactly because of the lack of such systems.

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