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Outline of funding

Total funds sought...
Amount to be released from reserve..
Balance to be sought in request for supplemental appropriations-

$1, 460, 000

700, 000 760, 000

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760,000 From the above table it may be seen that we estimated $350,000 would be allocated to Special Counsel and his staff, and $300,000 for his studies. (These amounts could be reallocated as Special Counsel deems appropriate.) We programmed $810,000 for our economic studies on a contractual basis.

The nature of the studies under consideration are entitled (a) Revenue and Revenue/Cost Relationships, (b) Traffic Flows, and (c) Survey of Railroad Service. Other subjects were included as possible areas for exploration for the Special Counsel. However, they are also topics the Commission might choose to investigate(a) The Operative Structure and Application of Rail Rates, (b) Responsiveness of Shippers to Rates and Service Characteristics, and (c) Financial Stability and Revenue Needs. An additional topic would be one involving costs which would be of benefit to DOT in the unhappy event that their legislation passes and also of benefit to the Commission, the carriers, and consumers in the event no statutory changes result. Staff work is continuing on an in-depth exposition of these studies.

As seen, the amount we expect to be released from reserve is about $700,000. After preparation of the necessary explanation for OMB and after authorization is received to obligate the funds Special Counsel and staff may be retained. Simultaneously we should be in a position to enter into contracts for studies essential to the successful conclusion of these investigations, all by June 30, 1972. The Special Counsel's contract study money ($300,000) and the additional Commission money ($460,000) are included in the request for supplemental Congressional appropriations. (If this request is acted upon favorably, it too would have to be obligated this fiscal year. A clause in the earlier economic study contract could be open-ended, providing for additional studies if money is made available.)

Our first priority will be locating the appropriate Special Counsel. Judge Friendly has been mentioned as a possible candidate. I understand that, in judicial circles, it is well known that he is contemplating retirement. I also understand that Brother Walrath, who is acquainted with Judge Friendly, is willing to initiate preliminary discussions. I would suggest that this be done immediately. There may be others who should be considered but, in any case, time is of the

It is highly important that, if we receive the money we have requested, we not allow the investigations to falter. It would be helpful if we could assign three additional examiners (experienced in economics, rates, costs, and service) to Ex Parte Nos. 270, 270 Sub-Nos. 1 and 2, and 271. Examiner Dolan would continue to supervise and coordinate the matters with the various bureaus and other members the Staff Task Force. There is one other alternative. Members of the Staff Task Force assigned to these proceedings would have to be spared from some of their regularly assigned duties in order to complete work which lies ahead. This includes such matters as the further explanation to OMB and to Congress as to how the funds will be obligated, what economic studies should be made, the technicalities of contract preparation, negotiation, evaluation of bids, monitoring work of the contractors, etc., retaining Special Counsel, Staff, support personnel and quarters, analyzing the statements filed in these investigations and preparing


appropriate reports and recommendations, and charting the future course of these investigations.

Therefore, I suggest that a commissioner be placed in administrative charge of these investigations. I also suggest that the Commission give preliminary consideration and approval to the matters expressed in this memorandum. Once we receive final authorization we will have to take action on short notice.



In the preliminary report in Ex Parte No. 270 we alluded to the role of Honorable Louis D. Brandeis as Special Counsel for the Commission in the Five Percent Case: “The Commission instructed him 'to see that all sides and angles of the case are presented of record,' without advocating 'any particular theory for its disposition' and to 'emphasize any aspect of the case which in (his) judgment, after an examination of the whole situation, may require emphasis.'

SELECTION, ROLE, AND SALARY The essential problems are the selection of the Special Counsel, the salary arrangement, and his role. We must know how much money can be offered and the manner by which we can retain such an individual.At that time we must be able to inform eligible persons what will be expected of the Special Counsel and what he is to receive in return.

Since the Special Counsel, to some extent, will be charged with responsibility for these investigations, he should be retained and become a party to the proceedings as soon as possible. Certainly before the direction of the proceedings is fixed the Special Counsel should have an opportunity to make his views known.


The Special Counsel would have legal authority at least equivalent to that of staff attorneys in the Bureau of Enforcement in any Commission proceeding in which it is directed to participate. However, because of the special role of Counsel in these far-reaching investigations, the obligations of Special Counsel would be much greater. This also follows from his added staff and the availability of adequate funds. Special Counsel should also receive the broad instructions given to Honorable Louis D. Brandeis.

Special Counsel would be a party to the investigations and would have to be treated as any other party. He would be assured complete independence. He could not be regarded as the Commission's spokesman or attorney. If he is to be charged with responsibility for the investigations, he should have the final say as to the evidence which he is to introduce in the record. This may create pooblems if he disagrees with economic studies put out on contract by the Commission. However, in case of an impasse, the studies could be released by the Commission just as the burden studies.


May 11, 1972.



Memorandum to the Commission:

We are still waiting for Bob Ginnane to let us know if he is in the position to tak the assignment as Special Counsel. Should he not accept the position we do not now have another candidate with the stature we feel is needed. I am attaching material furnished by John Danielson and Leonard Goodman.

OMB has released $700,000 for economic studies. Our request for the additional $760,000 would include funds for Special Counsel, staff, and his studies. This was originally sought as a supplemental appropriation for FY 1972. It is now being considered as an amendment to our budget request for FY 1973. Therefore, we do not yet have funds with which to retain Special Counsel but we expect they will be available later this summer.

1 From discussions with the General Counsel of the Civil Service Commission and his staff, we learned that the recipients of these contracts must be independent contractors, the rationale being to preclude subsequent suits against the Government for annuities.

Several persons mentioned Judge Friendly but our investigation revealed that he will not be eligible for retirement until July 1973. After that date he could retire and continue, as judges do, on full salary but if he were to resign earlier he would lose his retirement compensation. Under the circumstances it seems fruitless to even approach Judge Friendly. For these and other reasons further exploration in the judiciary offers little chance of producing potential candidates.

We have made informal contacts with representatives of the bar of the Commission and will give consideration to any candidate they suggest. At the same time the staff is widening the search to explore the availability of non-lawyers. Persons in other fields may find it easier to take a leave of absence than attorneys with an active practice. Moreover, non-lawyers would have no difficulty in functioning with a capable staff of attorneys as well as economists, engineers and other transport experts.

In the circumstances I will direct the staff to prepare a list of likely candidates. We will then present to you profiles of these individuals to get your initial views. This matter must be handled with some delicacy to avoid embarrassing ourselves or the candidate. Clearly, if a potential candidate indicated a willingness on his part, we should be in agreement in making an offer. The task is to find some prominent individual whose reputation and ability would immediately convey a sense of confidence in the success of this investigation, as well as be acceptable to all those whose continued cooperation and support will be essential to the success of Ex Parte Nos. 270 and 271.



June 20, 1972. Ex PARTE No. 270—INVESTIGATION OF RAILROAD FREIGHT RATE STRUCTURE Memorandum to the Commission:

The Technical Evaluating Team (Technical Team) evaluated the eight written proposals and together with the Corporate Performance Team came up with scores of 734 for Resource Management Corporation (RMC) and 709 for Charles River Associates (CRA). These point scores, as well as those for the other bidders, were arrived at by evaluating each proposal on the basis of 14 criteria. The conclusion of the team was that RMC was the better qualified contractor. (See Attachments.)

The Contractor Selection Board (Board) had the benefit of the oral and written evaluations and weighed scoring reports of the Technical Team. The Board also reviewed the written proposals of all those responding to the request for proposal (RFP). Finally, the Board, assisted by the Technical Team, participated in the oral presentation of RMC and CRA. (A copy of the transcript of that meeting is available in my office.) The Board members found themselves in unanimous agreement with the Technical Team's conclusion that the contract should be awarded to RMC rather than to CRA, the other finalist. Besides the advice and recommendation of the Technical Team several factors stood out in leading the Board to come to this conclusion:

1. The written RMC proposal was by all odds the best of those received. It demonstrated a clear grasp of the purpose behind the institution of Ex Parte Nos. 270 and 271 and of the data problems facing anyone attempting economic studies in furtherance of the aims of those proceedings. This contractor was familiar with the waybill data and its shortcomings and demonstrated its ability to deal with the cost data available. (Its sub-contractor selected to process the Rail Form A data, Robert Hines Associates, while not demonstrating statistical or economic brilliance, has experience in ICC rate and merger proceedings and is experienced in applying Rail Form A data and ICC costing techniques, as well as necessary modifications.)

None of the proposals clearly explain the econometric and statistical methodology to be used in the various study areas. None presented a clear alternative plan in lieu of utilizing 1969 or later waybill data which is still unavailable. However, we recognized the short time available for the firms to submit bids and did not call for such solutions.

Essentially the Commission will be acquiring a given number of man years of effort. Thus, it is highly relevant that at the oral presentation RMC made clear that the services of a highly regarded econometrician-David Nissen of Rice Institute—would be made available for a substantial amount of time, if we desired.

2. In dealing with the areas of rate of return and cost of capital, RMC was superior to any of the other bidders. In responding to questions, Dr. Ture, who will act as a consultant to Systan, a sub-contractor, was much more impressive than was Dr. Hughes, his counterpart for CRA. Dr. Ture demonstrated both a superior understanding of the economic theory underlying rate of return concepts and a superior ability to translate theory into useful form as well as an appreciation of the practical difficulties facing the Commission. It is important to move ahead quickly in this phase of the contract because, while we have received initial statements of position in Ex Parte No. 271, an extension of time was granted until October 1 for the verified statements of fact and argument. December 1 is the date for reply statements. This extension was granted because a rail expert witness is unavailable, but also because of the pendency of this contract effort. The two tasks can and must be dovetailed.

3. At the oral presentation RMC had available the individuals who would take a major part in the day-to-day conduct of the studies which they propose to perform. CRA, on the other hand, had available the management people who would have the responsibility for overall direction of these tasks. However, they would themselves commit relatively small amounts of their own time to the actual work. The RMC presentation was presided over by Dr. Armando M. Lago, who would be the project director and would be committed for 89 percent of his time over the course of the two-year contract. Presiding at the CRÀ presentation was Dr. William Hughes, who would be the project leader, but who would be committed for only about 13 percent of his time. As far as personnel is concerned, CRA may well have arrangements with people with more impressive backgrounds, and may have assembled a more impressive group of big-name consultants. However, the combined time of these key personnel would be much less than that to be spent by only three members of the RMC top team. The availability on a continuing basis of staff of known competence was perhaps the most important single factor leading to the Board's recommendation to award the contract to RMC.

4. One of the lesser factors that went into weighing the proposals was performance of contracts for other government agencies. An attempt was made to obtain an evaluation of RMC's and CRA's performance of contracts of similar scope and size. RMC did not fare well in the comments received from some technical personnel of DOT about a contract for about $650,000 which is nearing completion. However, DOT staff were unanimous in praising the competence of three of the top RMĆ staff members, including Lago and Nissen, who will be spending substantial amounts of time on the ICC studies. (If RMC is selected we expect to minimize any problems by establishing a monitoring officer to keep in close touch with the contractor to make certain the studies are proceeding on the right track and within the cost constraints imposed.) CRA received exceedingly good reports from other agencies which had used its services. However, in view of their inadequate oral presentation, it does not appear possible that the studies which it had performed satisfactorily had been directed and prepared by the same people who who would be involved for a substantial amount of time on our contract. Rather amazingly CRA has 65 percent of its time allocated to low level personnel.

5. A matter of some importance is the fact that RMC and some contractors are all located in the Washington area whereas CRA, principally based in Boston, would have to establish local offices here in Washington. The proximity of RMC should prove valuable in view of the expected working arrangements whereby the contractors' work will be specified by individual tasks with close monitoring of their effort by ICC personnel.

It is the considered judgment of the Board that RMC is the preferred contractor and that the managing director, with the assistance of Mr. Wilbur Wilson, should be instructed to commence negotiations with RMC leading to a contract committing the available funds.

I concur in this recommendation and I vote to approve the recommendation of the Contractor Evaluation Board. In view of the shortness of time available, I will clear this proposal as approved by the Commission unless I receive objection by 4:00 p.m. Wednesday, June 21.


Mr. POWERS. What was the next one?

Mr. BREWER. On February 26, 1973, I addressed the following document to the entire Commission:

Although I believe that I may properly enter the attached order, in view of my administrative responsibility in these proceedings, considering the extraordinary nature of the action, I am circulating the proposed order for your review. In the absence of objections on or before noon tomorrow, February 27, I propose to enter the order as soon as it will be appropriate.

That order is signed by Robert Oswald, our secretary, and it has to do with making Senator Gordon Allott a party to these proceedings and notifying them that he was now-well, I will read it to you.

It be further appearing that the Commission has now contracted the Honorable Gordon Allott, a former Senator of the United States, to serve as special counsel in these proceedings, and to employ the necessary staff, consultants and subcontractors for the purpose of producing such evidence and pleadings as he deems appropriate, necessary and practicable for the development of a full record for representation of the public interest; therefore, it is ordered that Special Counsel Gordon Allott be and hereby is made a party of these proceedings, and shall be served with all the papers entered by this Commission and served by the parties herein. Dated Washington, D.C., the 27th day of February 1973.

In all instances and on a number of occasions, I regret that other questions were not asked of the Commissioners, and I hope there will be an opportunity for you to ask these questions orally, they were kept completely informed of the progress, step-by-step, and I think they will confirm that, and there were no objections from any of the Commissioners, and on a number of occasions, at least six, at our special conferences, I asked the chairman to indulge me to bring everybody up to date on our progress in the negotiations.

Mr. Powers. Were minutes kept of these special conferences?

Mr. BREWER. No, sir. They were special conferences in connection with other cases, and I ask the chairman for permission to explain these, and I think that can be confirmed by other Commissioners. Mr. STAFFORD. Under our procedures at conference, we list the items to be especially considered, and then after we have finished that, then I ask if anyone, if any one of the Commissioners has anything he desires to bring before the Commission on an informative basis, or anything of this kind, and it is under this

Mr. DINGELL. Wouldn't the minutes reflect that?
Mr. STAFFORD. No, sir.
Mr. DinGELL. They would not?

Mr. Kaun. Mr. Chairman, the Commission does not keep minutes of its conferences. It records the votes as the votes are taken, and the votes are a matter of public record.

Mr. DINGELL. I am not an expert in the matter of the interior conduct of affairs of the Commission, but it does strike me that on a matter that was important enough to become a part of a special proceeding by the Commission, it does occur to me that matters relative would appear in the minutes.

I don't challenge that this did in fact transpire, but it just strikes me as rather curious that it did not appear in the minutes.

Mr. STAFFORD. In jest, or almost in jest, the other day one of the Commissioners said he thought he was never going to quit talking about it.

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