projects to improve naval operations, even though the proposal concerns SDI and did not even mention naval operations. ISI got a 3year contract for $5.3 million. Dr. Lau was named the scientific officer who would oversee the research effort.

In 1987, a magazine article criticizing the award to ISI due to possible conflicts of interest prompted a review of the procurement. An undocumented decision by ONR and SDIO led to a restructuring of the contract in July of 1987 which ended the research effort. Three days later, ONR issued a Request for Proposals to followup on the research performed under the first contract. In December of 1987, ISI was selected for the second contract, even though its bid was significantly higher in cost than a competitor. ISI's bid won due to a slightly higher score on technical merit given by a threeperson ONR technical evaluation committee chaired by Dr. Lau.

In sum, Dr. Lau serves with Dr. Cohen on Eastport which recommended certain SDI research. Dr. Cohen's employer submitted an unsolicited proposal to ONR to do that research. Dr. Lau, an employee of the Office of Naval Research, participated in awarding the requested contract to Dr. Cohen's employer under a program for naval-not SDI-research. When that award was questioned in the press, ONR terminated the contract. But 3 days later, ONR issued an RFP, a Request for Proposals, for another contract on the same work and again selected Dr. Cohen's employer based on the recommendation of a technical evaluation committee headed by Dr.

Lau.

These events raise questions about conflicts of interest, appearances of conflicts of interest, and possible self-dealing. They demonstrate the importance of rules regulating the conduct of advisory committees. Where an advisory committee like Eastport ignores FACA and operates without a charter, it also escapes disclosure requirements and other rules aimed at avoiding conflicts of interest. That should not happen.

Finally, we are going to hear about SDIO's most important advisory body, the SDI Advisory Committee or "SDIAC" that, while formally chartered under FAČA, is not complying with key FACA and conflict of interest rules. Evidence indicates that all 12 SDIAC members began work before receiving formal appointments to the committee. That means they began work before becoming subject to DOD's standards of conduct and the criminal conflict of interest laws.

Three members, or 25 percent of the committee, still operate without formal appointments, even though they have worked for the committee for periods of 1 and 2 years-meaning they still operate outside DOD's standards of conduct and the conflict of interest of laws. Nine SDIAC members began work before filing required financial disclosure forms and all 12 began work before ŚDIO reviewed their forms, despite financial affiliations with firms doing SDI-related work. Two members still do not have any financial disclosure forms on file.

Now, these events took place in the context of potential conflict of interest problems. Of the 10 members who have filed financial disclosure statements, 5 said they were paid consultants of firms, institutions or schools doing SDI-related work; 6 were directors or

trustees of such entities; 8 were stockholders in such companies, and 2 had other types of financial relationships with these entities. One SDIAC member is a paid consultant of seven firms doing SDI work, a director of one, and a stockholder in seven. One company for which that member is both a consultant and stockholder is a closely held, small business whose work depends to a significant degree on an SDI contract. Yet this member's year-old financial disclosure form has yet to be reviewed by SDIO, and he is yet to file any disqualification statement.

SDIAC's poor record of compliance with conflict of interest rules is the worst of all the DOD advisory committees examined during the staff investigation. Given these disturbing facts, we must ask what SDIO is actually doing to ensure the integrity of the SDIAC through compliance with DOD's standards of ethical conduct.

The bottom line is that SDIAC has failed repeatedly to comply with the legal requirements of FACA and DOD's conflict of interest rules.

FACA serves an important purpose in maintaining the public's confidence in the Government's use of outside advisers. DOD's compliance has been begrudging and, even then, promises to Congress have been broken. SDIO's compliance has been dismal and requires a major overhaul.

I happen to support the proper use of Federal advisory committees. A government needs the wise counsel of advisors. But the message we are sending today is that DOD and SDIO must either operate their advisory committees in accordance with the rules designed to ensure objective, high-quality advice and the absence of conflicts of interest or just quit using them. It is that simple.

Thank you.

Chairman GLENN. Thank you very much, Senator Levin.

Our first panel this afternoon is David O. Cooke, Deputy Assistant Secretary for Administration, Department of Defense, accompanied by Arthur H. Ehlers, Director, Organizational and Management Planning, Defense Committee Management Officer, and William Carroll, General Counsel, Strategic Defense Initiative Organization.

Mr. Cooke, you can lead off with your testimony, please.

TESTIMONY OF DAVID O. COOKE, DEPUTY ASSISTANT SECRETARY FOR ADMINISTRATION, DEPARTMENT OF DEFENSE,1 ACCOMPANIED BY ARTHUR H. EHLERS, DIRECTOR, ORGANIZATIONAL AND MANAGEMENT PLANNING, AND COMMITTEE MANAGEMENT OFFICER

Mr. COOKE. Thank you very much, Mr. Chairman, and Senator Levin. I am pleased to have the opportunity to be with you. Also I am very pleased to have with me Mr. Carroll, the General Counsel of SDIO, who can speak with particular reference to some of Senator Levin's comments.

I respectfully disagree with Senator Levin about the record of DOD in administration of the Federal Advisory Committee system.

1 See p. 45 for Mr. Cooke's prepared statement.

As a matter of fact, the GAO and IG reports you referred to in 1983, Senator, looked at only the Defense Science Board and several other related scientific advisory committees. They did not look at the great bulk of our 61 committees, all of which are operating I think very clearly within the limits of the statutes and, as a matter of fact, as you know, we review each committee and its charter at least once every two years when we recharter the organization and take them all through a full-scale review, including a review of its membership and their balance.

In addition, it is true that in 1983 we did set as an objective a complete review of all committees. In a 3-year period, we have completed some 56 of those reviews, as time and our staffing conditions have permitted, and we are continuing the reviews. These are separate and apart from the review we conduct every 2 years as a result of the rechartering of the committees.

But I do agree with you about the value that the advisory committees play generally in the defense and our national security programs. We are receiving the services of high-caliber experts at bargain rates.

Let me tell you very briefly, though-and, with your permission, Mr. Chairman, I will merely hit a couple of highlights and if you would allow the insertion of my statement in its entirety in the record, I would appreciate it.

Chairman GLENN. You entire statement will be included in the record. You can summarize it as you feel appropriate.

Mr. COOKE. As I said, we have 61 DOD advisory committees. Before a committee is established, a sponsoring official-and by a sponsoring official, I mean an official at the level of the Secretary of Defense, Secretary of a military department, the Chairman of the Joint Chiefs or an Under Secretary or an Assistant Secretary or the director of a defense agency such as the Director of SDIO, must see a need and request the establishment of a committee.

That request is examined first of all within that individual's organization by a committee management officer. The committee management officer in turn must deal with Mr. Ehlers, who is the overall DOD Committee Management Officer. Each committee itself has an executive secretary who is responsible for the daily operations of that committee.

Our DOD Directive 5105.18, entitled "DOD Committee Management Program," provides the overall policy guidance for the programs. Copies, of course, have been furnished to your staff.

In addition, we have implementing instructions and regulations and have issued policy memoranda as necessary. Now, the arrangement works in part because Mr. Ehlers and his staff deal with the organization's committee management officer and indeed the executive secretary of the proposed coordinating committee and work with them on the charter of the committee, the functions of the committee and the like. It works well, too, because we deal very closely with the Secretariat of GSA. Mr. Weiss is here to talk to you about their role, so it is an integrated lock-step arrangement and we have been able in working with GSA, without exception, to negotiate mutually agreeable solutions in the rare cases where GSA has some questions about the charter or the purpose of the

committees.

Now, as in the case of any widespread program, problems arise in the administration of DOD advisory committees. Because the arrangement I have sketched for you is centralized with policy, direction and oversight on top and decentralized execution-by decentralized execution, we look to the organization's committee management officer and the day-by-day executive secretary of the committee to insure the proper expenditure of funds, the keeping of adequate minutes, and the rest of the requirements of the FACA, but when they do arise, we do address them promptly.

You referred to the findings of the IG and GAO back in 1983. Very briefly, the IG report on the Defense Science Board on July 7th said that meetings were not always properly announced in the Federal Register, that the minutes of meetings and reports were not required at a central location, the minutes of the meetings were not prepared in the detail that at least that the IG thought was necessary and suggested that the designated Federal officials should be better aware of the laws and procedures, and they recommended, of course, that the Defense Science Board operations be reviewed periodically for compliance.

As part of the actions taken to correct that problem, operating procedures were issued by the Defense Science Board executive officer to the Defense Science Board military assistants on October 21, 1983. Guidelines were issued by the Defense Science Board Chairman and the Defense Science Board Task Force Chairpersons on February 15, 1984, addressing the criticisms I just outlined. The memo also addressed the balanced membership problem, appointment procedures, conflict of interest, and security, and, as I said, we have reviewed the Defense Science Board periodically since that time.

The GAO report on defense scientific advisory committees generally recommended that we should strengthen our financial disclosure and conflict of interest procedures, insure compliance with the requirement of timely Federal Register notice of meetings and keep better minutes of the meetings, and had some specific recommendations regarding the Navy Research Advisory Committee.

We, in actions to correct, announced the periodic review program, with special attention being given to science boards during the periodic review. As a matter of fact, with respect to the Navy Research Advisory Committee, we have reviewed it four times since the report, and I think you will find that it is line now.

We have also at times, when it has been brought to our attention that there are failures to follow procedure, have had no hesitancy in writing a memo saying in effect please get with it. Here is the typical language we have used:

It has come to my attention that at least one meeting has been held by the committee and others have been planned. No action should be taken by or for the committee until after it has been properly established pursuant to the Act.

So I think that when matters come to our attention, we are zealous in pursuing them and correcting the situation.

Mr. Chairman, you referred to the fact that our conflict of interest regulations or our standards of conduct now require financial disclosures from committee members, since those standards of conduct were reissued in 1987.

I can only say with respect to advisory committees, in a memo I signed in 1979, we specified that members of advisory committees should file a conflict of interest statement, our DD Form 1555, so that has been in existence as a requirement to the sponsors of those committees since that time.

Now, with respect to establishing committees under contracts, we do not knowingly authorize nor is it the Department of Defense's policy to condone the formation of a Federal advisory committee with contracts or with any other third party. If such arrangements come to our attention, we will confront the sponsors involved and initiate actions to cancel them.

With respect to Eastport, we learned about Eastport less than two weeks ago and we are now taking under review the question of Eastport, Senator Levin, and indeed some of the other advisory organizations that you at least have characterized as public advisory committees to see in our judgment whether they do fall within the purview of the act.

You, of course, have expressed a high degree of interest in the Strategic Defense Initiative Organization and its compliance. Our records show that the SDIO has one advisory committee which was established in 1985, in accordance with the same policies and procedures as every other Defense Advisory Committee.

However, should you have any specific questions on the day-byday operations of that committee or the other advisory-methods of obtaining advice that SDIO follows, why, we have with us, as I said, the General Counsel to speak for that organization.

That completes my statement, Mr. Chairman, and I shall be glad to answer questions now or hold it until you have had a chance to hear from Mr. Carroll, at your pleasure.

Chairman GLENN. Mr. Carroll, go ahead.

WILLIAM CARROLL, GENERAL COUNSEL, STRATEGIC DEFENSE INITIATIVE ORGANIZATION 1

1

Mr. CARROLL. Mr. Chairman, Senator Levin, it is a privilege to be here before you today. My name is William Carroll, and I am the General Counsel for the Strategic Defense Initiative Organization [SDIO].

As Secretary Cooke has indicated, there is the one formally chartered SDI advisory committee. The work on establishing that committee started at about the same time that SDI was started as an agency within the Defense Department, in April of 1984, after consultations with the GSA and GSA's consultations with OMB. Approval was given at the end of 1984, and at the end of 1986 a similar process was followed and the approval of the committee for another 2 years was given in January of 1987.

I do have a formally prepared statement that I would like to submit for the record, if I may, Mr. Chairman.

Chairman GLENN. It will be included in the record in its entirety. Mr. CARROLL. I will quickly summarize some of the major issues that were raised in the invitation letter.

1 See p. 61 for Mr. Carroll's prepared statement.