questions of whether or not there is oversight of the way the standards have been implemented. Somebody will have to do that job. It may not take as large a group to do that, but you cannot just walk away and leave it.

Mr. BENJAMIN. I do not think anybody is disagreeable as to the standards. The question before us is whether we ought to put another $1,800,000 into a board that was created at a time in history when there was great concern about the cost of procurement in the Vietnam War.

Mr. STAATS. If you were to reduce it, of course, you would simply stretch out the time.

Mr. BENJAMIN. I guess the real question goes back to the way you delivered your testimony. Should it be in the legislative branch or a part of the executive branch. We will get into questions later about whether there are other agencies that are more able to perform this function and then provide the continuous monitoring of it.

Mr. STAATS. It is possible that there are other agencies that could do it. I think there is a basic policy question here, though, as to whether or not standards would be issued by the Defense Department-after all, many, many years went by and they did not see the need for it, and Congress had to take the initiative to do this. If you were to turn it back over to the Defense Department, the question is whether or not the purpose would be accomplished. Mr. BENJAMIN. We have larger agencies in government including the OMB and the Federal Procurement Agency, including more in Defense. I do not think everybody in the executive branch is suspect.

Mr. STAATS. I can speak from long experience here with OMB. I was there for over 20 years. I do not think that the OMB, first, would ever set up enough staff to do this job. All the indications are that they would not do that.

The second is that their primary concern is with the budget. Personally I would not recommend that it be turned over to the OMB.

Mr. BENJAMIN. Wasn't there discussion in 1970 as the Bureau of the Budget was about to become the OMB putting it there?

Mr. STAATS. I do not recall that there was. If there was, I just do not recall.

Mr. BENJAMIN. How about the General Services Administration? How about the Office of Federal Procurement? Would you say no to each one?

Mr. KELLER. OFPP is part of OMB.

Mr. STAATS. I think, myself, if you were to vote it out of the legislative branch, you probably have to establish some statutory mechanism in the executive branch to do this job.

Mr. BENJAMIN. Of course, that is what you were advocating. Mr. STAATS. I do not think it would necessarily cost any less.

SIZE OF STAFF AND TIME REQUIRED TO ISSUE STANDARDS

Mr. BENJAMIN. Another discussion in 1970 was:

Senator GOODELL. You have recommended that there be a cost-accounting standards board. Do you have any concept of how large a staff this board should have and what kind of authorization we should have for it? Would you make recomendations

along that line, or, on the contrary, if we set it up in the wisdom of Congress in GAO, what sort of increased personnel would you need?

Mr. STAATS. The answer has to be related to how fast you are going to do it. If you did it on a-not crash-but a highly expedited basis, 18 months, obviously you would need more people.

I do not think we are talking about large numbers of people. I think a small, high quality staff would be involved either by the GAO or under the board.

We would like to see the maximum input from the accounting profession and from the industry organizations who are going to have to live with these standards. We feel that, as we did in this case, we did not use large numbers of people but we did draw heavily upon the advice from consultants and outside organizations. Senator GOODELL. Can you give us some idea of what you mean by large numbers? Ten or twenty or one?

Mr. STAATS. I think we are talking in that neighborhood.

Senator GOODELL. In other words, the actual cost of setting this up-either the cost accounting standards board or setting the operations up in GAO—would not be substantial compared to the amount of money we are talking about saving?

Mr. STAATS. I do not think so. We haven't been asked those questions before, about how much staff, but we will be glad to give it some thought and submit it for the record. We would relate it to whether or not you are going to try to complete the job in 18 months or a period of 3 to 5 years, as I responded to Senator Proxmire. Now 8 years later the staff is apparently 35, as you testified, 3 board members, 32 staff, 3 of which vacancies are not filled. Mr. STAATS. I think this discussion was in terms of professional staff.

Mr. BENJAMIN. How much of your 32 staff is professional?
Mr. STAATS. We have 19 professional staff.

Mr. BENJAMIN. Eight years later the staff is now 19 professionals. Was this a miscalculation in 1970? Let me equate it to what you do in GAO. You talk about staff years. If we are talking 8 times 19, that would be 152 staff years. In talking to Senator Goodell you are talking 3 to 5 years and 10 to 20 staff, which would mean 30 to 100 staff years, minimum and maximum. We are well over that. We are over the maximum by 50 percent.

Mr. STAATS. I hope you won't hold me responsible for guessing at that time, and I guess no one could be sure as to what something like this would involve at the outset of it. It was an honest answer. Mr. BENJAMIN. I reiterate, this was after an extensive study done by the GAO. The real argument apparently was whether it was going to be in the executive branch agency which you advocated, or as some of the members of Congress advocated, a part of the GAO. So, it was not a question of really not knowing what you were going to do. It is a question of where the agency would be. That is primarily the question that was before the Congress, whether it would be established and where it would be.

Mr. STAATS. This could have been a part of the GAO. Industry people would have been unhappy with it, unless they felt that there was going to be a board where industry would have some representation. The accounting profession would also be much hap pier if they had some representation on the board. It was a legislative compromise, but I think as time goes on, I would be very frank in saying, and I can say this very objectively because I won't be around, but the GAO could pick up this function at some point, assisted perhaps by an advisory body. I do not know how much money that would save, but that would be another option.

My own guess would be that, given the climate that exists here in the Congress, the climate that exists in the executive branch, it would probably be wiser to put it in GAO if it were not to be in the

board than it would be to turn it over to the Defense Department. That would be my opinion.

RICKOVER TESTIMONY DISCUSSED

Mr. BENJAMIN. Also in 1970 Admiral Rickover testified:

Almost 2 years have passed since Congress asked the GAO to study the feasibility of establishing uniform standards of accounting. Meanwhile the Department of Defense has awarded another $90 billion in defense contracts without benefit of uniform accounting standards. Perhaps the delay was unavoidable-time was needed to convince the accounting profession, the Department of Defense, and the General Accounting Office of the problem. However, these groups now generally agree that uniform accounting standards are feasible and should be established. We should proceed at once to establish and implement such standards.

The Department of Defense has had ample opportunity to correct the problem; it has done nothing. Even after the GAO study confirmed the feasibility and need for such standards, the Department of Defense has taken no action to set its house in order. Congress again will have to take the lead in this important issue, just as it has historically in many other issues involving the public interest.

Congress should require that uniform cost accounting standards be established and promulgated with the 18-month time period called for in Senator Proxmire's bill. Otherwise, years will be wasted while those involved theorize and debate accounting opinions. If Congress had not set an 18-month time on the GAO's study of the feasibility of establishing uniform cost accounting standards, I am sure the study would not yet be completed.

To avoid delay in establishing uniform cost accounting standards Congress should limit the scope of the proposed legislation to defense contracts. Later, after the standards have been put into effect for defense work, the standards may be extended to other Government work, if Congress so desires.

The word Admiral Rickover focused on was "immediacy". Why hasn't there been an urgency in developing all necessary standards if some remain to be developed?

Mr. STAATS. I think we could have put out more standards if we had larger staff to have done it. Admiral Rickover was, of course, one of the people who testified strongly in favor of this legislation, and he has been a strong supporter of the program from the very beginning. He was impatient. He saw no reason why we could not do this without consultation with industry, for example. He did not see why industry should be consulted. He felt we could do this and just do it on the basis of largely the accounting experience that he had had, for example. In my opinion that would not have worked at all. I do not think Congress would have ever accepted that, but he was impatient, and he was talking about issuing a complete set of standards within 18 months. Well, it would have been impossible.

Mr. BENJAMIN. Apparently members of Congress were talking that way too.

Mr. STAATS. They probably did not know as much about it even as he did. It would have been a completely and utterly impossible situation.

EXEMPTIONS AND CIVIL AGENCY COVERAGE

Mr. BENJAMIN. I am going to ask you to respond for the record to the following question.

Fifteen standards have been promulgated to date. During the same time, various exemptions have been established. Please detail these for us. Who is exempted? Who remains covered?

[The information follows:]

Section 331.30(b) of the CASB's regulations provide exemptions for the following:

(1) Any contract or subcontract award to a small business concern. A small business concern is any business enterprise which pursuant to the rules and regulations of the Small Business Administration is determined to be a small business concern for the purpose of Government procurement.

(2) Any contract made with an educational institution whose cost principles are subject to Federal Management Circular 73-8 except contracts that are to be performed by a federally funded research and development center operated by such an institution.

(3) Any contract made with a labor surplus area concern pursuant to procedures providing for a partial set-aside for such concerns as set out in ASPR 1-804 and FPR 1-1.804.

(4) Any contract or subcontract awarded to a foreign government or an agency or instrumentality of such government...or, insofar as the requirements of Cost Accounting Standard 403 and any subsequent standards are concerned, any contract or subcontract awarded to a foreign concern.

(5) Any subcontract to be performed outside the U.S. either by an agency of a foreign government or by a foreign concern in connection with the class of hydrofoil guided missile ship known as the "NATO PHM Ship."

(6) Any contract or subcontract of $500,000 or less, unless
awarded to a contractor who, on the date of such award, (i) has
already received a contract or subcontract in excess of $500,000
and (ii) has not received notification of work to be delivered
on that contract or subcontract and on all other contracts and
subcontracts awarded after January 1, 1975, which were subject
to the cost accounting standards clause.

(7) Any contract or subcontract awarded to a United Kingdom
contractor for performance substantially in the United Kingdom,
provided it has filed with the Ministry of Defence a completed
Disclosure Statement and agrees to follow consistently the
practices so disclosed.

B.

Essentially, U.S. business concerns awarded substantial negotiated national defense contracts are required to comply with all of the Board's

rules, regulations and Standards.

EXPANSION OF COVERAGE

Mr. BENJAMIN. Also for the record.

50 U.S.C. 2168(g) states: "The Board shall from time to time promulgate cost-accounting standards designed to achieve uniformity and consistency in the cost-accounting principles followed by defense contractors and subcontractors under Federal contracts." What other contractors are now covered? Explain the circumstances and the statutory authority allowing the expansion of coverage.

Mr. STAATS. We will be happy to explain that.

[The information follows:]

The Federal Procurement Regulation (FPR) promulgated by the General Services Administration sets forth the applicability of Cost Accounting Standards to Government contractors other than defense contractors and subcontractors. The FPR is prescribed by the Administrator under the authority of the Federal Property and Administrative Services Act of 1949, as amended (40 U.S.C. 471 et seq.). The basic coverage for CAS is spelled out in § 1-3.1203-2 of the FPR. It results in coverage of negotiated civil contracts which are essentially the same as the negotiated defense contracts which are subject to Public Law 91-379.

EXAMINATION OF RECORDS TO DETERMINE COMPLIANCE

Mr. BENJAMIN. Also I will ask you to answer this one for the record. Provide information concerning each instance in which the Board "examined or made copies of any documents, papers, or records" under paragraph (j) of the same section. For each instance in which documents, papers or records of non-defense contractors