in the Air Force ballistic missile program. Various factors were
cited, such as the high priority of the program, its technical com-
plexity, the contractor's unique scope of responsibility, its ability to
attract qualified personnel, and the potential risk to its reputation if
Government support for the program were to fluctuate drastically.
The memorandum pointed out that the contract restricted R-W from
doing either development or production work on the intercontinental
ballistic missiles (ICBM's) without specific approval by the Secretary
of the Air Force, and also excluded subcontracting from the estimated
cost on which the fee is based. In addition, the contractor was
expected to devote 75 percent of its efforts exclusively to the ballistic
missile program during the initial phase of the contract covering 18
months.

We were informed by the Air Force that the following changes
were made during the contract negotiations at Headquarters, U.S.
Air Force, which resulted in benefits to the Government:

1. An option was obtained to purchase two office buildings (Nos.
3 and 4) constructed by the Thompson Products pension trust fund
for housing the BMD complex. The decision to acquire these build-
ings was prompted, according to the Air Force, by the insistence of
R-W that approximately $300,000 of nonseverable equipment be
furnished by the Air Force for one of these buildings. At that time,
the Air Force learned that the cost of this office building was to be
charged to the Government over a 5-year period, with ownership to
be retained by the lessor. By exercising the option, the Air Force
acquired at cost ownership to property reportedly valued at more
than $1 million. In our opinion, the decision of the Air Force to
acquire these buildings in view of these circumstances was well-
advised and essential to protect the Government's interests.

However, according to Air Force records, the Air Force was not
aware that R-W had previously entered into a lease with the Thomp-
son Products pension trust fund for another office building (No. 2)
at an annual rental of $72,000 for use in the ballistic missile program.
This building cost $310,000 exclusive of land cost. Air Force records
indicate that, if this information had been known to the Air Force
at the time of the fee negotiation, the 14.3 percent fee might not
have been authorized.

2. An allowance for reimbursement of general research which had
been proposed by R-W and approved by the contracting officer for
inclusion in contract AF 18(600)-1190 was eliminated at the di-
rection of the Assistant Secretary. Air Force records disclose the
following information concerning this matter:

(a) A clause allowing reimbursement of general research costs
without limitation had been included in the proposed contract in
September 1954 by the Director of Procurement, ARDC.

(b) This clause was deleted in November 1954 at the request of
the Assistant Secretary.

(c) This clause was reinstated with dollar limitations upon
insistence by the Director of Procurement, ARDC.

(d) Dr. Wooldridge objected to the limitation on reimburse-
ment and discussed this matter with the Assistant Secretary in
December 1954.

(e) The Assistant Secretary rejected the entire allowance for
general research in December 1954.

Salaries paid to STL scientific personnel higher than prevailing rates In view of the subcommittee's finding that a noticeable difference existed in salaries paid by various missile contractors, we made a comparison of salaries paid by R-W/STL to its professional scientific personnel with salaries paid by other firms to personnel having comparable education and experience. We followed the same approach that has been used by the Los Alamos Scientific Laboratory of the University of California for 12 years in reporting national industrywide surveys of salaries of professional scientific personnel. We found that the salaries paid by STL for professional scientific personnel other than key employees have been higher than the average salaries paid by other organizations for personnel having comparable education and experience, based on data contained in the Los Alamos surveys for the years 1957 and 1958 and on information we obtained from eight California organizations in February to March 1959.

We compared the average salaries of technical employees of STL who had received academic degrees with the average salaries of employees of other organizations holding similar academic degrees, in accordance with the procedure followed in the Los Alamos survey. Employees holding bachelor's (B.S.) or master's (M.S.) degrees in science or engineering, who were engaged in research and development, were treated as one group, while employees holding Ph. D. or equivalent advanced science degrees were treated as a separate group. To recognize the experience factor, employees were grouped by the number of years since receipt of the B.S. degree, and average salaries of STL employees were compared with average salaries paid by other companies to employees in the same experience groupings. Separate comparisons of average salaries of STL employees holding supervisory positions were made with those of employees holding supervisory positions with other organizations, and similar comparisons also were made of salaries paid to personnel in nonsupervisory positions. We found that the average salary of STL professional scientific personnel was almost invariably higher than the average salary of personnel employed by other organizations who had similar academic degrees, and the same number of years of experience, as measured by the period elapsed since receipt of the B.S. degrees. Our findings are discussed in detail below:

Comparison of STL average salaries for professional scientific personnel with industrywide survey for 1957 and 1958

For the years 1957 and 1958, we compared the average salaries paid by STL to professional scientific personnel with the average salaries paid by other private industry, research institutes,1 and Government laboratories to personnel with similar education and experience. Our comparison included the aeronautical and electronic industries in view of their predominance in the Los Angeles area. We found that STL average salaries were higher in each of the respective years surveyed. As stated previously, our comparisons were based on data contained in the "National Survey of Professional Scientific Salaries," prepared by the Los Alamos Scientific Laboratory of the University of California, Los Alamos, N. Mex. The Los Alamos surveys present a

1 Laboratories operated under grants or endowments, either privately or by colleges and universities.

reply from the Department of Defense, by the Secretary of the Air Force, which appears in this report beginning on page 53, sets forth the position of the Air Force and reveals the addition of still another outside manager for Air Force's ballistic missile program, the Aerospace Corp.

The subcommittee, therefore, is making available in one publication the information furnished the subcommittee in the two General Accounting Office reports of October 21, 1959, and May 19, 1960, as well as followup actions to date by the subcommittee in this area. We believe this information, together with the Comptroller General's report to the Congress, also dated May 19, 1960, on "Review of Administrative Management of the Ballistic Missile Program of the Department of the Air Force," will be of interest and concern to members of the full committee, to the Congress, and to officials of the executive branch who are charged with responsibility for successful administration of the missile programs.

With kindest regards, I am,
Sincerely yours,

JAMES C. DAVIS,

Chairman, Subcommittee on Manpower Utilization,
House Committee on Post Office and Civil Service.