a determination is made based upon those weights as to which routes ought to be advanced. Then that is merely a general corridor that will be designated. After the general corridor is designated between, say, two cities, then the next step is that the State prepares, usually, aerial photographs. But sometimes they do it in actual ground surveys and precisely lay out a number of routes. When they do that, then they analyze the cost of the different routes, the economic effect of the different routes, and the economic effect upon traffic and transportation. Following that, they have a public hearing. Following the public hearing the State again considers all of those activities and submits their final recommendation to the Bureau.

The Bureau of Public Roads at that time analyzes the engineering and the economic and other facts regarding the route in the light of what was said at the public hearing, and then either agrees or vetoes the State's request.

That is the way a road is designated.

Mr. HARRISON. Do you give greater consideration to local needs or general use?

Mr. TALLAMY. We do give consideration to local needs.

Mr. HARRISON. Suppose that conflicts with the general use of the motoring public passing over the route.

Mr. TALLAMY. I didn't understand.

Mr. HARRISON. What I am trying to get is: sometimes local considerations would be one thing, and the general use of the road as an interstate communication would dictate another route.

Mr. TALLAMY. The local needs are to be given, under the legislation, equal attention with interstate traffic insofar as feasible and practical. In the advancement of that, what we have to do is to establish, for instance, a bypass route when the volume of traffic around a community is such to warrant its construction. If the volume of traffic does not warrant it, then we have to move closer to the community in order to do it.

Then we give local needs equal attention in providing additional interchanges to the extent that is reasonable in a location of that

nature.

Mr. HARRISON. In making these allocations up to now to what extent have the States increased the mileage as shown on the map that we were talking about a while ago?

Mr. TALLAMY. The States have pretty generally not increased the mileage.

Mr. HARRISON. And, as a rule, there has been no increase in costs as a result of changes made by State highway commissions in the routes shown in the map?

Mr. TALLAMY. An increase over what? The 1955 estimate, or what?
Mr. HARRISON. I meant increase because of added mileage.
Mr. TALLAMY. No; I would say not.

Mr. HARRISON. Are you familiar with the report the Comptroller General submitted to Congress on July 2 pointing out several matters for consideration by Congress?

Mr. TALLAMY. Yes, sir; I am.

Mr. HARRISON. Are you familiar with the summary of items contained, the recommendation contained in that report?

Mr. TALLAMY. Yes, sir.

(The following letter was received by the committee:)

DEPARTMENT OF COMMERCE,
BUREAU OF PUBLIC ROADS,
Washington, July 24, 1959.

Hon. WILBUR D. MILLS,

Chairman, Committee on Ways and Means,
House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: I have been thinking over my reply to the questions before your committee on July 22, 1959, regarding the General Accounting Office report covering the fiscal years 1957 and 1958, having to do with financial management. Because of the importance of the subject, I would like to enlarge upon my remarks.

First of all, I would like to point out that the operations of the Bureau were carried on during the 2-year period for which this report was submitted as well as years prior to and after the audit in such a manner that the expenditures reported by the Bureau were in agreement with the books of the Treasury and unliquidated obligations were supported by an inventory of documents. There was no question then, nor is there now, concerning the accuracy of the accounting for every dollar spent. The comments of the GAO deal principally with desirable improvements in financial management and accounting system techniques and are not directed primarily to the accuracy of the end result of the techniques which had been followed. We have, of course, given recognition to their comments and are continuing to alter and strengthen our accounting system and procedures, with the goal of making them the most modern available.

To effectively administer the expanded program, we had begun the strengthening of our financial organization and raising the qualification standards of our accounting and auditing personnel even before the close of the audit period. For example, in the last year and one-half we have increased our professional financial management staff by approximately 120 employees, including our auditing and accounting staff. Also, since the enactment of the 1956 act, we have added about 80 professional appraisers whose responsibility is to spot check, and completely check where found to be necessary, appraisals and right-of-way settlements. These men also evaluate the procedures and right-of-way operations of the State highway departments.

As another example of the steps we have taken to strengthen our financial management operations, we have established a Project Examination Division. This Division now includes three full project examination teams, composed of investigators, auditors, engineers, and appraisers, who are regularly conducting investigations in the field. It is their responsibility to examine operations of the Bureau of Public Roads field offices and the State highway departments and evaluate procedures and operations covering all facets of the Federal-aid program and, of course, auditing records, as warranted. Frequently, where we feel conditions warrant, we also have special teams in the field making special investigations.

The General Accounting Office report emphasized the need for additional professional accountants to the financial staff of the Washington office to assist the Bureau in its objective of conforming with the governmentwide program of modernizing the techniques and otherwise improving financial management of Government agencies as outlined in Budget Bureau Circular No. 57-5, dated October 10, 1956. We have already advised the General Accounting Office that we agree this is a desirable objective and have recently employed three outstanding former employees of the GAO. The head of this special staff ranked among the first top 10 in the entire United States when he passed the certified public accountant examination in 1954. We have given this staff the special assignment of developing plans for the expansion of present procedures and techniques as required to produce a system of accounting, budgeting, and financial reporting which will most adequately serve the Bureau needs and at the same time give recognition to governmentwide financial requirements. One of the important elements of this system will be the development of a plan for accrual accounting.

I might also point out that of the additional financial people mentioned previously, 20 were assigned to the main office in Washington. The new appointments included a CPA to head our Finance Division who has had many years of experience in Government accounting, including recent accounting system assignments with the GAO.

The reference by the General Accounting Office to lack of documentary support for obligations indicates dissatisfaction with the mechanics of the processes

followed in providing support to certification under the various accounts. It does not mean that the basic documents supporting an obligation do not exist. Again, this is a technical accounting matter, and we have taken steps as of July 1 of this year which will permit the presentation of the accounts in a manner which we believe will be satisfactory to the GAO. We face the task of perfecting the procedure during the course of the year, and we are working with the GAO on this problem.

Actually, the accounting problems which have been reported by the GAO developed during the fiscal year 1958, which was the first year of the operation of our accounting system under the decentralized plan. Decentralization of accounting operations were placed into effect late in fiscal year 1957 because of the magnitude of the program undertaken as a result of the 1956 act. It was impracticable to perform effectively in the Washington office the detailed accounting required by the expanded highway program.

It was not unexpected that some difficulties would arise in the course of decentralizing the financial control system. However, we are continuing to exert every effort to recognize them and to amend procedures, where necessary, as promptly as possible.

With respect to the GAO recommendation relating to organizational placement of audit responsibility, we have advised them that we will consider carefully the recommendations in the report, and, in the event desired results are not being realized under presently assigned responsibilities, appropriate steps will be taken.

We appreciate the opportunity of working with the GAO on these matters. You may be sure that the entire staff of the Bureau of Public Roads desires its plan of financial management to be modern and efficient in every respect and that every reasonable effort is being exerted to accomplish this objective.

Sincerely yours,

B. D. TALLAMY, Federal Highway Administrator.

Mr. CURTIS. Was that the report of this year?
Mr. HARRISON. Yes.

Has the Bureau of Public Roads instituted a method of review of the States' qualifications as related to bidding practices?

Mr. TALLAMY. Did you ask if we are reviewing such practices? Mr. HARRISON. Have you done it; yes. What have you done about that?

Mr. TALLAMY. Yes, sir. We have had conversations on that with. the various State highway people, and a committee is studying it now. We will, as a result of that, have a report as to all of the States in November of this year, and as a result of that report we will either adjust the present standards or not.

Mr. HARRISON. To what extent have you attempted to persuade the States to eliminate the practice of disclosing engineering estimates prior to the receiving of contractors' bids?

Mr. TALLAMY. That is a moot question. I do not think that we have requested any of the States not to disclose their estimates. In many States that is required by law and in other cases it is a highly desirable thing to do. If a State discloses the estimate, then there is no opportunity for someone to get it subversively, and it is wide open for everybody to know, and we are not at all sure that it is a desirable thing to try to hide an estimate before the bidding is received.

Mr. HARRISON. What are you doing to scrutinize the types of contractors that States enter into contracts with for consulting services? Mr. TALLAMY. The contracts that are entered into for consulting service are reviewed carefully by our division engineer. As a general rule, he does not have the authority to approve them. They have to go to the regional engineer, and that is one of the few instances that the division engineer does not have authority to approve on

his own. The regional engineer is the next in line of command from the Washington office.

So they are carefully reviewed, contract by contract, before they are approved, and not by the man that is in the State in which the contract is being advanced, with few clearly routine authorized exceptions.

Mr. HARRISON. I want to thank you, sir, very much for answering my questions.

The CHAIRMAN. Mr. Allen and Mr. Tallamy and the others at the witness table, will it be convenient for you to return to the committee at 1:45?

Mr. ALLEN. Yes.

The CHAIRMAN. Without objection, the committee will return at 1:45.

(Whereupon, at 12:40 p.m., the committee recessed until 1:45 p.m., this same day.)

AFTERNOON SESSION

The CHAIRMAN. The committee will please be in order.
Mr. Ikard will inquire.

Mr. IKARD. If I may just recapitulate for a minute here, it is my understanding from the testimony this morning that originally the estimates for this highway program were something in the order of $24,825 million or $25 billion, just to round it off. Then the trust fund was obligated to pick up the tab on prior authorizations that had been set up in the 1952 and 1954 Highway Acts, which obligations I believe were something in the order of $315 million.

STATEMENTS OF JOHN J. ALLEN, JR., BERTRAM D. TALLAMY, J. C. ALLEN, AND F. C. TURNER-Resumed

Mr. TALLAMY. Yes, sir.

Mr. IKARD. Then I believe one of your charts showed someplace that there is roughly an increase in cost which we blanket in to be $8,925 million, or we have been using the figure of $9 billion to round it off.

Mr. TALLAMY. Yes, sir.

Mr. IKARD. Then in addition to that, the 1,425 miles that was discussed at length here this morning costs an additional $1,500 million to where of the life of the program as it is now projected-we will need, first, the $315 million of these prior authorizations that were picked out of the trust fund.

Then we will need the $8,952 million, or $9 billion added cost, and then the $1,500 million that this 1,452 miles additional, in effect additional roads, will add to the cost.

That, generally, is a summation of where we are from a fiscal standpoint over the life of this program; is that correct?

Mr. TALLAMY. It is correct, sir, excepting that in the $315 million item there is the $175 million that is in the $25 billion estimate. We had $24,825 million. We use $25 billion.

Mr. IKARD. Then what is the net that you pick up? It is the difference between what? $175 million and $315 million? Mr. TALLAMY. $140 million.

Mr. IKARD. We know what this $1,500 million is. That is the increased cost brought about by this 1,452 miles that was allocated, so we know what that is.

Do you have any breakdown on this $9 billion or $8,952 million, the so-called increase in cost?

I have seen the figure used, for instance, that relocation of utilities was $1,500 million. Is that correct?

I would like, if you have the information, and if you do not I wish you would supply it for the record, an itemization of this so-called increase in price which is represented by this $9 billion.

Mr. TALLAMY. Yes, sir. I have it and I did put it in the record, and to refresh our testimony on it, $1.2 billion is the result of the increase in traffic forecasts.

Mr. IKARD. Translating that traffic forecast, what does that mean? Mr. TALLAMY. That means that we have an increased number of lanes because it is estimated there will be more traffic in 1975 than was estimated in the 1955 estimate.

Mr. IKARD. That is $1.2 billion?

Mr. TALLAMY. Yes, sir.

Then there is a $3.4 billion increase due to local needs.
Mr. IKARD. What does that mean?

Mr. TALLAMY. That is an expression of the increased number of interchanges and structures which are required because of the local needs concept as compared to straight interstate highway traffic concept.

In other words, you have more local needs. You have more interchanges. That amounts to $3.4 billion.

The utility item you mentioned is included in a group which includes the Interstate System signing. You see, we will now have signing to express highway standards uniformly throughout the entire United States.

Utilities is grouped in with that and it totals $700 million.

Then there was an increase between the time the estimate of 1955 was made and the estimate of 1958 was made of 12 percent in construction costs due to a general price rise in the construction field, and, of course, that applied to every item that there was for construction. It amounted to $3.6 billion.

Those items I just mentioned total the $8.9 million, and they are in a tabulation which I put in the record.

Mr. IKARD. Those are the figures that are shown on table 1 of your supplemental statement?

Mr. TALLAMY. That is correct; yes.

Mr. IKARD. Then the local need item, the $3.4 billion item, is, in effect, rather than an increase in cost, to some degree a change in concept, is it not?

Mr. TALLAMY. Yes.

Mr. IKARD. We started out, if my memory serves me correctly, with the idea in mind that we would connect these different areas of the country with a highway system, and I know there was a lot said about you could leave San Francisco and go to New York without encountering a red light on the way and all that. It was more of linkage of these areas together, as I understood the concept, and I may be wrong about this and I am just asking the question, rather than it was so much the urban problem?