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Mr. LARKIN. No. The task force members, Mr. Chairman, are not Federal employees. They have signed secrecy agreements. I say "they''; I mean 95 percent of them. We keep adding them, and the last few, we have not received statements from them. They have signed secrecy agreements, which alert them to the fact that they must be careful about any possible conflict of interest, and if they run into such they should disqualify themselves. Beyond that-and it is not required, under my understanding, because they are not Federal employees—they are agents, unpaid by the foundation. We have asked them all to give us additional data on background and personal data and financial data, in terms of securities holdings and so forth, so that we can review-and we are doing it now-to satisfy ourselves, to the extent we can, that they in fact do not have conflicts of interest. That was the significance of my statement.

The CHAIRMAN. You were, if I am informed correctly, the first general counsel of the Department of Defense when it was created. Mr. LARKIN. I was the second.

The CHAIRMAN. What would your reaction have been, as general counsel of the Department of Defense, if a top administrative officer of a major defense contractor was sent in by a group like yours to look at your defense procurement systems from the inside, with carte blanche to look at any and all of your practices and any and all of your records? Would that make you uneasy? Mr. LARKIN. You are giving me an "iffey” case, Mr. Chairman. The CHAIRMAN. You were there at the end-Mr. LARKIN. I know I was. What we did in those days, and I presume they are doing it now, is where we enlisted the expert assistance of different people who in fact were contractors. If I recall, at one period of time, we enlisted the assistance of Mr. Raymond and Donald Douglas, in terms of trying to get an evaluation from them as to the worthiness of an Air Force plane which was supposed to be both commercial and military. In that circumstance, however, trying to be sensitive to this conflict of interest problem, I think we made a very serious effort to make sure that they had no information that had any relation to their company. I think, as far as I understand it-and I have been away from the Government for many years now—the clearance that has been given by the White House and by the agencies to the executive committee members in some cases has reservations. They may be small.

To the extent that an executive is looking at the Energy Department, let us say, and he happens to be a director-not an officer, but a director and perhaps some stockholder-of some contractor to the agency, his clearance has restricted him from learning anything about any of the dealings of that company with the agency. As to other things, he is free to get information. That, as I understand it, is the procedure.

The CHAIRMAN. But you do know that under the Ethics in Government Act, as amended in recent years, the kind of consultant that you described at that time could be called into the Defense Department from the private sector to advise with you but could not then return to a company that was selling anything to the Air Force for a period of years. That was not the law in those days; that is very clearly the law now. When this committee passed that

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bill—with some reluctance, I might say, on the part of some oí us-during the Carter administration, it produced a rash of resignations by people from colleges and universities and other institutions because they were in the agencies from whom their institution was going to receive Federal money or by whom their institution was being regulated. So to get under the deadline that was set, July 1, 1978, they left Government so that they would not be barred.

Now, I do not know the man from Armour that you described. I just asked that one because you happened to have Agriculture with you. But if he is a top executive of Armour-I am on the committee that has the school lunch program, and we buy millions of dollars worth of products from the major packing houses in this country for the school lunch program and for the other feeding programs that we have. Do you not think that you and Mr. Grace ought to consult with your staff on the apparent problem that exists when a major contractor with the Department of Agriculture is represented at the top with somebody who can walk in and look at the whole program?

I am not suggesting that there is anything at all wrong. I am talking now about the “Ceasar's Wife syndrome." It just raises an immediate question in people's mind as to why a major contractor with a Federal agency ought to have their man on the inside.

Mr. LARKIN. Mr. Chairman, I am sympathetic to the problem, certainly. I, and others, have been asked to come down here as businessmen to look into procedures and efficiencies and inefficiencies. We have relied-and maybe we should not have; I do not know if you are suggesting we should not have we have relied on the Office of the Counsel to the President. We have relied on the different departments to do the clearing. To the extent they have cleared them, I have not tried to go behind their rulings and tried to rationalize them or contradict them or anything else. I feel I am satisfying whatever responsibility I may have in this regard if the experts in this matter are doing the clearing. Now that is what has been done.

The CHAIRMAN. I guess the point I was trying to get at with my original question is whether the agency that is being examined by a task force is at any time in the process asked to clear the person who is going to be on the inside. We understand that desk space and offices are being assigned, and obviously they did this over at OPM, and that is certainly at Government expense. Employees are being detached from their regular duties to go and get the files and run and get materials. There is a substantial involvement of our employees in this process which is natural to anybody who came in, whether a congressional committee, the GAO, or you. It would necessitate an expenditure of time, money, and space to accommodate that investigation.

Does the Secretary of Agriculture know that he has somebody from Armour who has the ability to pick employees of his company to come into the Department of Agriculture and ask any question he wants about the operation of agricultural programs and policies?

Mr. LARKIN. In that case, he is not with Armour and has not been for years. But, to answer the question, all the cochairmen

The CHAIRMAN. Well, let us turn him into a hypothetical. Mr. LARKIN. I understand they have been introduced to and have met with the Secretaries. They know their background. Those top people have been cleared by the agency itself. The assistant secretary for management or whoever else is the liaison with the task force is introduced to and meets and makes arrangements for all these task force members, whom they know, to deal with them. Specifically, as I understand it, those task force members are not Federal employees and are, therefore, as such, not subject to the conflict-of-interest statutes of the Federal Government. They are asked to and have signed secrecy agreements. So we are going further, without legal requirement, as I understand it. That is the situation.

The CHAIRMAN. We are running out of time, and I am fascinated, and I really want to thank you on behalf of the committee for giving us this kind of an overview and being so forthcoming and responsive.

I do not mean to be, although sometimes it appears to be, in a combative kind of process, but we try to get at an understanding in each of our own ways, as best we can. We would like to submit some additional questions to you, and I would ask if the list that Mr. Bolduc has there, of all the task force breakdown of membership could be left with us. If you do not have a copy, we will copy it for you here, so that we can then frame some questions to you on the basis of that knowledge. Mr. LARKIN. We will be happy to receive your questions.

The CHAIRMAN. As I indicated before, you are perfectly welcome to add to or supplement anything you have said today or anything that occurs to you after you leave today that you feel will illuminate this record and further serve whoever is interested enough to look back, in the future, and see who these people were and what they did for their Government. Under no circumstances do I want any of my comments to be construed as critical of businesspeople or Americans of any kind who are willing to give of their time and effort to try and make this Government work better.

This committee has one-seventh of the Federal budget under its jurisdiction, and we have been forced to make some very difficult and painful cuts, numbering in the billions of dollars in recent years, as a result of just the kind of effort that we hope you are putting forth. If you come up with ways in which we can save more money, you will make our job much easier. You are going to find that the Congress, on both sides of the Capitol, is more than anxious to be cooperative in every way possible. I do not want you to leave with the impression that I either started with or developed a prejudice toward your objectives. I just really am having some difficulty completely understanding them and will want to pursue further with other people what you are doing in order to get that understanding.

Mr. LARKIN. We find this project a very difficult one and complex one. It takes a lot of time and effort ourselves, so I guess we are both in the same boat.

The CHAIRMAN. Thank you very much. We have witnesses from the Department of Commerce and from the GAO. This room is going to be used in a few minutes to mark

up legislation. Dr. Devine is coming in, as a matter of fact, right now from OPM. So I wonder if we could ask you to let the staff work out with you another time that we could have you back before the subcommittee.

Who is here from Commerce?

Mr. MARGULIES. I am here from Commerce, and that is perfectly fine.

The CHAIRMAN. And what about GAO?
Ms. KLEEMAN. That is fine with GAO.

The CHAIRMAN. Thank you very much for your cooperation. Please accept my humble apologies for dealing with you in this fashion.

[Whereupon, at 1:28 p.m., the committee recessed, to reconvene at the call of the Chair.]





Washington, D.C. The subcommittee met, pursuant to adjournment, at 10:15 a.m., in room 304, Cannon House Office Building, Hon. William D. Ford (chairman of the subcommittee) presiding.

The CHAIRMAN. Today, the Subcommittee on Investigations resumes its inquiry into the status of the President's Private Sector Survey on Cost Control in the Federal Government.

Last week, as we opened our hearings, the subcommittee heard from Felix E. Larkin, a member of the Executive Committee on the President's study. Frankly, Mr. Larkin raised more questions than he answered, and I think members of the subcommittee were left with the feeling that the survey, which is being conducted by executives of large corporations, may indeed be exceeding or completely outside of its announced objectives.

When he first announced the study last winter, and again when he signed the Executive order setting up the operating machinery, the President gave assurances that various task forces would apply management techniques to correct waste and inefficiency problems. He stressed that the Survey would concentrate on procedures and not policy. Mr. Larkin left a different impression. His testimony, along with documents the subcommittee has obtained, make it plain that there are serious policy considerations involved in the activities of this group.

This seems especially true in the case of the task force looking into Federal personnel issues. This task force is concerning itself with potentially far-reaching policy questions, such as health care, retirement, and social security. This should not be within the purview of a study such as this. We are led to wonder if this is a study of process and inefficiencies, as the President stressed, or the beginning of an agenda for major policy change.

We hope that one of our witnesses today, Mr. Sy Pranger, who heads up the task force on personnel, would be able to tell us what his group is up to. If his group is working on a blueprint for major policy shifts, we would like to hear about it. This is only one of the areas where the subcommittee feels it knows far too little about how such a broad and extensive survey is being conducted throughout the Federal Government.


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