REIMBURSEMENT FOR COMMUNICATIONS SERVICES Senator MAGNUSON. Now, what is bothering Senator Allott and myself is that with all these other agencies, they are coming in here, and they have got money in their budgets. Now, we haven't got them all in yet, but here is our friend Macy who has got $67,000 increased costs of telecommunications services to be charged by GSA, $67,000. Mr. BOUTIN. Now, actually this whole system, Mr. Chairman, is a fully reimbursable system, You will remember that heretofore, right up until fiscal 1965, this committee and the Congress appropriated to GSA $5,400.000 as a subsidy. We had a direct subsidized program. We are asking for no subsidy this year, It is fully reimbursable by the using agency, BREAKDOWN OF $6 MILLION REQUEST Senator MAGNUSON. Well, then, what is the $6 million for? Mr. BOUTIN. The $6 million is that part of our costs and actually that has to be broken down into the communications services which is $1,986,000-our cost of development, engineering, maintaining, and developing the system itself. Now, to give you an idea of what this is going to mean, when this system is fully implemented, which will be July 1 of 1965, we will be able to report a direct annual saving of $23 million a year. DIRECT OVERHEAD COSTS Senator MAGNUSON. Well, why don't you charge these fellows the amount to make up the $6 million? Mr. BOUTIN. Well, for the same reason, Mr. Chairman, that we do not charge the using agencies in Federal Supply for our overhead costs. This is direct overhead cost, and we are limiting this now on communications, Mr. Chairman, to $1,986,000 because we have $2,239,000 as transportation, $330,000 in the motor vehicle management. We have got $145,000 in public utilities, $530,000 in service direction, and $770,000 in administrative operations. you went Senator MAGNUSON. But if you were a public utility and into the Public Utilities Commission, they would tell you to charge your customer $6 million more. Mr. BOUTIN. No. They would tell us to take out of the $23 million we are going to save our almost $2 million of now operating costs for a communications system, or a net of $21 million that we would have available for taxes and for the customers. Senator MAGNUSON. No, no. They would say if it costs you Mr. BOUTIN. Why not? QUESTION OF PRORATING COSTS Senator MAGNUSON (continuing). $6 million over what you are charging your customers, you better charge them pro rata this $6 million. Mr. BOUTIN. All I am doing is localizing the communications part. of this budget, which is $2 million not $6 million. Senator MAGNUSON. Excuse me. Strike that. I am talking about the amount for communications. That is $2,239,000. They would tell you to spread that Mr. GRIFFIN. Communications is $1.986,000. Transportation isMr. BOUTIN. That is right. We would have to spread that cost also among the using agencies, but this has not been the philosophy of any of our budgeting, in Public Buildings or Federal Supply or any of them. But there is no more subsidy, Mr. Chairman. That is the point I want to make. Heretofore we still had these operating expenses plus an operating subsidy of $5.4 million. Senator MAGNUSON. I understand, but our friend Macy is getting more than $67,000 worth of service, isn't he? Mr. BOUTIN. Oh, yes he is. Senator MAGNUSON. Then why shouldn't he pay for it? It would simplify our bookkeeping up here a little bit. REFLECTION OF TRUE COSTS OF AGENCY Senator ALLOTT. Well, if you will, Mr. Chairman, the thing I think is the chief concern is that-and this is the point of the chairmanwhen you do it this way, you do not actually reflect the expenses of the agency. I do not want to beat Mr. Macy over the head but Senator MAGNUSON. Well, I just used him as an example. All of them are coming in for the same thing. Senator ALLOTT. We are just using him as an example because he was up here quite recently. The $67,000 that he is now-that you say we are now charging back to them, and he is paying it, does not represent his share of this, then what is actually happening is that his budget, and every budget like his, does not reflect the true operating costs of that agency. Mr. BOUTIN. Well, that is absolutely true, and the same thing is true with every other segment, Senator, of this budget. We talked about Federal Supply. We are asking for slightly more than $54 million. Actually to make it truly reflective of costs to the using agencies, we would have to surcharge every single item that we would sell with a markup sufficient to completely take care of our overhead costs. Senator ALLOTT. I realize this, but this is an identifiable thing that we realize we are offering for the service of the Government as a whole. Getting back to your Federal Supply Service; when we appropriate, say, $54 million for that, we identify this as a governmental, overall governmental expense for the benefit of all of them. It is a new thing, not new but I mean it is new compared with 10 or 12 years ago. COMMUNICATIONS NEW SERVICE Mr. BOUTIN. Well, actually this whole thing is new as of last year. It is that new. Senator ALLOTT. Well, we have had the Federal Supply Service for several years now. Mr. BOUTIN. Oh, yes. I mean the communications portion. Senator ALLOTT. The real concentration and utilization of the Federal Supply Service has developed very rapidly over the last handful of years. 31-706-64-pt. 1—18 Mr. BOUTIN. Yes, sir. Senator ALLOTT. And we identify that, I think, as a service and we realize that the fact is you could not separate this and charge it off to each branch of the Government along with charges for communications services and the same thing might also be true in the transportation services. Actually you are carrying for them identifiable expenses in your budget which to that extent diminishes their budgets. SAVINGS BY REEXAMINING REQUIREMENTS Mr. BOUTIN. Well, let me give an example of how much of a problem this would be. We have a task force that I sent out to Scott Field in May of 1963 on the procurement of circuits with the Department of Defense where we examined the requirements of Defense and the civilian agencies. We also determined the redundancies within the existing system, and then went out jointly with the procurements. Now, we saved over $6 million in 1 year jointly between Defense and GSA. I do not know how in the world we could ever apportion that cost accurately, but yet if we did not have sufficient appropriations to have the 6 or 10 people there, we would be throwing away all of these savings. Senator ALLOTT. Now, do I understand this system correctly Senator MAGNUSON. No. You could charge them for those people. Mr. BOUTIN. But it will vary year to year, and it is a reoccurring annual saving. CIVIL SERVICE COMMUNICATION COSTS Senator MAGNUSON. Here is what Civil Service says, talking about telephone, telegraph teletype service: The increase of $67,000 requested for fiscal year 1965 for this category is brought by Public Law 87-847, approved October 23, 1962, which established a Federal telecommunications fund to be administered by General Services Administration and to ultimately function as a completely reimbursable operation. Previously a substantial portion of the cost of communications services provided by GSA to civil agencies was financed from specific GSA appropriation. However, commencing with July 1, 1964, the full cost of these services will be billed by GSA to the respective customer agencies. ESTIMATE FOR DIRECT COMMUNICATIONS COSTS Mr. BOUTIN. The full cost as far as the services themselves. All that we are providing here in the $1,986,000 is in reality the engineering capability to continually improve our system, the rate people who are investigating the procurement, and the utilization of the system itself, maintaining the liaison with Western Union and A.T. & T. long lines, with all of the member companies, people like Mr. Bond who is working day in and day out with all of these utilities. Now, Lloyd, do you want to speak to this? Senator MAGNUSON. I know what they do. I know what you are asking for is services that have got to be done. Mr. BOUTIN. Much of this is preplanned, too, you see, Senator. Some of the work we are doing now won't be realized for 3 years. Senator MAGNUSON. But your customers ought to pay for it. DIFFERENT TYPES OF OPERATING COSTS Mr. BOND. Senator, I think the difference is in the operating costs. The complete costs of operating the system as if it were a private telephone company are being charged to the customers. The costs which we are not charging to the customers are those costs involved in future planning, long-range planning over 3, 4, or 5 years, and in liaison with the Department of Defense and national communications system. PROPOSED REIMBURSEMENT FOR ALL COMMUNICATIONS COSTS Senator MAGNUSON. I understand what you are doing but in your private telephone company, that would be in the cost that goes to the consumer. They are planning their services, and the public utility commission would say that is a legitimate cost to the consumer. But here we have got a split; I mean, you would get your money. You would do the same thing you are doing, but what we are trying to suggest is that these agencies ought to pay for it if it is going to be a completely reimbursable operation. Mr. BOUTIN. I think, Mr. Chairman, without any question at all, that once this is fully implemented, which will be July 1 of next year Senator MAGNUSON. That is what he says. REIMBURSABLE SERVICES AFTER 1966 Mr. BOUTIN. I think to try to talk the Bureau of the Budget into granting permission to make this a completely reimbursable service during this implementation stage would be next to impossible. I think that after next year we could do it. Senator MAGNUSON. I think you see what I mean. Mr. BOUTIN. Oh, yes. I appreciate what you mean. Senator MAGNUSON. You people have to come in here and ask us for money for services that can be reimbursed, and it was intended to be reimbursed by the agencies. NEW FLAT-RATE SERVICE Mr. BOUTIN. You see, we are going on a flat-rate basis starting in July, which is something brand new. Our advanced records system will go in effect. in effect. Phase 2 of the telecommunications system will be in effect. I think that starting next year this could make some real sense, and with the permission of the committee, I would like to discuss it with the Bureau. Senator MAGNUSON. It just makes it easier for the appropriations because you say we are putting in a system, we are giving the agencies service, and that system cost us a number of dollars to run, the whole kit and caboodle, and therefore you are to pay for it. Now, by doing that we are saving everybody money. You are getting better service, and the taxpayer-every agency is going to come in here with an appropriation, reimbursable one. Then they require you to come in to do something extra. CHANGE IN LEGISLATION ON REVOLVING FUND Mr. BOUTIN. What we may have to do is to have a change in legislation in our telecommunications revolving fund that the Congress authorized last year and which this committee provided a $9 million appropriation for, but it would not be difficult legislation. Senator MAGNUSON. We had advanced you the capital to get started, and you are started, and you are getting it down, down, down. Mr. BOUTIN. We are in business in a big way. You know that a year ago, Senator, we had 10 percent of the civilian agency communications business. By next July 1 we will have 90 percent. Senator MAGNUSON. Well, I suppose in the long run to the taxpayer the whole thing adds up to what it costs, whether it comes in your budget or they reimburse you completely, but I think it would be much simpler for everybody if they would pay for what they are getting and what you need to do is to see that they get that service. Mr. BOUTIN. We would not resist that at all. Senator MAGNUSON. Because you are going to have to supervise this even when it gets completely in operation. Mr. BOUTIN. Oh, yes. Senator MAGNUSON. We cannot do all of them individually. Senator ALLOTT. Can't we do this on an informal basis with the understanding that they will take it up with the Bureau? Mr. BOUTIN. Definitely we will. Senator MAGNUSON. Oh, yes. Senator ALLOTT. If we do need a change in the law- Senator ALLOTT (continuing). We can do that. Senator MAGNUSON. Because the thing is operation. COMMUNICATIONS SAVINGS a very successful Mr. BOUTIN. Very successful. $23 million saving. And we have had excellent cooperation; I would like to get this into the record about the utilities themselves. They have really gone all out to get us this system and get it to us on time and get it to us at maximum economies. TRANSPORTATION SERVICES Senator MAGNUSON. All right. Anything on that item? Senator ALLOTT. It gets more difficult each morning to get to work around the Government cars. I come back to this every year. Senator MAGNUSON. Page 1-11. Senator ALLOTT. There are so many chauffeurs driving people around here to work I have a hard time to get my little old Ford down the street. BUDGET BUREAU DIRECTIVE ON ALLOCATION OF CARS TO AGENCIES Mr. BOUTIN. I think that your Ford and my Chevy II are going to get to work a lot easier, Senator. You know the Bureau of the Budget has issued a directive which allocates the number of the medium sized |