the preparation of these figures, reviewing to the extent that we could, in a relatively short time, some of the records that were available to us and of course checking calculations, space computations, and unit costs available. Mr. Cahalen and Mr. Herr worked on this assignment, and can answer any questions on it.

Senator PROXMIRE. You say on the bottom of page 436 in the hearings

All the major operating costs of the Printing Office seemed to have been considered in preparing the estimate of potential savings and on the basis of our review of the principal cost of the estimate we are generally satisfied the estimates were prepared with care within the limits of information presently available.

INTEREST ON FUNDS GOVERNMENT WILL BORROW FOR CONSTRUCTION

Now let me ask, I know that this is the way you normally proceed and I am not questioning at all the validity or the capability of the people who did this. But I am concerned about the fact that in this particular calculation, as in many, interest is omitted. Now the fact is that the Federal Government is going to have to go out and borrow $50 million. Is that right or wrong?

Mr. NEUWIRTH. That is correct.

Senator PROXMIRE. If it is going to appropriate that amount the Government will have to pay 4 percent for that. That is roughly the amount that the money costs now.

Why was that not included as a cost?

Mr. NEUWIRTH. Senator, we limited ourselves with the information that was furnished us by the Public Printer, and we confined ourselves to operating costs of the buildings; operating costs as incurred in the present Government Printing Office building with the projected operating costs in the new buildings.

Since interest is not considered in the present operating cost of the Government Printing Office we limited ourselves to the information made available to us by the Public Printer.

Senator PROXMIRE. Yes, but you say, as I read your letter, all the major operating cost-I see, operating cost. You consider this not to be an operating cost. You gentlemen are experts in finance as well as in many other things. Would you in your best judgment feel that it is appropriate and proper for the Congress in assessing the cost of this kind of operation to take into consideration the fact that it is going to be necessary to borrow $50 million to build this? We are in debt now $320 billion. Is there any other way that we can build this without borrowing money and paying interest on it?

Mr. NEUWIRTH. For the Government as a whole, certainly interest is a factor to be considered, although again we were limiting this primarily to current operating cost and anticipated savings in operating costs in the new Government Printing Office building.

COMPUTATION OF PRESENT BUILDING RENTAL AS SAVINGS

Senator PROXMIRE. Let me get at this another way: If this present building were to be sold for a substantial amount then it seems to me we could simply compute interest on the net figure. But it is not and the rental income on the old building is considered to be one of the savings. Isn't that true, the new rental income we are going to get?

Therefore, since the Government is going to have to procure a new asset, why it is not logical for us to consider as part of the cost the cost of interest which, as I calculated on a diminishing balance basis, would be $1 million a year?

Mr. NEUWIRTH. In fairness, you would also have to consider some amount of interest on the current buildings as well. After all it took Government money to build them, too. Some of these buildings are not too old.

Senator PROXMIRE. When we built it we should have. But my argument is that what you are doing-if you were selling the new building, as I said, and procuring part of the cost of the new building from the old building, then you could compute your interest on the net. But you are holding on to the old building and you are computing the rental returns you are getting by leasing out space in the old building as part of your income.

Therefore, in fairness it would seem to me that there is a financial cost involved here. Not only would any busines have to consider it but I think the Government would have too.

DEPRECIATION FACTOR

Mr. NEUWIRTH. We received the projected savings in operating costs as requested. Depreciation was not considered on either the old or new buildings. If you are going to take all cost factors certainly depreciation is a factor to be considered.

Senator PROXMIRE. I can understand why the argument for depreciation would have less validity if you did compute interest. But if you don't compute interest it seems to me that your depreciation argument is very, very strong indeed.

INCLUSION OF INTEREST IN DAM CONSTRUCTION COST

When we appropriate money for building a dam we do consider the interest cost as part of the cost along with the other costs in computing the cost of that dam operation, isn't that correct?

Mr. NEUWIRTH. I would say yes.

Senaor PROXMIRE. When we compute our benefit-cost ratio the interest cost involved is very, very important, whether it is 2.5 or 3.1, as it is roughly, it makes a big difference.

Mr. NEUWIRTH. Yes, sir.

Senator PROXMIRE. So in this kind of operation it would seem to me that the interest cost would be a significant figure. But you were asked for the operating cost, that is all you were asked to respond to, that is what you did.

Mr. NEUWIRTH. That is correct.

ONLY OPERATING COSTS OF OLD AND NEW BUILDINGS CONSIDERED

Senator PROXMIRE. As far as you are concerned, you would have no position on whether interest should be included or not. Am I fair or is that accurate or not?

Mr. NEUWIRTH. As an office policy interest is considered as a cost to the Government overall. If someone asked for the total cost of a building we would have to consider interest on that investment as a

cost. However, in this case we were comparing the current operating costs in the old buildings with projected operating costs.

Senator PROXMIRE. The question that faces the Congress is: Shall we build the building or not? If we do build the building there are certain economies involved but there are also certain costs. If we do build the building we certainly are going to have to go somewhere to get this additional $50 million. If we get that money we have to pay for it. Therefore, it seems to me from an overall standpoint you should consider it.

I think I have explored this point sufficiently. Let me proceed.

GENERAL ACCOUNTING OFFICE CAPABILITY

If the General Accounting Office had been requested to make the kind of study in 1965 that was made for the annex, would you have done so? Would you have felt qualified to do so? Would you have proceeded to do it?"

Mr. NEUWIRTH. I did not quite get that question.

Senator PROXMIRE. As I established in my conversation with Mr. Herr a little earlier, there was a different kind of study, as I understand it, a more comprehensive study made in connection with the 1962 appropriation.

My question is: Would a similar study have been conducted by your office now if it had been requested or would there have been technical reasons or other reasons why you could not have made that study now?

Mr. NEUWIRTH. If it means going into the construction type of equipment, and so forth, I seriously doubt whether we would be in a position to, if that is what you mean. On the other hand, comparison of costs, projected costs, we probably could.

Senator PROXMIRE. I am not going to explore this deeply because maybe one question can indicate how far you can go. The printing industry has made a charge that a building that could do this Government printing business could be constructed for a good deal less money, maybe $25 million or $30 million. Could that kind of contention be determined by you?

Mr. NEUWIRTH. No, sir.

Senator PROXMIRE. You could not?

Mr. NEUWIRTH. No, sir.

Senator PROXMIRE. Why not? Why could you not discuss this with the printing people and find out what kind of additional cost the Government would have that the industry does not have and make allowance for it? You are not equipped to do that?

Mr. NEUWIRTH. Again, if it means getting into types of machinery, certain types of construction, I think unless we got some technical help I seriously doubt that we would be in a position to come up with a proper answer.

COMPUTATION OF ELEVATOR RENOVATION COST AS SAVING

Senator PROXMIRE. Let me ask you a technical question in connection with this.

As I understand it, one of the savings that is provided in the printer's estimate which you seem to approve is the renovation of the elevators. Do you recall that figure?

I think that is in the 1965, the latest study that is referred to in this letter of June 1964, renovation of elevators. This would not have to be done if you moved. Is that correct?

Mr. CAHALEN. What is the question?

Senator PROXMIRE. The question is, Was the saving from not having to expend money on renovation of elevators if you move, include as a savings if you proceeded to build a new plant?

Mr. CAHALEN. Yes; it is in this $353,000.

Senator PROXMIRE. How did you consider that in view of the fact that if GPO abandoned the old plant they are going to have to renovate the elevators if another tenant is going to occupy the building and use it?

Mr. CAHALEN. That was not an established fact. The reason for renovating elevators was because of the heavy industrial use of the Government Printing Office.

Senator PROXMIRE. Would these elevators in their present form be usable for other purposes?

Mr. CAHALEN. They possibly could be.

Senator PROXMIRE. Did you have alternative purposes for which these elevators in their present form could be used?

Mr. CAHALEN. For passengers.

Senator PROXMIRE. You see, the question is that for most purposes these elevators would not be satisfactory, for an office building or purposes of that sort, although they may be all right for a printing establishment. But for any modern use they would have to be renovated. Certainly for most commercial purposes you would have to spend quite a bit of money. At any rate, you did not go into that particular detail as far as justifying the amount of rental you get per square foot?

Mr. CAHALEN. No.

REVISED STATUTES, SECTION 3709, AND NEGOTIATED CONTRACTING PROCEDURE

Senator PROXMIRE. Now let me proceed on an entirely different part of this. I understand that under 3709 of the Revised Statutes it is essential that at least three bids be taken before a contract is let. How are exceptions made in the case of negotiated contracts? I understand this would be a negotiated contract. Do you have any information on that?

Mr. CAHALEN. No.

Mr. NEUWIRTH. We don't have any information on that. I am sorry. Senator PROXMIRE. Do you know before a negotiated contract is awarded it is customary to examine the capability and capacity of others to accomplish the task?

Mr. NEUWIRTH. It is; yes.

TESTIMONY OF GENERAL SERVICES ADMINISTRATION

Senator PROXMIRE. Let me ask you this: In the testimony before the committee on June 15 the statement was made by the General Services Administration that a contract in the amount of $2.5 million

had been negotiated and was awaiting signature. This contract has been negotiated with Charles T. Main Co., which is a company that stated to the committee the study of the feasibility of remaining at the present location was not necessary.

Now this is not on the record but I am asking this question to find out if the General Accounting Office knows whether a contract has been negotiated with Charles T. Main Co.

Mr. CAHALEN. No.

Senator PROXMIRE. This should have been phrased as a question and not as a statement of fact because I am trying to explore the matter and find out if it is true.

You don't know what category this would fall into as far as negotiations are concerned or the necessity for requiring three bids to be taken?

Mr. NEUWIRTH. We have not looked into this, sir.

GENERAL ACCOUNTING OFFICE COMPETENCY

Senator PROXMIRE. Let me ask you if you feel that you would be in a stronger position to give us an evaluation of whether the Government is wise in spending this money if you could make a more comprehensive investigation than you have made.

What you did apparently was to check the operating costs, talk with the people in the Printing Office who are the experts, and satisfy yourselves that they were, as far as could be made certain, competent, honest appraisals. But you did not include financial cost such as interest and you did not go into the negotiation angle of it; is that correct?

Mr. NEUWIRTH. Yes; that is so.

Senator PROXMIRE. You could have gone a little further. You could not go all the way, apparently, to answer the question that I asked earlier on whether or not spending $50 million on this kind of building was wise or not.

You say you are not competent to do that?

Mr. NEUWIRTH. There is really not enough information available at this stage.

Senator PROXMIRE. Now before the Congress spends $50 million should we not get that information and make it available? If that information is not available I am wondering how wise we are to proceed with this immense expenditure.

is

Mr. NEUWIRTH. Generally speaking, I would say that this is a matter of congressional policy. As you know, the General Accounting Office very happy to do whatever a congressional committee wants to us to do. Most of our work, however, is on a postaudit basis, after a contract has been let and expenditures made. We can make an evaluation of management operations through review of records, documentation, and interviews with agency officials and establish whether the intent of the Congress has been carried out and whether the funds were spent efficiently and economically. We are not in a position to do this in a situation of this type. I believe this is a matter of congressional policy. Senator SALTONSTALL. Would the Senator yield for a question? Senator PROXMIRE. Yes, indeed.

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