(c) To the extent the Government has indicated as of the date of this contract, or thereafter Indicates, security classification under this contract as provided in paragraph (b) above, the Contractor shall safeguard all classified elements of this contract and shall provide and maintain a system of security controls within its own organization in accordance with the requirements of (i) the Department of Defense Industrial Security Manual for Safeguarding Classified SecurityInformation as in effect on date of this contract, which Manual is hereby incorporated by reference and made a part of this contract, (ii) any amendments to said Manual required by the demands of national security as determined by the Government and made after the date of this contract, notice of which has been furnished to the Contractor by the Contracting Officer, and (iii) those provisions of written agreements entered into by the parties pertaining to the adaptation of the Manual to the Contractor's business.

(d) Designated representatives of the Government responsible for inspection pertaining to industrial security shall have the right to inspect at reasonable intervals the procedures, methods and facilities utilized by the contractor in complying with the requirements of the terms and conditions of this clause. Should the Government, through its authorized representative, determine, that the Contractor has not complied with such requirements, the Government shall inform the Contractor in writing of the proper actions to be taken in order to effect compliance with such requirements.

(e) If, subsequent to the date of this contract, the security classifications or requirements under this contract are changed by the Government as provided in this clause and the security costs under this contract are thereby increased or decreased, the contract price shall be subject to an equitable adjustment by reason of such Increased or decreased costs. Any equitable adjustment shall beaccomplished in the same manner as if such changes were directed under the clause in this contract entitled "Changes."

(f) The Contractor agrees to insert, in all subcontracts hereunder which involve access to classified security information, provisions which shall conform, substantially to the language of this clause, including this paragraph (f) but excluding the last sentence of paragraph (e) of this clause.

(g) The Contractor also agrees that it shall determine that any subcontractor proposed by it for the furnishing of supplies and services which will involve access to classified security information in the Contractor's custody has been granted an appropriate facility security clearance, which is still in effect, prior to being accorded access to such classified security information.

Senator Case. Is it a standard form of contract used for all of these charter companies?

Mr. White. I do not know, sir. I have not had a chance to look at them.

Senator Flanders. Are there any further questions, Senator?

Senator Case. Presumably this contract sets up certain requirements. There must be some standards before the company would get one of these contracts, I assume.

Do you know whether there is any requirement of financial reliability before a company gets one of these contracts?

Mr. White. Theoretically there is supposed to be. But I would say from the record it was not too good. Theoretically nobody is supposed to enter into a contract with the Government unless they have financial responsibility.

Senator Case. The exhibit which the staff has listed as exhibit N" gives a list of delinquent airline accounts, fiscal year 1953; does that include any delinquencies prior to 1953?

Mr. White. I do not know how he prepared them. We keep 1953 separate as 1953, and 1954 separate as 195-4, and on back, as another question.

Senator Case. Do you have any accounts that are delinquent because of supplies rendered prior to July 1,1953 i

Mr. White. I would say "Yes."

Senator Case. Will you supply the committee with a list of the delinquencies separated as to those which were for supplies prior to July 1, 1953, and those for delinquencies since that date?

The point is that earlier testimony has indicated that the delin

?uencies prior to that date would be payable to the appropriation fund or the Treasury, whereas the delinquencies since that date would be payable to your revolving fund.

Mr. White. That is correct.

Senator Case. Would you also give us a table which will show the date at which the contract was made with each of these airlines?

Mr. White. On that one, sir, we will give it but some of them would be 1-charter contracts for one and you might have 10 of those during this period of time. You can do it 1 of 2 ways: you can make a contract for 2 years with 1 airline or you can have 10 different trips and make 10 different contracts during that period of time.

Senator Case. I would like to have the date of the first contract and if there is any

Mr. White. It might not have any relation to the amount of the delinquency.

Senator Case. It might not have any relation to that but it ought to give some clue as to the financial stability requirements when we first started doing business with the airline.

Senator Flanders. That can be obtained, I am sure. When obtained it will be put in the record.

(The documents referred to are as follows:)

Mr. White. There is one statement I would like to put in the record.

Prior to July 1953, Senator, there may be some people like Pan-Am who fall into the classification that owes money that we do not have a record of.

Senator Case. You can so indicate.

Mr. White. Yes, sir.

Senator Case. Wherever you have delinquency, if there is any base for it, let that be indicated.

Senator Flanders. I may say, Senator, that we are going to call Mr. White next. In view of that, may we excuse Mr. Sowers?

Senator Case. I think so. I was looking at staff exhibit which is labeled "Accounting Instructions No. 9."

I have not yet, in running down it rather hurriedly, found any particular reference in determining the financial responsibility of the contracting carrier.

Mr. White. The reason I say that, Senator, is because on the 23d of February a letter was issued by AMC in which they said that:

* * * the list of contractors indebted to the United States be checked to see whether the carrier is listed. This would be in addition to present procedures for determining financial responsibility in accordance with AFBI 70-254, paragraph 6.

That indicated to me when I started on this Thursday morning that they were prior to July 1953 checking financial responsibility.

Senator Case. But it does not tell us what they did, or how they checked it.

I notice in this contract it says:

Charter carriers' certificates will then enable petroleum officers to determine the appropriate price to be charged for fuel issued in accordance with existing instructions contained in—

then follow some identification letters—

dated November 10,1952.

That does not help us much. Apparently whatever was done under this directive of August 1953 related back to existing instruction of November 10,1952.

This goes more to directing specifications for the price, the standard price plus 3 percent plus 15 percent will be used for charter carriers rather than the standard price, and so forth.

It goes into pricing procedures rather than contracts. That is all.

Senator Flanders. Mr. Sowers, we will relieve you. You might stay around a little while because there might be some further questions coming up.

Mr. Sowers. Yes, sir.

Senator Flanders. I may say with regard to Secretary White, he had been scheduled as being the last of the group called, but some people have the habit of reading the last part of the story first, and that is what we are going to do now, so that he may have time to attend to his regular duties.

That is something that congressional committees do not always allow. I think we might establish a precedent with regard to that.

I might say that I am one of those who, in the case of a New Yorker short story, takes a look at the last page because that tells whether or not is it a harrowing story, and if it is a harrowing story, I do not want to read it because I cannot do anything about it.