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They have been concerned with the technical evaluation of the feasibility of proposed systems and equipments to accomplish this mission, and they have been assisting in a continuing review of both the overall system and of the combat surveillance program to insure that gaps do not exist in this.

We feel that Cornell has made major contributions to the basic program, to the design of specific systems, and to the philosophy and techniques of tests of some of these totally new types of equipment.

The real details, of course, of much of what they do are classified, and we certainly are prepared to go into them if you desire.

Mr. HÉBERT. We don't care to go into them. We just want the general overall picture, and I think the manner that General Trudeau would explain what this involves is sufficient for the overall picture.

Mr. SANDWEG. I think so.

General TRUDEAU. Well, they provide substantial numbers of scientists, analysts, and engineers who are concerned with the development of this special equipment for surveillance.

Mr. HÉBERT. Well, this is a very understandable contract as you have explained it. There is no need to go into this type of contract.

Mr. Hardy. The only question that concerns me in connection with this type of thing is how did you arrive at the pricing of this kind of contract?

Mr. Goldwag. The contract itself is a cost-plus-fixed-fee contract, as you might expect.

Multiple source negotiations were used. In an area like this the quality of the talent to be applied is of course considerably more important than the price.

Mr. HARDy. Did your contract specify the individuals who were to perform the contract ?

Mr. Goldwag. It did not specify them by name, it specified them by caliber: so many Ph. D.'s or equivalent.

Mr. Hardy. You could get a wide variety in that.

Mr. Goldwag. During the course of negotiations, agreements were reached between the Government and the proposed contractors as to the specific names of individuals to be employed.

The bulk of the cost is obviously in terms of personnel, a special overhead rate was negotiated for the contract and the detailed pricing analysis was performed.

The Cornell bid was neither the highest nor the lowest, but it was considered to be the best bid that was made considering what we considered a superior technical approach and the high caliber of the technical and scientific personnel that they proposed to furnish.

Mr. HARDY. Now, just one other aspect of this. I notice that this contract runs concurrently with the other contract which was also referred to, 74910.

Mr. Goldwag. Yes, sir.

Mr. HARDy. Now, are they using the same personnel on these two contracts? Are they paying for the same personnel twice?

Mr. GOLDWAG. No, different personnel are involved.

Mr. Greenspan can give you more details on the other contract but I can cover it briefly.

Mr. HARDY. I just want to try to understand how the pricing was done, whether or not there is an overlap of contracts, and-well, one question might be interesting in this:

.

What is the overhead factor in this? This is a cost plus fixed fee contract. What is the overhead factor in the fee?

Mr. STIEGLITZ. My name is Stieglitz. I am the contracting officer at Fort Monmouth.

The fee is approximately 6 percent. The charges are all direct. They only charge 15 percent for general and administrative expense.

Mr. HÉBERT. Fifteen percent as compared to 110 percent on the other contract we had just a while ago.

a Mr. HARDY. Fifteen percent overhead. Mr. STIEGLITZ. General and administrative expense. Mr. HARDY. And you said the fee is how much? Mr. STIEGLITZ. Six percent. Mr. Hardy. Six percent based on the face amount of the contract? Mr. STIEGLITZ. No; direct labor cost. Mr. HARDY. On the direct labor cost. Mr. COURTNEY. Well, it is a fixed fee. Mr. STIEGLITZ. Approximately an overall of 6 percent.

Mr. HARDY. Wait a minute. It it a percentage fee! I didn't think we had any percentage fees.

Mr. STIEGLITZ. No, it is equivalent to 6 percent, to be accurate.

Mr. COURTNEY. It is a sum which would be the equivalent of 6 percent on the contract; is that it?

Mr. STIEGLITZ. Yes.
Mr. Hardy. It is 6 percent on direct labor, not on the face amount.

Mr. STIEGLITZ. Well, we have various charges so it may be a little

Mr. HARDY. Do you know what the amount of the fee is?

Mr. STIEGLITZ. At the present time, I don't have that. I could get it for you.

Mr. Hardy. We are taking in percentages here, and percentages of what?

Mr. Goldwag. I have the exact figure, sir.

Mr. HARDY. I think that would be better. If we could just get the fee for each of these contracts, we would know more about what we are talking about.

Mr. STIEGLITZ. I have the exact figure. Estimated cost is $2,930,509, and the fixed fee is $175,735. That adds up to just slightly under 6 percent–5.99, to be exact.

Mr. HARDY. The figure came out something over a hundred thousand dollars above the estimated cost that you have there, according to the sheet that I have in front of me.

Mr. STIEGLITZ. Total allotment is $3,106,244, and I have broken it down into those two elements.

Mr. HARDY. I see.
I still don't know if I understand, but that is all right.
Mr. HÉBERT. Next contract.
Mr. COURTNEY. Let me ask this question, please, Mr. Chairman.
Was this done by university personnel?

Mr. GOLDWAG. T'he contract is with Cornell Aeronautical Laboratory. They are a separate entity. They are located in Buffalo instead of Ithaca, but they are a wholly owned subsidiary of the university. There is no connection with the university except at the highest Mr. COURTNEY. How high in the professional ranks do you go?

Mr. GOLDWAG. It is not a question of that. Cornell Aeronautical Laboratory is a separate entity. The professors are not particularly involved. However, the president of Cornell University is president of Cornell Aeronautical Laboratory. The executive vice president is the effective de facto head of the laboratory.

Mr. HARDy. If you require so many Ph. D.'s, you don't know whether they come from Cornell's staff. Actually, you don't know whether there are people from Cornell's staff serving on this contract or not.

Mr. GOLDWAG. We know the people serving there and we know where they come from.

What I said, sir, was the contract itself, the contractual document does not specify the names of the people. It specifies the caliber. By separate arrangements we have agreed on specific people.

At the time the contract was placed, all of the key people came down from Cornell, Buffalo, from the laboratory.

Mr. HARDY. You didn't borrow anybody from the university ?
Mr. GOLDWAG. No, sir.

Mr. HARDY. So we are getting up to the questions the chairman has been working on lately, in this case it is not demonstrable that we are subsidizing higher education.

Mr. GOLDWAG. That is correct.
Mr. HÉBERT. The next case.

Mr. SANDWEG. I think we can finish up, then, with two contracts by the Corps of Engineers, contracts Nos. DA44–009–ENG, 4515, with Jered Industries of Nazel Park, Mich., to study an assault ferry, $64,780, and also contract No. DA-004_EŅG, 4517, with Food Machinery & Chemical Corp. of San Jose, Calif., also to study an assault ferry for $116,575.

The results of the contracts are both the same. Each of the contractors made various recommendations. I correct myself. Jered Industries made various recommendations, none of which were adopted which have not already been adopted by USAERDL.

Food Machinery made various recommendations, the most important of which was that the design prepared by USAERDL be used for this bridge.

Again it appears here you might have drilled a couple of dry holes, and I wondered if we could have some explanation of that, since the results were (1) not adopted which had already been put into effect by USAERDL, and the other recommendation was one that was being used by USAERDL.

Mr. NORBLAD. Pardon me. What contract was this, what company at the top?

Mr. SANDWEG. Well, it is a separate page, Mr. Norblad, both of them are together.

Mr. NORBLAD. Thank you.
General TRUDEAU. Mr. Mullins.

Mr. Mullins. Howard II. Mullins, chief, Bridge and Research Group, Engineering Research and Development Laboratories, Fort Belvoir.

General TRUDEAL. Would you respond to Mr. Sandweg's question ? Mr. SANDWEG. Would you want me to repeat it again?

Mr. MULLINS. I believe you said it looked like we drilled a couple of dry holes.

Mr. SANDWEG. Yes. One corporation made recommendations which had already been adopted by the Army, and the other made recommendations to use a design already prepared by the Army.

Mr. MULLINS. Well, now, I don't believe that the statement that you are reading there quite reflects the exact situation.

Now, I don't know how the statement got there, it was probably picked up from some report that is not just exactly so.

Mr. SANDWEG. This is what we had to proceed on.
Mr. MULLINS. I realize that, sir.

I would like to read here, and I think if I read it I probably would do a little better than if I tried off the cuff, you know.

Mr. SANDWEG. That is quite all right.
Mr. Mullins. I believe this will explain it.

In September 1959, we at the laboratories heard that we would be asked to design a bridge of the mobile floating type. This is the type that you gentlemen are looking at. We had not yet received the military characteristics for the bridge, but we immediately began making sketches to determine as many different concepts for doing the job as possible.

In November 1959, I discussed the proposed bridge with engineering representatives of several outside firms to determine if these firms would be interested in doing work on such a bridge, and if they had any worthwhile ideas as to how the problem should be solved.

This was being done because we anticipated that the time allotted for the complete design of this bridge would be so short that we could not with the force we now have prepare the complete designs for the hull, the superstructure, and all of the machinery in time to ask for quotations in fiscal 1961.

In January 1960, several of these firms submitted unofficial proposals showing how they would solve the problem.

We had asked these people to submit these unofficial proposals with drawings depicting just how they would attack the problem, because we wanted to see what they could do and to make sure that they had an overall appreciation of the problems involved.

We were not interested in having these people come in and just tell us what a fine job they could do. We were interested in having them prove that they were competent.

While this was going on here at the laboratories, we proceeded to work on the design concept which we had worked out, and we considered most satisfactory. We started preparing the details for the hull, the superstructure, and we also made a machinery layout and determined the horsepower requirements at the various speeds when operating as a ferry.

In the meantime we had come to the conclusion that since this was such an extremely expensive and complicated piece of equipment it would be wise before committing ourselves to a final design and expending any money thereon, that we make sure beyond all reasonable doubt that we were on the correct road, that we had the correct design.

We thought it advisable that we bring some outside engineering talent to bear on the subject. It occurred to us that outside firms working independently might perhaps come up with a more simple and more economical design.

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We thought that, if we were going to do so, this engineering talent should be brought to bear in the very early stages of the design.

As a result of this thinking, we recommended to the Chief of Engineers that we be allowed to let some contracts on overall studies to outside industry. We did not feel we should depend on one contractor only, and we recommended that we be allowed to let more than one contract. This recommendation was approved.

As a result of that approval we let the two contracts under discussion, that is, to Food Machinery & Chemical Corp., and Jered Industries.

In setting out the scope of this work we tried to list everything that we could think of that we wanted these people to investigate. In other words, these were specific things that they must look into, and we emphasized to these people many times that the sky was the limit so so far as their investigation was concerned, that anything that they could design or invent would be satisfactory with us so long as it was practical and could be used.

We made it very plain to them that we did not want a lot of socalled harebrained ideas which would be of no practical value to us and which we could not incorporate in our final design.

After these contracts were let, we decided that it would not be a good idea for these contractors to go home and work for 4 months, which was the period the contracts were to run, and come back with the same layout we had worked out here.

We had been working on this job for some months now, and had many drawings quite well along. So we decided to show the contractor's everything that we had done so they would know as much as possible about the job before starting their work.

We emphasized to them that they were acting as consulting engineers to us and we expected them to come up with recommendations at the end of these studies as to exactly the type of structures we should use, the arrangement of the machinery, the type of drive line, the type of suspension, the type of water propulsion system, and every other item involved.

Now, that, sir, I think is the statement which will give you the reason why we thought we should let contracts to outside firms to make sure that we had not missed the boat, because this is to be an extremely costly job, and I suppose that we might assume that when completed and adopted that based on military bridges we have bought in the past that we can expect a minimum of probably $100 million will be involved in procurement of such equipment.

Mr. Hardy. Well, you gave them all the design work that you had done, you made that available to them.

Mr. Mullins. We showed them everything that we had worked out.

Mr. Hardy. And they came back and said, OK, boys, you did a good job, that is what you ought to go ahead with.

Mr. MULLINS. Not exactly. We got very extensive reports and also this is the type of report, Mr. Hardy, that we got.

Mr. Hardy. Which one is that, Food Machinery?
Mr. MULLINS. Yes.
Mr. HARDy. You said $116,000 for that.

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