Mr. SKEEN. In the words of Mr. Allen, we think a normal profit should be around 12 percent before taxes. We have never even come close to that. We have never made anything more than our basic profit. And even the renegotiators take that away from us.

Mr. GAVIN. There is not much alternative for you, other than the system we have here. It pretty much has to be accepted. But we do think that you should be satisfied with a reasonable profit.

Mr. SKEEN. We would be satisfied with a reasonable profit; yes, sir. And that is all we have ever wanted to make.

Mr. HÉBERT. Mr. Courtney.

Mr. COURTNEY. A question about your chart, Mr. Skeen. Page 2-A, I guess you would call it. It is the triangular chart.

Now you outlined in this chart the various layers of authority? Mr. SKEEN. Yes, sir.

Mr. COURTNEY. And responsibility and in your testimony you have now spoken of the relationship between Boeing. With the Department of the Air Force and this complex in Inglewood, Calif.? Mr. SKEEN. Yes, sir.

Mr. COURTNEY. The three participants.

Now the major decision, then, with respect to your responsibility, as you indicated on this chart, lies really in the combination of the BMD outfit?

Mr. SKEEN. Yes, sir.

Mr. COURTNEY. And Space Technology Laboratory?

Mr. SKEEN. Yes, sir.

Mr. COURTNEY. And what-not, and Boeing, isn't that right?

Mr. SKEEN. Our basic responsibility is in this area here.

Mr. COURTNEY. This is Boeing?

Mr. SKEEN. Yes, sir; this is Boeing.

Mr. COURTNEY. But so far as the administration of the Minuteman program is concerned

Mr. SKEEN. It is the top block here [indicating on chart].

Mr. COURTNEY. The top block?

Mr. SKEEN. Yes, sir.

Mr. COURTNEY. That is where the major decisions are made?
Mr. SKEEN. Yes, sir.

Mr. COURTNEY. And these are decisions made by the Space Technology Laboratory and yourself, and

Mr. SKEEN. No, and the Air Force.

Mr. COURTNEY. And the Air Force?

Mr. SKEEN. Yes, sir.

Mr. COURTNEY. Now do you have an equal voice in these conferences which you say lead to legal change orders, if you want to call them that, in the performance of your contract?

Mr. SKEEN. Yes, sir. That was the reason for the chart. We have - an equal voice here. With respect to items below the Boeing line,

we have more than an equal voice because this gets into the integration job.

Mr. COURTNEY. Yes. But let's stick now to the top block.
Mr. SKEEN. Yes, sir.

Mr. COURTNEY. In that case you say that you, with the Air Force, have an equal voice in the decision?

Mr. SKEEN. We are heard. They are the customer, yes, sir.

Mr. COURTNEY. But nevertheless the final decision, the ultimate decision, if there is a difference, would be with the Air Force as the customer?

Mr. SKEEN. Yes, sir.

Mr. COURTNEY. Now just one more question so we will be clear on the record.

In these proposals and particularly the proposal which you indicated, you made at the time you were awarded the Minuteman. Mr. SKEEN. Yes, sir.

Mr. COURTNEY. The contract, or letter contract.

Mr. SKEEN. Yes, sir.

Mr. COURTNEY. In those cases, did you propose a system of subcontracting with prospective prices?

Mr. SKEEN. Yes, sir.

Mr. COURTNEY. So that there was an indication in the proposal of who the major subcontracting tier would be, and their prospective price?

Mr. SKEEN. Yes, sir.

Mr. COURTNEY. Now having gone to that extent, was that proposal with respect to the subcontracting the result of negotiations with the prospective supplier?

Mr. SKEEN. Oh, no, no. It was a tentative proposal.

Mr. COURTNEY. On a tentative?

Mr. SKEEN. Yes, sir.

Mr. COURTNEY. Then we would understand there would be no commitment?

Mr. SKEEN. Oh, definitely not

Mr. COURTNEY. Let me finish the question so we will be clear on the record. There would be no commitment between Boeing and the subcontractor, or the associate contractor for that matter, or whatever you want to call him, who would be the indicated prospective source of the component or whatever supply or service was to be rendered, is that right?

Mr. SKEEN. That is right. And as I brought out in my testimony, we are now having another open meet-that is, open competition. Yes, sir.

Mr. COURTNEY. Just so we understand this is not a fixed proposition when it goes before the Air Force for award.

Mr. SKEEN. That is right.

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Mr. COURTNEY. Or whatever department is handling it.

That is all, of Mr. Skeen.

Mr. HÉBERT. Now we will have the Bomarc presentation.

Mr. COURTNEY. This is Mr. Wood-Lysle Wood, who has charge of the Bomarc.

And with him is Mr. Frank L. Dobbins, the Director of Material, who I guess would be called the contracting or subcontracting man. Now, this, Mr. Wood, differs in some respect from the contractual arrangements you have concerning Minuteman, about which Mr. Skeen has testified.

Mr. Chairman, with the permission of the subcommittee, they may wish to alternate on questions.

Mr. HÉBERT. Proceed.

Mr. COURTNEY. Would you like to interpolate your statement into the record and then speak concerning it.

Mr. WOOD. Yes. Mr. Chairman, with your permission, I would like to introduce this prepared statement in its entirety into the record. However, with permission and in the interest of saving your time and the time of the other gentlemen, I would be very happy to delete portions of this as I read it, if you wish, which would reduce the time.

Mr. HÉBERT. Mr. Wood, you may introduce the statement here and it will be printed in its entirety at this point in the record.

I think you noticed by the questions of the committee that we are interested in procedures and highlights, and that we avoid details. I think we can progress much more quickly.

Mr. WOOD. Yes, sir. I will be very happy to do so, and I have marked a set here with this in mind.

Mr. HÉBERT. Put that in the record now. Sit down. (The statement of Mr. Wood is as follows:)

STATEMENT OF LYSLE A. WOOD, VICE PRESIDENT, GENERAL MANAGER, PILOTLESS AIRCRAFT DIVISION, BOEING AIRPLANE CO.

Gentlemen, the purpose of this part of our prepared statement is to describe Boeing weapon system management practices as they have been applied to the Bomarc program, or more appropriately, the IM-99 weapon system. In the preceding weeks of testimony, you have received information on the general nature of the weapon system management task and the important contribution that this concept has made in decreasing the time from conception of an idea to operational deployment. Rather than further pursue this aspect of the problem, I will devote the majority of my time to reporting on actual experiences over the life of the Bomarc program.

The first development contract for the Bomarc weapon system was awarded shortly after the weapon system management concept was introduced by the Air Force. As far as we know, it is the largest system task which has been fully developed to the point of operations within that framework, and therefore, we believe that it is an excellent example of what can be accomplished by weapon system management.

Since an evaluation of the job that has been done on Bomarc is dependent upon first understanding the job that Bomarc itself must do, it is appropriate to describe the weapon system briefly. Some of this description may be repetition in view of what the committee has already seen and heard; however, for clarity in the record I seek your indulgence.

Bomarc is an area air defense system. It is comprised of five broad subsystems:

The electronic warning and control network, the Bomarc missile, the missile base, plus the associated ground support equipment and the necessary support logistics. Taking these subsystems in order, the electronic network, through connected radar stations, alerts the defense of an incoming attack, and automatically performs all of the tracking and intercept computations required to direct the missile toward the target.

The battle commander assigns the required number of missiles and, at the proper time, the missiles are automatically launched. Although an electronic network is an essential part of the IM-99 weapon system, it is also an essential element for other defense systems. As has been pointed out previously, “One man's subsystem is another man's system," and the electronic network became established as a separate system development with its system manager responible for assuring overall comptability with all the various programs which will use it. The network to which I have been alluding is the well-known semiautomatic ground environment, or SAGE system.