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WEAPONS SYSTEM MANAGEMENT AND TEAM SYSTEM

CONCEPT IN GOVERNMENT CONTRACTING

MONDAY, APRIL 13, 1959

HOUSE OF REPRESENTATIVES,

COMMITTEE ON ARMED SERVICES,
SUBCOMMITTEE FOR SPECIAL INVESTIGATIONS,

Washington, D.C.
The subcommittee met at 10 a.m., Hon. F. Edward Hébert (chair-
man of the subcommittee) presiding:
Mr. HÉBERT. The committee will

be in order. As is the custom of this committee, the Chair desires to make a statement at the opening of these hearings.

This morning we commence a study of the weapons system management concept of contracting and with it a development known as the team concept of contracting for research, development, and production of our new weaponry, principally, of course, in the missile field.

At the outset, I should like to emphasize that this study begins with no preconceived or performed judgment on the merits or demerits of the systems, merely because they are new. In fact, we shall have to determine whether they are in fact and in law departures from basic contracting principles as authorized by the Armed Services Procurement Act of 1947.

This subcommittee has been charged with the duty of investigating negotiated procurement, and I remind you of our report and recommendations of June 15, 1957, dealing with the Armed Services Procurement Act of 1947, and concerning the more than 92 percent of negotiated procurement than being undertaken.

What now develops seems to be an ever-increasing amount of negotiated procurement, among fewer contractors. This

development is attributed to the advent of newer and more intricate weapons; and to the complications of putting the vast new technological developments to work in a single operating unit, while exploring new avenues in old mediums of transmission, communication, control, and direction.

We roughly divide these developments into so-called conventional weaponry for conventional warfare and the new and highly developed technological warfare with missiles in, heretofore, unexplored mediums of air and water and for the possible introduction of nuclear firepower and perhaps propulsion.

Something is happening in this transition, if it may be so denominated.

Here we are dealing with “surface outcroppings": How deep the vein, what the ore may assay, may be conjectural at this time, but there is a clear and present duty on the part of this subcommittee on mandate from the chairman of the full committee to make the study.

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Contracting procedures, the number of contractors and suppliers in the various tiers of supply and service seem to be growing fewer; and the opportunity for competition, whether it be in negotiation or through the formal bid procedure, must be reexamined.

It is enough to say that, as we acknowledge the tremendous advances and progress of the sciences in weaponry itself, we are aware of transitions which appear to be occurring in research, development, and production of new weapons; but larger subjects of policy and procedure to accommodate to these things, pose many questions.

This study may be prosaic, perhaps to some bemused in the excitement over new scientific developments; but there does come a time when the feet must come down from the clouds; that is when the bills come due. We must concern ourselves with contracting procedures, simple, unromantic, lacking in glamour as that may be.

We must consider the impact of changes in our economic position in purchase and supply. We must think of and reexamine the safeguards which experience has brought about over the years; and which have been engraven into our Government procurement system as protection against the frailties of human nature and the excesses of unbridled enthusiasts.

This, in short, is time for a calm and considered look at what we are purchasing and how we are purchasing and paying, and how the economy is affected thereby, for good or ill.

I want to make it clear that by undertaking this inquiry and asking the first series of witnesses to appear, the subcommittee does not suggest that the witnesses whom you will hear are called in any special order or any special purpose than to inform and advise the subcommittee from their own experiences.

I think it will be evident as this inquiry begins that thought and effort have gone into the presentation we will have; and I am confident the subcommittee, the industry, and the country will profit by the information developed here as the picture unfolds.

For that reason, I desire to express my appreciation to North American Aviation, Inc., and to Lockheed Aircraft Corp., and the others who will follow, for the time and effort which they have conscientiously and generously given to answering our points of inquiry.

No special format has been set out. Instead, the subcommittee has suggested and the witnesses will have responded with points for discussion to be presented in their own way.

We must know whether prices are rising because of anything that has been left undone by the Government.

We must know something of the negotiations and the character and the effectiveness of the contracting procedures for these new weapons.

We must ascertain which of the systems now in vogue (about which there is some skepticism in high places) is well conceived and whether it affffords the proper protection for both Government and contractors, while, at the same time, being an effective way to meet our military requirements.

Is this system efficient and effective ? Are we departing from the traditional American economic system of competitive pricing and production? Are we preserving incentive? Are Government funds being used to finance, explore, and exploit domestic markets in competition with established nondefense businesses ? Are the bases of suppliers being reduced or constricted ?

If these things should develop, are we imperiling our sources of supply should any portion of them fail? What, in fact, are the prospects, militarily and economically, as a matter of policy and procedure, as we look upon a new era in weapons ? These are some of the things on our minds as we begin our study.

Before I call the first witness, I want to repeat for the sake of emphasis the fact that this committee is not interested nor is it exploring or plowing over ground which has been plowed by other committees of this Congress, in the field of weaponry and missiles.

This subcommittee is not seeking to hit the moon, nor is it seeking to suggest to the military experts the type of weaponry it must use.

This committee is interested in its primary mission of finding out how much the bills are going to be, who is going to pay the bill, and whether the American taxpayer is getting 100 cents on his tax dollar in that particular area.

I want that to be definitely understood, that this committee's hearings are not an encroachment nor a repetition of any hearings which have been held heretofore in connection with missile development. I want that to be clear in everybody's mind. I don't want any confusion on that subject.

This is a new hearing, in a new field, as far as missiles are concerned, but not a new field as far as this subcommittee is concerned. Its mission has been procurement and its mission has been, to use the language that we all understand—its mission has been to be the watchdog of the Defense treasury, and we will only proceed in that area and in that way.

Now, the first witness this morning will be Mr. J. L. Atwood, president of North American Aviation, Inc.

Mr. Atwood's testimony will take approximately three sessions. I think it would be advisable that he proceed without interruption, as has been the subcommittee practice.

If this presentation today concludes before we are summoned to the floor, perhaps we might take a few minutes in question, but in general I believe it best to allow the question to await the conclusion of his formal presentation. This procedure has been found very successful by this subcommittee in the past.

Now, Mr. Atwood, I want to express to you the appreciation of the subcommittee for the generosity, the time, and effort which you have put into preparation for this hearing.

Since this testimony will be printed, I hope you will without hesitation place a personal biography of your professional and business distinctions in this record.

Now, of course, all of us on this subcommittee know you and you know most of us, from other days. You have your eminence in your chosen field. But the permanent record, I think, should be augmented with a more ample statement.

So, if you have such a statement, it can be inserted in the record at this time, or you may do so at a later date. And may I again say to you personally, Mr. Åtwood, on behalf of the committee and the older members of the committee and the new members, we are glad to have you with us again and we appreciate your appearance.

JOHN LELAND ATWOOD, PRESIDENT AND DIRECTOR,

NORTH AMERICAN AVIATION, INC. Born Walton, Ky., October 26, 1904. Education: Plainview, Tex., public school; AB degree, Hardin-Simmons College, 1926; BS degree, civil engineering, University of Texas, 1928. Began as junior airplane engineer with the Army Air Corps, Wright Field, Dayton, Ohio, 1928; design engineer, Douglas Aircraft Co., 1930; chief engineer, North American Aviation, Inc., 1934; vice president, 1934; first vice president, 1941; president, 1948 to present.

Honors : Honorary Doctor of Engineering, Stevens Institute of Technology, 1955; President's citation of merit for war contributions, 1948; Commander of Merit by Republic of Italy for aviation contributions, 1955.

Memberships : Institute of Aeronautical Science, Inc. ; fellowship 1939 to present; president 1954 to 1955; American Management Association, director 1945 to 1958; Atomic Industrial Forum ; director 1945 to 1958; Industry Consulting Committee, National Advisory Committee for Aeronautics; member 1956 to 1958; chairman 1958 to 1959.

Mr. HÉBERT. Now you may proceed as you desire.

STATEMENT OF J. L. ATWOOD, PRESIDENT OF NORTH AMERICAN

AVIATION, INC. Mr. ATWOOD. Mr. Chairman, I first want to express my appreciation for the opportunity to appear. I think it is a very good time to render an accounting of our stewardship which we have manifested and to outline some of the factors involved in our technological progress and our weapons development.

I did not prepare a biographical statement, but if it is satisfactory to the chairman, I will give the counsel a brief résumé of my background for future incorporation in the record.

In accordance with your suggestions, we have prepared testimony for three mornings. If I may proceed, I will read my prepared statement at this time.

I hope to make a useful contribution to public knowledge and understanding on a matter that I believe is of primary interest to the subcommittee at this time.

I refer to weapons system contracting. The term "weapon system contracting" is in common use today, but it seems to mean different things to different people. These differences often lead to misunderstandings and misconceptions. Because of the need for arriving at a common ground of understanding, I will try to describe, as I see it, what weapon system contracting is, why it evolved, and how it is being utilized.

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