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March 30, 1972.



Memorandum to the Commission:

Reference is made to previous memoranda circulated within the past few days regarding the subject matter and particularly to the Chairman's memorandum of yesterday, March 29.

In our discussions, both Chairman Stafford and I agreed that the investigation in Ex Parte No. 270 is going to be difficult and of relatively long duration. It is not an assignment that any Commissioner would covet, in my opinion. I accepted the assignment with some reluctance recognizing that I am the junior member of this Commission and could only succeed in carrying out the administrative duties of the assignment with the wholehearted support and cooperation of each of the Commissioners and the Commission staff.

In my memorandum yesterday suggesting that Brother Walrath be authorized to make preliminary inquiries as to the availability of Judge Friendly, I did not in any way intend to convey the thought that we should employ him but we had to start somewhere. Hopefully there will be many qualified candidates and certainly Chairman Stafford and I are in total agreement that we should obtain many names before a final decision is made. Prior to sending out my memorandum, I had a discussion with Brother Walrath and he indicated that he did not know Judge Friendly personally but that he would be willing to make appropriate inquiries into the matter and we both agreed that before doing so, he should have the approval of the entire Commission. I am personally pleased that the Chairman has asked the General Counsel to discreetly determine whether Judge Friendly is contemplating retirement.

Regardless of who is administratively responsible for this investigation, it should be pointed out that time is of the essence and urgency should be the password.



March 30, 1972. To Commissioner BREWER:

The gist of this memorandum is that the General Counsel instead of Commissioner Walrath would find out whether Judge Friendly is really contemplating retirement. If the rumor is prevalent in judical circles this should not be too difficult a task. The essential point is that someone is making a move to find out whether Judge Friendly can be a candidate or not.

The Chairman also delineates the perimeter of the assignment of these proceedings for administrative handling. This seems essential since the minutes in this regard pertain more to cases involving hearing examiners and the minutes are not clear in a situation such as we have here. It seems well to get the rights and duties of all clearly defined in the initial stages.



March 29,



In connection with Brother Brewer's memorandum of this date, I am pleased to confirm that I did request that he accept the assignment referred to and that he agreed to do so.

Since our earlier discussions had been informal and oral, I felt it only fair now to explain to each of you our basic understanding of the arrangement. His assignment will be to see that progress is made toward completion of the record at the earliest practicable date, but working closely with Division 2 on procedural steps and with Fred Dolan as our designated staff head. He will, of course, present for Commission approval from time-to-time, substantive decisions, such as approval of Special Counsel and allocation of funds to be expended from the released funds and supplemental appropriation now hoped for, earmarked for this and related proceedings.

So far as Judge Friendly is concerned as a candidate for the position of Special Counsel, no final decision as to his selection has been made, nor is he even aware that his name is under consideration. You may have other qualified persons in mind, and both Brother Brewer and I earnestly solicit your suggestions.

I agree with Brother Brewer that we should move promptly to select someone of sufficient stature to command public respect as an impartial representative of the broad public interests involved in this proceeding. It is only fair that he, in turn, be given time to plan the selection and organization of his staff of cost experts, economists and attorney assistants within such budgetary restrictions as our special funds will permit.

At this point we have only hearsay evidence that judge Friendly is planning retirement from his active role as a member of the Federal bench. I have asked the General Counsel to find out discreetly whether this be a fact. It would be embarrassing, should we agree to approach the judge, to do so without prior assurance that he would be available for the position.

This we should know in a matter of days. Brother Walrath agrees with me and Brother Brewer that Judge Friendly's broad experience with appeals involving ICC cases, and his national reputation as an able, fair and effective judge, makes him an outstanding candidate for Special Counsel. However, Brother Walrath does not know him personally, only through correspondence, and suggests that if the judge is to be approached, perhaps it should be by me and our General Counsel's office.

With Brother Brewer's approval, I am suggesting that any additional names for the job be submitted by noon Friday, March 31. By then we should have some confirmation of Judge Friendly's retirement plans.



March 29, 1972.


ET AL. Memorandum to the Commission:

The Chairman has assigned these proceedings to me for administrative handling. As mentioned in my memorandum of March 27, in view of the need for expedition I suggest that we commence the search for Special Counsel by requesting Brother Walrath to initiate the correspondence with Judge Friendly to determine whether he would be interested in this opportunity.

In the circumstances, unless I hear from you to the contrary by 4 p.m. today, I shall inform Brother Walrath that the Commission is in favor of this initial step.



March 27,




Memorandum to Chairman Stafford:

Supplementing my earlier report, I am happy to state that we have excellent indications that our request for funding for these proceedings will be granted, probably with the understanding that some of the money be used in the area of cost finding. I also understand that we will have to transmit a letter, possibly by the end of this week, explaining to the satisfaction of OMB on what projects, etc., we intend to obligate the $700,000 to be released from reserve. (DOT will informally be given until April 14 to provide their comments to OMB.)

Our need for additional funding was set forth in the letter from you to OMB dated January 3, 1972, and the accompanying statement entitled "Request For Release Of Reserve”. This includes choosing a proper Special Counsel and retaining his services. Some preliminary work has been performed in this regard; specifically the type of financial arrangement, the Special Counsel's role, his rights and obligations, and his staff and funds for studies deemed necessary in the course of this investigation (see Appendix A).

Outline of funding

Total funds sought--
Amount to be released from reserve..
Balance to be sought in request for supplemental appropriations.

$1, 460, 000

700, 000 760, 000

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760,000 From the above table it may be seen that we estimated $350,000 would be allocated to Special Counsel and his staff, and $300,000 for his studies. (These amounts could be reallocated as Special Counsel deems appropriate.) We programmed $810,000 for our economic studies on a contractual basis.

The nature of the studies under consideration are entitled (a) Revenue and Revenue/Cost Relationships, (b) Traffic Flows, and (c) Survey of Railroad Service. Other subjects were included as possible areas for exploration for the Special Counsel. However, they are also topics the Commission might choose to investigate-(a) The Operative Structure and Application of Rail Rates, (b) Responsiveness of Shippers to Rates and Service Characteristics, and (c) Financial Stability and Revenue Needs. An additional topic would be one involving costs which would be of benefit to DOT in the unhappy event that their legislation passes and also of benefit

the Commission, the carriers, and consumers in the event no statutory changes result. Staff work is continuing on an in-depth exposition of these studies.

As seen, the amount we expect to be released from reserve is about $700,000. After preparation of the necessary explanation for OMB and after authorization is received to obligate the funds Special Counsel and staff may be retained. Simultaneously we should be in a position to enter into contracts for studies essential to the successful conclusion of these investigations, all by June 30, 1972. The Special Counsel's contract study money ($300,000) and the additional Commission money ($460,000) are included in the request for supplemental Congressional appropriations. (If this request is acted upon favorably, it too would have to be obligated this fiscal year. A clause in the earlier economic study contract could be open-ended, providing for additional studies if money is made available.)

Our first priority will be locating the appropriate Special Counsel. Judge Friendly has been mentioned as a possible candidate. I understand that, in judicial circles, it is well known that he is contemplating retirement. I also understand that Brother Walrath, who is acquainted with Judge Friendly, is willing to initiate preliminary discussions. I would suggest that this be done immediately. There may be others who should be considered but, in any case, time is of the

It is highly important that, if we receive the money we have requested, we not allow the investigations to falter. It would be helpful if we could assign three additional examiners (experienced in economics, rates, costs, and service) to Ex Parte Nos. 270, 270 Sub-Nos. 1 and 2, and 271. Examiner Dolan would continue to supervise and coordinate the matters with the various bureaus and other members of the Staff Task Force. There is one other alternative. Members of the Staff Task Force assigned to these proceedings would have to be spared from some of their regularly assigned duties in order to complete work which lies ahead. This includes such matters as the further explanation to OMB and to Congress as to how the funds will be obligated, what economic studies should be made, the technicalities of contract preparation, negotiation, evaluation of bids, monitoring work of the contractors, etc., retaining Special Counsel, Staff, support personnel and quarters, analyzing the statements filed in these investigations and preparing


appropriate reports and recommendations, and charting the future course of these investigations.

Therefore, I suggest that a commissioner be placed in administrative charge of these investigations. I also suggest that the Commission give preliminary consideration and approval to the matters expressed in this memorandum. Once we receive final authorization we will have to take action on short notice.


BACKGROUND In the preliminary report in Ex Parte No. 270 we alluded to the role of Honorable Louis D. Brandeis as Special Counsel for the Commission in the Five Percent Case: “The Commission instructed him to see that all sides and angles of the case are presented of record,' without advocating 'any particular theory for its disposition' and to 'emphasize any aspect of the case which in (his) judgment, after an examination of the whole situation, may require emphasis.”

SELECTION, ROLE, AND SALARY The essential problems are the selection of the Special Counsel, the salary arrangement, and his role. We must know how much money can be offered and the manner by which we can retain such an individual.: At that time we must be able to inform eligible persons what will be expected of the Special Counsel and what he is to receive in return.

Since the Special Counsel, to some extent, will be charged with responsibility for these investigations, he should be retained and become a party to the proceedings as soon as possible. Certainly before the direction of the proceedings is fixed the Special Counsel should have an opportunity to make his views known.


The Special Counsel would have legal authority at least equivalent to that of staff attorneys in the Bureau of Enforcement in any Commission proceeding in which it is directed to participate. However, because of the special role of Counsel in these far-reaching investigations, the obligations of Special Counsel would be much greater. This also follows from his added staff and the availability of adequate funds. Special Counsel should also receive the broad instructions given to Honorable Louis D. Brandeis.

Special Counsel would be a party to the investigations and would have to be treated as any other party. He would be assured complete independence. He could not be regarded as the Commission's spokesman or attorney. If he is to be charged with responsibility for the investigations, he should have the final say as to the evidence which he is to introduce in the record. This may create pioblems if he disagrees with economic studies put out on contract by the Commission. However, in case of an impasse, the studies could be released by the Commission just as the burden studies.


May 11, 1972.



Memorandum to the Commission:

We are still waiting for Bob Ginnane to let us know if he is in the position to take the assignment as Special Counsel. Should he not accept the position we do not now have another candidate with the stature we feel is needed. I am attaching material furnished by John Danielson and Leonard Goodman.

OMB has released $700,000 for economic studies. Our request for the additional $760,000 would include funds for Special Counsel, staff, and his studies. This was originally sought as a supplemental appropriation for FY 1972. It is now being considered as an amendment to our budget request for FY 1973. Therefore, we do not yet have funds with which to retain Special Counsel but we expect they will be available later this summer.

1 From discussions with the General Counsel of the Civil Service Commission and his staff, we learned that the recipients of these contracts must be independent contractors, the rationale being to preclude subsequent suits against the Government for annuities.

Several persons mentioned Judge Friendly but our investigation revealed that he will not be eligible for retirement until July 1973. After that date he could retire and continue, as judges do, on full salary but if he were to resign earlier he would lose his retirement compensation. Under the circumstances it seems fruitless to even approach Judge Friendly. For these and other reasons further exploration in the judiciary offers little chance of producing potential candidates.

We have made informal contacts with representatives of the bar of the Commission and will give consideration to any candidate they suggest. At the same time the staff is widening the search to explore the availability of non-lawyers. Persons in other fields may find it easier to take a leave of absence than attorneys with an active practice. Moreover, non-lawyers would have no difficulty in functioning with a capable staff of attorneys as well as economists, engineers and other transport experts.

In the circumstances I will direct the staff to prepare a list of likely candidates. We will then present to you profiles of these individuals to get your initial views. This matter must be handled with some delicacy to avoid embarrassing ourselves or the candidate. Clearly, if a potential candidate indicated a willingness on his part, we should be in agreement in making an offer. The task is to find some prominent individual whose reputation and ability would immediately convey a sense of confidence in the success of this investigation, as well as be acceptable to all those whose continued cooperation and support will be essential to the success of Ex Parte Nos. 270 and 271.



June 20, 1972. Ex PARTE No. 270-INVESTIGATION OF RAILROAD FREIGHT RATE STRUCTURE Memorandum to the Commission:

The Technical Evaluating Team (Technical Team) evaluated the eight written proposals and together with the Corporate Performance Team came up with scores of 734 for Resource Management Corporation (RMC) and 709 for Charles River Associates (CRA). These point scores, as well as those for the other bidders, were arrived at by evaluating each proposal on the basis of 14 criteria. The conclusion of the team was that RMC was the better qualified contractor. (See Attachments.)

The Contractor Selection Board (Board) had the benefit of the oral and written evaluations and weighed scoring reports of the Technical Team. The Board also reviewed the written proposals of all those responding to the request for proposal (RFP). Finally, the Board, assisted by the Technical Team, participated in the oral presentation of RMC and CRA. (A copy of the transcript of that meeting is available in my office.) The Board members found themselves in unanimous agreement with the Technical Team's conclusion that the contract should be awarded to RMC rather than to CRA, the other finalist. Besides the advice and recommendation of the Technical Team several factors stood out in leading the Board to come to this conclusion:

1. The written RMC proposal was by all odds the best of those received. It demonstrated a clear grasp of the purpose behind the institution of Ex Parte Nos. 270 and 271 and of the data problems facing anyone attempting economic studies in furtherance of the aims of those proceedings. This contractor was familiar with the waybill data and its shortcomings and demonstrated its ability to deal with the cost data available. (Its sub-contractor selected to process the Rail Form A data, Robert Hines Associates, while not demonstrating statistical or economic brilliance, has experience in ICC rate and merger proceedings and is experienced in applying Rail Form A data and ICC costing techniques, as well as necessary modifications.)

None of the proposals clearly explain the econometric and statistical methodology to be used in the various study areas. None presented a clear alternative plan in lieu of utilizing 1969 or later waybill data which is still unavailable. However, we recognized the short time available for the firms to submit bids and did not call for such solutions.

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