Mr. SMITH. Yes; it would be a definite advantage to the Government. We can already point to savings made in GSA projects if they would require this on all projects.

Senator FONG. And tell GSA where the design could be improved

upon.

Mr. SMITH. That is right.

Senator FONG. And materials could be substituted and where we could save money

Mr. SMITH. That is right. If it is laid out initially in that upstream portion of your plan, that is very important.

Senator FONG. But to do that before contract is secured, it would be a little difficult, would it not?

Mr. SMITH. No. They are doing this in some instances now.

Senator FONG. Send a bid out to 10 different bidders and then ask the bidders to send in ideas as to where they could eliminate costs or improve design?

Mr. SMITH. Yes; the GSA is requiring them to bid on a schedule.

Senator FONG. So, you are actually asking the bidders to draw a sketch of something and if the sketch is approved then you do business with that bidder. Is that the way it is handled?

Mr. SMITH. Yes, sir. We call it a CPM network. It is generally called a CPM network, the critical path method.

Senator FONG. Thank you.

Senator TYDINGS. I have no further questions.

Thank you very much.

Mr. SMITH. Thank you.

Senator TYDINGS. We now stand in recess until 10 o'clock tomorrow morning.

(Whereupon, at 12 noon, the committee recessed, to reconvene at 10 a.m., Wednesday, August 2, 1967.)

VALUE ENGINEERING

WEDNESDAY, AUGUST 2, 1967

U.S. SENATE,

COMMITTEE ON PUBLIC WORKS, Washington, D.C. The committee met at 10 a.m., pursuant to recess, in room 4200, Senate Office Building, Senator Jennings Randolph (chairman of the committee) presiding.

Present: Senators Randolph and Cooper.

Also present: Richard B. Royce, chief clerk and staff director; M. Barry Meyer, counsel; Richard E. Gerrish, minority staff director; J. B. Huyett, Jr., and Richard D. Grundy, professional staff

members.

The CHAIRMAN. In continuing our hearings, we have the assistance today of those individuals within Government who can counsel with us on the approaches that are being taken-or which are planned on being taken to make more effective the processes of administration that hopefully will result in the lessening of the cost of programs that are carried forward.

Will you identify yourself and proceed?

STATEMENT OF FRANK C. DI LUZIO, ASSISTANT SECRETARY FOR WATER POLLUTION CONTROL, DEPARTMENT OF THE INTERIOR

Mr. DI LUZIO. I am Frank Di Luzio, Assistant Secretary for Water Pollution Control, Department of the Interior.

Mr. Chairman, I would like to highlight the statement and place the total statement in the record, with your permission.

I am pleased to be here this morning to discuss systems analysis and its relation to the Nation's problems of water and waste management. I broaden the subject now slightly because I think that they are part of the same total problem, just as I feel that water supply and water pollution abatement also are different sides of the same coin; you cannot really examine one without the other.

Now, the Nation faces an enormous task in reversing the deterioration of its lakes, rivers, estuaries, and streams. It is a job which is essential to the future well-being of our country, and fortunately the President, the Congress, all levels of government, and the American public have shown an awareness and determination that this job be done.

The job will be neither easy nor cheap. All levels of government. and industry will spend much more on pollution control in the years ahead to meet the standards currently being established under the Water Quality Act of 1965.

Since our resources will never be unlimited, we therefore have an obligation to obtain the most cleanup per expenditure of our resources of funds, manpower, time, and facilities.

At this point, let me say that we should not separate water supply and pollution abatement. They are both parts of the same problem. And, as I discuss systems analysis, I will be looking at the full range of alternatives for water and waste management.

The water pollution control program is now at the stage where many goals for water quality have already been set and are being set through the States establishment of water-quality standards which determine whether a particular water resource will be used for purposes of industry, agriculture, municipal water supply, fish and wildlife, or outdoor recreation.

The priority problem will now be for the States, local communities, and industries to implement these goals efficiently by constantly analyzing alternative ways to implement these goals for a particular watershed or river basin; that is, through analyzing the full range of alternative ways to handle such problems as municipal, industrial, and agricultural waste, and acid mine drainage, and to construct and operate waste-treatment plants efficiently.

Before one can make meaningful statements about the application of systems analysis to water- and waste-management problems, one must define what one means by systems analysis, as well as the possibilities and problems of its use.

This morning I would like, briefly, to outline:

First, what is meant, within the context of the Federal Water Pollution Control Administration, by systems analysis;

Second, the various possibilities for its use by the Federal Water Pollution Control Administration;

Third, some of the problems of application; and

Fourth, the current and planned use of systems analysis techniques in the Federal Water Pollution Control Administration.

MEANINGS OF SYSTEMS ANALYSIS

There are many types and levels of systems analysis. For example, systems analysis, operations research and value engineering can be applied:

1. To the efficient allocation of Federal effort and use of Federal resources funds, personnel, equipment, facilities, and organization-to solve national problems and to achieve national goals; 2. To develop national goals and alternative programs for water and waste management;

3. To the efficient allocation of State, local, and industrial effort and resources to solve problems and attain goals;

4. To develop water- and waste-management goals and alternatives for a specific watershed or river basin;

5. To analyze the trade-offs between a range of alternatives for achieving water quality and for meeting the demands for water in a particular area, for instance:

A. Between the level of waste treatment; that is, tertiary treatment, and other alternatives such as use of reservoir releases for low-flow augmentation; or

B. Between alternative uses for water; that is, for higher priority municipal and industrial use versus use of the same water resource for irrigation.

6. To design, construct, and operate a specific local sewage treatment plant.

Several general types of questions can be asked in systems analysis. For instance, given a fixed amount of resources-money, manpower, time-how can we get the optiumum or maximum return for this level of resources expended? What range of alternative goals can we achieve with this fixed amount of resources?

Or, given a fixed goal, what alternative combinations of resources and actions can we use to achieve this fixed goal at least cost?

Or, for a given problem, what possible range of goals and range of combinations of means exist to achieve these goals?

As I see it, systems analysis is a technique to aid in rational calculation-first, to obtain the most return for a unit of resources spent, whether time, money, manpower, or facilities and, second, to avoid undesirable effects in our programs and activities.

For it includes, or should include (1) the quantifiable elementsthe resource and economic inputs, outputs, and effects of a program— elements which can be put in a computer-as well as (2) the intuitive, qualitative, the nonquantified or nonquantifiable elements, effects, inputs and outputs-that is, the political, social and moral elements.

In general, systems analysis requires us to look at all the critical elements of a problem-to analyze: (1) alternative goals; (2) the means of achieving them, in terms of, for instance, dollars, manpower, facilities, time and organization; and (3) the quantifiable and nonquantifiable effects, costs and benefits of choosing particular goals and means.

It requires us to analyze the effects, costs and benefits of alternative goals or actions, including the nonquantifiable, noneconomic effects of our decisions, actions and programs.

Moreover, we often find that the nonquantifiable effect-the moral, political or social factor-is the most important element to take into consideration in making a decision.

In my opinion, it is this area which contains the most important task of the Congress and of congressional committees the area of political and moral judgment and intuition, the area of political systems analysis.

This is the area in which Congress must perform its greatest contribution to society.

For the final decision in society cannot and should not be made by the technicians, the economists, the engineers.

This fact leads me to the suggestion that Congress, itself, needs systems analysis of the problems and programs upon which it must decide and which it must guide through authorizations and funding. The mere fact that this committee is looking into the matter is evidence that the Congress is aware of the problem.

With respect to water supply and quality problems, Congress has taken steps to put itself in a better position to make judgments.

The studies of Senator Kerr's Select Committee on Water Resources, the creation of the Water Resources Council, of the Marine Sciences and Engineering Council, as well as the recent passage of the bill to create a National Water Commission-are all evidence of congres

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sional concern for creating institutions through which we can examine the whole range of alternatives for developing and managing our Nation's water resources and managing its waste.

However, much remains to be done before Congress is in a position— as a regular part of its appropriating and authorizing activities—to take a broad look at the Nation's technical and institutional alternatives in solving its problems of water supply and waste management. Our mechanisms and institutions for implementing national water and waste management decisions, in my opinion, are still inadequate.

PROBLEMS OF APPLYING SYSTEMS ANALYSIS

In using and applying systems analysis to our problems of water and waste management, we need at each level of analysis, to look at: 1. All the crucial elements involved in the problems;

2. The alternative means-combinations of resources and activities for achieving water supply and water quality goals, as well as alternative goals where they have not already been set;

3. The probable effects, costs, and benefits (quantifiable and nonquantifiable) of a particular choice; and

4. Techniques and institutions for implementing our choices and decisions as to goals and means to achieve these goals. Applying and implementing systems analysis to the Nation's problems of water and waste management is not an easy task, for the following reasons:

1. Problem of Data: For many aspects of the water and waste management problem, the data required for performing systems analysis are either not currently available or expensive to collect and analyze.

2. Problem of Implementation: The national water pollution control program is a Federal, State, and local program which involves the public, all levels of Government and many sectors of society. For instance, even if a systems analysis for implementing a particular water and waste management program has been performed for a particular river basin, there would still be a need to implement this decision.

How should we implement the results of systems analysis performed on the Federal level when the carrying out of the results of this analysis depends on the activities and decisions of local and State officials who are not under the control of the Federal Government?

Even though one may perform an analysis of alternatives, costs, and benefits, there still remains the institutional problem of choice of alternatives, of implementation, and of institutions for choice and implementation. For many problems, and in many areas, such institutions do not yet exist.

3. Legislative Stress on Specific Alternatives: In addition, some elements of the range of alternatives for water and waste management have been stressed and made available through existing legislation for instance, construction of sewage treatment plantswhile other alternatives have not; for instance, low flow augmentation and reaeration, which will often accomplish the same goal. As a further example of legislative stress on specific alternatives, a technical systems analysis of the total national water pollution problem