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General SEEMAN. We didn't ask them to submit any proposal, sir.
Senator CANNON. Did you try to get any proposal or to ascertain costs of any facility comparable in size to the Natick proposal in the Chicago area?
General SEEMAN. No, sir; this is where we get our leg over the traces, because we are talking about management as well as location in the Chicago area.
The Research and Engineering Command testified that approximately 12 to 15 percent of the contracts involving the research and development mission are in the Chicago area; this indicates the widespread responsibility of the Quartermaster General and of his R. & E. Headquarters at Natick.
I hate to mention this because it looks as though you are downgrading a friend in one part of the country as opposed to friends in other parts of the country, but these are the facts.
Senator CANNON. Well, some of the testimony introduced here today indicated that over 60 percent, as I recall, of the business of this organization was in the Chicago area. Now somebody must be juggling figures here on us.
General SEEMAN. There was a figure of about 50–50 of the Quarter-master's research and development activity are in house, and 50 percent are contracted out. The Research and Engineering Command, as has well been brought out, handles all the research and development for the Quartermaster General, clothing and subsistence, fuel containers, which is a Quartermaster responsibility, all things like that, sir; and they are headed up at Natick. This is why there is a very substantial saving due to this consolidation.
Senator CANNON. Well, what did you mean when you said the big savings is in overhead personnel ? Do you mean in personnel operating this big facility that that is three or four times as big as you need now, and, if so, it would seem that that could be saved by getting the size of a facility you need in Chicago or wherever it happened to be?
General SEEMAN. Well, it is a combination of both, sir; a more efficient operation under the Research and Engineering Command, as well as getting out from under this building.
Senator CANNON. I am concerned about one other thing here. You say that you anticipate that you will let this facility go in 1963 or 1964. Why are you trying to hold on to it so long if Congress authorizes you to go ahead here as you are trying to get authorization?
General SEEMAN. It takes, as you know, if this authorization and appropriation is approved this year for the building, it will take 18 months to 2 years before you actually have a roof over someone's head, where you plan to move.
Senator CANNON. If you got it in 18 months that would make it the end of 1961, which is still quite a while from 1963 and 1964, as you indicate here, to release the facility.
General SEEMAN. This includes the time for reporting it and processing it and circularizing it among these other Defense agencies, the other Government agencies.
It is actually the time that we completely get it off our books. As you know, we report surplus facilities to the GSA, and then we have to carry it on our books for a certain period of time before actual removal.
Senator CANNON. So that there is no mistake in the record here, as I understand it, you actually have not tried to get comparable space, new space, in the Chicago area based on your estimated requirements ?
General SEEMAN. We have not tried to get the space, sir, but it has been part of the study of the cost of operating the Food and Container Institute in various areas, which has led to the overall Army conclusion to come to the Congress with this recommendation this year.
Senator CANNON. Have you made any study to determine personnelwise how many of these people who are employed by you, specialized people, would accept a move?
General SEEMAN. Pending the actual approval of a move, we would not go into this detail. We have this problem in many of our installations as we close down, as to just what the various personnel motivations are, with regard to changing with the job or staying in the area.
There are many other Government offices in the Chicago area, of course, and under their civil service rights, they can transfer.
Senator CANNON. Yes, I understand that, but I imagine this type of facility is one where you would have a lot of highly specialized people, would you not, technical people?
General SEEMAN. This is correct, sir. This is a risk we run in Government service.
Senator CANNON. I think that is all, Mr. Chairman.
Senator CASE. General Seeman, is any part of the prospective saving at Natick due to some coordinated operation that could be accomplished better there than if you remained in Chicago ?
General SEEMAN. Yes, sir. All of the contracts, sir, the contracting office for the Quartermaster Research and Engineering Command is at Natick.
They let all these contracts and supervise the whole program. So when you get these people into the same or adjacent buildings, you will have a closer coordination on that.
Senator STENNIS. Pardon me, General, make your answers as brief as you can, please. We have another witness here who, as I understand it, is scheduled to testify at another place in Washington this afternoon, and we want to get to him shortly.
Senator CASE. Mr. Chairman, let me ask this question this way: Would you, and you can answer it later or you can put it in the record, would you supply for the record, a comment upon whether or not, if other space were available in Chicago or could be made available, would it offer the same savings and economies that you anticipate by placing your operation in and at Natick? Then, Mr. Chairman, a second question which also I would like to have the answer supplied for the record, and that is that General Seeman or the Army study this GAO report and comment upon the difference in savings, which they estimate and which the Army has estimated.
Senator STENNIS. Yes, sir; we certainly want to all join in that request. Ĝeneral SEEMAN. I would be happy to do so.
Senator STENNIS. While we are on that subject, for the committee, I want to ask Mr. Nease, our very efficient assistant here, to compare
this square footage problem, compare the cost of construction with reference to the matter that is in the bill, and this proposed structure that someone in Chicago was to supply and get the General Accounting Office to assist him and, General Seeman, both of them to assist him in making these comparisons, so that the committee can, perhaps, have a capsule analysis.
(The information referred to follows:)
COMMENTS ON PROVIDING A FACILITY FOR THE FOOD AND CONTAINER INSTITUTE
EQUIVALENT TO NATICK IN CHICAGO
In response to the question, if other space were available in Chicago or could be made available, would it offer the same savings and economies that are anticipated by placing the Food and Container Institute in and at Natick, the following comments are offered:
The same savings and economies afforded by moving the Food and Container Institute to Natick would not be achieved by occupation of comparable space in Chicago. Of primary consideration would be the fact that relocation of the Food and container Institute in Chicago would require retention of more space and personnel there as opposed to Natick because of the denial of savings due to consolidation of the activity. The immediate proximity of supporting technical and testing laboratories directly related to the Quartermaster General's research and engineering mission at Natick, as well as the immediacy of command administrative and service support are closely related to the amount of personnel and space and the efficiency of operation.
The Army estimate as to the number of personnel spaces required for the Food and Container Institute operating at Natick is 220 and the space required is 112,175 square feet. In the present Chicago Administration Center, the Food and Container Institute employs 252 personnel and makes use of 188,000 square feet together with a share of the services of the station overhead. While some savings in technical personnel and space in Chicago might be achieved by relocation of the Food and Container Institute in more appropriate facilities, there would be a necessity for significant additional overhead personnel and space dependent upon the site selected although not to the extent now required by the operations in the inefficient Chicago Administration Center. The unit cost of new laboratory space at either Natick or Chicago may be assumed comparable and in the range of $32 to $35 per square foot; the Engineer News Record has a cost index for Chicago 3 percent above Boston. The provision of the administrative space necessary for the additional overhead services which would be necessary in Chicago would be an additional requirement. The space proposed for the Food and Container Institute at Natick is 112,175 square feet, to be provided by a combination of new and modification work at an estimated cost of $3,314,000, or an average cost of about $29.50 per square foot.
The cost of leasing and/or modification of any existing space in the Chicago areas as related to the cost for new space would be dependent upon a wide variety of factors.
The improved efficiency from the close command and technical relationship which would accrue by location of the Food and Container Institute at and in existing laboratory facilities at Natick is not capable of being measured in more finite figures than cited above. With the high overhead costs of operation at the Chicago Administration Center, responsible officials firmly believe the consolidation represents the most feasible and economical course of action.
The information concerning the proposed offer of the Illinois Institute of Technology to provide space for the Food and Container Institute in Chicago is contained in appendix V of the paper entitled "Relocation of the Quartermaster Food and Container Institute for the Armed Forces” as prepared by the Chicago Association of Commerce & Industry and entered in this record on page 557.
The cost as estimated by the Illinois Institute of Technologly is $5,940,000 for 180,000 square feet to be built by IIT leased to the Food and Container Institute "For a period of 10 to 25 years to allow a reasonable scheduling of amortization.” All anual "essential housekeeping services, including maintenance and repairs, janitor and guard service, steam, electricity, and heat, would be furnished by IIT at cost, plus a small overhead fee.”
ANALYSIS OF GAO REPORT The analysis of cost of planned inactivation of the Chicago Administration. Center report of the Comptroller General of the Unitel States, dated April 27, 1960, is a comprehensive and detailed evaluation of the Army proposal. It substantiates that fairly significant savings could be realized by the Government by inactivating the Chicago Administration Center (CAC) as planned by the Army. It considers that the difference between the Army estimate and the Comptroller General's analysis is caused mainly by the fact that,
1. Army estimates for support costs at relocated sites were substantially understated.
2. The costs incident to relocation of nonmilitary activities were not considered by the Army.
3. One-time costs of relocating CAC tenants were substantially understated by the Army.
These and other significant points covered in the report are analyzed as: follows:
UNDERSTATEMENT OF SUPPORT COST ESTIMATE
The Comptroller General, making his analysis at a later date used, as a basis, the program figures for fiscal year 1960, whereas the Army used fiscal year 1959 figures. Further, the Army's estimate excluded certain mission funds used to provide some administrative services for the Food and Container Institute in addition to the overhead support provided by the Chicago Administration Center, and likewise excluded these administrative costs from the estimates to support the institute at Natick, as being essentially a wash entry on both sides. The Comptroller General's report apparently included these administrative service costs, both in the estimates to support the Food and Container Institute at Natick, and in the estimated mission savings for consolidation at Natick as indicated by the following data:
The significant factor is that the General Accounting Office, using differentyear figures and applying different judgment and procedures in developing the estimates, confirmed the estimated annual reduction in costs for the Army, as indicated below: Total estimated annual reduction in costs: 1 Army estimate
$1, 297, 000 GAO estimate---
1, 346, 037 1 Exclusive of charges for amortizing the one-time costs.
COSTS INCIDENT TO RELOCATION NON MILITARY ACTIVITIES
The Army did not estimate the cost impact on non-Army activities as these costs can be appreciably affected by the ultimate disposition of the buildings which is in turn dependent on analyses and decisions which will be the responsibility of the General Services Administration at such time as the Army is in a position to report the facilities as excess. The General Accounting Office assumed that the non-Army tenants would be required to relocate to leased space and estimated the increased annual cost to the Government at $347,908, thereby reducing the Army annual reduction in costs noted above to a governmentwide reduction of $998,129. The one-time costs of relocating non-Army tenants wasestimated by the GAO at $145,000. Based on the GAO assumption, these estimates appear reasonable.
UNDERSTATEMENT OF ONE-TIME COST FOR RELOCATION
The Army estimate of the one-time cost is $4,141,000. The GAO estimate is $5,062,630. The major differences are as follows:
1. GAO included a $314,000 cost of proposed facilities in the MCA request for authorization at Natick above the figure used by the Army. This amount is to provide needed facilities at Natick, which can most economically be accomplished at the same time as the new construction requirement for relocating the Food and Container Institute. The facilities provided by the additional $314,000 do not now exist, either at Natick or the Chicago Administration Center; therefore, they are not believed properly chargeable to the inactivation of the Chicago Administration Center (CAC) or the move of the Food and Container Institute.
2. GAO included $145,000 for the movement of non-Army tenants, commented on above.
3. GAO included $209,000 design costs. Although this is a proper cost to include in the estimate for the inactivation of the Chicago Administration Center for the bulk of the Natick proposed construction, the Army did not include it in the one-time costs to be funded, as its funding had been provided through advance design funds.
4. GAO included an increase of $211,800 in the cost estimate for the proposed Natick construction as obtained from the Corps of Engineers field agency at the time of the GAO field visit. At that time, the preliminary design studies were not completed and the scope of equipment to be installed in the Food and Container Institute buildings had not yet been crystallized. Subsequently, in the course of progressive development, resolution of these circumstances indicates a construction cost estimate for the facilities, including those noted in paragraph 1 above, within the original budget estimate of $3,628,000.
CONCERN OVER DRASTIC SPACE REDUCTION
The GAO report accepted the space requirements projected by the Army at the relocation sites but indicated that this requirement might be found inadequate because of the drastic reductions compared to the space currently occupied in the CAC. A calculated reduction from 1,071,700 square feet occupied by all Army activities to 266,695 square feet is drastic. However, 499,000 square feet, or two-thirds of the reduction is due to the elimination of the station overhead now allocated to serve all tenants. The remaining reduction is not unreasonable for the activities concerned, considering the space economies to be achieved by consolidation of like activities and space characteristics and utilization more appropriate to the mission.
POSSIBLE SAVINGS THROUGH MODIFYING THE CAC FOR ADDITIONAL TENANTS
The GAO developed an estimate of savings which might be achieved by modifying the CAC to provide adequate space for activities now occupying leased space in Chicago under two conditions. The first condition assumed that CAC Army activities now located therein could be compressed to the space which the Army indicated would be satisfactory on consolidation and on relocation. Space so vacated, and that space now vacant, would be modified as necessary for tenants now occupying leased space in Chicago. The bulk of the space reduction from the proposed mission relocations is to be achieved by the elimination of the overhead requirement for the CAC and reduced space requirements resulting from consolidation of like activities. If these activities should remain in CAC, they cannot be substantially compressed. The second condition evaluated the improvement of current vacant space only. The GAO estimates are summarized as follows:
Compression Vacant space and vacant only
$8, 773, 496
$5, 480, 427