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: 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 was estimated 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: One-time costs.. Net annual reduction in costs.. Compression Vacant space and vacant only space $8,773, 496 $5, 480, 427 425, 522 The GAO notes that feasibility of such actions is dependent on a full management engineering study with respect to each possible tenant. The Army has made a similar analysis in the past but considered that it could not afford the high one-time costs indicated for the limited potential long-range savings. It should be noted that these estimates provide approximately the same or less reduction in costs as the Army plan, at appreciably higher one-time costs. In both of these estimates the GAO has retained current activities, including the Food and Container Institute, in the Chicago Administration Center, thereby eliminating the significant managerial and operational advantages which can be achieved by mission consolidation. Senator STENNIS. We have Dr. William Hampton, who is director of research, Ocean Spray Cranberry Co., who is going to testify in favor of the move. Doctor, we are very glad to have you here, sir, and I hope we can conclude with you in time to make your other appointment. I did not know that you were present awhile ago, or I would have taken you before General Seeman. All right. Do you have a prepared statement, Doctor? Mr. HAMPTON. I do not, sir. Senator STENNIS. All right. You proceed in your own way and make your points for the record. Mr. HAMPTON. I am going to be very brief, sir. Senator STENNIS. All right. STATEMENT OF WILLIAM HAMPTON, DIRECTOR OF RESEARCH, OCEAN SPRAY CRANBERRY CO. Mr. HAMPTON. My name is William F. Hampton, and I live in Duxbury, Mass. My business is a professional scientist and research manager. I think that the views which I may have by virtue of those qualifications might be of use to your committee in your deliberations. Senator STENNIS. I am sure they will, and we are glad to have them. Mr. HAMPTON. My technical qualifications are I hold a master's degree and a doctor's degree in chemistry. I have worked in the New England area since 1944, excepting for a 3-year stint of absence with the Food and Agricultural Organization of the United Nations. In that period of time, I have served in various capacities as a research worker and as a research manager with General Foods Corp. General Seafoods Division, and their Birdseye Division. By virtue of my professional and scientific background and my work, I have had opportunity to get to know in the period that I have lived there, the scientists in the New England area. In that time, I have developed the very highest regard for these men. I also know people across the country and in many countries around the world. It is my very definite professional opinion you will not go anywhere where you will find better qualified people than you will find in the New England area, particularly in the Boston area. This applies in any type of work which may be required to be carried on. The people are diversified and very competent. With regard to facilities in the New England area, there are the very finest facilities that are available anywhere in the world in any respect whatsoever. Therefore, sir, as a professional scientist offering an opinion for the benefit of the committee, I will say you will not find better facilities or people anywhere; in fact, I doubt if you would find them so good. On the aspect of professional scientific research management in the area of food, we have a rather unusual situation. Food technology is a very broad subject. It encompasses many sciences: biology, bacteriology, physiology, chemistry, physics, engineering, atomic science, and so on, and so forth. In tackling food technology research problems today, this is true generally in the area of any type of research, I believe, it is unusual to find a lone operator. The practice rather is that the team approach is used. The nature of the problems to be tackled, the type of skills that have to be brought to bear on the solution of the problem, the type of expense, and so forth, all demand what we call professionally the team or group approach. Therefore, Mr. Chairman, I would like to emphasize to your committee as strongly as I should, insofar as consolidation is possible, whereby you can bring to bear all the talents and experiences in diversified fields for the solution of the food problems, you would be well advised, in my opinion, to do so. I feel that in this respect the move that is contemplated here, would very definitely be indicated to be one whereby the effectiveness of the work can be very substantially increased, and I am quite positive from research management experience that very definite economies in the management and administration of the research program can be effected. Senator STENNIS. Thank you very much. As a professional scientist, will you answer this question: Do you think the Army could operate these undertakings through private enterprise, private research, and so forth? Mr. HAMPTON. I think, sir, it probably would be very difficult because of the very unusual and unique nature of the type of problems that the Army has to tackle. I do not have firsthand knowledge of these. I only have a superficial knowledge. But I do know that they are of a very highly specialized and rather unusual type which, sir, I would suggest makes all the more important the consolidation feature. Senator STENNIS. There is just no other demand for much of this work outside the military activity? Mr. HAMPTON. I would say, sir, it would be very expensive to have it done outside, and difficult to manage. Senator STENNIS. Thank you. Senator Case? Senator CASE. No questions. Senator STENNIS. Are there any other points now? Thank you, Doctor, very much. We appreciate your being here and the fact that you waited. Do you have anything further now, Senator? Senator SALTONSTALL. No, sir; Mr. Chairman, except to thank you. Senator STENNIS. We want to thank all the witnesses who have been here and have been very helpful to us. There is one other name on my list here, and that is, Dr. Raymond J. Spaeth. Mr. WILSON. I submitted his report. Senator STENNIS. That is already in the record, and I will mark that off. Gentlemen of the committee, Congressman Yates had to answer a quorum call, and I told him that he would be given a chance to finish his answers to that question or say anything else he wished at 2:30, when the committee reconvenes. If you cannot be here, you might want someone to be here, Senator. Senator SALTONSTALL. I cannot be here. Senator STENNIS. That concludes the matter except what Mr. Yates may have to say in rebuttal. Senator CASE. I have nothing else. Senator STENNIS. May I announce that this disposes of the witnesses for today on that question and others, except the following: We expect to hear General Harrison this afternoon who is president of the National Guard Association. Mr. Mallicoat, who is deputy director of the Oregon State Department of Planning and Development, with reference to real estate; Mr. Robert Weir, with reference to the same subject; then Mr. McGanney of the Southern Pacific Pipelines, California, a substitute proposal, with reference to a jet fuel pipeline that is a Navy matter. Will the Navy have someone here on that subject? All right, gentlemen, now by consent of the subcommittee, we will take a recess until 2:30. Especially to those witnesses who have been here this morning, we will certainly pursue this further and analyze their testimony, and I hope we can reach a sound conclusion. We will hear these other witnesses as rapidly as possible after we reconvene at 2:30, until which time the committee stands in recess. Thank you. (Whereupon, at 12:25 p.m. the subcommittee recessed to reconvene at 2:30 p.m.) AFTERNOON SESSION Senator STENNIS. The committee will come to order. Congressman Yates, we will be glad to hear you further now. Mr. YATES. I am sorry that a quorum call took me away from the committee. Senator STENNIS. All right. You heard virtually everything that was said here this morning, Congressman Yates? Mr. YATES. Yes, sir. Senator STENNIS. I do not think we took any further proof, unless it was a sentence or two after you left. Mr. YATES. I should like to make several points, Senator, if I may. Senator STENNIS. Yes. STATEMENT OF HON. SIDNEY R. YATES, MEMBER OF THE HOUSE OF REPRESENTATIVES FROM THE NINTH CONGRESSIONAL DISTRICT OF THE STATE OF ILLINOIS-Resumed Mr. YATES. First, I think that upon rereading of the report of the Comptroller General and his letter of transmittal, I think it is not against the interest of those whom I represent today. |