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ability, but, of course, are paid for by the Government. Under the terms of the contract, such supplies become the property of the Government upon delivery hy the vendor.

The salaries paid all personnel are stipulated in exhibit C to the amendment. Where a need arises for a skill not contemplated when the contract was negotiated, salary scales are subject to approval of the contract administrator. These salary scales were originally based on the rates paid by the Atomic Energy Commission to its logistic support contractor at Eniwetok. The rates generally are prevailing U.S. west coast rates.

The estimated cost and fixed fee for the contractor's services during the 15month current period and beginning July 1, 1960, was as stated in the contract $13,418,650. Through June 30, 1961, the actual gross costs incurred have been $14,350,000. These gross costs have been offset by collection from private parties (as was anticipated in establishing the contract amounts) by $5,791,552. Net charges to the contract through June 30, 1961, therefore, have been $8,564,448.

The criteria employed in selecting personnel have been established by the contractor. These include

1. All employees are examined by a doctor for physical capability.

2. Management personnel are subjected to three separate interviews by the following contractor's employment staff :

a. Personnel interviewer.
b. Supervisor of personnel.
c. Manager Pacific operations.

3. All other personnel receive two interviews, one from the personnel interviewer and a second from the supervisor of personnel. The supervisor of personnel is a highly qualified personnel administrator and all employees are also screened to eliminate moral, mental, and social incompatability to the maximum extent possible.

The supervision given to contractor's employees comes solely from the contractor. This embraces complete supervisory functions on all aspects of the employees work. The company has published rules and regulations governing employees activities on and off the job because of the nature of the assignment. Employees may be penalized, for example, for unauthorized entry onto adjoining islands as certain of these islands are under the jurisdiction of the Trust Territory of the Pacific and such entry constitutes illegal entry into another political entity.

The supervision given by the Department of the Navy is given to the corporate entity of the contractor and consists of work requirements generated by the military operations on the island. The Navy, for example, establishes the level of maintenance to be attained on the island installations; it transmits to the contractor work requests from other military users of the island; and it approves overall personnel and inventory ceilings on the basis of justifications generated by the contractor. Normal recurring functions are given the contractor on a blanket order basis such as the requirement to operate the public utilities, the housing and messing facilities, the school, etc. Once such an order is given, the Navy interest consists of monitoring the operation to insure satisfactory contract performance. Succinctly stated, the Navy does not supervise.

In broad terms the Navy tells the contractor what to do but not how to do it.

With respect to the school, and its management, the following data are furnished:

1. The curriculum of the George Seitz School is established by the school advisory board which consists of two members each from the Navy; the Navy's logistic contractor, the Transport Co. of Texas; the Army and the Army's technical contractor, Western Electric.

2. The maximum salary paid in each job category (teachers included) is established by the Government in exhibit C of the contract between the Bureau of Naval Weapons and the Transport Co. of Texas. The minimum salary and the step increases to the basic salary are recommended by the Transport Co. of Texas and approved by the contract administrator (commanding officer, Pacific Missile Range Facility, Kwajalein).

3. The Transport Co. of Texas prepares and presents detailed job descriptions for each employee. The descriptions are submitted to the commanding officer, Pacific Missile Range Facility, Kwajalein, for review and approval. The commanding officer compares these descriptions against established Department of Defense and Navy standards and approves them. The contractor de termines the individual's qualifications or capability to meet the description.

4. The Transport Co. of Texas hires teachers only for the school at Kwajalein. Since the Transport Co. of Texas operates only this school, the tenure of their teachers, as well as all other employees, is subject to the ability of TCT to maintain an efficient and economic operation and thus retain their contract. Specifically, a teacher without an employed spouse has a contract for 2 years which requires that during the school vacation he or she be assigned other tasks to preclude unemployment with compensation. Conversely, a teacher who is the spouse of a full-time employee may be employed or hired on the island and compensated for the duration of the school term. The teacher may or may not be employed during the school vacation periods but in the event employment is not desired, compensation is not rendered by the contractor. It might also be added that a teacher's salary is a weekly rate for the period of actual teaching and that the policy of the Navy is not to reimburse a contractor's employee for idleness.

5. Prior to contracting with the Transport Co. of Texas for the base operation of Kwajalein, the Navy maintained an accredited elementary school and a correspondence high school associated with the University of California. Transport Co. of Texas maintained this arrangement through the last school year. At the present time a new elementary and junior-senior high school combination is being constructed. Even though the senior high school population will probably not exceed 60 students, the Transport Co. of Texas is establishing a regular high school. The Navy has requested that the North Central Association of Colleges and Secondary Schools, which is under contract with the Army to examine Department of Defense schools in the Pacific area, visit Kwajalein this fall for the purpose of accrediting the George Seitz School. Transport Co. of Texas has based its recommendations to the school advisory board on the standards of the State of California. These standards are in consonance with the U.S. Office of Education and the National Education Association.

6. The teachers report to the school principal. The school principal supervises the conduct of the schools. The qualifications of the school principal are as set forth in enclosure (2) attached hereto.

The Navy has only one other contract where a community is serviced by a private contractor. This is at Eniwetok where the Navy in June 1960 took over an existing Atomic Energy Commission contract with Holmes & Narver, Inc. The operation under this contract is virtually the same as that described above except that there are no dependents on Eniwetok so certain functions peculiar to dependents are not required at this base.

The above information, and the attachments hereto, are designed to be specifically responsive to the subcommittee's areas of interest, as evinced in your August 14, 1961, letter. Should you require any additional information, however, we shall, of course, be pleased to furnish it. Sincerely yours,

KENNETH E. BELIEU,
Assistant Secretary of the Navy

(Installations and Logistics).

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WHEREAS, The Transport Company of Texas and the Government are parties to an agreement, Contract Noas 59-4176-c, under which the Transport Company of Texas furnishes logistic support to Government installations on Kwajalein Island; and

HEREAS, Section E entitled "Option" of Contract Noas 59-4176-c provides that the Government has an option to renew the contract for additional periodu not: to exceed two (2) years, with modifications mutually agreeable to the parties; and

WHEREAS, the Government has reviewed the competitive situation and has determined that it is in the best interest of the Government to exercise the option and extend the contract for a period of fifteen (15) months; and

WHEREAS, negotiations have been conducted and a mutually satisfactory agreement reached by the Contractor and the Government for the extension of the contract;

NOW, THEREFORE, effective 1 July 1960 Contract NOas 59-4176-c is amended as follows:

1. Under Section A, "Articles to be Furnished and Estimated cost and Fee", make the following changes:

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(b) Increase the total estimated cost by $12,631,650.00.
(c) Increase the fixed fee by $785,000.00.

(a) Increase the total estina ted cost plus fixed fee by $13,416,650.00. Under Section B, "Deliveries", add the following:

2.

Item 3

The services and materials hereunder shall be provided by the Contractor during the period from 1 July 1960 to and including 30 September 1961. 3. The following clauses and exhibits are deleted:

(a) Sections C through RR;
(b) The provisions of the existing contract contained on

DD Form 748 (1 Dec 53);
(c) Exhibits B and C including Schedules I and II of Exhibit C.

4. The following clauses and exhibits are added to and made a part of this contract:

(a) Sections C, D, E, G, H, I, L, and V and Exhibits B and C,

including Schedules I and II of Exhibit C, all as attached

hereto;
(b) DD Form 748 (Navy) (1 July 1958) and Buweps Supplement CR-S

(Jan. 60), omitting numbers 4, 5, 7, 10, 12, 13, 18, 19, 20,

25, 28, 29, and 33, as attached hereto.
(c) Exhibit D as attached hereto.
(a) SECTION F PLACE OF INSPECTION

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be made at the location where

Acceptance of the services hereunder will such services are performed.

(e)

SECTION J

CHARGES TO BE COLLECTED FOR FURNISHING OF PERSONAL SERVICES

Escept as may be provided for under the terms of this contract, the Contractor is not authorized to furnish personal services free of charge either to Contractor or U. S. Government Personnel. Personal services as used herein includes domestic services, laundry and dry cleaning services, barbering and beautician services, tailoring services and any other services for the personal benefit of the person to whom furnished.

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Services and materials shall be provided by the Contractor as

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cation to the Contractor of the individual so designated shall

be given by the Contracting Officer within 10 days after execu

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ment-owned equipment, materials and facilities on Kwajålein Atoll

required for the performance of this contract.

He shall be the

representative of all the United States Government Agencies,

foreign Governments and private parties on Kwajalein Atoll re

questing Contractor services and, as such, shall provide the

Contractor with User requirements for logistic support.

He

shall also approve from time to time the overall ceiling in

personnel to be maintained by the Contractor on Kwajalein Atoll.

SECTION E

OPTION

The Government shall have an option to renew this contract for

two successive periods, the first to commence 1 July 1960 and

end on 30 September 1961, the second to commence 1 October 1961

and end on 30 September 1962, with such modifications in Exhibit

B hereof and the estimated cost and fixed fee as the parties

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