was the low bidder. Approximately 3,500 man-hours were used in this contract and this involved personnel with three Ph. D.'s, three master's degrees, two B.S.'s, all in the field of electronics and mechanical engineering. The final report on the contract has not yet been submitted; consequently, the final evaluation has not been made. However, interim evaluations indicate that the instrumentation was well conducted, good legible records have been obtained, and data has been secured which can be satisfactorily reduced. It is already certain that the information which was sought, that is, a new body of data answering technical questions regarding the performance of these weapons under combat conditions, will be obtained. The second Atlantic Research contract was for the performance of concept studies in the preparation of designs for a new 81-mm. medium mortar and a new 4.2-inch heavy mortar. The work could not be done inhouse for the same reason, namely, that the workload in the mortar unit of the arsenal was such that the work could not be accomplished in a reasonable time. In this case, Atlantic Research Corp's bid was not the lowest, although it was an intermediate one; however, the overall evaluation indicated that the contractor's proposal was the most advantageous from the technical standpoint. Similar reviews were made of this contract and submitted as before to the Watervliet Arsenal contract board of awards. The contract is not yet completed; however, results to date have been as follows: Contractor made sound recommendations on basic design concepts; also, the contractor's efforts have played an important part in bringing about 2 new mortar designs, namely, the 81-mm. XM93 and the 107-mm., 4.2-inch SM95. Approximately 5,300 man-hours will be used in this contract involving the same personnel cited for the other contract. Copies of final reports on both contracts, together with Watervliet Arsenal evaluations, will be furnished shortly after completion of the contracts. STATEMENT OF ASSISTANT SECRETARY OF THE ARMY PAUL R. IGNATIUS IN RESPONSE TO SUBCOMMITTEE INQUIRY With respect to the committee's inquiry as to whether the Department of the Army's policy is satisfactory and should be continued, it is my belief that the present policy, as defined by Bureau of the Budget and Department of the Defense directives, permits the Army to discharge its responsibilities satisfactorily. The policy is to use Government owned and operated commercial and industrial type facilities only where it can be clearly demonstrated that private enterprise cannot perform the service or provide the product necessary to meet current and mobilization requirements, or that operation by the Government is necessary in the execution of the military mission. I feel that we have been able to comply with this policy without compromising our combat effectiveness position. In this connection, attention is invited to the instructions from the President to the Director of the Bureau of the Budget in July 1961 to explore the subject of contracting out with the Secretary of Defense, the Chairman of the Atomic Energy Commission, the Administrator of the National Aeronautics and Space Administration, and the Special Assistant to the President for Science and Technology. CONTRACTING-OUT PROCEDURES WEDNESDAY, AUGUST 9, 1961 HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED SERVICES, SUBCOMMITTEE FOR SPECIAL INVESTIGATIONS, Washington, D.C. The subcommittee met at 10:07 a.m., Hon. F. Edward Hébert (chairman of the subcommittee) presiding. Mr. HÉBERT. The committee will be in order. Members of the committee, when we adjourned yesterday we announced the Navy would be here this morning. The Navy has appeared through the Assistant Secretary and his witnesses. Mr. Secretary, will you identify the people at the table with you? Secretary BELIEU. Yes, sir. On my right, Vice Admiral Beardsley, Chief of Naval Material. Next to him, Bob Moore, rear admiral, Deputy Assistant Chief, Bureau of Ships. Where is Captain Harrington? Captain HARRINGTON. Right here. Secretary BELIEU. Captain Harrington, Assistant Chief for Production and Quality Control, Bureau of Naval Weapons. Captain Swain, special assistant to the Assistant Chief for Fleet Readiness, Bureau of Naval Weapons. Two witnesses, our principal witnesses: Dr. F. D. Rigby, Director, Mathematical Sciences Division, and Dr. Shirley Silverman, Director of Research, Office of Naval Research. These will be the principal gentlemen. We have other backup witnesses if needed, sir. Mr. HÉBERT. Now you are familiar with the discussion which we are going to have this morning, and these witnesses are prepared to answer? Secretary BELIEU. To the best of our ability; yes, sir. I have a prepared statement, as the chairman knows, plus the backup of more additional detail for the record, which the committee may pursue at its leisure, if it wishes. The Navy has been presented by committee counsel with some 15 contracts, which I would like to address myself to a little later on when I get through. These are in answer to the committee's specific questions. Mr. HÉBERT. You are prepared to respond to the questions on the 15 contracts? If there is some Secretary BELIEU. Yes, sir; we believe we are. information we don't have, of course we will provide it. Mr. HÉBERT. That is fine. Proceed, Mr. Secretary. Secretary BELIEU. Thank you, sir. Mr. Chairman and members of the committee, I am very happy to return today to reassure you regarding the policy evolved in the Navy regarding what is known as contracting out. It is the Navy's policy, in consonance with its mission, to maintain a fleet in readiness for emergencies and to develop a capacity for repair and overhaul of an expanded fleet operating under war conditions. This policy requires a representative capability inhouse for nearly every type of maintenance necessary to keep in readiness its ships, aircraft, and their associated weapons. Such capability provides for an immediate response to the fleet, maintains a mobilization nucleus of trained personnel within naval plants, achieves a balanced utilization of facilities, achieves maximum utilization of personnel and material, and sustains an engineering capability organic to the Naval Establishment. In accomplishing the objectives of this policy, the Navy will develop or retain within its establishment, insofar as practicable, an industrial capability for maintenance and repair of mission essential ships, aircraft, weapons, and components. It will contract for: (1) Nonmission essential weapons and components when military control and performance of such work is not required for military effectiveness, personnel training, or the maintenance of a rotation base: (2) New weapons which are mission essential or nonmission essential where an inhouse capability has not yet been achieved; and (3) Selected items where an inhouse capability does not exist, and where costs with other factors concerned are prohibitive to creating such a capability. The policy I have just stated is not, in my opinion, in conflict with Bureau of the Budget Bulletin 60-2 and Department of Defense Directive 4151.1 and can be carried out within the framework provided by them. Every cent expended from maintenance funds must achieve the maximum in defense. Over the years the Navy Department has maintained a searching and aggressive policy to discontinue activities no longer needed in its mission and to curtail or dispose of those activities as promptly as possible. Enforcement of this policy in its final result does avoid competition with private industry in the furnishing of those services which can be obtained more cheaply from normal commercial sources without detriment to military capability. Bureau of the Budget Bulletin 60-2 does no more than formalize this policy. From my statement that I am submitting for the record, it is apparent that discontinuance or curtailment of the bulk of activities affected to date has resulted from this prior policy and that only a mere handful of actions can be attributed to the issuance of Bureau of the Budget Bulletin 60-2. The crux of the situation is that the Navy is discontinuing or curtailing certain activities no longer needed to support our mission and is contracting out for services when it can be demonstrated that better readiness of the fleet in support of its mission and a more sound mobilization base can be achieved thereby with the maintenance funds available. Prior to World War II, the Navy, due to the uniqueness of its ships, its weapons, and its equipment, had developed both the capability and the capacity to accomplish practically all of its maintenance inhouse. This work consisted of the maintenance of ships, guns, aircraft, aircraft components, radio and electronic equipments. During the war, with the vast expansion of the fleet, it became necessary to place some of the increased ship repair workload in private shipyards. Following World War II, the Navy initiated a program to contract for depot maintenance of nonmilitary type aircraft, such as the R4D, R5C and JRF, in order to retain a mobilization potential within the rapidly declining aircraft construction industry. This action occurred quite naturally since our overhaul and repair depots were busily engaged in reworking combat aircraft for stowage as a mobilization reserve. Shortly after World War II the Navy contracting out program accounted for 20 percent of its ships overhaul, 65 percent of its new ship construction, and continued 100 percent of aircraft new production. As the post-World War II period progressed, many new technologies, new weapons, and new equipments evolved rapidly, such as jet engines, rockets, missiles, and vastly more sophisticated electronics. The Navy lost many skilled technicians and found it most difficult to recruit, train, and then retain the skills required to maintain these new items. Concurrently, requirements for repair factilities and test equipment changed to a marked degree. Thus began a shift in the pattern of depot maintenance operation. Actually, rapid technological changes prohibited, because of costs, the Navy from developing an inhouse capability for each new weapon or equipment. In this manner, our present day practice of contracting out has evolved. Department of Defense Directive 4151.1 is truly a reflection of Navy policy concerning maintenance of its equipment. As stated above, technological changes have prevented the Navy from attaining inhouse capability on certain mission essential items to the fullest extent. In these instances it is believed that the best overall interests of the Government are being served without detriment to Navy capability to perform its mission. În determining whether the maintenance of a weapon or equipment is to be contracted out, the Bureau of Naval Weapons considers several factors such as the following: (1) Capability: Presently, an inhouse capability does not exist for every weapon and/or equipment nor will it be developed immediately for each and every item due to complexity and changing technology surrounding its maintenance. However, as each product stabilizes, providing the requirements warrant it, and the costs are permissive, an inhouse capability will be developed. It is possible that in some cases reliance on contractor maintenance may continue indefinitely. This would generally occur in cases where the contractor is the only source, possesses the necessary repair and test equipment and the cost to duplicate or move these facilities inhouse could not be justified. Contracting out will no doubt be employed to accomplish |