Mr. DAHLIN. Could you at that time decide what the definition of "adequate price competition" is and whether the agency's definition was sufficient? Mr. DOUGLAS. Yes, I think that that would be quite appropriate for us to worry about in deciding whether or not a lawsuit should be brought. But, of course, as I understand it, the agency would still have the option of insisting on cost or pricing data or both, or of determining that one of the requirements of the subsection need not be furnished. Mr. DAHLIN. The Defense testimony indicated that the Department feels probably the overpricing cases, the overcharge cases that GAO has been developing may be reduced in the future due to Public Law 87-653, that in this line of cases GAO has been working under prior existing law and that these cases may well come to an end. Do you have any feeling about this situation? Is it likely from your point of view that there would still be false claims problems and continuing Justice Department jurisdiction? Mr. DOUGLAS. It is a little hard to tell because the statute has not been in effect long enough for us to see any trend. But I would think it would cut down on our litigation in this field. Mr. DAHLIN. If the agency finds sufficient data to make a price adjustment under this act, is there then sufficient data to refer to Justice to examine whether there has been a false statement or not? Mr. DOUGLAS. Well, there is no particular requirement on what the agencies should develop before they refer things to Justice. We would like it as full as possible. I do not know that I could say generally whether that would be true or not. Mr. DAHLIN. In other words, they have to develop grounds to achieve a price readjustment. They have to go in and find some kind of effective data in order to ask a contractor for-not ask but demand-a price readjustment under this act. Now, does this mean that at the same time the False Claims Act problems that you already face will be invoked? Or are these two separate areas? Mr. DOUGLAS. I do not know. Mr. DAHLIN. In one case that was referred by an agency to the Justice Department, the agency took the position that the mere fact that pricing estimates provided by a contractor were too high, that is, that they did not prove to be correct with respect to the cost of performance, the mere fact that the estimates were too high would not be enough to provide grounds for false claims. Now, does this also indicate something along the line we were just discussing as to whether or not there would also be no grounds for Justice Department jurisdiction with respect to false claims referrals or any other contract referrals? Mr. DOUGLAS. Well, I hate to fall back on generalities, but I just do not see how I could make a meaningful answer because we try to look at each case on its facts and see whether or not a case could be made out. Mr. HOLIFIELD. Then you can understand why the committee cannot understand some of these procedures when we ask question after question which you in your good judgment, and I am not criticizing you, decline to answer, to give us a definitive answer. Mr. DOUGLAS. I am not aware that any of these problems, Mr. Chairman, have come up in the Justice Department as yet. They may be coming up under this new statute, but I am not aware that they have, and, therefore, our experience and my own knowledge is necessarily limited. Mr. DAHLIN. One more area, Mr. Douglas. There appears to be a series of cases within the GAO reports where GAO takes the position that a contractor either knew or should have known that the information that it was submitting to a contracting agency was too high, too low as the case may be. There is a large area here where assumptions can be made about what data should be available to the contractor for certain kinds of negotiations with the Government. Now, is this an area where Justice jurisdiction may be exerted to decide or help the contract agencies decide what they require of the contractors as standards either of conduct or negotiation with the Government? Would that be within Justice concern? Mr. DOUGLAS. No, we do not advise the agencies. We litigate the cases, or decide not to litigate the cases. They have a battery of attorneys there which far outnumber ours. It is their responsibility to interpret their own regulations and to frame their own regulations. We are the litigators. We decide whether there is a case to bring into court. Mr. DAHLIN. Thank you, Mr. Chairman. JUSTICE AUTHORITY TO COMPROMISE Mr. ROBACK. Mr. Douglas, you say on page 5 of your statement that GAO has long referred compromise offers to the Justice Department. What does that mean? If somebody comes and offers a com promise to GAO, they buck it over to you? Mr. DOUGLAS. That is right. Mr. ROBACK. Do you mean by that, if they offer to negotiate a settlement, rather than to pay a determinitive figure, that is a finite claim which GAO determines on the basis of its audit, that because it is negotiable, this is a matter for Justice. Is that your understanding? Mr. DOUGLAS. That is right. Mr. ROBACK. So the fact that claims are negotiable makes this an area of responsibility on the part of the Justice Department? Mr. DOUGLAS. That is right. Mr. ROBACK. Now, you say you derive this authority from inherent rights, not from an explicit statute. Mr. DOUGLAS. That is correct. Mr. ROBACK. Because Justice itself did the deciding as to its own jurisdiction and, secondly, there is no statute. Therefore you decided it is inherent. Mr. DOUGLAS. No, that is not quite right. The Congress has given to the Attorney General control over litigation. And an inherent aspect of that power is the right to settle cases, just as he has the right to decide which cases not to bring. And the courts recognize this and endorse the Attorney General's view. Mr. ROBACK. I understand they have. Of course, the courts like to deal with a single legal officer in the Government, too; I mean they are a little prejudiced in favor of the Justice Department. Mr. DOUGLAS. Sometimes I wish that were always true. Mr. ROBACK. Judging by the unexceptional nature of their rulings, that is to say, for the Justice Department to be the voice of authority and the judicial officer of the Government. Now, your authority, you say to compromise, derives from the authority to litigate. If a blue book comes over from the General Accounting Office, does that in itself convey exclusive jurisdiction? In other words, when the blue book comes over, does it then become exclusively a Justice Department matter by mere fact of referral? Mr. DOUGLAS. Primarily, yes. On rare occasions the agency, with the concurrence of GAO, may ask that the case be brought back to them for some kind of agency renegotiation or new arrangements, or something like that, but basically when it does come to us it is ours to settle or to litigate, or not to bring suit. Mr. ROBACK. The GAO's broad authority to settle claims are only claims which can be identified by finite mathematical computation, is that your understanding? Mr. DOUGLAS. So far as settling is concerned, yes. Mr. HOLIFIELD. In other words, if they arrive at a judgment that a million dollars was paid in excess of what should be payed on a contract, they can only refer the matter to you. They cannot settle for $750,000 or $500,000? Mr. DOUGLAS. That is the position they have always taken, and it is a position we have accepted. Mr. ROBACK. So that regardless of whether it is prospective litigation or not, the mere fact that it is a negotiable item confers jurisdiction, as you say. Mr. DOUGLAS. Because it involves prospective litigation. Mr. HOLIFIELD. And you weigh the problem from a legal standpoint as to whether it would be better to prosecute the case for the full amount, or settle it for a lesser amount on a compromise basis? Mr. DOUGLAS. That is right, and we worry about litigation risks and ability to pay and the difficulty of proof. Mr. ROBACK. That the claim is negotiable, does that by definition mean that it is litigable? Mr. DOUGLAS. Yes, the two are opposite sides of the coin, really. Mr. ROBACK. So you are resting on your authority here to litigate or compromise litigation in any case. Mr. DOUGLAS. That is right. Mr. ROBACK. Have you given any thought, or has anybody in the Justice Department, to your knowledge, in the course of dealing with contractor claims, to whether it would make any sense to have, or is there a place in Government for a procurement court, analogous, let us say, to the Tax Court or some other special courts that have been created? Is there a need for a procurement court in Government? Mr. DOUGLAS. This is the first time I have heard of it, and I just do not know. I am not aware of the need. The Court of Claims is available, but I am not aware of any need for it. The Defense Department would be in a better position to say together with the contractors who have to wrestle with this problem. Mr. ROBACK. As far as you are concerned, you do not see any need. 48-132-65- -9 I mean it has not been a matter of consideration or that you have studied from where you sit? Mr. DOUGLAS. No, we have not studied it from where we sit, but that does not mean there is not one. Mr. ROBACK. Talking about this inherent power to compromise, you also have acquired some authority to compromise litigation which was given by reorganization way back in the 1930's in an Executive order. The powers of compromise that resided in other agencies now reside in the Justice Department. Do you assert the authority of compromise above and beyond that kind of transfer of authority? Mr. DOUGLAS. Yes, but the authority was not based on that Executive order. The Executive order merely reflected the broad powers of the Attorney General to compromise as to whether to bring litigation or not to bring it. Mr. HOLIFIELD. Mr. Callaway, do you have any questions to ask? Mr. HOLIFIELD. The staff will, as the Chair indicated before, submit a list of questions, Mr. Douglas, and seek your comments on those that you believe that you can answer properly. And we also want to submit the documents to you that we mentioned in the colloquy. Mr. DOUGLAS. Fine. Mr. HOLIFIELD. The Chair wishes to thank you for your appearance here this morning and your responsiveness to our questions. We are trying to determine where the delineation of authority rests between the Justice Department and the GAO on these matters, and we are finding it a little bit complicated and difficult to understand, as you can see. The meeting will now stand adjourned, and we will reconvene in the morning at 10 a.m., in this room. (The document concerning GAO cases referred to the Justice Department in the testimony above follows:) Hon. CHET HOLIFIELD, COMPTROLLER GENERAL OF THE UNITED STATES, Chairman, Military Operations Subcommittee, Committee on Government Operations, House of Representatives DEAR MR. CHAIRMAN: This is in further reference to your letter of January 7, 1965, requesting sumary data on contract matters contained in our audit reports to the Congress on contracts administered by the Department of Defense, National Aeronautics and Space Administration and the Atomic Energy Commission. In our reply of March 11, 1965, we furnished the data requested, with the exception of a listing of cases which had been referred to the Department of Justice. The attached schedule sets forth a listing of 41 cases referred to the Department of Justice, either by the agency concerned or by our Office, as well as the status of the Department of Justice action on each of the cases. We plan to make no further distribution of this report unless copies are specifically requested, and then only after approval has been obtained or public announcement has been made by you concerning the contents of the report. Sincerely yours, JOSEPH CAMPBELL, Comptroller General of the United States. U.S. GENERAL ACCOUNTING OFFICE SCHEDULE I.-Summary of cases reported to the Congress and the Department of Justice disclosing excessive prices negotiated or costs erroneously claimed and paid under Government contracts and status of Department of Justice action thereon, period July 1, 1958-Dec. 31, 1964 The material received from the military This matter is open and pending in the 41, 000 The Department of Justice letter dated |