that you must say how much of that $100,000 he is entitled to. The position of the bill is that the Navy Department does that and that you have no voice in it. You say you should determine whether or not the amount should be $100,000 or $85,000. Give us a background of your reasons why you think you should do that instead of some other department.

Mr. DREWRY. May I interrupt? It is not merely that.

The CHAIRMAN. That is what I am after.

Mr. DREWRY. I know; I am following your line of thought. But what you are asking is whether he thinks he should determine whether the amount should be $100,000 or $85,000. What this bill says, and what I have been insisting upon, is that somewhere along the line there should be a check or a recheck on what the Navy Department has done. The CHAIRMAN. That does not worry them and it does not worry me. What is worrying the Comptroller is that they do not reach the amount due the contractor. That is the trouble with the Comptroller's position. He wants to reach that. Under the language of the bill he does not reach it. Is not that the whole issue?

Mr. YATES. That is correct.

The CHAIRMAN. Then, because you are now precluded from saying what the contractor is going to get, you think you should do it in the interest of protecting the Government. You point out, with this yardstick established, how you are in a better position to reach the correct determination than the contracting officer.

Mr. YATES. Mr. Chairman, if I may, I should like to go back.
The CHAIRMAN. Yes; go back.

Mr. YATES. I should like to go back to the time of the enactment of the Budget and Accounting Act. In that act there was incorporated a provision which had long been on the staute books, section 236 of the Revised Statutes. It provides in effect that all claims by or against the Government shall be adjusted and settled in the General Accounting Office, and that all accounts of the Government, whether they involve collections or disbursements, shall be settled in the General Accounting Office, and the act also provides that those settlements shall be final and conclusive on the executive branch of the Government. The CHAIRMAN. What statute is that?

Mr. YATES. That is in the Budget and Accounting Act of 1921. In it was incorporated section 236 of the Revised Statutes of the United States.

The CHAIRMAN. Then, you do not construe that, by the use of the word "settlement," to permit you to reach an agreement as to the amount of settlement; you may construe it as payment?

Mr. YATES. I am trying to answer your general question, if I may proceed.

The CHAIRMAN. All right.

Mr. YATES. Because of that duty on the General Accounting Office, through the years a staff experienced in the adjudication of claims has been built up. The office has, therefore, had 23 years of experience in the handling of the most difficult contract claims and agreements. We believe, first, therefore, that we have experience to tackle a problem of this sort; secondly, there has been built up among the staff of the General Accounting Office what we believe to be the proper conception of absolute independence of judgment in the handling of obligations of the Government and obligations against the Government.

We know, Mr. Chairman, that there are many able, qualified, honest people in the departments; please do not think we have any different idea. But we feel definitely-and I state this from long years of experience in dealing with them-that many of them do not have the same feeling of independence or the same over-all desire to protect the interests of the Government as has the staff of the General Accounting Office, and the same might well be true of any other independent agency or commission.

The CHAIRMAN. In other words, you feel that your organization is a little bit more hardboiled?

Mr. YATES. No; we feel they are a little bit more careful and feel a little bit more concern about the interests of the taxpayers. If that means hardboiled, why, then, we rest on that.

Mr. MOTT. In other words, you have a different philosophy?

Mr. YATES. We think we have a different philosophy or conception, Mr. Chairman. I think any other independent agency similarly staffed and experienced could do it just as well as the General Accounting Office.

The CHAIRMAN. Then how can the General Accounting Office be brought into this picture without gumming up and delaying the final settlement over too long a period? Would it be possible? I want to state frankly that this runs through my mind, because I can see a great deal to what you have said from your viewpoint. Would it be possible to have representatives of your department sit in with the contracting officers and the other gentlemen in the different bureaus and then jointly reach a determination as to the amount due the contractor, and in the event that they fail to do so have an award made, from the facts submitted when you sat at the table, by someone else, such as the Secretary of the Navy?

Would that bring you into the picture satisfactorily, so that your voice could be heard and you would have an equal opportunity, with your long experience and your knowledge, to impress upon the contracting officer that this and that weight should be given or should not be given to such items in the bill? Would that be workable?

Mr. YATES. We do not think so, Mr. Chairman. We have discussed that at some length with another committee of the House, the House Committee on Military Affairs.

The CHAIRMAN. You feel that it would not be feasible?

Mr. YATES. We do not think so.

The CHAIRMAN. Well, this bill is different from the Military Affairs Committee bill. They do not have as much machinery. Let us take this bill and apply it.

A claim is filed originally with the Navy Department, or the Bureau of Ships. Under $50,000, according to the language of the bill, the contracting officer has the right to order payment of that amount. All claims are first reconsidered by that officer or some officer in that capacity. Why would it not be proper and permissible for you to have a representative sit there, so that you could have a voice in it? Mr. YATES. Who decides it?

The CHAIRMAN. If there is failure to reach an agreement, then the award is made by somebody up the line-either the Secretary or somebody else up the line-determining which one is predicated upon what he considers to be the sound and the proper basis for settlement. The only difference between such an approach as that and the one you

propose is that you want to have the complete, final word in the matter. But you have had your voice; you have had the opportunity to give the contracting officer the benefit of your experience; you have had also an equal opportunity to detect whether or not the officer is careless, negligent, or fraudulent, or under any influence in making the award or making the settlement. You have the basis of all the facts developed in the preliminary investigation. I grant you, of course, that there will never be very much of a record going over to your office, because it is all going to be a talk-around-the-table proposition anyhow. Mr. MAAS. What value would that have if they had no check on it? They could have a voice if they agreed with the Navy; if they did not agree, they would not have a voice.

The CHAIRMAN. That comes down to the sole question whether it shall be the policy of Congress to let the Comptroller General be the final, conclusive one, or whether some agency shall have a voice in the matter of determination.

Mr. RIVERS. There is policy today in section 236.

The CHAIRMAN. No.

Mr. YATES. I certainly do not wish to attempt to underestimate or oversimplify the proposal you have made or to attempt to brush it aside without mature consideration, but it happens that we have given a great deal of thought to a similar proposal. We have not been able to see how it would do more than seriously tie up the speeding along of the entire program. We have not been able to see how it would give the General Accounting Office any effective part to play in the matter.

It was even proposed by another committee that there be a threeman board at each terminating or settlement location and that that board should not have power to act finally to approve the settlement agreement unless the representative of the Comptroller General were on the side of the majority of the board. But even that, we thought, would serve only to tie up the speeding along of the program.

We believe, first, that the safe, sound way to handle this program is to clothe the departments and their officers with authority to negotiate with terminated contractors, agree tentatively upon an amount to be paid, and make at least a fair, decent record of their actions, which shall be open to scrutiny by the Congress, by the General Accounting Office, or by anyone else in the Government who should scrutinize the record.

The CHAIRMAN. Go over that again. You believe that there should be a sufficient record?

Mr. YATES. We believe that there should be a sufficient record to at least permit the officers who enter into these agreements to record their own actions; that there should not be just a conversation over the corner of a table, that is not reduced to record.

The CHAIRMAN. I agree with you thoroughly. Now, does this bill include a sufficient record, or would you have a suggestion how to build up a sufficient one? Would you, for instance, require the writing of a report or a decision, and then weigh each one of those factors? Is that your idea?

Mr. YATES. Mr. Chairman, this bill does not provide definitely for any record. It leaves in the Secretary of the Navy authority to determine by regulation what record shall be made.

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Mr. MOTT. What kind of record would you require to make such settlement of these contracts as you propose and in the way that you propose them? Take, for example, the provision in section 4 of the bill, subsection (b), on page 4, which reads:

Settlement may be made regardless of formal or technical defects or omissions in contracts, and unauthorized acts or commitments of officers or agents may be ratified. Contracts, whether or not terminated, may be amended to make contractors eligible for the benefits contemplated by this title.

Now, the Secretary of the Navy or the contracting agency of the Navy and the contractor get together, and they make settlement of the contract, in which these factors enter into it. They may overlook the technical defects or omissions in contracts. They may pay for unauthorized acts or commitments of officers or agents, which may be ratified. The contract, whether or not terminated, may be amended to make the contractor eligible for the benefits contemplated under the title. Nothing could be any broader than that. That is absolute, unlimited discretion.

A contract under subdivision (b) of section 4 is made and sent to you. What kind of record would you require accompanying that settlement so that you could intelligently go into it and see if it was properly made?

Mr. YATES. Congressman, we view that particular section 4 (b) as aimed at a different problem from that which we are discussing at the moment. That is, there are many contracts that have deficiencies, oversights, or omissions. There are informal contracts. We view that subsection as merely designed to permit the perfecting of those contracts so that all contractors whose contracts have been terminated will be put on the same basis with respect to settlement.

Mr. MOTT. I understand that, but what kind of record would you want to accompany that settlement, so that you could see whether or hot it was done properly?

Mr. YATES. The general law would require that any amendment to any contract be sent to the General Accounting Office, so we would get the amendment itself. What I was speaking of when you asked the question was the type of evidence, the extent of evidence, to accompany the settlement agreement to show the basis for reaching the agreement.

Mr. MOTT. What kind of record would you want?

The CHAIRMAN. There is a great deal in what he says. For instance, the basis of settlement as set out in section 6, and it establishes certain factors. Now, when they reach an agreement as to the amount, what he has in mind is the writing of an opinion or a statement. Take subparagraph (7), for instance:

General experimental and research expense shall be allowed to the extent consistent with the established pre-war experimental and research program of the contractor, or to the extent related to war purposes.

If any allowance is going to be made for that, then they have to have evidence and proof to justify it, and on each one of those things that are factors involved his position is that there must be supporting documents instead of just a general blanket statement, as we give him.

Mr. YATES. Mr. Chairman, in general, yes. We have devised some schedules and forms which some time ago we turned over to the staff

of this committee. We explained at the time that we did not regard them as perfect; that they were subject to further study, and so forth. But we designed them with a view to requiring the very minimum of evidence to produce a fair record and yet not interfere with speedy negotiations and settlements.

It was proposed to us by officials of one of the departments early in our discussions that no record be sent to the General Accounting Office; that, indeed, there be no record made by the contracting officer by which he would commit himself to the reasons for agreeing to the settlement.

The CHAIRMAN. You know that Congress will not agree to that.
Mr. YATES. I hope not.

Mr. BATES. Mr. Chairman, Mr. Warren was interrupted in his testimony.

Mr. WARREN. Mr. Chairman, I should like to proceed on this, because I notice some members of the committee who were not present when I started. Then, I want to come around to the question you asked, Mr. Bates. I have an answer to that.

I should like to show you what is going to be done if this bill becomes a law, and what is being done now. Here is a termination settlement. You asked, Mr. Chairman, what they asked for and what it was approved for. They asked for $94,227.60, and it was approved for the same amount. There is all the record there is to it [indicating]. Mr. GRANT. What was wrong with that?

Mr. WARREN. We do not know.

Mr. GRANT. It might be all right?

Mr. WARREN. It might be all right, yes; we do not know. But what are the functions of the General Accounting Office now in reference to this? What will be the functions under this proposed bill? They will send this to us with no supporting data. A hundred-dollar clerk will take this and say, "Yes; here is the settlement for $94,000. Here is the voucher they have sent over for $94,000." Check; the audit is made; and that ends it.

Mr. BATES. But you had some point of interest in that settlement, Mr. Warren. As I understand it, they allowed a settlement of $18,000 for loss from operations. Elaborate briefly on that, please.

Mr. WARREN. All that I can tell about it is just the one sentence here, and I said this appears to be a very good example of liberality. The contractor was paid $18,920 for loss from operations. This figure represents a 24-percent fee for merely purchasing $74,300 worth of material and supplies.

This one is for $230,420.22. this is all that comes to us. Remember, now, that you

Now, gentlemen, here is another one. It is made up of many, many items, but Here is one of two pages for $194,600. are going to have them run into hundreds of millions in the cases of the big ones.

Here is one for $374,186.20. Here is one for $1,190,000.

Mr. MOTT. Is the one for a million dollars as brief as the other two? Mr. WARREN. Yes; here it is. The claim for this one of $1,190,000 was allowed. Check; the audit is made.

The CHAIRMAN. Mr. Grant asked a very pertinent question: What was wrong? Your point is, Mr. Warren, that you do not have enough to determine that?

Mr. WARREN. That is right; we do not know.