123. Contracting for Metroliner and TurboTrain Projects.-The Metroliner and Turbo-Train demonstration projects administered by the Federal Railroad Administration, Department of Transportation, did not accomplish their objectives on a timely basis and were not conducted as originally planned. Technical problems encountered with the trains delayed the start of the projects and prevented the contractors from maintaining operational enough cars to run the number of round trips necessary to fully accomplish the projects' objectives.

The Metroliners and Turbo-Trains were an advancement of the state of the art. No similar equipment had ever been constructed or used in regular passenger service in the United States. An agreement was entered into to lease two Turbo-Trains being developed, and authorization was given to a railroad company to contract for the construction of 50 Metroliners, without knowledge as to whether the trains would be able to operate to the degree anticipated for the demonstrations. In view of the significant Government funds committed to the demonstrations, the development and testing of prototypes should have been encouraged to provide greater assurance that later demonstrations could be carried out as planned.

Also, the contracts with the railroad company and with the lessor of the Turbo-Trains did not provide for a reduction in the amount of the contracts in the event the trains could not be used as planned. As it was not known whether the trains would perform as anticipated, a provision should have been included in the contracts to protect the investment of the Government.

The Department of Transportation agreed with GAO's proposals that when the Department sponsors future demonstration programs involving new equipment, it should (1) encourage the use of a prototype to insure, to the extent possible, that the equipment will perform as anticipated and (2) provide for contract price adjustments if the equipment is not used to the degree planned. The Federal Railroad Administration issued a policy statement providing for the adoption of these proposals in sponsoring future demonstrations. (Report to the Congress, B-164497(5), Jan. 27, 1971)

124. Contract Award Practices and Administration. The contracting policies and procedures of the Federal Railroad Administration (FRA), Department of Transportation, contained weaknesses affecting the timeliness, legality, and proper administration of

contracts.

Because of the frequent requests for purchase requirements on an urgent basis, the contracting officer was not provided with sufficient leadtime to complete procurement actions before the work starting dates. This resulted in the frequent use of letter contracts and a lessening of competition. Also, the contracting officer failed to definitize the letter contracts into negotiated contracts in a timely manner and was unable to negotiate some contracts until after substantial amounts of work had been completed. On several occasions, FRA project officials directed contractors to perform work prior to obtaining authorization from the contracting officer. Also, there were no systematic contract cost control methods.

FRA agreed with GAO's recommendations for corrective action. (Report to the Acting Administrator, FRA, Aug. 21, 1970)

125. Acquisition and Utilization of T-38 Jet Aircraft.-GAO's review of the National Aeronautics and Space Administration (NASA) Manned Spacecraft Center's procurement of eight T-38 aircraft at a cost of about $6.7 million for use in the astronaut training program indicated that some of the eight aircraft might not be needed to meet astronaut and staff pilot flying requirements. The estimated future flying requirements used to determine the number of aircraft needed exceeded the past flying experience. In addition, NASA's announcement that the number of astronauts is excess by about one-third also indicated that future flying requirements were likely to decrease instead of increase.

Because of the possibility that the purchase of some of the undelivered aircraft could be canceled, GAO suggested that NASA reassess the need for purchasing the eight aircraft on the basis of a consideration of its past flying experience as an indication of future flying requirements.

NASA did not concur and stated that the procurement action had been reassessed and that the aircraft were needed to meet the requirements of the astronaut training program. (Report to selected committees of the Senate and the House, B-172171, May 28, 1971)

Facilities, Construction, and Leasing

126. Administration of Construction Contract Provisions.-The Army Corps of Engineers and the Naval Facilities Engineering Command are agents for

the Department of Defense (DOD) in the construction of military facilities. GAO reviewed their inspec tion procedures for insuring that construction is in accordance with contract specifications and found a need for strengthening such procedures.

A number of military facilities accepted by the Government as completed were not built in compliance with contract specifications. As a result, the facilities were not fully satisfactory for their intended use and/ or the Government had to spend additional time and effort having deficiencies corrected.

GAO recommended that the Secretaries of the Army and the Navy have the two construction agencies:

Systematically monitor the enforcement by field offices of the quality control programs of contractors.

Review the inspection reporting practices of field offices, correct those not in compliance with agency regulations, and implement a system for prompt communication of inspection findings from the field offices to the construction management levels.

Improve the Army training programs for inspectors and establish such programs in the Navy. Perform more comprehensive reviews of field offices' implementation of agency procedures for inspection and supervision of military construction. GAO also recommended that the Secretary of Defense take action to insure that the two construction agencies exchange information and coordinate activities in areas of mutual interest regarding construction quality assurance.

DOD agreed with these recommendations and in June 1971 advised GAO of the corrective actions taken or planned by the two construction agencies. (Report to the Congress, B-171496, Apr. 16, 1971)

127. Department of Defense Reporting to the Congress on Nonadvertised Military Construction Contract Awards. In August 1970 GAO issued a report to the Congress on a survey of certain aspects of the award and administration of military construction contracts.

Under the military construction authorization acts, the military departments are required to report to the Congress all nonadvertised (negotiated) military construction contract awards. The fiscal year 1968 reports listed 110 nonadvertised contract awards, totaling $91 million, and indicated that about 91 percent of the amount of military construction contracted for in that year had been advertised.

GAO found that the reports to the Congress did not include most of the nonadvertised military construction contract awards for work overseas. GAO identified 125 awards of this type: 100, totaling $184 million, in Southeast Asia; and 25, totaling $7 million, in the Republic of Germany. Inclusion of these overseas awards in the nonadvertised contracts reported to the Congress would have shown the proportion of advertised contract amounts in fiscal year 1968 to be 72 percent rather than 91 percent.

GAO noted also that the Department of Defense (DOD) was not required to report to the Congress nonadvertised construction contract awards financed with other than the military construction appropriations. GAO identified nonadvertised military construction contract awards of $98 million in fiscal year 1968 that had been funded from other appropriationsprincipally procurement appropriations. In addition, GAO had found in an earlier review that subcontracts for construction had been awarded by prime contractors holding negotiated defense contracts for research and development and for production of materiel.

GAO suggested that DOD require the military departments to improve their practices in reporting to the Congress. In response, DOD stated that other means had been used to keep the Congress informed of the overseas awards discussed in GAO's report. The Department, however, concurred in the suggestion and cited new instructions that had been put into effect to insure proper reporting in the future.

Since the requirement to report nonadvertised military construction contract awards does not extend to contracts financed from other than the military construction appropriations and in view of the substantial amounts involved, GAO suggested that the Congress might wish to consider requiring DOD to broaden its reporting to include these contracts. (Report to the Congress, B-133316, Aug. 18, 1970)

128. Problems in Developing the Fast Flux Test Facility. The Fast Flux Test Facility (FFTF) was being designed to provide for radiation exposure of fuels and materials under conditions similar to those expected to be encountered in liquid metal breeder reactors. Construction of the FFTF was estimated by the Atomic Energy Commission (AEC) to cost $102.8 million.

Delays were encountered in completing the conceptual design of the FFTF, the first step in the design cycle, thereby resulting in compressed schedules for

completing the remaining phases of the work. These delays were caused by management problems; specifically, the laboratory responsible for the project had not established an engineering-oriented organization with sufficient management and technical capabilities to develop a complex project such as FFTF, and, AEC did not effectively bring about changes in organization and design approaches that had been identified as being essential. Also, the technological base for developing the project was not as advanced as initially believed.

AEC agreed with GAO's suggestion that AEC review the reactor development and technology organization and all levels of contractor and laboratory management involved with the project to streamline the organization, to strengthen review channels, and to provide some assurance that there will be maxicontribution by staff and management to this high-priority project. (Report to the Congress, B-164105, Sept. 23, 1970)

129. Building Under Construction Different Than the One Described to the Congress.-At the National Aeronautics and Space Administration's (NASA) Manned Spacecraft Center, an engineering building under construction was substantially different in function, program application, and cost from the one NASA described and justified to the Congress.

The building authorized by the Congress was estimated to cost about $2.6 million and would have provided office space for 704 employees of the Manned Space Flight Program. The building under construction was estimated to cost $2.4 million plus about $14.8 million for laboratory equipment and would provide primarily laboratory space for employees of the Earth Resources Survey Program.

There was no indication that the Congress or its committees had been notified of the change; however, the engineering building was not identified as a specific item in the NASA authorization act. The GAO has long held that the breakdown into amounts of individual items in an agency's budget estimates presented to the Congress that are the basis on which lump sums are appropriated is not binding on the administrative offices of the agency unless such breakdown is carried into the law. GAO sees no reason why such position shouldn't be equally applicable insofar as lump-sum authorizations are concerned.

GAO stated that the committee might wish to consider identifying in NASA's authorization acts the specific projects to be constructed with appropriated

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funds. This identification would restrict the availability of funds appropriated under the construction of facilities appropriations to the projects and amounts identified in the authorization acts.

In the 1972 fiscal year authorization for NASA, bill H.R. 7109 reported out by the committee identified the specific projects to be constructed with appropriated funds. On June 29, 1971, the Senate passed the authorization bill which included the identification of the projects. (Report to the Senate Committee on Aeronautical and Space Sciences, B-165118, Mar. 29, 1971)

Procurement Procedures and Practices

130. Potential Savings by Replacing Government-Owned Sedans Each Year.-The Federal civil agencies had a domestic fleet of 37,000 sedans at the end of fiscal year 1969. The cost of operating them during that year was $27.7 million, of which $17.8 million was related to the 22,500 sedans in the General Services Administration's (GSA) interagency motor pools.

GAO reported that replacing GSA's sedans each year rather than every 5 years would save the Government an estimated $5.1 million annually because (1) maintenance, repair, and tire costs are lowest during the first year of ownership and (2) the discount obtained. by the Government when it purchases sedans substantially offsets the depreciation factor during the first year of ownership.

GAO recommended that the Administrator of General Services, with the concurrence and cooperation of the Office of Management and Budget (OMB):

Adopt a 1-year replacement standard for sedans in the interagency motor pools.

Revise the Federal Property Management Regulations to require other Federal civil agencies to adopt a 1-year replacement standard for sedans.

Examine into the feasibility of adopting a 1-year replacement standard for station wagons and light trucks in the civil fleet since they are purchased and operated under conditions similar to sedans.

Department of Defense vehicles are not subject to GSA replacement standards and were excluded from GAO's review. However, because the findings might have application to these vehicles as well, GAO recommended that OMB examine into the feasibility of adopting a 1-year replacement standard for Depart

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ment of Defense sedans, station wagons, and light trucks.

GSA agreed with GAO's proposals. OMB also agreed that a 1-year replacement cycle for GSA's sedans was optimal in the long run but planned to continue the current replacement cycle for the present time-primarily because of the impact of the additional capital investment on the overall Federal budget and the relative priority of other Federal projects. GAO expressed the belief that the payoff on the capital outlay was significant and that the additional capital investment plus imputed interest would be recovered through annual savings in about 2 years. (Report to the Congress, B-158712, June 9, 1971)

131. Career Program for Procurement Personnel.-Department of Defense (DOD) procurement of weapons, support equipment, and other goods and services totals tens of billions of dollars annually and involves hundreds of thousands of procurement transactions. The procurement transactions are subject to numerous statutes, policies, regulations, and directives and require procurement personnel with a great deal of special knowledge, skill, and dedication. GAO made a study of the effectiveness of the Department's program for recruiting, training, and stimulating people to pursue careers in the procurement field.

The development of the current career program for procurement personnel was prompted by the Secretary of Defense in 1965. Because of resistance from some of the services, however, the program was not fully implemented.

GAO's study showed that, to revitalize the program, a major effort needed to be directed toward (1) updating the program to meet the needs of procurement as envisioned for the 1970's and beyond, (2) recognizing the conflicting career objectives of civilians and of military officers in procurement, (3) raising the status of the procurement field, (4) attracting young, high-caliber people, (5) providing more data to assist the Defense Procurement Career Management Board in its decisions, (6) improving the selection of personnel for managerial procurement positions, and (7) giving more intensive management attention to the program-the responsibility for which is split between two part-time boards.

GAO recommended that, to meet future needs of procurement, the Secretary of Defense initiate action to update the current career program and resolve other issues raised in GAO's report. To insure a complete and objective evaluation of the program, it may

be desirable to use experts from DOD, other Government agencies, industry, and educational institutions. The evaluation should be directed to:

Creating one organization to manage the program on a full-time basis.

Establishing prerequisite education requirements for use at the trainee level.

Studying the feasibility of a separate recruiting program for young trainees.

Formulating a program to reduce the turnover of young people.

Performing an in-depth analysis of the broadened procurement function to determine the optimum organization structure and staffing requirements and to lay out career patterns and training required to meet the staffing requirements.

Establishing a realistic career appraisal and counseling program.

Considering establishment of a Department of Defense procurement academy for developing management personnel and as a center for direction of procurement training regardless of where the training is conducted.

Establishing a management information system to provide information for making decisions in recruiting, training, and overall management of the career program.

Formulating a separate funding program or taking other steps to prevent disproportionate cuts in training funds during overall fund cutbacks.

Appraising the effectiveness of the Central Automated Inventory and Referral System.

Determining the requirements to raise the status and enhance the image of the procurement career field.

Establishing uniform standards for selection of personnel for the procurement function.

Insuring that the career program provides full and satisfying career opportunities for personnel entering the procurement field.

Working with the Civil Service Commission on all proposed corrective actions under its purview. GAO was advised that the Department of Defense would undertake an intensive effort to improve its procurement career development program for both military and civilian personnel. (Report to the Congress, B-164682, Aug. 13, 1970)

132. Emergency Procurement.-During fiscal year 1968 the Department of Defense negotiated about

$5.4 billion of emergency procurement; about 72 percent was negotiated without obtaining competition. Emergency procurement declined to about $2.5 billion in fiscal year 1970, but the percentage of noncompetitive procurement remained at about the fiscal year 1968 level. GAO found that many of the noncompetitive procurements might have been made competitively, at lower costs, and with acceptable time for delivery.

A report issued to the Congress in March 1971 pointed out that GAO's review of 54 noncompetitive procurements amounting to $33 million showed that, for 36 of them amounting to $31.5 million, there was information available at the time of the awards that there were other suppliers who could have delivered at lower prices and within the desired periods. GAO estimated that, had competition been obtained, about $3.1 million could have been saved on 14 of the 36 procurements and an amount not readily determinable on the remaining 22 procurements.

GAO recommended that decisions to procure noncompetitively in emergencies be based on:

A determination that the selected supplier can make delivery a specified number of days, weeks, or months earlier than other suppliers.

An estimate of the additional unit cost to result from the proposed noncompetitive procurement.

A statement, from the commander of the activity needing the item, that the additional cost is justified by the time saved.

The Deputy Assistant Secretary of Defense (Installations and Logistics) advised that there was no need to implement GAO's recommendations because procurement officials were already giving great weight to the urgency of need cited by the requesting activity and were considering availability of other sources of supply, price factors, and other relevant matters in decisions to procure without competition.

GAO pointed out that the degree of urgency for emergency procurements was generally indicated only by reference to a high priority number on the procurement request without support as to urgency of mission, date material was required, or effect of delay. Little attempt was made to determine whether the earlier projected delivery date was worth the additional cost. GAO stated that its findings showed a need for the recommended improvements in awarding emergency procurements. (Report to the Congress, B171561, Mar. 25, 1971)

133. Small Purchases (Department of Defense).—A small purchase is described in the Armed Services Procurement Regulation as the procurement of supplies and nonpersonal services the aggregate amount of which does not exceed $2,500. In fiscal year 1969 small purchases in the Department of Defense (DOD) amounted to $1.6 billion for about 6.9 million transactions. Of the $1.6 billion, about $926 million (58 percent) was awarded without competition.

In an earlier examination GAO had found that buyers had not been aware that some of the items they bought were listed in suppliers' catalogs or Federal stock catalogs at lower prices. GAO found also that in many cases the buyers lacked sufficient information concerning the items they were buying to enable them to adequately evaluate the reasonableness of the prices charged by the suppliers.

GAO examined into the implementation of the corrective measures established by DOD and the military services after the hearings held in the fall of 1967 by the Subcommittee for Special Investigations, House Committee on Armed Services.

The examination indicated that most of the locations GAO visited had effectively implemented the corrective measures. GAO's tests showed that generally small purchases were fairly priced. GAO believes, however, that DOD should continue to monitor this area closely because of the large number of small purchases and the significant number of personnel who are engaged in making small purchases.

Among the improvements noted were better training of buyers, improved procurement data, and more extensive internal reviews of small purchase activities. Also, the Department published a Small Purchase Manual. (Report to the Congress, B-162313, Jan. 29, 1971)

134. Small Purchases (District of Columbia Government). GAO examined small open market purchases made by the District of Columbia Government. During fiscal year 1968, District agencies processed 38,675 purchase orders, totaling about $4.6 million under authority delegated to them by the Bureau of Procurement to make purchases directly from vendors for supplies and services within certain limitations.

GAO's review of 5,300 purchase orders showed that, generally, information recorded by the agencies was not sufficient to fully identify the items purchased; agencies did not avail themselves of Federal or District supply sources when identical or similar items were