Mr. WOLL. We might take a few jeeps, cats, road graders, and trucks.

Mr. ROMNEY. My thought was to take a couple of work orders and at random see if they are here.

Mr. SCORDAS. The work orders will be with the items in the shops. (Examples of work orders and related documents are found in app. 4, infra.)

Mr. ROMNEY. Mr. Woll, when an item of equipment is accepted by AID at a depot, your representative makes a preliminary inspection of the property, does he not?

Mr. WOLL. Yes, sir.

Mr. ROMNEY. Ánd when the item is sent to the rehabilitation center, what inspection is made at that point of the equipment?

Mr. WOLL. A receiving inspection is made when property first arrives at the marshaling site to ascertain if the property has been damaged since the first inspection at the holding activity when we issued a request for it. Subsequent to that another inspection is made to determine the actual amount of repair that is required to put this item in a serviceable condition. This will list hours, it will list repair parts that are required, and it will list the specific work that is to be performed. Mr. ROMNEY. If it appears that the work to be performed on this vehicle would exceed the norm, what decisions are made in such circumstances?

Mr. WOLL. It just depends, Mr. Romney. If this item has been committed for a high-priority AID project such as Saigon, we will go ahead and repair the item regardless of cost, whether it exceeds the 15 percent or goes up to 40 percent. If this item has been committed for a high-priority program, whatever amount is necessary we spend. If we are just building up a stock in hopes of a future order and we find our original offer is low and that it will take considerably more money, we probably cannibalize the item and use the parts to repair other items of equipment.

Mr. ROMNEY. Will you explain how the commitment with regard to Vietnam works? Is it not true that a mission project officer or a country representative might come to this base to see what they wish to acquire? In the case of Vietnam does a commitment occur with respect to a piece of property before the property arrives here?

Mr. WOLL. In some instances, yes. I will explain this. We have given Vietnam the top priority of all other AID projects and programs worldwide. Normally we will only commit a piece of property if it has been received at the marshaling site. This is due to the fact that in the past when we have requested property from the military and other U.S. Government agencies we have made commitments and then we have found the military and other Government agencies refused to give up the property. When I say "refuse," they have other need for it and they keep it rather than turn it over to us. So several years ago we made a decision we will only accept a firm order on property we actually have in our possession.

With Vietnam we have given them first priority on everything. When we issue a transfer document to the military or other Government agency, we anticipate we will get the property after a period of time. As I mentioned, sometimes we don't. But we take a copy of each of these transfer items and twice a month we bundle them up and send

them to Saigon. Saigon has 30 days to screen each of these documents and then they tell us they want 50 or 100 of them or all or some of them. We immediately tell Saigon this is only a temporary measure because the possibility exists we will not get all these items, but we will get most of them. Then as the items come in we earmark them for Saigon and consider it a commitment and begin work on it immediately. Our schedule is based on the firm commitments we have made.

Mr. ROMNEY. In the course of the rehabilitation of an item it might be discovered that far more work is required than originally appeared to be the case. What consultation is necessary upon that discovery and what decisions are made in a typical situation?.

Mr. WOLL. Well, No. 1, when a piece of property comes in here it is inspected to ascertain if it has been cannibalized since we received an order for it and whether it has been damaged. Then an inspection is made by the contractor's staff as well as our marshaling site superintendent. Each item of repair that is required for this item is listed on a work order with the time that it is supposed to take. After this work order has been negotiated by our marshaling site superintendent and the contractor's personnel they start to work on the property. If during this process it is found that something else comes to light that requires more rehabilitation than we thought, our marshaling site superintendent has the authority to determine whether we should go forward with this, and the criterion for going forward with rehabilitation is if a firm commitment has been made in the past.

Mr. ROMNEY. This is not an economic criterion. If the work requires an additional amount of money that would make the item perhaps twice as expensive for you to process than was estimated before, you would still carry it through if you had the commitment?

Mr. WOLL. Yes, sir.

Mr. ROMNEY. Does this happen in every case?

Mr. WOLL. No, sir. It better not happen in every case. If it does our inspection and the contractor's inspection of the item prior to the start of the work is not right, and it just better not happen in every case. Mr. ROMNEY. Do you have an idea of how many times it is necessary to make a subsequent addition to the work order?

Mr. WOLL. Al, could you give us an estimate?

Mr. GIBSON. Roughly 20 to 25 percent. At the same time some of our work orders run under the estimate.

Mr. ROMNEY. And in each case before a work order is amended is there a physical inspection made by the AID representative to determine whether it is feasible to proceed?

Mr. WOLL. Yes, sir.

Mr. ROMNEY. In cases where you do not have a prior commitment? Mr. WOLL. Yes, sir.

Mr. ROMNEY. In each case?

Mr. WOLL. Yes, sir.

Mr. ROMNEY. In terms of actual number of items, does this not impose a considerable workload on the AID representative? In effect, then, you have three inspections of every item: (1) The brief inspection upon arrival to see if the item has been cannibalized or damaged in shipment; (2) the inspection to determine what work is to be done; and (3) in 20 or 25 percent of the cases an inspection or examination to determine what should be done with respect to possible amended work orders?

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Mr. WOLL. That is right.

Mr. ROMNEY. How many people do you have to do all these inspections?

Mr. WOLL. We have one AID representative here, and we certainly are understaffed. We anticipate in the very near future to have another AID man stationed at Antwerp. We have already made arrangements and this man is being processed in the States.

To carry on further with your question, Mr. Romney, when a piece of property is completely rehabilitated our AID man also inspects some. Naturally he cannot inspect all with his other duties and responsibilities here, but this is a responsibility of the contractor. The contractor certifies that the work has been done and that the property is in serviceable condition. At the beginning when we first started and production was not as high, the input was not as high. I issued instructions to the previous marshaling site superintendent that he was to inspect each and every item. Now we can't do that. The work has grown too much.

Mr. ROMNEY. Do you do any spot checking of the work done by the contractor?

Mr. WOLL. Yes.

Mr. ROMNEY. On what basis?

Mr. WOLL. Al, how do you go about it?

Mr. GIBSON. Prior to the painting or final inspection I go out with the contractor's representatives and do the inspection with them. This includes going out on the road, roadchecking it, and testing it thoroughly. We bring it in and check the hoses, fan belts, check to see if the air cleaner has been cleaned, the oil has been changed, and this sort of thing, and this is done on a spot-check basis, like checking a generator unit to see that it is carrying the load, that the cycle is right.

Mr. ROMNEY. You are talking now about a complete inspection of a selected item made on a random or scientific selection basis from certified rehabilitated pieces of equipment?

Mr. GIBSON. That is true. And every time you go through to check, you check the work in process while it is being repaired, what they are doing to it.

Mr. ROMNEY. In terms of actual items you have received and that have been rehabilitated and certified, could you supply us with the number of items and the amount of time on a given item, for example, a jeep or a piece of road building equipment or a piece of electrical equipment?

Mr. WOLL. We will supply that information to you, sir.

(Subsequently, AID supplied the following information :)

AVERAGE FOUR-WEEK PERIOD, ANTWERP PRODUCTION

The average inspection times in hours for the following items are

Mr. GIBSON. It is difficult to pull it out of the top of your head because as you go through the shop you don't look at each piece of equipment and say you have put so much time on this or this. You train yourself to check many things as you go through, the same as when you go through an area to pick up something for our program. You don't put it down in hours and minutes.

Mr. WOLL. We can come up with a formula for this.

Mr. ROMNEY. In the acquisition of spare parts for the rehabilitation work, how are these charged into the cost of the work?

Mr. GIBSON. If we have cannibalized parts that are listed as AIDfurnished parts, whether they are cannibalized out of other equipment or parts we have in our own shop, or if it is a case of the contractor purchasing it, we have a bill for every part that is purchased.

Mr. WOLL. When we acquire spare parts from the military through excess sources, each of these parts has an acquisition value. This acquisition value is charged dollarwise to the repair of the capital item, but there isn't any spending of moneys on it. It is noted on the work order that one generator has been taken from lot 50 and put on lot 70, and that price is charged to it. This does not increase our total rehabilitation cost because actually we paid nothing for this generator to start with, but it is so listed on the work order. In other words, inasmuch as we receive an excess part for nothing we do not charge ourselves anything for this. It is a matter of record that a generator that costs $17.50 went into the repair of this item.

Mr. ROMNEY. Does this affect your computation of 15-percent average?

Mr. WOLL. No, sir.

Mr. ROMNEY. It does not?

Mr. WOLL. No, sir.

Mr. ROMNEY. When the contractor acquires spare parts, how are these billed? Does the contractor bill the purchase price to him or does he add an administrative cost to that?

Mr. WOLL. There is an administrative cost of 11 percent over and above the purchase price of a part. This is set up in the contract. Originally it was 12 percent and then it was negotiated downward 1 percent. This is for the use of the contractor's purchasing department procurement people.

Mr. ROMNEY. How do you determine the reasonableness of this factor, and are there other administrative costs which are a part of the contractor's charges in addition?

Mr. WOLL. Not in addition to the average rates. The only one concession that has been made to the contractor is the additional cost for the procurement of parts. This was in our original contract at 12 percent and negotiated downward to 11 percent, as I mentioned before. Mr. ROMNEY. In the rehabilitation at Rota do you acquire spare parts using a similar administrative charge?

Mr. WOLL. I will have to ask Mr. Scordas. Do we pay any procurement charge through the Navy or Air Force or the contractor at Rota? Is that in the interservice support agreement?

Mr. SCORDAS. We pay no service charges at Rota for parts. That is all included in the overhead.

Mr. ROMNEY. Mr. Woll, are the administrative charges for the offices of AID now being reflected in the cost of rehabilitation?

Mr. WOLL. All of our field offices, all of our personnel salaries, are reflected against the revolving fund. I believe 80 to 84 percent of the Washington staff is also paid out of the revolving fund. It is not 100 percent. I believe it is 80 to 84 percent of all our expenses out of Washington that is paid out of the revolving fund.

Mr. MONAGAN. You can get that information more accurately.
Mr. WOLL. Yes, I can get that.

(Subsequently, AID's Government Property Resources Division furnished the following information:)

Number Washington staff__

Number not paid from revolving fund.

Percentage paid from revolving fund__

Number worldwide personnel (including Washington)
Number not paid from revolving fund....

Percentage paid from revolving fund.

Mr. MONAGAN. I think we should note for the record the decorations here the cartoons. That seems to be Mr. Waters on the top and Mr. Woll on the right and is that Mr. Adriaenssens on the left? And President Johnson outnumbers King Baudouin 2 to 1.

Is this a picture of the signing of the contract?

Mr. WOLL. Yes, it was signed at the consul general's office.

Mr. MONAGAN. I would like to ask a few questions about the contract. itself. Is this a fixed-sum contract?

Mr. WOLL. It is a fixed-price, indefinite-quantity contract.

Mr. MONAGAN. And what is the unit?

Mr. WOLL. Dollars.

Mr. MONAGAN. I mean, fixed price per what?

Mr. WOLL. Per input per year. We have a minimum guarantee this year for $1,250,000.

Mr. MONAGAN. That is acquisition cost?

Mr. WOLL. No, that is dollar cost. This is what we guarantee the contractor we will input in here for work.

Mr. MONAGAN. Work to that amount?

Mr. WOLL. Yes.

Mr. MONAGAN. But what is the unit of payment that is in the contract?

Mr. WOLL. Are you referring to the hourly rate?

Mr. MONAGAN. I am trying to find out what the measurement is in the contract.

Mr. WOLL. It is an hourly rate for labor plus a storage rate for outside and inside storage.

Mr. MONAGAN. We agree to furnish work to the amount of blank dollars?

Mr. WOLL. Yes.

Mr. MONAGAN. How many dollars?

Mr. WOLL. $1,250,000, covering the period November 1966 to November 1967.