ECONOMICS OF DEFENSE POLICY:

ADM. H. G. RICKOVER

HEARING

BEFORE THE

JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES

NINETY-SEVENTH CONGRESS

For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20402

13 BOST XL

02/92 53-005-00

JOINT ECONOMIC COMMITTEE

(Created pursuant to sec. 5(a) of Public Law 304, 79th Cong.)

RICHARD BOLLING, Missouri

LEE H. HAMILTON, Indiana

GILLIS W. LONG, Louisiana

PARREN J. MITCHELL, Maryland

FREDERICK W. RICHMOND, New York
CLARENCE J. BROWN, Ohio

MARGARET M. HECKLER, Massachusetts
JOHN H. ROUSSELOT, California
CHALMERS P. WYLIE, Ohio

STEVEN D. SYMMS, Idaho

PAULA HAWKINS, Florida

MACK MATTINGLY, Georgia

LLOYD BENTSEN, Texas
WILLIAM PROXMIRE, Wisconsin
EDWARD M. KENNEDY, Massachusetts
PAUL S. SARBANES, Maryland

JAMES K. GALBRAITH, Executive Director
BRUCE R. BARTLETT, Deputy Director

(II)

CONTENTS

NAVY CONTRACTS AND GOVERNMENT POLICIES

August 23, 1968-H. G. Rickover memorandum for the Chief of Naval

Material responding to Chief of Naval Material memorandum of August

22, 1968, and recommending the contract fee which the Naval Material

Command considered too low be increased by 5 cents..

August 26, 1968-Chief of Naval Material memorandum responding to H.

G. Rickover memorandum of August 23, 1968, stating the August 22,

1968, Chief of Naval Material memorandum on this issue was misinter-

preted, and directing that the contract postnegotiation clearance

logically justify the fee negotiated.

September 11, 1968-H. G. Rickover memorandum for the Chief of Naval

Material taking exception to the contention of the August 16, 1968, Chief

of Naval Material memorandum that the August 22, 1968, Chief

of Naval Material memorandum was misinterpreted...

September 26, 1968-Chief of Naval Material memorandum responding to

H. G. Rickover memorandum of September 11, 1968, and stating that

"in our acquisition process there is required a mutual exchange of infor-

mation, such that our recent exchange of correspondence would be

unnecessary"

October 16, 1968-H. G. Rickover memorandum responding to the Chief

of Naval Material's September 26, 1968, memorandum and emphasizing

that the Naval Material Command should not be directing the Naval

Ship Systems Command to pay higher fees. (No record exists of a

response to this memorandum.)__

November 13, 1968-H. G. Rickover memorandum for the Assistant Sec-

retary of the Navy (Installations and Logistics) concerning the need for

improvements in ship procurement practices___

November 20 and November 25, 1968-Assistant Secretary of the Navy

memoranda responding to H. G. Rickover's November 13, 1968, memo-

randum on the need for improvements in ship procurement practices and

stating these issues are being addressed by a Pricing and Cost Control

Study Group.

February 12, 1969-H. G. Rickover memorandum for the Assistant Sec-

retary of the Navy (Installations and Logistics) concerning the procure-

ment of main sea water pumps for SSN 685 as an example of the need for

improvements in ship procurement practices..

March 17, 1969-Assistant Secretary of the Navy (Installations and

Logistics) memorandum responding to H. G. Rickover's February 12,

1969, memorandum on the procurement of main sea water pumps

for SSN 685 as an example of the need for improvements in ship procure-

ment practices. The response states the Pricing and Cost Control

Study Group is addressing the problem..........

March 28, 1969-H. G. Rickover memorandum for the Assistant Secretary

of the Navy (Installations and Logistics) concerning the procurement

of main sea water pumps for SSN 685---

May 7, 1969—Chief of Naval Material memorandum for H. G. Rickover

describing the resolution of the problem set forth in H. G. Rickover's

March 28, 1969, memorandum for the Assistant Secretary of the Navy

(Installations and Logistics) on the procurement of the main sea water

pumps for SSN 685--

(III)

April 30, 1969-H. G. Rickover memorandum for the Assistant Secretary
of the Navy (Installations and Logistics) concerning review of controls
over construction costs of nuclear-powered ships at Newport News
Shipbuilding & Dry Dock Co. (See response to October 23, 1969, H. G.
Rickover memorandum for the Assistant Secretary of the Navy (Instal-
lations and Logistics).)---

July 8, 1969-H. G. Rickover memorandum for the Chief of Naval Material
stating that actions by the Naval Material Command Procurement
and Control Division are having a deleterious impact on the naval
nuclear propulsion program. (No record exists of a response to this
memorandum.).
July 15, 1969-H. G. Rickover letter concerning the contractual status
of technical correspondence and documents exchanged between ship-
builders and the Government regarding work under the technical
cognizance of NAVSHIPS (08) in ships under construction......---
July 25, 1969-Newport News president's letter to H. G. Rickover agreeing
to implement the actions of H. G. Rickover's letter of July 15, 1969, on
the contractual status of technical correspondence and documents
exchanged between shipbuilders and the Government regarding work
under the technical cognizance of NAVSHIPS (08) in ships under
construction__.

August 20, 1969-Electric Boat general manager letter to the Commander,
Naval Ship Systems Command, agreeing to implement the actions
of H. G. Rickover's July 15, 1969, letter on the contractual status of
technical correspondence and documents exchanged between ship-
builders and the Government regarding work under the technical
cognizance of NAVSHIPS (08) in ships under construction.........
September 13, 1969-H. G. Rickover memorandum for the Assistant Secre-
tary of the Navy (Installations and Logistics) concerning procurement
practices and cost control under Navy contracts with Electric Boat Divi-
sion, General Dynmaics. (No record exists of a response to this memoran-
dum.).
October 23, 1969-H. G. Rickover memorandum for the Commander, Na-
val Ship Systems Command concerning the need for improved procure-
ment and cost control practices in the construction of Naval ships-
December 1, 1969-Commander, Naval Ship Systems Command memoran-
dum responding to and enclosing the action taken on H. G. Rickover's
memoranda of April 30, 1969, and October 23, 1969, concerning control
of construction costs at Newport News Shipbuilding & Dry Dock Co.
December 23, 1969-H. G. Rickover memorandum for the Commander,
Naval Ship Systems Command concerning deficiencies in the procure-
ment of hull steel by Newport News Shipbuilding & Dry Dock Co.
January 7, 1979-Commander, Naval Ship Systems Command memorandum
for the Deputy Commander for Nuclear Propulsion responding to and
indicating the actions taken on H. G. Rickover's December 23, 1969,
memorandum concerning deficiencies in procurement of hull steel by
Newport News Shipbuilding...
January 29, 1970-H. G. Rickover memorandum for the Commander,
Naval Ship Systems Command concerning deficiencies in procurement of
hull steel by Newport News Shipbuilding & Dry Dock Co---
March 5, 1970-Deputy Commander, Naval Ship Systems Command
(Field Activities) memorandum to the Chief of Naval Material (MAT
021) concerning H. G. Rickover's memoranda of December 23, 1969, and
January 29, 1969, concerning deficiencies in procurement of hull steel by
Newport News..
February 2, 1970-H. G. Rickover memorandum for the Commander, Naval
Ship Systems Command recommending corrective action for the unsatis-
factory situation with shipbuilding and overhaul contracts at Ingalls
Shipbuilding. (No record of a response to this memorandum.) - - - -
February 14, 1970-H. G. Rickover memorandum for the Commander,
Naval Ship Systems Command requesting corrective action regarding the
unsatisfactory situation with shipbuilding and overhaul contracts at
Newport News and Electric Boat..

March 9, 1970-Commander, Naval Ship Systems Command memorandum
responding to H. G. Rickover's February 14, 1970, memorandum con-
cerning the unsatisfactory situation with shipbuilding and overhaul con-
tracts at Electric Boat and Newport News. The response states that some
of the problems which led to the situation have been resolved and “we are
looking toward a solution (to the others) as soon as possible”.

February 16, 1970-H. G. Rickover memorandum for the Commander, Naval Ship Systems Command concerning control of ship construction costs at Newport News Shipbuilding & Dry Dock Co. (No record exists of a response to this memorandum.)

February 19, 1970-H. G. Rickover memorandum for the Assistant Secre-
tary of the Navy (Installations and Logistics) concerning procurement
practices and cost control under Navy contracts at Electric Boat Divi-
sion, General Dynamics. (No record exists of a response to this memo-
randum.)__

March 25, 1970-H. G. Rickover letter to Senator William Proxmire
concerning remarks by Gordon W. Rule on the naval nuclear propulsion
program in testimony before the Joint Economic Committee..
May 28, 1970-H. G. Rickover letter to Senator William Proxmire con-
cerning implementation of the Truth-In-Negotiations Act by the Depart-
ment of Defense__

July 15, 1970—H. G. Rickover memoradum for the Assistant Secretary
of the Navy (Installations and Logistics) concerning overhead costs on
Navy contracts at Electric Boat. (Enclosures deleted.) (No record exists
of a response to this memoradum.)...
August 26, 1970-H. G. Rickover memorandum for Assistant Secretary of
the Navy (Installations and Logistics) commenting on NAVSHIPS
investigation of deficiencies in procurement and cost control practices
of the Electric Boat Division, General Dynamics--.
September 17, 1970-Assistant Secretary of the Navy (Installations and
Logistics) memorandum responding to H. G. Rickover's August 26, 1970,
memorandum on NAVSHIPS investigation of deficiencies in procure-
ment and cost control practices at Electric Boat. The response states that
H. G. Rickover's comments are being forwarded to the Naval Material
Command for comment and action..
October 13, 1970-H. G. Rickover memorandum for the Commander,
Naval Ship Systems Command concerning lack of corrective action on
procurement and cost control deficiencies at Newport News Ship-
building & Dry Dock Co. (No record exists of a response to this memo-
randum.).
October 30, 1970-H. G. Rickover memorandum for the Assistant Secre-
tary of the Navy (Installations and Logistics) concerning excessive
shipbuilder profits on nuclear submarine overhaul and conversion contracts_
November 20, 1970-Assistant Secretary of the Navy (Installations and
Logistics) memorandum for the Chief of Naval Material concerning H. G.
Rickover's October 30, 1970, memorandum on excessive shipbuilder profits
on nuclear submarine and overhaul contracts. The Assistant Secretary
recommends certain actions be taken immediately on this matter._-
December 2, 1970-H. G. Rickover memorandum for the Assistant Secre-
tary of the Navy (Financial Management) concerning contractor cost
performance measurement for commercial shipbuilders. (No record exists
of a response to this memorandum.) _ _.
February 4, 1971—H. G. Rickover memorandum for the Commander,
Naval Ship Systems Command concerning cost control and procurement
deficiencies at Electric Boat Division of General Dynamics and Newport
News Shipbuilding & Dry Dock Co. (No record exists of a response to
this memorandum.)..

April 14, 1971-H. G. Rickover memorandum for the Commander, Naval
Ship Systems Command concerning deficiencies in the procurement of
nickel alloy materials by Newport News Shipbuilding & Dry Dock Co...
June 7, 1971-Commander, Naval Ship Systems Command memorandum
responding to April 14, 1971, H. G. Rickover memorandum on deficien-
cies in procurement of nickel alloy materials by Newport News and for-
warding a report of actions taken by the supervisor of shipbuilding,
Newport News on the issue.

May 6, 1971-H. G. Rickover memorandum for the Deputy Chief of Naval
Material (Procurement and Production) concerning excessive profit rates
on Navy contracts with Electric Boat for SSBN Poseidon missile con-
versions. (No record exists of a response to this memorandum.) _
June 4, 1971-H. G. Rickover memorandum for the Commander, Naval
Ship Systems Command concerning the need for improved controls over
change order pricing at Electric Boat. (No record exists of a response to
this memorandum.)....

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