As you know, our principal activity is the production and marketing of a wide range of food products, and it is not immediately clear that food products will be a major area of concern in your deliberations. We will, however, give further study to the bill, and if we have any relevant suggestions to make, we will certainly send them to you. Sincerely, Hon. ABRAHAM RIBICOFF, GORDON EDWARDS, LOCKHEED AIRCRAFT CORP., Chairman, Subcommittee on Executive Reorganization, DEAR SENATOR RIBICOFF: You wrote Mr. D. J. Haughton, chairman of the board of Lockheed Aircraft Corp. concerning S. 1285 entitled "A bill to establish a National Economic Conversion Commission," on August 26, 1969. The questions you raise on your letter are being carefully considered and Mr. Haughton will reply to you shortly. In the meantime I would like to commend the subcommittee for its study and concern with civilian needs and how industry, having a high level of technical competence, might meet these needs. At Lockheed we have been studying how our reservoir of technology and manpower might be brought to bear. I am proud to say that we have made some worthwhile contributions. Thank you for giving Lockheed an opportunity to comment upon S. 1285. You will hear from Mr. Haughton shortly in response to your questions. Sincerely, W. R. WILSON, Vice President. SEPTEMBER 26, 1969. DEAR SENATOR RIBICOFF: You have invited Lockheed to comment upon S. 1285, proposing a National Economic Conversion Commission. We very much appreciate this opportunity to respond and wish to commend the subcommittee for its concern and focus upon public needs and human problems in civilian life. Those of us who are in a highly technical industry feel that we can contribute substantially to the solution of many problems facing society. At the same time we feel that there are clear limitations upon our capabilities in this area. We have developed a highly sophisticated "systems approach" to technical problems. The "systems approach" can help solve many problems but is by no means the answer to all social issues. We are, however, concentrating much of our effort on this side of our business and hope to continue to do so. Answers to questions raised in your letter are attached. Thank you for this opportunity to comment upon S. 1285. Sincerely, D. J. HAUGHTON, Chairman of the Board. 1. What is your view with regard to S. 1285? S. 1285 focuses upon conversion of defense industry capabilities to civilian uses at some future time. We feel that the subject matter should not be one of conversion. Rather it should urge our industry to focus upon both civilian and national security needs at the same time, and make substantial contributions to both. We believe it would be more desirable and useful for the bill to be aimed at the subject of your letter; namely, "how can the ability, imagination, and energy of private industry be organized to make dramatic contribution in meeting public needs." This important subject is independent of changing security needs. Here at Lockheed we now have programs designed to meet civilian needs while at the same time, we carry on our responsibilities for contributing to national defense. We feel that it is the desire of every defense contractor to achieve a reasonable balance between defense and civilian programs. Section V of the bill would require the contractor to define its capability for converting manpower, facilities, and any other resources now used for specific military products or purposes to civilian uses. The defense industry is under great pressure to produce its products efficiently and at the lowest possible cost. Its facilities and its organization are designed to meet these objectives. In some cases it may not be feasible or economical to convert from a defense to a civilian product. A facility used for a defense product may better be surplused than converted. S. 1285 does not state that the award of a defense contract shall be conditioned upon a satisfactory showing that manpower, facilities and other resources can easily be converted to civilian uses, and we sincerely hope that this is not the intent. It is our belief that the tax dollar would be inefficiently used by requiring that facilities and organizations be developed to meet both defense and civilian needs. The requirement that the contractor demonstrate his ability to convert manpower, facilities and other resources to civilian uses adds a burden that can only result in additional cost, particularly when one or the other category is not clearly defined. We do not believe that this will achieve the basic procurement objective of acquiring the best product at the best possible cost. 2. Has your organization been engaged in any "spinoff" or conversion effort? If so, what has been your experience? We think it wise to distinguish between "conversion" and "spinoff." In many cases, we can quickly achieve conversion of a defense product to civilian use, as in the case of the conversion of the military C-130 to the civilian L-100. We do not consider such to be a product spinoff. Where we can make use of the same resources and people in our line of business, we achieve the civilian objective much more easily and much more efficiently than where a new and separate organization, production facility, and market must be developed as is required in case of a spinoff. Spinoffs usually involve a substantial time lag and the cost of entering the other market is higher. Lockheed Aircraft Corp., its divisions and subsidiaries, have attempted to make maximum use of technology developed either for defense products or for civilian products in support of the other. In a conversion sense, our commercial Electra passenger transport was the basis for the design of the military P-3 antisubmarine aircraft. Our C-130 military cargo aircraft has been converted for civilian purposes and is now in extensive use as the L-100 for Delta Air Lines and several airlines and oil companies exploring the North Slope oil fields in Alaska. Our L-100's supported the Government of Zambia in transporting essential supplies to and from that country during a period of isolation during the last few years. We should point out that Lockheed has developed worthwhile spinoffs based on aerospace technology, such as information systems for State governments, hospital information systems, education programs, low cost housing systems, ocean systems projects, including off-shore oil exploration and deep submergence vehicles. We also have developed an attractive line of computers and computer elements for the civilian market based on technology first developed for defense applications. In summary, Lockheed has long been engaged in both conversion and spinoff efforts. Our experiences have been mixed, and we feel that we should continue. But we should do it only as the market can be adequately defined. To do otherwise would be an inefficient and unwise use of resources. 3. What financial or governmental obstacles have you encountered in "spinoff" or conversion? Obstacles differ in each case. In some of our conversion activities, such factors as very heavy financing requirements, long payout periods, different engineering and manufacturing requirements and extensive market development work are all important obstacles which basically can be treated as financial obstacles. Problems related to work with government "social" programs include fragmented customer structures, such as differing city, county, and State governments, complicated by partial funding and direction from the Federal Government, widely divergent funding methods, and most importantly, lack of a clearly identifiable customer with experience on how to buy sophisticated products and services. 4. Are there products, systems or techniques on the drawing boards of private industry that could be directly applied to the solution of urban problems? If so, what is holding them back? We have many ideas and products applicable to urban needs, such as housing, transportation systems, traffic control, crime prevention, education, and medical care. We are encouraged about the drug education program which was developed by our scientists at the Lockheed Missiles & Space Co. This program, which includes 15 hours of study and involvement by teenage students, examines the problem of drug usage among their peers. This program is being sold to high schools around the country at a minimal cost per student. Initial reports indicate excellent acceptance. The drug education program was developed by skilled 49-327 0-70-5 systems personnel originally employed to solve defense needs. We consider this to be a satisfactory spinoff. On the question of what is holding us back, we find that lack of sufficient research and development funds and lack of consistent, early program sponsorship are two major problems. Another is that the market is fragmented and usually involves public funds with attendant inconsistancies of financial management and ever-present political pressures. In general, society is not well structured institutionally to create the kind of broad market required to support major development and production on programs designed to assist urban problems. We are, however, encouraged that the Department of Transportation and the Department of Housing and Urban Development are moving to sponsor and support programs aimed at solving urban problems. 5. Would a guaranteed market-or any other Federal action-improve this situation? The concept of a guaranteed market does not exist in the defense business. We have never asked for a guaranteed market and we believe that healthy competition will produce the best product at the best cost, and is by far the preferred approach. If any government or Federal action is warranted, we feel that the model housing program by HUD is a good example of encouraging a market without guaranteeing it. Another way in which the Federal Government can encourage industry to participate in solution of urban problems is by establishment of standards such as those set by the Bureau of Standards for all to meet in the marketplace. Federal Government action to cut through detrimental institutional practices such as archaic building codes are urgently needed. 6. How should the guaranteed market work? What financial arrangements would be necessary and for how long a period of time? We do not believe in a guaranteed market. 7. Which areas of public need do you feel can best be met by government? We believe that State, local, and Federal governments are addressing the problems of public need. We would encourage their further efforts, and suggest that they work in concert with private industry to meet these needs. There are many "mixed" areas which can be attacked by joint government-industry effort, such as housing, transportation, pollution abatement, utility services, medical care, training, waste disposal and recreation. It occurs to us that many of our universities have depended on Government research grants to provide a part of their financial support; however, student and other pressures have forced the universities to cut back this form of research, thereby adding to their already heavy financial burdens. We urge the government to consider asking our colleges and universities to perform research in such areas as social sciences, environmental pollution, transportation, housing and many other areas of broad public concern to offset these problems and to properly utilize a vital national resource. Hon. ABRAHAM RIBICOFF, LING-TEMCO-VOUGHT, INC., Chairman, Subcommittee on Executive Reorganization, U.S. Senate, Washington, D.C. DEAR SENATOR RIBICOFF: Thank you for the opportunity to comment on S. 1285, a bill to create a National Economic Conversion. Commission. I am in full agreement with the stated purpose of the bill-to begin exploring ways of converting the skills, products, and technologies developed in our defense and space programs for civilian uses. Your objective of learning what contributions private industry might make to domestic projects if the Federal Government provided for those projects the kind of support it has provided for defense/space programs is certainly a commendable goal. I have little doubt that private industry can make significant contributions to the solution of some of our domestic problems. At the same time, however, I believe that there is a tendency on the part of the public to underestimate the extreme complexity of some of our country's urban problems. I would like to illustrate this point by pointing out that defense and space programs, by and large, involve the design and construction of hardware systems to meet generally well defined performance and operating specifications. As you know, industry has demonstrated a high degree of competence in developing extremely sophisticated hardware to meet exacting specifications. In contrast, many of our domestic problems are almost totally "people centered" rather than "hardware centered." Because of that, the solution to such problems may demand fundamental changes in the way people respond to their personal needs. Such problems cannot be solved by the hardware capabilities of private industry. For example, a modern high-speed urban transportation system, although technologically attainable, may not be effective in relieving traffic congestion if many people continue driving their automobiles as a matter of personal convenience. I suspect that a close examination of most of our domestic problems would reveal the significant areas in which no amount of private industry expertise can provide solutions. In regard to your specific questions,' my comments are as follows. 1. As I have stated, the intent of the proposed bill is commendable. I would suggest, however, that the term "economic conversion capability" used in the bill be defined more specifically. With regard to the bill's provision that defense contractors be required to define their capability for converting manpower, facilities and many other resources from military to civilian uses, I must question the purpose and value of that requirement. It would appear that it would impose an unnecessary burden on contractors who are already overburdened with time consuming and costly reporting and documentation requirements. It would, of course, increase overhead costs which would be reflected ultimately in higher defense costs to the Government. As a defense contractor, I can assure you that we are vitally concerned with reducing costs and must oppose any measure that would increase costs unnecessarily. 1 The questions that were asked by the subcommittee staff can be found in letter dated Aug. 26, 1969, p. 13, of this committee print. |