Mr. BROOKS. The House had approved $781 million.

Mr. HODGES. I think that's it.

You

Mr. BROOKS. The original request was about $818 million. decided to waive $18 million and try and go for $800 million in the Senate?

Mr. HODGES. That's right. Then we find the supplemental came in within 2 weeks after that, too late to go to the House; we had to bring in about as much on a supplemental as we had saved before. Mr. BROOKS. That leaves your position now requesting what? You are going to stay with the $800, roughly?

Mr. HODGES. With the supplemental we would be about where we first started with the House, roughly.

Mr. BROOKS. Back to the $18 million?

Mr. HODGES. That's right, primarily because of the supplemental. Most of that extra, Mr. Chairman, out of the $18 million, about $14 million of it, was for Maritime for building more ships.

Mr. BROOKS. These figures are based on the annual, on the 1963 fiscal annual basis, but we have had some supplemental appropriations in the meantime. Are they adjusted to compensate for that? Mr. WALLHAUSER. Mr. Chairman, may I ask a question? Mr. BROOKS. Certainly.

Mr. WALLHAUSER. In which departments did the House Appropriations Subcommittee delete or suggest deletion of employees? Mr. HODGES. Mr. Klotz?

Mr. KLOTZ. Sir, they did not suggest deletion of present employees, they just

Mr. WALLHAUSER. I'm glad to have Mr. Klotz answer this. They did reduce the number of new requests by appropriations?

Mr. KLOTZ. Of new requests, that's correct, but that was pretty much across the board.

Mr. WALLHAUSER. It was an across the board.

Mr. KLOTZ. Not in every agency. For instance, they eliminated entirely, totally, our request for new positions in general administrauon, that included all our requests for the vastly expanded efforts in the international field, export expansion, trade missions, trade fairs, and so on and so forth.

All our requests there were cut a hundred percent, or eliminated a hundred percent, whereas in some of the other bureaus the cuts were not quite so drastic, but they were more or less across the board. Mr. WALLHAUSER. Did the House subcommittee give a percentage reduction, do you believe?

Mr. KLOTZ. No, sir; they did not.

Mr. WALLHAUSER. They analyzed, in other words, your request for new jobs, didn't they, before they suggested the reduction? Mr. KLOTZ. Yes, indeed.

Mr. WALLHAUSER. All right.

Mr. BROOKS. Governor, could you lower the Senate request if you got this 10-percent authority? That is, this authority to transfer a certain percentage of your people from one agency to another? Mr. HODGES. The answer would be I don't think we could immediately at the time of this particular budget. I think this 10-percent or the flexibility or consolidated appropriations, depending on whatever terminology you use, simply gives us a chance with incentive of getting down into the bureaus and deciding what we could eliminate.

Mr. BROOKS. Of course, in practice, Governor, don't most secretaries assign personnel in many instances for specific duties from one area to another when the load in one area increases?

Mr. HODGES. I would say not half enough.

Mr. BROOKS. If Congress has adjourned and the workload in one area should increase significantly certainly you would feel justified, and be justified, in transferring some people, assigning them over there because they would still be paid in X Division, they would work in Y Division.

Mr. HODGES. I think, sir, on a temporary basis.

Mr. BROOKS. Now, Governor, in view of your statements about this situation do you think that the present staff could be expected to absorb some of these new duties that we have been talking about? Mr. HODGES. Well, I'm sure that if we went at it hard enough there could be some of that. I don't know how much. I would not think substantially so. I would think that the average agency, bureau head, several of them are in the audience, conscientiously put down the number of people they think are needed, the extra people that are needed. I think what the average one of us, including them, does not do is to go back and ask himself the question every 6 or 12 months, should this thing continue like it is? I think that is found not to be done.

MARITIME ADMINISTRATION

Mr. BROOKS. Well, Mr. Secretary, one other question on a separate subject.

On June 28 we sent a letter to the Maritime requesting a complete review of the 1961 GAO report; one particular question raised by the General Accounting Office pertains to Maritime's refusal to check the ships contract bids which under law had to be determined reasonable before they could be approved. Now, after your personal review of this problem, which I know you have had a chance to take a look at now, has any corrective action been taken on this?

Mr. PRINCE. Yes; there has. As a matter of fact, the recommendation dealt with contractual allocations; those contracts which are not given to the responsive low bidder but for reasons under laws and regulations are allowed to be allocated.

There was back in a GAO report several years ago a criticism of the administration for not checking the arithmetical accuracy of these contracts which are allocated. I don't think that there have been any-let me answer your question directly any contracts in the future that are allocated, the arithmetic will be checked. Mr. BROOKS. Before they are approved.

Mr. PRINCE. Before they are approved by anybody.

Mr. KLOTZ. I believe that the case you refer to, Mr. Chairman, goes back to 1958. That was the contract allocation that your letter referred to.

Mr. BROOKS. Right. They had not checked them since. I would like to submit that letter for the record.

(The document is as follows:)

Hon. THOMAS E. STAKEM, Jr.,
Chairman, Maritime Commission,
Washington, D.C.

JUNE 28, 1962.

DEAR MR. STAKEM: On April 17, 1961, the former Federal Maritime Board issued comments on the Comptroller General's report of March 1961, concerning certain construction differential subsidy and related ship-construction contracts. While several aspects of this report are still under subcommittee study, one particular point stressed in the Comptroller General's report merits comment and consideration at this time. On page 30 of the report, it was recommended that "where contracts are awarded through allocation, the details supporting the bids relating to such contracts be carefully examined to arrive at sound and realistic prices which are in keeping with the intended purposes of allocation." This recommendation arose after the General Accounting Office auditors discovered that the Board was deeming contracts allocated to specific yards for defense mobilization base purposes as "fair and equitable" without making a cost analysis of the contract price. This practice was discovered after substantial errors were found in the arithmetical computation of a successful bid under a contract allocated to a west coast shipyard pursuant to section 502(f) of the 1936 Merchant Marine Act. In explaining why the Maritime staff had not discovered such errors, which would have lowered the contract price, and thus affected the determination of whether this price was "fair and reasonable," the former Board asserted that it was subsequently found that the bid also contained other errors which counteracted those found by the General Accounting Office, and, therefore, "it seems purely speculative to conclude that by opening up negotiations on the price the only correction (in the contract price) would have been the one favoring the Government."

On the basis of this discovery, the General Accounting Office recommended that the Board undertake a detailed analysis of each potentially successful contract bid and to determine, on the basis of such an analysis, whether the price was "fair and reasonable" as required by the act. The former Board, however, objected to this procedure, and in its comments on the Comptroller General's report asserted that it would continue to rely upon various collateral criteria in determining the fairness and reasonableness of contract prices.

The subcommittee, after review of the former Board's position, recommends that immediate steps be taken altering present Commission policies not in keeping with the General Accounting Office's recommendations. It appears that the Board in an attempt to explain away an obvious inadequate review of the particular contracts in question distorted basic administrative and contract policies and procedures essential to the protection of the Government and to the long-range success of the programs involved.

If there were no statutory requirement that the price be "fair and reasonable" in contracts involving substantial sums, a thorough review of the successful bid or proposal should be made if for no other reason than to uncover arithmetical computation errors and other mistakes which affect contract price and which could, unless corrected, result in serious misunderstandings, including litigation.

Fundamentally, however, in view of the specific legislative direction requiring a determination that the price be "fair and reasonable," a thorough cost analysis must be made of specific bids or proposals which might culminate in the allocated award of a contract under section 502(f) to the Merchant Marine Act. Collateral determinations, interpolations, and the use of inadequate arbitrary "yardsticks" such as the 6-percent cost differential provided in section 502(d) of the act cannot be considered as adequate substitutes for such analysis.

Certain statements made by the Board merit specific comment. On page 14 of the Board's comments, it is stated that, "Experience and bidding has shown that there is a variation between low and high bids on many projects as much as 25 percent, and since bids prepared by the shipyard management take into account many business reasons not necessarily known to the Board, it is almost impossible to declare a certain bid to be too high or too low from the shipyard's point of view."

Even where there is a variation as high as 25 percent in the competitive bids received, the lowest bid is not necessarily a "fair and reasonable" price. Realistically, from a shipyard's point of view, a bid which has a calculated chance of being accepted is difficult to conceive as being "too high." Shipyards, like other businesses, often bid high or low for many reasons not directly related to cost, and bids often reflect many contingencies. After a decision has been made to allocate a particular contract, it would seem fair and reasonable for the Government to review and analyze the prospective contractor's estimated cost so as to

make reasonably certain that the contractor, in his own unique environment of labor and material costs, efficiency, contract backlog, and the multitude of other factors affecting price, has determined a price which is either fair and reasonable to the Government or can be negotiated to that level.

On page 15 of the Board's comments, the statement is made that "The Board may reasonably assume that bids of substantial yards are based upon a proper business judgment and computation by its management." Such an assumption by a Federal regulatory agency can open the way to lax enforcement of its responsibilities and costly errors of omission.

Lastly, the Board uses the 6-percent differential, which, under section 502(d), is the standard to be followed in the allocation of certain ship-construction contracts to higher cost west coast shipyards, as a means of comparing specific east coast bids, deemed to be "fair and reasonable," with specific bids submitted by west coast yards. In the Todd Shipyard bid, the Board simply urged Todd to reduce its contract price to within 6 percent of the lowest east coast bid which previously had been determined to be "fair and reasonable." The Board then concluded that the Todd bid was also "fair and reasonable" because it fell within this legislative standard adopted many years ago purely as a guide in the allocation of certain ship construction contracts to west coast yards. The 6-percent differential was used for a similar purpose in the National Steel case. The use of the differential contained in section 502(d), in this manner, is not appropriate. It was determined on the basis of a comparison of certain east and west coast ship construction cost averages. It was not intended, nor can it be used to compare or equate specific east and west coast contract bids for the purpose of determining the fairness and reasonableness of either.

Even if the use of such a differential percentage were appropriate, the Board knew, or should have known, at the time these contracts were executed in 1958, that the 6-percent figure contained in section 502(d) was no longer a reliable estimate of the differential. Certainly this fact was understood and appreciated by the Board in April 1961 when the Board's comments were prepared, as the Chairman of the Board had testified before the House Merchant Marine and Fisheries Committee in August 1959 that although the exact differential was difficult, if not impossible, of precise ascertainment, it was the opinion of the Board at that time that the differential amounted to about 4 percent.

In addition to a review of the former Board's position on the matter discussed here, it also is recommended that the Commission undertake a de novo review of the entire report in the light of other alterations which might be advisable in the former Board's conclusion. Looking forward to an early reply, I remain, Sincerely,

JACK BROOKS, Chairman.

DUPLICATION IN WEATHER FORECASTING

Mr. BROOKS. I would like to go into another subject now, Governor, that is, I'm certain, one of significance to you and to all of us who travel by plane occasionally. It concerns some problems connected with weather analyses, detailed in a report submitted to Congress in January 1962. We have some maps we want you to take look at, some charts on display concerning weather chart problems we will get to later. The GAO report stated that, based on its review of weather facilities of the Bureau's Hurricane Forecast Center and the Department of the Navy's Fleet Weather Facility at Miami, Fla., certain operations of the Navy pertaining to hurricane forecasting duplicated those of the Weather Bureau. The Weather Bureau and the Navy agreed that certain of the functions being duplicated by the Navy could be eliminated. However, with respect to the activities, the two agencies were in disagreement concerning the necessity of duplication.

În consideration of substantial savings that could result from elimination of all unnecessary duplication in hurricane forecasting activities in Miami, the GAO recommended that the Secretaries of Commerce

and Defense explore the necessity of continued duplication by the two agencies.

I wonder, have the two agencies studied the situation in Miami? Mr. HODGES. Yes, the Navy Center now is going to be housed directly next to the Office of the Weather Bureau, in November, when the space is available. I think that ought to eliminate the apparent duplication. Any detail on this, we have Dr. Cressman here, of the Meteorological Center of the Weather Bureau.

Mr. BROOKS. Doctor, why don't you come up? Get him a chair, and let him sit right here.

In the same report, Governor, you know the GAO stated that the Weather Bureau maintains two weather forecasting offices in Miami which could be consolidated with resultant savings in operating costs. The GAO proposed that you consider combining your two Weather Bureau offices and were advised that after such consideration that consolidations would be advantageous and would take place as soon as the space became available.

I wonder what the current status of this situation is?

Dr. CRESSMAN. Mr. Chairman, the two offices will be combined at the same time the facilities of the Navy and the Weather Bureau are consolidated in Miami. I believe that will be about November of this year.

Mr. BROOKS. Doctor, I'm sorry, did you say they have done it or are going to?

Dr. CRESSMAN. The two offices will be combined at the same time that the offices of the Navy and the Weather Bureau will be consolidated in Miami; I believe that will be about November of this year when space becomes available.

Mr. BROOKS. It has come to the attention of the subcommitteehere is a sample that you might use to refresh your memory, Doctor, and other detail.

It has come to the attention of this subcommittee that a similar situation exists with respect to the fleet numerical weather facility of the U.S. Naval Postgraduate School at Monterey, Calif. The Navy, in Monterey, has for some time been producing general weather forecasts and certain specialized types of forecasts that have been or can be produced by the Weather Bureau at its National Meteorological Center in Suitland, Md.

The subcommittee has obtained some information concerning the functions performed and the charts produced by the Navy in Monterey concerning which we would like your views, Mr. Secretary, and perhaps those of Dr. Cressman, who is an expert in the field, as to whether the Weather Bureau is now producing or can produce similar weather data?

Mr. CRESSMAN. Mr. Chairman, of this sample of charts that you have given me here all but four of these charts are either a basic product of the Weather Bureau that are produced routinely by the National Meteorological Center or can easily be obtained from the basic products from the National Meteorological Center. There are some slight differences in the charts but we consider them relatively minor.

An early form of two of these charts dealing with sea condition forecasts were prepared by the Weather Bureau for the Navy Fleet Weather Central at Suitland about 4 years ago; however, the Navy

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