Senator SYMINGTON. The way I understand it, you feel that by giving the Air Force authority to design and construct somewhere between $60 million and $100 million per year, you would severely reduce the efficiency of the present design and construction agents. Is this correct?

Mr. SHILLITO. I don't know whether I would say severely reduce the efficiency but on balance I would say that is a correct statement, Mr. Chairman, yes, sir.

Senator SYMINGTON. We note in the department there have been ups and downs, ranging from $200 million to $400 million per year. It is difficult to see how taking away $60 million to $100 million, per year, could make them inefficient. Would you comment on that?

Mr. SHILLITO. I would like to suggest that with this recommendation in the BRAB report that we would be well advised to await the responses, the staffing of the report, in that, of course, one of the re-ponses will be as has been from the Secretary of the Air Force, and Secretary Seamans will as a result of that response very specifically touch on a few of these points. I, too, would like very much to obtain his position as regards these points, Mr. Chairman.

Senator SYMINGTON. Thank you.

Would you furnish this committee the number of military civilians employed in design and construction of the military construction pro- . gram by the Army Corps of Engineers and the Naval Facilities Engineering Command? We would appreciate the numbers at each level from the districts up through the Washington level, for the fiscal years 1968 through 1971.

Mr. SHILLITO. We will,

(The information follows:)

The number of Corps of Engineers and Naval Facilities Engineering Command employees involved in design and construction of the military construction program are as follows:

1 Excludes military personnel assigned to construction field offices in Vietnam and Thailand, which averaged approxi

mately 100 officers during this period.

Senator SYMINGTON. Thank you. I notice in the discussion of inhouse as against the work to outside architects and engineering firms the comments of the BRAB on that.

We had a letter from someone who questioned the way these contractors are chosen. These are cost plus contracts, are they not in effect? Mr. SHILLITO. Most architect and engineering contracts are lump sum. They are minimum risk type contracts, Mr. Chairman.

Senator SYMINGTON. And some people feel that special preference is given to certain contractors. How do you pick these contractors when there is no competition?

Mr. SHILLITO. Mr. Chairman, the contractors are selected on the basis of the most qualified contractor to do that particular job and the individual service awarding the contract that we are concerned with, the architect and engineering contract we are concerned with, goes into great detail in making the selection.

Now about a year and a half ago I made quite a point relative to architect and engineering contractor selection. I might mention that this led to a very extensive test. I don't recall how long that test ran but it was about 6 to 8 months. I was pretty much the stimulant of this test and it was supported by the General Accounting Office. My feelings, which I still believe to be the case, were that the selection of architect and engineering contracting should be awarded on a technical basis and architect and engineering contracting firms should be required to submit technical competitive proposals.

Senator SYMINGTON. You say architect and engineering.

Mr. SHILLITO. Architect and engineering firms should be required to submit technical competitive proposals and that the award then should be made, and that all qualified firms or firms believing they were qualified should have the opportunity to submit such proposals and that the award then should be made after careful analysis on the part of the awarding service. The award then should be made on a technical basis.

Concurrent with their submittal of their technical proposals, it was my recommendation, as a result of this study, that the architect and engineering firms competing also submit their estimates to do the job but that the estimates not be the basis for making the award. We had planned to test this approach and it was recommended by the Congress that we pretty much stay with the approach that we have been using over the years rather than going further with the test. I frankly still believe, Mr. Chairman, that we should have gone ahead with the test.

Senator SYMINGTON. Would you file for the record your concept of what that test would be?

Mr. SHILLITO. I will indeed.

(The information follows:)

The background of the Architect-Engineer (A-E) selection test and the proposed procedure are described below.

DoD contracts for A-E services over the past years have been awarded on the basis of negotiations rather than on the basis of price competition. Basically, a Selection Board reviews the qualifications and other factors relating to the ability of A-E firms to perform the required work and establishes a slate of at least three firms in order of preference. Price negotiations based on a government estimate and cost information submitted by the A-E are then conducted with the first firm. If negotiations with the firm are unsuccessful, negotiations are

then conducted on a sequential basis to the next firms on the slate until a contract is awarded. A-E contracts are normally awarded on a fixed price basis. In a report of April 1967, the GAO among other items concluded that the DoD method of procuring A-E services did not comply with 10 USC 2304 (g) which requires that proposals be solicited from the maximum number of qualified sources consistent with the nature and requirements of the services to be procured and discussion held with all offerers who submit proposals within a competitive range price and other factors considered. The DoD position was that the statute permits selection on the basis of technical ability when the members of the profession reject price competition and that pending clarification by Congress, it was planned to continue the present practice.

This matter lay dormant until December 1969 when due to renewed interest by both GAO and Congress, a study was initiated within DoD on A-E contracting and completed in May 1970. Among many recommendations contained in the study report was a suggestion that a new selection procedure be tried under which A-E firms would provide technical proposals accompanied by a sealed envelope containing an estimate of price. Under this system a Selection Board would place a minimum of three firms in order of preference based on an evaluation of qualifications and technical proposals. The sealed envelope containing the prices would then be opened and a decision made as to whether the order of selection should be changed based on the price estimate provided by the A-E firms. A one-year test of this revised selection procedure was scheduled to start in two field offices of the construction agencies in August 1970.

The A-E profession strongly opposed the tests primarily on the basis that (a) price would become the dominant factor in the selection process, and (b) the furnishing of technical proposals involved considerable costs. This opposition reached Congressional levels resulting in two actions: (1) language was included in Section 604 of the FY 1971 Military Construction Authorization Act P.L. 91-511 stating that A-E contracting "unless specifically authorized by the Congress shall continue to be awarded in accordance with presently established procedures, customs and practices" and (2) H.R. 16443 was passed by the House which would essentially provide a system for A-E contracting comparable to that currently being practiced by DoD. However, the legislation would permit obtaining alternative conceptual designs from A-E's to assist in selection. H.R. 16443 was approved by the Senate Government Operations Committee near the end of the 91st Congress, but did not reach a floor vote. Among the items discussed by the Congressional Committees in their review of A-E procurement practices was the matter of the current 6% statutory limitation on A-E fees. The Committees considered that this should be retained and therefore H.R. 16443 made no modifications to this limitation on fees.

In view of the Congressional action, the test proposal of revised A-E procedures was withdrawn on October 15, 1970. No action is planned to change the present provision in Section 604, P.L. 91-511, and procurement of A-E services will continue essentially as in the past.

Recommendations of the study group which would improve A-E practices within the general framework of the basic policy are being implemented. No further modifications on A-E contracting are planned at this time.

The matter of procurement of A-E services is one of the areas currently under review by the Commission on Government Procurement.

Senator SYMINGTON. Apparently in any community there are at least some architects and engineers that have what you call a fair advantage in this field over the years.

Mr. SHILLITO. Yes, sir.

Senator SYMINGTON. And actually when you choose them, regardless of the quality of the job they do, in effect you are guaranteeing them a return, are you

not?

Mr. SHILLITO. You indeed do.

Senator SYMINGTON. Why do you think it is that a relatively few numbers of companies, considering the total number of architects and engineers, over and over again get so many contracts from the Department of Defense?

Mr. SHILLITO. I think your experience would cause you to develop the same conclusion that I would have here, Mr. Chairman, and that is, when you are thinking of awarding architect-engineering contracts, a contract that ties to the need for highly qualified, technically competent people, a consulting contract, you look at the competency of the people, frequently comparatively few that you really want to do the job that you are concerned with.

Senator SYMINGTON. But it is public money that you are distributing. Mr. SHILLITO. Yes, sir.

Senator SYMINGTON. I found, as a former businessman, that often instead of going to a law firm with 86 names in it, if you found a good young hungry lawyer

Mr. SHILLITO. Yes, sir.

Senator SYMINGTON. You could get a better job perhaps than if the senior partner in a law firm assigned it to some clerk who was in there because he was a cousin of one of the other senior partners. Do you understand my point?

Mr. SHILLITO. Yes, sir.

Senator SYMINGTON. I just wonder why some companies are so consistently I wouldn't want to use the word inadvisably-"favored" as there really isn't any competition; and inasmuch as our resources are limited, I would be very interested in what your competitive suggestion

was.

Mr. SHILLITO. Yes, sir, Mr. Chairman. If we may, we will give you a complete recap of the study that we conducted of the tests that we had planned to run and how this was put together and our reasons as to why we felt this was a logical thing to test. We believe that our recommendations warranted consideration.

Senator SYMINGTON. Under present procedures you can be more judicious, as I understand it. Is that correct?

Mr. SHILLITO. Yes, sir.

Senator SYMINGTON. You have stated that you could not accept the Air Force costs because of the differences in the accounting systems, and the opinion that the Air Force does not include all the costs associated with design and construction. It should be relatively simple to run an audit on the work you give the Air Force and prove out what the actual costs are.

Mr. SHILLITO. There is no reason at all why we can't do that, Mr. Chairman. In fact, that is exactly what we did, along with other considerations in arriving at the recommendation to not give one or two of the projects that have been under consideration to the Air Force.

Senator SYMINGTON. We gather you concluded that giving the Air Force the work they asked for would so increase the total costs of doing business at any particular base, that even their commitments for reduced costs could not offset it. Is this correct?

Mr. SHILLITO. The total cost; yes, Mr. Chairman.

Senator SYMINGTON. Thank you. Did you make an analysis of what these increased costs would be at the time your decision on the Air Force requests was made?

Mr. SHILLITO. We did.

Senator SYMINGTON. Would you file that for the record?

Mr. SHILLITO. As best we can, Mr. Chairman, we will.

(The information follows:)

The extent of the analysis conducted is shown in the insert for the record contained earlier in the transcript. Because of the innumerable impacts of pro and con decisions considered in the analysis (e.g., cost for transfers and/or reduction-in-force for civil service employees by the construction agents at their field offices affected) quantifiable costs were not developed.

Senator SYMINGTON. Thank you.

The report shows also that it cost the Army 142 percent to handle its own work, but they charged the Air Force 17.1 percent. The Navy did its own work for 12.2 percent, but charged the Army 13.1 percent and the Air Force 13.3 percent.

The Air Force handled its work for 12.6 percent. In all frankness wouldn't this indicate it is more cost effective for each agency to do its own work?

Mr. SHILLITO. It would cause me to believe each of these particular instances should be looked at and, as you indicated earlier, the elements reviewed and determination made, sir.

Senator SYMINGTON. Thank you.

We will now take up title 7 of the bill which relates to the general provisions. For the most part they are identical to those of prior years. We will address ourselves only to the two provisions; namely, 705 and 707, where changes are proposed.

Section 705 (a) continues in effect the previously established policy of repealing military construction authorization that has not been used within a specified period after enactment-about 2 years. This year you are proposing an amendment to make it clear that all unused NATO infrastructure authorizations are not automatically repealed. Will you explain why you believe this is necessary?

Mr. SHILLITO. Yes; I would like to have Mr. Sheridan cover these segments.

Mr. SHERIDAN. That is because of the peculiar manner in which the NATO infrastructure projects are funded where each NATO country contributes a portion of the funds and it is different than the way our normal construction projects are authorized. There is a question in the way the law is written now, according to our legal advice, as to the automatic repeal of NATO infrastructure unless this new language is included by the Congress solely for the purpose of protecting the commitments of the United States.

Senator SYMINGTON. It always has been that way, hasn't it?

Mr. SHERIDAN. It has been that way but the question has arisen. Senator SYMINGTON. How much infrastructure authorization is outstanding at this time?

Mr. SHERIDAN. We will have to furnish that for the record. (The information follows:)

As of July 1, 1971, unused authorization will be $53.4 million.

Senator SYMINGTON. What is it, roughly?

Mr. SHILLITO. Approximately $50 million.

Senator SYMINGTON. In section 704, you propose three changes in existing law. The first would amend section 2674(a), title 10, United States Code, the minor construction authority, by eliminating, for