In November 1967, a clean bill, H.R. 12510, was introduced by Mr. Holifield and six other members of the Committee on Government Operations Mr. Blatnik, Mr. Reuss, Mr. Rosenthal, Mr. Erlenborn, Mr. Edwards of Alabama, and Mr. Horton. This bill was reported by the Committee on Government Operations on November 6, 1967. No further action was taken.3

[H. Rept. No. 1796, 89th Cong., second sess.]

DEFENSE CONTRACT AUDITS (REORGANIZATION OF
THE DEFENSE ACCOUNTING AND AUDITING DIVI-
SION OF THE GENERAL ACCOUNTING OFFICE)
Thirty-Fifth Report by the Committee on Government Operations
(Submitted to the Speaker August 2, 1966)

This is a followup to House Report No. 1344, reporting developments bearing upon GAO organization and operations. It contains no new recommendations.

By letter of April 18, 1966, Comptroller General Staats informed the committee that the Defense Accounting and Auditing Division would be reorganized on a functional basis, with the following eight subdivisions:

Research and Development
Procurement

Supply Management

Manpower

Facilities and Construction

Support Services

Management Control Systems

Program Direction and Evaluation

The functional reorganization of the Defense Accounting and Auditing Division was expected to result in greater ease, efficiency and adequacy of coordination of audit review with the work of the policy officials in the Department of Defense and the military departments.

The International Operations Division of GAO was expanded by the addition of an office in Saigon, Vietnam, in order to review the large and growing expenditures of U.S. funds in that area.

Establishment of a Vietnam office was expected to produce new and adequate review of expenditures in that war zone area so that cost controls could be adequately established both for foreign aid and military programs even as the fighting continued in that country. The report also took note of the fact that the committee's intent in House Report No. 1344 with respect to a 6-year statute of limitations to run against the Government, equal to that applying to contractor claimants against the Government, had been carried out by the enactment of H.R. 13652 and the signing of Public Law 89-505 on July 18, 1966.

Subsequently, in the 91st Congress, the bill was reintroduced as H.R. 474, passed by the House on September 23, 1969, and by the Senate on September 26, 1969.

The new statute of limitations places the Government and private claimants on an equal footing, and requires that the rights of the Government be identified and established as quickly as possible by the appropriate Government officials. It would permit contractors to manage corporate finances with reasonable certainty after allowing for the period of time for contingencies to arise.

[H. Rept. No. 2318, 89th Cong., second sess.]

GOVERNMENT USE OF SATELLITE COMMUNICATIONS Forty-Third Report by the Committee on Government Operations

(Submitted to the Speaker October 19, 1966)

This report examines recent developments in Government use of satellite communications, particularly the procurement of 30 satellite circuits by the Department of Defense, the procurement of communications services for the Apollo program by NASA, and the arrangements being made by Comsat to provide such circuits through the so-called Intelsat II satellites.

The report also reviews steps being taken to provide the initial Defense communications satellite system, to plan for the advanced Defense communications satellite program, and to develop a tactical satellite communications system.

There are complex issues in the Government procurement of satellite services from Comsat. DOD made a direct contract with Comsat Corp. to provide 30 circuits, notwithstanding an FCC decision that the Government should, except in unique and exceptional circumstances, contract through the established U.S. international carriers. FCC pointed out to the committee that carriers other than Comsat can offer composite cable and satellite circuit rates which will bring substantial savings to the Government as a user of such services, and to other private customers as well.

The report reviews the many facets of the procurement negotiations, the policy implications, and the statutory requirements. Also discussed is the question of obtaining operational use from NASA applications technology satellites, the proposal by Comsat to FAA for a special air traffic control communications satellite, and the need for coordinated Government telecommunications management.

Fourteen days of public hearings were held in August and September 1966, and were printed and published in October 1966.

RECOMMENDATIONS

INITIAL SYSTEM READINESS (Recommendation 1):

To serve urgent communications needs to South Vietnam and other points in the Far East, the Department of Defense should take all possible steps to bring to a state of operational readiness its initial military system for satellite communications. The most immediate, pressing problem is to correct the deficiencies in transportable ground stations and to place operable terminals

at required overseas points. The committee endorses the recent action taken by the Army during our hearings to give top priority to critical components for these terminals.

Results.-DOD declared the Pacific portion of the IDCSP network an operational asset on July 1, 1967.

CAPACITY EXPANSION (Recommendation 2):

The initial system, for which $112 million has been obligated through fiscal year 1966, was designed with too limited capacity. Despite the large investment, the system is designed to provide only two voice or a "handful" of data circuits. There are options to expand this capacity with comparatively modest extra cost by redesign of ground and space equipment, or by adding terminals and satellites beyond those scheduled. Some capacity expansion will be obtained by improvement or redesign of ground terminals, now underway. The committee recommends that the Department of Defense expand the capacity of the initial system 10 to 20 times by an optimum combination of capacity expansion factors. Results. IDCSP capacity was upgraded by an improvement program. For the larger ground stations, this produced a capacity of 12 channels per link, instead of two.

SYSTEM REPLENISHMENT AND UPGRADING (Recommendation 3):

The initial system, planned with research and development objectives in mind, will be replaced by an advanced, operational system by 1970. It is important in the intervening period to maintain initial system replenishment by providing necessary boosters and satellites and timely launches for continuous effective operations, particularly after the research and development objectives have been achieved. The committee recommends that the initial system be replenished and upgraded for continued useful service until an advanced system is in operation.

Results. The committee's intent has been carried out. Replenishment launches brought the usable IDCSP satellite population to 25 in August 1968. The satellites have 6-year cutoff switches, and the follow-on system is being planned to meet the deadline so imposed.

ADVANCED SYSTEM CAPACITY (Recommendation 4):

The advanced system, for which six preliminary configuration studies have been made under contract, and which will enter the contract definition phase in fiscal year 1967 upon approval by the Joint Chiefs of Staff and the Secretary of Defense, will also be a multi-million-dollar project. To insure that the advanced system effectively meets essential military needs and yields a better return on the taxpayers' investment, the committee recommends that the system be designed and built to provide a significant fraction of military traffic. The system should have a capacity of at least 100 to 200 voice-grade circuits to major overseas points of

interest. The military needs its own hardcore system of secure, reliable, flexible, and survivable communications not affected by the business, labor, and international complexities and incidents of commercial operations. At the same time, as satellite and cable technologies advance, and commercial capacity expands to meet growing traffic needs, the military can be expected to continue relying on commercial sources for the bulk of its routine communications.

Results. The design criteria for an advanced system have been altered several times. However, the subcommittee objectives are being substantially met.

TACTICAL SYSTEM DEVELOPMENT (Recommendation 5):

In accord with an earlier committee recommendation, the Department of Defense is developing a tactical system of satellite communications for use by combat and other field units with small mobile terminals in jeeps, trucks, aircraft, ships, and submarines. Program management, at this stage, is the responsibility of a triservice steering group. In view of the great importance of tactical satellite communications for future military effectiveness, consideration should be given now to strengthening the management of the program and giving it surer direction. The committee believes the program should have a project-office-type organization, with full representation by the military services. This office should be appropriately located in an existing Defenselevel agency or military department.

Results.-DOD plans to introduce a project organization when the project is far enough developed. The executive steering group has continued to function.

PROCUREMENT OF COMMERCIAL SATELLITE SERVICES (Recommendation 6):

There is a clash of policy within the Government between the Department of Defense and the Federal Communications Commission regarding the procurement of satellite services from Comsat. The issue of whether Comsat is to be mainly a carrier's carrier or to supply services directly whenever the Government orders them. The committee recommends that the DCA assign the Comsat contract to one or more U.S. international carriers, based upon an across-the-board substantial reduction in charges for satellite and cable circuits in the Pacific area. Carriers have declared their willingness to make such reductions if the contract is assigned. An assignment of the contract would have these advantages: (a) The Department of Defense would realize substantial net savings from a reduced composite rate for satellite and cable services; (b) these savings to the Government might well be doubled because of the strong probability that foreign carriers would make commensurate rate reductions for their portion of the circuits; (c) Comsat would suffer no loss in revenues since it would supply, through Intelsat, the space segment services in any case; (d) the action would accord with the con

sidered decision of the U.S. regulatory agency; (e) more harmonious relationships among Government agencies and within industry would be promoted.

Results. After many delays in the installation and conditioning of service, and difficulties in apportioning the circuits among the commercial carriers, the contract was assigned and transferred on May 1, 1968.

The composite rate approach which the committee endorsed in the report introduced a general rate reduction in the form of a single rate for both satellite and cable circuits. It produced very substantial savings for the Government because of the large numbers of cable circuits presently under lease. Since the Government policy is to purchase cable as well as satellite circuits in order to provide reliable assurance that some circuits will always be available, these cable circuits will not be abandoned even if satellite circuits are leased. FCC economic analysis for the committee shows that about $10.5 million will be saved by present proposals for composite satellitecable rates in the Pacific area, on a yearly basis, for all Government users alone. On a 3-year basis, which is simply the 3-year basis of present satellite-circuit contracts, this savings is $31.5 million.

Generally, in utilities and communications (rate regulated) industry matters, a 10-year basis is used for cost comparisons. On this basis, the savings for the Government alone would be $105 million for the Pacific area.

For other commercial users, the potential savings are small in the Pacific area because there are few leased circuits in that area. They amount, according to the FCC estimates, only to about $1.5 million over 3 years, or $5 million over 10 years.

EXTENSION OF RATE REDUCTIONS (Recommendation 7):

The Department of Defense, as a major user of cable circuits across the Atlantic as well as the Pacific and as a substantial contributor to the gross revenues of the international carriers, believes that cable circuit charges are too high. Earlier it petitioned the FCC to take action looking toward lower cable rates; and certain reductions worldwide, which took effect October 1, will save the Government $1 million, and double that amount if foreign carriers follow suit. The Department believes that additional substantial reductions should be made. The committee recommends that the FCC take appropriate action to promote rate reductions for Atlantic cable services. Such rate reductions in the traffic-heavy Atlantic not only would yield larger savings to non-Government as well as Government users but hold forth the promise of doubled savings to both by encouraging foreign carriers to reduce their rates commensurately. If these efforts are not successful, the Department of Defense should consider diverting a portion of its Atlantic communications traffic to an expanded military satellite system.

To insure that satellite economies are appropriately reflected in tariff adjustments of this type, the FCC may require increased staff and resources to examine the public and governmental