in private industry who supply components and services for the communications satellite systems." The fact that, under the Satellite Act, the corporation will be the only direct U.S. participant in the international communications satellite system, does not justify the inequity involved in requiring the corporation to pay for benefits of NASA research while permitting other private American companies to benefit from such research without paying for it. For the corporation will not be a monopoly in any meaningful sense: the satellite system, when established, will compete with other means of telecommunications for the business of international communications. Moreover, under the provisions of the Satellite Act, it is possible that the corporation will not have a monopoly in any sense with respect to satellite terminal stations in the United States-essential elements in the satellite system. Section 201 (c) (7) of the Satellite Act provides that it is for the Federal Communications Commission to determine, in terms of the public interest, convenience and necessity, whether satellite terminal stations are to be constructed and operated by the corporation or by one or more authorized communications common carriers or by the corporation and one or more such carriers jointly. The act further provides that the Commission shall authorize the construction and operation of satellite terminal stations by the corporation or communications common carriers, "without preference to either." It is entirely possible under these provisions of the Satellite Act that, not only may the corporation not have a monopoly on the construction and operation of satellite terminal stations, but that some or even all such stations will be constructed and operated by private American companies other than the corporation. Private companies would also benefit from the development and manufacture of hardware for the entire system, and the NASA communications satellite research program will assist in providing a basis for such a capability. Thus, the benefits of the NASA program will be widely dispersed, and the inequity of requiring that the corporation alone pay for such benefits is clear. The carrying out of a requirement that the corporation pay for the benefits, as determined by the NASA Administrator, of NASA research programs, would also be subject to a number of serious practical difficulties. First, precisely because many of the technologies being pursued in the NASA communications satellite research program "are of general and urgent interest in many other areas of space flight, exploration and application," the benefits will flow in many directions and as a practical matter it would not be possible for the NASA Administrator, or anyone else, to determine in monetary terms the benefits of the program which are benefits to the corporation, or to distinguish benefits to the corporation from benefits to other private American companies, or to distinguish benefits to all private American companies from benefits to other phases of the national space program. Second, by the very nature of research, the benefits derived from a particular research program may not be ascertainable for an indefinite period, and determination of each year's benefits at the end of the year, as though the benefits were a kind of inventory of shoes, is an approach which ignores the nature of research and the nature of the benefits of research. Third, the proposed requirement that the corporation pay for the benefits of NASA research is not accompanied by a suggestion that the corporation have a voice in deciding the research which NASA will carry out. We think it would not be in the national interest (or in the interest of the corporation) for the corporation to decide the nature of NASA's research programs. In this regard, the provisions of section 201(b) of the Satellite Act, providing for consultation and cooperation between the corporation and NASA with respect to research, reflect the approach which we think is the right one. But without an effective voice in the determination of the research work that NASA will do, the corporation would be in the untenable position of being obligated to pay for research which it did not request, over the nature and costs of which it will have no control and which the corporation may consider is of no benefit to it. For apparently it is the intention that the NASA Administrator will determine, not only the value of the benefits received by the corporation, but will also determine, without reference to any standards, the question whether the corporation has received any benefit from a particular NASA research activity. The inclusion of the proposed language in the NASA Authorization Act would also contravene the clear intent of the Congress as evidenced by the provisions of the Satellite Act and the legislative history of that act. Section 201 (b) of the Satellite Act directs NASA to carry out certain activities "in order to achieve the objectives and carry out the purposes" of the act. An examination of the specific provisions relating to the activities required to be carried out by NASA makes it clear that it was anticipated that the corporation would reimburse NASA for certain of those activities (those described in subparagraphs (3), (5), and (6) of sec. 201(b)). These activities, specifically stated to be reimbursable, are those relating to the furnishing of satellite-launching services or the furnishing of other services "in connection with the establishment and operation of the system." The NASA activities specified in section 201(b) of the Satellite Act as reimbursable by the corporation do not include research and development activities. The provisions of section 201 (b) which contemplate that NASA will carry out research and development activities (i.e., subparagraphs (1), (2), and (4)) do not make any mention of reimbursement by the corporation. They contemplate that NASA will carry out such activities, period. The words of section 201(b), defining NASA's responsibilities under the Satellite Act, make it clear that, when the Congress intended that the corporation should reimburse NASA for certain activities, it said so specifically. The introduction of the concept that NASA research activities should be paid for other than by NASA would in effect be an amendment of the Satellite Act through the mechanism of NASA authorization legislation. The conclusion that under the act, NASA's research and development activities are to be paid for by NASA is supported not only by the specific language of section 201(b) of the act, but also by the nature of certain of the research activities which it was contemplated NASA would undertake. It makes perfectly good sense for the Satellite Act to say, as it does, that the corporation shall reimburse NASA for satellite-launching services and for other services requested by the corporation in connection with the establishment and operation of the system. These are activities which are specifically oriented toward the corporation and which do not contribute to any national space program except the program for a communications satellite system. It was clearly contemplated, however, that the research and development activities to be conducted by NASA would be activities of many possible applications and of benefit to many different phases of the national space program. For example, in testifying, on April 11, 1962, before the Subcommittee on Antitrust and Monopoly of the Senate Judiciary Committee, Dr. Dryden, Deputy Administrator of NASA, referred to the contemplated NASA research and development program as follows: "There will be continuing research and development in the communications satellite field by the Government. The Government is interested in it because of applications within the Government itself as well as because of the commercial applications of satellites." SEC. 201. In order to achieve the objectives and to carry out the purposes of this Act "(b) the National Aeronautics and Space Administration shall— "(1) advise the Commission on technical characteristics of the communications satellite system; "(2) cooperate with the corporation in research and development to the extent deemed appropriate by the Administration in the public interest; "(3) assist the corporation in the conduct of its research and development program by furnishing to the corporation, when requested, on a reimbursable basis, such satellite launching and associated services as the Administration deems necessary for the most expeditious and economical development of the communications satellite system; "(4) consult with the corporation with respect to the technical characteristics of the communications satellite system; “(5) furnish to the corporation, on request and on a reimbursable basis, satellite launching and associated services required for the establishment, operation, and maintenance of the communications satellite system approved by the Commission; and The Satellite Act, of course, does not treat the phrases "establishment and operation" of the system and "research and development" as meaning the same thing. There is a specific definition of "research and development" (sec. 103(5)) which clearly shows the understanding and intention that "research and development" refer to activity preliminary to the establishment and operation of the system. "(6) to the extent feasible, furnish other services, on a reimbursable basis, to the corporation in connection with the establishment and operation of the system." [Emphasis supplied.] We appreciate your interest and your willingness to spend the time with us today. Thank you. Dr. CHARYK. Thank you. Mr. WELCH. Thank you. (Whereupon, at 12 noon, the subcommittee was adjourned.) 1964 NASA AUTHORIZATION THURSDAY, MAY 2, 1963 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON APPLICATIONS AND TRACKING AND DATA ACQUISITION, The subcommittee met at 10 a.m., in room 214-B, Longworth Building, Hon. Ken Hechler presiding. Mr. HECHLER. The committee will be in order. This morning, in continuing our hearing on the NASA authorizations, we discuss the important areas of procurement methods and policies. This committee is interested in insuring that the policies and procedures are in the public interest, that small business is properly protected, and that NASA pursue an effective and efficient course in obligating the authorized funds. This committee is also interested in obtaining information on the distribution of contract dollars with nonprofit organizations, in contracts through other Government agencies, and some of the results of the incentive contract methods. We are very pleased to have with us this morning, Mr. Ernest W. Brackett, Director, Procurement and Supply Division, NASA; we are pleased to welcome you here, Mr. Brackett, and you may proceed with your prepared statement. Mr. BRACKETT. Thank you, sir. STATEMENT OF ERNEST W. BRACKETT, DIRECTOR, PROCUREMENT AND SUPPLY DIVISION, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION Mr. BRACKETT. Mr. Chairman and members of the subcommittee: Since NASA became an operating agency, its procurement functions have become increasingly important. During fiscal year 1962, approximately 90 percent of funds appropriated by the Congress were spent by contracts as compared to 64 percent in fiscal year 1960. In fiscal year 1964, the percentage of funds going to contractors may increase further. NASA appreciates its responsibility to see that this money is spent prudently, economically, and in accordance with the intent and policies laid down by the Congress and the President. DECENTRALIZATION OF NASA'S PROCUREMENT OPERATIONS Each of NASA's Centers place contracts in support of the projects assigned to their cognizance. Four other NASA offices also do contracting for the agency. The Jet Propulsion Laboratory is operated |