It was focusing in on the-did the members have any interest in the work they were reviewing?

Senator LEVIN. But weren't they paid a per diem by the United States Government for objective advice to us?

Mr. CARROLL. There was a contract price that reflected their daily work.

Senator LEVIN. Wasn't that $1,000 a day?

Mr. CARROLL. Well, the pricing was looked into――
Senator LEVIN. Were they paid a per diem?

Mr. CARROLL. I would have to answer that for the record, sir. I have not looked at it in a couple of years.

But it is my understanding they talked in terms of per diem, but the price was based on not only when they were meeting, but the work that they did away.

Senator LEVIN. Who paid the members of that Eastport Group? Mr. CARROLL. That was furnished by the Air Force through the University of Maryland.

Senator LEVIN. That was taxpayer dollars, wasn't it?

Mr. CARROLL. Absolutely.

Senator LEVIN. They were advising the U.S. Government, weren't they? Do we pay people to advise anyone else other than us?

Mr. CARROLL. Well, we do not pay them directly.

Senator LEVIN. They were receiving Government funds to give advice, were they not, to the SDIO?

Mr. CARROLL. Well, it was set up as a contract between the Air Force's Office of Scientific Research and the University. That is what they were trying to do.

Senator LEVIN. I am talking about the Eastport Group. The Eastport Group recommended that certain research be done, and it was paid by the Government, wasn't it?

Mr. CARROLL. Yes, sir, it was.

Senator LEVIN. They made the recommendation, and then two members of that group took some action. One member, Dr. Cohen, on behalf of his employer, ISI, files the proposal with ONR, and Dr. Lau, the other member of the Eastport Group, recommends that proposal be funded. Those are the two things that happened.

My question to you is: Don't you see an appearance problem? Mr. CARROLL. Well, the problem that I have is that I am not an expert in this field, but as I understand it, there are not too many people who do have the expertise in this networking of high speed computers.

Senator LEVIN. I understand that, but did Dr. Cohen, when he participated in the Eastport Group proceedings that led to the recommendation that that research be done, did he disqualify himself? Mr. CARROLL. No, sir, he did not.

Senator LEVIN. How do you know that? How do you know that he did not disqualify himself, by the way?

Mr. CARROLL. Well, there was a contract provision that required the people who were doing the review of the research at that time to certify that they did not have any interest in the proposals.

That certification was not done, so I assume there was no disqualification.

Senator LEVIN. OK, so as far as you know, he did not disqualify himself. Then, a few weeks after that recommendation comes out, his employer, we are talking about ISI, files an unsolicited proposal-and I am repeating this-with ONR, not making any reference to the ONR program, and it is funded for $5 million, and the officer reviewing it for ONR is his colleague on Eastport.

Now, I am telling you, this is one of the reasons we have FACA-so that we can make a matter of public record exactly what the interests are of the people who are giving us advice.

Maybe you do not want to answer the question. I will answer my own question. There is an appearance problem to me. There is an appearance problem. I am very much troubled when that kind of thing happens.

Now, maybe there is no alternative. Maybe Dr. Cohen is the only person who can give advice to the Government. And maybe his firm, or his entity, ISI, is the only one who can do the recommended research. Maybe. I doubt very much that that is true, by the way, because of what I will get to in a moment.

But if that is true, at least it ought to be public. It ought to be out there on the record. There ought to be disclosure forms. There ought to be ethics laws that apply.

Instead, what we have here-because Eastport never was covered by FACA-is we have them circumventing the very laws which were intended to avoid conflicts of interest.

Mr. CARROLL. Again, the people who made the decision at the time acted, I believe, in good faith. They went from one research organization to another as to how advice from outside the Government could be obtained, and that was the process they followed.

Senator LEVIN. Do you know why the ISI did not go to the SDIO for funds? Why did they go to ONR, since the SDIO had its own program it could have awarded money under? Do you know why ISI went to ONR?

Mr. CARROLL. At that time the SDI was just starting its contract organization.

Senator LEVIN. Do you know whether SDIO had contracting authority at that time?

Mr. CARROLL. I believe we got it in October of 1985. I do not know how many people we had at that time. It took awhile for that office to make its presence known.

But even today we still would look to the services that have certain expertise to do the contracting for us.

Senator LEVIN. But not under their "Broad Agency Announcement" procedures, would you?

Mr. CARROLL. We have our own broad agency announcement. Senator LEVIN. And the ISI proposal was submitted under a Broad Agency Announcement procedure, was it not?

Mr. CARROLL. Yes it was.

Senator LEVIN. OK. We are going to have to move on. Let me just get to one more contract. There was public outcry about the first contract. As I understand it, that contract was terminated or revised; is that correct?

Mr. CARROLL. Restructured, yes, sir.

Senator LEVIN. Restructured. Then the ONR issued a new Request For Proposals to continue that research. And as I understand

it, there were three companies who bid on that RFP and submitted proposals.

One was thrown out immediately as not being eligible. The ISI submitted a proposal for $6.3 million. There was another company called Sparta which submitted a proposal for $4 million. That is over $2 million less.

There was a three-person technical evaluation committee chaired by Dr. Lau. That is the same Dr. Lau. One evaluator, not Dr. Lau, praised Sparta's proposal, indicating it not only was responsive, but superior to ISI.

Yet the ONR contracting negotiator recommended that the contracting officer declare the Sparta proposal "non-responsive without any chance to receive this award." The director of ONR's contracts division decided that, "Based upon the technical evaluation report, and the negotiator's evaluation," only ISI was in the competitive range for the contract.

My question to you is, why was Sparta declared nonresponsive and not given even a chance to negotiate its own proposal? Do you know?

Mr. CARROLL. No. As I understand it--I do not know that it was the director of contracts, because as I understand it, when it got up to that level, they questioned the fact that there were no discussions, and they intend to follow that process.

Senator LEVIN. We received a letter from you on March 14th of this year which says-we are now talking about the second contract-that "the University of California has been selected for the award." Is that correct?

Mr. CARROLL. Well, it had been selected by the negotiating team. The award was still in review. That was my understanding that they had been selected for the award.

Senator LEVIN. What you are telling us today is that following the announcement of this hearing, that you are now going to review this entire matter?

Mr. CARROLL. Well, the Office of Naval Research, I believe, is, yes, sir.

Senator LEVIN. Are you going to supervise that in any way? This is SDIO money, isn't it?

Mr. CARROLL. That is correct. But I do not have a supervisory role to these agencies.

Senator LEVIN. We will ask the IG to do that. We will make part of the record the documents I have referred to so far, and we want to thank you all for coming.1

If you have any additional comments you want to make for the record, we would welcome them. The record will also be left open for Senator Glenn or any other member of the committee that might want to ask questions of you.

Again, we are grateful for your being here. Thank you.

The next witness will be Dr. David L. Parnas, who is a professor of computer and information sciences at Queens University in Ontario. Where in Ontario, may I ask?

Dr. PARNAS. Kingston, Ontario.

1 See p. 164 for selected documents related to SDIO and DOD advisory committees.

Senator LEVIN. Kingston, thank you.

Professor Parnas, you could sit right in the middle there where that mike is, so we can all hear you. Professor, we are going to need you, like our other witnesses, to summarize your testimony for us.

The entire testimony will be made part of the record.

TESTIMONY OF DAVID L. PARNAS, Ph.D., PROFESSOR OF COMPUTER AND INFORMATION SCIENCES, QUEEN'S UNIVERSITY, ONTARIO, CANADA1

Dr. PARNAS. Thank you very much, Mr. Levin. I must say that I am very glad that you are holding these hearings, and I am privileged to be able to contribute in some way.

I want to tell you that I am a computer scientist, one who has spent about 14 years of his life in various ways advising the Government while holding academic positions. But I am not a lawyer. I am not somebody that has studied conflict of interest.

And everything that I tell you will be based on my personal experience, but you cannot generalize it, because I do not know how typical my experience is.

I was appointed-well, let me put it this way, I am not sure of the technical term-but in May of 1985 I received a phone call from Dr. Mizell, at that time an employee of ONR, who asked me quite literally if I wanted to save the world from nuclear conflagration, and then told me that he would pay me $1,000 a day to do it, and that they were forming an advisory panel called the SDIO panel on computing in support of battle management, and they wanted me to serve that summer 18 days.

At that point the word, Eastport Group, was never mentioned. That is the same panel, however, that later became known as the Eastport Group.

After that phone call, I had several phone calls with Dr. Lau and also some communication by electronic mail. I learned the names of the other panelists and the dates, and both people repeatedly confirmed $1,000 a day plus expenses on a per day basis.

Just shortly before the first meeting-I believe the letter was dated June 5, 1985, about 2 months after the phone call-I received a letter from James Offut, a naval officer assigned to SDIO, and an assistant director at SDIO, which confirmed my membership on the panel; called it an advisory panel; gave it a vague charter, which was to advise the Government on how to spend lots of money.

There was no detailed description of what we were supposed to do, and there was no confirmation in that letter of the amount of payment. So as of that date, the amount of payment was only an oral agreement between myself, Dr. Lau and Dr. Mizell.

During the 2-month period before the first meeting, I thought over the arrangement, and I personally became concerned about conflict of interest. This was never brought up by them, but I was also at that time a part-time employee of the Naval Research Lab, which is under the ONR. And I was also under contract to TRW, which you may know to be a major SDIO contractor.

1 See p. 94 for Dr. Parnas' prepared statement.

And I called up Dr. Lau at one point and said, perhaps I cannot serve because I have a conflict of interest, because I have a project at NRL that could certainly benefit from funding from this source. His response, which I think was very prophetic, was that he was not worried about that kind of conflict of interest. He said everybody on the panel has that kind of conflict of interest, and went on to tell me that if we did not have projects of interest to SDIO, why would they want me on the panel.

My questions about conflict of interest continued when I listened to the advisory panel, because it became clear that each of the other panelists was making proposals for SDIO funding of work that they were either presently involved in or wanted to do.

When my turn came, and I was asked to make a proposal, I refused, saying that I had not yet learned enough about SDIO to know what the Government needed in that area. And then I was told, well, that is OK, just talk about the work you are doing that got you here.

And it was clear to me that there was no separation in their mind between talking about what you wanted funding for and advising the Government.

Another thing that bothered me was during one lunch, one of the other panelists whom you have not mentioned here, who was a TRW employee, or actually, a subsidiary of TRW, told me that he was not taking the $1,000 a day, because his job for TRW was going to Washington and trying to get word of good contracts to bid for, and he did not want to be paid twice for the same job.

So although he was a member of the panel, he was at least honest enough not to take the $1,000 a day, but I wondered how he could handle the conflict of interest inherent in that role.

I was asked by the letter to talk about the finances. I should point out that we only had a spoken agreement on the $1,000 a day, and as you probably know, after the first meeting, several weeks after the first meeting, I resigned from the panel, and I did not get paid.

I started trying to find out what was going on. I did not particularly want the payment for $1,000 a day, because I thought it could be argued that since I resigned I did not deserve it. But I wanted my expenses back. And I was told that they were having trouble getting the contract put through, and that in fact, they had tried to put it through as a noncompetitive contract for the University of Maryland, and then they were forced by what they called green eye shade guys to make it a competitive procurement.

And as far as I can tell, the actual contract did not go through until the panel had completed most of its work.

I ultimately received payment from the University of Maryland, and that was the only communication I ever had from the University of Maryland. They did not participate in the selection, and they were not even mentioned in the beginning.

As I said in my written testimony, there was a detailed discussion in which they said they did not know how I was going to be paid, and it did not matter.

One thing that I think should be important: It has been assumed that this is an expert panel. As a computer scientist, I can say that none of the people on the panel were the people that, I believe,

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