BENEFITS TO INDUSTRY FROM MODULE

Mrs. HANSEN. To what extent would private industry benefit by the construction of this module?

Dr. WONG. If we constructed this module we conduct our operating tests. I think the data will be opened up to be utilized by all of the industry. They will be tremendously beneficial and will open a new field for them.

COSTS TO INDUSTRY OF OSW TECHNOLOGY

Mrs. HANSEN. In the event this module is constructed and should prove successful, what license or fees would you charge private industry for their use of any research break-through that might be achieved?

Dr. WONG. I think that under the law we could not charge them any royalty, is that correct?

Mr. O'MEARA. There wouldn't be a royalty assigned to it.

Mrs. HANSEN. You are only interested in developing a fair price for the people of the United States.

Mr. O'MEARA. That is right. We are not interested in what industry gains, we are interested in the price we can make water available to the people of the United States.

Mrs. HANSEN. I am sure you are aware of the constant criticism about where the tax dollar is going. I think it is important for the people to understand that part of their future depends upon the investments that are made today for research on the total water problem. Would you contract for the construction of the module? Mr. O'MEARA. Yes, sir.

SELECTION OF MODULE CONTRACTOR

Mrs. HANSEN. What procedure would you follow in selecting the contractor?

Dr. WONG. If you recall, we would ask the industry to give us a design. In other words they have to tell us what they think and why this way, what philosophy, what methodology, what approach they are using and then after they tell us the design philosophy we would like to have a fixed, cost construction contract which will also include operating costs.

Mrs. HANSEN. You appraise the suitability of their designs and their proposals?

Dr. WONG. That is correct. Then we will have an operational contract and then they will have the construction and will have to guarantee the performance.

Mrs. HANSEN. For 5 years?

Dr. WONG. At least for, we are thinking 2 or 3 years, at least. We believe the people who meet the contract should demonstrate their capability not necessarily to be the lowest costs. I don't believe that the lowest cost is the important factor. I believe the best for the money, so it is not necessarily that the dollar be the only measure.

Mrs. HANSEN. Do you anticipate this will be a negotiated contract on a cost-plus-fixed-fee basis or will it be awarded on a competitive basis?

Dr. WONG. I think fixed cost.

Mrs. HANSEN. Negotiated contract?
Dr. WONG. Yes.

Mrs. HANSEN. Does the awarding of the contract depend on the ability of the contractor to perform certain tasks?

Dr. WONG. Yes.

Mrs. HANSEN. Does the awarding of the contract also depend on the contractor's experience?

Dr. WONG. Correct, and how much money or how much experience they have put in and maybe they have prepared themselves better than another contractor.

EFFECT OF MODULE ON OTHER RESEARCH

Mrs. HANSEN. If this module should prove to be successful, to what extent would that tend to reduce your research efforts on other desalinization processes?

Dr. WONG. I would believe that this will not necessarily reduce our other areas of research effort because we are continuously on the lookout for better processes. Now, this is distillation but we still continue to forge ahead on this reverse osmosis.

Mr. HANSEN. Are the desalinization programs going to continue so that it is a constantly improving process?

Dr. WONG. I believe so.

ADMINISTRATION RESTRICTION ON CONSTRUCTION

Mrs. HANSEN. The administration has currently placed a 75-percent holdback on all new construction projects. What assurance can you give the committee that this project will not be similarly restricted in fiscal year 1971?

Mr. O'MEARA. Our type of development work has not been considered a construction project under the terms of the rules that were established by the Bureau of the Budget. This is research and development effort and not a construction project.

Dr. WONG. It is not construction.

Mr. WYATT. What about the science laboratory in Corvalis, Madam Chairman? That is research and development.

Mrs. HANSEN. We have several labs in that category.

Mr. O'MEARA. They have included laboratory facilities, but this is a piece of experimental equipment.

Mr. HITE. This is the difference.

Mrs. HANSEN. How did that happen?

Mr. HITE. These guidelines are more or less clearly spelled out in the BOB Circular 70-5 which posed the construction freeze on us.

Mrs. HANSEN. Will you please insert a copy of that document in the record.

Mr. HITE. I would be happy to furnish it.

Mrs. HANSEN. I am sure you would.

1. Purpose. This Bulletin sets forth procedures and guidelines for achieving the reduction in construction announced in the President's statement of September 4, 1969 (see attached copy). The President has directed a 75% reduction in new contracts for government construction and has strongly urged State and local governments to follow the example of the Federal Government by cutting back temporarily on their own construction plans including, very importantly, federally assisted projects. This Bulletin requires submission to the Bureau of the Budget by each agency of (a) a plan for reduction of Federal construction and monthly reports on results of operations under the plan, and (b) a listing, by month, of the Federal share of State and local public works, under present plans, and monthly reports on actual amounts of obligations or contracts awarded.

2.

Coverage. This Bulletin applies to direct Federal construction and to lease contracts providing for construction · of buildings specifically for Government use. For this purpose, "direct Federal construction" is defined as all direct public works activities--both civil and national defense--included in table P-2 of the special analysis on public works of the 1970 budget (pages 232-238 of the "Special Analyses" volume). Separable land acquisition, equipment, and design and planning contracts related to construction are excluded; however, obligations for these purposes should maintain a reasonable relationship to construction plans. Lease-construction projects will be included in the plan for the agency responsible for the contract, even though the building may be for sole occupancy by another agency. Reductions are to be accomplished by deferring the initiation of new contracts for construction (including additions or major alterations to existing facilities) and for leaseconstruction of new buildings for Government use and new projects to be constructed by Federal employees ("force account" work).

Excepted and excluded from the deferral policy, and from the base from which the 75% reduction is to be calculated, are only the following:

a. Obligations for overseas construction covering (1) the purchase of local labor and materials (including the use of excess foreign currencies) and (2) the purchase of U. S. labor and materials for urgently required in-country operations in Viet-Nam.

b. Restoration of facilities damaged or destroyed by fire, flood or other natural disasters.

C. Forest Service and Bureau of Land Management construction related to efforts to hold down lumber prices.

d. Urgently needed Indian schools.

e.

Facilities producing electric power that will deliver power on-line by January 1, 1973.

f. New construction determined by the Secretary of Defense to be urgently required for the national security, upon concurrence by the Director of the Bureau of the Budget and approval by the President.

Agency heads are expected to comply with this deferral policy without requesting specific exceptions for additional meritorious projects. The allowance of 25% of initially planned funds for new construction is intended, in part, to make an exception or appeal procedure unnecessary. Within the 25% allowance, preference should be given to projects of the highest social priority; i.e., programs designed to alleviate critical, identified social needs which are of the greatest immediate importance to the safety and well-being of our people. For those agencies with only one or two construction projects, when compliance with the President's directive would require 100% deferral, the agency head may propose an alternative deferral plan to the Bureau of the Budget if such an alternative is required to protect the Government's interest or investment.

3. General guidance. It is intended that 75% of the dollar amounts for all new direct Federal construction and for lease-construction projects planned to be started after September 4, 1969, be deferred for an indefinite period of time. Each agency will:

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submit a month-by-month plan for the fiscal year 1970, identifying construction actions consistent with the April 15, 1969, budget totals, and

reduce by 75% or more the dollar volume of the actions scheduled from September 5 through June 30.

This reduction is to be applied on an agency-wide basis (not necessarily on a bureau-by-bureau or appropriationby-appropriation basis). The reduction should be applied to direct Federal construction planned under the April 15, 1969, budget totals, adjusted for changes, if any, in estimated unobligated balances at the start and end of the year. For lease-construction projects, the reduction should be applied to the total cost of buildings to be constructed under contracts estimated to be entered into after September 4, 1969. The reduction may include construction which has already been planned for deferral (since April 15) as part of the action taken by the agency to control 1970 outlays pursuant to Bureau of the Budget Bulletin No. 70-3 dated July 31, 1969. Deferrals will be made on a month-by-month basis in such a way that at least a 75% reduction on a cumulative basis will have occurred at the end of each month.

In planning for periods beyond June 1970--and in case the President terminates the deferral period earlier, for the months after the end of the deferral period--agencies should not plan to schedule construction work later to make up (or catch up) for the time lost during the deferral period.

4. Federal construction reduction plan. Six copies of plans in the form illustrated by the attached Exhibit 1 covering direct Federal public works and lease-construction, will be submitted to the Bureau of the Budget not later than September 26, 1969. The plan for the agency as a whole should be supported by a plan for each bureau or comparable organizational unit which has construction activities. The Bureau of the Budget will request such additional data from time to time as may be required.

The plan will be prepared as follows (see Exhibit 1):

Section A. Summary

Amount columns

Column (a) will contain amounts consistent with the budget plan announced on April 15, 1969, with adjustments for differences, if any, between estimated and actual unobligated balances at the start of the year and between prior and