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small number of NASA employees at the higher grades have gone to work for aerospace industry and vice versa. In fiscal year 1975, for example, there were only three such employees who have gone into industry, less than 1 percent of the total 487 separations in these higher grades. I should mention in checking into those three, I found that one of them went to the California Institute of Technology as a professor, but nevertheless had to report this because the Jet Propulsion Laboratory of California Technical is a contractor of NASA.
Senator PROXMIRE. If Chairman Patman would let me interrupt at that point, this does look very good and very encouraging, but it's awfully hard to tell on the basis of the preceding witness' testimony whether this is an accurate and complete picture. How are you assured that these were the only former employees of NASA who went to work for contractors? Do you know where all of them went to work? Do you have a clear record on your former employees?
Dr. Low. Senator Proxmire, I cannot be 100 percent sure that we have the total numbers since the law places the responsibility in each individual to report. However, since NASA is a much smaller agency than the Department of Defense, we can do much more in terms of notifications and follow-up than apparently has been possible for the Department of Defense.
In the years 1971 to 1975, only 55 employees have reported going to the areospace industry in these higher grades. There may be a few errors in our numbers, but I don't expect that there are large discrepancies. We do follow up. We do post notifications-we do post requirements and regulations on bulletin boards. We informour contractors and we follow up individually by notifying people who leave NASA of the requirement to report.
Senator ProxMINE. Have you found any violations?
Senator PROXMIRE. You have no instance of an employee who has failed to comply with the law and indicate when he has worked for a contractor?
Dr. Low. I know of one instance where we reminded an employee before he was in actual violation. We have followed up in that way. We know of no instances of violations.
Senator PROXMIRE. So it would have been a violation if they had not filed, but you made sure that they did ?
Dr. Low. Yes, sir. In the same period of time, by the way, this last year, NASA hired 143 persons at grade 13 or above. Of this, 16 came from the major aerospace contractors. I should mention also that reports on these transfers are publicly available and are sent annually to the Congress.
I'd like to make two observations here. First, NASA employees going to industry, of course, are disqualified by law from representing a private company to NASA in areas which are under their responsibility while at NASA. Second, I believe that the interchange of people between NASA and industry is a healthy and extremely important one to the productivity, efficiency and success of our aeronautic and space programs. It is therefore NASA policy to include among its top management members a mix of career civil servants and managers with extensive industry experience.
I'd like to add in passing, Senator Proxmire, that in my view, this policy has contributed in a major way toward NASA's excellent productivity record which you noted in your statement of January 2.
In closing, Mr. Chairman and Senator Proxmire, let me say that NASA regards as serious and most unfortunate the violations of our standards of conduct regulations, which I have mentioned. The public has a right to demand that we conduct our affairs without even a hint of impropriety or scandal. The actions we are taking are designed specifically to protect against such occurrences in the future. Perhaps the most unfortunate aspect of recent events is that the actions of a few could create a doubt in the minds of the public concerning the remaining thousands of NASA employees who have conducted themselves over the years in strict adherence to the letter and to the spirit of NASA's standards of conduct.
Dr. Fletcher and I are determined to do whatever is necessary not to let this happen again. Thank you, Mr. Chairman.
[Prepared statement of Dr. Low follows:)
STATEMENT OF DR. GEORGE M. Low, DEPUTY ADMINISTRATOR,
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
Mr. Chairman, Mr. Vice Chairman and members of the committee, my appearance before the Committee this morning, in response to Senator Proxmire's letter of January 14, 1976, will supplement the information that NASA has already given to the Committee and its staff on NASA's actions in response to news media articles that senior Government officials visited hunting facilities as guests of aerospace contractors.
When the articles regarding defense contractors first appeared last September, NASA initiated a number of actions ;
First, NASA's General Counsel and our Director of Inspections and Security promptly contacted officials of the Defense Department to voice our concern in this matter, to offer our full cooperation in DoD's investigation, and to request that DoD inform us if in its investigation it was found that any NASA employee was in any way involved. I confirmed those discussions with a letter to the Deputy Secretary of Defense, and in his response, Mr. Clements promised to keep us informed of any involvement of NASA employees.
Second, I directed NASA's Office of Inspections and Security to initiate an investigation to determine the extent to which NASA employees were entertained by NASA contractors by way of gifts, tickets to sporting or cultural events, vacation trips, or invitations to hunting lodges. Although that investigation is still underway, we have completed a major portion of it and on December 30, 1975, the NASA General Counsel forwarded a report on it to the Department of Justice with the request that we be advised whether, in the Department's opinion, any of the reported instances documented in the report warrants the institution of criminal proceedings.
We were advised verbally on January 15, and in writing on January 23 that attorneys in the Justice Department were still reviewing the matter to determine the desirability and scope of further investigative or prosecutive action. But the Assistant Attorney General stated his view that meanwhile administrative disciplinary action by NASA would not interfere with any actions undertaken by the Department.
A copy of the report that we sent to the Department of Justice was sent to the Committee on January 16 so that the Committee staff could review it.
Third, we have taken disciplinary action against those NASA employees who, in violation of NASA's regulations, acted improperly in accepting invitations to hunting lodges. Acting under a special delegation from me, the Assistant Administrator for Personnel Programs has issued formal letters of reprimand to seven NASA employees found to have visited hunting lodges as guests of aerospace contractors. These letters constitute official personnel actions under the Civil Service system. I will discuss additional disciplinary actions later in my statement.
Fourth, I undertook with the General Counsel a thorough review of NASA's Standards of Conduct regulations with a view toward developing more specific guidance to NASA employees. As a result of that effort, we decided that there was a need to clarify and generally to restrict the regulations concerning the acceptance by NASA employees of anything of value from private concerns doing or seeking business with NASA. On January 19, 1976, a complete revision of that part of our regulations was published in the Federal Register and a copy sent to each NASA employee. Copies of that revision and my forwarding memorandum a re attached to my statement as Appendix A. (p. 90].
Finally, we are amending our procurement regulations to require that all future NASA contracts in excess of $1 million include a Standards of Conduct Certification. To be able to make that certification the contractor and his major subcontractors must have established (1) a written company policy providing for appropriate dissemination of NASA's regulations concerning the acceptance of gifts, (2) a code of conduct for company employees observing the restrictions on NASA employees, and (3) disciplinary procedures for any company employee responsible for causing a violation of the company policy. The company policy would be available for review by NASA.
A draft of the certification is attached to my statement as Appendix B [p 94]. We have forwarded that draft to the Office of Federal Procurement Policy with the suggestion that they review it for possible application Government-wide, and a proposed NASA procurement directive based on the draft is now being prepared for publication in the Federal Register.
With that as an introduction, let me now turn to the specific matters listed in Senator Proxmire's January 14 letter and address each separately.
STANDARDS OF CONDUCT REGULATIONS In amending our Standards of Conduct regulations we defined more precisely the general rule prohibiting the acceptance by a NASA employee or his spouse or minor child, from a private person or organization having relationships with NASA, of any gift, gratuity, entertainment (including food, refreshments, tickets or invitations to performances and other events), favors, loans, trans. portation, accommodations, or any other thing of monetary value. And we tightened up significantly the exceptions to that general rule. For example, the so-called “business-lunch" exception is now limited to the acceptance of food and soft drinks only in a contractor's plant when the conduct of official business will be facilitated and when no provision can be made for individual payment. Otherwise, a NASA employee may not accept food or refreshments from a contractor, even if official business is transacted. Other exceptions are also severely limited and clearly defined in the new regulations; employees are cautioned that the exceptions are to be strictly construed. Under the new regulations, the Office of Inspections and Security will continue to have the responsibility to receive and investigate alleged violations of the Standards of Conduct.
RESULTS OF NASA'S INVESTIGATION The investigative report that we sent to the Department of Justice and provided to the Committee staff records the interviews of 75 NASA employees and other officials detailed to NASA. The interviews were conducted by the Office of Inspections and Security between October 1 and December 8, 1975. Those selected for this initial group of interviews include all top management officials at NASA Headquarters as well as those named by various sources, including the staff of this Committee, as having hunted as guests of the Northrop Corporation or Rockwell International Corporation.
In these interviews, 13 current NASA employees or detailees and one former NASA employee acknowledged that they had hunted as guests of either Northrop or Rockwell while they were employed by or detailed to NASA. One current NASA official acknowledges hunting as a guest of Northrop while at DOD.
Actions taken with respect to these 13 employees are as follows: 7 received formal written reprimands; 2 received letters of censure; 2 received verbal reprimands; and 2 cases are under further investigation.
In addition, the investigation identified 14 employees who accepted tickets for sporting events and the like from NASA contractors. Eleven of these received
verbal reprimands. We determined that the remaining three were not in violation of our then-existing Standards of Conduct regulations.
POSSIBLE IMPACT OF CONTRACTOR ENTERTAINMENT ON COXTRACT AWARDS COSTS
In Senator Proxmire's letter of January 14, reference is made to the possible impact that contractor entertainment of Federal officials may have had on contract awards and costs.
With respect to the selection of contractors, I am convinced that the safeguards and the checks and balances built into NASA's rigorous Source Evaluation Board (SEB) procedures used for major dollar procurements (over $1 million) make it virtually fail-safe.
At the first level in the SEB process, a number of Government experts from NASA and often from other agencies analyze and evaluate hundreds of discrete elements concerning the business or technical aspects of the contractors' proposals. They report their findings to the SEB itself or more often to special committees of the SEB, which in turn report to the SEB. The record thus created supports and documents the overall analyses and evaluations presented on the record by the SEB to the selecting officials.
In our large procurements, the final SEB report is the work product of so many separate employees of NASA and perhaps other agencies, often more than a hundred, that the ability of any one or even several employees improperly to influence the result is just about impossible. Throughout the process the findings of the SEB are subjected to and must withstand challenge and crossexamination as to their adequacy and accuracy. The final selecting official, while required to exercise his judgment in considering various trade-offs among costs and technical and other factors, is constrained in his selection options by the findings of the SEB and the supporting record. And his decision, which in major procurements is reached in consultation with two other senior officials, must be reduced to writing and must be able to withstand scrutiny by the GAO and even the courts. Nothing uncovered in our investigation would lead us to conclude that any contract award was, or even could have been, improperly biased.
With respect to any impact on contract costs resulting from contractors entertaining Federal officials, I understand that there are a number of actions underway, taken by this Committee, by the Defense Contract Audit Agency (DCAA) and by the General Accounting Office (GAO). Since its inception, NASA has followed the Federal "one-face-to-industry” concept in the audit of costs incurred by its contractors. Because DCAA is the cognizant audit agency for the aerospace contractors with which we do business, that agency performs all audits of these contractors for NASA.
We have been advised that the DCAA, in addition to its review of the Northrop Corporation, has expanded its review of the Washington office activities of eight other contractors for the possible incurrence of gratuity and entertainment expenses. Those contractors are: Boeing, General Dynamics, Hughes, Lockheed. Martin-Marietta, Raytheon, Rockwell International and Sperry. These reviews are all still in process and no interim reports have been issued.
We also have been informed that the GAO is beginning its reviews of the questionnaires that this Committee sent to a number of companies. We are in contact with the DCAA and will review the result of its audits, and we will look to the results of the Committee's and GAO's efforts, when they are available, to gauge the adequacy of the steps we have already taken and to determine whether other actions would be desirable.
INTERCHANGE OF PERSONNEL BETWEEN NASA AND AEROSPACE COMPANIES
Section 2462 of Title 42 of the U.S. Code requires the registration of persons moving from NASA to NASA's major contractors and vice versa. Under that law, NASA maintains records going back to fiscal year 1971 on (1) all report. ing NASA employees at grade GS-13 or higher who within the previous three fiscal years were employed at an annual salary of $15,000 or higher by a major contractor, i.e., one awarded $10 million or more in the reporting fiscal year, and (2) all reporting former NASA employees who were at GS-13 or higher within the previous three fiscal years and who were employed by a major contractor within the reporting fiscal year at $15,000 per year or higher. Those records
are publicly available and I am told that they were recently reviewed by the staff of this Committee. Reports based on the NASA records are submitted annually by NASA to the President of the Senate and the Speaker of the House and to NASA's two authorizing committees.
Under the law, the responsibility is on each individual to register and criminal sanctions are provided for failure to do so. NASA has an active program to give adequate notice of the requirement, within NASA and within the private companies falling within the $10 million threshold.
Historically, very few NASA employees separating at GS-13 and above report going to middle or high level jobs with the firms covered by the reporting requirements. In FY 1975, for example, there were only three such employees, less than 1% of the total of 487 separations at GS-13 and above. During the five-year period of the reports, FY 1971 - FY 1975, there were only 55 of a total of 3,141 separations from NASA at GS-13 and above, or less than 2%. Of course these employees are disqualified by law from representing a private company to NASA in areas which were under their responsibility while with NASA. The disqualifications are either for one year, or forever, depending upon the nature of their former responsibility.
With respect to movements the other way, i.e., from major aerospace firms to NASA, the reported data are comparable. During FY 1975, NASA hired 143 persons at grade GS-13 and above; of these, 16 report coming from major contractors. And during the five-year period, FY 1971 - FY 1975, 65 reported such employment, out of a total of 543 accessions at GS-13 and above.
Since aerospace engineers are, by training and experience, qualified to work either on the Government side or the aerospace industry side of defense, space and aeronautics programs, and since their choices beyond those opportunities are somewbat limited, I believe the numbers I have given are surprisingly low, certainly not cause for any action or further restrictions. Moreover, NASA has always had a policy, which I believe is sound, to include in its top management a mix of career civil servants and managers with extensive industry experience. In my view this policy has contributed in a major way toward NASA's excellent management record which Senator Proxmire noted in his January 2 press release.
EFFECT OF THE "CWAS” PROGRAM ON CONTRACTOR COSTS You asked that NASA provide in this hearing information on NASA's participation in the DOD program known as the Contractor's Weighted Average Share in Cost Risk (CWAS).
NASA has not incorporated CWAS provisions in our procurement regulations and we do not plan to do so. The basis for our position is our concern with the validity of the underlying premise that contract costs can be assumed to be reasonable based on the extent of the contractor's commercial and fixed price business.
In the interest of uniformity in dealing with our major contractors, however, NASA agreed in 1967 to observe CWAS ratings approved by DOD on a case-bycase basis. This was to be done after first determining that the extent of NASA involvement and other factors did not warrant any NASA objections to the application of a CWAS rating to a particular profit center. Even in such cases, however, we have never felt compelled to accept a cost which we believed to be unreasonable solely because the contractor was CWAS qualified.
We are informed that DOD is reviewing its CWAS program criteria in the area of consultants' fees and related matters, and we will, of course, be interested in the results of that effort.
In closing, Mr. Chairman, let me say that NASA regards as serious and unfortunate the violations of our Standards of Conduct which I have mentioned. The public has a right to demand that we conduct our affairs without even a hint of impropriety or scandal. The actions we are taking are designed specifically to protect against such occurrences in the future.
Perhaps the most unfortunate aspect of the recent publicity is that the actions of a few couid create a doubt in the minds of the public concerning the remaining thousands of NASA employees who have conducted themselves over the years in strict adherence to the letter and the spirit of NASA's Standards of Conduct.
Mr. Chairman, this concludes my prepared statement.