Senator PROXMIRE. Aren't you in the position in the Department of Defense where you would normally be acquainted with proposals to the Congress of this kind?

Mr. CLEMENTS. Yes, sir. I would be, and more particularly, in regard to this conflict of interest issue and this whole matter about which we are discussing here this morning I have that direct responsibility and for legislation to be proposed that would interface with that particular charge of responsibility I can't imagine that our position would be contradictory to what I am telling you.

Senator PROXMIRE. All right, sir. Well, I will have my staff work with your staff so we are sure we know exactly what we're talking about, the time it was requested and give you all the details so that we can explore it.

Mr. CLEMENTS. I would appreciate that. [See Appendix IV (K), p. 436.]

Senator PROXMIRE. Yesterday Mr. Hampton, the Civil Service Commissioner, stated that in the case of executive interchange programs care must be exercised to assure that no official could go from the Government to any company that he could aid with inside information. Yet the Navy sent a contract price analyst from the Naval Air Systems Command to work for Northrop during the midst of the F-18 competition.

Wouldn't he have had access to pricing data from Northrop's competitors on this program?

Mr. CLEMENTS. He could have, of course. I don't know that he would have had, but he could have had.

Senator PROXMIRE. Doesn't that at least indicate an appearance of unethical possibilities?

Mr. CLEMENTS. I think it certainly has the appearance of poor judgment, Senator Proxmire. I don't think that was well thought through.

Senator PROXMIRE. We will give you the details then and will you check that out and give us the facts on it?

Mr. CLEMENTS. I'd be pleased to receive that and we will check it

out.

[See Appendix IV (K), p. 436.]

Senator PROXMIRE. Mr. Secretary, I will just take a minute or two to conclude. I'd like to conclude this set of hearings on standards of conduct and conflict of interest by emphasizing the seriousness of the problem we are dealing with here. Hunting trips and sports tickets would not be a matter of concern if there were only a few isolated cases of poor judgment. It is the breadth of the company hospitality programs and the widespread acceptance of these costly "freebies" that causes our concern. We have found entertainment facilities operating throughout the country. The operation of these facilities raises questions about whether companies might go beyond mere hospitality, as they have done in many of their overseas marketing operations. It raises questions about whether government officials might be tempted to accept more than a few hunting trips or weekends at resorts. These are questions of the most serious kind, as Dr. Low and Mr. Clements have pointed out this morning.

We heard testimony yesterday that the companies do these things simply because everyone else in industry does them. That sounds dangerously like the justification for payments to foreign officials.

We also heard that entertainment and gratuities are merely a way of developing good will. We have to examine that closely. Good will is a bankable asset, to be drawn on when a company is looking for a favor in return. In the commercial world it is everyday practice, but in government contracting there are no disincentives to excessive entertainment, as there are in private business. There need to be lines drawn and distinctions made.

Besides that, gratuities are a one-way street when it comes to the government. Few, if any, civil servants could repay this lavish hospitality in kind. The recipient inevitably become the debtor with obligations to repay.

Testimony yesterday indicated that the companies receive no gain for their investment in hospitality. If that is so, then why do they do it?

If, on the other hand, entertainment is a profitable activity—if there is a quid pro quo-then the government ought to stop it.

Yesterday officials of North American Rockwell and Northrop indicated that they no longer are entertaining Federal officials. They are making the right decision and this is good news for the taxpayer. The committee will do its best to double check these assertions and to discover whether or not the same policy is being followed by other aerospace companies.

This kind of behind the scenes entertainment, cloaked in a deliberate policy of not keeping records and perhaps fed by charges to government contracts, has no place in government-industry relations. Lobbying is a proper function for citizen and businessmen alike. But the lobbying should be a matter of public record, by employment of registered lobbyists, and clearly in the public view.

Disclosure is therapeutic. If the corporations are doing nothing improper, then they should make public their records, the list of attendees, the associated costs, and the purpose for such entertainment. Let their stockholders be the judge of their corporate policies and let the public be aware of how they conduct their business.

Mr. Secretary, I want to thank you and I very, very much appreciate your tough and forceful position on conflict of interest and the very serious problem which confronts us. We do have some questions for the record. We would appreciate it if you would respond to those. [See additional questions, Appendix IV (H & L), pp. 427, 454.] Mr. CLEMENTS. Good. I'm pleased to have been here, Senator Proxmire, and I want to assure you, and I think you have sensed that, I feel just as strongly about this as you do.

Senator PROXMIRE. Thank you very much, sir.
The committee will stand adjourned.

[Whereupon, at 12:40 p.m., the hearing was adjourned.]

APPENDIX I

Hon. WILLIAM PROXMIRE,

U.S. CIVIL SERVICE COMMISSION,
Washington, D.C., February 10, 1976.

Vice Chairman, Joint Committee on Defense Production,
U.S. Senate, Washington, D.C.

DEAR SENATOR PROXMIRE: Enclosed are copies of correspondence relating to the investigation by the Civil Service Commission into alleged charges of favoritism in the hiring of former employees of Rockwell Corporation by the National Highway Traffic Safety Administration. You will recall that I offered to furnish this material to your Committee.

We are also returning the transcript as corrected.

I do appreciate the opportunity you gave me to appear before the Joint Committee.

In January 1973, the Subcommittee on Investigations, House Post Office
and Civil Service Committee, launched an inquiry into alleged irregu-
larities and abuses connected with name requests for high level (GS-13,
-14, and -15) positions. The thrust of the inquiry was to investigate
the substance of the allegations and determine if bona fide considera-
tion was actually given other eligible candidates in keeping with merit
concepts. The subcommittee focused its investigation on hires made
through the Washington Area Office during calendar years 1971 and 1972.
Three agencies, in particular, were singled out for close scrutiny:
(1) the National Highway Traffic Safety Administration, (2)
Administrative Office of the U.S. Courts, and (3) Department of the
Air Force.

The Commission staff fully cooperated with the inquiry, providing all
information requested, including two appearances before the subcommittee
to answer questions and provide a briefing on Senior Level examining pro-
cedures. We have now received the final report of the subcommittee
which, while acknowledging that certain steps have been taken to "strengthen
and improve" Senior Level examining procedures, recommends certain additional
actions be taken.

SUBCOMMITTEE FINDINGS

In brief, the subcommittee found that:

In NHTSA and the Administrative Office of the Courts there is
substantial evidence to support allegations of favoritism, pre-
selection, and questionable qualifications of name requests, and
that persons who filed in the open examination really had little
or no chance for meaningful employment consideration;

The practice of using panel members from the hiring agency "is
suspect," lending itself to abuse and loss of credibility for
the merit system. The subcommittee believes the use of panels
could be reduced by:

Keep Freedom in Your Future With U.S. Savings Bonds

CSC FORM 631
VEMBER 1961

1.

2.

Using Commission examiners rather than panel members from
hiring agencies, and

Closer scrutiny of name requests by the Commission. In
this connection, the subcommittee report implies we should
require agencies to disclose fully all circumstances lead-
ing to the submission of name requests (i.e., by providing
all internal correspondence about the name request, by
identifying previous associations between the name requested
person and employees of the agency, etc.).

COMMISSION RESPONSE

The Commission took several steps during the course of the subcommittee inquiry to assure job relatedness and adequate documentation of examining practices:

о Issued two bulletins to agencies (copies attached), and several internal letters outlining procedures and requirements aimed at strengthening the integrity of the examining process, and a special presentation to the LAG;

Arranged a pilot test in the Washington Area Office using
panel members from other than the hiring agency;

O Established a link between BRE and BPME to follow up on "questionable" cases;

Held conferences in Washington, Philadelphia, Dallas, and
San Francisco on documentation, selective certification, con-
sistency in rating, and other examining matters; and

By agreement between BRE and BPI, established a procedure for
checking the qualifications of those Senior Level hires made
through the Washington Area Office on whom a full field
investigation is conducted.

While the subcommittee generally commends these steps, it offers six additional recommendations and asks for a report on the results of the actions already taken.

SUBCOMMITTEE RECOMMENDATIONS

1. CSC should enlarge its examiner workforce in order to evaluate Senior Level requests in-house, except where we need subject matter expertise. When panels are necessary, we should exercise closer supervision over them.

2.

Requesting agencies should not be permitted to designate panel
members except when so requested by the CSC.