magnitude of programs in these areas and the benefits which accrue to companies from such relationships, as well as their impact on Standards of Conduct Regulations and Conflict of Interest Laws. We are pleased to cooperate with the committee in this regard. It is our understanding that in today's hearing it is not the Joint Committee's intention to explore the details of corporate programs or cost claims.

Let me address myself first to the question of the company's policy regarding entertainment and gratuities. These words, of course, may mean different things to different people. Our company, like every company that I have ever heard of, engages to some extent in activities that may be regarded as falling in this category, but it has been the company's long-standing policy that such activities will be kept to a minimum and within the bounds of common courtesies consistent with ethical business conduct and with applicable laws and regulations, including DOD and NASA regulations. I think that some entertainment is a normal and usual concomitant of commercial business relationships, and that it serves useful purposes. I suggest that it also serves useful purposes in the relationships between Government contractors and agencies of the executive branch. I believe it significant that the applicable Executive Order and the DOD and NASA regulations included numerous exceptions to the general prohibition against entertainment and gratuities.

Among the exceptions which the Executive Order indicates may be appropriate are "acceptance of food and refreshments available. in the ordinary course of a luncheon or dinner meeting or other meeting" and situations involving "personal relationships where the circumstances make it clear that it is those relationships rather than the business of the persons concerned which are the motivating factors." So far as I am aware, these exceptions and some of the others embodied in agency regulations have not been defined in detail.

As an example, the DOD regulations have permitted acceptance of entertainment, gratuities, et cetera, in situations "in which, in the judgment of the individual concerned, the Government's interest will be served by participation by DOD personnel in activities at the expense of a defense contractor," provided an appropriate report is made by the DOD individual involved.

For these reasons the regulations may well have been construed more broadly than intended and resulted in commonly accepted practices which were not thought to be improper under the regulations. Moreover, so far as I am aware, there were no statements by the procurement agencies or others alerting the industry or suggesting the possibility that these regulations were being too broadly construed.

I cannot comment on the magnitude of entertainment and gratuities by the industry. With respect to our company, I would like to emphasize that lunches and dinners have constituted the great preponderance of our activities. Other courtesies are also extended. For instance, we have invited visitors from Federal agencies to sports, cultural and social events and to hunting facilities, but I believe these would be found to be a minor part of the total.

The company has also had hospitality suites in connection with industry and professional association meetings and similar gatherings. These suites are in support of gatherings sponsored by such associations and our guests include not only Federal agency officials and employees, but also company people and many persons from other companies and organizations. Rockwell is also called upon by various organizations to support banquets or similar functions by purchasing tickets. Sometimes agency personnel are guests, and at other times guests are from the commercial sector. Overall, however, it is my impression that this has been a relatively minor activity.

I would now like to address the issue of the benefits which may accrue from entertainment.

First, let me say that the main thrust of our efforts as an aerospace contractor is to operate successfully in a highly competitive environment and to perform the programs for which we have responsibility in the most effective way possible. Most of the programs in which we are engaged are complex and difficult, and the Government is a demanding and tough customer. We have no illusions regarding the means to success. Essentially, they are three: management competence, technical superiority, and effective cost control. Our whole company is dedicated to success through these means. I think our accomplishments in this regard have been notable, and our people can be justly proud of their achievements in the performance of a number of complex programs for the Government.

In contrast, entertainment is certainly not essential to successful accomplishment of Government business. Yet I think it is fair to note that it affords a benefit just as it does in connection with commercial business.

It provides an opportunity to get to know better the people with whom we are working and to achieve a better understanding of mutual problems.

In short, it is one means of approaching what we are all striving for in our complex society, improved communications.

While suggesting that there is this beneficial result, I want to emphasize that it is not the company's purpose in proffering entertainment to influence any agency official or employee with respect to the manner in which he discharges his duties on behalf of the Government. It is inconceivable to me that any such official or employee would be so influenced by a luncheon or dinner or by an invitation to attend a football game or by a visit to a hunting facility.

Indeed, the procurement process, particularly in the aerospace industry, is such that personal associations have little or no significance. In the environment of recent years, procurement decisions are the result of carefully documented analyses which, by the very nature of the highly regulated procurement procedures, are based on extensive technical, cost and management data. This requirement of documentation which the Government always requires, is prevalent not only in connection with major procurement decisions, but, so far as I have experienced, in the frequent determinations which have to be made in the course of program performance.

I appreciate that the ultimate question before this committee and the Congress is whether new laws should be enacted on this general subject.

My own view with respect to that question is that entertainment should not be barred categorically because, as I have indicated, I believe it has some value. I do believe that it would be desirable if there had been more explicit definitions of those activities which are permitted and those activities which are prohibited in order to avoid any inadvertent breach of the spirit and intent of the applicable Executive Order and the agency regulations. I welcome the steps that have recently been taken by DOD and are currently being taken by NASA to clarify the meaning and intent of the regulations. I want to assure you of our intention to comply fully.

I turn now to the other subject referred to in the vice chairman's letter, the company's policy on the hiring of former Federal officials. I can state our position very simply. It is our policy to consider former Federal officials for positions for which they may be qualified. This policy, I believe, is consistent with the policies of our Government which do not prohibit the employment by Government contractors of a former Federal official merely because of his prior Government service. Indeed, I would think a Government contractor might be subject to criticism if he were to discriminate on this basis. Moreover, a Government contractor might thereby be denied valuable talents in performance of difficult tasks.

There are, of course, statutory provisions relating to the hiring of former Government officials and our personnel people are mindful of them in implementing our employment policy.

I understand that the committee is interested in the impact of employment of former Federal officials by Government contractors. Based on my experience at Rockwell, I do not believe such employment has adversely affected the Government. Obviously, our hiring qualified, experienced people improves our products and performance, but it does not give us any improper advantage or influence in our dealings with the Government. There are two factors on which I would like to comment in this connection.

First, for the reasons I mentioned earlier, the procurement process is so highly regulated and controlled that previous associations can have little or no weight.

Second, constant changes in technologies, requirements, policies and personnel make it likely that the insights that a former official may have into the affairs of an agency for which he worked will be of little relevance within a short time after he leaves Government service. Thus, the emphasis in hiring former Government officials has to be on their qualifications to perform duties and responsibilities for the company rather than assuming that information gained in Government service will be of any long-range utility.

I would like to add that my personal view is that the public interest would be better served if more, rather than fewer, of the many able management and technical men and women within the Government would join industry. With the program challenges all of us face today, we can use good people who are experienced, capable and dedicated to achieving our national space and defense goals.

Finally, I want to express my concern that industry's performance on the programs for which it has responsibility may be adversely affected if it becomes more difficult to attract able and experienced people from industry to Government. Public service, and particularly public service by capable people willing to do so for the productive periods in their career, should be encouraged and supported. Restrictions beyond those presently in effect that would make employment with a Government contractor more difficult after Government service are not, in my judgment, in the Government's long-term interest.

I appreciate the opportunity given me to make this brief statement of our company's views on these important questions. I would be pleased to answer any question the committee may have or to elaborate upon my statement.

[Prepared statement of Mr. Anderson follows:]

STATEMENT OF ROBERT ANDERSON, PRESIDENT, ROCKWELL INTERNATIONAL

CORPORATION

My name is Robert Anderson. I am President and Chief Executive Officer of Rockwell International Corporation.

Rockwell is a major multi-industry company engaged in Automotive, Consumer, Electronics. Industrial and Aerospace Operations. The Company was formed through the merger of North American Aviation, Inc. and RockwellStandard Corporation in 1967.

Rockwell's total sales last year were approximately $5 billion, of which about 38% were to the Government. This may be contrasted with total sales of about $2.4 billion, of which about 74% were to the Government at the time of the merger.

The Company employs about 123,000 people throughout the United States and abroad, of which about 45,000 are engaged in work for the Government.

I am appearing in response to a request from the Vice Chairman to express our views on certain issues which the Joint Committee is examining. These are corporate policies regarding entertainment and gratuities and contractor hiring of former federal officials, the magnitude of programs in these areas and the benefits which accrue to companies from such relationships, as well as their impact on Standards of Conduct Regulations and Conflict of Interest Laws. We are pleased to cooperate with the Committee in this regard. It is our understanding that in today's hearing it is not the Joint Committee's intention to explore the details of corporate programs or cost claims.

Let me address myself first to the question of the Company's policy regarding entertainment and gratuities. These words, of course, may mean different things to different people. Our Company-like every company that I have ever heard of engages to some extent in activities that may be regarded as falling in this category, but it has been the Company's long-standing policy that such activities will be kept to a minimum and within the bounds of common courtesies consistent with ethical business conduct and with applicable laws and regulations, including DOD and NASA regulations.

I think that some entertainment is a normal and usual concomitant of commercial business relationships, and that it serves useful purposes. I suggest that it also serves useful purposes in the relationships between Government contractors and agencies of the Executive Branch. I believe it significant that the applicable Executive Order and the DOD and NASA regulations included numerous exceptions to the general prohibition against entertainment and gratuities.

Among the exceptions which the Executive Order indicates may be appropriate are "acceptance of food and refreshments available in the ordinary course of a luncheon or dinner meeting or other meeting . . ." and situations involving "personal relationships where the circumstances make it clear that it is those relationships rather than the business of the persons concerned which are the motivating factors. . ." So far as I am aware, these exceptions

and some of the others embodied in agency regulations have not been defined in detail. As an example, the DOD regulations have permitted acceptance of entertainment, gratuities, etc., in situations "in which, in the judgment of the individual concerned, the Government's interest will be served by participation by DOD personnel in activities at the expense of a defense contractor", provided an appropriate report is made by the DOD individual involved.

For these reasons the regulations may well have been construed more broadly than intended and resulted in commonly accepted practices which were not thought to be improper under the regulations. Moreover, so far as I am aware, there were no statements by the procurement agencies or others alerting the industry or suggesting the possibility that these regulations were being too broadly construed.

I cannot comment on the magnitude of entertainment and gratuities by the industry. With respect to our Company, I would like to emphasize that lunches and dinners have constituted the great preponderance of our activities. Other courtesies are also extended. For instance, we have invited visitors from federal agencies to sports, cultural and social events and to hunting facilities, but I believe these would be found to be a minor part of the total.

The Company has also had hospitality suites in connection with industry and professional association meetings and similar gatherings. These suites are in support of gatherings sponsored by such associations and our guests include not only federal agency officials and employees but also Company people and many persons from other companies and organizations. Rockwell is also called upon by various organizations to support banquets or similar functions by purchasing tickets. Sometimes agency personnel are guests, and at other times, guests are from the commercial sector. Overall, however, it is my impression that this has been a relatively minor activity.

I would now like to address the issue of the benefits which may accrue from entertainment.

First, let me say that the main thrust of our efforts as an aerospace contractor is to operate successfully in a highly competitive environment and to perform the programs for which we have responsibility in the most effective way possible. Most of the programs in which we are engaged are complex and difficult, and the Government is a demanding and tough customer. We have no illusions regarding the means to success. Essentially, they are three management competence, technical superiority, and effective cost control. Our whole Company is dedicated to success through these means. I think our accomplishments in this regard have been notable and our people can be justly proud of their achievements in the performance of a number of complex programs for the Government.

In contrast, entertainment is certainly not essential to successful accomplishment of Government business. Yet I think it is fair to note that it affords a benefit just as it does in connection with commercial business. It provides an opportunity to get to know better the people with whom we are working and to achieve a better understanding of mutual problems. In short, it is one means of approaching what we are all striving for in our complex society-improved communications.

While suggesting that there is this beneficial result, I want to emphasize that it is not the Company's purpose in proffering entertainment to influence any agency official or employee with respect to the manner in which he discharges his duties on behalf of the Government. It is inconceivable to me that any such official or employee would be so influenced by a luncheon or dinner or by an invitation to attend a football game or by a visit to a hunting facility.

Indeed, the procurement process, particularly in the aerospace industry, is such that personal associations have little or no significance. In the environment of recent years, procurement decisions are the result of carefully documented analyses which, by the very nature of the highly regulated procurement procedures, are based on extensive technical, cost and management data. This requirement of documentation which the Government always requires, is prevalent not only in connection with major procurement decisions, but. so far as I have experienced, in the frequent determinations which have to be made in the course of program performance.