Economy in Government Contracting. Atomic Energy Commission Experience

Abstract

President Johnson has pledged that the executive branch be administered with the utmost thrift and frugality; that the Government will get a dollar's value for a dollar spent; and that the Government will set an example of prudence and economy.' Heads of departments and agencies, responding to this pledge, are undertaking affirmative action to carry out this request-including the initiation of cost reduction programs, the de-emphasis of cost-type contracting, and the re-emphasis of fixed-price and incentive-type contracting. Accordingly, there is occasion to examine carefully the experience of the Atomic Energy Commission (AEC) with regard to economy in contracting, and particularly in regard to the use of various forms and methods of contracting. In evaluating various forms and methods of contracting, there must be considered the whole of contracting used by the agency and indeed the organization and functions of the agency as a whole. What is desirable for one type of system may not work well for another; similarly, one form of contract may work well for one type of function or operation but may not work very well for another. In very broad terms, the AEC is responsible for a program of manufacturing fissionable material and atomic weapons; developing nuclear propulsion systems for naval vessels; conducting research and development aimed at improved weapons, more efficient production, generation of useful power from atomic energy, utilization of radioactive material for medical, biological, and health purposes; and regulating the peaceful uses of atomic energy. Thirteen Field Offices carry out the atomic energy program under the general direction and supervision of the AEC Headquarters office. Most AEC work is accomplished by contractors. There are more than I35,000 persons working directly in the program, of which approximately 7,0oo are AEC employees. The rest work for our contractors. At present, the AEC investment in plant, equipment, and real estate is approximately eight billion dollars, and operating costs are at an annual level of approximately $2.7 billion. These government-owned facilities are managed and operated for the AEC by contractors. Our operating contractors comprise a variety of industrial, academic, and not-for-profit organiza-