VITAL MATERIAL INVENTORY - VITAL FUNCTIONS UPDATE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP68B00724R000100090039-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 15
• Document Creation Date: December 14, 2016
• Document Release Date: July 29, 2003
• Sequence Number: 39
• Publication Date: November 28, 1966
• Content Type: MF

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SECRET
OXCART/IDEALIST
MEMORANDUM FOR: See Distribution
Copy 7 of 7
2 8 NOV tro
25X1A
SUBJECT Vital Material Inventory - Vital Functions Update
1. General
a. Definition
(1) Vital materials and/or vital positions are those
documents and functions that are essential to
reconstitute the operations of OSA/DD/S&T in the
event of a nuclear attack or disaster which
precludes operations at Headquarters.
2. Requirement
ao An updated list of vital materials for OSA is to be
compiled and submitted to the CIA Records Administration
Office, See Attachment I - Present Inventory.
bo In addition to the vital materials list, a list of
those Headquarters staff positions necessary to perform
the vital functions to sustain operations is to be
included,
3. Responsibility
a, Functional Elements/OSA/DD/S&T
(1) Each functional element is-asked to review
its inventory of documents on file at the Vital
Records Center to ascertain if it complies with
1 a 10 (Attachment I).
NRO REVIEW COMPLETED
e" cr+>>ua 1
EKC1wft,! IN ".1 aato^1at1c
OXCART/IDEALIST
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(2) In addition, it is requested that any changes in
the Attachment, along with a list of Vital Staff
Positions, be submitted to Compt/OSA/DD/S&T within
five days for coordination, consolidation and
transmittal to CIA Records Administration Office.
JOHN PARANGOSKY
Deputy Director of Special Activities
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Cy 1 -.Compt/OSA
2 - Compt/OSA (chrono)
3 - DD/SA
4 - D/R&D/OSA
5 - D/M/OSA
6 - D/O/OSA
7 - RB/OSA
MARD/COMPT/OSA:
Distribution:
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OXCART/IDEALIST ATTACHMENT I TO
I. Present Inventory
A. Major Categories
1. Policy Directives and Plans
a. CIA/SAC Agreement - SAC Operations Order 1009
CHALICE EWP Operational Plan
2. Liaison Agreements with other government Agencies
a. Support of CIA in peacetime (TAB 6) TS-52262/1
b. Air Force support of Project AQUATONE
TS-103292/A - dated 25 March 1955
B. General Operational Guidance
25X1A 1. Cryptic Reference Files
a. Operation
IDEALIST-1 - - y
2. Reports Control Manuals - Manuals used in generating
mission message formats for planning, directing and
controlling data between Project Headquarters, the
detachments and support units.
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b. OXCART-8348-Cy 29, OXCART-8288-Cy 5
C. Operational Support
1. Lists of Special Contracts - This list consists
of the following:
a. Contract number
b. Company
c. Status of Funds - Each FY
d. Total amount of Contract
e. Total amount by Company
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ROUTING AND RECORD SHEET
SUBJECT: (Optional)
Vital Material Inventory - Vital Functions Update
FROM:
EXTENSION
NO.
DATE
MARD COMPT OSA
7761
22 November 1966
TO: (Officer designation, room number, and
building) -
DATE
OFFICER'S
COMMENTS (Number each comment to show from whom
INITIALS
to whom. Draw a fine across column after each comment.)
DD SA
RECEIVED
FORWARDED
1.
j.
MARD COMPT/OSA
2.
COMPT OSA
EO/OSA (for informa
tion)
4.
DD SA (for signatu
eZ____
______
5.
/
MARD/COMPT/OSA
(for xeroxin
6.
RB/OSA (for distr
butio
7.
8.
10.
12.
13.
14.
15.
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Copy 6 o f 6
22 NOV 1966
MEMORANDUM FOR: Acting Deputy Director for Science and
Technology
25X1A ATTENTION:
SUBJECT: Study of the Procurement Systems of the CIA.
REFERENCES: A. Study of the Procurement Systems of CIA. by
25X1A dated
July Ivub
B. Memorandum to Executive Director-Comptroller
from Inspector General dated 4 October 1966
C. Memorandum to Deputy Directors and PPB from
Executive Director-Comptroller dated
7 October 1966 (Exec.Reg.No.66-4266)
25X1A
1. This memorandum is submitted for your information and
in response to your verbal request for our comments on the
procurement study, reference A, known generally as the I
I I
2. We have reviewed the document as thoroughly as possible
within the limited time available. Our comments are generally
limited to those areas which directly affect OSA.. It is our
understanding that the major proposals concerning organizational
changes are not intended to apply to the OSA. system. In those
instances where we have commented on changes which only indirectly
affect OSA., it is because the proposals are patterned on OSA's
system and we feel that the OSA. experience should be taken into
consideration.
3. The report itself represents a substantial effort,
particularly in the accumulation of statistical data to reflect
the scope of the Agency's procurement activities. We are, of
course, gratified that the OSA, contracting system withstood the
test of outside scrutiny and emerged as the pattern which is
being proposed for installation in the rest of the Agency. While
the report contains a few minor errors or misunderstandings, it
is generally factual and we believe that it can be accepted as a
base from which improvements can be sought. We concur with the
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age
Inspector General when he says that "even if the recommendations
are not accepted the findings still indicate the need for
strong corrective action". We quote this statement because we
think that it identifies the greatest value the report will have.
That is, the Agency officials who are responsible for administer-
ing these programs can, with the data available, determine the
course of action which should now be taken. Certain of the
recommendations contained in the report are valid and should be
followed, but on the whole we think that the solutions which are
proposed are disproportionate to the problem. The recommenda-
tions are quite broad and involve complete changes in concept in
Agency management. They propose functional and organizational
changes which involve all of the Deputy Directorates, and the
establishment of a new policy position in the immediate office
of a Deputy Director. The report seems to have lost sight of
the fact that the focus of the effort is an activity in the
Office of Logistics which involves only a handful of people. The
implementation of the recommendations would require a much greater
application of manpower, some of it at very high levels (such as
the Special Assistant to the DD/S) and some of it in hard-to-
find categories (such as the engineer who would be assigned to
the industrial auditors as a consultant). We feel that the
changes which are proposed are far too sweeping for the problems
which exist, and that a more balanced program of improvement
should be undertaken before such extraordinary corrective
measures are considered.
3. RECOMMENDATION: Designate a Special Assistant to the
DD/S for Procurement -
In several places the report states that there is no
single person who is responsible for procurement policies and pro-
cedures. It is proposed that this be corrected by designating a
Special Assistant to the DD/S for Procurement. In the first
place, we cannot concur in the premise upon which the recommen-
dation is based. It has always been well established that the
Director of Logistics is the officer responsible for the develop-
25X1A ment and implementation of procure nt policies and procedures.
This responsibility is inherent in I and in
25X1A other statements in both Tne commenda-
tion also stipulates (pp IV ZI) al Assistant to
the DD/S for Procurement should have a staff and assume functions
which go beyond procurement review. This seems to be an unneces-
sary duplication of effort in an era when T/0's are being cut
rather than enlarged. Further, the proposal contemplates that
the Special Assistant for Procurement would have the authority to
adjudicate differences between the contracting officers, the
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auditors, and the project officers. Ile would thus have the
authority to make decisions which must now be made by the
Director of Logistics, the Director of Finance, or the command
components who are responsible for the management of the pro-
grams. We do not believe that the Director of Logistics and the
Director of Finance should be insulated from the DD/S or that the
authority of the operating component should be diluted. Slowness
of reaction is one of the report's major criticisms of the
present system, and the addition of a new echelon of staff super-
vision cannot possibly result in more rapid response to require-
ments. This is particularly true when one recognizes that the
Special Assistant for Procurement would probably be in the
Headquarters Building, the contracting officers and auditors
would be in Ames Building, and the project officers could be
located anywhere. We believe the objective can be more efficiently
accomplished by specifically charging the Director of Logistics
with the responsibility for improvement rather than by creating
a duplication of effort and a diffusion of responsibility. Above
all, we feel that it would be a mistake to establish a Special
Assistant to the DD/S for Procurement, and simultaneously make
the DD/S&T responsible for R&D procurement. With the other con-
trols already existing, this would result in a total diffusion
of responsibility.
4. RECOMMENDATION: Centralize all R&D Contracting in the
DD/ S &T
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Probably the most far-reaching recommendation in the report
was the proposal to transfer the responsibility for all R&D
contracting from the Office of Logistics to the DD/S&T. (It is
our understanding that the report contemplates no change in the
OSA system which was highly commended.) We believe that the
report defeated its own proposal by acknowledging that TSD (DD/P)
contracting should not be included. TSD contracting will have
to be done somewhere, and if it is not included in the same
structure which manages the DD/S&T contracting, it can only be
assumed that it will continue to be handled in-the Office of
Logistics or in TSD itself. There is also the question of pro-
curement for NPIC (DD/I) which is not fully resolved. In fact,
although the report proposes that R&D contracting be centralized
in DD/S&T, the net effect of the proposal would be to decentralize
the system and require a much greater application of manpower.
At the present time there are only two systems in the Agency
(although the report at one place said there were three and in
another place that there were five)-. These two are (a) the 25X1A
managed by the Director of Logistics. Actually, the NRO
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programs of OSA should not be considered in statistics which
are used for a long-range Agency decision since the level of
effort in these programs is being significantly reduced and,
in any event, they have little relationship to or impact on
the procurement being conducted elsewhere in the Agency. If
the R&D contracting is ultimately transferred to the DD/S&T, we
feel that the OSA. experience in this field should be carefully
considered. The transfer of the contracting officers from the
Office of Logistics to the DD/S&T would not in itself create an
R&D procurement system. It would also be necessary to transfer
personnel from the Industrial Contract Auditing Division of the
Office of Finance and perhaps establish a separate disbursing
function as well. The team approach to procurement would be
much more effective than the present system used by the Office
of Logistics, but we are inclinded to believe that it should be
established under the cognizance of the Director of Logistics
for the entire Agency, including TSD and NPIC, rather than the
DD/S&T alone. The components concerned are already co-located
in Rosslyn and this should not be difficult.
5. RECOMMENDATION: That a Contract Review Board be
Established
We are not aware of any existing problem which would have
been avoided by a Contract Review Board. The report itself
identified no problem of internal control. Most of the criti-
cisms concern coordination and procedures at the working level.
Consequently, we are not sure what is to be accomplished by a
review board. There is already a significant review of all
programmed activities in the Agency, and we doubt that the survey
team fully appreciated this. The Agency's planning and program-
ming system assures careful consideration of each item included
in a component's budget, and large items are included as separate
line items. After the Agency budget is approved, individual
transactions are subject to further review and approval under
carefully prescribed approval procedures before the contracting
officer can negotiate the contract. The Deputy Director con-
cerned is responsible for authorizing the activity, the Director
of Logistics is responsible for the contracting, the Office of
General Counsel participates in all contracts, the Director of
Finance is responsible for all contract auditing and disbursing,
and the entire arrangement is subject to review by the Audit
Staff. We do not see how a Contract Review Board could add any-
thing to that level of responsibility. Rather, we would propose
that Agency management clearly charge those offices with the
specific improvements it feels should be effected in the field
of contract management. A. Contract Review Board would probably
have no great effect on OSA.. The Office of Logistics handles all
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contracting for items included in our Agency budget, but these
are not large enough to fall within the scope of a Contract
Review Board. Again, we assume that the NRO contracting would
continue separately under the system approved by the DCI.
6. RECOMMENDATION: Establish a Management Information
System
In several places the report refers to a need for a manage-
ment information system, and the Inspector General discussed
this in depth in para 10 of his memorandum. We concur in this
requirement. OSA, is attempting to develop an internal infor-
mation system to advance internal program management, as well as
contribute to a broader system which will facilitate staff review
in the immediate office of the DDS&T. However, we do not concur
in paragraph 10-d of the Inspector General's covering memorandum
in which he suggests that, since his own office does not have ex-
pertise in the field of automatic data processing, consideration
be given to employing an outside consultant, and perhaps the
author of the report, to assist in the development of information
systems in the areas mentioned. It is our view that the Agency
has a significant capability in the ADP field. OSA has been well
pleased with the support received from OCS during the past few
weeks, and we are confident that OCS and our own Automatic Data
Processing Division can handle our requirements in this area.
Automation of programs is obviously a permanent, long-range ob-
jective, and any talent which is needed but not now available
should be sought in the form of staff employees.
7. RECOMMENDATION: Establish a central repository of
information concerning contractors
and their performance.
We concur in the need for such a repository and will be
willing to cooperate in the development of appropriate procedures.
8. RECOMMENDATION: Merge all of the Auditing Functions
in the Audit Staff, Office of the
Inspector General
..We believe that this recommendation was based on a lack of
understanding of the role of the industrial contract auditor as
contrasted to the function of the Agency's Audit Staff. Aside
from the differences in functions, there are the practical problems
which would arise if the Agency attempted to absorb personnel
and responsibilities presently under the control of the DCAA,.
The Agency's Audit Staff conducts periodic audits of all OSA acti-
vities, including the function of the industrial contract auditors.
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Since the Inspector General has nonconcurred in this recommenda-
tion, we will not attempt to document our objection in depth.
9. RECOMMENDATION: That a policy of rotation of USAF
auditors be adopted
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On Page 111-112, the report recommends that the OSA./DCAAA,
auditors be rotated, although no specific rotational period-is
suggested. This is justified on the basis that it is necessary
to maintain a "fresh viewpoint". It is also stated that "IDEALIST
and OXCA.RT have continued with the same contractor and con-
tracting teams (including auditors) for a period of eleven years".
25X1A
10. In the first place, it is simply not true that the same
personnel have been performing the same functions for eleven years.
The Contract Management Division has contracting officers. 25X1
Of these ,E have been in OSA. for unt, year or less, and 25X1
others have been here for less than three years. Only have 25X1
been in this program for as long as ten years, and their assign-
ments have not always involved the same contracting firms. The
Audit Staff has increased over the years, and there are presently
auditors assigned to OSA.'s Industrial Audit Division. Of
these have been here less than two years. There are
only v o ave been in the same position for more than four
years. 25X1
supervising auditor have both been on the contracting team for more
than three years. Our largest contract has been handled by the
same contracting officer over the years, but audit supervision in
this contract has changed.
There is no contract in which the contracting officer and e
11. Thel uditors assigned to the Agency to audit the
NRO projects have recently been transferred from the Air Force to
the Defense Contract Auditing Agency insofar as their career
service is concerned, but there will be no change in the operating
procedures. The DCAA. has several thousand auditors at various
locations around the country and these people are long-term
residents of their respective communities. Under DCAA. procedures
an employee may not be compelled to accept an assignment which
would require that he sell his home, move his family, and re-establish
himself in another community. Thus, a policy of enforced rotation
would not mean that our auditors would be rotated from one locale
to another, within the project, but that they would be returned..
to DCAA, and presumably replaced by other DCAA. personnel. In the
past few months we have reviewed over 100 files and interviewed
numerous auditors in an attempt to EOD three auditors. Once
selected, security clearances and normal administrative delay
result in a processing period of 6 to 8 months. If we had to
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rotate. the. ;staff of auditors at specified intervals, the personnel
problems would be exceedingly burdensome. We will, of course,
rotate or reassign any auditor whenever this is necessary. We
are not sure what the report means by a "fresh viewpoint", but
we do not think it is the over-riding consideration in this in-
stance. The only substantive justification for a rotational
policy is to assure that an auditor is not permitted, by long
tenure, to become careless or involved in collusion or conflict
of interest. The present methods of supervision in our audit
program are designed to guard against these hazards whether due
to long tenure or a lack of competence, as well as assure that
the audits are performed according to established auditing stan-
dards. As contrasted to the "fresh viewpoint", it is our view
that the interests of the Government are best served through a
thorough knowledge of all of the policies and procedures of the
contracting firm. These firms are constantly making minor ad-
justments in their internal systems and procedures in response
to governmental rulings, and it is essential that the auditor be
able to identify and assess these as they take place. The staff
becomes knowledgeable of the contractor's systems and can more
effectively control the cost generated against the various con-
tracts being completed by the contractor. Such thorough know-
ledge of the contractor's financial organization also is very
beneficial when performing price/cost evaluations of proposals
submitted by the contractor in contemplation of a government
contract award.
12. RECOMMENDATION: Improve inventory controls
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to the attention of the Air Force, since we can't demonstrate
that a problem exists. We will continue to work to improve the
procedures, with specific attention to the feasibility of com-
puterizing the system. The latter will be seriously considered
if we determine that ADP equipment would either improve effi-
ciency or reduce costs.
25X1A
13. There is one other item which we should discuss.' On
page 111-58 the report states that "Certification for payment on
all but the final payment is virtually an automatic action".
It then goes on to say that there is no participation in the
payment process by the contracting officer. There is no further
reference to this in the report, and it is not the subject of a
specific recommendation, but we feel that the implications of
the comment are such that we must respond to it. It is true that
the billings from the contractor for partial payments are sent
to the Finance Operations Division, which is responsible for all
disbursements by OSA.. FOD has the originals of all contracts,
and each billing is desk audited before payment is made. Nothing
involving money is handled as an "automatic action". At the
present time FOD is holding over 70 billings for further documenta-
tion. For the larger contracts there are resident contract audi-
tors and the charges are audited at the site. When partial pay-
ments are made by FOD, a notification is sent to the contracting
officer. The contracting officer also receives' copies of the
monthly accountings which are submitted by the contractor. The
contracting officer reviews all of the documentation and, if any
question arises, it is resolved before the next monthly billing
is processed. In no case may the cumulative partial payments by
FOD exceed 85% of the contract price. This system has worked
well and is endorsed by both Contracts Management Division and FOD.
Prior experience showed that a requirement for prior coordination
of each billing resulted in unwarranted delays because the con-
tracting officers were frequently out of town and not available
for coordination when the billings were presented. The contractors
have significant sums tied up in these programs and one of the key
features of the OSA, system is prompt processing of their billings.
FOD is an integral part of the procurement team and in processing
these vouchers they are not acting blindly. If there is any re-
maining doubt about this particular procedure, we will be happy
to discuss it in greater detail.
14. In summary, we feel that the survey has served a use-
ful purpose in identifying problem areas and accumulating the
data necessary to enable Agency management to determine the most
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logical course of action. On the other hand, we believe that
the problems can be resolved much more simply than as suggested
in the report. We would urge that a more moderate solution be
sought before resorting to major conceptual and organizational
changes.
25X1A
?PAUL N, BACALIS
Brigadier General, USAF
Director of Special Activities
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