NOTIFICATION(Sanitized) OF NON-ACCEPTABILITY OF TWO OF OUR OVERRUN PROPOSALS

• Document Type: CREST
• Collection: NGA Records (Formerly NIMA)
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78B04770A002800020003-8
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 10
• Document Creation Date: December 28, 2016
• Document Release Date: May 19, 2005
• Sequence Number: 3
• Publication Date: November 3, 1967
• Content Type: MF

1. I have attached basic iafozption providing the .background
:for the overrun condition, oft contreotst the, Vu-graph.Meker;
end _ the , P. Y. Print .Enlarger
.?3 Nor 67
DATE OF DOG I DATE RECD DATE I
3 l
TO. Chief, Support Staff
FROM
USPENSE DATE
sdEfi. Notification of Of
I Accepter i1ity of of
our overrun Proposals
13i, r'ibution:
m/#:/ 3S
Orig .&'I,':
j /A{TD
CROSS REFERENCE ORS
POINT OF FILING
DATE
SENT.
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3-
ec9ass eviewby hGA.
25X; I
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BEST COPY
AVAILABLE
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 Approved For Release 2005/06/06 CIA-RDP78BO477OA002800020003-8
OVERRUN CONDITION OF THE VUGRAPH MAKER AND P.I. PRINT ENLARGER
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1. The Projects for the Viewgraph Maker and thePl Print Enlarger
are presently under separate contracts with the
predicts that both of these contracts will require about a 50% overrun
to complete. The Government is seriously concerned about the magnitude
of these overruns and the fact that they were not anticipated sooner.
It is hoped that will carefully examine its performance on these
contracts to determine if they are representative of the standards by
which is to be judged.
2. Significant historical data for each project is provided below.
Comments are included to emphasize certain aspects of cited documents or
events.
3. At this time, the Government can find no gross technical
deficiencies in the basic concept of-,the equipment being furnished under
the subject contracts; although a thorough evaluation of technical
performance must of course, rest on the acceptability of the delivered
items. However, the target costs of the contracts have already been
reached and =estimates considerable des* n and engineering effort yet
to be carried out. This, and comments from July monthly report for
the PI Print Enlarger (Statement A.3. - "Redesign was effected in a number
of major areas."), suggest that technical performance was open to some
criticism.
25
25
4+. The most disturbing aspect of II performance rests in its 25
inability to predict costs either before or after contract negotiations.
The Government puts great trust in a contractor's ability to accurately
account for past costs and to predict future costs with a reasonable degree
of accuracy. proposals stressed its ability to accomplish such
controls and the contract was awarded relying on I intent to do so. 25
When the contractor grossly underestimates his future efforts, he creates
administrative delays that prolong the completion of the project. He may
also disturb the Government's R&D budget to such an extent that other
projects are jeopardized. In the two projects under discussion, 25
consistently predicted via its monthly reports that the projects were in
no financial difficulty. last monthly reports were delayed, but
verbal contacts with project managers predicted no overruns. When
I Isuddenly predicted a 50% overrun on the PI Print Enlarger, the Govern-
ment was immediately concerned about the financial status of the Viewgraph
Maker. However, two =personnel reported that the latter project would
not have an overrun. Within two weeks, this statement was contradicted by
the same personnel and a 5010 overrun was estimated.
5. submitted independent proposals for the PI Print Enlarger
and for the Viewgra h Maker. The contracts were negotiated and signed at
different times. should have estimated its target costs on the basis
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that only one contract would be signed. Since both contracts were let,
and since both projects had considerable common technology, design, and
even component parts, II should have been in a position to exploit
these commonalities to the financial benefit of itself and the Government.
6. The Directorate concerned has informed the Government's
Contracting Officer that it will not accept its estimated total costs to
complete the projects as a ceiling price. Therefore, the Government is
confronted with an uncertain total cost for either project and cannot
assess the cost effectiveness of the equipment.
Due to the magnitude of the estimated overruns and because of
I luncertainty of these overruns, the Government could decide to
terminate these contracts. This would mean that the Government would
have spent a considerable amount of money and received virtually nothing
for it. The Government should request that =review both projects
and suggest any alternative courses of action that would be of more
advantage to the Government
(~rnrfr nr`'rF,I
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HISTORICAL DATA FOR PROTECT #10197, VIEWGRAPH MAKER CONTRACT
PROTECT 9619
4 November 1966. I Isubmitted Technical Proposal,
(dated 2 November 1966). Total price quoted for two units was
Of particular interest is section 5.2.3 of the pro-
posal describing computerized PERT controls to predict costs and
time periods for the completion of programs.
17 March 1967. I Ireported an increase in overhead and G&A rates and
quoted a fixed'price of I for two units.
13 April 1967. Contract I Iwas executed with a tar et cost
and target fee totalling The only amendment to tar
25X
proposal was the inclusion of ground glass port for viewing the
image plane. This contract was a cost-plus-incentive-fee type. The
period of performance was to be from 13 April 1967 to 14 August 1967.
The fee was subject to an 80-20 share on all costs over or under target
costs.
21 Aril 196 . The Contracting Officer's technical representatives,
I land discussed the project
with The designers expressed some concern
about the adequacy of the 10-15 Platemaster in accomplishing the task.
They decided to use an 11-17 Platemaster as a basic framework for the
Viewgraph Maker.
8 May 1967. Layout Study J92208-115703 was completed. At this point
areas requiring extensive design effort should have been identified.
12 May 1967. to discuss 25X
the project. I Irevealed no serious technical
problems to be overcome.
31 May 1967. I Isent its first monthly report. Some parts had already
been ordered. Total costs were predicted to be exactly the target
costs of the contract..
23 June 1967. II sent its second monthly report. This report covered the
period of 1 to 31 May. Some parts were -received. Intended progress
during the next month (June) predicted the completion of "...all
design efforts." (emphasis added) and*"Release all items for procurement."
(emphasis added). No increase in costs were predicted.
24 July 1967. 0 sent its third monthly report. This report covered the
period of 1 to 30 June. Intended progress during the next month again
predicted completion of all design, drafting and procurement. No increase in
costs were predicted.
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11 August 1967. Ito discuss an overrun on another
contract (PI Print Enlarger was on vacation, but
specifically questioned as to the status of funds for
the Viewgraph Maker project. He assur did not
anticipate an overrun on Contract
15 August 1967. 0 was called by Q and information was
requested concerning the status of the funds. I Istated that
he did not see any financial difficulties and in ac , thought that
he could possible complete the project for less than the target costs.
2X
225X
25X
25X
24+ August 1967. I land informed him of an
anticipated overrun of about I Iwas reminded to 25X
check the details of the contract to determine his company's obligation
in spending more than target costs. This was the first indication of
an overrun status.
14 September 1967. delivered the fourth monthly report
covering the period of 1 to 31 July (it did not predict any increased
costs) On this same date, 25X
discussed the contract with the Governments Contracting Officer and
his technical representative and a Government auditor. A cost analysis
was presented by 0 which estimated that an additional lI was 25X
needed for the completion of the project.
27 September 1967. Government personnel visited "to discuss the project. 25X
presented an analysis of the Viewgraph Maker. He discussed
technical areas where design problems had occurred. However, these
problems had not been relayed to the Government previously nor did the
monthly reports indicate any difficulties. Statements were made in all
monthly reports that there were no unresolved technical matters. 0 25X
was requested to absorb their overrun costs and propose costs again.
12 October 1967.
delivered a revised analysis of costs proposal
for the Viewgraph Maker.
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----]Project 9 1
HISTORICAL DATA FOR PROJECT #10147 PI Print Enlarger Contract
Total price quoted wasiI based on a fixed price contract.
8 September 1966. I Isubmitted Technical Proposal
January 1967. II reported an increase in overhead and G&A rates and
quoted a fixed price of
27 February 1967. Contract was executed with a target cost
and target fee totalling Included were seven items as an
addendum to the Contractor's proposal. This contract was a cost-plus-
incentive-fee type. The period of performance was to be from
27 February to 27 September 1967. The fee was subject to a 90-10
share on all costs over or under target costs.
13 April 1967. I Isubmitted its first monthly report for the period of
28 February to 31 March. More than 10% of the work was reported as
complete with a proportionate. amount of funds being spent.
18 April 1 267. By this date, layout drawings 92208-124100, J-124577, and
25X
25X
J-124578 were completed by I At this point, areas requiring 25X
extensive design efforts should have been identified.
21 April 1967. The Contracting Officer's technical representative I 25X
Ito discuss the project with
Many technical details were discussed but 0 expresse
no concern over the difficulty of their solution.
12 May 1967. again visited
reported on his progress on the PI Print Enlarger. Technical areas
were again discussed.
12 May 1967. I Isecond monthly report was sent covering the month of
April. Design of the condenser lenses was reported about 90% complete.
Drive design was complete, frame 100%, vacuum platen 90%, paper
transport 50%. 50o requested revision of exposure time from "less
than one second" to "five to two second range."
20 June 1967. The Third monthly report was sent covering the month of May.
Condenser lens design was reported as complete. Electrical parts were
being ordered. Circuit drawings were'being prepared.
July 1967. I uinformed that the June monthly 25X
report was nearly complete, but that there was a delay by the accounting
department in completing the status of funds. gave no 25X
indication at this time that there would be any overrun.
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Week of 24+ July 1967. called to report an anticipated
overrun of approximately This was the first indication of an
overrun status.
11 August 1967. I Ivisited)
intent was to review everawing, if necessary to
determine where costs might be reduced. However, nearly all of the
design was reported as complete and most the parts were ordered.
14+ September 1967. delivered a cost analysis
to the Governmen overrun o was predicted. One of the
items reported as contributing to the overrun was the cost of the
condenser assembly. It was estimated as while the actual price
was I Why this could not have been predicted three or four
months sooner was not explained. The July and August monthly reports
were also delivered at this time.
27 September 1 267. Government personnel visited u to discuss the
project. presented several reasons for the PI Print
Enlarger overrun. However, the reasons indicated were under
control for several months. If the overruns could not have been
prevented, they should have been obvious before the contract was
negotiated. was requested to absorb their overrun costs and
present a new cos proposal.
12 October 1967 delivered a revised analysis of costs
for the project. Included in this analysis was a copy of the third
month) report. Page 5 of that report indicates that there was a
overrun estimated on 26 May. This information has been changed
and does not agree with the third monthly report previously delivered
to the Government. The latter report had predicted no overrun. The
analysis also indicated 600 hours of engineering, design, and drafting
to be completed. This information does not conform with information
gathered at the 11 August meeting.
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0
Format to Contain Comments On:
1. Past business with
II
2. Future business witY~
3. Existing contracts
4+. Trouble contracts (Vu-graph Maker & P.I. Pring Enlarger)
a. Nature of trouble
(1) Changes in technical aspects w/o government approval
(2) Administrative errors
a. Untimely reporting
b. Altered reporting
c. Unanticipated costs
b. Nature of claims
(1) Before contract changes
(2) Unapproved alterations
5. Cite our detailed records of these deficiencies.
6. The requirement for continuously improving management
7. The recommendation they assume liability for their poor performance
8. Implication of these problems in relation to the Automatic Stereo
Scanner contract; we would expect that
this, project would proceed according to contract.
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 ^ UNCLASS IFA roved G1 fagRL 005/06/06: CIA-RDPfid3Oi bbt OOO3-8 )1 SECRET
ROUTING AND RECORD SHEET
SUBJECT: (opt not) Request for Overrun Expenditure of
for a Vie raph Maker
FROM:
Asst. fo Technical Development
NO.
NPIC/TDS- 9567
DATE
26 Ktober 1967
TO: (Officer designation, room tuber, and
building)
DATE
OFFICER'S
COMMEN (Number each comment to show from whom
INITIALS
tow o Draw a line across column after each comment.)
RECEIVE
-FORWARDED
0
Ch/Support Staff
1
2. Asst for Planning
and Management
3. Technical Advisor
f
to the Director
4. Director, NPIC
5.
SS/LB
(After Approval)
6.
>
7.
y
8.
9.
10.
11.
12.
13.
14.
15.
SECRETv~vv^v CONFIDENTIAL ^~ I SEA ON'Y vvv__E UNCLASSIFIED
5