SENATOR MCINTYRE'S REQUEST TO THE GENERAL ACCOUNTING OFFICE FOR AN EVALUATION OF US AND USSR R&D EXPENDITURES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80B01495R000100150015-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 16, 2016
• Document Release Date: July 19, 2005
• Sequence Number: 15
• Publication Date: April 21, 1971
• Content Type: MF

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2 1 APR '971
MEMORANDUM FOR: Dr. Henry A. Kissinger
Assistant to the President for
National Security Affairs
SUBJECT Senator McIntyre's Request to the
General Accounting Office for an
Evaluation of US and USSR R&D
Expenditures
1. Please refer to my note of 13 April 1971
forwarding a letter from the Comptroller General,
Mr. Staats, concerning Senator McIntyre's request.
2. As you know, by agreement with DOD, CIA
is responsible for all costing on Soviet military
and military-related R&D programs. For this reason,
the GAO people are asking the people in my Office
of Strategic Research for their help in meeting the
request levied on them by Senator McIntyre.
3. We do not wish to be unresponsive but before
I give the go-ahead on this I want to be sure you
understand and approve the relationship. For one
thing, this will be the first time we have provided
intelligence information of this degree of detail
to the General Accounting Office. And secondly, to
respond completely to the questions asked of GAO
by the Senator, we find it will be necessary to
clear a few GAO persons for access to satellite
4. 1 would appreciate hearing from you on this,
particularly if either of the aspects mentioned above
gives you any problem.
Copy 6
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5. I am sending a copy of this memorandum to
Secretary Laird for his information and comment.
iol a.rd ? 1Ln
Richard Helms
Director
Copy furnished:
The Honorable Melvin R. Laird
.The Secretary of Defense
Distribution:
Cy 1 -- Addressee
2 -- The Sec. of Defense
3 -- DCI
4 -- DDCI
5 -- ER w/basic (copy)
6 -- DDI cy basic
7&8 -- D/OS
D/OSR:BCCLarke:l
F20 April 1971)
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COMPTROLLER GENERAL OF THE UNITED STATES
April 9, 1971
?TAT
Confirming our telephone conversation this afternoon, I am
enclosing a copy of a letter from Senator McIntyre which is self-
explanatory.
Members of our staff met with Mr. Eberhardt Rechtin, Principal
Deputy Director, Defense Research and Engineering, to obtain back-
ground on the statement presented by Dr. Foster in his testimony
before the Senate Armed Services Committee. We are arranging to
obtain a copy of the DOD study.
Mr. Rechtin referred to the helpful information which he had
obtained from and has been contacted by
A study of the type requested by Senator McIntyre is of course
not the first of such efforts but it is a very ditticult one. we
would appreciate very much your cooperation and designation of an
individual with whom we can work.
Needless to say, staff of this Office assigned to the study
will have the necessary security clearance.
Harold Rubin of our sta .
The Honorable Richard Helms, Director
Central~Intelligence Agency
Washington, D.C. 20:05
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50TH ANNIVERSARY 1921- 1971
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RLD[ML EIVILDINO, I onmMOUTH, N.ii.
GOY43G-7720
April 1, 1971
The Honorable Elmer B. Staats
Comptroller General of the United States
General Accounting Office Building
Washington, D.C.
1 18
Dear Mr. S to ats :
In recent testimony to the Senate Armed Services Committee,
Dr. John S. Foster, Jr., Director of Defense Research and
Engineering, warned of the existence of a $3 billion gap between,
:U.S.-and U.S.S.R. expenditure levels for defense-related reacarch
and development:
2-971, p. 2-5)
The clear inference to be dre -m from this statement is that
U.S. e)~penditures of about $7 billion for military R&D are now
exceeded by Soviet expenditures of about $10 billion annually.
Such a statement has obvious national security implications.
Because it is important that we neither underestimate nor magnify
Soviet expenditures in this area, I am writing'to request your
assistance in evaluating both the data and the methodology on t,ihich
the Defensc Department's conclusion is based.
How was the conclusion reached? How much confidence should be
Placed in this or any other study which attempts to compare U.S.
and Soviet expenditure levels for military R&D? A study by the
G neral Accounting office is the best means I can think of for
obtaining at least tentative answers to these questions.
v . . . it appears that this year the Soviet Union
will be devoting about 40 to 50 per cent .ore in
equivalent effort to military'R&D than the U.S.
This additional effort amounts to about 3 billion
i;` cqui;r 1cn1 U.S. dollars,", (Statement of ;fiarch 18,
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Mr. Staats.
page 2
The study I envisage would have four parts:
1) Dollar evaluation of U.S. research and development
exmenditures :
Defense-related research and development expenditures consti-
tute only a part of our total RcD expenditures as a nation, yet
ex-oenditures in other areas also contribute to differing degrees
both to the strength of our overall technological base and to
our military potential. It is important, therefore, that there be
made available to the Congress a comprehensive picture of our total
R&D effort as a nation, together with an indication of its allocation
into component parts. Because of their close relationship to mili-
tary technology, I ani especially interested in the amount of money
being directed annually to the fields of space and atomic energy
research' both by the government and private industry.
Moreover, not all of our clearly defense-related researci., and
development expenditures are funded through the annual R.D.T.&E.
budget of the De-oartment of Defense. The following should also
be included in an accurate assessment of our total annual expendi-
tures in this field:
a) the annual costs of defense contractors' independent
research and development, bid and proposal,-and other technical
effort programs, both that fraction financed directly by the
Department of Defense and tha' defense-related fraction financed
by the contractors themselves under cost-sharing provisions now
in force;
b). the annual salaries of military and civilian govern-
ment, personnel working on defense-related research and development
efforts whose salaries are not included in the R.D.T.&E. appro-
priation;
c) the annual construction, equipment, testing, and other
operating costs of defense-related research and development instal-
lations to the extent not funded.in the R.D.T.&E. appropriation; and
d) defense-related costs of an R&D nature often funded
in the procurement or other appropriations, such as the costs of
many modernization programs, work done pursuant to Engineering
Change Proposals, and many Advance Production Engineering expenditures.
The above list is, of course, illustrative rather than all-
.inclusive.. Other costs which should',be included in a calculation of .
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batS
.Huge 3
our total defense-related R&,:D expenditures might well turn uI,
during the course of your study. It is important, however, tnat
the Congress be given as accurate a picture of these expenditures
as 'possible, together with a clear indication as to which of the
component items, and at what levels of expenditure, have been
included in the Defense Department's study and your own, respectively.
2) Ruble evaluation of Soviet research and development
expenditurres :
Due?to the extreme secrecy surrounding Soviet defense acti-
vitics and the low reliability of officially published Soviet
data, it would seem extremely difficult to gauge the precise
magnitude of Soviet research and development activities at any
time. If the Congress is to put any reliance on the Defense
Department's estimates in this area, it will have to have a clear
ind.eation of how these estimates are'derived.
The following are among the questions to which answers are
urgently needed and-should be possible:
a) what are the Defense Department's estimates of
overall Soviet research and development expenditures, Soviet
expennditures on deleiiai-rela.~eu R&D, and Soviet expenditures on
R&D in the fields of space and atomic energy?,,:,
b) Where in the official Soviet'?budget 'categories are
these expenditures believed to be funded?
c). To what extent are Defense Department estimates of
these expenditures actually based uron published Soviet budget
data, and to what extent on other means of what kinds?
d) ~hnat range of error can realistically be expected
to be associated with these estimates?
e) To what extent has the Defense Department attempted a
break-out of its aggregate estimate of Soviet defense-related R&D
expenditures into component parts? v?hat is the nature of this
break-out, howr was it accomplished;' and' how 'reliable can it be
expected to be?
3) Evaluation of potential biases due to structural differences
between the U.S. and ;o Ji et economies:
Ours is a largely private enterprise econom;j, while the Soviet
economy is state-controlled. Consequently, many types of research
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Mr. Staats
page i.
and development privately financed in the U.S. will be financed
directly by the Soviet government.
In the U.S., for example, the great bulk of basic and applied
research in such fields as computers, instrumentation, and micro-
electronic technology is conducted by private enterprise. Much of
this research has obvious potential for military applications yet
except for the relatively small portion financed under defense
contracts or associated with the Defense Department's inde;)endent
research and development and related programs, it would not be
included normally in a calculation of overall U.S. defense-related
RP&D expenditures. In the Soviet Union, on the other hand, similar
research will be government funded and might more readily be included
in a calculation of Soviet expenditures.
One important part of your study might be to examine f+
composition underlying the aggregate Defense Department estimates
of U.S. and Soviet defense-related expenditures, respectively, to
ensure that structural differences in the two economies are not
allowed to bias the results. An accurate corm .rison would require
additions to the U.S. total to offset all inclusions in the
Soviet total of defense-related work funded by the Covernme:t
the Soviet Union but by private industry in..the United States. n.
1) Evaluation of ruble to dollar conversion methodology:
One of the most crucial aspects of any comparison between
Soviet and U.S. expenditures is the choice of an exchange rate
translating rubles into dollars. The artificial nature of the
official exchange rate prevents its being used, but the choice
of an alternative rate is difficult..
This section of your study might address the following
questions:
a) What was the exchange rate used by the Defense
Department in its calculations, and by what precise methodology
was this rate derived?
b) Is there any way of deriving such a rate without
in.efxect, estimating directly how much it would cost to do in, the
United States the Soviet work. which is being costed? Do wre know
enough about the precise nature of the Soviet work in question to
be able to make such a calculation? If such a procedure seas
utilized by the Defense Depar-tr:ent with respect to the present
comparison, what different rates were chosen for the different
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Mr. Staats
Page 5
categories of Soviet effort underlying the total, and how was the
rate for each of these categories derived?
an realistically be expected to
of error c
c} What range be associated with the exchange rate chosen by the Defense Departent? study I fully recognize the compltan interim reportaonryourJinvesti-
you to make, but I would appreciate
gation by June 1, 1971. It should be possible within the next 'two
? U.S.
rough magnitude of overall U
th
e
identify
tionths at least to ~- and to determine the data
expenditures for defense-related R&D
and methodolor used by the Defense Department in calculating
comparable Soviet expenditures. Due to the sensitive nature of some
of the information on which your study will have to be based, I
would. like to receive both. a classified and an unclassified version
i ne is received, consideration.
When that report
.
of y~^x _ iT = repay..epth
as to the practicality and advisability of a more detailed, 3-''
stud; of the Defense Department's comparisons of U.S. and Sovic
efforts will be in order.
a-^k- g at least the initial chases
Your cooperation in unc.cr ?k=.in~ w deeply appreciated.
of the ^invi1l betavail have
of your office
touconsult~7with personnel
My
as
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Thomas J. McIntyre
.United-'States Senator
b
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