STUDY OF THE PROCUREMENT SYSTEMS OF THE CIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85B00803R000200010012-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 5
• Document Creation Date: December 15, 2016
• Document Release Date: December 15, 2003
• Sequence Number: 12
• Publication Date: December 5, 1966
• Content Type: MF

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MEMORANDUM FOR: Executive Director-Comptroller
SUBJECT ~~, Study of the Procurement Systems of the CIA
REFERENCES A. Stud of the Procurement S stems of CIA by
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July 1966
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)
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1. This memorandum is submitted in response to your request
for our comments on the rocurement study; Reference A, known
generally as the Report,
2. The report itself represents a substantial effort,
particularly in the accumulation of statistical data to ieflect
~che scope of the Agency's procurement activities. We are, of
.course, ;ratified that the OSA contracting system withstood the
~i:cst of out:=side scrutiny and emerged as the pattern which is
~~cinn proposed .Tor ins~~allation in ~l:he rest o:T 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
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.
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iilat 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 whple we think that the solutions which are
proposed are disproportionate to the problem. The recommendations
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 netiv 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.
A. 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 procedures.
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 recommendation is
sza.sec~. It has always been well established that the Director of
Logistics is the officer responsible for the development and
i~~:?aier^sentation of procurement olicies and procedures . This
responsibility is inherent in and (2) and in other
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also sti~~ulates (pp IV 21 that the pecial Assistant to the DD/S
for Procurement should have a staff and assume functions which
go beyond procurement review. This seems to be an unnecessary
duplication of effort in an era when T/O'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. ITe would thus have the
authority to make decisions tivhich must now be made by the
Director of Logistics, the Director of Finance, or the command
components who are responsible far the management of the programs.
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 reportTs major criticisms of the present
system, and the addition of a new echelon of staff supervision
cannot possibly result in more rapid response to requirements.
phis 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 respon-
sibility 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 _
tre DD/S for Procurement, and simultaneously make the DD/S&T
responsible for R&D procurement. With the other controls already
existing, this would result in a total diffusion of responsibility.
B. RECOIIME~TDATIOi~I': Centralize all R&D Contracting in
the DD/S&T
Probably the most far-reachiizg 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
ou-r 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
assu~~~ed that it will continue %o be handled in the Office of
Logistics or in TSD itself. There is also the question of pro-
cu~eraent for NPIC (DD/I) which is not fully resolved. In fact,
although the report proposes that RED contracting be centralized
i1X D:,+/SST, the net effect of the proposal would be 'to decentralize
the systcra and require a much greater application of manpower.
At the present time there are only two systems in the Agency
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~.i.l~t,hou~li tlxe report at one place said there were three and in
~~iloth~~r place that there were five) . '
IvT:,',t~ system and (b) the Agency system
m~~,naged by the Director of Logistics. c ua y, e
programs of OSA should not be considered in statistics which
are used for a long-range Agency decision ~i~~e the ~~vel ?~
e~far`~ iii th~s8 ~~~~r~.m~ ~:~ bei~.tl~ sigrii~icantiy reduced and,
:in any event, they have little relationship to or impact on
~tiie procurement being conducted elsewhere in the Agency. If
'l:he R~:.D contracting is ultimately transferred to the DD/S2aT, 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
14~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 inclined to believe that it should
remain under the cognizance of the Deputy Director for Support
as a support service for the entire Agency. It may be useful
to examine the pros and cons of recognizing the procurement
function as sufficiently and uniquely technical and complex
to justify a separate organization and career service structure.
C. RECOMMENDATION;- That a Contract Review Board be
Established
ti9e 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-
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cisms concern coordination and procedures at the working level.
Conseriuently, 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. Tlae 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 concerned
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is responsible for authorizing th.e activity; the Director
of Logistics is responsible for the contracting; the Office of
General Counsel participates in all contracts; the Director of
rinancc is responsible for all contract auditing and disbursing;
and the entire arrangement is subject to review by the Audit
Staff, tiYe 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.
D. RECOMMENDATION: Establish a Management Information_
System
In several places the report refers to a need for a manage-
,~zent information system, and the Inspector General discussed
this in depth in paragraph 10 of his memorandum. We concur in
this requirement. DD/S&;T is attempting to develop an internal
i~:formation system to advance internal program management, as
Gveli as contribute to a broader system which will facilitate
staff review in our immediate office. 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
expertise 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. Automation of
programs is obviously a permanent, long-range objective, and any
talent which is needed but not now available should be sought
in the form of staff employees.
E. RECOMMENDATION: Establish a central repository of
information concerning contractors
and their performance.
Y" ::; :;~~nc~t-r in the need for such a repository and. will be
willing to cooperate in the development of appropriate procedures.
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