LETTER TO MR. MICHAEL J. MALANICK FROM HUGH E. WITT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00498A000200070008-4
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 9
• Document Creation Date: December 15, 2016
• Document Release Date: September 16, 2002
• Sequence Number: 8
• Publication Date: October 6, 1976
• Content Type: LETTER

EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF FEDERAL
PROCUREMENT POLICY
O CT 6 1976
OMB Declassification & Release Instructions on File - No Referral to OMB
Mr. Michael J. Malanick
Acting Deputy Director
for Administration
Central Intelligence Agency
Washington, D. C. 20505
DD/A. Registry l
'?~ Q y
The proposed Office of Federal Procurement Policy (OFPP)
Regulation No. 1 establishes a Federal Procurement Regula-
tory System applicable to the'executive agencies. Section 5.a.
of the regulation provides that the Armed Services Procure-
ment Regulation (ASPR) shall be applicable to the Department
of Defense and to the National Aeronautics and Space Adminis-
tration (NASA), and that the Federal Procurement Regulations
(FPR) shall be applicable, except for NASA, to the civilian
executive agencies, and, in certain authorized areas, to all
executive agencies.
Your letter of August 12, 1976, sets forth a detailed justi-
fication for, and explanation of, your agency's longstanding
practice of following the ASPR -- to the maximum extent
practicable consistent with your statutory responsibilities
and agency programs -- and requests an exemption from the
above requirements so as to continue that practice.
Based upon the justification contained in your letter, the
Central Intelligence Agency is hereby exempted from the
applicability requirements of Section 5.a., of OFPP Regula-
tion No. 1, and may follow the ASPR -- to the maximum
practicable extent -- instead of the FPR, except in those
areas where the FPR is applicable to all executive. agencies.
Sincerely,
ugh E.- Witt
For Release 2002/11/04: CIA-RDP79-00498A000200070008-4
 STATINTL Approved For Release 2002/11/04: CIA-RDP79-00498A000200070008-4
Approved For Release 2002/11/04: CIA-RDP79-00498A000200070008-4
 Approved For Releas 2 /
K+-Rf3S79
DD/A Registry
A000200070008-46
9
12 AUG 1976 fi e
The Honorable Hugh E.. Witt
Administrator for Federal Procurement
Office of Management and Budget
Washington, D. C. 20503
Dear Mr. Witt:
Your memorandum of December 22,.1975, requested. our views
on the draft Office of Federal Procurement Policy (OFPP)
Regulation No. 1. The Central Intelligence Agency's (CIA)
comments were provided during a meeting with you at your
office on February 24, 1976, and in my memorandum to you
dated March 2, 1976. During.the meeting with you and in
the March memorandum, we requested an exemption from OFPP
No. 1 to allow this Agency to continue to utilize the Armed
Services Procurement Regulation..(ASPR) as a guide for its
procurement policies rather than the Federal Procurement
Regulations (FPR) and agreed that the exemption would be
implemented by separate correspondence with you rather
than as a change to the regulation. This letter is in
response to a June 29, 1976, request from your Mr. Haugh
for additional information and-to specifically request
an exemption from the FPR and authority to follow, instead,
the ASPR.
The basic procurement authority for CIA is found in
Sections 3 and 8 of the CIA Act of 194.9, 63 .Scat. 208,
PL 81-110, June 20, 1949, as amended... This Act authorizes
the CIA to procure necessary supplies and services. by
either formally advertised or negotiated procurement methods
in accordance with selected provisions of the Armed Services
Procurement Act of 1947, 62 Stat.. 21, PL 80-413, February 19,
1948. Section 8a of the CIA Act of,1949 provides broad
authority for expenditure of.funds made available to the
Agency by appropriation or otherwise notwithstanding other
provisions of law; moreover, Section 8b of the Act authorizes
Approved For Release.20
ff 000200070008-4
 OFFICIAL L"SE ONLY
Approved For Release 2002/11/04: CIA-RDP79-00498A000200070008-4
the expenditure of funds without regard to law and regula-
tion for objects of a confidential, extraordinary, or emer-
gency nature. The certification of the Director of Central
Intelligence suffices for the settlement of such expenditures
without further review by the General Accounting Office.
The Federal Property and Administrative Services Act of
1949, 63 Stat. 377, PL 81-152, June 30, 1949, 40 U.S.C.A.
474 (17) provides an exemption for CIA with the language!
"Nothing in this act shall impair or affect any authority
of . . . (17) the Central Intelligence Agency; . . .''
Executive Order 11905, United States Foreign Intelligence
Activities dated 18 February 1976, also impacts on CIA
procurement. It recognizes-the Presidentts concern, among
other things, for conduct of research and development efforts
by the Agency. Section 4(b)(7) directs that CIA "Carry
out or contract for research, development and procurement
of technical systems and devices relating to the functions
authorized in this subsection.",.and in Section 4(b)(9)
that CIA " . . conduct administrative, technical and
support activities in the United States or abroad as may
be necessary to perform the functions described in paragraphs
(1) through (8) above, including. procurement . . . develop-
ment of essential cover and proprietary or unclassified
research, analytical and developmental services and special-
ized expertise; and entering into similar arrangements
with academic institutions.. . . ."
Our present procurement practices follow closely those
of the Department of Defense DOD) and are best described
by the Headquarters which states'. STATINTL
"It is the policy of the antra Intelligence Agency to
apply the Armed Services Procurement Regulation (ASPR)
to procurement of supplies and services. However, the
extraordinary authorities of the CIA Act of 1949 will be
applied when conformance to-the requirements of the ASPR
would adversely affect the-accomplishment of an Agency
program." The term "extraordinary authority," used in
this excerpt, refers to Section 8 of the CIA Act which
is discussed in the preceding paragraph. Our contract
boilerplates include mandatory ASPR clauses and our con-
tractors are required to utilize standard DOD forms for
reporting of patent, property, or other matters. Audit
procedures follow closely the Defense Contract Audit Agency
(DCAA) Manual, and we work closely with DCAA to avoid dupli-
cation of effort in the establishment of indirect rates.
DOD training courses in the field of procurement are a
mandatory part of our career development plans for procure-
ment personnel. While we are. not familiar with security
Approved For Relea 0 1 04 : CIA- 7 J1.Y8A000200070008-4
'#~
c 0i,
 7 USE ONLY
Approved For Release 2 2119FFItA 4 : IA-RDP79-00498A000200070008-4
and classification requirements o.f.other civilian agencies,
we suspect that our requirements in this area are closer
to those of DOD, We are a subclaimant to DOD in the Defense
Materiel System, and our contracts include appropriate
designators as to the assigned priority rating. The types
of supplies and services we require are most like those
of DOD, This fact results in high frequency of commonality
in the use of contractors by CIA and DOD. Appeals from
decision of our contracting officers are referred to the
Armed Services Board of Contract Appeals. Our close working
relationship with DOD, described in this paragraph, also
carries over into the areas of supply, maintenance, technical
and research and development. Nonetheless, the CIA must
maintain its independence from DOD to perform its statutory
missions.
Necessary variances from, the ASPR result primarily
from the fact that the Director of Central Intelligence
is responsible for the protection of intelligence sources
and methods. This responsibility is included in subsection
(d)(3) of the National Security Act of 1947, 61 Stat. 495,
PL 80-253, July 26, 1947. This responsibility is further
defined in Executive Order 1190.5, United States Foreign
Intelligence Activities dated 18 February 1976. Section
4(b)(8) directs CIA to "Protect the security of its instal-
lations, activities, information, and personnel." In many
of our procurements the fact that we are contracting with
a specific company or that we have invited a group of com-
panies in a particular field of expertise to bid would,
Y rovide information to the opposition that we are interested
n identifiable intelligence collecting techniques. We,
therefore, have determined.-that-we should reduce visibility
on our contracting as much as possible, and, while we attempt
to obtain competition to the maximum degree possible consis-
tent with the nature of the supplies or services being
purchased, we cannot advertise our procurement actions,
nor can we prudently synopsize and publicize our negotiated
procurement actions on either a preaward or post award
basis. This would be one example of variance from ASPR.
A second example would be the fact that, while we incor-
porate standard ASPR clauses into our contracts, we modify
those clauses that require or allow privity by third parties
to our contracts to exclude such privity without the ex-
pressed approval of the contracting officer. Examples
of such clauses are the Renegotiation Act, Examination
of Records, Audit, EEO, etc.
Approved For Release 2002/11/04: C 4-RDP79- 94 8A000200070008-4
1. SSE
 OAI EC USE NLY
Approved For Release 2002/11/04: CIA-RDP79-00498A000200070008-4
To describe our system of review and oversight and
checks and balances it is first necessary to briefly des-
cribe our procurement organization. The Director of our
Office of Logistics in the Directorate for Administration
exercises all delegable procurement authority of the Director
of Central Intelligence as Agency head, except as otherwise
specifically delegated by the Director. Production and
services procurements, automatic data processing equipment
acquisitions, general purchases,_ and Federal Supply Schedule
buys are centralized in the Procurement Division in the
Office of Logistics, For research and development procure-
ments, the Director of Logistics has established a decen-
tralized procurement system consisting of contracting teams
assigned to operating offices with sufficient contract
volume to warrant such action. Each of the research and
development contracting teams and each of the branches
within the Procurement Division is staffed with a senior
contracting officer who holds a written delegation of
contracting authority. He is supported by a sufficient
number of negotiators to handle his volume of contracts,
plus a security officer and a price/cost analyst. A Procure-
ment Management Staff, reporting directly to the Director
of Logistics, assists him in the management of the decen-
tralized research and development teams and the centralized
Procurement Division. This Staff functions as the overall
point of coordination for the creation and maintenance
of uniform Agency procurement policies and procedures and
acts as a focal point for efforts to increase the efficiency
and effectiveness of Agency procurements. This Staff also
performs periodic reviews, for the Director of Logistics,
of the contracting teams and the Procurement Division
to insure that procurement policies are implemented by
uniform procedures and practices. The chief of this staff
serves as the Agency representative on various interagency
committees concerned with procurement. There also is a
Contract Review Board (CRB) which reviews proposed procure-
ments having an estimated value of $150,000 as well as
selected procurements which might affect Agency contractual
policy or procedures. The Board makes recommendations
to the Director of Logistics who makes the final. decision
on whether to approve a contract award. The Board is also
charged with the responsibility for providing recommendations
on Agency procurement policies, procedures, and practices
when requested to do so by the Director of Logistics.
Membership on the Board includes senior officer represen-
tation from each directorate, plus advisors from the Office
of General Counsel, Industrial Contract Security, and the
Contract Audit Staff. Because of the responsibility of
Approved For Release 2002/11/04: CAA-RDP79
 Approved For Relea @ Q 1 icli ~ 498A000200070008-4
the Director for protection of sources and methods (dis-
cussed above), this Agency also maintains its own security
staff to handle security matters relating to contracts
and an audit staff to perform price/cost analysis and neces-
sary interim and final audits of contracts. Both of these
staffs maintain close liaison with counterpart organizations
in DOD.
25
is
Operating components while generating requirements
and establishing budgetary levels for their programs are
not delegated contracting officer authority to execute con-
tracts on behalf of the Government. This right is reserved
to our contracting officers and, as in other agencies, con-
stitutes a critical part of our system of checks and balances.
A second important. check and balance is provided by our
General Counsel who can stop issuance of a contract if not
Approved For Release 200 R 79-00498A000200070008-4
_2115M M
tunfilu AL USE 8fifty
 I
Approved For Releas 042MP! UT.' h
A000200070008-4
consistent with applicable law.. The Contract Review Board
with its interdirectorate membership is also considered
to be an important check and balance along with the required
approval of the Director of Logistics.
While procedures described herein are unique in certain
aspects, they follow closely DOD procedures and the ASPR.
In view of this, the CIA requests that QFPP approve an exemp-
tion from OFPP Regulation No. 1._ The specific request is
that this Agency be exempted from the Federal Procurement
Regulation published by the General, Services Administration
and authorized to follow, instead, to the maximum practicable
extent the Armed Services Procurement Regulation.
May I say in closing that l appreciate very much the
assistance and guidance provided to our procurement personnel
by your Mr. Haugh in his letter _of June 29, 1976. 1 trust
that information herein will facilitate your approval of
the exemption requested above.
Sincerely,
7s/ Michael J. Malanick
Michael J. Malanick
Acting Deputy Director
for
Administration
Distribution:
Orig - Adse
v-Z- - DD/A ~ ~.~ . ti3 ;
STATINTL 1 - OL Official
Originating Office:
es -McDonhld
irector of Logistics
'9 AUG 1976
Approved For Release /14 R 9- 1 8J4000200070008-4
 Approved For Relea001%&4 h~IAP498AO00200070008-4
the Director for protection of sources and methods (dis-
cussed above), this Agency also maintains its own security
staff to handle security matters relating to contracts
and an audit staff to perform price/cost analysis and neces-
sary interim and final audits of contracts. Both of these
staffs maintain close liaison with counterpart organizations
in DOD.
25X1 C
Operating co ponents while generating requirements
and establishings udgetary levels for their programs are
not delegated contracting officer authority to execute con-
tracts on behalf of the Government. This right is reserved
to our contracting officers and, as in other agencies, con-
stitutes a critical part of our system of checks and balances.
A second important check and balance is provided by our
General Counsel who can stop issuance of a contract if not
Approved For Release 2002/11/04: CFA-RDP79-00498A000200070008-4
F rP gAj ONLY