Acquisition Reform: Comparison of Army's Commercial Helicopter Buy and
Private Sector Buys (Letter Report, 03/17/95, GAO/NSIAD-95-54).

GAO reviewed the procedures the Army used to procure its New Training
Helicopter (NTH), focusing on: (1) the differences between the Army's
and private sector's procurement procedures; (2) Army efforts to
streamline the NTH procurement; and (3) whether the NTH acquisition
could be used as a baseline against which to implement futher
acquisition improvements.

GAO found that: (1) the Army's NTH acquisition took longer, involved
more people, and generated significantly more paperwork than the private
sector's acquisition of similar helicopters; (2) the Army's NTH
procurement was more complicated than the private sector's procurement
because the Army had to comply with more extensive and less flexible
system requirements and numerous laws, regulations, and documentation
requirements; (3) the Army streamlined its NTH acquisition process by
employing more commercial-type practices, modifying existing commercial
helicopters, using commercial standards in lieu of military
specifications and standards, and reducing some solicitation data
requests, contract clauses, and documentation requirements; (4) the Army
could have further improved the NTH acquisition by approving deviations
and waivers in a more timely fashion and further reducing contractors'
paperwork requirements; (5) the Army needs to implement the reforms
called for in the Federal Acquisition Streamlining Act to further reduce
the differences between the Army's and commercial sector's acquisition
process; (6) the act's commercial preferences and procurement regulation
exemptions should significantly expand and simplify the Army's
procurement of commercial items; and (7) although the NTH acquisition
could be used as a baseline to implement further commercial acquisition
practices, it would not be an appropriate baseline to implement
procurement improvements for combat or other missions, since these
missions can only be satisfied by unique development efforts.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-95-54
     TITLE:  Acquisition Reform: Comparison of Army's Commercial 
             Helicopter Buy and Private Sector Buys
      DATE:  03/17/95
   SUBJECT:  Army procurement
             Federal procurement policies
             Procurement evaluation
             Helicopters
             Procurement procedures
             Documentation
             Equipment contracts
             Procurement regulation
             Defense operations
IDENTIFIER:  National Performance Review
             Army New Training Helicopter
             UH-1 Helicopter
             DOD Planning, Programming, and Budgeting System
             
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Cover
================================================================ COVER


Report to the Secretary of Defense

March 1995

ACQUISITION REFORM - COMPARISON OF
ARMY'S COMMERCIAL HELICOPTER BUY
AND PRIVATE SECTOR BUYS

GAO/NSIAD-95-54

Acquisition Reform


Abbreviations
=============================================================== ABBREV

  DOD - Department of Defense
  FAA - Federal Aviation Administration
  FAR - Federal Acquisition Regulation
  NTH - New Training Helicopter
  TEUE - Training Effectiveness User Evaluation
  TINA - Truth in Negotiation Act
  RFP - request for proposals

Letter
=============================================================== LETTER


B-260371

March 17, 1995

The Honorable William J.  Perry
The Secretary of Defense

Dear Mr.  Secretary: 

The Congress, the executive branch's National Performance Review, and
the Department of Defense (DOD) have emphasized the need for
reforming the federal government's acquisition processes.  The
federal acquisition system has been described as complex, unwieldy,
and in need of comprehensive reform.  One key aspect of the current
reforms is to use commercial procurement practices to buy commercial
products. 

Army officials have cited the acquisition of the Army's New Training
Helicopter (NTH) as an early example of success in streamlining its
acquisition process to buy a commercial item.  In this report, as a
"case study," we (1) compare this Army acquisition with acquisitions
by two of the largest private sector purchasers of similar
helicopters to determine key differences between these buys and the
reasons for such differences, (2) identify successes the Army
achieved in streamlining the NTH acquisition, and (3) discuss
potential improvements that could be achieved from acquisition reform
efforts.  Our comparison is not intended to suggest that the
identified private sector processes would be appropriate for a
government procurement.  However, as the government moves to greater
use of commercial practices to procure commercial items, a
comparative analysis can be a helpful tool in gauging status and
progress. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The Army's acquisition of the NTH was vastly different than private
sector companies' acquisition of similar helicopters.  Specifically,
the Army's acquisition took longer, involved more people, and
generated significantly more paperwork. 

Key reasons for these differences were that the Army's procurement
included

the need to comply with a myriad of laws and regulations;

more extensive and less flexible system requirements; and

numerous documentation requirements for the proposal and award
process, including contingencies such as bid protests. 

Nevertheless, in procuring the NTH, the Army streamlined its
acquisition process somewhat and used more commercial-type practices. 
For example, it adapted a commercial helicopter for the NTH rather
than pursuing a lengthy development program, deleted a number of data
requests and contract clauses from the request for proposals (RFP),
and used commercial standards in lieu of military specifications and
standards.  In addition, the Army requested fewer program evaluations
and other documents than are normally required in the acquisition
process--these include functional areas such as testing, safety, and
logistics. 

We believe the Army could have made further improvements through
quicker approval of deviations and waivers and additional reductions
in contractors' paperwork requirements.  However, to significantly
reduce the differences between the Army's and commercial sector's
acquisitions, further reforms, such as those proposed by the
Secretary of Defense and called for in the recently enacted Federal
Acquisition Streamlining Act of 1994, need to be implemented.  For
example, the act should significantly expand and simplify the
procurement of commercial items because it stipulates a preference
for such items and eliminates the applicability of certain laws and
clauses previously required.  We believe, therefore, that the Army's
NTH acquisition could be used as a baseline against which further
improvements that might result from acquisition reform initiatives
could be measured.  However, for combat or other missions that can
only be satisfied by unique development efforts, the NTH would likely
not provide an appropriate baseline. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The DOD acquisition system has been described as a complex web of
laws, regulations, and policies adopted to, among other things,
ensure standardized treatment of contractors; prevent fraud, waste,
and abuse; and further socioeconomic objectives.  This complex
situation has been cited by DOD officials as adding to (1) the time
to procure commercial items from the private sector and (2) the costs
of such items in terms of administrative burdens placed upon both DOD
and its suppliers.  Several efforts are underway to change the way
DOD buys commercial items.  One approach is to streamline or
eliminate as many government-unique requirements in the procurement
of commercial items as possible.  This is what the Army stated was
done in the procurement of its NTH. 

Although the NTH acquisition began several years before the current
reform efforts, the Army's objective was to streamline the cost of
entry-level rotary wing training by using a "not-business-as-usual"
approach to the acquisition process.  To reduce the cost of this
training without degrading its effectiveness, the Army sought to
replace the UH-1 Huey with a commercial helicopter that had lower
operating costs.  The Huey, although more effective than the system
it replaced, was also more expensive to operate and maintain.  A 1989
study estimated that expenses could be reduced by about $40 million a
year by using a new training helicopter rather than the Huey.  Thus,
the Army incurred extra cost every year until the NTH replaced the
Huey. 

The Army awarded a contract in March 1993 to Bell Helicopter, Textron
Incorporated, for delivery of 157 NTHs and 12 cockpit trainers with
deliveries beginning in October 1993.  The contract price was about
$85 million.  The Army began training with the aircraft--a commercial
nondevelopmental item\1 that was certified by the Federal Aviation
Administration (FAA)--in April 1994.  The NTH, as shown in figure 1,
is now being used for all phases of the Army's entry level rotary
wing training. 



(See figure in printed edition.)Figure 1:  The Army's New Training
Helicopter

Our comparison of the Army's NTH and the private sector purchasers'
processes is limited in a number of respects.  For example, the Army
NTH buy consisted of 157 helicopters while the private purchasers
stated that, for them, a large buy would be about 10 aircraft. 
However, since DOD is moving toward adapting the processes of world
class customers in buying commercial products and the Army has
identified the NTH as a successful commercial procurement, we believe
these commercial purchasers' processes can serve as an indicator of
progress in moving away from government-unique terms, conditions, and
practices.  Appendix I details the acquisition process for both the
Army NTH buy and the private sector purchasers included in our work. 


--------------------
\1 DOD regulations define a nondevelopmental item to include, among
other things, commercial items and commercial items modified for
military use.  In 1994, the Federal Acquisition Streamlining Act
defined commercial items to include items available to and used by
the general public that incorporate minor modifications to meet
federal requirements. 


   ARMY'S NTH BUY DIFFERS FROM
   PRIVATE SECTOR HELICOPTER BUYS
------------------------------------------------------------ Letter :3

Differences we noted in the Army's NTH buy and acquisitions by the
private sector purchasers we spoke with appear quite significant. 
One main difference is that the Army's NTH acquisition took more
time.  From the time the need was identified in 1986 to initial
aircraft delivery in 1993 was 7 years.  Of this time, it took about
23 months from the time Congress approved funding for the purchase in
November 1991 to initial delivery in October 1993.  In comparison,
the major private sector purchasers of helicopters we spoke with
stated that their acquisitions of similar helicopters normally take
about 3 months from the time a customer identifies its need until
aircraft delivery.  This time frame, according to these purchasers,
does not normally include the time it takes the customers to develop
their requirements and obtain funding for the aircraft.  Whether the
23-month period or some other period is most appropriate as a
comparison with the time required for private sector buys is
debatable; however, DOD and service officials acknowledge that the
time to acquire their aircraft was a considerably longer period than
that required for private sector acquisitions. 

Additionally, the Army involved several hundred government personnel
in the acquisition process while the private sector purchasers
involved just five to seven people.  However, the government
personnel's involvement with the acquisition varied significantly
from full-time participation to attending a few meetings.  According
to Army representatives, a core group of about 50 people was
significantly involved in the program management and the evaluation
and selection of the NTH contractor. 

We also noted that during the Army's NTH acquisition process,
contractors and government officials were required to provide large
quantities of data.  For example, the contractors were required to
respond to the RFP with seven separately bound volumes, which
included an overall executive summary for their proposal in one
volume, their technical proposal approach in another, and their cost
proposal in another.  Furthermore, numerous copies of each volume
were required--specifically, 50 copies of the executive summary and
from 10 to 20 copies of each of the remaining 6 volumes were
required.  One contractor's representative stated that its proposal
contained 62 pages of life-cycle cost data, including such
information as the parts requirements per month, compared to 1 to 2
pages of cost data normally required in a commercial contract.  A
representative for another contractor that responded to the RFP
stated that a truck was rented to deliver the proposal because the
Army required so many copies.  The private sector purchasers we
talked with did not require this type or quantity of data.  We were
told that they only asked for a few pages of data. 

Army officials also noted that they were required to submit a number
of program documents, some of which they believed added no value
because a commercial aircraft was being bought.  These included a
Test and Evaluation Master Plan and a Safety and Health Data Sheet. 
Similar documentation was not required in private sector purchases of
helicopters. 


      REASONS FOR DIFFERENCES
---------------------------------------------------------- Letter :3.1

Several reasons account for the key differences between Army and
private sector procurement.  These include the Army's (1) compliance
with numerous laws and regulations, (2) more extensive and less
flexible system requirements, and (3) need for documentation
throughout the proposal and award process.  We were told these were
not major factors in private sector procurements. 


         LAWS AND REGULATIONS
-------------------------------------------------------- Letter :3.1.1

Government procurements are subject to various statutory and
regulatory provisions that place requirements on government personnel
and can require contractors to revise or modify their commercial
practices.  Such statutory provisions include (1) competition
requirements that were enacted to obtain low prices, avoid
favoritism, and ensure offerers a fair chance when competing for
government contracts; (2) socio-economic requirements to promote
desirable social objectives; and (3) audit requirements developed to
ensure the government obtains what it pays for.  Audit requirements
include the Truth in Negotiation Act's (TINA) requirement for
contractors to submit cost or pricing data.  Regulatory guidance
includes the Federal Acquisition Regulation (FAR) and DOD's
acquisition and budget guidances--DOD Directive 5000.1--Defense
Acquisition, and Directive 7045.14--The Planning, Programming, and
Budgeting System. 

Government and contractor officials have often identified such
government-unique requirements as impediments to commercial buys.  In
fact, one contractor noted that the possibility that the NTH
procurement could have involved TINA requirements almost resulted in
his company not submitting a proposal.  Although the planned
competitive procurement was not subject to TINA requirements, the
contractor was concerned that changes in the procurement process or
modifications to the NTH contract after award could in some way
involve certified cost or pricing data.  In fact, an August 1992
draft RFP stated that although the contractor may not be required to
submit a signed certificate, "the contracting officer, however,
reserves the right to require the certification if it is determined,
prior to award, that adequate competition does not exist or if the
possibility of overpricing exists." This could have opened the
concerned company's books as well as its subcontractors' books to
government inspections.  An Army contracting representative commented
that it does not make sense for the government, when seeking the
benefits of buying commercial products, to place such requirements on
contractors whose products have already been produced for the
commercial market. 

Concerning regulatory provisions, Directive 5000.1, for example,
defines a disciplined approach to the integration of DOD's
requirements, acquisition, and budgeting processes.  Generally, a DOD
acquisition program is (1) initiated in response to a validated
military need that becomes an approved requirement, (2) prioritized
and must compete for funds in the DOD Planning, Programming, and
Budgeting System, and (3) further prioritized and must vie for funds
during the congressional authorization and appropriation process. 

This process of prioritizing and competing for funds frequently
results in changes and causes funding uncertainties.  In the case of
the NTH, funding uncertainties related to the budget and
appropriation process and the subsequent change in its acquisition
strategy significantly increased procurement time.  Specifically,
when the need for a new training helicopter was recognized in 1986,
the Army gave other systems a higher priority for scarce procurement
funds than the new trainer.  As a result, the Army decided to use
operations and maintenance funds to lease the aircraft and in 1990
received congressional approval to do so.  Congress subsequently
decided it was more beneficial to buy the aircraft and in November
1991, provided $23.5 million for the NTH initial procurement.  The
commercial purchasers that we spoke with acknowledged that they were
not subject to such legislative and regulatory constraints. 


         MORE EXTENSIVE AND LESS
         FLEXIBLE REQUIREMENTS
-------------------------------------------------------- Letter :3.1.2

DOD's traditional acquisition process is requirements driven; it
begins with an extensive identification of operational and
performance requirements derived from a variety of sources including
the intended users (pilots, maintenance personnel, and trainers). 
The initial requirements list is subjected to scrutiny and compared
to, but not limited by, what is available in the commercial market. 
For the NTH, the Army specified 83 of its requirements as critical,
but several of these, such as a third seat, crash-worthy fuel cells,
and crash-worthy seats, were not available on any potential
competitor's aircraft.  Army representatives said they specified 83
critical requirements because FAA certification assured only basic
requirements and in an area such as aircraft instrumentation NTH
students must have a working knowledge of many more instruments than
an FAA certification required.  They also stated that they had to be
specific in their requirements to avoid ambiguity. 

In contrast, the two private sector purchasers said they were limited
to commercially available capability and would normally define only a
few requirements as critical.  These representatives said that
private sector buyers define their requirements but may choose an
item that provides less.  They further stated that, in contrast, the
government requires its contractors to meet stated requirements in an
RFP or run the risk of being found unacceptable.  In some instances,
they stated that the government also required competing contractors
to identify items capable of exceeding government-defined
requirements.  For example, the RFP for the NTH states that failure
to achieve any critical requirements will result in contractors being
eliminated and also asked contractors to highlight any requirements
that have been exceeded and may result in training and safety
benefits or cost savings.  An Army official said that such
information was needed in the NTH "best value" determination to
properly assess and value those items that exceeded the stated
minimum requirements. 


         DOCUMENTATION RELATED TO
         PROPOSAL AND AWARD
         PROCESS
-------------------------------------------------------- Letter :3.1.3

The government's proposal and award process has been characterized as
a lengthy series of paperwork hurdles for both the contractor in
trying to be responsive to RFPs and for the government to be prepared
for contingencies such as bid protests.  This process can
substantially lengthen the procurement process.  Also if the process
is not carried out properly, a bid protest can ultimately negate the
contract award. 

The Army was required to (1) provide a 15-day notice to companies
before releasing RFPs and (2) allow 30 days for such companies to
respond.  Additionally, contractors who responded to this RFP, as
discussed previously, had to provide numerous copies of separate
volumes of information.  Army officials that were involved with the
NTH buy stated that much of the documentation was required so the
government could evaluate the contractors' claims about their
helicopter's performance.  For example, contractor claims about
life-cycle costs and performance characteristics had to be
substantiated by various individuals within the acquisition process,
and as a result, numerous copies were required.  Again, the private
purchasers noted that they did not make such data requests.  We were
told that they only ask for a few pages of data. 

Regarding bid protests, FAR Subpart 33-1 provides procedures to
follow should contract awards be protested to the agency, the General
Services Board of Contract Appeals (for automated data processing
acquisitions), or our office.  Private sector purchasers, however, do
not normally encounter such protests.  Army representatives told us
that much of the documentation they requested in the RFP and prepared
on their own was done in case of a bid protest.  They stated that
since the NTH buy was a streamlined procurement process, they wanted
to ensure that a clear audit trail documented the actions taken and
the reasons why. 

A small team was informally formed to participate in meetings with
the offerers and to assist in the review and revision of contract
documentation so that these would be written in a clear, concise, and
unambiguous manner.  An Army representative told us that when one of
the four competitors did protest the NTH award to our office,\2 the
documentation that had been gathered was essential in showing what
happened during the NTH competition and was instrumental in defending
the Army NTH procurement actions and resolving the protest in favor
of the Army. 


--------------------
\2 Enstrom Helicopter Corp., B-253014, Aug.  13, 1993, 93-2 CPD 189. 


   ARMY STREAMLINED ACQUISITION,
   BUT ADDITIONAL IMPROVEMENTS
   WERE POSSIBLE
------------------------------------------------------------ Letter :4

Much of the Army's streamlining can be attributed to the fact that it
opted for a commercial helicopter instead of pursuing a development
program.  A development program would have added substantial time and
cost to the acquisition.  In addition, by selecting a commercial
aircraft, the Army was able to test each offerer's aircraft using the
Army's operating procedures, methods, and personnel.  All of this was
done at the manufacturer's expense and allowed the Army to avoid an
expensive testing program.  Further successes identified by Army
officials include:  (1) reducing some system requirements to make it
easier for some contractors to compete; (2) deleting some unnecessary
data requests, contract clauses, and specifications from the NTH RFP;
and (3) preparing fewer program evaluations and related documents. 
Although progress was made in these areas, further improvements were
possible. 


      ARMY TEST PROGRAM AVOIDED,
      BUT MANUFACTURERS INCURRED
      SIGNIFICANT COSTS
---------------------------------------------------------- Letter :4.1

Army officials noted that, in pursuing an FAA-certified aircraft,
they saved money and reaped many benefits by performing a Training
Effectiveness User Evaluation (TEUE) on the manufacturer's aircraft
instead of conducting an expensive test program.  The TEUE, according
to these officials, provided a means for the Army to test the NTH and
see if it would do the intended mission using the actual operating
procedures, methods, and personnel.  This test was accomplished at
the manufacturer's expense and the aircraft remained the
manufacturer's responsibility.  While this test may have been a
significant cost benefit for the Army, some representatives of the
manufacturers told us that the TEUE was expensive for them.  One such
official told us that, because of the costs relative to the TEUE, his
company would not participate in an effort like this again. 


      SYSTEM REQUIREMENTS REDUCED,
      BUT FURTHER IMPROVEMENTS MAY
      HAVE BEEN POSSIBLE
---------------------------------------------------------- Letter :4.2

Army officials stated that the procurement package used in the NTH
buy incorporated flexibility regarding what was an acceptable
requirement and, as a result, some system requirements were reduced. 
Specifically, they stated that classifying their requirements as
critical and noncritical allowed the acceptance of less than
specified needs for noncritical requirements.  Based on its analysis
of comments received from competitors, the Army reduced several
requirements, including

airspeed from 100 to 90 knots,

a hover altitude from 4,000 feet density to 2,300 feet density,

fuel capacity from 3-1/2 hours to 2-1/2 hours, and

airframe crash-worthy limits from 26-feet-per-second to a limit open
to discussion based on contractor data. 

An Army representative said that the reductions in these requirements
made it easier for contractors to compete.  In fact, one contractor
avoided elimination from competition when the airspeed requirement
was lowered from 100 to 90 knots. 

Although some requirements were reduced, contractors who responded to
the NTH solicitation noted that further Army concessions would have
made it less burdensome in terms of people needed and paperwork
required for them to develop special Army-unique items.  While
requirements were separated into critical and noncritical,
contractors were still required to respond to each.  Furthermore, as
previously noted, 83 requirements were classified as critical.  One
requirement that contractors believed could have been reduced was the
"three seat" cockpit configuration whereby, in addition to the
instructor and student pilot, a second student in the aircraft must
have an unobstructed view of the instruments.  Contractors stated
that this was the most difficult and costly requirement for them to
meet.  Army representatives, however, stated that the cockpit
configuration was a critical requirement that was needed to save time
and money.  They noted that because a second student was being
exposed to and trained in the cockpit environment and could interact
with the instructor and other student pilot, training time should be
reduced. 


      CONTRACTOR WORKLOAD REDUCED,
      BUT MORE IS NEEDED
---------------------------------------------------------- Letter :4.3

The Army took several actions to streamline the acquisition of the
NTH and ease requirements on potential contractors.  The RFP, for
example, was shortened from an initial draft of 330 pages to a final
version of about 100 pages.  Army representatives said they
eliminated unnecessary data requirements, contract clauses, and
references to military specifications.  For instance, an Army
representative stated that 21 of 27 proposed data items cited in the
original RFP were unneeded and were subsequently removed.  The data
demand for engineering change proposals, for example, was removed
from the RFP because the contractor rather than the Army had
configuration management responsibility.  This data demand would have
required (1) the contractor to prepare engineering change proposal
documents, (2) Army engineers to evaluate and approve them, and (3)
the contractor to wait until funding was made available before
proceeding with the engineering changes.  Further, the contractor
would have had to submit 28 copies of each change proposal for the
Army to evaluate and process. 

The Army also eliminated about 98 contract clauses that were
identified by either the Army or contractors as being unneeded.  As a
result, the final RFP referred to only 64 separate contract clauses,
which are listed in appendix II, and included the full text of 8
other clauses. 

Additionally, in purchasing an FAA-certified aircraft, the Army
relieved contractors of the cost of complying with extensive military
specifications and standards.  Furthermore, other specifications and
standards were eliminated during the RFP review process.  For
example, the Army eliminated Military Specification MIL-Q-9858A,
"Quality Program Requirements," from the final RFP since quality
control processes, although less onerous, were already imposed under
the FAA certification.  DOD and contractor officials have often said
that MIL-Q-9858A causes extensive government oversight and additional
contractor cost in assuring compliance with various provisions for
quality control such as maintaining detailed records of tests and
inspections taken in response to test deviations, scrapped material,
and process trends.  Army officials told us that this specification
was not required for commercial aircraft but could have been imposed
in the NTH contract.  Accordingly, compliance with this specification
could have added a substantial burden, especially on contractors who
did not do business with the government and did not already have a
system that met this requirement. 

Despite the above reductions, the government still required a
multitude of data from offerers.  This included the volumes of data
in response to the RFP and various details not typically provided to
commercial customers such as technical manuals and data about
technical support.  According to the contractors, these requirements
create a significant paperwork burden because they must prepare and
submit the documents to be considered for contract award.  A number
of them stated that they spent millions of dollars in preparing
proposals and competing for the NTH contract.  In commenting on these
data requirements, Army officials said that such data could be
justified by the significant differences between the nature of Army
operations and the private sector and by differences in the number of
aircraft bought. 


      FEWER ASSESSMENTS AND
      PROGRAM EVALUATIONS, BUT
      WAIVERS AND DEVIATIONS TOOK
      TOO LONG
---------------------------------------------------------- Letter :4.4

In addition to easing the paperwork burden on contractors, the Army
was able to streamline the acquisition process by waiving some
reports, plans and evaluation requirements.  Some Army NTH
representatives said the waived documents were non-value-added
because the NTH was an FAA-certified aircraft with no combat mission. 
Waived reports include the operational test and evaluation report
that would have required time, manpower, and other Army assets to
prepare.  For example, resources would have been required to perform
the test, which would have involved participants from several Army
testing and evaluation agencies as well as Army pilots.  The use of
these resources could translate into substantial costs to the Army. 
Other documents that Army representatives said they waived because
they were unneeded include: 

System Threat Assessment Report, which documents the Army's threat
assessment against a specific system.  This assessment was waived
because the NTH is a training helicopter that has no combat mission. 

Live Fire Test and Evaluation Report, which is provided to Congress
to report results of realistic survivability or lethality testing. 
This report was waived because the NTH is solely a training device
with no combat mission. 

Development Test and Evaluation Report, which provides the results of
developmental test and evaluation of a system.  This evaluation was
waived because the NTH is a nondevelopmental item and an
FAA-certified aircraft. 

The Army experienced delays in obtaining some deviations and waivers
because of legal concerns and pressure from officials in functional
areas within the acquisition process.  For example, the Army
requested a deviation from the legal prohibition against allowing
contract financing on commercial products.\3 It took several months
to obtain and did not arrive soon enough for the Army to avoid
developing three different options to include in the RFP because of
the uncertainty about whether the deviation would be granted before
the RFP due date. 

One of the NTH competing contractors told us this was an example of
the government being out of "sync" with commercial procurement
practices by allowing fewer financing options than are normally
available in the private sector.  An Army representative said failure
to provide government financing on commercial procurement such as the
NTH could impede firms, especially smaller firms, from bidding on
government contracts for commercial products.  The impediment would
result because firms would have to invest their own funds or borrow
large sums to finance production if government financing is not
available. 

Army officials also identified some program documents as adding
little or no value to the NTH buy.  In these instances, NTH program
office representatives explained that sometimes it was simpler to
prepare the requested documents than to obtain waivers because some
functional proponents had higher level support than the program
manager.  For example, an NTH Program Office representative said the
office yielded to pressure from the testing community by preparing a
Test and Evaluation Master Plan, which when approved said little more
than development and operational testing were not necessary because
the NTH is a commercial helicopter.  The Army hired a contractor to
prepare this 64-page plan, which was completed in about a year and
cost about $70,000. 

In addition to the Test and Evaluation Master Plan, other examples of
program documents that added little or no value, according to Army
officials, included: 

Human Factors Engineering Report, which identified concerns such as
the minimization of crew workload for the NTH.  While the program
manager was able to eliminate certain sections of the report, he was
unable to waive the entire document. 

System MANPRINT Management Plan, which provided optimum man and
machine interface for the already designed nondevelopmental item. 

Computer Resources Life Cycle Management Plan, which was a 22-page
plan that stated that since the NTH is a commercial, nondevelopmental
item, no unique software for operation or support was required. 

Safety and Health Data Sheet, which provided information about
safety; radioactive materials; explosives and hazardous materials;
munitions; and health hazards, such as acoustical energy, biological
and chemical substances, oxygen deficiency, and radiation energy. 
Although the NTH solicitation specifically required an FAA-certified
aircraft, the safety functional proponents ultimately required the
Army to prepare the data sheet.  Army proponents of the Safety and
Health Data Sheet insisted that noise test data be gathered for the
NTH.  The Program Office, the FAA, and the contractor believed that
such data was unnecessary because this was an FAA-certified aircraft
and over 4,000 Bell Jet Rangers were flying. 


--------------------
\3 The Federal Acquisition Streamlining Act, enacted in October 1994,
eliminates this prohibition and authorizes government financing under
such terms and conditions as are appropriate or customary in the
commercial marketplace for commercial items.  This includes advance
payments up to 15 percent. 


   ACQUISITION REFORM MAY OFFER
   ADDITIONAL OPPORTUNITIES
------------------------------------------------------------ Letter :5

To significantly reduce differences between the Army's and commercial
sector's acquisition processes, further reforms--such as those set
forth by the Secretary of Defense and Congress--would be required. 
Specifically, many of the laws, regulations, and other reasons for
the extended NTH acquisition process, the numerous participants, and
extensive paperwork requirements could be reduced when various DOD
initiatives and the recently signed Federal Acquisition Streamlining
Act of 1994 are successfully implemented. 


      DOD'S BLUEPRINT FOR A
      COMMERCIAL PURCHASING
      ENVIRONMENT AND RECENT
      LEGISLATIVE REFORMS
---------------------------------------------------------- Letter :5.1

In February 1994, the Secretary of Defense told Members of Congress
that it was imperative that the United States be able to rapidly
obtain commercial and other state-of-the-art products and technology
to meet post-Cold War security challenges.  He noted, however, that
the DOD acquisition process--which is subject to considerable
"stove-piping" of functions and massive coordination requirements, in
addition to extensive laws, regulations, and oversight
requirements--basically impeded DOD's access to such commercial
items.  As an example, he stated that, under the current process, DOD
was often unable to buy commercial products, even when they were
cheaper.  He then presented his vision to transform DOD's acquisition
process into a commercial purchasing environment.  This vision
statement was based on recommendations in the executive branch's
National Performance Review and the Section 800 Panel report.\4

Among other things, the Secretary asserted that acquisition laws and
regulations must separately define and state a clear preference for
commercial items over other nondevelopmental items, and specially
designed items.  To accomplish this, he contended that commercial
acquisitions should be exempt from government-unique laws,
regulations, procedures, processes, or practices.  He noted that
acquisition policies and processes must be structured so that the
fewest number of people are involved in a given process and the time
required to acquire products and services is substantially reduced. 

He further stated that there should be (1) a mandatory exemption from
TINA requirements to submit cost or pricing data for most commercial
item acquisitions and (2) approval of and authorization of waivers
for the DOD pilot programs.  The Section 800 Panel report noted that
TINA requirements created a barrier for the use of commercial and
modified commercial products by DOD.  The Panel, in recognition of
TINA's adverse impact, drafted an alternative pricing provision.  The
Secretary requested the TINA exemption as a major step to creating a
commercial purchasing environment.  Regarding the pilot programs, he
noted that, since some time will be needed to revise regulations and
train personnel in the new purchasing environment, approval of DOD's
pilot programs would "jump start" acquisition reform by allowing the
immediate purchase of commercial and commercial-like items using
commercial practices. 

In October 1994, Congress passed the Federal Acquisition Streamlining
Act, which incorporated many of the Secretary's proposals.  Through
this act, Congress, among other things, sought to encourage the
purchase of commercial items in the government and reduce impediments
to these purchases.  One provision required the FAR to include a list
of statutes that are inapplicable to contracts and subcontracts for
acquiring commercial items.  Several such statutes were identified in
the act and included the ones related to

contingent fee certifications,

Anti-Kickback Act procedural requirements,

Drug-Free Workplace Act requirements,

subcontractor direct sales limitations to the United States,

suspended or debarred subcontractors identification requirements,

procurement integrity certifications, and

Clean Air Act certifications. 

Such government-unique requirements were found to be inconsistent
with normal commercial practice and a driver of increased
administrative expenses and paperwork for commercial companies
awarded government contracts for commercial items.  All of the above
requirements were included in the NTH solicitation.  At the time of
our review, DOD officials informed us that, as part of the regulatory
implementation of the Federal Acquisition Streamlining Act of 1994,
they have ongoing efforts to develop the lists of inapplicable
statutes for commercial procurements. 

Additionally, the act includes, among other things, provisions that: 

Establish a clear preference for the use of commercial items over
other nondevelopmental items and unique government-designed items (as
set forth in the Secretary's vision). 

Require preliminary market research before developing new
specifications and before soliciting any bids or proposals in excess
of $100,000.  This was done to determine whether agency needs could
be met by available commercial items and is a process quite similar
to the way the private companies we spoke with make purchases--that
is, identifying what is in the market and making tradeoffs instead of
using the more independent requirement development process that
existed for the NTH buy. 

As previously noted, the act also authorizes commercial item payments
using commercial terms and conditions when in the best interest of
the United States.  Under this arrangement, financing payments could
be used unless the agency head determines that such payment is
inconsistent with terms and conditions in the commercial marketplace
or not in the government's interest.  As discussed, such a change
could have been beneficial in the NTH procurement and would have
precluded the time lag and other problems associated with the NTH
Program Office's attempt to waive the prohibition on contract
financing for commercial items. 

Additionally, the act includes certain provisions that are designed
to improve the purchasing environment for commercial items.  These
include the (1) authorization of DOD pilot programs to test
innovative procurement procedures and (2) exemptions to TINA
requirements for the submission of cost or pricing data.  Regarding
the DOD pilot programs, Congress approved special statutory authority
for five of the seven acquisition programs originally nominated by
DOD.  To date, DOD has granted the participating programs waivers
from regulations not required by statute, and worked with the
programs to develop measurement processes to determine the success of
the acquisition approaches made possible by waivers.  Regarding TINA
requirements on commercial items that are not acquired competitively,
the act requires the contracting officer to seek information on
prices at which the same or similar items have been sold in the
commercial market.  If the information is adequate to evaluate price
reasonableness, the contracting officer must exempt the procurement
from cost and pricing data requirements. 

These and other changes appear to be a big step toward reducing the
"red tape" and administrative burdens associated with the
government's acquisition of commercial items.  It should be noted,
however, that no one has data on how much such reforms will reduce
the cost, time, number of participants, or paperwork required in
DOD's acquisition of commercial items.  DOD officials, however, have
stated that they currently have ongoing efforts to quantify and
collect such data.  This type of information is key in determining
whether adapting commercial practices to procure commercial items
will provide significant benefits to DOD.  We, therefore, believe
that the Army's NTH streamlining effort could be used as a baseline
against which further improvements that might result from acquisition
reforms could be measured.  However, some combat or other missions
are only satisfied by unique development efforts (such as the B-2 and
F-22).  In such cases, the NTH would likely not provide an
appropriate baseline. 


--------------------
\4 This is DOD's Acquisition Law Advisory Panel's report entitled
Streamlining Defense Acquisition Laws, which was convened under
Section 800 of the National Defense Authorization Act of 1991. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :6

In commenting on a draft of this report, DOD stated that it concurred
with the report.  DOD also agreed that the Federal Acquisition
Streamlining Act offers even more opportunity for the use of
commercial practices and for improved government procurement of
commercial type items.  DOD's comments are reprinted in their
entirety in appendix III. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :7

We reviewed the Army's NTH acquisition and related documentation
including, but not limited to, various draft and the final RFP, and
an Army after action report entitled "New Training Helicopter
Acquisition Process." We compared this NTH acquisition to
acquisitions of similar commercial helicopters made by private firms. 
To accomplish our objectives, we gathered and analyzed applicable
data regarding each of the above and interviewed a number of
officials within the Army, DOD, and the private sector.  These
included individuals from:  the U.S.  Army NTH Product Office at the
Army Aviation and Troop Command in St.  Louis, Missouri; the Army's
Aviation Training Brigade located at Fort Rucker, Alabama; Bell
Helicopter, Textron Incorporated, located in Fort Worth, Texas; the
Defense Plant Representative's Office located at Bell Helicopter;
American Eurocopter Corporation located in Grand Prairie, Texas;
Premier Helicopter Company located in Grand Prairie, Texas; Enstrom
Helicopter Corporation located in Menominee, Michigan; Grumman
Aerospace and Electronics Corporation located at Bethpage, New York;
and Petroleum Helicopter, Incorporated, and Keystone Helicopter
Corporation--two major private sector helicopter purchasers--located
in Lafayette, Louisiana, and Westchester, Pennsylvania, respectively. 

In addition, we reviewed (1) the Secretary of Defense's acquisition
reform plan entitled "Acquisition Reform:  A Mandate for Change,"
which was presented before the House Committee on Armed Services on
February 9, 1994; (2) the Federal Acquisition Streamlining Act of
1994, Public Law 103-355; and (3) various reports and studies
relative to commercial practices and the federal government's
procurement of helicopters.  We conducted our work between February
and December 1994 in accordance with generally accepted government
auditing standards. 


---------------------------------------------------------- Letter :7.1

We are sending copies of this report to interested congressional
committees.  We will make copies available to others upon request. 
Please contact me on (202) 512-4587 if you have any questions
concerning this report.  Major contributors to this report are listed
in appendix IV. 

Sincerely yours,

David E.  Cooper
Director, Acquisition Policy, Technology,
 and Competitiveness Issues


PROCESS FOR ARMY NTH BUY AND
PROCESS USED BY SOME PRIVATE
SECTOR PURCHASERS OF SIMILAR
HELICOPTERS
=========================================================== Appendix I


   ARMY'S NTH ACQUISITION
--------------------------------------------------------- Appendix I:1

The Army's NTH acquisition strategy changed over the life of the
program.  Initially, the Army proposed a lease it called a "turnkey"
or Single Contractor Aviation Trainer concept where one contractor
would provide aircraft maintenance, support, and conduct the Initial
Entry Rotary Wing flight training using contractor instructor pilots. 
Concerns about the cost of the concept and its potential to adversely
impact existing training operations resulted in the Army revising its
plan to a lease with an option to buy.  The Army received
congressional authorization in November 1990 for a 5-year lease of
the trainer aircraft.  However, Congress repealed this authorization
the following year and directed the Army to present a direct buy
strategy. 

The NTH acquisition extended over about 7 years from the time the
need for the NTH was identified in 1986 to initial aircraft delivery
in 1993.  For the first 4 years, most of the effort was devoted to
leasing because procurement funds were not available.  Concurrent
with finalizing whether to lease or buy, the Army was involved in
developing and approving detailed operational and performance
requirements for the NTH.  As discussed below, this was an iterative
process throughout the acquisition cycle that involved numerous
participants such as the users, potential contractors, and the buying
commands. 

Table 1.1 provides an overview of key events during the 7-year
acquisition of the NTH.  The table is followed by a more detailed
discussion of key events of each acquisition phase. 



                                    Table 1.1
                     
                        Key Events in the NTH Acquisition

Year      Phase     Responsible organization\a     Participants and events
--------  --------  -----------------------------  -----------------------------
1986      R         Headquarters                   Army Vice Chief of Staff
                                                   directs new training
                                                   helicopter be acquired.

1987      R         Aviation Center                User representatives meet to
                                                   discuss requirements for the
                                                   NTH.

          P         Buying command                 Industry interest in NTH
                                                   solicited via a Commerce
                                                   Business Daily announcement.

          P         Contractors                    Several contractors respond
                                                   to the Commerce Business
                                                   Daily announcement.

1988      P         Aviation Center                Communicates with contractors
                                                   about NTH.

          R         Training Device Program        Tasks contractor to perform
                    Manager                        an economic analysis of
                                                   initial entry rotary wing
                                                   training.

          R, P      Contractors                    Meet with congressional
                                                   representatives about the NTH
                                                   program.

          N         Aviation Center                Begins purging prior trainer
                                                   out of inventory.

1989      R         Headquarters                   Briefs House and Senate Armed
                                                   Services Committees on
                                                   planned acquisition.

          R         Aviation Center                Provides Training and
                                                   Doctrine Command with
                                                   requirement document.

          R         Training Device Program        Completes economic analysis
                    Manager                        of an integrated system for
                                                   initial rotary wing training.

          R         Training and Doctrine Command  Approves economic analysis
                                                   performed by contractor.

          P         Aviation Center                Issues draft request for
                                                   proposals.

          P         Training Device Program        Briefs Army Aviation Center
                    Manager                        on lease concept for NTH.

          R         Headquarters                   Validates economic analysis
                                                   performed by contractor.

          R         Training and Doctrine Command  Approves Commercial Training
                                                   Device Requirement document.

          P         Headquarters                   Reviews draft lease language.

1990      R         Headquarters; Training and     Authorizes acquisition of NTH
                    Doctrine Command               from a requirements
                                                   standpoint.

          R         Program Manager for Training   Performs market survey of
                    Devices                        commercial users.

          N         Headquarters                   Army Acquisition Executive
                                                   directs the NTH to be managed
                                                   by the Army buying command.

          N         Congress                       Authorizes a 5-year lease of
                                                   the NTH.

1991      N         Training Device Program        Transfers management
                    Manager                        responsibility to Army buying
                                                   command.

          S         Buying command                 Convenes senior level review
                                                   board and requests
                                                   designation of source
                                                   selection authority.

          S         Headquarters                   Army Acquisition Executive
                                                   appoints source selection
                                                   authority.

          P         Buying command                 Issues draft request for
                                                   proposals.

          P         Contractors                    Respond and comment on draft
                                                   request for proposals.

          N         Congress                       Repeals lease for the NTH.

          N         Headquarters                   Army Acquisition Executive
                                                   directs the NTH be managed by
                                                   Program Executive Office--
                                                   Aviation.

          S, P      Program Executive Office--     Transfers NTH funding and
                    Aviation                       staffing from Army buying
                                                   command to Program Executive
                                                   Office--Aviation; issues a
                                                   revised draft request for
                                                   proposal to contractors.

          S         Headquarters                   Source selection authority
                                                   appoints the source selection
                                                   advisory council.

          P         Contractors                    Respond and comment on
                                                   revised draft request for
                                                   proposal.

          R         Program Executive Office--     Asks for a revalidation of
                    Aviation                       Commercial Training Device
                                                   Requirement document.

          R         Training and Doctrine Command  Revalidates Commercial
                                                   Training Device Requirement
                                                   document.

1992      S         Program Executive Office--     First source selection
                    Aviation                       advisory council meeting held
                                                   at buying command.

          S         Test and Experimentation       Conducts Training
                    Command                        Effectiveness User Evaluation
                                                   (TEUE) pretest Fort Rucker.
                                                   at Fort Rucker.

          P         Aviation Center                Hosts presolicitation
                                                   conference for potential
                                                   contractors.

          S         Program Executive Office--     Source selection plan
                    Aviation                       completed.

          P         Test and Experimentation       Attends presolicitation
                    Command                        conference at Fort Rucker.

          S         Program Executive Office--     Second source selection
                    Aviation                       advisory council meeting.

          S         Test and Experimentation       Prepares the TEUE test plan.
                    Command

          P         Program Executive Office--     Issues final request for
                    Aviation                       proposals and hosts
                                                   preproposal conference for
                                                   contractors.

          P         Contractors                    Submit proposals.

          S         Aviation Center                Hosts TEUE.

          S         Contractors                    Attend TEUE at Fort Rucker.

          S         Program Executive Office--     Source selection advisory
                    Aviation                       council meetings III through
                                                   V.

1993      S         Contractors                    Submit best and final offers.

          S         Program Executive Office--     Holds source selection
                    Aviation                       advisory council meetings VI
                                                   and VII.

          S         Headquarters                   NTH selection coordinated
                                                   with acting Army Acquisition
                                                   Executive.

          C         Program Executive Office--     Contract awarded March 30.
                    Aviation

          C         Aviation Center                Receives first NTH in
                                                   October.
--------------------------------------------------------------------------------
\a Organizations referenced are Army except for Congress and
contractors. 

Legend for phases

R = Requirements determination
P = Proposal solicitation
S = Source selection
C = Contract award/delivery
N = Not applicable


      REQUIREMENTS DETERMINATION
------------------------------------------------------- Appendix I:1.1

The Army identified a need for a new training helicopter in July 1986
to replace the aging and difficult to maintain helicopter then used
for initial rotary wing training.  The Army's process for developing
operational and performance requirements began with discussions with
various user organizations (such as pilots, maintainers, and
trainers).  The Army eventually defined its NTH requirements to
include

a turbine-powered engine,

three seats,

dual controls,

90 knot airspeed, and

selected crash-worthy features. 

In 1989, the Army's training school approved a statement of
operational and performance requirements that added additional
details on various categories of these requirements such as cockpit
environment, navigation and communication capabilities,
maintainability, and reliability.  In February 1990, the operational
and performance requirements were approved and in mid-1990, an Army
assembled team visited and surveyed large users of commercial
helicopters in the same class as the NTH to obtain information on
operating costs and performance. 


      PROPOSAL SOLICITATION
------------------------------------------------------- Appendix I:1.2

In September 1987, the Army solicited interest from industry in the
Commerce Business Daily by identifying its basic operational and
performance requirements.  Subsequently, in February 1989, the Army
issued the first draft request for proposal (RFP), which consisted of
330 pages, including a 42-page statement of work, a 16-page system
description, as well as referencing 81 separate contract clauses. 
Between February 1989 and December 1991, the Army issued a number of
draft RFPs that consisted of hundreds of pages and requested
potential contractors to provide a multitude of information in a
variety of categories. 

Throughout the acquisition process, the Army received many comments
from industry.  For example, 144 potential prime contractors and
subcontractors commented on its December 1991 draft RFP.  Concurrent
with issuing the draft RFP, the Army involved a large number of
people in its decision-making process.  For example, it held a
presolicitation conference at Fort Rucker, Alabama, during March
1992.  Attendees included 52 industry personnel and at least 19
government personnel representing the Federal Aviation Administration
(FAA) and several Army commands responsible for training, testing,
and procurement as well as the Army's training school.  The final RFP
for the procurement was issued on May 1, 1992, and amended in August
1992. 


      SOURCE SELECTION PROCESS
------------------------------------------------------- Appendix I:1.3

The Army's source selection process incorporated procedures to choose
a source whose proposal has the highest degree of realism and
credibility, and whose performance was expected to best meet
government objectives at an affordable price.  In November 1991, the
Army appointed a source selection authority for the New Training
Helicopter (NTH).  This individual was responsible for (1) reviewing
an advisory council's recommendations; (2) assessing the analyses of
the contractors' proposals that were conducted by the source
selection evaluation board; and (3) ultimately, making the final
source selection decision that was presented to the Army Acquisition
Executive.  The source selection authority's advisory council
included senior military and civilian officials representing several
Army organizations.  According to an Army official, the evaluation
board consisted of about 100 civilian and military
officials--including 25 full-time members, 60 part-time members, and
15 consultants. 

There were a number of meetings involving numerous participants
during the source selection process.  The Army held a preproposal
conference at the Army's procurement command in June 1992.  The
conference was attended by at least 25 government personnel
representing the FAA, the Assistant Secretary of Defense, and 4
separate Army organizations as well as 32 private industry
representatives. 

The NTH Source Selection Board evaluated the responding contractors'
proposals in six areas:  (1) technical, (2) training effectiveness,
(3) management, (4) logistics, (5) past performance, and (6) cost. 
According to the RFP, these areas were weighted as follows: 

     "Training effectiveness was more important than cost.  Cost was
     more important than logistics, which was more important than
     management or past performance.  Management and past performance
     were approximately equal."


      CONTRACT AWARD AND DELIVERY
------------------------------------------------------- Appendix I:1.4

The Army received five proposals.  The contract was awarded to Bell
in March 1993 and required Bell to deliver 157 TH-67, Bell Jet Ranger
helicopters.  The basic Bell Jet Ranger is made at a Bell facility in
Maribel, Canada, and then flown to a Bell subcontractor facility in
Fort Worth, Texas, where the basic helicopter is modified to an NTH. 
Deliveries of the NTH started in October 1993 and will continue
through May 1996. 


   PRIVATE SECTOR PROCUREMENT
--------------------------------------------------------- Appendix I:2

We discussed and documented the private sector's process for
acquiring helicopters with two large private sector commercial
helicopter operators that buy from several different manufacturers. 
To provide a perspective for discussion, we have arranged the private
sector practices into the same categories we used for the NTH. 


      REQUIREMENTS DETERMINATION
------------------------------------------------------- Appendix I:2.1

The purchasers described a typical commercial helicopter procurement
starting with a determination of the customers' requirements for a
helicopter.\1 According to the purchasers, this includes identifying
such characteristics as the aircraft's size, speed, and range.  They
said that their customer requirements are typically limited to what
is available in the commercial marketplace but can include some
modifications.  According to these purchasers, this information is
generally readily available and this process can often be completed
within hours or days.  They further stated that their customers
usually have a couple of critical requirements and that these
requirements drive the process. 


--------------------
\1 This process does not include the time it took the customer to
develop their requirements and obtain funding for the aircraft.  The
private purchasers did not know what occurred prior to their
customers coming to them. 


      PROPOSAL SOLICITATION
------------------------------------------------------- Appendix I:2.2

The private purchasers we talked with stated that their proposals for
buys of about 10 aircraft could be up to 4 pages long, with the whole
acquisition process being completed in about 3 months.  This includes
the time from when a customer identifies a need for an aircraft to
its delivery. 


      SOURCE SELECTION
------------------------------------------------------- Appendix I:2.3

After evaluating the responses to proposals and discussing needs and
what is commercially available with the purchaser, the customer makes
a selection.  Generally, the customer decides on a helicopter that
meets most but not all of the requirements.  This type of decision is
made based on a cost/benefit analysis that may show the additional
capability is needed only a small percent of the time.  In such a
case, the purchaser may recommend that the customer utilize an
alternative to meet the additional capability as a cost-effective
solution. 


      CONTRACT AWARD AND DELIVERY
------------------------------------------------------- Appendix I:2.4

Once the customer has made his decision, the purchaser will then
lease or buy the selected helicopter from a manufacturer based on
cost comparisons.  We were told that, in total, only five to seven
key purchaser representatives were involved in the contract award
decision. 

The purchasers told us that they generally buy an unmodified
aircraft.  They said that it is more cost-effective to make any
modifications for their customer rather than having the manufacturer
make modifications.  They further said that the manufacturer's
delivery time varies depending on what aircraft are in their
inventory.  For example, one purchaser noted that it took about 3 to
8 weeks from the time of order to receipt of an unmodified aircraft. 
Modifications would lengthen this time; however, both purchasers
noted that from the time of order to final delivery was about 3
months. 


CONTRACT CLAUSES
========================================================== Appendix II

1.  Contracting Officer's Representative
2.  Statutory Prohibitions on Compensation to Former Department of
 Defense Employees
3.  Special Prohibition on Employment
4.  Termination--Commercial Items
5.  Invoice and Payment--Commercial Items
6.  Changes--Commercial Items
7.  Patents and Copyright Indemnification--Commercial Items
8.  Inspection and Acceptance--Commercial Items
9.  Title and Risk of Loss--Commercial Items
10.  Price Reduction for Defective Cost or Pricing Data--Contract
 Modifications--Commercial Items
11.  Audit of Contract Modifications--Commercial Items
12.  Technical Data and Computer Software--Commercial Items
13.  Technical Data and Computer Software Withholding of
 Payments--Commercial Items
14.  Certification of Technical Data and Computer Software
 Conformity--Commercial Items
15.  Clauses to be Included in Contracts with Subcontractors and
 Suppliers--Commercial Items
16.  Exercise of Option to Fulfill Foreign Military Sales Commitments
17.  Small Business and Small Disadvantaged Business Subcontracting
 Plan (DOD Contracts)
18.  Buy American Act and Balance of Payments Program
19.  Qualifying Country Sources as Subcontractors
20.  Preference for Certain Domestic Commodities
21.  Preference for Domestic Specialty Metals
22.  Preference for Domestic Hand or Measuring Tools
23.  Ground and Flight Risk
24.  Accident Reporting and Investigation Involving Aircraft,
Missiles, and  Space Launch Vehicles
25.  Certification of Claims and Requests for Adjustment of Relief
26.  Certification of Indirect Costs
27.  Pricing of Contract Modifications
28.  Officials Not to Benefit
29.  Gratuities
30.  Covenant Against Contingent Fees
31.  Restrictions on Subcontractors Sales to the Government
32.  Anti-Kickback Procedures
33.  Price or Fee Adjustment for Illegal or Improper Activity
34.  Limitation on Payments to Influence Certain Federal Transactions
35.  Protecting the Government's Interest When Subcontracting With
 Contractors Debarred, Suspended, or Proposed for Debarment
36.  Examination of Records by Comptroller General
37.  Order of Precedence
38.  Utilization of Small Business Concerns and Small Disadvantaged
 Business Concerns
39.  Small Business and Small Disadvantaged Business Subcontracting
 Plan
40.  Utilization of Women-Owned Small Businesses
41.  Liquidated Damages--Small Business Subcontracting Plan
42.  Utilization of Labor Surplus Area Concerns
43.  Labor Surplus Area Subcontracting Program
44.  Notice to the Government of Labor Disputes
45.  Walsh-Healey Public Contracts Act
46.  Equal Opportunity
47.  Equal Opportunity Preaward Clearance of Subcontracts
48.  Affirmative Action for Special Disabled and Vietnam Era Veterans
49.  Affirmative Action for Handicapped Workers
50.  Employment Reports on Special Disabled Veterans and Veterans of
 the Vietnam Era
51.  Clean Air and Water
52.  Drug-Free Workplace
53.  Duty-Free Entry
54.  Restriction on Certain Foreign Purchases
55.  Federal, State, and Local Taxes
56.  Progress Payments
57.  Interest
58.  Assignment of Claims
59.  Disputes
60.  Protection of Government Building, Equipment, and Vegetation
61.  Limitation of Liability--High Value Items
62.  Limitation of Liability--Services
63.  Commercial Bill of Lading Notations
64.  Limitation of Price and Contractor Obligations




(See figure in printed edition.)Appendix III
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
========================================================== Appendix II


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV

NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C. 

David Childress
Stacy Edwards
Marion A.  Gatling

KANSAS CITY REGIONAL OFFICE

Lawrence A.  Dandridge
David J.  Henry
Lillian I.  Slodkowski
John G.  Wiethop
