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With the assistance of the General Accounting Office, the_subcommittee plans to conduct a comprehensive review of the Peace Corps' new country entry programs, with particular emphasis on programs in Central and Eastern Europe.

b. Benefits.-The subcommittee's work will help Congress assess the effectiveness of the Peace Corps' processes for planning, developing, coordination, and implementing new country entry programs. It will also help Congress assess the Peace Corps's relationship with the Department of State in the countries of Central and Eastern Europe where it has initiated new programs. The subcommittee review will also assess the effectiveness of Peace Corps' processes for recruiting volunteers for new country entry programs and providing them with appropriate training, assignments, and in-country health care and other support. Finally, the subcommittee's review of the funding and other resources allocated for the new country entry programs will help Congress determine whether existing programs in other regions of the world have been adversely affected.

c. Hearings. No hearings have been scheduled on this matter. 19. The Navy AOE-6 Program.

a. Summary. Since 1992, the Legislation and National Security Subcommittee has been reviewing the Navy AOE-6 class ship acquisition, in particular the sources of huge cost overruns and irregular financial dealings in this four ship program.

The AOE-6 class fast combat support ships are designed to operate as part of carrier battle groups, resupplying other ships in the battle group with food, petroleum, ammunition, and other supplies. In January 1987, the Navy awarded an $862.9 million fixed price incentive contract for the design and construction of four AOE-6 class ships to the National Steel and Shipbuilding Co. [NASSCO]. Under this contract, the Navy eventually purchased a total of three AOE-6 class ships, but did not purchase a fourth ship, because the program was experiencing significant cost increases and delays.

By February 1991, NASSCO had filed over $300 million in claims against the Navy, based upon its escalating contract costs. NASSCO estimated its loss at about $250 million for the first three ships, and demanded $25 million from the Navy in emergency relief threatening to file for bankruptcy protection if these funds were not provided. The Navy provided the requested funds, which represents the maximum amount the Secretary of the Navy could award without securing congressional approval under Public Law 85-804.

By early 1991, the delivery date for the first ship had slipped by more than 1 year and the delivery date for its unique reversing reduction gear had slipped by more than 2 years.

On December 26, 1991, the Navy and NASSCO negotiated a settlement, which increased the total AOE-6 contract price by $237 million to $1.1 billion. The Navy thus agreed to pay significantly more for three AOE-6 class ships than the original contract price for four ships. During this time period, Congress provided another $500 million for a fourth AOE-6 class ship.

Throughout the program, both the Department of Defense inspector general and the General Accounting Office have been reviewing

the program. The GAO recommended that the fourth ship not be built until the contract problems with NASSCO have been thoroughly reviewed and the need for such a ship is reassessed.

Despite these concerns, on January 19, 1993, the day before President Clinton took office, the Navy awarded the contract for the fourth AOE-6 class ship to NASSCO.

In response to this unusual action, the GAO recommended that the Secretary of Defense direct the Secretary of the Navy to suspend further expenditures under the AOE-10 ship contract until the total cost and further program risks are identified and controlled. To date that recommendation has not been followed.

The subcommittee is concerned that the AOE-6 class ships are being purchased without the careful and prudent review that GAO has repeatedly recommended. Particularly in light of the scheduling delays and the cost growth experienced by the program, these hasty decisions to buy more AOE-6 class ships should be carefully reviewed.

b. Benefits. The subcommittee's work will help Congress assess the viability of the AOE-6 acquisition program and decide whether additional ships are needed. The fiscal constraints that Congress must face means that purchases of major military hardware have to be completely justified. The subcommittee's review will also help Congress assess whether the Navy's acquisition of major systems is consistent with good contract management and sound business practices.

c. Hearings. No hearings have been scheduled on this matter. 20. Alleged Sale to the Department of Defense of Foreign-Made Machine Tools as Domestic Products.

a. Summary.-During 1991 and 1992, the Legislation and National Security Subcommittee received serious allegations of fraud from two U.S. machine tool manufacturers (Cincinnati Milacron and Giddings & Lewis) and Mr. Fred Pedicone, a former employee of the Mazak Corp. The manufacturers and Mr. Pedicone alleged that Mazak was substituting machine tools made in Japan for ones made in the United States, and fraudulently representing that these machine tools are of domestic origin. With the assistance of the General Accounting Office, the subcommittee initiated an investigation of these serious charges.

Mr. Pedicone had previously contacted the U.S. Customs Service concerning this matter, prompting Customs to open an investigation, and subsequently filed a Federal False Claims Act (qui tam) action against Mazak.

The Mazak Corp., the United States based subsidiary of Yamazaki Mazak of Japan, allegedly sold machine tools to the Department of Defense certifying that they were of domestic origin, when in fact they were manufactured and assembled in Japan. These actions would represent violations of fiscal year 1987, 1988, and 1989 defense appropriations acts, which restrict DOD procurement to United States and Canadian sources for certain machine tool classifications. In addition, such misrepresentations might also represent violations of the 1989 National Defense Authorization Act, and the Buy American Act of 1933 which requires that the domestic content of products procured by DOD exceed 51 percent.

Mazak's alleged mislabeling would also represent a violation of 18 U.S.C. § 1031, which prohibits the making of false statements to Federal Government for the purpose of obtaining contract awards. In a special report to the subcommittee "Alleged Buy American Act Violations," the GAO Office of Special Investigations substantiated violations of the Buy American Act and Customs mislabeling laws. GAO also reported that the Justice Department declined to prosecute these violations, because the charges involved were misdemeanors of considerable age and Mazak was already exposed to substantial liability on a civil fraud claim.

In August 1992, Mazak officials agreed to pay $2.39 million to resolve the qui tam claim filed by Mr. Pedicone, with $1.6 million of that total being paid to the Federal Treasury. An audit of Mazak's 1992 and 1993 sales activities, conducted by the accounting firm of Peat Marwick, concluded that Mazak was in compliance with the Buy American Act. Mazak will be audited again in 1995 to evaluate the firm's activities and procedures to ensure compliance with the Buy American Act. In addition, the results of the 1995 audit will be provided to the Air Force debarring official for evaluation.

b. Benefits. The machine tool industry is critical to the U.S. manufacturing base as well as the Nation's ability to meet the its defense mobilization needs. According to GAO, Department of Defense purchases represent about 10 percent of total machine tool consumption in the United States. Competition from foreign producers has been steadily eroding the domestic machine tool industry. The subcommittee's work enhanced the enforcement of the Buy American Act requirements in DOD procurement, and helped Congress assess their effectiveness in preserving U.S. contractor's ability to meet the Nation's defense needs.

c. Hearings.-No hearings have been scheduled on this matter. 21. The Strategic Target System [STARS].

a. Summary.-Begun in 1985, to date the Strategic Target System [STARS] has cost some $183 million, with $27 million more requested for fiscal year 1994, for a total of $210 million. STARS consists of refurbished Polaris missiles with payloads specially produced to simulate Soviet warheads. The system was designed to provide targets for the weapons planned under the now-defunct Global Protection Against Limited Strikes [GPALS] system of the Reagan and Bush administrations. With the assistance of the General Accounting Office [GAO], the Legislation and National Security Subcommittee examined the need to continue the STARS program after the cancellation of the weapon system it was designed to test.

The GAO report to the subcommittee, "Ballistic Missile Defense: Strategic Target System Launches from Kauai" (GAO/NSIAD 93270), revealed some disturbing information. In particular, this GAO report indicates that there are three areas of concern:

There is no longer a need for these test missiles;

The program will cost almost $50 million to launch test targets that could have been launched for as little as $3.5 million each; and,

Star Wars officials misled the public and the Congress on the existence of acceptable alternatives to launching these test missiles from Hawaii.

The STARS program was proposed in 1985 when the threat was thought to be a massive attack from the Soviet Union. The administration at that time was in a rush to deploy a Star Wars system, and there was a shortage of missiles that could be used as test vehicles. This is no longer the case.

Further, the systems the STARS targets were intended to test have been canceled or delayed. In the 1992 environmental impact statement for STARS, officials claimed the system was "vital to the development of key GPALS components." However, GPALS has now been canceled, as have the weapons cited in official documents as needed for STARS.

In 1993, the congressional requirement to deploy a national ballistic missile defense system in 1996 was rescinded. Most recently, the Department of Defense's bottom-up review of ballistic missile defenses explicitly rejected options to deploy a system in the United States. Rather, the Department has decided to proceed with only a "National Missile Defense Technology Program" which would "preserve a minimum capability in the key technologies" and would continue the Brilliant Eyes or an equally effective alternative "as a technology program."

The GAO reports the following costs for the STARS program through fiscal year 1998:

Millions

Development fiscal years 1985-93

$183.1

Fiscal year 1994 request

27.0

Total annual operational cost fiscal years 1995-98 (at $20 million per year)
Launch costs fiscal years 1995-98 (5 launches at $10.9 million)

80.0

54.5

Total cost, fiscal years 1985-98

344.6

For these expenditures the government will have purchased the ability to launch into space seven refurbished Polaris missiles with target payloads-at $49.2 million per launch.

The original plan to launch 40 STARS missions was scrapped last year. The existing plans only call for these seven launches, plus six more missions that were planned for system integration tests of the National Missile Defense System.

However, as noted above, the National Missile Defense System has now been canceled. There will not be any system whose integration needs testing, and therefore, the justification for these last six STARS missions is not clear.

Ending the program now would save $161.5 million (the 199498 expenditures). The government would have spent $183.1 million for just two launches of questionable value, or $91.5 million per launch, but cancellation would save the government from throwing good money after bad.

GAO also reported that, according to program officials, all the primary objectives of the five planned tests they reviewed could be met from alternative sites. Specifically, GAO found the second STARS test, launched on August 25, could have been fired from a Minuteman III from Vandenberg Air Force Base in California at a savings of over $1.5 million. GÃO also found that other missions using STARS rockets could be fired from Vandenberg, or from Wal

lops Island, VA, or the Eastern Test Range, Florida. Other possible launchers include a Minuteman II, a Trident C4, or a Firebird missile.

b. Benefits. The subcommittee's investigation revealed that this program was no longer critical to the national defense. This investigation and others conducted by the subcommittee contributed to a congressional consensus in 1993 to trim almost $1 billion from the fiscal year 1994 Department of Defense request for the Ballistic Missile Defense Organization. Department of Defense officials are now reviewing the STARS program in particular and considering whether to terminate or redirect the program.

c. Hearings. No hearings have been scheduled on this matter. 22. Performance of the Patriot Missile.

a. Summary.-During the 102d Congress, the Legislation and National Security Subcommittee conducted an investigation and convened an oversight hearing on the performance of the Patriot missile in the Gulf War.

Chairman Conyers is concerned by doubts raised during that investigation about the validity of the claimed success of the Patriot missile. In particular, the Army continues to claim that the Patriot hit almost all of the approximately 47 Scud missiles it engaged. However, independent reviews of the Army's assessment found little evidence to support these claims. For example, a study by the Congressional Research Office found evidence of only one hit, while the General Accounting Office detected only three to four Scud hits. In response to these serious questions, on January 28, 1993, Chairman Conyers wrote to Secretary of Defense Aspin requesting an independent evaluation of the missile's performance in the Persian Gulf War and an independent scientific review of the video evidence of the Patriot's performance. Chairman Conyers stated that these two steps are crucial in order for the Congress to realistically evaluate a request from the Department of Defense to invest billions of dollars into new anti-tactical ballistic missile programs. DOD is yet to assuage such an independent evaluation, raising only further questions about the program.

b. Benefits. Despite the official refusal to conduct an independent evaluation, the subcommittee's work in this area has led other independent experts to offer to review the performance of the Patriot missile. In December 1993, a panel of the American Physical Society concluded that, contrary to Army claims, the video evidence of the Patriot intercept attempts was scientifically useful in evaluating the missile's performance. The American Physical Society has offered to conduct an independent review, at no cost to the government, if it can obtain access to the classified Army evaluations.

An accurate gauge of the performance of the Patriot missile is important because American service men and women may have to rely upon this system for protection in the future. By cooperating with the American Physical Society, the Department of Defense can help secure more accurate information about the performance of this system. Without the subcommittee's work, it is unlikely that this no-cost offer would have been made.

c. Hearings. No hearings have been scheduled on this matter.

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