in NATO's international staff, who are directly supervised by an American, Mr. Eugene Merrill, and remotely supervised by NATO's infrastructure committee, the United States Representative on which is Mr. Walter Martin, a member of the staff of Mr. John L. Holcombe, deputy comptroller of the Department of Defense for Europe, who in turn comes under Mr. Wendell Anderson, the defense adviser in USRO. It may be observed parenthetically that all of the American civilians who represent the United States within the various segments of NATO are members of USRO under Ambassador Hughes, whose deputy is Mr. Edward Martin.

After the several NATO echelons have screened the proposed program, it is submitted by NATO's military standing group to the individual NATO countries for further consideration. In the United States, the Joint Chiefs of Staff first screen it, then the Office of the Assistant Secretary of Defense for International Security Affairs, then the Secretary of Defense himself, and lastly the Department of State, which forwards it to USRO together with the agreed United States position on the proposed program when it comes up for consideration before the North Atlantic Council, where it is first acted upon by the permanent representatives (including our Ambassador Hughes), and then by the foreign ministers themselves (including our Secretary Dulles).

Fiscal and Other Controls

The above allocations of responsibility for the NATO infrastructure program have resulted in the adoption of extremely rigid procedures for fiscal control, international audit, end-use inspections, and international competitive bidding, all of which were inaugurated with the fourth slice, to be applied as well to all unfinished projects under preceding slices. Approval by the North Atlantic Council of the recommended program authorizes its execution and sparks the rigid budgetary control procedures into operation. As construction sites are finalized and as the detailed plans, specifications, and cost estimates are developed for each project within a host country, authorizations to commit funds are made by NATO's Infrastructure Payments and Progress Committee, the United States representative on which is also Mr. Walter Martin. This committee performs additional screening and then grants authority to commit such funds as are justified by the circumstances of each case.

It may be noted that United States contributions to such funds are committed by NATO and obligated by the Department of Defense, rather than being both committed and obligated by Department of Defense like other military-assistance funds. Payments are made quarterly in advance, based on estimates of expenditures for the fol

lowing calendar quarter as submitted by the host country and approved by the NATO Infrastructure Payments and Progress Committee. It is interesting to note that the proportionate ratio of each member nation is carried down through every project authorized within the program. Reports are received in the Department of Defense from its representatives in USRO on a day-to-day basis, and a project-byproject review is thus made possible well in advance of the submission of the quarterly bills. Assurance is thus had that every other NATO country contributes its share at the same time as the United States does, or else our own payment would be held up-a development which happily has never occurred.

As commitment authorizations are granted by NATO's Infrastructure Payments and Progress Committee, NATO's international staff notifies each delegation of its required contributions, on the basis of cost estimates. The program is then executed in each country by and under the authorities in that country. They must adhere to NATO standards and are subject to inspection by a NATO inspection team composed of a representative of NATO's international staff, of the appropriate military headquarters which will man the facility, of the representatives of the user nation, and of the representatives of the host country. At least two inspections of the physical site are made by this NATO inspection team, one during the course of construction, and the second upon completion of the facility. Thus, although the host country is responsible for issuing invitations for bids and for awarding the contracts, NATO takes appropriate steps on its own to insure that quality and other construction standards are properly maintained.

Final audit is performed by NATO's International Board of Auditors for Infrastructure, which is composed of representatives of France, Italy, Norway, the United Kingdom, and the United States. This board was created in 1953 during the excitement over the fourth slice, and is responsible directly to the North Atlantic Council. The United States representative on this board is Mr. Charles M. Bailey, director of the European branch of the General Accounting Office, which is located at Paris. The fact that this board is the final auditing echelon for expenditures within the NATO infrastructure program illustrates quite clearly that the financial protection of the United States Government in this whole program is achieved only through international fiscal control, simply because the program itself is international in substance and scope.

International Competitive Bidding

Beginning with 1953, contracts were let for the construction of projects within this program on the basis of international competitive

bidding. This system was begun largely at the insistence of the United States, the United Kingdom, Canada, and the Netherlands. The other NATO countries have been anxious to have this system applied for projects outside their own territorial limits but for various reasons it seems for the most part to run into obstacles within their respective borders, mostly because of a multitude of barriers which are inherent any organization based on a grouping of sovereign authorities, each of which is empowered to issue laws, decrees, and regulations within its sovereign territory which may have a prohibitive result on the full development of this system.

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However, international competitive bidding is, at least in principle, the agreed procedure except in cases where there is a governmental monopoly or where the NATO facilities are expansions of national facilities being constructed by the host country. In the latter case, since the original contractor has his equipment and personnel right on the spot, it is generally more advantageous for NATO to negotiate the contract with him rather than to offer it for competitive bidding. Such contracts are given additional careful scrutiny by NATO's international staff to insure that exorbitant profits and unrealistic cost vouchers are precluded.

The United States Department of Commerce has established procedures for the distribution of information concerning invitations to bid on this program to firms in this country through the Foreign Commerce Weekly and various secondary informational media. American firms are supposed to write directly to the agency of the host country specified in the announcement or invitation. Like all bidders in other countries, they must establish their competence and responsibility, generally by submitting a résumé of their background and experience. If a copy of this résumé is sent to the United States Department of Commerce, this Department will undertake to certify qualified firms to the United States representative on NATO's Infrastructure Payments and Progress Committee, which will in turn pass this information on to all NATO countries in the form of consolidated lists of certified firms. The United States Government does not undertake to render special assistance to any American firm in obtaining such contracts or in easing restrictions which may be placed on them by other NATO countries. Many American firms have been successful already in obtaining such contracts. However, a large number of these contracts have been for the supply of material and its installation, rather than for the construction of the fixed facilities themselves.

Economic Gain to NATO Countries

In such a vast program of military public works, it is natural to ask how much national economic benefit is received by the countries to

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which NATO construction projects have been allocated. These countries have obviously benefited from such basic economic factors as the stimulation of production, the reduction of unemployment, and the increase in their dollar balance. What is particularly at issue, however, is the economic gain accruing to the host country in terms either of capital gains or operating revenues, since it assumes title to the facility, which in many cases may be used for civilian peacetime purposes while awaiting emergency use by NATO.

However, it has been found that such a line of inquiry seems unrealistic in connection with a grouping of nations wherein mutual security and mutual defense are the prime and overwhelming objectives. It has been emphasized again and again that the NATO infrastructure program, like all other NATO programs, is based on obligations which we have freely assumed under treaties negotiated by the executive branch of our Government and confirmed by the legislative branch, and that it is pointless to attempt to analyze the gains which may accrue to host countries where facilities are actually constructed, because the question of what incidental national gain is received becomes practically meaningless when viewed against the broader perspective of the importance of adequate preparations for collective defense.

Further, it is virtually impossible to isolate such economic benefits. Let us say that a project has been completed for expanding a nation's own telecommunication facilities between points X and Y, and that 20 additional circuits have been constructed to supplement the 10 which were already there. All 30 of these circuits would be available for civilian use during peacetime, and all 30 would be available for NATO use should war break out. It is obviously difficult to attempt to break down the proportions of the respective equities engendered by each of these availabilities. Nevertheless, certain procedures have been established in an effort to determine at least what percentage of the operating revenues received from the civilian use of such facilities is due to NATO's supplementary construction, and this amount is charged against the host nation.

To continue the illustration, should these 20 additional circuits have been routed, at the host country's request, through a city or town some distance off the straightest or most economical line between points X and Y, the technical officials in NATO's international staff would determine the additional cost which such a routing would entail and the host country would be assessed the full amount of this difference. On balance, it thus appears that every possible precaution is taken to prevent what might be called national profiteering, and that the NATO infrastructure program, as presently administered and con

trolled, has surprisingly few soft spots, considering the magnitude and complexity of the program.

Relationship to Other United States Activities

The National Security Council gives broad guidance for United States participation in the NATO infrastructure program from the point of view of national policy. The formulation of the detailed United States position on various points is worked out by the Department of Defense in consultation with the Department of State. The United States position is practically always determined on the basis of purely military considerations. Sometimes unilateral United States military objectives might enter into the picture and suggest that NATO airfields should be located where they might also serve as emergency landing fields for the United States Air Force's Strategic Air Command, say in Iceland.

Only in rare instances does the United States position appear to be influenced by collateral considerations of foreign policy. This might occur when there is question of extending to non-NATO countries the privilege of bidding on infrastructure contracts, or when it appears that existing treaties might have to be revised in order to allow infrastructure projects to be located in certain areas. However, the rarity and relative unimportance of such compromises effectively points out that the Department of Defense has the almost exclusive responsibility in the Executive Branch for staffing this program.

Definitive United States positions are eventually translated into concrete proposals for presentation to the North Atlantic Council by the Secretary of State or his permanent deputy. Since all decisions of the council are on a unanimous basis, any such proposal must be accepted by 13 other nations in order to carry. It may be assumed that the other countries will naturally view such proposals in the light of their own national interests.

No evidence has been noted that FOA, either at Washington or through its missions in NATO countries, has attempted to influence either the development of the infrastructure program, the allocation of projects to certain countries, or the awarding of contracts to this or that bidder. Section 102 (c) of Executive Order 19575, dated November 6, 1954, specifies that the Department of Defense will administer the military assistance program subject to coordination by FOA, and that it will keep FOA fully and currently informed on projects undertaken within this program, including all matters relating to the utilization of funds. These provisions extend of course to the NATO infrastructure program, which is a portion of the larger military assistance program.