Mr. KAMMER. Yes, sir. Mr. SMITH. So what are you proposing? Instead of owning the satellites and selling the services, you want to determine whether or not to propose Mr. KAMMER. Yes, sir. Mr. SMITH [continuing]. To sell the satellites and then the Government would buy these services? Mr. KAMMER. Yes, sir. The motivation for this really has to do with Landsat. As you can see, the actual sales receipts are very modest; $3 million is a lot of money to most pople, but for a program this size it is not what you would expect. Over the past 10 years there has been a lot of discussion, starting actually in 1972, that the Landsat earth resources data was highly commercializable and had a lot of significance to the private sector. It was asserted that a large market could be created that would be to the benefit of the country as a whole. Under the custodianship of the Federal Government itself, it is obvious that this market hasn't been developed. There is a belief that if we commercialize this, at least it is a possibility that I have been asked to look at, that it would be possible to develop this market, to make it much larger than it currently is. Mr. SMITH. Since we are not receiving much in the way of dollars-I mean $3 million, as you say, is not much compared to the cost of everything here-doesn't that mean that the vast majority of the services are used by the Federal Government? Mr. KAMMER. In the case of meteorological data, that is certainly the case. In the Landsat data, approximately 25 percent of the data is used by the Federal Government. It has been between 25 and 34 percent over the past five years. CONTENT OF THE RFP Mr. SMITH. Are you considering looking into whether or not we should hire a marketing agency to market some more of this? Mr. KAMMER. I believe that is one of the possibilities that will emerge in the RFP. I am not limited. Mr. SMITH. Then we would still own the satellite but promote to a greater extent the sale of services? Mr. KAMMER. That could easily be a result of this process, sir. I am not limited to picking one answer. I am to develop options and provide recommendations to the Secretary, and it will be up to him as the selecting official to decide. Mr. SMITH. You are not confined, then, to a proposal to sell it and buy back services? Mr. KAMMER. The initial RFP will be written in that way, but the proposers are free to propose anything that they wish. Mr. SMITH. Proposers? Mr. KAMMER. The people that respond to the RFP. But the Presidential Decision Memorandum and the statements by the Secretary of Commerce that in effect become instructions to this SEB, are to assess the sale of all or major components of the land and weather systems to the private sector, so I am instructed to write an RFP that will do that. Mr. SMITH. How much more difficult would it be for you to write an RFP which also permitted assessing the possibility of a more vigorous sales program to sell the services? Mr. KAMMER. The RFP will permit that response, I think that there are a lot of people, from the literature that I have read and people I have talked to, that believe that what is called value-added services is where the real potential is. This would be the marketing end in effect, taking raw data and making it attractive to some particular audience. And there are a lot of people that are very, very aggressive about those activities. If the government takes the posture that this is the only part that they will let go, and they will keep the rest, in effect what the government will have done, and this could be the final decision is to decide to keep everything that costs a lot of money and generates no income and give away everything that generates income. Mr. SMITH. You wouldn't give it away; you would sell it? Mr. KAMMER. Okay, but even as you sell it, you may be foregoing an opportunity to transfer a large part of the costs that are now associated with it, and are now reflected in the federal budget, and put them into the private sector. It may not be the case, sir. It is something that I have been told to assess to see if it is a possibility. Mr. SMITH. It seems to me that you can accomplish the same result, unless the government is going to pay more for the service than it is now paying on a net basis. If a private interest buys it and sells the government services, they are going to have to get as much out of it on a net payout for services; aren't they? Mr. KAMMER. That is possibly the case, sir. However, if they expand the market, they could be selling at a lesser price. I think it is intuitive that if you have a larger market, you can make a good profit and sell at a lower price than if you have a confined market. The market is very small now. Mr. SMITH. I have taken more than my amount of time already. I will continue later. Mr. Early. DELAYS IN PROCUREMENT Mr. EARLY. Thank you, Mr. Chairman. Mr. Kammer, in your statement you explain that the $1 million request would be reprogrammed from an appropriation for the replacement of aging equipment. Why was the procurement of this equipment delayed? Mr. KAMMER. It is a procurement slippage in the acquisition of computers. Mr. EARLY. And what will be the impact on NOAA operations of this delay? Mr. KAMMER. In fiscal year 1983 there will be no impact. In fiscal year 1984 the slippage must be made up in other ways. Mr. EARLY. I don't understand how you can delay a purchase that we appropriated money for. An item you asked for, and said that you needed. Mr. KAMMER. I am answering in the sense that the slippage is going to occur whether the SEB exists or not. Mr. EARLY. From what programs will the 19 Source Evaluation Board staff be drawn? Mr. KAMMER. Primarily from the Systems Planning and Development staff, which is a part of NESDIS. Mr. EARLY. Who chose the staff? Mr. KAMMER. The staff was recommended by John McElroy, who is the Director of NESDIS. I talked with each of them and made my selection from these people. They are excellent people. Mr. EARLY. Was Defense included in this selection? Mr. KAMMER. Not in the selection of those 19 people. However, there are three individuals that have been identified by the Department of Defense who are available to me full time. Two are in a staff capacity and one is a member of the Source Evaluation Board itself. Mr. EARLY. You indicate that they have already been selected. CONTRACTS FOR PRIVATE SECTOR STUDIES Mr. EARLY. In your statement you explain that most of the $1 million funding will cover private sector studies needed by the SEB. Why do you need to contract out studies? Mr. KAMMER. I think a lot better job can be done from an accounting point of view by an outside firm. This is a very large job. It is going to take a large staff, and it is very important in a complex study like this that the results be acceptable to all of the bidders. One controversy that you can imagine is arguments that the Federal Government has assigned too high a value to the equipment. If a respected private firm, that people are accustomed to dealing with, makes this statement, I believe that it will go down better. I think we will have less argument. Mr. EARLY. But what will SEB evaluate if private firms are to be contracted for this purpose? Mr. KAMMER. The contractor is going to provide a list of the equipment, their best judgment on the value of the equipment, both from an acquisitional value and, where they can make a judgment, of the market value. There are going to be a lot of cases, I think, where we are not going to have a good judgment on what the market value is, and that is the point where our judgment is going to have to be put into this process. It may be that we will discover that some of the accounting devices are inconsistent with our own opinion or inconsistent with arguments made by others, and we will have to think about those cases. PREVIOUS STUDIES ON SATELLITE TRANSFERS Mr. EARLY. We have had three reports-from the National Academy of Public Administrators, ECON, Inc., and the Earth Satellite Corporation-on the issue of transferring satellites to the private sector requested by Congress. These three plus three other studies have been completed, and now you come here to tell us that we have had six studies which all conclude that a transfer would not be in the country's best in terest but that that is not enough? Why do we need any more studies? Are we going to keep doing studies until they say "sell"? Mr. KAMMER. Sir, my mandate is not to bring in a particular answer, such as sell, for instance. Mr. EARLY. Well, why aren't the six previous studies adequate? Mr. KAMMER. Well, I have read them, and they all draw on the same data base, which in fact came from NOAA, NESDIS in large part, and somewhat from NASA, I think they have done the best job that they can with the data, but they are basically essays, in my opinion, which is to say that they strike out in a somewhat subjective way in a theoretical direction. The difference between them and the present process is that this involves an RFP. We are asking people to make proposals, to assign dollar values to them, to sign their names to them, with the potential that they will be taken very seriously. The government might very well turn around and say, "Fine, I will take you at your word, that is what we are going to do." I think you will get a much more hard-nosed, pragmatic kind of a result that way. Mr. EARLY. I see. But regarding the individual studies mentioned in response to Mr. Smith's questions regarding the contract studies, will these be competing bids on sole source? Mr. KAMMER. For the first of these I have run a competition, but of course haven't awarded, because I am awaiting decisions, on this reprogramming proposal. It is my intention to compete all the stud ies. PURPOSE OF THE SOURCE EVALUATION BOARD Mr. EARLY. I see. You have explained the purpose of the Source Evaluation Board as finally resolving the question of whether or not to transfer to the private sector "all or portions of the department's satellite system;" Will you also consider not transferring any part of the Department's satellite system? Mr. KAMMER. Yes, sir. That is my instruction. Mr. EARLY. On what basis will the Board be able to consider adverse effects of such a transfer? Mr. KAMMER. One of the strategies that we are considering, and it is reflected in the plan, is what we are calling it a "government bid." The idea is to try to aggregate the cost to the government of providing the same services that are proposed, considered in the RFP, so that one would have a financial comparison to make. Now, that is, in my view, not the only way to make the decision, and shouldn't be. There is another kind of a question to ask, which is, what are we willing to pay to advance the research and development, to disseminate it, to encourage its application throughout the economy? I think there have been a lot of subtle and not so subtle effects from other advances in space technologies and other technologies, that have been good for the economy even though that perhaps wasn't the original objective. I think that needs to be thought about too, and I think that was one of the impulses that gave rise to the presidential decision. Mr. EARLY. I want to stay within my 10 minutes this first time around, but is there a commercially viable market for the land remote sensing data or the weather data, in your opinion? Mr. KAMMER. I don't know. That is the reason for running the RFP. Mr. EARLY. Isn't it true that the United States is almost the sole user of this information today? Mr. KAMMER. In the case of Landsat, of the data that is sold, about three-quarters of it is sold to nonfederal users, and most of that is the private sector, not state and local governments. State and local, I think, has never been higher than 12 percent in any year. Mr. EARLY. Will you supply for the record a breakdown of all those private users that you are speaking of? Mr. KAMMER. Yes, sir. By name or by category, sir? Mr. KAMMER. Certainly, sir. Mr. EARLY. Unless it would threaten your objectives. |