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PRIOR INVESTMENT, BALANCE OF PROTOTYPE COST AND TERMINATION COST

I want to put this question to the members of the committee, and ask that my whole statement go in: Is it responsible public policy to throw away $1 billion of national investment already made in transportation, science and technology? That is what we have put in. The truth is, Mr. Chairman, that the completion of this program, the two prototypes, will require $478 million. I am informed by the Department of Transportation that terminating the program now could cost $335 million in fiscal year 1971 which includes refunds to contractors, obligations made under continuing resolution, and so on. If we pay back the airlines the difference between completion, Mr. Chairman, and termination, is the $143 million, plus what we have spent under the Joint Resolution thus far? This is the central issue that the committee has to face. And if you terminate it, all the contractors get bailed out. If you build the two prototypes, and they do not come up to specifications, then the contractors will have lost their investment, and they and the Government will not be required to reimburse them.

That concludes my statement. Chairman ELLENDER. Thank you, Senator Jackson. (Senator Jackson's prepared statement follows:) Mr. Chairman, members of the Committee, I appreciate the opportunity to appear before this hearing of the Senate Appropriations Subcommittee on Transportation. I appear today in support of the Fiscal Year 1971 budget request for continued funding and development of the civil supersonic transport prototype program.

Mr. Chairman, the issue before this Committee and the Congress is the completion of two prototype aircraft in which more than one billion dollars has already been invested. I ask you to complete the job. I ask you to allow American scientists, engineers, technicians, and working men and women to put in the air a safe, economic, and environmentally sound transport that will be a revolutionary advance for the world transportation system of the 1980's.

Last year when I testified before this Committee the big issue was the environment. Unprecedented national attention has been focused on the environmental consequences of this major step forward in technology. That is all to the good when it results in a better, safer, environmentally sound product.

Such is the case with the SST. We already have assurances that the American SST will be cleaner and quieter than the commercial jets traveling our airways today. We know the American SST will be cleaner and quieter than the foreign SST's which are today being offered for sale to the world's airlines. We know that a world air transportation system of the 1980's using American SST'S will carry the air traffic of the future with far less environmental impact than a system using the subsonic jet transports of today.

Now that these facts are better understood the debate this year is moving largely to economic issues. Among the questions which the members of this Committee must answer are the following:

Is it responsible public policy to throw away a $1.009 billion national investment already made in transportation, science and technology?

Can the nation afford to forgo a potential $17.2 to $50 billion favorable impact on our balance of payments ?

With a 9 year high in unemployment, can we seriously consider terminating a program that directly employs 14,000 American working men and women and indirectly employs another 30,000 people in virtually every state

of the Union ? I think that the answers to these questions are obvious. In fact, I fail to comprehend why there should be any real doubt about the outcome. Look, for example, at the difference between the costs of terminating the program and completing the program. They are almost equal. Completion will require an additional investment of $478 million. I am informed by the Department of Transportation that terminating the program now could cost $335 million in FY 1971

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(includes refund to contractors, obligations made under the continuing resolution, refunding airline payments toward construction and for delivery positions). If all this is refunded the difference between completion and termination is only $143 million, plus the amount used to date under the Joint Resolution.

And this is an investment which will be fully repaid upon the production of 300 aircraft. It is not a grant, not a subsidy and not a federal handout. It is an investment in our economy. In the production phase, this investment will mean 50,000 direct jobs and a total of 150,000 indirect jobs. The program will result in new titanium technology, in safer navigation systems, in greater productivity, in increased passenger comfort, and in a healthy American aviation industry.

Mr. Chairman, a recent issue of the National Observer discussed the antitechnology, anti-science undercurrent that has become involved in the debate on this program. The Observer quoted Dr. Fred Singer, a distinguished scientist with the Department of the Interior, as saying that the reasons for this are complex:

"Perhaps one of the important reasons is that the SST has become a symbol. In my view, we are witnessing here a general reaction against all technological progress, and against basic science itself, on the part of a coalition of people which-paradoxically-includes scientists."

Mr. Chairman, I am in full agreement with Fortune's science writer, Lawrence Lessing, who in the current issue writes that he cannot accept "the proposition that America needs less growth, less knowledge, less skill, less progress.” Scientists and engineers, he says, "are increasingly cast as the villains of this emotional drama. But it should be obvious that science by its nature and structure can offer society only options."

We have an option today. We can write off the investment of people and money we have made through the years in the civil supersonic transport and forego the employment, economic and technological benefits the program offers. Or we can use American science and technology to build a better mode of transportation and thereby participate in the benefits that will follow from this course of action.

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STATEMENT OF HON. JOHN A. VOLPE, SECRETARY OF TRANSPOR

TATION
ACCOMPANIED BY:

WILLIAM MAGRUDER
R. PARSONS
JOHN P. OLSSON

DEVELOPMENT TOTAL AND COMPONENT COSTS Chairman ELLENDER. Now Mr. Volpe, the question of cost has come up, I notice, in the newspaper, as to what the ultimate cost would be if we should appropriate $290 million for 1971, as has been requested by you, and then $235 million next year. Now, according to figures obtained from your office, if we proceed according to plans, the entire cost to the Federal Government will be $1.342 million; Boeing will put out $28 million; General Electric $94 million; the airlines $59 million, for a total of $1,723 million. As was just stated by Senator Jackson, if this program is terminated, the cost could be about $334 million. And in the course of your remarks, I wish you would set the record straight as to what we have been talking about here, because that is one issue I think should be developed by you, if you will.

And at this point, I will ask that this memorandum from Mr. Witeck, who is clerk of the subcommittee, be placed in the record. (The memorandum follows:)

SST PROGRAM'S START The initial funding for the supersonic transport for research and development began with an $11 million appropriation for fiscal 1962 and a $20 million appropriation for fiscal 1963 in the Independent Offices Appropriations Acts. This re

search was carried out by the Federal Aviation Agency, the National Aeronautics
and Space Administration, and the Department of Defense.
The total appropriated through fiscal 1970 amounts to $708,375,000.

GOVERNMENT AND INDUSTRY COST SHARING

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1 Excludes $22 million in delivery deposits-in escrow at Treasury.

The Boeing and General Electric contribution includes $132 million in new facilities and commercial costs, consisting of $97 million for Boeing and $35 million for General Electric.

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TERMINATION COSTS AS OF 3/30/71 The costs to terminate would require an estimated minimum appropriation of $253 million; consisting of $85 million for contractor shares, $156 million to fund operations under the continuing resolution, and $12 million in miscellaneous liquidation or termination costs.

In addition to this $253 million, there is the probable refund of the $22 million delivery deposit escrow fund and a question as to refund of the airlines $59 million on a moral obligation basis.

In all, this could involve a total of $334 million.
Estimated Government Costs Through Prototype Phase

Information supplied on March 8, 1971, from the Office of Supersonic Transport, indicates that on the basis of a 1971 appropriation of $290 million, the Government share would be $1,342 million and the first flight date would be March 1973.

On the basis of $210 million for 1971, the total costs of the prototype phase would increase by $227 million (from $1,283 million to $1,510 million), the amount of the increase to be assumed by the Government would be dependent upon renegotiation of contracts and the first flight date would be March 1974.

On the basis of the $227 million increase, the previously estimated total of $1,723 million through prototype and test phase becomes $1,950 million.

On both bases detailed above, the Government's share assumes the allowance of the $235 million requested for fiscal 1972.

NATIONAL SCRUTINY AND CRITICAL ASSESSMENT

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Chairman ELLENDER. You may proceed, sir.

Secretary VOLPE. Thank you very much, Mr. Chairman, and members of the committee.

In the interests of time, and with your permission, Mr. Chairman, I would like to shorten my presentation this morning. My entire prepared testimony has been distributed. Some of the prepared material is rather detailed, and I am aware that there are a number of witnesses to be heard.

Mr. Chairman, the supersonic transport development program has endured a penetrating national scrutiny. Never in the history of this Nation has a technological advancement been so critically assessed by government, by scientists, by political leaders, and by the American people.

I applaud that kind of careful evaluation. And I would like to consider myself among the vanguard that has weighed development of the SST against all possible detrimental effects. I am confident that this administration's decision to continue the SST program is a cor

rect one, and an essential one. As you and the committee enter this latest phase of your deliberations over this program, Mr. Chairman, I once again want to say that I appreciate the opportunity to appear

before you to present the reasons for that decision.

Before getting to that presentation, however, I would like to make a personal observation. The national debate over the SST program is one of the healthiest exercises in democracy that I have ever seen. Everyone has benefited from this debate. Our program is now far superior to that originally envisioned. The Nation is far more informed and involved than ever before.

Unfortunately, we have reached the point in these discussions where little of substance has not been said before. It now seems that the catch phrase and slogans and the more sensational and scary scientific testimony are all that remain which is new "news."

Mr. Chairman, I would now like to proceed to the real issues before us. I am here today to ask that this vital development program

be advanced to fruition. I am here to seek your approval for the continued funding of the development, and let me make this very emphatic, because I find people that I talk to; don't seem to understand the number of planes involved here--the funding for the development of two, exactly two, supersonic transport experimental test planes—two prototype aircraft against which performance claims can be measured and environmental concerns weighed. I request your approval of a funding level for fiscal year 1971 which will allow completion of the program on its planned schedule at minimum cost.

RELATIONSHIP OF PROTOTYPE DEVELOPMENT AND

ENVIRONMENTAL RESEARCH

To begin, I want to clear up all confusion concerning the relationship between our prototype development program and our environ. mental research efforts. The two are inexorably related. This is a package program aimed at providing all the information necessary to make a commercial production decision.

That means that we must know every technological and engineering ramification of the SST in flight. It means that we must know every environmental ramification. And while many of these environmental answers can be provided through basic research, they must be related to the actual test plane before any fully confident decision can be made on commercial production.

The SST program provides a unique opportunity for technological development in concert with technological assessment. We must build the prototypes and undertake the environmental research.

For example, our research indicated some time ago that sideline noise would be a problem. We didn't stop the program because of it, however. And now, through continued technological development, that problem is being solved. I am convinced that continued prototype de velopment, together with the accompanying research, can resolve all the environmental concerns that have been expressed.

I have spent enough years in public life to know that charges of impending disaster are inevitable in any new program which stretches man's abilities to exist on this earth. There were cries of disaster or economic upheaval whenever new devices were introduced into our

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society. Brig. Gen. “Chuck” Yaeger, first test pilot to break the sound barrier in 1947, was told by "experts,” before his historic flight; that he would “disintegrate” or become a “vegetable” or that his “bone marrow might demineralize."

That is not to say that some of the concerns expressed are not legi. timate and valid. We have recognized these. As a matter of fact, our entire SST research program is designed to test such concerns under the scrutiny of our best research and technology.

As you know, I have taken and will continue to take strong positions against any transportation program or project which threatens to cause irreparable damage to our citizens on environmental, social, or economic grounds. I am not one to pursue technical advancement for its own sake. The SST is a well balanced program of progress which is planned to prevent any adverse side effects.

Now, let me point out specifically why I feel this to be the case.

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PRODUCTIVITY

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First, there is no question that the SST will be the most productive aircraft ever built in the history of the world. It will do the work of three of the new trijets or about two of the big 747's. This will have the very real effect of providing our airlines with a more efficient aircraft to meet the continuously increasing demand for air transportation. It will mean also a great many fewer planes, as Senator Jackson pointed out. The operation of an aircraft which will do more work per unit of cost can only result in a more solid financial base for the airline industry as a whole. I might add here that this same attribute of higher productivity will also make a major contribution toward reducing the crowding of our skies, because fewer planes will be needed to meet air travel demands.

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Second, the SST development program represents the advance cutting edge of civilian flight technology. In this field, you either win or you are not in the race at all. You stay out in front or you drop far behind. The United States is currently leading in aerospace technology. It is just inconceivable to me that this country would purposely forfeit first place in the area of civil aviation.

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ECONOMIC VIABILITY

This technological leadership leads directly to my third point. And that is the economic viability of the SST, and in fact our entire airframe industry. Unless we maintain our lead, our competitors will quickly take the market away from us. I would remind you—as has already been indicated to you by Mr. Meany--that the Russians, the British and the French are breathing down our necks. The BritishFrench Concorde is flying. A second generation Concorde may already be on the drawing boards. The Russian TU-144 is flying. What more warning do we need than the two-page ad which appeared in a recent issue of Aviation Week magazine. This ad, as you can see, is not just the TU-144, the SST, but it shows the Russian “family of airplanes”- led by the supersonic TU-144.

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