The Central Intelligence Agency and Overhead Reconnaissance; the U-2 and Oxcart Programs, 1954-1974

Secret NOFORN
Chapter 2
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use. Public Law 110, approved by the 81st Congress on 20 June 1949, designates the Director of Central Intelligence as the only government employee who can obligate Federal money without the use of vouchers. By using unvouchered funds, it is possible to eliminate competitive bidding and thereby limit the number of parties who know about a given project. The use of unvouchered funds also speeds up the Federal procurement cycle. A general contractor such as Lockheed can purchase much, if not all, of the supplies needed for a project without resorting at each step to the mandated procurement procedures involving public, competitive bidding.

In mid-December 1954, President Eisenhower authorized DCI Dulles to use $35 million from the Agency's Contingency Reserve Fund to finance the U-2 project. Then on 22 December 1954, the Agency signed a letter contract with Lockheed, using the codename Project OARFISH. The Agency had proposed to give Lockheed "performance specifications" rather than the standard Air Force "technical specifications," which were more rigid and demanding, and Kelly Johnson agreed that such a move would save a lot of money. Lockheed's original proposal to the Air Force in May 1954 had been $28 million for 20 U-2s equipped with GE J73 engines. During negotiations with CIA General Counsel Lawrence R. Houston, Lockheed changed its proposal to $26 million for 20 airframes plus a two-seat trainer model and spares; the Air Force was to furnish the engines. Houston insisted that the Agency could only budget $22.5 million for the airframes because it needed the balance of the available $35 million for cameras and life-support gear. The two sides finally agreed on a fixed-price contract with a provision for a review three-fourths of the way through to determine if the costs were going to exceed the $22.5 million figure. The formal contract, No. SP-1913, was signed on 2 March 1955 and called for the delivery of the first U-2 in July 1955 and the last in November 1956. Meanwhile, to keep work moving at Lockheed, Richard Bissell wrote a check for $1,256,000 and mailed it to Kelly Johnson's home on 21 February 1955.