PAGENO="0001" . `;~ ffjr-~j 1 ~ ~ 90th Congress } JOINT COMMITTEE e~ai~ BACKGROUND MATERIAL ON ECONOMY IN GO VERNMENT-1967. MATERIALS PREPARED FOR THE SUBCOMMITTEE ON ECONOMY IN GOVERNMENT OF THE JOINT ECONOMIC COMMITTEE CONGRESS OF THE UNITED STATES ~VrVkJ~'~T flrPOSITORY O~ S~ ~ 2 STATE UNIVERSITY COLLE~ O~ iO~iTh' JERSEY UBRARY, CAMDEN, N. J~ 08102 1~/iAY3 1967 / APRIL 19(37 Printed for the use of the Joint Economic Committee U.S. GOVERNMENT PRINTING OFFICE 77-601 WASHINGTON 1967 For sale by the Superintendent of Documents, U.S. Government Printing Office Washington, D.C. 20402 - Price 75 cents 0 £9 3 L ~ LI PAGENO="0002" SENATE JOHN SPARKMAN, Alabama I. W. FULBRIGHT, Arkansas HERMAN E. TALMADGE, Georgia STUART SYMINGTON, Missouri ABRAHAM RIBICOFF, Connecticut JACOB K. JAVITS, New York JACK MILLER, Iowa LEN B. JORDAN, Idaho CHARLES H. PERCY, flilnois WillIAM H. MOORE JoHN B. HENDERSON HOUSE OF REPRESENTATIVES~ RICHARD BOLLING, Missouri HALE BOGGS, Louisiana HENRY S. REUSS, Wisconsin MARTHA W. GRIFFITHS, Michigan WILLIAM S. MOO RHEAD, Pennsylvania. THOMAS B. CURTIS, Missouri WILLIAM B. WIDNALL, New Jersey DONALD RUMSFELD, Illinois W. E. BROCK 3D, Tennessee GEORGE. B. IDEN DANIEL I. EDWARDS DONALD Al WEESTER (Minority> SUBCOMMITTEE ON EcoNo~iY IN GO~ERNM~NT WILLIAM PROXMIRE, Wisconsin, Chairmçzn HO USE~ OF. HEPRESENTATWES~ WRIGHT P~TMAN, Texas MARTHA W. GRIFFITHS, Michigan WILLIAM S~ MOQRHEAD, Pennsylvania~ THOMAS B. CURTIS, Missouri DONALD RUMSFELD, Illinoi~ RAY WARD, Economic Consuitpnt, JOINT ECONOMIC COMMITTEE (Created pursuant to sec. 5(a) of Public Law 304, 79th ColIg.) WILLIAM PROXMIRE, Wisconsin, Chairman WRIGHT PATMAN, Texas, Vice Chairman JoHN R. STARE, Executive Director J~1Es W. KNOWLES, Director of Researc1~ ECONOMISTS SENATE JOHN SPARKMAN, Alabama STUART SYMINGTON, Missouri LEN B. JORDAN, Idaho CHARLES H. PERCY, Illinois II PAGENO="0003" LETTER OF TRANSMITTAL MAY 2, 1967. To the Members of the Joint Economic Committee: I am transmitting herewith for your use and other members of the Congress and the interested public, selected background material on economy in Government. These data have been prepared especially for hearings of the Subcommittee on Economy in Government scheduled for May 8, 9, 10, and 16, 1967. This study was prepared by Mr. Ray Ward, temporary economic consultant to the subcommittee, and any findings and conclusions herein are the author's and are neither approved nor disapproved by the subcommittee. Sincerely, WILLIAM PROXMIRE, Chairman, Joint Economic Committee. PAGENO="0004" PAGENO="0005" CONTENTS Page~ Letter of tra~~smitta1 ~ III Introduction 1 Scope of Federal government obligations 2 Table 1. Total obligations by object by major object class, by fiscal year 2 Table 1(a) Obligations for personal services and benefits, by fiscal year 4 Table 1(b). Obligations for contractual services and supplies, fiscal year 5 Table 1(c). Obligations for acquisition of capital assets, by fiscal year_ 7 Table 1(d). Obligations for grants and fixed charges, by fiscal year - 8 Table 1(e). Undistributed obligations, by fiscal year 9 Tab.e 1(f). Estimated total obligations by object class showing obligations to the public separate from those of other accounts, by fiscal year 10 Trends in real property holdings, 1955-66 11 Lists of tabins and charts 11 Table 2. Worldwide trends in Federal real property holdings, 1955-66 11 Table 2(a) Agency comparison of federally owned real property in the United States as of June 30, 1965, and June 30, 1966~. 13 Charts: Cost of real property owned by the United States throughout the world 14 Cost of real property owned by the United States in the United States, 1955-66 (land, buildings, structures) - - - 15 Cost of real property owned by the United States in the United States, 1955-66 (defense agencies, civil agencies). - 16 Land owned by the United States in the United States, 1955-66 17 Cost of Federal land in the United States, 1955-66 18 Floor area of federally owned buildings in the United States, 1955-66 19 Cost of federally owned buildings in the United States, 1955-66 20 Cost of federally owned structures in the United States, 1955-66 21 Magnitude of DOD property management activities 22 Property holdings 22 Table 3. DOD property holdings as of June 30, fiscal years 1955-66 22 Table 4. Federal Government expenditures and GNP-comparison with national defense programs and military functions ex- penditures, fiscal years 1939-68 23 Table 5. Number of DOD military and civilian personnel sta- tioned in the United States (including Alaska and Hawaii) and annual payrolls, by State of duty location, as of June 30, 1965 24 Table 6(A). Defense personnel and toi~al population in the United States, as of June 30, 1966 25 Table 6(B). DOD: Estimated payrolls for military and civilian personnel, fiscal year 1966 32 Supply systems inventories 34 Table 7. DOD supply systems inventories by inventory stratas as of June 30, fiscal years 1958-66.~ 35 V PAGENO="0006" VI CONTENTS Magnitude of DOD property management activities-Continued Page Scope of procurement activities 35 Table 8. Net value of military procurement actions in the United States and possessions, fiscal years 1951-66 35 Net value of procurement actions by States, fiscal years 1963-66__ -- 36 Percentage breakdown by States and the District of Columbia, fiscal 1966 Table 9. Net value of* miitary~ procurement actions by States, fiscal years 1964, 1965, 1966 36 Table 9(a). Net value of military procurement by States, by percent of total, fiscal year 1966 38 One hundred companies and their subsidiary corporations listed ac- cording to net value of military prime contract awards 38 Table: Percent of total, 1960-66 - 38 Table: Index of 100 parent companies which, with their subsidi- aries, received the largest dollar volume of military prime con- tract awards in fiscal year 1966 Table: One hundred companies and their subsidiaries listed ac- cording to net value of military prime contract awards, fiscal year 1966 42 Negotiated and advertised procurement actions 49 Table 10. Net value of military procurement actions, with busi- ness firms for work in the United States, classified by method of procurement, fiscal years 1951-66 49 Table 11. Awards by statutory authority (July-June, 1964-65, 1965-66) 50 Table 12. Military prime contract awards of $10,000 or more for research, development, test and evaluation work, by region and State, and by type of contractor, fiscal year 1966 52 Table 12(a). Military prime contract awards of $10,000 or more for experimental, developmental, test, and research work in order of rank by State and the District of Columbia, fiscal year 1966 Fixed-price versus cost-reimbursement contracts 54 Table 13. Net value of military procurement actions, by type of con- tract pricing provisions, fiscal years 1952-66 54 Utilization of military stocks 54 Table 14. Utilization of DOD assets, fiscal years 1958-66 55 Disposition of DOD surplus stocks 55 Table 15. Total dispositions (at acquisition cost) of DOD surplus personal property, fiscal years 1958-66 55 Table 16. Proceeds from disposal sales of surplus personal property by the military departments, fiscal years 1958-66 56 Table 17. Costs of disposal sales of surplus property by the military departments, fiscal years 1958-66 56 Appendixes: 1. Supporting tables by major agencies on obligations by object class, fiscal years 1966, 1967, and 1968 57 All agencies Legislative branch 58 The judiciary 60 Executive Office of the President 61 Funds appropriated to the President 62 Department of Agriculture 64 Department of Commerce 65 Deparrment of Defense-Military 66 Department of Defense-Civil 68 Department of Health, Education, and Welfare 69 Department of Housing and Urban Development 70 Department of the Interior 72 Department of Justice 73 Department of Labor 74 Post Office Department 76 Department of State Department of Transportation- 78 Treasury Department 80 Atomic Energy Commission_ 81 General Services Administration 82 PAGENO="0007" CONTENTS VII 4ppendixes-~iontinued 1. Supporting tables by major agencies, etc.-Continued Page National Aeronautical and Space Administration 84 Veterans' Administration 85 Other independent agencies 86 District of Columbia 88 2. Y~ar end fiscal year 1966 Department of Defense cost reduction program status report 90 3. Updated progress report of the Defense Supply Agency of the Department of Defense 144 4. U.S. General Accounting Office of selected reports issued to the Congress during the period January 1, 1966, through February 28, 1967 172 5. Digests of selected U.S. General Accounting Office reports listed inappendix4 177 ~ GSA selected statistics, July 1, 1956, to June 30, 1966 286 ~Public Buildings Service 287 Federal Supply Service 290 National Archives and Records Service 291 Transportation and Communications Service 292 Property Management and Disposal Service-Stockpile management 294 Property Management and Disposal Service-Excess and surplus property 296 Analysis of staff employment 298 Savings and economies to the Government as a result of GSA operations, fiscal years 1965 and 1966 299 PAGENO="0008" PAGENO="0009" BACKGROUND MATERIAL ON ECONOMY IN GOVERNMENT-i 967 INTRODUCTION The Federal Government's bill for property management activities, real and personal, consumes a major part of the annual budget In addition to the annual expenditures, the inventories of property held by the military and civilian agencies worldwide cost billions upon biffions of dollars. The selected background inateri~]s contained herein reveal the scope and diversity of these activities. The previous subcommittee hearings and reports, buttressed by hundreds of General Accounting Office reports, and those of other `qualified sources, show that a most fruitful field for economy in government lies in the improved organiza- tion and management of these functions. I PAGENO="0010" Scope of Federal Government Obligations The continuous increase in the scope and cost of the Federal Government is revealed by the following analysis of obligations by object classes. OBIEcT CLASS ANAI1Y5I5 BUDGET FOR FISCAL YEAR 1968 This analysis presents a summary by object class of the Federal obligations as shown in the budget appendix for 1968. Object~ classes describe the nature of the particular service, article,. or other item for which the obligations are incurred regardless of the purpose or program served. Thus, obligations for the procurement of an automobile are classified under object class 31, "Equipment," whether the procurement is for the purpose of national defense, law enforcement, or public works construction. Object classes represent the type of products or services to be re- ceived by the ordering agency; therefore, while the price of the auto- mobile may include charges by the supplier for transportation, or other items, the entire amount of the procurement is classified under- object class 31, "Equipment." A series of supporting tables presenting each major Government. agency's obligations by object for the administrative budget and trust. funds, respectively, is included in appendix 1, page 57. An overall summary of obligations by major object class covering both ad- ministrative budget and trust funds follows: TABLE 1.-Obligations for contractual services and supplies [In millions of dollarsi Description 1966 actual 1967 estimate 1968 estImate Personal services and benefits . Contractual services and supplies . Acquisition of capital assets . Grants and fixed charges Undistributed . 36,422 67,691 33, 343 65, 303 2,162 40,138 70,238 37, 521 75, 135 11,994 43, 735 74,484 37,712 80,384 10,556 Total obligations incurred Deduct: Interfunds and Intragovernmental payments Reimbursements between accounts 204, 922 4,764 28,127 235, 026 6,524 32,490 246,872 6,732 29,865 Obligations to the public . Receipts from the public Recoveries of prior-year obligations . Net obligations of the Government Administrative budget . Trust funds Intragovernmental~ . 172, 031 19,807 1, 538 150,686 (120,477) (33,568) (-3, 359) 196, 012 22,204 1, 168 172,642 (138,883) (38,783) (-5, 024) 210,275 25,873 1, 136 183,267 (143,170> (45,417) (-5, 320) Source: Budget Bureau. 2 PAGENO="0011" BACKGROUND: ECONOMY IN GOVER tE~T~-1 967 3 PERSONAL SERVICES AND BENEFITS Obligations for personal services and benefits are estimated at about $43.7 billion in fiscal 1968. Object class 11, "Personnel corn-. pensation," consists mainly of direct payments for personal services rendered to the Government. It also includes payments to some non-Federal personnel (for instance, employees of the National Guard who are State employees). Most of the obligations for object class 12, "Personnel benefits," represent contributions to Federal civilian employee trust funds and cash allowances paid to certain civilian and military employees. In 1968, for example, $1,140 million will be paid by employer agencies to the civil service retirement and disability fund; $189.1 million will be paid to the employees health benefits fund; and $62.4 million will be paid to the employees life insurance fund. These amounts are in addition to employee contributions. Object class 13, "Benefits for former personnel," covers pensions, annuities, and other benefits due former employees or their survivors paid directly from employing agency accounts to the beneficiary. Benefits paid from retirement trust funds financed from employer and/or employee contributions and premiums are classified under object class 42, "Insurance claims and indemnities." These figures are not precisely the same as similarly labeled amounts in special analysis C (civilian employment in the executive branch) of the 1968 budget because (a) detailed object schedules are not provided in the budget appendix for items proposed for separate transmittal (b) costs included in annexed budgets are not tabulated here; and (c) these figures include certain payments for non-Federal employees as noted above. PAGENO="0012" Description 1966 actual 1967 estimate 1968 estimate 11 Personnel compensation: Department of Defense-Military: Military personnel 10, 511 11, 764 13,254 Civilian permanent positions 6,882 7,331 7,857 Other personnel compensation 823 926 915 Department of Agriculture 728 782 805 Department of Health, Education, and Welfare 722 815 872 Deoartment of Interior 519 566 575 Department of Justice 308 329 336 Post Office Department 4, 196 4, 681 4, 874 Treasury Department 687 745 759 National Aeronautics and Space Administration 353 380 388 Veterans' Administration - 1, 062 1, 142 1,180 Other 3, 197 3,545 3, 764 Total, personnel compensation 12 Personnel benefits: * Department of Defense-Military: Military Civilian Post Office Department - ~,Teterans~ Administration Other Total, personnel benefits 13 Benefits for former personnel: Department of Defense-Military Department of Labor Civil Service Commission Other Total, benefits for former personnel Total, personal services and benefits Distribution of total obligations: Administrative budget Trust funds Tothepublic~_ 29,988 33, 006 35, 579 .4 BACKGROUND . ~ IN GOVERI~MENT-~1 9.67 TABLE 1(a) .-Obligations for personal services and benefits [In millions of dollars] 2, 962 3:224 3,907 572 628 680 323 369 395 158 207 210 562 642 684 4, 577 *. 5, 070 .5,876 1,594 . 1,819 2,027 98 61 60 104 112 119 61 69 74 1, 857 2, 061 2,280 36,422 40,138 43,735 35,689 39,336 42,892 733 802 843 4,577 5, 070 5,876 31,845 35, 068 37,859 CONTRACTUAL SERVICES AND SUPPLIES Total obligations to be incurred in 1968 for contractual services and `supplies will represent nearly one-third of the gross total of obliga- tions incurred by the Federal Government in that year. Object class 21, "Travel and transportation of persons," covers travel, per diem allowances, rental of passenger motor vehicles, and other similar items. Contractual charges for rental of trucks, move- ment of household goods, freight, parcel post, etc., are included in object class 22, "Transportation of things." Object class 23, "Rent, communications, and utilities," includes the rental of lands, structures, and equipment (other than passenger transportation equipment), communications services performed by contract, and ufflity services supplied by others. interagency charges, such as printing performed by the Government Printing Office as well as contractual charges for PAGENO="0013" BACKGROuND: ECONOMY IN GOVERNMENT-i 967 5 other duplicating services, are classified in object class 24, "Printing and reproduction." Object class 25, "Other services," comprises con- tractual services not otherwise classified. Object class 26, "Supplies and materials," is made up of all commodities (a) ordinarily consumed within a year after being put into use, or (b) which are converted in the process of construction or manufacture, or (c) which are used to form a minor part of equipment or fixed property. Of the total obligations in 1968 for contractual services and supplies, the Department of Defense (military) will obligate- Seventy-five percent of all obligations for object class 21, "Travel and transportation of persons." Seventy-one percent for object class 22, "Transportation of things." Fifty-seven percent for object class 23, "Rent, communica- tions, and u iities." Forty-two percent for object class 24, "Printing and repro-~ duction." } ifty-six percent for object class 25, "Other services." Seventy-nine percent for object class 26, "Supplies and ma~ terials." Object class 26, "Supplies and materials," includes $3,554 million in commodities which will be sold or donated under foreign assistance or other programs. TABLE 1 (b) .-Obligations for contractual services and supplies [In millions of dollars] Description 1966 actual 1967 estimate 1968 estimate 21 Travel and transportation of persons: Department of Defense-Military 1, 24~ 1,271 1, 470 Other 425 449 481 Total, travel and transportation of persons 1,674 1,720 1,951 22 Transportation of things: Department of Defense-Military Department of Agriculture Post Office Department Other Total, transportation of things 23 Rent, communications, and utilities: Department of Defense-Military Post Office Department General Services Administration Other Total, rent, communications, and utilities 24 Printing and reproduction: Legislative branch Department of Defense-Military Other Total, printing and reproduction 2,871 374 776 280 2,988 267 820 276 3,476 253 858 277 4, 301 4,351 4,864 1.249 1.51 241 642 1,271 165 262 684 1,470 184 266 727 2.293 2,486 2,759 91 135 112 107 140 117 113 172 128 338 364 413 PAGENO="0014" 6 BACKGROUND: ECONOMY IN GOVERNMENT-19 67 TABLE 1(b).-Obligations for contract'ual services and supplies-Continued [In mfflions of dollars) Description 1966 actual 1967 estimate 1968 estimate 25 Other services: Department of Defense-Military Department of Defense-Civil Corps of Engineers~ -- Department of Health, Education, and Wellare AtomicEnergyCornniission National Aeronautics and Space Administration Civil Service Commission.. Other Total, other services -26 Supplies and materials: Department of Defense-Military Funds appropriated to the President: Military assistance Economic assistance Departmentof Agriculture General Services Administration.. Other Total, supplies and materials Total, contractual services and supplies Distribution of total obligations: Administrativebudget Trustfunds Tootheraccounts To the public 14,736 .500 438 1,898 4, 193 708 5,056 15 941 603 654 2,048 4,081 774 4,943 17 085 568 748 2,103 4 093 860 5,159 27, 529 29,045 30,616 24,276 373 484 3,927 694 1,802 31, 556 24,433 424 ~44 4,441 771 1,759 32,272 26,641 437 ~ 3,848 784 1,697 33,881 67,691 66,257 1,434 19,342 48,349 70,238 68,568 1,670 20,943 49,295 74,484 72,690 1,882 20,294 54,190 ACQUISITION OF CAPITAL ASSETS The largest timelag between obligations and expenditures occurs when the Government acquires various tangible capital assets. The timelag may be as much as several years, as in the case of naval ships and military aircraft. Object class 31, "Equipment," includes the purchase of durable personal property which will provide services for a number of years in the future, such as aircraft, ships, certain heavy armored equipment, trucks, and automobiles. Object class 32, "Lands and structures," comprises real property. The Department of Housing and Urban Development will obligate one-third of all obligations for object class 33, "Investments and loans," in 1968 including- $330 million for loans to construct housing for colleges and hospitals. $431 million for planning advances and loans for initial financ- ing of urban renewal projects. $1,337 milJion in the secondary market operations trust revolv- ing fund for the purchase of FHA and VA insured loans by FNMA in order to provide for limited liquidity of Government- insured mortgages and to improve the distribution of investment capital available for mortgage financing. $656 million for loans for low-rent public housing. PAGENO="0015" Description 1966 actual 1967 estimate 1968 estimate Equipment: Department of Defense-Military 14,601 14, 264 15, cioi Funds appropriated to the President: Military assist- ance 956 1,155 1,344 Post Office Department 94 124 152 National Aeronautics and Space Administration 244 262 227 Other 829 1,003 1,025 ~ u~i, equipment 16, 724 16,808 18,739 32 Lands and structures: Department of Defense-Military 1,700 1,526 1,628 Department of Defense-Civil Corps of Engineers -- 813 753 811 Department of Housing and Urban Development - -- 710 736 739 Department of the Interior 363 427 417 General Services Administration 164 216 206 National Aeronautics and Space Administration 239 110 85 Other 683 787 984 Total, lands and structures 33 Investments and loans: Funds appropriated to the President: International financial institutions Economic assistance Department of Agriculture Department of Housing and Urban Development 1 - - Veterans' Administration Other independent agencies: E~pOrt-Import Bank Sniall Business Administration Other Total, investments and loans Total, acquisition of capital assets Distribution of total obligations: Administrative budget Trust funds To other accounts To the public 4,672 4,561 4,870 354 1,211 3,160 3,724 464 1,576 533 925 374 1,137 3,665 4,334 563 3,407 516 2,155 124 1,375 3,628 3,731 473 2,781 631 2,359 11,947 16,151 14,102 BACKGROUND: ECONOMY IN GOVEItNMENT-1 9 6~7 7 TABLE 1(c).-Obligations for acquisition of capital assets [In millions of doilarsi 33,343 37,521 37,712 30, 706 33,945 34, 735 2, 637 3, 576 2, 977 5,330 8, 627 5, 401 28, 013 28,894 32,311 1 Excludes loans to the secondary market operations trust funds which are fully repaid within the year, ~imounting to $1,698,000,000 in 1966; $1,800,000,000 in 1967; and $1,400,000,000 in 1968. GRANTS AND FIXED CHARGES The Federal Government provides grants-in-aid to State and local governments, and grants to research institutions, private individuals, and others. In 1968, the Department of Health, Education, and Welfare will obligate an estimated $11,471 million, more than two- fifths of all obligations for object class 41, "Grants, subsidies, and contributions." Object class 41 includes- $2,298 million for price-support payments and retirement of farm acreage by the CCC. $4,240 miffiou for grants to States for old-age assistance, aid to families with dependent children, and aid to the blind and permanently and totally disabled. $3,995 miffion for education and vocational rehabilitation. $1,789 miffion for grants by the National Tustitutes of Health. In the Department of Transportation, $4,402 miffion is estimated for payments from the highway trust fund. Obligations in object class 42, "Insurance claims and indemnities," are composed mostly of- $ 19,928 miffion for social security payments from the Federal old-age and survivors insurance trust fund. PAGENO="0016" Description 1966 actual 1967 estimate 1968 estimate 41 Grants, subsidies, and contributions: Funds appropriated to the President: Office of Economic Opportunity 1, 050 1,305 1, 657 Department of Agriculture 3, 757 4,499 3, 651 Department of Health, Education, and Welfare~ 8,546 10,288 11,471 Department of Housing and Urban Development.. 1,083 1,284 1,705 Department of the Interior 319 487 548 Department of Labor 938 1, 088 1,049 Department of Transportation.. 4,140 3,574 4,609 National Science Foundation 397 437 467 Other 1,689 1,875 2, 014 Total, grants, subsidies, and contributions 42 Insurance claims and indemnities: Department of Health, Education, and Welfare Department of Labor Veterans' Administration Civil Service Commission Railroad Retirement Board Other Total, insurance claims and indemnities 43 Interest and dividends: Department of Agriculture Department of Housing and Urban Development Treasury Department - Other Total, interest and diviciends 44 Refunds: Department of Housing and Urban Development Department of the Interior Civil Service Commission Other Total, refunds - Total, grants and fixed charges Distribution of total obligations: Administrative budget - Trust funds - Tn nfh ~rqr~'nmit~ 21,769 24,837 27, 171 30,001 35,021 36,787 65,303 75,135 80,384 8 BACKGROUND: ECONOMY IN GOVERNMENT-1 967 $1,980 miffion for benefit payments from the Federal disability insurance trust fund. $2,624 million for benefit payments from the Federal hospital insurance trust fund. $1,121 milTion from the Federal supplementary medical in- surance trust fund. $4,558 million in the administrative budget for compensations, * pensions, and related benefits to veterans and their survivors. $1,764 million for withdrawals by the States from the unem- ployment trust fund. Object class 43, "Interest and dividends," is comprised principally of interest on the public debt-$14,050 mi]Jion of the $15,754 mi]Jion estimated for 1968. Object class 44, "Refunds," consists only of refunds of nontax receipts; income tax and certain other refunds are netted against receipts and are therefore not reported as obligations. TABLE 1(d).-Obligations for grants and fixed charges [In snirnons of dollars] 19,925 24,468 26,038 2, 049 1,887 1,857 5, 040 5, 319 5,241 1,559 1,792 1,965 1,200 1,250 1,314 228 305 378 356 424 371 340 575 877. 12,132 13,509 14,205 321 336 305 13,149 14,844 15,754 132 192 425 76 66 57 158 158 158 18 15 32 384 432 * 672 35, 157 40, 513 42, 566 30 146 34 622 37,818 2,683 3,327 3,758 62,620 71,808 76,626 PAGENO="0017" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 9 UNDISTRIBUTED OBLIGATIONS Certain obligations are not distributed by object class-or object class estimates are not available. The totals for such undistributed obligations are shown separately in the following table. The undistributed items consist of- Changes in object classification; these are chiefly deductions for project orders to correct for duplication of obligations which had earlier been obligated in lump sums and now are distributed by objects. TJnvouchered obligations, which are exempted by law from detailed vouchering, usually for confidential purposes. Change in selected resources, representing adjustments to cost- type data included in the object class totals. Amounts proposed for separate transmittal, which are budget recommendations to be transmitted for appropriation action after the budget is sent to the Congress; detailed object schedules are not yet available for these proposals. Budget allowances for 1967 and 1968 are included in this line. Items not distributed otherwise; these are mostly financing items such as transfers of funds and repayments. Charges for quarters and subsistence, which are provided in kind. TABLE l(e).-Undistributed obligations [In millions of dollars] Description 1966 actual 1967 estimate 1968 estimate Changes in object classification Unvouchered -249 13 -221 28 -229 30 Change in selected resources Proposed for separate transmittal Not distributedotherwise Quarters and subsistence charges Total, undistributed obligations Distribution of total obligations: Administrative budget Trust funds To other accounts To the public 1, 499 918 -19 -1, 020 12, 060 1, 166 -19 667 8,904 1, 203 -19 2, 162 1, 167 995 1, 206 956 11,994 11, 045 949 10,947 1,047 10, 556 5, 099 5 457 9,287 1,269 OBLIGATIONS TO THE PUBLIC When one agency or account within an agency orders goods or services from another, obligations are charged by the ordering agency to a single object class in the same manner as if ordered from outside the Government; obligations are then also charged by the receiving agency in accordance with its purchases (personnel, supplies, and materials, etc.). Since ordering agencies record their part of the transactions in such object classes as 25, 26, and 31, these classes contain a number of duplicated interagency obligations. However, these duplications cannot be completely identified and segregated in the detailed accounting schedules, because for the most part they are shown separately only in the accounts of the agencies which receive the orders. Obligations to the public by object class therefore 77-6Ol-67----2 PAGENO="0018" -10 BACKGROUND: ECONOMY IN GOVERNMENT-i 9 67 cannot be derived directly from the obj ect schedules. The following table represents an effort by the Bureau of the Budget to estimate -these data: TABLE i(f).-Estimated total obligations by object class showing obligations to the public separate from those to other accounts [In millions of dollars] 1966 1967 1968 To the To other To the To other To the To other public accounts public accounts public accounts Personal services and benefits: 11 Personnel compensation 12 Personnelbenefits~~- 13 Benefits for former personnel - Contractual services and supplies: 21 Travel and transportation of per- son&- 22 Transportation of things 23 Rent, communications, and utili- ties 24 Printing and reproduction 25 Otherservices 26 Supplies and materials Acquisition of capital assets: 31 Equipment 32 Lands and structures 29, 988 1, 857 1,001 2, 931 1,478 173 22,874 19, 892 12, 669 3, 823 4,577 673 1, 370 815 165 4,655 11, 664 4, 055 849 33, 006 2, 061 945 2, 753 1, 393 164 24,524 19, 516 11, 936 3, 603 5,070 775 1, 598 1, 093 200 4,521 12, 756 4,872 958 35, 579 2, 280 1,151 3,311 1, 695 198 25,950 21, 885 14, 414 4, 378 519 5,876 800 1, 553 1, 064 215 4,666 11, 996 4, 325 492 583 33 Investments and loans - Grants and fixed charges: 41 Grants, subsidies, and contribu- tions 42 Insurance claims and indemnities 11, 521 21, 769 30, 001 426 13, 355 24,837 35, 021 2, 796 13, 27, 171 36, 787 996 758 43 Interest and dividends 44 Refunds 10, 466 384 2, 683 11, 517 432 3,327 11, 672 3, 269 Undistributed 1, 206 Total 172, 031 Administrative budget 138, 207 Trust funds - 33, 824 956 10, 947 1, 047 9, 287 1, 32, 891 196, 012 39, 014 210, 275 36, 597 30, 773 2, 118 157, 566 38,446 35,939 3, 025 164, 107 46, 168 33, 737 2, 810 PAGENO="0019" Trends in Real Property Holdings, 1955-66 Attached are tables and charts showing a worldwide comparison between 1955 and 1966 and the year by year trends in the Federal Government's ownership of real property in the United States as follows: Tables Worldwide trends in Federal real property holdings, 1955-66. Agency comparison of federally owned real property in the United States, 1955-66. Charts Worldwide-Comparing 1955 with 1966.-Cost of real property owned by the United States throughout the world. United States-Trends by years, 1955 to 1966.-Cost of real property owned by the United States (land, buildings, and structures). Civil agencies vs. Department of Defense: Cost of real property. Land owned (acres). Cost of Federal land. Floor area of federally owned buildings. Cost of federally owned buildings. Cost of federally owned structures. Worldwide data on land costs, buildings' floor area and costs, and structures' costs are not available because, for security reasons, Department of Defense reports only total cost and total land area data on its holdings outside the United States. The U.S. charts reflect a change in coverage between 1958 and 1960. Through 1958 Alaska and Hawaii were included in the statistics on "outlying areas." In 1959, data for civil agencies in Alaska was added to the U.S. inventory. In 1960, data for Department of Defense in Alaska and Hawaii, and for civil agencies in Hawaii, was added to the U.S. inventory. TABLE 2.-Worldwide trends in Federal real property holdings, 1965-66 COST IN BILLIONS 1955 1966 Increase ~ Amount Percent Civilian agency holdings Defense holdings Total Inside United States Foreign and outlying areas Total - $13. 7 24. 3 $23.2 46. 1 $9. 5 21.8 69 90 38. 0 69. 3 31.3 82 32.5 5. 5 62.4 6. 9 29.9 1. 4 92 25 38.0 69.3 31.3 82 11 PAGENO="0020" 12 BACKGROuND: ECONOMY IN GOVERNMENT-196'7 TABLE 2.-Worldwide trends in Federal real property holdings, 1955-66-Con. ACRES IN MILLIONS 1955 1966 Increase Acres Percent Civilian agency holdings Defense holdings Total Inside United States Foreign and outlying areas Total 722. 31. 3 734. 7 2 30.6 12. 4 (.6) 2 (2) 753. 5 765.3 11.8 2 407. 345. 9 764.8 6 . 5 356. 4 (345. 1) 87 100 753. 5 765.3 11.8 2 FLOOR AREA IN MILLION SQUARE FEET 1955 1966 Increase Floor area Percent Civilian agency holdings Defense holdings 1 Total 1 Inside United States Foreign and outlying areas 1 Total 1 .584. 1,646. 6 638. 1 1 1,891. 5 53. 5 245. 4 9 15 2, 230. 7 2, 529. 6 298. 9 13 2, 196. 34. 3 2,496. 1 4 33. 5 299.8 (.9) 14 (3) 2, 230. 7 2, 529.6 298. 9 13 I Data on floor area not furnished by DOD for its military functions outside the United States. PAGENO="0021" 0 0 0 ci Percent t~j 0 57 0 7 (1) ~ (2) 15 216 101 (33) ~ 55 ~ 94 ~ (100) 12 19 12 (2) 10 Q? `1~ab1e ~(a).-Agency compari'son of federally Owned real property ~n the United 8ta~es ä~ of June 3O, ThM, and June do, J96~ [Dollar amounts in thousands] Agency ~ . 1955 1966 Increase or (decrease) Cost Land (acres) Floor area (square feet) Cost Land (acres) Floor area (square feet) Cost Land Floor area Amount Percent Acres Percent (Square feet) Department of Defense: Air Force Army Corps of Engineers Navy Total, Department of Defense. Civil agencies: Agriculture Atomic Energy Committee Commerce Federal Aviation Agency General Services Administra- tion Health, Education, and Welfare Housing and Urban Develop- ment Interior NASA Tennessee Valley Authority Veterans' Administration All other agencies (13) Total, civil agencies Total all agencies $4, 034,854 6, 655, 189 3, 177, 971 229, 027 10, 231,901 7, 057,305 3, 932, 513 4, 170, 067 373, 116,940 701, 279, 685 10, 702, 996 560, 879, 127 $14,033,938 9,717, 746 7, 716,875 8,813, 626 8, 628,067 11, 452,479 6, 734, 944 3, 657,065 584, 663, 714 748, 815, 782 10, 597, 727 547, 454, 276 $9, 999,084 3, 062, 557 4, 538,904 2, 584, 599 248 46 143 41 (1, 603,834) 4,395, 174 2, 802, 431 (513, 002) (16) 62 71 (12) 211, 546, 774 47, 536, 097 (105, 269) (13,424,851) 20, 097, 041 25, 391, 786 1, 645, 978, 748 40, 282, 185 30,472, 555 1,891, 531, 499 20, 185, 144 100 5, 080, 769 20 245, 552, 751 691, 052 2, 704, 551 202, 870 0 1, 136, 780 155, 257 546, 865 3,432, 683 0 1, 384, 422 1, 077, 882 1, 043, 718 167, 894, 227 2,003, 157 36,359 0 73, 695 4,338 22, 097 211, 504, 056 0 749,838 45, 905 170, 936 7, 857, 525 80, 602, 742 12, 630,359 0 119, 553, 556 13, 121, 486 86, 733, 327 45, 483,432 0 2, 723, 664 101, 144,833 80, 490, 391 1,892, 061 3, 890, 200 180,038 464, 471 2, 352, 578 428, 947 3, 122 6, 407, 260 1,495,950 2, 291 666 1, 476, 915 1, 215, 754 186, 885, 858 2, 152, 145 9, 253 61, 517 . 15, 579 5, 217 173 544,083, 612 135,410 724, 516 25, 212 191,081 24, 864, 215 81,035, 387 8,511, 923 8, 088, 187 185, 680, 739 25, 508, 638 60, 240 51,086,950 25,134,034 3, 235, 078 112, 779, 781 78, 540, 478 1, 201, 009 1, 185, 649 (22, 832) 464, 471 1, 215, 798 273, 690 (543, 743) 2, 974, ~77 1,594,950 907, 244 399,033 172, 036 174 44 (11) 107 176 (99) 87 65 37 16 18,991, 631 148,988 (27, 106) 61, 517 (58, 116) 879 (21, 924) 332, 579, 556 135,410 (25,322) (20, 693) 20, 145 11 7 (75) (79) 20 (99) 157 (3) (45) 12 17, 006, 690 432, 645 (4, 118, 436) 8, 088, 187 66, 127, 183 12,387, 152 (86, 673, 087) 5, 603, 518 25,134,034 511, 414 11, 634, 948 (1,949,913) 12,376, 080 382, 504, 608 550, 341, 315 22, 098, 962 734, 289, 573 604, 525, 650 9, 722, 882 79 351, 784, 965 92 54, 184, 335 32,473, 121 407, 896, 394 2, 196,320, 063 62,381, 147 764, 762, 128 2,496, 057, 149 29, 908, 026 92 356,865, 734 87 299, 737, 086 14 PAGENO="0022" 14 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 COST OF REAL PROPERTY OWNED .BY THE UNITED STATES THROUGHOUT THE WORLD AS OF JUNE 30, 1955 AND JUNE 30, 1966 MILLIONS OF DOLLARS NET INCREASE OR (DECREASE) _______ ______ 1966 OVER 1955 FOREIGN COST IPERCENT $4, 873 CIVIL AGENCIES $ 9, 574 70 DEFENSE AGENCIES $21, 771 89 CIVIL OUTLYING~ $31, 345 82 AGENCIES AREAS UNITED STATES $29, 9081 92 523, 251 ~` $2 103 OUTLYING AREAS (1, 213)1 (37) FOREIGN 2, 6501 119 $31, 345 82 $38, 012 __________ _________ FOREIGN $2, 223 CIVIL AGENCIES ______ IN U.S. $13, 677 OUTLYING $62, 381 AREAS (9%) DOD (36%) \$~~3~6 (90%) $46, 106 (66 %) IN U.S. $32, 473 DOD (85%) $24, 335 (64 %) JUNE 30, 1955 JUNE 30, 1966 Source: Administrator, General Services Administration. PAGENO="0023" BACKGROUND: ECONOMY IN GOVERNMENP-1 967 15 COST OF REAL PROPERTY OWNED BY THE UNITED STATES IN THE UNITED STATES 1955-1966 MILLIONS OF DOLLARS NET INCREASE 1966 OVER 1955 LI LAND ~ BUILDINGS Wit HI STRUCTURES _____________ TOTAL $29, 908 COST PERCENT $2,024 85 11, 053 76 16, 831 108 92 2, 369 1955 ~ 15 629 I~IP!' 47~ J $32, 473 2,463 1956 ~ j~ i'1'VJ~~ 866~4 $34, 313 2, 512 1957 ~ ~ $36, 230 2, 552 iJJ11I1Itt!~1ltLL1I'~~/ */i~~1 1958 ~ $38, 018 2, 753 1959 ~ 1 $41, 095 2, 956 1960 ~~3~383 ~ 1 $46, 255 3, 146 1961 ~~5I 244 J~J I!lfftIff ~ j $49, 655 3,462 1962 ~ $52, 378 3 765 1963 ~_ ~ $54, 514 3, 980 1964 ~ $57~ 203 4, 122 1965 ~ ] $59, 845 4, 393 1966 ~ [I] $62, 381 Source: Administrator, General Services Athninistratiôn. PAGENO="0024" 16 BACKGROUND: ECONOMY IN GOVERNMENT-1967 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 MILLIONS OF DOLLARS NET INCREASE 1966 OVER 1955 _____DEFENSE AGENC1ES L ICIVIL AGENCIES TOTAL COST OF REAL PROPERTY OWNED BY THE UNITED STATES IN THE UNITED STATES 1955-1966 COST PERCENT 520, 185 100 9, 723 ~ $29, 908 92 /VA. ~ 12, 376 ç~c, 474/~~~/f%J 12., 839 11 13, 118 538 - 13, 480 $32, 473 $34, 313 $36, 230 I $38, 018 $41, 095 14,957 $46, 255 JP26, 75,jjf~ff~f/f~4 14, 338 ,aio $49, 655 16,726 j $52, 378 17,617 $54, 514 19, 139 j $57, 203 1965 p~9.2~O#Sta~~ 26,605 j $59, 845 1966 ~ 22,099 j 562, 381 Source: Administrator, General Services Administration.. PAGENO="0025" BAöKGROUND: ECONOMY I~ GOVER~MENT-1 967 THOUSANDS OF ACRES NET INCREASE 1966 OVER 1955 L JCIVILAGENCIES 351, 786 ____ DEFENSE AGENCIES 5, 080 TOTAL 356, 866 17 LAND OWNED BY THE UNITED STATES IN THE UNITED STATES 1955-1966 i ACRES PERCENT 92 20 87 382, 504 382, 930 1955 1956 1957 1958 1959 1960 25, 392 ~ 407, 896 26. 575 409, 505 27, 159 408, 553 27, 563 408, 191 381, 394 380, 628 1961 1962 1963 1964 1965 1966 Source: 741,630 768, 29, 714 771, 27, 761 767, 640 512 766 797 903 515 ~ ~ 762 : 741,798 -~ 740,005 -~ 742,794 28 003 770, 28, 689 769, 29 771 770, ~ 96; 30,472 764, Administration... 741,214 740,744 ~z~o Administrator,. General Services PAGENO="0026" 118 BACKGRoUND: ECONOMY IN GOVEItNMENT-1967 MILLIONS OF DOLLARS NET INCREASE 1966 OVER 1955 _____ DEFENSE AGENCIES [ CIVIL AGENCIES TOTAL 1962 1963 1964 1965 P312111UT057 F~7Si7~ 1,082 iI!fi ~~~~d1VaII 1, 078 p~r, ~ 1, 11 $2, 369 $2, 463 52, 512 $2, 552 $2, 752 $2, 956 $3, 980 $4, 128 COST OF FEDERAL LAND IN THE UNITED STATES 1955-1966 1 COST PERCENT $1, 401 107 623 59 $2, 024 85 1955 1956 1957 1958 1959 1960 1961 1,157 - 1, 317 j $3, 146 1,405~] $3, 462 1,490 $3, 765 1,680 ~ ~ Source: Admthicftrator, General Services Administration. PAGENO="0027" BACKGROUND: ECONOMY IN GOvERN E:NT-1 967 19 FLOOR AREA OF FEDERALLY OWNED BUILDINGS !~iLHE UNITED STATES 1955-1966 ~ MILLIONS OF SQUARE FEET NET INCREASE 1966 OVER 1955 /4W DEFENSE AGENCIES ______ CIVIL AGENCIES TOTAL 300 AREA PERCENr 246 15 54 10 - 11 1955 ~so 2, 196 1956 505 1 2, 172 1957 480 2, 161 .1958 ________ [484 2, 205 11959 489 2, 282 1960 ~ J 2, 415 1961 964/~ 503 2, 467 1962 521 J 2, 457 1963 ~ 5~] 2, 469 `1964 87~~ff~ 556 j 2, 443 1965 584 J 2, 458 1966 ~, ~ 604 ] 2, 496 Source: Administrator, General Services Administration. PAGENO="0028" MILLIONS OF DOLLARS NET INCREASE 1966 OVER 1955 ____ DEFENSE AGENCiES I ~JCIVIL AGENCIES TOTAL 6,374 $21, 870 $22, 488 ~ $23, 244 ~ $24, 368 1966 ~ s, 543 525, 529 Source: Administrator, General Sen-ices Administration. 20 ~Aci*GRouicD: ECONOMY IN GOVEE1s~mNT-1967 COST OF FEDERALLY OWNED BUILDINGS IN THE UNITED STATES 1955-1966 ~ COST PERCENT 57, 712 83 3, 342 64 SIl, 054 76 ~s,z~J 514, 475 ~ 5, 163 $14, 866 9~1~4357 5,056 J $15, 491 ,pr. ~ `3J~j $16, 213 $17, 524 5,523 j $19, 916 5,883 521, 265 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 PAGENO="0029" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 21 $19, 253 $20, 818 $23, 382 $25, 245 __________ $27,. 046 I $28, 261 ~ $29, 979 _____________ $31, 349 COST OF FEDERALLY OWNED STRUCTURES * . *. ~MILLIONS OF DOLLARS NET INCREASE 1966:OVER 1955 _______ COST PERCENT ____ DEFENSE AGENCIES $11, 072 116 L~JC1VILAGENCIES :5.759,. 94 TOTAL $16, 831 108 $15, 629 $16, 984 _____________________ $18, 227 ~zo//AI,z3a 1955 1956 1957 1958 1959 1960 1961 1962 1963 7, 859 !5~~!%e~/1Uj8~z14 PSI B, 9 ~ 1964 1965 1966 ~ ~ $32, 460 Source: Administrator, General Services Administration. PAGENO="0030" Magnitude of DOD Property Management Activities PROPERTY HOLDINGS The total of DOD's real and personal property holdings has risent annually from $129 billion in fiscal year 1955 to $184 billion at the~ end of fiscal year 1966. Real property holdmgs increased from $21 to $38 billion and~~ personal property holdings, including construction in progress, from $107 to $145 bfflion during the 12-year period. However, "supply systems" inventories have been reduced by $13 billion during this period and "stock funds" by $2 billion. During: 1966, there was a small buildup of supply inventories. TABLE 3.-DOD property holdings as of June 30, fiscal years 1955-66 1 [In millions of dollars] Total and type of property 1955 1956 1957 1958 1959 1960 Total 128, 694 134, 082 146, 021 24,892 121, 129 149, 465 150, 660 154, 617 31,997 122, 620 Real Personal Supply systems 21,343 107, 351 22,918 111, 164 26,891 112, 574 29, 689 120,971 50, 780 10,974 53, 799 47, 652 44,467 42,002 Stock funds Appropriated funds Total Real Personal 8, 153 42, 627 9,772 41,202 10,970 42,829 8,913 38, 739 8, 162 36,305 7,312 34, 690 1961 1962 1963 1964 1965 1966 158, 508 164,835 35,378 129, 457 171,364 36, 565 134, 799 173, 455 36, 734 136, 721 176,221 37, 557 138, 664 183, 570 38, 390 145,180 34, 124, 470 Supply systems Stock funds Appropriated funds 40,837 40, 652 40, 096 38, 795 36,986 37,661 6,413 34,424 6, 154 34,498 6,527 5,749 33, 569 33, 046 5,327 31, 659 5,850 31,811 1 Source, "Real and Personal Property of the Department of Defense," an annual report. Expenditures for DOD military functions as a percentage of the~ gross national product increased by 5 percent in fiscal 1966 and are- estimated to increase more sharply in 1967 and 1968. 22 PAGENO="0031" C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) -~ C) C) C) C) C) C) C) C) -1 C) C) ~ CCC) C) C) CC; C C CD C) C) C) C ~ ~ ~ ~C) ~ ~~c.t- ~ ~ C)*c~- ~& it CD ~ CD Cl) ~ CDC) ~C) c~~1 CDO ~ CD~ ~C) ~QO CD~ çp~1 g) ~ C o ~D- CI) ~ o ~CD~ CD 1~C E ~ 0CJ) C C C:- _.000 (DC: C ~iC(D C) ~. C C) ~ ~* C~ ~ ~CD ~ C)C)~D.C)C)C)C)CCCC)~.C)C)C)tCC)CCC)C)C)C)C)C)C)C)C~.C)C)CD U~ ~ (*~ IDi D*Dl ~ ~g ~-, * ~3 ~o ~ ~(IDj ~ ~ ~ C)C)C)C C)-~C)~C)O ~d ~ ~ ~Cj ~D1 ~- C- C:~ ~ ~C ~ ~ ~ CD Pp~-~ CC C'~ C) C) C) C) C~ )~. C) C) C) C) C) -~ C) C) C) C) C) C) C) C) C)) C) C) C) C) C) C) C) C~ ~CD ~ C CCC) C) C) C) C) C) C) C) C) C) C) C) C) C) C) C) CCC) CCC) C) C) C) C) C) ~ . . ~ . p$Cp~.D~)3 C) C)) C) C) C) C) C) CC C) C) C) C) C) C) C) C) C)) C) -4 C) C) C) C) C) C) ~)) C) C) C) ~d ~ - C C-'- C `-3 ~ ~ ~` C)' ~ C) ~ ti `It' ~ C) CD. ~C. CD w 0 I Lmj 0 0 0 LTj Dl C) C) C) C) C) ~)) C) C) C) 009CC) 0 C) C) C) C)) C)) C)) C) Co C) C) ~ `~ ~CD S Co C) C) C)) C) C) C) C) C) C) C) C) C) C) C) C) C) ~ CC CCC) 0)0CC) C) C) ~)) C) C) 2-1P OOCC) C C) C) CO C) C) CCC) 00 CCC) C) C) C) C) C) C C) C) CCC) CCC) ~ CCC) C) CCC) 00 0 P~iI PAGENO="0032" 24 BACKGROUND: ECONOMY IN~GOVRMENT-19 ~7 TABLE 5.-Number of DOD military and civilian personnel~s.tatione.d in the United States (including Alaska and Hawaii) and annual payrolls, by State of duty locatiOn - ~ ~ Active duty military personnel Civilian employees Number, June 30, 1965 1 Estimated annual pay and allowances2 Number, June 30, 1965 Estimated annual payroll 2 U.S. total 1,641,244 $7, 780, 791,000 Alaska Arizona Arkansas~__ California Colorado Connecticut Delaware - 940, 763 $6, 774, 018,000 District of Columbia Florida Georgia Hawaii.. Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan 24, 016 30,892 21,244 9,898 212,859 35,421 3, 695 7, 222 19,850 69,969 93,980 40, 184 5,410 47, 427 8, 506 1,445 29, 757 48,901 34,334 12, 246 51, 435 30, 450 19,899 5, 167 21 302 28, 518 9, 526 16,404 7, 565 7,714 36,857 21,507 35,097 86, 815 12, 306 18, 639 33,991 4,955 15, 593 6, 550 50, 197 6,573 18,428 165, 099 4,642 2S7 88,811 45,556 528 4, 204 4, 579 24, 794 Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota 130,342,000 137, 571, 000 104, 506, 000 53, 634, 000 983, 125, 000 163, 031, 000 23, 089, 000 43,086, 000 142, 486, 000 361, 772, 000 396, 437, 000 182, 799, 000 30, 506, 000 219, 320, 000 41,052, 000 8, 066, 000 172, 835, 000 171,979, 000 127, 801, 000 64, 521, 000 253, 749, 000 153, 458, 000 104, 764, 000 23, 892, 000 104,898, 000 103, 612, 000 50, 413, 000 101, 366, 000 40, 086, 000 41,374, 000 165, 783, 000 110, 630, 000 173,826, 000 344,414, 000 59, 066, 000 110,833,000 161, 249, 000 25, 722, 000 76, 592, 000 37, 8S6, 000 185, 320, 000 34, 362, 000 90. 144, 000 798, 445, 000 23, 555, 000 1, 5S1, 000 443, 878, 000 210 507 000 2,513,000 21, 593, 000 24, 703, 000 142, 619, 000 33, 268 6,281 7, 176 3,961 138, 777 14, 450 3, 132 1,236 29,040 25,154 33, 563 18,964 433 28, 124 12, 466 630 4,728 12,050 6, 531 1, 687 41, 103 22,809 11,614 2, 105 6, 194 17,101 1,030 3, 999 2, 656 8, 147 25, 085 11,110 44, 628 10, 478 1, 386 37, 252 25, 606 3,420 66, 382 8, 808 15,302 * 1, 344 6, 178 60,051 19,335 74 79, 5S2 22, 301 1, 126 2,311 595 227,683,000 57, 311, 000 48, 100, 000 29, 065, 000 1, 046, 581, 000 100, 550, 000 23, 460,000 7,745,000 229,850,000 168, 116, 000 223, 527, 000 120, 789, 000 3,036, 000 200, 111, 000 83, 269, 000 3,744,000 31,949, 000 79, 133, 000 44,290,000 10, 498, 000 342, 742,000 172, 010, 000 83, 094, 000 12,899,000 41, 676, 000 113, 513, 000 6, 366, 000 24, 914,000 18, 154, 000 62, 235, 000 170, 601, 000 75, 042, 000 342, 113,000 63, 389, 000 8, 155, 000 332, 930, 000 168, 584, 000 23, 273, 000 509, 561, 000 56, 053, 000 98, 540, 000 8, 865, 000 14, 832, 000 398, 522, 000 138, 504, 000 399, 000 540, 152, 000 .156, 825, 000 6, 867, 000 11, 922, 000 4, 479, 000 Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah \Te~ont Virginia Washington West Virginia Wisconsin Wyoming - Undistributed Washington, D.C., metropolitan area - District of Columbia Maryland Virginia 62, 246 353, 364, 000 79, 558 19, 850 142, 486, 000 13, 189 65, 602, 000 29, 207 145, 276, 000 594, 520, 000 29, 040 16,017 34, 501 229, 850, 000 133, 566, 000 231, 104, 000 I Excludes naval personnel assigned to fleet units and to other afloat and mobile activities. 2 Fiscal year 1965. PAGENO="0033" -~1 -1 C C United States (including Alaska and Hawaii): Military Civilian Total Alabama: Military Civilian Total Cailfornia: Military - Civilian 1,832,047 1,034,795 Percent of Cl United ~ States Cl 0 ci 100.0 ~ 100.0 100.( 0 1.4 4.'~ ~ 2.3 ~ 2.1 Z 1.3 .3 TABLE 6A.-Defense personnel and total population in the United States, by State, as of June 30, 1966 Population July 1, 1965, census (revised) Percent of Number United States Depart- ment of Defense as percent of State population Total Department of Defense 1 Percent of Number United States Army Percent of Number United States ~1avy 2 Percent of Number United States Air Force Number Alaska: Military 100.0 715,251 100. 0 358, 292 100.0 100.0 Civilian Total Arizona: 454, 549 100. 0 662, 247 327,948 100.0 280,549 193, 795, 000 100.0 1. 5 2,866, 842 100. 0 1, 073, 543 100. 0 782, 497 100. 0 942, 796 32, 093 33, 211 1. 7 3. 2 22, 655 20,331 3. 2 5. 7 413 42 . 1 (3) 9, 025 12, 383 3, 486, 000 1. 8 1. 9 65,304 2. 3 42, 986 4. 0 455 . 1 21, 408 267, 000 Civiliah Tnt~l 29,216 6, 592 .1 Arkansas: Military. fli~i14~ 13.4 35,808 1.6 12,161 .6 3,048 1, 755, 000 1.2 1.7 .9 20, 675 7,953 .8 15,209 3, 001 494 1.1 .8 1.4 1.8 28,628 .7 14,054 .1 3,016 3, 495 4, 822 3, 390 1,941,000 1.0 .7 1.0 .5 17,070 9, 203 4, 523 1.0 8,212 1, 731 576 .5 .4 .8 .7 13,726 84 14,122 .2 3,766 18, 403, 000 See footnotes at end of table, p. 31. .5 2,307 .3 17,888 429 .1 125 (3) 3,665 1.0 0 0 4, 094 .4 9.5 2.2 404,863 - 246, 610 158, 252 13. 5 15. 3 45, 256 21, 692 6.3 6. 1 128, 416 90, 527 38. 2 27, 6 72, 938 38, 908 11. 0 13.9 8, 649 821 125 (3) 14.1 66, 948 9, 470 6.2 218,943 38.0 111,846 11.9 PAGENO="0034" Colorado: Military - Civilian - Total Connecticut: Military Civilian Total Delaware: Military - Civilian Total Flori(la: i~lilitary Civilian Total Georgia: Military Civilian Total IIawaii: Military Civilian Total Idaho: Military Civilian Total 4)), 516 15, 578 Percent of ~ United (~3 States ~ ______ 0 0 3.4 c~ 2.8 !»=i 3.2 (3 0 1.)) 4 ~ .0 - 0 5.7 3.4 2.6 ~ 7.4 H 4. 1 17 1:1 ~ TABLE 6A.-Defense personnel and total population in the United States, by State, as of June 30, 1966-(Contiuued) Population July 1, 1965, census (revised) Percent of Number United States 1)epart- inent of Defense as percent of State populatioii Total 1)epartinont of l)efenso I Army Navy 2 Air Number Percent of United States Number Percent of United States Number Percent of United States Number 2.2 1.5 17,833 7,587 2.5 2.1 415 0. 1 (3) 22,268 7,841 1, 949, (1(1(1 1. 0 2.9 56, 094 3. (1 25, 420 2. 4 417 . 1 30,109 4, 226 3, 605 . 2 . 4 196 208 (3) . 1 3, 954 2, 751 .9 . 8 7(1 75 (3) (3) 2,830,000 1.5 3.0 7,831 .3 404 (3) (~605 .9 151 (3) 7,128 1,321 .4 .1 108 52 (3) (3) 136 (1 (3) 0 6,884 1,256 503, 00)) . 3 1. 7 8, 449 . 3 16(1 (3) 146 (3) 8, 14(1 69,207 27,653 3.8 2.7 3,40)) 2,123 .5 .6 28,213 15,493 6.2 4.7 37 185 0,627 5,796, (((((1 3. 0 1. 7 96, 86)) 3. 4 5, 532 . 5 43, 7(16 5. 6 47,212 109,420 39,939 6.0 3.9 86,542 15,839 12.1 4.4 5,431 2,493 1.2 .8 17,447 20,870 4,391,00)) `A3 3.4 149,359 5.2 102,381 9.5 7,924 1.)) 38,317 28, 691 20,755 1.6 2.)) 6,827 5,652 1.0 1.6 10, 777 11,859 2.4 3.6 11 091 3,201 71(1, 000 . 4 7.)) 41), 450 1. 7 12, 479 1.2 22, 636 2.9 14, 292 1. 5 . 3,1)76 514 .2 .1 73 98 (3) (3) 814 3 .2 (3) 31(89 413 .5 .1 693, 0)))) . 4 . 6 4, 490 . 1 171 (3) 817 (3) 3, 5(12 . 4 PAGENO="0035" Civhian_____________::_~~ Total 10,641,000 Indiana: Military Civilian Total Iowa: Military Civilian Total Kansas: Military Civilian Total Kentucky: Military - Civilian Total Louisiana: Military Civilian Total Maine: Military Civilian Total Maryland: Military Civilian Total 2.9 2. 0 2. 6 w .6 ~ .2 ~ C .1 ~ z 1 .4 ___- 1.1 0 0 .1 0 (3) 1.5 .5 0 0 1.2 1.4 ~ .4 ~ 1.1 ~ .2 ~? 60, 287 29,449 5.5 .8 89,727 3. 3 6,382 . 9 34, 453 7. 6 19, 443 2. 9 16, 233 4. 5 5, 728 1. 8 5, 558 3. 1 22, 615 2. 1 40.181 5. 1 21~ 001 9,840 14,917 .5 1.5 4,386 6,500 .6 1.8 597 .1 4,857 .7 4, 893, 000 2. 5 . 5 24, 757 9 10, 886 1. 0 7,068 665 2.2 860 3 2, 758, 000 1. 4 . 1 1,555 781 . .1 .1 250 491 (3) .1 7, 204 1 1. 0 (3) 5, 717 1,101 2, 336 1 741 1 205 (3) 124 (3) ---- 34,792 5,481 . 1.9 .5 24,328 4,053 . 3.4 Li 761 133 (3) .2 1, 225 9,703 2, 248, 000 1. 2 1. 8 40, 273 1. 4 28, 381 2. 6 894 (3) 1 1,170 3, 173, 000 51,884 15,184 2.8 1.5 51,133 12,852 7.2 3.6 228 2,290 . .1 .7 10, 873 523 1. 6 2. 1 67, 068 2. 3 63, 985 6. 0 2, 518 3 23 -_~ 35C0000~18 13 40, 084 7,661 2. 2 .8 28, 846 4,805 4. 0 1.3 1, 323 1,206 . . 3 .4 546 9, 915 47 74~ 17 33651 dl 2529 3 1,454 10, 785 1, 806 . 6 . 2 221 57 (3) ~ 1, 248 701 . 3 2 11369 9, 316 -~ 986,000 .5 1.3 12,591 .4 278 (3) . 1, 029 47, 463 28,172 2. 6 2.7 30, 232 18,951 4. 2 5.3 15, 034 3. 3 10,345 2, 197 2, 587, 000 1. 3 2. 9 75, 635 2. 6 49,183 4. 6 23, 771 3. 0 105 28,222 22,938 1. 5 2. 2 11, 464 7, 960 1. 6 2. 2 2, 798 8, 146 . 6 2. 5 2 13, 960 5, 123 2. 1 1. 8 Massachusetts: Military Civilian Total 5,361,000 2.8 1.0 51,160 1.8 19,424 i.s 10,944 1.4 19,083 2.0 _______ - See footnotes at end of table, p. 31. PAGENO="0036" `00 Michigan: Military - Civilian Total Minnesota: Military Civilian Total Mississippi: Military Civilian Total 1\Iissouri: Military Civilian Total Montana: Military Civilian Total Nebraska: Military Civilian Total Nevada: Military Civilian 18,265 12,713 6,329 2, 702 (3) (3) Percent of ~ `United Q States ~ 0 2.:) ci .7 ~ 1.8 171 0 3 0 __.` 4 0 3. 0 1.3 3.1 0 1.4 ~ .3 H _______ I C) -1 TABLE 6A.-Defense personnel and total population in the United States, by State, as of June 30, 1966-(Continued) Population census July 1, 1965, (revised) Percent of Depart- mont of 1)efense IS percent of State Total Department of Defense 1 Percent of United Army -________ Navy 2 Air Force ~ Number Number Percent of United Numnher Percent of United Number United States population Number States States States 1.0 1.2 1,818 8,443 0.3 2.4 1,073) 167 0. 2 15. 368 2, 020 8,317,000 4. 3 0. 4 30,978 1. 1 10, 261 1. 0 1, 246 . 2 17, 388 5, 141 2,314 . 3 .2 1, 233 1,049 . 2 .3 90:1 100 . 2 (3) 3, 005 718 3,562,000 1.8 .2 7,455 .3 2,282 - .2 1,003 .1 3,723 28,011 7, 357 1.5 . 7 592 2, 800 .1 . 8 1,920 838 .4 . 3 25,499 3, 690 2,309,000 1. 2 1.5 35, 368 1. 2 - 3, 302 .3 2, 718 . 4 29,189 38,846 20, 601 2.1 2. 0 31,561 14, 331 4.4 4. 0 846 192 .2 . 1 6,439 5, 266 4,492,000 2. 3 1. 3 59,447 2. 1 45, 892 4. 3 1, 038 . 1 11, 9 5 1, 233 . 1 95 284 (3) . 1 35 0 (3) 0 9, 265 947 703,000 .4 1. 5 10, 628 . 4 379 (3) 35 (3) 10, 212 - 12,385 3, 678 .7 . 4 246 1, 830 (3) . 5 372 154 .1 (3) 11,767 1, 684 1.4 1,459,000 .8 1. 1 16, 063 .6 2,076 .2 526 . 1 13,451 .3 .3 28 11 1,144 1,416 .2 .4 5,157 1,268 .8 111)1) .2 I 2. 1 9. 121 . 3 39 (3) 2,560 . 3 6, 425 . 7 PAGENO="0037" 1,525 .3 3,535 .5 7,577 2.3 540 .2 Total New Jersey: Military Civilian Total New Mexico: Military - Civilian Total New York: Military Civilian Total North Carolina: Military Civilian Total North Dakota: lvlilitary Civilian Total Ohio: Military Civilian Total Oklahoma: * Military Civilian Total Oregon: Military Civilian Total 153 (3) 281 .1 w 1.2 2.1 1.6 0 2.0 2.3 2. 7 2.4 ~ 1.5 0 .4 1.2 z 1.8 .4 0 0 1.4 2.5 ~ 8.3 4.2 1.8 8.5 ~ _____* 3.8 ~3 Milita~y 5, 213 Civilian 8, 437 .3 .8 673, 000 - . 3 2. 0 13, 650 . 5 434 (3) 9, 102 1.2 4, 075 .4 48,762 28,327 2.7 2.7 36,721 20,481 5.1 5.7 2,635 4,641 .6 1.4 9,406 1,894 1.4 .7 6, 781, 000 3. 5 1. 1 77, 089 2. 7 57, 202 5. 3 7, 276 .* 9 11, 300 - - 18,655 11,892 1.0 1.1 3,599 5,889 .5 1.7 1,030 123 .2 (3) * 14,026 4,490 1, 014, 000 . 5 3. 0 30, 547 1. 1 9,488 . 9 1, 153 . 1 18, 516 33, 241 35,357 1. 8 3.4 12, 299 14,702 1. 7 4.1 6, 029 9,715 1. 3 3.0 14, 913 7,453 18, 106, 000 9. 4 . 4 68, 598~ - 2:4 27, 001 2. 5 15, 744 2. 0 22, 366 92, 702 11,591 5. 1 1.1 35, 191 4,103 4. 9 1.1 47, 536 6,304 10. 5 1.9 9, 975 1,047 4, 935, 000 2. 5 2. 1 104, 293 3. 6 39, 294 3. 7 53,840 6. 9 11, 022 12,165 1,227 .7 .1 62 193 (3) .1 15 0 (3) 0 12,088 1,033 652, 000 . 3 2. 1 13, 392 . 5 255 (3) 15 (3) 13, 121 19, 756 38,318 1. 1 * 3.7 2,256 2,921 .3 .8 812 1,159 .2 .4 16, 688 23,310 10, 241, 000 5. 3 . 6 58, 074 2.0 5, 177 . 5 1, 971 *. 3 39, 998 37,866 31, 361 2.1 3. 0 25,768 5, 143 3.6 1. 4 378 2, 154 .1 . 7 11,720 23, 878 2, 448,000 1. 3 2. 8 69, 227 2. 4 30, 911 2. 9 2, 532 .3 35, 598 1, 938, 000 1. 0 . 4 3, 578 3,528 7, 106 . 2 .3 . 2 190 2,675 2, 865 (3) .8 - . 3 348 1 349 . 1 (3) (3) 3, 040 771 3, 811 . 5 .3 .4 Sec footnotes at end of table, p. 31. PAGENO="0038" Pennsylvania: Military- Civilian - Total Itliode Island: Military Civilian Total South Carolina: Military Civilian Total South Dakota: Military Civiliati Total Tennessee: Military Civilian Total Texas: Military Civilian Total Utah: Military Civilian Total Percent of ~. United 0 States ~1 ______ 0 0 0.2 ci 2.2 ~ i~r1 (3) 0 (3) - (3~ 0 2. 5 ___.i~ `~ 2.0 0 .2 .9 ~4 .2 -~ Co 17.9 ~` 14.9 TABLE GA-Defense personnel and total population in the United States, by State, as of June 80, 1966-(Continued) Population July 1, 1965, census (revised) Percent of Number United States Depart- snent of Defense as percent of State population Total Department of Defense' Percent of Number United States Army Percent of Number United States 14, 878 0. 8 5, 843 0. 8 7, 626 71,386 6. 9 27, 294 7. 6 25, 901 1.7 1,409 7.9 6,1112 11, 583,000 6. 0 0.7 86,264 3. 0 33, 137 3. 1 33, 527 4. 3 7,561 9, 486 9,332 . 5 .9 356 345 . 1 .1 9, 074 8,921 2. 0 2.7 56 1 891,000 .5 2.1 18,818 .6 701 .1 17,995 2.3 57 60, 191 17, 089 3. 3 1. 7 25, 200 3, 050 3. 5 . 9 18, 568 12, 365 4. 1 3. 8 16, 423 2, 213 2,550,000 1.3 3.1 77,800 2.7 2~25O 2.6 30,033 4.0 18,636 6, 160 1,348 . 3 .1 06 766 (3) .2 18 0 (3) 0 6, 046 580 -_________ 686, 000 . 4 1. 1 7, 508 . 3 862 . 1 18 (3) 6, 626 21,860 6,690 1.2 .6 644 2,269 .1 .6 15,583 985 3.4 .3 5,642 630 3, 850, 000 2. 0 . 7 28,559 1. 0 2, 913 . 3 16,568 2. 1 0,278 200,882 70, 043 11.3 6. 8 78,631 25, 209 11.0 7. 0 9,712 2, 134 2.1 . 7 118 539 41,643 10, 591, 000 5. 5 2. 6 276,925 9. 7 103, 840 9. 7 11, 846 1.5 100. 182 17.0 4,480 27, 005 .2 2. 6 002 6, 706 .1 1. 9 137 181 (3) . 1 3,441 10, 689 .5 6. 0 094,000 .5 3.2 31,485 1.1 7,608 .7 318 (3) 20,130 2.1 PAGENO="0039" Vermont: i\'lilitary Civilian Total Virginia: Military Civilian Total Washington: Military Civilian Total Washington, D.C., metropolitan area: Military Civilian Total West Virginia: Military Civilian Total Wisconsin: Military Civilian Total Wyoming: Civilian - Total Undistributed: Military Civilian Total 2(13 63 1.1 0 1.9 1.1 1.7 3.0 3.3 tn 3.1 o 0 0 (3) (3) 61 (3) 28 (3) 10 (3) 0 102 11 (3) (3) 404, 000 . 2 .1 326 (3) 89 (3) 10 (3) 203 (3) ---- 66 253 49,821 3. 6 4. 8 28, 976 10,837 4. 1 3. 0 28, 385 34, 218 6. 2 10. 4 8, 892 1, 608 1. 4 . 6 3, 756, 000 1.9 3.1 116, 074 4. 0 39, 813 3. 7 62, 603 8. 0 10, 500 - - 47 557 24,534 2.6 2.4 30, 348 6,075 4.3 1.7 4,512 15,196 1.0 4.6 12, 688 2,998 2,973, 000 1. 5 2. 4 72, 091 2. 5 36, 423 3. 4 19, 717 2. 5 15, 686 70, 526 85, 638 3. 9 8.3 33, 723 32, 567 4. 7 9. 1 17, 054 35, 354 3. 7 10. 8 19, 749 9, 210 2, 413, 000 1.2 6. 5 156, 164 5. 4 66, 290 6.2 52, 408 6. 7 28, 959 528 1,125 (3) .1 240 1,052 (3) .3 76 0 (3) 0 212 17 (3) (3) 1,815,000 .9 .1 1,653 .1 1,292 .1 76 (3) 229 (3) 3,401 2,485 .2 .2 836 1,360 .1 .4 288 0 .1 . 0 2,277 549 4, 140, 000 2. 1 . 1 5, 886 .2 2, 196 .2 288 (3) 2, 826 3,092 624 . 2 . 1 30 11 (3) (3) 18 2 (3) (3) 3, 944 610 330,000 .2 1. 4 4, 616 . 2 41 (3) 20 (3) 4, 554 39, 403 0 2.2 0 0 0 0 0 36, 800 0 8. 1 0 2, 603 0 39, 403 1.4 0 1 Includes 68,006 civilians employed by other defense activities such as Defense Supply 4 Excludes personnel in the Washington, D.C., metropolitan area. Agency and Office of the Secretary of Defense. Therefore, total Department of Defense 5 Consists of the District of Columbia; Montgomery and Prince Georges Counties in column will not add across in all cases. Maryland; Alexandria, Fairfax, and Falls Church cities, and Arlington and Fairfax 2 Includes Marine Corps. Counties in Virginia. Less than 0.05 percent. 0 36,800 4.7 2,603 I. PAGENO="0040" 32 BACKGROUND: ECONOMY IN GOVERNMENT-1967 C) I - P. - ~`1 ~ - `~ ~ P-C C'~ C~ -~ ~`i ~D - - P. `~ C ~ ~ - - -~ c~- -~ ~- c~ c'~ - c~ t- -~ -~ ~ P. C ~. C -~ - ~ ~ ~o z ~ -~ c~i ~ ~ ~ ~p~c~T ~ ~ ~ c~-~ C~ -~ r- t- P~ C C ~ - C P. Co CO P. ~ ~- - P- CCC - - C- .~C ~ :C-~~~-_. ~QQ~~ZZZZZZZZC) PAGENO="0041" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 33 ~ ~ ~ `~ `~ ~ t- t,. ~ ~ ~ PAGENO="0042" 34 BACKGROUND: ECONOMY IN GOVERNMENT-i 9 67 SUPPLY SYSTEMS iNVENTORIES As stated in table 3 above, the total of "supply systems" inventories from fiscal year 1955 through fiscal year 1966, was reduced from $51 to $38 billion or $13 billion. The stratification of such stocks, or breakdown into purpose for which they are held, reflects a distinct change during fiscal years 1964, 1965, and 1966. In prior years, the strata were peacetime operating stocks, mobilization reserve stock, economic and contingency retention stocks, and excess stock. These are shown in table 7 and are explained in footnotes 2 through 7. Stratification of supph~ systems inventories as of June 30, 1964, and June 30, 1965, was in accordance with improved logistics guidance which called for application of assets first against requirements to support (1) approved forces; that is, Active and high-priority Reserve Forces of the 5-year force structure and financial program; and (2) general forces. The guidance was again changed so that, as of June 30, 1966, assets are applied to approved forces, either as authorized for acquisition or for retention. The data for these strata are not comparable with that in prior years, except in a very general way, and, therefore, have not been shown separately in the table (see footnotes) but are included in subtotal and total. The criteria for the establishment of economic retention and con- tingency retention strata have not been drastically revised, although the exigencies of world situations may result in somewhat different levels being established under them. The excess strata now repre- sents those stocks that are beyond limits of a. particular service and for which screening for utilization by other elements of the Department of Defense is mmderway but for which final DOD disposal action has not been initiated. They are significantly less in value than those reported in prior years. PAGENO="0043" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 35 TABLE 7.-DOD supply systems inventories by inventory stratas as of June 80,1 fiscal years 1958-66 [In millions of dollars] Total and inventory strata 1958 1959 1960 1961 1962 1963 1964 1965 1966 Total Unstratified Total stratified Peacetime operating 2 - Mobilization reserve Economic retention Contingency retentions Excess stocks 6 46,585 44,203 41,727 40,537 40,299 39,684 38,383 36,506 37,167 2, 440 44, 145 3, 056 41, 147 2, 083 39, 644 1, 819 38, 717 1, 837 38, 462 1, 425 38, 259 2, 582 35, 801 2, 704 33, 802 3, 221 33, 946 14, 538 12, 134 5, 593 1, 050 10, 418 15, 306 11, 530 4, 703 1, 611 7, 146 15, 657 10, 893 6, 618 1, 361 5, 115 14, 722 11, 030 6, 343 1, 246 5, 377 15,601 10, 725 5, 454 1, 040 5, 643 15,379 10, 921 5, 912 636 5, 411 (7) (7) (7) (7) 3, 596 3, 629 1, 248 1, 814 5, 528 3, 466 (7) (7) 4, 180 1, 865 3, 250 1 Total inventories in this table do not include value of Navy shipboard supplies included in table 3. 2 Peacetime operating stock is that portion of the total quantity of an item on hand which is required to equip and train the planned peacetime forces and support the scheduled establishment through the normal appropriation and leadtime periods. Mobilization reserve materiel requirement: The quantity of an item required to be in the military supply system on M-day, in addition to quantities for peacetime needs, to support planned mobilization to expand the materiel pipeline, and to sustain in training, combat, or noncombat operations prescribed forces until production by industry equals consumption. Economic retention stock is that portion of the quantity in long supply which it has been determined will be retained for future peacetime issue of consumption as being more economical than future replenish- ment by procurement. Contingency retention stock is that portion of the quantity in long supply of an obsolete or nonstandard item for which no programed requirements exist and which normally would be considered as excess stock, but which has been determined will be retained for possible military or defense contingencies for U.S. or allied forces. 6 Excess stock as reported herein is stock which is indicated to be above the sum of footnotes 2, 3, 4, and 5 al)ove and for which specific determination as being within the needs of the Department of Defense has not been made or disposal action initiated. 7 These strata are not available for 1964, 1965, and 1966 because of changes in logistics guidance. In 1965 their sum was $24,893,000,000, divided into approved force stocks ($23,665,000,000) and general force stocks ($1,228,000,000). The guidance was again revised in 1966 when the sum of these two was $24,651,000,000 allocated to approved forces as levels of acquisition ($23,640,000,000) and retention ($1,011,000,000). SCOPE OF PROCUREMENT ACTIVITIES The net value of military procurement actions amcnrnted to ~$35.7 billion in fiscal year 1966, an increase of $1 1.1 billion over fiscal year 1965. TABLE 8.-Net value of military procurement actions in the United States and possessions, fiscal years 1951-66 [In billions of dollars] Fiscal year Net value of military pro- curement actions Fiscal year Net value of military pro- curement actions Net value of Fiscal year military pro- curernent actions 1951 1952 1953 1954 1955 1956 31. 9 42. 2 28.4 11.9 15. 5 18.2 1957 1958 1959 1960 1961 19. 9 22. 8 23.9 22.5 24.3 1962 27. 8 1963 28. 1 1964 27.5 1965 26.6 1966 35. 7 . Source: "Military Prime Contract Awards and Subcontract Payments or Commitments, July 1965- June 1966," Office of the Secretary of Defense. PAGENO="0044" 36 BACKGROUND: ECONOMY IN GOVERNMENT-1967 ~ET VALUE OF PROCUREMENT ACTIONS BY STATES, FISCAL YEARS 1963-66 (SEE TABLES 9 AND 9A) The percentage breakdown of military procurement actions by States and the District of Columbia shows for fiscal year 1966: Percent of total: 15 to 20 5 to 10 4 to 5 3 to 4 Number of States Percent of total-Continued 1 2 to 3 5 1 to 2 1 0 to 1 3 Number of States 5 9 27 TABLE 9._.1\Tet value of military procurement actions by States,1 fiscal years 1964, 1965, and 1966 State [Dollar amounts in thousands] Fiscal year 1964 Fiscal year 1965 Fiscal year 1966 Amount Percent Amount Percent Amount Percent 527,470,379 S26,63l,132 535,713,061 3,053,272 24, 417, 107 100. 0 3,363,052 23, 268,080 100. 0 3,999,758 31, 713, 303 100. 0 Total, United States Not distributed by State ~ -- State totals Alabama Alaska Arizona Arkansas California Colorado Cormecticut Delaware District of Columbia Florida Georgia Hawaii Idaho Illinois Indiana 190,681 101, 545 173. 825 29,731 5,100.650 389,511 1,126.054 30.424 222, 947 782,591 520,169 52,112 7,804 429,201 537,940 .8 . 4 .7 .1 21.0 1.6 4.6 .1 .9 3.2 2.1 .2 (~) 5.8 2.2 165,176 74, 175 176,857 39,284 5,153,639 249,151 1,180,111 38,239 247,576 633,332 662,417 72,213 11,724 421,899 604,925 Iowa 103,392 .4 133,951 Kansas Kentucky 289,045 40,476 1.2 .2 229,051 42,749 Louisiana Maine Maryland Massachusetts Michigan Minnesota 181,427 31.531 547.936 1,032,062 591,290 217.941 .7 .1 2.3 4.2 2.4 .9 255,834 68,771 584,333 1,178,729 532,897 259,500 Mississippi 155,911 Missouri 1, 349,671 Montana 16,422 Nebraska 33,921 Nevada 6,361 New Hampshire 64,857 New Jersey 917, 561 New Mexico 71,486 New York 2,496, 438 North Carolina 273, 516 North Dakota 192,025 Ohio 1,028,946 Oklahoma 122,489 Oregon 29,104 Pennsylvania 883,065 Rhodelsland 38,173 South Carolina 51,621 South Dakota 23,308 Tennessee 193,564 Texas 1,294,431 Utah 340,040 Vermont 14, 012 Virginia 690,852 Washington 1, 085, 696 West Virginia 87, 327 Wisconsin 177, 217 Wyoming 49,408 .6 5. 5 .1 .1 (5) . 3 3.8 .3 10. 2 1. 1 .8 4.2 .5 .1 3. 6 .2 .2 . 1 .8 5.3 1.4 . 1 2.8 4. 5 . 4 . 7 . 2 152, 188 1, 060,781 69,375 42,708 19,142 52,400 820, 309 84,137 2, 229,473 288,408 48,997 863,113 119,803 39,624 988,811 86,323 81,580 21,062 197,283 1,446,769 191,713 32, 202 469,097 545, 607 90, 312 203. 003 7,867 (5) .8 9 22. 1 1. 1 5. 1 9 1. 0 2. 7 2. 8 8 2. 6 .6 1.0 .2 1. 1 .3 2. 5 5. 1 2.3 1. 1 4:6 .3 .2 3. 5 .4 9.6 1.2 .2 3.7 .5 .2 4. 2 .4 .4 6.2 .8 .1 2. 0 2.3 .4 .9 281 549 71,666 248, 228 95, 701 5,813,078 255, 893 2, 051, 560 37,445 328, 111 766,955 799, 362 64, 170 20 004 919,779 1 068 259 247,619 312, 629 70, 057 302, 906 51,340 842, 527 1, 335,952 918,426 497,994 162, 305 1,112,665 13, 779 80,478 32, 02.8 109, 591 1, 090, 122 86, 230 2,819,153 449,331 83,113 1.588,955 158,492 89,983 1, 665, 087 131,722 176,424 23,315 502,168 2,291,454 169,681 81,066 425, 487 444,368 149, 300 364,684 11,112 .8 .3 18. 3 .8 6. 5 0 2.4 2. 5 (5) 2. 9 3. 4 .8 1.0 .2 1.0 .2 2. 7 4. 2 2. 9 1.6 .5 3. 5 (5) .3 3.4 .3 8.9 1.4 .3 5.0 .5 .3 5.3 .4 1.6 7. 2 .5 .3 1.3 1. 1 (5) PAGENO="0045" BACKGROUND: ECONOMY IN GOVERNMENT-i 9 67 37 I See "Notes on Coverage." 2 Inclodes all contracts awarded for work performance in the United States. The United States includes the 50 States, the District of Columbia, U.S. possessions, the Canal Zone, the Commonwealth of Puerto Rico, and otiser areas suhject to the complete sovereigsaty of the United States, hnt does not inclnde occupied Japanese islands and trost territories. Includes contracts of less than $10,000, all contracts awarded for work performance in the Common- wealth of Puerto Rico, U.S. possessions, and other areas subject to the complete sovereignty of the United States, contracts which are in a classified location, and any intragovernsnental contracts entered into overseas. Net value of contracts of $10,000 or more for work in each State and the District of Columbia. Less than 0.05 percent. I Civil functions of the Army Corps of Engineers for flood control and rivers and harbors work. Civil functions data are shown separately, and are not included in military fnnctions tabulations. Revised. NOTES ON COVERAGE It is emplsasiced that data on prisne contracts by State do not provide any direct indication as to the State in which the actual production work is done. For the majority of contracts with massufacturers, the data reflect the location of the plant where the product will be finally processed and assembled. If process- ing or assenably is to be performed in more than 1 plant of a prime contractor, the location shown is the plant where the largest dollar amount of,work will take place. Construction contracts are shown for the State where the construction is to be performed. For purchases from wholesale or otlser distribution firms, the location is the address of tlse contractor's place of business. For service contracts, the location is gen- erally the place where the service is perforsned, but for transportation and communications services the house office address is frequently used. More important is the fact that the reports refer to prime contracts only, and cannot in any way reflect the distribsstion of the very substantial amount of material and component fabrication and other subcon- tract work that may be doses outside the State where final assembly or delivery takes place. The report includes definitive contracts, and funded portions of letter contracts and letters of intent, job orders, task orders, and purchase orders on industrial hirms, and also includes interdepartmental pur- chases, snade from or through otlser goversimental agencies, such as those made through the General Services Administration. The State data include upward or downward revisions and adlustments of $10,000 or more, such as cancellations, price changes, supplemental agreements, amendments, etc. The estimated amounts of indefinite delivery, open-end or call-type contracts for petroleum are included in the report. Except for petroleusu contracts, the report does not include indefinite delivery, open-end, or call-type contracls as such, bsat does include specific purchase or delivery orders of $10,000 or more which are placed against these contracts. Also excluded from the report are project orders; that is, production orders; issued to Government-owned-and-operated facilities such as Navy shipyards. however, the report includes the contracts placed with industry by tlse Government-operated facility to complete tlse production order. PAGENO="0046" o ~ CD*'~~ H .~1 CD~~l_.~CD CD~-~ o C~ H ~ ~ 0 CD ~ ~ (DO ~ l)~ I ~* -. CI) 0 p CD ~ CD o CD ~ p ~ ~~~CDU)~ ~ ~ ~ ~ `~:D~ ~ C-~P ~CD~ CJ~ p CDc+-~CD~ ~ ~-~.0~-t-Cl) ~ 0 ~ CD CD~p~-~ ~ ~ c~ CD ~1 C). ~ ~ ~ CD ~ 0 ~ ~ 0 ~c-t- CD~CDP~~ Il ~ CD pcjq ~ CD c+P~CD~ ~ C ~ H L~i 0~ C) C) L~~d Ct C) Ct 01 C)) 0 Ct C) C)) ~1 C~) Ct C) C) Ct 0 C) - ~ C)C)C) C))~C)C)C) C)C)~ C)~ o ~~*o ~oo 0 0 C) 0 C))C)~ i~);c~J~ :C~~))&) C))C)C)C)C) l~ L~) C)C)~ C) C) C) C) L) Cl) Cl) C))l~C)C)C) Cl) - I) C)) C) ~j ~ C)) C)C)I~ C) C) C) Cl) ~1).~3 I) - C) ))l).I~C) Cl) C) ~ -~ C) ~i ~ ~ C)) C) C) C) C)) - C) C) -IC) C) C) C)) C) C) C) l) ))- Ct C) C) C) C) C) C) C) a~ ;Ct ~J) C) C) C) C) C) C) C))IC)CtC)C) C) - C) )Ct C) It~ ~ ~ C C)Cl)~ Cji~ C)C)C) C)C))C))I~-I C)~C)C) Ctj ~ 0 0 C (:1 0 C z C C) 0 C C) C) -1 C) C) C) )Ct )Ct )Ct C) C)) C)) C) C) C) C)C)C)C)C))C)~IlC)C)C)C)C)C)C)C)IC))C))-C)C) C) 1 C) C) C) C) C) C) )~) C)) )Ct C) C) C)) C) C)) -~ C)) C) C) C) C) C) C) PAGENO="0047" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 39 In fiscal year 1966, awards to U.S. companies for work at home and overseas increased 38.7 percent to $33,532.6 million and the 100 com- pany total increased 28.4 percent to $21,400.8 million. The value of $40.2 million for the company in 100th position on the list for the current fiscal year is $16 million higher than the 100th company figure in fiscal year 1965. As indicated above, the rate of increase in fiscal year 1966 for awards to the 100 companies lagged 10 percent behind that for total awards. At the same time small business firms increased their share of the total from 19.6 percent in fiscal year 1965 to 21.4 percent in fiscal year 1966. The list for fiscal year 1966 contains 23 companies which did not appear on the fiscal year 1965 list. Of the new names, 10 appear between 51st and 75th positions and 12 between 76th and 100th positions. One of the new names, Raymond-Morrison-Brown-Jones, a joint venture with contract awards totaling $547.9 million is in ninth position. There were two major corporate changes affecting the list during fiscal year 1966. Continental Motors Corp., which appeared on both the fiscal year 1964 and 1965 lists, was acquired by Ryan Aeronautical Co. as a subsidiary. Republic Aviation Corp., also on the list for the previous 2 fiscal years, was acquired and merged into the operations of Fairchild Hiller Corp. In addition, there were two corporate name changes during fiscal year 1966 as follows: Hercules Powder Co. to Hercules, Inc., and Socony Mobil Oil Co. to Mobil Oil Corp. The contract work of many of the companies in fiscal year 1966 involved more than one major procurement category. However, each company is assigned to the procurement category in which it has the largest dol]ar volume of awards. As the result of large increases in certain types of procurement in fiscal year 1966, the table below shows companies in four new categories as follows: tex- tiles and clothing, construction equipment, weapons and building supplies. The largest increase in number of companies occurred in ammunition, which had 13 more companies in fiscal year 1966 than in fiscal year 1965. The laigest decreases were in missiles and petroleum, each having five fewer companies than in the previous fiscal year. Number of companies Procurement category Fiscal year 1965 Fiscal year 1966 Change Total Aircraft 100 100 21 19 -2 i\/Iissiles . 18 13 -s Ships 6 3 -3 Tank-automotive 8 9 +1 Weapons Ammunition 0 7 1 20 +1 +13 Electronics 16 18 +2 Services 7 s -2 Construction 4 1 -3 Photographic equipment and supplies Petroleum 2 11 0 6 -2 -5 Textiles and clothing Construction equipment Building supplies 0 0 0 2 2 1 +2 +2 +1 PAGENO="0048" 40 BACKGRoUND: ECONOMY IN GOVERNMENT-1967 The four nonprofit contractors (see Index) listed for fiscal year 1966 represent a decrease of two from the number on the list for the preced- ing fiscal year. For the most part, these nonprofit contractors pro- vide research, development, and training services in the missile-space and electronics programs. Four companies received prime contract awards of more than $1 billion each in fiscal year 1966, compared to two companies in fiscal year 1965. These companies and a brief description of their more important work are as follows: Lockheed Aircraft Corp. leads the list for the fifth consecutive year with $1,531 million, or 4.6 percent of the total. This is a decrease of $184 million in value and 2.5 percentage points from fiscal year 1965. The aircraft contracts of this company include the C-5A heavy logis- tics jet carrier, O-141A Starlifter jet cargo transport, C-130E Hercules turboprop jet transport, and the P3B Orion patrol bomber. It is the principal prime contractor for the Polaris and Poseidon missiles, is an important contractor for military space vehicles, and performs re- search in conjunction with the sateffite control network. The com- pany and its subsidiaries also receive contracts for shipbuilding and electronics. General Electric Co., having $1,187 miffion in awards and 3.5 per- cent of the total, advanced to second place in fiscal year 1966 from fourth place in fiscal year 1965. It received substantial contracts for the production of aircraft engines. Ordnance contracts were for the production of 7.62-millimeter machineguns, 20-millimeter cannon, and guidance and control systems for missiles. This company also received large contracts for electronics and communications equipment and nuclear propulsion systems for ships. The following two companies in third and fourth positions have a difference of less than $3 miffion in their total awards. United Aircraft Corp., whose contracts totaled $1,138.7 million (3.4 percent), ranks third. This compares with a contract value of $632.1 mii]ion and sixth position in fiscal year 1965. The prime con- tract work of the company is principally for the production of aircraft engines. Contracts for aircraft were for the production of helicopters. In addition to these awards, the company received smaller contracts for ordnance items and for propellers. General Dynamics Corp. received awards amounting to $1,136 million which represented 3.4 percent of the total and is in fourth place. The value compares to $1,178.6 million in fiscal year 1965. This company received contracts for aircraft, missiles, and ships. The aircraft contracts are largely for the production of F-ill fighters; those for ships include repair and alteration of various types of vessels and new construction of landing craft and submarine tenders; and the missile-space contracts involve the development or production of Atlas, Redeye, Tartar, and Terrier missiles, and boosters for the space program. PAGENO="0049" CO © CO ~4z -0 ~0 ~C) ~10 0 )` CO )0 CO Co C>.) )).. C>.) C) 0) )0)) )~) C) C) CC 0) C) CCC 0) CO C.) -1CC COO -4 CCC C.) COO) COO) CO C) CO CO CCC C..) )-) CO CCC C) -C C) CCC CO CO C) C.) 0)-CC) 0)00)))) 0))- >0 00-4C) CO -4)0 C' C) C) 0)0.0)0)0 0 CCC 4 )~) CO -.1 C..) )CC 0-4 CO CCC C.) 0) C) 0 0-IC) C- C) C) Pt 0 E C~ )-`C)-4--3COCOCO -30 C)aCC0CO-4COCC)~0C-'C0O)CC))-' C.OCOC))CO)-)0 ..CC)-3CCC -3)~CC CC)C.))C-C-.C)COCCO) -ICC0) COb) Co CO 0)0) )0. C) )O 0CC) C) )0. CCC.) )0CC -4 C-' CO OCCO C) 0)0)0)00) 4CoC000CC) C) 0)0)0).) CO C0 COO )0 C$~ C-)) U 0 -C C~C) ~ CD 0 O~C C-I t21 ~ 0) Q 0 U Co~ ~d 0)0) CC0 ~ _C~) C-) 00>-)) cc to>- -1 Cc~ Co C) 0 C) PAGENO="0050" 42 BACKGROUND: ECONOMY IN GOVERNMENT-1967 100 companies and their subsidiaries listed according to net value of military prime contract awards, fiscal year 1966 (July 1, 1965, to June 30, 1966) Rank Companies Millions of dollars Percent of U.S. total Cumulative percent of U.S. total U.S. total Total, 100 companies and their subsidiaries2 Lockheed Aircraft Corp - Lockheed Shipbuilding and Construction Co Total General Electric Co United Aircraft Corp 533, 532. 6 21,400.8 100.0 63.8 100.0 63.8 1,525.6 5.4 General Dynamics Corp Stromberg-Canton Corp United Electric Coal Co 1,531.0 1, 187.0 1,138.7 4.6 3.5 3.4 4.6 8. 1 11.5 1,133.3 2.6 0.1 Boeing Co McDonnell Aircraft Corp Conductron Corp Hycon Manufacturing Co Tridea Electronics, Inc - 1,136.0 914.5 3.4 2.7 14.9 17.6 692.3 7.8 17.5 4.6 722.2 2.2 1 2 3 4 5 6 9 10 11 12 13 14 15 153.2 (3) 7.3 1.~ .4 2.5 18.0 485.7 672.1 2.0 21.8 American Telephone and Telegraph Co Bell Telephone Co. of Pennsylvania Chesapeake and Potomac Telephone Co Mountain States Telephone and Telegraph Co New England Telephone and Telegraph Co New Jersey Bell Telephone Co New York Telephone Co Northwestern Bell Telephone Co Ohio Bell Telephone Co Pacific Northwest Bell Telephone Co Pacific Telephone and Telegraph Co Southern Bell Telephone and Telegraph Co Southwestern Bell Telephone Co Teletype Corp Western Electric Co., Inc Total Textron, Inc - Accessory Products Corp Bell Aerospace Corp Cleveland Metal Abrasive Co Dalmo Victor Co T)url3am Manufacturing Co Erie Tool Works Jones and Lamson Machine Co Nuclear Metals, Inc Sheafler (W. A.) Pen Co Textron Electronics, Inc Textron Oregon, Inc Townsend Co 15.4 (3) 532.3 (3) (3) (3) (3) (3) 1.5 4.2 I 1 554.8 547.9 520.4 508. 0 506.0 1.6 1.6 1.6 1.5 1.5 Raymond International, Inc.; Morrison-Knudsen Co., Inc.; Brown & Root, Inc.; and .T. A. Jones Construction Co_ North American Aviation, Inc General Motors Corp AVCO Corp Kaiser Industries Corp Kaiser Aerospace & Electronics Corp Kaiser Jeep Corp Kaiser Steel Corp National Steel & Shipbuilding Co Total Ford Motor Co Phulco Corp Total Sperry Rand Corp 23.4 25.0 26.6 28.1 29.6 1.0 3.9 358.4 42. 7 35.4 I 441.4 1.3 30.9 91.7 347.9 439.6 426.8 1.3 32.2 1.3 33.5 See footnotes at end of table, p. 4S. PAGENO="0051" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 Raytheon Co Amana Refrigeration, Inc Dage-Bell Corp Machlett Laboratories, Inc Micro State Electronics Corp Penta Laboratories, Inc Total Westinghouse Electric Corp Hagan Controls Corp Thermo King Corp Total Martin-Marietta Corp Bunker-RamoCorp Bunker-Rarno Eastern Technical Center, Inc Total 19 Hughes Aircraft Co General Tire & Rubber Co Aerojet-Delft Corp Aerojet-General Corp Aerojet-General Nucleonics Batesville Manufacturing Co Fleetwood Corp General Tire International Co Space Electronics Corp Space-General Corp Total Gruman Aircraft Engineering Corp Ling-Temco-Vought, Inc Continental Electronics Manufacturing Co Continental Electronics Systems, Inc Kentron Hawaii, Ltd LTV Electrosystems, Inc LTV Ling Altec. Inc Okonite Co. (The) Total Bendix Corp Beck-Lee Corp Bendix Field Engineering Corp Bendix-Westinghouse Automotive Air Brake Co Dage Electric Co., Inc Microwave Devices, me: Sheffield Corp Total Douglas Aircraft Co Northrop Corp Northrop Carolina, Inc Page Communications Engineers, Inc Total 26 Honeywell, Inc 27 Collins Radio Co Radio Corp. of America RCA Defense Electronics Corp Total International Telephone & Telegraph Corp Barton Instrument Corp Documat, Inc Federal Electric Corp ITT Gilfillan, Inc ITT Technical Services, Inc ITT Terryphone Corp Jennings Radio Manufacturing Corp Total See footnotes at end of table, p. 48. 43 100 companies and their subsidiaries listed according to net value of military prime contract awards, fiscal year 1966 (July 1, 1965, to June 30, 1966)-Continued Rank Companies Millions of dollars Percent of U.S. total Cumulative percent of U.S. total 16 17 18 $356. 7 (3) 10.7 20 21 22 23 24 25 368.5 1.1 34.6 343.1 5.5 348.7 1.1 316.8 20.6 337.8 336.6 1.0 1.0 36.7 37.7 12. 6 286:5 1.0 18.4 (3) 0.2 (3) 7.8 327.3 322.9 1.0 1.0 38.7 39.7 259. 0 5.~ 4.9 39.2 1.0 310.8 276. 1 (3) 4.7 (3) (3) .6 281.8 278.9 .9 .8 .8 40.6 41.4 42.2 182.7 93.0 276.0 250.6 245.3 .8 .8 .7 43.0 43.8 44.5 242.1 242.4 45.2 120.3 57. 6 39.2 1.5 219.8 .7 45.9 28 29 PAGENO="0052" 44 BACKGROUND ECONOMY IN GOVERNMENT-1967 Litton Industries, Inc Airtron, Inc Analogue Controls, Inc Clifton Precision Products Co., Inc Ingafls Shipbuilding Corp Litton Precision Products, Inc Litton Systems, Inc Mellonics Systems Development, Inc Monroe Calculating Machine Co., Inc Monroe Intl., Inc P 5 Corp U.S. Engineering Co., Inc Total Standard Oil Co. (New Jersey) American Cryogenics, Inc - Esso International, Inc Esso Research & Engineering Co Esso Standard Eastern, Inc Esso Standard Oil Co. (Puerto Rico) Humble Oil & Refining Co Total Ryan Aeronautical Co Continental Aviation and Engineering Corp Continental Motors Corp Wisconsin Motor Corp Total General Telephone & Electronics Corp Automatic Electric Co Automatic Electric Sales Corp California Water & Tel. Co General Telephone & Electronics Laboratories, Inc General Telephone Co. of Florida General Telephone Co. of Puerto Rico General Telephone Co. of the Southeast Lenkurt Electric Co., Inc Sylvania Electric Products, Inc West Coast Telephone Co International Business Machines Corp Science Research Associates Service Bureau Corp Olin Mathieson Chemical Corp Pan American W'orld Airways. Inc Pan American Grace Airways Total 37 FMC Corp Gunderson Bros. Engineering Corp Du Pont (E. I.) de Nemours & Co Remington Arms Co., Inc .100 companies and their subsidiaries listed according to net value of military prints contract awards, fiscal year 1966 (July 1, 1965, to June 30, 1966)-Continued Rank Companies J~Iillions of dollars Percent of U.S. total Cumulative percent of U.S. total $13. 2 2 46. 9 6. 6 152.0 30 31 32 33 34 35 36 219.4 0.7 46.6 1.4 129. 3 1.5 17.2 1.2 63.4 214.0 .6 47.2 69. 7 29.5 98.6 1.8 199.6 .6 47.8 Tntal 0 5.6 5. 1 (3) 1 4:1 18L3 (3) 196. 4 .6 48.4 180.8 .7 181.6 .6 49. 0 38 173.0 .5 49.5 170.0 (3) 170.0 .5 50.0 162.5 162.6 .5 Total 161.1 .5 39 ChryslerCorp 150.2 .4 See footnotes at end of table, p. 48. 50. 5 20.4 140.7 51.0 51.4 PAGENO="0053" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 Standard Oil Co. (California) - California Oil Co Caltex Oil Products Co.4 Caltex Philippines, Inc.4 Chevron Asphalt Co Chevron Chemical Co Chevron Oil Co Community Oil Co., Inc Hoffman Fuel Co., Inc Independent Gasoline & Oil Co. of Rochester Standard Oil Co. of Kentucky Standard Oil Co. of Texas Total Goodyear Tire & Rubber Co Goodyear Aerospace Corp Goodyear International Co Kelly-Springfield Tire Co Lee Tire & Rubber Co Motor Wheel Corp Total Hercules, Inc Haveg Industries, Inc MilD Research, Inc Total General Precision Equipment Corp Controls Co. of America General Precision Decca Systems, Inc General Precision, Inc Grafiex, Inc National Theatre Supply Co Strong Electric Corp Tele-Signal Corp Total Thiokol Chemical Corp Norris-Thermador Corp Fyr-Fyter Co Total Texaco, Inc Caltex Oil Products Co. Caltex Philippines, Inc 4 Jefferson Chemical Co., Inc Paragon Oil Co Texaco Caribbean, Inc Texaco Experiment, Inc Texaco Export, Inc Texaco Puerto Rico, Inc Texaco Trinidad, Inc White Fuel Co., Inc Total 47 Signal Oil & Gas Co Garrett Corp Southland Oil Corp Space Petroleum Corp Total TRW,Inc Lear-Siegler, Inc American Avitron, Inc Astrek Instrument Corp Cimron Corp Hokanson, (C.G.) Co., Inc Lear-Siegler Service, Inc 45 100 companies and their subsisidaries listed according to net value of military prime contract awards, fiscal year 1966 (July 1, 1965, to June 30, 1966)-Continued Rank Companies Millions of dollars Percent of U.S. total Cumulative percent of U.S. total $84. 1 .8 39.7 .~ (3) .3 (3) (3) 10.9 4.8 40 41 42 43 44 45 46 141.1 0.4 51.8 50.9 78.5 (3) 130.5 .4 52.2 118.6 11 120.1 .4 52.6 0 .3 (3) 108. 1 1.3 (3) 1.8 5.9 117.4 110.7 .4 .3 53.0 53.3 110. 0 110.6 .3 53.6 21.6 39.7 .~ 1. 3:2 38.3 .4 48 49 105.7 .3 53.9 5.9 97. 1 See footnotes at end of table, p.48. 105.4 .3 54.2 103.6 .3 54.5 89.0 .4 .4 7.5 98.0 .3 54.8 PAGENO="0054" 46 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 100 companies and their subsidiaries listed according to net value of military prime contract awards, fiscal year 1966 (July 1, 1965, to June 30, 1966)-Continued Rank Companies Millions of dollars Percent of U.S. total Cumulat've percent of U.S. total 50 Mobil Oil Corp $97 7 55 1 51 Eastman Kodak Co 94.2 Eastman Kodak Stores, Inc 1.6 Recordak Corp 7 Total 96.5 .3 55.4 52 Bethlehem Steel Corp 89.9 Bethlehem Steel Export Corp .9 Calmar Steamship Corp 1.3 Total 92.1 .3 55.7 53 Curtiss-Wright Corp 91.1 .3 56.0 54 Asiatic Petroleum Corp 88.0 .3 56.3 55 Colt Industries. Inc 4.5 Inc 12.1 Colt's Inc .1 Colt's Patent Fire Arms Manufacturing Co., Inc 63.4 Fairbanks Morse, Inc 4.6 Pratt & Whitney, Inc I 1.9 Total 86.6 .2 56.5 56 Magnavox Co 83.5 .2 56.7 57 Harvey Alunsinum, Inc 32.6 Harvey Aluminum Sales, Inc 49.8 Total 82.4 .2 56.9 58 Aerospace Corp 80.4 .2 57.1 59 Fairchild Huller Corp 80.1 .2 57.3 60 InternationalHarvesterCo 73.1 laugh (Frank G.) Co 1.7 MacLeod & Co 2.8 Total 77.6 .2 57.5 61 Sanders Associates, Inc 77. 1 .2 57.7 62 Stevens (J. P.) & Co., Inc 75.8 .2 57.9 63 Firestone Tire & Rubber Co 73.9 Dayton Tire & Rubber Co H .6 Total 74.5 .2 58.1 64 United States Rubber Co 74.5 Masland Duraleather Co (3) United States Rubber International Corp (3) Total 74.5 .2 58.3 65 United States Steel Corp 69.5 Reactive Metals, Inc (3) TotaL 69.5 .2 5S.5 66 American Electric, Inc 1 68.6 .2 58.7 67 Chamberlain Corp 67.4 .2 58.9 68 Teledyne, Inc 62.3 .2 59.1 69 Hupp Corp 61.6 .2 59.3 70 Condec Corp 56.6 Consolidated Avionics Corp (3) Consolidated Controls Corp~. - - .4 Total 57.0 .2 59.5 71 American Machine & Foundry Co 55.4 Cuno Engineering Corp~ .7 Volt (W. I.) Rubber Corp .2 Total 56.3 .2 59.7 See footnotes at end of table, p. 48. PAGENO="0055" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 47 100 coin panics and their subsidiaries listed according to net value of military prime contract awards, fiscal year 1966 (July 1, 1965, to June 30, 1966)-Continued Rank Companies Millions of dollars Percent of U.S. total Cumulative percent of U.S. total Motorola, Inc Motorola Commnnications & Electronics, Inc Motorola Overseas Corp Total Western Union Telegraph Co Day & Zimmerman, Inc Sverdrnp & Parcel, Inc ARO, Inc Total Union Carbide Corp Englander Co., Inc Korad Corp Ocean Systems, Inc Union Carbide Internat., Inc Total Newport News Shipbuilding & Dry Dock Co Massachosetts Institote of Technology Vitro Corp. of America Vitro Minerals & Mining Corp Total Burlington Industries, Inc Cleveland Woolens Erwin Mills, Inc KlopmanMills, Inc Total .JohnsllopkinsUniversity Caterpillar Tractor Co Towmotor Corp Total GeneralTime Corp Texas Instruments, Inc Metals & Controls, Inc Total National Presto Industries, Inc Westinghouse Air Brake Co Failing (George E.) Co Le Tourneau-Westinghousc Co Melpar, Inc Wilcox Electric Co., Inc TotaL Flying Tiger Line, Inc American Manufacturing Co. of Texas Emerson Electric Co Rantec Corp Total Atlantic Research Corp Northeastern Engineering, Inc Total Clark Equipment Co Universal American Corp Amron Corp Von Kohorn-Universal Corp Total $50.0 5.0 (3) 55.0 0.2 59.0 54.9 .2 60.1 54.1 .2 60.3 72 73 74 `a 76 77 78 79 So Si 82 83 84 55 86 87 88 89 90 91 92 See footnotes at end of table, p. 48. (3) 52.3 52.3 48.5 1.1 2.1 (3) .2 60.5 51.8 51.5 50.7 .2 .2 .2 60.7 60.9 61.1 49.3 1.2 50.5 36.4 2.4 11.7 (3) .2 61.3 50.5 50.5 .2 .2 6L5 61.7 47.0 2.5 49.5 48.0 .2 .2 61.0 62.1 47.2 (3) 47.2 45.5 .1 .1 62.2 62~3 1.2 16.2 18.0 44.0 43.6 43.4 .1 .1 .1 62.4 62.5 62.6 42.8 42.9 .1 62.7 41.7 4L8 4L7 .1 .1 62.8 62.9 1.2 40.4 (3) 4L6 .1 63.0 PAGENO="0056" 48 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 100 companies and their subsidiaries listed according to net value of military prime contract awards, fiscal year 1966 (July 1, 1965, to June 30, 1966)-Continued Rarikt Companies Millions of dollars Percent of U.S. total Cumulative percent of U.S. total 93 94 95 96 97 98 99 Control Data Corp 535.8 Control Corp .1 Data Display, Inc (3) Datatrol Corp Rabinow Electronics, Inc .2 TRG, Inc 4.8 Total 41.2 System Development Corp 40.7 Burroughs Corp 40.4 Burroughs Control Corp .3 Total 40.7 Hayes International Corp 40. 7 Bowen-McLaughlin-York, Inc 40.5 Dow Chemical Co 39.6 Dow Corning Corp .6 Total 40.2 Borg-Warner Corp 34.4 Morse Chain Co (3) York Corp 5.8 0.1 .1 63.1 63.2 .1 . 1 .1 63.3 63.4 63.5 .1 63.6 100 Total 40.2 Continental Oil Co 32.3 American Agricultural Chemical Co (3) Douglas Oil Co. of Calif 6.8 Western Oil & Fuel Co 1.1 .1 63.7 Total 40.2 .1 63.8 1 Net value of new procurement actions minus cancellations, terminations, and other credit transactions. The data include debit and credit procurement actions of S10,000 or more, under military supply, service, and construction contracts for work in the United States plus awards to listed companies and other U.S. companies for work overseas. Procurement actions include definitive contracts, the obligated portions of letter contracts, purchase orders, job orders, task orders, delivery orders, and any other orders against existing contracts. The data do not include that part of indefinite quantity contracts that have not been translated into specific orders on business firms, nor do they include purchase commitments or pending cancellations that have not yet become mutually binding agreements between the Government and the company. 2 The assignment of subsidiaries to parent companies is based on stock ownership of 50 percent or more by the parent company, as indicated by data published in standard industrial reference sources. The com- pany totals do not include contracts made by other U.S. Government agencies and financed with Depart- ment of Defense funds, or contracts awarded in foreign nations through their respective governments. The company names and corporate structures are those in effect as of June 30, 1966. Only those subsidiaries are shown for which procurement actions have been reported. `Less than $50,000. 4 Stock-ownership is equally divided between Standard Oil Co. of California and Texaco, Inc.; half of the total of military awards is shown under each of the parent companies. PAGENO="0057" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 49 NEGOTIATED AND ADVERTISED PROCUREMENT ACTIONS Negotiated procurements for fiscal year 1966 were 85 percent of total awards with business firms in the United States, up 3 percent from the previous year. Significantly, the DOD states that when items can be procured competitively the savings are about 25 percent. TABLE iO._Net value of military procurement actions, with business firms for work in the United States, classified by method of procurement, fiscal years 1951-66 Fiscal year Total net value (millions) Formally advertised procurement Negotiated procurement Millions Percent Millions Percent 1951 1952 $30,823 41, 482 27, 822 11, 448 14,930 17,750 19, 133 21,827 22, 744 21, 302 22, 992 26, 147 27, 143 26,221 25, 281 34, 026 $3,720 4, 479 3, 089 1, 789 2,386 2,815 3, 321 3,115 3, 089 2, 978 2, 770 3, 412 3,538 3,889 4, 660 5, 147 12.1 10.8 11. 1 15. 6 16.0 15.9 17. 4 14.3 13. 6 14. 0 12.0 13. 1 13.0 14.8 18. 4 15. 1 $27,103 37, 003 24, 733 9, 659 12,544 14,935 15, 812 18,712 19, 655 18,324 20, 222 22, 735 23, 605 22, 332 20, 621 28, 879 87.9 89.2 88.9 84.4 84.0 84.1 82. 6 85.7 86. 4 86. 0 88.0 86. 9 87.0 85.2 81. 6 84. 9 1953 . 1954 - 1955 1956 . 1957 1958 . 1959 - 1960 1961 - 1962 1963 1964 1965 1966 Total, 1951-66 391, 071 54, 196 13. 9 336, 874 86. 1 Source: "Military Prime Contract Awards and Subcontract Payments or Commitments, July 1965- June 1966," Office of the Secretary of Defense. Three types of negotiation authority account for 44 percent of all procurement in fiscal 1966 as compared to 54 percent in fiscal 1965. The results for fiscal years 1965 and 1966 follow: Contract awards by statutory authority (excerpt from table 11) 1 Percent 1965 1966 Impracticable to secure competition by formal advertising Experimental, developmental, test, or research Technical or specialized supplies requiring substantial initial investment or extended period of preparation for manufacture 14. 4 16. 6 23. 0 15. 5 21. 1 16.2 Total 54. 0 43.8 1 Over 35 percent of all negotiated procurement was obtained by price competition in fiscal year 1966. PAGENO="0058" TABLE 1i.-Awards by statutory authority (July-June) [Amounts In thousands] `total - $27, 997, 037 Intragovernin eiital 612, 470 Statutory authority (i~ U.S.C. 2301(a)) July 1964-June 1965 July 1965-June 1966 Total -________ A mount Per- cent Army aniount . Navy amount Air Force amount Defense Supply Agency unount Total Amount Per- cent Army amount Navy amount Air Force amount - $6, 327, 460 $8, 968, 550 111,620 278,301 $9, 658, 648 $3, 042, 379 $38, 243, 107 $11, 298, 202 $10, 464, 257 $10, 740, 754 199, 478 23, 069 1, 014, 603 158, 799 448, 909 363, s:ii `I'otal, except intragovernmentai.. - Formally a(Ivertise(l Other authority (subtotal) (1) Natioiiai emergency (subtotal) (a) Labor surplus area and in- (lustry setasides (8) Sniall business setasides (subtotal) 1. Unilateral 2. Joint (c) l3alance of payments pro- gram (2) Public exigency (3) Purchases not more than $2,500 (4) Personal or professional services_ -- - (0) Services of educational institutious (6) Purchases outside United States~_ (7) Medicines or medical supplies (8) Supplies purchased for authorized resale 27, 384, 567 4,817,214 100~ 0 17.6 6, 215, 840 1,563,378 8, 690, 247 1,709,438 9, 459, 170 431,132 3, 019, 310 1,113,266 37, 228, 504 5,283,158 1(11). 0 14.2 11, 139,403 1,792,440 10, 015, 348 1,417,196 10,377, 223 455,292 22, 567, 353 2 1, 638, 930 82.4 2 6. 0 4, 652, 462 512, 501) 6, 080, 809 332, 857 9, 028, 038 306, 864 1, 906, 044 480, 709 31, 945, 346 1, 856, 600 85. 8 5. 0 9, 346, 963 484, 759 8, 598, 152 328, 946 9, 921, 931 255, 909 158, 166 1, 464, 146 . 6 5. 3 36, 110 471, 778 26, 127 300, 626 24, 595 273, 780 71, 334 411, 962 156, 672 1, 594, 571 .4 4. 3 37, 375 444, 897 23, 264 304, 912 7, 690 240, 938 62, 215 1, 401, 931 . 2 5. 1 30, 351 441, 427 24, 479 282, 147 6, 053 267, 727 1, 332 410, 630 1, 398, 904 3 195, 667 3. 8 . 5 406, 559 38, 338 273, 285 31, 627 142, 737 98, 201 16, 618 . 1 4, 612 104 8, 489 3, 413 105, 357 . 3 2, 487 770 7, 281 w 0 ci Defense Supply ~ Agency ~ amount 0 z ______ 0 $5, 739, 894 ~ 43,364 5, 696, 530 1,618,230 0 4,078,300 0 786, 986 88, 343 603, 824 57~ 323 27, 501 94, 819 e~ 03 1, 209, 593 ~ 350, 922 349,559 120, 657 22, 150 1, 104, 298 1,302, 953 78, 820 431, 284 1, 036, 916 67, 353 4. 0 5. 1 . 3 1. 0 3. 8 .2 415, 316 378,499 35, 023 09, 178 486, 086 1, 114 238, 673 443, 970 31, 051 150, 391 104, 293 1, 556 3)4, Ill 344, 145 12, 746 181, 715 185, 474 1, 836 85, 430 226, 339 0 0 261, 063 62, 847 .5, 1)11, 0101 1, 704, 868 92, 431 383,1149 1, 934, 316 126, 742 13. 7 4. 6 . 3 1. 0 5. 2 .3 2, 461, 358 461, 560 34, 843 11)7, 819 659, 179 2, 227 582, 858 513, 610 41, 959 159,384 694, 779 2, 455 827, 784 378, 776 15, 629 116, 446 230, 799 1, 403 170, 674 . 6 49, 795 25. 662 76. 879 18,338 230. 439 . 0 56, 487 49, 261 102, 541 PAGENO="0059" (9) Perishable or nonperishable sub- sistence (10) Impractical to secure competition by formal advertising (11) Experimental, developmental test, or research (12) Classified purchases (13) Technical equipment requiring standardization and interchange- ability of parts (14) Technical or specialized supplies requiring substantial initial in- vestment or extended period of preparation for manufacturing~._... (15) Negotiation after advertising (16) Purchases to keep facilities avail- able in the interest of national de- fense or industrial mobilization___ (17) Otherwise authorized by law 801, 857 3, 929,339 4, 556, 792 115, 000 52, 400 6, 284, 334 1, 616 337, 241 567, 546 2.9 14.4 16.6 -4 .2 23.0 (4) 1.2 ~2.1 56,464 729, 401 932, 697 78,409 6,109 672, 178 47,430 152, 263 50, 759 1,470, 132 834, 971 35,801 30,315 2, 977,359 793 56,301 195, 925 141, 305 1, 552, 010 2, 789, 104 790 15,976 2, 634, 797 806 233, 494 185, 227 553, 329 177, 796 20 0 0 0 17 16 34,131 For definitions and coverage, see notes on coverage. 2 Revised; see table 15, footnote. 1, 088, 222 5, 746, 988 4,495,669 122, 571 105, 630 6,039,207 9,889 2, 171, 779 754, 753 2.9 15.5 12.1 -3 -3 16.2 (4) 5.8 2.0 61,865 1, 386, 531 1, 084, 911 74, 284 2, 461 831, 676 6, 225 1, 455, 618 175, 160 44, 951 1, 842, 956 961, 576 44, 736 43,119 2,613,892 3,530 349, 458 320, 682 135,207 2, 194, 627 2, 449, 149 3, 551 53, 769 2, 593, 639 108 364, 256 198,338 846, 199 322, 874 33 6, 281 26 2,447 60.573 3 Use of the joint procedure was discontinued on July 1, 1965; this value represents modifications in fiscal year 1966 to contracts awarded under this procedure prior to July 1. Less than 0.05 percent. 0 0 0 0 0 0 0 z C) PAGENO="0060" CD C C) C) 0 Ct ~3a)a) 1~ta~ ~&~L3 0 C) C, (I) C, C) i::3 - ~ a) a) a) 0303 ~P. C) a) 1 C) C) C) CO -~C~ a) ~.a) -1~P. a)t3tD-1-1a) C-~ C-~a)~P. a) C)) a)a) ))~ ))~ C)) a) a) a) a) 03 -.4 C)3 a) 03 0 C, ~Cs~3 ~ 1a)C))~~ C) a)C,~P.-.a) -~ - C)a)CO COa) g~ ~j::~ ~ ~L~j ~. .- a) a) a) C-~- .3 C) a) a) t3 a) P. a) C)) S-) .3 )~ a) CJt C)) a) - C Ct a) a) a) -.4 a) C))-.~ P. C) a) a) C) a) a) a) a) a) a)._, S- C) C)) a) a) 3 a) C) C) -1 a) a~ C) ~ ~ a) ~ CCa)a) a) a)a)~a)a) a) a) C., a) Ct a) CC ~ ~ d ~ a) C) C) C)~ P. a) (3) a) C)) (P. C(t C) a) C) C) C)) a) a) a) a) -~ a) a) a) ~ C-' a) CCC) a) a) a) P. P. a)C)3C)) C)) a) )3 Ct © C-~ a) P. a) a) a) -) a) a) a) C) ~ 0 `-`. ~ C) C)~ ~ ~-t C)) -~. a). -`F'Pt-'~ C-' a) a) a) a) CC- -1 P. a).:~a)a)~-'a) a) ~) a) ,~ ~` .C)-D3p ~)) a) C-' a) (P. ~4 p.C)p) a) P. a) a)pa)a)a) C)) 3)- a) a) p p a) a) ,C)~ ~ `~ CD ~ ~ -))t~SDc33C~cJ1O~ CD CD ~CD ~SD S I .* H: I ~ CCCCD ,-~ I I -~ I I ~- ~ ?~ - a)~CD ~ S)R) C Ca)~) -._a) ~0 OSS)) ~DC)* C)~ ~ CD~ ~ CD0 ~+) ~_~p 0~ ~ ~C-~ ~ ~w C±C pCstl C-~ Cl) i CDp I ~CD CD ~`co ~ ~-` I CD~' CDCD I ~3a) ~ ID~ a))~ C ~S- C~t~)), `~ 0_SC ~ ()(~ ~ ~_S ~: C~3 S.- ~ ` I ~ I i CD I I ~ 0CD ~ r~ W~ ~-~c:) 00 ~-` W~ ~ ~ CD~-'. ~ CDP (.3-3 IP. IP.a)C3 3)))) 0 0 C) w C) C) C) ci t:'i C) 0 C) 0 IP.-)))03a)a)a)C-~a)C))3)a)C)ta) ~ ~ ~ ~-~3L PAGENO="0061" P ~ ~ ~ a: oH o CO g) ~ Zc1c~ ~ E ~a~o 0 o ~ ~ 0 o0~ ~ E o ~ o~ 0 -. 0 0 co o~o O~ 0 000 0CC 0CC ~ 0' ~ 0 a 0 0 0 0 0 `IC 0 `IC 0 0 0 0 CC CO 0 H 00 IC. It 00 ~ CO0 ~ ft CO CO CO ~-0 CO - Co CO CO CO CO Co ~-~- Co -C Co CO CO CO COO CO CO ~ - ~~1COE1'I CO CO CO CO CO ~ ~ 10 ~ ~ 0 C+ ~3 0 ~ `~ CO'~ CO .~ ,~`d t.~ t'~ CO 0 CO -C Co CO Co CO CO Co CC `~ ~ CO ~ ~ ~~:~:;::: $`ISCE,'I ~ 10 ~ 0 ~ ~ . ~CC ~o H C CO CO CO ~ COCO~Co CO CC CC CO CO COO -~ ~ ~~CO~COCOCO COCoE,'I CO CO CO ~ ~O 10 0 0 ~ ~0 ~ ~ 0 ~1H ..~, C~ Co~Co 3 I~ CO 000 CO CO CO CO CO CO IC~ ,o.3© CO CO CD~ ~ H CO CD ~ ~ IC. 00 ~ `0 CO 0 0 CO 0 0 0 0 0 0 z 0 0 H 1~0 CO -C CO CO CoO ~ 0 CO CC CO CO COCOCOCOCOCOCOCO CO CC CO CO CO-C CO -CCC CO Co ~ CO CO ~ CO CO CO CO CO 21 2 CC Co ~~~COCO-CCOCo~COCO CO CO COO ~ -2 CO 10-210 ~ CO1 000 ~0 CO CO 00 CO CO CC CO Co CO CO CO CO COO CO 10 0 0 0 COO 0 CC CC Co ~C Co CO -C CO Co Co PAGENO="0062" Fixed Price Versus Cost Reimbursement Contracts Notable progress was made during the past 2 fiscal years in the use of fixed-price contracLs with an increase of 5.3 percent in fiscal year 1965 and 2.7 percent in fiscal year 1966. Since fiscal year 1961 the increase has been 21.3 percent. TABLE 13.-Net value o.f military procurement actions, by type of contract pricing provisions,' fiscal years 1952-66 [Dollar amounts in millions] Fiscal year Total net value of actions Type of contract Fixed price Cost reimbursement Dollars Percent of total Dollars Percent of total 1952 $34,028 29,285 10,942 13,661 16,102 17, 997 22 162 22 873 21,182 22,857 25, 780 26, 225 25,328 24, 331 33, 515 827,954 23,358 7,70S 10,366 11,221 11,995 13 389 13 520 12,160 13,243 15, 667 17, 013 18,029 18, 619 26, 551 82.1 79.8 70.4 75.9 69.7 66. 6 60. 4 59. 1 57.4 57.9 60. 8 64.0 7L2 76. 5 79. 2 $6,074 5,027 3,234 3,295 4,881 6,002 8 773 9 353 9,022 9,614 10,113 9, 212 7,299 5,711 6, 964 17.9 20.2 29.6 24.1 30.3 33.4 39. 6 40. 9 42.6 42.1 39. 2 35. 1 28.8 23. 5 20. 8 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 `Includes Army, Navy, and Air Force, hut excludes Armed Services Petroleum Purchasing Agency. Beginning Jan. 1, 1957, data for the Military Petroleum Supply Agency, the successor to ASPPA, are in- cluded. Includes oversea procurement except for Army prior to fiscal year 1958. Excludes intragovern- mental procurement. Excludes procurement actions less than $10,000 in value. Also excludes some Navy letters of intent (on whichpricingprovisions had not been determined) during fiscal year 1952. Source: "Military Prime Contract Awards and Subcontract Payments or Commitments, July 1965- June 1966," Office of the Secretary of Defense. Utilization of Military Stocks Substantial progress was continued in the utilization of existing inventories thus obviating the need for additional procurements. From fiscal year 1958 through fiscal year 1966 the amount of utiliza- tion has steadily risen from $213 to $1,859 million andstill greater improvement is expected in the future as service requirements are matched with inventory stocks through the use of uniform catalog- ing and modern data processing equipment, as item specifications are standardized, and short shelf life items are more efficiently managed. 54 PAGENO="0063" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 55. TABLE 14.-Utilization of DOD assets, fiscal years 1958-66 [In millionsj Utilization of DOD assets Fiscal year- 1958 1959 1960 1961 1962 1963 1964 1965 1966 DOD interservice supply support program (wholesale) Intraservice utilization of military service declared excess property Interservice utilization of military service declared excess property Total $32 117 64 $119 232 134 $141 408 117 $228 616 131 $353 637 122 $420 626 111 $396. 769 160 $357 1799 304 $231 11,240 388 213 485 666 975 1, 112 1, 157 1,325 1,460 1,859 1 Includes reutilization of supply system inventories. Source: Office of Secretary of Defense. Disposition of DOD Surplus Stocks The volume of disposal of surplus DOD personal property has declined about 25 percent from fiscal year 1958 to fiscal year 1966 (table 15~ while the percent of total gross proceeds to the total acquisi- tion cost has declined from 3.38 to 2.90 percent and the percent of proceeds to acquisition cost (other than scrap and salvage) has in- creased almost 1~ percent (table 16). Meanwhile the cost of sales have more than trebled as a percent of gross proceeds from fiscal year 1958 to fiscal year 1966 (table 17). TABLE 15.-Total dispositions 1 (at acquisition cost) of DOD snrplns personal property, fiscal years 1958-66 [In millions} Fiscal year- 1958 1959 1960 1961 1962 1963 1964 1965 1966 Utilized by other Government agencies and MAP Abandoned or destroyed Authorized donations Sales (other than scrap and salvage) Expended to scrap Total dispositions $168 62 221 2,465.8 2, 993. 7 $361 $141 99 118 314 347 2,789.2 2,356.4 4, 576. 8 3,626. 7 $349 44 275 1,771.3 4, 331. 8 $271 50 258 1,236.2 2, 233. 1 $188 74 233 891.6 2, 537. 8 $194 117 273 980 3, 818 $305 129 282 975 2, 983 $604 114 285 2804 2,614 5, 911 8, 141 6, 589 6, 791 4, 061 3, 941 5, 399 4, 769 4, 421 I Exclusive of DOD interservice transfers. 2 Includes sale of $86,000,000 of missile phaseout property. PAGENO="0064" 56 BACKGROUND: ECONOMY IN GOVERN NT-i 967 TABLE 16.-Proceeds from disposal sales of svrplns personal property by the mslstary departments, fiscal years 1958-66 [In millionsi Proceeds from disposal Fiscal year- 1958 1959 I 1960 1961 1962 1963 1964 1965 1966 From sale (other than scrap and salvage) From sale of other property Total Acquisitioncoet (total) Percent of total gross proceeds to total ac- quisition cost Percent of proceeds to acquisition cost (other thanscrapand salvage) $128 55 $140 72 $124 70 $106 61 $87 48 $59 40 $61 42 $55 53 $47 1 52 183 212 194 167 135 99 103 108 99 5,460 7,366 5,983 6,123 3,482 3,446 4,815 3.958 3.418 3.38 * 5.18 2.88 5.2 3.24 5.25 2.71 5.98 3.87 7.02 2.87 6.66 2.14 6.22 2.72 5.64 2.90 6.52 1 Includes proceeds realized from sale of missile phaseout property. TABLE 17.-Costs of disposal sales of snrplvs property by the military departments, fiscal years 1958-66 [In mfflions) Costs of disposal sales of surplus property Fiscal year- 1958 1959 1960 1961 1962 1963 1964 1965 1966 .Jost tor aemultarizaclon Costs for preparation and selling Total $24.0 18.5 820. 5 37.8 826. 6 51.8 $19. 1 65.5 S9. 1 69. 0 89. 5 62. 6 $12. 7 64.6 $13.2 65.1 $13. 5 62. 9 42.5 58.3 212. 0 78.4 194. 0 84.6 167. 0 78.1 135.0 71.2 90. 0 77.3 103. 0 78.3 108.0 76.4 99.0 Gross proceeds Percent of sales costs to gross proceeds 183.0 23.0 27. 5 40.4 50.6 58.0 75.2 75.0 72. 5 77.2 PAGENO="0065" 00 0 rJ) ~ z 0 Cl CO 0 - - Cl CICICICICI Cl 57 77- 601-67-5 PAGENO="0066" Obligations by objects for the fiscal years 1966, 1967, and 1968-Continued 30 Acquisition of capital assets - 32, 406 31 EquIpment 32 Lands and structures 33 investments and loans 40 (Irants and dxcii charges 41 Grants, subsidies, and contrihutions 42 Insurance claims and indemnities 43 Interest and dividends 44 Refunds 90 Other.. 91 Unvouchercd 92 Not distributed otherwise 93 Administrative and nonadminlstrativo expenses - - - 94 Clunigo in selected resources 95 Quarters and subsistence charges 96 Changes in object classification i'roposed for separate transmittal Total obligations imscurrcd Less obligations financed from other sources - Reimbursements from administration budget account * *Reinmbnrsenments from trust funds Receipts from the public Recoveries of prior year obligations I mmterfund transactions w 39, 112 18,739 4,870 0 15. 502 80,384 ~ 27, 171 36,787 ~ 15, 754 (*3 672 0 8.006 0 30 1, 203 -229 0 8. 904 0 <4 248 272 -59,680 -28, 774 -2,492 -25, 872 -1, 136 -1, 412 188,587 i-& Description 1966 actual 1967 estimated 1968 estimated . Adminis- trative budget Trust funds Total Adminis- trativo budget Trust funds Total Admninis- trativo budget Trust funds Total c~i 2, 635 35, 041 35, 743 3, 578 39, 321 30, 135 2,977 16,154 4, 583 11, 670 57(1 89 1, 975 16,724 4, 672 13, 645 15,851 4, 327 15, 565 958 234 2, 386 16,808 4, 561 17, 951 17,575 4, 564 13, 096 1,164 306 1, 506 35, 157 30, 146 65, 303 40, 513 34, 622 75, 135 42, 566 37, 818 17,196 4, 835 12,993 133 4,573 25, 166 156 251 21,769 30, 001 13,149 384 20,706 5, 108 14,520 89 4,042 29, 913 324 343 24,837 35, 021 14,844 432 22,076 5, 272 15,121 08 5,095 31, 515 634 574 1,168 905 2,162 11,045 709 11,844 2,549 54,558 13 154 1, 259 -18 -241 (1) 764 241) -1 -8 13 918 1, `(99 -11) -249 28 361 -1, 011 -18 -221 12,057 (1) 805 -9 -1 3 28 1, 166 -1, 020 -19 -221 12,060 30 458 757 -18 -221) 4,101 (1) 745 -90 -1 4,803 170, 678 -50, 201 35, 942 -2, 373 2(16, 619 -52, 574 195, 355 -56, 473 41, 471 -2, 688 236, 826 -59, 162 109, 294 -56, 124 48, 978 -3, 561 -25, 932 -3, 319 -18, 777 -1,538 -635 -481 -93 --1, 029 (1) -770 -26, 413 -3, 412 -19, 806 -1, 538 - 1, 405 -29, 976 -3, 721 -2(1, 845 -1, 146 -766 -544 -49 -1, 358 -4 -734 -30, 520 -3, 769 -22, 203 -1, 168 -1, 500 -28, 103 -2, 463 -23, 740 -1, 136 -682 -671 -28 -2, 132 -730 Net obligations immeurre(L 120, 477 13, 565 151,1)45 138,883 38, 783 177, 666 143,170 45, 417 10 Personal services and benefits_ 11 Persomsnel compensation: I'ermnanent positions Military personnel i'ositions other than jemnimnemit OIlier persomimsel compensation LE (II SLA'I'I yE B RANC II? 141~ 1 142 1)6 14 ~ii 149 117 2 14 150 157 12:3 (1) 1 124 14 158 130 14 (i) 131 14 PAGENO="0067" Special personal service payments 12 Personnel benefits Personnel benefits, military 13 Benefits for former personnel 20 Contractual services and supplies 21 Travel and transportation, persons 22 Transportation of things - 23 Rent, communications, and utilities 24 Printing and reproduction 25 Other services Services of other agencies Payments to specified accounts 26 Supplies and materials 30 Acquisition of capital assets 31 Equipment - 32 Lands and structures 33 Investments and loans 40 Grants and fixed charges 41 Grants, subsidies, and contributions 42 Insurance claims and indemnities 43 Interest and dividends 44 Refunds 90 Other 91 Unvouchered.~ 92 Not distributed otherwise 93 Administrative and nonadministrative expenses 94 Change in selected resources 95 Quarters and subsistence charges 96 Changes in object clasification Proposeti for separate transmittal Total obligations incurmed__ Less obligations Iiflance(l from other sources Tieimhuiseiiients from adnimnistiative budget account - Reimbursements from trust funds Receipts from the public Comparative transfers Recoveries of prior year obligations Net obligations incurred 9 (1) (1) 9 (1) 10 (1) (1) 10 (1) 10 (1) (1) 11 (1) - 146 1 147 166 1 167 174 1 175 3 2 5 91 7 (1) 37 (1) (1) (1) (1) (1) (1) (1) 3 2 5 91 8 (1) 37 4 2 6 107 8 (1) 39 (1) (1) (1) (1) (1) (1) (1) 4 2 6 107 8 (1) 39 4 3 6 113 7 1 40 (1) (1) (1) (1) (1) (1) (1) 4 3 6 113 7 1 40 8 (1) 8 12 (1) 12 10 (1) 10 5 2 (1) 6 2 10 2 (1) 10 2 10 (1) (1) 10 (I) (1) (1) - (1) (1) (1) (1) (1) (1) (1) (1) (1) - (I) - (1) (`) (1) (1) (1) (1) (1) ~~j:j::: (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (0 - 124 124 132 132 138 138 118 - 6 - 118 6 129 2 129 2 136 2 136 2 - 419 -194 -194 2 421 --194 -194 459 -206 -206 2 461 -206 -206 480 -214 -214 2 482 -214 --214 ci 0 0 ci 0 0 0 0 tn ~yt See footnotes at end of table, p. 89. 225 9 253 2 255 266 2 268 PAGENO="0068" Obligations by objects for the fiscal years 1966, 1967, and 1968-Continued 10 Personal services and benefits 11 Personnel compensation: .Peririanent i)031ti0115 Military l)ersOnliei Positions other than permanent Other personnel COflhlJeiisatiOli Special l)ersOlial service paynients 12 Personnel benefits Personnei benefits, military 13 Benefits for former i)erSonliei 20 Contractnai services and supplies 21 Travel and transportation, persons 22 Transportation of things 23 Rent, communications and utilities 24 I'rinting arid reproduction 25 Other services Services of other agencies Payments to specified accounts.. - 26 Supplies arid materials 30 Acquisitions of capital assets 31 Equipment 32 Lands and structures 33 Investments and loans 40 Grants and fixed charges 41 Grants, subsidies, and contributions 42 Insurance claims and indemnities 43 interest and dividends 44 Refunds Description 1066 actual 1067 estimated 1968 estimated - - Adminis- trative budget Trust funds Total . Adminis- trative budget Trust funds Adminis- Total trative budget Trust funds Total TIlE JUDICIARY 72 72 80 80 85 56 2 (1) 10 4 (1) 56 2 (1) 10 4 (1) 63 1 (1) ii 4 (1) 63 1 (1) ii 4 (1) 67 1 (1) 12 5 (1) 67 1 (1) 12 S (I) 8 8 9 9 10 - 10 4 (I) 2 1 1 (1) 4 (1) 2 1 1 (1) 4 (I) 1 1 1 2~ 4 (1) 2 1 1 1 5 (1) 3 1 1 1 S (I) 3 1 1 1 2 2 2 2 2 2 2 2 2 2 2 w a 0 ci a 0 0 0 0 2 i 1 1_ 1 1 1 (1) 1 (1) 1 (1) 1 (1) 1 (1) 1 (1) (1) (1) 1 90 Other PAGENO="0069" 91 Unvouchered 92 Not distributed otherwise 93 Administrative and nonadministrative expenses 94 Change in selected resources 05 Quarters and subsistence charges 96 Changes in object classification Proposed for separate transmittal Total obligations incurred Less obligation financed from other sources Reimbursements from administrative budget accotmt Reimbursements from trust funds Receipts from the public Comparative transfers Recoveries of prior year obligations Net obligations incurred 10 Personal services and benefits 11 Personnel compensation: Permanent positions Military personnel Positions other than permanent Other personnel compensation Special personal service payments 12 Personnel benefits Personnel benefits, military 13 Benefits for former personnel 20 Contractual services and supplies 21 Travel and transportation, persons 22 Transportation of things 23 Rent, communications, and utilities 24 Printing and reproduction 25 Other services Services of other agencies Payments to specified accounts 26 Supplies and materials 30 Acquisition of capital assets 31 Equipment 32 Lands and structures 33 Investments and loans Sec footnotes at end of tal)lc, p.89. 97 ~s- a (1) C 97 - a 0 - 21 18 0 () 0 -4 7 1 ~ (1) 1 ~ -1 (1) (1) 82 (1) (1) 82 (1) 00 (1) 1 91 (1) 06 (1) 1 (1) (1) (1) (1) (1) (1) 81 (1) 82 EXECUTIVE OFFICE OF TIlE PRESIDENT 00 1 91 18 96 18 20 20 21 - 15 1 (1) (1) 1 15 1 (1) (1) 1 17 1 (1) (1) 1 17 1 (1) (1) 1 18 1 (1) (1) 1 - - - 10 10 10 10 7 1 (1) 1 1 3 5 (1) 1 (1) 1 1 3 5 (1) 1 (1) 1 1 3 5 (1) (1) 1 1 3 5 (1) 1 (1) 1 1 3 1 (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) PAGENO="0070" Obligations by objects for the fiscal years 1966, 1967, and 1968-Continued 11 Personnel compensation: Permanent positions 170 Military personnel Positions other than permanent -- C) C 28 w C) 0 0 ci Description 1966 actual 1967 estimated 1968 estimated Adminis- trativo budget Trust funds Total Adminis- trativo budget Trust funds Total Adminis- Trust trative funds budget Total 40 Grants and fixed charges 41 Grants, subsidies, and contributions 42 Insurance claims and indemnities 43 Interest and (I1VI(len(15 44 Refunds 90 Other 91 Unvouchered 92 Not distributed otherwise 93 Administrative and nonadministrative expenses 94 Change in selected resources 95 Quarters an(1 subsistence charges - 96 Changes in object classification Proposed for separate transmittal Total obligations incurred Less obligations financed from other sources Reimbursements from administrative budget account Reimbursements from trust funds Receipts from the public Comparative transfers Recoveries of prior year obligations Net obligations incurred (1) (1) (1) (I) (1) (1) -~ (1) (I) (1) 28 -1 28 -1 31 -1 31 -1 28 -1 28 -1 -2 (1) (~) -2 (1) (1) -1 -1 -. -1 ------ -1 27 27 30 30 28 FUNDS APPROPRIATED TO THE PRESIDENT 10 Personal services and benefits 275 (1) 275 337 (1) (1) (1) 170 337 368 198 7 (1) (1) 198 212 368 (1) 212 6 PAGENO="0071" Other personnel compensation - Special personal service payments 12 Personnel benefits Personnel benifits, military - 13 Benefits for former personnel 20 Contractual services and supplies 21 Travel and transportation, persons 22 Transportation of things 23 Rent, communications, and utilities 24 Printing and reproduction 25 Other services Services of other agencies Payments to specified accounts 26 Supplies and materials 30 Acquisition of capital assets 31 Equipment 32 Lands and structures 33 Investments and loans -. 40 Grants and fixed charges 41 Grants, subsidies, and contributions 42 Insurance claims and indemnities 43 Interest and dividends 44 Refunds 90 Other 91 llnvouchered 92 Not distributed otherwise 93 Administrative and nonadministrative expenses 94 Change in selected resources 95 Quarters and subsistence charges 96 Changes In object classification Proposed for separate transmittal 76 85 ~ 22 0 1)09 ~ 95 0 1,053 3,369 1,513 ~ (1) 1,856 0 1,992 i,oo6 ~ (1) 76 15 -171 ~ 0 (1) 1 -100 ~ i'd -72 7,505 -782 -229 ~-& (1) -242 q~ -310 11 48 33 (1) (1) 11 48 33 (1) 13 74 39 (1) (1) - (`1 13 74 40 14 87 45 (1) (1) 14 87 45 (1) 1,960 217 2,177 1,522 377 1,899 1,536 411 1,946 80 120 19 5 592 200 1 943 (1) 3 (1) 69 2 143 80 123 19 5 661 202 1 1, 087 77 87 21 5 421 95 1 816 - (1) 5 (1) 101 5 266 77 92 21 5 522 100 1 1, 082 76 79 22 5 507 89 1 757 (1) 7 (1) -.- 102 6 296 2, 365 540 2, 905 2, G38 896 3, 534 2, 270 1, 099 613 38 1,714 540 1,153 38 1,714 418 2 2,218 896 1,314 2 2,218 414 (1) 1,856 1,099 - 1,506~ 10 1,516 1,754 13 1,766 1,977 15 1,426 (1) 80 10 1,426 (1) 80 10 1,676 (1) - 78 13 1,676 (1) 78 13 1,900 (1) 76 15 -214 -214 -152 -152 -171 (1) -199 -16 (1) -199 -16 (1) 1 -172 18 (1) 1 -172 18 (1) 1 -100 -72 5, 892 -625 -147 (1) -237 -242 767 (1) (1) 6,659 -625 -147 (1) -237 -242 6,098 -956 -562 (1) -288 -105 1, 286 7,384 -956 -562 (1) -288 -105 5, 979 -782 -229 (1) -242 -310 1, 526 Total obligations incurred Less obligations financed from oter sources Reimbursements from administrative budget account Reimbursements from trust funds Receipts from the public Comparative transfers Recoveries of prior year obligations See footnotes at end of table, p. 89. Net obligations incurred 5, 266 7,676 6, 033 5,144 1,286 6,428 5,197 1,526 6, 723 PAGENO="0072" 10 Pesonal services and bench ii- 11 Personnel coin penstlion Permanent positions- i'v[ilitary peisonnel.. - - Positions other than )eiii(UI1(Olt - Other personnel commi pensation - Special personal service payiiienls - 12 PeisOflil(1 1)1111(11(5- [ci sontiel bemiclils, iii ii itaiy 13 Bemmelils for former pci somimmel 21) ( ~oiltiUeti1)1l serVices 01(1 5(1 (1)1(S 21 Travel amid traiisport~ttioi( , pci SOIlS 22 Transportation of (hin~s 23 Rent, comnniun eat ions, md mit-il it irs 24 Printing (11(1 reproduction 25 Other services -- Services of oti er agriicies Payments to specilied accounts 26 Supplies and materials 30 Acquisition of capital assets 31 Equipment 32 Lands amid sti uctures 33 Jnvestiiients and louis 0 - 40 Grants and llxed cliarge; 41 (1 rants, subsidies, ii ((1 eoiitiil)mitiOi(S 42 Insurance elaiiiis cud iil(Ieinnities 43 Interest tmi(1 (liVidO(idS -1-1 I[efuiids - Obligations by objects for the fiscal yeas's 1966, 1967, and 1968-Continued Description 11)06 actual 1967 estimated 1968 cstimatc(1 - Adininis- Trust Adminis- Trust trative funds Totill trativo funds `l'otal budget budget Admlnls- trative budget Trust funds Total 1)EPARTMERT OF AG 1t[CIJLT ORE 750 39 789 809 41 85(1 834 43 ~7G (1)() 81) 26 71 (1) 0 Lvi 0 0 z 0 0 0 Lvi e~o C) 591 75 23 2 58 (1) 28 7 1 (1) 3 (1) 019 82 25 2 61 (i) 640 79 23 1 65 (1) 20 7 2 (1) 3 (1) 670 86 25 1 68 (1) 651) 81 25 1 68 (1) 3)) S 2 (1) :1 (1) 6,581 17 6,508 6,826 11) 6,843 6,354 18 6,372 38 373 37 11 424 57 1,771 3,924 2 1 1 (1) 5 5 (1) 3 40 374 38 ii 429 62 1,717 3,927 41 265 38 14 322 61 1,646 4,437 2 1 1 (1) 8 2 (i) 4 43 267 39 14 33(1 63 1,646 4,441 43 252 41 15 272 59 1,826 3,846 2 1 1 (~) 8 2 (I) 3 45 253 42 16 28)) 61 1,826 3,848 3,251 10 3,261 3,781 7 1,788 3,755 8 :1,703 38 6)) 3,152 1 2 8 31) 62 3,16(1 4)) 81 3,660 I 2 5 4)) 8:) ~l,605 44 87 3,624 1 2 5 - 45 89 3,628 4, ms 4, 157 1 4, 157 4,919 (1) 4, 950 4,004 (i) 3, 757 43 356 1 (1) 1 3, 757 43 356 2 4, 41)9 27 424 (1) (1) (1) 4, 409 27 42-1 (1) 3, 654 4(1 371 (1) (1) (i) 3, 654 40 371 (1) PAGENO="0073" 90 other 91 Unvouchered 92 Not distributed otherwise 93 Administrative and nonadministrative expeuses~. 94 Change in selected resources - 95 Quarters and subsistence charges 96 Changes in object classification~ - Proposed for separate transmittal Total obligations incurred Less obligations financed from other sources Reimbursements from adniinistration budget account Reimbursements from trust funds Receipts from the public Comparative transfers~.~. Recoveries of prior year obligations Net obligations incurred 713 (1) 713 -1, 458 (1) -1, 459 207 (1) 1 720 -2 -5 (1) (1) 1 720 -2 -5 1 -1,496 -2 39 (1) (1) 1 -1,496 -2 39 1 313 -2 -105 (1) (1) 1 313 -2 -105 15,452 -8, 207 67 -5 15,518 -8, 212 14,907 -9, 623 66 -10 14,973 -9, 633 15,214 -8, 610 68 -6 207 -2, 587 -5,612 -5 (1) -2, 587 -4 -5, 617 -5 -2, 513 (1) -7, 100 (1) -9 -6 -4 -2, 513 (1) -7, 107 (1) -13 -2, 545 (1) -6, 066 DEPARTMENT OF COMMERCE 7, 245 61 7, 306 9, 284 56 5, 340 6, 604 285 4 289 62 370 4 10 Personal services and benefits 11 Personnel compensation: Permanent positions Military personnel Positions other than permanent Other personnel compensation Special personal service payments 12 Personnel benefits Personnel benefits, military 13 Benefits for former personnel 20 Contractual services and supplies 21 Travel and transportation, persons 22 Transportation of things 23 Rent, communicatons, and utilities 24 Printing and reproduction 25 Other services Services of other agencies Payments to specified accounts 26 Supplies and materials 30 Acquisition of capital assets 31 Equipment - 32 Lands and structures 33 Investments and loans - 375 439 3 15,282 -8,617 C~ -2,545 (1) -6,072 0 ci 6,665 L~i 0 442 258 (1) 104 35 (1) 0 44 -`1 1 457. 16 L:'ll 4 !~ 29 H 14 196 4 p.-~ 214 (1) 31 16 1 23 1 2 1 1 (1) 216 (1) 32 17 1 23 1 236 (1) 69 29 (1) 35 1 3 1 (1) (1) 239 (1) 70 29 (1) 35 1 256 (1) 104 35 (1) 44 1 3 (1) (1) (1) 310 3 312 442 3 445 454 3 10 3 20 13 113 48 83 20 (1) (1) (1) (1) 1 (1) 1 (1) 10 3 20 13 114 48 85 20 11 3 24 13 228 37 104 22 (1) (1) (1) (1) 1 (1) 1 (1) 11 3 25 13 229 37 105 22 16 4 29 14 195 47 126 23 (1) (1) (1) (1) 1 (1) 2 (1) 90 5 95 66 34 100 109 34 142 28 5 34 31 34 64 26 34 10 10 11 11 3 51 51 25 .25 80 60 3 CJ1 See footnotes at end of table, p. 89. PAGENO="0074" Obligations by objects for the fiscal years 1966, 1967, and 1968-Continued Description 1966 actual 1967 estlinated 1968 estimated Adminis- trative budget Trust funds Total Adminis- trativo budget Trust funds Total Adminis- trativo budget Trust funds Total 40 Grants an(l fixed charges 41 Grants, subsidies 111(1 contrIbutions 42 Insurance claims and Indemnities 43 Interest and (liVl(len(ls - 44 Refunds 900ther 91 Unvouchered, administrative 92 Not (tistributed otherwise 93 Administrative an(l Ilona(lmlnlstratlon expenses 94 Change in selected resources 95 Quarters and subsistence charges 96 Changes In object classification Proposed for separate transmittal Total obligations incurred Less obligation financed from other sources Reimbursements from administration budget account Reimbursements from trust funds Receipts from the public Comparative transfers Recoveries of prior year obligations Net obligations Incurred 629 2 631 683 2 685 753 1 755 629 1) 1) 1) - 2 (1) 629 (I) 2 (1) 681 (1) 2 (1) 2 (1) 681 (1) 4 (1) 749 (1) 4 1 (1) 749 (1) 5 (1) -0 -6 1 11 1 -6 (1) -6 (1) -1 (~) 2 -1 (1) 2 1 (1) 1 (I) 1,307 -246 -224 -2 -20 1 -1 14 1, 321 -246 -224 -2 -20 1 -1 1, 564 -412 -385 -2 -22 (1) -4 43 1, 600 -412 -385 -2 -22 (1) -4 1, 756 -501 -471 -2 -29 41 1, 797 -501 -471 -2 -29 1,061 14 1,075 1, 151 43 1,194 1,254 41 1,296 DEPARTMENT OF DEFENSE-MILITARY w 0 fri 0 0 0 fri -1 10 Personal services and benefits 11 Personnel compensation: Permanent positions Military personnel Positions other than permanent Other personnel compensation Special personal service payments 12 Personnel l)enelits Personnel benefits, military 23, 345 23, 345 25, 692 6,882 10,511 114 429 280 572 2, 062 25, 692 6, 882 10,511 114 429 280 572 2, t)02 28,639 7,331 11,764 206 407 313 628 3, 224 28, 039 7, 331 11,764 206 407 313 628 3, 224 7, 857 13, 254 221 387 307 68(1 3, 007 7, 857 13, 254 221 387 307 680 3,007 PAGENO="0075" 1,594 1,594 1,819 1,819 2, 027 2, 027 50, 426 44, 516 10 44, 525 46, 129 20 46, 149 50, 418 7 1, 249 2,871 1,259 135 13, 576 1, 156 24, 269 (1) (1) (1) 4 - 6 1, 249 2,871 1,259 135 13, 576 1, 160 24, 276 1, 271 2,988 1,375 140 14, 629 1, 300 24, 426 (1) (1) (1) 13 7 1, 271 2,988 1,375 140 14, 629 1, 312 24, 433 1, 470 3,476 1,582 172 15, 871 1, 213 26, 634 (1) (1) (1) (1) 7 16, 319 (1) 16, 319 15, 822 (1) 15, 822 - 17, 645 (`) 14, 601 1, 700 18 (1) (1) 14, 601 1, 700 18 14,264 1, 526 32 (1) (1) 14, 264 1, 526 32 15, 991 1, 628 25 (1) 13 Benefits for former personnel 20 Contractual services and supplies 21 Travel and transportation, persons 22 Transportation of things 23 Rent, communications and utilities 24 Printing and reproduction 25 Other services Services of other agencies Payments to specified accounts 26 Supplies and materials 30 Acquisition of capital assets 31 Equipment 32 Lands and structures 33 Investments and loans 40 Grants and fixed charges - 41 Grants, subsidies, and contributions 42 Insurance claims and indemnities 43 Interest and dividends 44 Refunds 90 Other 91 Unvouchered 92 Not distributed otherwise 93 Administrative and nonadministrative expenses 94 Change in selected resources 95 Quarters and subsistence charges 96 Changes in object classification Proposed for separate transmittal Total obligations incurred Less obligations financed from other sources Reimbursements from administrative budget account Reimbursements from trust funds Receipts from the public Comparative transfers Recoveries of prior year obligations Net obligations incurred 164 164 179 179 29 48 87 -1 29 48 87 -1 32 59 88 -1 32 59 88 -1 41 72 115 -1 -_~______ 50 50 10,813 10,813 1,295 1,470 3, 476 1,582 172 w 15, 871 ~. 1,214 0 17,645 0 15, 091 1,628 ~ 25 228 ~i ___ ___ ___ ___ ___ ___ ___ ___ 0 41 0 72 ~ 1,295 28 125 0 -2 0 (1) -224 ~ ________ 1, 369 84, 393 10 84, 403 98, 635 20 98, 655 98, 224 7 98,232 -22,557 -22, 557 -25, 143 -25, 143 -23, 378 -23, 378 -20,695 * -649 -2,034 CC ______ C) 7 74,853 ---1 228 10 10 26 18 26 18 28 125 - - 255 255 -45 -45 -2 (1) -215 (1) -215 (1) -216 11, 030 (1) -216 11, 030 (1) -224 1, 369 61,836 -19 283 -1, 251 -1, 806 -19 283 -1,251 -1, 806 -22 062 -1, 086 -1,917 -22 062 -1, 086 -1,917 -90 695 -649 -2, 034 - -216 -216 -78 -78 ~1Ô 61,846 73,493 20 73,512 74,846 See footnotes at end of table, p. 89. PAGENO="0076" Obligations by objects for the fiscal years 1966, 1967, and 1968-Continued Description . 1966 actual 1967 estimated 1968 estimated Adininis- tratlvo budget Trust funds Total Admiuls- trativo budget Trust funds Total Adininis- trativo budget Trust funds Total DEPARTMENT OF DEFENSE-CIVIL 00 375 6 381 390 10 Personal services and benefits ii Personnel compensation: Permanent 1)OSitions Military personnel Positions other than permanent Other personnel compensation Special I)erSoual service payments 12 Personnel benefits Personnel benefits, military 13 Benefits for former personnel 20 Contractual services and supplies 21 Travel and transportation, persons 22 Transportation of things 23 Rent, communications and utilities 24 l'rinting and reproduction 25 Other services Services of other agencies Payments to speciiied accounts 26 Suonlies and materials 3l~ 19 19 22 (1) 2 6 5 (1) (1) (1) (I) 396 315 11) 20 (1) 404 323 2(1 18 (1) 24 (1) 7 6 (1) (I) (1) (1) 328 20 18 (1) 25 (1) 333 4 21 18 25 (1) 25 3 288 8 206 72 6 (1) (I (1 (1) 616 9 625 719 8 727 687 6 - 693 25 12 (I) (1) (1) (1) 6 2 24 12 379 8 220 70 294 8 208 73 w C) 0 410 3:19 0 4 0 22 ~ 18 0 (1) 26 0 26 0 12 ~ 2 357 ~i 8 214 30 Acquisition of capital assets 31 Equipment 32 Lands and structures 33 Investments and loans 40 Grants and fixed charges 41 Grants, subsidies and contributions 42 Insurance claims an(i indesiiiiltles 43 Interest and dividends 44 Refunds 840 (1) (1) (1) (1) (1) 15 24 4 12 383 9 223 71 855 25 4 12 354 212 69 783 (1) (1) (1) (1) 3 (1) 23 807 847 20 31 809 (1) 15 32 823 31 749 4 (1) 23 31 772 4 30 813 4 (1) - 20 57 1 57 63 (1) 63 80 (1) 80 43 2 12 (1) (1) (1) 1 43 2 12 1 40 11 12 (I) (1) - 40 ii 12 (I) 58 10 12 (0 (1) (I) 58 11) 12 (I) PAGENO="0077" 39 Other -9 91 Unvouchered, administrative 92 Not distributed otherwise 93 Administrative and nonadministratjve expenses 94 Change in selected resources 95 Quarters and subsistence charges.... 96 Changes in object classification Proposed for separate transmittal Total obligations incurred Less obligations financed from other sources Reimbursements from administrative budget accounts Reimbursements from trust funds Receipts from the public Comparative transfers Recoveries of prior year obligations Net obligations incurred Personal services and benefits Personnel colilpensation: Permanent positions Military personnel Positions other than permanent other personnel compensation Special personal service payments 12 Personnel benefits Personnel benefits, military 13 Benefits for forsner personnel 20 Contractual services and supplies 21 Travel and transportation, persons 22 Transportation of things 23 Bent, communications and utilities 24 Printing and reproduction ~ 25 Other services Services of other agencies Payments to specified accounts 26 Supplies and materials 30 Acquisition of capital assets 31 Equipment 32 Lands 011(1 structures 33 Investments and loans w 0 0 0 L:rj 0 0 0 0 0 C) (I) -9 -3 (1) -3 2 (1) 2 9 -1 (1) (1) 9 -1 ._4 (1) 2 (1) -1 2 3 -1 3 (1) -1 1,878 -518 30 (1) 1,909 -518 1,953 -539 38 (1) 1,991 -539 2,020 -532 33 (1) 2,054 -532 -385 -134 1 (1) (1) -385 (1) -134 1 -399 -142 3 (1) -399 (1) -142 3 -385 -147 (1) -385 (1) -147 10 11 1, 361 30 1, 391 1, 415 38 1, 452 DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE 435 350 785 1,488 525 33 1,521 366 891 578 377 955 365 16 10 ~ 36 4 272 7 50 (1) 21 637 23 61 4 57 4 440 19 13 . 43 5 317 3 20 ... 25 757 22 33 ~ 68 5 484 21 14 48 6 333 2 14 1~ 27 817 23 28 74 6 487 113 599 632 223 855 727 243 970 22 5 20 7 279 54 48 52 .6 2 35 7 49 8 6 28 7 55 14 328 62 48 58 30 9 24 9 352 -76 55 77 5 2 38 5 157 10 5 . . 35 11 61 14 510 86 55 83 . 35 10 - 27 . 10 445 51) 58 83 . 6 2 40 . 5 174 10 5 . . 41 12 67 . 15 620 69 18 89 334 8 341 356 173 529 421 35 457 27 24. 283 7 . 1 .. 34 25 . 283 .29 53 274- 3 20 150. 33 73 424 .. 37 84 301 : 2. 33 39 117 301 See footnotes at enml of table, p. 89. PAGENO="0078" Obligations by objects for the fiscal years 1966, 1967, and 1968-Continued Description 1066 actual 1067 estimated 1068 estimated Adminis- trative budget Trust funds Total Adminis- trative budget Trust funds Total Adininis- trative budget Trust funds Total 40 Grants and fixed charges 41 Grants, subsidies, and contributions 42 Insurance claims and indemnities 43 Interest and dividends - 44 Roftmds - 00 Other 01 Unvouchered 92 Not distributed otherwise -. 93 Administrative and nonadministrative expenses 94 (Thange in selected resources - 05 Quarters and subsistence charges 00 Changes in object classification Proposed for separate transmittal - Total obligations incurred - Less obligations financed from other sources Reimbursements from administrative budget account Reimbursements from trust funds Receipts from the public Comparative transfers Recoveries for prior year obligations Net obligations incurred 8, 677 19, 704 28, 471 10, 670 24, 080 34, 750 11,813 25, 653 8, 546 131 (1) 19, 704 8, 546 10, 925 10, 280 388 2 (1) 24, 080 10, 280 24, 468 2 11, 379 4 (1) 25, 653 12 612 623 618 678 1,206 4,733 (1) 13 -1 612 (1) 012 13 -1 (1) (1) 192 -2 427 678 (1) 678 102 -2 427 (1) (1) 160 -2 179 593 4, 140 9, 944 -244 20,877 -86 30, 820 -330 12,810 -385 25, 521 -36 38, 331 -422 13,918 -507 -240 31,042 -5 -159 -7 -45 (1) -86 (i) -159 -93 -45 M (1) -224 -37 -124 -1 (1) -36 73 -124 -1 (1) -11 -256 --~~ 037 9, 609 20, 701 30, 400 12, 425 25, 484 37,009 13,410 1)EPARTMENT OF ROUSING AND URBAN 1)EVELOPMENT a _____ ______ _____ ______ 0 37,507 11471 26,032 ~ 5,071 0 ______ _____ _____ C (1) 593 0 _________ _________ ___________ IIIIIZIIZ~!~ ~ 4,319 !»=~ 44,960 0 -512 0 ______ ______ ______ ______ -4 -240 t'l -16 ~d -256 ~ _____ ____ _____ _____ _____ :::::::::: 44,44 ~ cm 144 153 113 132 132 139 139 1 1 1 1 1 1 1 1 (1) (1) (1) (I) 10 Personal services and benefits 11 Personnel compensation: Permanent positions Military personnel iZ'ositions other than permanent.. Otherpersonnelcomnpensation Special personal service payments 129 129 144 118 (11 118 1 (1) PAGENO="0079" 20 Contractualservicesandsupplies 21 Travel anti transportation of persons 22 Transportation of things 23 Rent, communications, and utilities 24 Printing and reproduction 25 Otherservices Servicesofotheragencies Payments to specified accounts 26 Supplies and materials 30 Acquisitionofcapitalasscts 31 Equipment 32 Lands and struct~ures 33 Investmentsandloans 40 Grants and fixed charges 41 Grants, subsidies and contributions 42 Insurance claims and indemnities 43 Interest and dividends 44 Refunds 90 Other 91 TJnvouchered 92 Not distributed otherwise 93 Administrative and nonadministrative expenses 94 Change in selected resources 95 Quarters and subsistence charges 96 Changes irs object classification Proposed for separate transmittal Total obligations incurred Less obligations financed from other sources Reimbursements from administrative budget account Reimbursements from trust funds Receipts from the public Comparative transfers Recoveries of prior year obligations 8 (1) 12 1 ~ 64 4 0 80 ~ 1 Q 5,872 739 5,131 igi a 3007 0 1,705 0 (1) 877 42g 340 0 189 0 22 9,543 !~ -8,054 ,-~ -511 -1,428 )-~ -5,762 (0 C) -353 ...1 12 Personiselbenefits 9 9 10 10 11 11 Personnel benefits, military 13 Benefits for former personnel 85 19 104 104 28 132 137 34 171 8 (1) 10 1 12 2 51 1 13 6 8 (1) 10 1 25 2 57 8 (1) 11 1 18 2 62 1 22 (1) 6 8 (1) 11 1 40 3 68 1 8 (1) 12 1 37 4 74 1 27 (1) 6 4,330 1,804 6,133 5,153 1,719 6,872 4,535 1,337 1 710 3, 618 1, 804 1 710 5, 422 2 736 4, 415 1, 719 2 736 6, 134 2 739 3, 794 1, 337 1,426 129 1,555 1,653 400 2,053 2,062 945 1,083 (1) 211 132 129 1,083 (1) 340 132 1,285 (1) 279 89 296 104 1,285 (1) 575 193 1,705 (1) 273 83 604 341 198 241 440 527 -10 517 430 -90 35 164 241 35 405 204 323 -10 204 313 189 218 22 -90 6, 169 -4, 750 2, 192 -463 8, 361 -5, 213 7, 581 -6, 104 2, 137 -714 9, 718 -6,818 7,317 -6, 574 2,226 -1,480 -284 -1, 733 -2,412 -320 -154 -309 -438 -1, 733 -2,722 -320 -641 -2, 107 -3, 081 (1) -275 -103 -2 -609 -745 -2, 109 -3, 690 (1) -275 -335 -1, 417 -4, 470 -353 -177 -11 -1,292 Net obligations incurred 1,419 1,729 3, 148 1,477 1,423 2,900 743 746 1,489 See footnotes at end of table, p. 89. PAGENO="0080" Obligations by objects for the fiscal years 1966, 1967, and 1968-Continued 10 Personal services and benefits 11 Personnel compensation: Permanent l)OsitiOllS Military personnel l'ositions other than pernmanent Other personnel compensation Special personal servico payments 12 Personnel bemmeilts Persommel benelits, military 13 rlemments for former persommnol 20 Contractual services and supplies 21 Travel 011(1 transportation, persons 22 TransportatIon of things 23 Remit, comnmummmcations, and utilities 24 Printing 111(1 reproductiomi 25 Other services Services of other agencies Paynments to speeilied accoummts 20 Supplies amid materials 30 Acquisition of capital assets 31 Equipment 32 Lands and structures 33 Investments and loans 48 Grants and fixed charges 41 Giants, subsidies, and contributions 42 Insurance claims and indemnities 43 Interest and dividends 44 Refummds 1066 actual Description Admninis- Trust trative funds Total bu(lget 1067 estimated 1968 estimated Adniiuis- trative budget Trust funds Total Adminis- Trust trativo funds bu(lget Total DEPARTMENT OF TIlE INTERIOR 1S47 10 558 1107 11 608 609 12 621 w 0 0 L~ 0 0 0 0 C) 457 38 14 1 38 (1) 8 1 (`) 1 465 39 14 1 38 (1) 497 43 14 1 43 (1) 9 1 1 506 44 15 1 43 (1) 506 43 14 1 45 (1) 9 1 (1) 1 515 45 14 1 46 (1) 361 14 375 409 10 428 431 19 451 28 12 26 6 114 24 (1) 152 (1) (1) 5 (1) 10 (i) 2 29 13 20 6 124 24 (1) 154 32 14 28 6 148 20 (1) 154 (1) (i) 1 (1) 15 (1) 2 32 15 21) 6 163 27 (1) 156 35 15 30 7 106 28 (1) 15(1 (1) (I) 1 (1) 15 (1) - 2 :9; 16 31 7 181 28 (1) 152 435 2 438 514 - 3 517 521 7 528 51 363 22 1 2 (1) 51 365 22 60 42:1 32 1 2 61 425 32 81 411 29 1 6 82 417 29 331 76 406 500 66 566 564 57 620 - 319 3 9 (I) Q) 76 310 3 9 76 487 1 ii - (1) ~) ~ 487 1 ii 518 2 is (I) (1) 57 518 2 15 57 -14 -6 -20 87 (1) 87 133 (1) 133 9) Other PAGENO="0081" 91 Unvouchered, administrative 92 Not distributed other~vise__ 93 Administrative and nonadministrative expenses 94 Change in selected resources -1 95 Quarters and subsistence charges 96 Changes in object classification~ Proposed for separate transmittal Total obligations incurred~.... - ~ Less obligations financed from other sources. Reimbursements from administrative budget account Reimbursements from trust funds..._ ~ Receipts from the public Comparative transfers Recoveries of prior year obligations. Net obligations incurred 1,469 (i) (1) (1) (1) (1) 1 -6 (1) -6 3 -4 -4 (1) -6 -4 -10 -4 -5 92 (1) (1) (1) 1 3 -4 -5 92 (1) (1) -4 133 (1) (I) 1,661 -191 96 (1) 1,757 -192 2,107 -341 99 2,207 -341 2,258 -340 94 -103 -79 -3 - (1) (1) -103 -79 -4 -108 -3 -230 (1) -108 -3 -230 (1) -l06 -3 -231 96 1,566 1,766 99 DEPARTMENT OF JUSTICE 1,865 f 1,918 94 329 1 330 353 (1) 353 362 (1) 10 Personal services and benefits 11 Personnel compensation: Permanent positions Military personnel Positions other than permanent Other personnel compensation Special personal service payments 12 Personnel benefits Personnel benefits, military 13 Benefits for former personnel 20 Contractual services and supplies 21 Travel and transportation, persons 22 Transportation of things 23 Rent, communications and utilities 24 Printing and reproduction 25 Other services Services of other agencies Payments to specified accounts 26 Supplies and materials 30 Acquisition of capital assets 31 Equipment 32 Lands and structures 33 Investments and loans 280 1 281 300 (1) 300 306 (1) 2 18 (1) (`) 2 18 2 20 (1) 2 20 2 21 (1) 7 22 (1) (1) 7 22 7 24 (1) 7 24 7 26 (1) (1) -4 133 2,353 -340 C~i -106 ~ -3 ~ -231 o ci 2,013 t~J 0 ______ C 362 306 21 7 6) 26 --i! :~ 93 161 254 95 16 110 99 71 2 11 2 11 2 49 (1) (1) (1) (1) 159 (1) 2 17 2 11 2 170 2 51 16 3 11 3 11 1 50 (1) (1) (1) 13 (1) 2 16 3 11 3 25 1 (1) 52 18 3 11 3 11 2 52 (1) (1) (1) 69 (1) 2 - 14 (1) 14 21 (1) 21 26 (1) 26 11 (1) 11 11 (1) 11 11 (1) 3 3 10 10 16 (1) (1) 11 16 Sec footnotes at end of table, p. 89. PAGENO="0082" Obligations by objects for the fiscal years 1966, 1967, and 1968-Continued 10 Personal services and benefits 11 Personnel compensation: Permanent positions Military I)ersoiinel Positions other than permanent l)escrlptlon 1966 actual 1967 esthnated 1968 estiniatcd Adininis- trative budget Trust funds Total Adminis- trativo budget - Trust funds Total Adsniois- trative budget Trust funds Total 40 Grants and fixed charges 41 Grants, sui)si(iies alI(i contributions 42 Insnraiice claims and iiideiiiiiities 43 Interst toil divi(iends 44 Refunds 90 Other 91 Unvonchered nitnittistrative 92 Not distributed otherwise 93 Admnnstrative and itonadininistrative expenses 94 Change in selected resources 95 Quarters alI(i sni)sistence charges 96 Changes hi object classification Proposed for separate transniittal Total obligations incurred Less obligations financed from other sources Reimbursements from administrative budget account Reisnbursements from trust funds Receipts from the public Comnparativetransfers Recoveries of prior year obligations Net obligations incurred 1 (I) 1 8 (1) 8 14 (I) 1 (0 (1) (1) 1 (I) - (1) 8 (I) (1) (I) 8 (1) (1) 13 (1) (1) (I) 13 (1) (1) 17 17 -6 -6 35 35 (I) 17 -1 (1) 17 -1 (1) -9 -1 3 (1) -9 -1 3 (1) 4 -1 31 (1) 4 -1 31 455 -63 162 -9 616 -71 471 -59 16 -13 487 -72 535 -59 71 -1) 607 -68 -59 - -4 -6 -3 -59 -6 -6 -55 (1) -4 -10 -2 -55 -10 -6 -55 (1) -4 ~7 -2 -55 7 -6 392 153 545 412 3 415 476 62 538 DEPARTMENT OF LABOR 14 a 0 ci a 0 0 C Co -1 184 8 192 156 8 164 161 78 7 85 86 7 93 92 7 99 1 (1) 1 1 (1) 1 1 (1) 1 8 169 PAGENO="0083" Other personnel compensation Special personal service payments - 12 Personnelbenefits Personnelbenefits,military 13 Benefits for former personnel 20 Contractualservices and supplies 21 Travelandtransportation,persons 22 Transportationof things 23 Rent, communications, and utilities 24 Printingandreproduction 25 Otherservices Services of other agencies Payinc~its to specified accounts 26 Supplies and materials - 30 Acquisition ofcapitalassets 31 Equipment 32 Lands and structures 33 Investments and loans 40 Grants and fixed charges 41 Grants, subsidies, and contributions 42 Insurance claims and indemnities 43 Interest and dividends 44 Refunds 90 Other 91 Unvouchered 92 Not distributed otherwise 93 Administrative and nonadministrative expenses 94 Change in selected resources 95 Quarters and subsistence charges 96 Changes in object classification Proposed for separate transmittal Total obligations incurred Less obligations financed from other sources Reimbursements from administrative budget accounts Reimbursements from trust funds Receipts from the public Comparative transfers Recoveries of prior year obligations Net obligations incurred (1) 1 1 (1) (1) (1) 1 6 7 1 (1) 1 (1) (1) 7 1 8 60 60 (1) 6 98 98 - 61 1 (1) 7 61 551 181 73 54 20 74 62 20 82 (1) 6 5 (1) (1) 1 6 (1) 6 (1) 6 5 (1) (1) 1 7 (1) 6 7 (1) 5 3 (1) (1) (1) 1 7 (1) 6 3 (1) 3 6 34 1 (1) 1 (1) 16 (1) 3 7 35 16 1 (1) 3 7 32 2 (1) (1) (1) (1) 18 7 32 18 2 6 38 2 (1) (1) (1) 18 7 38 18 2 211 (1) 211 295 100 395 305 (1) 306 1 - 210 (1) 1 210 1 295 (1) 100 1 395 1 304 (1) 1 304 477 2, 523 3,000 480 2,428 2,908 503 2,414 2,917 - 402 75 536 1,974 13 938 2,049 13 403 77 605 1,810 13 1,008 1,887 13 411 93 638 1,764 12 1,049 1,857 12 (1) 122 122 12 99 111 92 92 (1) 122 (1) 122 (1) (1) 12 99 99 (1) 12 92 92 927 -276 2,671 (1) 3,598 -276 997 -370 2,655 (1) 3,652 -371 1,031 -385 2,535 (`) 3,565 -385 -43 -229 (1) -1 -3 (1) -43 -230 (1) -1 -3 -51 -318 (1) (`) -1 (1) -51 -318 (1) (1) -1 -53 -53 -328 (1) -328 -3 -3 a C a C C 0 C Co 652 2,670 3,322 627 2, 655 3,281 646 2,534 3,180 See footnotes at end of table, p. 89. PAGENO="0084" Obligations by objects for the fiscal years 1966, 1967, and 1968-Continued 10 Personal services au(1 benefits 11 Personnel conipensat.ioii: Permanent positions Military l)e1SOIii5Cl Positions other thaii pennanent Other personnel coinpeusatioii Special personal service payments 12 Pet sonnel benefits Personnel benefits, military 13 Benefits for former personnel 20 Contractual services and supplies 21 Travel and transportation, persons 22 Transportation of things 23 Rent, communications 1.11(1 utilities - 24 Printing amm(l reproduction 25 Other services Services of other agencies Payments to specified accoumits 26 Supplies and materials 30 Acquisition of capital assets 31 Equipment 32 Lands and structures 33 Investments and baits 48 Grants and fixed charges 41 Grants, subsidies, and contributions 42 Insurance clainis an(l indemnities 43 Interest and dividends 44 Refunds 1)escription 1066 actual 1067 estimated 1968 estimated Adminis- trativo budget Trust funds Total Adminis- trativo budget Trust funds Total Adminis- trative budget Trust funds POST OFFICE 1)EPARTMENT 4, 519 4, Sf9 5, ((50 5, 268 w Ci Total 5,268 Ci 0 1 255 0 3() 0 858 *~ 184 7,~ 102 152 :~ 114 C~ Cs 3, 045 822 329 323 3, ((45 822 329 323 3, 359 974 348 369 3, 359 974 348 369 3, 492 1,017 365 395 3, 492 1,017 365 395 1,094 1,094 1,159 1,159 1,255 28 776 151 7~ 48 2 82 28 776 151 7 48 2 82 28 820 165 7 52 2 85 28 821) 165 7 52 2 85 3() 858 184 9_ 71 2 102 115 115 155 155 266 266 94 21 94 21 124 31 124 31 152 114 - 12 12 12 12 13 13 13 14 -- 14 PAGENO="0085" 01) Other 91 Unvouchered 92 Not distributed otherwise 93 Administrative and nonadministrative expenses 94 Change in selected resources 95 Quarters and subsistence charges 06 Changes in object classification Proposed for separate transmittal Total obligations incurred Less obligations financed from other sources Reimbursements from administrative budget account Reimbursements from trust funds Receipts from the public Comparative transfers Recoveries of prior year obligations Net ol)ligations incurred 5,740 -4,793 5,740 -4,793 6,378 -5,151 6,378 -5,151 6,804 -6,153 6,804 -6,153 -218 -4,574 -1 -218 -4,574 ,-l -238 -4,912 -238 -4,912 -257 -5,896 -257 -5,896 947 947 DEPARTMENT OF STATE 1,227 210 (1) 1,227 211 651 226 651 10 Personal services and benefits 11 Personnel compensation: Permanent positions Military personnel Positions other than permanent Other personnel cosupensation Special personal service payments 12 Personnel benefits Personnel benefits, military 13 Benefits for former personnel 20 Contractual services and supplies 21 Travel and transportation, persons 22 Transportation of things 23 Rent, communications and utilities 24 Printing and reproduction 25 Other services Services of other agencies Payments to specified accounts 26 Supplies and material; 30 Acquisition of capital assets 31 Equipment 32 Lands and strnctures 33 Investments and loans 1 227 234 1 174 (1) 174 187 (1) 188 194 1 194 2 (1) 2 2 2 2 7 7 7 7 8 2 2 2 2 2 8 25 (1) 25 27 (1) 28 29 (1) 2 29 235 w 0 ci L~,1 0 0 0 C) 130 (1) 130 139 (1) 139 143 (1) 140 21 16 24 1 28 24 3 12 (1) (1) (1) (1) (1) (1) 21 16 24 1 28 24 3 12 21 17 27 2 30 26 3 13 (1) (1) (1) (1) (1) (1) 21 18 27 2 30 26 3 13 21 18 29 2 30 24 3 14 (1) (1) (1) (1) (1) (1) 21 18 29 2 30 24 3 14 52 (1) 52 59 (1) 59 35 (1) 35 11 41 (1) 11 41 12 47 (1) 12 47 12 23 (1) 12 23 See footnotes at en d of table, p. 89. PAGENO="0086" Obligations by objects for the fiscal years 1966, 1967, and 1968-Continued Description 1066 actual 1067 estimated 1008 estimated Adminis- trative budget Trust funds Total Adminis- trative budget Trust funds Total Adniinis- trative budget Trust funds Total 40 Grants and fixed charges 41 Grants, subsidies, and contributions 42 Insurance claims and lndesnnlties 43 Interest and dividends 44 Refunds 00 Other 91 Unvouchered 92 Not distributed otherwise 03 Administrative and nonadmninistrativo expenses 04 Change in selected resources 95 Quarters and subsistence charges 06 Changes in object classification Proposed for separate transmittal Total obligations Incurred Less obligations financed from other sources Reimbursements from administrative budget account Reimbursements from trust funds Receipts from the public Comparative transfers Recoveries of prior year obligations Net obligations Incurred 140 0 158 148 12 160 157 13 170 140 (1) (1) 0 (1) 140 0 (1) 148 (1) (1) 11 (1) 148 11 (1) 157 (1) (`) 12 (1) 157 12 (1) 1 1 5 5 2 2 (`) -1 2 (1) -1 2 (1) 3 2 (1) 3 2 (1) -. 2 (1) ---- -- ----- 543 -130 10 (1) 553 -130 578 -165 12 590 -165 509 -152 14 582 -152 -128 -2 (1) (1) -128 -2 (1) -142 -6 -18 -142 -6 -18 -148 -4 -148 -4 .~_ 413 10 422 413 12 425 417 14 430 DEPARTMENT OF TRANSPORTATION 2 Go w C) C) fri C) 0 0 C) 0 H (C C) 10 Personal services an(l benefits 11 Personnel compensation: Permanent positions Military personnel Positions other than permanent Other personnel compensation Special personal service payments 12 Personnel benefits Personnel benefits, military 762 42 803 817 478 133 23 38 43 46 38 (1) 3 862 516 133 24 41 43 842 498 15~ 42 47 41 (t) 4 889 538 151 31 46 45 515 154 31 43 42 (1) 4 556 154 32 47 PAGENO="0087" 13 Benefits for former personnel 41 41 45 20 Contractual services and supplies 21 Travel and transportation, persons 22 Transportation of things 23 Rent, communications, and utilities 24 Printing and reproduction 25 Other services Services of other agencies Payments to specified accounts 26 Supplies and materials 30 AcquisItion of capital assets 31 Equipment 32 Lands and structures 33 Investments and loans 40 Grants and fixed charges 41 Grants, subsidies, and contributions 42 Insurance claims and indemnities 43 Interest and dividends 44 Refunds 90 Other 91 tJnvouchered, administrative 92 Not distributed otherwise 93 Administrative and nonadministrative expenses 94 Change in selected resources 95 Quarters and subsistence charges 96 Changes in object classification Proposed for separate transmittal Total obligations Incurred Less obligations financed from other sources Reimbursements from administrative budget account Reimbursements from trust funds Receipts from the public Comparative transfers Recoveries of prior year obligations Net obligations Incurred 26 3 3 3 (1) 11 4 15 11 4 4, 402 4, 402 561 512 48 48 38 21 65 ~ w 214 52 o (1) 120 ~ 269 0 ___- 174 !z~ 95 ~ ________ 4,630 ~ ___* 0 4,609 0 * (1) * 5 0 * 15~* 343 0 - -i~ -13 0 -1 -1 - ~0 ~1 6,642 ~ -131 ~ T~ -~ -~ -25 (1) -25 :- 1,486~ ~025~ 6,511 ~ 5, 051 -26 45 443 18 461 636 23 659 485 27 16 54 2 205 30 (1) 109 3 3 3 (1) 5 1 3 30 19 58 2 210 31 (1) 112 31 17 57 3 373 45 (1) 110 3 3 3 (1) 8 1 4 34 20 61 3 382 46 (1) 114 35 17 61 3 202 51 (1) 116 157 16 173 304 18 322 254 76 80 9 7 85 87 218 86 10 7 228 94 163 91 146 4, 001 4, 147 194 3,386 3,579 2,271 140 1 5 4,001 (1) 1 4,140 1 5 188 1 5 3,386 3,574 1 5 207 (1) 5 15 471 (1) 47 -15 (1) -15 -218 48 -1 (1) 48 -1 -14 -1 (1) -14 (1) (1) See footnotes at end of table, p. 89. 1, 554 -130 4, 077 -16 5, 631 -147 1,935 -132 3, 472 -20 5, 407 -152 1, 591 -105 -95 -1 -24 -10 (1) -16 (1) (1) (1) -111 -1 -24 -10 (1) -97 -1 -25 -9 -20 (1) -11~ -25 -9 1, 423 4, 061 5, 484 1, 803 3, 452 5,255 PAGENO="0088" 10 Personal services and benefits- ii (~NO~lfl(~l COOhI)e15S~ItiOn I `(ruiatI(nt 15)51110115- ri ilitary )ersonnel.___.-~. - I OSiIiOLIS other th~iii p(rlnanent Other personnel (`o111j)eflSRtlOII Specaal personil service )ty1I1ents~. .- 12 P(lsonhu(l h(Ilefits ._ `crsonntl 1)(11(fits, Inilitiry 1:1 boIls for former l)(rso1111(l 2(1 ( otitrctiiil services 01(1 5Ul)I)lieS -. - - - - - 21 Iravel 05(1 transport ation, persons - - 22 Transportation of things.. 23 Rent, communications and utilities 24 Printing and reproduction 25 Other services Services of other agencies Payments to specified accoLintS 26 Supplies and materials - 70 Acquisition of capital assets ii Equipment 12 Lsn(ls sn(1 structures 33 1n~es1inents and loans 40 Orants and fixed charges - 41 (Jrants, subsidies, and contributions 42 Insurance claims and indemnities - 43 Interest and (lividends - 44 Refunds i)eseription Obligations by objects for the fiscal years 1966, 1967, and 1968-Contiflhled 1966 actual 1967 estimated 1068 estimated TREASURY DEPARTMENT C/D Adininis- Trust Adinlnis- `I'rust Admiuls- Trust trativo funds Total trativo funds Total trativo funds Total ~- budget budget budget 0 735 2 738 708 3 8(11 815 3 818 hi 0 0 yI 0 (111) 21 24 1 5(1 2 (1) (1) (1) (1) 641 21 24 I 51 685 3(1 26 1 56 2 (1) (1) (1) (1) 688 3(1 26 1 50 708 24 24 I 58 2 (`) (`) (1) (1) 711) 2-I 21 1 51) 153 1 153 168 1 168 11(5 21 6 45 10 i:i 32 18 (1) (1) (1) 1 (i) 21 6 45 16 14 32 18 2:1 7 46 16 13 42 20 (i) (1) (1) 1 (1) 2:1 7 46 16 14 42 20 21 7 54 17 14 28 20 (1) (1) (1) 1 (1) 25 7 54 17 15 28 21) 27 (1) 27 22 (1) 22 22 (1) 27 (1) (1) (1) 27 (1) (1) 21 (1) (1) 21 (1) 20 (1) 1 (`) - --_ (1) 12,228 23 12,251 13,580 36 13,616 14,212 35 52 44 12, 132 20 3 1 ~L__ 71 47 12, 132 1 -~ 52 10 13, 509 ~ 28 7 (1) 1 80 20 13, 509 1 52 7 14, 153 25 9 1 77 16 14, 183 1 ~ 166 0 0 151 hi 22 ~ H 20 14,247 ~ 90 Other - PAGENO="0089" 91 Unvoucliered 92 Not distributed otherwise 93 Administratise and nonadministrative expenses 94 Change in selected resources 95 Quarters and subsistence charges 96 Changesinohjectclassiflcation Proposed for separate transmittal Total obligations incurred Less obligations financed from other sources Reimbursements from administrative budget account Reimbursements from trust funds Receipts from the public Comparative transfers Recoveries of prior year obligations Net obligations incurred - 13,081 10 Personal services and benefits 11 Personnel compensation: Permanent positions Military personnel Positions other than llermnanent Other l)ersOnnel compensation Special personal service payments 12 1'm~rsonnel benefits Personnel benefits, immilitary 13 Benefits for former personnel 20 Coistractual services and supplies 21 Travel and transportation, persons 22 Transportation of things 23 Rent, communications, and utilities 24 Printing and reproduction 25 Other services Services of other agencies Payments to sPecified accounts 26 Supplies and materials 30 Acquisition of capital assets. 31 Equipment__~_ 32 Lands and structures 33 Investments and loans w CD CD 0 .15, 167 ~ ______ LTj CD 92 0 CD 0 lB ______ lB LB A -1 (1) (1) (1) (1) ( ) (I) (1) -2 (1) -2 (1) (1) (1) (1) (1) (1) (1) - (1) (1) (1) 76 76 13, 141 -60 26 (1) 13, 167 -60 14, 569 -93 39 14, 608 -93 15, 290 -162 38 15. 328 -162 -25 -1 -35 (1) -25 -1 -35 (1) -29 -1 -63 (1) -29 -1 -63 (1) -32 -1 -129 (1) - -32 -1 -129 (1) - ATOMIC ENERGY COMMISSION 26 13, 107 14, 476 39 14, 515 15, 129 38 84 (1) 84 90 (1) 00 92 (I) 75 1 1 (I) 6 (1) (0 .. (1) 75 .1 1 (I) 6 (1) 80 1 1 (1) 6 (1) (`) (1) 80 1 1 (I) 6 (I) 82 1 1 (1) 7 (I) (1) (1) 82 1 1 (1) 7 (1) 2,267 1 2, 268 2,364 1 2, 365 2, 379 (`) 2, 379 4 3 145 1 1,827 70 217 .. 1 ~- 4 3 145 1 1,828 71) 217 4 5 128 1 1,979 68 170 (1) 1 4 5 128 1 1,080 68 179 4 5 118 1 2,022 83 146 (1) .~ (1) 4 5 118 1 2,023 83 146 313 313 267 267 287 287 151 163 151 163 152 115 152 115 1113 134 553 134 See footnotes at end of table, p. 80. C13 PAGENO="0090" Obligations by objects for the fiscal years 1976, 1967, and 1968-Continued 10 Personal services and benefits 11 Personnel compensation: Permanent positions Military personnel Positions other than pei-inanent Other personnel compensation Special personal service payments_. - Description 1068 actual 1067 estImated 1068 estimated Adininis- trative budget Trust funds Total Adminis- trativo budget Trust funds Total Admhiis- trativo budget Trust funds Total 40 Grants and fixed charges 41 Grants, subsidies, and contributions 42 Insurance clabsis and indemnities 43 Interest and dividends 44 Refunds 90 Other 91 Unvouchered 02 Not distributed otherwise 93 Adminstratlon and notiadininistration expenses 04 Change In selected resources 95 Quarters and subsistence charges 116 Changes In object classification Proposed for separate transmittal Total ol)ligations incurred Less obligations financed from other sources Reimbursements from administrative budget account Reimbursements from trust funds Receipts from the public Comparative transfers Recoveries of prior year obligations Net obligations incurred 3 3 0 6 6 3 (1) 3 (1) 6 (1) 0 (1) 6 (1) 6 (I) 40 (I) 40 220 (1) 220 48 48 40 (`) 46 (1) 220 (1) (1) 220 (1) 48 (1) 48 2, 714 -343 1 2, 715 -343 2, 948 -355 1 2, 984 -355 2, 812 -310 (I) 2, 812 -310 -209 -2 -130 -3 -209 -2 -130 -3 -239 -7 -100 (1) -239 -7 -109 (1) -217 -3 -98 -217 -3 -98 2, 371 1 2,372 2, 593 1 2, 504 2, 403 (1) 2, 403 GENERAL SERVICES ADMINISTRATION 6 w 0 0 0 ci t:~i 0 0 o 0 0 t~1 Co C) -5 260 260 282 230 4 7 1 (1) (1) 231 4 7 282 246 6 9 294 (1) (1) 1 247 6 9 295 259 6 8 (1) (I) 259 6 8 PAGENO="0091" 12 Personnel benefits- Personnel benefits, military 13 Benefits for former personnel 20 Contractual services and supplies 21 Travel and transportation, persons 22 Transportation of things 23 Rent, communications, and utilities 24 Printing and reproduction 25 Otherservices Services of other agencies Payments to specified accounts 26 Supplies and materials 30 Acquisition of capital assets 31 Equipment 32 Lands and structures 33 Investments and loans 40 Grants and fixed charges 41 Grants, subsidies, and contributions 42 Insurance claims arid isidenmities 43 Interest and dividends 44 Refunds 90 Other 91 Unvouchered 92 Not distributed otherwise 93 Administrative and nonadininistrative expenses 94 Change in selected resources 95 Quarters and subsistence charges 96 Changes in object classification Proposed for separate transmittal Total obligations incurred Less obligations financed from other sources Reimbursements from administrative budget accounts Reimbursements from trust funds Receipts from the public Comparative transfers Recoveries of prior year obligations Net obligations incurred 1,564 1,606 w 266 3 C) 213 12 ~ 281 ~ 784 0 255 49 206 3 C) 0 (1) ci 144 0 0 30 ii~ 2,302 -1,602 ~. -1,554 A -40 -8 ~-` 0) 18 (1) 18 21 (1) 21 21 (1) (1) (1) (1) (1) (1) 1,427 (1) 1,428 1,564 (1) 22 (1) (1) 1,606 3 29 241 3 19 12 255 694 (1) (1) (1) (1) (1) (1) (1) 3 29 241 3 190 12 255 694 4 37 262 3 199 12 276 771 (1) (1) (1) (1) (1) - (1) 4 37 262 3 199 12 276 771 4 43 266 3 213 12 281 784 (1) (1) (1) (1) (1) (1) - 1,931 (1) 193 - 234 (1) 234 255 (1) 29 164 (1) 31 (1) (1) (1) - 29 164 (1) 3 18 216 3 (1) (1) (1) - 18 216 3 48 206 3 (1) (1) 2 (1) 1 (1) 2 (1) 1 2 (1) 1 (1) 2 (1) 1 2 (1) 1 (I) 85 (`1 85 124 124 144 See footnotes at end of table, p. 89. 1 84 (1) - 1 84 14 110 14 110 30 114 1,968 -1,357 1 -1 1,969 -1,358 2,207 -1,540 1 -1 2,208 -1,541 2,301 -1,601 1 -1 -1,317 -35 -4 (1) -1 (1) -1 -1, 317 -35 -5 (1) -1 -1, 501 -36 -2 -1 (1) -1 -1, 501 -36 -3 -1 -1, 554 (1) -40 -7 -1 611 (1) 611 667 (1) 667 700 (1) 700 PAGENO="0092" Obligations by ob~eets for the J1~e(1l years 1966, 1967, an(l 1968-Cuiiiinued I)escription 1067 actual 1067 estimated 1008 estimated Adnsinis- trative budget Trust funds Total Adininis- trative budget Trusi; funds Total Adininis- trativo budget Trust funds funds NATIONAL AERONAUTICS AN!) SPACE ADMINISTRATION 380 380 410 410 419 10 Personal services and benefits 11 Personnel compensation: Permanent positions Military personnel Positions other than permanent Other l)msonllel compensation Special personal service payments 12 Personnel benefits Personnel 1)eflelits, military 13 Benefits for former personnel 20 Coi itractual services and sn i)1)lies 21 Travel an(l traiisportatioii, 1)11501 s 22Transportatioii of things 23 Rent, connnunications 01(1 utiiitics 24 Printing 01(1 reproduction 25 Other services Services of otiier agencies i'ayrnents to si)ecifled accounts 26 Supplies and materials 30 Acquisition of capital assets 31 Equipment 32 Lands and structures 33 Investments and loans 40 Grants and fixed charges `ii Grants, subsidies, and contributions 42 Insurance claims and indemnities 4:3 Interest and dividends 44 Refunds 332 332 360 360 369 369 2 2 4. 4 8 3 5 5 5. 5 5 5 14 14 11 11 11 11 (1) 26 (1) 26 (1) 29 (1) 29 (1) 30 (1) 30 (1) (1) (1) (1) (1) (1) w 0 0 419 0 0 0 0 131 131 H 4, 573 (1) 4, 573 4, 474 1 4, 475 4, 492 2 4, 494 2(1 18 86 7 3, 973 220 250 (1) 20 18 86 7 3, 973 220 250 21 18 113 8 :i, 059 122 233 1 21 18 113 8 3,059 122 233 2! 17 324 8 3, 063 127 232 2 ~ - 21 17 124 8 3, 066 127 232 483 483 378 378 312 (1) 312 244 2:19 244 239 262 116 - 262 116 227 85 (1) 227 85 8 3 3 3 3 3 :i (1) 3 (1) 3 (1) 3 (1) 3 (1) 3 (1) PAGENO="0093" 90 Other 91 1Jnvouchered 92 Not distributed otherwise 93 Administrative and nonadministrative expenses 94 Change in selected resources 95 Quarters and subsistence charges 96 Changes in object classification Proposed for separate transmittal Total obligations incurred Less obligations financed from other sources Reimbursements from administrative budget accounts Reimbursements from trust funds Receipts from the public Comparative transfers Recoveries of prior year obligations Net obligations incurred 10 Personal services and benefits 11 Personnel compensation: Permanent positions Military personnel Positions other than permanent Other personnel compensation Special personal service payments 12 Personnel benefits Personnel benefits, military 13 Benefits for former personnel 20 Contractual services and supplies 21 Travel and transportation, persons 22 Transportation of things 23 Rent, communications, and utilities - 24 Printing and reproduction 25 Other services Services of other agencies Payments to specified accounts 26 Supplies and materials 30 Acquisition of capital assets 31 Equipment 32 Lands and structures 33 Investments and loans See footnotes at end of table, p. 89. 5, 439 -57 (1) 5, 439 -57 5, 264 -102 1 5, 265 -102 5,226 -79 2 -56 (1) -56 (1) -91 -12 -91 -12 -65 -14 5,382 (1) 5,382 5, 162 VETERANS' ADMINISTRATION 1 1,219 1,219 1,348 5,163 5,148 2 1,348 1,390 1,390 977 977 1,054 1,054 1,094 1,094 (1) (1) 64 21 80 78 (1) (1) 64 21 80 78 (1) (1) 59 28 88 119 (1) (1) 59 28 88 119 (1) (1) 57 29 91 119 (1) (1) 57 29 91 119 487 1 488 466 2 468 486 1 488 5,229 -79 o -65 ~ -14 0 5,150 C) 0 0 0 0 ~ 302 17 30 99 10 316 17 17 5 (1) 30 32 5 5 (1) 100 10 102 10 5 2 1 317 293 (1) (1) 2 17 3~ 102 1~ 295 18 34 11~ 12 301 (1) (1) 1 532 116 647 611 217 828 656 117 772 46 71 415 1 (1) 115 46 71 530 58 60 493 1 (1) 216 59 60 709 64 78 513 (1) (1) 116 65 78 6311 Go PAGENO="0094" 40 Grants and fixed charges- 41 Grants, Sl1bSl(lieS aiid contributions- 42 Insurance claims and indemnities 43 Interest and (livklendS 44 Refunds 00 Other 91 ljnvouehered administrative 92 Not distributed otherwise 93 AdministratIve and nonadiniiiistrativo expenses 04 Change Iii selected resoisrces 95 Quarters an(l subsistence charges 96 Changes in object classification Propose(l for sel)arate transmittal - Total obligations incurred Less obligations financed from other sources Reimbursements from administrative budget accounts Reimbursements from trust funds Receipts from time public Comparative transfers Recoveries of prior year obligations Net obligations incurred 10 Pcisonal services and benefits 11 Personnel compensation: Permanent positions Military personnel Positions other than permanent Obligations by objects for the fiscal years 1966, 1967, anti 1968-Continued 1966 actual 1967 estImated 1968 estimated Description Adminis- Trust Adminis- Trust Adminis- Trust trativo funds Total trativo funds Total trativo funds Total budget budget budget VETERANS' ADMINISTRATION-Continued 4, 507 612 Ii, 119 4,865 863 5,728 5,064 641 5, 705 56 4, 429 23 (112 (1) 56 5, 040 23 (1) 387 4, 457 22 863 (1) 387 5, 319 22 (1) 442 4, 600 22 641 (1) 442 5, 241 22 (1) -28 -28 135 135 78 78 -20 -8 -20 -8 2 -8 141 2 -8 141 88 -8 -3 88 -8 -3 (3,717 -1,483 728 -176 7, 445 -1,659 7, 426 -768 1, 081 -187 8,507 -955 7, 674 -1,395 759 -189 8,433 -1,585 -180 -3 -1,301 -176 -180 -3 -1,477 -176 -592 -187 -176 -779 -176 -1,219 -189 -176 -1,409 00 w 0 0 d ti~i a cm 0 0 0 C) 5, 234 553 5, 786 6, (358 895 OTHER INT)EPENDENT AGENCIES 637 20 657 694 7, 552 6, 279 422 12 51 (1) 570 6,848 21 716 729 464 13 5'1 (1) 24 477 4 54 753 488 14 58 (1) 5% 58 434 PAGENO="0095" Other personnel compensation 18 Special personal service payments 1 (1) 12 Personnel benefits - 43 Personnel benefits, niilitary 13 Benefits for former personnel 97 6 20 Contractual services and supplies ________ 21 Travel and transportation, persons 22 Transportation of things 23 Rent, communications and utilities 24 Printing and reproduction 25 Other services Services of other agencies Payments to specified accounts 26 Supplies and materials 30 Acquisition of capital assets 31 Equipment 32 Lands and structures 33 Investments and loans 40 Grants and fixed charges 41 Grants, subsidies, and contributions 42 Insurance claims and indemnities 43 Interest and dividends 44 Refunds 90 Other 91 Unvouchered 92 Not distributed otherwise 93 Administrative and nonadministrative expenses 94 Change in selected resources 95 Quarters and subsistence charges 96 Changes in object classification V - Proposed for separate transmittal -- Total obligations incurred - Less obligations financed from other soutCes.~ - Reimbnrsenients froni administrative budeet account Reiuibursements from trust funds Receipts from the public Comparative transfers Recoveries of prior year obligations Net obligations incurred 845 V 2,946 19 1 43 104 16 1 48 106 (I) (1) 1 6 17 2 49 112 16 1 50 113 (1) 1 1 7 16 1 51 119 453 712 1,164 475 777 1,253 493 866 1,359 32 31 35 10 123 38 36 148 (`) (1) 3 (1) 705 1 2 1 32 31 38 10 828 38 38 149 32 35 36 11 116 40 46 159 (1) (1) 3 (1) 765 1 7 1 33 35 39 11 882 40 53 160 36 35 39 13 118 41 48 164 - (1) (1) 4 (1) 853 1 6 1 2,266 47 2,312 4,178 200 4,379 3,548 45 65 85 2,116 (1) 6 41 65 91 2,157 88 63 4,027 (1) 11 189 88 74 4,216 85 50 3,413 1 5 39 637 513 47 77 2, 926 3, 563 701 3, 296 3, 997 722 3, 589 (1) 2, 766 3 158 513 2, 813 80 158 560 55 86 2 3, 133 3 158 562 3, 188 89 158 598 56 68 2 3, 425 4 158 146 261 172 -6 30 24 1 161 146 - 30 -2 30 V 145 7 -28 15 28 1 1 35 -27 16 5 -4 (1) - 60 (0 100 4, 138 -3, 293 3, 731 -785 7, 869 -4, 078 6, 043 -3, 225 4, 325 -859 10, 368 -4, 085 V 5~ 493 -3, 594 4, 684 -957 -234 -2 -2, 358 8 -706 -253 -53" (1) -488 -2 -2, 890 8 -706 V -254 -88 -2, 216 6 -674 -310 (0 ~549 -564 -88 V -2, 765 6 -674 -247 -9 -2, 866 -473 -32(1 (1) -637 w 36 35 C) 42 13 ~ 971 ~ 42 0 55 ~ 165 3,592 86 ~J 55 C) 3,452 4311 0 600 3,481 72 158 162 0 0 t~j 101~ 10, 177 -4, 551 -567 ~ -9 -3, 503 ~ -473 3, 031 2,818 3, 466 6, 283 1,899 3,727 5,626 Sec footnotes at end of table, p.89. PAGENO="0096" Obligations by ohjccts for the fiscal years 1966, 1967, and 1968-Continued *. .._ *_~_ _._. .~ --- _*__. _.__._ 1967 actual 1967 estimated 1968 estimated ])escription A(lmninis- Trust Admninis- Trust Adminis- Trust ti'ativo funds `total trativo funds Total trativo funds funds budget budget budget -.--. -.-.-- --- ----.- .- ... --- DISTRICT OF COLUMBIA 10 Personal services an(l l)enoflts it Personnel compensation l'ermandnt POsitiOIms Military personnel Positions other than permanent Other personnel COmnI)OnsatiOII SIJcclal personal servico payments 12 Personnel benefits Personnel benefits, military 13 Benefits for former l)ersOnmlei _____________ 20 Contractual services and supplies Travel and transportation, persons Transportation of things - Rent, communications, an(l utilities Printing and reproduction - Other services Services of other agencies Payments to specif led amounts Supplies and materials ___________ 30 Acquisition of capital assets 31 Equipment 32 Lands and structures 33 investments and loans - 40 Grants, and flxod charges 41 Grants, subsidies, and contributions 42 Insurance claims and in(lemllmties 43 Interest and (livideuds 44 RefUl(d5 ____________ 11)6 13 8 (I) 17 13 196 13 8 (I) 17 13 232 16 8 (1) 2(1 15 232 16 8 (1) 2)) 15 2113 If) 7 (1) 23 16 151 253 If) 7 (1) 23 16 154 3 120 123 3 132 136 1 1 1 (1) 3 9 1 68 16 7 19 1 (1) 12 1 68 16 7 19 3 1 (1) 11 1 75 18 8 19 1 (1) 15 1 75 18 8 19 3 (1) 13 1 87 if) 9 21 260 (1) 17 1 87 19 9 - 21 312 71 73 144 90 187 278 15 15 8 57 71 8 8 57 79 90 12 168 8 168 98 91 53 60 236 9 52 236 62 112 44 38 83 50 -~ 41 60 28 88 44 17 H f) 5 11 S 9 5 50 21 9 10 1 71 f) 10 1 f) 13 1 9 13 1 247 247 292 21 22 23 24 25 292 318 318 w 0 C cl txl C C 0 C -4 I PAGENO="0097" 90 Other 91 92 93 94 95 96 .~ 0 (1) (1) 1~ Unvouchered - - Not distributed otherwise Administrative and nonadministrative expenses Change in selected resources Quarters and subsistnce charges - Changes in object classification Proposed for separate transmittal Total obligations incurred Less obligations financed from other sources Reimbursements from administrative budget account Reimbursements from trust funds -47 Receipts from the public - Comparative transfers Recoveries of prior year obligations 2 12 11 1 12 Net obligations incurred -58 -3 118 -47 478 -61 596 -108 154 -35 655 -114 809 -149 127 782 -156 1 Less than $500,000; N0TE.-Details may not add due to rounding. -58 -47 -3 -35 71 417 488 -111 -3 -111 -35 -3 -153 .---- -3 119 541 Source: Budget Bureau. 660 127 626 (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) 10 12 ii 12 C) 908 ~ _________ _________ _________ -156 ~) 752 Co C) PAGENO="0098" Appendix 2 YEAR END FIsCAL YEAR 1966 DEPARTMENT OF DEFENSE COST REDUCTION PROGRAM STATUS REPORT' ASSISTANT SECRETARY OF DEFENSE (INSTALLATIONS AND LOGISTICS), October 10, 1966. Memorandum for the Secretary of Defense. Subject: Year end fiscal year 1966 cost reduction program status report. The Department of Defense cost reduction program has now been fully operational for 4 years. During this time observers of the Department of Defense have witnessed a new era of management improvement and emphasis. Also, for the first time, the actual dollar effects of increased management effort have been measured and reported to all levels of the Department of Defense through the mechanism of the cost reduction program. Major improvements have occurred in such areas as the development of materiel require- ments, reutilization of excess materiel, value engineering, procure- ment, base utilization, transportation, telecommunications, equip- ment and real property management, packaging, etc. New areas for increased emphasis are constantly being sought. In future periods increased attention will be directed to such major areas as the management of ADP, increased productivity, and in conjunction with the OASD (Manpower), DOD military and civilian personnel training requirements. In view of the increased activity experienced in southeast Asia, savings reported in fiscal year 1966 are indeed noteworthy. Final year end fiscal year 1966 hard savings amounted to $4.5 bfflion which is about $300 miiJion less than the total hard savings achieved in fiscal year 1965. The reduction in hard savings reported in fiscal year 1966 can be primarily attributed to reduced savings of over $900 million which occurred in areas concerned with the refinement of requirement calculations. A substantial portion of the $900 million reduction results from increased materiel and funding requirements for south- east Asia. Much of this reduction was offset by unexpected increases in savings reported in other areas. These areas include value engineer- ing, procurement, terminating unnecessary operations, departmental operating expense, telecommunications, transportation and packaging. ISource: Office of Secretary of Defense. 00 PAGENO="0099" BACKGROUND: ECONOMY IN GOVERNMENT-19 67 91 The final year end fiscal year 1966 status by major DOD com- ponents is as follows (all tabular dollar data in this report are stated in millions unless otherwise indicated): . Fiscal year 1966 -,________ Fiscal year 1966 goal to be realized by fiscal year 1968 Fiscal year 1967 goal to be realized by fiscal year 1969 Hard savings Cost avoid- ance and decision savings Total savings Army Navy Air Force DSA DCA MAP Total $785 1,508 2,001 163 3 3 $567 330 939 35 6 $1,352 1,838 2,940 198 3 9 $1,164 1,827 2,721 185 2 100 $1,197 1,865 2,791 177 2 30 4, 463 1, 877 6,340 5,999 6,062 The report contains six attachments. Attachment A is a summary of cost reduction savings reflected in DOD budget estimates for fiscal years 1964 through 1967. Attachment B is a summary of the status of each cost reduction area as of June 30, 1966. Attachment C shows the disposition of fund savings realized during fiscal year 1966. At- tachment D is a summary of man-years of effort saved in fiscal year 1966 from cost reduction actions reported since fiscal year 1961. Attachment E contains examples of items converted from sole source procurement to price competition. Attachment F is the audit opinion for this report. I. BUYING ONLY WHAT WE NEED l.A. Refining requirements calculations I.A.1. Major items of equipment A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost. avoidance savings Total realized savings . Fiscal year 1966 goal . Budgeted savings Fund savings Total Army Navy Air Force Total $132 500 96 $5 61 9 $137 561 105 $15 - $137 561 120 $120 652 107 728 75 803 15 818 879 Almost 90 percent of the savings reported in this area represent reductions in fiscal year 1966 requirements as a result of management actions taken prior to submission of the fiscal year 1966 Department of Defense budget estimates. The remaining 10 percent of the savings remited from more recent actions. Some examples of actions which have produced savings follow: Army Detailed studies were made of Army regulations, supply bulletins, other guidance documents and management practices throughout the PAGENO="0100" BACKGROUND: ECONOMY IN GOVERNMENT-i 96.7 Army. Based upon these studies, maintenance float factors for select major items of equipment were revised and requirements for fiscal year 1966 were reduced by $8.1 million. A contract for TJH-1 aircraft required one set of ground handling wheels to be supplied with each aircraft. A subsequent review revealed that two sets of these ground handling wheels would support three aircraft. The buy rates were reduced, the contract was modified and a saving of approximately $500,000 was realized. Change in the method of computing both the worldwide inventory and annual service practice requirements for the Nike-Hercules missile was made as a result of recommendations contained in an Army audit agency report. This action reduced the Army funding requirements for fiscal year 1966 by $4.2 million. Navy Savings of $1.5 million were realized based upon an analysis and decision to eliminate front mounted winches from 2~-ton and 5-ton trucks procured during fiscal year 1966. Air Force Prior to fiscal year 1966, two camera analyzers were authorized for each RF-40 squadron. Based upon an evaluation of category II testing, the authorization per squadron was reduced to one camera analyzer per squadron. Fiscal year 1966 procurement of this item was reduced from 25 to 9 for a saving of $614,000. I.A.2. Initial provisioning A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal Budgeted savings Fund savings Total Army Navy Air Force Total $25 175 $1 14 $1 39 175 $1 7 $2 39 182 $20 109 78 200 15 215 8 223 207 The Army savings resulted from numerous individual actions, many of which produced savings of $100,000 or less. Typical actions were (1) elimination of the allowance for a main armament part as an on-board spare self-propelled combat vehicles, (2) deletion of a hoist * as~embly as an authorized repair part for the Sergeant missile system and (3) expediting the return of unserviceable fire control devices and considering such returns in requirement computations for the first time. The Navy savings resulted from several different types of actions. Savings of $13.8 mfflion in missile spares (for other than Polaris) resulted from the nonnuclear ordnance study. Budgeted savings on Polaris missile spares totaled $10.9 mfflion resulting primarily from a decision to extend the service use of the A-2 missile for the 608 and 616 classes of submarines in lieu of the previously planned con- PAGENO="0101" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 93 version to the A-3 missile. Additional savings were realized from a computerized method of determining the amount of repair parts required in support of new equipment being placed on board ships. This method of calculating savings is known as the mean family replacement factor (MFRF). A substantial part of the Air Force savings resulted from actions which reduced the ratio of initial aircraft spares cost to end item cost. This ratio has been reduced from 16.7 percent in fiscal year 1961 to 11.8 percent in fiscal year 1966. Additionally, savings of over $23 million were realized in the communications and electronics area by actions such as (1) developing improved computation techni4ues, (2) limiting quantities initially provisioned to a 12-month operating program in lieu of provisioning for the life of the end items, and (3) establishing new management review levels. I.A.3. Secondary items A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal Budgeted Hard savings savings Total Army Navy Air Force DSA Total $3 17 $17 2 14 $3 34 2 14 $ 5 34 7 14 100 594 4& 34 19 53 10 775 During the past 4 years this area of the cost reduction program has probably witnessed a greater degree of management attention than any other single area of the program. Requirements factors have been refined, computational techniques have been improved, inven- tory control systems have been revised, high-speed transportation systems have been used to move key items to points of need with* resultant savings in time and in inventory investment and the in- creased application of ADP capabilities have greatly increased the timeliness of data elements needed by supply and inventory control managers in making day-to-day decisions concerning whether to buy, repair, substitute or dispose of individual items. In short, the entire system for managing secondary items has undergone significant refinement in the past 4 years. These changes have had a substantial impact on the range and quantity of secondary item requirements and produced large savings in fiscal year 1963, fiscal year 1964, and fiscal year 1965. In fiscal year 1966, savings of $63 million were achieved against an objective of $775 million, a shortfall of over $700 million. This reduction in dollar savings does not imply that management improvement actions initiated over the past 4 years are no longer effective. To the contrary, with substantially increased requirements now being generated in southeast. Asia, these actions are more meaningful today than ever before. In the past most savings reported in this area have been measured on a funding level basis-the difference between funds appropriated for secondary items in the base year versus those required in the PAGENO="0102" 94 BACKGRoUND.: ECONOMY IN GOVERNMENT-i 967 reporting year, supported with appropriate examples of management improvement actions. This method of measurement is quite valid when force levels and activity rates remain relatively stable. When these elements fluctuate either up or down, however, an erroneous result is obtained. When they increase, as was the case in fiscal year 1966, reportable savings are reduced. As a consequence, the savings of $63 million reported in fiscal year 1966 does not accurately reflect the true effects of management actions taken since fiscal year 1961. Without them, we believe that procurement requirements for fiscal year 1966 would have been substantially greater than those actually experienced. The funding level method of measurement will not he authorized for use in this area for fiscal year 1967. I.A.4. Technical manuals A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal Budgeted savings Fund savings Total Army Navy Air Force Total 2 Si 2 1 4 $5 1 9 $3 3 6 5 3 8 5 13 12 Savings realized on the procurement of new technical manuals as well as on revisions to existing manuals are reported in this area. New and intensified actions which (1) reduce quantitative require- ments or (2) relax qualitative requirements of technical manuals without adversely affecting mission accomplishments are the type of actions which produce reportable savings. This is a very difficult area in which to measure the dollar savings resulting from management improvement actions. In many in- stances, particularly for new weapon systems an actual "before" and "after" cost comparison cannot be made. Therefore, the "before" cost must be estimated in many cases. Several examples of savings reported in this area are as follows: Army Savings of $55,000 were realized by using manufacturer's manuals in lieu of requiring new manuals in military format as previously prescribed. Navy Savings of $400,000 were realized by changing the specifications on preliminary technical manuals for the A7A aircraft. Air Force Savings of $112,700 were realized by reducing the number of technical publications for electronic equipment. PAGENO="0103" BACKGROUND: ECONOMY IN GOVERNMENT-19 67. 95 I.A.5. Technical data and reports A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal . Budgeted savings Fund savings Total Army Navy Air Force Total $1 2 $1 2 7 $2 4 7 $5 8 $7 4 15 $5 5 18 3 10 13 13 26 28 Examples of savings achieved in this area follow: Army Savings of $26,880 were achieved by changing from hard copy drawings to microfilm image cards used in bid sets and other procure- ment actions. Navy Net savings of $520,000 were achieved by institution of computer programing techniques in analyzing electronic circuits'. Air Force Savings of $300,000 were achieved by implementation of a stand- ardization program for selected generator sets, This action permitted the identification and one-time procurement of all needed engineering data, which can also be utilized each time a future procurement is made, regardless of the contracting source. I,A.6, Production base facilities A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal Budgeted savings Fund savings Total Army Navy Air Force Total $4 $4 $4 $4 2 3 4 4 9 The Air Force realized $4 million of fund savings by actions which reduced production base requirements which had been budgeted, appropriated, and apportioned. PAGENO="0104" 96 BACKGROUND: ECONOMY IN GOVER~MENT-19 67 I.B. Increased use of excess inventory LB.1. Equipment and supplies A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal Budgeted savings Fund savings Total Army Navy Air Force DSA Total $3 46 11 9 $3 25 17 $6 71 28 9 $142 213 169 2 $148 284 197 11 $222 190 20 15 69 45 114 526 640 447 Achievements during fiscal year 1966 were as follows: Utilization Base Fiscal year year 1966 Increased utilization Army Navy AirForce DSA $187 239 530 . $335. 5 523.4 726.7 10.5 $148. 5 284.4 196.7 10.5 Total 956 1, 596. 1 640. 1 The two basic types of transactions included in this area of the DOD cost reduction program are (1) receipts by an ICP or central inventory manager; and (2) receipts by other than an ICP or central inventory manager of excess and long supply inventories required to meet a valid need of the receiving DOD component. Nonreimbursable interservice and intraservice transfers of potential and declared DOD excess materiel accomplished within the framework of the Defense materiel utilization program contribute significantly to the cost reduction area "Increased use of excess inventory-Equip- ment and supplies." Savings in this cost reduction area are based on the net increase in DOD materiel utilization over the level of reutiliza- tion over the level of reutilization accomplished during fiscal year 1961. The fiscal year 1966 objective in this area was to achieve gross reutilization of $1,403 mfflion. Total DOD reutilization accomplished during fiscal year 1966 was $1,596.1 million, or 13.6 percent more than the fiscal year 1966 objective as shown on the following chart: PAGENO="0105" BACKGROtrND: ECONOMY IN GOVERNMENT-i 967 97 Examples of savings reported in this area follows: Army obtained from the Air Force and Navy a total of 117 aircraft engines for use on the CV2 aircraft. Net savings $2, 901, 518 Army received from the Air Force on a nonreimbursable basis 14 TJ6A aircraft to satisfy CONUS requirements. Net value 1, 019, 917 Army received from the Navy on a nonreimbursable basis 1 TC47 aircraft and 3 C45 aircraft. Net savings 362, 190 Army received from the Air Force 1,783,249 cartridge, caliber .30, tracer, on a nonreimbursable basis thereby precluding Army procure- ment of a like item. Net savings 213, 990 Army received from the Navy 14,382 demolition kits on a non- reimbursable basis thereby precluding Army procurement of a like item. Net savings 890, 307 Army obtained 1,078,764 grenades which were excess to Navy and Marine requirement but needed by the Army. Net savings 2, 268, 451 Navy reclaimed parts and other items from stricken aircraft valued at 7, 593, 527 Navy obtained, from Air Force four components of the AN/ALE2 chaff dispenser on a nonreimbursable bais. Net savings 268, 435 Navy received from Army 1,200 caliber .50 heavy barrel, machine- guns. Net savings 780, 000 Navy received from Air Force and Army excess materiel needed for Tabs operational requirements. Net savings 354, 000 Navy received from Army without reimbursement 2 harbor tug boats and 12 barges for use in support of construction in Vietnam. Net savings 875, 300 Marine Corps received from Army on a nonreimbursable basis, ammunition for small arms, mortars, artillery, also rockets, mines, and demolition material. Net savings 36, 226, 508 Air Force obtained through coordination with GSA and the Bureau of the Mint 7,414.24 troy ounces of platinum without reimburse- ment. Platinum was used to meet Air Force requirements for fine wire spark plugs. Net savings 725, 605 Air Force received from the Navy excess AlE type aircraft. Net savings 12, 329, 800 (MiIIion~ of'Dollars - Cumulative) PAGENO="0106" 98 BACKGROUND ECONOMY IN GOVER~MENT-19 67 Air Force received 11 excess R3350-A quick engine change kits from the Navy and modified them to R3350-93 configuration. Net savings $343, 035 DSA excess stocks of tape, water repellent were serviced and made both water repellant and mildew resistant to satisfy a requirement for 13,906,000 yards of tape. Net savings 671, 035 DSA had approximately 90,000 limited standard insect headnets, that were categorized as excess stock when they were declared un- acceptable for Navy use in southeast Asia. Following evaluation by the U.S. Army Natick Laboratories and approval by the U.S. Army Support Center, this stock was utilized to satisfy Army backorders and reduce procurement of the standard item. Net savings 135,000 I.B.2. Redistribution of idle production equipment A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoid- ance savings Total realized savings Fiscal year 1966 goal Budgeted savings Fund savings Total Army Navy Air Force DSA $8 7 5 $8 7 5 $51 14 2 $59 21 7 $1 2 EIIIIIIIiIII~ 20 6: 8: 3 The basic objective of this area is to increase the utilization of idle production equipment. Savings are reported when redistributions of idle production equipment during a reporting period exceed the redistributions made during a corresponding period in the base year (fiscal year 1963). Redistributions during this year exceeded the base year by more tha.n 130 percent. This represents an outstanding achievement by the defense industrial plant equipment center and the military departments. Accomplishments during fiscal year 1966 were as follows: Redistributions Increased redistribu- tions Base year (fiscal year 1963) Fiscal year 1966 Army Navy Air Force DSA Total $15.7 10.9 40.4 $74.7 31.3 48. 0 1.8 $59. 0 20.4 7.6 1.8 - 67. 0 155.8 88.8 PAGENO="0107" BACKGROuND: ECONOMY IN GOVERNMENT-19 67 99 I.B.3. Excess contractor inventory A summary of the savings realized in this area during fiscal year 1966 is as follows: . Realized hardsavings Realized cost avoidance savings Total realized savings . Fiscal year 1966 goal Budgeted savings Fund savings Total Army Navy Air Force Total $3 $28 (2) $3 28 (2) $3 28 (2) $4 5 8 3 26 29 29 17 The basic objective of this areais to increase the utilization of excess contractor inventory. Savings are reported when the amount of excess contractor inventory reutiized during a current reporting period exceeds the amount of reutilization made during a correspond- ing period in the base year (fiscal year 1962). Achievements during fiscal year 1966 were: Reutilization Increased reutilization Base year (fiscal year 1962) Fiscal year 1966 Army Navy Air Force Total $2.9 4.9 6.7 $6.0 32.9 4.9 $3.1 28.0 (1.8) 14.5 43.8 29.3 The amount of reutilization achieved during fiscal year 1966, particularly by the Navy, is very commendable. Some examples of reutiizations during fiscal year 1966 follow: Army Components, M527 fuse.-Five types of components, total value $245,574, became excess to a completed contract for M527 fuses. These components were transferred to another contractor for use in the M527B1 fuse loading program. Ammunition containers, M353, 90MM packing material.-Excess ammunition containers used for shipping ammunition items to the Army contractor for operation of a portion of Joliet Arsenal were determined to be usable by the Army contractor operating the Milan Army Ammunition Plant (MAAP). A total of 46,683 boxes and 101,649 fiber containers were transferred for use under the MAAP contract. New boxes and fiber containers would have cost $248,151. The used boxes and fiber containers were renovated for $43,505. Components, CBU-3 bomb dispenser iterns.-Contractor inventory of containers and bomblette components (CBTJ-3) consisting of dis- pensers, retainers, straps, clips, protectors, arming devices and, cable assemblies, in the total value of approximately $100,060, became excess to a contract for operation of the Louisiana Army Ammunition PAGENO="0108" 100 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 Plant. They were transferred to contracts being performed at the Milan Army Ammunition Plant. Navy Mauler missile.-Following termination of an Army contract for the Mauler missile system with General Dynamics, an intensive screening of available excess property was undertaken. This resulted in the transfer of property in the approximate value of $30.7 miffion for use by General Dynamics in the performance of a Navy R&D contract for the Terrier-Tartar missile system. The property included two mobile launching pads, 1,336 line items of electronic parts, 154 line items of special test equipment, as well as large quanti- ties of miscellaneous purchased parts. Polaric system.-Excess property previously used for Polaris research and development by Lockheed Missiles & Space Co. was transferred for use in the manufacture of missile components and in providing tactical engineering services. The property, valued at approximately $691,000, included a high-speed digital conversion station console and seven special test consoles. Air Fcrce Minuteman.-Used magnetic tapes, which became excess to certain contracts with TRW systems, were reconditioned and used in lieu of procurement of new tapes under another contract with TRW systems in support of the Minuteman program. Savings, after deduction of reconditioning costs, were $136,000. Gommunications sets, AN/TRG-87.------Various materials, valued at $142,000, which became excess as a result of the termination of a production contract for UHF communications sets, MN/TR~-87 were retained at cost by the contractor for use in the performance of a contract for another type of communication set. Electronics items.-Property consisting largely of high reliability electronics items, became excess to various contracts with North American Aviation (Autonetics) in support of certain phases of the Minuteman program. This property, valued at $3.8 million, was transferred for use in performance of other contracts with North American for certain other phases of the Minuteman program. I. C Eliminating goldplating A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal Budgeted savings Fund savings Total Army Navy Air Force DSA Total $48 44 71 5 $36 62 39 19 $84 106 110 24 $76 8 84 3 $160 1 114 194 27 $70 132 150 12 168 156 324 171 495 364 1 In addition, savings of $34,000,000 were realized in Army and Air Force funds as a result of Navy VE actions. PAGENO="0109" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 101 Typical examples of savings in this area follow: Army Modification of design for decontamination and reimpregnating kits.- A value engineering review of the kit design suggested the use of lower cost plastic materials and simplification of the design. The changes were implemented and net savings of $934,363 were realized. Shillelagh missile test requirements.-Individual reliability, quality and engineering test data requirements were subjected to a value analysis. As a result, a combined missile test plan was proposed and adopted. This combined missile test plan eliminated redundant testing and provided the required test data. Savings of $326,700 resulted from this action. High Cost Electronic Amplifier Tube.-A VE study of a high cost klystron amplifier tube produced new technical guidance for industry enabling competitive manufacture of the tube. As a result of this YE study a net saving of $261,800 was realized. Navy Elimination of Unnecessary Design Elements on Prefabricated Build- ings.-Prior to procurement of prefabricated steel buildings, a YE study of applicable specifications led to elimination of several specifica- tion provisions and simplification of others. As a result of the design changes developed during the YE study, $2.1 million was saved. Airframe of Terrier/Tartar Nonflight missile.-Application of value engineering to the design for high cost nonflight training, handling and test missiles led to their redesign using less costly pressed wood in lieu of a metal airframe. Net savings on the initial procurement amounted to $444,850. Change in specification on f?d.75~inch rocket dummy warhead.-Prior to application of YE, the 2.75-inch FFAR dummy warhead was plaster loaded, assembled and painted per specification. A new design speci- fication setting forth requirements for key parameters of weight, shape, size, etc., leaving material selection and method of manufacture at the contractors' option resulted from a YE effort with a resultant net saving of $1.4 million. Air Force Specification of sensor tests and change in model utilization. A value engineering change proposal recommended modification of qualifica- tion sensor tests and changes in qualification model utilization. The YE action was approved and a saving of $205,600 was realized. 0-141 walkways. Custom built aluminum honeycomb panels were fabricated by the contractor and used as walkways in the C-14 1 aircraft. After the application of value engineering, the honeycomb panels were replaced by less expensive plywood panels. A saving of $131,500 was realized from this action. DSA Black leather gloves.-The range of thickness in leather as specified in Mil Spec MIL-G--176o2B (S. & A.) dated December 3, 1963, and deviation list dated June 3, 1964, made it necessary for industry to be PAGENO="0110" 102 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 very selective in obtaining skins intended for production of gloves. It was estimated that oniy 50 percent of the skins available would meet the requirements. Through a va1u~ analysis study, it was determined that this thickness range could be changed to "1% ounces to 2% ounces." In addition, the requirement for the seamless knit liner yarn was changed from "2 ply only" to "single or 2 ply." These changes were reflected/in current contracts and savings amoimting to $100,224 were realized from the changes. Pipe, steel FSN 4710-162-1022.-Prior to value engineering, DCSC procured 2-inch pipe, steel, zinc coated with a requirement of "Electric resistance welded or seamless pipe." A va.lue engineering study of this item found that adhering to, "Electric resistance welded", restricted procurement to a small group of bidders. The YE study resulted in a change of the purchase requirement to "seamed or seamless." This action produced savings of $103,700. I.D. Inventory `item reduction A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized coat avoidance savings Total realized savings Fiscal year 1966 goal Budgeted savmgs Fund Total savings Army Navy Air Force DSA Total (Si) (1) 68 17 ($4) (4) (3) 13 ($8) (5) 65 30 ($8) (5) 65 30 Si 62 19 80 2 82 82 82 The basic objective of this area of savings is to reduce the number of items in the Department of Defense supply system. For cost reduc- tion reporting, a cost factor of $100 per item has been established as the annual average cost of managing an item of supply. Savings are reported when the number of items eliminated during a current re- porting period exceed the number of items eliminated during a cor- responding period in the base year (fiscal year 1961). The effect of the increase in number of items eliminated during prior years is reported as a budgeted saving. The effect of the increase in items eliminated during the current year is reported as a fund saving. Achievements during fiscal year 1966 were as follows: Items eliminated Increase in number of items elimi- nated Base year fiscal year 1961 Fiscal year 1966 Army Navy Air Force DSA 81,154 128,058 163,052 35,027 42,289 81,810 132,992 164,027 -38,865 -46,248 -30,060 129,000 Total 407,291 421, 118 13, 827 PAGENO="0111" BACKGRQUND: ~ECQNOMY. IN GOVERNMENT__19~7 103 As a result of reviews performed under the standardization program items are being designated standard, limited standard, or nonstandard. items designated nonstandard are eliminated from the DOD supply system when existing stocks are disposed of by consumption, sale, or disposal. The following examples demonstrate the results of reviews per- formed during fiscal year 1966: Item description . Number of items . Reviewed Designated nonstandard Fixed composition resistors Electrical plug connectors Quartz crystal unit Fixed film resistors Cotter pins Eye bolts Retaining rings Flat washers Engine starter Radiator cap Pneumatic tank valves Intake air cleaner Butterfly valve 1, 637 1,031 11, 864 4,714 1, 037 3, 545 199 3, 182 1, 052 168 74 875 69 1,248 558 5, 961 3, 731 719 1, 780 102 1,817 575 132 34 411 47 II. BUYING AT THE LOWEST SOUND PRICE II.A. Shijt from noncompetitive to competitive procurement A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal Budgeted savings Fund savings Total Army Navy Air Force DSA Total $65 128 167 3 $59 116 13 $65 187 283 16 $65 187 283 16 $116 155 167 3 363 188 551 551 441 PAGENO="0112" 104 BACKGROtTND: ECONOMY IN GOVERNMENT-i 967 Actual progress in this area through June 30, 1966, is charted below: CONTRACTS AWARDED ON BASIS OF COMPETITION AS A.PERCENT OF TOTAL. DOLLAR VALUE OF CONTRACT AWARDS Fiscal year- 1962 1963 1964 1965 1966 Army Navy Air Force DSA 43. 9 35.4 17.3 93.7 48.3 39. 1 18. 0 91.3 51. 8 36.7 21.2 91. 5 .52.8 41. 7 25.2 90.3 43.9 38.4 25. 8 92. 1 DOD average 35. 6 37. 1 39. 1 43.4 44.4 FY 1961 1962 1963 1964 1965 1966 1967 The percentage of price competitive awards to total awards by DOD components since fiscal year 1962 is as follows: [In percenti PAGENO="0113" BACKGROUND: ECONOMY IN GOVERNMENT-l9 67 105 Every effort is being made to increase the use of formal advertising in competitive procurement awards. The ratios of formal advertised procurement to total procurement and two-step formal advertising to total formal advertising since fiscal year 1961 follow: [Dollar amounts in billions] Fiscal year Total price competition Formal advertizing Amount Percent Total ~ Amount Percent 2-Step ~ Percent of Amount formal advertising 1961 1962 1963... 1964 1965 1966 $8. 1 10. 1 10. 8 11. 0 11.9 16. 5 32. 9 35. 6 37. 1 39. 1 43.4 44.4 $~. 9 3. 5 3. 7 4. 1 4.8 5.3 11. 9 12. 6 12. 7 14. 4 17.6 14.2 (1) $0. 085 . 275 . 416 .726 . 926 (1) 2. 4 7. .5 10. 1 15.1 17. 5 I Not available. The increase in the use of price competitive awards continues- increasing from 32.9 percent to total obligations in fiscal year 1961 to 44.4 percent at the end of fiscal year 1966. During this same period, competition by formal advertising increased from 11.9 percent of obligations in fiscal year 1961 to 14.2 percent in fiscal year 1966. Increases in the use of two-step advertising have also been achieved. Two-step advertising was at a level of $85 million in fiscal year 1962; increasing to $726 million in fiscal year 1965 and equaling $926 mfflion in fiscal year 1966. Two-step advertising is an example of consolidation and refinement of existing procurement management improvement programs designed to provide increased cost savings. The concepts of the cost reduction program are more important now than ever before. In particular, procurements must continue on a sound rather than an expedient basis in order to offset the increasing costs of SEA operations. Extraordinary disciplines have been established to review any proposed shift from competitive procure- ment to sole source procurement. II.B. Shift from GPFF to fixed or incentive price contracts A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal Budgeted savings Fund savings Total Army Navy Air Force Total $111 142 347 $111 142 347 $123 (9) 66 $234 133 413 $151 151 368 600 600 180 780 670 77-601-67------8 PAGENO="0114" 106 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 Progress in this area through fiscalyear 1966 is charted below: COST PLUS FIXED FEE CONTRACTS AS A PERCENT OF TOTAL CONTRACT AWARDS .8 The percentage of CPFF awards to total awards by military de- partment is as follows: [In percent] Fiscal year- 1961 (9 months) 1964 1965 1966 Army . Navy - 32.8 24.3 50.6 13.5 11.1 14.4 11.9 9.4 10.4 13.8 14.2 6.7 Air Force - DOD average 38.0 12.0 9.4 9.9 The following table shows *the trend away from CPFF contracts since 1961 and the shift to fixed-price and incentive types: Year Percent Fixed price types less incentive Incentive type CPFF Other Firm Other Total CPIF FPI Total 961 31 a 1962 38. 0 1963 41. 5 1964 46. 3 1965 52.8 1966 57.5 1~ 9 10.8 7. 6 6. 4 4.9 3. 5 46 7 48.8 49.1 52. 7 57. 7 61. 0 3 " 4. 1 11. 7 14. 1 11.2 8.3 11 9 12. 0 15.8 18. 5 16. 6 15.9 14 4 16. 1 27. 5 32. 6 27.8 24.2 36 6 32. 5 20. 7 12. 0 9.4 9.9 2 3 2. 6 2. 7 2. 7 5. 1 4. 9 195i 1957 195i 1959 1955 1961 1962 1963 1964 8965 1916 1967 PAGENO="0115" BACKGROUND: ECONOMY. IN GOVERNMENT-l.9 6~7 107 Early progress reports in this area were mainly concerned with reporting the shift from CPFF contracts to incentive contracts. Qualitative improvement in incentives as well as the quantitative increases were discussed in subsequent reports. The sizable shift from CPFF contracts to firm-fixed-price contracts should be high- lighted. rfhe firm-fixed-price contract is the preferred contract type under most conditions. Under the firm-fixed-price contracts, the contractor assumes full cost responsibility and guarantees to deliver a product meeting our specifications-this is, in effect, the best form of in- centive contract, with the contractor assuming responsibility for all costs under or over target at the start of the contract period. Firm-fixed-price contracts, as a percent of total obligations, have increased from 31.5 percent in 1961 to 57.5 percent as of June 30, 1966. During the same period, incentive contracts (both CPIF and FPIF) have increased from 14.4 percent in 1961 to 24.2 percent of total obligations as of June 30, 1966. Studies have been initiated to seek out improvements that can be made in incentive contracting and contract management procedures. This is part of a continuing evaluation program to develop the best interrelated support that can be provided for the procurement process. Moving away from the less desirable CPFF form of contracting does not imply a total shift away from CPFF. The CPFF form of contract may be used where appropriate for the performance of re- search, or preliminary exploration or study were the level of effort is unknown. One of the first multiple-incentive contracts, the contract for the VELA Nuclear Detection Satellite, has been completed. Under this CPIF development contract, the contractor earned 11.9 percent fee (profit) on target cost compared with a target fee of 8.3 percent. The incentive increase in fee of $869,000 over target fee was the result of the contractor achieving 97.2 percent of the possible performance awards. The contractor for this important arms control satellite has stated that technical excellence and effective cost controls are not at odds. The multiple-incentive concept emphasizes these mutually reinforcing objectives. 11.0. Direct purchase breakout A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal Budgeted savings Fund savings Total Army Navy AirForce $2 $1 6 5 $1 8 5 $1 8 5 $5 1 Total 2 12 14 14 6 Direct purchase breakout concerns the purchase of items by the Government directly from item manufacturers instead of through prime contractors. The objective is to eliminate middleman costs. PAGENO="0116" 108 BACKGROUND: ECONOMY IN GOVERNMENT-1967 The preponderance of the savings realized during fiscal year 1966 was on the procurement of spares and repair parts as documented in the DOD spare parts procurement report. II.D. Multiyear procurement A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Rea1ize.~ cost avoidance savings Total realized savings Fiscal year 1966 goal Budgeted savings Fund savings Total Army Navy Air Force Total $30 23 17 $30 23 17 $30 23 17 $22 12 6 70 70 70 40 The objective of this area is to obtain lower contract prices by awarding contracts covering requirements for two or more program years in lieu of separate contracts each year. All departments exceeded their respective fiscal year 1966 goals. Examples of savings reported in this area follow: Unit price Fiscal year 1966 net savings Single year Multiyear Army: Personnelcarrier,M-113 $19,313 1,743 49, 536 43, 642 1, 917 24 56 101 153 8, 600 116 2,501,895 15, 509 1, 967 910 $17,369 1, 625 47,492 42, 356 1,720 22 52 94 135 7, 462 88 2,024,118 14, 498 1, 547 845 $1,769,040 930, 430 367, 948 149, 658 169, 684 233,000 141, 290 335, 511 1,089,152 255, 865 697,425 2,388,885 244, 662 448, 100 101,800 Engines, LD-465 Recovery vehicle, 51-578 Gun, howitzer, 8-inch, 51110 Receiver-transmitter, RT-246 Projectile, 105 mm., M4S6E1 Navy: Bomb fin, 51K 14 Bomb, 51K 81 (empty) Bomb, IlK 82-1 (empty) UHF multicoupler AN/SRA-33 Sonobuoy, AN/SSQ-41 Aircraft C-2A Air Force: Attitude ref. and computer system Pylon assembly, SUU-1 Altimeter, AAU-19/A II.E. Letter contracts The status of letter contracts as of June 30, 1966 was: [In millions of dollars] On hand Overage Percent overage Army Navy AirForce Department of Defense $831 1,070 809 $148 574 539 17.8 53.6 66.6 2, 710 1, 261 46. 5 PAGENO="0117" BACKGROUND: ECONOMY IN GOVERNMENT-i 967' 109 The dollar volume of letter contracts on hand continues to increase, from $1.9 billion as of March 31, 1966, to $2.7 billion on June 30, 1966. This increase is largely attributable to priority actions required in support of Vietnam operations. Of more significance, however, is the increase in timely definitiza- tion of letter contracts. On December 31, 1962, when letter contracts on hand reached a peak of over $3 billion, 66 percent of the dollar volume were over 6 months old. As of March 31, 1962, only 47 percent of the dollar volume were overage and as of June 30, 1966, only 46.5 percent. of the dollar volume on hand were over 6 months old. II.F. Reduction in undefinitizeci change orders The dollar value of undefinitized changes increased during fiscal year 1966, primarily as a result of increased southeast Asia activity. However, the percentage of dollar value of undefinitized change orders over 6 months old decreased from 45 percent at the end of fiscal year 1965 to 38 percent at the end of fiscal year 1966. This is most significant as timely definitization is necessary to insure mini- mum risk to the Government. III. REDUCING OPERATING COSTS III.A. Terminating unnecessary operations A summary of the savings realized in this area during fiscal year 1966 is as follows: The net annual savings expected to ultimately accrue from decisions to terminate unnecessary operations are reported as decision savings when such decisions are announced. Hard savings are reported in the year actually realized. Savings and related data pertaining to decision actions through June 30, 1966, follow: Realized hard savings Unrealized decision savings Total hard and un- realized decision savings Fiscal year 1966 goal Budgeted savings Fund savings Total Army Navy Air Force DSA Total $196 137 432 3 $26 $196 137 458 3 $65 76 507 8 $261 213 965 11 $200 185 750 13 768 26 794 656 1,450 1,148 [Dollar amounts in millions] Army Navy Air Force DSA Total A. Number of actions . B. Acres released (thousands) C. Acquisition cost D. Personnel space reduction 1. Military 2. Civilian ... E. Annual savings 268 430 $1, 434 36, 309 274 263 $1, 371 34, 117 329 1, 116 $3, 561 130, 734 7 1, 113 878 1, 809 $6,366 202, 273 11, 409 24,900 18, 100 16, 017 101,993 28, 741 129 984 131, 631 70, 642 $261 $213 $965 $11 $1,450 PAGENO="0118" 110 BACKGROUND: ECONOMY IN GOVERNMENT-1967 III.B.1. DSA operating expense savings A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal Budgeted Fund Total savings savings DSA $58 $2 $60 $4 $64 $57 Total savings of $64.4 miffion have been achieved in this area as follows: $3 1.3 miffion in personnel savings initially achieved upon the establishment of DSA; $11.9 million in distribution system savings; $6.1 mfflion from consolidation of the Defense Automotive Supply Center and Defense Construction Supply Center; $4.9 million from productivity increases; $2.3 mfflion from improvements in the manage- ment of ADPE; $1.7 mfflion from closures of Defense Surplus Sales Office and $6.2 million from miscellaneous actions. III.B.2. Consolidation of contract administration A summary of the savings realized in this area during fiscal year 1966 is as follows: DSA Realized hard savings Unrealized decision savings Total hard and un- realized decision sivings Fiscal year 1966 goal Budgeted Fund Total savings savings DSA.. $5 $5 $14 $19 $19 The total savings ($19 million) for this area are anticipated to be achieved by personnel reductions resulting from the consolidation of contract administration functions within the Department of Defense. A hard saving of $4.6 million was achieved by end of fiscal year 1966. IJI.B.3. Departmental operating expense savings A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal Budgeted savings Fund savings Total Army Navy Air Force Total $6 30 104 $16 10 64 $22 40 168 $25 3 15 $47 43 183 $20 15 100 140 90 230 43 273 135 This area is used tO report saving~ which are not specifically re- portable in any other cost reduction area. During fiscal year 1966 there were many thousands of individual actions reported by the military departments which produced savings in departmental PAGENO="0119" BACKGROUND: ECONOMY IN GOVERNMENT-i 9 6~7 111 operating expenses. Most of these actions were initiated at field installations and produced savings of less than $100,000 each. Several examples of the savings reported in this area follow: Army Savings of more than $3 million were realized during fiscal year 1966 through improved management of automatic data processing systems. Consolidation of APP activities, improved equipment utilization management, use of metering devices to compute APPlE utilization and purchasing rather than leasing APP equipment are typical types of actions which produced savings. Installation of an automated cargo planning data system produced savings of $131,000 by reducing demurrage costs, increasing the tonnage loaded per rail car and eliminating double handling of cargo. Air Force Net savings of $638,900 were realized by improvements in the area of automatic data processing. One typical action was the replace- ment of PCAM equipment with B263 computers at Air Training Command bases. This action saved $242,800 after deducting the cost of the new equipment. Net savings of $124,300 were realized by a change in processing vinyl base charts. Previously, vinyl charts were printed on only one side. Under the new process, two-side printing is accomplished. 111.0.1. Improving telecommunications management A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1066 goal Budgeted savings Fund savings Total Army Navy Air Force DCA Total - $47 9 89 2 $1 1 3 1 $48 10 92 3 $2 21 $50 10 113 3 $46 6 ~ 2 147 6 153 23 176 137 Savings were achieved in this area from the following actions: Action Army Navy Air Force DCA Total Consolidation and integration of leased lines TELPAK Disapprovalofprogramobjectives Conolidation, elimination, and noninstallation of circuits, equipment and systems, including main- tenanceandoperations.. Reduction in base communications and maintenance $25.4 19.2 6.2 $10.1 .2 $66.8 45.5 . $0.7 1.9 $103.0 19.2 52.8 operations Miscellaneous Total .5 .7 .3 1.2 .3 50.3 10.3 113.3 2.6 176.5 PAGENO="0120" 112 BACKGROUND: ECONOMY IN GOVERNMENT-l9 67 111.0.2. Improving transportation and traffic management A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal Budgeted savings Fund savings Total Army Navy Air Force Total $31 12 37 $1 1 2 $32 13 39 $25 10 14 $57 23 53 $14 7 25 80 4 84 49 133 46 Savings were achieved in this area from the following actions: Army Navy Air Force Total Reduction in overseas mail costs Reduction in through bifi household goods costs Increased use of less than 1st class air travel Reduction in MAC airlift contract costs $12.8 10.6 5. 5 21.3 6.7 $1.8 2. 5 6.6 9.2 3.0 $5.0 10. 6 5. 4 18. 5 13.9 $19. 6 23.7 17. 5 49.0 23. 6 Miscellaneous Total 56.9 23. 1 53.4 133.4 111.0.3. Eqnipm ent maintenance management A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal Budgeted savings Fund savings Total Army Navy Air Force Total $9 44 23 $14 3 SO 58 26 $24 6 6 $33 64 32 $58 60 110 76 17 93 36 129 228 Examples of savings achieved in this area are as follows: Army Budgeted savings of $3.2 million were realized during fiscal year 1966 by elimination of depot levelmaintenance on general purpose tactical support vehicles (3%_, 23/2-, and 5-ton trucks). Maintenance support is now provided at the general support level. The consolidation of maintenance activities in Army operations in Europe (TJSARETJR) improved maintenance management, reduced manpower and saved $224,000 during fiscal year 1966. Navy Adoption of a process for reclaiming turbine nozzle guide vanes on J-52 and J-57 engines produced savings of $9.7 million during fiscal PAGENO="0121" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 113 year 1966. Bent, bowed, and distorted guide vanes which were previously discarded are now reclaimed, repaired, and used in the engine overhaul program. Savings totaling $668,211 were realized through reorganizations and improvements in procedures. Air Force Savings of $548,000 were achieved from a review of operational training requirements and analysis of maintenance data with a resultant reduction in inspection requirements. III.C.4. Noncombat vehicle management A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal . * Budgeted savings Fund savings Total Army Navy Air Force Total $8 6 10 $4 2 $12 6 12 $7 2 5 $19 8 17 $18 3 12 24 6 30 14 44 33 Savings of $9.9 million were realized through procurement of 2,745 commercial type vehicles in lieu of military design vehicles. The balance of the savings reported in this area resulted from many individual actions. These include the consolidation and realinement of functions, improved methods and procedures, reduction in vehicle inspections, increased time between maintenance cycles with im- proved maintenance scheduling, increased use of motor pools and radio controlled operations through more effective dispatching, reduction in personnel required through additional application of user driver operation of vehicles, and reduction in overage vehicles. III. C.5. Use of contract technicians A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal Budgeted savings Fund savings Total Army Navy Air Force Total $7 $1 1 $8 1 $8 1 $9 4 17 7 2 9 9 30 The reported savings resulted from an accumulation of many in- dividual actions. Typical actions were the replacement of contract technical instructors with direct hire civilians, reductions through consolidation of requirements, reduced travel and overtime by im- PAGENO="0122" 114 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 proved work scheduling, and replacement of contract technicians with military or civilian direct hire personnel. 111.0.6. Improving military hovsing management A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings - Budgeted Fund Total savings savings Savings in this area were achieved from many actions taken at installations throughout the world. Implementation of a DOD policy decision prohibiting furniture procurement for initial issue in new housing units produced significant savings in fiscal year 1966. Increased utilization of family housing quarters, intensified engineer- ing reviews of repair projects, centralized labor force scheduling, utility conservation programs and use of satisfactory but less costly materials for repairs and maintenance are other typical actions which produced savings during fiscal year 1966. 111.0.7. Real property management A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal Budgeted savings Fund savings Total Army $7 Navy 19 Air Force 15 Total 41 S7 $4 23 9 24 $8 1 5 $15 24 29 $16 16 22 13 54 14 68 54 The savings achieved in this area represent the accumulation of many individual actions in the functions necessary to maintain and operate the real property at the more than 7,000 installations through- out the world. Typical management actions are those which resulted in lower utility rates, adapting modern methods and techniques to increase labor performance and consolidation and simplification of the maintenance and operation functions to reduce manpower, ma- terial and equipment requirements. PAGENO="0123" BACKGROUND: ECONOMY IN GOVERNMENT-i 967. 115 111.0.8. Packaging, preservation, and packing A summary of the savings realized in this area during fiscal year 1966 is as follows: Realized hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal Budgeted savings Fund savings Total Army Navy Air Force DSA Total $6 4 1 $1 2 15 1 $1 8 19 2 $5 1 4 1 $6 9 23 3 $3 4 5 1 11 19 30 11 41 13 Achievements in this area during fiscal year 1966 were outstanding. Each military department and the DSA exceeded their individual goal by more than 100 percent. In total, savings for this area ex- ceeded the goal by more than 210 percent. Examples of savings achieved during fiscal year 1966 are as follows: Army A saving of $262,400 was realized by using wood skids in ]ieu of pallets for shipping 105mm cartridges. In the past, fuzes were repacked in a metal box with polystyrene supports and two such boxes were overpacked in a wirebound wooden box. Savings of $426,000 were realized during fiscal year 1966 by changing th9 method of packing so that use is made of the same ma- terial in which the fuzes were received. Navy Savings of over $1.9 million were realized during fiscal year 1966 by using salvage ships in lieu of MSTS ships, as previously used, to dispose of unserviceable ammunition. Savings of $505,000 were realized from a management action where- by removal of the ICC hazardous classification ("class A explosive") for otto fuel was obtained. This permitted use of a less expensive container. Formerly, regulations required use of a polyethlene con- tainer packed in sawdust inside a 15-gallon stainless steel drum. Air Force Savings of $13.8 mi]lion were realized by redesigning the packing used for bomb fin assemblies so that 6 to 12 assemblies could be shipped in cleated plywood containers instead of packing each assembly in a separate metal crate. Savings of $341,000 were achieved by developing a new container concept for C-141 aircraft engines which would satisfy both air and surface shipment requirements plus long-term storage requirements. A moisture vaporproof flexible container is used under this new con- cept. Previously metal containers were isued. PAGENO="0124" 116 BACKGROUND: ECONOMY IN GOVERNMENT-1967 DSA Savings of $93,000 were realized by accepting the contractor's modified commercial packaging for engine repair parts in lieu of mili- tary level A packaging as previously required. IV. MILITARY ASSISTANCE PROGRAM (MAP) A summary of the savings realized in this area during fiscal year 1966 is as follows: Reallzed hard savings Realized cost avoidance savings Total realized savings Fiscal year 1966 goal Budgeted Fund Total savings savings MAP $3 $3 $6 $9 $100 All savings in this area have resulted from actions reported by the four Unified Commands (CINCPAC, CINCSOUTH, CINCSTRIKE and CINCEUR). Details on most of the individual actions are classified. PAUL R. IGNATIUS, Assistant Secretary of Defense (Installations and Logistics). ATTACHMENT A DOD cost reduction program-Cost reduction savings reflected in budget estimates 1 [In millions of dollars] Fiscal year 1933 1965 total total ~ ~ 1966 total 1967 Accom- Planned Total plished I. RTJYING ONLY WHAT WE NEED A. Refiningrequirements calculations: 1. Major items of equipment: Army Navy Air Force Total - 2. Initial provisioning: Army Navy Air Force D SA Total 3. Secondary items: Army Navy Air Force DSA Total S75 $156 569 5 1 1 1 $69 190 ~ 5-36 240 97 $80 624 43 $75 413 2 293 373 747 490 156 646 9 37 86 19 86 28 106 78 47 24 47 24 133 133 184 47 24 71 34 78 525 33 25 81 448 52 22 55 661 61 6 469 3 5 9 469 5 670 607 799 475 8 483 4. Technical manuals: Army Navy Air Force Total 3 1 4 8 6 5 1 9 2 8 See footnote at end of table, p. 119. PAGENO="0125" BACKGROUND: ECONOMY IN GOVERNMENT-i 9 67 117 DOD cost reduction program-Cost reduction savings reflected in budget estimates 1-Continued [In millions of dollars] Fiscal year 1964 1965 1966 total total total Accom- plished 1967 Planned Total BUYING ONLY WHAT WE NEED-con. $1 $1 $2 $4 $1 1 $2 1 1 A. Refining requirements, etc-Con. 5. Technical data and reports: Army Navy Air Force DSA Total 6. Production base facilities: Army Navy Air Force Total B Increased use of excess inventory: 1. Equipment and supplies: Army Navy Air Force D SA Total 2. Redistribution of idle produc- tion equipment: Army Navy Air Force Total 3. Excess contractor inventory:~ Army Navy Air Force Total - C. Eliminating goldplating: 2 4 2 2 1 3 13 17 13 19 9 7 5 11 3 41 31 30 5 30 5 16 16 75 35 35 1 1 1 1 1 1 3 3 3 1 1 3 3 3 6 Navy 5 Air Force DSA 3 3 7 5 20 10 48 Total D. Inventory item reduction: Army Navy Air Force DSA 19 37 33 12 60 33 31 97 7 14 15 83 56 112 168 1 1 52 68 19 20 6 Total, buying only what we need H. BUYING AT THE LOWEST SOUND PRICE A. Shift from noncompetitive to compet- itive procurement: Army 72 89 6 68 26 95 1,142 1,168 1,973 1,165 348 Air Force DSA 1,513 53 67 116 44 44 61 71 128 206 206 60 75 167 205 205 2 3 3 See footnote at end of table, p. 119. 176 216 414 455 455 PAGENO="0126" 118 BACKGROTJND: ECONOMY IN GOVERNMENT-1967 DOD cost reduction program-Cost reduction savings reflected in budget estim ates 1-Continued II. BUYING AT THE LOWEST SOUND PRICE- continued B. Shift from CPFF to fixed or incentive price: Army - Navy Air Force DSA Total C. Direct purchase breakout: [in millions of dollars] Navy Air Force Total D. Multiyear procurement: Army Navy Air Force Total Total, buying at lowest sound price III. REDUCING OPERATING COSTS A. Terminating unnecessary operations: Army Navy Air Force DSA Total B. Consolidation and standardization of operations: 1. DSA operating expense savings 2. Consolidation of contract ad- ministrator, DSA 3. Departmental operating ex- pense savings: Army Navy Air Force Total C. Increasing efficiency of operation: 1. Improving telecommunication management: Army Navy Air Force DCA Total 2. Improving transportation and traffic management: Army 5 Navy Air Force 7 DSA Total I 12 See footnote at end of table, p. 119. Fiscal year 1964 total 1965 total 1966 total 1967 Accom- plished Planned Total $120 65 251 $111 142 346 $132 153 346 $132 153 346 436 599 631 631 9 " $9 1 21 42 21 51 1 10 63 73 $176 652 1.015 10 1,149 1,159 59 52 199 68 30 236 100 67 382 9 170 152 581 2 170 153 581 310 359 551 905 7 912 38 53 57 57 5 2 57 7 7 15 2 6 6 6 15 3 18 86 137 137 7 20 94 158 3 161 57 1 61 7 4 38 40 5 83 1 25 8 113 1 1 26 8 113 1 119 49 129 147 1 148 5 2 1 17 18 3 3 3 ::- PAGENO="0127" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 119 DOD cost reduction program-Cost reduction savings reflected in budget estimates 1-Continued [In millions of dollars] Fiscal year 1964 total 1965 total 1966 total 1967 Accom- pushed Planned Total III. REDUCING OPERATING COSTS-cofl. C. Increasing efficiency of operation-Con. 3. Improving equipment mainte- nance management: Army Navy Air Force Total 4. Noncombat vehicle manage- ment: Army Navy Air Force Total 5. Use of contract technicians: Army Navy Air Force Total 6. Improving military housing management: Army 2 2 Navy 4 - Air Force - -- 6 - Total 12 2 7. Improving real property management: Army Navy Air Force Total 8. Packaging, preservation and packing: Army Navy Air Force DSA Total Total, reducing oper- ating costs IV. MILITARY ASSISTANCE PROGRAM Total, MAP Total program Summary: Army Navy Air Force DSA DCA $3 $9 $15 $7 $7 25 37 24 32 $3 35 63 69 81 81 28 109 108 120 3 123 12 12 9 3 9 1 2 12 8 2 9 4 12 12 12 21 15 10 25 1 1 7 1 1 7 8 2 17 7 1 2 1 18 9 2 18 9 9 27 8 21 29 2 4 4 4 6 4 8 2 8 14 4 4 6 14 12 13 19 2 1 8 1 8 8 11 6 11 19 6 2 3 9 27 36 8 44 1 1 1 1 1 3 2 3 1 3 5 1 ~i 1 3 5 4 545 641 1,066 1,475 *98 1,573 1, 863 2, 461 4, 054 2, 650 1, 595 4,245 322 484 979 78 399 698 1,250 114 546 1,237 2,122 148 1 306 723 1,536 84 1 269 619 674 33 575 1,342 2,210 117 1 9 Total program 1,863 2, 461 4, 054 2,649 1,596 4,245 1 Savings identified and reported as reflected in the original presidential budget for each fiscal year. PAGENO="0128" 120 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 ATTACHMENT B Department of Defense cost reduction program, fiscal year 1966 I. Buying only~what we need: A. Refining requirements calculations: 1. Major items of equipment: Army Navy Air Force Total Initial provision- ing: Army Navy Air Force Total 3. Secondary items: Army Navy Air Force DSA Total 4. Technicalmanuals: Army Navy Air Force Total 5. Technical data and reports: Army Navy Air Force Total 6. Production base facilities: Army Navy AIr Force Total B. Increased use of excess inventory: 1. Equipment and supplies: Army Navy Air Force DSA Total 2. Redistribution of idle produc- tion equip- ment: Army Navy Air Force DSA Total [In millions of dollars] Summary of area Realized hard savings Budg- Fund eted savings Total savings Cost avoid- ance and unreal- ized decision savings Total savings 1 Fiscal year 1966 goal Fiscal year 1967 goal $132 500 96 $5 61 9 $137 561 105 $15 $137 561 120 $120 652 107 $125 665 100 728 75 803 15 818 879 890 - 25 175 1 14 1 39 175 1 7 2 39 182 20 109 78 4 50 50 200 15 215 8 223 207 104 3 17 14 17 2 3 34 2 14 5 5 8 34 7 14 35 100 594 46 16 30 300 10 34 19 53 10 63 775 356 3 2 1 2 3 1 4 5 3 1 9 3 3 6 3 1 4 5 3 8 5 13 12 8 1 2 1 2 7 2 4 7 5 8 7 4 15 5 5 8 5 3 12 3 10 13 13 26 28 20 4 4 4 4 2 3 4 3 4 4 4 9 7 3 46 11 9 3 25 17 6 71 28 9 142 213 169 2 148 284 197 11 222 190 20 15 157 200 20 10 69 45 114 526 640 447 387 8 7 5 S 7 5 51 14 2 59 21 7 1 2 5 7 2 ~20 20 2 69 2 89 3 14 See footnotes at end of table, p. 123. PAGENO="0129" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 121 Department of Defense cost reduction program, fiscal year 1966-Continued [In millions of dollars] I. Buying only what we need- Continued B. Increased use of excess inventory-Con. 3. Excess contractor inventory: Army Navy Air Force Total C. Eliminating goldplating: Anny Navy Air Force DSA Total D. Inventory item reduction: Army Navy Air Force DSA Total Total buying only what we need__ -- r. Buying at the lowest sound rice: A. Shift from noncom- petitive to compet- itive procurement: Army Navy Air Force DSA Total percent competitive 2 Total amount of savings B. Shift from CPFF to fixed or incentive price: Army Navy Air Force Total percent CPFF~ Total amount of savings C. Direct purchase breakout: Army Navy Air Force Total D. Multi-year procurement: Army Navy Air Force Total Total buying at lowest sound price $3 $3 $28 28 (2) (2) Summary of area Realized hard savings Cost I avoid- ance Total and unreal- savings 1 ized decision Fiscal year 1966 goal Fiscal year 1967 goal Budg- eted savings Fund savings Total . savings $3 28 (2) $4 $3 8 1 3 26 29 29 17 4 48 44 71 5 36 62 39 19 84 106 110 24 $76 8 84 3 160 114 194 27 70 132 150 12 136 160 200 20 168 156 324 171 495 364 516 (4) (1) 68 17 (4) (4) (3) 13 (8) (5) 65 30 (8) (5) 65 30 1 62 19 62 37 80 1, 290 2 375 82 1, 665 817 82 2,482 82 2,823 99 2,405 65 128 167 3 59 116 13 65 187 283 16 per- del- cent lars 43.9 65 38.4 187 25.8 283 92. 1 16 per- del- cent lars 49.0 116 40.4 155 21.4 167 91. 6 3 per- del- cent lars 43.0 40 40.4 207 21.4 207 91. 6 3 363 188 551 44.4 551 40.5 441 42.0 457 1111 142 347 111 142 347 123 (9) 66 per- del- cent lars 13.8 234 14.2 133 6. 7 413 per- del- cent lane 10.0 151 8.5 151 12. 5 368 per- del- cent lars 15.0 180 10.4 153 7.0 368 ~600 ~600 180 9.9 780 9.8 670 9.8 701 2 1 6 5 1 8 5 1 8 5 5 6 1 1 2 12 14 14 6 7 30 23 17 30 23 17 30 23 17 22 12 6 35 30 10 -~ 965 70 270 70 1,235 180 70 1,415 40 1,157 75 1,240 See footnotes at end of table, p. 123. 77-0Ol-67----9 PAGENO="0130" 122 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 Department of Defense cost reduction program, fiscal year 1966-Continued III. Reducing operating costs: A. Terminating unnec- essary operations: Army Navy Air Force DSA Total B. Consolidation and standardization: 1. DSA operating expense 2. Consolidation of contract ad- ministration - 3. Departmental operating ex- pense savings: Army Navy Air Force TotaL C. Increasing efficiency of operation: 1. Improving tele- communica- tion manage- ment: Army Navy Air Force DCA Total 2. Improving trans- portation and traffic man- agement: Army Navy Air Force Total 3. Improving equip- ment mainte- nance manage- ment: Army Navy Air Force ______ Total 4. Noncombat ve- hicle manage- ment: Army 8 Navy 6 Air Force 10 Total ~ _____± 5. Use of contract technicians: Army 7 1 Navy i 1 Air Force Total 7~ 2 [In millions of dollars] Realized hard savings * Cost avoid- ance Summary of area Budg- eted savings Fund savings Total and unreal- ized decision savings Total savings 1 Fiscal year 1966 goal Fiscal year 1967 goal $106 137 432 3 $26 $196 137 458 3 $65 76 507 8 $261 213 965 11 $200 185 750 13 $262 205 962 15 768 26 794 ~656 1,450 1,148 1,444 58 5 2 60 5 4 14 64 19 57 19 62 19 6 30 104 16 10 64 22 40 168 25 3 15 47 43 183 20 15 100 44 30 230 140 90 230 43 273 135 304 47 9 89 2 1 1 3 1 48 10 92 3 2 21 50 10 113 3 46 6 83 2 33 10 120 2 147 6 153 23 176 137 165 31 12 37 1 1 2 32 13 39 25 10 14 57 23 53 14 7 25 43 10 30 80 4 84 49 133 46 83 9 44 23 14 3 9 .58 6 24 6 6 33 64 32 58 60 110 45 60 60 76 17 73 36 129 228 165 4 12 6 12 7 2 5 19 8 17 18 3 12 19 7 14 30 14 44 33 8 1 40 8 1 9 9 4 17 9 1 9 -~---~ 10 See footnotes at end of table, p. 123. PAGENO="0131" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 123 Department of Defense cost reduction program, fiscal year 1966-Continued III. Reducing operating costs- Continued C. Increasing efficiency of operation-Con. 6. Improving mili- tary housing management: Army Navy Air Force Total 7. Improving real property management: Army Navy Air Force Total 8. Packaging, pres- ervation and packing: Army Navy Air Force DSA Total Total reduc- ing operating costs IV. Military assistance program (MAP): ISA Total MAP Total program Summary by major category I. Buying only what we need.. II. Buying at the lowest sound price III. Reducing operating costs... IV. Military assistance program... Total program Summary by Depart- ment/Agency Army -~ Air Force DSA DCA MAP Total program [In millions of dollars] Summary of area Realized hard savings Cost avoid- ance and unreal- ized decision savings Total savings 1 Fiscal year 1966 goal Fiscal year 1967 goal Budg- eted savings Fund savings Total $4 6 5 $3 $4 6 8 $4 4 2 $8 10 10 $7 5 7 $6 8 7 15 3 18 10 28 19 21 7 19 15 4 9 7 23 24 8 1 5 15 16 24 16 29 22 19 17 22 41 13 54 14 68 54 58 6 4 1 1 2 15 1 1 8 19 2 5 1 4 1 6 3 9 4 23 5 3 1 4 5 5 1 11 19 30 11 41 13 15 1,372 Air Force 188 1,560 874 2,434 3 3 6 9 1,919 100 2,386 30 3, 627 3 836 3 4,463 6 1, 877 9 6,340 100 5,999 31 6, 062 1, 290 965 1, 372 375 270 188 3 1, 665 1, 235 1, 560 3 817 180 874 6 2, 482 1, 415 2, 434 9 2, 823 1, 157 1,919 100 2, 405 1, 240 2,386 31 3, 627 836 4, 463 1, 877 6, 340 5, 999 6, 062 680 1.174 1, 656 115 2 105 334 345 48 1 3 785 1,508 2, 001 163 3 3 567 330 939 35 6 1, 352 1,838 2, 940 198 3 9 1, 164 1,827 2, 721 185 2 100 3, 627 836 4, 463 1,877 6, 340 1, 197 1,865 2, 791 177 2 30 5, 999 1 Includes certain one-time savings not expected to recur in the same amounts in future years. 2 Fiscal year 1961 actual was 32.9 percent; fiscal' year 1966 actual was 44.4 percent; savings are 25 percent per dollar converted. 1st 9 months of fiscal year 1961 was 38 percent; fiscal year 1966 actual was 9.9 percent; savings are 10 per- cent per dollar converted. Represent savings realized from dollars converted in fiscal year 1964 and reflected in the fiscal year 1966 budget estimate. Savings are considered to be realized 2 years subsequent to year of conversion. 1 Unrealized decision savings totaling $10,000,000 have not yet been processed for audit validation. 6,062 PAGENO="0132" ~i~Ii~d ~ `1 ~ p~c~ ~. Pq~ CC (CM CD ~ :~ 0 CD CD Co CC H CD CD CD Co CD ~3 Co ~ ~C- 0~ ~* to Ltj H 0 1111: ~~:Ex" CICD b 0000000000 000 0 00000 0 ???? PP9P?? 00000 w a 0 a 0 0 0 PAGENO="0133" CD P a ~d~dO ~ ~dO ~d 0 ~ ~ I: ~ I ~ I H ~ ~ ~ ;-~:~ ~ ~ I~ I -i- ~ II ~ ! ~ ~+ E 00000 000 00000000000 00 000000000 CD CD CD ~ ~ ~ I~ ~ Q~. 0 ~.CD ~ CD CII CD CD w CD 0 t~j CD 0 0 0 I 000000 00000~ C' 0 PAGENO="0134" 126 BACKGROUND: ECONOMY IN GOVERNMENT-1967 DOD cost reduction program~-Disposition of realized fund savings, fiscal year 1966-Continued [In millions of dollars] Area number Cost reduction area/appropriation and budget activity Amount Disposition ARMY-continued Ill-C-2... Improving transportation and traffic SL 723 management. MPA . 159 Reprogramed. OMA: 2200 1. 360 Do. 2300 . 094 Do. 2800 006 Do. OMF . 104 Do. III-C-3..~ Improving equipment maintenance .382 management. MPA . 041 Do. OMA: 2300 060 Do. 2900 .004 Do. OMF . 112 Do. RDTE: 5700 .165 Do. III-C-4..... Improving noncombat vehicles man- 3.866 agement. MPA . 006 Mifitary reassigned. OMA: 2400 . 001 Reprogramed. 2800 002 Do. 2900 . 101 Do. 2000 . 019 Do. PEMA: 4500 3. 828 Do. III-C-5. Use of contract tecimicians 575 OMA: 2100 .306 Do. 2300 033 Do. 23L . 326 Do. III-C-6~ Improving military housing manage- . 800 Do. ment, military housing: 1700. III-C-7.. Improving real property management, . 028 Do. RDTE: 5700. III-C--8.~ Packaging, preserving and packing~ . 752 ASP .259 Do. PEMA: 4100 .097 Do. 4200 017 Do. 4600 . 142 Do. 4700 .162 Do. 4800 . 065 Do. RDTE: 5700 . 010 Do. NAVY I-A-i Major items of equipment 60. 800 SCN: 5 59. 600 By S/I 744, funds already authorized In fiscal year 1966 will be utilized as an offset against the fiscal year 1967 ship- building program financed by SCN. OPN: 1940 .200 Reprogramed to other OPN accounts by fiscal year 1966 apportionment process. 1950 . 600 Do. 1980 .400 Do. PAGENO="0135" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 127 DOD cost reduction program-Disposition of realized fund savings, fiscal year 1966-Continued [In millions of dollars] Area number Cost reduction area/appropriation and budget activity Amount Disposition NAvY-continued I-A-3 Secondary items R.D.T. & 11., N: Various PAMN: 6 1637 2693 0. & M.N.: 1916 1920 OPN: 1920 1925 1945 2410 2415 2426 2526 NMF NSF NIF Miscellaneous PMC: Various MC, SP: Various I-A-3 Technical manuals PAMN: 1033 1402 1407 1507 1515 1925 1535 2032 OMN: 1925 1918 2410 NIF SCN: 2445 2455 2457 BA:5 R.D.T. & 131.: 1920 9615 Reprogramed to purchase additional ma- terial. Reprogramed to other elements (cost overruns). Reprogramed $235,000 to satisfy other re- quirements under program (5741); re- programed g331,000 within the same appropriation to procure other urgently needed items. Reprogramed within the same appropria- tion to procure urgently needed items. Reprogramed to procure other urgently needed items within same appropriation. Reprogramed. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Retained in see. C limitation of various contracts to fund whatever manuals or changes that may be required during the production span. Do. Do. Do. Do. Do. Reprogramed to other elements (cost overruns) of the same fiscal year pro- grams. Do. Do. Reprogramed to reduce overhead costs. Do. Reprogramed to other elements (cost overruns) of same fiscal year program. Do. Do. .005 Do. 105 Reprogramed against other approved requirements. .007 Reprogramed to reduce overhead costs. I-A-2 Initial provisioning - NSF SCN: 2435 $14. 635 4. 099 .011 OPN: Not identified 9.355 624 16. 762 - 003 036 .357 721 621 .013 1.165 283 005 077 855 2.382 009 3. 279 5. 389 286 078 1. 140 072 1. 240 001 002 .011 034 400 080 .028 018 031 - 001 - 003 - 006 - 003 - 003 001 002 Various PAGENO="0136" 128 BACKGROUND: ECONOMY 1N GOVERNMENT-i 967 DOD cost reduction program-Disposition of realized fund savings, fiscal year 1966-Continued [In millions of dollars] Area number Cost reduction area/appropriation and budget activity Amount Disposition NAvY-continued 0. & MN.: isa-S 1095 2410 2415 2500 4105 Not identified SCN: BA-2 BA-5 2454 and 2455 MPN: 2202 R.D.T. & E., N: 1035 0340 0689 PAMN: 1036 1535 2698 Miscellaneous Miscellaneous - I-B-i Equipment and supplies - PAMN: 1637 1945 NMF NSF - 1918 2315 Various MCN: 2.561 R.D.T.&E.,N: 9481 9620 9674 0689 Various SCN: BA-S NIF OPN: 1915 1961 1926 2316 2426 Not identified Various 125 Reprogramed. Do. Do. Do. Do. Reprogramed to offset increased cost in the operations area. Do. Do. Reprogramed to other elements (cost over- runs) of the same fiscal year program. Do. Do. Reprogramed. Reprogramed to other elements (cost over- runs) of the same fiscal year program. Represents several actions each under $100,000. Reprogramed. Do. Do. Do. Do. Do. Reprogramed to other requirements under program (3320-1, $467,000,000, balance. Reprogramed. Do. Do. Do. Do. Do. Do. Reprogramed to finance other approved unfunded programs under project AIJTEC. Reprogramed within the same appropria- tion. Do. Do. Do. Reprogramed to other elements (cost overruns) of applicable fiscal year pro- gram. Reprogramed to other elements (cos- overruns) within the same appropria- tion. Reprogramed to reduce overhead costs. Reprogramed to other procurements within same appropriation. Do. Do. Do. Reprogramed to other elements (cost overruns) within the same appropria- tion. Reprogramed. Represents several actions each under $100,000. I-A-S Technical data and reports 52. 264 102 020 024 070 .015 028 009 098 023 074 .005 010 * 694 531 227 002 .055 004 078 .167 .015 23. 421 19. 947 054 006 124 .011 .010 028 023 276 .015 .037 .412 .050 .015 040 001 680 055 039 333 .915 219 PAGENO="0137" Co -~ w 0 0 to k-&~ 0 ~C COCC. Co E ~ 0 ~ CD~ Co ~ C Co w Z~Z Co 00 0 a ~ Z-~-~ a *~ ~ C ~ r ~ C ~ C ~ C C CC CC C C CC : ~ ~ : I ~ ~ ~ ~ C CC ~ (C Co~ ~ ~ ~ ~ ~ o ~ C~0 CC. CC. CCC - C ~ ~ o C 0 , CC ~ ~ ~ ~ 0 ~ ~ ~ ~ ~ c °~ ~ ~ ~ 0+0 c~ ~ ~ ~ p~ 0CC * tC ~ ~ ~ to to to to ~ to Co to Co Co to Co © to © Co © Co Co © Co Co Co Co Co Co Co Co Co Co ~ Co to Co Co to CO CCC 0 ~ 0+ Co Co Co Co C~0Co Co ??°?~9??P?P?~ 00 O00O00000O0O~qO. 0000pp?99p000000+C ~ 00 0 0 E o~ o0~ * :~+ . 0.0 Coo ~Co 00+ 0Co CC 00 ~t1 ~Co~CC 0 ~Co 0~ PAGENO="0138" 130 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 DOD cost redn~ction program-Disposition of realized fund savings, fiscal year 1966-Continued [In millions of dollars] Area number Cost reduction area/appropriation and budget activity Amount Disposition NAvY-continued R.D.T. & E.N: 2441 2445 2451 2465 Various FH, N MCN: 2531 2541 2551 2552 2559 2561 \Tarious MCNR: 2561 NMF Shift from noncompetitive to competi- tive procurement. 9 Various PMC OPN: 1910 2215 2415 2426 8416 Various 0. & MN: Various SCN: 2435 2444 2445 8426 8436 SCN: 8446 8456 Various NMF MCN Reprogramed to other elements (cost over- runs) of the applicable fiscal year pro- gram. Do. Reprogramed. Do. Do. Reprogramed to offset increased costs. Reprogramecl. Do. Do. Do. Do. Do. Reprogramed to offset cost overruns. Reprogramed. Do. Because of the statistical method of calcu- lating savings in this area, it is not pos- sible to identify realized fund savings to appropriations or budget activities. Due to the great number of individual items involved, time and workload did not allow for provision of appropriation and budget accounting documentation. Reprogramed to offset items of increased expense. Do. Do. Price of award exceeded budget account. The additional funding required was re- duced by the savings. Reprogramed to finance other elements cost overruns). Do. Do. Do. Do. Reprogramed to offset items of increased expense. Reprogramed $1,186,000 to offset items of increased expense, balance $2,298,000 re- programed. Reprogramed to offset items of increased expense. Do. Do. Reprogramed to finance other elements (cost overruns) within the same appro- priation. Do. Do. Do. Reprogramed to offset items of increased expense. Reprogramed. Do. I-C Il-A $0237 .287 237 .241 1.016 181 001 023 119 001 .006 .032 6. 060 002 2. 534 59. 700 5. 514 Il-C Direct purchase breakout II-D Multiyear procurement 22. 827 PAMN: 2.411 .386 1. 933 .321 .350 003 004 .339 3. 154 6. 629 3. 484 * 007 .013 * 021 1. 785 1.190 * 180 227 * 378 * 001 011 111-A Terminating unnecessary operations, * 100 Reprogramed to other activities. MPOMC. PAGENO="0139" a o ~ ~ z CC -1 0 CC ~ ~i. ~,0 Co Co Co © Co Co ~ Co Co Co Co Co 00 p -~ ~o 0 CC C) 0 0 CC-~. CCCC CC 0 0 CC CC 0 0 0 CC 0 C) C) C) C) C) C) 0 0) Co ~ ~ 00 0 00 ~.C) (C Co Co Co (C (C _Co~p?~ 9~ ~0 .CC ~ 00 00 ~ ~0 0* -~ Co CC ~ CC a o ~ 0 0 0 CC 0 0010 0~ (C 0 0 ci 0 0 0 (C 0 CC 0 0 0~ B 0 00 CC 0 0 (C CD 0* PAGENO="0140" 132 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 DOD cost reduction program-Disposition of realized fnnd savings, fiscal year 1966-Continued [In millions of dollars] Area number Cost reduction area/appropriation and budget activity Amount Disposition NAVY-continued 2741 3/003 Unidentified 0. & M, MC: 2710 2715 MC, N: 2561 Improving telecommunications man- agement, 0. & M., N: 1115. Improving transportation and traffic management. 0. & M, MC: Various SCN: 2 - 3 - 4 OPN: MA 2 1924 - 1946 1980 - PAMN: 1439 2689 - OM, MC: 2710 Various Noncombat vehicle management OPN: Various 0. & M, N: Various Various NIP 1.045 001 002 .243 .175 014 Reprogramed. Do. Do. Do. Reprogramed to satisfy other requirements. Do. Do. Reprogramed to fund unprogramed re- quirements resulting from the current southeast Asia operations. Reprogramed to reduce overhead costs. Reprogramed within the same appropria- tion. Do. Do. Reprogramed to other elements (cost over- runs) of the applicable fiscal year programs. Do. Do. Do. Reprogramed. Do. Reprogramed to other elements (cost overruns) of the applicable fiscal year programs. Do. Do. Do. Do. Reprogramed. Do. Do. Do. Do. Do. Do. Represents several actions each under $100,000. Represents several actions each under $100,000. Do. Do. Reprogramed to reduce overhead costs. Reprogramed to (cost overruns) program. Do. Do. Do. Do. Reprogramed to procure other Items with- in the same funding area. Reprogramed. MP, MC: $0. 018 .072 .016 .032 .089 .006 .011 1.200 .645 .063 .582 13. 399 4,957 3.372 182 - 005 1.099 Various -~ Improving equipment maintenance management. NIP 0. & M.N: 1916 1918 Reprogramed to meet other approved re- quirements. Represents several actions each under $100, 000. III-B-3_. III-C-L.. III-C-2 -. m-C-4. - - 9415 59n5 635 028 .010 .200 012 004 039 .049 .352 .747 .003 .225 598 007 .245 258 088 .506 .118 058 .017 0.31 024 .243 015 III-C-5___ Use of contract technicians OMN: SCN: lOLl finance other elements of the same fiscal year R.D.T. & E, N: 9659 Various PAGENO="0141" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 133 DOD cost reduction progra~mn-Disposition of realized fund savings, fiscal year 1966-Continued [In millions of dollars] Area number Cost reduction area/appropriation and budget activity Amount Disposition NAvY-continued III-C-7_ Improving real property management. NIF 0. & M, N: 1918 1920 O.&M.,N: 2310 2410 2410A 2415 2415A 2445 2500 4650 4805 4905 5105 - 5305 Various. O.&M.,MC. Various SCN BA-2 BA-4 BA-5~ 2424 2454 2462 R.D.T.&E.,N: 2455 2465 9689 Miscellaneous OPN: 2415 III-C-8~.... Packaging, preserving, and packing - - OPN: 1916 1925 1926 1997 2596 8406 8416 Various NMF PAMN: 1033 1505 1537 1637 1925 Program 6320.1 Program 6320.2E Program 6366.3 Miscellaneous 0. & M. N: 1918 1920 2310 2410 2520 NIF. R.D.T. & E., N: 9689 SCN: 1924 1933. MP, N: 225& Reprogramed to cover urgent station re- quirements. .156 Do. * 081 Reprogramed to other essential require- ments. Do. Do. Do. Do. Do. Do. Reprogramed to flnancs increased costs of maintenance and utilities. Do. Do. Reprogramed to other essential require- ments. Do. Do. Do. Reprogramed. Do. Reprogramed to other elements (cost over- runs) of the applicable fisca1~year~pr~~ gram. Do. Do. Reprogramed to other eleirents. Do. Do. Do. Do. Do. Do. Do. Reprogramed witlsin the same~area. Do. Do. Do. Do. Do. Do. Do. Reprogramed~to Thther7areas of expense without an increase in deposit by funding activity. Reprogramed to cover other areas of ex- pense within the~same appropriation. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Reprogramed to reduce overhead costs. Reprogramed. Do. Do. Do. $3. 464 - 076 039 .535 042 .274 .014 * 003 1, 253 .001 002 005 * 007 .001 232 182 007 .210 .192 054 .017 003 .018 .010 .011 * 022 .007 .010 ~.210 .225 * 003 001 048 229 003 123 .026 1. 029 020 * 030 * 005 * 264 * 002 .078 * 002 .053 005 * 081 .030 064 .014 * 004 * 052 .006 .001 002 001 PAGENO="0142" 134 BACKGROUND: ECONOMY IN GOVERNMENT-1967 DOD cost reductiost program--Disposition of realized fund savings, fiscal year 1966-Continued [In millions of dollars] AIR FORCE Major items of equipment A/C procurement: 1100 Missile procurement: 21133A 2'.~00 Other procurement: 8300 S400 8500 RDTE: 620673 63680-A 671357 6900 A/C procurement: 1029 1040 1500 Other procurement: 84412-L 8500 RDTE: 620,673 62325-A 0362 671559 6300 ~ Secondary items 0. & M.: Al') .003 .114 * 071 1.212 * 048 * 032 * 292 .121 * 002 2.245 .113 * 122 .011 1.126 .420 .080 004 075 009 * 057 .213 .015 6686 A/C procurement: 10476-L . 244 Missile procurement: 2013 . 152 Other procurement: S9u15 - 438 448 458 489 458 1-A-i Area number Cost reduction area/appropriation and budget activity Amount Disposition $8. 711 1. 924 * 104 * 004 .010 - 248 4.228 030 .100 268 075 .783 .050 .097 .034 .292 .083 048 .090 067 1.895 Reprogramed. Do. Do. Do. Do. Do. Do. Do. Do. Do. To be explained. Do. Do. Do. Do. Do. Do. Do. Do. Do. Reprogramed. Do. Do. Do. Do. Retained in 3,100 area for purchase of additional equipment. Savings reprogramed for other essential 0. & M. equipment and supplies. Reprogramed. To be explained. Reprogramed. Do. Do. Reallocated within program 624-A to fund requirements. Reprogramed. To be explained. Do. Do. Do. Do. Do. Do. Reprogramed. Withdrawn-applied to other programs by P/A BSD 64-81 dated Sept. 15, 1965. Reprogramed to procurement of cargo handling equipment. Reprogramed. Reprogramed to fund a new ECXC request "Klystron aging study." Funds utilized for repair of other com- ponents. 458 478 RDTE: 620 I-A-4 Technical manuals Other procurement: 8424 O.&IL: 431 RDTE: 620673 63 670 A/C procurement: i0443-Q Missile procurement: 20133 Other procurement: 84474-L O.&M.: 431 RDTE: 6337 63624-A P6199 I-~A--5 Technical data and reports e&tn 0. & M.: .302 .103 057 .002 PAGENO="0143" BACKGROtJND: ECONOMY IN GOVERNMENT-i 967 135 DOD cost reduction program-Disposition of realized fund savings, fiscal year 1966-Continued [In millions of dollars] 6363 6369-AJ/6380-A 6399 6206 A/C procurement: 6141 Various O.&M.: 8440 RDTE: 6132 Various I-A-6 Industrial production base A/C procurement: 149999 Missile procurement: 249999 249999 249999 RDTE: 63649-D Use of excess equipment and supplies - A/C procurement: 1299 1500 1510 1599 2010 2011 2013 2043 2513 2522 Other procurement: 8-M 8100 8500 0. & M.: 431 448 458 478 489- RDTE: 6262 6767 6813 6906 A/C procurement: 1032 1040 1042 1044 1053 1842 Missile procurement: 2031 2042 2999 0. & M.: 478 Reprogramed to cover cost overrun (APO4. (694)-516). Reprogramed to support program slippage. Applied with other funds to headquarters TJSAF directed requirements. Reprogramed. Funds reprogramed to other requirements. Reprogramed. Applied with other funds for unscheduled spares requirement. To be determined. Do. Do. Do. Do. Reprogramed. Retained to meet funding requirements for other nonrecurring maintenance work. $58.2 returned to headquarters AFSC and the fiscal year 1965 PA reduced. Balance of $15 retained and applied to other fiscal year 1965 projects. Applied to fiscal year 1966 requirements contract AF 33(038)-18896. Returned to SSD (SSY) for use on 649D end item. Reprogramed. Do. Do. Do. Reprogramed to support AIM-7E Sparrow missile. Reprogramed. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Reprogramed to help fund overtun on MBRV contract AFO4(694)516. Reprogramed. Do. Do. To he explained. Do. Do. Do. Do. Do. Do. Do. Do. Do. I-A-5 Area number Cost reduction area/appropriation and budget activity Amount Disposition AIR FORCE-Continued RDTE: 6262 6104 I-B-i $0. 052 038 014 $4. 023 082 062 009 1.208 038 024 236 040 3.960 3.438 * 247 073 044 .158 16. 642 .010 * 758 * 029 6.983 * 800 002 672 035 002 .297 .017 .179 - 061 002 - 042 1.144 .065 * 070 .196 033 * 582 187 2.880 123 057 003 006 .151 * 698 * 144 019 * 001 PAGENO="0144" 136 BACKGROuND: ECONOMY IN GOVERNMENT-i 967 DOD cost reduction program-Disposition of reaTized fund savings, fiscal year 1966-Continued [In millions of dollars] Amount AIR F0RcE-COntrnued RDTE: 6132 $0018 6242 .010 62 . 055 6362 . 046 6747_ .160 .5655 . 013 -- . 003 Eliminating goldplating 38.471 A/C procurement: 1100 4.219 1200 . 0~2 1500 1.375 1600 .224 2~Iissile procurement: 2000 2. 159 2100 .143 2200 . 032 Other procurement: 8100 . .178 8200 .058 8400 1.849 8500 . 299 8800 .188 MCAF: P-321 . 024 0. & M.: P-in . 003 4.300 . 222 RDTE: 2800 .021 6200 1.332 6300 4. 045 A/C procurement: 476-L . 040 A/C procurement: 1000 2.976 1100 .922 1300 . 083 1500 . 057 1800 *038 Missile procurement: 133B 2.036 2000 1.536 2100 . 146 Other procurement: 8100 10. 691 8200 .100 8400 .003 8700 8S00 .286 MCAF: P-331 .135 RDTE: 2900 .135 6100 . 685 6209 ~ 3600 .942 6900 .037 Shift from noncompetitive to competi- $116. 000 tive. Direct purchase breakout 5. 000 Multiyear procurement 17.400 A/C procurement 6.948 Missile procurement . 026 { `:~ A/C procurement 4.661 Missle procurement (Navy) 2. 140 0. & M, (Navy) . 079 RDTE .054 Unknown (Army) 1.232 Disposition To be explained. Do. Do. Do. Do. Do. Do. All reprogramed within same BPAC. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Disposition to be determined. Disposition to be determined. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Not identified due to method of reporting in this area. Do. Reprogramed. Do. Do. Funds returned and applied to fund other requirements. To he determined. Do. Do. Do. Do. Area number Cost reduction area/appropriation and budget activity I-B-I I-C Il-A II-o__ - PAGENO="0145" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 137 DOD cost reduction program-Disposition of realized fund savings, fiscal year 1966-Continued [In millions of dollars] Area number Cost reduction area/appropriation and budget activity Amount Disposition AIR FORCE-Continued Ill-A Terminating unnecessary operations - - MOAF O.&M - Air Force operating expenses Family housing: 700 711 Missile procurement: 210 290 Other procurement: 850 MCAF: 321 331 0. & M.: 430 440 450 478 480 Military personnel: 510 530 562 RDTE: 620 630 670 680 690 National Guard: 529 Indus fund: 011 020 Improving telecommunications man- agement. 0. & M.: 438 448 450 458 482 489 Military personnel: 500 510 530 RDTE: 690 Improving transportation and traffic management. 0. & M.: 433 448 450 458 481 485 489 Military personnel: 510 570 Claims: 911 77-601-67-10 Reprogramed to other MOP projects. Reprogramed within appropriation to fund highest priority deficiencies, primarily increased costs associated with southeast Asia activities. Savings used to continue payment of military personnel released for reassign- ment to other essential programs. .054 Do. .019 Do. .010 Do. .644 Do. 1.428 Do. .008 Do. .036 Do. .012 Do. .617 Do. .097 Do. 2. 241 059 Used to pay for diversion of personal parcel post mail from sea to air. .199 Reprogramed. .016 Do. .352 Do. .037 Do. .038 Do. .008 Do. .459 Do. .053 Do. 1. 020 To pay other claims for damages to house- -` hold goods. $26. 057 10. 439 1.172 Military personnel 14.446 63, 968 .406 .012 .134 067 071 3.712 2.001 3.054 3.054 7.110 .849 4.117 9.347 11. 853 .230 1.480 1.110 .285 6.989 * 643 .112 015 .454 2. 925 III-B-2._ - "I-_C-i--- III-C--2_ - - Reprogramed. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. Do. PAGENO="0146" b 0 Co A I ~ Co ~ ~ ~n 0-. 0 t:i~ ~ ~ 0 A A Co Co Co 0 0 0 ~XD w 0 0 ci 0 0 0 0 z 0 CD ?~PP 9? 99?????? 9??? 9? ~ 0 Co 9?? 2???? 9? 2?? 922????? 99? 9? 9?????? ~ CD PAGENO="0147" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 DOD cost reduction program-Disposition of realized 1966-Continued [In millions of dollars] 139 fund savings, fiscal year Area number Cost reduction area/appropriation and budget activity Amount Disposition DEFENSE SUPPLY AGENCY I-A-6 Industrial production base, defense stock funds. $0. 016 Reprogramed. ~t-C Eliminating goldplating, defense stock funds. 19.400 Do. I-.D Inventory item reduction, defense stock funds. 12.900 Do. `11-A Shift from noncompetitive to competi- tive unknown, 12.800 Not identifiable due to method of reporting in this area. 111-B-i...... DSA operating expense savings, de- fense stock funds. 2.200 Reprogramed. Ill-C-&~ Packaging, preserving and packing, defense stock funds. . 800 Do. PAGENO="0148" ATTACHMENT D Department of Defense cost reduction program-Summary of manpower savings, fiscal year 1966 Sunisnary by area Hard Civilian Military Number of man-years saved Cost avoidance Civilian Military Total Civilian Military Total 17 30 74 2 99 6 1 116 80 31 2 1,342 11 91 32 105 1 196 33 229 I. Buying only what we need: lAS. Technical data and reports: Army Navy Air Force Total 1.0 Eliminating goldplatlng: Army Navy Air Force Total Total, buying only what we need III. Reducing operating costs: III.A Terminating unnecessary operations: Army Navy Air Force DSA Total III.B.1 GSA operating expense savings III.B.2 Consolidation of contract administration III.B.3 Departmental operating expense savings: Army Navy Air Force Total 111.0.1 Improving telecosamunications management Army Navy Air Force Total 28 66 28 1,408 11 1,342 11 100 1,442 11 1,453 1, 433 43 205 1 1, 638 44 1, 682 15, 649 869 11,850 404 28 1,419 9, 823 16,445 61,896 39 w a 1~ L'4 a 0 0 0 25, 472 17, 314 73, 746 443 4,139 ~-.L 3,377 C~ 21,367 ~ 15, 649 869 11, 850 404 9, 823 16,445 61,896 39 28, 772 7, 770 453 88, 203 357 25 310 28, 772 8, 080 453 88, 203 357 25 116, 975 8, 437 478 2,119 918 2,476 625 4, 773 16, 298 770 238 118 332 38 178 2, 889 2, 714 4,891 1, 250 663 16,476 9, 638 17, 841 1, 126 548 10, 494 18, 389 28, 883 63 36 190 44 9 107 45 100 152 190 63 226 44 9 107 235 342 PAGENO="0149" 111.0.2 ImprovIng transportation and traffic management: Army - 96 Air Force - - 86 Total Improving equipment maintenance management: Army Air Forc& 14 10 Improving noncombat vehicle management: Army Navy Air Force 86 14 10 96 14 110 111.0.3 111.0.4 111.0.6 111.0.7 111.0.8 14 110 235 1,074 823 181 5 1,274 349 148 1,388 584 1,222 823 1,569 5 1,274 2,132 1, 460 497 1,388 2, 629 2, 848 350 16 130 30 292 1 152 1,863 794 Improving military housing management: Army Navy Air Force Total Improving real property management: Army Navy 1,879 A .. 131 30 925 480 46 293 152 1,863 1,909 14 234 17 21 1 14 255 14 18 273 248 17 21 1 269 18 287 4,415 Packaging, preserving, and packing: Army - Navy Air Force DSA Total - Total, reducing operating costs - Total program 968 1,755 1,692 19 804 105 47 32 9 127 1,073 1,802 1,724 9 1,082 19 1,821 931 2,655 4,599 959 5,558 823 184 136 2,153 1,227 ~ 2,097 ~ 5,477 0 ci 526 !2 293 ~ 2,015 2,834 t~i a 0 0 0 tn C) 88 32 113 113 88 32 113 88 1 33 120 1 113 233 1 234 54, 221 110,846 2, 436 2, 112 56, 657 112,958 169, 615 55,654 110,889 2,641 2,113 58,295 113,002 171,297 PAGENO="0150" Department of Defense cost reduction program-Summary of manpower savings, fiscal year 1966-Continued _____ w Total 0 1,682 0 169,615 171, 297 33,936 ~ 25,621 ~ 102, 382 9, 358 171,297 0 0 H C) -4 Summary by area Number of man-years saved Hard Cost avoidanco Total Civilian Military Civilian Military Civilian Military Summary by major category: I. Buying only what we need 111. Reducing operating costs Total program Sumnmnary by department or agency: Arsny Navy Air Force DSA Total program 1,433 54, 221 43 110,846 205 2, 436 1 2, 112 1,638 56, 657 44 112, 958 55, 654 110, 889 2,641 2, 113 58, 295 113, 002 19,501 7, 970 19,556 8,627 11,018 17, 107 82,343 421 1,648 506 177 310 1,769 38 306 21,149 8, 476 10,7:13 8,937 12,787 17, 145 82,649 421 55, 654 110,889 2, 641 2, 113 58, 295 113, 002 PAGENO="0151" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 143 ATTACHMENT E Examples of increased price competition Item Noncom- petitive unit price Competi- tive unit price Percent reduction Total savings Bomb fuze, M905, tail assembly Power supply, PP-2058/ULA-2(V) Indicator pulse analyzer, IP-47l/ULA-2(V) Shroud, steering control module SP GAX-5766 ANJAPN-153(V) doppler navigation radar Extendible earth anchor, Harvey P/N44-564l1 Oxytetracycline tablets Voltage regulator, CN-514Q/GRC Case assembly, XM 188 Helicopter, 40 mm. grenade launcher, MS - Transistor test set, TS-18360U Accessory outfit, gasoline field range Propellant loading, MK36, MOD 5 TALOS guidance control and airframe Wing tank release, F-104 Attitude indicator ASROC launcher $15 1,239 4,113 750 2,924 75 5 2,273 2,392 18,827 357 123 799 138, 091 67 1,425 331, 243 $12 834 3,072 538 1,567 47 4 1,205 1,622 12, 518 240 98 510 99, 679 9 987 215,694 20 32 25 28 46 37 20 46 32 33 32 20 36 28 86 31 35 $168, 780 27,118 88,890 27, 560 4,221,135 231,800 96, 530 331,078 13, 090 1, 072,545 109,103 44, 577 177,270 3,534,870 285, 591 206, 736 4,853,058 ATTACHMENT F COST REDUCTION PROGRAM-AUDIT OPINION-YEAREND FISCAL YEAR 1966 COST REDUCTION STATUS REPORT We have reviewed the yearend fiscal year 1966 cost reduction status report under the provision of DOD directive 5010.6, May 22, 1964, and DOD instruction 7720.6, January 20, 1964. Our review, which gave consideration to the cost reduction audits performed by the Defense audit organizations, included selective evaluation of pertinent documents, records, and data and other auditing procedures deemed appropriate in the circumstances. A detailed examination of all items was not performed. Based on this review and subject to the comments contained in the body of the report and the footnotes to the report attachments, it is our opinion that, with the exception of man-years saved (attach- ment D) explained below, the savings reported conform to the criteria of the governing directive and instruction. The summary of manpower savings (attachment D) continues to include a substantial number of man-years as hard savings without corresponding reductions in authorized manpower spaces as required by change 8, dated June 10, 1966, DOD instruction 7720.6. As stated in the third quarter fiscal year 1966 audit opinion, we believe the discrepancies in manpower reporting will be corrected when the DOD components have completed implementation of change 8 which clarifies this requirement. K. K. KILGORE, Deputy Gomptroller for Audit Systems. PAGENO="0152" Appendix 3 UPDATED PROGRESS REPORT OF THE DEFENSE SUPPLY AGENCY OF THE DEPARTMENT OF DEFENSE* PREFACE APRIL 5, 1967. The material which follows has been prepared for use of members of the Subcommittee on Economy in Government of the Joint Eco- nomic Committee of the Congress of the United States for their hearings of 1967. J. C. HETLER, Captain, SC, USN, 7)eputy Assistant Director, Plans, Programs, and Systems. SINGLE MANAGER SYSTEM *Source: Director, Defense Supply Agency. COUNCIL 1-I SECRETARY OF DEFENSE AFSS CENTER MANAGER AGENCIES LEi~E~T~jij FIGu~ 1 144 PAGENO="0153" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 145 THE DEFENSE SUPPLY AGENCY The Defense Supply Agency has been in operation since January 1962 and is performing effectively all assigned missions and functions. As a major element of the Defense logistics establishment, the Agency provides responsive and efficient supply support and logistics services to its customers at less cost and thereby has fully justified its establishment. HISTORY, MISSION, AND ORGANIZATION PRE-DSA ORGANIZATION Prior to the establishment of the Defense Supply Agency, the Secretaries of the military departments were designated single man- agers of selected supply and service activities for all components of the Department of Defense (fig. 1). Their responsibilities were carried out by separately organized operating agencies within their respective military departments. These agencies achieved an envi- able record of effective support to the military services with significant reductions in operating costs and inventories. Their experience dem- onstrated the merits of a single agency furnishing common supplies and services to all military departments. Prior to the time DSA was organized, three commodity managers were assigned to the Navy, of which one, industrial, was still in the process of assuming management of assigned commodity classes. Five commodity managers and one service manager were assigned to the Army. Two of these commodity managers, automotive and con- struction, were still in the early phases of activation. Electronics management is shown in dashed lines under the Secretary of the Air Force because this commodity had already been studied and recom- mended for integrated management; and the present DSA electronics center, developed from the Air Force control center for electronics materiel, was turned over to DSA at the time of DSA's establishment. The Armed Forces Supply Support Center (AFSSC) administered the Defense-wide cataloging, standardization, and materiel utilization programs and conducted integrated management studies. Also transferred to the Defense Supply Agency, but not shown in figure 1, are the surplus property sales activities of the military departments. The Military Air and Military Sea Transport Services, shown in figure 1 as single-manager agencies, have remained in the Departments of the Air Force and Navy. MISSION The DSA mission consists basically of three major elements: Providing wholesale supply support to the military services and other Defense activities with assigned supply commodities. Administering logistics services and programs. PAGENO="0154" 146 BACKGROUND: ECONOMY IX GOVERX~IENT-1967 DoD LOGISTICAL SYSTEM - 1962 FIGu1~z 2 Providing field contract administration services to the Defense establishment and the National Aeronautics and Space Administration. DSA ORGANIZATION Figure 2 depicts the changes in the Defense supply and logistics service organization, authorized by the end of 1962. The depart- mental single managers were taken over in place, as field activities of the Defense Supply Agency, with assigned personnel, funds, equip- ment, and facilities. Their operations continued without interruption under a new and shortened chain of command. This was also true of the operational elements of the former Armed Forces Supply Support Center and the miJitary surplus property sales activities, which were assigned to the Defense Logistics Services Center, a DSA field ac- tivity. Figure 3 depicts the DSA organization today and reflects the assignment in June 1964 of contract administration functions pre- viously performed by some 165 contract management offices of the military services and DSA. DEF SUP SECRETARY OF DEFENSE FIELD ACTIVITIES PETROLEUM CLOTH & TEXI] &IEDICAL SUBSISTENCE] INDUSTRIAL GENERAL AUTOMOTIVE ~ CONSTRUCT1ON1 ~ ELECTRONICS LOG SVCS TRAFFIC ND PLANT EQPTJ PAGENO="0155" BACKGROUND: ECONOMY IN GOVERNME~'T-1 967 147 During the first 3 months of the Defense Supply Agency's existence, the Headquarters staff consisted of a planning group, most of whom were on loan from the military departments and the Office of the Secretary of Defense. Selection and assembly of a permanent staff began after the initial organization and staffing plan was approved in December 1962. The present headquarters staff, as depicted in figure 4, assists the director in the direction and control of the Agency and is concerned with broad planning and management of the total DSA mission and the establishment of long- and short-range objectives and standards of performance. Its key personnel exemplify the joint military staffing principle, with each of the military services represented at the directorate or immediately subordinate level. The assistant director, plans, programs, and systems is principal staff adviser and assistant to the director for development and application of policies, plans, programs, and systems affecting multiple DSA functional activities. The comptroller assists the director as principal financial management and manpower staff adviser. The deputy director for contract administration services acts for the director, DSA, in exercising management and operating control over CAS missions, operating programs, and supporting field activities; he is assisted by executive directors for contract administration, quality assurance, production, and by the chief of industrial security. The executive directors for supply operations, procurement, and produc- tion, and technical and logistics services are principal staff advisers and assistants to the director, DSA, in the development and applica- tion of policies, plans, programs, and systems for their respective functional areas. The counsel, the inspector general, the special assistant for public affairs, and the staff directors for installations and services, administration, military personnel, and civilian personnel perform staff support functions of a major headquarters. The field establishment is comprised of 25 major activities, identified in figure (5) by name and activity head. The military command positions are staffed on the basis of balanced military representation and are rotated among the military services. The geographical loca- tions of the 25 major DSA field activities are depicted in figure (6). PAGENO="0156" DEFENSE SUPPLY AGENCY DIRECTOR DEPUTY DIR~] w a LTI a 0 0 ic H~1 IUSPE~J ~~IRS ~~~ROLLER L~:~~J [2i~~~'] EI~~IIII1 I ~ [~I~NPICTj ~j~o~j rII,~R~(~(?:~:oI: ~r~a~0R~L@ DEPUTY DIRECTOR FOR CONTRACT ASIA IN IS IRA TION ICR VICES * TINE ~ E~~TO APPOONRO FIGuRE 3 PAGENO="0157" BACKGROUND: ECONOMY IN GOvERNME~r-l 967 149 Defense Construction Supply Center: Rear Adm. I. F. Haddock, USN. Defense Electronics Supply Center: Brig. Gen. G. J. McClernon, USAF. Defense Fuel Supply Center: Rear Adm. F. W. Martin, Jr., USN. Defense General Supply Center: Maj. Gen. R. J. Laux, USA. Defense Industrial Supply Center: Brig. Gen. J. D. Hines, USA. Defense Logistics Services Center: Col. F. Mercer, USAF. Defense Personnel Support Center: Brig. Gen. J. M. Kenderdine, USA. Defense Documentation Center: Dr. R. B. Stegmaier, Jr. Defense Depot Mechanicsburg: Col. W. H. Herndon, USA. Defense Depot Memphis: Col. T. I. Martin, USA. Defense Depot Ogden: Capt. A. J. Fisher, USN. Defense Depot Tracy: Capt. R. C. Dexter, Jr., USN. Defense Industrial Plant Equipment Center: Col. F. H. Sitler, USAF. DSA Administrative Support Center: Col. W. Paule, USAF. Defense Contract Administration Services Region Atlanta: Col. L. P. Murray, Jr., USAF. Defense Contract Administration Services Region Boston: Col. F. A. Bogart, USA. Defense Contract Administration Services Region Chicago: Col. J. P. Gibbons, USAF. Defense Contract Administration Services Region Cleveland: Col. N. T. Dennis, USA. Defense Contract Administration Services Region Dallas: Capt. W. G. Normile, USN. Defense Contract Administration Services Region Detroit: Capt. W. W. Tolson, USN. Defense Contract Administration Services Region Los Angeles: Brig. Gen. A. E. Exon, USAF. Defense Contract Administration Services Region New York: Brig. Gen. C. W. Clapsaddle, Jr., USA. Defense Contract Administration Services Region Philadelphia: Col. G. Johnson, Jr., USA. Defense Contract Administration Services Region San Francisco: Col. B. 0. Montgomery, USAF. Defense Contract Administration Services Region St. Louis: Capt. R. S. Sullivan, USN. FIGURE 5.-Major field activities HEADQUARTERS DEFENSE SUPPLY AGENCY EXECUTIVE DIRECTOR EXECUTIVE DIRECTOR EXECUTIVE DIRECTOR I EXECUTIVE DIRECTOR EXECUTIVE DIRECTOR I EXECUTIVE DIRECTOR SUPPLY OPERATIONS PROCUREMENT TECHNICAL AND I CUIITRRCT QUALITY ASSURANCE PR000CTIOSI AND PRUDUCTIUR LOGISTICS SERVICES ASMINISTRATIUV RAVe veX Oen Brig Gee CCI Capt I P Rcttcrrs XXV R E Lee USAF ML Hanrtick USAF R V Railing XOVF F C DcarborongV OUR iS Grape 1 JaSuaTy 1967 FIGURE 4 PAGENO="0158" DSA MAJOR FIELD ACTMT~ES ~ * TRACY OODEN~ L COLUM~US~ 1~ r - ~~ANDtA___1D: A ~ : c 0 SAN FNANCISCO -- *~ICHMOND \ ST. LOUISF~~ - - - - - - - -- ~ S~'pply C.,d.r I- )_ .4. - El I S pply C I j ~ °`~ L---;;~~LJ S I I d t I Eq pm I C t * A~TTA ~ ~ OTFENSE COPIT~ACT AOMINISTTATION SEQ VICES `S REGIONAL HEADOUA~TERS FIGURE 6 PAGENO="0159" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 151 DSA OBJECTIVES When Secretary McNamara established the Defense Supply Agency, he established two primary objectives for the Agency: First, to insure effective and timely support of the military services in the event of mobilization, war, or other national emergency, as well as in peacetime. Second, to furnish this support at the lowest feasible cost. The order in which these objectives are stated is not accidental; it reflects the priority which governs all DSA programs. This priority and these objectives also govern the criteria against which DSA's achievements will be measured. FIGURE 7.-Indicators of DSA growth [Dollar amounts in millions] End January 1962 End fiscal year 1963 End fiscal year 1964 End fiscal year 1965 End fiscal year 1966 End fiscal year 1967 plan Items centrally managed (thousands) Inventory Procurement Personnel 87 1, 029 $1,588 $2, 412 $2, 670 9, 500 25,970 1,328 $2,232 $2,701 31, 141 1, 369 $1,977 $3, 042 34, 128 1,335 $1,994 $5, 740 1 53, 554 1, 517 $2,276 $6, 250 2 56, 683 1 Excludes 3,426 temporary civilian personnel. 2 Current OSD allocation (June 30, 1967) full-time permanent civilian and military personnel; GROWTH OF DSA DSA made rapid progress in the assumption of assigned functions, as indicated in figure (7). In January 1962, DSA took over wholesale management of 87,000 items with an inventory value of more than $1.58 bfflion. By the end of fiscal year 1966, the number of items centrally managed (excluding items designated for local purchase) exceeded 1.33 million, with a value of over $1.99 billion, and will ap- proximate 1.51 million items by the end of fiscal year 1967. At that time, the inventory value is expected to be over $2.27 billion, and the annual rate of procurement will increase to over $6.25 billion. The increase of personnel, both headquarters and field, has proceeded in phase with the assumption of management tasks and the increased workload as a result of Vietnam. As of the end of January 1962, over 9,500 military and civilian personnel had been transferred to DSA. At the end of fiscal year 1965, full-time DSA personnel numbered 34,128. By the end of fiscal year 1966, DSA personnel had increased to 53,554, principally due to assumption of contract administration services functions; and based on OSD allocation, fall-time personnel can reach 56,683 by the end of fiscal year 1967. By the end of fiscal year 1965, DSA had taken over management of all assigned commodities and services, except for 45 selected Federal supply classes. Items in these 45 classes, along with service-retained items in other DSA classes, are being reviewed against DOD-approved item management coding criteria. This review will be completed in December 1967. PAGENO="0160" 152 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 SUPPLY SUPPORT INVENTORY CONTROL POINTS DSA manages six supply centers (fig. 6) as follows: Defense Construction Supply Center, Columbus Ohio. Defense Electronics Supply Center, Dayton, Ohio. Defense Fuel Supply Center, Alexandria, Va. Defense General Supply Center, Richmond, Va. Defense Industrial Supply Center, Philadelphia, Pa. Defense Personnel Support Center, Philadelphia, Pa. The Fuel Supply Center procures bulk and solid fuels but does not control inventories. Management of DSA inventories is currently distributed among the remaining five inventory control points, which compute replenishment requirements for assigned items, maintain inventory and transaction records, receive and edit requisitions, procure materiel, and direct shipment or procurement action, as appropriate. More than 8,000 personnel are employed in these functions. Other Center personnel are engaged in related activities, such as cataloging, standardization, and installation management. Assignments of commodities to centers were determined through separate commodity studies conducted over a 6-year period. Among centers, wide variations existed in the numbers of items managed and in the mix of technical, personnel-related, and bulk materiel items. Functional and commodity assignments, as well as location of centers at specified military installations, have been influenced by the availability of space and facilities and by considerations of im- proved customer service and reductions in operating costs. During 1965, DSA consolidated the functions of the Medical Supply Center, Brooklyn, the Subsistence Supply Center, Chicago, and the Clothing and Textile Supply Center, Philadelphia, into the Defense Personnel Support Center at Philadelphia. DSA DiSTRIBUTION SYSTEM o Specialized Missions 0 Full Management by DSA FIGuRE S PAGENO="0161" BACKGROUND: ECONOMY IN GOVERNMENT-i 96.7 153 Early in 1966, the supply centers assumed the purchasing responsi- bilities for decentralized and nonstandard items in DSA-managed classes of materiel required for support of Army and Air Force ac- tivities overseas; except for support of Air Force activities in the Pacific area which was assumed in January 1967. DISTRIBUTION SYSTEM For assigned commodities, the Defense Supply Agency determines requirements for wholesale storage space; manages, controls, and oper- ates assigned warehouses and depots; and arranges for the use of storage space and related services and facilities of the Department of Defense, other Government agencies and commercial warehouses as required. The Defense Supply Agency also arranges transportation for initial distribution of stocks from supplier to point of storage, from point of wholesale storage or the supplier direct to the customer, and for redistribution as required between wholesale storage points. On January 1, 1962, items assigned to DSA or to be assigned to DSA were stored in 77 locations. On January 1, 1963, the DSA distribution system was implemented with 11 of the 77 becoming permanent DSA distribution activities and 18 becoming direct supply support points for support of the Navy. The objectives of the distribution system were- The establishment of a storage pattern based on the concept of positioning stocks close to the concentrations of military posts and ports of embarkation in the United States. Centralization of all requisitioning procedures and stock control functions in the Defense Supply Centers, effective July 1, 1963. The DSA distribution system consists of seven principal depots and four specialized support depots (fig. 8). Principal depots.-These depots are responsible for the receipt, storage, stock readiness, inventory, and issue of DSA items of supply, including general mobilization reserve stocks for the support of specific areas, activities and/or forces designated by Headquarters, Defense Supply Agency. These depots are: Defense Construction Supply Center, Columbus, Ohio. Defense Depot, Mechanicsburg, Pa. Defense Depot, Tracy, Calif. Defense Depot, Ogden, Utah. Defense Depot, Memphis, Tenn. Defense General Supply Center, Richmond, Va. Atlanta Army Depot, Forest Park, Ga. Speciali2ed support depots.-These depots have functions similar to those of the principal depots, except that their missions are specialized as to type of material or scope of support. The specialized support depots are: Defense Electronics Supply Center, Dayton, Ohio. Defense Personnel Support Center, Philadelphia, Pa. Naval Supply Center, Norfolk, Va. Naval Supply Center, Oakland, Calif. The two Navy-operated specialized support depots support the fleet, Navy overseas activities, and selected Navy activities within a 25-mile radius. In addition, they support all military~service requirements in 77-6O1---67-----11 PAGENO="0162" 154 BACKGROUND: ECONOMY IN GOVERNMENT-i 9 6,7 emergency situations (priorities 1-8) when such support is not availa- ble elsewhere in the DSA system. Direct supply support points.-The DSA distribution system also includes 10 direct supply support points (not included in fig. 8) which have been established in support of large-volume users, such as Navy shipyards, repair facilities, and recruit training centers. These points are under military service management. The supply mission for DSA commodities at these points is restricted to the stocking of FSG 95 (metals, bars and shapes) for the support of on-base industrial and maintenance requirements and clothing for recruit training centers. Attrition sites.-As of December 31, 1966, DSA materiel was stored at 20 temporary storage locations, or attrition sites. However, the number of attrition sites at any given time will fluctuate because of continuous capitalization of items as a result of item management coding and DSA assumption of new missions and item assignments. Until supply missions become stabilized, and until the current critical short- age of DSA-managed storage space is alleviated, a target date for com- plete elimination of attrition sites cannot be projected. DSA policy for evacuation of stocks from attrition sites is disposition-in-place of excesses; redistribution of replenishment stocks from attrition sites into permanent depots in lieu of replenishment from procurement; attrition to satisfy customer demand; and bulk relocation into perma- nent depots when economically justified. PROCUREMENT AND PRODUCTION DSA's procurement program objectives are generally being met as indicated below: Small business.-Awards to small business during the first 6 months of fiscal year 1967 amounted to $1.37 bfflion or 43.5 percent of total awards to U.S. firms. This is 2.8 percent below the goal of 46.3 percent; however, it exceeds the accomplishment for the same period in fiscal year 1966 by $388 million or 0.8 percent. It is expected that the yearend goal will be met. Labor surplvs area awards.-Awards ($10,000 and above) to labor- surplus areas dining the first 6-month period of fiscal year 1967 amounted to $343 mfflion-l2.6 percent of total dollar awards within the United States and possessions. This is 1.6 percent in excess of the established fiscal year 1967 goal of 11 percent. Competitive awards.-Competition remained at a high level of 93.1 percent of total awards subject to competition during the first 6-month period of fiscal year 1967. This is 1 percent above the established goal. Formal advertising.-Formal advertising has suffered somewhat due to the necessity to meet high priority requirements from southeast Asia by negotiated procurements. The percentage of the value of all DSA procurements made through formal advertising was 27.4 percent in the first 8 months of fiscal year 1967, compared to 31.9 percent during a corresponding period in fiscal year 1966. However, since there has been a 33-percent increase in the value of total procurements during the same period, the value of the formally advertised portion actually increased by $153.3 million. It should be noted that although the formal advertising rate declined, the percentage of competition was actually higher. During the first 8 months of fiscal year 1967, our PAGENO="0163" BACKGROUND: ECONOMY IN GOVERNMENT-1967 155 competitive rate was 92.8 percent compared to 92.6 percent for the same period in fiscal year 1966. In some commodity areas, the more attractive civilian demand during the past year has made it difficult to attract suppliers with sufficient productive capacity to meet defense needs, and the Agency has had to resort to "rated" orders to obtain supplies. Any improvement in the formal advertising rate is believed to be contingent on changes in the southeast Asia situation and a softening of the civilian economy. The southeast Asia situation has had significant impact on procure- ment and production activity. During the first 6 months of fiscal year 1967, 447,000 contracts, aggregating $3.6 billion, were awarded. This represents an increase of 65,000 awards and $1 billion over the comparable period of fiscal year 1966. It is anticipated that procure- ment volume for fiscal year 1967 will exceed $6.2 bfflion compared with actual fiscal year 1966 volume of $5.74 bifiion and fiscal year 1965 volume of $3.04 billion. To obtain military supplies for Vietnam in the quantities reflected by this increased procurement volume in the face of heavy civilian demand, special measures had to be taken. Included among these measures were- (a) Changing, with service concurrence, Government specifi- cations to permit procurement of acceptable commercial products wherever possible, to broaden the production base. (b) Procuring substitutes on an interim basis to meet urgent requirements when specification changes were inappropriate. (c) Increasing production of short supply items at Government- operated facilities. (d) Furnishing industry advance information of anticipated quantitative and delivery requirements. (e) Limiting accelerated delivery procurement to immediate operational support needs. (f) Avoiding payment of premium prices for accelerated de- liveries wherever possible by reevaluation of such requirements with the services. (g) Giving increased management attention to using more real- istic production leadtimes and scheduling deliveries in consonance with industry conditions. (h) Securing assistance of the Business and Defense Services Administration (BDSA) of the Commerce Department in invok- ing mandatory production provisions of the Defense Production Act of 1950, as amended. A total of 581 rated orders were issued by DSA from mid-December 1965 to January 30, 1967, and as of January 30, no rated orders were pending. SUPPLY EFFECTIVENESS In November 1962, DSA implemented a uniform system for the measurement of supply effectiveness. This system employs stand- ardized reporting by all supply centers and uses two key indicators to measure effectiveness. The first indicator, stock availability, measures the performance of centers as inventory managers by the percentage of requisitioned items supplied from available stocks. The number of requisitions received in the period July-December 1966 rose to 10.38 mfflion, 10 percent PAGENO="0164" 156 BACKGRoUND: ECONOMY IN GOVERNMENT~-l967 over the number received during the same period in 1965. Overall availability for the DSA system averaged 84.2 percent for the period July-December 1966 compared to 88.2 percent for the comparable period in 1965. This drop is attributed to the surge in demands from Vietnam, exhausting available supplies, and our inability to obtain replenishment from industry in time to meet required delivery dates. The second indicator of system effectiveness, on-time fill, measures supply system effectiveness by the percentage of items processed for shipment by the DSA supply system within the time frames specified in the DOD uniform materiel movement issue priority system (TJMMIPS). On-time fill durmg the period July-December 1966 averaged 73.7 percent compared to the 80.9 percent for the same period in 1965. This decrease in on-time fill was due in part to the large number of back orders released when materiel was received from producers plus the effect of heavy depot-level workload stemming from the increase in requisition volume, noted above. TECHNICAL AND LoGIsTIcs SERvICES AND PROGRAMS ITEM ENTRY CONTROL The expanded defense item entry control technical review program is being implemented in accordance with the planned schedule. This expanded program has absorbed Project Shakedown and has assigned to all of the defense technical review activities (DTRA's) additional responsibilities for catalog purification and item reduction studies for all assigned Federal supply classes. As of December 31, 1966, 54 Fed- eral supply classes, accounting for approximately 63 percent of all new item growth, have been brought under the program. Nine military department and four Defense Supply Agency field activities have been designated as DTRA's. Full implementation of 67 Federal supply classes, accounting for approximately 75 percent of all new item entry into the DOD supply system, is scheduled for completion by July 1, 1967. Through December 31, 1966, DTRA's have reviewed 282,089 pro- posed new items of which 95,586, or 33.8 percent, were determined to be exact duplicates or possible duplicates of items already in the DOD supply system. An additional 25,414, or 9 percent, were returned for various errors in item identifications. Item entry control embraces a composite of many separate manage- ment programs and projects aimed at reducing item proliferation dur- ing the complete life cycle of an equipment or weapon system. The development of an optimum IEC system must assure the required compatibility between proj ects being developed by separate func- tional managers, and provide the means for their assimilation and integration into an overall DOD lEO system. This system develop- ment is being pursued in close coordination with the military depart- ments, Defense agencies, and staff elements within OSD, and is under continuous refinement and revision as individual elements of the over- all system progress. In this connection, emphasis is being placed on acceleration of the DOD standardization program. Supply standardi- zation policies and procedures governing item reduction studies are being revised to provide more comprehensive and effective DOD-wide supply standardization. Increased emphasis is also being directed PAGENO="0165" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 157 to the attainment of optimum military standard coverage for FSG 53 (hardware) and FSG 59 (electronics) during the next 3-year period and coverage for other high growth Federal supply classes within 5 years. DSA, at its Defense Logistics Services Center (DLSC), continues to provide a mechanical screen of manufacturers' part numbers. This service is made available to all DOD provisioning activities to ascertain whether an item has previously been assigned a Federal stock number. A net increase of 128,377 DOD items was recorded in the Federal catalog during calendar year 1966. This increase reflects a significant reversal of the reduction reported for calendar year 1965. Tn the first half of 1966, 199,631 items were added to the Defense catalog and 132,871 items deleted-a net increase of 66,760 items. This trend continued during the second half of the year. In the period July- December 1966, 175,019 items were added and 113,402 items deleted- an increase of 61,617 items. As of December 31, 1966, there were 3,907,703 DOD items in the Federal catalog, as compared to 3,779,326 on December 31, 1965. The net increase in catalog items can be attributed in part to the introduction of repair parts for new major end items, and fewer deletions due to retention of older equipments for possible use in southeast Asia. Extended use of these older equipments in the un- favorable terrain of southeast Asia has created repair parts demands not previously experienced. MATERIEL UTILIZATION Efforts are continuing toward improvement and refinement of mechanized procedures for screening releasable assets of military service inventory control points against military service inventory control point requirments. Interservice and intraservice reutilization resulting from this process, conducted centrally at the Defense Logistics Services Center, and from direct interrogations between inventory control points, totaled $403 million for fiscal year 1966 ($231 million interservice reutilization and $172 million intraservice reutilization). Utilization of military service declared excess, which is screened primarily through manual rather than mechanized procedures, amounted to $1.456 billion in fiscal year 1966. However, progress has been made in the establishment of mechanized procedures to the ex- tent that the need for detailed description by reporting. activities of items having a Federal stock number has, to a considerable extent, been eliminated. Mechanized processes now provide the means for the Defense Logistics Services Center to develop descriptions of the property for utilization screening within DOD, as well as for screening by the General Services Administration. A program providing for special handling of. excess and potential excess items of comparatively high value (exceeding $10,000) was fully operational in fiscal year 1966. The program centers around the publication of special utilization "flyers" containing full data on an item, including photographs, tailoring the description of these "fly- ers" to selected potential users, and making a special effort toward utilization through telephone contact, as well as through research, to determine substitute and interchangeable uses for an item. In fiscal year 1966, $57.4 million in utilization was realized from this program. PAGENO="0166" 158 BACKGROtTND: ECONOMY IN GOVERNMENT-19 67 Weapons systems materiel utilization program Administered by the Defense Supply Agency in cooperation with the military services, the weapon systems materiel utilization pro- gram promotes defensewide redistribution and utilization of military weapon systems assets and other large aggregations of special high- cost materiel generating from phaseouts, tactical withdrawals, and program terminations. The major objective of this DOD program is the achievement of maximum reutilization of materiel by the military services and other Federal agencies through: close working relationships and liaison between DSA and all echelons of the military, Defense agencies and other Federal agencies; the development of early planning inteffigence regarding military systems to be phased out or otherwise discontinued; the development of new or alternate uses and applications of the ma- teriel; the distribution of ifiustrated brochures; and other promotional efforts by DSA personnel. DOD reutilization of phased-out weapon systems assets through intraservice and interservice transfers has been substantially improved under the weapon systems utilization program. Total utilization during fiscal year 1966 from the publication of brochures on the mis- sile phaseout progTam amounted to $127 million. Industrial Plant Equipment (IPE) As a follow-on action to a 1961 GAO review of the management of idle production equipment within the Department of Defense, OSD approved a joint study project, chaired by DSA, which resulted in the 1962 Report on the Management of Capital Plant Equipment. OSD approval of this report early in 1963 led directly to the establish- ment of the Defense Industrial Plant Equipment Center (DIPEC). DIPEC maintains a comprehensive record of service-owned, high- value items of plant equipment and provides a variety of reports to meet service needs such as equipment by type, who made it and when it was made, its present location by military or contractor activity, and other details necessary to such functions as production planning. As of December 31, 1966, 365,729 units of equipment with an acqui- sition cost of $3.68 billion were recorded in the central inventory. The Center also receives reports on idle equipment which it may allocate to fill an immediate need in lieu of new procurement; it may direct the equipment to be held in storage against an anticipated need; or it may direct disposal if the equipment does not warrant retention. In fiscal year 1966, equipment with an acquisition cost of $185.8 million was allocated to meet Defense needs. During the first half of fiscal year 1967, this effort amounted to $94.8 million, with the largest part going to Defense contractors in support of high urgency southeast Asia requirements. Substantial improvement has been made in IPE management since DIPEC was established and progress is being made toward accomplishment of the actions required by the 1966 GAO survey on the adequacy of controls over Government-owned property in possession of contractors. PAGENO="0167" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 159 Subsidiary programs Subsidiary materiel utilization programs, operated in addition to the basic mechanized and manual screening programs, include: A final asset screening of surplus items immediately prior to these items being offered for final disposal by sale; $3.2 million of utilization was realized from this effort in fiscal year 1966. The identification of interchangeable and substitutable items to permit use of materiel for other than the purpose originally intended. An additional quantity of items worth $143.5 million were offered as a result of this procedure. A program to mechanically screen releasable assets and require- ments of conventional ammunition throughout the Department of Defense. The program became operational July 1, 1966, providing asset availability listings for review by requiring departments. Retail Interservice Logistic Support to promote greater ex- change of supplies and services at the local level through develop- ment of interservice support agreements. Growth of the pro- gram is reflected in the reported dollar value of retail inter.- servicing on a worldwide DOD basis which increased from $229 million in fiscal year 1965 to $335 million in fiscal year 1966. In the same period, support agreements increased some 200 to 3,199. MATERIEL DISPOSAL DSA is responsible for the administration of the DOD disposal pro- gram worldwide. This responsibility includes the development of systems, techniques and procedures for disposable personal property in accordance with OSD policy guidance, supervision of resource pro- grams for DOD disposal activities, elimination of disposal holding activities when practical and economical, and operation of defense surplus sales offices in CONUS. The disposal program involves several subprograms, i.e., utilization of DOD excess, donation, sales, demilitarization, and scrap preparation. Under authority of the annual Department of Defense Appropriations Act, the costs incurred by all DOD elements engaged in the disposal of excess, surplus and foreign excess personal property are reimbursed from the proceeds derived from the sale of surplus and foreign excess personal property. The remainder is transferred to the U.S. Treasury. The dollar value of property processed for disposal during fiscal year 1966 totaled $6.035 billion, of which $2.345 billion was reutilized within DOD, transferred to other Federal agencies and MAP, or donated to authorized recipients. Value of property sold, scrapped, abandoned, or destroyed during fiscal year 1966 was $3690 billion. Gross proceeds received from sales during fiscal year 1966 were $118.5 million. A return of 6.5 percent of acquisition value was realized for property sold, other than scrap. Disposal expenses for fiscal year 1966 were $80.2 million. Expenses include costs incurred in excess and surplus inventory accountability, utilization screening of DOD excess, handling of excess and surplus property at holding activities, preparation of sales descriptions and displays, demilitariza- tion, reclamation, scrap preparation, lumber and timber operations, and support costs related thereto. PAGENO="0168" 160 BAcKGROUND: ECONOMY IN GOVERNMENT-i 96.7 Efforts toward improvement of the management and operation of the DOD disposal program are continuing. Some of the major im- provements completed or in process are as follows: (a) When DSA was established, the 34 consolidated surplus sales offices (CSSO) of the military departments and four regional sales offices became field elements of the Defense Logistics Serv- ices Center (DLSC). The CSSO were redesignated as defense surplus sales offices (DSSO). On January 29, 1965, the four DLSC regional sales offices were eliminated; and the number of DSSO has been progressively reduced from the original 34 to 12. Annual recurring savings from these reduction actions are $2.7 mfflion. (b) DSA, in coordination with the military services, has been engaged in a program to eliminate holding activities of DOD wherever practical and economical. As of January 1, 1967, de- cisions were made to consolidate disposal functions at 79 holding activities. Sixty-five consolidations have been completed with a resultant savings of $2.6 million. Four planned consolidations were cancelled due to announced base closure actions (three) and redetermination that consolidation was not practical (one). The remaining 10 consolidations are in process. (c) A program to reduce costs incident to printing and distri- bution of sales catalogs. This has resulted in savings of $5.9 mifiion through fiscal year 1966. (ci) Programs have been developed for conservation or sale of special materials, e.g., silver recovery, special processes for han- dling copper and copper-base alloy scrap, centralization of cer- tain commodity sales such as jeeps and bearings, and segregation of high temperature alloy scrap. (e) DSA has developed a proposed program system which will provide meaningful and uniform operational data for managing and controlling the disposal program. The proposed system pre- scribes development and use of time standards, valid workload data, a uniform cost accounting structure and a selective cost and performance reporting system. WAREHOUSING GROSS PERFORMANCE MEASUREMENT SYSTEM On February 1, 1965, DSA was assigned responsibility for managing the warehousing gross performance measurement system, in coordina- tion with the military departments and in accordance with instructions provided by the Assistant Secretary of Defense (Installations and Logistics). The Department of Defense Warehousing Gross Per- formance Measurement Office has been established within DSA to develop, monitor, analyze, and maintain the system. The objective of the system is to provide a uniform method of evaluating the effectiveness of warehouse operations and resource utilization in DOD storage activities. VALUE ENGINEERING Elimination of "goldpla.ting" in specifications for commodities managed by DSA continues to make progress. The fiscal year 1967 goal for cost reductions from value engineering analysis actions has PAGENO="0169" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 161 been established at $12 million; and $16 million from fiscal year 1967 actions for the period fiscal years 1967-69. While additional oppor- tunities are presented as new commodities are assigned, a plateau is being reached as more and more of the assigned commodities have been. subjected to value analysis. However, value engineering analysis actions taken during the first half of fiscal year 1967 are expected to result in validated savings of $6.5 million in the fiscal years 1967-69 period. It is anticipated that actions in the second half of the fiscal year wifi result in additional savings of $9 mfflion in fiscal years 1967-69 for a total of approximately $15.5 mfflion for the 3-year periodS DEFENSE DOCUMENTATION In November 1963 DSA assumed, from the Air Force, operational control of the Defense Documentation Center (DDC) which had replaced the Armed Services Technical Information Agency. Policy guidance for DDC is exercised by the Director of Technical Informa- tion, Office of the Director of Defense, Research and Engineering. DDC provides classified and unclassified management information services, without charge, to Government organizations and contractors engaged in Government research and development programs. DDC maintains and operates the research and technology work unit data bank and reinted banks of management information; acquires technical reports, announces them, and furnishes copies to authorized users; makes technical report searches for DDC users; maintains a centralized system for registration and certification for access to DOD scientific and technical information; maintains the DOD "Thesaurus of Technical Terminology"; provides primary distribution of technical reports obtained from selected foreign countries and the NATO Advisory Group for Aerospace Research and Development; and provides referral service to additional DOD sources of specialized scientific and technical information. The DDC mission includes development of new and improved concepts, processes, techniques, services, products, and integrated systems for management information and technical documentation in support of the DOD scientific and technical information program. As continuing additional requirements have been imposed for services to the research and development and logistics communities, DDC has developed from an R. & D. document supply activity to a major repository and retrieval activity for technical management information. DOD/GSA SUPPLY RELATIONSHIPS-CIVIL AGENCY SUPPORT Under terms of the DOD/GSA agreement reached at the end of 1964, a joint DSA/Federal Supply Service Materiel Management Review Committee was formed in 1965 to determined appropriate supply management assignments to DSA and GSA of Federal supply class (FSC) groups, classes and items under DOD integrated manage- ment. Agency heads have approved initial management assignments of 99 FSC's to DSA and 52 to the General Services Administration. Transfer to GSA of items in these 52 "Primary Federal supply service classes" is scheduled for July 1967. An additional FSO has been assigned to GSA but has not yet been scheduled for transfer. PAGENO="0170" 162 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 The DOD/GSA agreement further provided for DSA to consider support of all civil agencies for the commodities of fuel, electronics, clothing, and textiles, medical and subsistence supplies, provided conditions of economies and support effectiveness are met. A DSA/ GSA committee has completed its evaluation of the feasibility and economy of DSA support of all Federal civil agencies for fuel, elec- tronics, and clothing and textiles and determined that: Support for fuels involving procurement, but little workload impact on inventory management and distribution, will produce cost savings of approxi- mately $2.5 million annually and will not adversely affect military service support. There is a high degree of commonality in electronics supplies used by civil agencies and DSA. DSA already supports approximately one-half of the civil agencies' annual $10 million electronics require- ment. Savings from expansion of DSA support for all civil agency common item electronics requirements will approximate $0.6 million, in addition to the $0.6 million now being saved under current DSA support. In the clothing and textiles areas, there is substantially less com- monality of civil agency and DSA items; therefore, savings are less significant and workload impact greater. In view of already heavy commitments, DSA has proposed, and the Secretary of Defense has approved, limiting expansion of civil agency support to those specific instances where clear savings can be made without degrading military support capability. The clothing and textile ai ea will be re-examined from time to time to identify any support which DSA might provide to civil agencies on a case by case basis; but at this time there is no plan for DSA to assume over-all support. The Secretary of Defense has approved the DSA proposal to support civil agencies for fuel and electronics. Phase-in of fuel support over a ten-month period is scheduled to begin six months from the final Bureau of the Budget decision authorizing such support. The tenta- tive scheduling for support of civil agencies for electronics provides for phase-in over a twelve-month period, beginning 1 July 1968, to assure civil agency support without adverse impact on DSA present heavy workload in the electronics area. Studies of medical and nonperishable subsistence are in process. While final conclusions and recommendations have not been developed, the relatively heavy workload involved, without evidence of substan- tial economy, indicates that DSA support should be limited, similar, to that approved for clothing and textiles, with provisions for future reconsideration. Progress is being made in perishable subsistence support of Veterans' Administration and Department of Health, Education, and Welfare hospitals by the regional subsistence offices of DSA. Sales have totaled $654,000 for the period April-December 1966. In conjunction with the Department of the Interior, consideration is being given to the extension of perishable subsistence support to the $2 million school program of the Bureau of Indian Affairs. Support of the Post Office Department for electronics, general and industrial supplies is also under review. Annual sales of these commodities to the Post Office Department would approximate $2 million. PAGENO="0171" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 163 Under separate interagency arrangements currently in effect, DSA supports the Coast Guard with a full range of materiel; Veterans' Administration and Public Health Service with selected medical items; the National Aeronautics and Space Administration and the Federal Aviation Agency with electronics materiel; the Maritime Administration with fuel, and clothing and textiles; and the Office of Economic Opportunity with clothing and textiles and subsistence items. CIVIL DEFENSE LOGISTICS DSA is responsible for logistics support of the national civil defense program under the policy control and direction of the Office of Civil Defense, Office of the Secretary of the Army. In providing civil defense logistics support, DSA operates a national distribution system which issues survival supplies for the stocking of public fallout shelters. During the past fiscal year, supplies for 7.5 million persons were issued. The total supplies issued since the pro- gram began in fiscal year 1962 are sufficient for 45.8 million persons in more than 81,000 shelter facilities. DSA has begun evaluation of the condition of survival supplies in shelters by utilizing the veterinary services of the Army and Air Force to inspect supplies on a scientific sampling basis. Certain samples wifi also be subjected to laboratory analysis. A pilot inspec- tion has been successfully conducted to test basic procedures and inspection techniques. Through a phased program, the condition and readiness of survival supplies at military installations, in Federal buildings, and in public fallout shelters everywhere will be evaluated. Since the establishment of the DSA civil defense materiel distribu- tion system, 54 percent of the warehouses initially participating in the storage and issue of survival supplies have been consolidated. During fiscal year 1966 Civil Defense-owned engineering equip- ment, which is managed by DSA, was loaned to State governments to alleviate local community suffering and hardships from drought and flood damage. This included the loan of approximately 114 miles of pipe, 158 pumps and related items to 24 States for use in 91 communities. STANDARDIZATION AND CATALOGING The Defense Supply Agency now has standardization management responsibility for approximately 2.4 million items or 62 percent of the 3.9 million DOD items in the Federal supply system. DSA is continuing to give major attention to the reduction in the number of items in assigned commodity classes. In fiscal year 1966, as a result of identification of duplicate or similar items and of stand-j ardization actions, decisions were made and concurred in by the military departments to eliminate 116,274 items (fig. 9). These decisions were based on a review of 283,445 items during the 12-month period. The goal for fiscal year 1967 is a total of 96,500 decisions, to be based on a review of approximately 328,000 items. At the end of the second quarter of fiscal year 1967, DSA had completed review and coordination of 118,587 items, and the military services had concurred in the elimination of 50,793 items from the supply system~ PAGENO="0172" 164 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 This represented 36 percent of the fiscal year 1967 item review goal of 328,000 items and 53 percent of the reduction decision goal of 96,500 items. FIGURE 9 CONTRACT ADMINISTRATION SERVICES The Defense Contract Administration Services (DCAS) mission was assigned to DSA after extensive study and represents one of the most significant efforts of the Defense Department to improve logistics management. The consolidation does not embrace, or affect, the procurement function itself, but rather the administration of contracts in the field after they have been executed by the contracting offices of the military departments and DSA. A prime objective of the merger was to provide a "single face to industry." During 1962 and part of 1963, a study known as Project 60 was conducted under the policy guidance of high-level Department of Defense military and civiiian personnel. The study indicated the existence of considerable overlap and duplication in contract adminis- tration services functions among the military services under the Army Materiel Command, the Office of Naval Material, and the Air I~ orce Systems Command; and further indicated the feasibility of consolidat- ing the functions for centralized management. A pilot test region established at Philadelphia, Pa., in April 1964, demonstrated the feasibifity and potential advantages of consolidating contract ad- ministration services functions on a nationwide basis. On the basis of the success of the pilot test, the Secretary of Defense, on June 4, 1964, assigned responsibility for these functions to DSA. A national planning group, composed of temporary duty personnel from the military services and DSA, developed a national implementa- tion plan (NIP) which was approved by the Secretary on December 28, STANDARDIZATION ITEM REDUCTION DECISIONS ThOUSANDS 120 80 40 0 FT 1966 FT 1967 PAGENO="0173" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 165 1964. The planning group formed the nucleus of the headquarters element of the DCAS organization. During the development of the NIP, a memorandum of understanding was developed with the National Aeronautics and Space Administration concerning CAS per- formance on NASA contracts. The NIP provided for gradual permanent staffing of the DCAS headquarters element and for a time-phased schedule for consolidating and merging the contract administration services components of the military services and DSA into 11 defense contract administration services regions (DCASR's), responsible for administering contracts under the centralized management concept. The headquarters ele- ment was established on a permanent basis on February 1, 1965, and is now staffed with the 329 military and civilian personnel authorized. The current organizational structures of the headquarters element of DCSA is shown in figure 3. Provision was made for required aug- mentation of the DSA common staff in areas where support services are furnished to DCAS. Conversion and organization of the DCAS field structure was completed on December 1, 1965, with the activation of the last two of the DCASR's at Los Angeles and San Francisco. The geographical alinement of the Defense Contract Administration Services regions is depicted in figure 10, which also shows the districts and service offices within each region. The directors of the regions are identified in figure 5. Consolidation of contract administration services functions within DSA involved the merging of 165 military service and DSA contract management offices into approximately one hundred offices. Despite the many problems associated with a conversion effort of such magni- tude the transition was made with full consideration of the functional transfer rights and interests of the approximately 20,000 employees identified by the military services and DSA as performing contract administration services functions. During this period, contract administration functions and operations were continued without interruption or impairment of the Government's interest. DCAS is responsible for providing a wide variety of support services to the purchasing offices of the military services, NASA, and other Federal agencies and certain foreign governments. These services include preaward surveys, review of contractor purchasing systems, quality assurance and inspection, property administration, produc- tion surveillance and reporting, transportation, payments to con- tractors, industrial security and other functions required in connec- tion with industry performance on defense contracts. Responsibifity for initial award of contracts and for all decisions with respect to the nature and quantity of items and services to be purchased remains with the military service, DSA and NASA buying offices; DOAS performs those contract administration functions that can best be handled at or in close proximity to the contractor's plant. In addi- tion to retaining responsibility for contract awards, the military services are responsible for the administration of those categories of contracts not included in the mission assignment to DCAS; for example, contracts involving perishable subsistence items, basic research studies, military and civilian construction, repair and over- haul of naval vessels. Military services are also responsible for administration of those contracts in specific plants assigned by DOD under the plant cognizance program. PAGENO="0174" w a 0 0 ci a 0 0 0 FIGURE 10 PAGENO="0175" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 167 The defense industrial security program is unique in the field of contract administration services in that its responsibility includes not only those facilities in which DCAS has contract administration re- sponsibility, but also all facilities where the military departments have retained plant cognizance responsibility. In addition to having re- sponsibility for security administration of all DOD classified contracts, the defense industrial security program provides the same service for classified contracts awarded by eight other departments and agencies of the Government; namely, the Departments of State, Commerce, and Treasury, the National Aeronautics and Space Administration, Federal Aviation Agency, General Services Administration, Small Business Administration and the National Science Foundation. In the consolidation of the defense industrial security program, procedures for processing personnel security clearances were central- ized from approximately 110 cognizant security offices into the De- fense Industrial Security Clearance Office (DISCO). Centralization of the personnel clearance function has resulted in improved manage- ment efficiency and the ability to insure greater uniformity in clear- ance determinations. Moreover, the centralized operation lends itself to future adaptation to automatic data processing. In consolidating CAS functions, it was anticipated that savings would accrue from three factors: (1) the merging of offices, (2) the use of computers, and (3) increased standardization and uniformity of operation. Realization of savings was to be achieved by a time- phased reduction in personnel over a 5-year period. Utilizing pre- consolidation workload and manpower as a base, the objective was a reduction of approximately 10 percent in personnel by fiscal year 1968 to reflect a recurring reduction in personnel costs of $19 million by fiscal year 1969. In December 1965, the first month of full DCAS nationwide opera- tion, the level of workload had already increased 20 percent above the level prevailing when the savings estimates were made, when, for example, the number of primary and secondary contracts being ad- ministered was 138,000. By December 1966, the number was 219,000, an increase of 60 percent. A further increase to 220,000 is expected by June 30, 1967. During the same period the number of invoices completed had changed from an annual rate of 1.07 to 1.71 million, also an increase of 60 percent. By June 30, 1967, the annual rate is expected to reach 1.96 million. Still another example is the dollar value of material inspected and released for shipment, which rose from an annual rate of $13.729 billion in December 1965 to $16.672 billion in December 1966, a 20 percent increase. The projected annual rate as of June 30, 1967 is $17,726 billion. These examples, together with other primary workload indicators, show an overall workload increase ranging from 37 to 63 percent during the past year. To accomplish this increased workload, man- power was increased by 20 percent. These increases are for the most part attributed to the impact of the SEA buildup, added NASA requirements, and the transfer to DCAS of the administration of some contracts previously assigned to the military departments under the DOD plant cognizance program. The workload increase compared with the workforce increase demon- strates a reduction in cost per work unit performed. Accordingly, the original estimate of anticipated savings appears to have been ex- PAGENO="0176" 168 BACKGROUND: ECONOMY ]~ GOVERNMENT-i 967 ceeded. However, a more precise computation of savings for com- parison with the original estimate is not feasible because of the sig- nificant but immeasurable influence of several factors. These include changes that have occurred in the contract administration mission where the net effects on workload and resources are not clearly identifiable; the impact of SEA requirements which, on a postfacto basis, are not fully separable from the otherwise normal workload; and the effects of the learning curve on operation during the first year. These factors notwithstanding, current workload and resource data indicate that the full savings originally anticipated were being realized earlier than scheduled and will continue to recur through fiscal year 1967 and fiscal year 1968. Beginning with fiscal year 1967, DSA budgeted and funded for CAS functions. During fiscal year 1965, DOAS operations were financed through reimbursement to DSA from military appropriations. Fiscal year 1966 financing was accomplished through transfers of funds from the military departments. Support of NASA and other non-DOD agencies will continue to be financed through reimbursement. Some of the areas of major effort during the first year of operations \\Tere (a) Quality assurance.-The SEA buildup created a significant workload in suppliers' plants, particularly in the ammunition, weapons, clothing and medical commodities. Through extensive training and some recruitment, the challenge has been successfully met. To meet changing industrial and defense technologies, and other factors im- pinging upon readiness to perform, DSA CAS is pursuing a quality assurance skills acquisition program. DSA OAS is currently training approximately 1,000 quality assurance personnel who are performing on NASA contracts. In addition, quality assurance personnel are attending service schools, non-Government schools, and colleges to become better equipped to accomplish the assigned mission. (b) Plant safety.-Included in the initial CAS functional assign- ment from the military departments was responsibility for monitoring safety in contractors' facilities pertaining to nonhazardous materials and processes involved in Government contracts. Early in 1966 DCAS was assigned, for contracts administered, the additional re- sponsibility for maintaining survefflance of ffight safety and safety matters on hazardous and dangerous materials and processes. Since assignment of the function, as DSA representative has chaired a DOD committee to develop ASPR guidance on hazardous and other- wise dangerous material safety, uniform contract safety clauses, and a Department of Defense manual prescribing standards to be followed by manufacturers of hazardous and dangerous materials. (c) Delinquent contracts.-Due to the urgency of the southeast Asia situation, special management attention had to be given to the problem of reducing the number of contracts in a delinquent delivery status. Increased leadtimes for materials and overloaded plant conditions contributed to a rising trend in contract delinquencies. Top manage- ment personnel of selected delinquent contractors were visited by DCASR personnel to emphasize the importance of timely deliveries and to assist the contractors in attempting to reduce their delinquen- cies. (d) Defense materials and priorities assistance.-Special emphasis was placed on accomplishment of the objectives of the defense ma- PAGENO="0177" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 169 terials and priorities assistance program, which necessitated the reorienting, training, and indoctrination of Government employees and defense contractors. DCAS participated with the Business Defense Services Administration, Department of Commerce, in nationwide briefings attended by approximately 25,000 defense contractor representatives in 30 U.S. cities. Additionally, vigorous in-house training was conducted and a continuing program was developed for providing technical assistance to both Government and contractor personnel. (e) Industrial security.-Immediately following consolidation of the industrial security function, action was taken to identify cleared facilities which had not been engaged in classified procurement for 18 or more months. Administrative termination of these "dormant" facilities resulted in a reduction of cleared facilities from approximately 22,000 to approximately 15,000. This has contributed to the efficiency of the program in that resources can be expended at facilities actually engaged in classified procurement. (f) Small business.-A vigorous small business and economic utilization program was pursued; 1,378 small business/labor surplus area subcontracting programs have been established in prime con- tractor plants and are being revised quarterly by CAS field force of 48 small business/labor surplus area specialists located in 11 regions and in 15 of the 26 district offices. (g) Management of property.-Significant improvements have been made in the management of property. New programs provide for more thorough analyses and qualitative evaluations, better identifica- tions of conditions, and sounder bases for conclusions and actions. (1) Contractor property control systems.-Provided for greater depth and scope of reviews and evaluations of each system periodically, established minimum frequency of survefflance visits, and provided a statistical sampling technique with guidance for the sizes of samples and the limits of acceptability. (2) Contractor use of industrial plant equipment.-Fixed initial responsibility for performance of usage analysis by the best qualified DCAS specialist available during production; established firm requirements for timely reviews; provided improved criteria for determining when equipment may be considered idle by equat- ing with procuring activity plans, programs and intentions, respecting original authorization for acquisition and use; and specified a reporting procedure to support decisionmaking and necessary action. (3) Centralized management of functions, skills and reports.- Identified other specific functions within the overall management of Government property for performance by quality assurance, industriui specialist, transportation, and safety personnel in such areas as condition, maintenance, shippping, and loss or damage, with reports to the property administrator making the total story on the quality of the contractor's management, and establishing bases for compliance actions. (4) Revised job standards for property administrators.- Undertook a study which disclosed the need to revise antiquated and obsolete notions of property administration. These standards are now being rewritten to more closely approximate a manager of assets in the light of prevailing industrial and economic con- 77-601-67-----12 PAGENO="0178" 170 BACKGROUND: ECONOMY IN GOVERNMENT-i 9 6~7 ditions and designed to attract higher caliber personnel by creating a career progression as a recruiting incentive, all to the end of upgrading the quality of performance. (5) Training.-Conducted seminars in the 11 DCASRs, bringing to property administrators and their supervisors current doctrine, such as emphasis on proper utilization of equipment by contractors and timely and accurate preparation of records and reporting. (6) Regulatory coverage.-Participated in distinguishing re- sponsibilities of the contractor and the Government; eliminating nonessential reporting; standardizing required reports as manage- ment tools and for other governmental purposes; developing contract provisions requiring maintenance of utilization records; and furnishing new guidance in disposition of inventory and prompt plant clearance, preparation of inventory schedules, reporting for screenmg, and responsibilities of the plant clearance officer. (7) Reconciliation of industrial plant equipment records.- Recognized the need for purification of the system from an eco- nomic and practical viewpoint and arrange for a 2-year program of reconciliation of the records of the national inventory of in- dustrial plant equipment with the property in possession of contractors by an orderly, no-additional cost operation during the contractor's normal inventory taking. To summarize, the Defense Contract Administration Services mission has been implemented and successfully incorporated into the DSA organization. Contract administration services functions are being performed effectively and efficiently, and with savings in costs over the previous methods. More significant benefits and improved performance are expected to be achieved as the DCAS organization stabilizes and gains additional experience and performance data in operations under the Project 60 concept. Conversion to the current DCAS organization was achieved without any significant adverse impact upon the Government organizations and personnel involved. DSA ACHIEVEMENTS iN REDUCING COSTS OF OPERATIONS The Defense Supply Agency has continued support to the military services without interruption or impairment, during maj or organiz a- tional change. This has involved the extension of central control over a group of heterogeneous agencies and the development of uniform policy, standards, and procedures with a view toward providing the military services with better support at less cost. The President's budget for fiscal year 1963 was based on the expecta- tion that the functions transferied to DSA would he performed at a cost of $27.7 million less than the budgeted cost of performing the same functions within the military departments. The Congress assessed an additional reduction of $2.7 million, making a total budget cut of $30.4 million, related principally to a reduction of 3329 civilian per- sonnel spaces. Consolidation of the Army and Marine clothing fac- tories produced an additional saving of $0.9 million, resulting from a reduction of 146 personnel spaces, for a total fiscal year 1963 operating exoense saving of ~31.3 million. During fiscal year 1964, this $31.3 million was augmeited by additional savings, realized from reorganiza- PAGENO="0179" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 171 tion of the distribution system, improved use of automatic data proc- essing equipment, consolidation of the Defense Automotive and Con- struction Supply Centers, and closing of certain Defense Surplus Sales Offices, for a total of $39.6 million. Consolidation of the Medical, Subsistence, and Clothing and Textile Supply Centers into the Defense Personnel Support Center resulted in a reduction of 483 civilian and 38 military spaces, with a net saving during fiscal year 66 of approxi- mately $4.2 million exclusive of onetime costs. By the end of fiscal year 1966 total savings from reduced cost of operations had reached $58.3 million. STJ1\{MARY In the 5 years since its establishment, it has become apparent that DSA has not, and will not, solve all military supply and logistics services problems. Some of these are bound up in the complex rela- tionships of military strategy and national economics and the rapid obsolescence of military materiel caused by the forward sweep of technology. DSA has in this 5-year period, however, demonstrated that it can support the military services effectively and efficiently in the major military commitment in Vietnam. In so doing, the agency has proven the soundness of the concept of integrated manage- ment of common supplies and logistics services in Defense and that it can be made to work in time of war, mobilization, or peace. PAGENO="0180" Appendix 4 U.S. GENERAL ACCOUNTING OEFICE INDEX OF SELECTED REPORTS ISSUED TO THE CONGRESS DURING THE PERIOD JAN. 1, 1966, THROUGH FEB. 28, 1967 Index No. Report file No. Date Title of report Department 1 B-152980_ Jan. 6, 1966 Review of Policies and Procedures Applied In Defense; Treasury; Evaluating Foreign Source Components and Agriculture. Barter Bids for an Undersea Cable Commu- nications System, Department of Defense, Department of Agriculture, Treasury De- partment. 2 B-114878~ Jan. 18, 1966 Review of Controls Over Utilitzation and AEC. Procurement of Photographic Equipment at the Sandia Laboratory, Albuquerque, N. Mex., Atomic Energy Commission. 3 B-118662 do Use of Contractor-Furnished Personnel In Post Office. Violation of Statutes Governing Federal Employment, Post Office Department. 4 B-146917 - Jan. 28, 1966 Possible Savings From Improving the Man- Navy. agement Control of Projectile Fuse Covers and Other Reusable Ammunition Compo- nents, Department of the Navy. 5 B-133038.... Feb. 17, 1966 Actions Being Taken To Achieve Greater HEW. Utilization of Limited-Life and Long-Supply Items in Civil Defense Medical Stockpile Managed by Public Health Service, Depart- ment of Health, Education, and Welfare. 6 B-146966 do Pricing of Recorders Purchased From Mid- Air Force. western Instruments, Inc., Tulsa, Okla., Department of the Air Force. 7 B-114851. Feb. 18, 1966 Need to Reexamine Planned Replacement and Treasury. Augmentation of High-Endurance Vessels, Western Area, U.S. Coast Guard, Treasury Department. 8 B-132977~~ Feb. 23, 1966 Potential Savings Through Direct Procure- Navy. ment of Components Used in Production of Variable Timing Fuzes, Department of the Navy. 9 B-158193 do. Need for Postaward Audits to Detect Lack of Defense. Disclosure of Significant Cost or Pricing Data Available Prior to Contract Negotia- tion and Award, Department of Defense. 10 B-125065 - Mar. 11, 1966 Review of the Management of Inventories by Army. the Army Map Service, Washington, D.C., Department of the Army. 11 B-136516 do Review of the Relocation of Railroad Facilities, Do. Walter F. George Lock and Dam, Fort Gaines, Ga., Corps of Engineers (Civil Func- tions), Denartment of the Army. 12 B-156167~ Mar. 23, 1966 Operation of a Dairy Farm by the U.S. Naval Navy. Academy, Annapolis, Md., Department of the Navy. 13 B-133102 - Mar. 24. 1966 Review of the Management and Utilization Army. of Capeliart, Wherry, and other Government- Owned Housing, Department of the Army. 14 B-133127 do Econmries from Making Electron Tubes FAA. Available to other Government Users, Fed- eral Aviation Agency. 15 B-154282 do Need for Improvement in the Management of Interior. Vehicle Utilization, Bureau of Indian Affaiis, Department of Interior. 16 B-114807_ - Apr. 12, 1966 Need for Improvement in Multiple-Award GSA. Contracting I'olicy, General Services Ad- ministration. 17 B-1l4868 do Savings Attainable Through Revisions of Interior. Construction Standards to Avoid Excess Seating Capacityin School Dining Facilities, Bureau of Indian Affairs, Department of the Interior. 18 B-133127 do Opportunities for Savings Through Greater FAA. Use of Available Mifitary Aircraft Parts, Federal Aviation Agency. 172 PAGENO="0181" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 173 Index No. Report ifieNo. Date Title of report Department 19 B-133386 - Apr. 12, 1966 Review of Royalties Charged to the U.S. Gov- Air Force. ernment for Use by Government Contractors of Chemical Milling Inventions, Department of the Air Force. 20 B-158427 do Review of Safety Conditions isi Certain Storage Agriculture; GSA. Areas Primarily in the South Building of the Department of Agriculture, Washington, D.C., Department of Agriculture, General Services Administration. 21 B-158515 do Review of Long-Term Medical Research on FAA. Aging of Aviation Personnel, Federal Avi- ation Agency. 22 B-122796 - Apr. 21, 1966 Review of Reemployment Leave Travel Bene- Defense and other fits Granted Certain Civil Service Employ- Government ees in States of Alaska and Hawaii, Depart- agencies. ment of Defense, and Other Government Agencies. 23 B-133044 do Savings Available Through Utilization of VA. Greater Quantities of Excess Medical Equip- ment and Supplies, Veterans' Administra- tion. 24 B-133127 do Opportunity for Savings Through Payment of FAA. Relocation Costs Rather Than Subsistence Allowances for Contractor-Furnished Em- ployees, Federal Aviation Agency. 25 B-146924 do Savings Attainable Through Reductions in AEC. Fire Department and Guard Force Staffing at Government-Owned Contractor-Operated Installations, Atomic Energy Commission. 26 B-146962 do Review of Selected Overhead Costs Charged to Defense. Government Contracts by the Univac Divi- sion of Sperry Rand Corp., St. Paul, Minn., Department of Defense. 27 B-157535 do Review of Prices Negotiated on Selected Con- Army. tracts for Ammunition and Weapons Com. ponents, Department of the Army. 23 B-157711 do Potential Savings by Buying Instead of Leas- Air Force. ing Specialized Transportation Equipment, Department of the Air Force. 29 B-114858 - Apr. 29, 1966 Need for Improved Coordination of Transmis- Interior. sion Line Construction Practices of the Bureau of Reclamation and the Bonneville Power Administration, Department of the Interior. 30 B-118634 do Opportunity for Savings by Reducing Over- Army. time on Revetment Construction and Main- tenance on the Lower Mississippi River, Corps of Engineers (Civil Functions), De- partment of the Army. 31 B-146917 do Potential Savings Through Improved Manage- Defense. ment of Ammunition, Department of Defense. 32 B-158604 do Policy Guidance Strengthened on Direct Do. Procurement of Components Needed by Contractors in Production of Weapon Systems and other Major End Items, De- partment of Defense. 33 B-158662 do Reduction in Dollar Outflow Possible Through State. More Extensive Use of American-Made Building Materials in Embassy and Related Construction Projects, Department of State. 34 B-l14833_. May 24, 1966 Opportunities for Reducing the Number of Agriculture. Vehicles Maintained in Fleet Soil Conserva- tion Service, Department of Agriculture. 35 B-154068 - May 25, 1966 Planning for and Utilization of Automatic NASA. Data Processing Equipment, Arres Research Center, Mofiett Field, Calif., National Aero- nautics and Space Administration.' 36 B-158625 do Review of Development of Certain Scientific NASA. Instruments for the Surveyor Project, Na- tional Aeronautics and Space Administration. 37 B-l46730 - May ~7, 1966 Recovery of Needed Parts From Excess Air- Air Force. craft Engines, Department of the Air Force. 38 B-114878 - May 31, 1966 Preferential Allowances Paid to Certain Con- AEC. tractor Employees at the Hanford Works, Richmond, Wash., Atomic Energy Commis- sion. 39 B-157371.. - June 3, 1966 Potential Savings by Consolidation of Field Defense. Organizations and Facilities for Recruiting Military Personnel, Department of Defense. 40 B-L58482 do Management of the Procurement of Major Navy. Eauioment and Related Spare Parts by the U.S. Marine Corps, Department of the Navy. 41 B-l5851&. June 16, 1966 Review of Readiness Status of Idle Ammuni- Army. tion-Produstion Facilities, Department of the Army. PAGENO="0182" 174 BACKGROUND: ECONOMY IN GOVERNMENT-l96~7 Review of Repair Practices Relating to Single- Family Properties Acquired Through Mort- gage Insurance Programs, Federal Housing Administration, Department of Housing and Urban Develonment. Review of the Purchase of Title Insurance on Properties Acquired in the State of Florida Under the Loan Guarantee Program, Veterans' Administration. Savings Available by Use of Conventionally Designed Airport Traffic Control Towers at Low-Activity Airports, Federal Aviation Agency. Review of the Equipment Modification Pro- gram for M48A1 Tanks, Department of the Arsny. Savings That Can Be Attained by Rebuilding Used Motor Vehicle Tires, Department of the Air Force. Review of Procurement of Equipment for Im- plementing Automation of Water Data Records, Geological Survey, Department of the Interior. Potential Savings Through Greater Use of Available Government Gasoline Outlets, Department of Defense. Survey of Internal Audits and Inspections Relating to U.S. Activities in Vietnam, De- partment of State, Agency for International Development, Department of Defense. Savings Available by Canceling Hazard Insur- ance Policies on Properties Acquired Upon Default of Housing Loans, Veterans' Ad- ministration. Potential Savings Through Improved Controls Over Per Diem Payments to Military Per- sonnel, Department of the Air Force. Review of Charges to Defense Contracts for Use of Company Operated and Chartered Aircraft, Department of Defense. Need to Improve Contracting Procedures for Employment of Appraisers To Value Indian Lands, Department of Justice. The Utilization and Dispositon of Excess Beds and Related Bedding, Department of De- fense. Opportunity to Reduce Costs of Providing Protection From Heat and Cold on Ship- ments of Certain Perishable Commodities, Commodity Credit Corporation, Depart- iaent of Agriculture. Review of Reporting of Taxable Income and Tax Withholdings of Military Personnel, Department of the Army. Review of Certain Active Duty Retirement Benefits for Army and Air Force Reserve Officers, Department of Defense. Possible Savings by Discontinuing the Pur- chase of Public Liability Insurance Covering Acquired Property, Federal Housing Admin- istration, Department of Housing and Urban Development. Need for Interservice Action When Manage- ment Policies and Practices Differ for Similar Supply Items, Department of Defense. Management of Selected Time Compliance Technical Orders Requiring Modifications to Engines for F-lOO Aircraft, Department of the lir Force. Potential Reductions in Cost of Automotive Travel by Federal Employees Where Use of Government-Owned Vehicles Is Feasible. Review of Program for Replacement and Pro- cureinent of Motor Vehicles, Post Office Department. Potential Savings Through Improved Utiliza- tion of Space Available on Administrative Military Aircraft, Department of the Air Force. Title of report Department 45 B-158572 do 46 B-159200 - June 29, 1966 47 B-118678__ July 15,1966 48 B-159072 do 49 B-159451__ July 18,1966 50 B-118660__ Aug. 9,1966 51 B-125037 do 52 B-146948 do 53 B-159l35 do 54 B-159148 do 55 B-114824_ Aug. 10, 1966 56 B-125036 do 57 B-146551 do 58 B-114860~ Aug. 15, 1966 59 B-146778 - Aug. 18. 1966 60 B-158959 - Aug. 22, 1966 61 B-158712 - Aug. 23,1966 62 B-114874_ Aug. 31, 1966 63 B-159l87~ Sept. 7,1966 FHA. VA. FAA. Army. Air Force. Interior. Defense. State; Defense. VA. Air Force. Defense. Justice. Defense. Agriculture. Army. Defense. FHA. Defense. Air Force. Governmentwide. Post Office. Air Force. PAGENO="0183" 175 BACKGROuND: ECONOMY IN GOVERNMENT-i 967 Potential Savings Through Improvement in the Management of Materials Handling Equipment and Commercial-Design Trucks, U.S. Marine Corps, Department of the Navy. Review of the Maintenance of Combat Vehicles, Department of the Army. Review of Procurement and Utilization of Security Covers for Nuclear Weapons, Atomic Energy Commission and Depart- ment of Defense. Potential Savings to the Government Through Increased Purchasing From General Services Administration Supply Sources by Contrac- tors Which Operate Facilities of the Atomic Energy Commission. Review of the Policy of Leasing Motor Vehicles for Use by Government Contractors, De- partment of Defense. Long-Term Leasing of Buildings and Land by Government Contractors. Followup Review of the Management of Air- craft Engines Used in Ground Training Pro- grams, Department of the Air Force. Procurement of Thrust Vector Control Nozzles for the Minuteman Missile Program, Depart- ment of the Air Force. Review of Policies and Procedures Followed in Determining the Size of the New Second, Lock at Sault Ste. Marie, Mich., Corps of Engineers (Civil Functions) Department of the Army. Review of Selected Aspects of Scheduling for Design, Integration, and Test of Nimbus Spacecraft National Aeronautics and Space Administration. Management Control of Nike-Hercules Missile Launching and Handling Rails. Potential Savings Through Greater Use of Available Government Gasoline Outlets, General Services Administration. Review of Procurement of Detachable Helicop- ter Ground Handling Wheel Assemblies, Department of the Army. Procurement of Printing of Technical Manuals from Equipment Contractors, Department of Defense. Review of Coordination Between Procurement of Technical Equipment and Its Ultimate Utilization, Federal Aviation Agency. Savings Attainable in the Use and Pricing of Certain Nonperishable Foods, Department of Defense. Utilization of Motor Vehicles in the Cape Kennedy Interagency Motor Pool; General Services Administration, National Aeronau- tics and Space Administration. Review of Price Increases Under Shipbuilding Contracts, Department of the Navy. Review of Determinations of Wage Rates for Construction of Carters Dam, Ga., Depart- ment of Labor. Review of Policies and Procedures Used in Determining the Administrative Office Space To Be Provided in Major Postal Facilities, Post Office Department. Need to Resolve Differences in Procedures Used by Federal Timber Management Agencies in Appraising Timber Offered for Sale, Forest Service, Department of Agricul- ture; Bureau of Indian Affairs, Bureau of Land Management, Department of the In- terior. Savings Available by Purchasing Rather Than Leasing Commercial Two-Way Radio Equip- ment, Department of Defense. Need for Improving Administration of the Cost or Pricing Data Requirements of Public Law 77-653 in the Award of Prime Contracts and Subcontracts, Department of Defense. Index No. Report ifieNo. Date Title of report Department 64 B-133324 - Sept. 19, 1966 65 B-159407 do 66 B-114878_ Sept.20,1966 67 B-114878 do - 68 B-146876 do 69 B-156818_ - Sept. 20, 1966 70 B-132989 - Sept. 30, 1966 71 B-146876 do 72 B-118634__ Oct. 19,1966 73 B-133394__ Oct. 31,1966 74 B-156760 do 75 B-159072 do 76 B-159271 do 77 A-90545.... - Nov. 28, 1966 78 B-133127 - Nov. 29, 1966 79 B-146700 do 80 B-159210.. Nov. 30, 1966 81 B-159206__ Dec. 5, 1966 82 B-156269_.. Dec. 14, 1966 83 B-153129_ - Dec. 27, 1966, 84 B-125053__ Dec. 29,1966 b5 B-160410 - Jan. 10, 1967 86 B-39995 - Jan. 16, 1967 Navy. Army. AEC; Defense. AEC. Defense. Defense. Air Force. Do. Army. NASA. Army. GSA. Army. Defense. FAA. Defense. GSA; NASA. Navy. Labor. Post Office. Agriculture, Interior. Defense. Do. PAGENO="0184" 176 BACKGROUND: ECONOMY IN GOVERNMENT-i 9 67 Index No. Report IlleNo. Date Title of report Department 87 B-146778-- Jan. 18,1967 Review of Procurement of Foreign Produced Defense. Aircraft Ejection-Seat System, Department of Defense. 88 B-15S469 - Jan. 23, 1967 Review of Methods Used To Provide Tele- Do. phone Service to Mifitary Family Housing Occupants, Department of Defense. 89 B-133188__ Jan. 25,1967 Review of Geodetic Surveying Activities Interior; Com- within the Federal Government, Bureau of merce. the Budget, Department of the Interior, and Department of Commerce. 90 B-157421~ Jan. 31,1967 Procurement of Locomotives for Thailand Defense. Under the Miiltary Assistance Program, De- partment of Defense. 91 B-39995~_ - Feb. 15, 1967 Survey of Reviews by the Defense Contract Do. Audit Agency of Contractors' Price Pro- posals Subject to Public Law 87-663. 92 B-188654~ Feb. 23,1967 Potential Savings Through Constructing USIA. rather Than Leasing Housing at Brewerviile, Liberia, U.S. Information Agency. 93 B-133118 do Potential Savings in the Procurement of Spare Navy. Aircraft Parts for Outfitting Aircraft Carriers, Department of the Navy. 94 B-160419 do Savings Available Through Expanded Use of GSA. Regional Contracts for the Repair and Main- tenance of Selected Office Machines, General Services Administration. PAGENO="0185" Appendix 5 DIGESTS OF SELECTED U.S. GENERAL ACCOUNTING OFFICE REPORTS ISSUED TO THE CONGRESS DURING THE PERIOD JANUARY 1, 1966, THROUGH FEBRUARY 28, 1967 [Index No. 1-B-152980, Jan. 6, 1966] REVIEW OF POLICIES AND PROCEDURES APPLIED IN EVALUATING FOREIGN SORCE COMPONENTS AND BARTER BIDS FOR AN UNDERSEA CABLE COMMUNICATIONS SYSTEM, DEPARTMENT OF DEFENSE, DEPARTMENT OF AGRICULTURE, TREASURY DEPARTMENT Our review disclosed that the Department of the Air Force, at the direction of the Department of Defense, awarded a contract for the domestic source procurement of a communications system at a price $2.3 million higher than a foreign source bid in order to minimize dollar payments abroad. The award was made under Department of Defense policies imple-. menting its balance-of-payments program. The Department's poli- cies did not require that the bidder's estimated domestic and foreign cost components be taken into account in evaluating the merits of alternative bids. Had this been done, more detailed consideration could have been given to the fact that the successful bidder intended to obtain substantial amounts of goods and services abroad under the contract and that the $2.3 million price differential paid to this bidder seemed excessive in relation to the balance-of-payments advantages which could be expected. It would then have been apparent to the Department of Defense that the premium of $2.3 million would result in a balance-of-payments advantage of $1.4 million, or about a 61-cent balance-of-payments gain for each extra dollar expended. This contrasts with the normal goal of the Cabinet Committee on Balance of Payments that each extra dollar of cost achieve at least a $2 advantage in balance of payments. Of equal significance, the Department of Defense did not attempt to evaluate another offer of the low bidder to accept surplus agri- cultural commodities in partial payment (barter) for the communica- tions system. Under this offer, the low bidder proposed to sell the commodities abroad and use the proceeds to pay his foreign costs. This offer, which was $2,150,000 lower than the successful bidder's price, was rejected on the grounds that existing policy did not permit consideration of a barter offer from a foreign source bidder whose dollar bid had been rejected. Had the barter offer been accepted under arrangements that would not result in a significant reduction of commercial United States agricultural exports, substantial financial advantage would have been realized by the United States. Because of the possibility of achieving significant savings on like transactions in the future, we proposed at the conclusion of our review 177 PAGENO="0186" 178 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 that the procurement policies that had been followed in evaluating offers for the communications system be revised. Our proposal was considered in a study made for and approved by the Cabinet Com- mittee on Balance of Payments. In commenting on our report, the Cabinet Committee advised us that it recognized the need to consider the United States and foreign source elements included in domestic source and foreign source bids, so as to avoid premium prices that result in little or no advantage to the United States balance of payments. The Committee advised us that the Department of Defense had adopted a modified procedure which would help to ensure that the higher price paid for a domestic product is compensated for by an acceptable amount of balance-of- payments advantage. The Committee pointed out, however, that it is generally not possible to identify the value of the foreign component and that the magnitude of procurement may not justify the adminis- trative burden involved; thus this procedure has limited application. The Cabinet Committee has advised us also of its conclusion that the total overall volume of procurement through barter of surplus commodities is at an appropriate level and that any increase in the volume of barter procurement, as suggested in our report, probably would result in the disposal of agTicultural surpluses at the expense of normal commercial sales. The Committee commented that there is no practical way to determine specifically, on a percentage basis, the extent to which a particular barter transaction might displace com- mercial sales. In commenting on our findings, the Cabinet Committee advised us that it did not plan to recommend changes in current procurement policies of the executive branch. In view of this position, we are not making any recommendation to the executive branch. We are issuing this report to the Congress in the event that it may wish to inquire further into the basis of the judgmental decisions made by the execu- tive branch and their consistency with congressional purpose. [Index No. 2-B-114878, Jan. 18, 1966~ REVIEW OF CONTROLs OVER UTILIZATION AND PROCUREMENT OF PHOTOGRAPHIC EQUIPMENT AT THE SANDIA LABORATORY, ALBU- QIJERQUE, N. MEX., ATOMIC ENERGY COMMISSION We found that, because of inadequate management controls over the procurement, utilization, and retention of cameras at the Sandia Laboratory, certain organizational units had retained cameras, costing about $274,000, which were excess to their needs and that certain organizational units had purchased new cameras costing about $62,000 although it appeared that the requirements could have been fulifiled by reassigning the cameras on hand. We found also that Sandia generally did not realize the benefits that might have been obtained through competitive procurement because cameras had been requisi- tioned and procured by brand name and model without adequate consideration as to whether other brands or models would meet the requirements. The laboratory is operated by the Sandia Corporation under a cost- type contract with the Atomic Energy Commission. PAGENO="0187" BACKGROIJND: ECONOMY IN GOVERNMENT-1967 179 The organizational units included in our review subsequently re- ported 140 cameras as being excess to their requirements and reas- signed 33 of the cameras, costing about $40,000, to other organizational units in need of the cameras, thereby obviating the necessity for procurement of similar equipment. Also, Sandia has taken action to strengthen its procedures for providing assurance that (1) utilization of cameras is periodically reviewed, (2) cameras excess to the needs of individual units are transferred to a central facility and made available to other potential users, (3) procurements of new cameras are authorized only after consideration as to whether the requirements can be met from stocks on hand, and (4) the procurement of specific brands and models of cameras is adequately justified. The Commission has directed its field offices to make reviews of operating contractors' equipment-acquisition-and-use controls and of the practices and procedures for determining when equipment is excess, particularly in reprogramed areas or areas of reduced activity. In view of the actions taken or planned toward establishing improved controls over equipment, we are making no recommendations at this time; however, in the course of our continuing reviews of the Com- mission's activities, we plan to examine into the effectiveness of these actions. [Index No. 3-B-118662, Jan. 18, 1966] USE OF CONTRACTOR-FURNISHED PERSONNEL IN VIOLATION OF STATUTES GOVERNING FEDERAL EMPLOYMENT, POST OFFICE DEPARTMENT Since 1958 the Post Office Department has contracted for the services of contractor-furnished personnel to supplement tile technical staff of its Office of Research and Engineering. Under these contracts, the Department selects the individuals to be furnished by the con- tractors, determines their rates of pay, supervises them, and plans and programs their work. In addition the Department can direct the contractors to remove any individual who is no longer needed or who is not performing his assignment in a satisfactory manner. The Civil Service Commission has stated that such a contract or an arrangement is ifiegal since it is tantamount to an employer-employee relationship and that the services of these individuals should be employed under the Civil Service Act and paid for as provided in the Classification Act. In his letter dated May 27, 1965, the Postmaster General advised us that it had not been feasible to have a technical staff comprising all civil service personnel because the Congress had not approved the Department's requests to replace contractor-furnished personnel with civil service personnel. Subsequent to our bringing the Department's practice of using contractor-furnished personnel to the attention of the Civil Service Commission, the Chairman of the Commission advised the Post- master General on August 20, 1965, that the contracts in question are illegal and that immediate steps must be taken to terminate the illegal practices. We compared the costs that were incurred by using contractor- furnished personnel during the period July 1961 through November PAGENO="0188" 180 BACKGROUND: ECONOMY IN GOVEKNMENT-19 67 1964 with the costs that we estimated would have been incurred by using civil service personnel. We estimated that the cost of $5,673,000 incurred by using contractor-furnished personnel during that period was $205,000, or 3.7 percent, more than the cost that would have been incurred by using civil service personneL The Postmaster General disagreed with our computations showing that the Department, by using contractor-furnished personnel rather than civil service personnel, had incurred additional cost to the Gov- ernment and stated that the Department had determined that the estimated costs for using civil service personnel would have approxi- mated the costs for using contractor-furnished personnel. Although we do not agree with the Department's cost estimates, we believe that the major matter for consideration is the ifiegality of the Depart- ment's contracting practice. In a letter dated November 23, 1965, the Postmaster General advised the Civil Service Commission that the Department had reached the decision that it would not be feasible at this time to staff with civil service personnel the entire function which had been handled under contract. He advised the Commission further that the De- partment was planning to let the existing contracts expire and then to replace these contracts with new contracts which would eliminate the employer-employee relationship. By letter dated December 16, 1965, the Chairman of the Civil Service Commission informed the Department that the Commission would review the new contracts and the relationships established thereunder, to ascertain whether they represent, from a civil service standpoint, a legal means for the procurement and use of contract services. In view of the fact that the Department has stated that the ifiegal contracting practice wiJi be discontinued, we are not making a recom- mendation at this time. Further, no action is being taken by us on payments made under the contracts, because the contractors furnished the personnel in good faith and the Government has received the benefit of their services. [Index No. 4-B-146917, Jan. 28, 19661 POSSIBLE SAviNGs FRo~1 IMPROVING THE MANAGEMENT CONTROL OF PROJECTILE FUZE COVERS AND OTHER REUSABLE AMMUNITION COMPONENTS, DEPARTMENT OF THE NAVY During the 3-year period ended June 30, 1964, the Navy incurred costs of as much as $218,000 because significant quantities of reusable fuze covers were not returned by user activities, and other quantities, although returned, were lost or sold as scrap by one of the ammunition stockage points. Since the Navy has a continuing need for these fuze covers, possible savings of as much as $595,000 could be realized during the 5-year period ending June 30, 1970, by establishing effective controls over the return and reuse of these covers. Although our review did not include an examination of records pertinent to reusable ammunition components other than MK 4 fuze covers, we did note that procurements of other reusable ammunition components were made necessary by the failure of user activities to PAGENO="0189" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 181 return such components to the supply system. The Assistant Secre- tary of the Navy (Finanôial Management), in a letter dated August 24, 1965, advised us that the Department of the Navy concurred in the findings set forth in our report and that corrective actions, to the extent of issuing instructions and directives and the undertaking of a servicewide audit of the Navy's ammunition supply system by the Auditor General of the Navy, had been taken or were planned. We recommended that the Secretary of the Navy take the necessary action to develop and implement appropriate accounting controls over the issue and return of reusable ammunition components to the Navy supply system and to establish adequate surveillance over the operation of such controls to ensure their effectiveness. In this connection, we recommended that consideration be given to assigning the responsibility to account for all reusable ammunition components issued to a vessel to the commanding officer and that appropriate reports of such accountability be designed for issuance, through appropriate channels, to the inventory manager. The difference between the quantity of reusable components issued to the vessel and the quantity still on hand or returned to an ammunition depot should be supported by appropriate explanatory reports. [Index No. 6-B-146966, Feb. 17, 1966] PRICING OF RECORDERS PURCHASED FROM MIDWESTERN INSTRU- MENTS, INC., TULSA, OKLA., DEPARTMENT OF THE AIR FORCE Our examination into certain costs of procuring electronic malfunc- tion detection and recording systems disclosed that Midwestern Instruments, Inc., Tulsa, Oklahoma, did not use its most recent cost experience as a basis for its price proposal and that, as a result, an overstatement of about $192,800 was made in the price negotiated with Lockheed-Georgia Company, Marietta, Georgia, a division of Lockheed Aircraft Corporation. This cost was passed on to the Government under Lockheed's contract AF 41(608)-16733 with the Air Force. Under the terms of this contract, Lockheed added a charge of $41,800 to provide for spares administration, packing, and profit thereby increasing the cost to the Government by $234,600. Had either the Air Force or Lockheed requested and had Midwestern furnished the most recently experienced costs and vendors' quotations before the final prices were established, the Air Force and Lockheed could have detected the overestimates and would have been in a position to negotiate appropriate reductions in the prices of the sub- contract and the prime contract. In response to our suggestion that appropriate recovery be made, the Department of the Air Force has recovered by offset action from Lockheed the amount of $234,623. Lockheed has appealed this re- coupment action to the Armed Services Board of Contract Appeals. The case will be heard by the Armed Services Board of Contract Appeals at a later date. The prices commented on in our report relate to the model 813LQ recorder, a component of a malfunction detection and recording system supplied by Lockheed for use principally in the B-52 aircraft. The price charged by Midwestern for the recorder component of the 813LQ PAGENO="0190" 182 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 recorder comprised $1,304,776 of the total purchase order price of $2,586,296. The balance of $1,281,520, comprising about 50 percent of the total purchase order price, was for galvanometers and magnetic structures which were the remaining principal components of the model 8l3LQ recorder. We were unable to examine into the reason- ableness of the price for the galvanometers and magnetic structures because Midwestern refused to furnish us any cost information on these components. Midwestern claimed that, on the basis of its representation that these components were proprietary catalog items, it was not required to furnish this information. We have advised Midwestern that it has no valid claim and that it has wrongfully refused to make records pertaining to galvanometer and magnetic structures available for our review. In commenting on a draft of our report, Midwestern disagreed with our finding and recommendations. ~`1idwestern stated as its belief that, when all costs incurred by Midwestern throughout the develop- ment and production of the malfunction detection and recording system under all contracts are considered, the Government has not sustained any increased costs. Lockheed, on the basis of its inde- pendent review, advised us that it was entitled to a price reduction of approximately $108,000 under the defective-pricing-data clause of the subcontract with Midwestern. Subsequent to the period covered by our review, (1) Lockheed established written procedures to be followed in making an analysis and evaluation of a subcontractor's proposed prices and (2) the Armed Services Procurement Regulation was revised to require an explanation of why cost or pricing data were not required and a statement of the basis for this determination. We believe that effective administra- tion of these revised procedures and proper enforcement of these revised regulations should obviate the occurrence of situations similar to those described in our report. {Index No. 7-B-114851, Feb. 18, 19661 NEED To REEXAMINE PLANNED REPLACEMENT AND AUGMENTATION OF HIGH-ENDURANCE ~`ESSELS, WESTERN AREA, U.S. COAST GUARD, TREASURY DEPARTMENT On the basis of our review of the operating experience during fiscal years 1962-64, we believe that the Coast Guard's plans for acquiring 14 high-endurance vessels to replace the 11 high-endurance vessels presently assigned to the Western Area, primarily for search and rescue and ocean-station duties, are questionable. In our opinion, the stated requirements can be reduced, thereby saving about $45 million in construction costs and about $3.6 million annually in vessel opesatrng costs. In developing its vessel requirements, the Coast Guard did not use actual operational data to determine the number of new high-endur- ance vessels needed to carry out its assigned functions, The Coast Guard's planning document, known as the Vessel Report, states a requirement in the Western Area for three additional high-endurance vessels at an estimated cost of $15 million each. Our review showed, however, that the actual utilization, during fiscal years 1962-64, of PAGENO="0191" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 183 most of the 11 high-endurance vessels in the Western Area was sub- stantially below the standard of 180 days established by the Coast Guard as a maximum for the annual operation of the vessels. The Vessel Report indicates that the three additional high- endurance vessels are needed primarily to provide long-range search and rescue assistance from continental bases and Hawaii. Coast Guard operational data analyzed by us showed, however, that very little search and rescue work of any type, with oniy a negligible amount of long-range search and rescue work, was performed by the high- endurance vessels during the 3-year period covered by our review. Furthermore, on the basis of Coast Guard criteria relating to vessel capabilities, most of the search and rescue missions performed by the high-endurance vessels deployed from continental bases and Hawaii were of a type which could apparently be carried out as effectively by the smaller and less costly medium-endurance vessels which the Coast Guard plans to acquire. In view of the past workload and search and rescue demands in the Western Area and in view of the search and rescue coverage which the Coast Guard specifies is within the capabilities of the new medium- endurance vessels, we believe that the Coast Guard's stated require- ment for 14 high-endurance vessels in the Western Area is excessive. We believe further that the Coast Guard needs to relate current opera- tions and expected workload changes to the planning elements used in developing its replacement program so that substantial expenditures are not incurred for facilities not needed to carry out assigned missions. We proposed that the Coast Guard reexamine the planned replace- ment and augmentation program for high-endurance vessels in the Western Area and consider revising the program so that the proposed acquisitions conform more closely to needs, as indicated by actual utilization data and current operating standards. By letter dated November 1, 1965, the Commandant of the Coast Guard advised us that h~ completely concurred with our proposal that the Coast Guard reexamine the planned replacement and augmentation program for high-endurance vessels in the Western Area and that he had taken the necessary action to provide for a critical and continuing review of vessel requirements. The Commandant stated that several actions had been taken or were in process which would improve the Coast Guard's techniques for analyzing its requirements and would enable the Coast Guard to make valid amendments to its vessel procure- ment plans. In a report submitted to the Congress on January 29, 1965, we rec- ommended that the Commandant of the Coast Guard reexamine the planned replacement program for high-endurance vessels in the East- ern Area and consider reducing the proposed acquisitions so that they conform more closely to needs. The Commandant advised us that our previous report and our finding relating to the requirements for high-endurance vessels in the Western Area would be used as guidelines in the Coast Guard's planning and analytical efforts. In view of the Commandant's statements, we are not making a recommendation at this time, but, during future reviews, we plan to evaluate the actions taken by the Coast Guard. PAGENO="0192" 184 BACKGROUND: ECONOMY IN GOVERNMET~T-1967 ~Index No. 8-B-132977, Feb. 23, 19661 POTENTIAL SAVINGS THROUGH DIRECT PROCUREMENT øF COMPONENTS USED IN PRODUCTION OF VARIABLE TIMiNG FUZES, DEPARTMENT OF THE NAVY The Navy, in contracting for variable timing fuzes, can purchase directly from the component manufacturers rather than through prime contractors certain electron tubes and reserve energizers required for use in the fabrication of the variable timing fuzes. The components can then be supplied to prime contractors as Government-furnished material. Such action should result in significant savings to the Government in the procurement of variable timing fuzes over the next 5 years. Prior to May 1962, the Navy had supplied the tubes and energizers for use in connection with the ~variable timing fuze contracts as Government-furnished material either from stock or through direct procurement from the component manufacturers. However, under a contract awarded by the Naval Ammunition Depot, Crane, Indiana, in May 1962 and one awarded by the Navy Ordnance Supply Office, Mechanicsburg, Pennsylvania, in July 1963 and amended in June 1964, Eastman Kodak-the prime contractor-was authorized to purchase the tube and energizer requirements not available from existing Navy inventory. We estimate that, as a result of this change in procurement, the Government incmTed additional costs of about $421,000 under the two contracts. The official procurement files of the naval activities involved in the award of the 1962 and 1963 con- tracts did not contain any documentary evidence to indicate the basis for the Navy's decision to discontinue its practice of supplying tubes and energizers as Government-furnished material. Moreover, we could not find any regulations which require that the contract ifies be documented to indicate the basis for a decision to discontinue the use of components as Government-furnished material after initIal breakout has been achieved. We found that, while Eastman Kodak was purchasing tubes and energizers for use in producing variable timing fuzes under these two contracts, the Navy was procuring similar, but not identical, com- ponents directly from the same vendors and providing them as Government-furnished material to Eastman Kodak for use in fab- ricating other types of fuzes. In addition, an Air Force audit report dated May 16, 1963, on the pricing of the tubes used in missile fuzes, contained a statement concerning the dual procurement of electron tubes and recommended that the Bureau of Naval Weapons co- ordinate all requirements common to both Navy and Eastman Kodak and place prime contracts with the same vendor for the consolidated tube requirements. However, the Bureau of Naval Weapons took no action with respect to this recommendation. The Assistant Secretary of the Navy (Financial Management) commented on our findings by letter of July 26, 1965, stating that in this case there would have been a saving to the Government if the tubes and energizers had been furnished to the contractor by the Navy. The Assistant Secretary stated also that the Navy agreed that, had it furnished the Air Force audit report to the contracting officials responsible for these variable timing fuze procurements, the PAGENO="0193" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 185 potential for cost savings through breakout would have been high- lighted. He stated further that steps were being taken to ensure that tubes and energizers would be purchased directly by the Gov- ernment and furnished to the prime contractors in connection with the future procurements of Variable timing. and influence fuzes. This action should result in future significant savings to the Govern- ment. In addition, on October 1, 1965, the Armed Services Procurement Begulation was amended to provide guidance for making decisions on whether or not components should be purchased by the Govern- ment directly and supplied to an end-item contractor as Government- furnished material and to provide that the records of the purchasing activity be documented to show the basis for the decisions. [Index No. 9-B--158193, Feb. 23, i966} NEED FOR POSTAWARD AUDITS To DETECT LACK OF DISCLOSURE OF SIGNIFICANT COST OF PRICING DATA AVAILABLE PRIOR TO CONTRACT NEGOTIATION AND AWARD, DEPARTMENT OF DEFENSE A number of our reports issued to the Congress disclosed situations in which significant cost information that was available or known to a contractor prior to the negotiation of contract prices or to the award of contracts was not disclosed to Government negotiators. As a result, contract prices were increased by the inclusion in price pro- posals of estimated costs that were substantially higher than the costs that should reasonably have been anticipated on the basis of informa- tion known to the contractors. In some of these cases, agency auditors and other personnel had, prior to price negotiations, performed audits and reviews of available contractor records and of other data submitted to them by the con- tractors. However, because certain cost information was not dis- closed by the contractors or became available after the audits were performed, the preaward audits were not effective in disclosing cost estimates that were excessive in the light of information available ~t the time of negotiation and at the time of award of the contracts. Further, because of the limited time allowed for performance of pre- award reviews of pricing proposals, the scope and depth of the reviews may have been curtailed and the available information may not have been evaluated adequately. In addition, in instances in which there was a lengthy time span between completion of the audit of the price proposal and commence- ment of negotiations and between completion of negotiations and award of the contract, significant pertinent information was acquired by contractors during these periods but was-not disclosed to Govern- ment negotiators. Generally, the contractors certified that complete and current information available at the time of negotiations had been disclosed to Government negotiators. These situations, all of which adversely affect the Government's financial interests, have been disclosed as a result of postaward pricing reviews performed by the General Accounting Office. Under these circumstances, the defective pricing data clause in the contract provides a contractual basis for adjusting the price after the contract 77-601-67-13 PAGENO="0194" 186 BACKGROUND: ECONOMY IN GOVERNMENT-i 9 67 is awarded. In view of the effectiveness of postaward audits in identifying information available to contractors but undisclosed to contracting officers at the time of negotiation and in identifying inaccurate, incomplete, and noncurrent cost or pricing data submitted and certified to by contractors, it seems essential that the Department of Defense established some organized procedure for a postaward review-at least on a selective basis-of the data used in negotiating contract prices. Audit procedures set forth in the Defense Contract Audit Manual issued in July 1965, provided for only general surveil- lance of this area and not for regularly scheduled selective postaward reviews. In our draft report submitted to the Department of Defense, we proposed that, in order to achieve the benefits, intended by enact- ment of Public Law 87-653, in negotiating fair and reasonable prices on the basis of contractors' full disclosure of accurate, complete, and current significant cost or pricing data, the Secretary of Defense consider requiring that- 1. The Defense Contract Audit Agency establish a program for regularly scheduled postaward reviews of selected contracts as a required element of the Department of Defense procure- ment management review process. 2. Contracting officers evaluate the need for postasvard audits of contracts awarded on the basis of certified cost or pricing data that they have reason to believe may not be accurate, complete, or current or may not be adequately verified and, in such in- stances, specifically request the Defense Contract Audit Agency to make a postaward audit. 3. The Armed Services Procurement Regulation be revised to provide that a clause be included in all negotiated contracts which exceed $100,000-except when the price negotiated is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation-granting the contract- ing officer or his authorized representatives the contractual right to examine all data, including books, records, and documents generated during the contract period, considered necessary for verifying that the data submitted and used in establishing the contract price were accurate, complete, and current at the time of the contract negotiation and award. The Assistant Secretary of Defense (Comptroller) has advised us that the Department of Defense agreed that there is a need for regularly scheduled postaward audits and that steps were being taken to implement our proposals. [Index No. iO-B--125056, Mar. 11, 19661 REVIEW OF THE MANAGEMENT OF INVENTORIES BY THE ARMY MAP SERVICE, WASHINGTON, D.C., DEPARTMENT OF THE ARMY In October 1964, of a total of $1.1 million invested in inventory of map~making and other supplies, approximately $700,000 was excess to the current needs of the Army Map Service. We found that a com- bination of (1) inaccurate stock records, (2) incorrect usage data, and (3) unnecessarily high stock levels had been a major contributing factor PAGENO="0195" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 187 to the accumulation of the excesses. The accumulation of unneeded supplies at the Map Service was particularly significant since the excess inventory included sizable quantities of film and photographic supplies which deteriorate if stored too long and which have to be disposed of at a fraction of their cost. In the past, the Map Service disposed of significant quantities of supplies that had deteriorated and, at the time or our review, its inventories included significant quantities of ifim and other photographic supplies that had been on hand longer than the recommended periods. In addition to the fact that the Government incurs a financial loss when supplies are disposed of, the maintenance of excess inventories results in added costs for storage, handling, and interest. We brought our finding to the attention of the Department of De- fense and pointed out that appropriate reductions in inventories could produce savings not only by decreasing losses through deterioration and obsolescence hut also by reducing storage and handling costs. Also we advised the Department that it appeared that satisfactory measures had been taken to improve the accuracy of stock records but that further action was needed to provide for the correct usage data and the establishment of more reasonable stock levels. We were subsequently advised that various corrective measures were instituted to maintain the inventory at an absolute minimum for mis- sion requirements, including the establishment of new supply levels for individual items. On the basis of our review, we estimate that the adoption of the new supply levels resulted in a reduction of about $870,000 in procurement costs during fiscal year 1966. Furthermore, smaller inventories will result in (1) future savings in storage and han- dling costs, (2) reduction in losses due to deterioration, and (3) reduced interest on funds invested in inventory. [Index No. 11-B-156516, Mar. 11, 1066] REVIEW OF THE RELOCATION OF RAiLROAD FACiLITIES, WALTER F. GEORGE LOCK AND DAM, FORT GAINES, GA., CORPS OF ENGINEERS (CIviL FUNCTIONS), DEPARTMENT OF THE ARMY Our review of the railroad's general ledger accounts indicated that the Corps paid about $770,000 more than it cost the railroad to have the relocation work performed. The railroad was able to perform the relocation work for less than the contract price, primarily because of favorable terms received in subcontracting certain work and because of a Government allowance for additional operation and maintenance costs, which the Corps should have known would not be incurred because of a change in the type of bridge to be constructed. Also included in the relocation costs recorded by the railroad were the costs of certain facility betterments valued at about $21,000. This amount should be considered an added payment to the railroad because the Government generally is reimbursed for the cost of betterments. Although it is the general policy of the Corps to use cost-reim- bursable-type contracts for major relocations, the Corps entered into a firm fixed-price relocation contract with the railroad because it believed that the use of the fixed-price contract would result in savings PAGENO="0196" 188 BACKGROUND ECONOMY IN GOVERNMENT-i g 67 to the Government. A more complete evaluation of the cost esti- mates, which we believe reasonably should have been made in the circumstances, would have indicated that the proposed amount of the fixed-price contract would not have resulted in the savings antici- pated by the Corps and, therefore, that there was no need to deviate from the general policy which prescribes the use of cost-reimbursable contracts. The railroad does not agree that it was paid $770,000 more than the cost of the relocation, because certain costs for supervision and other overhead expenses were not allocated and recorded in its records as part of the contract costs and because considerations other than construction costs were involved in the contract. When we requested that the railroad make available to us the subsidiary accounting records or work orders, so that we might examine the nature of the charges to the contract or provide us with a reasonable estimate of the unallocated costs, we were advised that the work orders could not be located and that the railroad was not in a position to make an esti- mate of the amount of unallocated costs without exhaustive accounting work. While it is possible that some costs may not have been allocated to the relocation and that these costs would have reduced the $770,000 difference between the contract amount and the railroad's costs, on the basis of data included in the cost estimates of the Corps and the railroad, it is unlikely that these costs would have resulted in a sub- stantial reduction. Our reasons for this conclusion and the con- siderations referred to by the railroad are discussed in the report. To minimize the possibility of the occurrence of similar situations in the future, we propose that existing regulations be amended to require that requests by division or district engineers to enter into fixed-price contracts for major relocations be fully supported by de- tailed cost analyses or other justifications to enable the Chief of En- gineers to adequately evaluate the circumstances requiring a deviation from the prescribed procedures. The Corps agreed to give further consideration to extending the requirements for the approval of the use of fixed-price contracts for major relocations and advised us that the Chief of Engineers had emphasized to division and district en- gineers the need to minimize the use of such contracts. Subsequently, however, we were informed that the existing regulations were con- sidered adequate and that no revision was contemplated. In view of the importance of adequate administrative review and determination of the need to deviate from prescribed contracting pro- cedures, we are recommending that the Secretary of the Army direct the Chief of Engineers to formally amend the existing regulations to require that field requests for permission to enter into fixed-price contracts for major relocations be supported by detailed cost analy- ses or other justifications to enable the headquarters office to properly evaluate the circumstances requiring a deviation from the prescribed procedures. PAGENO="0197" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 189 [Index No. 12-B-156167, Mar. 23, 1966] OPERATION OF A DAIRY FARM BY THE U.S. NAVAL ACADEMY, ANNAPOLIS, MD.; DEPARTMENT OF THE NAVY The dairy farm at the United States Naval Academy, Annapolis, Maryland, was established in 1911 to provide the midshipmen with a source of pure milk following an outbreak of typhoid fever attributed to the unprocessed milk purchased for the midshipmen's mess. In the 54 years which have passed since the dairy was established, commercial dairy operations have improved to the point that there is no longer any reason to consider it necessary for the Naval Academy to operate a dairy to ensure the availability of a supply of pure milk and milk products. Further, its continued operation appears to be contrary to Government policies with respect to competition with private enterprise and retention of real property. The records maintained by the dairy indicated that the cost to the Government for milk and milk products obtained from the Academy dairy was less than the prices charged other Government activities by commercial sources. We found, however, that certain additional adjustments to the dairy farm costs were necessary in order to reflect the true cost to the Government. After these adjustments, annual savings of about $84,000 would be realized by the Government if the Academy dairy farm was sold and the Academy's milk needs were obtained from commercial sources. Inasmuch as the continued operation of the dairy farm appeared contrary to Government policy and in view of the economies which could be realized through discontinuing its operation, we proposed to the Navy that consideration be given to the disposal of the dairy farm. The Navy has agreed that the dairy is no longer necessary and has advised us that a plan will be developed to phase out the dairy with the objective of minimizing the impact on the local farm community and providing the maximum return on the midshipmen's store invest-~ ment. The Navy advised us also that the Department of Defense was preparing a directive which would provide specific guidelines for an evaluation of commercial activities operated by the military depart-. ments in order to arrive at a decision which would be in the best interests of the Government. Concerning the Navy's comment on providing the maximum return on the midshipmen's store investment in the dairy farm, we were advised by a cognizant official that the Navy was considering whether the midshipmen's store should participate in the proceeds from the sale of the dairy farm. We were further advised by this official that a final decision on this matter had not been made by the Navy as of January 18, 1966. It should be recognized that the computations in our report were based on the assumption that the proceeds from the sale of the dairy farm would accrue to the United States Goveinment and that any other disposition of such proceeds would alter the comparative costs of the procurement of dairy products by the Academy and, thus, the savings to the Government. In the event that the Navy determines that any proceeds from the sale of the dairy should not be deposited with the Treasury, the proposed disposition of the proceeds sb~uJd PAGENO="0198" 190 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 be submitted with appropriate explanation of the basis for the Navy's determination to the Comptroller General for a decision. Since the Navy plans to phase out the dairy at the Naval Academy, we made no recommendations. {Jndex No. 13-B-133102, Mar. 24, 19661 REVIEW OF THE MANAGEMENT AND UTILIZATION OF CAPEHART, WHERRY, AND OTHER GOVERNMENT:OWNED FAMILY HOUSING, DEPARTMENT OF THE ARMY Available family housing remained vacant or was being used for other than its intended purpose at Army installations while service- men were being paid quarters allowances to provide their own housing. In order to estimate the amount of increased annual expenditures for quarters allowances in the Department of the Army, we applied the increased rate of such expenditures, as disclosed in our review, to the total expenditures for basic allowance for quarters, as paid by the Army, for fiscal year 1964. On the basis of this calculation, we estimated that the Army's increased expenditures for quarters allow- ances would amount to approximately $3 million annually because of the unutilized available housing. Had the Government-owned family housing been occupied by eligible personnel, the Government's cost of family housing could have been offset by the resultant reductions in quarters allowance payments as intended by the Congress. We found during our review that Gdvernment-owned family housing remained vacant or was used for other than its intended purpose for excessive periods because instal- lation officials responsible for the management of family housing did not (1) control the time taken to process and renovate family housing for reoccupancy, (2) maintain complete listings of personnel eligible for family housing, (3) direct eligible personnel to occupy available family housing, and (4) redesignate excess available officer housing to meet the housing needs of enlisted men. The Deputy Assistant Secretary of Defense (Family Housing) con- curred in general with the findings, conclusions, and proposals con- tained in our draft report and outlined to us a series of corrective actions being taken Army-wide. He stated that our findings had been and continued to be of valuable assistance to the Department of Defense in the administration of the family housing program. He stated that, at the specific installations concerned, corrective action had been initiated on deficiencies uncovered by the General Account- ing Office as rapidly as they were identified and that conditions noted for periods prior to fiscal year 1964 did not continue to exist through- out fiscal year 1964. Furthermore, a Department of the Army letter dated September 10, 1964, notified all commands of the deficiencies noted by the General Accounting Office. It was not our intention to indicate that all the deficiencies disclosed during the period of our review continued to exist at those specific installations after corrective actions had been taken. The purpose of our estimate was to show the increase in the Army's annual ex- penditures for quarters allowances in terms of 1 fiscal year's expendi- tures. An audit report issued by the Army Audit Agency dated PAGENO="0199" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 191 January 18, 1965, reported the continued existence of such manage- ment deficiencies during fiscal year 1964. In view of the corrective actions initiated by the Department of Defense and the Department of the Army, we did not make any recommendations. We believe that the actions being taken are a start in the right direction and that they merit the continued atten- tion of top management officials in order to ensure that the desired improvements are accomplished. We plan to evaluate the effective- ness of the corrective actions taken as part of our continuing review of the utilization of Government-owned family housing. [Index No. 14-B-133127, Mar. 24, 19661 ECONOMIES FROM MAKING ELECTRON TUBES AVAILABLE TO OTHER GOVERNMENT USERS, FEDERAL AVIATION AGENCY In a previous report to the Agency, issued in October 1961, we brought out the need for the Agency to review and dispose of inactive depot stocks, including electron tubes, and to establish maximum stock allowances on the basis of actual or anticipated usage. Our follow-up review disclosed that the Agency had not taken adequate action to identify and dispose of tubes excess to its reasonably current needs because it had established retention levels which, in our opinion, were too high in view of the ready availability of tubes on the market. In June 1962, the Agency decided that a 5-year supply of tubes should be maintained in stock. In June 1964, the Agency lowered the retention level to a more realistic 10-to-22-month supply for the pur- pose of making tubes available to the Department of Defense. As of September 30, 1963, the Agency had on hand about $2 million worth of tubes in excess of a 2-year demand and about $1.4 million worth of tubes in excess of a 3-year demand. Thus, the Agency retained for long periods large quantities of tubes which should have been made available to other Government users. We noted that in 1963 and 1964 the Department of Defense purchased from commercial sources significant quantities of tubes which, at the times they were purchased, could have been supplied from Federal Aviation Agency stocks. In April 1964, about midway through our follow-up review, the Agency entered into an agreement with the Defense Electronic Supply Center which resulted in the Agency's reducing its retention levels for certain tubes. However, the Agency did not reduce its retention levels for tubes that were not to be rej)orted to the Supply Center and did not make overstocks of such tubes available to the General Services Administration for possible use by several civil agencies which were also users of many Agency tube types. The retention of more tubes than were needed to meet the Agency's reasonably current requirements resulted in a larger Government investment in inven- tories than was necessary. Moreover, such retention (1) tends to *increase interest costs because the Government borrows substantial funds to finance its operations, (2) increases the chance of financial loss through obsolescence, and (3) could result in additional storage and handling costs and in the expiration of tube warranty periods *while tubes are on the shelf. We proposed that the Administrator of the Federal Aviation Agency direct that retention levels for tubes other than those reported to the PAGENO="0200" 192 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 Defense Electronic Supply Center be adjusted downward, additional excess tubes be identified and so classified, and procedures be estab- lished to make the Agency's overstocks of tubes available to other civil agencies. In his letter to us dated August 17, 1965, the Administrator of the Federal Aviation Agency agreed that certain tubes had been held in quantities which were excessive to current needs and had not been made available for the use of other Government users. He stated that action was being initiated with the General Services Adminstra- tion to develop a coordinated system to ensure that the Agency's overstocks would be made available to other civil agencies, that the Agency was in he process of revising its retention levels for tubes, and that, after the revisions were made, inventories of tubes would be adjusted and excess stocks reported. Subsequently, we have been informed by an Agency official that (1) the General Services Administration is planning to include elec- tronic items in the National Supply System by July 1, 1966, (2) under this system, the Defense Supply Agency will provide supply support for all electronic items for all agencies, and (3) in view of these developments, the Agency does not believe it worthwhile to implement special procedures to make its overstocks available to other civil agencies. In this connection, we have been informed that it will be some time before actual supply support for electronic items is ac- complished by the Defense Supply Agency. Accordingly, we are recommending that the Administrator of the Federal Aviation Agency initiate action to have the Agency's overstocks of electron tubes re- ported to the General Services Administration, thus making them available for use by other civil agencies. [Index No. 15, B-154282, Mar. 24, 19661 NEED FOR IMPROVEMENT IN THE MANAGEMENT OF VEHICLE UTILI- ZATION, BUREAU OF INDIAN AFFAIRS, DEPARTMENT OF INTERIOR Our examinations into vehicle utilization at seven locations under the jurisdiction of the Muskogee and Anadarko, Oklahoma, Area Offices indicated that 17, or 30 percent, of the 57 vehicles included in our review were excess to Bureau needs and that the need for an addi- tional 7 vehicles was questionable. We found that assigning vehicles for the exclusive use of certain individuals and organizational units, instead of using pool operations whenever practicable, was the prin- cipal reason for the relatively large number of excess vehicles. Our examinations at locations in the Muskogee and Anadarko Areas also disclosed that vehicle operators' records were not being adequately maintained and that, therefore, responsible area office officials did not have the information necessary for the effective management of the vehicles. Our analyses of motor vehicle usage reports at the Central Office indicated the possibility that a substantial number of Bureau-owned vehicles were not being adequately utilized at locations that were not included in our detailed field examinations. For example, these reports show that more than half of the passenger vehicles and light trucks in the Bureau's fleet during all of fiscal year 1963 were utilized PAGENO="0201" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 193 less than the average use objectives established by the General Serv- ices Administration; some of the vehicles were not, used at all during the year. We found that these reports were not used by Central Office officials for management control purposes although it is pointed out in the Bureau of Indian Affairs Manual that the analyses of re- ports on past operations, which are developed through the Bureau's financial management control system, could indicate that weak- nesses exist in vehicle utilization practices. We brought our findings to the attention of Department and Bureau officials and proposed that vehicle utilization practices be reviewed at Bureau locations with the obj ective of pooling vehicles where practicable and disposing of vehicles in excess of needs. We proposed also that vehicle operators' records be properly maintained so that management officials can adequately review and evaluate vehicle utilization. We were advised that our proposals would be adopted, and in December 1965 the Department advised us that the findings in this report disclosed some significant weaknesses in the management of vehicles and that it was the Bureau's intention to eliminate those weaknesses as rapidly as possible. We were advised that the Bureau had initiated action for an almost complete take-over of its motor vehicle fleet by the General Services Administration. Transfers of vehicles have been completed at the Anadarko and Muskogee Area Offices, and, as a result of the pooling operations, it is expected that annual operating costs of the Anadarko and Muskogee Area Offices will be reduced by about $33,000 and $40,000, respectively, and that total vehicle needs will be reduced by about 100 vehicles. In view of the corrective actions taken or to be taken by the De- partment and the Bureau, we are making no recommendations on the specific matters noted in the report at this time. As part of our *continuing review of the Bureau, we plan to make examinations into the action taken at an appropriate time. We noted, however, that the Bureau's Office of Audit does not review the utilization of vehicles. In our opinion, such reviews by internal audit are a significant and necessary management control function; therefore, we are recommend- ing that the Commissioner of Indian Affairs require the Office of Audit to include the examination into vehicle utilization as part of its reviews of propery utilization. [Index No. 16-B-114807, Apr. 12, 19661 NEED FOR IMPROVEMENT IN MULTIPLE-AWARD CONTRACTING POLICY, GENERAL SERVICES ADMINISTRATION We made a review of selected multiple-award contracts awarded by the General Services Administration for felt tip markers. Multiple-award contracting is the awarding of concurrent contracts to differen t suppliers of comparable or competitive products or services, which can be used by Government agencies to fill their varying requirements. Because certain actions taken by the con- tracting officer, with which we disagree, were consistent with a policy governing the General Services Administration multiple-award PAGENO="0202" 194 BAcKGROuND: ECONOMY IN GOVERNMENT-i 967 system of contracting, our review was expanded to include an evalu- ation of that policy. In February 1962 General Services Administration determined that three brands of felt tip markers available to agencies under its negotiated multiple-award contracts were comparable in performance. Notwithstanding this determination, General Services Adminis- tration renewed and extended the contract with the supplier of one of these brands during the period September 1962 through February 1964 at prices which were substantially in excess of prices negotiated with suppliers of the other two brands. We estimate that increased costs of about $300,000 were incurred by Government agencies that ordered the higher priced markers during that period. We believe that the increased costs would have been avoided had the General Services Administration either (1) negotiated a lower price with the supplier of the higher priced markers or failing this, (2) not extended nor renewed the contract with that supplier, thereby re- moving that brand of marker from the Federal Supply Schedule. The General Services Administration on July 1, 1965, in comment- ing on our preliminary proposals, stated that there was no supportable method whereby, under the multiple-award system, a supp]ier offering comparable or competitive product could be precluded from partici- pating in the Federal supply system simply because his product was priced higher. In view of the fact that the actions of the contracting officer were based on General Services Administration policy and in view of the substantial amount of negotiated procurement under the multiple-award system, we believe that the award of contracts to the supplier of the higher priced item has implications beyond felt tip marker contracts and that a revision of General Services Administra- tion contracting policy would be desirable. The General Services Administration enters into the negotiation of multiple-award contracts at a disadvantage when it adheres to the self-imposed requirement that it must ultimately award a contract to each supplier of a comparable or competitive product regardless of price. Under these circumstances there is little reason for the sup- plier to make the price concessions which are a part of the contract negotiation process. While a dollar value cannot be assigned to the advantage that would result from a stronger posture by the General Services Administration in negotiating multiple-award contracts, we nevertheless believe that there will be occasions when the Government will benefit if both the General Services Administration contracting officers and the contractors enter into negotiations of multiple-award contracts with the understanding that the contracting officer need not award a contract if he cannot negotiate a price that he believes i~ reasonable, all facts considered. Accordingly, we are recommending to the Administrator of General Services that the General Services Administration revise the policy governing its multiple-award system of contracting, so that a con- tracting officer is not required as a matter of policy to award a contract to, or to extend or renew a contract with, a supplier with whom he cannot negotiate a reasonable contract price. PAGENO="0203" BACKGROUND: ECONOMY IN GOVERNMENT~-1 967 195 [Index No. 17-B-114868, Apr. 12, 1966] SAVINGS ATTAINABLE THROUGH REVISIONS OF CONSTRUCTION STAND- ARDS TO AVOID EXCESS SEATING CAPACITY IN SCHOOL DINING FACILITIES, BUREAU OF INDIAN A~'AIRS, DEPARTMENT OF TH~ INTERIOR As a result of our review the Bureau has revised its construction standards, and we estimate that construction and furniture costs of dining facilities at four 1,000-pupil schools being planned by the Bureau will be lowered by about $146,000 as a result of the reduction in excess seating capacity. In addition, savings in construction and furniture costs can be realized by the reduction of seating capacities of dining facilities at smaller schools. In 1957 the Bureau established a standard for the construction of dining facilities which provided for a seating capacity of 50 percent of the maximum school enrollment in the main dining room. We exam- ined operations of dining facilities at five selected schools and observed that the number of seats used at the point of maximum occupancy was less than 400, even though in some instances more than 1,000 pupils were fed. The number of seats vacant at the point of maximum occupancy ranged from 150 to 275. Our observations showed that the capacity of serving lines and the turnover rate of pupils in the dining areas, rather than the size of the student body, are the principal factors that determine the number of seats needed in a dining facility. Since the Bureau apparently did not consider these limiting factors in 1957, the standard of providing seat- ing capacity in dining facilities for 50 percent of the maximum enroll- ment of schools is unrealistic, in our opinion, and significant additional construction and furniture costs have been incurred. Moreover, action was not taken to revise the 50-percent seating standard although a cognizant Bureau official formally advised the Commissioner of Indian Affairs in 1962 that the seating standard being used resulted in overbuilding dining facilities at schools with large student enrollments. After we brought our findings to the attention of Department officials, we were advised in August 1965 that the Bureau initiated a study of dining facility operations and we were informed in December 1965 of the results of the survey. After further discussions with Bureau officials in January and February 1966, we were advised that construction standards for dining facilities at schools with enrollments of more than 479 pupils would be revised and that plans for a new standard 1,000-pupil school dining facility had been completed. Our comparison of these revised plans with the plans previously used for a standard 1,000-pupil school dining facility showed that the dining area was reduced from about 9,000 to about 6,300 square feet, or a reduction of about 30 percent. On the basis of cost data furnished by the Bureau, we estimate that construction and furniture costs at four 1,000-pupil schools being planned by the Bureau will be lowered by about $146,000 as a result of the reduction of excess seRting capacity. Although the Bureau took action to reduce excess seating capacity in school dining facilities after we brought our findings to the attention of the Department, the action taken was based on the results of a survey of dining operations that appeared questionable since actual PAGENO="0204" 196 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 counts of vacant seats in the dining facilities were not made. Conse- quently, we believe that further savings may be attainable. Therefore we are recommending that the Commissioner of Indian Affairs reevaluate seating capacity needs at school dining facilities before giving his approval for the revised construction standards. As part o~ our continuing review of Bureau activities, we plan to make an examination of the actions taken by the Bureau at an appropriate time. [Index No. 18-B-133127, Apr. 12, 19661 OPPORTUNITIES FOR SAVINGS THROUGH GREATER USE OF AVAILABLE MILITARY AIRCRAFT PARTS, FEDERAL AVIATION AGENCY On the basis of our reviews at two Air Force installations, it appears that substantial savings can be achieved through the greater use of military aircraft parts. During fiscal year 1964, the Agency's pur- chases of aircraft parts from commercial sources amounted to about $2.2 million. Our review disclosed that the majority of the types of items purchased from commercial sources were carried in the Air Force supply system and that a number of these types of items were in long supply in the Air Force system. The purchases were made from commercial sources when military parts were available because of the Federal Aviation Agency's policy of emphasizing that approved commercial sources be the first source of supply for aircraft parts needed for the Agency's aircraft fleet. How- ever, many of the parts in the Air Force system were acquired from the same commercial sources as those used by the Agency. Subsequent to our review, the Federal Aviation Agency began participating on a test basis in the Department of Defense Interservice Supply Support Program. Under this program, the military services report stocks in long supply to the Defense Logistics Service Center of the Defense Supply Agency where the information is consolidated and furnished to participants in the program in accordance with requirements reported by the participants. ~ u]l participation in this program should provide the Agency with current information as to the availability of military parts. However, on the basis of our review, we concluded that it was unlikely that maximum use of such parts would be achieved by the Agency unless its policy was changed to emphasize that military stocks be considered as the first source of supply. In his letter to us dated July 30, 1965, the Administrator of the Federal Aviation Agency informed us that the Federal Aviation Agency was participating in the Department of Defense interservice supply program and was using assets of that Department when available to satisfy the Agency's operating requirements. He stated that a previous General Accounting Office report had prompted the Agency to reexamine its policy regarding the use of military aircraft parts. The Administrator agreed that the Agency's policy in effect at the time of our review did limit the use of military parts and that the Agency should use the Department of Defense supply system as the prime source of supply for aircraft parts whenever possible. In this regard,~ he stated that an Agency directive issued in Feb- ruary 1965 authorized the use of military aircraft parts on certified PAGENO="0205" BACE~GROUND: ECONOMY IN GOVERNMENT-i 967 197 Agency aircraft and that overhauled and repaired military parts would be used as well as new parts. We note that, ~in March 1965, the Agency issued a directive for the gmdance of its procurement personnel which states, in part, that personal property requirements will not be procured from commercial sources until it has been de- termined that the needed items are not available from other agencies. If these directives are effectively implemented, the deficiency dis- cussed in this report should not recur. We are recommending that the Administrator of the Federal Aviation Agency ascertain through future management reviews and internal audits that the aforemen- tioned directives are being effectively administered and that mihtary aircraft parts are being used to the maximum extent practicable. [Index No. 19-B-133386, Apr. 12, 19661 REVIEW OF ROYALTIES CHARGED TO THE U.S. GOVERNMENT FOR USE BY GOVERNMENT CONTRACTORS OF CHEMICAL MILLING IN- VENTIONS, DEPARTMENT OF THE AIR FORCE A basic chemical milling invention was developed by a Department of the Air Force prime contractor, North American Aviation, Inc., Los Angeles, California. Inventor laboratory notes, technical reports, and other records of the contractor show that the invention was made to solve a problem arising in the performance of an Air Force research and development missile contract. The invention had been classified by the contractors as being not subject to the patent rights provisions of the contract, and thereafter the Government was charged royalties for its use. Although the terms of the contract were subject to varied interpretations, we believe that a reasonable interpretation would have granted the Government a royalty-free license to use the invention. When the Air Force became aware of the basic chemical milling invention, it raised the issue of the Government's rights to royalty- free use of the invention but did not resolve the issue. At the time of our review, Government contracts with other firms had been charged chemical milling royalties totaling almost $500,000, of which an unidentified portion covered improvement patents and know-how of another company whose records were not subject to our review. We informed the Secretary of Defense of our findings and proposed that his Department take the necessary steps to settle the matter on equitable grounds and to avoid any unwarranted royalty payments in the future. In commenting on these proposals, the Department of Defense advised us that the Air Force General Counsel's Office had entered into preliminary discussions with counsel for the Air Force prime contractor to resolve the legal issues relevant to a determination or the Government's rights in the inventions in question and, further, that the Air Force would advise us or the action taken on these proposals at a later date. The Air Force advised us in February 1966 that it had negotiated With the prime contractor a proposed settlement agreement which the Air Force intended to execute in the near future. This agreement in essence provides for (1) the rebate to the Government of $157,000 as settlement of one half of the prime contractor's share of the chemical PAGENO="0206" 198 BACKGROUND: ECONOMY IN GOVERNMENT-19 67 milling royalti~s paid by Government contractors through September 30, 1964, (2) the continuing rebate of one half of the prime contrac- tor's future share of such royalties, add (3) the grant of royalty-free licenses in the contractor's 12 chemical miffing inventions and 5 mventions on which patent applications' have been ffled. We believe that difficulties arise as to the Government's license ~rights because of varied interpretations given the definition of the term "subject mvention" contamed in the Armed Services Procurement Regulation (ASPIR) patent provisions. Although the ASP'R definition of a subject invention was revised during our review to mean any invention made "i' * * in the course of or under this contract * * the Government is stifi confronted with the' difficult task of establish- ing whether a nonsubject classification by a contractor is' justified. We therefore proposed that the Department of Defense amend the ASPR patent provisions to provide a broader and more definitive description of the term "subject invention" and to establish a pre- sumption that any invention made during performance of a contract, which relates to the subject matter of the contract or to work incident to or required under the contract, is a "subject invention." We also proposed that the Department consider a further amend- ment of the ASPR patent provisions to provide that both the military services and the Comptroller General of the United States have the right of access to records necessary to determine whether any invention of a contractor is a subject invention or to determine compliance by a contractor with the requirements of the patent rights clause. The Department of Defense informed us that our proposed change in the ASPR, along with other proposed changes dealing with patent administration, had been considered by the ASPR Patents Sub- committee and that the Subcommittee's report was scheduled for con- sideration by the full ASPR Committee. When final action is taken by the ASPR Committee, the Department will advise us of any changes in the regulation. [Index No. 20-B-158427, April 12, 1966] REVIEW OF SAFETY CONDITIONS IN CERTAIN STORAGE AREAS PRI- MARILY IN THE SOUTH BUILDING OF THE DEPART~IENT OF AGRI- CULTURE, WASHINGTON, D.C., DEPARTMENT OF AGRICULTURE, GENERAL SERVICES ADMINISTRATION We noted that trash was permitted to accumulate in storage areas; -printed matter was stored in a manner that obstructed sprinkler cover- age; corridors and aisles were used for storage areas, thus impeding ~the movement of fire-fighting equipment; extension cords were used `unsafely; broken bulbs and unprotected lighting fixtures created fire hazards; employees smoked in areas highly susceptible to fire; "No Smoking" signs had not been posted in areas where they should have `been posted; and inspection and maintenance of fire extinguishers `were inadequate not only in storage areas but elsewhere in the South `Building, so that many of the extinguishers were of questionable use- fulness. We have included in the report photographs taken during our review in 1964 showing the conditions of some of the storage areas in the South Building. PAGENO="0207" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 199 In our opinion, the hazardous conditions for which Department of Agriculture officials are responsible were primarily attributable to the ~absence of a coordinated Department-wide policy and of adequate standards, techniques, and procedures pertaining to the prevention and control of fire and related hazards. Also, we believe that the unsafe conditions for which the General Services Administration is responsible resulted because its buildings manager did not comply with established General Services Administration regulations and did not provide adequate maintenance in the attic and subbasement storage areas in the South Building. In a letter dated September 29, 1965, the Director, Office of Plant and Operations, Department of Agriculture, informed us that he had checked various parts of our proposed report with the agencies of the Department having interest in those areas and had reviewed with officials of the General Services Administration certain of our findings. He noted that the issues we had raised were well taken and added that the Department was eliminating the hazards. The Director itemized certain specific actions which had been taken or were planned to correct the deficiencies we reported and stated that he expected that the actions which the Department was taking would also prevent the recurrence of such hazards. In a letter dated October 20, 1965, the Assistant Administrator for Finance arid Administration, General Services Administration, ex- plained in detail the corrective measures which had been or would be taken on the various deficiencies noted in our proposed report. We believe that the actions taken or contemplated by the Depart- ment of Agriculture and the General Services Administration are substantially responsive to our proposals and, if properly implemented, should eliminate and prevent the recurrence of the deficiencies dis- closed in our review in the South Building. We noted, however, that similar deficiencies existed in three of six other governmental agency buildings which we subjected to a selective review in December 1965. Therefore, we are recommending to the Administrator of General Services that our findings be brought to the attention of the agency's managers in the other buildings under General Services Administration control with the request that similar reviews be made and any neces- sary corrective action be taken. Although our findings pertain primarily to one of many govern- mental agency buildings in the Washington, D.C., area, we are bringing the results of our review to the attention of the Congress because the deficiencies disclosed both in that building and in three of six other buildings included in our subsequent review demonstrate some of the unsafe and hazardous conditions which should be avoided by all Government agencies. Also, our findings should be of interest to all Govermnent agencies in connection with their responsibilities under the "Mission Safety-70" program initiated by the President on February 16, 1965, which has as its objective a 30-percent reduction of Federal employees' injuries and related costs by 1970. PAGENO="0208" 200 BACKGROUND: ECONOMY IN GOVERNMENT-1967 [Index No. 21-B-158515, Apr. 12, 1966] REVIEW OF LONG-TERM MEDICAL RESEARCH ON AGING OF AVIATION PERSONNEL, FEDERAL AVIATION AGENCY The objective of the Federal Aviation Agency's efforts in this 25- year research project is to develop methods for measuring the physio- logic age, as distinguished from the chronologic age, of aviation per- sonnel. The Public Health Service, Department of Health, Educa- tion, and Welfare, also is supporting a project through a research grant to learn more about the process of physiological aging and its progress is relation to chronological age. The latter project is using pilots as a study group and is expected by the grantee to continue for a total of 30 years. The projects, currently being funded at annual rates totaling about $365,000, will cost the Government $9.7 million ($5 miiiion for the Federal Aviation Agency and $4.7 million for the Public Health Service) if they are financed to completion. In our opinion, the need for the Federal Aviation Agency to under- take a separate long-term project on the aging of pilots and other avia- tion personnel is questionable because (1) the general objectives of each project are similar and each project is based on the same planning study and (2) the information being developed under the Public Health Service-supported research project could, it seems, have been adapted to meet the objectives of the project which the Federal Aviation Agency had recently initiated. In 1960 the Federal Aviation Agency awarded a contract to the Lovelace Foundation for Medical Education and Research, Albu- querque, New Mexico, for a research planning study of aging criteria. The Lovelace Foundation advised the Agency that an extensive planning study was necessary before any long-term project on aging could be effectively initiated. Prior to the award of the contract, the Subcommittee on Independent Offices of the Committee on Appro- priations, House of Representatives, expressed concern that the Fed- eral Aviation Agency was about to undertake research in an area already being studied by the Public Health Service and by other Government agencies. The Agency informed the subcommittee that, to its knowledge, neither the Public Health Service nor any other research group was conducting research on aging related to the task of piloting. Subsequently, the Agency learned that the Foundation intended to apply to the Public Health Service for a grant to support a long-term project on the aging of pilots. However, the Agency proceeded to make the first examinations in its long-term aging project. We conclude that, upon being advised of the Foundation's intention to apply to the Public Health Service for a grant to conduct long-term research on the aging of pilots, the Federal Aviation Agency could have formally communicated with the Service and the Foundation to deter- mine whether one long-term project could be devised to meet the needs of both agencies. If these procedures had been followed, the Federal Aviation Agency's research objectives related to the aging of pilots and other aviation personnel may have been attained, as part of the long-term project supported by the Public Health Service, at sub- stantially lower cost to the Government. The Federal Aviation Agency disagreed with our findings on the bases that (1) the methodologies of each of the projects differ and PAGENO="0209" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 201 (2) the studies do not, for the most part, duplicate each other although they are similar. We do not mean to imply that there are no differ- ences between the two projects. However, the general objectives of each project are similar and the research subjects in both projects are representative of the population for which the Agency requires data. Accordingly, we believe that with adequate coordination the Public Health Service-supported project may have been modified to satisfy the objectives of the project which the Federal Aviation Agency had recently initiated. The Agency acknowledged that there were no formal procedures for coordinating research between it and the Public Health Service. The Federal Aviation Agency advised us that it would establish formal procedures for coordinating new research projects with the Public Health Service. With regard to whether both projects should continue to be fi- nanced, the Administrator, Federal Aviation Agency, informed us that Agency officials had discussed this matter with Public Health Service officials, at which time they agreed that each group would maintain its separate project. Because of the technical nature of the question in- volved, we are not in a position to determine the merits of the decision reached. The situation described in this report serves, however, to il- lustrate the importance of adequate coordination between Govern- ment agencies before long-term research projects are initiated. The establishment of formal procedures by the Federal Aviation Agency for coordinating new research projects with the Public Health Service, if such procedures are properly implemented, should assist in accom- plishing research objectives in a more economical manner. Accord- ingly, we are making no recommendations at this time. We will continue to observe the manner in which the Federal Aviation Agency and other Government agencies coordinate their research efforts. [Index No. 22-B--122796, Apr. 21, 19661 REVIEW OF REEMPLOYMENT LEAVE TRAVEL BENEFITS GRANTED CERTAIN CIVIL SERVICE EMPLOYEES IN STATES OF ALASKA AND HAWAII, DEPARTMENT OF DEFENSE AND OTHER GOVERNMENT AGENCIES The General Accounting Office has made a review of reemployment leave travel benefits granted certain civil service employees in the States of Alaska and Hawaii by the Department of Defense and other Government agencies. Under the law, the Government pays the expenses of round trip travel of certain employees and the transportation of their immediate families from their posts of duty in Alaska or Hawaii to their desig- nated residences at time of appointment or transfer, for the purpose of taking leave between tours of duty. These benefits are provided to attract employees with needed skills to duty posts outside the continental United States and to induce them to extend their tours of duty at such posts. The hearings on the authorizing legislation (5 U.S.C. 73b-3) indicate that reemploy- ment leave travel benefits were for employees who do not intend to become permanent residents of Alaska or Hawaii and that a reevalua- 71-GO1-67-----14 PAGENO="0210" 202 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 tion was to be made of the need for reemployment leave travel benefits when these territories became States. Our review disclosed, that many Federal employees were obtaining these travel benefits although they had lived for many years in, had registered to vote in, and had bought homes in, Alaska or Hawaii. Under existing law, these employees, because they were considered to be nonresidents of Alaska. or Hawaii at the time of appointment or transfer, are permanently entitled to reemployment leave travel benefits; whereas employees who were considered to be permanent residents of Alaska or Hawaii when they were hired are not entitled to these benefits. To ascertain whether similar benefits were provided by private in- dustry to employees from the United States mainland, we inquired into the policies of several of the larger corporations having offices in Alaska or in Hawaii. Seven of the nine corporations we queried advised us that they did not provide employees from the United States mainland with transportation to the mainland for the purpose of vacationing. Although entitlement to reemployment leave travel benefits is based upon the employee's actual residence at time of appointment or transfer, the implementing Bureau of the Budget regulations do not define "actual residence." As a result, many employees are obtaining benefits on the basis of administrative determinations of actual residence which appear to be questionable. The Government's cost for reemployment leave travel benefits to employees in Alaska and Hawaii amounts to about $1.4 million a year. We did not estimate how much of this amount could be saved by terminating benefits for employees who become established resi- dents of Alaska or Hawaii and by applying more restrictive criteria in determining the employee's place of actual residence at time of appointment or transfer. We believe, however, that the savings from such actions would be significant. The matters discussed in this report were brought to the attention of the Bureau of the Budget and several Federal agencies having employees in Alaska and Hawaii. The Bureau of the Budget and these agencies generally agTeed that provision should be made for terminating reemployment leave travel benefits for employees who become established residents of the States of Alaska and Hawaii and that there is a need to clarify the intent of the law with respect to an employee's actual residence at time of appointment or transfer. We recommended that the Bureau of the Budget, under its existing authority, specify criteria for determining "actual residence at time of appointment or transfer," for the guidance of administrative personnel responsible for determining the entitlement of employees to reemployment leave travel benefits. We suggested that, because conditions affecting the recruitment and retention of civil service employees in Alaska and Hawaii have changed since enactment of the legislation providing for reemploy- ment leave travel benefits and because there is no provision for terminating such benefits in the light of changed conditions, the Congress may wish to consider legislation providing for discontinuing reemployment leave travel benefits when they are no longer appropriate. PAGENO="0211" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 203 [Index No. 23-B--133044, Apr. 21, 1966] SAVINGS AVAILABLE THROUGH UTILIZATION OF GREATER QUANTITIES OF EXCESS MEDICAL EQUIPMENT AND SUPPLIES, VETERANS' ADMINISTRATION On the basis of our review, we believe that the veterans Adminis- tration Could have used considerably greater quantities of certain medical equipment and supplies that were declared excess by the Department of Defense in 1962 and 1963 than it actually acquired. The excess items cost about $2.7 million. Of these excess items, about $1.8 million worth were acquired by Government agencies- including about $450,000 worth acquired by the Veterans Adminis- tration-and about $900,000 worth were donated to recipients outside the Government. We believe that a significant quantity of the $900,000 worth of donated excess items could have been used through- out the Veterans' Administration hospital system. In our opinion, the Veterans' Administration did not acquire the maximum quantities of excess medical equipment and supplies that it could have used, because responsibility for screening and evaluating excess property for use by the Veterans' Administration was not centralized and was therefore ineffective. We advised the Administrator of Veterans' Affairs of our findings and proposed that he centralize authority and responsibility for, and provide procedures for, effectively screening and utilizing excess property. The Deputy Administrator of Veterans' Affairs informed us on September 8, 1965, that he agreed that the Veterans' Administration should make the fullest practicable use of excess property of other Government agencies and that procedures had been developed centralizing the responsibility for screening and maximizing the utilization of excess property. [Index No. 24-B--133127, Apr. 21, 1966] OPPORTUNITY FOR SAVINGS THROUGH PAYMENT OF RELOCATION CosTs RATHER THAN SUBSISTENCE ALLOWANCES FOR CON- TRACTOR-FURNISHED EMPLOYEES, FEDERAL AVIATION AGENCY During the 5-year period ended June 30, 1964, the Government incurred significant additional costs that could have been avoided if the Agency had paid relocation costs rather than subsistence allow- ances for certain contractor-furnished employees assigned to work at its National Aviation Facilities Experimental Center. We believe that, when it was advatnageous to do so, the Agency's contracting personnel should have authorized or requested relocation, at Govern- ment expense, of contractor-furnished employees assigned to work on projects at the Center for periods in excess of 1 year. We believe also that the basic cause for the additional costs was the absence of specific guidelines for use by the Agency's contracting personnel in evaluating the allowability and reasonableness of subsistence and relocation allowances. Although the precise amount of savings that would have been realized is not readily determinable, we found that the cost of relocat- PAGENO="0212" 204 BACKGROUND~ ECONOMY IN GOVERNMENT-i 967 ing contractor-furnished employees who worked at the Center for periods ranging from 12 to 52 months would have been significantly less than the cost of the subsistence allowances paid to the contractor. We believe that, in view of the long term and complex nature of the projects and the lack of in-house capability to perform such projects, the Agency knew, or should have known, that some contractor- furnished employees would be needed at the Center for extended periods of time and that relocating these employees at Government expense would have been advantageous. We proposed that the Administrator, Federal Aviation Agency, require that precise policies and procedures relative to the allowabiity and reasonableness of subsistence and relocation allowances for contractor-furnished employees be established. We proposed also that such policies and procedures direct that the duration of the contractor- furnished services be realistically evaluated and that reasonable relocation costs be paid for contractors' employees on extended assignments if such payments will result in lower overall contract costs. In his letter to us dated September 27, 1965, the Acting Adminis- trator advised us that the Agency was developing guidelines for use by contracting personnel in evaluating the allowabiity and reasonable- ness of subsistence and relocation expenses when negotiating and administering contracts. He advised us also that the Agency had initiated actiOn to strengthen other controls in the subsistence and relocation allowances area. The action taken or to be taken by the Agency, should effectively deal with the matter discussed in this report. In view of the import- ance of this matter, however, we will, as a part of our continuing review of the Agency's activities, evaluate the effectiveness of (1) the Agency's guidlines when they are issued and (2) the manner in which the guidelines are implemented. ~Index No. 25-B-146924, Apr. 21, 19661 SAVINGS ATTAINABLE THROUGH REDUCTIONS IN FIRE DEPARTMENT AND GUARD FORCE STAFFING AT GOvERNMENT-OWNED CONTRACTOR- OPERATED INSTALLATIONS, ATOMIC ENERGY COMMISSION On the basis of our review, we believe that (1) savings of about $65,000 annually are attainable by reducing the number of regular fire department employees at the Portsmouth, Ohio, Gaseous IDiffu- sion Plant operated by Goodyear Atomics Corporation and (2) sav- ings of about $124,000 annually are attainable by consolidating the fire and guard management staffs at both the Portsmouth Gaseous Diffusion Plant and the Oak Ridge National Laboratory which is operated by the Union Carbide Corporation. These savings, in our opinion, are attainable without impairing the effectiveness of the fire protection and prevention activities at these plants. Information about these potential economy measures was available to Commission officials at Oak Ridge from annual fire loss, protection, and prevention cost reports and from quarterly wage and salary reports submitted by operating contractors. We believe that proper reviews and analyses of these reports would have enabled Commission PAGENO="0213" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 205 officials to compare the costs of the fire protection and prevention activities between the plants and thus identify the potential economy measures discussed in the report. We presented the matters discussed in the report to the Com- mission's General Manager for comment, and, at our request, the General Manager obtained for us the views of Goodyear and Carbide. The contractors and the Commission stated reasons why personnel reductions could not have been made earlier, but they indicated that steps were being taken to realize the potential economies. We are recommending that the Commission's General Manager (1) require a review of fire protection and prevention and guard force activities at its other contractor-operated installations for the pur- pose of ascertaining whether adequate and effective levels of these activities are being conducted in the most economical manner and (2) direct the attention of Commission employees to the importance thorough reviews and analyses of cost and staffing reports regularly submitted by operating contractors, which provide a basis for evaluat- ing the comparative economy of similar activities at different plants. [Index No. 26-B--146962, Apr. 21, 1966~ REVIEW OF SELECTED OVERHEAD COSTS CHARGED TO GOVERNMENT CONTRACTS BY THE UNIVAC DIVISION OF SPERRY RAND CoRP., ST. PAUL, MINN., DEPARTMENT OF DEFENSE In our review we found questionable charges to Government con- tracts by the Univac Division of Sperry Rand Corporation, St. Paul, Minnesota, totaling $264,000, consisting of plant maintenance and occupancy costs, interest, and accelerated amortization of lease hold improvements. Univac allocates plant maintenance and occupancy costs incurred in its eight operating plants on a so-called one-roof basis. Under this method, these costs are combined into one pooi and an average cost per square foot on plant space is computed considering the total working area in the eight plants. This is then allocated to Govern- ment and commercial operations in each plant on the basis of the area utilized for each type of work. Inequities result from this method when space used for Government operations is charged with costs incurred exclusively or predominantly in areas used for com- mercial operations. In our review we identified about $152,000 of plant maintenance and occupancy costs incurred in a 12-month period which were charged to the Government, although they were related to the company's commercial operations. For example, about $127,000 of rent and local property taxes incurred in various other plants were allocated to Government contracts performed in plant II, a rent-free Navy- owned plant used primarily for Government work. If these expenses had been accumulated on an individual plant basis and allocated in proportion to Government and commercial work performed in each plant, we estimate that Univac's commercial work would have borne $77,000 of this $127,000. We believe this would have been a more realistic basis for allocating these expenses. PAGENO="0214" 206 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 We also found that Univac charged the Government with interest~ costs of about $29,000 (including about $18,400 applicable to cost- type contracts), recorded by the contractor as rent, and with accel- erated amortization costs of $83,000 on leasehold improvements. Neither of the charges was questioned by the Air Force auditors, although they appeared to be contrary to the pertinent provisions of the Armed Services Procurement Regulation. The Department of Defense informed us that, after we had called the matter to its attention, it effected recovery of interest reim- bursed to Univac through the fiscal year ended March 31, 1964, under cost-type contracts and agreed to redetermine the amounts allowable for amortization of leasehold improvements. With re- spect to plant maintenance and occupancy costs, the Department also agreed to seek an adjustment of the overhead inequitably allocated to the Government. [Index No. 27-B--157535, Apr. 21, 1966~ REVIEW OF PRICES NEGOTIATED ON SELECTED CONTRACTS FOR. AMMUNITION AND WEAPONS COMPONENTS, DEPARTMENT OF THE ARMY The Government has incurred additional costs because two con- tractors proposed, and the Government accepted, prices that were overstated in relation to cost information known to the contractors prior to the dates on which the proposals were made. Our review of one contract awarded to Aeroj et-General Corporation and three contracts awarded to The Cleveland Pneumatic Tool Company revealed that the primary cause of the overstated prices had been the failure of both contractors to base their labor cost estimates on the most recent production information available. Furthermore, although there was substantial production experience available prior to the award of each of the contracts in question, Army procurement officials did not, in our opinion, adequately review such production data to verify the reasonableness of the contractor's proposal. Our selective examination into the pricing of the contract awarded to Aerojet-General Corporation indicated that the price had been overstated by about $957,000. When we brought our findings to the attention of the Department of the Army it initiated a further review, from which it concluded that the contract price actually had been overstated by about $2.8 million. Our review of the prices negotiated with The Cleveland Pneumatic Tool Company indicated that the prices of the three contracts had been overstated by about $239,000. Each of the four contracts was awarded subsequent to the enactment of Public Law 87-653, and therefore included pro- visions for price adjustments. The Department of the Army advised us that, on the basis of its review of the circumstances, it agreed that the contracts had been overpriced and informed us that it was taking action to obtain appropriate refunds. In view of the actions being taken by the Department of the Army to adjust the contract prices, we made no further recommendations. PAGENO="0215" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 207 [Index No. 28-B-157711, Apr. 21, 1966~ POTENTIAL SAVINGS BY BUYING INSTEAD OF LEASING SPECIALIZED TRANSPORTATION EQUIPMENT, DEPARTMENT OF THE AIR FORCE The Department of the Air Force provides logistic support for all Government missile and space programs. On the basis of our review, we are of the opinion that, during the period October 1961 through June 1965, the Air Force expended about $1 million more to lease liquid oxygen and nitrogen transport trailers from common carriers than it would have expended to purchase and maintain the trailers. These costs were incurred as a result of the Air Force's adherence to a policy of leasing specialized transportation equipment from carriers without first considering the comparative costs of leasing and of owning the equipment. Had the comparative costs been considered before the agreements were made with the carriers, we believe that the. financial advantages of ownership could have been foreseen and the additional costs avoided. In its comments on this matter in April 1965, the Department of the Air Force recognized that, when a long-term requirement existed for specialized transportation equipment, it might be advantageous. to consider Government purchase and stated that its transportation regulations would be revised to require a cost analysis of Government purchase versus lease or exclusive-use arrangements when such equip~ ment is required. This revision had not been incorporated in th~ regulations at the time of issuance of our report. The Air Force did not agree, however, that the leasing arrange- ments had resulted in avoidable costs to the Government, claiming that acceptable military design trailers could not have been purchased in time to meet the transportation requirements and thus avoid pay-~ ment of interim leasing charges for commercial design trailers. Although the Air Force did not comment specifically on the possible procurement of commercial design trailers, we were informally advised that, since it already had military design trailers in its inven- tory, the Air Force would not have considered commercial design. trailers. It is our opinion that the Air Force should not have limited. its consideration of trailers to be purchased to those of military design. We believe that, if commercial design trailers were considered satisfactory for transporting the propellants under leasing arrange- ments with the carriers, they would have been equally satisfactory for the same purpose if under Government ownership. We recommended that, in revising the transportation regulations,. the Secretary of the Air Force considered including a provision. specifying that specialized commercial design equipment be purchasec[ in lieu of military design equipment, if financially advantageous to' the Government, and used to transport military cargo. We recom- mended also that the Secretary of the Air Force institute a review to determine whether existing lease arrangements should be continued or' whether some alternative arrangement should be negotiated with the carriers. PAGENO="0216" 208 BACKGROUND: ECONOMY IN GOVERNMENT-1 967 [Index No. 29-B-114858, Apr. 29, 1966] NEED FOR IMPROVED COORDINATION OF TRANSMISSION LINE CON- STRUCTION PRACTICES OF THE BUREAU OF RECLAMATION AND THE BONNEVILLE POWER ADMINISTRATION, DEPARTMENT OF INTERIOR The Bureau and the Administration have adopted different practices in constructing tower footings without fully evaluating alternative methoth of construction. Our review showed that, because of these different practices, there have been substantial differences betwe3n the amounts which the Bureau and the Administration have agreed to pay for the construction of tower footings. For example, we found that the Bureau specified the use of concrete pad footings on 473 miles of transmission lines under conditions that it appears would have permitted the use of steel footings, such as those generally constructed by the Administration, and that the prices of the concrete pad footings were about $492,500 more than the average prices of steel footings of equal or greater structural strength constructed by the Administra- tion. In addition to differences in practices relating to construction of tower footings, we noted or were advised of other differences between the transmission line construction practices of the Bureau and the Administration, such as the extent of soil testing, weight of towers used, size of conductors, size and number of insulators used, use of overhead ground wires, and use of Government-furnished materials. Although the Office of the Assistant Secretary, Water and Power Development, Department of the Interior, is responsible for the direction and supervision of the Bureau and the Administration, an official of this Office advised us that the Office has not required coordination of transmission line construction practices and has not reviewed or evaluated the differences in the construction practices of the two agencies. We believe that the results of our review indicate a need for cen- tralized coordination to provide reasonable assurance that, when im- proved systems or techniques-in terms of either efficiency or econ- omy-are developed, they will be promptly implemented by all the agencies which can benefit from their use. The Department did not agree that centralized coordination is needed and its views are recognized in the report. We are recommending that the Secretary of the Interior reconsider the Department's position and require that a study be made to de- termine the full extent of the differences between the transmission line construction practices of the Bureau and the Administration and the potential for effecting savings by the adoption of more uniform practices. We are recommending further that this study be used as the basis for determining the degree of coordination necessary and practicable to effect the potential savings and for developing pro- cedures to implement such coordination. PAGENO="0217" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 209 ~Index No. 30-B-118634, Apr. 29, 1966] OPPORTUNITY FOR SAVINGS BY REDUCING OVERTIME ON REVETMENT CONSTRUCTION AND MAINTENANCE ON THE LOWER MISSISSIPPI RIVER, CORPS OF ENGINEERS (CIVIL FUNCTIONS), DEPARTMENT OF THE ARMY The accompanying report presents our findings regarding the opportunity for savings by use of a 40-hour workweek in lieu of regularly scheduled overtime on revetment Construction and mainte- nance Work performed by the Corps of Engineers (Civil Functions), Department of the Army, on the Lower Mississippi River. Revet- ment construction involves the laying of concrete mattresses at selected bank locations to protect vulnerable bank areas from the eroding action of the river currents. On the basis of our review, we believe that, in most cases, the Corps of Engineers could accomplish planned revetment work over an extended construction period by using a 40-hour workweek in lieu of scheduled overtime work to accelerate revetment operations. We made an examination of past construction seasons and programs to demonstrate the feasibility of doing this work in the future without the use of regularly scheduled overtime. We estimate that the Corps of Engineers could have realized savings of about $521,000 during fiscal years 1962 through 1965 by eliminating scheduled over- time in revetment construction activities performed by the Memphis District of the Corps of Engineers on the Lower Mississippi River. The Department of the Army advised us that the Corps of Engineers must consider many factors in planning and carrying out this complex land and marine construction operation. The primary factors which the Department stated must be considered relate to adverse river stages and weather conditions. In determining that a 40-hour work- week was feasible, we gave consideration to the possible effect of adverse river stages and weather conditions on the Corps' ability to perform the work. The Department stated that failure to complete the yearly program. would subject the bank areas to additional erosion and could result in damage to partially completed revetments. We believe that many of the potential problems mentioned by the Department would be present regardless of whether the work was performed by using scheduled overtime or on a 40-hour workweek basis with overtime limited to that required after it becomes apparent that necessary work cannot be completed because only a portion of the authorized~ revetment work can be accomplished in any one construction season. Also, the risks are present in any year because, as district officials informed us, revetment work is most effectively performed when erosion of the banks has progressed to a certain stage. Prior to or after the time this stage has been reached, the effectiveness of per- forming revetment work is reduced. We are therefore recommending that the Chief of Engineers direct the Lower Mississippi Valley Division to use a 40-hour workweek in programing revetment construction by the Memphis District and that overtime be limited to that required after it becomes apparent that necessary work cannot be accomplished on a 40-hour workweek basis. PAGENO="0218" 210 BACKGROUND: ECONOMY IN GOVERNMENT-1967 {Index No. 31-B-146917, Apr. 29, 1966] POTENTIAL SAVINGS THROUGH IMPROVED MANAGEMENT OF AMMUNI- TION, DEPARTMENT OF DEFENSE The Army Ammunition Procurement and Supply Agency, Joliet, Illinois, authorized the procurement of .22-caliber and 90-millimeter ammunition without inquiring whether other military departments had excess ammunition that could be made available to meet Army needs. At the times during fiscal year 1965 when procurement was authorized by the Army, the Marine Corps had substantial quantities of these types of ammunition on hand that were excess to its current needs. After we brought this matter to the attention of agency officials, ammunition Valued at $713~0OO was transferred from the Marine Corps to the Army. As a result, approved plans for the procurement by the Army of additional .22-caliber ammunition Valued at $431,000 were canceled and requirements for future pro- curement of 90-millimeter ammunition were reduced. The Army failed to query the Marine Corps on the availability of stock that was excess to its current needs because responsible per- sonnel were not aware of Army policy or procedures concerning this matter. The need for procedures to ensure that one service will not authorize procurement of equipment or supplies until it has ascer- tained whether its requirements can be met from excess stocks of other services has been recognized by the Department of Defense and the military services for many years. The Deputy Assistant Secretary of Defense (Materiel Require- ments), commenting on a draft of this report, acknowledged that the Army had erroneously authorized the procurement of the ammunition without first determining whether the Marine Corps had excesses that could be made available to meet the Army's needs. He advised us that additional management controls had since been instituted to provide assurance that Army commodity managers would follow prescribed procedures in future situations of this type. In addition, he advised us that subsequent to our review an interdepartmental task group had been formed to review the supply management of weapons and related ammunition, including interservice utilization. We met with members of the task group and were advised that, as a result of their efforts, over $9 million worth of ammunition had been *earmarked for interservice utilization and over $150 mfflion worth of ammunition had been made available for transfer to eligible countries under the military assistance program. This group also told us of their plans for a more effective program for interchanging information on ammunition needs and excesses among the services. Under this new program, authorized in October 1965 and to be implemented in fiscal year 1967, it is planned that automatic data processing equip- ment will be used to match the needs of one service with releasable stocks of the other services and thereby improve the possibility that optimum use will be made of stocks in long supply. If the new Department of Defense program for interchanging am- munition among the services is to attain optimum effectiveness, care- ~fully devised management controls and checkpoints will be essential. Accordingly, we recommended to the Secretary of Defense that the personnel responsible for developing this new program be instructed to give particular attention to the need for such controls. PAGENO="0219" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 211 [Index No. 32-B--158604, Apr. 29, 1966] POLICY GUIDANCE STRENGTHENED ON DIRECT PROCUREMENT OF COMPONENTS NEEDED BY CONTRACTORS IN PRODUCTION OF WEAPON SYSTEMS AND OTHER MAJOR END ITEMS, DEPARTMENT OF DEFENSE The General Accounting Office has issued to the Congress a large number of reports over the past several years on reviews of the policies, procedures, and practices followed within the Department of Defense in determining whether certain components needed for installation in weapon systems or other major end items being produced should be purchased by the contractors or purchased by the Government and furnished to the contractors. In these reports we pointed out the economies that could be realized in Government procurement if the Department of Defense and the military services would make greater efforts to furnish components to contractors in instances where it is feasible and to the advantage of the Government to do so. The economies stem from several factors. Purchasing of the com- ponents by the Government provides an opportunity to consolidate requirements for a component common to several weapon systems or other major end itenis and to take advantage of the lower prices that may be available for purchases in larger quantities. Inasmuch as military procurement is subject to provisions of the Armed Services Procurement Regulation which requires the use of formal advertising procedures designed to obtain full and free competition, unless specifically excepted by law, the Government is more likely to purchase the components competitively, thus affording all qualified producers an opportunity to participate in supplying the Government's needs. Also, the furnishing of components to the contractor places the Gov- ernment in a sound position to negotiate a lower price for the end item by reducing the profit or fee which otherwise would be allowed on the contractor's cost of items purchased under the contract. In the subject report we stated that the Department of Defense had recently added to the Armed Services Procurement Regulation a pro- vision which contains a policy statement and procedural guidance de- signed to encourage and expand the practice of furnishing components to contractors when the cirumstances are appropriate. The prior policy guidance, in effect during the periods covered by our reports, apprared to us to tend to discourage the practice we were advocating. The earlier policy guidance, which Irad been in effect since piror to 1959, was provided in the Armed Services Procurement Regulation (section 13-201) in the following terms. It is the general policy of .the Department of Defense that contractors will furnish all material required for the performance of Government contracts. How- ever, the Government should furnish material to a contractor when itis determined to be in the best interest of the Government by reason of economy, standardiza- tion, the expediting of production, or other appropriate circumstances. This provision gave the military services broad latitude and was variously interpreted in their implementing instructions. The inter- pretations ranged from the position of the Air Force, that components should be Government furnished to the maximum practicable extent, to the position of the Navy's Bureau of Ships, that the furnishing of such items should be "reduced to an absolute minimum." PAGENO="0220" 212 BACKGROUND: ECONOMY IN GOVERN~tENT-19 67 The new guidance, which was added to the Armed Services Pro- curement Regulation on October 1, 1965, as revised December 1, 1965 (section 1-326), places gTeater emphasis on direct procurement of components. The Department of Defense policy is now stated as follows Whenever it is anticipated that the prime contract for a weapons system or other major end item will be awarded without adequate price competition, and the prime contractor is expected to acquire a component without such com- petition, it is Department of Defense policy to break out that component if (i) substantial net cost savings will probably be achieved; and (II) such action will not jeopardize the quality, reliability, performance or timely delivery of the end item. The desirability of breakout should also be considered (regardless of whether the prime contract or the component being purchased by the prime contractor is on the basis of price competition) whenever substantial net cost savings will result from greater quantity purchases or from such factors as improved logistics support through reduction in varieties of spare parts and economies in operations and training through standardization of design. This provision does not apply to all procurement decisions, but only to those which deal with whether components that were furnished by the contractor in a. previous procurement of a weapon system or other major end item should be furnished by the Government. in a forthcoming procurement. Thus it does not apply to the initial decisions which must be made at the inception of the procurement program. We understand that the Armed Services Procurement Regulation Committee is developing guidance which will cover initial decisions. In addition to placing emphasis on direct procurement, section 1-326 places responsibiit.y for breakout decisions on the project manager a.nd sets forth certain requirements for establishing and maintaining records for identifying c.omponents which have been considered for breakout a.nd for disclosing the basis for decisions which are made. Section 1-326 also establishes certain guidelines to assist project. managers in malñng their decisions. We believe that the adoption of section 1-326 represents a signifi- cant step toward realizing more fully the economies which are obtain- able by direct procurement under appropriate circumstances. The progress that results will of course depend upon the effectiveness of implementation by procurement organizations and surveillance by the services. We have been advised that the progress will be evalu- ated by the Department of Defense Procurement Management Review Program as a part of its continuing reviews of the operations of procurement organizations. ~Index No. 33-B--158662, Apr. 29, 1966] REDUCTION IN DOLLAR OUTFLOW POSSIBLE THROUGH MORE Ex- TENSIVE USE OF AMERICAN-MADE BUILDING MATERIALS IN EM- BASSY AND RELATED CONSTRUCTION PROJECTS, DEPARTMENT OF STATE Our examination into selected purchases of building materials for embassy and related construction projects overseas disclosed a num- ber of instances where foreign-made materials were used in lieu of American-made materials. Our examination was concerned entirely PAGENO="0221" BACKGROUND: ECONOMY IN GOVERNMEWP-1967 213 with purchases from outside the country in which the construction was performed and from countries in which the United States holds no excess foreign currencies. Purchases of foreign-made materials with nonexcess foreign currencies or dollars have an adverse effect on the United States balance of payments. The most significant instance which we noted of using foriegn-made materials, paid for with nonexcess foreign currency, was in the con- struction of an annex to the American Embassy in New Delhi, India, completed in 1965. We identified purchases totaling about $273,000 in individual amounts of over $1,000 from suppliers in England, Germany, and Prance made by the Indian contractor during construc- tion. All the items noted appeared to be of a type that could have been purchased in the United States. Although we did not attempt to ascertain the full extent of the fore- going practice, it seems possible, in view of the size of the Foreign Serv- ice building construction program (about $14 miffion for fiscal year 1966), that the Department could make a worthwhile contribution toward alleviating the United States balance of payments problem by making an appropriate modification in its present procurement regula- tions to require the maximum use practical of American-made mater- ials in its construction projects. The Department expressed general agreement with our findings and conclusions and stated that it had undertaken to review and alter the policies leading to a greater use of American-manufactured products within the limits of practicality in contracts executed after March 1, 1966. The Department stated, however, that there was a practical limit with respect to its use of dollars for the purchase of American products in that the Congress annually requires the Foreign Service building program to expend local currencies in amounts which approxi- mate 70 percent of the annual appropriation. There is no requirement that such local currencies be excess or near-excess to United States needs. We believe that the Department's indicated actions will achieve the desired result, within the limitations imposed by the appropriation acts, if properly implemented and given the continued attention of responsible management officials. Therefore, we are making no recom- mendation to the Department at this time but plan to examine into the effectiveness of the actions taken at a later date. With regard to the Department's comment concerning the mandatory use of local cur- rencies in the Foreign buildings program, we are suggesting that the Congress may wish to consider changing the language used in the annual appropriation act to the effect that the use of foreign currencies for constructing and operating foreign buildings is made mandatory only in those instances where such usage will be beneficial to the United States balance of payments. [Index No. 34-B-114833, May 24, 1966J OPPORTUNITIES FOR REDUCING THE NUMBER OF VEHICLES MAIN- TAINED IN FLEET, SOIL CONSERVATION SERvICE, DEPARTMENT OF AGRICULTURE Our review of the available evidence on the utilization of 453 vehicles assigned to selected Soil Conservation Service offices in three PAGENO="0222" 214 BACKGROIJND ECONOMY IN GOVERNMENT-1967 States indicated that 84 vehicles, or about 19 percent of the vehicles assigned to the selected offices, were not needed. In our opinion, the accumulation of more vehicles than were needed at the selected offices evidences a need for (1) the pooling of vehicles among offices located in proximity to each other, where possible, and (2) the assigning of vehicles on the basis of actual usage. For the 84 vehicles which our review indicated were not needed, we estimate that the net replacement value-excess of average acqui- sition cost over average resale value-in fiscal year 1965 was about $90,000. Agency procedures provide for the assignment of vehicles throughout Soil Conservation Service operations on the basis of quota criteria which do not consider actual usage or the possibility of pooling vehicles among offices. We believe, therefore, that an appropriate revision of the agency's procedures to consider these matters would afford an opportunity to reduce the Soil Conservation Service vehicle fleet by a larger number of vehicles than the specific number indicated by our review at the selected field offices. The Administrator, Soil Conservation Service, in his letter of November 23, 1965, did not specifically comment on the excess ve- hicles indicated by our review but stated that, as a result of certain studies made by the agency subsequent to the time the preliminary results of our review were brought to his attention, it was found that an immediate reduction of 71 vehicles could be made in the agency's fleet. He stated, however, that he considered the present system of the Soil Conservation Service better adapted to the overall problem of determining the number of vehièles needed than other systems which the agency had under consideration. He proposed, however, to (1) institute an intensive study of the agency's present system and (2) select some typical States which would be required to maintain daily-use records for a period of approximately 1 year in order to determine the number of times vehicles were needed and when those needs might be met by the use of vehicles of another office nearby. We believe that our review has demonstrated that, while the present agency quota system is not unreasonable for use as a general guideline, it needs to be supplemented by guidelines which provide for giving due consideration to the actual vehicle usage information and to any planned future program changes before making the final determination as to vehicle needs. We believe also that our review has shown that consideration should be given to the pooling of vehicles at Soil Conser- vation Service offices located close to each other. We are recommending that the Secretary of Agriculture request the Administrator of the Soil Conservation Service to initiate at this time a Service-wide review of daily vehicle utilization for the purpose of establishing the number of vehicles neededby the agency, giving due consideration to the possibility of pooling vehicles at locations where there is more than One office, as well as to planned changes in future program activity. We are recommending also that agency guidelines for assigning vehicles be supplemented to provide for the pooling, where feasible, of vehicles at locations where the Soil Conservation Service has :norc than one office and that all assignments be periodi- cally reviewed as to reasonableness and justified on the basis of the actual usage of the vehicles. In this connection, we are recommending that the Administrator be required to revise agency procedures. to PAGENO="0223" BACKGROUND: ECONOMY IN GOVERNMENT-1967 215 provide for the daily recording of mileage readings and hours of use of vehicles. [Index No. 35-B--154068, May 25, 1966] PLANNING FOR AND UTILIZATION OF AUTOMATIC DATA PROCESSING EQUIPMENT, AMES RESEARCH CENTER, MOFFETT FIELD, CALIF., NATIONAL AERONAUTICS AND SPACE ADMINISTRATION The Ames Research Center has, in recent years, leased computers that have been significantly underutilized and as a result has incurred relatively high computer processing costs. We believe that this situ-. ation can be attributed to Ames' permitting its various organizational units to pursue separate courses of action with respect to automatic data processing activities and not requiring thorough analytical studies which would have served as a basis for the evaluation and selection of the optimum equipment configuration needed to meet Center-wide processing requirements. We believe further that a contributing factor has been that NASA Headquarters did not fully evaluate the effectiveness of Ames' practices relating to its planning for, and acquisition and utilization of, automatic data processing equipment. The excess computer capacity acquired by Ames and the fragmented approach that has repeatedly been taken in determining its automatic data processing equipment requirements strongly suggest the need for centralized direction of the planning for, and the aCquisition and operation of, all its computer systems. We believe that ample evidence of the existence of excess computing capacity was available with regard to wind tunnel data reduction, general scientific computing work, and administrative data processing to have indicated the need for a Center-wide study. Our review re- vealed that, during the 3-year period ended April 1964, Ames paid basic monthly equipment rentals of about $784,000 for operational use time that was not used. Also, we noted that the estimated in- service hours of Ames' two major computers for fiscal year 1965 were substantially fewer than the average of the estimated in-service hours of the same types of computers used by all Government agencies for that period. We believe further that this low utilization experience should have prompted the Space Administration and Ames to deter- mine whether two major computers were needed or whether Ames' requirements could have been met by the use of one computer. The Space Administration advised us that, in line with our proposals, responsibilities had recently been assigned at Headquarters for the central management of automatic data processing, instructions were being formulated which would require management evaluation of installation effectiveness, and a review board had been established at Ames to consider qJl automatic data processing resources and needs on a Center-wide basis. The Space Administration, however, does not agree that unused computer capacity was avoidable or that the use of only one computer system at Ames, if it had been feasible, would have resulted in economies. Whether it would have been technically or economically feasible for Ames to consolidate its equipment needs in past years could not, in our opinion, have deen determined without first performing a detailed study of Center-wide data processing PAGENO="0224" 216 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 requirements. As of February 1966, the Space Administration was still not in a position to make such a determination, because a study of the required magnitude was not yet available. We believe that, if the assigned responsibilities at Headquarters for the central management of automatic data processing equipment activities are properly carried out, more effective planning for and utffitization of such equipment throughout the Space Administration will result. Similarly, if the newly established Ames review board effectively monitors equipment utilization and systems development and evaluates proposed equipment acquisitions, we believe that de- ficiencies of the type discussed in this report will be eliminated or greatly minimized. Because of the importance of automatic data processing to the Space Administration's research and development activities, we plan to devote more attention to this area in the future. We are making this report to the Congress because of the increasing importance of computer technology in Government operations and the increasing costs being incurred therefor. We believe that the prac- tices described in this report demonstrate the need for effective control. ~Index No. 36-B-158625, May 25, 196611 REViEW OF DEVELOPMENT OF CERTAIN SCIENTIFIC INSTRUMENTS FOR THE SURVEYOR PROJECT, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION The objectives of the Surveyor project are to soft-land a series of unmanned instrumented spacecraft on the moon's surface, gather scientific and engineering data about the moon, and transmit the data back. to the earth, where it will be disseminated to the scientific and engineering communities. In our review we learned that th~ Space Administration had expended about $5.7 million for the design and development of certain scientific instruments which were removed from the approved Surveyor spacecraft payload after a reduction in the predicted capability of the Atlas/Centaur launch vehicle required a drastic reduction in the weight of the spacecraft instrument pay- load. We therefore undertook a review of the management of instrumentation development, to determine whether costs of this nature could be avoided or reduced. On the basis of our review, we believe that a significant part of these costs were incurred after it became apparent that the use of the instruments was no longer feasible. We found that the Space Admin- istration had not promptly initiated appropriate studies for establish- ing the instrumentation it desired for a lighter weight spacecraft for the early Surveyor flights when it was evident that such action was necessary. We found also that the Space Administration took no action to discontinue the development of instruments for use on a heavier weight spacecraft at the time that data became available which showed that the reduced launch vehicle performance and the correspondingly reduced instrument payload would apply to all approved flights. We believe that, had the Space Administration taken timely action to suspend or discontinue development of these instruments for which, on the basis of available information, there was no reasonably f ore- PAGENO="0225" BACKGROUND: ECONOMY IN GOVEKNMEN'P-l 967 217 seeable use, expenditures of as much as $2.5 million could have been avoided. Further, we believe that such timely action could have released scientific and technical manpower in both Government and industry to meet other, and possibly more pressing, demands at a time when the demand for scientists and engineers exceeded the supply. The Space Administration did not agree with our finding. Its comments are recognized in the report. We are reporting this matter to the Congress because of the interest expressed in the Surveyor project, as indicated by the Subcommittee on NASA Oversight, Committee on Science and Astronautics, House of Representatives, which issued a report dated October 8, 1965, entitled "Project Surveyor," and in the belief that the results of our review will be of value to the Congress in its surveillance over the space programs. We believe also that our report, by pointing out a specific area where, in our view, management was not fully effective, will be of assistance to the Space Administration in its management of future space programs. [Index No. 37-B-146730, May 27, 1966] RECOVERY OF NEEDED PARTS FROM EXCESS AIRCRAFT ENGINES, DEPARTMENT OF THE AIR FORCE * The Air Force has placed considerable emphasis on the importance of recovering needed parts from excess aircraft engines being processed for disposal, and this emphasis has resulted in significant savings each year. We found, however, that in the reclamation of J57 and R4360 engines in fiscal year 1964, parts costing about $872,000, for which the Air Force had requirements, had not been listed for recovery when the engines were processed for disposal. Many of these parts were omitted from the lists due to errors, oversights, and misunder- standings on the part of commodity managers at the San Antonio Air Materiel Area, Texas, and. because supervisory reviews did not detect these omissions. In some instances, published lists of parts to be recovered were not provided to the commodity managers for review for accuracy and completeness, and, in other instances, heavy work- loads delayed revision and updating of these lists to reflect latest requirements. In addition, at the Oklahoma City Air Materiel Area, Oklahoma, engines were disposed of before an appropriate list of parts to be saved had been issued by the engine manager at San Antonio. . . We brought our finding to the attention of Air Force officials during our review, and the Air Force took action to recover any needed parts which had not yet been disposed, of. By that time, however, it was possible to recover only parts costing $213,400; the remainder had already been disposed of. After allowing for condemnations and reclamation and repair costs, we estimate that this action resulted in savings of about $137,000. We estimated that, if provision had been made initially for the recovery of the entire $872,000 worth of parts' it would have resulted in additional savings of about $443,000. The Air Force commented on our finding in a letter dated August 25, 1965. The Air Force acknowledged that deficiencies had existed in the reclamation process in fiscal year 1964 and agreed that errors and untimely reclamation had caused the loss of needed parts. We 77-601-67-15 PAGENO="0226" 218 BACKGROUND: ECONOMY IN GOVERNMENT-19 67 were also advised of various procedural changes to preclude recur- rence of conditions we found, which had been made subsequent to our review. Generally, we believe that the Air Force has established an effective program for obtaining needed parts from engines being disposed of. The importance of the program is emphasized in Air Force regulations, and application of existing procedures has resulted in substantial dollar savings each year from reclamation. Our review showed, however, that failure to reclaim even a relatively few parts which are needed can result in substantial losses which, we believe can be avoided. We believe also that the action taken by the Air Force as a result of our review will further improve existing procedures and that, if effectively implemented and enforced, these improved pro- cedures should help prevent recurrence of the type of deficiencies identified during our review. [Index No. 38-B--114878, May 31, 1966] PREFERENTIAL ALLOWANCES PAID TO CERTAIN CONTRACTOR E~r- PLOYEES AT THE HANFORD WORKS, RICHLAND, WASH., ATOMIC ENERGY COMMISSION Shortly after assuming operation of the Hanford Works in Septem- ber 1946, the General Electric Company determined that the existing wage rate structure for certain craft and clerical positions was not equitable. Therefore, General Electric proposed in May 1948 and, with subsequent Commission approval, adopted a new wage structure designed to eliminate the inequities. The preferential allowance was adopted in conjunction with the wage structure realignment because General Electric considered it inadvisable to reduce the total wages of about 3,400 employees receiving wages at rates higher than the rates established under the wage realignment. General Electric expressed the belief that the preferential allowances would be elimi- nated over a period of time by upgrading, transfers to higher rated jobs, and usual personnel turnover. No specific or determinable time limit was placed on the payment of the preferential allowances, and, as of February 1, 1965, 146 employees were still receiving the allowance which totaled about $55,000 annually. Our review showed that, within 3 years after the new wage structure became effective, the basic wage rates for most affected job classifica- tions had, through general wage increases, equaled or exceeded the previous basic wage rates. Not only was the preferential allowance retained after the new basic rates were raised above the previous rates, but it also was increased as basic wage rates were increased. We believe that the continued payment of the allowance, which was designed to mitigate the economic consequences of the wage structure realignment, has resulted in a misalignment of pay at the Hanford Works, thus violating the basic principle of equal pay for substantially equa.l work. We believe also that, because a specific or determinable time limit was not established when the allowance was approved, the Government continues to incur inequitable wage costs. General Electric is withdrawing as the operating contractor at the Hanford Works, and, under a program of diversification announced PAGENO="0227" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 219 by the Commission, a number of contractors, rather than a sole operating contractor, are conducting the various activities. The new support services contractor, who employs practically all of the persons still receiving the allowance, commenced operations effective March 1, 1966, and is currently negotiating with the employees' union with a view toward ultimate resolution of the problem. We presented the matters discussed in the report to the Commis- sion's General Manager for comment, and, at our request, the General Manager obtained the views of the General Electric Company. We proposed that the Commission consider reviewing the wage structures at its other contractor-operated installations with a view toward. ascertaining whether similar incremental allowances are being paid~ and, if being paid, whether the Government may be incurring inequi-~ table wage costs. We proposed also that the Commission adopt a; policy applicable to all its installations, which will provide that a specific or determinable time limit be placed on the payment of any similar allowances in the future. The Commission and General Electric stated that the matter of reducing or limiting preferential rates at Hanford had been considered in the past but that the rates were considered far less important than the other issues which were part of the total wage package subject to negotiation and therefore were not given high priority. They pointed out also that, in 1946 when General Electric assumed operation of the Hanford Works, it inherited a wage structure containing rates that were substantially higher than comparable area rates but that the current rates were substantially in line with area rates despite the preferential allowances. Regarding our proposals, the General Manager informed us that the Commission was taking steps to accomplish the intent of our proposals. In view of these actions, we are making no recommendations at this time. [Index No. 39-B-157371, June 3, 1966] POTENTIAL SAVINGS B~ CONSOLIDATION OF FIELD ORGANIZATIONS AND FACILiTIES FOR RECRUITING MILITARY PERSONNEL, DEPARTMENT OF DEFENSE The General Accounting Office reviewed the operation by each military service of separate organizations and facilities to recruit military personnel for their regular forces. We believe that, if the separate field recruiting organizations and facilities of the four military services were consolidated, millions of dollars could be saved annually. In addition, we believe that con- solidation of the field recruiting offices of the four military services would help achieve the purpose of the President's new program for improving and facilitating communications with the public. The potential savings are best illustrated by the manner in which the branch recruiting stations are operated. Each of the services canvasses the entire country through separate networks of many hundreds of branch stations. As a result, there is substantial duplica- tion of expense for office space and equipment, utilities, personnel, motor vehicles, and recruiting forms. PAGENO="0228" 220 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 As shown in our report, ii the recruiting organizations were COflSOil- dated, each of the services could have at least one representative at each recrintmg station. This would permit each service to present to interested prospective applicants its enlistment programs and to inform them of any advantages or benefits peculiar to the particular service involved. In recent years the Department of Defense has directed the con- solidation of a number of significant services and activities that are common to all military departments. This action has resulted in the establishment of Defense-wide organizations, such as the Defense Supply Agency and the Defense Contract Audit Agency. The Mc- Cormack-Curtis amendment to the National Security Act of 1947 Authorized the Secretary of Defense to unify any common supply or service activity that was not a major combatant function without consulting the Congress or the Joint Chiefs of Staff. Subsequent to the enactment of the McCormack-Curtis amendment, the Joint Eco- nomic Committee held hearings on the matter and identified military recruiting activities as one of the fruitful areas subject to consolida- tion. The House Appropriations Committee has also expressed con- cern over the use of separate facilities by the military services for recruiting purposes. We brought our findings to the attention of the Department of Defense and the four military services and proposed that the Secre- tary of Defense, imder the authority given him by Public Law 87- 651, enacted September 7, 1962 (10 U.S.C. 125), direct that a field test of the consolidation of military recruiting organizations and facili- ties be conducted. We were informed that a Defense-wide study of recruiting facilities was underway to develop plans for relocating and combining separate recruiting offices to the extent practicable. We were advised that this study would identify appropriate geographical areas for conducting a test of the consolidation of recruiting offices. The Department informed us also of action taken to further combine and unify physical examining, mental testing, and enlistment process- ing functions within the military services. In view of the significant savings which we believe can be achieved if the separate field recruiting organizations and facilities are consoli- dated, we reconimended to the Secretary of Defense that the contem- plated field test be undertaken and completed as expeditiously as feasible. We requested the Secretary of Defense to furnish us with the results of the study as well as the results of the field test to be made of the consolidation of recruiting offices. [Index No. 40-B-158482, June 3, 1966] MANAGEMENT OF THE PROCUREMENT OF MAJOR EQUIPMENT AND RELATED SPARE PARTS BY THE U.S. MARiNE CORPS, DEPARTMENT OF THE NAVY We found that there is a diffusion of responsibility in the manage- ment and supervision of major equipment procurement programs of the United States Marine Corps. There were a total of five separate management organizations-three in the Department of the Navy, one in the United States Marine Corps, and one in the Department PAGENO="0229" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 221 of the Army-involved in the acquisition of 234 new-type cargo trucks for use by ground support elements of four Marine Corps air units. Because this diffusion of responsibility was not adequately coordinated, the new trucks, which cost over $1.8 million, were purchased without combat essential spare parts. During the period that the spare parts were not available, the air units were required to use old, deteriorated trucks. As a result, the readiness of the four units was affected for a period of 14 months after the delivery of the trucks. The Assistant Secretary of the Navy (Financial Management), by letter dated November 10, 1965, informed us that the Navy concurred in our findings. We were also furnished copies of instructions covering policies and procedures issued with the intent of preventing the re- currence of deficiencies of the type noted in our report. Under the present procedures in the Department of Defense, various organizations will continue to be responsible, and properly so, for different segments of equipment procurement programs. In order that there be adequate management control, we recommended to the Commandant of the Marine Corps that the basic responsibility for the coordination and supervision over all aspects of major equip- ment procurement programs including the end items and related spare parts be assigned to a specific organization within the Marine Corps. ~Index No. 41-B--158514, June 16, 1966] REVIEW OF READINESS STATUS OF IDLE AMMUNITION-PRODUCTION FACILITIES, DEPARTMENT OF THE ARMY The General Accounting Office made a review of the readiness status of a selected Department of the Army idle ammunition production facility. Our review and a broader study later conducted by the Army indicated that many facilities considered essential for mobilization purposes would probably not be available for emergency ammunition production when needed. Certain other facilities apparently are not required for immediate production but have been maintained in a high state of readiness at considerable cost under contracts with various contractors. This resulted, in our opinion, from a general lack of attention to this critical area and the fact that too few qualified persons were assigned to industrial readiness planning. Our review of one production facility showed that the equipment had been maintained by contractors for about 6 years in a leased plant at costs totaling more than $500,000, on the basis that military requirements dictated that 90 mm shell production be started within 3 months in the event of mobilization. We found, however, that these facilities probably could not have been made ready for production in less than 6 months because of the need for certain special tooling and plant preparation. This is about the same length of time that would have been required to prepare for production if the equipment had been placed in Government-owned storage facilities at much lower cost. Furthermore, the need for maintaining the equipment in readiness to produce shells within 3 months was questionable because PAGENO="0230" 222 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 the Army had sufficient 90 mm shells on hand to meet its requirements during the first 6 months of a mobilization period. Subsequent to the date of our review, we were informed by agency officials that the equipment involved in our study was being placed in Government storage facilities as a result of a reevaluation of require- ments. However, our review of available studies on requirements disclosed no significant changes since 1959. Although the Department of Defense did not concur in our findings and conclusions, it did concur in our proposal to call the reported conditions to the attention of personnel having responsibility for administration of idle production equipment. The Army study, completed in October 1965, concluded that ammu- nition production planning was not adequate to meet emergency de- mands. These findings included the observation that 43 of 180 com- panies surveyed would not be able to produce the ammunition items called for by mobilization plans because of lack of equipment, technical data, and qualified management and production personnel or because of undue reliance on certain subcontractors. The Army survey team has made certain suggestions for improving the industrial readiness position for ammunition and for maintaining better control in the future. We believe that adoption of these suggestions would help prevent the adverse conditions found during our review. Therefore, we recommend that the substance of these suggested corrective actions be adopted. [Index No. 42-B-ii4860, June 21, 19661 REVIEW OF REPAIR PRACTICES RELATING TO SINGLE-FAMILY PROP- ERTIES ACQUIRED THROUGH MORTGAGE INSURANCE PROGRAMS, FEDERAL HOUSING ADMINISTRATION, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT We first informed the Commissioner, Federal Housing Adminis- tration, of the need for timely repair action, in our report to the Congress dated June 7, 1965 (B-114860), concerning single-family properties acquired by the agency in Wichita, Kansas. In that report we stated that our limited surveys also showed a need for timely repair action in cities other than Wichita and recommended that the agency establish effective control procedures to require the directive of its insuring offices and other officials of the agency to take aggressive action to repair acquired properties in accordance with the Admin- istration's basic repair policies. This report supplements our previous report and describes our ffndings with respect to the agency's acquired properties located in the State of Georgia. Our review of acquired single-family properties in the State of Georgia indicated a need for improving repair practices and that many properties owned by the agency in parts of Georgia were in a deteriorated condition. In our opinion, the timely repair of acquired properties would improve sales potential and decrease the co~ts of holding these properties in inventory. We also believe that the condition of some of these properties contributed to neighborhood blight and that the delay in repairing these properties may, in soiue cases, result in higher repair costs. Further, the follow-up action by officials in Washington and the field on the findings in internal audit PAGENO="0231" BACKGROUND: ECONOMY IN GOVERNMEN1~-1 967 223 reports with respect to this problem in Georgia did not appear to be effective. In commenting on our finding the Commissioner stated that he had been concerned with the repair problem for some time. The Com- missioner stated that he believed it was proper for property manage- ment officials to consider the consequences of expending large amounts of money for repairs on properties which had no sales or rental potential in the foreseeable future and which, therefore, might have to be repaired again in some cases. The Commissioner stated, however, that these consequences should be balanced against the public obliga- tion of the agency to avoid, as much as possible, blight and deteriora- tion of neighborhoods by putting the property in presentable condi- tion through necessary exterior repairs. In October 1965 the agency revised its property management instructions to provide that, without fail, all properties acquired be repaired immediately after acquisition. A partial exception is to be made where there are concentrations of properties which cannot be sold within 6 months. In those cases, exterior repairs are to be made to put the property in presentable condition and to prevent undue deterioration which may result from such problems as roof leaks or broken windows. In addition, steps were taken to increase the effectiveness of follow-up action on internal audit reports. These specific actions, if effectively implemented, and the increased emphasis now being directed toward solution of the problem should, in our opinion, help to correct the situation discussed in this report. [Index No. 43-B-118660, June 21, 1966] REVIEW OF THE PURCHASE OF TITLE INSURANCE ON PROPERTIES ACQUIRED IN THE STATE OF FLORIDA UNDER THE LOAN GUARANTY PROGRAM, VETERANS' ADMINISTRATION We found that potential savings of about $255,000 a year could be realized at this one regional office if the practice of obtaining title in- surance was discontinued. Our review indicated that the purchase of title insurance could be discontinued because the Veterans' Administra- tion had obtained adequate assurance of good and marketable title from mortgage holders who conveyed the properties to the Veterans' Administration upon default of guaranteed loans. Our review of over 300 cases showed that title insurance companies reported 15 cases with title defects. These defects appeared to be of a minor nature which, for the most part, were caused by the failure of mortgage holders' attorneys to fulfill their responsibilities in tendering title to the Veterans' Administration.~ The defects were easily cured by the mortgage holders' attorneys, and, under such circumstances, we believe that it is more economical for the Veterans' Administration to assume the unlikely risk of acquiring property with a significant title defect than to pay private insurers for assuming such risks. In addition, we believe that the practice of purchasing title insurance is a departure from the general policy of the Federal Government to be self-insured by assuming its own risk of loss. The Veterans' Administration has made substantial reductions in the cost of obtaining title evidence at various regional offices, and the PAGENO="0232" 224 BACKGROIJND ECONOMY IN GOVERNMENT-i 967 Central Office in Washington has given this matter considerable attention over the past several years. However, we believe that there have been uimecessary delays in effecting economies because some regional offices have been reluctant to make changes in their title evidence requirements. We proposed to the Administrator of Veterans' Affairs that the practice of purchasing title insurance on properties acquired in Florida be discontinued. We proposed also that the Central Office make more penetrating evaluations of the reasons offered by regional offices for continuing the purchase of costly title evidence and direct regional offices to confine purchases of title evidence to that which is absolutely essential. The Deputy Administrator of Veterans' Affairs advised us that in November 1965 procedures were revised to eliminate the purchase of title insurance on properties acquired in Florida. Under the revised procedures, the Veterans' Administration accepts or rejects titles to properties tendered by mortgage holders in Florida on the basis of title binders (commitments to insure title) issued by title insurance companies at substantially less cost that title insurance. We esti- mate that the new procedures will result in savings of about $180,000 a year on properties acquired in Florida. However, we believe that an opportunity exists to save an additional amount of about $75,000 a year in Florida by not purchasing title binders. It is our view that the title binders are also unnecessary for the same reasons we believe that the title insurance was unnecessary, and we are therefore recom- mending that the purchase of title binders be discontinued. The Deputy Administrator informed us that at present four re- gional offices were stifi purchasing title insurance because of valid extenuating circumstances but that appropriate plans were being developed to resolve the problems at these offices in the immediate future. Because additional savings may be available on a Government-wide basis, we plan to make examinations into the title insurance practices of other Federal agencies involved in the acquisition of real property. [Index No. 44-B-133127, June 21, 1966] SAVINGS AVAILABLE BY USE OF CONVENTIONALLY DESIGNED AIRPORT TRAFFIC CONTROL TOWERS AT LOW-ACTIVITY AIRPORTS, FEDERAL AVIATION AGENCY Our review disclosed the need for improved controls to ensure that structures being financed by the Agency are the most economical design available for the effective control of air traffic. We found that the Federal Aviation Agency approved the construction of control towers without first having analyzed the relative benefits and costs of the tower design. As a result, the Agency will incur additional costs of about $2,250,000 for the construction of 28 control towers of a new design at low-activity airports. The Agency proceeded with the construction of these towers even though available cost information showed that their cost would significantly exceed the cost of con- Ventionally designed towers previously constructed at other low- activity airports. The Agency had planned to construct, in addition PAGENO="0233" BACKGROUND: ECONOMY IN GOVERNMEW2-1 9 67 225 to the 28 towers being constructed, similarly designed towers at four other low-activity airports in calendar year 1965. Our comparison of the relative merits of the new and conventional designs indicates that the additional costs are largely attributable to aesthetic factors inherent in the nonconventional design of the new towers. Agency officials have informed us that such nonconventional design provides no significant functional improvements over con- ventio~ially designed towers previously constructed. In view of the significant additional cost of the new towers, the design of which was apparently selected for aesthetic factors rather than for any functional improvements over towers previously constructed, we question whether the more expensive design was justified. In his letter to us dated November 3, 1965, the Administrator indicated that he agreed with our findings and advised us that towers of a lower cost design would be substituted at the four locations already scheduled for new towers. He stated that at 17 locations a reduction in expenditures could have been realized if a timely cost reduction program had been undertaken; for the remaining 11 locations, con- struction was too far along to make any major changes that would produce a reduction in cost. The Administrator informed us also that, to conform to the Federal Aviation Agency's policy of selecting economical architectural designs that meet their operational and technical requirements, the Agency is pursuing means of reducing the cost of not only the towers designed for low-activity airports but also the towers planned for high-activity airports. However, to avoid reoccurrence of the situation described in this report, we are recommending that the Administrator direct that the Federal Aviation Agency's Orders be amended to recognize the policy relating to the selection of economical designs and to establish the necessary instructions to implement this policy. {Index No. 45-B-158572, June 21, 19661 IREVIEW OF THE EQuIPMENT MODIFICATION PROGRAM FOR M48A1 TANKS, DEPARTMENT OF THE ARMY The General Accounting Office reviewed the Department of the Army's equipment modification program for M48A1 tanks. We believe that the Department of the Army should develop and consider cost and other pertinent factors relating to the alternative of accomplishing major equipment modifications during the overhaul process when such an alternative is available. Pertinent information with respect to the question of whether to convert used or unused gasoline-powered M48A1 tanks to the diesel-powered M48A3 con- figuration was not presented to top management officials, at the Army Chief of Staff and Secretary of the Army level, for consideration when the decision was made to convert the unused tanks. The decision was based, in part, on estimates of $63,033 to convert an unused tank and $71,360 to convert a used tank, indicating a savings through conversion of unused tanks. However, at that time the Army was aware that, in any event, the used tanks were to be completely torn down and rebuilt at an estimated unit cost of $12,621. Presentation of these facts to top management officials would have PAGENO="0234" 226 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 provided them with the alternative that, on the basis of cost data available at the time, about $2.3 million could have been saved by installing the diesel engine and other M48A3 features in the used tanks during the rebuild process rather than converting the unused tanks. The objective of the Army's conversion and rebuild programs, that is, to have both M48A1 and M48A3 tanks available for use by the troops, could have been accomplished by issuing the unused tanks immediately and converting the used tanks at the time they were rebuilt. On the basis of costs actually incurred, about $5.7 million would have been saved if used tanks had been converted during the rebuild process. In commenting on our report, the Department of the Army took the position that all factors were considered. We were informed that (1) professional judgment dictated a need for the most reliable equipment with the least possible delay and, accordingly, the decision was made to retrofit unused tanks rather than used tanks and (2) "No other method of achieving this objective was known * * It is our opinion that pertinent cost data was not considered at the time the modification program was approved and that there is a serious question as to whether any significant increase in effectiveness was gained through the conversion of unused tanks as compared to the conversion of used tanks during the rebuild process for several reasons outlined in our report. Further, it is impossible to tell what decision Army officials would have made if adequate cost data had been developed and considered. There appears to have been con- siderable feeling on the part of some of the Army personnel involved that only unused tanks should be converted in order to have the best equipment possible in the hands of the troop units. However, without being provided full information, the Chief of Staff and the Secretary of the Army had no means of judging the relative costs and military effectiveness of the alternatives available for accomplishing their objective. We recommended that, when major equipment modifications are to be undertaken, the Secretary of the Army specifically provide that (1) if a normal overhaul program is also to be undertaken, Army personnel develop all pertinent cost and other factors concerning the alternative of accomplishing the modifications at the same time and (2) the data be furnished to top level Department of the Army personnel for consideration in connection with program approval. [Index No. 46-B--159200, June 29, 1966] SAVINGS THAT CAN BE ATTAINED BY REBUILDING USED MOTOR VEHICLE TIRES, DEPARTMENT OF THE AIR FORCE On the basis of our analysis of the tire-rebuilding statistics for 80 Air Force installations and our observations of tire inspection and rebuilding practices at 11 of the installations, we estimate that more extensive rebuilding of used motor vehicle tires by Air Force installa- tions, instead of buying new replacement tires, would have resulted in savings of as much as $2 mfflion in one fiscal year and could likewise result in substantial savings in future years. At most of the installa- tions included in our review, requirements for replacement tires were PAGENO="0235" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 227 being met to some extent through the rebuilding of used tires; but, on the whole, insufficient emphasis had been placed on this source of potential savings. For example, many used tires were being con- demned when they could have been rebuilt, and, in many cases, tires were worn excessively before removal, thus precluding rebuilding. We found that tire inspection personnel had not been adequately indoctrinated in the benefits to be derived from rebuilding used motor vehicle tires and that sufficient review and control had not been exer- cised over their activities. The Air Force had established general policy guidance with respect to tire maintenance which provides that used motor vehicle tires be rebuilt and used by Air Force instal- lations whenever possible. The instructions point out that careful periodic inspection of tires will provide carcasses suitable for rebuilding and that such tires can be expected to last as long as new tires and in some cases longer. We found, however, that the extent to which this general policy guidance had been implemented varied substantially among installations. We concluded from our review that there was a need for the estab- lishment of specific tire-removal criteria which could be applied by vehicle maintenance personnel to ensure the removal of tires before excessive wear prevents rebuilding. In addition, since each Air Force installation has the responsibility for obtaining replacement tires for its motor vehicles, it seemed evident to us that closer supervision of tire inspection, removal, and rebuilding activities by base officials and increased command surveillance were required to ensure effective performance and to realize the maximum savings possible. We discussed our findings with responsible Air Force officials at. the installations and major commands included in our review. We were informed that appropriate action either had been or would be taken to prevent future disposal of used motor vehicle tires that could be rebuilt. The actions taken were directed primarily toward providing closer supervision over the inspection and removal of used tires. In a letter dated April 30, 1966, the Assistant Secretary of Defense (Installations and Logistics) stated that the Air Force was in general agreement with our findings. He informed us that a new technical order had been prepared to provide, among other instructions, for the periodic inspection of tires and for their removal if the remaining tread depth is less than %2 inch at its lowest point. He also stated that in accordance with our suggestions, this matter had been referred to the Inspector General of the Air Force as an item of special interest for future mspection programs and a letter had been sent to all major Air Force commands requesting that necessary action be taken to preclude the recurrence of these conditions. In addition, copies of a draft of our report had been furnished to the other military depart- ments and all commands had been requested to give additional attention to the review and inspection of field operations to ensure compliance with applicable policies and technical publications. We believe that the Departments of Defense and the Air Force have taken appropriate actions on our findings and that these actions should result in substantial savings. PAGENO="0236" 228 BACKGROUND: ECONOMY IN GOvERNME~r-1967 [Index No. 47-B-118678, July 15, 1966] REVIEW OF PROCUREMENT OF EQUIPMENT FOR IMPLEMENTING AUTOMATION OF WATER DATA RECORDS, GEOLOGICAL SURVEY, DEPARTMENT OF THE INTERIOR Before developing a system to automate streamfiow records, the Geological Survey collected basic streamfiow data with an instrument known as a strip-chart recorder. In June 1962, the Survey completed its evaluation of the automation program and concluded that savings in costs and manpower could be realized by using a digital recorder. Both recorders collect the same type of water data-the strip-chart recorder produces a graphic chart which requires manual methods of interpretation while the digital recorder produces a punched tape which is interpreted by processing on a general-purpose computer. During fiscal years 1963 through 1965, the Geological Survey purchased and installed digital recorders to automate water data records and, during the same period, continued to purchase new strip-chart recorders of the type being replaced by digital recorders. This situation occurred because the Survey did not develop an overall plan to show the number of digital recorders that would be periodically needed in each district office to effectively implement the automation program a.nd did not provide for coordination in relocating replaced strip-chart recorders so as to avoid the procurement of additional new strip-chart recorders. We believe that the Survey knew or should have known that replaced strip-chart recorders would be available periodically to meet the needs of the various district offices during the equipment substitution phase of the automation program. Nevertheless, the Survey purchased new strip-chart recorders, most of which were of the type being replaced by the digital recorder for about $155,000, while at the same time it was generating a surplus of strip-chart recorders. We noted also that the Survey procured a substantial number of the batteries needed to operate the digital recorder from local sup- pliers even though comparable batteries were available on the Federal Supply Schedule at a lower cost. We estimate that, when the conversion to the digital recorder is completed in fiscal year 1968, the Government could achieve savings of about $13,000 annually if the batteries needed to operate digital recorders are procured through the Federal Supply Schedule. We brought the matters discussed in this report to the attention of the Department of the Interior and proposed that an overall plan be developed which would provide for the timely procurement, dis- tribution, coordination, and installation of all water data collection equipment to avoid further procurement of new strip-chart recorders. We proposed also that instructions to field personnel be revised to require procurement of digital recorder batteries through the Federal Supply Schedule, except in justifiable emergency situations. In December 1965, the Department advised us that it agreed with the intent of our proposals and was therefore asldng the Geological Survey to take appropriate actions necessary to carry out our pro- posals. The Department stated that the Survey would develop a plan for stronger central control and coordination of procurement and distribution of water data collection equipment. The Department PAGENO="0237" BACKGROUND: ECONOMY IN GOVERNME:NT-1 967 229 stated also that the Geological Survey had agreed to issue revised instructions to require field personnel to purchase digital recorder batteries through the Federal Supply Schedule as proposed. The instructions were issued effective November 22, 1965. As a part of our continuing review of the activities of the De- partment, we are planning to evaluate the effectiveness of the cor- rective actions taken or promised. ~Index No. 48-B-159072, July 15, 1966] POTENTIAL SAVINGS THROUGH GREATER USE OF AVAILABLE GOvERN- MENT GASOLINE OUTLETS, DEPARTMENT OF DEFENSE The General Accounting Office examined into the credit-card pur- chases of automotive gasoline for vehicles of the Departments of the Army, Navy, and Air Force. We found that maximum use of Govern- ment gasoline outlets was not being made primarily because respon- sible military officials had not taken action to effectively control credit- card purchases of gasoline. The military departments annually spend an estimated $5 million for the credit-card purchase of gasoline from commercial service sta- tions. The cost of gasoline purchased with credit cards is from about 10 cents to 16 cents a gallon more than the cost of gasoline obtained from Government outlets. Although we were not able to arrive at a firm estimate of the annual savings available to the military depart- ments, our review indicated that the departments could realize sub- stantial savings in their annual operating costs if drivers of vehicles of the Army, Navy, and Air Force made greater use of available Government outlets. We apprised the Secretary of Defense of our findings and suggested that certain actions be taken to attain maximum use of Government gasoline outiets for military vehicles. The Deputy Assistant Secre- tary of Defense (Logistics Services) indicated to us in a letter dated April 20, 1966, that the Department of Defense was in general agree- ment with our suggestions. [Index No. 49-B-159451, July 18, 1966] SURVEY OF INTERNAL AUDITS AND INSPECTIONS RELATING TO UNITED STATES ACTIVITIES IN VIETNAM, DEPARTMENT OF STATE, AGENCY FOR INTERNATIONAL DEVELOPMENT, DEPARTMENT OF DEFENSE Our work Was undertaken in consideration of (1) the importance of internal audit and management inspection functions as an essential but sometimes neglected element of management control, and (2) the continuing concern of the Congress with effective management control of these programs. We believe that, by this broadened approach, our report should have more impact on promoting improvements in agency management control practices than would a report concerned with the correction of individual instances of waste and inefficiency which in some cases have already been recognized by the agencies concerned. PAGENO="0238" 230 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 ln the survey and report we have endeavored to identify the more signfficant program areas, relate them to the surveifiance by the 15 principal audit or inspection organizations or units having responsi- bilities there, and point up the areas in which more effective sur- vefflance effort seems to us most needed. Generally these are well known to the departments and agencies concerned. Our purpose in reporting them in this fashion is to provide helpful information for the CongTess, its Committees, and the executive agencies by presenting, in reasonable perspective, something of the scope of our United States programs, and the related departmental audit and inspection responsi- bilities in Vietnam. in so doing we have duly recognized the unique problems caused by the conditions under which the programs are being conducted there, and the related fading of normal boundaries of responsibilities between civil and military activities. In this connection we have included in the report a tabulation de- signed to identify in the briefest fashion (1) the work which we found being done in Vietnam by the respective agencies to carry out their responsibilities for internal audit, inspection, and management review, (2) some of the more important and more pressing areas in which we believe greater agency efforts are needed, (3) actions taken by the agencies toward more effective review and corrective measures since the time of our field work in March 1966, and (4) any further plans which the agencies have stated to us. The most significant problem areas in terms of magnitude, vulnera- bility to operational and management deficiencies, and consequent waste in regard to economic assistance are the commercial import program and the rural construëtion (formerly counterinsurgency) program. The commercial import program consists of the importa- tion by Vietnamese importers of needed commodities, financed by the United States, through commercial channels. The rural construc- tion program is the major economic assistance effort applied directly to the Vietnamese populace. Substantive-type audits had been completed or were in process for parts of the economic assistance, commercial import, and rural con- struction programs, relating to about $67 million from July 1, 1964, to the time of our survey in March 1966. Those programs totaled approximately $800 million for the 2 fiscal years 1965 and 1966. Most of the audit work done has been by the Mission Audit Staff of the Agency for International Development. Formal audit reports, where issued, have pertained to relatively narrow segments of pro- grams, although their stated scope indicated adequate coverage of the specific areas involved. For example, one report covered end-use observation of $3.5 million of a $72 million iron and steel import program for fiscal years 1960 to 1964. Special-purpose inspections and investigations also have been per- formed, principally by the Management Inspection Staff of the Agency for International Development and by the Inspector General of Foreign Assistance. In view of the known difficulties in effectively carrying out the economic assistance program in Vietnam, there appears to be an urgent need for a continuing evaluation of program makeup and performance for agency top management use. We believe that there is a particular need for increased surveillance of the operations in- volved in the receipt, distribution, and end use of the huge quantities PAGENO="0239" BACKGROUND: ECONOMY IN GOVERNMEW2-1967 231 of commodities being imported into Vietnam under the economic assistance program. These operations by their nature and circum- stances are conducive to manipulation and irregularity. The underlying problems relating to management control of the economic assistance programs in Vietnam, although intensified, are generally not new. rfhe more obstinate continuing difficulties have received considerable attention in congressional hearings and reports over the past several years. They also have been observed in our earlier reviews and are included in two reports which we transmitted to the Congress in July 1964. AID has taken aggressive action in recent months toward applying greater audit and review effort in significant program areas. For example, a special group has been established in Vietnam to give par- ticular attention to strategic commodities; and action has been started to increase and upgrade the Mission audit staff in Vietnam. In connection with the military construction program, totaling nearly $600 million up to March 1966, $504 million had been incurred under a single joint-venture contract for construction of air bases, port facilities, cantonments and logistical and administrative facilities for United States and Vietnamese military forces, and other projects. Audits to date by the defense agencies having responsibility have been limited mostly to examinations of the contractors' cost representations as shown on vouchers presented for payment. insofar as we could determine, no management reviews or evaluations have been under- taken of substantive contract performance or of the broader control aspects of the construction program. The atmosphere surrounding the billion-dollar construction under- taking in Vietnam and the conditions of urgency under which the work is proceeding are at best conducive to a large element of waste, some of it unavoidable. Many of the management controls which are applied in a normal construction operation are precluded by the circumstances. In our opinion, this creates an urgent need for a counterbalance in the form of a searching management review and inspection function on a continuing basis to reduce avoidable waste without hindering the program. There appears to a particular need for audits and inspec- tions concerning the adequacy and timeliness of delivery, the end use, and the propriety of costs of the large amounts of equipment, spare parts, and supplies that are being provided under the program. We found no audits being conducted nor did we find any current plans by the audit agencies of the Departments of the Army and Navy to perform audits of military supply or logistics activity other than construction in Vietnam. The Air Force Auditor General was plan- ning some audit by temporary duty staff in the areas of accounting and finance, procurement, and nonappropriated funds. However, Army and Air Force audit agencis were performing extensive audits at Pacific bases and in the United States of activities relating to logistics support of the military effort in Vietnam. Audits conducted by the military commands in Vietnam have been limited mostly to nonappropriated fund activities such as officers' and enlisted men's clubs and open messes. The circumstances under which the economic and military assis- tance and military construction programs are conducted and the scope, complexity, and uniqueness of the activities in Vietnam suggest a greater than ordinary need for a continuing plan of top management PAGENO="0240" 232 BACKGROUND: ECONOMY IN GOVERNMENT-1967 survefflance. The internal audit and review problems, however, are aggravated, particularly in the economic assistance program, by (1) limited audit and inspection manpower, as to both numbers and qualifications, (2) diffusion of audit staff efforts, and (3) the war con- ditions and other environmental elements including difficulties in securing access to information in regard to joint activities with the Government of Vietnam. We recognize that special management techniques have been applied in the Vietnam operation. Our report does not imply deroga- tion of these techniques, but is related to the extent to which the regularly constituted audit and investigative organizations have performed their functions in Vietnam. In this connection we believe that the Defense practice, which has in essence excluded the regularly constituted audit arms of the miJitary services from performance of audits of support activities in Vietnam, should be reconsidered to permit these agencies to perform needed audit and review functions in areas where these functions would not interfere with combat opera- tions nor obstruct United States purposes. Following through from the information developed in this survey, our Office is scheduling further work to be performed in the United States and in Vietnam, relating to the more crucial areas of the commercial import program and the vast construction program. [Index No. 50-B-118660, Aug. 9, 1966] SAVINGS AVAILABLE BY CANCELING HAZARD INSURANCE POLICIES ON PROPERTIES ACQUIRED UPON DEFAULT OF HOUSING LOANS, VETERNS' ADMINISTRATION On the basis of our review, we believe that estimated savings of about $112,000 could have been realized in fiscal year 1965 at the six Veterans' Administration regional offices visited by us, if (1) available refunds on unexpired insurance policies had been obtained and (2) regulations had been revised to enable cancellation of hazard insurance policies in certain States granting mortgagors redemption rights. Since the regional offices which we visited administered about 29 percent of all properties acquired by the Veterans' Administration during fiscal year 1965, we believe that substantially greater savings are available nationwide. It is the stated policy of the Veterans' Administration to be self- insured against hazards to properties owned by it. This policy is consistent with the general policy of the Government to assume its own risk of loss, on the theory that the magnitude of the Government's resources makes it more advantageous to carry its own risks than to have them assumed by private insurers. However, in May 1964 the Veterans' Administration revised its instructions to require that a hazard insurance policy on acquired property be permitted to remain in force regardless of the amount of the unexpired premium, unless the property is sold prior to the expiration date of the policy. Previous instructions required prompt cancellation of an insurance policy on property acquired by the Veterans' Administration when the unexpired premium amounted to $20 or more. PAGENO="0241" BACKGROUND: ECONOMY IN GOVEKNMENT-1 967 233 Certain States have laws which establish a period of time subsequent to foreclosure during which mortgagors in default may redeem their properties. Existing regulations of the Veterans' Administration do not provide the agency with the authority to cancel unexpired in- surance policies on properties acquired in these States. Under these circumstances the Veterans' Administration is unable to become self- insured. A revision in these regulations seems particularly desirable when receivers are appointed who have a duty under State law to carry hazard insurance during their period of custodianship. The insurance carried by the Veterans' Administration is of no practical value because .it duplicates the receivers' insurance coverage. The Deputy Administrator of Veterans' Affairs disagreed with our estimate or the amount of savings available and stated that the Vet- erans' Administration had made a study at 16 regional offices and, on the basis of the statistics gathered, was not satisfied that any loss of revenue had been shown. However, he stated that the Veterans' Administration planned to make a more comprehensive study at all applicable field stations and would reconsider its position at the con- clusion of the study and reevaluation of its current policy. We reviewed the information developed at 4 of the 16 regional offices included in the Veterans' Administration study and believe that the savings available were significantly understated, primarily be- cause the study was not based on the earliest date that the insurance policies could have been canceled. Since a large number of properties are being acquired by the Veterans' Administration annually, we believe that a substantial amount of savings would be available to the Veterans' Administration if prepaid hazard insurance policies were canceled promptly when the risk of loss passes to the Veterans' Administration or the receivers. Accordingly, we are recommending that the Administrator of Veterans' Affairs require mortgage holders to cancel prepaid hazard insurance policies upon transferring risk of loss to the Veterans' Administration or the receivers. Also, because the regulations do not now provide the Veterans' Administration with the necessary authority to cancel the policies during redemption periods in States granting mortgagors redemption rights, we are recommending that the regulations be revised to provide such authority. [Index No. 51-B--125037, Aug. 9, 19661 POTENTIAL SAVINGS THROUGH IMPROVED CONTROLS OVER PER DIEM PAYMENTS TO MILITARY PERSONNEL, DEPARTMENT OF THE AIR FORCE The General Accounting Office made a review of per diem payments made to Air Force military personnel deployed on an overseas airlift support mission in a noncombat zone. We inquired into the management controls in effect and the possible need for strengthening the regulations when an apparent disparity between allowable per diem and lodging and subsistence costs came to our attention. We found that per diem allowances paid to military personnel deployed on a support mission exceeded their estimated 77-601-67-16 PAGENO="0242" 234 BACKGROUND: ECONOMY IN GOVERNMENT-i 067 lodging and subsistence costs by about 200 percent. We believe that responsible military officials could have taken action to have the per diem reduced inasmuch as they had personal knowledge that the per diem substantially exceeded the lodging and subsistence expenses incurred by the individuals involved. The Department of Defense agreed that per diem should be paid only as warranted and justified and that the findings discussed in our report had been brought to the attention of appropriate service officials. He stated further that action had been taken by all military departments to improve administrative control over travel per diem entitlements and that standardized internal audit programs would be examined and revised to direct attention to matters discussed in our report. Also the Joint Travel Regulations were revised, effective April 1, 1966, to make it clear that it is the responsibility of the local commander as well as the theater commander to initiate changes in the per diem rates when warranted. Since October 1963, we have issued 10 reports to the Congress on unnecessary or illegal per diem payments in the military departments. The total dollar deficiency shown in these reports amounted to about $10 million. Owing to the significant deficiencies found in our re- views, we believe that the area of per diem is one requiring special and continuing attention by top management personnel of the Department of Defense and the military services to overcome the problems involved. We plan to perform additional reviews of internal controls and of the effectiveness of the corrective actions taken or proposed by the military departments. [Index No. 52-B-146948, Aug. 9, 1966~ REVIEW OF CHARGES TO DEFENSE CONTRACTS FOR USE OF COMPANY OPERATED AND CHARTERED AIRCRAFT, DEPARTMENT OF DEFENSE The General Accounting Office reveiwed charges to defense con- tracts for use of company operated and chartered aircraft. The company aircraft operations included in our review generally have grown from small numbers of relatively inexpensive, piston aircraft to larger fleets of aircraft that include turbojet and pure jet types, the cost of which is in the miffions of dollars. The number of pilots required to operate the aircraft and the cost of flight operations have increased accordingly. In addition, information supplied by the Department of the Air Force indicates that the Government's financial interest in contractor aircraft operations is vastly more than that shown in our review. According to the Air Force, companies in the United States, such as the defense contractors included in our review, are utilizing approximately 20,000 executive and business ~types of aircraft. Reviews of nine defense contractors that extensively used company operated or chartered aircraft indicated that the cost of such aircraft use was substantially more than the cost of equivalent commercial ulr transportation. For example, the cost of operating the five private executive air- craft of one contractor during the year reviewed was about $1 mfflion or about six times the cost of equivalent commercial air transportation. PAGENO="0243" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 235 Tractically all the additional cost was charged through overhead to contracts with the Department of Defense and, to a limited extent, with the National Aeronautics and Space Administration. Our tests indicated that most of the contractor's flights were routine in nature with no priorities assigned. We concluded that the contractor could have performed effectively under its Government contracts by using commercial and chartered aircraft and available Government- sponsored air services. This contractor has since reduced its executive fleet to one aircraft. In some situations, it appeared that the additional cost of a private aircraft operation may have been justified by the urgency and high priority of the work performed or by the need to have a minimum capability for emergency needs. In our opinion, however, the addi- tional cost in most cases outweighed the apparent benefits. The military departments primarily concerned, agreed that the `contractors, in certain instances, did not need aircraft for the support ~of major contracts to the extent they had been used. As a result, in negotiating overhead cost for the years under review, certain dis- allowances were made by the departments. In an earlier report to the Congress (B-146948, October 21, 1964), we recommended that the Secretary of Defense provide all military services with guidelines to be followed in determining the allowability ~of costs of company-operated aircraft to be included in prices of nego- `tiated Government contracts. We were informed that this has now `been done and the entire matter was referred to the Armed Services `Procurement Regulation Committee for its consideration and appro- priate coverage in the Armed Services Procurement Regulation. `We were informed also that the military services had issued guidance to their procurement personnel with respect to this matter. ~Index No. 53-B-i59i35, Aug. 9, i966] `NEED TO IMPROVE CONTRACTING PROCEDURES FOR EMPLOYMENT OF APPRAISERS TO VALUE INDIAN LANDS, DEPARTMENT OF JUSTICE Our review disclosed a need to improve contracting for employ- ment of appraisers `through the strengthening of contracting proce- dures and establishment of guidelines for aiding in determining the reasonableness of appraisers' proposed fees. We found that uniform procedures or guidelines had not been prescribed for aiding attorneys `who select appraisers; management had not effectively reviewed Con- tracting actions; appraisers had not been required to furnish such basic ~data as estimated man-days, per diem rates for personal services, `travel, outside fees, printing, overhead, or other expenses in support of their bid proposals; and thele was usually an absence of negotia- tions between attorneys and appraisers. We proposed to the Attorney General that policies and procedures `be prescribed for governing the selection of appraisers and that pro- vision be made for periodic reviews of contracting activities for deter- mining whether prescribed policies and procedures are being effectively carried out at the operating level. We proposed also that appraisers be required to furnish sufficient financial or other fee information for ~enabling the contracting officials to effectively evaluate the reasonable- PAGENO="0244" 236 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 ness of proposed fees, and that contracting practices include negotia- tions with appraisers concerning fees and other matters after proposals are received. The Assistant Attorney General, Lands Division, advised us that, in accordance with our proposals, the Lands Division would prepare and issue formal policies and procedures for negotiating with and selecting appraisers and that it was the Department's intention to adopt our proposal that appraisers be required to furnish cost data. He stated, however, that our proposal that negotiations be carried on with prospective appraisers presented a number of problems. Although adoption and implementation of these measures should improve the contracting procedures for the employment of appraisers, we believe that additional improvements are needed. Accordingly, we are recommending that the Attorney General, to improve con- tracting activities, provide for periodic reviews of the contracting activities of the individual attorneys for determining whether pre- scribed policies and procedures are being effectively carried out at the operating level. We are recommending also that the Attorney General prescribe methods and criteria for guiding individual attorneys in determining the reasonableness of proposed fees. We are further recommending that the Attorney General, to afford the Department a better basis for determining that appraisal fees are reasonable, require contracting officials to negotiate with appraisers, on the basis of proposed costs or other information, after initial proposals are received. In response to our request for all pertinent records, the Department denied us free access to such records applicable to 20 cases then in litigation and furnished us with only those records which, in its opinion, were needed for, or pertinent to, our review. Because the Depart- ment did not permit us to make the selection of the documents needed for our review, we were unable to make a completely independent review of the contracting activities. Consequently, we are not aware of any additional information in these ifies which might affect the matters discussed herein. We are reporting these matters to the Congress because they show the need for the Department of Justice to strengthen its contracting procedures for employing appraisers to value Indian lands, which is especially important in view of the large number of future contracts which the Department has estimated will be required. Also, prior congressional interest in this area had been expressed by individual members of the Congress and by the Subcommittee on Departments of State, Justice, and Commerce, the Judiciary and Related Agencies Appropriations, Committee on Appropriations, House of Represen- tatives. [Index No. 54-B-159 148, Aug. 9, 1966] THE UTILIZATION AND DISPOSITION OF EXCESS BEDS AND RELATED BEDDING, DEPARTMENT OF DEFENSE In 1963 and 1964 the Defense General Supply Center reported to Headquarters, Defense Supply Agency, that the Army beds and mattresses were in long supply and that the Center proposed to issue these beds to the Air Force and Navy in lieu of new procurement. PAGENO="0245" BACKGROUND: ECONOMY IN GOVERNMENT-1 9 6~7 237 However, the Center was instructed by Headquarters, Defense Supply Agency, to comply with the request of the customer and not issue substitute items without prior concurrence of the requisitioning serv- ices. Consequently, action was taken to dispose of 521,700 excess Army beds valued at $9.9 million. Meanwhile, 165,000 preferred beds and related bedding were procured at a cost of $8 mifiion. Following our inquiries into this matter, 271,500 of the excess Army beds were withdrawn from disposal. These beds were subsequently requisitioned by the military services, including the Air Force and Navy, for use in southeast Asia and supporting areas, at a savings of about $10.6 mifiion. In our opinion, additional procurement savings of $9.4 million could have been realized if the 250,200 beds previously disposed of had been used to ifil Air Force and Navy requirements. A similar matter was previously reported to the Congress on April 27, 1965, concerning the refusal of the military services to use excess 4,000-pound warehouse platform trailers to avoid procurement of similar equipment. The Deputy Assistant Secretary of Defense (Materiel Requirements) commented on our report by stating that significant disagreements between the services and the Defense Supply Agency should be referred to the Office of the Secretary of Defense. However, he did not agree with our proposal that the services be required to justify their refusals of substitutes in writing. The Air Force and the Navy reasons for nonacceptance of the excess Army beds were not clearly documented and evidently were based on other than technical considerations, while the decision by Defense Supply Agency to acquiesce to the serivces' desires was based to a substantial degree on its desire to maintain good customer relation- ships. In view of the significant amount of potential savings, we believe that, had this matter been referred to the Secretary of Defense, a different decision might have been reached. The Department of Defense expressed general concurrence with our findings. The Department further concurred in principle with our proposals that refusals by the military services to accept substitute non-tactical-type items be supported by written justifications in instances where significant potential savings can be realized and that acquiescence by the Defense Supply Agency to such refusals be documented showing the basis for such decisions. [Index No. 55-B-114824, Aug. 10, 1966~ OPPORTUNITY TO REDUCE COSTS OF PROVIDING PROTECTION FRoM HEAT AND COLD ON SHIPMENTS OF CERTAIN PERISHABLE COM- MODITIES, COMMODITY CREDIT CORPORATION, DEPARTMENT OF AGRICULTURE Our review disclosed that costs could be reduced by, and savings to the Government would result from the Corporation's eliminating excessive protection on shipments of butter and cheese without risking spoilage or deterioration of these commodities. We examined into past shipments made by the Corporation of butter and cheese and compared the protective services furnished with those which commercial firms would have furnished such shipments. On the basis of information developed in our review, we estimate that the PAGENO="0246" 238 BACKGROUND: ECONOMY IN GOVERNMENT-1967 Corporation could have realized savings in rail transportation costs for butter and cheese of about $219,000 during fiscal year 1964, if it had required protective services comparable to those which a. commercial shipper would have required. We believe that addi- tional savings may be available on shipments of other perishable commodities. Guidelines prescribing the protection to be provided for the Cor- poration's perishable commodities during shipment were issued by the Department in 1958. Agency officials had not kept the details explaining the basis on which the guidelines had been developed, but. these officials believed that the guidelines may have been based, in. part, on a survey that had been made of commercial shipping practices. In our discussions with officials of four large distributors of dairy products, however, we found that the Corporation's guidelines gen- erally required more protection than was then being required by commercial shippers. The Executive Vice President, Commodity Credit Corporations stated that he concurred with our suggestion that a comprehensive study would be desirable and that an evaluation of protective services required for protecting perishable commodities from damage or deterioration in transit would be made. He stated also that the requirements would be revised, where appropriate, to keep the cost of protective services at a minimum consistent with prudent manage- ment. He stated further that periodic evaluations would be made to review the adequacy of such requirements. The Executive Vice President questioned, however, the practica- bility of adjusting the generally prescribed amounts of protection to be provided to take into consideration special weather conditions existing at the time of shipment. He also pointed out that shipments of print butter made by commercial firms are maintained at tempera- tures ranging from 35° F. to 42° F. and that the Corporation requires contractors to precool print butter to 20° F. before shipment. Our review disclosed, however, that the conditions pertaining to the Cor- poration's acquisition and storage of print butter had changed sub- stantially from those existing at the time this requirement for pre- cooling print butter had, some time prior to 1955, been established~ We believe that appropriate revisions to protective services re- quirements will result in savings in transportation costs. We believe also that, to obtain the maximum benefits from revising the protective services requirements, provisions would have to be made which would enable the Department to revise previously issued instructions if weather conditions upon which the previously issued protective serv- ices instructions had been based change substantially prior to ship- ment. We believe further that, in view of the changed conditions, consideration should be given to revising the requirement that print butter be frozen to 20° F. prior to shipment. Accordingly, we are recommending that the Secretary of Agriculture require Department officials, as part of the evaluation of protective. services requirements which they intend to make, to explore the oppor- tunity for reducing costs by instituting procedures providing for revising protective services instructions when changed weather condi- tions prior to actual shipment would materaffly affect the amount of protection previously prescribed. We are recommending also that consideration be given to the feasibility of revising the requirements for freezing print butter prior to shipment. PAGENO="0247" BACKGROIJND: ECONOMY IN GOVERNMENT-i 967 239 [Index No. 56-B-125036, Aug. 10, 19661 REVIEW OF REPORTING OF TAXABLE INCOME AND TAX WITHHOLD- INGS OF MILITARY PERSONNEL, DEPARTMENT OF THE ARMY The General Accounting Office made a review of the reporting to the Internal Revenue Service of taxable income and tax withholdings of military personnel by the Department of the Army. We found numerous clerical and arithmetical errors in the pay records and forms W-2 prepared by the Army, which demonstrated the need for more aggressive and effective supervision and internal controls. On the basis of the number of errors we found, we estimate that the Armywide errors amounted to about $16,000,000 in the reported members' income subject to income tax and to about $2,280,000 in the reported income taxes withheld from members. We further estimate that these errors. unless detected and corrected by the individual members in filing their returns, may have resulted in significant underpayments and overpayments of income taxes for the period reviewed. These errors were primarily the result of the failure of the clerical personnel to satisfactorily perform their assigned tasks. In addition, we found that the errors went undetected or, when detected, were not properly corrected although there are nu- merous regulations and review programs in existence to prevent this. In advising the Secretary of Defense of our finding in the review of tax information reported by the Army for calendar year 1963, we proposed that the Secretary of the Army (1) delay the filing of Forms W-2 for 1964, by arrangement with the Internal Revenue Service, until sufficient review could be made to ensure the reliability of the reported information, (2) require a complete review of Forms W-2 for 1963 so that necessary corrections could be made within the statutory time limitations, (3) issue instructions designed to emphasize supervision of base-level activities in order to minimize errors, and (4) ensure that procedures established for future reconciliation reviews are effectively carried out as intended. By letter of July 1, 1965, the Deputy Assistant Secretary of the. Army (Financial Management) forwarded Department of the Army comments made on behalf of the Secretary of Defense. The Army concurred in general in our finding and proposals. He reported that actions were being taken regarding the last two proposals and informed us of the planned institution of the Centralized Automated Military Pay System by 1968. With respect to the first two proposals, how- ever, the Army was unable to take action because the Forms W-2 were not available. The Internal Revenue Service advised the Army and our Office that filing of the 1964 Forms W-2 could not be deferred, because the initial processing of forms for all taxpayers must be completed at the same time in order for the enforcement program to be effectively carried out and that, once the Forms W-2 are made available for use in field offices, there is no practicable means of identi- fying and reassembling those submitted except on a case-by-case basis. In our previous report on errors in the reporting of tax information by the Air Force (B-125036, December 20, 1963), we had suggest.ed that special reviews be made of Army and Navy reporting of tax information to determine whether similar deficiencies existed in those departments. We were advised by the Department of Defense that PAGENO="0248" 240 BACKGROUND: ECONOMY IN GOVEKNMENT-1967 the Army and Navy had procedures for verifying, on a test basis, the accuracy of information reported to the Internal Review Service and that, therefore, special reviews of prior years were considered unneces- sary. We were advised, however, that special reviews would be made of information reported for 1963 to ensure the accuracy of the infor- mation as well as the effectiveness of the review procedures. More recently, we reviewed tax information reporting by the Navy; and on February 18, 1966, we reported to the Secretary of Defense that we had found that incorrect tax data were being reported and that the Navy review generally would not identify these discrepancies. In April 1966 the Navy concurred in general in our findings and informed us of remedial measures being taken. We recommended that, to provide an auditable record unti] the improved military pay system becomes effective, the Army Forms W-2 be prepared in sufficient number to provide a copy for retention and use in the individuals' ~`1iitary Pay Records. [Index No. 57-B-146551, Aug. 10, 1966] REVIEW OF CERTAIN ACTIVE DUTY RETIREMENT BENEFITS FOR ARMY AND AIR FORCE RESERVE OFFICERS, DEPARTMENT OF DEFENSE Many retired Army and Air Force Reserve officers are receiving active duty retirement pay based on a grade higher than the highest grade attained on active duty. This benefit is not available to either Reserve officers of the Navy and Marine Corps or Regular officers of all four military services, and it is doubtful that the Congress intended this special benefit. The significance of this matter is demonstrated by the substantially higher retirement pay accruing to the Reserve officers who retired from active duty in fiscal years 1964 and 1965 in a grade higher than that in which they had served. These officers will, over the years remaining in their life expectancy, receive about $100 million more in retired pay than they would if retirement had been limited to their highest active duty grade. Further, it appears that, unless the present retirement legislation is changed, there will be many among the 136,000 Army and Air Force Reserve officers on active duty at June 30, 1965, and among those later entering on active duty, who will retire with similarly increased benefits. The described situation has developed as a result of the language of the Army and Air Force Vitalization and Retirement Equalization Act of 1948 (62 Stat. 1081) and the policy of the Army and Air Force which permitted many Reserve officers on active duty to be promoted to a permanent Reserve g'rade higher than the temporary grade held by them on active duty. The act does not specifically require active duty service in the retired grade, whereas the legislative history, although inconclusive, indicates that the Congress expected Army and Air Force Reserve officers to have served satisfactorily in the grade on which active duty retired pay is to be based. Also, the policy of promoting Reserve officers on active duty to a higher rank on the Reserve officers' register, a policy initiated by the Secretary of War in 1946, was not intended as a basis for determining retirement pay. Instead, its PAGENO="0249" BACKGROUND ECONOMY IN GOVER~MENT-1967 241 purpose was to assure Reserve officers on active duty that their rank and order of precedence on the Reserve promotion lists would not be jeopardized by their continued service on active duty. The combi- nation of these two circumstances, however, led to the practice of retiring Reserve officers from active duty with retirement pay based. on a Reserve grade in which they have never served. We brought our findings to the attention of the Secretary of Defense and suggested that a separate and specific legislative proposal on this matter be developed and submitted to the Congress. In response, the Deputy Assistant Secretary of Defense (Manpower) indicated that the retirement grade and pay under active duty retirement laws should be directly linked with active duty service and pointed out that a provision to bring this about had been included in comprehensive officer personnel legislation submitted to the Congress. Regarding our suggestion that separate legislation be developed and proposed, he stated that, in the event the comprehensive proposal was not enacted, consideration could be given to a separate proposal. As shown in our report, a provision to terminate the subject practice had, on two prior occasions, been inc]uded as part of comprehensive legislative proposals that were not acted on by the Congress. ~Index No. 58-B-114860, Aug. 15, 1966] PossIBLE SAVINGS BY DISCONTINUING THE PURCHASE OF PUBLIC LIABILITY INSURANCE COVERING ACQUIRED PROPERTY, FEDERAL HOUSING ADMINISTRATION, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Our review of premium costs and claims relating to public liability insurance purchased by property management brokers under contract to the Federal Housing Administration indicated that elimination of the requirement that brokers purchase this coverage could result in significant savings to the agency. Premium costs for this type of insurance covering bodily injury amounted to about $340,000 a year, which was far in excess of the claims being paid under this coverage. For example, the agency records showed that only about $9,200 in claims for bodily injury were paid over the 8-year period from Janu- ary 1957 through October 1965. The annual amount of realizable savings cannot be realistically estimated in advance because the amounts of future claims cannot be predicted nor can the amounts of increases and decreases in administrative costs which would result from the agency's assumption of risk be readily determined at this time. However, in view of the agency's claim experience over a num- ber of years, we believe that the overall long-term net savings which would result from elimination of premium costs of about $340,000 a year would be significant. In view of the past experience of the Federal Housing Administra- tion, we believe that it would be more economical for the agency to adopt the Government's long-standing policy of self-insurance by assuming the risks covered by this type of insurance, as the agency has previously done with respect to hazard insurance risks on its acquired properties and general comprehensive liability risks in all contracts except those of management brokers. PAGENO="0250" 242 BACKGROUND: ECONOMY IN GOVERNMENT-1967 Moreover, we believe that savings may be realized by adopting the self-insurance policy for other coverages provided for in management contracts, such as surety bonds and burglary insurance, if the agency's cost and claim experience is found to be similar to that related to public liability insurance. The large number of properties being acquired by the Federal housing Administration as a result of foreclosures under its mortgage insurance programs increases the importance of keeping costs and losses related to the management and disposition of such properties to a minimum. The Federal Housing Commissioner informed us that the agency was favorably disposed toward the general premise of self-insurance and was studying our proposals, but that it needed more information and more time to evaluate the administrative and legal factors in- volved; to appraise more definitively the risks which would be ~assumed; to compare the risks with premium costs and additional administrative, investigative, and legal expenses which would be assumed; and to determine what effect the agency's becoming a self- insurer would have on brokers' bids for management fees. In view of this action and the agency's previous actions, which indicate its general acceptance of the principle of self-insurance, we are not making any recommendations at this time. [Index No. 59-B-146778, Aug. 18, 19661 NEED FOR INTER5ERvICE ACTION WHEN MANAGEMENT POLICIES AND PRACTICES DIFFER FOR SDITLAR SUPPLY ITEMS, DEPART- MENT OF DEFENSE The General Accounting Office reviewed the Department of the Navy's supply management of a rocket catapult used in an aircraft ejection seat for emergency ejection of a pilot from an aircraft. This review was directed primarily toward an evaluation of the Navy's practices in determining its need for these catapults and the decision to procure new catapults instead of rework available stocks of overage catapults. Our review also included inquiry into the exchange of information with the Department of the Air Force on a similar catapult which had been developed from the Navy's item. There is a need for the individual military services to exchange and use information concerning the management and operating practices and policies of other services for the same or similar items in order that each might identify opportunities for improved management and potential savings. With regard to the aircraft ejection-seat rocket catapults, the application of such exchange would have disclosed to the Navy that the Air Force policies and practices were more economical. We estimate that, on the basis of requirements through fiscal year 1969, the adoption by the N avy of the Air Force policy and practices could reduce future Navy progTam costs between $275,000 and $800,000. The Assistant Secretary of Defense (Installations and Logistics) by letter dated March 16, 1966, advised us that our findings had been reviewed by the Department of Defense and the Military Depart- ments and that a preliminary evaluation indicated that the restoration PAGENO="0251" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 243 of overage aircraft ejection-seat catapults might result in a savings to the Government. We were advised that the Department of Defense concurred in our proposals that the Navy's decision not to restore overage catapults be evaluated and all overage catapults be held in stock until the evaluation was completed. Many items of equipment used by one military department are either identical or similar to items used by another department. Our findings on the aircraft ejection-seat catapult program and our review of other equipment programs demonstrate that increased inter- service consideration by equipment managers of the different policies and practices within each of the military departments could result in the adoption of more effective and efficient management techniques. We therefore recommended to the Secretary of Defense that a pro- gram be established that will ensure the exchange and use of informa- tion between the individual military services with respect to the management and operating practices and policies of each for the same or similar items to identify opportunities for improved management and potential savings. We recommended further that this program emphasize the need for exchange of information during the entire life of the equipment programs to ensure that each using service is aWare of pending or approved changes that would be of benefit to all users. [Index No. 60-B-158959, Aug. 22, 19661 MANAGE1\IENT OF SELECTED TI~iE COMPLIANCE TECHNICAL ORDERS REQUIRING MODIFICATIONS TO ENGINES FOR F-100 AIRCRAFT, DEPARTMENT OF THE AIR FORCE The General Accounting Office reviewed the management of selected time compliance technical orders requiring modifications to engines for F-100 aircraft. Aircraft engines of a given design frequently have undesirable but latent characteristics that are not detected until data on performance under actual operating conditions has been accumulated and eval- uated. After a problem area has been identified and the means of solution determined, a time compliance technical order for modifica- tion of the engines is issued. These orders are directives used by the Air Force to provide information and instructions to maintenance .activities for accomplishing modifications within a specified period of time. Such modifications are undertaken to eliminate safety hazards, to improve reliability, and to facilitate maintenance. Our review indicated that there was a need for significant improve- ments in the management of time compliance technical orders to ensure their timely accomplishment. The technical order program for aircraft engines is a dynamic and complex program which requires constant attention by all levels of management during all phases of its operation. The Air Force has made certain improvements in the program; however, in our opinion, greater improvements are necessary to prevent loss of aircraft because technical orders were not accom- plished in a timely manner. Air Force records show that two F-100 fighter aircraft crashed and were destroyed because certain engine components which endangered the operation of the aircraft were not replaced. Prior to the loss of PAGENO="0252" 244 BACKGROUND: ECONOMY IN GOVERN~tENT-1 967 these two aircraft, the Air Force had determined that the failure of these components had caused several F-100 aircraft to crash and hadi initiated special projects to replace these components. However, sufficient controls were not established to ensure that timely replace- ment of the defective components actually had been made by the various commands. In May 1961 the Air Force established a special project to replace defective support weldments in engines for F-100 aircraft. Replace- ment of the components was not accomplished in a timely manner, however, and in March 1964 failure of a support weldment caused the crash of an F-lOO aircraft. The Air Force established another special project in November 1962 to replace defective fuel manifolds in engines for F-lOO aircraft. Again replacement of the components was not accomplished in a timely manner, and in September 1963 failure of a fuel manifolc[ caused the crash of another F-100 aircraft. Absence of control over these projects continued to exist after the crashes. As late as February 1965 Air Force records showed that defective weldments and manifolds still were installed in a significant number of engines for F-lOU aircraft. At the conclusion of our re- view in June 1966 the records showed that significant progress had been made and that the modifications necessary to remove the de- fective components had been completed on all but a small number of engines for F-100 aircraft. The Air Force advised us that it acknowledged the difficulties ex- perienced in the technical order program and cited a history of actions which had been initiated to improve technical order compliance. The Air Force also emphasized that, while its program was not perfect, discernible improvements in technical order compliance were a matter of record. The Air Force has made many changes and improvements in its technical order management system in past years, but our review, as well as internal Air Force examinations, has shown that the operation of the system lacks sufficient controls to insure accomplishment of Air Force objectives. We believe that there has been recent im- provement in the accuracy of engine management records, but stifi greater and continuing accuracy in such records and the reports based upon them wifi be critical to the future effectiveness of the technical order management system. Because of the complexity of the technical order program and the various organizational elements involved, we recommended to the Secretary of the Air Force that technical order compliance be subj ected to close and vigorous administration. We believe that the following areas require the immediate attention of Department of the Air Force officials. 1. Accuracy of records and reports relating to technical order actions. 2. Clarity of lines of authority and responsibility for imple- mentation of required technical orders. 3. Adequacy of coordination between logistics and maintenance activities. 4. Adequacy of accountability for modification kits and control over modification scheduling. PAGENO="0253" BACKGROUND: ECONOMY IN GOVERNMEWr-l 967 245 [Index No. 61-B-158712, Aug. 23, 1966] POTENTIAL REDUCTIONS IN Cos~ OF AUTOMOTIVE TRAVEL BY FEDERAL EMPLOYEES WHERE USE OF GOVERNMENT-OWNED VEHICLES Is FEASIBLE Many employees of the Federal Government drive their privately owned cars a substantial number of miles in the performance of their duties. Frequently, the official mileage traveled by employees is at or exceeds the level at which the cost of operatmg an interagency motor pool car is less than the reimbursement mileage rates established by the various Government agencies. Our review of travel pro- cedures at 14 major Government agencies showed that agencies had not been furnished information 011 the cost of operating interagency motor pooi cars at various mileage levels and therefore were not in a position to adequately consider the alternative of providing these cars to high-mileage drivers. Our more detailed reviews at selected field offices of the Internal Revenue Service, the Federal Housing Administration, and the Federal Crop Insurance Corporation showed that the annual cost of reim- bursing high-mileage drivers for official travel exceeded the cost of operating interagency motor pool cars by about $245,000. If the mileage patterns observed were typical, the annual nationwide costs to these agencies of reimbursing high-mileage drivers fer official travel exceeded the cost of operating interagency motor pool cars by about $1.6 million. An agency can obtain the benefits from the lower cost of operating an interagency motor pooi car by furnishing employees with inter- agency motor pool cars or by establishing a reimbursement mileage rate that gives consideration to the relative cost of operating an interagency motor pooi car if an employee prefers to use a privately owned car for his personal convenience. We recognize that there are factors other than the operating cost of an interagency motor pooi car that should be considered in determin- ing whether the use of such cars is advantageous to the Government. We believe, however, that adequate consideration of all pertinent factors would result in substantial reductions in travel costs of many agencies throughout the Government. We brought our findings to the attention of the Bureau of the Budget and proposed that it (1) revise the Standardized Government Travel Regulations to require that consideration be given to the relative cost of operating interagency motor pool cars, in determining whether the use of a privately owned automobile is more advantageous to the Government and in establishing the amount payable on a mileage basis when employees and others rendering services to the Government elect, for personal reasons, to use privately* owned motor vehicles in the conduct of official business, and (2) periodically obtain and dis- tribute to other Government agencies information on the cost of operating interagency motor pool cars at various mileage levels. The Bureau of the Budget has agreed that additional guidelines, including data on the cost of operating interagency motor pool cars, should be provided to agencies for use in making determinations relat- ing to the use of ears for travel of Federal employees. We believe that such guidelines will, if properly followed, result in substantial reductions of the Government's travel costs. PAGENO="0254" 246 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 [Index No. 62-B-114874, Aug. 31, 1966] REVIEW OF PROGRAM FOR REPLACEMENT AND PROCUREMENT OF MOTOR VEHICLES, PosT OFFICE DEPARTMENT On the basis of our review of the maintenance of selected motor vehicles at seven vehicle maintenance facilities in three postal regions, we believe that the Department could achieve substantial savings if action were taken to obtain more timely replacement of older vehicles. To accomplish these savings, it would be necessary for the Depart- ment to initiate vehicle procurement more expeditiously and to fully consider procurement lead time in establishing vehicle requirements. Our analysis of the repair and maintenance costs of selected vehicles of ¾-ton and 1-ton capacities showed that vehicles which were 6 or more years old had been substantially more costly to maintain than newer vehicles. We estimate that the cost for operating the overage vehicles at the facilities we reviewed was $110,000 greater in calendar year 1964 than the cost would have been for operating newer vehicles. the same number of miles. If the conditions found in the seven facilities we reviewed are typical of the conditions at other locations, substantial additional costs may be attributable to operating overage vehicles throughout the postal service. Our review showed also that overage vehicles were much less de-~ pendable than newer vehicles to operate. For example, at two facili- ties vehicles less than 6 years old traveled an average 1,170 miles. between unscheduled repairs, while overage vehicles traveled only an average of 560 miles between such repairs. The Department had continued to operate vehicles beyond their scheduled replacement dates primarily because the ordering of new vehicles had been delayed and because, when vehicle requirements. had been established, full consideration was not given to administra- tive and production lead time. We found that, although the Depart~ ment generally had anticipated receiving new vehicles in the same fiscal year in which funds for these vehicles were made available, the Department had not received the vehicles when anticipated. Our analysis of procurement records for vehicles needed in fiscal year l964~ showed that from 3 to more than 9 months had elapsed after the beginning of the fiscal year before the Department had issued pur-~ chase orders for the vehicles to the General Services Administration and that from 21 to 29 months elapsed from the beginning of the fiscal year to acceptance of the last vehicle. In February 1966 we brought these matters to the attention of the Postmaster General and proposed that the Department strengthen its procedures to provide greater assurance that vehicles are replaced when it is most economical to do so and that vehicles required for new service routes are obtained in a timely manner. We suggested specifically that the Department prepare its vehicle specifications and procurement requests in the period between the submission of its budget and the beginning of the new fiscal year so that the General Services Administration can request bids immediately after the Department's budget is approved by the Congress. We suggested also that the administrative and production lead time be included as a factor in determining new-vehicle requirements and that the current experienced lead time be reviewed to determine whether the procure- ment and delivery of new vehicles can be accelerated. PAGENO="0255" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 247 The Postmaster General, in his letter to us dated April 1, 1966, stated that the Department agreed that it should strengthen its program for replacement and procurement of motor vehicles. Ho. informed us that, after our review, there had been an improvement. through the earlier submission of requisitions to the General Services. Administration. He stated also that the General Services Adminis- tration was devoting considerable effort to expediting contract awards and securing on-time contract performance. He further informed us. that the Department would continue studies to reduce the time required to complete delivery of vehicles and that requests for funds.. would recognize reasonable production lead times. [Index No. 63-B--159187, Sept. 7, 1966] POTENTIAL SAVINGS THROUGH IMPROVED UTILIZATION OF SPACK AVAILABLE ON ADMINISTRATIVE MILITARY AIRCRAFT, DEPART- MENT OF THE AIR FORCE The General Accounting Office made a review of the utilization of administrative military aircraft maintained for mission-support service at selected Air Force installations. Specific attention was directed toward ascertaining the extent to which commercial air service was procured for Air Force personnel when seats were available. on these military aircraft. Various Air Force transportation regulations provide that personnel on official duties should travel, to the extent possible, on military air-. craft flights being made for mission-support purposes to the desired. destinations. Several factors could limit utilization of available space on military flights. The factor over which the Air Force. apparently has least control is the option of civilians to refuse military transportation if it is not a condition of their employment. How-. ever, civilian employees are encouraged to use military aircraft when space is available, in the interests of economy. During our review we found that transportation procedures followed did not provide sufficient control to attain optimum utilization of available adminis-~ trative military aircraft. On the basis of our analysis of pertinent records at four installations during portions of fiscal years 1964 and 1965, we believe that substantial savings in expenditures for air travel could have been realized through more stringent control of travel authorizations. We submitted a draft report on the results of our review at on~ major installation to the Secretary of Defense on March 26, 1965. In a letter dated January 20, 1966, the Department of the Air Force,. commenting for the Secretary of Defense on our draft report, stated that, although it did not necessarily agree with our estimate of costs which might have . been avoided, adjustments to the transportation. request issuing procedure had been implemented to ensure more. effective use of available Government airlift. On July 23, 1965, Headquarters, Department of the Air Force, issued a letter to its major commands, outlining the policies to be observed by all Air Force activities in utilizing passenger space available as a by-product of operation of the command support fleet. PAGENO="0256" 248 BACKGROUND: ECONOMY IN GovERwME~r-1 967 We believe that the Air Force has initiated the necessary actions to increase utilization of its administrative aircraft and thereby reduce air travel costs. [Index No. 64-B-133324, Sept. 19, 19661 POTENTIAL SAVINGS THROUGH IMPROVEMENT IN THE MANAGE- MENT OF MATERIALS HANDLING EQUIPMENT AND COMMERCIAL- DESIGN TRUCKS, U.S. MARINE Coups, DEPARTMENT OF THE NAVY The General Accounting Office found a need for increased attention to the established procedures and controls by management personnel at Marine Corps Headquarters and at the installations reviewed, to ensure that the quantities of equipment and trucks assigned for use were commensurate with the needs. Our review indicated that, as a result of the nonadherence to procedures and controls, unneeded vehicles valued at over $1.6 million had accumulated at the three installations. If our findings are representative of the general situation throughout the Marine Corps, the accumulation of unneeded vehicles of these types could amount to as much as $5 mifiion. The Department of the Navy's comments indicated that the Navy concurred, with reservations, in our findings on unneeded vehicles and advised us of the action that had been taken to revise the Marine Corps instructions which existed at the time of our review. The Marine Corps has improved and refined its procedures for identifying excess vehicles and, in addition, has emphasized the necessity for complying with existing instructions. We believe that the present procedures and controls, if effectively implemented, shouhi help prevent recurrence of the type of deficiencies identified during our review. [Index No. 65-B-159407, Sept. 19, 1966J REVIEW OF THE MAINTENANCE OF COMBAT VEHICLES, DEPARTMENT OF THE ARMY The General Accounting Office made a review of the policies and practices of the Department of the Army with respect to the mainte- nance of combat vehicles, especially tanks of the M48 series. We found that the Army was classifying combat vehicles as needing to be rebuilt, on the basis of visual inspections. As a consequence, virtually all maj or components of equipment classified as needing to be rebuilt were dismantled completely, repaired, and reassembled. We believed that substantial savings could be achiev~ed if combat vehicles requiring maintenance were tested with available diagnostic equipment and other techniques as a means of determining the repair work actually necessary. Our examination into the repair of certain major components of M48-series tanks showed that savings of more than $1,760 could be achieved for each tank that did not actually require rebuilding. Since the Army has plans for expending $147.6 miffion during fiscal years 1966 through 1969 for the depot repair of 10,848 combat vehicles, including 3,131 M48-series tanks, we believed that the savings that PAGENO="0257" BACKGROUND: ECONOMY IN GOVER~MENT~19 67 249 could be achieved by strict adherence to the Army's stated policy of inspecting and repairing only as necessary would be very substantial. We brought these matters to the attention of the Department of Defense and the Department of the Army on December 29, 1965. The Deputy Assistant Secretary or the Army (Installations and Lo- gistics), in commenting on our draft report, stated that the Army, in general, agreed with our findings and that it had revised the ap- plicable bulletin, Technical Bulletin ORD 245, on December 23, 1965. He informed us that the revised Bulletin stated, in part, that "Un- necessary disassembly of assemblies and sub-assemblies in or out of vehicles will not be accomplished." He advised also that the Bulletin provided that "To the fullest extent possible, test equipment will be used to determine assembly and sub-assembly reliability, quality and performance." Our review of the Bulletin showed that it specified that engines in combat vehicles having 1,500 miles or more be over- hauled (rebuilt) and that engines, transmissions, transfer cases, and axles in tactical vehicles having 5,000 miles or more be overhauled. This language indicated to us that test equipment would not be used on vehicles meeting the above mileage criteria. Consequently, during April and July 1966, we performed a limited followup review at three of the Army's five maintenance depots; namely, Tooele, Red River, and Letterkenny. At Tooele, we found that the Bulletin had been fully implemented, with the exception of the mileage criteria not being applied literally. Instead, the depot was using diagnostic test equipment whenever possible, the mileage criteria being considered only as a guide. At Red River and Letter- kenny, we found that the Bulletin had not been fully implemented; therefore we were unable to determine how these depots would have applied the mileage criteria. We learned, however, that the Army Tank-Automotive Center, Warren, Michigan, had requested all depots to submit specific comments and/or recommendations on the Bulletin by June 6, 1966. The Center stated that the comments and recommendations being requested were "for the purpose of final updating of TB ORD 245." We were advised by an Army official that revisions to Technical Bulletin ORD 245 were con- tinually under consideration. We believe that the actions which the Army has already taken in revising Technical Bulletin ORD 245 will result in substantial sav- ings, regardless of how the mileage criteria are applied by depots other than Tooele. [Index No. 66-B-114878, Sept. 20, 1966] REVIEW OF PROCUREMENT AND UTILIZATION OF SECURITY COVERS FOR NUCLEAR WEAPONS, ATOMIC ENERGY COMMISSION AND DEPARTMENT OF DEFENSE Our review indicates that savings could be achieved through reduced procurement of specially designed security covers. In 1960 the external dimensions of many types of nuclear weapons were declassi- fied by a change in the Atomic Energy Commission-Department of Defense Classification Guide, thus, eliminating the need for security covers under certain conditions. However, in evaluating the con- 77-601-----67------17 PAGENO="0258" 250 BACKGROUND:* ECONOMY IN GOVERNMENT-i 967 tinued need for security covers in 1960 and 1961 in recognition of the change in the Classification Guide, the Commission and the Depart- ment, in our opinion, did not adequately consider the reduced require- ments of the military services in their determination of future procure- ments of covers. Consequently the Commission continued to provide security covers in the same manner as before the external dimensions of the weapons were declassified. Between January 1961 and March 1965, the Commission expended about $650,000 in the continued procurement of security covers for the four types of weapons included in our review. During visits to two Strategic Air Command bases where two of the four weapons systems were represented, we were advised that the security covers were not needed for any on-base activity and that they represented a storage problem. In July 1964 we discussed this matter with officials of the Com- mission. Shortly thereafter, the Commission and the Defense Atomic Support Agency reviewed their security cover procurement policies, with particular emphasis on the needs and requirements of the using military services, and they concluded that the ratio of security covers to weapons delivered to certain military services could be reduced. As a result, the remaining production of security covers for two of the weapons included in our review was canceled, with an estimated saving of abàut $16,000, and procedures were established to evaluate the requirements of the military services in determining future procure- ment of covers. Since production of security covers was complete, or essentially complete, for the two remaining weapons included in our review, reductions in procurement of security covers for these weapons were no longer possible. In April 1966 we were advised that action had been initiated to authorize the Department to dispose of certain security covers which had been determined to he no longer of use in the weapons program. Security covers for the four weapons which we reviewed were included on the proposed surplus list. In our opinion, had the Commission and the Defense Atomic Sup- port Agency adequately considered the need for security covers by the military services in their initial evaluation of procurement require- ments, a substantial portion of the approximately $650,000 spent for security covers between January 1961 and March 1965 for the four systems included in our review could have been avoided. We believe that the revised procedures established by the Commis- sion and the Department for determining the requirements of all users prior to providing covers, if effectively implemented, should eliminate future procurements of unneeded security covers and result in worthwhile economies. [Index No. 67-B-114878, Sept. 20, 19661 POTENTIAL SAVINGS TO THE GOVERNMENT THROUGH INCREASED PURCHASING FROM GENERAL SERVICES ADMINISTRATION SUPPLY SOURCES BY CONTRACTORS WHICH OPERATE FACILITIES OF THE ATOMIC ENERGY COMMISSION All the contractors whose activities we reviewed utilized the General Services Administration in varying degrees as a source of procurement of common-use items. However, even in those cases where the PAGENO="0259" BACKGROUND ECONOMY IN GOVERNMENT-i ~`67 251 contractors were making substantial use of the General Services Administration as a source of supply, we identified additional common- use items which could have been purchased through the General Services Administration. Our review showed that savings to the Government amounting to about $309,000 might have been achieved during the period extending from fiscal year 1963 through the latter part of fiscal year 1965 if these items had been procured through General Services Administration rather than directly from commercial suppliers. We believe that within the Commission's policies and procedures there exists an appropriate framework which should promote the maximum use of General Services Administration as a procurement source and that, through its periodic evaluations, the Commission should have been in a position to examine into the contractors' effec- tiveness in relation to this matter. We found, however, that the em- phasis placed on this aspect had varied considerably among operations offices, with the result that additional costs were being incurred, in some cases quite substantial, which could well have been minimized. Accordingly, we proposed that the Commission's General Manager reemphasize to the operations office officials the importance of making thorough reviews of operating contractors' practices and procedures relating to the use of General Services Administration as a procure- ment source. Also, we proposed that the General Manager instruct the operations offices to require the contractors to include in their records written documentation in support of decisions to purchase from sources other than those of the General Services Administration~ common-use items for which there is a continuing need. The Com- mission has advised us that it will implement our proposals. Corrective actions also were taken by the contractors after we brought our findings to their attention. One contractor revised its policy to place emphasis on increased procurement from General Services Administration supply sources. Other contractors, in imple- mentation of existing policies, made changes in practices, to procure certain items from General Services Administration sources in the future or obtain certain items from the General Services Administra- tion to use and evaluate on a trial basis to determine whether the items would be satisfactory for their needs. We believe that the actions taken or to be taken by the Commission and the contractors should promote a more effective use of General Services Administration sources of supply by the operating contractors. However, we plan, as part of our continuing review of Commission operations, to evaluate the effectiveness of these actions in subsequent reviews. [Index No. 68-B--146876, Sept. 20, 19661 REvIEw OF THE POLICY OF LEASING MOTOR VEHICLES FOR USE BY GOVERNMENT CONTRACTORS, DEPARTMENT OF DEFENSE The General Accounting Office made a review of the policy of leasing motor vehicles for use by Government contractors. This report presents our findings together with information on the action (1) which the Department of the Air Force has already taken and plans to take by February 1967 to discontinue leasing vehicles for use PAGENO="0260" 252 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 of contractors at Vandenberg Air Force Base and (2) which the De-. partment of Defense plans to take to modify regulations a.nd policies in the Departments of the Army, Navy, and Air Force with respect to the interpretation of 5. U.S.C. 78. Because of problems that arose from having many contractors making independent arrangements for their own intrabase transporta- tion, beginning in August 1962 the Air Force Systems Command- through its Baffistic Systems Division and Space Systems Division- awarded contracts to firms for leasing vehicles for the use of contractors in performing Government contracts at Vandenberg Air Force Base. We estimate that savings of about $800,000 could have been realized over the 3-year period of the current contracts if the Government had purchased the vehicles and furnished them to the contractors for their use on the base. It has been the opinion of the Department of Defense that it is the intent of the congress to control the purchase of passenger vehicles by the Department of Defense, regardless of whether the vehicles are to be used by Government or contractor personnel, and that 5 U.S.C. 78 precludes acquisition by the Department of Defense of vehicles other than those specifically authorized by the congress in the annual De- partment of Defense Appropriation Acts. In our view, the restric- tions on procurement of vehicles included in 5 U.S.C. 78 pertain only to vehicles to be procured for use by Government agencies and depart- ments. We believe, for example, as stated in our report dated October 2, 1964 (B-146876), that funds appropriated for procurement of mis- siles can be used to purchase vehicles needed by contractors in the per- formance of contracts financed with such funds and that it is not necessary for the Air Force to obtain congressional approval to pur- chase vehicles for use of contractors to perform work under Govern- ment contracts. In commenting on our report, the Deputy Assistant Secretary of Defense (Logistics Services) advised us that the Air Force in March 1965 initiated a program to replace with Government-owned vehicles, to the maximum feasible extent, the vehicles then leased for contractor use at Vandenberg Air Force Base. The Deputy Assistant Secretary stated that 101 of the 425 vehicles discussed in our report were pro- grammed for replacement in 1966 and that the Air Force was attempt- ing to program procurement of the remaining 324 vehicles so that they would be on hand when the leasing contract for vehicles for Vandenberg expired in February 1967. With respect to 5 u.s.c. 78, the Deputy Assistant Secretary indi- cated that, although he stifi felt that this legislation was intended to impose rigid congressional control over the acquisition of passenger vehicles for use of both agency and contractor personnel, he recognized that potential savings might be realized in certain circumstances by procuring rather than leasing such vehicles and he was accepting our interpretation that the statute applied only to vehicles acquired for use by agency personnel. He stated that a memorandum to the Assistant Secretaries of the Army, Navy, and Air Force for Installations and Logistics was being issued, requesting that applicable regulations and policies be modified as soon as possible to include the revised policy. We believe that this revised policy should make it possible to realize savings in transportation costs at other military installations where substantial numbers of passenger vehicles and trucks may be leased for extended periods for use by Government contractors. PAGENO="0261" BACKGROUND: ECONOMY IN GOVERNMENT-19 67 253 {Index'~No. 69-B-156818, Sept. 20, 1966] LONG-TERM LEASING OF BUILDINGS AND LAND BY GOVERNMENT CONTRACTORS The General Accounting Office review of the long-term leasing of buildings and land by one contractor, the Lockheed Missile & Space Company disclosed that this method of acquiring facilities is more costly to the Government than would be the case if the contractor had constructed and retained ownership of the property for use on Govern- ment work. We believe that current provisions of the Armed Services Procurement Regulation provide an incentive for contractors to rent and should be reconsidered by the Department of Defense. Lockheed entered into noncancelable leases on property which cost about $27 million, for a 25-year period, which committed it to pay total rentals of about $46 million. Although the cost of the land and interest expense on the contractor's investment in buildings and land would not have been reimbursable under the Government cost- reimbursement contracts in effect, the contractor, through the long- term leasing arrangements, is being reimbursed for all costs of the property. If the use of the facilities continues almost exclusively for negotiated Government work over the initial 25-year period of the leases, the Government will pay, through reimbursement of rental payments, about $19 million more than the cost of the buildings, which would be the amount chargeable to Government contracts as depreciation if the contractor owned the property. Under these conditions, however, the contractor will save during this same period a substantial amount, which we estimate at about $10 mi lion, in interest expense which it would have incurred to finance ownership of the facilities. Also, the higher leasing costs are included in the cost base in establishing fees or profits on Government contracts. Furthermore, under the current Armed Services Procurement Regula- tion guidelines for establishing the source of resources portion of the contract profit allowances, a contractor is allowed the same profit or fee consideration for furnishing the facilities whether they are owned, and the contractor absorbs the financing costs, or whether they are rented, and the contractor passes the rental costs, which would include the owner's financing costs, on to the Government. In commenting on a draft of this report, both Lockheed and the Department of Defense emphasized the risk that Lockheed took by entering into the 25-year noncancellable leases without the assurance that its work under Government contracts would continue during the entire period. However, the Department agreed with our position that the risk is substantially the same whether the contractor purchases the facil- ities or acquires them through long-term leasing arrangements. The Department stated that it was aware of the magnitude of the leasing costs and that it was not precluded by the Armed Services Procurement Regulation from considering the reasonableness of the costs of leasing in any current or future negotiations. Further, the Department stated that the Armed Services Procurement Regulation Committee would be requested to review the rental cost principle, particularly under noncancellable, long-term leases. The Department also ad- vised that consideration of revisions to the weighted guidelines, which PAGENO="0262" 254 BACKGROUND: ECONOMY IN GOVERNMENT-i 9 67 are used in the establishment of profits and fees, would be possible after sufficient data had been obtained under a Department of Defense Profit Review Study. We recommended to the Department of Defense that, in its review of the rental cost principle, it consider the alternatives discussed in this report; that is, either to consider the costs of rented buildings and land used by defense contractors to be allowable to the extent that they do not exceed the costs of ownership or to provide a clear distinction between owned and rented facilities in establishing profits or fees. We recommended also that, in conjunction with consideration of these alternatives, the Department review the matter of a require- ment for disclosure of contemplated actions involving special or unusual costs to be incurred by defense contractors. ~Index No. 70-B-132989, Sept. 30, 19661 FOLLOW-UP REVIEW OF THE MANAGEMENT OF AIRCRAFT ENGINES USED IN GROUND TRAINING PROGRAMS, DEPARTMENT OF THE * AIR FORCE The General Accounting Office made a follow-up review of man- agement of aircraft engines used in ground training programs. The review was made for the purpose of evaluating the effectiveness of actions taken by the Air Force to correct the deficiencies cited in our November 1962 report to the Congress titled "Management of Jet Aircraft Engines by the Air Training Command in its ground training programs for the Department of the Air Force" (B-132989). Our follow-up review showed that the Air Training Command had made significant improvements in its procedures for establishing re- quirements for engines and for controlling the use and disposition of engines acquired for training purposes. We found, however, that certain of the improved procedures had not been adequately imple- mented at the Command's technical training centers. As a result, the maximum benefits attainable from the improved procedures were not being realized. In our earlier report we noted that, in its training courses, the Air Training Command was using engines that were needed by other commands for operational use, although older series engines, suitable for training purposes, were available from long supply in the Air Force inventory. In comiuenting on our report, the Air Force in- formed us that it had established procedures for the exchange of supply-status information between the Air Training Command and the Air Force Logistics Command which, in conjunction with other ~hanges in Air Force management progTams, were expected to result in a significant improvement in engine management. As a result of the various improvements, such as the consolidation of training courses so that engines and related equipment could be used in more than one course, the Air Training Command during fiscal years 1963 and 1964 took action to release or eliminate requirements for engines and equipment valued at about 812,400,000 that, in many cases, were needed for operational use by other commands. WTe found, however, that the technical training centers were not making proper use of the engine supply-status information furnished PAGENO="0263" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 255 by the Air Force Logistics Command. Consequently, available substitute engines were still not being utilized to the maximum extent possible in order to release engines needed by other commands. When we brought this to the attention of Air Training Command officials, 37 engines valued at about $3,100,000 were released by the Air Training Command for use by other commands. In commenting on our report in a letter dated July 6, 1966, the Air Force stated that some shortcomings had existed in the program and that our follow-up review had generated a revitalization of its procedures so that effective management could be achieved. In addition, the Air Force stated that the Air Force Inspector General would include in his inspections the matter of control and utilization of aircraft engines by the technical training centers to ensure that effective management procedures would be followed. [Index No. 71-B--146876, Sept. 30, 1966J PROCUREMENT OF THRUST VECTOR CONTROL NOZZLES FOR THE MINUTEMAN MISSILE PROGRAM, DEPARTMENT OF THE AIR FORCE The General Accounting Office reviewed, the procurement of thrust vector control nozzles used in the production of first-stage motors of the MINUTEMAN intercontinental ballistic missile by the Depart- ment of the Air Force. In our review of selected components procured by prime contractors for the weapon system, we found that, in establishing a firm price for thrust vector control nozzles purchased by Thiokol Chemical Corpora- tion for use in producing first-stage MINUTEMAN missile motors under negotiated purchased order P62-08432, Arde-Portland, Inc., (1) had not advised the contractor that it had received lower price quotations from, and had placed orders at lower prices with, suppliers of certain components and (2) had used direct labor cost data which, in our opinion, were unrealistic. In our opinion the costs incurred for the purchased components were about $592,800 less than the amount that had been estimated in negotiating the purchase order price due to reductions in price that had been obtained by Arde-Portland prior to definitizing the purchase order but which it had not made known to Thiokol. Also, the lack of realistic cost data for production labor had resulted in the costs' having been over~ estimated by an indeterminable amount. Thiokol, by requests included in several teletypes sent to Arde- Portland during September and October 1962, attempted to determine the new prices that Arde-Portland had obtained from its suppliers for the components it proposed to purchase. Arde-Portland's response to the effect that it had incurred increases of substance in these costs was apparently interpreted by Thiokol to mean that Arde-Portland's costs for obtaining the components had increased relative to the estimated costs considered in the initial price negotiations held in August 1962. In actuality, however, Arde-Portland's reply was not responsive, for, as a result of its negotiations with its suppliers during the period September 7 to October 15, 1962, Arde-Portland had negotiated sub- contracts with its suppliers for virtually all of its requirements and had been quoted prices for the small remaining balance of its require- PAGENO="0264" 256 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 ments, which, in almost every case, were substantially lower than the estimated prices that had been considered in the initial price nego- tiations. We estimate that, as a result, Arde-Portland's costs for subcontracted items were about $592,800 less than the estimated costs it had included in its initial price proposal. In our view, the overestimating occurred because Thiokol and the Air Force did not obtain or review the latest available evidence of the estimated costs that Arde-Portland expected to incur in performing its contract with Thiokol. The Air Force advised us on August 17, 1965, that: Since August 1964, in addition to an Air Force committee review, an audit is required on all fixed-price subcontract proposals received by Thiokol in excess of $250,000 when the price is to be based on an analysis of a cost estimate. The Air Force also stated that, to avoid a recurrence of the situation dealt with in our report, Thiokol had incorporated these instructions m its internal procedures, reorganized its purchasing department and made extensive personnel changes and that a subsequent survey made by an Air Force Western Contract Management Region Purchasing Methods Analysis Team had showed that all deficiencies previously found in Thiokol's pricing and negotiating areas had been corrected. As the result of a meeting held on December 7, 1965, pertaining to the findings included in our draft report, Aide-Portland, Thiokol, and Air Force representatives negotiated supplementa.l agreement 36 to contract AF 04(694)-133. This agTeement reduced the amount of the contract by $266,375, in final settlement of the overestimated material and labor costs of more than $592,000 disclosed by our review. We recommended to the Secretary of Defense that he bring the facts of this procurement to the attention of contracting officials, to empha- size that attempting to obtain recovery after contract performance is not a satisfactory substitute for obtaining, during contract negotia- tions, reasonable evidence of the estimated costs that subcontractors expect to incur. [Index No. 72-B--118634, Oct. 19, 1966] REVIEW OF POLICIES AND PROCEDURES FOLLOWED IN DETERMIN- ING THE SIZE OF THE NEW SECOND LOCK AT SAULT STE. MARIE, MICH., CoRPs OF ENGINEERS (CIVIL FUNCTIONS) DEPARTMENT OF THE ARMY On the basis of our review, we estimated that the cost of designing and constructing the New Second Lock was increased by about $651,000 because the Corps of Engineers decided to increase the au- thorized size of the New Second Lock without first adequately estab- lishing the maximum-size ships that could be expected to use the new lock during its economic life. Shortly after construction started and after the design work was substantially completed, shipping interests expressed concern over the adequacy of a proposed 1,000- by 100-foot lock. As a result, the Corps stopped construction and design work, restudied the proposed lock size, and decided to increase the size of the lock to 1,200 by 110 feet. In our opinion, the data upon which the decision was made to increase the lock size to 1,200 by 110 feet was basically the same as the data available at the time the Corps decided to build the 1,000~foot lock. PAGENO="0265" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 257 The Department of the Army, in commenting on the matters presented in this report, generally disagreed with our findings and conclusions. The Department stated that three principal changes in conditions occurred between 1959, when the decision was made to increase the length of the lock to 1,000 feet, and 1962, when the decision was made to increase the length of the lock to 1,200 feet. The changes referred to by the Department relate primarily to tech- nological changes in ship construction and in processing of low-grade ores and to improvements in the Great Lakes connecting channels. Although these principal changes would probably affect the date at which larger Great Lakes ships would be placed in service, we believe that sufficient information was available in 1959 to place the Corps on notice that these changes would occur during the economic life of the lock and we believe that the Corps should have considered the effect of these changes in determining the size of the New Second Lock. These and several additional comments by the Department have been considered in our report and are included as appendix II. Existing regulations and procedures provide general guidelines to be used in the planning and designing of locks, and we are not recom- mending that these be revised or that more detailed guidelines be established because we recognize that numerous factors are involved in determining the size of a lock and that these factors vary depend- ing on the type of vessels and traffic which will use the lock. Because the decision as to the size of each lock to be constructed-as in the case of the New Second Lock-involves the exercise of judgment, we believe that it is particularly important that the information compiled during the lock-size studies and the recommendations made by the district engineers based on these studies be critically reviewed and evaluated by responsible officials in the division and in the Office of the Chief of Engineers. Accordingly, we are recommending that, in order to minimize the possible occurrence of similar situatiOns, the Chief of Engineers bring this report to the attention of all district engineers to stress the im- portance of conducting thorough studies before building new locks. We are recommending also that the Chief of Engineers bring this report to the attention of the division engineers and officials in the Office of the Chief of Engineers to demonstrate the need for more critical evaluations of representations and proposed actions of the district engineers to ensure that the representations and actions are in line with current and forecast lock-size requirements. [Index No. 73-B-133394, Oct. 31, 1966] REVIEW OF SELECTED ASPECTS OF SCHEDULING FOR DESIGN, INTE- GRATION, AND TEST OF NIMBUS SPACECRAFT, NATIONAL AERO- NAUTICS AND SPACE ADMINISTRATION The primary objective of the Nimbus project at its outset was to develop a meteorological satellite system which would be capable of meeting operational, as well as research and development, needs of the nation's atmospheric and weather services. We undertook a review of selected aspects of the management of the Nimbus project, PAGENO="0266" 258 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 after noting that project cost estimates had been substantially ex- ceeded and that launch schedules had not been met, to consider the need for strengthening the Space Administration's management practices relating to research and development projects. We noted that, in the early stages of the Nimbus project, the Space Administration's Goddard Space Flight Center required the Nimbus spacecraft integration contractor to work on prototype spacecraft design and test planning when only tentative design information was available about the spacecraft subsystems. These subsystems- integral parts of the spacecraft-were being designed and fabricated by other Space Administration contractors for integration into the spacecraft. The Goddard Center subsequently authorized the inte- gration contractor to give recognition to delays in completion of the spacecraft subsystems. The integration contractor, however, had to perform substantial reanalysis, redesign, and rework relating to integration and spacecraft testing at an estimated cost of about $1.1 mfflion because much of the tentative subsystem design information it had used in meeting the requirements or the integration schedule proved to be inaccurate. On the basis of our review, we believe that this situation occurred because the Goddard Center did not give timely recognition to the effects of expected delays in delivery of subsystem hardware on the integration effort at the time these delays became known. Also, we believe that the Goddard Center did not assure itself at that time that any benefits which might have been expected from adhering to outmoded schedules would have offset the added costs which could have resulted from using tentative design data. In our opinion, postponement of the start of spacecraft design and test planning would have evidenced a recognition of the situation as it existed at that time; that is, undertaking spacecraft design and test planning based on tentative design data involved the unnecessary risk of increasing project costs. Because accounting records normally maintained for the perform- ance of cost-type research and development contracts do not contain this type of information, a reasonable approximation cannot he made of costs that might have been avoided by a more timely adjustment of the integration schedule. We believe, however, that the magnitude of the expenditurse of about $1.1 million subsequently made for reanalysis, redesign, and rework indicate that substantial costs might have been avoided. The Space Administration, whose comments are included in the report, did not agree with our finding regarding the need for more timely adjustment of schedules under the circumstances that existed. In this regard, we noted that the Space Administration recently issued a new agencywide policy directive for the planning, approval, and conduct of future major research and development projects. This policy, known as Phased Project Planning, was evolved because of the undesirable results that occurred in the form of increased costs over those predicted, and delays or slippages in established schedules, when major research and development projects were allowed to proceed almost directly from feasibility studies to full-scale hardware devel- opment. The new policy directive provides that future research and devel- opment projects similar to Nimbus will normally be conducted in four PAGENO="0267" BACKGROUND: ECONOMY IN GOVERNMENT-19 67 259 sequential phases-Advanced Studies, Project Definition, Design, and Development/Operation-with each phase a specifically approved activity to be undertaken only after review and analysis of the preceding effort by agency top management. TJnder this system final hardware design, development, and fabrication will not be undertaken until necessary design work relating to critical systems and sub- systems has been performed to provide reasonable assurance that milestore schedules for the final or development phase can be met. In contrast, milestone schedules for the delivery of advanced state-of- the-art hardware for integration and testing in the Nimbus project were established at the outset and, in our opinion, were adhered to unnecessarily after the Space Administration learned that these schedules were virtually unattainable because of typical develop- mental problems. In this regard the Space Administration's policy directive, issued in October 1965, to improve the management of research and develop- ment projects would, if adequately implemented, eliminate the likeli- hood of a recurrence of this situation. The directive contemplates an orderly approach to the management of research projects. However, the tenOr of the Space Administration's comments to us, 1 month after issuance of the directive, indicates that, under circumstances similar to those cited in this report, Space Administration management would again make the same decision. Therefore, we plar to examine into the implementation of the new policy as part of our continuing review of the management of Space Administration research and development proj ects. [Index No. 74-~-B-15676O, Oct. 31, 1966] MANAGEMENT CONTROL !oF NIKE-RERCTJLES MISSILE LAUNCHING AND HANDLING RAILS The Army's management control over the computation of require- ments, the procurement, and the accountability of major items of NIKE-HERCTJLES missile ground support equipment was inade- quate in that the Missile Command was unable to account for sub- stantial quantities of costly missile system equipment. The inability to account for this equipment was a result of an inadequate record- keeping system which did not provide sufficient data on which to base requirement computations. Requirements were computed on the basis of new deployments, authorization of increased number of missiles assigned, and individual users' requests, less the quantity of rails shown to be on hand in depots and on order. The total quantity already available at users' locations and the condition thereof were not considered in the requirement computation. At the time of our review, the Missile Command had obtained authorization of funds and was in process of procuring 149 NIKE- HERCULES missile launching and handling rails, at a cost of about $1.3 million, which were in excess of actual requirements. After we suggested that it reevaluate overall requirements, an Army-wide re- view was initiated, which resulted in a decision to cancel the planned procurement of 149 rails. PAGENO="0268" 260 BAcKGROUND: ECONOMY IN GOVEKNMENT-1 967 The problems associated with the management control of NIKE rails are not unique. We have previously found and reported on a number of instances where procurement actions were initiated because stock already in the Army supply system was not adequately accounted for by using organizations and because the Army did not have ade- quate procedures for verifying asset data received from using organiza- tions with procurement and issue information. We have found also that these conditions were due primarily to the lack of adequate accounting control over inventories, particularly at the time of delivery and extending in greater or lesser degree to all echelons of the supply system. The Deputy Assistant Secretary of the Army (Installations and Logistics) has advised us that the Army concurred generally with our findings and agreed that the records transferred to the Missile Command by the Major Item Supply Management Agency were not adequate to provide inventory control on the rails previously issued to users. The Army noted, however, that certain actions had been taken which it believed would provide supply commodity managers with current, accurate, and reliable worldwide asset information. The Army is engaged in an overall program for developing a central control of assets and requirements for major items and certain signifi- cant spare parts. We believe, however, that the improvements that might result from the Army's actions wifi depend to a great extent on the performance of the individuals responsible for establishing and reviewing requirements and authorizations. [Index No. 75-B-159072, Oct. 31, 1966] POTENTIAL SAVINGS THROUGH GREATER USE OF AVAILABLE GOVERN- MENT GASOLINE OUTLETS, GENERAL SERVICES ADMINISTRATION We found that greater use of Government gasoline outlets is feas- ible and that substantial savings can be achieved if responsible General Services Administration officials will take action to more effectively control credit-card purchases of gasoline from commercial service stations. In our report dated July 15, 1966 (B-159072), we reported a similar finding on our review of credit card purchases of automotive gasoline for vehicles of the Departments of the Army, Navy and Air Force. The General Services Administration annually purchases an esti- 25 million gallons of gasoline from commercial service stations. The cost of gasoline purchased with credit cards is from about 7 cents to 19 cents a gallon higher than the cost of gasoline obtained from Government outlets. Our reviews at selected interagency motor pools showed that about 27 percent of the gallons of gasoline pur- chased at commercial service stations could have been purchased at Government gasoline outlets at substantial reductions in cost. If the feasibility of using Government gasoline outlets that we observed is typical for all motor pools, we estimate that the Government could save about $600,000 annually by using available Government gasoline outlets to the maximum extent practicable. We apprised the Administrator, General Services Administration, of our findings and suggested that certain actions be taken to obtain PAGENO="0269" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 261 maximum use of Government gasoline outlets for vehicles of the General Services Administration. The Assistant Administrator for Finance and Administration informed us in his letter dated June 28, 1966, that several problems were being encountered but that the General Services Administration was in general agreement with the objective of our suggestions. He advised us of a number of actions that would be taken. As part of our continuing review of the motor vehicle operations of Federal agencies, we plan to look into the effectiveness of the actions taken by the General Services Administration to obtain greater use of Government gasoline outlets. [Index No. 76-B-159271, Oct. 31, 1966] REVIEW OF PROCUREMENT OF DETACHABLE HELICOPTER GROUND HANDLING WHEEL ASSEMBLIES, DEPARTMENT OF THE ARMY We found that, as of November 1964, the Army had procured more ground handling wheel assemblies than were needed to support its total planned inventory of TJH-1 helicopters. The overprocurement was caused by the fact that Army procedures did not require using units to report accessories or components of major items of equipment which were unnecessary, oversophisticated, or furnished in quantities greater than needed and did not specify that this factor be considered in requirement computations. After we discussed this condition with Army officials, action was initiated to establish more realistic require- ments for these assemblies. As a result, procurement orders for 117 wheel assemblies or 58.5 sets costing approximately $43,700 were canceled and the need for possible future procurement of an additional 2,400 sets costing about $2.1 million was eliminated. The Assistant Secretary of Defense subsequently advised us that the Department of Defense concurred in our finding and stated that the Army's revised criteria for wheel assemblies should preclude further overstatement of needs. The Assistant Secretary of Defense further advised that, on the basis of planned procurement of UH- iBID helicopters through fiscal year 1967, the Army would be able to utilize all the UH-1B/D wheel assemblies in the system and probably would have to procure additional ones. The only wheel assemblies which would then be excess to the Army's needs would be 172 sets for the UH-1A helicopter, valued at $176,000, which could not be used for the UH-1B/D helicopter. The increased requirement for TIH-1B/D wheels was due to the fact that the Army had greatly increased its planned procurement of IJH-1B/D helicopters since the date of our review. We believe that, in view of this increase, savings on future procurement of ground handling wheel assemblies resulting from the Army's revised criteria should be even greater than $2.1 million. The Assistant Secretary of Defense also advised us that the Office of the Secretary of Defense and the Department of the Army concurred in our proposal that procedures be established to provide for using units to report to higher authority all items received with or furnished on major items of equipment that are unnecessary, oversophisticated, or in excess of actual needs. He said that the Army would make a study to determine the form and scope of these procedures. PAGENO="0270" 262 BACKGROUND: ECONOMY IN GQVERNMENT-1967 [Index No. 77-A-90545, Nov. 28, 1966] PROCUREMENT OF PRINTING OF TECHNICAL MANUALS FROM EQUIP- MENT CONTRACTORS, DEPARTMENT OF DEFENSE We made a review of the opportunity for savings by the Department of Defense in the procurement of the printing of technical manuals from equipment contractors. We conducted this review in coopera- tion with the Joint Committee on Printing, Congress of the United States, which, as part of its overall study of the Federal printing program, had requested us to review the practices followed by the military departments in the procurement of printing. On the basis of our review, we believe that, in most cases, the military departments can achieve significant savings by procuring the printing of technical manuals from commercial printers, under formally advertised con- tracts awarded by the Go~erniTnënt Printing Office in lieu of procuring such printing from the manufacturers of equipment. The. Joint Committee on Printing, as part of its authority under title 44 of the United States Code, promulgates and publishes the Government printing and binding regulations. The regulations state that, when printing is authorized as part of an equipment contract, the cost thereof must be identified in the contract and a record of the cost thereof must be maintained for review. Our examination covering the fiscal year ended June 30, 1964, dis- closed that (1) information on t.he total expenditures for printing technical manuals procured from equipment contractors was not maintained by the military departments and (2) costs for printing technical manuals generally were not identified in the individual equipment contracts. Therefore, we made a review of Government expenditures for the printing of technical manuals at selected con- tractor locations. Our detailed examination of the contractors' records disclosed that the cost to the Government for printing techni- cal manuals furnished to the military departments under equipment ëontracts held by these contractors amounted to approximately $2.2 million in fiscal year 1964. Also, we obtained from the Govern- ment Printing Office estimates of the prices that could have .been obtained for printing certain manuals furnished by these contractors if the printing had been procured from commercial printing sources under contracts awarded by the Office. On the basis of data obtained from the contractors and the Government Printing Office, we estimate that the military departments could have saved about $770,000, or 35 percent of the $2.2 million. * On the basis of our limited test, we estimated that, during fiscal year 1964, the military departments spent between $25 million and $30 mifiion for printing manuals procured through equipment con- tractors and that the military departments could save about 35 percent of such costs annually. For fiscal year 1964, this savings could have amounted to about $8 million. In our opinion, adequate cost information would have furnished a sound basis on which the military departments could have determined the most economical method of procurement and thereby realized significant savings. In reply to our draft report on this matter, the Department of Defense concurred with our findings that information on the total PAGENO="0271" BACKGROUND: ECONOMY IN GOVERNMENT-i 967. 263 costs incurred by the military departments for the printing of tech- nical manuals procured from equipment contractors was not available and that costs for printing technical manuals generally were not identified in the individual equipment contracts. Further, the De- partment concurred with our recommendation that the Secretary of Defense take the necessary action to ensure maximum procurement of printing of technical manuals through the Government Printing Office consistent with cost e~onomy and operational effectiveness. We were also advised that the military services had underway accel- erated programs for obtaining the printing of their manuals through contracts established by the Government Printing Office. These `~ctions should result in significant savings to the Department of Defense in the procurement of technical manuals. ~Index No. 78-B-133127, Nov. 29, 1966] REVIEW OF COORDINATION BETWEEN PROCUREMENT OF TECHNICAL EQUIPMENT AND ITS ULTIMATE UTILiZATION, FEDERAL AVIATION AGENCY On the basis of our review, we believe that there was a need for the Agency to achieve better coordination between the procurement of air navigational and traffic control equipment and its ultimate installation at field facilities. We noted that the Agency had ac- cumulated sizable overstocks of such equipment because it had procured the equipment without having firm plans for the installa- tion of the equipment. We noted also that, because of the inadequacy of its procedures for determining stock availability, the Agency had purchased equipment from commerical sources, at a cost of about $136,000, when similar equipment stocked at its Oklahoma City depot was in excess of reasonably current needs. We noted evidence that procumrent actions had been expedited in an apparent effort to obligate funds before the end of the fiscal year. The overstocks and unnecessary or premature purchases resulted in (1) large stocks of some items becoming obsolete because of techno- logical advances after the items were purchased, (2) the manufacturers' warranties on many of the items in storage substantially or com- pletely expiring, and (3) the premature investment of Government funds in inventories when these funds might have been used for other more essential purposes. Also, these factors tended to result in additional interest, storage, and handling costs. We proposed that the Agency (1) establish definitive procedures for determining the amount of air navigational and traffic control equip- ment to be purchased, (2) discontinue the practice of procuring air navigational and traffic control equipment on the basis of budget estimates and tentative plans, and purchase such equipment as near as possible to the date of actual need for the equipment on specific approved projects, and (3) identify equipment excess to the Agency's reasonably current needs for approved or firmly planned projects, and report excess stocks to the General Services Administration so that they may be made available to other Government agencies. PAGENO="0272" 264 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 In a letter to us dated May 10, 1966, the Administrator of the Federal Aviation Agency stated that he agreed with our findings and our proposals for corrective action. He informed us that the Agency had issued, during the past 2 years, three directives designed to provide stopgap corrective action until such time as more comprehensive system improvements could be implemented. The Administrator informed us also that, on November 2, 1965, the Agency issued the more comprehensive system improvements for the management of project material, which would be fully implemented in the Agency by December 31, 1966, and would provide for the constant comparison of requirements and assets, the reassignment of assets to meet changing requirements, and the early identification and prompt disposal of excesses to ensure their availability to other Government agencies. The Administrator added that (1) an Agency directive would be issued to give formal status to informal instructions now in existence which provide for miscellaneous construction supplies to be procured on a more realistic basis, (2) every effort was being made to buy equipment nearer to the actual need date, and (3) Agency internal audit follow-up and future management reviews would determine the effectiveness of all the corrective actions taken. We believe that the comprehensive system improvements, when they are fully in effect, should significantly enhance the coordination between the purchase and ultimate use of equipment. In the interim, however, we believe that, for effective management of project ma- terial now on hand, definitive criteria are needed as to when material reserved for a future project may be considered available for current use on another project with an earlier start date, and we are recom- mending that such criteria be included as an amendment to the Agency's November 1965 directive. [Index No. 79-B-146700, Nov. 29, 1966] SAVINGS ATTAINABLE IN THE USE AND PRICING OF CERTAIN NON- PERISHABLE FOODS, DEPARTMENT OF DEFENSE The General Accounting Office has made a review of certain aspects of the use and pricing of specification nonperishable foods within the Department of Defense. We believe that significant savings will be realized by the military services in the future through maximizing the use of food items pack- aged in large-size containers. We believe also that significant savings wi]l be achieved by the services, in connection with the sale of food items to mi]itary commissary stores, as a result of establishing prices for food items on the basis of their actual cost in each size of container rather than on the basis of the average cost in all container sizes. In this connection, our review indicated that, during fiscal year 1964, annual savings of as much as $2 miffion could have been realized had maximum use been made of foods packaged in large-size containers and had food items sold to commissary stores been priced at actual cost. At the time of our review, policies and procedures had not been established to determine and/or encourage the use by military serv- ices of the most appropriate size or type of container of food. In PAGENO="0273" BACKGROTJND: ECONOMY IN GOVERNMENT-i 967 265 addition, the Defense Subsistence Supply Center, which managed food items for the Department of Defense, had taken the position that its responsibility was limited to furnishing food items in the manner pr& scribed by the military services. In advising the Department of Defense of our findings, we also proposed that the Secretary of Defense establish a program for the periodic review of subsistence items used by the military departments to identify uneconomical practices and that he initiate the necessary corrective action. The Deputy Assistant Secretary of Defense (Materiel Require- ments), by letter dated June 21, 1966, concurred with our findings and conclusions and, in regard to our proposal, identified recent steps taken by the military departments and the Defense Personnel Support Center which provide the means for continuous review of subsistence items used by the military departments. These steps are (1) issuance of military departmental regulations requiring the utilization of large- size containers, (2) implementation on January 1, 1966, of Defense Personnel Support Center policy establishing separate prices for each size container of food, and (3) distribution to the services of Defense Personnel Support Center usage reports to provide the capability of determining and controlling the container sizes of food being used by their installations. In addition, the Deputy Assistant Secretary advised us that the Sec- retary of Defense had recently authorized, and would establish on or about July 1, 1966, a focal point Directorate of Food Services Manage- ment Systems within the Office of the Deputy Assistant Secretary of Defense (Materiel Requirements). Responsibility for the con- tinuation and improvement of the program to identify uneconomical practices and to initiate corrective action will be assigned to that Directorate. The action by the military departments and the Defense Personnel Supply Center was taken after our review was completed and our findings brought to their attention. Effective central control over the program, in our opinion, would likely have resulted in earlier identi- fication of the uneconomical practices so that corrective measures could have been taken by management officials. In this regard, we believe that the plan of the Secretary of Defense to establish a focal point Directorate of Food Services Management Systems will likely provide the central control needed to efficiently manage the subsistence program. [Index No. 80-B-159210, Nov. 30, 1966] UTILIzATION OF MOTOR VEHICLES IN THE CAPE KENNEDY INTER- AGENCY MOTOR POOL; GENERAL SERVICES ADMINISTRATION, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION Because of continuing congressional interest in efficient and eco- nomical motor vehicle operations in the Government, we are reporting on these matters to inform the Congress (1) of the corrective actions taken by the General Services Administration and the National Aeronautics and Space Administration and (2) of the opportunity to improve utilization of interagency motor pool vehicles by establishing 77-6O1-67-----18 PAGENO="0274" 266 BACKGROUND: ECONOMY IN GOVERNMENT-i 067 vehicle rental rates that should discourage the use of motor vehicles for unusually low mileage requirements and, at the same time, recover The actual cost of owning and operating vehicles on the basis of usage by each agency. Prior to our review the National Aeronautics and Space Adminis- tration renewed certain long-term lease contracts with a commercial leasing firm. Our review showed that, if the General Services Admin- istration and the National Aeronautics and Space Administration had coordinated their efforts in determining the best means of providing motor vehicle support, substantial economies could have been achieved by obtaining transportation support from the General Services Administration. Before the expiration of these leases and without a proper deter- mination as to whether the leases could be terminated without penalty to the Government, the General Services Administration established a motor pool at Cape Kennedy, Florida, and purchased additional vehicles to provide transportation support to the National Aero- nautics and Space Administration. As a result, the number of Govern- ment owned and leased vehicles on hand in the Cape Kennedy area substantially exceeded the number needed. Our detailed review of vehicle utilization records covering a 9-month period during fiscal year 1965 showed that the number of vehicles assigned to the National Aeronautics and Space Administration by the Cape Kennedy motor pool continued to substantially exceed the number of vehicles required to efficiently and economically satisfy automotive needs. Our review showed also that the General Services Administration motor vehicle rental rates, which were in effect throughout the coun- try, did not recover the full cost of owning and operating vehicles assigned to meet low-mileage requirements. We believe that, if the General Services Administration would establish a rental rate structure designed to recover vehicle costs on the basis of usage by each agency, vehicle utilization would be improved on a nationwide basis. Such action should also provide the necessary degree of correlation between the rates charged and the cost to the Government to enable and en- courage the consideration of such costs by vehicle users in their deci- sions as to how their transportation needs should be met. We brought our findings and proposals for corrective action to the attention of the General Services Administration and the National Aeronautics and Space Administration. In their written comments on these matters, neither agency agreed fully with our findings, but both agencies informed us of substantial degrees of corrective action that had been taken. To improve utilization of vehicles and recover vehicle costs on the basis of usage by each agency, we are recommending to the Administrator of General Services that motor vehicle rental rates be revised to provide for a flat rate to cover the fixed costs that are incurred by the passage of time plus a mileage rate to cover the variable costs that are related to the miles driven. PAGENO="0275" BACKGROUND: ECONOMY `IN GOVERNMENT-i 967 267 {Index No. 81-B-159206, Dec. 5, 19661 REVIEW OF PRICE INCREASES UNDER SHIPBUILDiNG CONTRACTS, DEPARTMENT OF THE NAVY The General Accounting Office has examined into the propri- ety of certain price increases under shipbuilding contracts. The Department of the Navy agreed to reimburse prime ship- building contractors for price adjustments paid to their supplier of marine propulsion equipment and turbine generator sets on the basis of increases in the supplier's catalog prices for designated commercial items. Within 3 months after the award of the related subcontracts, the supplier increased the catalog prices for the designated `commercial items and claimed and was paid price increases of more than $1.7 million for items purchased by the Government. The record shows, however, that, with respect to certain of these items, there were no commercial sales of the items designated by the supplier as the nearest commercial equivalent upon which to base price adjustments. Also, for the remaining items, increases in the commercial selling prices were not proportionate to the increases `in the supplier's catalog prices. In fact, in some instances, even though the catalog prices were~ increased, the commercial `selling price re~ mained the same. rphe Department of the Air Force resident auditor responsible for all Department of Defense activities at the supplier's plants requested the supplier to furnish information on its commercial selling prices and other pertinent data concerning the price increases prior to the time the Navy reimbursed the prime contractors for the $1.7 million discussed in this report. The requested information was not furnished by the supplier. The prime contractors and the supplier advised us, in substance, that the price increases were in accordance with con- tractual arrangements. The Armed Services Procurement Regulation in effect at the time of negotiations did not specifically require the agency or the prime contractors to establish that catalog prices were bona fide commercial prices before agreements were reached to pay price increases based upon increases in catalog prices. In accordance with the provisions of Public Law 87-653, the procurement regulation has been revised to require that catalog prices for designated commercial equivalents be verified to ensure that they represent actual prices of commercial items sold in substantial quantities to the general public. Further revisions are being considered by the Armed Services Procurement Regulation Committee. in addition, we were advised that our findings on certain of these items suggested a possible breach of contract and that the Navy would made a detailed evaluation. Department of the. Navy officials advised us also that, in the study indicates a basis for recovery, the Navy will evaluate the remaining items discussed in this report as well a.s other items purchased under other Government prime con- tracts and subcontracts awarded under conditions and terms similar to those discussed in this report. PAGENO="0276" 268 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 [Index No. 82-B-156269, Dec. 14, 1966] REVIEW OF DETERMINATIONS OF WAGE RATES FOR CONSTRUCTION OF CARTERS DAM, GA., DEPARTMENT OF LABOR Our review showed that the wage rates determined by the Depart- ment as prevailing, thereby becoming minimum rates payable f or construction of the Carters Dam project, increased an average of about 63 percent during the period March 20, 1963, to January 28, 1965. We estimated that, as a result of the wage-rate increases, the contract value of phase II work-about $15.4 mifiion-included about $1.7 million in extra direct labor costs which we believe were con- sidered by the contractors in their bids and accordingly increased the project cost to the Government. The higher minimum wage levels were largely based on wages paid by contractors for the diversion tunnel and the main dam, phase I, which were relatively small contracts of $601,265 and $1,827,045, respectively. The contractor for the diversion tunnel paid premium wages principally because of the hazardous and specialized nature of his work. We believe that these high rates for unusual work should not have been carried forward, as was done by the Department, as minimum wage rates for more ordinary work. By agreements with local unions, the contractor for the main dam, phase I, paid wages at increased rates on only the last part of the phase I construction. These increased wage rates were accepted by the Department as being the prevailing wage levels in the area and, as of January 28, 1965, were determined to be the minimum wage rates payable by the contractor on the main dam, phase IT, the $15.4 million contract. We believe that lower minimum wage rates would have been determined had appropriate consideration been given to (1) the wage rates prevailing on similar heavy and highway construction work in the area, instead of using as a basis the wage rates determined and paid for prior work of a specialized and hazardous nature at the dam; (2) the wage rates paid during the representative peak payroll periods on similar work in the area, instead of using the rates paid only during the last few weeks of just prior work on the dam; and (3) the wage practices of other contractors in the area, instead of using the higher rates negotiated by an outside contractor for a small part of his work on the dam. By letter dated January 11, 1966, the Assistant Secretary for Administration, Department of Labor, informed us that the Depart- ment had no specific comments on our findings except to say that all the information available to the Department at the time of issuance of the determinations was considered and it is believed that the rates predetermined were proper for the type of construction involved. The Assistant Secretary also stressed that this opinion was consurred in by the Wage Appeals Board in its decision of March 1, 1965. In a second letter, dated March 8, 1966, the Assistant Secretary for Administration commented on why the Department did not consider highway and road projects in its determination of prevailing wages for Carters Dam construction. His pertinent comments and our evaluation are included in the body of the report. This report is for the information of the Congress because we be- lieve the Department's wage determinations are not in accordance PAGENO="0277" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 269 with the intent of the Davis-Bacon Act which is that its administra- tion should not be used to exert either an inflationary or a deflationary effect. We believe that it was not intended that the Government be put in the position of fixing or of anticipating wage levels or that wage determinations be used to establish high wage rates for Govern- ment-financed projects in areas where lower rates actually prevail, but that the wage determination requirement was intended to protect comparable wage levels in the area prevailing before beginning of the construction contract. [Index No. 83-B-153129, Dec. 27, 1966] REVIEW OF POLICIES AND PROCEDURES USED IN DETERMINING THE ADMINISTRATIVE OFFICE SPACE To BE PROVIDED IN MAJOR POSTAL FACILITIES, POST OFFICE DEPARTMENT Our review indicated a potential for substantial savings to the Government through (1) planning the office space in new postal facilities on the basis of standards comparable to those established by the General Services Administration for use in determining the office space needs of other Federal agencies and (2) subleasing office space in leased postal facilities, which is in excess of current require- ments. The Department's space standards provide for administrative offices which, in the 10 facilities that we reviewed, averaged about 32 percent larger than would have been provided under General Services Adminis- tration standards. We believe that, in most cases, the administrative operations of postal facilities could be carried out without loss of efficiency in offices of the sizes authorized under the General Services Administration's standards which were developed, with the coopera- tion and concurrence of more than 60 Federal agencies, on the basis of studies made to determine the amounts and types of space required for efficient operations. We estimated that, if the 10 major leased facilities covered by our review had been planned on the basis of the General Services Admin- istration standards for administrative office space, the savings in rentals might have amounted to as much as $88,000 annually, or $2,580,000 over the lives of the leases. As the Department currently has about 90 major facility projects under development and has a continuing program for constructing new facilities to meet its expand- ing needs, we believe it reasonable to conclude that substantial savings to the Government wouJd result if the office space for new postal facilities were planned on the basis of standards comparable to those established by the General Services Administration. The Post Office Department has sole responsibility for planning facilities to be acquired under the lease-construction program, but a question exists as to the agency responsible for establishing standards for the administrative office space to be occupied by the Department in federally owned buildings. The Post Office Department and the General Services Administration are in disagreement as to which of the two agencies has this responsibility. Although the General Services Administration generally has not required compliance with its space standards with respect to Post Office Department office PAGENO="0278" 270 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 space in federally owned buildings, it has disagreed in the past with the Department's requests for office space in several such buildings. Some of these disagreements had not been resolved at the time of our review. In commenting on our findings, the Postmaster General advised us that the Department proposed to adopt new administrative office space standards more in line with current needs and the General Services Administration's allowances. While the adoption by the Department of new standards for admin- istrative office space should result in improvement of the conditions found in our review, we believe it to be desirable to have a consistent Government-wide policy with respect to administrative office space, and we found in our review no sound reasons for exempting the Post Office Department from the general policy of having the General Services Administration responsible for establishing or approving office space standards for Government agencies. We also believe it to be desirable to remove the uncertainty which now exists as to which agency has the responsibility for determining the amounts of office space to be provided to the Department in federally owned buildings. We are recommending that the Congress give consideration to enacting legislation which would make the General Services Adminis- tration responsible for either establishing or approving the standards to be used in planning space for the Post Office Department's adminis- trative activities in both leased facilities and federally owmed buildings. The Department usually plans the administrative office space for major lease-construction projects on the basis of estimates of the re- quirements 20 years in the future, with the result that most new facilities contain substantial amounts of unneeded office space during the first few years after the facilities are constructed. We believe that, with adequate advance planning, much of the excess office space in new leased facilities could be consolidated in one area so as to facili- tate subleasing until the space is needed, which would result in savings to the Government. In view of the Post Office Department's con- tinuing program for constructing new facilities to meet its expanding needs, we believe that the savings resulting from subleasing could he substantial. We estimated that, for 8 of the 10 leased postal facilities involved in our review, the Government could realize annual savings in rental costs of about $147,500 by subleasing the planned excess office space to other Government agencies which lease office space from private lessors. A portion of these savings would be offset by moving and partitioning costs that would not otherwise be incurred. In cases where excess office space could not he subleased to other Government agencies, the Department could sublease to non-Government users. The Department concurred with our proposal that office space in postal facilities be subleased to the maximum extent practicable and stated that it would establish appropriate procedures to implement this policy. PAGENO="0279" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 271 [Index No. 84-B-125053, Dec. 29, 1966] NEED TO RESOLVE DIFFERENCES IN PROCEDURES USED BY FEDERAL TIMBER MANAGEMENT AGENCIES IN APPRAISING TIMBER OFFERED FOR SALE, FOREST SERVICE, DEPARTMENT OF AGRICULTURE; BU- REAU OF INDIAN AFFAIRS, BUREAU OF LAND MANAGEMENT, DE- PARTMENT OF THE INTERIOR There are three principal timber-selling agencies in the Federal Government: the Forest Service, Department of Agriculture, and the Bureau of Land Management and Indian Affairs, Department of the Interior. Each of these agencies uses the analytical appraisal method to calculate appraised values representing the minimum acceptable selling prices of timber. Under the analytical appraisal method, the value of a given amount of standing timber is considered to be the residual value after deducting the estimated processing costs and an allowance for profit and risk from the estimated selling value of the timber end products. The procedures used by the three agencies to appraise timber in the States of Oregon and Washington have differed in significant respects in regard to (1) determining the estimated selling values of wood products and by-products, (2) estimating the cost of producing wood products, and (3) establishing the allowance for profit and risk. Therefore, because of their varying procedures regarding these factors, the three agencies could compute significantly different appraised values for like stands of timber. We believe that it is important, when different agencies are selling timber, for the responsible management officials to coordinate their activities to help ensure that the policies and procedures for the ap- praisal and sale of this timber are uniform and equitable to both the Government and timber purchasers. We found that certain of the valuation procedures followed by the agencies did not recognize the full value of timber end products. We estimate that, if, in each such instance, the more appropriate pro- cedures of one agency had been used by the other agencies, the ap- praised value of timber offered for sale in fiscal year 1963 and part of fiscal year 1964 could have been increased by more than $3.1 million. The inaccuracies causing the underappraisal resulted from (1) not considering the value of sawlog chips, a wood by-product, (2) using inappropriate lumber pricing data, and (3) using outdated veneer prices in establishing selling values for peeler logs (logs suitable for the production of veneer sheets). Competitive bids accepted from purchasers for part of this timber were sufficiently above the appraised amounts to offset about $1.5 million of the $3.1 million understatement of appraised values. If the remaining timber had been offered for sale and sold at appraised values adjusted by the underappraisals disclosed by our review, the Government would have obtained nearly $1.6 million in additional revenue. For other differences in procedures identified in our review that con- tributed to the calculation of different appraised values for like stands of timber, we were unable to determine which agency's procedures were the more appropriate. Consequently, we were unable to esti- mate what the effect on the appraised values of each agency would PAGENO="0280" 272 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 have been if the agencies, in each such instance, had utilized the most appropriate of the different appraisal procedures. As discussed in this report, the Federal timber management agencies have taken action to eliminate some of the differences in their appraisal procedures. However, officials of the Department of Agriculture a.nd the Department of the Interior have not resolved other differences although there was a statement of congressional intent in 1956 that the Federal timber-selling agencies should have uniform policies, methods, and procedures and although, in 1959, the Bureau of the Budget requested both Departments to achieve consistency in these areas. Interagency committees that were assigned responsibility in 1961 for developing uniformity in the agencies' timber appraisal procedures have not submitted their recommendations on this subject to either Department~ However, a joint study of appraisal procedures re- cently conducted by the Department of the Interior and the Depart- ment of Agriculture for the Bureau of the Budget should provide information on the differences and relationships between the agencies' appraisal procedures, that could be useful for instituting appropriate uniform appraisal procedures. In commenting on these matters, both the Department of the In- terior and the Forest Service, Department of Agriculture, agreed that it would be desirable to attain a higher degree of uniformity in the appraisal procedures used by the Federal timber-selling agencies. They did not accept our estimates of the underappraisals and revenue losses. An official of the Bureau of the Budget informed us in December 1966 that the aforementioned joint study was still under review. This official advised us that the Bureau of the Budget was deferring specific comment on the matters discussed in our report, pending completion of this review. In connection with this consideration of the joint study, we are recommending that the Director, Bureau of the Budget, take the necessary action to ensure that the agencies jointly develop and apply the most desirable set of appraisal pro- cedures that will resolve the existing differences, discussed in this report as well as any other differences disclosed by the study. [Index No. 85-B-160410, Jan. 10, 1967] SAVINGS AVAILABLE BY PURCHASING RATHER THAN LEASING Cor~i- MERCIAL Two-WAY RADIO EQUIPMENT, DEPARTMENT OF DEFENSE The General Accounting Office has made a review of the costs incurred by the military services for leasing commercial two-way radio equipment. As of June 30, 1965, the military services were leasing commercial two-way radio equipment from three manufacturers at an a.nnual cost of about $9.5 million. This type of equipment has a generally accepted useful life of 5 to 7 years and has not been subject to frequent technological obsolescence. On the basis of our review, we estimate that, by purchasing rather than leasing the equipment, the Depart- ment of Defense could save about $2.5 miffion a year, or about PAGENO="0281" BACKGRoUND: ECONOMY IN GOVERNMENT-196'7 273 $12 miffion over a 5-year period, the minimum estimated useful life of the equipment. Department of Defense policy on rental of equipment, as set forth in the Armed Services Procurement Regulation, provides that the decision to lease rather than purchase be made on a case-by-case basis and that leasing be used only when it is more economical. We found that such decisions have not always been made in accordance with this policy. Our review disclosed that, while all the military services use the same type of commercial two-way radio equipment and acquire it from the same manufacturers, the Department of the Air Force leases such equipment almost exclusively but the Departments of the Army and Navy purchase the greater part of their equipment. Of the total annual leasing costs of about $9.5 million being incurred by the Department of Defense, about $8.6 mifiion was for Air Force equipment and about $0.9 million was for Army and Navy equip- ment. Information we obtained on equipment purchased by the services subsequent to 1960 showed that Air Force purchases amounted to about $0.3 mifiion worth of this type of equipment compared with Army and Navy purchases which amounted to about $3.7 mifiion. Since the equipment has similar application in the three military services it appears to lend itself to procurement by a single procure- ment office. Vesting responsibility for purchasing the equipment in a single procurement office would permit consolidation of requirements, with a view to obtaining more favorable prices on volume purchasing, and would promote effective cross-service utilization of the equipment. Accordingly, we proposed to the Secretary of Defense that the Department (1) give consideration to the need for issuing instructions to the military services to ensure that their determinations to lease or purchase commercial two-way radio equipment, including equip- ment in use, were justified on the basis of the criteria enumerated in the Armed Services Procurement Regulation, (2) designate a single procurement office to consolidate requirements for two-way radio equipment, since it is common to all services, and (3) give considera- tion to purchasing the equipment on an incremental basis when funds to finance the purchase of all equipment needed to fill the total require- ments are unavailable. The Department of Defense advised us on November 1, 1966, that it concurred in our conclusion that significant savings could be realized by the outright purchase of commercial two-way radio equip- ment. The Department advised us further that action was being taken to implement the proposals. [Index No. 86-B-39995, Jan. 16, 1967] NEED FOR IMPROVING ADMINISTRATION OF THE COST OR PRICING DATA REQUIREMENTS OF PUBLIC LAW 87-653 IN THE AWARD OF PRIME CONTRACTS AND SUBCONTRACTS, DEPARTMENT OF DEFENSE During fiscal years 1957 through 1966, we submitted to the Con- gress 177 reports disclosing that Government costs on negotiated prime contracts and subcontracts were increased by about $130 million. The increased costs resulted primarily from the failure of contracting officials in negotiating contract prices to obtain accurate, current, or PAGENO="0282" 274 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 complete cost or pricing data upon which to establish fair and reason- able prices. As a result of certain of these reports, the Congress enacted Public Law 87-653 to provide safeguards for the Government generally where competition is lacking. We examined into the extent that agency procurement officials were requiring prime contractors and subcontractors to submit cost or pricing data and a certificate prior to the award of negotiated con- tracts as required by Public Law 87-653 effective December 1, 1962. Our examination covered 242 negotiated prime contracts and sub- contracts awarded to 85 prime contractors and 89 subcontractors after October 1964. This examination was performed at 18 military pro- curement agencies and 31 prime contractor plants during the period April 1965 to June 1966. We found that 185 of the 242 procurements were awarded under requirements of the law and the procurement regulations for submis- sion of cost or pricing data and a certificate that the data submitted were accurate, complete, and current. However, in 165 of these awards, we found that agency officials and prime contractors had no record identifying the cost or pricing data submitted and certified by offerors in support of significant cost estimates. As a result it appears that the certificate is not wholly effective since it may be impracticable to establish whether the offeror had submitted inaccurate, incomplete, or noncurrent data in instances where he had not identified the data he had certified. Further, the Government's rights under the defective-pricing-data clause required by the law to be included in these contracts may be impaired since in such cases it may be impracticable for the contracting officer to estab- lish that erroneous data were relied on the negotiation if data were not submitted or made a matter of record by the offeror. We also found that, in the remaining 57 of the 242 procurements examined, agency and contractor records of the negotiation indicated that cost or pricing data were not obtained apparently because the prices were based on adequate price competition or on established catalog or market prices of commercial items sold in substantial quantities to the general public. Public Law 87-653 waives the requirement for obtaining certified cost or pricing data under such circumstances. However, the records of these awards did not contain an explanation by the contracting officials of why cost or pricing data were not required and the reasons for determining that the prices were based on adequate price competi- tion or on catalog or market prices of commercial items. As a result, it could not be ascertained whether the bases for these determinations were consistent with criteria established in the Armed Services Procurement Regulation. We found that prime contractors also had no record identifying the cost or pricing data submitted by subcontractors in support of signifi- cant cost estimates even though agency contracting officials were required, under negotiated prime contracts other than firm fixed-price type, to ascertain that such data were being obtained. Therefore, there also appears to he a need for thorough reviews by agency administrative contracting officials to ensure that prime contractors are obtaining adequate cost and pricing data, where appropriate, in the award of subcontracts. PAGENO="0283" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 275 We found that agency officials in awarding prirn.e contracts were not requiring prime contractors to use a new Contract Pricing Pro- posal Form (DD Form 633) dated December 1, 1964. This form contains instructions to offerors which, if properly implemented, could, in our opinion, go a long way toward achieving compliance with the procurement regulations implementing the law. The Department of Defense has now taken steps to correct this matter. However, during our review of subcontracts, we found that prime contractors were not being required to use the new form in obtaining proposals from their subcontractors. We proposed that the Department of Defense clarify its procure- ment regulations to provide that, where cost or pricing data are required in the award of prime contracts and subcontracts, agency officials and prime contractors be required to obtain from offerors written identification of the cost or pricing data, as defined in the iegulations, in support of cost estimates along with certificates specifically covering the identified data and to retain such records in procurement files. We proposed also that the prescribed certificate be revised to require the contractor to certify that a written identification of the cost or pricing data, as defined in the regulation, provided or otherwise made available to the contracting officer or his representative in support of the proposal, has been submitted and that such data are accurate, complete, and current as of the date agreed upon by the. parties (which shall be as close to the date of agreement on the nego- tiated price as is practicable). Further, we proposed that the Department of Defense take appro- piiate actions to emphasize and clarify certain existing requirements dealing primarily with the application of Public Law 87-653 to the award of subcontracts and to ensure that agency and contractor officials are complying with them. The Deputy Assistant Secretary of Defense (Procurement) advised us that a special group had been appointed under the guidance of his office to study all the material contained in our report. He assured us that the necessity of providing additional guidance on the subject of submittal and retention of data or identification in lieu of submittal will he considered. ~Index No. 87-B-146778, Jan. 18, 19671 REVIEW OF PROCUREMENT OF FOREIGN PRODUCED AIRCRAFT EJECTION-SEAT SYSTEM, DEPARTMENT OF DEFENSE Our review of the procurement or the ejection-seat system for in- stallation in F-4C type of aircraft shows, in our opinion, that the selection of a domestically produced seat system instead of the foreign-produced seat system could have resulted in potential savings of about $4.4 million in procurement, maintenance, and supply sup- port costs for fiscal years 1964 through 1969. Our estimate of potential savings was based on the selection of the domestically pro- duced seat system installed in the Department of the Air Force F-105 type of aircraft. (This review was made in response to a request dated September 16, 1963, from the Chairman, Committee PAGENO="0284" 276 BACKGROUND: ECONOMY IN GOVERNMENT-i 9 67 on Appropriations, House of Representatives, to perform cost studies of the F-4 type of aircraft.) One of the factors considered in the selection of the foreign-pro- duced seat system to be installed in the Department or the Navy version of the F-4 aircraft was the assumption that savings were obtainable through the use of identical seat systems in both versions of the F-4 aircraft. At the time procurement of F-4C type of aircraft for the Air Force began, however, a less costly comparable seat was in use in Air Force fighter aircraft, and we believe that this seat system could have been used with minor modifications in the F-4C aircraft. The Navy's ejection-seat system was produced by a foreign man- ufacturer who claimed proprietary rights for this item. Conse- quently, in addition to the cost differential mentioned above, the use of this seat system in Air Force F-4C type of aircraft involved a number of factors which, in our opinion weighed against its procure- ment. Among these factors were (1) the effect that a lack of a domestic source of supply would have on mobilization capability in time of national emergency, (2) the inherent disadvantage to the procuring party in attempting to negotiate favorable terms with a sole-source producer, compounded by the location of that producer in a foreign country, and (3) the additional tax revenues and employ- ment opportunities which the use of an ejection-seat system manu- factured in the United States would generate. The Deputy Assistant Secretary of Defense (Materiel Require- ments) advised us that the Department did not agree that savings could have been realized through selection of the domestically pro- duced ejection-seat system installed in Air Force F-105 type of air- craft, or that the F-105 aircraft seat system could have been modified in time to be installed in the first F-4C type of aircraft. In addition, we were advised that the foreign-produced seat system was selected because it possessed safety features which made it superior to the domestically produced F-l05 seat. We have carefu]ly considered the position of the Department of Defense in light of the information of record and are of the opinion that the circumstances surrounding the continued procurement of a foreign produced seat system would be of interest to the Congress. Although the Department of Defense has established a Cost and Economic Information System for use by management in (1) perform- ing feasibility and predesign studies, (2) making choices among com- peting development or production alternates, and (3) negotiating systems and development contracts, we do not believe that the im- plementation of this system will provide the Department of Defense with the type of information uecessary to fully evaluate the type of problem highlighted in our report. In this connection we were ad- vised that the Cost and Economic Information System was not de- signed to identify individual items of equipment, such as ejection seats, already in the supply system that offer significant cost reduction and/or increased efficiency through alternate sources of supply but was designed only for analyses of total new weapon systems and new major components such as aircraft engines. We recommended, therefore, that the Secretary of Defense either through expansion of the Cost and Economic Information System or through a subordinate system provide for appropriate analysis of PAGENO="0285" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 277 individual items or equipment such as ejection seats, radar systems, and communications equipment that are not included in the present system. In this regard, the system should provide for (1) the identi- fication of alternate items of equipment and related costs for consider- ation by appropriate levels of management and (2) the continuous review and survefflance or procurements, particularly those made on a sole-source basis, in an effort to establish when cost savings may be realized on alternate sources of supply. [Index No. 88-B-158469, Jan. 23, 1967] REvIEw OF METHODS USED To PROVIDE TELEPHONE SERVICE TO MILITARY FAMILY HOUSING OCCUPANTS, DEPARTMENT OF DEFENSE The General Accounting Office has made a review of the methods used to provide telephone service to military family housing occupants with a view to determining the reasons why different policies and procedures exist within the three military departments. We also examined into the economy of the methods of providing telephone service. Congressional policy, as expressed in the United States Code (10 U.S.C. 2481), has not permitted the military departments to sell certain utility services unless it has been determined that the needed services were not available from another local source. Notwith- standing this policy, we found that the Departments of the Army, Navy and Air Force sold telephone service to a substantial number of the military family housing occupants although commercial service was available. We believe that this situation results in large part because the military departments differ in their interpretation of the law and because the Department of Defense has not provided definitive guidance to the military departments to ensure uniform interpretation and compliance with the law. In a letter dated July 20, 1966, commenting on our findings, the Deputy Assistant Secretary of Defense (Logistics Services) stated that the Army, Navy, and Air Force had not been in accord in their inter- pretation of the law and that Government-operated telephone systems would be utilized only where commercial service was otherwise unavail- able and when it was determined that it was "in the interest of national defense or in the public interest" to provide such service. He stated also that our proposal regarding the uniform application of the statute by all the military departments was accepted by the Department of Defense and would be implemented. Under the procedures that the Department of Defense plans to follow, there is a potential for savings through the elimination of telephone lines, leased at Government expense, presently required where telephone service to housing occupants is provided through tele- phone company switchboards rather than directly through military installation switchboards. The Deputy Assistant Secretary of De- fense stated that the Department of Defense, in order to secure the maximum economic advantage within the existing framework of the law, intends to examine in detail the possibility of allowing commercial companies to connect their systems serving base housing to the Government-controlled administrative systems. We agree that this PAGENO="0286" 278 BACKGROUND:* ECONOMY IN GOVERNMENT-i 967 proposal has merit and should be studied further for the purpose of attaining economies. ~Index No. 89-B-133188, Jan. 25, 1967] REVIEW OF GEODETIC SURVEYING ACTIVITIES WITHIN THE FEDERAL GOVERNMENT, BUREAU OF THE BUDGET, DEPARTMENT OF THE INTERIOR, AND DEPARTMENT OF COMMERCE The General Accounting Office has made a review of the geodetic surveying activities of selected agencies of the Federal Government. Our findings and recommendation with regard to the economies available through improved coordination of these activities are summarized in this letter and described in more detail in the accom- panying report. Geodetic surveys are basically land surveys made for the purpose of determining the precise position of specific points on the earth's surface in terms of latitude, longitude, and elevation. Once the positions are identified and monuments are established to mark the positions, the area is considered to be under geodetic control. This report is concerned primarily with horizontal control which identifies positions of known latitude and longitude. The Environmental Science Services Administration, Department of Commerce, has the responsibility for establishing a nationwide network of geodetic control points, and the Bureau of the Budget has the responsibility for coordinating geodetic surveying activities in the Federal Government. Other Federal agencies-including the Geological Survey, Depart- ment of the Interior, in its national mapping program and the Bureau of Public Roads, Department of Commerce, in its highway progTams- also establish geodetic control points. These geodetic control points generally are established, however, only to standards required for individual program needs and, for the most part, do not meet the standards of accuracy required to extend the national network. Con- sequently, the Environmental Science Services Administration plans to resurvey most of the same areas to establish geodetic control ~oint~ that will meet the standards of the national network. * We believe that, if the initial surveys could be made to national network standards, substantial savings in effort and cost would result, because it would not be necessary for the Environmental Science Services Administration to resurvey the same areas. On the basis of data available during our review, we estimated that past or planned expenditures for geodetic surveys which would not contribute to the national network of geodetic control by the Bureau of Public Roads under its highway programs would total about $30 million and by the Geological Survey under the topographic map program would total about $15 mifiion. The Bureau of the Budget, in June 1966, agreed that it should con- tinue to press for improved coordination and efficiency in the conduct of the Government's geodetic control activities but doubted that it was either desirable or possible to ensure that all geodetic control work would extend the national network. Subsequently, in Sop- temper 1966, the Bureau of the Budget advised us that the Geological Survey and the Environmental Science Services Administration had entered into an agreement whereby horizontal geodetic control to PAGENO="0287" BACKGROUND: ECONOMY IN GOVERNMENT-1967 279 national network standards would be achieved as a part of the Geo- logical Survey's topographic map program. The agreement provides that, where other requirements are equal, preference in the authorization of mapping will be given to an area which has been basically controlled over an area which does not contain basic control. The Geological Survey will continue to advise the Environmental Science Services Administration of its mapping plans so that it may accomplish as much of the basic control as possible. In situations where a portion of a large uncontrolled area must be mapped, however, the Geological Survey will establish horizontal control to national network standards, with proper connections to existing control points. We believe that this agreement is an important step in the right direction. In our opinion, however, a more economical arrangement may be possible by requiring Geological Survey to perform all the basic control required for those areas which are presently uncontrolled and which it plans to map under its current mapping program. Such an arrangement would result in only one field operation by the Geo- logical Survey, whereas, if the Environmental Science Services Ad- ministration performs the control prior to the time the Geological Survey does its mapping, two field operations would be required- one by the Environmental Science Services Administration to establish the control and one by the Geological Survey to identify and utilize the control for mapping purposes. The various agencies, in commenting on this matter, did not indi- cate that any specific action would be taken to improve the coordina- tion of the geodetic surveying activities of the Bureau of Public Roads *and other Federal agencies with those of the Environmental Science Services Administration. In our opinion, geodetic control surveys should be performed to national network standards whenever such surveys are performed in an area where they will fit into the overall nationwide geodetic control plan and whenever such control would eliminate the need for the Environmental Science Services Adminis- tration to resurvey the same area. Accordingly, we are recommending that the Director, Bureau of the Budget, determine whether the geodetic surveying activities con- ducted by Federal agencies and under programs administered by Federal agencies are or such a nature and scope that it would be economically feasible to have such surveys, when undertaken in un- controlled areas, performed to standards which would extend the na- tional network of geodetic control. This recommendation contem- plates that the Environmental Science Services Administration will continue to provide for the direction and coordination necessary for establishment of a national network of geodetic control and that con~ideration will be given to having it fund the additional costs incurred by other Federal agencies to bring their surveys up to the national network standards. [Index No. 90-B-157421, Jan. 31, 1967] PROCUREMENT OF Loco~IoTIvEs FOR THAILAND UNDER THE MILITARY ASSISTANCE PROGRAM, DEPARTMENT OF DEFENSE The General Accounting Office has examined into the Department of the Army's procurement of locomotives for Thailand under the PAGENO="0288" 280 BACKGROUND: ECONOMY IN GOVEKNMENT-l 967 military assistance program. Our ffndings are summarized in this letter add described in more detail in the accompanying report. We found that the Department of the Army had incurred costs of about $1 million to buy for and deliver to Thailand, locomotives which were unable to meet Thailand's specific requirements for main- line use, the purpose for which furnished. We found also that De- partment of the Army officials had not obtained clarification of con- tradictory technical requirements but, instead, had prepared a pur- chase description and initiated procurement of the locomotives before ascertaining whether the locomotives would be able to perform the function for which they were intended. Therefore the locomotives procured, which are adequate only for switching and yard work, are being replaced with main-line locomotives costing about $2,305,000. The replacement locomotives were expected to be delivered to Thai- land in December 1966. In otu' opinion, locomotives which were unsuitable for the specific needs of the user would not have been procured if Department of the Army officials had obtained clarification of the contradictory technical requirements. We believe that such clarifications would have been facilitated by management procedures requiring the user's review and approval of a purchase description for complex nonstand- ard items prior to the award of a contract. In view of significant unnecessary costs that could be incurred in similar cases throughout the Defense establishment, we proposed that the Secretary of Defense require the military departments to establish procedures requiring that purchase descriptions for complex equipment be submitted to interested review and user activities for comment and approval prior to procurement. We proposed also that the Secretary of Defense direct the Department of the Army to consider using the locomotives DOW in Thailand, which are adequate only for switching and yard work, for satisfying potential requirements or, in the absence of such valid requirements, to consider selling the locomotives to Thailand. The Department of the Army, on behalf of the Department of Defense, advised us that then-current policies and procedures within the Defense establishment were responsive to our proposals, and that applicable Army Regulations direct that supplying agencies correspond directly with military assistance advisory groups and unified com- mands when clarification is essential for ensuring that the equipment to be procured will meet the user's requirements. As discussed in this report, however, even though direct contact had been established between the requisitioning and procuring activities, locomotives were procured that were not suitable for performing the passenger and freight-hauling functions required. Accordingly, we are recommending that the Secretary of Defense require the military departments to establish procedures providing for user activity review and approval of a purchase description for complex nonstandard equipment when there is doubt as to the exact nature of the intended equipment. This review should be made prior to the award of a contract for the equipment and should be documented in the contract file covering such procurement. The Department of the Army also advised us that it was exploring potential outlets for the locomotives which were unsuitable for the purposes for which provided. We intend to inquire further into the PAGENO="0289" BACKGROUND: ECONOMY IN GOVERNMEWE-l 967 281 disposition of or uses made of the switching locomotives by United States activities. [Index No. 91-B-39995, Feb. 15, 1967] SURVEY OF REVIEWS BY THE DEFENSE CONTRACT AUDIT AGENCY OF CONTRACTORS' PRICE PROPOSALS SUBJECT TO PUBLIC LAW 87-653 Since July 1965, contract audit work in the Department of Defense has been performed by the Defense Contract Audit Agency, a new agency formed at the direction of the Secretary of Defense by consoli-. dating various contract audit staffs formerly assigned to the three military departments. We made a survey of the Agency's reviews of contract pricing pro- posals negotiated without the safeguards of competition. These reviews, which are made prior to negotiation with the contractor, constitute a substantial portion of the Agency's workload and are accorded the highest priority. Our survey included work at Agency audit sites at 20 plants of private companies generally among the top 100 defense contractors in the United States. The Agency is making significant progress. But our survey showed that, in order to operate more effectively with its workload of many thousands of contract pricing proposals totaling over $40 billion annually, improvements are needed in four areas, as summarized below. 1. Prices of most defense procurement contracts are based largely on estimated costs in proposals submitted by contractors as a basis for negotiation. Nationwide and individual reviews in recent years by military procurement and audit organiza- tions-as well as current surveys by the Defense Contract Audit Agency-have disclosed a need for major contractors to improve and incorporate into a formal system their estimating methods and procedures. This would provide greater management con- trol over the estimating processes used in preparing price pro- posals, and facilitate review and negotiation. We brought this problem to the attention of top Defense officials in a preliminary report and in a special briefing. In January 1967 the Department released a Defense Procurement Circular, effective im- mediately, designed to attain a number of improvements, including- Policy guidance to procurement officials and auditors. Criteria for acceptable cost estimating systems. Reasons why these systems benefit industry as well as Gov- ernment. Steps to be taken to correct present deficiencies. This action by the Department is important and commendable. We recommended some steps to help out the new directive. 2. In a number of instances defense auditors did not review significant cost estimates in price proposals. This was due in part to a carryover of practices followed by former audit organiza- tions when responsibilities for reviews of proposals were less than those currently specified in procurement regulations. The De- partment told us that actions are underway-or are planned-to 77-601-67-10 PAGENO="0290" 282 BACKGROUND: ECONOMY 1N GOVERNMENT-i 967: correct this situation. We recomniended that the Secretary of Defense review these corrective efforts within the' next year. 3. Defense auditors ordinarily were not receiving information from procurement officials on the usefulness of their audits in negotiations or on ways that their services could be more effective in future negotiations. The Department has acted on our proposal to provide this type of "feedback" to its auditors. 4. Defense auditors have experienced difficulties, when re- viewing proposed contract prices, in obtaining what they con- sidered to be sufficient access to contractors' records. The Department informed us that new guidelines had been issued to help resolve these access-to-records problems. If this action is supported by continuous assistance from procurement officials, at all levels, it should improve the situation. In a prior report to the Congress (E-158193, February 1966), we recommended that the Defense Department establish a regularly scheduled program to administer the defective pricing provisions required in certain types of negotiated contracts by Public Law 87-653----"The Truth in Negotiation Act." This law provides for price adjustments in favor of the Government when it is found that established prices have been increased significantly because of de- fective data used in negotiations. A program for these reviews was established by the Defense Contract Audit Agency during 1966. [Index No. 92-B-118654, Feb. 23, i967] POTENTIAL SAVINGS THROUGH CONSTRUCTING RATHER THAN LEASING HOUSING AT BREWERVILLE, LIBERIA, UNITED STATES INFORMATION AGENCY The General Accounting Office has examined into the economical aspects of the construction of housing rather than the planned and current leasing of housing by the United States Information Agency at Brewerville, Liberia. We believe that savings of upwards of $2 mii]ion would have been obtainable over the period of the 33-year country-to-country agree- ment if the United States Information Agency, at the appropriate time, had sought and obtained from the Congress the necessary funds and had constructed houses required at Brewerville, Liberia, rather than leasing from private owners. Although the total potential savings are diminishing each year, we believe that substantial savings are still possible by constructing housing. Moreover, the potential savings could be much higher if the Agency African Program Center in Brewerville, Liberia, is staffed to the level that the Agency has planned and if the number of houses constructed are increased to meet the full level of planned staffing. The Agency requested funds from the Congress in its fiscal. year 1964 budget to construct the African Program Center, but no m- formation was furnished to the Congress as to how the Agency planned to meet housing needs for employees required to operate this facthty. The Agency did not request funds for construction of housmg m either its fiscal year 1964 or fiscal year 1965 budget submissions, PAGENO="0291" BACKGROUND: ECONOMY IN GOVERNMENT~-~1 967 283 although the Agency was already well aware of the desirability of constructing its own housing rather than leasing. We were informed that the Agency subsequently attempted to request funds for housing construction in its fiscal year 1966 submission but that this request was deleted by the Agency from the budget submission to the Congress when the Bureau of the Budget required the Agency to reduce the total budgetary funds being requested. No request for funds for this purpose appeared in the fiscal year 1967 budget submission to the Congress. We submitted a draft report on this subj ect to the United States Information Agency. The Agency's response indicated general agreement with the facts presented in our report. [Index No. 93-B-133118, Feb. 23, 1967] POTENTIAL SAVINGS IN THE PROCUREMENT OF SPARE AIRCRAFT PARTS FOR OUTFITTING AIRCRAFT CARRIERS, DEPARTMENT OF THE NAVY The General Accounting Office has examined into the noncompeti- tive purchase of spare parts by the Department of the Navy for use on aircraft placed aboard aircraft carriers. The purchase of parts competitively or directly from parts manu- facturers whenever feasible is a stated policy of the Department of Defense. We found, however, that spare parts for the initial support of certain aircraft weapon systems were being purchased by the Navy from the airframe manufacturer on a sole-source basis although the majority of the parts were manufactured by other sources from which the Government could have obtained the parts at a significant reduc- tion in price. We were informed that the Navy purchased the parts from the airframe manufacturers because sufficient time was not available to permit purchase of the parts competitively or directly from parts manufacturers. With adequate advance planning, we believe that this problem can be overcome and that the Navy can realize the savings obtainable by purchasing from other sources. For example, we estimate that savings of as much as $2.3 million on the RA-5C and A-6A types of aircraft might have been realized if the procurement method we are advocating had been followed in the outfitting of certain aircraft carriers. We estimate also that future savings of about $1.5 million can be obtained on the A-7A type of aircraft by adoption of this procurement method before the carrier outfittings and that comparable savings can be realized on other aircraft to be purchased in the future. On the basis of the information obtained during our review, we believe that it is practicable to buy a substantial portion, if not all, of the parts for carrier outfittings from parts manufacturers on a com- petItive or direct basis instead of through the airframe manufacturer on a sole-source basis. This is exclusive of those parts manufactured in whole or significant part by the airframe manufacturer itself. Therefore, we proposed that the Secretary of the Navy take the necessary steps to increase the quantities of parts that will be pur- chased competitively or directly from parts manufacturers for carrier outfittmgs. In this connection, we proposed that the Navy identify PAGENO="0292" 284 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 and purchase those parts which have a procurement lead time short enough to permit competitive or direct procurement from the parts manufacturers in time to meet carrier outfittings schedules. For the remaining parts, those having a relatively long procurement lead time, we proposed that a study be made to determine whether, with adequate planning, it is also practicable for the Navy to assume procurement responsibility for some, if not all, of those parts. The Department of the Navy in a letter dated September 27, 1966, expressed agreement with our proposal and stated that it would take such steps as are necessary to increase purchase of aeronautical spare parts in support of carrier outfittings on a competitive basis or di- rectly from parts manufacturers. On December 28, 1966, the De- partment also advised us that it plans to purchase more than 46 percent of the total value of spare parts required for support of A-7A type of aircraft on a competitive or direct basis. ~Index No. 94-B-160419, Feb. 23, 1967] SAVINGS AVAILABLE THRouGH EXPANDED USE OF REGIONAL Cox- TRACTS FOR THE REPAIR AND MAINTENANCE OF SELECTED OFFICE MACHINES, GENERAL SERVICES ADMiNISTRATION The General Accounting Office has made a review of the General Services Administration program for obtaining repair and mainte- nance services for selected Government-owned office machines. The review showed that opportunities existed for savings on the repair and maintenance of office machines through the use of contracts with local repair firms instead of through the use of national Federal Supply Schedule contracts with machine manufacturers. Our findings are summarized in this letter and described in detail in the accompanying report. The General Services Admmistration makes available repair and maintenance services for office machines to Federal agencies through national contracts negotiated with the office machine manufacturers and published in Federal Supply Schedules and through regional contracts awarded on a competitive bid basis to local repair firms. The national and regional contracts generally provide several basic plans for servicing office machines, including repairs and services made on a per-call basis at an hourly charge, and maintenance inspec- tions and services, including any necessary replacement parts, at a fixed annual fee. Our review showed that the prices paid for repair and maintenance services for adding machines, calculators, comptometers, and electric typewriters under the national contracts were higher than the prices charged for the same types of services under regional contracts and under separate arrangements ma.de by Federal, State, and local gov- ernment activities, and commercial concerns with selected local repair firms. On the basis of our review, we beheve that the services furnished under regional contracts and under separate arrangements were satis- factory and that the price differences were not justified by service considerations. We estimate that Federal agencies could have saved up to $1.2 million during fiscal year 1965 for repair and maintenance PAGENO="0293" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 285 services of the selected office machines through the use of local repair firms instead of the Federal Supply Schedule contractors. Our review also showed that, although Government and independ- ent studies indicated that the per-call basis was the least expensive method for obtaining services, most of the Federal expenditures had been for the more costly maintenance inspections and services at a fixed annual fee. The General Services Administration had, in July 1965, encouraged Federal agencies to study and analyze their office machine servicing needs as part of a project to establish Government- wide guidelines for obtaining service for office machines. However, because of the lack of agency responses, the General Services Adminis- tration had taken no further action. In a letter dated August 15, 1966, the Deputy Administrator advised us that the General Services Administration was in accord with our proposals to (1) expand the use of regional contracts for servicing office machines and aggressively stimulate their use by Government agencies and (2) review the status of the project to establish criteria and guidelines to assist Government agencies in determining the best method to be used in obtaining services for office machines. The Deputy Administrator stated that, to give additional impetus to the regional contract program, it now appeared that a scheduled phaseout ~of the use of the national contracts in selected areas, especially where * sufficient contractor capability was known to exist, was warranted. He stated also that the agency expects to have regional contracts in ~effect in all regions by June 30, 1967. The Deputy Administrator advised us also that a revision to the Federal Property Management Regulations concerning the relative * advantages and disadvantages of the per-call and annual maintenance contracts would be published and that more definite criteria and guide- lines would be issued to Federal agencies at a future date. The first revision to the Federal Property Management Regulations was effec- tive on November 4, 1966. We believe that the proposed actions should result in a greatly expanded regional contract program with significant savings to the Government. We believe also that participation by the Department of Defense in the General Services Administration regional contract program, to the maximum extent possible, will result in the lowest overall prices to the Government. 77-601-67-----20 PAGENO="0294" Appendix 6 G.S.A. SELECTED STATIsTICs, JULY 1, 1956-JuNE 20, 1966 SOURCE OF DATA This publication contains selected financial and operating statistics~ covering GSA's operations and growth for the fiscal years 1957 through 1966. These statistics are presented for each GSA "service" by maj or program activity. Financial data and related operating statistics, where applicable,. are based on actual year da.ta contained in budget justifications submitted to the Bureau of the Budget. Data. not contained in budget submissions a.re based on other official published financial and operating reports. Data have been adjusted for the more significant changes to reflect comparability irrespective of the date of establishment of organiza- tional or funding entities (e.g., Transportation and Communications Service, Property Management a.nd Disposal Service, Data Processing Working Fund) and of the realinement of functions among the Services and Staff Offices. 286 PAGENO="0295" BACKGROTJND: ECONOMY IN GOVERNMEI~T-l 9 6~7 0000)000000 00 -0000000 CO 00 287 CO~-400C0 00 00)000000 00 00 CO ~ 0000 0000 00 E~00) 000000 000000 0)~0)~-O 00 CO 00)0000)00 000000 00 00 E~ 00 00000000 00 000000 00 00 0000 ~ 00 00000000)00 00 CO 0000 0- CC 00 00 0)1 CO 0)000 ~ E#)0~ 000000 ~ 00000000 0 ~8o-45~0-. 00) 00)00000000 00 0000 ~ 0000 00)~ 000)100 ci3~-~~-~ 00000)) 000000) 00 4ç-~-~ 0000 00 0)~ CC 0000000000 ~ 0000)00 00 0000000000 00 ~ C0000-00 00 ~ 000)1 22 00)0)~ 000000 ~ 0)1000- 0000 ~0000~00 0/) 0- 0000000000 I- 00 00000100 00 ~ OOCOCC 000 CO 00 CO 0000 00)0)0) 0000 0000 (1)1/) 000)000 000000 0-- 0-- 00 (1)01)00 00000000 00000000 CCCI 00 00 01) 00 00 Cl Cl 0000000000 000000CC 0'- 000000 00 0000000000 00 00 0000000000 00 Cl 0000000000 CI Cl 00 CI 00 ~ 0)00)0 ~ ~ 000000 ~00 00000000 ~ ~ 00 0000C000 ~ : Cl 0000000000 Cl ~ ~00C-CC00 ~ 0-'- CO 0000 CO 0-- 0000 (1)01) Cl 00 Cl 0000000 000000 000000000 00000)0CC 0000 C0) 01) 00 CI 0'- 00000000 00000000 00000000 00 1- C-. 000000 00 Cl 00000000CC Cl C'- 0'. 000000)1 0-. 0) C,) 0) t~Q -~ CO C~ 00)0 boo 2 :~ *~z WOO bC~ ~0)_' .~ P-~~ :~ 2~ 2 ~ C) 22 O~CC~C) ~iI~ 0)) 0) 8~ ~ ~ ~ 2 ~ bCo~2 b~D0) C'- 2 ~ 0)ooO,9 o o ço~ ~ ~2 :~ :~ ~ * E2 ~ ~ ~2~-2 L ~t~J E~ ~ JC~o~~OO ~w~O C) 0 CO 0 PAGENO="0296" Public Buildings Service-Continued Space management workload (million average net square feet): Government-owned space-financed by: Operating expenses, PBS. Other agencies and other GSA funds Total Leased spaee-flinanced by: Operating expenses, PBS. Other agencies and other GSA funds Total `l'otal all space Number of occupants of buildings Construction: GSA direct: Construction: Appropriation Obligations. - - Sites and expenses: Appropriation - Obligations.. Payments, purchase contracts: Appropriation Obligations. Additional court facilities: Appropriation. Obligations Transfer to GSA: Appropriation Obligations Construction services fund: Income by source: Operating expense, PBS Sites and expenses.~ Repair and improveusent Other GSA funds Other Government agencies Total w $87.5 54.2 141.; $29. 5 14. 3 43.8 tn 185.5 0 623, 473 ~ $133. 6 133.3 19.5 0 23.5 0 3.4 3.4 .4 69.6 64.4 80.1) 0 5.1 -.1 6.4 .3 5.5 1957 1958 1959 1960 1961 1962 1963 1064 1065 1966 $54.9 14. 6 $54. 9 19. 3 $55. 1 22. 9 $57. 7 26. 0 $62. 9 29. 9 $69.2 35. 5 $73. 5 40. 1 $78.6 46. 5 $83.5 50. 3 69.5 74. 2 78. 0 83.7 92.8 104. 7 113.6 125. 1 133.8 $20. 5 13. 5 $21. 4 14. 4 $22. 0 14. 5 $22. 1 14. 0 $22. 0 13. 9 $24. 0 13. 0 $26. 9 14. 0 $30. 6 12. 8 $30. 4 13. 2 34.0 35.8 36.5 36.1 35.9 37.0 4~9 43.4 43.6 103.5 461, 054 110.0 473, 110 114.5 472,492 119.8 480, 946 128.7 486, 841 141.7 532, 971 154.5 548, 606 168.5 575, 157 177.4 593, 161 $0.5 5. 5 5.0 13. 2 .2 65.4 59. 5 $3.9 4. 1 20. 0 7. 9 1.3 .1 43. 5 39. 6 $173.1 55. 0 39. 9 30. 3 .3 .1 133. 4 85.8 $95. 7 25.0 8.8 1.7 1.3 24. 3 46. 6 $166.0 127. 4 21. 0 18. 9 4.0 3.7 56. 3 62. 6 $215.4 79. 4 24. 9 14. 5 5.2 4.7 4.5 1.3 56. 1 49. 3 $182.4 243. 2 30. 5 36. 2 5.4 5.0 8.5 2.5 51.8 41. 2 $157.6 125. 6 40. 0 33.8 5.2 5.2 4.1 84. 5 69. 9 $164.7 157. 2 20. 1 23. 4 9.9 9.8 1.5 61. 6 44. 0 1.0 .2 .3 .1 1.1 .2 .5 .1 1.3 .2 .8 .1 $0.2 1.1 4.2 .1 2.3 $0.3 1.6 4.3 .1 2.9 $0.5 1.7 4.0 .1 3.3 $0.7 2.4 4.0 .2 4.3 $0.8 3.7 4.5 .2 5.2 $1.1 4.0 4.8 .1 5.9 1.6 1.0 2.4 7.9 9.2 9.6 11.6 14.4 15.9 18.2 PAGENO="0297" BACKGROUND: ECONOMY IN GOVERNME~T-1 967 289 ~ ~QOO c~o r~-~ t~-c~ ~t~- ~ ~ c~ C~©C~ ~ ~ e~oo~'~ c~_ c~c~c~ ~ OOC)~ ~ ~ ~ :~ I fi :~ Q ,~ PAGENO="0298" 290 BACKGRO~IND: ECONOMY IN GO VER»=~ MENT-1 967 ©~ ~- ~r-~ ~t-c~ c~ c~ c~ ~ N- c~ ~ C~ ~ - . ~- e-) tQ~ ~ ~t- C~~1 ~ ~ C~ ~t- o~-~c~ ~ -~ ~ ~t-~ ~ :::~: ~ ! ! c~ N- - -~ N- ~ ~ N- ~ ~cc c~ t~-c~-~ ~I z~- c~ - ~ ~ N- ~ ~ - - C~ N- ~ ~- ~ -. .-,- ~J~c) -~ ~ ~ ~ ~ H ~ ~ ~ ~ ~ :~ -~I~-~ ~ ~ :~ :~-~ -~-~ (_)~ -~-~,- ~~-` ~C) ~ 0 z PAGENO="0299" BACKGROUND: ECONOMY IN GOVERNME~r-1 967 291 ~2 C) - ~) C) C) C) C) C) C) C) C) ~ ~C)~ C) C) ~ C) C) C) ~) ~ ~- C) C) C) ~C)- C) C) ~Qc~ t~- C) C) C) ~ C) ~ C) C) C) C) ~ C) C) ~ C) C- C) C) C) C) C) C) C) C- ~ C) C) C) . C) C) C) C) C) C) C) C) C) C) C) C- C) C) C- C) C) C)C) CCC) C) C) C) C- C) C) C) C) CCC) C) CC C) C- C) `~ C) C) C) ~4 C) C) C) C- C) C) C- C) C) C) C) C) ~CC- CCC) CCC) C) C) C) C) C) C- C- C) C) C) C) C)~C)C)C) C) C) C) C)C) C) C) ~ C) C) C) C) ~C)C) C) C) C) C- C) C) C) C) C) C) CC C) C) C/i C) C) C) C) C) C) C)C)C) C) C) C) C) C) C)C) C) C) C) C) CC)C)~)~ C) C) C) C) C) C) C) C) C) CCC) C)C) C) C) C) C) C) C- C) C) C) C)C)C) C) C) ~ C) C- C)C- r ~ -ii F !! !~ !- ! -I;~- F CC C) ~ I ~ I ~U~CC I ~ ~CC O~ C) CC) CC Q~I C)CC CC ~ CC ,I~,CC ~ ~ *+)C)).~~~ ~ ~C) C ~ C)~~ C~ Q~CC "~ Q CC) /iQ *~-C) IC CC ~ ~O ~ ~ Z C ~ CC/i/i ~ ~ ~ - ~ ~ ~ ~ C ~ ~ -~ ~ CO~~bC j~ C-C~ CC ~ ~C ~ `CC) CC.~ CC.~.2 ~ ~_ ~ ~ ~ ~Ci O'~ /i ~o ~O ~ ~ E ° C o ~ z PAGENO="0300" Transportation and communications service 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 Regulatory proceedings: Transportation cases: Entered Concluded Pending, end of period Utility cases-GSA: Entered Concluded Pending, end of period Utility cases delegated Communications: Including SAGE cases: Entered Concluded Pending, end of period Estimated freight savings (In millions) Interagency motor pool system: Pools in operation Vehicles in use, Juno 30 Revenue mileage (in thousands) Nonrovenue mileage (in thousands) Sales (in thousands) Operating expense: Obligations (iii thousands) Appropriated fun(ls Transfers atid reimbursements Federal telecommunications fund sales 2 (in snillions)__ Cost of communications service (in thousands): Voice Record Other 21 22 6 S 2 $9.7 22 6, 535 40,293 $3,704 $1, 959 16 18 20 $12. 1 33 10,848 86, 962 $7, 429 $2, 515 22 8 6 $16.0 44 13, 196 129,612 $10, 972 $2,995 12 11 23 1( 2 $15.6 56 17,342 170, 056 $14, 444 $2, 977 9 14 18 11 15 $24. 1 60 20, 659 221, 768 $18, 733 $3, 305 16 15 $16.9 66 23, 726 248, 147 $20, 920 $4,046 10 9 17 2 19 $19. 1 75 26,833 292, 722 $24, 469 $4,800 8 11 14 5 3 21 $12.5 82 32,869 344, 704 $28, 213 $5,120 td C) I'l 0 L~I C) 8~ 0 3 2~ 18 0 $31 94 45, 612 473, 165 717 $39, 264 $5, 865 $5,712 ~ $153 C $81.6 $69. 7 $3.9 $3.8 5 9 10 2 1~ $31 91 38,941 411,049 $34, 340 $5,834 $1, 820 $130 $2, 305 $210 $2, 758 $237 $2, 755 $222 $3, 057 $248 $3, 807 $238 $4, 554 $246 $4, 915 $214 $5, 634 $200 $15.5 $13.5 $1.8 $17.1 $14.8 $2. 1 $19.3 $16. 6 $2.7 $21.1 $18. 1 $3. 0 $22.7 $19.8 $2. 8 $27.1 $23. 5 $3. 2 $33.6 $20. 4 $3. 7 $0.2 $41.5 $33. 3 $4. 5 $1.7 $63.5 $60. 7 $4. 1 $3.2 PAGENO="0301" Number of employees, end of period: Appropriation: Central office Field Total DPA, CCC, and CD warehousing, etc.: Central office Field Total Interagency motor pool: Central office Field Total Federal telecommunications fund: 2 Central office Field Total - Total, transportation and communications service: Central office Field Total 1 Established in fiscal year 1962. Activated ~uly 1, 1963. w 14 14 ~ 0 15 ci 849 864 L~i 74 0 1515 0 321 2,467 2 788 0 143 92 157 119 132 119 129 136 147 157 172 172 206 184 200 173 214 188 218 177 235 276 251 265 304 344 390 373 402 395 50 6 57 6 61 6 36 33 18 11 18 11 17 11 21 4 22 - 56 63 67 69 29 29 28 25 22 284 10 338 12 375 16 449 14 485 12 502 12 535 14 681 14 794 284 348 387 465 499 514 547 695 808 3 1, 100 1, 100 1, 162 1, 173 1, 189 1, 274 1, 366 12 1, 488 28 1, 469 31, 100 3 1, 100 1, 162 1,173 1, 189 1, 274 1, 366 1, 500 1, 497 193 1, 482 224 1, 563 205 1, 662 181 1, 791 179 1, 842 202 1, 959 235 2, 096 247 2, 346 278 2, 451 1,675 1,787 1,867 1,972 2,021 2,161 2,331 1Estimated. 2, 593 2,729 PAGENO="0302" Property management and disposal service-Stockpile management 1957 1058 1959 5960 1961 1062 1063 1964 1065 6, 041. 8 216. 6 679. 6 143. 5 6, 169. 0 291. 0 1, 140. 1 226. 5 6, 216. 2 604. 1 1, 368. 2 98. 5 6, 153. 5 754. 2 1, 448. 7 119. 1 6, 107. 2 950. 6 1, 482. 9 108. 8 6, 049. 6 1, 141. 1 1, 495. 8 09. 9 5, 806. 5 1, 276. 1 1, 499. 5 57. 4 5, 677. 3 1, 358. 2 1, 463. 6 15. 3 5, 394. 6 1, 306. 5 1, 307. 0 10. 1 27. 1 32. 5 9. 5 9. 5 9. 5 Inventories, end of period (acquisition cost): National stockpile Supplemental stockpile Defense production Commodity Credit Corporation Other Total Number of storage locations Commercial Government: Military agencies - Civilian agencies Disposals (sales value): SCM - DPA - Otl1er - GSA/CD depots: Warehouses in operation Storage locations, fallout shelter supply - Inventory, end of period 1 - w C) C) 0 1066 d 4, 913. 5 1,407.6 ~ 1,181.3 18.0 20.2 0 7,540.6 152 67 44 z 41 ~ 808.9 ,_~ 198.5 ~ 20.7 C) -4 7, 108.6 7, 860.0 8, 296. 5 8, 485.0 8, 659.0 8, 786. 4 8, 649. 5 8,514.4 8, 181. 1 223 216 217 215 213 208 165 158 152 136 65 22 129 65 22 130 62 25 125 58 32 123 58 32 42.2 27. 1 119 57 32 47. 7 29. 2 10.6 79 53 33 80. 5 30. 0 73 52 33 127. 1 40.0 67 47 38 343.3 80.2 9.0 21 24 23 22 22 21 21 40 18 34 17 24 16 14 85.0 06. 2 90. 5 - 09. 5 100.8 117. 5 208.9 216. 6 228.8 213.9 PAGENO="0303" 295 BACKGROuND: ECONOMY IN GOVERNMENT-i 967 C) C) C) ~ ~1 C) C) C) C C) C) ~ - C- C) C) C) C 0 0 PAGENO="0304" 296 BACKGROUND: ECONOMY IN GOVERNMENT-i 967 Ci c- cc c-i cc cc cc cc cc ccci Ci .-ccc ccci cc c~ - ~ c- cc ~ ~ c-~ ~ ~ ~ -~ Ci - Ci Ci ~ Ci Ci Ci Ci Ci t- cc cc ~c cc cc cc Ci Ci cc Ci ,-c ~ Ci Ci Ci Ci c-i ~ ~9 ~-i cc cc Ci cc - -~ Ci- ~ cc Ci t- C Ci Ci Ci Ci Ci ~C ccc Ci Ci Ci Ci ~ Ci ~ - ~ Ci ccc cci C1' ~ Ci Ci Ci ~ _ _ _ - Ci- cc Ci ~i Ci - cc Ci Ci Ci Ci ~ Ci Ci Ci - Ci Ci Ci Ci Ci - Ci ccc Ci Cit-i- Ci Ci Ci Ci Ci t- Ci ~i Ci t- ~ Ci cc- Ci Ci cc CiCi Ci ~ Ci Ci Ci ~ cc _ Ci- Ci- Ci- Ci Ci Ci ~ t-- Ci Ci Ci Ci Ci Ci Ci Ci Ci Ci Ci Ci Ci Ci Ci Ci cc Ci Ci Ci ~ Ci ~ Ci Ci cc Ci cc cc ccc Ci Ci Ci Ci cc Ci Ci c-cc cc cc Ci Ci Ci Ci Ci Ci CiCi Ci Ci Ci Ci Ci Ci~ iS ccc- cc- Ci Ci `c- Ci CiV- Ci ~ Ci cc-cc c-i Ci c-i - cc- cc Ci Ci CC CiCi ccci cc c-icc-c- cc cc -c-c cc c-i cc cc c-c -c cc- cc Ci - ~ - Ci Ci - Ci cc cc - cc C) Ci ccc- cc c-~ Ci t-- Ci ccc Ci i- ~i cc cc cc cc-cc cc- ~ - Ci -c-c c-c Ci Ci - - Ci cc cc~ C - cc cc c- cc Ci is 4 PAGENO="0305" BACKGROTJND: ECONOMY IN GOVERNME~r-l 967 0 o *;~0c .~ 00~ o~ :o ~ ,~ :~ ~ ~ 0 o ~ ~ I ~ 0 0 .~.- CO OC c0~ co ~ C-c CO CO ~ C-C~ ;~ 0c~~ ~ c~E~ ~ ._o .-~ r~ 0 00 0 o 00 *~00 000 C-c~~~c ~-c 0 p - CO t- ~- CC 297 0000 00 Cl co 0000 ~ 00010 00 0- 0000 0-i~ ~ 000 CO 00 00 Cl ~ 0100 ~00 0~ 00000 0100 00 ~c cot-Cico 0000~0~ 00 0cC E1~ E1~ OcO 00000000 0000 Oo-o ~0 00 cC 01 cc ~tt ~ 00000 0CC000000cC~ 00000 C 0001 00 ~ C0~ 00 00 cc ~00~000000 010 00 00000 cc ~-c c0 0- ~c t-o~ ~c CC 000 000-00 :00 00 00-00cC 0-~ .1/0010 0-00 00000 0000 000,-I 00- 00-00 0-- 00 00- ~ 00- ~ ~ii ~ ~ 000 000000 000O~ 000/0010 00 Cl ~00 0000 00' 0/0 000-- 00 0000 Cl 00 00 00 0cC CCC oO CC 0 CC CC CCC 0/) CC 01 CI) CO 0 PAGENO="0306" Analysis of staff employment 1957 1958 1959 1960 1061 1062 1963 1964 34 39 1) 48 7 1,024 6 1,010 9 1,003 12 918 14 892 13 935 16 045 8 910 8 929 1065 1066 0111cc of Administration: Stall direction Program atl(l policy planning Procurement regulations Presidential conmlissioli liaison Financial services~ Supervision - Budget Credit and linance Accounting.. Manpower and tiansgeiiieiit Supervision ._ - ---. Managenietit eviliiation Administrative services Personnel -. Investigative ser~icea_ Audit Compliance aiid security - Other (uoiirecurrhig) Accounting automation project GSA Institiite.(iuterageiicy) Systems and procedures (regions) Office of General Counsel Staff employment by fund: Administrative operations fund 1)ata processing working fniid Working capital fund (duplicating plant) Salaries and expenses, Ollice of Administrator_ Total employment: Presidential commissions, small agencies Total GSA: Regular programs Youth opportunity campaign Relation, administrative support to total: Direct administrative support Total program employment - Ratio 31 01) 43 851 33 09 48 839 34 101 47 821 31 102 49 736 31 08 51 712 44 101 53 737 33 104 40 750 43 100 41) 748 42 09 51 737 431 449 454 418 445 420 400 473 400 17 18 201 107 25 32 203 193 22 32 203 197 16 2(1 186 196 17 24 188 216 20 20 160 220 34 29 180 247 13 26 181) 245 17 28 206 248 153 164 161 158 162 163 152 154 157 93 1) 97 67 03 (38 91 67 02 70 93 7(1 83 (39 83 71 86 71 28 28 32 43 45 40 40 34 59 28 28 32 43 45 40 10 39 34 15 44 35 041 40 199 o 18 754. 521) 27 0 232 ~ 26(1 155 t~ 79 76 48 26 ~ 124 ~ 1,851 ~ 660 446 135 2,152 ~ 37, 244 c~ 023 -1 1,803 39, 306 4.58 117 125 126 131 125 134 138 135 130 1, 753 140 127 100 1, 701 171 140 101 1, 785 177 145 104 1, 680 275 166 103 1, 683 315 185 112 1, 714 456 251 131 1, 824 489 316 133 1, 794 495 379 131 1, 841 580 406 128 265 236 1,291 1,463 27, 410 27, 891 27, 046 28, 213 29, 944 31, 519 32, 650 34, 807 36, 092 432 1,725 27, 410 6.29 1,763 27, 891 6.32 1,753 27, 046 6.27 1,637 28, 213 5.80 1,638 29, 044 5.47 1,674 31, 784 5.27 1,775 32, 886 5.40 1,760 36, 188 4.86 1,782 37, 555 4.75 NoT1~.-Tlme arrangement of functional classifications is in accord with current organization (1)ecember 1066), and the data has been adjusted for changes in fmnidiiig policy during the 10-year period. Employment data comprises both permanent and other positions. PAGENO="0307" BACKGROUND: ECONOMY IN GOVERNMENT-i 967 299 Savings and economies to the Government as a result of GSA operations, fiscal years 1965 and 1966 [In millions of dollars] Selected statistics 1966 1965 1. Savings through improvement of operating procedures and techniques and in- creased productivity in supply, transportation, and communications operations: a. Savings from large volume buying of supplies and materials for distribution through the GSA supply system and FSS schedule purchasing by using agencies 363.1 307.0 b. Reduction in freight costs of GSA and other Government agencies through consolidation of slsipments,negotiation of rates with carriers, etc 31. 9 31. 0 c. Reduction in public utilities and communications costs through operation of the Federal Telecommunications System, consolidation of switch- boards, execution of areawide contracts, negotiation and representation before regulatory bodies, etc 12.4 24.0 2. Savings and economies from more effective utilization of Government resources and improvement of consolidated services: a. Reduction in costs by evacuation of high cost Government and commercial storage facilities, through greater use of lower cost Government facilities, and by avoidance of costs through extension of the rotation cycle . 1 * 4 b. Avoiding rental of office space by increased emphasis on moving dead or inactive records to GSA records centers to release substantial quantities of office space for reuse, and filing equipment, steel shelves and transfer cases put back into active use, thus avoiding new procurement of similar items. Fiscal year 1966 also includes savings of $10,900,000 from provision by GSA of records management assistance to agencies (data for prior year not available) 15.7 c. Increased emphasis on better space utilization, the conversion of warehouse and other special use space to office space, and the conversion of excess military and post office installations to office space, have avoided the leasing of space to house the Federal establishment; also economies from the conversion of manual operations by use of mechanical devices for elevators, boilers, protection and cleaning, etc.: (1) Conversion of special use and excess space to office space 8. 1 (2) Conversion of manual operations by use of mechanical devices .4 1. 1 d. The expansion of the motor pool program (activated in 1954) as compared with prepool operations by agencies continues to pay dividends to the Government-annual savings .2 16.0 e. The transfer of excess personal and real property among Federal agencies and the rehabilitation of personal property affords maximum possible use of available Government-owned property and thus minimizes ex- penditures for new property. Efforts of GSA's Property Management and Disposal Service have contributed to the continued growth of these programs and also resulted in an increased return on sales: (1) Property put to further Federal use (acquisition cost) 952. 0 918. 6 (2) Proceeds from sales of: (a) Personal property 13.0 11.3 (b) Realproperty 125.0 46.3 (3) Rehabilitation of personal property and distribution of such prop- erty through the GSA supply system (acquisition cost) 90. 0 73. 6 f. Automatic data processing sharing exchanges 26.0 3. Through constant attention to improving our organization, snaking maximum use of automatic data processing techniques, expansion of common services for use by other agencies, and improvement of our operating procedures, we have made savings which may be termed "administrative improvements" 1. 6 . 6 Total 1,631.4 1,443.0 0 PAGENO="0308" `1