PAGENO="0001" MILITARY SUPPLY SYSTEMS~ (dW~2cfl~ HEARINGS BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS HOUSE OF REPRESENTATIVES NINETIETH CONGRESS SECOND SESSION JUNE 24, 25, 25, 27, JULY 1, 2, AND 18, li)d8 Printed for the use of the Committee on Government Operations ~ U.S. GOVERNMENT PRINTING OFFICE 97-475 WASHINGTON : 1968 P1 PAGENO="0002" COMMITTEE ON GOVERNMENT OPERATIONS WILLIAM L. DAWSON, Illinois, Chairman CHET HOLIFIELD, California JACK BROOKS, Texas L. H. FOUNTAIN, North Carolina PORTER HARDY, Ja., Virginia JOHN A. BLATNIK, Minnesota ROBERT B. JONES, Alabama EDWARD A. GARMATZ, Maryland JOHN E. MOSS, California DANTE B. FASCELL, Florida HENRY S. REUSS, Wisconsin JOHN S. MONAGAN, Connecticut TORBERT II. MACDONALD, Massachusetts J. EDWARD ROUSH, Indiana WILLIAM S. MOORHEAD, Pennsylvania CORNELIUS B. GALLAGHER, New Jersey WILLIAM J. RANDALL, Missouri BENJAMIN S. ROSENTHAL, New York JIM WRIGHT, Texas FERNAND J. ST GERMAIN, Rhode Island FLORENCE P. DWYER, New Jersey OGDEN R. REID, New York FRANK HORTON, New York DONALD RUMSFELD, Illinois JOIIN N. ERLENBORN, Illinois JOHN W. WYDLER, New York CLARENCE J. BROWN, Ja., Ohio JACK EDWARDS, Alabama GUY VANDER JAGT, Michigan JOHN T. MYERS, Indiana FLETCHER THOMPSON, Georgia WILLIAM 0. COWGER, Eentuc~y MARGARET M. HECKLER, Massachusetts GILBERT GUDE, Maryland PAUL N. McCLOSKEY, Ja., California CHRISTINE RAY DAVIS, Staff Director JAMES A. LANIGAN, General Counsel MILES Q. ROMNEY, Associate General Counsel J. P. CARLSON, Minority Counsel WILLIAM H. COPENHAVER, Minority Professional Staff MILITARY OPERATIoNS SUBCOMMITTEE CHET HOLIFIELD, California, Chairman EDWARD A. GARMATZ, Maryland FRANK HORTON, New York WILLIAM S. MOORHEAD, Pennsylvania DONALD RTJMSFELD, Illinois WILLIAM J. RANDALL, Missouri JOHN N. ERLENBORN, Illinois HERBERT ROBACK, Staff Administrator PAUL RIDGELY, Investigator DOUGLAS G. DAHLIN, Counsel JOSEPH LUMAN, Defense Analyst CATHERiNE KOEBERLEIN, Research Analyst (II) PAGENO="0003" CONTENTS Hearings held on- Page June 24, 1968 June 25, 1968 39 June 26, 1968 81 June 27, 1968 105 July 1, 1968 169 July 2, 1968 211 July 18, 1968 259 Statements of- Cosgrove, Rear Adm. Paul F., Jr., Supply Corps, U.S. Navy, Deputy Commander, Naval Supply Systems Command for Supply Opera- tions; accompanied by Comdr. Richard N. Dreese, Supply Corps, U.S. Navy 105 Fasick, J. Kenneth, Associate Director, Supply Management, Defense Division, General Accounting Office, Washington, D.C.; accom- panied by Jerome H. Stolarow, Assistant Director; Marvin Coibs, Assistant Director; Felix E. Asby, Assistant Director; and John Landicho, Audit Manager 2 Haddock, Rear Adm. I. F., U.S. Navy, Assistant Director, Plans, Programs, and Systems, Defense Supply Agency; accompanied by Col. William H. Murray, U.S. Army, Chief, Programs and Policy Division Plans, Programs and Systems Directorate; and John C. Rimkus, Assistant Chief, Systems Division Plans, Programs and Systems Directorate 211 Heiser, Maj. Gen. Joseph M., Jr., Assistant Deputy Chief of Staff, Logistics (Supply and Maintenance); accompanied by Brig. Gen. John Klingenhagen, Deputy, ADCSLOG (S. & M.); CoL Anthony Daskevich, Deputy, ADCSLOG (S. & M.) for PURM; Lt. Col. Oscar J. Sanders, Staff Officer, Supply Policy and Procedures, Director of Supply; Col. J. M. Tumlinson, Chief, European-North Africa Branch, Theaters, Division of Plans; Wayne Smith, Tech- nical Adviser, ADCSLOG (S. & M.); John Taylor, Chief, Logistics Doctrine and Systems Office, DCSLOG; all Department of the Army; Brig. Gen. Leo B. Jones, Deputy Commanding General, First Logistics Command, U.S, Army, Vietnam; and Robert Woodside, Office of the Deputy Chief of Staff Personnel 39, 82 Miller, Maj. Gen. Frank D., Assistant Deputy Chief of Staff for Logistics (Doctrine, Systems, and Readiness); accompanied by Brig. Gen. John Klingenhagen, Assistant Deputy Chief of Staff for Logistics (Supply and Maintenance); Col. Perry S. Finney, Jr., Chief, Supply Policy and Procedures Division, Director of Supply, ADCSLOG (S. & M.); Col. Anthony Daskevich, Deputy ADCSLOG (S. & M.) for PURM; Col. Noble E. Taylor, Deputy Chief, Materie1~. Movements Division, Director of Army Transportation; Col. J. B. Humphrey, Chief, ADSAF Management Office, OACSFOR; Lt. Col. Oscar J. Sanders, Staff Officer, Supply Policy and Procedures Division, Director of Supply ADCSLOG (S. & M.); Wayne Smith, Technical Adviser, ADCSLOG (S. & M.); J. P. Cribbins, Special Assistant for Logistic Support of Army Aircraft, DCSLOG; John Taylor, Chief, Logistics, Doctrine, and Systems Office, DCSLOG; W. C. Murphy, Chief, Field Operating Systems, LDSO; B. E. Seitz, Chief, National Operating Systems, LDSO; Joseph C. Zengerly, Director of Materiel Readiness and Support Services, Assistant Secretary of Army (Installations and Logistics); Sherman M. Meiselman, Chief, Maintenance Programs Branch, Director of Maintenance, ADCSLOG (S. & M.) 170 (III) PAGENO="0004" `V Statements of-Continued Pare Morris, Hon. Thomas D., Assistant Secretary of Defense (Installa.. tions and Logistics); accompanied by Robert A. Brooks, Assistant Secretary of Army (Installations and Logistics); and Paul H. Riley, Deputy Assistant Secretary of Defense (Supply and Services) - 259 Riemondy, Brig. Gen. Augustus, Director of Supply and Services, Deputy Chief of Staff (Supply and Logistics), Headquarters, U.S. Air Force; accompanied by Lt. Col. William W. Yary, Congressional Hearings Project Officer 148 Tyler, Maj. Gen. Paul R., Quartermaster General of the Marine Corps 123 Letters, statements, etc., submitted for the record by- Carney, John, General Services Administration: Letter from Lawson B. Knott, Jr., Administrator, GSA, to Chairman Holifield, dated July 18, 1968, re the role of GSA in support of the Department of Defense 233 Cosgrove, Rear Adm. Paul F., Jr., Supply Corps, U.S. Navy, Deputy Commander, Naval Supply Systems for Command for Supply Operations: Biographical sketch 105 Statement 106 Statement regarding General Accounting Office Report B- 133118 138 Fasick, J. Kenneth, Associate Director, Supply Management, Defense Division, General Accounting Office: Listing of the various supply systems for the support of the U.S. Army Forces in Southeast Asia 33 Haddock, Rear Adm. I. F., U.S. Navy, Assistant Director, Plans, Programs, and Systems, Defense Supply Agency: Biographical sketch 211 Heiser, Maj. Gen. Joseph M., Jr., Assistant Deputy Chief of Staff, Logistics (Supply and Maintenance): Biographical sketch 39 List of supply responsibilities of the Army Materiel CommancL 55, 82 Secretary of Defense memorandum establishing PURA, dated November 24, 1967 69 Time phased plan-Army supply system ADP standardization, chart 89 Miller, Maj. Gen. Frank D., Assistant Deputy Chief of Staff for Logistics (Doctrine, Systems, and Readiness): Audit report-Army's supply system for support of Vietnam (U) (class II and IV materiel) 203 Biographical sketch 170 Structure for logistic system development, chart 181 Supply support structure, chart 173 Morris, Hon. Thomas D., Assistant Secretary of Defense (Installations and Logistics): Initiation of a 6-month project to develop long-range logistics, manpower plans and objectives, memorandum dated May 1, 1968 272 Review and approval of automated logistics systems, memo- randum dated May 4, 1968 271 Selection and acquisition of automatic data processing equipment (ADPE), DOD Directive dated September 28, 1963 301 Riemondy, Brig. Gen. Augustus, Director of Supply and Services, Deputy Chief of Staff (Supply and Logistics), Headquarters, U.S. Air Force: Biographical sketch - 142 Data comparing Army, Navy, and Air Force use of Military Air- lift Command services 153 Statement 143 PAGENO="0005" V Letters, statements, etc.-Continued Riley, Paul H., Deputy Assistant Secretary of Defense (Supply and Services): Excerpts from request for proposal used in a recent Navy com~ Page puter acquisition 283 Responsibilities for the administration of automatic data process- ing equipment program, DOD directive dated September 28, 1963 305 Tyler, Maj. Gen. Paul R., Quartermaster General of the Marine Corps: Biographical sketch 130 Statement 130 APPENDIX Background material on the Defense Supply Agency 309 PAGENO="0006" PAGENO="0007" MILITARY SUPPLY SYSTEMS MONDAY, JUNE 24, 1968 HOUSE OF REPRESENTATIVES, MILITARY OPERATIONS SEPOOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS, Washington, D.C. The subcommittee convened at 10 a.m., in room 2247, Ra~burn Building, Hon. Chet Holifield presiding. Present: Representatives Chet H~lifield, William J. Randall, and Frank Horton. Also present: Herbert Roback, staff administrator; Douglas Dahlin, counsel; Joseph Luman, defense analyst; and Paul Ridgely, investigator. Mr. HOLIFIELD. The committee will be in order. This week the Military Operations Subcommittee will review the military supply system concepts, methods, and operations in the Army, Navy, Air Force, and Defense Supply Agency. We will open the hearings today with a presentation by representatives of the General Accounting Office, who have made studies of many facets of military supply and logistics, both in domestic and overseas installations. I might observe at this point that since the reorganization of the Defense Accounting and Auditing Division, following our hearings of 1965 the GAO has been giving more systematic attention to specific functional areas in the Defense Establishment, and one of these is supply management. The term "supply management" is used to describe the chain of supply activities after procurement and before disposal. It is obvious that good supply management reduces the problems at the beginning and end of the supply chain, and can yield large savings because of the multibillion-dollar investments in military inventories. The Military Operations Subcommittee in earlier studies `has re- viewed and analyzed supply management areas such as cataloging and standardization, materiel utilization, and the single-manager system. In the intervening years, technological progress in data handling, communications, and transportation has provided new management tools in military supply and logistics, and many new techniques or methods have been devised. The purpose of these hearings is to look at the military supply systems in terms of basic management concepts, problems, and progress, and likely develop- ments down the road. This subcommittee has always tried to approach these problems objectively, with full awareness that our combat forces must be prop- erly equipped to do their job, and this consideration comes before all else. We have also an appreciation of the field commander's job, (1) PAGENO="0008" 2 and the differences in outlook between him and the commodity mana- ger who may have to support more than one commander. We believe that the general knows more about combat than the auditor, but we also believe that military supply systems can be sub- jected to the auditor's scrutiny with profit, which means savings, as many reports of the GAO demonstrate by the readiness with which the services accept and attempt to act on their findings. Consequently, we think it is appropriate to start these hearings with a general review by GAO representatives. We will consider their testimony in conjunction with that of the military departments and Defense agencies, and we will make our own observations and recommendations in due course. The schedule for the remainder of the week is as follows: Tuesday, Department of the Army; Wednesday, Department of the Navy; Thursday, Department of the Air Force; Friday, Defense Supply Agency. This morning we will start off with the Associate Director, Supply Management, Mr. J. Kenneth Fasick. Mr. Fasick, you may proceed. STATEMENT OP J. KENNETH PASICK, ASSOCIATE DIRECTOR, SUP- PLY 1~ANAGEMENT, D~PENSE DIVISION, GENERAL ACCOUNTING OFFICE, WASHINGTON, D.C.; ACCOMPANIED BY JEROME H. STOLAROW, ASSISTANT DIRECTOR; MARVIN COLBS, ASSISTANT DIRECTOR; FELIX E. ASBY, ASSISTANT DIRECTOR; AND JOHN LANDICHO, AUDIT MANAGER Mr. FAsICK. Mr. Chairman, we are pleased to be here today to dis- cuss some of the General Accounting Office's findings and observa- tions relating to the military supply system. I am accompanied today by Mr. Jerome H. Stolarow, Mr. Marvin Coibs, Mr. Felix E. Ashy and Mr. John Landicho. During the last several years, we have devoted a substantial por- tion of the resources of our Office to reviews of logistics matters in the Department of Defense. This effort is in recognition of the mag- nitude of the investment in military supplies and equipment, and of the varied and complex problems faced by the services in managing the system. Operating supplies in the military services' inventories are valued at over $37 billion; over 4 million items of stock are man- aged by the individual military services and the Defense Supply Agency; logistics costs, including procurement funds, involve about $50 billion or 70 percent of the Defense budget; and significant seg- ments of our military forces are at the end of long overseas pipelines. For example: Over one-third of all DOD military and civilian personnel are located outside the continental United States (CONUS). Twelve of the 17 active Army divisions were deployed to either Vietnam, Korea, or Europe. About two-thirds of the Air Force's tactical squadrons, airlift squadrons and bomber wings are in either Europe or the Far East. It is therefore evident that supporting the military forces is impor- tant, costly, and complex. PAGENO="0009" 3 One of our recent reviews of an important segment of logistics resulted in a report to various congressional committees in March 1967. This report contained the results of our review of the respon- siveness of the military supply systems to the increased demands generated by the conflict in Vietnam. I believe that the major con- clusions we reached as a result of that review are still valid and would be of interest to this committee at this time. We concluded that the basic supply systems of the military depart- ments did not seem sufficiently flexible to meet emergency demands efficiently and economically. Certain indicators of supply effective- ness showed relatively poor performance; that is, only a small per- centage of requisitions were filled within the time prescribed, a large number of items were not in stock at the various stockage levels, a high percentage of high priority requisitions were used, and sig- nificant numbers of requisitions for small quantities rather than for replenishment quantities were flowing through the systems. The mili- tary services, to compensate for these shortfalls in their supply sys- tems, instituted various satellite systems or took various extraordinary actions to support the basic supply systems. These measures, admit- tedly necessary under the circumstances to maintain supply effective- ness, undoubtedly resulted in additional costs. As a follow-on to our March 1967 report, we reviewed certain aspects of the Department of the Army's management of supplies in the Republic of Vietnam. A report on the results of this review was submitted by the Comptroller General to the Congress last week. We reported that, despite adverse conditions, the Army supply system has, in our opinion, been responsive to the combat needs of the military units in Vietnam. This high level of support has been achieved, however, through costly and inefficient supply procedures. The Army had recognized many of its supply management prob- lems and initiated certain corrective actions prior to the time of our review. We have noted, however, areas which, in our opinion, warrant additional management attention as follows: 1. The development of accurate data related to stocks on hand and consumed. Such data are needed to facilitate accurate and timely determinations of supply requirements and to preclude significant imbalances of stock. 2. The identification and prompt redistribution of the large quan- tities of excess material now in Vietnam. 3. The development of programs which will insure the prompt return of reparable components to the supply system. This problem area is discussed in further detail later in my statement. 4. The institution of procedures designed to increase both intraserv- ice and interservice utilization of available supplies. 5. The enforcement of greater supply discipline in order to reduce to a minimum the costly shipment of supplies and equipment under high-priority requisitions. This matter is also discussed in further detail later in my statement. We believe that the supply problems being encountered were due, in large measure, to the fact that the Army did not have a trained logistical organization capable of assuming inventory management responsibilities in Vietnam when the buildup of forces was begun. PAGENO="0010" 4 The lack of sufficient computer capability, the shortage of trained inventory managers, and the lack of military personnel to operate depot activities particularly demonstrated this fact. The Army there- fore was compelled to (1) recruit civilian inventory managers and storage technicians, (2) install and reprogram a large-scale computer to replace card-processing equipment, and (3) organize and send special teams to Vietnam to review stocklists and to verify inventory locations and quantities. Army officials advised us that a quick reaction inventory control center was being organized. This organization, with its own com- puter equipment, pretested programs, and trained military personnel, will be available to move into future combat situations-such as those in Vietnam-and to establish supply management capabilities within a short period of time. Because of our findings, and because of reports already available to the Department of Defense, the Secretary of Defense instructed the Assistant Secretary of Defense to visit Vietnam to look into the problem of excess supplies. As a result of that visit, steps were taken to insure the identification of all supply excesses in Southeast Asia and the prompt redistribution of such excesses. Implementation of these plans should, in our opinion, eventually lead to significant re- ductions in excess stocks in Vietnam and to the use of such stocks by other military activities. We `also made several specific proposals with respect to the problems identified during our review in Vietnam. These involved the use of more descriptive demand codes for requisitions, the establishment of a system for challenging unauthorized use of high-priority requisitions, and the providing of periodic lists of short supply items to inventory managers. Although the Army agreed with our findings, it did not agree with these proposals for improved pro'cedures. We recognize that the management emphasis being applied by the Army will tend to improve supply discipline and help to correct the problems. We be- lieve, however, that such emphasis by itself is not sufficient. We there- fore have recommended to the Secretary of the Army that certain of our proposals for improved procedures be reconsidered. In our opinion, our reviews in the logistics area have indicated that improvements in supply effectiveness and efficiency require additional emphasis upon improving the basic logistics systems and certain of the logistics concepts. Further, the successful attainment of necessary improvements is dependent, to a large degree, on improvement in the acquisition, training, and effective utilization of logistics personnel. We noted that not all the military services were experiencing sup- ply problems to the same degree. It appears that the Air Force experi- enced the fewest problems and that the Navy had less than the Army. The reasons for the differences were not susceptible of finite measure- ment. Certainly, the respective missions of the three services have a bearing on the magnitude and nature of their supply task. The Army's logistics task is very difficult and complex in that it must support massive ground forces spread out geographically in many individual units. The services' differing supply concepts and organizational philosophy may also be a partial explanation. The Air Force supplies its bases directly from five stockage points in the united States that are adjacent to its inventory control points. PAGENO="0011" 5 un the Air Force there is a line of logistics control from the Air Force Logistics Command through the various inventory control points and weapons systems managers, to Air Force bases both in the United States and overseas. Worldwide asset data on many items is provided to inventory controt points through periodic reporting. The Navy, with a different mission and resultant different supply concepts, has multiple stockage points. However, the Navy's logistics philosophy is somewhat similar to that of the Air Force wherein there is recognition of the line of logistics control from the Chief of Naval Material to the various major supply centers and the depots both in the United States and overseas. Central supply control is maintained on a worldwide basis through periodic report procedures. The Army also has multiple stockage points both in the United States and overseas. However, the Army philosophy differs from the other services in that there is no single line of logistics control ex- tending from the Chief of Staff, through the Army Materiel Com- mand, to overseas stockage points, and to the stock stored at posts in the United States under the control of the Continental Army Command. The Army Materiel Command, counterpart of the Air Force Logis- tics Command and the Naval Materiel Command, now has control of stocks only to the level of depots in the United States. When supplies are issued to posts in the United States, the Continental Army Com- mand (CONARC) assumes responsibility. Under CONARC, the var- ious U.S. Armies "own" stock at the posts in their area of responsibility. When supplies are issued to the overseas commands, such as the U.S. Army, Pacific, and the U.S. Army, Europe, they assume responsi- bility and "ownership." The overseas commands all have separate depots complexes and supply control points. Mr. H0LIFmLD. Will you stop at this point and explain what you mean by "own" and "ownership ?" Mr. FASIOK. We explain this a little further on, Mr. Chairman. Mr. HOLIFIELD. All right. Go ahead. Mr. FASICK. Basically then, the differences in the physical aspects of the three services' supply systems are dictated in part by differences in missions and access to rapid transport facilities. The more subtle difference in organizational philosophy is much more difficult to define and involves relationships between "staff" and "line" functions, where logistics is a staff function as distinguished from operations, or line functions. In the Air Force the base supply officer has a "staff" responsibility through organization channels to the Air Force Logistics Command. At the same time, he is under the "line" command of the commanding officer of the base. This philosophy of dual responsibility is recognized and accepted at all levels, in both the Air Force and Navy. In the Army, however, much more emphasis is placed upon a philosophy of "command pre- rogative," wherein an Army commander retains complete control and responsibility with respect to all facets of logistics, personnel and military operations related to his mission. For example, the 2d Logis- tical Command in Okinawa is under the command of the U.S. Army, Ryukyu Islands. Therefore, little, if any, command relationship PAGENO="0012" 6 exists between the commanding officer of the 2d Logistical Command and the Army Materiel Command. We believe that this fragmentation of logistics control and responsi- bility may be contributing to many of the Army's supply problems in that it results in the Army's inventory managers losing visibility and control over substantial stocks maintained in major stockage points overseas and in the Continental Army Command. While the supply systems of each of the services is susceptible of improvement, we are of the opinion that the Army's system is deserv- ing of high-level management attention. I should like to discuss, there- fore, the following areas that, in our opinion require improvement: 1. Need for improved worldwide control over Army inventories. 2. Need for improved supply discipline within the Army logistics system. 3. Need for expeditious standardization and simplification of vari- ous supply systems within the Army. NEED FOR IMPROVED WORLDWIDE OONTROL OVER ARMY INVENTORIES Each major command in the Army "owns" and manages the sup- plies and materiel in its possession without regard to the available assets or requirements of the other commands. Although the Army Materiel Command (AMC) is the "wholesale" supplier for the Army and is responsible for the procurement and distribution of supplies and equipment, AMC inventory managers often make procurement, distribution and disposal decisions without knowledge of worldwide requirements or assets. Such decisions, made on the basis of incomplete information, not only lead to unnecessary expenditures of funds but can delay the filling of high-priority requirements for extended pe- riods of time. Although the Army has established a reporting system for major items of equipment such as tanks and aircraft, no such system has been instituted for supplies and secondary items held in major stor- age points in the Army system beyond depots under AMC's control in the continental United States. Inventory managers do, on occasion, request special reports on the status of selected items of supply, but such reports are limited to a relatively small number of items and are not requested on a regular basis. Furthermore, even when the managers have knowledge of avail- ~bie assets, AMC inventory managers do not have the ability to effect redistribution of supplies that are in the possession of any other com- mand. Such redistribution in many cases is desirable to alleviate more urgent demands existing elsewhere. In general, we have found a pattern of uneconomical supply actions that could be attributed to a lack of information and control for man- agement officials. This matter has been the subject of a number of reports by the General Accounting Officer over a period of years. For example: 1. In May 1964 we reported that the 8th Army, in Korea, had accu- mulateci about $1.1 million worth of excess spare parts for the Nike missile system. These parts were not reported as excess, and were, therefore, not available to meet other worldwide requirements. PAGENO="0013" 7 In response to our findings, the Department of the Army advised us that it was in the process of implementing additional procedures to provide inventory control points with information on the status of overseas stocks. 2. In January 1965, we reported that the TJ.S. Army, Europe, had about $1.2 million of excess spare parts for the Corporal missile sys- tem and that unnecessary procurements of about $370,000 had been made because these excesses were not reported to higher authority. 3. In February 1965 we reported that units of the 3d Army, located in Florida, had accumulated at least $735,000 worth of excess parts that had not been reported to higher commands. The Department of the Army advised us, at that time, that reorganization of its supply and maintenance organization would enable national inventory con- trol points to "control and regulate the flow of materiel through the system" and provide for the flow of logistical transactions directly from the customer level to the inventory control points. 4. In April 1967 we reported to the Congress that we had identified excesses-including permissive overstockage up to an 18-month sup- ply-of vehicle and electronic components valued at about $3.2 million in 7th Army, Europe, that had not been reported. Many of these items were urgently needed by other Army commands. In reply to our findings, the Army stated that stocks issued to and owned by tactical forces should not be considered in determining a theater asset position, or be subject to distribution at the discretion of inventory control points. 5. In May 1968, we reported that there was a need to improve re- quirements computations for expensive missile repair parts. We found, during our review, that inventory managers at the Army Missile Com- mand were not computing requirements in accordance with Army regulations because they were not receiving adequate demand and as- set data from overseas commands. The Army advised us that improve- ments in its reporting system, to become effective during 1968, would help alleviate this problem. Recently, the Department of the Army advised us that a reporting system, encompassing about 1,500 high-value items, would be instituted during 1968. Utilizing this system, inventory managers will supposedly have data available to them on worldwide asset positions. We have not yet had an opportunity to evaluate the operation or effectiveness of this system. NEED FOR IMPROVED SUPPLY DISCIPLINE WITHIN TIlE ARMY LOGISTICS SYSTEM The Army logistics system, which has no clear lines of command authority between the various echelons o~f si~ply, together with shortages of trained logistics personnel, limits the attainment of a necessary degree of discipline. Inadequacies in supply di~cipline are clearly reflected in the loss of control over repairable asset~ and in the high incideace of high-priority requisitions being processed through the supply system. Recently, the General Accounting Office reviewed the practices fol- lowed by the Department of the Army to control the return of re- pairable spare parts to maintenance centers for repair and reissue. PAGENO="0014" 8 We found that about 70 percent of the items included in our tests were not returned for repair which resulted in additional expenditures for new parts. Our review showed that incorrect data in Army publications and the lack of effective action by supply activities to obtain the return of repairable items contributed to this problem. Of particular interest, in connection with the Army's logistics con- cept, was the fact that officials at supply activities advised us that they had no authority or responsibility for insuring that repairables were recovered. Pursuant to Army regulations, they depended on unit commanders to turn in repairable components. We found that some sr~pply activities requested user units to explain and justify the failure to turn in repairable assets. However, many of the using activities neither turned in the missing items nor furnished explanations. TJsu- ally, the supply activities took no further action. For the items included in our sample tests, the Army had pur- chased almost $8 million worth of new parts during a 21-month period. In our opinion, a substantial portion of that cost could have been avoided if the repairable assets had been properly controlled and turned in. In commenting on our findings, the Army stated that pro- cedures at Army installations would be reviewed and strengthened as necessary. With respect to high-priority requisitions, we have noted during the last several years that an abnormally high percentage of requi- sitions are being designated as high priority by the requisitioners. The significance of this fact is that such requisitions can, and do, re- sult in expedited handling at all levels, emergency procurement ac- tions, and the use of premium transportation. In our opinion, the substantial numbers of high-priority requisitions used is a reflection of the many complex problems affecting the Army's supply system. Supply discipline is negated because military using units cannot obtain reasonable response to their requisitions unless they are submitted with high priorities. From the standpoint of over- all supply efficiency and economy, however, it is imperative that high- priority requisitions be limited to those items that are urgently required by the users in order to maintain their mission capability. We looked into the use of high-priority requisitions for noncombat essential items by units in Vietnam on two separate occasions and found the highest possible priorities being assigned to items such as paper clips, davenports for quarters and offices, dictionaries, liquor glasses, and similar items. Both the quantities being requisitioned, and the nature of the items, made it appear doubtful that mission capa- bilities would be adversely affected if lower priorities were used and if the requisitions were not filled as expeditiously as high-priority requisitions. When we discussed these matters with personnel from the units that had submitted the requisitions, they readily admitted that there was no justification for the assignment of most of the high priorities. They also advised us that, in many instances, their superior officers had instructed them to submit the requisitions under high-priority designators. PAGENO="0015" 9 PRIORITY SYSTEM Mr. HOLIFIELD. When a high priority is assigned to an item, does that mean that it has access to the most expensive form of transportation? Mr. FASIOK. Usually it does, Mr. Chairman. Mr. HOLIFIELD. In other words, rather than being shipped by boat, let us say, it will be shipped by air? Mr. FASICK. That is right. Mr. HO~FIErAD. If it was given this high priority? Mr. FASICK. In most instances. Mr. HORTON. Isn't there some sort of review system of those priori- ties? That is not established by the unit commander, is it? Mr. FASICK. Well, the criteria are established by the commands and by the Department of the Army and by the Department of Defense. However, the implementation of the criteria is a responsibility in the Army of the unit commanders. They are not challenged at this point. Mr. HORTON. Do you say something in here about the question of challenging? Mr. FASICK. Yes, sir; we do. We believe there should be some sort of a challenge system with respect to high-priority requisitions. Mr. HOLIFIELD. I had som.e informal information given me a few years ago by a person working in a clerical capacity in Army supply, and this person told me that the whole system of priorities should be examined. She told me once of the assignment of high-priority classifi- cation to items that were being sent by air to a base in Greenland, where the items themselves would not be needed until next spring or a matter of months and where the ships could have very well taken the rather bulky commodities that required a lot of air transportation. Mr. FASICK. This is precisely the effect that we are referring to when we speak of abusing high-priority requisitions. That is, the overexten- sive use of them, causes the use of higher priority transportation and possibly more of it. We have no way of estimating to what extent this occurs, but it certainly has an effect. Mr. HORTON. Coming back to this question of challenge, is there no challenge at a higher level in the Army with regard to the establish- ment of priorities. Is that the condition that exists now? Mr. FASICK. With the requisitions there is no challenge system in terms of the priority designator. There is a challenge system as to the method of transportation. Once it gets to the port, they make a deci- sion whether to ship it by air or not. Where possible, because of the vol- ume of high-priority cargo some of it may not be shipped by air. Mr. HOLIFIELD. But that is after the material is transported to the point of departure? Mr. FASICK. The port of embarkation; yes, sir. Mr. DARLIN. When was that system setup? Mr. FASICK. This has been in effect, I suppose, for several years. Mr. DAHLIN. The challenge system? Mr. FASICK. For air transportation. This doesn't mean, however, that some items which are noncombat essential still wouldn't go by air. This is a little bit out of our area, but in the air transportation PAGENO="0016" 10 area, once you contract for and have so much capability, they fill the airplanes up once they have committed themselves. Mr. ROBACK. Do liquor glasses go by air? On that point, although it seems a little amusing, supposing there were an order-and maybe there is an order, in view of the gold flow problem-that causes a lot of things that ordinarily would be purchased on the local economy to be brought in from the ljnited States. What would be a high response supply item from the local economy now becomes a slow response if you are going to ship it by water, let us say, through the extended supply chain. Perhaps there is some ra- tionale for priority movement of the things you mentioned here, like davenports or liquor glasses that seem inconsequential as far as combat is concerned. Is there anything like that involved? Mr. FASICK. I don't have a specific, Mr. Roback, but there is not a doubt that this has some impact. As a matter of fact, it probably had an impact on the requisitioner when he found he couldn't get the quick local response through a normal requisition, he says let's put the high- priority designator on it and get it quick. We need the items. The ICP's in the Army admit that over 50 percent of the requisitions they are receiving today are still high-priority designated. Mr. ROBACK. The consequence of overdesignating high-priority items is that the system doesn't work. If everything becomes high pri- ority, nothing is high priority-that is the end result. Mr. FASICK. Precisely. This overtaxes the system and causes the whole system then to be adversely affected. Mr. IROBACK. On the other hand, since there is a priority system, every commander knows that for each request, if he puts it low, it is going to be treated low. Therefore, he might be disadvantaged. So there is a natural compulsion to upgrade the request. Mr. FA5ICK. It is absolutely natural, I can understand it. I think this illustrates the point we are trying to make regarding supply discipline. Until this is deeply imbued and implemented within the whole Army structure, then this type of violation or excessive use of these designators will continue to occur. Mr. ROBACK. Along the line of Mr. Horton's question, couldn't you compress the number of eligible items for high priority; in other words, you can say by definition that certain kinds of supplies are not going to be high priority? Mr. FASICK. You could. Mr. ROBACK. Even though the commanding officer needs liquor glasses to properly entertain, let us say, visiting dignitaries, including Congressmen, nevertheless, you could say that item will not be on the priority list. Mr. FASICK. Right. For example, if refrigerators are for the officer's quarters, that is one thing; but if they are for the hospital, that is another thing. I would consider that combat essential. For the officer's quarters, I think they can wait a while for the refrigerators. It would be difficult to put down one broad sweeping criterion that you could say is applicable without exception. Mr. HoRToN. Let me ask you another question. With regard to the challenge system. What is' the comparison between the Arn~y situation and the Navy and the Air Force ~ Do you have the same problems in the Navy and the Air Force that you have in the Army? PAGENO="0017" 11 Mr. FASIOK. Yes, you do. Iii the Air Force they have a philosophy overseas that most of the replenishment material for aircraft support is shipped by air. They defend this on the basis that they can minimize stocks. They have an in-house capability, being Air Force, for flying much of the material. I think within the Air Force they also have a high incidence, possi- bly not as high as the Army, but a high incidence of using high priority requisitions. Mr. HORTON. Is there some means at a higher level where this whole challenge system could be studied and reviewed, say, in the Depart- ment of Defense? Mr. FASICK. We have recommended this, yes, particularly with respect to the Department of the Army; but I think it is applicable to the other two services also. For example, in Vietnam, the 1st Logis- tical Command, if they were in a position to question or challenge the requisitions coming from the combat units, for the types of noncom- bat essential supplies Mr. Roback had in mind, I think this would help immensely. Mr. HORTON. I certainly would not agree with any combat chal- lenge system on combat equipment. But it would certainly seem to me in the noncombat area there could be some challenge instituted not only at the lower level of command, but at the top level as well, so that you make certain that there is some equalization. I can understand, for example, the Air Force flying planes over might take advantage of the fact that it is their items that are going over, so they utilize air space. There ought to be some sort of adjustment between the services there. Mr. FA5ICK. I agree. Mr. DAHLIN. You said 50 percent of the items were in the higher priorities. I think that is the way you put it. Do you have any break- down of just what the rates are that you are talking about of high priority requisitions? Mr. FASICK. We have some statistics here in the Army area, show- ing how it has gone up over the years. For example, in 1962-these are the high priority requisitions received by the inventory control points in the United States-in 1962 it was 13 percent. In 1963 it was 14. In 1964 it was 17. In 1965 it was 31. We are in the Vietnam era now-in 1966 it is 53 and in 1967 it is 54 percent. In this current year it ranges between 49 and 56 percent that they are receiving that are high priority requisitions. Mr. DAHLIN. They are all not high priorities? Mr. FASICK. Not the highest. They are priorities 1 through 8, of the 20 priorities that exist in the supply system. The Army admits that they have a problem, and they have reduced the number to some extent. I think those in Vietnam are somewhere in the neighborhood of 32 percent or less now, and they are reducing it through command emphasis. They admit that they would like to get down to a lower figure. They are shooting for 25 percent, but possibly something even better is desirable, I am not in a position to give a figure. The command emphasis will work to a certain point, but I still think that a chal- lenge system on the part of the inventory control center in Vietnam or 97-475-68-----2 PAGENO="0018" 12 in any of the overseas commands will even improve on this, and get the supply system back to what is a more normal state. In connection with the high priority requisitions, we proposed to the Army that a chalhmge system be established in Vietnam to ques- tion the need for high priorities assigned to requisitions for noncom- bat essential items. Although they agreed that the volume of high priority requisitions appeared to be excessive, Army officials have taken the position that the problem can best be resolved by continued command emphasis on the need to comply with existing regulations. It is here, as I stated earlier, that we have requested that the Secretary of the Army reconsider our proposal for a challenge system. ARMY COMMANDS AND SUPPLY SYSTEMS The Army's concept of organization affords each commander a wide degree of latitude with respect to logistics, personnel, and military operations. In the area of logistics, this concept has resulted in the establishment of a number of separate and distinct supply "systems" within the Army. Each of these systems differs from the others, and each is subject to change as commanding officers and other key person- nel are transferred and replaced by personnel from other commands. The principal Army logistics organizational elements and their responsibilities can be outlined as follows: 1. Deputy Chief of Staff for Logistics (DCSLOG) The principal adviser to the Chief of Staff on logistics matters. DOSLOG is responsible for logistics planning and policy but has no command responsibilities. 2. Army Materiel Command (AMC) The "wholesale" supplier for the Army. AMC has the responsi- bility for development, test, cataloging, requirements determination, procurement, production, distribution, supply control, inventory con- trol, maintenance direction, and disposal of supplies and materiel. Management by AMC is limited to the inventories under its direct control, that is, those in AMC depots which are all located in the United States. 3. Continental Army Command (CONARC) The organization responsible for administration and control of all activities at posts located in the continental United States (except for logistics activities under control of AMC). Within Department of the Army guidelines, CONARC prescribes supply policies and proce- dures for those activities. 4. Combat Developments Command (CDC) The organization responsible for determining the organization, materiel objectives and requirements, and combat doctrine for the entire Army. 5. Overseas commands. The principal overseas commands are the TJ.S. Army, Europe (USAREUR), and the U.S. Army, Pacific (USARPAC), each of which has several major subordinate organizational elements. Each major subordinate organization is relatively autonomous with respect to supply matters. Each of the above-mentioned organizational elements is involved in logistics management and/or planning, but there are no lines of PAGENO="0019" 13 command responsibility between them, each being responsible oniy to the Chief of Staff of the Army. While geographic and tactical considerations may justify some variances in Army logistics concepts, we believe these should be rela- tively minor. Inventory management, stock control and other logistics concepts, however, should be standard and should be susceptible to standardized supply processing systems. Each major command in the Army has had the responsibility for determining its own data processing requirements. Although the sys- tems must, to a certain degree, be compatible with certain standards prescribed by the Department of Defense, each command designs its own system, devises data processing programs, develops management reports, and obtains data processing equipment. As a result, there has been dissimilarity in the systems, and data developed may not be readily interchangeable between supply activities. To illustrate, when a large-scale computer system was to be installed in Vietnam, the data processing equipment was moved from the Army Communications Zone, Europe, which was then being relocated from France to Ger- many. When the equipment reached the Long Binh complex near Saigon, a major programing effort was deemed necessary in order to utilize the equipment for inventory management and stock control in Vietnam. The same equipment had previously been utilized for similar functions in France. Mr. ROBACK. What is the significance of that point? Do you mean they should have bought the equipment somewhere else? Mr. FASICK. No, Mr. Roba'ck; hut it is a reflection of the command changing `a program which had already been established in Europe. It reflects again the differences in the supply systems among and be- tween the different commands within the Army. Mr. DAHLIN. You mean the programs had to be squared with the sys- tem as it h~id been developed in Vietnam? Mr. FASICK. It was tailored to meet what the Vietnam commanders determined would be their needs. Mr. ROBACK. That would be inevitable, though, even if you had a standard system? Mr. FA5ICK. No; not necessarily. I think the Air Force base supply system is a pretty good illustration, where they have a standard pro- gram that is applicable worldwide. No deviations are made to that program at a local level. If ch'ahges are needed they have to be programed by higher levels. You could move an airman from a base in Europe and put him in a base in Thailand and he can operate the system. This isn't true in the case of the Army. Mr. DAHLIN. You aren't challenging the point, though, that this particular machine was usable or should have been used in Vietnam? Mr. FASICK. No; we compliment the Army for using equipment with- in the system as opposed to gomg out `and buying new equipment. Mr. LTJMAN. You are saying if they had the standard system they `are trying to move toward, they would have been able to move this piece of equipment without significant reprograming and the people could have gone in and operated it without the need to fly in tech- nicians to cope with all these other pi'oblems? PAGENO="0020" 14 STANDARD ADP SYSTEMS Mr. ROBACK. Mr. Fasick, the Department of Defense has issued a supply management reference book which is DA Pamphlet 700-1 of January 1965, and it contains a statement on page 107 as follows: The Army has developed a standard ADPS for material management at ICP'Sr depots, and other affected activities. Does that refer to the US. portion only or is it true worldwide? Mr. FASICK. This is applicable to the ICP's-the seven ICP's-and If think there are a few more organizations involved in the whole test also. That is what they call the NAPALM program, and it is still being tested and developed in St. Louis at the Aviation Materiel Command. This is called the national ADP program for AMC logistical management. Mr. ROBACK. The layman would read this as saying the Army has a standard automatic data processing system. Mr. FASICK. We explain some of this a little later in our statement, but the Army does have several test programs underway to standard- ize different echelons of their supply system. Mr. ROBACK. They have standard automatic data processing equip- ment in the United States? Mr. FASTCK. No; they don't. Mr. ROBACK. They don't have it in any case, whether in the United States or overseas? Mr. FASICK. Not today; that is right. But they are moving in that direction. What we are hoping is that they will move a bit faster in this direction because we believe that standardization and simplifica- tion of these systems is absolutely essential to overcoming many of their problems. Mr. ROBAOK. Does standardization mean that they have to buy all these equipments from one manufacturer, like IBM? Mr. FAsIcic. I don't think so. I think that equipment, as long as it can perform the same function, could be compatible. In the NAPALM system they have in mind the IBM equipment. At different levels-for example, they have a system they are devel- oping called COSMOS for the Army command levels in CONARC in the United States. Mr. ROBACK. Suppose one of those systems eventuates in an IBM equipment, just hypothetically, and they then have to make this com- patible or standardized with a system at another level of supply management. In one case it might be the Army installations, in another case it might be the headquarters, whatever is involved. Does that mean once they invest in IBM machines they have to invest in IBM machines throughout the whole system? Mr. FASICK. I wouldn't think so. Mr. ROBACK. You don't think procurement becomes a problem here as far as standardization is concerned? Mr. FASICK. No. Mr. ROBACK. You are familiar with the fact that the Comptroller General ruled on a contract award proposal with regard to the Air Force, involving automatic data processing equipment for their base activities generally. IBM was the prospective recipient, and the Comp- PAGENO="0021" 15 troller General overturned this proposed award, and ultimately it went to Burroughs. Now, suppose the Air Force wanted for some other purposes to extend their data processing equipment. Would they be stuck with Burroughs, so to speak? Mr. FASICK. It depends on what the system is used for, but I be- lieve for a period of time they may be locked into Burroughs. Mr. ROBACK. The reason I raise this question is that within Army and possibly other circles there is a concern and a feeling, at least I have encountered it, that competitive procurement of the equip- ment is a drag on standardization. "If we have to go out and be sure that everybody is competitively bid, how can we standardize?" That is the gist of the question. Mr. FASICK. I think the equipment can be compatible between dif- ferent levels of supply and yet be different equipment. There prob- ably is something to be said that once you make a decision, and then competitively procure a type of equipment for a given level or for a certain purpose, that you would be locked in for a period of time with that equipment. Mr. ROBACK. Do you think that these equipments should be ded- icated equipments or general-purpose equipments? Mr. FA5ICK. I think as an office we generally advocate as broad a usage of equipment as possible, and within that framework general purpose would be more desirable. However, there are some cases where the complexity and the scope of the task to be performed happens to be such that it would merit a system of its own. Mr. R0BACK. We will come back to that. Perhaps you ought to finish your statement, and we will discuss some of these matters across the board. Mr. FASICK. In addition, the different systems developed and maintained prevents the Army from making the most effective use of the limited number of skilled systems analysts and data process- ing programers that are available. While design and operation problems are considered to be normal in any new computer installation, it appears that standardization of systems and equipment could reduce these difficu]ties to a minimum. Furthermore, the efforts of skilled data processing technicians could be utilized to the best advantage if standard programs were developed and applied. By permitting each command to design and install its own system, problems are magnified because the experience gained by personnel in one command cannot be immediately and effectively utilized in another command. Another result of the logistics procedures existing in the Army is the absence of a focal point that could provide more effective control over supply transactions. Army officials estimate, and our limited tests have confirmed, that significant quantities of requisitions are being lost or misplaced somewhere between the requisitioners and the supply points. It appears that the number of organizations that must process each document and the lack of control over documents during transmission are major factors in the loss of requisitions. Because of the Army's organization and dispersion of inventories, requisitions must often be passed from one echelon to another before PAGENO="0022" 16 reaching the point from which shipment can `be initiated. For example, a priority requisition prepared by a unit in Korea must be processed by the following five organizations if no stock is on hand in Korea 1. Requisitioning unit. 2. Direct support unit. 3. 8th Army Depot, Taegu, Korea. 4. National Inventory Control Point. 5. CONTJS depot. Mr. ROBACK. What does processing mean there? If you had rapicl~ fire communications and it was shot through the system at one time, what difference does it make? Mr. FA'sIcK. At each level they check to see if they have the stock on. hand; if they don't, they pass it on. Mr. ROBACK. Theoretically, they could do that by pressing a button if they had all the automatic equipment? Mr. FASICK. I think so. In their long-range logistics plan, I suspect the Army has this kind of a system in mind to expedite and simplify these types of transactions. A requisition for a unit in Europe may be processed through as many as six echelons of supply: 1. Requisitioning unit. 2. Direct support unit. 3. ~Tth Army Inventory Control Center. 4. Supply and Maintenance Agency. 5. National inventory control point. 6. CONTITS depot. The Air Force and Navy organizations and inventory placement practices facilitate the maintenance of only three basic echelons of supply-the requisitioning unit; the base or supply ship; and the air materiel area or tidewater depot. I think the point we are making here, Mr. Chairman, is that for each additional level of supply or echelon of supply that you have, you increase the chance for error and for problems, and that the more simple the system is the better opportunity you have to have an effective supply system. Mr. HORTON. It also means more personnel, too, doesn't it? Mr. FASICK. It certainly does. On the other hand, as I pointed out before, the Army has somewhat of a different problem. Mr. HORTON. Why? Mr. FASIOK. We are not suggesting that all of the echelons of supply could or should be eliminated. Mr. HORTON. Why does it have a different problem? Mr. FASICK. In the sense of the dispersal of units and the land masses over which they must transport materials, as opposed to a fixed base or a ship that goes out pretty well laden down when it goes out, so that its resupply problems are complex, but I think less so than the Army's. Within that framework, we are not suggesting that the Army completely reorganize, but I think hearings of this nature will result in some study and thought to ways we could do it better, to consider possibly where echelons of supply might be eliminated at savings in investment in inventory and in the interest of simplifying the supply systems. PAGENO="0023" 17 Mr. HORTON. All YOU are saying there is the number of bases might be more than you might have in the Navy, and perhaps in the Air Force, but I don't know why you would have to have these extra commands. Mr. FASICK. You have a point there, but I don't think we can arbitrarily eliminate some. They do require some further study. But the Army, for example, at one time supported Vietnam principally through the 2d Logistical Command in Okinawa. They found they could ~et better support and more expeditious support by supporting Vietnam direct and bypassing Okinawa. Okinawa at one time had approximately $200 million of stock. Since they have been bypassed, that stock has been attrited down to some- where in the area of $50 million. The Army has eliminated a sizable amount of investment in inventory. True, they have an investment in inventory in Vietnam. Even there we have found that with the order-ship time and the eipeditious deliveries they are getting, the improvement in transportation, that they can reduce their inventories in Vietnam considerably. Another illustration of this same point is that in Europe they had a 7th Army Inventory Control Center and 7th Army depots in addition to having a communications zone and a supply and maintenance agency with depot complexes. As I understand it, today the Army is considering eliminating the 7th Army depot complex and the Inventory Control Center in the 7th Army, and having the direct support units in the divisions and in the corps go directly to the Supply and Maintenance Agency of COMZ. So this will in effect eliminate an investment in a sizable amount of inventory or could, if properly implemented. To overcome the difficulties presented by processing through the numerous echelons of supply, the Army has devised several special supply systems for support of the forces in Southeast Asia. One of these systems entitled "Red Ball" is designed to provide accelerated handling and improved control over requisitions for repair parts for deadlined equipment in Vietnam. Red Ball requisitions are forwarded direct from Vietnam to a control office in San Francisco. The requisitions are then routed to the proper inventory control points, and surveillance is maintained by the control office to insure expeditious processing and shipment. Requisitions for Hawk missile parts and ammunition are also routed directly from Vietnam to the United States to insure more effective supply response than can be expected from the normal supply system. Such specifically designed supply systems are relatively expensive because procedures, data processing equipment, and personnel are uti- lized for a limited number of transactions. However, under the present Army organization, it appears that such systems are required to pro- vide effective supply support for critical items. The Army has initiated a number of studies and plans designed to overcome the problems described above. Some of these are: 1. A standard data processing system for national inventory con- trol points (NAPALM). 2. A standard data processing system for inventory control by Army areas in the United States is now being tested at the Presidio of San Francisco (COSMOS). PAGENO="0024" 18 3. A standard data processing system for field units is now being tested at Fort; Hood, Tex. (CS3). In conclusion, I should like to point out that our reviews have indicated that the Army is able to support its combat operations in Vietnam. Although there were shortages of some supplies, we found no indications that missions were not accomplished because of logis- tics problems. It is our view, however, that Army supply operations worldwide can be improved and that even more effective support can be accomplished at a lower cost through improved worldwide inven- tory data, more effective supply discipline, and standardization of systems. Mr. Chairman, this concludes our prepared statement, and we would be pleased to answer any questions that you or the members may have. Mr. HOLIFLELD. Thank you, Mr. Fasick. Mr. Horton? SUPPLY CONTROL IN VIETNAM Mr. HORTON. Mr. Chairman, I think it is a very comprehensive report. I did want to ask a couple of questions that are not covered in here. You have touched on the broad problem. With regard to Vietnam, you don't talk in here in connection with control of equipment and supplies and the like too much. I was *concerned about some of the comments that are being made today in the press, and there was an article recently in the Saturday Evening Po~ by Mr. Lederer, concerned with some of our equipment and supplies ending up in the hands of the black market. Did your report go into that type of control? Mr. FASICK. No; not in this particular review, although our Inter- national Division did look into some aspects of this area, but I'm not prepared to discuss that. Mr. HORTON. I didn't mean to talk about that specifically. I was concerned with the problem of control and safeguarding equipment that is over in Vietnam. Mr. FASICK. I think in the area of military supplies that there was a problem which was brought about because of chaotic storage conditions that existed in Vietnam. For example, the 506th Depot in Saigon was right down in the market area. It was very difficult to control. But I think the Army has done a rather good job in the past year or so of improving control over supplies received, in stor- nge, and while in transit to the using units. This was the subject of un internal audit report on the part of the Army, and I think they have taken some strong steps in the meantime to overcome it. Most of the problems I think that were alluded to in these articles in the press relate to some of the AID and other items. Mr. HORTON. I understand that, but I was asking the question with regard to the military equipment, whether or not there is a problem there. Mr. FA5IOK. I think the military are always alert, they know they have a problem. In conditions such as exist in Vietnam, I think they would have to admit they still have a problem. They are trying to minimize it, and from what we can. discern, they are doing a fairly good job of this. PAGENO="0025" 19 Mr. HORTON. In your report you don't cover here any need for, addi- tional control or protection of equipment once it is in Vietnam for supply to the units? Mr. FASIOK. Again, Mr. Horton, we didn't specifi~al1y address our- selves to this question. To the extent that I speak of it, it is because of observations we made, peripheral observations, while in Vietnam, but it wasn't specifically a part of this review. Mr. HORTON. Your report and your review was directed more to- ward the organization? Mr. FASIOK. No; toward the control over and management of Army supplies in Vietnam. Mr. COLBS. When we say control in that connection, we speak of con- trol in terms of the stock control records-do you know how much you have and where it is-as opposed to the security which I believe you are referring to? Mr. FA5IcK. Possibly you haven't had an opportunity-this report was just issued on Friday. Mr. HORTON. I haven't seen it. I did look through it and saw a couple of pictures that showed outside storage which wasn't very happy. The boxes were all broken, and this is one of the things I was concerned about. Mr. FASICK. Some of those pictures in the report reflect the condi- tions in Saigon itself. The Army is building this very large complex, about 25 miles northwest of Saigon, to which they are moving the supply and other support organizations. As they get warehouses built, many of those problems will be overcome that are illustrated in the pictures. In terms of control over materiel, when it first went into Vietnam the Army went in with a "push" system. It was a question of troops going in and getting as much stock and materiel to support them as they could. They admittedly didn't have an organization that could control and account for this stock. As a result, for a period of a year and a half or 2 years, there was a great deal of stock over there that they could not account for. There is a large amount of stock in Viet- nam that they don't know they have or they don't know where it is~ Our point in our report I suppose is directed toward a need for the Army now to start managing. Our first conclusion is, had there been an organization that would complement their divisions supplywise when they went into Vietnam, possibly they wouldn't have had nearly the problems that they did have. But now that they have the problem, it is time to settle down and start to manage the stocks over there. There is a tremendous amount' of stock that is excess and could be used elsewhere by other Army commands or by any of the other services. REPORTrNG OP INVENTORY Mr. HORTON. Much of your report is concerned, as I would label it, with inventory, lack of inventory and also lack of reporting. I no- ticed on pages 10, 11, and 12, you talk about some of the specific matters that were investigated by the GAO. It would seem to me that part of the problem there, and also in Vietnam, would be the problem of inventory, and also reporting on this inventory. PAGENO="0026" 20 Mr. FASICK. It is this. It gets `back again to the basic principle of visibility. The Army loses visibility from the point of view of an in- ventory manager in the United States, once it is shipped out of the Army Materiel Command's depot complexes. If it goes to a post, camp, or station in CONARC, the inventory managers lose control. If it goes to Vietnam or any unit in the U.S. Army, Pacific, they have lost `control. They have lost visibility. Mr. HORTON. On that question the chairman asked you to define ownership, and I don't think it was discussed fully, not to my satisfac- tion anyway, later in the report. Does that ownership mean that once it is turned over to a command, the' higher command then loses it? Do they sign for it? Mr. FASICK. In effect, this is what it amounts to. Once it is issued it is out of the Army Materiel Command system. It gets back again to the principle in the Army of command prerogative where the commander is responsible for logistics as well as his people, as well as his military operations. Whereas in the other two services, the inventory control people in the United States do retain visibility and have influence on the redistribution of stocks. This is the primary difference between the Army's system and those of the other two services. Mr. HOLIFIELD. This gets down to the point of having an accurate inventory for posts, camps, and stations, doesn't it? Mr. FASICK. That would be a very important- Mr. HOLIFIELD. You lose it at the post level, do you not? Is it the post or the command level? Mr. FASICK. You really don't lose it, Mr. Chairman. Mr. HOLIFIELD. I know you don't lose it physically, but you lose it from the standpoint of accountability in inventory. Mr. FASICK. Yes, sir; from the point of view of worldwide control. A man sitting back here, who is responsible for a commodity area, has no visibility and no jurisdiction over the really `hundreds of millions of dollars of stock, once it has been shipped out of `his depots, of which there are 20 in the United States. Mr. ROBACK. However, you have a different type of control. For ex- ample, in the post, camp, or station, the commander is allotted so many funds, he has to buy those things? He has to buy those supplies under a stock fund concept. The theory is if `he has to pay for what he uses, he is not going to be wasteful. So there is a different type of control at that level. Mr. FA5I0K. This is true, but they also have problems under the stock fund in terms of excesses-more supplies than they need-or supplies that they do need that are not on hand. Mr. H0LnrIELD. I know when this committee was working on the uniform catalog, we found out that posts, camps, and stations `had `tre- mendous stocks of certain items which apparently were completely stagnant, and this was demonstrated when the war was over and we finally got into the problem of disposing of surplus materials. An order would go out to all of the posts, camps, and stations to look for a certain item, and if it was in excess, to ship it in, and there were literally carloads of items that were shipped in from some posts, camps, or sta- tions that they had lost track of. I recall in one instance they gathered up in a central point of ac- cumulation nuts and bolts from these different outlying posts, camps, or PAGENO="0027" 21 stations, and they got carloads of all kinds of bolts that were obsolete, like the bolts and nuts that were used to put gun carriages together in the Civil War. This sounds ridiculous, but it was literally true. Here were these stocks being carried in inventory, obsolete items that had been carried in inventory for 75 or 100 years. Mr. FA5ICK. This has been the subject also of some effort on our part. First of all, precisely the same thing happened in Vietnam about a year ago. The Department of Army sent 500 men over there to go down to the DSU units, which are the units that directly support the combat elements and to get them to return material they didn't need- no questions asked. Carloads of items were returned into the depots that the Army has in Vietnam. It required a great deal of effort to catalog, identify and get items back into stock. This posed a problem to the Army. In the area of inactive items we issued a report about a year ago pointing out that DSA and the Navy had over 800,000 items in their inventory that had not moved for ~ years or more. We suggested to them that they take a new hard look at this-do you need to keep it in your system? Inactive items in the system compounds the problem of trying to manage inventories. They are aware of this problem, but it is tied into a number of other problems and it is going to take quite awhile for them to work themselves out of this situation. Mr. HORTON. I have no further questions. Mr. H0LIFIELD. Any questions, Mr. Randall? Mr. RANDALL. I have none. Mr. HOLIFIELD. Mr. Roback? Mr. Randall, will you take the chair? Mr. RANDALL (presiding). Our chief counsel, Mr. Roback, do you have some questions? REPORTING AND VISIBILITY Mr. ROBACK. You discussed in your statement the question of visi- bility, namely, getting information worldwide. You also have stated or implied that visibility ought to lead to control. Is it your position that the Army Materiel Command, after acquiring visibility, ought to have the power to redistribute stocks against the preference or the requests of the theater commander? Mr. FASICK. Down to a certain level, yes, sir. I think materiel should be under the control of AMC. The materiel exists in the major stockage points outside the AMC area as it is known today. For example, the material are located at depots under the control of the Supply and Maintenance Agency in Europe and at the 8th Army depots-there are two of them over there, Camp Carroll and Ascom City. They are large complexes, comparable to the complexes we have in the United States, and we believe the materiel should be under the control of AMC. We do not believe it would be necessary to bring under such control the materiel at direct support units which are supporting the combat units. They have sizable amounts of stocks, ranging between 2,000 and 10,000 items, which they usually manage. This we don't suggest that AMO control. Mr. ROBACK. The philosophy of the Army as distinguished from the Air Force and Navy, as you point out, has been more toward corn- PAGENO="0028" 22 mand prerogative in the theater, ~so that the commander has the dis- position of supplies as well as other matters under his command. Your statement, then, is that there could be some inroad on that pre- rogative without necessarily completely overcoming it? Mr. FA5ICK. Not at all. It would not. I think it goes back, Mr~. Roback, probably to confidence in a system. I suspect that command prerogative in the sense that it is defended in the Army, is, in my opinion, a reflection of lack of confidence in the supply system-a feeling that the commander must have the supplies himself. Mr. IROBACK. Do you think that psychologically and perhaps his- torically, it has been due to dispersal geographically, lack of communi- cations, and a feeling of "let's get what we can and get hold of it, so we will have it when we need it," whereas technically if you had a worldwide communications network for logistics and reasonably ac- curate reporting, those fears ought to be dispelled? Is that the sense of what you are saying? Mr. FASICK. Very much so. Mr. LUMAN. Do you feel at this time that the Army has the wherewithal to implement such a system of visibility? Do they have the computer compatability? Do they have the communications? Is the inventory control point in the States so set up that it can take over the function of visibility of these items at overseas depots? Mr. FASICK. I think to a limited extent. The Army is now working on taking about 1,500 or 1,700 items and bringing it under this visi- bility and control concept, as we understand it, as it has been described to us. It is still in its implementing or planning stages. This is a start. But I think that they have a limited capability, and they will have to develop an improved capability which will come about through this standardization of systems which they are working on. I would like to think they could move faster than possibly they might have in mind. Mr. ROBACK. You say they really couldn't put into effect the plan you seem to espouse in your statement until they get this compati- bility of computers? Mr. FASIOK. Very much so. As a matter of fact, the Army system, as we see it today, is wrought with a great deal of unreliability in its system. I would be the last one to suggest that we go on the system at once because I think you would probably create more chaotic condi- tions than now exist. But I think a plan should be devised and it should be recognized from conception that this is the long-range objective, to accept the concept of visibility and AMC control down to the major stockage levels worldwide. Mr. HORTON. When you are talking about visibility, you are talking about reporting in a sense, aren't you? Mr. FA5IcK. That is one facet of it. Mr. HORTON. That is the most important facet? Mr. FASICK. Yes, sir. Mr. HORTON. Is there any reason why you can't have the reporting system and still have the command system that the Army has? Mr. FASICK. No, there is no reason why you couldn't have it except it brings another element that usually has to be brought to bear in order to effect efficiency in a supply system. For example, redistribu- tion actions, if AMC were to decide that it is more important to have PAGENO="0029" 23 ~ornething in Vietnam than in the 7th Army, it would have to get permission in the 7th Army under the command prerogative concept to move it. Whereas under a control concept they could move it if in the wisdom of the people at this level they determined it is more important to get it to Vietnam. Mr. HoRToN. Under the present system they don't even have that? Mr. FASICK. They don't have visibility under the present system. Mr. LTJMAN. They don't even know there is excess in the 7th Army? Mr. FAsIcK. That is right. Mr. iRoBAcTi. But you testified they have selected visibility for cer- lain types of high value or critical items? Mr. FA5IcK. On a selected number of items. Mr. LUMAN. I think the Army's historical reply, as evidenced by the number of reports you have listed in your statement, when you draw these shortcomings to their attention, is to contend that they can rectify these wrongs through increased command emphasis and procedures and without a basic change in the system. Mr. FA5I0K. We think the Army needs a basic change in its concept in order to overcome these problems. I don't believe that through command emphasis alone that it will completely alleviate the problems. Mr. LUMAN. Do you think the present system and philosophy enables them to completely utilize the improvements made in com- munications, transportation and data processing over the past 10 or 15 years? The supply systems have new tools in the form of computers and high-speed communication and better transportation, tools that they didn't have, let's say, 15 years ago. Do you think the present Army philosophy of logistics as it exists today enables them to utilize fully these management tools in their logistics planning and carrying out their stockage functions? Mr. FASICK. No, I think they have a capability to do a better job. On the other hand, we must recognize the scope of the activity in the logistics area has increased immensely, and this in itself required the high-speed communication and the sophisticated new types of equipment in order to hold their own. I think the point you are making is, that if they don't change, they are wasting, in effect, the equipment they now have. I think the equipment they have is necessary even under the present concept they have. It is essential to it. 1 believe, however, if they changed their concept, that the equipment and the capability of equipment available today would facilitate the new concept more so than possibly it would have 10 or 15 years ago. CHALLENGE SYSTEM Mr. LUMAN. In the challenge system, where you have a disagreement with the Army on high-priority requisitions, their counterproposal to your last report was essentially to render a report to the commander of any unit if that unit exceeded 25 percent in high-priority requisi- tions. Is that their general approach to the problem? Mr. FA5IcK. As I understand it, this is their general approach, and also to admonish the commanders to adhere to the criteria that have been established. On the other hand, under the conditions that the peo- ple live under, for example, in Vietnam or any other part of the Army system, there will be a tendency to strain the system. Within this PAGENO="0030" 24 framework, I think that command emphasis will result in some further reductions in the use of high-priority requisitions, but I think their chances for greater reductions would be enhanced if they had a chal- lenge system. Mr. LUMAN. This would operate the same as a man's income tax return, where he has no guarantee it will be audited but the fact that it might be will make him a little more honest. Mr. FASIOK. A very good example, yes. Mr. LUMAN. You feel without this the commanders will tell the supply people just keep it under 25 percent? Mr. FA5IOK. I don~t think this would be adequate, no. I don~t know what a percentage should be. It well might be in some units that 40 percent is essential, that the nature of their particular activity and their supply position would require that they use 40 percent. To use an arbitrary figure of 25 would not be a good principle at all. RETURN OF REPAIRABLE PARTS Mr. LUMAN. You mentioned in discussing the problem of repairable spare parts that many of the units were ordered to turn in an item to get a new one. They didn't turn the item in, and this ran to as high, as 70 percent. You also mentioned in some cases the people who were to receive the reparable item went back to the unit and requested the information on its whereabouts, but the unit ignored the request for information. The supply activity took no action in some of these cases. What further action could they take? Mr. FASIOK. Tinder present procedures there is really not too much more they could do except to continue to keep pressure on them. They don't have any line responsibility on that unit. Again it gets back to a reflection of the command prerogative of the unit, and it is also a reflection of the problem of supply discipline. People aren't doing what they are supposed to do. The unit is supposed to turn it in, but they don't do it. Mr. LUMAN. Do you think AMO visibility over some of these items, with AMO control, would help provide some higher level pressure to get turn-ins? Mr. FASIOK. Oh, yes; I think if they had control in this sense it would improve this particular area considerably. Mr. LUMAN. Do you think that would clear up the problem? Mr. FAsICK. No. Mr. ASBT. I think that the problems of high-priority requisition and the turn-in of the repairables are close together. rfhere are exist- ing instructions or guidelines which spell out clearly what requisitions merit high priority. There are no punitive provisions for violating these guidelines. Likewise, there are instructions that say unit corn- mi~nders will see to it that unserviceable items are turned in, but nothing is done if these instructions aren't followed. I think that some provision or change must be made down through the varying oper- ating levels so that these instructions are followed or that some ac- tion is taken to insure that in the future they will be followed. Mr. LUMAN. One approach would be the approach the Army is apparently taking; that is, we are going to stress this in a manage- ment concept, a command concept, we are going to put stress on this PAGENO="0031" 25 and tell the commanders to watch it closely. You have come up with a suggested second solution in the case of the high-priority requisi- tions; that is, there be a sampling system to catch people who might be submitting a requisition that shouldn't be high priority. Do you have this kind of a solution for the repairable spare parts problem? Mr. STOLAROW. The Army has advised us that as soon as they have the capability at the direct support unit-that is, small computer capability-they will prepare listings of the returns of repairable items by unit. There will be some additional pressure on the com- manding officers of the using units through the circulation of these listings to require turn-ins or explanations. This would be a step in the right direction. Mr. FA5ICK. This is the form of a challenge system, where the sup- ply activity takes positive action to ~et an explanation or the return of the repairable from the using activity. Mr. LTJMAN. This problem of repairable spare parts being returned is not a problem peculiar to Vietnam. Mr. FASICK. Not at all. Mr. LLJMAN. You have the same situation in Europe or Korea, don't you? Mr. FASICK. Worldwide, really, with respect to the Army. Mr. LUMAN. But you feel that based on your past reviews of these problems a decision simply to place more command stress on it will not in itself really attack the problem unless it is followed up with some kind of a system to assure this is done? Mr. FASICK. Yes. Mr. ASBY. That is correct. QTJ[CK REACTION INVENTORY CONTROL CENTER Mr. DAULIN. Back to this quick reaction inventory control center that is being set up, is that in direct response to your recommenda- tions as initially developed? Did you recommend this type of center? Mr. FASICK. We did recommend it before we knew that the Army had already been doing something in this area. It was included in our recently issued Vietnam report, the draft of which we sent out in December. But the Army, back in June 1967, had started to give thought to this concept. We have 16 Army divisions normally that go through dry runs and maneuvers and are always ready to go. But they have never had a logistics system with trained personnel ready to support them once they deploy. There was always a question of trying to piece together a logistic organization. It was further com- pounded in the Army by the fact that most of their depots and supply activities back in the States at the wholesale level were manned by civilians. But when you go to a Vietnam, you have a limited ability to use civilians. It is a military operation. They didn't have the people trained to do the job over there. So, I think this action the Army is taking is an excellent move in terms of getting themselves in a position to support their divisions in the event they may be called up to per- form their missions. Mr. DAHLIN. From the point of view of your criticism, if the Army could achieve instant standardization overnight, would such a center probably be necessary? PAGENO="0032" 26 Mr. FA5IcK. Yes; it still would be necessary. Mr. DAHLTN. Still would be? Mr. FASIOK. Because we have in mind here logistics units-skilled logistics people, equipment and a set of operating procedures-that ~would be capable of working with the military units wherever they may have to go to perform their missions. You can't pick up civilians ~out of the depots in the States and expect to do this. Mr. DAHLIN. If the center were standardized with some system, it presumably would be standardized with the CONUS system. Mr. FA5ICK. Oh, yes. It would have to be standardized or compati- ble with the CONTJS system, and I should hope that the Army has in mind down the road again the concept that we are pushing, and that is, to get standardization. To get, in effect, plug-in type units that can be picked up and moved anywhere in the world and operate without any undue difficulty. Mr. IDAHLIN. That doesn't necessarily happen though. After all, the Army did form these Pacific ICC's or the logistics commands, as nucleus organizations back in the States. They went out and produced their own peculiar organizations in Vietnam, didn't they? Mr. FASIOK. Under the present Army concepts there is nothing to prevent that from happening again, but I think the Army is working on devising the technique, the plan, the policy, the operating proce- dures for this new quick reaction team or unit. But they will still have problems once they are called upon to go to Europe and then they move from Europe to the Pacific. Unless the Army comes up with standardization, and the types of things we are suggesting, then this unit or organization would have problems adjust- ing to the new command. Mr. DAIILIN. Does it make entire sense that such a quick reaction capability-which is presumably for some crisis in the future-be just a single service effort, from your point of view? Mr. FA5ICK. Well, sometimes types of commodities that the different services have and the peculiarities of the problems they face requires them to have some autonomous or independent type organizations. It seems to me it makes sense in the case of the Army to have their own. This particular one they are devising is, as I understand it, to be -capable of supporting corps-type operations. They would need several of them for anything larger. So I think that the Army would be justified, at least within the framework of the -near future, as I see it, to have this type of organization itself. Mr. DAIILIN. You are recommending one. Did you recommend any- thing of the sort to the Navy and the Air Force? Do you think they need something in the case of a crisis? Mr. FASIOK. The Air Force-I can't describe it in detail-does have something like this, a kit or a package they pick up supplywise which enables them to open up a new base and be in a position to support the Tbase quickiy~ ADAPTATIONS OF SUPPLY SYSTEMS Mr. IROBACK. Is the theory of this quick reaction ce~pability to try to adjust the going system to crises, or is it something over and above that? You haveS pointed out in your statement that the supply in Vietnam has ieen done quite well but at high cost and with possible ~inefficienciesbeeause of all the special adaptations that had to be made. PAGENO="0033" 27 Is this to try to overcome all these special adaptations? Mr. FA5ICK. Yes. In effect, it should improve efficiency and also reduce cost if it is properly implemented. Mr. ROBACK. But any supply system probably is going to have special adaptations. For example, you attribute them to the present Army organization. You say such systems are required to provide effective supply service for critical items. You are talking about "Red Ball." The Air Force has a "Red Ball" too, does it not? Mr. FASICK. Yes, it has something comparable. Mr. ROBACK. It isn't necessarily the fact that it is the Army's sys- tem. Every system in a war, and in a war like Vietnam, which in many ways is very unusual, experiences special adaptations. Many of the ter- rain and environmental features which have made special supply demands were either not anticipated or couldn't be foreseen until they were experienced in the field. So, you are inevitably going to have special adaptations in any system, isn't that so? Mr. FA5ICK. I agree. Mr. ROBACK. You are trying to minimize the special adaptations, or trying to get away from having to say that the whole system doesn't work when it should be working for combat and not be just a peacetime relatively leisurely system; is that the general philosophy you are propounding? Mr. FA5ICK. That was very well expressed. Mr. ROBACK. You mentioned the possibility of wrapping up certain depots in Europe and supplying units from the United States? Mr. FASICK. I was suggesting they could eliminate some layers of supply ownership and should give consideration to it. Mr. ROBACK. You said the Army was planning or proposing to eliminate certain depot complexes; did I understand that correctly? / Mr. FASICK. I don't know about the depots themselves, but organi. zationally they are giving consideration to eliminating the ~th Army Inventory Control Center. Mr. ROBACK. In other words, the inventory control would be in the United States? Mr. FASICK. No, it would be in the Communications Zone's Supply and Maintenance Agency, which is the next highest level. This is the U.S. Army, Europe's logistics organization. Mr. RonAcic. Looking at the Air Force concept, where you have worldwide control from inventory control points in the United States which are in proximity with the supply depots, the air materiel areas, is there an evolution toward U.S. centralized control over all these field logistics systems? Mr. FA5IcK. There is. There is visibility and a degree of control. Mr. ROBACK. I mean, is the Army sort of gradually evolving along that line, which the Air Force has instituted? Mr. FASICK. I think so. Mr. ROBACK. Are you recommending, or do you believe, that the Army could control the inventory from the United States now? Mr. FASICK. If they overcome some of their other basic problems in the supply systems, conceptually they could do it now, yes. Mr. ROBACK. This would be standardization of data processing equip- ment and communications, is that right? 97-475--68-----3 PAGENO="0034" 28 Mr. FASJCK. It would involve this. Mr. RANDALL. We are talking about inventory control from the United States; we are not talking about war over here, we are talking about NATO's operations in Europe. Mr. FASI0K. Yes. Mr. RANDALL. That's one thing, and I hope we won't confuse any inventory control with the situation where there is a shooting war. How do you accomplish inventory control from the United States? You don't mean to completely control it? Somebody is going to have to be controlling it in the area; you either have an operation or you don't have. You have some kind of operations over there. Address yourself as to how you do that. I mean, you are not with the Air Force, but it has been suggested that the Army will be evolving toward the Air Force's system of a worldwide inventory control and control from the United States. How is that accomplished? I will have to first say we are pretty close to the military, but we are always on the procurement and the military construction end~ and not exactly on this end. I would like for you to address yourself to that. Ho.w is that accomplished? Mr. FA5IcK. Possibly the best way to explain it would be in the case of the Air Force, where they do have, through high-speed communi- cations and computers, visibility of their stocks at their bases, both in the TJnited States and overseas. Mr. RANDALL. Then the emphasis is on the word "control." It seems to me there would be no substitute for actually checking your in- ventory where the inventory is. You are simply saying it is going to be communicated back; that's what you mean by control? Mr. FA5IcK. That's right; visibility, sir. Mr. RANDALL. Visibility? Well, all right. Mr. ROBAOK. Do you think visibility by itself is enough for control, or do you think you have got to have the actual power to redistribute? Mr. FAsIcK. I think they need the power to distribute it, too. If the Army develops a system where the commanders can have confidence in their supply system, it will work. Mr. LUMAN. You are talking here about visibility at depots; you are not going to trifle with the division commander at all? Mr. FASICK. No, sir. We are not talking about the 7th Army in itself, with its direct support units (DSU's). Each division has several, and the 7th Army has a number of them. No; we are talking about the large depot stockage complexes that they have overseas today over which commodity managers in the United States have no visibility and no control. Mr. RANDALL. How was that? You say they have no visibility and no control? Mr. FASICK. No visibility and no control, except on a special request basis. A commodity manager in the United States may, through a special request, ask a depot in the 7th Army- Mr. RANDALL. Of course, we have been over there a few times, and I think a lot of it will turn on what you mean by the word "visibility," and I don't know whether we have gotten around to defining that or not. May I ask a few questions, if it is all right, Mr. Counselor? Mr. ROBACK. Fine. I'm delighted. PAGENO="0035" 29 GAO REVIEW IN VIETNAM Mr. RANDALL. You say GAO sent a team to Vietnam. How many men did you send down there? Mr. FASICK. We had 12 men. Mr. RANDALL. I understood you to ~ay 60. This is the genesis of this report? Mr. FASICK. Yes; that report. Mr. RANDALL. You said, as I gathered, when I came in-and I haven't had a chance to either read the report or your statement, just barely the chairman's remarks, and also his note to the members calling this series of meetings-you said you gave the Army a chance to turn in their items, no questions asked. I think those were the words you used earlier. Mr. FASICK. We didn't give them a chance. I was merely observing, or made the comment, that the Army had advised us that this was one of the exercises they went through. They went through this, incidentally, before we went to Vietnam to make our review. Mr. RANDALL. "They," meaning the Army. Mr. FASICK. The Army; yes. They had sent 500 men over there- Mr. RANDALL. That's where I got the 500. The Army had sent the 500. You sent the 12. Mr. COLB5. We sent 12. Mr. RANDALL. Let's be a little, more specific about this turn-in. We were down there and we thought that the. supply system was at that point, at least in January of this year, working rather well. Was that your conclusion, Mr. Roback? Mr. ROBACK. Generally; yes. Mr. RANDALL. What did this turn-in consist of? What did you find they didn't need? Mr. FASICK. We didn't find this, sir. Mr. RANDALL. You were down there though. You know something about it. Mr. FASIOK. Yes, sir; we were there. Each unit and the direct sup- port units have an authorized stockage list, the items they were sup- pose to carry and that they can expect their units to requisition from them. A requirement determination is made pursuant to a formula to determine how many of these items and what items they will keep at these support units. The Army exercise amounted to checking what these people had against what they were authorized to have, both in types of items as well as quantities. They revalidated, in effect, their stockage list. Mr. RANDALL. What I am trying to get at, did you find or did the Army find-and you certainly were there at the time the Army was there or were you subsequent to the Army? Mr. FAsICK. Subsequent. Mr. RANDALL. But you certainly were privy to, and you knew what the Army had done, the 500 Army men; you 12 men resurveyed what the 500 had done? Mr. FASICK. Well, yes; we saw the effects of what the 500 had done. Mr. RANDALL. You were there for that purpose; weren't you? Mr. FASICK. Yes, sir-well, we were there to look over the control and management of Army inventories in Vietnam. PAGENO="0036" 30 Mr. RANDALL. I am trying to get you to tell us in what categories- what did you find? We are going to get to these thousands of items that were not needed in inventory or hadn't been moving you said. What did you find down there that hadn't been moving? Mr. FASICK. I can't directly relate through our report here a specific item. I would venture to say that it covered all ranges of Army commodities. Mr. RANDALL. Everything in other words? Big items or little items? Mr. FA5IOK. Big items and little items. Mr. RANDALL. Jeeps and everything? Mr. FASICK. Jeeps, spark plugs, tires; any commodity that the Army uses in its operations overseas. As we point out in our report, the Army in Vietnam has approx- imately 120,000 different types of items they stock and keep on hand to support the troops. According to their own records, which they admit were unreliable because of the conditions we spoke of earlier, they recognized- Mr. RANDALL. What condition could that be except you are in a combat area down there? That is why I think we ought to get a dividing line between the two different situations. In what conditions did they say they were unreliable? Mr. FASICK. In the sense the records didn't really reflect what they had on hand and the quantities that they had on hand. Mr. RANDALL. I think we ought to put in the record- Mr. FA5ICK. Now, some of this is a reflection of this mass of ma- terial that was turned in. This was a desirable exercise, it was a good start. The next step, and they have been in the process for the last several months, is trying to get control of the stocks in their depots, to find out what they have and how much they have and then correct the records so that they can properly manage their supplies. The Army is very conscientious about this. I think they are doing a magnificent job considering the conditions under which they work. You say combat. Mr. RANDALL. I think there is where we have to stop right there. Many of the places that our subcommittee have visited are now in the direct line of fire. I think this touches on the whole problem. We are all interested, of course, in efficiency and in control and not hav- ing anything that you don't need, but there it is a pretty nasty war and it is getting as bad as it ever was. I want you to say, if you can, what can be done under those conditions that isn't being done? Mr. FASICK. I think the five things that we state in our report. Mr. RANDALL. In the conclusion here, your recommendations are on page 36'? Mr. FASIOK. It is really on pages 3 and 4, and then possibly 36. Mr. ROBACK. Which `are you referring to? Mr. FASICK. True, the Army is under fire to some extent. Cam Ranh Bay and Qui Nhon, they have been subject to some fire, but they have relatively fixed bases now with competent people, and they are get- ting more competent people daily. They have the capabilities in terms of equipment and computers to do `a better job of managing what they have. I think the Army will be the first to admit that you can't hide under the excuse we are under fire in terms of losing control over our stocks and our inventory, because if they don't know what they PAGENO="0037" 31 have and if they don't know where it is, they are going to have a very difficult time supporting their combat units. So, it is important for the logistics people to get control of this area. Mr. LUMAN. Your recommendation here, once again, is speaking to these large fixed depots rather than what the 101st Airborne has? Mr. FA5ICK. Right, very much so. We are not talking about the platoon, or the company. We are talking primarily here of the depots and getting control. We are also alluding to the depots doing a better job in assisting the direct support units, so they can do the job they need to do. PIJRA PROGRAM Mr. R0BACK. Secretary Morris was in Vietnam. He recommended the setting up of the redistribution agency for the whole theater, did he not? Mr. FASICK. Yes; he did. I think this is a reflection of the large amount of stocks that they knew were excess. Mr. ROBACK. In the early days General Westmoreland wanted to put the troops in quickly, and the supplies lagged. When the supplies caught up, they more than caught up. In a sense, and given the limita~ tions in the Army supply management systems, you not only had lots of supplies but you didn't always have good records on them. This is a problem we are now trying to grapple with. Mr. FA5ICK. Yes. Mr. ROBACK. Assistant Seeret~try Tom Morris, as we understand, is now in Southeast Asia and is probably reexamining or taking another look, and we are hoping we will be able to get a firsthand account from him when he gets back. I would like to ask one more question, Mr. Chairman. Mr. RANDALL. Go ahead. I have some more questions. DOCTRINE FOR SUPPLY AIRLIFT Mr. ROBACK. Considering the fact that there are large differences in the kind of airlift criteria, that is, airlift practices between the Air Force and the Army, let us say, what difference does that make to worldwide control and responsiveness of these supply systems? The Army doesn't move nearly as much by air as the Air Force does. Is it implied in this kind of recommendation that you make for standard- ization, complete visibility, and redistribution of assets, that the sup- ply responsiveness hinges upon new concepts of airlift? Mr. FASICK. I think so. I think the Army is even thinking ahead to an increased capability and availability of airlift to them. Mr. ROBACK. What I see there are contrary tendencies. On the one hand you have to develop a doctrine of airlift for the grounded Army, so to speak; on the other hand, there is a lot of concern, in which the GAO probably not only shares but helps to articulate, that there is too much going by air that is not airworthy. So you have a tendency to discourage people from developing air- mindedness in cargo when you are constantly criticizing them for hauling by air what ought to go by slower methods. These are practi- cal problems of the operators. PAGENO="0038" 32 Mr. FAslcic. I had the pleasure of meeting with some people out at MAC, including the commander of the Military Airlift Command. They are pointing out that the cost of air transportation is constantly coming down so that someday many of the systems and concepts we have for distribution will and should change. I even asked the ques- tion about the Army's stockpiling of railroad cars for transporting people when today we are moving all of our people through airlift and other rapid forms of transportation as opposed to railroads. Mr. ROBACK. You refer to the rolling stock? Mr. FAsIcK. Rolling stock that they have stored. Mr. ROBAGK. 5,000 or whatever old cars in rolling stock, and narrow gauge, no doubt. Mr. FASICK. Then we were also talking to General Norton, com- mander of the Army Aviation Materiel Command. He was pointing out that they didn't have the availability of airlift and needed to move, for example, engines for helicopters, by surface, but they had at that day reached a new agreement with the Air Force people for increased air availability and he was pleased. I think this all ties in, Mr. Roback, to what the Army should be thinking in terms of its logistics concepts. Should we be thinking in terms of massive, large overseas stockage organizations or should we be thinking in terms of rapid resupply? But that is down the road a bit. Mr. DAHLIN. On page 20 of your statement you talk about several supply systems for the support of the forces. Have you developed a list of just how many systems you are talking about? Are you talking about regular systems or all of these as priority systems? Mr. FA5I0K. I would like to be a little bit careful how I describe these because I think Mr. Roback hit a very valid point where he pointed out that all supply systems need, in some cases, extraordinary actions in situations such as we are finding in Vietnam. Let me give you an illustration. The Marine Corps, for example, never did trust the communication systems until very recently between Vietnam and Okinawa. So they not only sent some of their requisitions through the trans- ceiver transmission system but they duplicated it by having a courier fly daily from Vietnam to Okinawa to carry the requisitions to be sure they got them. Here is an illustration where they compensated for a weakness in the system with something else that was less efficient; but it was the only way they could assure themselves that they would get their requisitions there. Mr. DAiTLIN. This was before they introduced computers into the Marine Corps system. Mr. FAsIcic Well, no; it wasn't. They had the computers in the Marine system, but it was a question of not having faith in the com- munications system that the Army was using between Vietnam and Okinawa. They just refused to accept- Mr. DAHLIN. They were afraid the data would get scrambled? Mr. FAsIcK. Scrambled or lost. A clerk walking to one of the switch- ing stations could trip and lose a box of cards and you would lose your requisitions. Mr. RANDALL. There have been some instances of that and we know of some. I am not sure it is a question of faith but rather a question of faith shaken on the part of the Marines. PAGENO="0039" 33 Mr. FASICK. But I think this is what we have in mind. Whenever you don't have confidence in your system and you want to be sure it is done, you take extra actions to be sure it is done; and if we can take actions to get the system more sound, we won't have to do these kinds of things. Mr. IDAHLIN. That is a Marine Corps item you mentioned. What are the special supply systems that you include within your comment on page 20? Mr. FASICK. Let us furnish something for the record on that, Mr. Dahlin. I don't have it at the moment. Mr. COLB~. There are a couple of examples mentioned on page 20. It is certainly not an all-inclusive list. Mr. DAHLIN. You didn't try at the time to find out just what the situation was with respect to these systems? Mr. FASICK. We had a list of between 15 and 20 we had picked up just as an illustration, and we can get a list of that nature for you and furnish it for the record. (The following information was supplied for the record:) LISTING OF THE VARIOUS SUPPLY SYSTEMS FOR THE SUPPORT OF THE U.S. ARMY FORCES IN SOUTHEAST ASIA SPECIAL SUPPLY SYSTEMS 1. Red Ba1l-Requisjtion~ for deadlined equipment in Vietnam are forwarded direct to a control office in San Francisco. 2. Hawk missile supply system-Requisitions are routed directly from Viet- nam to the inventory control point (ICP) in the United States. 3. Army aircraft supply system-Requisitions for repair parts are routed di- rectly from Vietnam to the ICP in the United States. 4. Artillery supply system-Requisitio~~ for repair parts for artillery items are routed directly from Vietnam to the ICP in the United States. REGULAR SUPPLY SYSTEMS (The following supply systems operating in Vietnam are essentially the same as those used throughout the world for the types of item shown.) 1. Subsistence items. 2. Items for the support of South Vietnamese forces. 3. Commercial vehicle repair parts. 4. Bulk-petroleum, oil, and lubricants (PO.L). 5. Items procured locally. 6. Medical items. 7. Supply of parts for the support of new equipment deployed to Vietnam 8. Ammunition items. 9. Common housekeeping items. 10. Repair parts for equipment other than those specifically cited above. Mr. LTJMAN. Does this increasing automation of supply procedures make the importance of check systems greater now in terms of supply discipline; in other words, is it easier to distort the supply system be- cause you are just using numbers rather than names of items? Do you think this plays a role in the need for a check system? Mr. FASICK. Under the complex systems that exist, I think the man- agers must exercise judgment through exception reviews or other types of reviews. It is all the more important to build checks into your com- puter programs, something along the line that Mr. Roback spoke about before. Any time you get a high-priority request for certain types of noncombat essential commodities, then it should be ques- tioned or could be questioned. PAGENO="0040" 34 Mr. OOLBS. This is an advantage that these types of standardized sys- tems give you. It gives you a basis for analysis. You can analyze trans- action data coming from using units, by commodities, and see what your experience has been. This will point up the exceptions such as abuse of the system that will require specific management attention. Mr. ROBACK. You referred in your testimony to an earlier report to several committees of the Congress. This was not a formal report by the Comptroller General? Mr. FASICK. No, it wasn't. It was transmitted by the Comptroller General to the chairmen of various committees. Mr. ROBACK. It wasn't a blue book, was it? Mr. FASICK. No. USE OF STOCK FUNDS Mr. ROBACK. In that report were some of the things you have re- capped or restated in your testimony, but there was one item I recall that you didn't touch upon in your testimony, and that is you suggested that possibly under combat or crisis conditions the stock fund method of financing supplies could be inefficient or a delay factor. If the fund was inadequate or the commanders didn't have the requisite funding, then there would be unnecessary delays and you thought perhaps there ought to be suspensions, as I recall- Mr. FASICK. A raising of stock fund control to a higher level. Mr. ROBACK. Would you expand on that a bit and do you still sub- scribe to that position? Mr. FASICK. We do. In the report we recommended it and the Army has adopted it. No supplies are being denied to Vietnam now because of stock fund limitations. We did find, as pointed out in that report, back in March 1966 that several hundred million dollars of supplies were held up because of the allocation of stock funds- Mr. ROBACK. Who is the paying entity closest to Vietnam? Who has to pay for the supplies? Mr. FASI0K. TJSARPAC-U.S. Army, Pacific. Mr. ROBACK. Under what conditions ought there be suspension? When there is fighting, actual combat? Mr. FASICK. Yes, this is what we suggested. ADEQUACY OF FACILITIES IN VIETNAM Mr. RANDALL. That was the long bell indication that the House is in session. I think under the rule we have consent to sit while the House is in session. I won't be very long. I have just a few questions. I find no reason to question some of your recommendations on page 3 of your report, which seem to be very reasonable. When I get over on page 4, you talk of the lack of sufficient computer capability. You are not suggesting putting computers out there in the field, are you? Mr. SToLAimow. The Army is doing just that, sir. Mr . FASICE. Down at the DSU unit- Mr. RANDALL. Whereabouts, in Saigon? Mr. FASICK. In Saigon, Cam Ranh Bay, Qui Nhon. Mr. RANDALL. We managed to break away from our keepers one afternoon and got around a little `bit on our own. That is why I want to ask you something about these photographs. When were these photographs taken? PAGENO="0041" 35 Mr. FASICK. November and December of 1967. Mr. RANDALL. We will have to say we didn't see anything quite as disheveled as this unless some of this stuff just came in. We found some pretty good warehouses there, and in pretty good order. Mr. FASICK. That was at Long Binh. Mr. RANDALL. Up and between there and Cam Ranh. We took a pretty long trip, and, I would have to submit, all up and down there it was much better than your photographs would indicate. You say this was in December? Mr. FA5ICK. November and December. Mr. LUMAN. This is Saigon? Mr. FAsICK. Saigon, the 506th Depot, which is moving, and I suspect it is going to take them a couple of months to get them moved to Long Binh. Mr. RANDALL. We have established the fact that you are going to put computers in the field. Mr. FASICK. The Army is. Mr. RANDALL. You say there is a shortage of trained inventory managers. These would all have to be civilians. Mr. FASICK. No, sir. They have military people trained. For example, you may have had occasion to visit the Marines' computer center. It is about 10 miles outside of DaNang. They have it all sandbagged, but they have a very complicated computer set up there 10 miles outside of DaNang. But these are essential, sir, to today's modern, highly sophisticated, highly complex logistics systems. I don't think they could operate without them for a very long period. Mr. RANDALL. Your contention is at the time you wrote this report there was still inadequate facilities for the storage of inventory in December? Mr. FA5ICK. Very much so, and I suspect the Army would be pleased to point out to you, too, that they could use more facilities. Mr. RANDALL. I don't think there is any doubt about that. I just have to challenge the disparity between your photographs and some of the things we felt were in pretty good condition as far as their warehousing. You recommend that the Secretary, on page 36, establi~sh a system for challenging the priorities of requisitions in Vietnam to preclude unauthorized use of unnecessary high priorities. Well, of course, a high-priority item is something you have to have, and I assume that someone is going to pass judgment on that at the start. How are you going to check on that commander? How are you going to challenge it? Mr. FASICK. If the man comes in and he wants a refrigerator or a davenport- Mr. RANDALL. Is it quantities or items? Mr. FASICK. It would be types of items and quantities, both. Mr. RANDALL. I think there is a reasonable doubt about refrigerators, but as distinguished from the number of weapons-you are not talking about weapons? Mr. FA5IcK. Not combat essential items at all. Mr. RANDALL. Then you are not talking about combat items? Mr. FASICK. We are talking about noncombat essential items. Mr. RANDALL. You refer there to an inventory manager. Are you suggesting that be within the military or is that civilian? On page PAGENO="0042" 36 36 you say you recommend the Secretary initiate a procedure whereby periodic lists of short-supply items will be submitted by operational organizations to inventory managers. Who are those people? Mr. FASI0K. These would be the inventory control points here in the United States. For example, the Aviation Command in St. Louis, Mo., the Tank Automotive Command- Mr. RANDALL. Over in Illinois? Mr. FASICK. In Michigan. LOW-DEMAND ITEMS Mr. RANDALL. I was interested in your remarks just a second after I came in when you said that the DSA had 800,000 items in inventory that had not been moved. Mr. FASI0K. This was DSA and Navy. These were items that had not moved for a period of 24 months or more. There had been no activity. Mr. RANDALL. What is your recommendation as to that? Mr. FA5ICK. We recommend that they give consideration to eliminat- ing these items from the inventories. Mr. RANDALL. You established a period of 2 years. Is there anything magic about that time? If it hadn't moved for 6 months or a year, would you make the same recommendation? Mr. FASICK. No. Two years isn't necessarily magical, except that we feel that once something has been in an inventory 2 years and you haven't had any activity in it, it deserves some sort of review. Mr. RANDALL. But a year would be all right in your opinion? Mr. FASICK. Yes; I think so. There are many items- Mr. RANDALL. Eighteen months? Mr. FASIOK. Now it is a question of degree. Mr. RANDALL. I am trying to get you to say why you say 2 years. You just found that to be a factor. How did you reach the 2 years? Mr. FA5I0K. Many times the services determine whether they are going to stock an item based on the number of demands they get in a certain period of time. Frequently, if they have three demands in a 1-year period, then they decide to stock that item. So, working from that basis, if they have had no demands for an item in 2 years and if after reviewing the case- Mr. RANDALL. The statute of limitations runs out after 2 years? Mr. FASI0K. Not necessarily in every single case. There are times when an item is essential. You may not have any use for it for 10 years, but if you didn't have it when you need it a system would break down completely. Mr. RANDALL. I will have to say to you that is the whole theory of stockpiling. We think we need some of that around as long as it is usable, no matter where it is. Mr. FASICK. The point of the 800,000-and-some items is that we are not suggesting all of those be eliminated and dropped from the in- ventory tomorrow, but we think it illustrated the magnitude of a problem that needed more attention than it was getting so far. I think the Department of Defense is in sympathy with that position, once they can get the wherewithal to work on it. PAGENO="0043" 37 Mr. R0BAOK. Generally in the past they have tried to work on break- ing down-I think the Navy had a fractionation program where they would try to segregate, for example, slow moving items. All managers try to identify slow moving and fast moving and other categories for management purposes. This was just one instance where they, hadn't been giving enough attention to the problem? Mr. FAslcic. Right. Mr. RANDALL. I think we should announce that when we adjourn today we adjourn until 10 o'clock tomorrow morning in this same room and General Heiser of the Army will be our chief witness. Before we adjourn, I would like to thank Mr. Fasick, although I want to put it very clearly on the record I don't agree with all of this. I submit the commander certainly must have some prerogatives which he must perpetuate in the field. (Thereupon, at 12:10 p.m., the committee was recessed, to recon- vene at 10 a.m. Tuesday, June 25, 1968.) PAGENO="0044" PAGENO="0045" MILITARY SUPPLY SYSTEMS TUESDAY, JUNE 25, 1968 HoUsE o~ REPRESENTATIVES, MILITARy OPERATIONS SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPEI~&TIoNs, Washington, D.C. The subcommittee met, pursuant to recess, at 10 a.m., in room 2247, Rayburn Building, Hon. Chet Holifield presiding. Present: Representative Chet Holifleld. Also present: Herbert Roback, staff administrator; Douglas Dahlin, counsel; Joseph 0. Lunian, defense analyst; and Paul Ridgely, in- vestigator. Mr. HOLIFIELD. The committee will be in order. Today we continue with our hearings on military supply man- agement. Maj. Gen. Joseph M. Heiser, Jr., Assistant Deputy Chief of Staff for Logistics in the supply and maintenance areas will present his statement. General Heiser, I note your statement is rather lengthy. Members of `the staff may have some questions as you go along and also at the conclusion of your statement. So excuse us if you are interrupted, but you cover so many important issues we want to get some amplification as we go along. General, you may proceed. STATEMENT `OP MAJ. GEN. JOSEPH M. HEISER, JR., ASSISTANT DEPUTY CHIEF OF STAFF, LOGISTICS (SUPPLY AND MAINTE- NANCE); ACCOMPANIED BY BRIO. GEN. JOHN KLINGENHAGEN, DEPUTY, AD'CSLOG (S. & M.); COL. ANTHONY DASICEVICH, DEP- UTY, AD'CSLOG (S. & M.) FOR PURM; LT. COL. OSCAR J. SANDERS, STAFF OFFICER, SUPPLY POLICY AND PROCEDURES, DIRECTOR OF SUPPLY; COL. J. M. TUMLINSON, CHIEF, EUROPEAN-NORTH AFRICA BRANCH, THEATERS, DIVISION OF PLANS; WAYNE SMITH, TECHNICAL ADVISER, AD'CSLO'G (S. & H.); JOHN TAYLOR, `CHIEF, LOGISTICS DOCTRINE AND SYSTEMS OFFICE, DCSLOG; ALL DEPARTMENT OP THE ARMY; BRIG. GEN. LEO B. JONES, DEP- UTY COMlV~A,NDIN'G GENERAL, FIRST LOGISTICS COMMAND, U.S. ARMY, VIETNAM; AND ROBERT WOO'DSIDE, OFFICE OP THE DEP- UTY CHIEF OF STAFF PERSONNEL BIOGRAPHICAL SKETCH, MAr. GEN. JOSEPH M. HEISER, JR. Joseph M. Heiser, Jr., was born in Charleston, S.C. on January 22, 1914. He attended Providence College, Providence, R.I., and The Citadel, Charleston, S.C. He was awarded a masters degree in business administration upon comple. tion of a 2-year course in industrial executive training at the University of Chi- cago in 1956. (39) PAGENO="0046" 40 He served in an enlisted status from April 1942 to February 1943 and attained the grade of first sergeant. He was commissioned a second lieutenant on May 15, 1943, upon graduation from the Officer Candidate School, Aberdeen Proving Ground. During World War II he served in the European Theater of Operations and was awarded the Legion of Merit for this service in combat support of U.S. forces in their mounting of the Normandy invasion and liberation of Northern Europe. Following World War II he was assigned as assistant executive officer, Office of the Chief of Ordnance, where be remained until selected for attendance at the Command and General Staff College in September 1949. in 1950, at the outbreak of the Korean conflict, he was assigned to the Far East Command as ammunition supply officer and assistant ordnance officer of Pusan Base Command. He was subsequently assigned to the 7th Infantry Divi- sion and during this period of service was awarded an Oak Leaf Cluster to his Legion of Merit as well as the Bronze Star and Commendation Ribbon with Metal Pendant. Returning to OONUS in 1951, General ileiser was named executive officer of the ordnance school where he remained until assigned in 1954 as a student officer to the University of Chicago. In 1956, he returned to the Office of the Chief of Ordnance as executive officer. lie entered the National War College in August 1960. General Heiser arrived in Europe in September 1961. He was assigned as As- sistant Chief of Staff, G-4, 4th Logistical Command, and served in that capacity until his appointment as chief of staff and deputy commander of the command on June 27, 1962. He assumed duty as Chief of Staff, U.S. Army Oommnnications Zone, Europe, on March 11, 1963. He was assigned as Assistant Deputy Chief of Staff for Logistics (Supply and Maintenance), Department of the Army, on April 4, 1966. General HEISER. Mr. Chairman and members of the committee, 11 am Maj. Gen. Joseph M. Heiser, Jr., Assistant Deputy Chief of Staff for Logistics in the supply and maintenance areas for the Headquar- ters, Department of Army. For the last 2 years I have been directly involved in improving supply and maintenance effectiveness Army- wide and particularly in South Vietnam. Starting in July this year, my interest in the South Vietnam logistic system will be more specific with my assignment as the commanding general of the 1st Logistic Command. Mr. Chairman, I may insert off the record a comment here, sir. (Off the record.) General HEIsER. Findings contained in General Accounting Office reports and prior committee presentations are indicative of the highly penetrating study given to the combat logistic system. The thDrough- ness and dedication evidenced in the General Accounting Office reports are a tribute to the dedicated service of their personnel and success of their functional approach to audit work. Over the years, and especially the most recent 2 years, contacts with General Accounting Office's representatives at all levels have been most rewarding and their suggestions concerning improvement of operations in Southeast Asia and Armywide have been most helpful. The Army has met with General Accounting Office representatives during the course of their Southeast Asia reviews and prompt cor- rective action has been taken where possible and practical. It is in the context of this relationship that my remarks will be directed. I would like to add that we have had periodic meetings with the General Accounting Office so that we could have reviews of situations with which they were familiar, to indicate what progress was being made as time went along. PAGENO="0047" 41 The General Accounting Offic~ opinion that the Army supply system has been responsive to combat needs is a reflection of success in today's highly complex environment. In the next hour or so that Department of Army logistics management structure will be presented along with a short résume of the history and development of operational man- agement controls used Armywide and an outline of logistic commands in Southeast Asia, including some information on the complexities to the Army weapons system, equipment, and materiel. Prior General Accounting Office reports and Department of Army efforts to eliminate deficiencies will be addressed briefly as they apply to efforts in process or planned for logistic operations, including the Quick Reaction Inventory Control Center, and planning underway for use of future technological advances in transportation, communi- cations, and automation capabilities. It should be noted that the more complex problems existing in the logistic system are principally identified to the more difficult area of repair parts management. In consideration of complex problems in the logistic system, it is essential that such systems be designed both in continental United States and overseas so that they will be effective in a combat environment. GENERAL HISTORY AND DEVELOPMENT OF SUPPLY SYSTEMS IN USE, DEPART- MENT OF ARMY-WIDE AND LOGISTIC COMMAND ORGANIZATIONS IN SOUTH VIETNAM The Army supply system, like that of the other military depart- ments and the Defense Supply Agency, is governed by broad policies established by the Secretary of Defense. The Secretary of the Army is aided in supply ar~d logistics matters by the Assistant Secretary of the Army, Installations and Logistics. Within the Army staff, the Deputy Chief of Staff for Logistics is the principal adviser to the Chief of Staff and to other staff and major command elements on logistics matters. The Army was reorganized in 1962 and major realinements were made in the supply system. The Army within the continental United States was formed into three major commands: The Continental Army Command, the Combat Developments Command, and the Army Materiel Command. The traditional technical services were reduced or eliminated, and except for medical supplies, all of their former materiel functions were centralized within the new Army Materiel Command. The Deputy Chief of Staff for Logistics staff supervision was strengthened. Under this revised concept, the Army Materiel Command is the wholesale supplier for the Army as well as principal participant in supervision of Army logistics worldwide. Upon its activation in 1962, it assumed the miss~ions formerly assigned to the Chiefs of Technical Services of the Army concerning the development, test, cataloging direction, quantitative requirements determination, procurement, pro- duction, distribution, supply control, inventory control, maintenance direction, and surplus disposal of supplies and equipment. The Army Materiel Command has eight major subordinate com- mands. Seven are commodity commands which are responsible for materiel management in a specific commodity area: tank-automotive, PAGENO="0048" 42 aviation, missiles, weapons, electronics, mobility, and munitions. One is a service command responsible for providing test and evaluation services to the Army. National inventory control points are responsible for the worldwide management of inventories of assigned commodities. The individual commodity manager at the national inventory control point is respon- sible for the management of specific items assigned to him. This responsibility includes accounting for assets, requirements computa- tions and direction of procurement, distribution, overhaul and dis- posal. As a result, all of the wholesale functions and technical assist- ance and supervision of retail functions of inventory management for an item are centralized at one place. The Army's field logistic concept is one of rapid repair and return of weapons systems and equipment to combat with minimum invest- ment in resources and highest availability to the combat commander. When materiel cannot be quickly repaired in the forward or corps and Army combat areas, it is evacuated to the relatively more secure area of the communications zone where more comprehensive fixed maintenance facilities can be used. The Army uses the standard Defense requisitioning system, as do all services. Order and shipping time criteria are centered around combat missions, commodities, transpQrtation costs, and related capa- bilities needed in combat. For the most part petroleum, oil and lubricants, ammunition, and general-purpose vehicle maintenance sup- port is provided by the Army to other services in a combat area and overseas in peacetime. There are approximately 2,500 mobile field Army units which must be supported by the Army supply system in Vietnam. These units submit requisitions to the supply system for materiel, including the repair parts needed for about 200 major maintenance significant items in each unit. Initially, it was considered possible to support combat units from static or fixed base camps; however, the large number of units and their high degree of mobility and extended com- bat missions away from the base camp prohibit application of this support method. Mr. R0BAOK. General, at that point, what is the method? You cannot supply from fixed base camps, so how are you sup- plying? General HEIsER. What we are doing, sir, is supplying from a base of three major depots in Vietnam, in Saigon, Qui Nhon, and Cam Ranh Bay areas, and those are the only fixed installations we have. The other installations are direct-support and general-support units that accompany the combat units in their operations, so that they move. Mr. ROBACK. You are still operating from fixed base? General HEI5ER. We are operating from three depots, sir. The fixed bases I am talking about, Mr. Roback, are the bases that were initially established to support a combat division, for example. An example would be the fixed base that was established outside of Bien Hoa for the 101st Airborne Division. The 101st Airborne Division has not been within 200 to 300 miles of that base in the last 6 months. In fact, they are north now, Qui Nhon. PAGENO="0049" 43 Therefore, the value of that fixed base now, because of the movement of tactical troops, becomes less valuable in terms of a supply center. Mr. ROBACK. These 2,500 mobile units that are being supported, do they include advisory units attached to the ARVN? General HEI5ER. No, sir. Mr. ROBACK. Do they include Special Forces camps? General HEISER. No, sir. They would not include the Special Forces camps. Mr. ROBACK. What is the lowest unit level that is a subscriber? General IFIIEIsER. We are talking here, sir, about the unit that has a supply entity in terms of the fact that they have certain authoriza- tions upon which they requisition, and that they submit requisitions on the system. I think that is the easiest way to describe it. Mr. ROBACK. They are the subscribers? General Hrn5ER. Yes, sir. Mr. ROBACK. What is the lowest unit for requisition, a company? General HEISER. No, sir; a battalion. Mr. ROBACK. Battalion? General HEISER. In the infantry setup. Mr. RoBAcic. Is it fair to say that among the 2,500 mobile field Army units that are supplied, that the majority of them are battalion, maneuver and other battalions? General HEISER. Sir, they are maneuver battalions, separate com- panies, if they happen to be separate, including if they are DSTJ, that is not assigned to a division but as a separate direct support unit. It can be a company or it can be a battalion, sir. Mr. ROBACK. All right. General Hrn5ER. This then is a thumbnail sketch of the Army's logistic organization, and management control. Let us examine the build-up in South Vietnam to gain some idea of the complexities of overseas logistic support. The Army's logistic operations in South Vietnam are managed by the Headquarters, U.S. Army, Vietnam. This headquarters exercises command over all types of material, including separate commands controlling aircraft, avionics and aircraft armament, medical supplies, engineer equipment and ammunition, petroleum, oil and lubricants, repair parts and other supplies. Full-scale planning for logistic support of Department of Army forces in South Vietnam began in 1964 to meet requirements of the U.S. combat involvement and on April 1, 1965, the 1st Logistics Com- mand was assigned and located at Saigon. The command's initial tasks were to obtain the necessary real estate and establish support capa- bility in the areas of Saigon, Cam Ranh Bay, Qui Nhon, Nha Trang, and Vung Tau. Responsibilities of the 1st Logistics Command included supply oper- ations-except aircraft-maintenance support, transportation, grave registration, and miscellaneous services. Support to engineer activities, excluding major construction, and purchasing and contracting serv- ices was also accomplished. Mr. ROBACK. Generally, what forces or elements does the Army not support in Vietnam? General HETSER. Excuse me, sir? 97-475-68-4 PAGENO="0050" 44 Mr. ROBACK. What U.S. forces in Vietnam or engaged in the Viet- imm conflict are not supported by the Army? General J-JEISER. There is none, sir. Mr. ROBACK. I mean you do not support the Marines, do you? General HEI5ER. We support the Marines partially, sir, depending on where they may be located. Mr. ROBACK. Could you tell us at' this point what is the allocation of responsibilities for support for Vietnam? General HEISER. Yes, sir. Basically, each service supports itself. However, in an effort to avoid duplication, where a service responsibility cannot be included entirely within a certain geographical area, there have been arrange- inents made, as they are made throughout the services to assure that we do not duplicate the efforts of on~ another to the extent that this can be avoided. Now, sir, for example, basically the South Vietnam combat area is divided into four Corps Zones. Starting at the north, at the DMZ and working south, we have the I Corps Zone, which is primarily and has been, as you know, a responsibility of the Navy and the Marines. This has become more complex since the first of this calendar year, when Army troops were moved up in considerable numbers into this area. There is then the second, third, and fourth Corps Zones progressing down to the Delta area. In the second, third, and fourth Corps Zones, since the Army's combat units predominate, it is basically an Army mission to support those Corps Zones. In the I Corps Zone, it is basic- ally a Navy mission to support those Corps Zones. Within this rather simplified approach, it becomes a little complex, and I can go into this to the extent that you desire. However, in the I Corps Zone, I think we might examine this and indicate what does happen. The Army has moved up into the I Corps Zone into an area at Da Nang, for example, at which the Navy has a base development plan with the Marines and in which the Navy has been the principal agency responsible, including port operations. The Army is supporting Army units to the extent that it has been determined practicable, using common supply through the Navy to support Army units. For example, food. Food to Army units in I Corps Zone is supplied through the Navy. It becomes more complex when we get into repair parts and support of equipment, because of the fact that we are talk- ing about different types of equipment in many cases, and so what we have to do, and what Army policy in this regard is that we will not duplicate anything that we can get through the Marine supply system in I Corps Zone, but we will support the Army requirements on those items that are not available through the Navy supply system in I Corps Zone. Now that can be applied, I think, pretty generally across the entire South Vietnam area. I would like to add to this that there has been considerable inter- service supply support agreements, both in Vietnam and outside of Vietnam, whereby the services support one another depending upon the economics of the situation as they are seen, sir. PAGENO="0051" 45 Mr. ROBACK. All right. General 1-TEIsicu. Since 1965, the 1st Logistics Command has grown from the initial 34 military personnel to over 50,000 military personnel and approximately an equal number of civilian personnel providing combat service support to U.S. forces of more than one-half million, not including support to allied forces. I might insert here, sir, that the workload, the 1st Logistical Com- mand handles, to give some size of the scope of the problems-in May, which is a good exemplary month, we received 248,000 short tons in those three depots, and we shipped out of those three depots to cus- tomers 268,000 tons, or in excess of a half-million tons in the month. This does not include 2.6 million barrels of POL, but of course POL, that is bulk POL, and this goes through pipeline. So in addition to this, there is one other fact: that in retrograde, moving unserviceables out of the country, we have reached a 30,000 short-ton level in this regard. Mr. R0BACK. You have 100,000 employed by the 1st Logistical Com- mand equally divided into military and civilian? General HEIs1~n. Roughly; yes, sir. Mr. ROBACK. The civilians do not count in your force level quotas, do they? General HEIsin. We have a civilian ceiling that is authorized Viet- nam both in terms of Department of Army civilians as well as local nationals, sir, in addition to the limits on military personnel. Mr. ROBACK. In the 530 or 540,000 U.S. forces in Vietnam, are these 50,000 counted? General HEISER. Yes, sir. Mr. ROBAOK. Do you have a civilianization program to try to put more civilians in there so that more of the military personnel will be counted as combat, available for combat? General HEis1~n. Sir, may I first of all, in view of the questions that are going to take place, state I have two witnesses with me at the table that I would like to introduce so that you will know when they get involved in the questions and answers. One is Brig. Gen. Leo B. Jones, who is the deputy commander of the 1st Logistical Command in Vietnam. He was not brought back here especially for this hearing, but he happened to be here, and so he is cooperating with us to assist in answering your questions, sir. Over on my right, sir, is Mr. John Taylor, who is in the systems portion of the DCSLOG office, and so when we get into examination, particularly an examination of logistics systems having to do with ADP processes and other things, Mr. Taylor I am sure will be of value. And then behind us, sir, in case of need, we do have some others, including, while he may not answer questions, I would like to intro- duce for future reference Brig. Gen. John Klingenhagen, who ap- parently will be announced as succeeding me in my job when I leave, sir, and tomorrow is my last day. Mr. ROBACK. We just happened to catch you. You can hit and run on this one. General HEISER. Yes, sir. Mr. lloLIFIra~n. Kind of a going-away party for you. General HEISER. Yes, sir. It is my privilege, sir. PAGENO="0052" 46 I would like General Jones perhaps to answer this question of civilianization. General JONES. Specifically on civilianization, the answer to your question, sir, is "Yes." We are civiianizing more this year. Our target for the 12 mouths ending May 31 is 7,100 personnel. In other words, we will lose military authorization for that many military spaces, and they will be replaced with civilians, within the 1st Logistical Command. This does not include other civilianization in Vietnam, which I am not prepared to talk to. Mr. ROBACK. I understand. General JONES. But we have the bulk of it, sir. General HEISER. May I clarify that, sir? General Jones said he would lose. He is speaking of the 1st Logis- tical Command as opposed to the entire Army complex. Mr. ROBACK. If you lose so many military, if you need to do the work, you have replaced them to the extent that you can with civilians? General JONES. Yes, sir. Mr. ROBACK. Let me ask you this: In other connections we will be discussing logistics and supply personnel requirements. Is the civilian- ization trend or effort contradictory to or contrary, I should say, to the development of properly trained military personnel for logistics as- signments in a theater? General HETSER. Sir, may I answer this one because it is involved really Armywide, and I might add that you will get into this later. But you already know that there is a project coordinator for the redistribution of local excesses within the Department of Defense. I happen to be that project coordinator. As a result of this responsibility, I have had the opportunity in the last 6 months of observing other services and their practices. I would like to take my hat off to the Air Force in this regard, because of what I have seen in the last several months. The Air Force has a formal way of setting up civilians to back up the military in the field. They have various teams that are organized here in CONIJS and they are dispatched overseas as the requirement is necessary, to do various things that require professional capability that is not always available within a military base overseas. We have been doing this in the U.S. Army on an informal basis, but not formally. We have to structure ourselves to do this, in my humble opinion. Now, what this leads to is this, sir: We are in a sophisticated logis- tical structure and system. As you well know, we have the responsi- bility of conducting this in a military combat environment, using the bulk of our people, being 2-year men who have a year or a little more to serve, and of course in Vietnam 1 year no matter what. In a sophisticated system, it is difficult to maintain know-how of the bulk of the soldiers in this regard; and secondly, sir, it is also difficult to maintain the level of proficiency required in many of our more sophisticated types of jobs. One of them, for example, is the program design and supervision maintenance of programs of automatic data processing equipment. As a result, we are and we intend in the future to lean, if anything, more heavily on civilian personnel who are available to do certain PAGENO="0053" 47 highly specialized jobs within the military, and it is my personal opmion, on the basis of my experience, sir, that this will include con- siderable in the combat zone. Now this is not unusual. World War II, as you will recall, I am sure, had many civilians in the various theaters of operations, both con- tractor and Department of Army. I do not think we recognized quite as much, because we did not examine into the various theaters of operations to the extent we are going today. But this is not really new except that perhaps, sir, because of the sophistication involved, we may have to carry it further, Mr. Roback. Mr. ROBACK. The environment may be conducive to emphasizing military personnel, but the rotation and the discontinuity involved, let us say, in the short tour militates against that, so you are interested in getting more civilians into overseas theater operations as far as logistics and supply are concerned; is that right? General JoNEs. We are talking two different types of civilians here, sir. We are talking-my remark and my answer to your question was on the 7,100. These are being replaced by Vietnamese nationals. The other side of the question is the Department of the Army civil- ian or a contractor who may hire some U.S. nationals, in order to do that. General HEISER. Yes, sir. Now- Mr. ROBACK. Your civilianization program is to hire the so-called indigenous personnel? General JoNEs. Right, sir; with respect to these 7,100. Mr. ROBACK. The other question we are talking about is the appro- priateness of having U.S. civilian personnel in theaters. General JONES. Right. General HEISER. Yes, sir. Mr. ROBACK. In operational theaters? General JONES. Right. General }1rnsi~. Your summation of this is right, Mr. Roback, in that w~ do have to compare the advantages of civilians against the disadv~intages of civilians that occur in times of close combat; for example, Tet. Tet disrupted considerably our ability, and if you want to call it that, lines of communication, down to the point of a worker, whether he be a U.S. worker or whether he be a South Vietnamese worker, getting into his place of employment, and General Jones could elaborate on this considerably, but we are only now getting back to somewhere around 80 percent of the number of civilian employees employed at the depot in Saigon that we had prior to Tet, and this gives you some indication of the fact of what you have said. We have to be careful that we do not overdo this, because otherwise, in a tough combat situation, we can find ourselves in a difficult situation. Mr. HOLIEIELD. These people just faded away; it that right? General HEISER. Well, sir, they faded away; and to some extent it was because they wanted security, to get out of the fighting area, and to another extent a lot of these people lust could not get back and forth, Mr. Chairman, including some of the military had a difficult time getting back and forth to their place of business where they were not completely within a secure area. Mr. ROBACK. Do the civilians get hazard pay? PAGENO="0054" 48 General HEI5ER. No, sir. Mr. ROBACK. TJ.S. civilians? General HEI5ER. The U.S. civilians-Mr. Woodside says the U.S. civilians do not get any kind of hazard pay but they get an allowance over there. Mr. ROBACK. Will you continue? General HEISER. Since most of the war materials and equipment are delivered by ocean transportation, the support commands and depots are located at or near accessible ocean ports. Largest of the three major support commands is at Saigon where the 4th Transportation Com- mand operates both the port at Saigon and a new port terminal 31/2 miles downstream. Principal storage of material has been substan- tially transferred from crowded facilities in and around Saigon to Long Binh, which is approximately 25 miles north of Saigon. Inventory management in South Vietnam is accomplished by the 14th Inventory Control Center. The 14th was initially formed at Fort Hood in September 1965, and arrived in Vietnam in December. On arrival in South Vietnam, the 14th Inventory Control Center provided assistance to the depot operations at Cam Ranh Bay and Saigon, and in October 1966 was reassembled in Saigon, and began its mission of centralized stock control and supply management that same month. The following October, the entire operation was relocated to Long Binli and large-scale computers installed to improve operational control and processing timeliness. Mr. ROBACK. Can you tell us, General, what is the difference between a control center and a control point? General HEISER. Sir, we use the term "control center" to cover those inventory management centers in our field operations. We generally restrict the inventory control point terminology to the national agen- cies, such as the national inventory control points which are part of our Inventory Command, I mean Commodity Commands, and DSA, for example, their various inventory control points. So that it is more a question of national versus field structure organization. Mr. ROBACK. Are there control points in theaters, overseas theaters? General HEISER. Yes, sir. Excuse me, sir, we do not use the term "inventory control point" overseas. Mr. ROBACK. The wording "inventory control point" refers to a commodity management and control in the United States, CONUS? General HEISER. Yes, sir; that is essentially correct. Mr. R0BACK. Does the inventory control center, such as the one in Saigon, combine inventory control management and physical distribution of stocks? General HEISEE. From the viewpoint of paper directives, et cetera; yes, sir. Now they are responsible for this in terms of operationally carrying it out- Mr. ROBACK. That is the depot operation? General HEISER. That is the depot operation. Mr. ROBACK. That is not the control center? PAGENO="0055" 49 General HEI5ER. No, sir; that is right. They direct the move- ment, sir. Mr. ROBACK. Then let us recap the question. What is the difference between a control center and a control point as far as function goes? General HEISER. Sir, I would say the only difference is the scope of responsibility. At the inventory control points in the CONUS in the United States, they are responsible Army-wide and in the terms of DSA, for ex- ample, they are responsible DOD-wide for certain commodities. Mr. ROBACK. For a given segment of commodities? General HEISER. Yes, sir. Now, overseas they are re~ponsible, generally speaking, an inven- tory control center is responsible for all commodities within that par- ticular area of responsibility. Mr. ROBACK. I see. In other words, it is not distinguished by commodity classifications, but it combines all those commodity functions within that center for that particular theater? General HEISER. Yes, sir. However, I would like to indicate, sir, that within the inventory control center, in order to get proper management to the commodity, and that is basically what we are after is to keep the end item in the hands of troops operable, we have organizations we split down into commodity areas, so that commodities within an inventory control center will get special management by commodities, sir. Mr. ROBAOK. Is this center in Saigon of the nature of the quick reaction inventory control center that you were talking about? General HEISER. Sir, it will do the same functions that the 14th ICC in Saigon at Long Binh, outside of Saigon. The quick reaction inventory control center will perform the same functions that the 14th ICC now performs. Mr. ROBACK. It is of this nature of organization? General HEI5ER. Yes, sir; that is right. Mr. ROBACK. This is a prototype? General HEISER. Yes, sir. Mr. ROBACK. Or at least this is the experience upon which you are developing that conc~pt? General HEISER. Yes, sir. We are using that as well as the experi- ence we had in other places, such as the 7th Army, where we had and still have, although it is being consolidated now, a 7th Army Inven- tory Control Center, and we have had this in operation now for many years, and we are using the experience gained at all of these, in addi- tion to the standardization that we are now implementing, sir. Mr. ROBACK. You may proceed. General HEISER. To obtain the needed improved timeliness and es- sential management improvements, the card computer systems were converted to the large-scale computer. During this period the U.S. Army, Pacific, standard supply system w~ts being developed to handle the complexities of the requisition edit and supply management processes. At the time of this buildup, this standard system was being tested and installed in the more stable environments in Korea, Oki- nawa, Japan, and Hawaii. PAGENO="0056" 50 Mr. ROBACK. Excuse me for interrupting again, General, but these are important descriptive terms, and we want to be sure we under- stand them. What is the Pacific standard supply system? Is it unique, is it the first such system, or is it the extension of other systems? General HEI5ER. Sir, what it really is, the U.S. Army, Pacific, as with the rest of the Army, has been attempting since the early 1960's, and even prior to that time, with the beginning of the Army's use of card data, using cards instead of manual requisitions as a basis for supply, we have been striving from the early days to determine the `appropriateness of computers in our supply system, and getting the best use out of computers, depending upon the state of the art, and also upon our ability to manage these computers and their processes. What you see in the U.S. Army, Pacific, system is, I would say, an advance stage of this process that has been going on for some time. The Pacific, unlike Europe, has subordinate commands based upon geographical separation, meaning Hawaii, Okinawa, Korea, and Japan; they had to have inventory control centers at each of these places, and what they wanted to do was to establish a standard sys- tem so that they could communicate one with another as well as with the headquarters in U.S. Army, Pacific, Hawaii. As a result, they devised a system, based upon directives that were out and based upon the military standard `system, including MTLSTRIP and other military standard systems, in order that they would not have a hodge-podge of computer programs in each of their commands, but that they would have a standard system. Mr. R013ACK. This is theater standard, so to speak? General HEISER. Yes, sir; that is correct. Mr. ROBACK. When you talk about a Pacific military standard system, you are talking about a standardization for the Pacific? General HEISER. Yes, sir. Mr. ROBACK. All right. General HEISER. From October 1966 up to this time, information on depot inventories is recorded by the 14th Inventory Control Cen- ter and item demand histories maintained. We are now talking about Vietnam proper, sir. Based on this data and other factors, requisitions are prepared to replenish depot stocks. Requisitions from using units for materiel are edited to determine availability of stock from the closest depot and then from other denots in South Vietnam. Should one of the three depots be unable to supply the required material, the requisition is sent to continental United States for supply through the 2d Logistics Command on Okinawa where assets there that belong to the 14th Inventory Control Center, or are excess to the r&iuirements of other Army elements assigned to Okinawa, are utilized to meet the requirement. Mr. ROBAOK. Let me anticipate some discussion later on and ask this question about the routing. This question was raised by the Gen- eral Accounting Office witness yesterday about different layers of management. PAGENO="0057" 51 The requisition goes to the continental United States through Okinawa. Why does it not go to the continental United States which would, let's say, have information on Okinawa. General HEISER. Sir, `actually your question is not far from our objective in terms of the 14th ICC placing a direct requisition on the continental United States in TOP's. In fact, as we go further, you will see that to some extent we are already doing this. However, sir, I think it well to bring out at this point that while we had the objec~tive of cutting out 2d Log Command it would be inefficient and uneconomical to do so at `the present time, `because of the number of requisitions that can still be filled out of the 2d Logisti- cal Command, and the reason for this involves the support of the 2d Logistical Command for the U.S. forces in Vietnam. In Vietnam we have a peculiar structure in that the land mass in- volved and the combat action involved would normally compare what is in-country to what might be called logistically at least a field army, and to back up a field army you would have a communications zone. Now, the communications zone to a large extent would be the 2d Log Command in the case of the situation we have in the Pacific. The 2d Log Command is still responsible for providing certain support to the U.S. Army, Vietnam. One of the `things that they are now doing is, for example, when we have a problem in Vietnam that we cannot fully handle by the forces in there, such as, for example, the identification of boxes of material that have accumulated and they needed identification classification, and `they are in the way in Vietnam, we evacuate these to Okinawa, 2d Logistical Command. At this point they identify it and pick it up, most of which is serv- iceable, and we find, for example, that by requisitions continuing to go through 2d Log, we are able to fill `a continuing significant `amount, and to some extent it increases, depending upon how much more, how many more items are identified. For example, 41 percent of the requisitions out of Vietnam in Janu- ary, that is just one I have in my mind, 41 percent of those requisitions out of Vietnam were filled by 2d Logistical Command on those requisi- tions that went in. Now this is not normal. It is closer to 20, 25, 30 per- cent, but it does indicate the significance of passing these requisitions through 24 Log. At some point in time, sir, it is the objective of the Army to cut this out. Mr. R0BACK. So that Okinawa serves in a sense as a communications zone parallel to the communications zone in Europe. General HEISER. To some extent; yes, sir. Mr. ROBACK. In a sense? General HEISER. Yes, sir. Mr. LTJMAN. May I ask this: General, would not the ideal objective be to treat Okinawa just as you do any of your depots in the States? If you had the communications capability to tax CONUS for all the equipment, and they could either go to one of the points in the States and tell them to ship or go to Okinawa and direct them to ship. If you had the communications, could you do this? PAGENO="0058" 52 General ITEISER. Sir, we could do this if we had the communications and we had the automatic data processing capability, and the manage- ment capability to back this up. What I think we have to be careful about, both the present state of the art and the future state of the art, in terms of determining whether we can reduce ordinary ship time by handling a requisition at 2d Logistical Command as opposed to having a requisition come to CONUS and then have the NICP, who would have visibility at least of the stocks on Okinawa, prepare a material release order for a ship- ment from Okinawa. At the present time, sir, I do not have any hesitancy in stating that I think we are doing the job better using 2d Log Command than we would if we placed those requisitions on the NICP's back home. Mr. LUMAN. They have that visibility right now? General HEISER. Sir, they have a limited visibility. This gets involved a little bit in a story of asset management. However, in answer to your question, we have over the last year been sending weekly transaction reports from the 2d Logistical Command to the NICP's in CONTJS. Mr. ROBACK. They have information copies, is that it? General HEISER, No, sir. These were actually designed as a weekly summary to go to the NICP's. Actually, the Secretary of Defense wants to do just what you and I want to do, and we have a directive from the Secretary of Defense that said we would do this. We have done this. The unfortunate part of it is, sir, that the state of the art is such and the volume of the work is such that, except on an exceptional basis, we are not using this weekly transaction report to the extent that we would like to use it, and this highlights the fact that while there are things we want to do, we are not at the level of the state of the art to do all those things we want to do right now. Mr. LTmIAN. You do occasion a delay with the present system of 3 to 5 days, do you not, by going through Okinawa in processing? General HEI5ER. Yes, sir. There is a delay. Now that 2 to 5 days, of course, depends on the number of cycles we run in the equipment out in 2d Log Command. We can run a daily cyc'e there if need be. In the case of requisition, replenishment requisition, and that is what I am talking about primarily, in case of a replenishment requisi- tion, if we fill the requisition on the 2d Log Command, really a cycle of every other day, for example, and I mention this only because there is a thinking that indicates you have to have a daily cycle'. I think we have to be a little careful. We can get uneconomical in terms of what we spend in ADP and to have a daily cycle, if you cannot react to that daily cycle in terms of shipping as immediately as you can do the APP work, then you really have put too much money in your APP, unless you want to put more money into people who actually pick and pack and ship. Now, in terms of passing requisitions that cannot be filled on 2d Log; yes, sir, you do have a delay, depending upon the number of cycles you run, sir. Mr. ROBACK. Does Red Ball run through Okinawa? General HEIsER. Well, sir, Red Ball runs two ways. Recognizing that Red Ball is a priority system to take an item off deadline that is a PAGENO="0059" 53 combat-essential-type it;em, what we do is we send a requisition to the continental United States, and because we know we have these stocks in Okinawa, we send a duplicate to Okinawa. Mr. ROBACK. The one that gets there first is used? General HEISER. Yes, sir. Mr. ROBACK. Both of them come? General HEISER. Yes, sir. Mr. ROBACK. You are sure you understood what 11 said there? That is, the equipment that gets there first is used. General HEISER. The part that gets there first. Mr. ROBACK. Both of them send, and the one that gets there first is used, and you said "Yes." General HEISER. I beg your pardon, I did not get the one part. The part that; gets there first is used; yes, sir. I did not get that last part. Mr. ROBACK. The implication is that both ship to the requisition. General HEISER. Sir, they both do ship to the requisition. And we think this is appropriate, because, recognizing what caused that reqiii- sition to start in the first place was an item that was deadlined for which they had no part. Mr. ROBACK. I was being jocular but I see it is a serious situation. General }JEISER. It is. Mr. ROBACK. Actually, both of them respond to the requisition, and the equipment that gets there first is used, and the other presumably is needed, so it will be used in due course? General HEI5ER. It will avoid a Red Ball coming in the very next day perhaps, in many cases. Mr. ROBACK. I did not understand how it worked. General HETSER. You were right on the point, sir. Mr. ROBACTi. All right. General HETSER. In support of Vietnam, the Army has gained much experience in the use of military standard systems in support of combat. As a result of this experience, the standard system has been developed to include effective control and management in support of inoperable equipment, and we were just talking Red Ball, which is an example, as well as to include weapons system management of highly operationally essential combat weapons systems. For example, weapons system management for aircraft is configured with separate logistic management control through the Army Materiel Management Center of the 34th Transportation Group. Requisitions for aircraft, and I might add this, that we are talking about several thousand fixed- and rotary-wing aircraft, which is a large amount of aircraft, requisitions, and by the way, they are located at some 260 different locations, requisitions for aircraft, armament and avionics materiel are forwarded directly to the U.S. Army Aviation Command at St. Louis and special management is provided in this area of high- cost material and reparable components in a manner very similar to the Air Force system. In fact, if we analyze this, it is practically identical, and, in the case of our aircraft in the densities we are talking about, which are considerable, we are sending all our requisitions to one place for all systems, and there we have a breakout of systems based upon the type of the aircraft, ~nd we manage it intensively therefrom. PAGENO="0060" 54 Mr. ROBACK. Will you clarify this paragraph in this sense: that you are discussing the Army experience with standard systems, military standard systems in support of combat, but you are really discussing what is sometimes referred to as the stovepipe system. General HEIsER. Yes, sir. Mr. ROBACK. Special systems that have been developed either because the supply system, the standard system does not accommodate itself, or because these particular items are of critical importance, or for some other reason? General HEIsER. Yes, sir. In fact, Mr. Roback, you have covered it very well. This paragraph is meant to cover Red Ball and meant to cover intensive management, and intensive management particularly as demonstrated under the stovepipes that we have established. The main reasor~ we put this paragraph in here, sir, was to indicate that while it could be considered that we have set up special systems, recognizing that the organization and the procedures that we are using today have been combat-tested for the first time, we are not in our minds establishing special systems. We are implementing the standard system as it has to be done, in order to manage the equipment in the hands of troops, so that we do not consider that Red Ball in support of deadline equipment in a combat zone is a special system that is only for the time being. We think it is a necessary thing, and in reality MTLSTRIP procedures call for issue group priority 1 to be handled in `a certain length of time. This is our experience in how can we issue priority group 1. Mr. ROBACK. I see two contrary formulations. Somewhat in the testimony yesterday the formulation was that special systems are devised because the general system is not fully adaptable. You are saying that the experience of the general system leads you to perfect it by special `treatment of given categories. General HEISER. Yes, sir; and we are taking a leaf-let's face it, on the stovepipe we are taking a leaf from the Air Force system, and we are using weapons system management which is in reality somewhat a replacement of the technical services management that occurred be- fore the reorganization. What we are saying is that you have to have a straight-line responsi- bility for the items in the hand of the combat soldier to be sure that he gets what he needs in terms of that item being operable in the combat zone. Mr. ROBACK. Later on we will want to discuss why it is, then, that for certain kinds of items, high value items or critical items of a weapon system type, it is more appropriate or suitable for the Army Materiel Command to exert overseas control `than it is for other second- ary types of supply. General HEI5ER. We can talk to this now, sir, or we can talk to it subsequently. Mr. ROEAOK. Let's talk to it now and later on you will probably cover some other aspect. If this is a refinement of a system, why is the Army Materiel Command suitable for overseas control of it and not of other supplies? General HEISER. May I point out, sir, that the Army Materiel Com- mand, and I am afraid we are going to perhaps get ahead of our PAGENO="0061" 55 statement later on, so please excuse it, sir, but there is a misconception I believe to some extent in the authority and control the Army Mate- riel Command has outside the continental United States. It is true that, commandwise, direct commandwise, they have no responsibility outside the United States in terms of commanding a particular installation or commanding personnel assigned to an over- seas commander. However, this is about the only dogmatic simple statement you can make, sir. The Army Materiel Command, and we can supply for the record a listing of those things that the Army Materiel Command is responsi- ble for, but the Army Materiel Command is responsible, basically at least, through technical channels of everything from birth to death of a piece of equipment, including the design of it in the beginning and including the testing of it and down through the distribution to troops, and finally the disposal of it at the end. (The list referred to follows:) The Army Materiel Command (AMC) and its national inventory control points have responsibility for worldwide management of all items under their jurisdic- tion. Although AMC does not have command authority over supply units over- seas, it does exercise management influence over items in overseas depots in many ways. For example AMC writes most of the supply and maintenance regu- lations prescribing procedures to be followed and promulgating Army policy with respect to management of these supplies. Following are some specific responsi- bilities of AMC and the applicable regulations: 1. Conduct of supply control studies resulting in procurement of Army world- wide requirements, AR 710-45. 2. DesignatIon of items to be reported on in the Army's asset reports, AR 711-5, AR 711-80, AR 711-140. 3. Designation of critical items and the responsibility and authority to redis- tribute these items, AR 710-50. 4. Computation of overseas mobilization reserve stockage levels. 5. Supply procedures for TOE and TDA units and activities, AR 735-35. 6. Supply procedures for direct support units (DSU's), AR 711-16. 7. Overall monitorship and reviewing authority for establishment and main- tenance of operational projects, AR 725-65. 8. Develops worldwide policies and procedures regarding maintenance of class V supplies (ammunition) In overseas areas, AR 752-22. 9. Local purchase of civilian-typo items, AR 715-30. 10. Determines the item manager and advises Army users worldwide of desig- nated supply source of the item. Also identifies decentralized items for local procurement, AR 700-1, AR 700-3, AR 700-12. 11. Develops Army-wide procedures and criteria for disposal of property, AR 755 series. 12. Develops Army-wide procedures pertaining to support for international logistics programs, AR 795 series. 13. Develops Army-wide procedures and criteria for determining dry battery requirements, AR 730-8. 14. Operates the Army Packaging Board and develops packing, packaging, and marking criteria and procedures, AR 15-450, AR 700-15. 15. Develops and monitors Army-wide implementation of MJLSTRIP proce- dures for implementation (requisitioning, issue, and receipt procedures). AMC has the same responsibilities for MILSTRAP (accounting), MILSTEP (evalu- tion), and TJMMIPS (priorities). 16. AMC has ownership and total responsibility and control over the 1,700-plus items included in the program for extension of AMC ownership of high dollar items overseas. 17. Assist DA in centralized control over worldwide depot maintenance pro- gram fully implemented July 1, 1968. General HEISER. Now it is true that the overseas command ha~ a re- sponsibility, but included in this responsibility is the responsibility PAGENO="0062" 56 for him to carry out the directives that emanate from the Army Ma- teriel Command pertaining to supply, pertaining to maintenance, and pertaining to individual items of equipment. I think that we should recognize this, because there is a certain feeling and it has been stated, and I would like to state it directly, that command prerogatives interfere with supply. Sir, it is not the Army position. To the contrary, if command pre- rogatives, if we call it that, interfere with supply, they would be done away with. We do not think command prerogatives interfere with supply. We think that supply is a system based upon a structure which places responsibility at various levels of command, and it is through the coordination of these levels that this job is done. Now as time goes on, and as we see that through centralization we can do a better job, because of the times, because of the tools, because of improved communications, improved APP, et cetera, there is no hesitancy on the part of the U.S. Army to centralize. However, sir, and this is my own statement, we are not going to centralize for centralization's sake. For example, we can get into this more fully, but we are testing today, and it is in the statement, and I am kind of messing up this whole statement, but we are testing today the extension of owner- ship of certain particular items anywhere in the U.S. Army depot level and above, overseas included. This is called AMC ownership plan test. This is now in operation. It began May 1. It covers some 1,'TQO, at the last count almost 1,800, I think, items. These are being transferred from overseas command- ers' ownership accounts to the responsibility and accountability of the commanding general of the Army Materiel Command. This is going to be evaluated and, based upon this evaluation. several things can happen. First of all, the number of items can be extended, depending upon what we find the capability of AMC to handle it. Of course it can be narrowed too, depending upon that same result, based upon the evaluation. Further, there is a question of ownership versus visibility. We are in this test testing ownership, whether ownership is necessary or whether visibility is necessary is a question that will come out of this evaluation. Mr. IROBACK. The visibility means that there is an accurate and known identification, let us say, of stocks, in an overseas theater? If you know where it is and how much and of what type, then you have visibility? General HEISER. Yes, sir. Mr. ROBACK. And the question is whether, having that visibility, you can persuade a reluctant theater commander to let go of some of it, if you need it somewhere else? General HEI5ER. Sir, there is more than persuasion involved. Mr. ROBACK. I mean if you had control, that is if the Army Mate- riel Command had control, they could say "move it," and if they did not have control they would say, "You have too much of it. I hope you would see fit to move some of it to this other theater"? General HEISER. Sir, you are using language that is not necessary today. I would like to talk to this point particularly. PAGENO="0063" 57 There is also some indication that the Army does not have worh1 wide control of assets today. Mr. ROBACK. Let me interject, General, that I am not arguing. General HEISER. No, sir; I know you are not. Mr. ROBAOK. The case for the Army Materiel Command. General HEIsER. Yes, sir. Mr. ROBACK. We are trying to understand what is involved. General HEI5ER. Please, I talk sincerely, that is all I am, sir. I am not arguing. I am sincere in this because we have sume pretty signifi- cant points to get across, and I appreciate the opportunity of talking with you about them. I would like to be sure that no one gets the notion that the assets of the U.S. Army are uncontrolled. There is a control. The fact that we have not extended AMC overseas to cover all of our as~ets within their command responsibility does not mean there is a lack of control. First of all, there are two ways of doing control. One is to extend AMO overseas, and everything that is over there is a part of their direct accountability and responsibility. The other is the one that the Army has used for many years and is changing as it appears appropriate in the best efforts of increasing the effectiveness and economy, and that is that we establish, under close control, the authority at each level for what they can have, both in terms of using and in terms of what they can stock, and then we make it a command responsibility at each of those levels to insure that they do this job properly. Mr. IROBACK. In other words, you feel that the command prerogative can be reconciled with good management of overseas stocks by visi- bility, by the proper kind of equipment to handle the data, and by sufficient communications, and by whatever else is needed? General HEISER. Yes, sir. In fact, I might even say, Mr. Roback, that we hope to find out through tests whether we can depend better on reports that come back to the Army Materiel Command indicating what the asset situation is, and that they take direction then to order these things in proper distribution as opposed to what we are doing today and trying to perfect today in many parts of our system, which is depend- ing upon that commander to carry out his responsibility, and if he has an authorization, and he does have, it is his responsibility to have what that authorization says he is authorized. If he does not have it, he is required to requisition. If he has too much he is required to take appropriate disposition action. Now there is a moot point here, sir, and we are not certain which is best. We are in the process of trying to determine that, sir. I might add, sir, while we are talking about this, Mr. Roback, that in addition to the fact that there is a little perhaps misunderstanding of the Army's control, there is also a misunderstanding of the fact that there is no asset visibility today. There is asset visibility today. Per- haps not to the extent that is fully required, and perhaps not in terms of the periodic reporting that is required, based upon a capability that is increasing all the time in `terms of APP capability and communica- tions capability. But please recognize that we have an asset reporting system today, and that we report on those items that the Army Materiel Command feels are most sigimifi~ant and that they can handle. PAGENO="0064" 58 Now we report certain items quarterly, and we report certain items monthly, and some of these items are reported down to and ~ncluding the field troop unit level. In addition to this, we have an intensive management regulation, which came out earlier this year, on which we have been working for some time, which gives AMC the responsibility of saying that any par- ticular item requires intensive management. The field commander can contribute to this. This ties in with the critical items list that is involved in ocur hearing. The field commander can contribute to this. At this point this regu- lation specifies that the Army Materiel Command can make worldwide redistribution within Army assets available, so that I point these out only because these are some of the items which indicate the fact that, first of all, AMC does not stop when you come to the waterline of con- tinental United States; and, secondly, that there are procedures and controls today. Now this does not question the fact that we can make improvements in this, and in fact we can justify the statement that says we are mak- ing improvements in this, including some other things we will talk about in the statement, sir. Mr. ROBACK. Is an alternative to extending the control of AMC over- seas pulling back of certain kinds of supply functibns from the com- manders to the United States? General HEISER. That is a part of it; yes, sir. Mr. IROBACK. Is that an alternative procedure? General HEIsER. Yes, sir. In fact, right along that line, sir, one of the things we did, I might say over my objection as the man in the field at that time, was that we pulled back the requirements computation for the overseas reserve stockage from the overseas command to the Army Materiel Command. The Army Materiel Command today is responsible for determining the requirements for war reserves in overseas theater. I happened to be in the European theater at that time, and I felt very strongly that this was incorrect. I have now changed seats, and you change points of view. I now have a better reaction to this. However, I still recognize that there are some fallacies in here that require close coordination, because the minute you centralize, you have to be careful that the man on the ground has a capability of reacting to the centralized kind of directive that takes place in terms of deter- mination of requirements. Mr. ROBAOK. Since you were in the European theater, the com- munications zone activities-right? General HETSER. Yes, sir. Mr. ROBACK. Can you give us at this point an overview of what changes are taking place in the U.S. supply concept and disposition in Europe? General HEISER. Yes, sir. Mr. ROBACK. As it affects the communications zone and anything else of relevance to our discussion. General HrasER. Sir, first of all, recognizing that there are limits in terms of military and civilian resources available to us, particularly in overseas theaters not directly `involved in combat, and included in this are the various implications of flow of gold, the U.S. Army, Europe, PAGENO="0065" 59 today is attempting to maintain readiness, and at the same time to reduce the costs of that combat readiness. As one of the means of doing this, they have reorganized their struc- ture. As you know, they have combined the 7th Army and the U.S. Army, Europe Command, maintaining each of the headquarters sep- arately in terms of an ability to react to contingencies. In addition, in the logistics area, which I would like to talk directly to, and may I ask a question concerning classification. Are we getting into the classification area Colonel TUMLINS0N. Not yet. General HEISER. OK. We are today con~solidating the 7th Army Inventory Control Center with the supply and maintenance agency of the communications zone, which in reality was the inventory control center in the terms we are talking for the communications zone. Today we are consolidating these and making one inventory control center out of it. We have further taken action to draw down stocks in the general support level, meaning what we would call, sir, field Army depots. We are going to exhaust these field Army depots and use communication zone depots directly. Mr. ROBACK. You are going to attrite them out? General HEISER. Attrite out the field Army depot. Sir, I think we should recognize that part of this is possible only because we had to draw up our line of communication, move out of France, for example, into Germany, and as a result the depots we now have in the communications zone are now in Germany, and it just does not make sense at the present moment to have a communications zone depot and across the street from this depot have a field depot of the 7th U.S. Army. And so it just does not make sense and so this i~ what is happening today. In addition to this, we have established at a lower level a capability, 1 should say we will establish at a lower level a capability to perform management of inventory at each of the cor~s levels. In other words, the two corps over there will have a capability, a computer that will go along with this capability for management purposes. They will not receive requisitions, et cetera. They will be primarily there to assist in management, but not interfere in the processing of requisi- tions et cetera. Now, sir, I must ~ay that this is a necessary thing, and considered acceptable by the Department of Defense under the present circum- stances. [Deleted.] We have had, as you already know, certain problems in improving management of our three depots in Vietnam. One of the reasons for these problems is that the three depots in Vietnam were doing a high degree of retail work a4s well as wholesale work. They were deal- ing with individual customers to the extent, for example, that Saigon at one time was dealing directly with 700 individual customers, which means that they were doing retail distribution as opposed to wholesale distribution for which a depot is designed. [Deleted.] However, sir, this is what I need to point out: We had rather fixed installations in the field Army in Europe, because we were too fixed in position in our peacetime posture over there. 97-475-68-----5 PAGENO="0066" 60 [Deleted.] So I would like to' be sure that is understood. Mr. ROBACK. Thank you. General HETSER. With this brief history in mmd, the tremendous buildup of logistic support in South Vietnam over the last 3 years can be appreciated. At the same time, it was the continuous mission of the Army to assure combat readiness through effective logistic support of forces in Korean, Europe, the United, and elsewhere. SPECIAL EFFORTS IN PROCESS OR PLANNED TO IMPROVE LOGISTIC OPERATIONS The Army is aware of the problems of supply responsiveness and the need for improved management for supplies. We agree that cer- tain management improvement steps are necessary in the three areas enumerated by General Accounting Office; that is, worldwide control over inventories, supply discipline, and standardization, and simpli- fication of supply systems. With respect to General Accounting Office recommendations con- tained in the January draft report on improved management for Army supplies in Vietnam, the Army has recognized the need for logistic com- mands manned by trained military personnel and moved out to activate a quick reaction inventory control center in an operation status in con- tinental United States by the end of the second quarter fiscal year 1969, emphasizing the return of reparable items and challenged high pri- ority requisitions. Mr. ROBACK. You are not saying that you have a challenge system now, are you? General }}IEISER. Sir, we have a challenge system to this extent, sir, and we are looking further into this. In fact, I might add that a direct contribution of the committee was made, you might want to consider it that, yesterday, in that there was discussion here between the GAO and the committee concerning challenging, and it seemed to be the gen- eral consensus, which we certainly support, that a challenge of an item that is necessary to remove a piece of combat essential equipment from deadline does not allow challenge, that you have to try and get this as quickly as you can. However, it was brought out that there are items that are not combat essential, and why can they not be challenged, and as a result of this, sir, we took action immediately a~fter your meeting yesterday to get this out to the field and find out why this is not so, why we cannot do more of a challenge of nonessential combat-type equipment. In line with this, sir, to a certain extent this has already been done, Mr. Roback. We have directives which we can produce for the committee as you may require, Mr. Chairman, that indicate that in certain particular Federal classes, we will not just forward the requi- sition. They will be challenged in terms, for example, of furniture and canteen type equipment, such as kitchen equipment for the bases, and this kind of thing. In addition to this, sir, we really have a challenge at the unit level. Now the question of challenge involves a question of discipline con- cerning the guy that does the challenging, and in an Army unit, the basic unit that starts the requisition, there is and has been on the PAGENO="0067" 61 books for some time a requirement that the unit commander or his designated representative in writing review the appropriateness or propriety of every issue 1 and 2 requisition. This is in Army Regulation 735-35. There is a challenge at that point. The question is, How good is the challenge? Mr. ROBAOK. Whether the company commander is in cahoots with the supply sergeant. General HEI5ER. Yes, sir; or maybe the other way around, and of course it really depends on the commander's point of view at that level. Also, at the inventory control center, sir, as we have said and, by the way, as is being done in the 14th Inventory Control Center, there is a challenge to' some extent. Now there is not, as I said, a challenge of, for example, a Red Bail requisition, which as I would say, I would liken it to issue group priority group 1, there is no challenge of a Red Ball requisition at the 14th ICC, once it arrives, if it is for a combat piece of equipment. The reference of the GAO yesterday to some items that arc not combat essential, these slip through, sir, and I must admit this was an error, and these things will occur, in a number of items we are talking about, sir, because we are talking about 400,000 items that are Army managed. And in addition to that, there are some 800,000 items we use that are managed by other people, meaning 1.2 million items, and within this 1.2, and within the tonnages that we have already talked about, yes, sir, there are some errors. Now further, back in the United States we have a certain chal- lenge based upon the amount that is in a particular requisition, and the NICP will go back and ask questions about this and, even further, we have a challenge of what we call the Logistic Control Office, Pacific, which is in San Francisco, where any air shipment over 1,000 pounds is challenged directly with the 1st Logistical Command in Vietnam. Therefore, sir, it is entirely probably that we can improve this without any question, but I think, sir, that we have a challenge system, beginning at the highest levels, the Chief of Staff, the Secretary of Army, and right down to the lowest level of command, we have command maintenance management inspections that are made of every unit in the U.S. Army, including Vietnam periodically, and one of the specific requirements for these inspectors from the higher headquarters is to examine to determine are they missing the priority system. And further, the Inspector General throughout the chain of com- mand from the Inspector General, U.k Army, down, also has this as a requirement. The Army Audit Agency has this as a requirement, and each com- mander in the field at every level has the requirement for the command below him. It is not perfect, but sir, it is working, and working much better than I would say ever before. For example, at one time we had high priority requisitions ema- nating out of Vietnam over 80 percent. The Army Audit Agency, who looked into this in December and January of this year, found-I beg your pardon, we found as a result of the Army Audit Agency report, PAGENO="0068" 62 and previous GAO reports in our followup, that this has been reduced as of that December-January sample to 29.9 percent. I would also indicate, sir, and I am not making any kind of com- parisons, each of the* services have their own problems, and from my viewpoint at the redistribution and utilization level of project co- ordinator for all services under the Secretary of Defense, I will just say this, sir, as an example: If you look at the records of the Defense Supply Agency, you will find that the U.S. Army is using lower priority requisitions for the items supplied by DSA and GSA, I would say GSA for certain, than any other part of the Department of Defense. My point is, sir, that we need to improve but we think we are im- proving, and we think we have a system for doing it. We think further, as I indicated earlier, we are willing to move out and try to do some- thing better about it, including the wire that went out last night to Vietnam asking them why can we not put a block in the piece of equipment, in the machine, on certain types of noncombat essential items, to be sure that a challenge has been made. Mr. ROBACK. Can I draw this interpretation from your remark? This is not a general but a specific one, that since the Army, compared with the Air Force, transports much less of its cargo by air, the opportunities for transporting nonairworthy cargo might lie more in the Air Force, let us say, than in the Army? General HEIsER. No, sir. Mr. ROBACK. You are not saying anything like that? General HEIsEii. I am not inferring that at all because I have no knowledge of that, Mr. Roback. Mr. ROBACK. Well, you challenge over 1,000-pound shipments. General HEISER. Yes, sir. Mr. ROBACK. Compared to Army transport, Air Force transport must be seven times as much; that is, in terms of the proportion of their cargo transported by air. I would guess the Air Force transports 70 or 80 percent by air and the Army maybe 20 or 30. I am just taking these figures out of the air. General HEISER. May I be very factual with you? Mr. ROBACK. I hope you always will be factual. General HmSER. Yes, sir. But I want to be sure that it is recognized that I tadk representing the Army, but I also have had the oppor- tunity of looking broader, thank goodness. Let's go to the support of our aircraft. In the support of aircraft, we are dealing to a large extent with high-dollar-value kinds of items, engines that cost upwards of $60,000 apiece. We tend to think in terms of transport by air, in terms of criticality. We are trying to throw into this not only criticality, but economies of the situation; and, in terms of the Army and the Air Force, I would like to indicate that we are finding that in terms of support of aircraft, which is certainly among the most highly operationally essential weapons systems we have in the Army, and in turn of course the Air Force, we are finding that the transport by air in the last analysis, sir, may be the most economical and also the most effective; which means that we may find that in certain categories of mission-essential type equipment, that it is in the best interests of the United States to use higher priority requisi- PAGENO="0069" 63 tions than we would normally use for those items of equipment that are less mission-essential, or that are of higher density in the field. What I am saying really is that it is far more significant today to have a JIUEY helicopter down for a part than it is to have a truck down for a part; and, therefore, in making these considerations, both criticality and economics, we are finding that in the support of our aiircraft we tend to do more by air. Mr. ROBACI~. You are also saying that criticality is not necessarily a factor in airworthiness in this sense- General HEI5ER. Yes, sir. Mr. ROBAOE. That even items that are not very critical or not very sensitive might be more economically transported by air because you would not have all the pipelines and storage? General HEISER. Exactly. Mr. Ron~cK~ So you could not necessarily measure the economics of airworthiness by the invoice cost for the transportation, so to speak? General HEIsF~n. Exactly, sir, Mr. ROBACK. Are you saying that as part of your remarks? General JIEISER. Yes, sir. In fact, that is really what I intended to say pertaining to the eco- nomics as opposed to the criticality. And I might say that in the past we have, in placing our require- ments on the Air Force for air transportation, we have tended more or less to deal with criticality. We now have a study in being-and again I am getting a little bit ahead of myself, but it is pertinent to your point-we have a study in being that is exploring fully this whole ave- nue of economics of materiel being air transported, both now as well as in the days of the C-5A. Mr. ROnACK. Is this a study in the time frame of the C-5A? General HETSER. As one of the remote objectives; yes, sir. Mr. ROBACK. As I recall, your statement has a 19~O-75 time frame. Is that the time of the C-5A? General HEI5ER. Sir, it does have that; but it also has immediate application in that we have by Federal stock numbers specific items that this study has indicated are definitely candidates for air trans- portation now, and we have furnished those Federal stock numbers again to show AMC's importance. We furnished those Federal stock numbers for the Army Materiel Command to determine and place requirements for air transportation as appears appropriate to handle these particular items right now in support of South Vietnam and the rest of the Army, sir. Mr. LUMAN. Could I ask one thing? General, you indicated in your discussion of safeguards on high priority requisitions that the unit commander has to review the re- quirements. The fact that you have your IG and CMI inspections shows somewhat of a check on this command, but do you not think the unit commander is torn between two desires: No. 1, to obey the law as far as his requisitions and equipment are concerned and No. `2, to make sure his unit is supplied? Isn't there a tendency perhaps to upgrade the priority? The GAO report indicated some of those errors you mention were not errors exactly. The man was directed to put it in. What in your PAGENO="0070" 64 system do you have to check on this commander other than an annual inspection, let's say? (veneral IJEIsER. Sir, it is more than an annual inspection. We have teams that are hitting them periodically. I did not mention all the teams. For example, in Vietnam we have teams that go out of Headquarters, U.S. Army, Vietnam, that go out and look at these things on a con- tinuous basis, round-robinwise. The last I heard they had about 10 of these teams. General Jo~s. We have teams at each support base. General HEISER. Almost every command has these kinds of people going around examining this. Now it involves judgment. The unit commander wants to keep his tank, for example, operational, there is no question about that. But if he needs a glass, and I do not say wineglass, however, a wineglass at a certain location such as a depot, a shot glass as it is commonly called can be pertinent at a hospital. And so it is tough to exclude any particular item. A refrigerator for an officer's quarters is questionable high priority, but a refrigerator to store medicines or a refrigerator to store batteries is certainly not questionable. Now more directly to your question, the unit commander has to use his judgment. Mr. LUMAN. I am just wondering, though. I did not want to interpret your statement to mean that the Army feels since the man is a unit commander, you know, his judgment in supply matters is pretty much unchallenged. General IJEISER. No, sir. Mr. LUi~1AN. Because he happens to be a commander. General HEI5ER. It is not supreme, sir, but we do, based upon what he knows is in the regulations and in his training for carrying out the regulations before he ever gets into the command. slot, we do expect him to carry out his responsibility and we inspect him on the basis upon which he carries it out. I think we have to basically approach it this way. Mr. H0LImELD. I think you have to place that responsibility there. Of course the way he discharges it also goes into his record. General HEISER. Yes, sir; and it also determines how long- Mr. Hor~irmu~. You do have the inspection teams, as you say? General HEISER. Yes, sir. Mr. HOLIFIELD. That go in, and if they give a series of bad reports on him, why it is part of his record? General HEI5ER. And it is more than that. It determines how long a tenure he has in this job, sir. Mr. HoLIrn~D. This is one of the things that we want to try to find out, the difference between a technical management of inventory and the practical need to have the articles where they are, whether they are accounted for back here in Washington or not in a central inventory? General HFJISER. That is right, sir. Mr. H0LIFmLD. And I can see where a combat group moving fast might lose track of equipment from the standpoint of a recorded in- ventory at a specific location, but you would still have the inventory available for utilization. PAGENO="0071" 65 General HEISER. Mr. Chairman, today, sir, at the national inventory control point, let's assume for the moment that a particular item comes up, what we call a supply control study, to determine, in other words, on the computer it is shown that this item now needs a new buy because we have exhausted our supplies down to what we call a reorder point. At this point in time, this manager has certain information available to him. Depending on the date on the calendar, it may not be as timely as we think it should be. In fact, I will state that it is not as timely as we would like it to be because we would like it to be real time just exactly worldwide. What is the situation on this item? However, we do have available to him information of what is the latest data that was available at the time the report came in. Now this is where ADP comes in, and this is where the importance of sufficient management know-how available to handle what ADP brings in is. Under the Secretary of Defense directive, we are trying very hard to come up witl~ transaction reporting on some 140 different types of Army materiel in the field. In order to do this, we are attempting to get a `transaction report of sufficient reliability to utilize this in terms of management. Mr. Horn~IELD. What do you mean by transaction report? General HEIsER. What we mean, Mr. Chairman, is that, for ex- ample, let's take a tank in the hands of a tank company in a division in Vietnam. That tank can be knocked out by enemy mines. We would, by a transaction report, APP card being reported in from the nearest ADP transceiver in Vietnam, that card could go into a location here in the United States, indicating that we have one less tank than we thought we had a few minutes `ago. This would then provide, and this i's an example simplified, the man who has to determine the requirements of a buy for tanks the knowl- edge that his assets are one loss `than it was before this report came in. Now to the extent that we can, we are trying to determine what can we do in terms of achieving this kind of transaction reporting. We are getting in reports now at the Data Center in Kentucky. We have to evaluate this to determine can we gst it in in reliable fashion, `and we think probably this might be one of the less complex parts of the problem, because once we get it in, we then have to deter- mine can we utilize this management data. Sir, one of our very serious problems in this regard is that the com- puters can give us much data. Probably the biggest part of the man- agement problem is to determine what do you need that a computer can give you that you can manage. And as they say in the artillery, sometimes you fire short. I should turn `this over to General Jones who is an artillery man. Sometimes you fire short and you adjust and you fire long and then finally you hi't the target the third time. To some extent that is what we are doing. We were firing short without the use of some computers and standard- ized systems. Now we are going in and trying to see what we can do, and we have to adjust in `order to determine what is a balanced management ap- proach to the use of systems and tools that go with it, sir, and that is what we are in the process of in almost every area. I think we have recited many of them already this morning, sir. PAGENO="0072" 66 Mr. HOLIFIELD. How do you explain the apparent criticism of the GAO in regard to rating the Army considerably below the Navy and the Air Force in their inventory and management accountability? As I understand their reports, they did rate you lower, and there must be some basis for the charge. I would suppose that they would be doing it earnestly and with conviction. General IlimsER. Yes, sir. Mr. H0LIFIELD. But I would like to have your explanation as to this. Do you accept that charge, and if so, is there any reason, logistical reason, why it has to be that way? General HEISER. Mr. Chairman, I would like to be excused, sir, be- cause really of lack of knowledge, sufficient knowledge to make a com- parison between the three services or the four services, counting our friends the Marines. But I would like to reply to your question as honestly as I know how. The first difference is volume, Mr. Chairman. The U.S. Army is involved in considerable volume. Basically, it starts with the num~ber of troops we support. And included in these numbers of troops are not just the. total figures of the U.S. Army, but the allied forces in- volved as well, sir. Volume leads, sir, to the fact that you can make more errors just aga.in because of volume, sir, and therefore I honestly believe that the GAO just on logic alone is probably correct in that they could prob- ably find more errors in the Army than the other services. The difference will be degree., however, sir. My limited knowledge would indicate that we all to some extent, sir, have the same kinds of management problems. Now I will admit that the Air Force, for example, has done a terrific j~b in standardizing APP and the use of it at their bases. I might say, sir- Mr. H0LIFIELD. How does this volume of tonnage and numbers of units, how does it compare with yours? General }IEISER. Sir, I honestly cannot answer this except again I am now in the Air Force area, but to try to be responsive, sir, I believe they have some 32 airbases in support of Southeast Asia, all of which are not of course in the particular area. Now this also' involves' some problems, sir. What we are talking about in Vietnam is stuff on the gro'und in Vietnam, in terms o'f Vietnam itself. This is somewhat different from the other services who to a limited extent are in Vietnam, but to a greater extent are outside Vietnam, either on the water or in permanent bases for which they are able to carry out the support of the combat in Vietnam. Now this does not say there is anything wrong with this. This sim- ply says there is a different condition. As I indicated just comparing aircraft, sir, we have our helicopters based in 250 different places in volume in Vietnam, so that I do not mean to make odious comparisons. I do not know that they are odious. In fact, as a man who' has tried to watch closely and learn something, I admire what the Air Force has done. PAGENO="0073" 67 Mr. HOLIFIELD. I am seeking in my own mind, not from the stand- point of excusing but from the standpoint of understanding- General HEISER. Yes, sir. Mr. HOLIFIELD (continuing). To compare the differences in the problems that are involved. I can see where a ship is a rigid, you might say a rigid, entity. General HEISER. Yes, sir. Mr. HOLIFIELD. Self-contained. It has everything right there and you can count it, and as it moves everything moves with it. General HEISER. And they do not have much room, sir. Mr. Hoi~i~ri~r~n. There is very little attrition, or let us say destruc- tion unless the ship itself is destroyed. General I-IEISER. Yes, sir. Mr. HOLIFIELD, But where you have masses of troops moving and taking equipment with them and subjecting it to the hazards of con- tinuous destruction, I can see where the physical job of maintaining inventory would be much greater and much more difficult. General HEISER. And that is part of your answer, Mr. Chairman. Mr. HOLIFIELD. And particularly when you get into smaller items, like rifle~s and things which can disappear pretty easily by theft, loss or destruction, it would seem to me that the job of maintaining an ac- curate inventory would be almost impossible. General HEISER. Yes, sir. Mr. ROBACK. General Heiser probably would want to add, I do not want to testify for him but maybe he would want to add, that they also have to do a lot of dirty work for the Air Force in the way of supplying things, so the Air Force can have a cleaner supply opera- tion of its own; is that right? General HEISER. Sir, I appreciate your assistance. Mr. HOLIFIELD. I think it is all right for him to testify. I just got through testifying. General HEISER. Sir, we appreciate this contribution by the chair- man and all. Mr. ROBACK. This is by way of a question in the light of the chair- man's question about comparative volume: Is it not a fact that you have responsibilities for supplying the other services with consider- able volume? General HEISER. Considerable volume, yes, sir. However, I must admit, sir, that at the present time we do not do too much in the way of repair parts, which again to a large extent, what we are really talking about in terms of the problem is the prob- lem of repair parts. There are a number of repair parts that we have to support to keep equipment going. I think it fair to say that like we do in our aircraft, which is a highly important system, we are paying very intensive management care to this particular kind of item. So does the Air Force. I think that we have a certain degree of management that we can give to a certain level of items. At some point in time you have to depend upon not the eyeballing by a human being but you have to depend upon equipment, and this is where of course the problem of machines comes in and programing and program design. (Off the record.) PAGENO="0074" 68 Mr. HOLIFIELD. Let's proceed now. General HEIs1~n. Examples of short-term management improvement programs designed to achieve better worldwide control over inven- tories are: Army Materiel Command ownership and accountability of approxi- mately 1,700 high-dollar value secondary items in overseas depots was placed in effect on 1 May 1968. In March 1969 this procedure will he evaluated to determine whether it should be expanded to include additional items. The Department of the Army Distribution and Allocation Com- mittee has been established since 1965 to provide central control and management of major items of equipment based upon worldwide asset data. Further procedural changes are in process to improve upon the accuracy of asset reports and asset data. Major efforts are underway to improve and automate the Army's authorization and related asset reporting system, thus providing the base for responsive and accurate equipment distribution planning studies. From Army units, both Regular and Reserves, we receive asset data on approximately 12,000 Federal stock numbered items. The accuracy of this asset data has shown significant improvement in the past 3 years, and has increased from 78 percent in 1965 to 94 percent in 1968. One of the major efforts underway is the Stanford Research Insti- tute pr~posal for the development of an integrated logistics manage- ment information system which is planned for the 1970-75 time frame. And I might add, as they bring out things that can be tested and proven, we will implement them. This long-range goal, when implemented, will result in vast improvement in the asset reporting system. In the interim, an internal study is being conducted to determine and implement the shorter range requirements for in~rovements in the asset reporting system, some of which we have already discussed. In addition to aircraft items and aircraft maintenance mentioned earlier, weapons system management programs are in operation. Weapons system management provides for continental U.S. inventory control points and major commander application of specific manage- ment criteria to critical items in order to assure the most effective and economical supply posture. Those weapons systems and major items are: Hawk missile system Here missile system Pershing missile system M102 105 mm. howitzer (towed) ADH M107 175 mm. gun (SP) M108 105 mm. howitzer (SP) M109 155 mm. howitzer (SP) M123A1 155 mm. howitzer (towed) M110 8-inch howitzer Fire control systems for the five preceding weapons: M41A3 twin 40 mm. artillery AW(SP) M88 tank recovery vehicle (FT) M113 armored personnel carrier M48A3 medium tank PAGENO="0075" 69 M48A20 medium tank M578 light armored recovery vehicle All aircraft Supply discipline has been en~phasized and additional steps taken to provide needed improvements where we believe this added effort will result in more effective and efficient operations. For example, a program referred to as the closed ioop program is in operation to achieve greater control over recovery and repair of selected reparable items. We have approximately 160 different types of equipment controlled under a closed loop, which is in reality an elongated direct exchange, meaning that in Vietnam they have a cer- tain authorization. Until they send one out for repair, they do not get another one in, and the system itself puts discipline into this kind of thing. I might say, sir, this is a real step forward in terms of combat sup- port. In certain items which we could su~pply for the record, we are now overhauling and returning to the theater in 1968 and 1969 more of these types of equipment than we are buying new, and this, sir, is a real step forward in terms of efficient logistical support. These items are normally repaired and returned to the supply sys- tem in lieu of new procurements. By requiring a reparable item to be turned in to obtain a serviceable item, a basic motivation for supply discipline is initiated. In the area of excess materiel, the Department of Defense program for utilization and redistribution of materiel in the Pacific area has been implemented with the Army acting as executive agent. The purpose of the program is to reduce excesses and ~avoid unnecessary sui~pluses upon cessation of hostilities in Vietnam. Mr. ROBACK. You will si~pply the terms of reference on that agency, will you? General HEIsER. Yes, sir. (The information referred to follows:) ThE SECRETARY OF DEFENSE, Washington, DXI. November 24, 1967. Memorandum for Secretaries of the Military Departments; Chairman, Joint Chiefs of Staff; Assistant Secretaries of Defense; Directors of Defense Agencies. Subject: Utilization and redistribution of excess materiel in the Pacific area. General Westmoreland has reported that the logistic buildup in Southeast Asia has now been virtually completed, `and that never before in our history have military forces been so effectively supported. The Military Departments, the Defense Agencies, and all commands concerned are deserving of the highest commendation for this superb achievement. This buildup has required since 1965: The transportation to Vietnam, a distance of 10,000 miles, of over 1 million men and almost 8 million short tons of ammunition, supplies and equipment. The construction in Vietnam of `a complete logistical base which includes `personnel facilities for a force of 525,000 men, 6 new deep draft ports, 88 airfields, and over 12 million square feet of covered storage space, in which `are stored about 300,000 different items of supply. General Westmoreland has placed increasing emphasis during the past year on the importance of prudent and economical management of these resources. He wants to maintain not only the most responsive logistic support base in our history, `but also the best managed. I fully endorse this objective. The aftermath of past conflicts has been the accumulation of huge surpluses, which because of deterioration and obsolescence PAGENO="0076" 70 have had little salvage value, Following Korea, for example, we were left with $12 billion of such excesses. I am determined that this will not happen in Vietnam. The speed and magnitude of the Vietnam buildup has unavoidably resulted in the accumulation of some imbalances and excesses in inventories. We will begin immediately to redistribute these excesses so as to assure their application against approved military requirements elsewhere in the military supply system. By doing so we can avoid the inefficiencies and waste experienced In the past. To this end the following steps will be taken, effective at once: First, the Secretary of Army is designated Executive Agent for the De- partment of Defense to assure that SEA excess material of all Services is promptly identified and made available for redistribution. A General Officer will be designated the Project Coordinator. Second, the Commander-in-Chief, Pacific, will establish a special agency to (1) maintain an inventory of excess materiel idefitified in the Pacific area, (2) supervise redistribution or disposal of such material within his area, and (3) report the availability of materiel which cannot be utilized in the Pacific area to other Defense activities, in accordance with procedures developed by the Project Coordinator. This Agency will be known as the "Pa- cific Utilization and Redistribution Agency." By February 1, 1968, I desire th receive the Secretary of Army's plan for the implementation of the Project, and ~INCPAC's plan for the organization and operation of the Pacific Utilization and Redistribution Agency. Each month there- after, I would like to receive a report on the excess materiel identified and on the reutilization accomplished. ROBERT S. MCNAMARA. General HEISER. The program provides for continuous `inventory of stocks, analysis of requirements and redistribution of excesses to fill valid requirements of the Army and other services. I might also add that this is certainly an innovation, and that we have tried to redirect supplies between services at the national level in CONT5S, but we have never in the field tried to do it in a combat area~ It began with the Air Force and the Army and to some limited extent the Navy in Europe, in a program over there, and we have progressed from that to this program in the Pacific area, and we look for maxi- mum economic results out of this. Mr. DAHLIN. Is this program back on schedule now? Was it kind of disrupted there for a while? General }IEIsER. No, sir; not really disrupted. We began to set up the system using the system in Europe develoned *by the Air Force where `they are the DOD executive agent, as I say. The plan was approved in March, and we are progressing. We have been progressing from that point. We have a computer on Okinawa that is handling this. Mr. ROBACK. With the terms of reference, you might supply a little narrative of what you have been able to do to date with it. General HEISER. We will, sir. (The information requested follows:) The project for the mtilization and redistribution of materiel in the Pacific area (PURM) was established by direction of the Secretary of Defense on Nov. 24, 1967. The purpose of the project is to identify e~eesses `and Imbalances which unavoidably resulted from the speed and magnitude of the logistical buildup in Vietnam, and redistribtite these excesses to assure their application against valid requirements elsewhere in the DOD supply system. In the memorandum directing the project, the Secretary of Defense designated the Secretary of the Army as the executive agent for DOD; instructed OIi~OPAO to est~b1ish a special agency to supervise the redistribution of excess materiel in the Pacific, and directed that a general officer be appointed as the project coordinator for DOD. The Commanding General, 2d Logistical Command, Okinawa, was given the responsibility for the establishment and operation of the special agency which PAGENO="0077" 71 is known as the PAC!OM Utifizaition and Redistribution Agency (PURA). Maj. Gen. Joseph M. Heiser, Jr., ADCSLOG (S. & M.), was appointed as the project coordinator for DOD. The plan for implementation of the project was completed on January 29, 1968 and approved by the Office, Secretary of Defense on March 1, 1968. On March 8, 1908 the plan was implemented on a limited basis using Army-owned DSA/QSA excess items valued at $37.8 million. During the months of April and May 1968, the Army~own~ excesses were screened against requirements of the other military services in the Pacific area. The initial screening resulted in filling requirements of the USAF, USN, and USMC valued at $1.4 million. On April 15, 1968 each PAOOM component command reported its' initial in- crement of excesses to PURA for screening against PAOO'M-wide requirements. Total excesses reported by all services are valued at $50.6 million. Excess listings were prepared by the agency (PURA) and distributed to the PAOO'M component commands for screening against valid requirements. The screening process has been completed and requirements are being placed against the excesses. The final results of the screening are being tabulated at this time. The concept of the project requires each military service in the Pacific to perform inventories, reconcile dues-in and dues-out, update requisitioning objec- tives, identify excesses beyond service requirements, and, on a monthly basis report the excess to PURA for screening on an interservice basis. The project provides for interserylce utilization of excesses within the geographical area of the Pacific Ooniniand which did not heretofore exist. Supplies found to be in excess of the needs of all services in the Pacific area are reported to the respective CONUS inventory managers for further screening on a worldwide basis and final disposition. The activities of the PURA as of this time have been on a limited scale using an unsophisticnted type operation. The agency is presently going into a fully com- puterized operation which will provide a much greater capability and be more responsive to service needs in processing excesses for redistribution. The PURA test results indicate that the project is sound hnd will result in substantial savings and better utilization of materiel identified as excess in the Pacific area. General HEISER. On another subject, Project Counter is a program for providing trained assistance teams on a temporary basis to assist commanders in the Pacific in accomplishing essential supply tasks that are beyond their current capabilities. Over 1,000 persons are now in Vietnam `on this and other similar assistance teams. I might indicate that this is also where the Army Materiel Command is essential. In fact, the 1,000 is a minimum figure, sir, It is closer to 2,000 that come from AMC. A special program of reconciliation of requisitions for supplies and equipment in Vietnam and cancellation of requisitions for items no longer required has resulted in cancellations of over 124,000 requisi- tions since January 1968 on depots located in South Vietnam. The reconciliation of customer back orders at the Army Materiel Command as of February 29, 1968, resulted in cancellation of over 22,000 requisi- tions valued at $122 million. With the establishment of the 14th Inventory Control Center in Vietnam, stocks of all three major depots can be managed simultane- ously. By applying assets in `one depot a~ainst requirements `at another, cancellations of many outstanding requisitions on continental United States supply Sources could be submitted. A total `of $283 million worth of cancellations were requested fro'm July 1967 through April 1968. I would caution the use of that figure without recognizing, however, that there is a dynamic problem here, and that is that we cancel a requisition from the year level. By the time it gets back to the national inventory control point, there is ~a certain passage of time through which th~ dynamics of supply have been taking place. As a result, many of the cancellations are attempted only to find that they may PAGENO="0078" 72 have been shipped or they may be in transit, so that we do have this kind of a problem following this through. Retail customers of the 506th Depot in Vietnam were reduced from 700 to only 61, of which 16 are from other services. We are progressing this way in other depots. Procedures have been established to automatically challenge air shipments weighing over 1,000 pounds. This system has resulted in a sizable reduction in unnecessary use of prioiity transportation. I might add that in addition to this, the Air Force assists us in this regard, in that technically our challenge of 1,000 pounds and up is really what we call a validation. The Air Force likewise challenges before they ship, so that we have another challenge on top of that, in assisting us to keep from shipping stuff air transport that is not really required. The procedures for computation of quantities of supplies necessary to be placed on order to allow for order and shipping times to Vietnam have been changed to reflect actual times for groups of items rather than an average time for all items. This change, when fully imple- mented, will result in a reduction of 16 days of pipeline. This is, therefore, in the millions of dollars. The situation in South Vietnam is dynamic and the logistics system must continuously respond to changing combat operations. We con- tinually review this matter and, as an example, a conference was held this month with the 14th Inventory Control Center personnel and ap- propriate supply agencies here in CONUS to cut off flow of nones- sential materiel to Vietnam because of changing tactical environment. For example, there is a base camp program that has been approved that is now being cut back because of various things pertaining to base camps which indicate that in the judgment of the commanders there they feel it is not reRuired to carry this base to camp construction to the extent it was origmally approved. As a result, we are cutting back on the requirements. In doing so, we are creating a logistic problem in that the require- ment of supplies to support this base camp were moving, and now what we have to do is try to be sure that we take appropriate supply action so that this does not unnecessarily accumulate as excess. In 1966, experience in South Vietnam clearly indicated a need for improvement in quantity and quality of military supply personnel. Immediate steps were taken to provide needed depot experience for 350 personnel, each quarter, who graduate from the Quartermaster School. This 90-day training rotates enlisted men through practical application experiences involving all aspects of depot operations and equips them to perform well in the establishment and operation of depots. Evaluation of the performance of graduates of this training by Comffiandiflg General, U.S. Army, Vietnam, indicates superior per- formance over those who had only theoretical training. Capability to identify and account for these personnel by military occupational speciality codes has also been improved to provide for appropriate ;assignment. Action also is being taken to establish a course of instruction of short duration-about 5 days-designed for senior commanders and ~key staff officers from corps to brigade or comparable unit level. The PAGENO="0079" 73 objective of this course is to improve combat readiness, at reduced costs, by providing actual or prospective commanders and key staff officers with the basic knowledge needed to obtain optimum respon- siveness from the supply system. Emphasis is placed on avoiding actions that detract from supply performance and on timely, proper actions to expedite or follow up on supply actions. In May 1968, the Assistant Secretary of Defense (Installations and Logistics) called upon the assistant secretaries of the services for installations and logistics to review current maiming of key logistics functions (primarily procurement, contract administration, mainte- nance, depot and warehousing operations), to determine current logistics manpower needs and status (civilian and military), to pro- ject trends for up to 25 years, and recommend adjustments to com- pensate for deficiencies revealed. The initial meeting of this ad hoc planning task force was held on May 13, 1968, and full-time efforts are underway on what is expected to be a 6-month effort. The policy direction of the task force will emanate from a Logistics Manpower Planning Board. The membership of this board was planned to include the Materiel Secretaries, the Deputy Chiefs of Staff for Logistics, the Director of the Defense Supply Agency, and a member of the Joint Chiefs of Staff. On May 27, the materiel commanders were included in the mem- bership of the hoard, making the Commanding General, U.S. Army Materiel Command, a member. Long-range projection and planning are to be given consideration later in the project development. Within the Army, a study is in process to determine the develop- mental base and training programs needed to overcome shortages of military personnel qualified in large-scale wholesale operations. Offi- cer, warrant officer, and supervisory noncommissioned officer positions at depot, inventory control center, and the headquarters level positions needed to supervise such operations are under consideration for special developmental attention. Initially, this study will address present needs for Southeast Asia, followed by study of long-range needs to develop and sustain these skills, including the necessary continental United States rotational and developmental base. DEFICIENCIES PREVIOUSLY REPORTED BY THE GENERAL ACCOUNTING OFFICE Prior General Accounting Office reports concerning U.S. Army, Pacific, presented various deficiencies in logistic operations. In 1963, overstockage of Nike missile repair parts was found and attributed to failure to identify and report parts as excess and per- missive overstockage. In 1964, effectiveness of missile systems, communications systems, aircraft, and construction equipment inventory programs were con- sidered deficient due to lack of efficient and experienced management personnel to manage the depot and its storage and accounting processes. D~ficiencies were also noted in 1966, concerning asset visibility to the Army Tank-Automotive `Command of tank and automotive stocks, located in Europe, and I will discuss actions in the area of worldwide PAGENO="0080" 74 asset control shortly. Problems related to the U.S. Army Missile Com- mand's asset visibility and performance were also observed in Europe and the United States during 1965 and 1967~ and it was found that cOrrective procedures had not been implemented to provide for accu- rate authorization of mission essential parts. The Army, generally, concurred in the findings and immediate assistance was provided to correct deficiencies and along with other actions, inexperienced personnel were replaced. The detailed review of missile logistic support by the General Accounting Office at various Army commands has provided us a basis for further consideration and application of weapons system manage- ment similar to that of the Air Force, providing the desired far- reaching control by a national level manager. The various weapons system management programs are representative of strides taken toward this goal. In 1966, the installation of computers for logistic management was considered premature by the General Accounting Office because of de- ficiencies in record and document discipline. The Army proceeded with plans to provide standardized logistic systems in U.S. Aimy, Pacific, as a major step in achieving the operational control necessary, and the final General Accounting Office report recognized the problems related to withdrawal of the computers that were installed in late 1965 and 1966 with reoonunendation that basis weaknesses in operating systems be corrected prior t'o future installation of automatic data processing equipment. General Accounting Office has substantially contributed to the im- provement efforts presented. There is no doubt of our desire to be re- sponsive to the assistance provided. OVERSEAS SUPPLY OWNERShIP AND ASSET VISIBILITY-COMMAND AND LOGISTIC RELATIONSHIP There have been several inquiries by members of the subcommittee staff concerning the possibility of reorganization as an approach to obtaining better asset control at overseas locations. I am specifically referring to `the Department of Armys study of possible extension of the Army Materiel (kmmand's activities overseas. There are a number of advantages during peacetime for extension of Army Materiel Command control to depot stocks overseas. There are a number of serious problems in assumption of operationai control overseas, and I think we have talked about some of these problems earlier. The study presented many desirable objectives that are not realistic in today's environment or under several possible combat situations. It appears more practical to utilize improved communications and Army Materiel Command national inventory control point capability as they develop, to return logistic management functions to the United States, thus improving management while contributing to the reduction of ex- penditures overseas. The implementation of Army Materiel Command asset visibility for super high-dollar value items is a demonstration of the Army's action to extend Army Materiel Command's asset visibility overseas, PAGENO="0081" 75 The initial visibility of 1,700 items and the capability to control re- parabies provided the Army Materiel Command will be expanded commensurate with effective and economic combat operational and readiness support. Army efforts will be directed at bringing home ap- propriate functions when Army Materiel Command can and should absorb them. The interpretation of "commander's prerogative" being assumed to- day, often erroneously, requires some clarification as to what it does and does not mean in the Army. The Army operates under the management philosophy of centralized supervision and policy and procedural direction with appropriate de- centralization of operational control to commanders on the ground. The Headquarters, Department of Army, provides central direction and guidance to commanders through policies, regulations, field man- uals and other directives, The authority to act in a field situation is assigned the commander, under the guidance prorvided. Under the stress of combat, the com- mander is authorized greater latitude in his decisions because he has direct and personal knowledge of the geographic and combat environ- ment. Nevertheless, the commander remains responsible to his su- periors for his decisions. Materiel is only one of the resources provided to the field commands. The Army recognizes that in peacetime the state of the art provides for the real time manipulation of data by computers and that reduc- tion of order and shipment time is possible. However, movement of supplies by premium transportation cannot be provided to all Army forces worldwide and the Army furnishes sister services common sup- ply support on many bulky items such as ammunition, rations, and petroleum products. The ~Army policy is based on the field com- mander's responstbility to perform his mission. The Army is not opposed to changes in the supply system which are economical and will still support the commander's mission. The Army is continually trying to improve the logistics system and improvements have been accomplished and are in process. A major goal of these improvements is the more economical man- agement of supplies and the greater flexibility for utilization of sup- plies within major commands. In this regard, the Army is already planning to centralize control of supplies at command levels where detail logistics management can be provided that is responsive to sub- ordinate commanders' resource requirements. There are many logistic functions that have been centralized to assist the field commander. Examples are the use of repair modules in lieu of piece parts re- placement, direct exchange of assemblies such as carburetors and gen- erators, more accurate computation of unit repair parts usage so that it is unencumbered by unneeded material, and responsive support for weapons systems in terms of hours or days instead of weeks and months. And I might add the operational readiness figures of our equipment in Vietnam are the highest that they have been in the history of the U.S. Army, and we can supply for the record what J mean by this, sir. But we are ma\intaining equipment in the Army today in opera- tiona~l readiness that exceeds any standards that we expected in ~ombat before, Mr. Chairman. 97-475-68-----6 PAGENO="0082" 76 The Army is aggressively pursuing programs to overcome the indi- cated problems of asset visibility and fast movement of supplies, con- currently with other programs that I will discuss later. The visibility and movement programs involve improvements in asset visibility, whether or not ownership changes, and stockage re- duction overseas when improved transportation can provide resources on a comparable basis. Economical fast transportation can aid in re- duction of stocks in transit. PLANNING FOR FUTURE IMPROVEMENTS IN LOGISTIO OPERATIONS Major changes in the Army's logistic system are under study or in progress. In the transportation area, a major study effort is underway to determine how we can best use the rapidly advancing air transport technology in the 1970-75 time period. This study, called Army Logis- tics Support Concepts-air lines of communication, examines several different concepts of supplying troops using an air line of communica- tion, and develops possthle savings in both personnel and stockage levels that could accrue from the use of such concepts. The first part of this study has been completed, using scenarios de- picting conflict in Africa and Asia and is currently being staffed. A follow-on portion of the study will use scenarios prepared for Europe and the Mideast and this study is scheduled for completion in August. A stu'dy is in progress to `provide the information and `analysis essential for determining the optimum peacetime employment of mili- tary airlift and se'alift systems. The study will lay the necessary ground work for insuring t'hat efficient use is made of the growing airlift force. It will identify those items which are economically eli- gible for air delivery overseas considering total distribution costs, including investment in pipeline inventories. Toward this end, as I indicated earlier, the study is providing a list of Federal stock-numbered items and the corresponding costs per ton-mile `at which the items are air eligible. And today we are using these outputs of the study to determine what we should be doing today and between now and 1970 on time frame, Mr. Chairman. There is a need for expeditious standardization of supply systems to take advantage of advances in computer and communications tech- nology. Greater emp'hasis is being placed on the design, development, implementation, and maintenance of stand'ard logistics automatic data processing systems by the Department of Army. The reorganization of the Army in 1962, which eliminated the tech- nical services and established the Army Materiel `Command, had a profound impact on the Army logistics system and its tradi'tional msthods of providing logistic support. In the spring of 1966, the findings of an Army study group indi- cated that as a result of that reorganization, control of `t'he key func- tions of logistics doctrine `and logistics systems development had been fragmented to an undesirable degree. The study recommended that those functions be brought together into a new `staff element under the Deputy Chief of Staff for Logistics `and adequately staffed as a means to improve his control and management of the Army logistics system. PAGENO="0083" 77 As a result, there was established a new general grade position, that of Assistant Deputy Chief of Staff for Logistics, for Doctrine, Sys- tems, and Readiness. Reporting to him is the Logistics Doctrine and Systems Office, located in the Pentagon with a strength of 46 people. The Logistics Doctrine, and Systems Office is directly supported by a field agency (the Logistics Doctrine, Systems, and Readiness Agen- cy) located at New Oumberland, Pa., with an authorized strength of 195 people. The Logistics Doctrine and Systems Office and its sup- porting field agency provide for the central general staff direction of the Army-wide program of logistic systems development by estab- lishing design criteria and prescribing standard data elements, stand- ard input-output formats, and common program packages. Detailed logistic systems design and programing has been decentralized to major subordinate commands as follows: The U.S. Army Combat Developments Command is responsible for detailed development of logistics systems for the Army in the field (entire overseas logistic system). The U.S. Army Materiel Command is responsible for detailed de- velopment of all wholesale standard logiStic systems peculiar to oper- ations in the United States of America. The basic concepts of standardization and simplification of logistics systems for the Army in the field, less post, camp, and station systems, are announced in the "Administration Support Theater Army (TAS TA-'TO) Study" dated March 1967. The combat service support system `of the automatic data systems for the Army in the field provides for automation of logistics, admin- istrative, and financiai functions, and is based on compatible proce- dures throughout the Army in the field. Operations of both the continental United States and overseas units of the Army in the field will be standardized to the maximum extent so that a continental U.S. unit deploying overseas can "unplug" from the continental United States and "plug" into an overseas command logistics system without modification or abnormal delay. Prototype installation of combat service support systems for divi- sion and corps level operations will be tested in III Corps at Fort Hood, Tex., beginning in July 1968. Current theater-level systems, including recent actions regarding the upgrade of the U.S. Army Pacific standard supply system will be considered as the basic building blocks for the standard theater-level logistics system. Pending the development, test, and fielding of the combat service support systems, several different types of automatic data processing systems have been or will be developed, tested, and distributed as appropriate within elements of the Army in the field in support of immediate logistics functions. Included are: Magnetic ledger card systems to mechanize class II and IV supply operations in the maintenance battalions. Stock control operations at 50 direct-support units/general-support units within `Southeast Asia have been mechanized utilizing standard equipment programs and procedures developed centrally by an element of the U.S. Army Com- bat Redevelopment Command and these systems will be extended to other direct-support units/general-support units Army-wide with distribution to commence in early fiscal year 1969. PAGENO="0084" 78 The post, camp, station, installation level logistics systems develop- ment effort within continental United States is a function of the U.S. Continental Army Command and D~puty Chief of Staff for Logistics, Department of Army. The centralization of supply management operations centralizes installation stock control and accounting into one activity under the direct control of the Army commander. A stock con4~ro'l center utiliz- ing standard automatic data processing equipment, programs, and procedures is being implemented for each continental U.S. Army area with a U.S. Oontinental Army Command activity for systems control and program maintenance. Centralization and standardization of supply management opera- tions will provide benefits in the areas of reduced processing time, improved materiel readiness, and reduced supply operating and train- ing costs. Although responsibility for this system has been assigned to U.S. Continental Army Command, that command, in coordination with U.S. Army Combat Development Command, is responsible for the centralization of supply management operations interface with the combat service support system. Both will act under the supervision of the Deputy Chief of Staff for Logistics, Headquarters, Department of Army. The national automatic data processing program for Army Materiel Command Logistic Management (NAPALM) provides for uniform materiel management procedures, standard automatic data processing equipment and standard programs at the Army wholesale logistics level. Objectives of this program include: Design of standard systems to support the operational mission at this level. Standard documentation to responsible managers to perform sur- veillance of the system. Maximum automation of management decision in order to reduce the hard copy output and the requirement for systems inquiry. Establishing a common, standard automatic data processing data base in support of like functional areas across national automatic data processing program for Army Materiel Command Logistics Manage- ment organizational levels. This program envisions a three-phase approach to standardization which permits an orderly progression from the documentation of specifications for the automatic data processing equipment to the development of standard systems at the affected installation of each organizational level of the U.S. Materiel Command. The national automatic data processing program for Army Materiel Command Logistics Management organizational levels are: a. Commodity commands/centers/national inventory control points. b. Depots. c. Arsenals. d. Laboratories. e. Test and evaluation command systems. f. Data bank systems. The inventory management applications of the commodity com- mands comprise a major portion of this effort, is the most critical in PAGENO="0085" 79 terms of effort and readiness,, and is a key management system which is to be developed on a priority basis. Prior to the installation of the National Automatic Data Processing Program for Army Materiel Command Logistics Management, auto- matic data processing equipment, the standard systems will be tested and evaluated at a prototype installation. To provide for central direction and control of this project, U.S. Army Materiel Command has established an automated logistics management systems activity at St. Louis, Mo. Recent reviews of the Army logistics system have highlighted the fact that there must be a better organized, structured, and coordinated study effort to develop doctrine for the Army wholesale logistic system as a corollary effort to Army in the field logistics doctrine. A conceptual study on the Army wholesale logistics system is being initiated to parallel the combat development command Army in the field concepts studies of the 1980-85 time frame. Objectives of this study are to provide a framework for the derivative studies essential to establish new doctrine for `the Army wholesale logistic systems, and to project the overall Army wholesale logistic systems for the 1980-85 time frame in connection with evaluation of the impact of logistics experience in Vietnam, implementation of Army in the field logistic concepts under the combat service support system, evolution of mission assignments to the Defense Supply Agency, improvements in trans- portation and communications, and organizational trends and studies impacting upon Army logistics. At present the study team is develop- ing the many basic research documents required. To assure that the various systems under development interface properly and provide a cohesive vertical management information system for the Army, we have underway a study and design effort which has as its objective the `establishment of an `integrated supply, maintenance and materiel readiness reporting system from the unit level up through intervening echelons to Headquarters, Department of Army. This effort began with an identification of the essential elements of information required for management and decisionmaking at each echelon of the Army. The system is being designed to provide this in- formation from data banks operating in support of the various func- tional systems now under development at the several echelons of the Army described. It is the Army's intention that this effort will result in a standard worldwide information system which will integrate supply, maintenance and materiel readiness reporting into a single cohesive system. In conclusion, improved control of Army inventories, systems dis- cipline and standardization and simplification of the various supply systems within the Army have been initiated and are in process of execution. In today's dynamic logistic environment, emphasis is being placed on the need for improvement in logistic control and economy by the Secretary of Army, the Chief of Staff and at all command levels. Previous examples cited highlighted the positive measures underway to obtain immediate improvements. Intensive review of requisitioning objectives has been conducted for major commands by Headquarters, Department of Army and the PAGENO="0086" 80 Army Materiel Command's national inventory control points. A pro- cedure has been established whereby the Army Materiel Command will continue to provide this type of review and other management assistance semiannually on a scheduled and continuing basis. Headquarters, Department of Army ~has also conducted special semiannual reviews of the National Inventory Point procedures for computation of Army-wide a~ssets an~1 requirements and plans are being made to extend this type of review to other major commands. The Army has positive measures underway to improve on our present logistic support structure and to take full advantage of modern tech- nology in order to provide the `best possible support to our combat forces. Currently accepted concepts are also being critically examined and questioned in order that the future Army logistics system can be designed on a sound logical basis to best support land combat in the future. The Army `has a four-point systems improvement program directed at achieving an integrated, standard, future logistic system that provides for: Central direction and `control of logistic system development at Headquarters, Department of Army, Deputy Chief of Staff for logistics level. Intensive systems design and development efforts addressing each support echelon in the Army Logistics System, intended to provide worldwide standardization. The development of an integrated supply, maintenance and materiel readiness information system to integrate the support systems into a cohesive, vertical system from unit to Headquarters, Department of Army level. Long-range study and operations research, examining, and chal- lenging the doctrinal base upon which t'he present system is based. T'he U.S. Army has and is exploring every practicable means of increasing effectiveness and efficiency of its logistic system. Every improvement practicable is and will be made provided it is compatible with the Army basic mission of supporting the combat soldier in battle. I thaa'ik `all of you for your interest in this most significant area and I and other Army witnesses will be pleased to respond to questions. Mr. HOLIFIELD. We will instruct the staff to prepare their questions so we can start questioning you immediately on this statement the first thing in the morning. General HEIsER. Thank you, Mr. Chairman. Mr. ROBACK. At all points where you have suggested supplying additional material for the record, take that as a request by the committee. General HEI5ER. We will, sir. Mr. HOLIFIELD. Thank you very much, and thank you for your appearance here this morning. The meeting is adjourned until 10 a.m. (Whereupon, at 12 noon, the committee recessed, to reconvene at 10 a.m. Wednesday, June 26, 1968.) PAGENO="0087" MILITARY SUPPLY SYSTEMS WEDNESDAY, JUNE 26, 1968 HousE OF REPRESENTATIVES, MILITARY OPERATIONS SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS, Washington, D.C. The subcommittee met, pursuant to recess, at 10:15 a.m., in room 2247, Rayburn Building, the Honorable Chet Holifield presiding. Present: Representatives Chet Holifield, Horton, and Erlenborn. Also present: Herbert Roback, staff administrator; IDouglas IDahlin, counsel; Joseph Luman, defense analyst; and Paul Ridgely, investigator. Mr. HOLIFIELD. We will continue our hearings on military supply management. I have a little announcement to make. I am chairing the Committee of the Whole House today, and the House meets at 11, so this means that I have to leave to take the chair in the House of Representatives. I regret particularly that we could not get this information to the Navy in time to let them know that we could not put them on this morning. We will use this hour with the Army. You gentlemen are welcome to stay for the hearing or you can be excused, because we will not be able to put you on this morning. We will have to adjourn at 11. General Heiser, I think we had put your complete statement in the record yesterday, the part you did not read, and today we will have some questions. Mr. ROBACK. We also have General Jones with us today, who can give us the benefit of his wisdom on Vietnam, Mr. Chairman. General Heiser, you referred to the reorganization of the Army in 1962, which set up the Army Materiel Command, and then you say that in the spring of 1966 an Army study group found that logistics doctrine and system development had been fragmented to an unde- sirable degree. Will you amplify that? I gather that the reorganization in 1962 disestablished the basic Army technical service system. Now, did that create more problems than it resolved in the logistics field? 81) PAGENO="0088" 82 STATEMENT OF MAJ. GEN. JOSEPH M. HEISER, JR., ASSISTANT DEPUTY CHIEF OF STAFF, LOGISTICS (SUPPLY AND MAINTE- NANCE); ACCOMPANIED BY BRIG. GEN. JOHN KLINGENHAGEN, DEPUTY ADOSLOG (S. & M.); COL. ANTHONY DASKEVICH, DEPUTY ADCSLOG (S. & M.) FOR PURM; LT. COL OSCAR J. SANDERS, STAFF OFFICER, SUPPLY POLICY AND PROCEDURES, DIRECTOR OP SUP- PLY; COL. J. M. TUMLINSON, CHIEF, EUROPEAN-NORTH AFRICA BRANCH, THEATERS DIVISION, DIVISION OP PLANS; WAYNE SMITH, TECHNICAL ADVISER, ADCSLOG (S. & M.); ROBERT WOOD- SIDE, OFFICE, DEPUTY CHIEF OF STAFF PERSONNEL; JOHN HEEDEEN, OFFICE, ASSISTANT FOR MANAGEMENT, ADCSLOG (S. & M.); AND JOHN TAYLOR, CHIEF, LOGISTICS DOCTRINE AND SYSTEMS OFFICE, DCSLOG, ALL DEPARTMENT OP ARMY; AND BRIG. GEN. LEO B. JONES, DEPUTY COMMANDING GENERAL, FIRST LOGISTICAL COMMAND, U.S. ARMY, VIETNAM-Resumed General HEISER. Sir, my sincere answer to this is that what oc- curred at the reorganization of the Army in 1962 in my experience occurs with any significant reorganization. The decision was made that we would depart from not the technical services itself, but from the organization represented by the Chief of Technical Services, which headed up logistic system for each of the technical services down to and including the technical service officers and men in technical service units in the field Army. Now, the basic decisions involve the fact that it eliminated the Chiefs of Technical Services. It provided for a basis for facilitating the standardization of eight Army logistic systems that extended com- pletely to the units in the field. This reorganization has taken place. In fact, it is one of the manage- ment problems that occurred during the Vietnam buildup, because at the time of the Vietnam buildup, we were still in the process of carry- ing out some of these decisions of reorganization. Now in answer to your question, did this create problems, some of the problems that were created were because of the very fact that we were in a transition stage from one organization to another. Other problems occurred because in carrying out this reorganization, we were in a very fluid situation, and the military standards system governing logistics to some extent were also in the process of being planned, dissected, modified and approved and put in the field. And so what we had in at least the 1960 to 1965 and 1966, and I could even say further period up until the present day, but especially during 1960 to 1965 the logistics system was in a state of real dynamic change. The Department of Defense directives were requiring certain changes, and I include the fact that it was during this period that we implemented the military standards system for supply, commonly known as "MILSTRIP," in the Army, Army Regulation 725-50. And most of the follow-on military standard systems have been imple- mented during this period. PAGENO="0089" 83 At the same time, within the Army we were taking part in this reorganization. For example, I think it was only about a year ago-check me, Leo, if I am not right_-it was only about a year ago that we completed the reorganization of field units from a technical service organization to what we call a COSTAR organization based upon functional supply and maintenance as opposed to technical services-oriented type of orga- nization and mission. So in examining the system, sir, I would say that in answer to your question, we were and still are in the process of solving some of the problems that emanated of necessity from just reorganizing, not that there was anything wrong with the reorganization. Mr. Ro1i~cK. Give us an example. What was the problem that grew up here as between "logistics doctrine" and "systems development"? In other words, why was there this fragmentation? Were there too many separate centers of decision? Or policy deter- mination? What was the problem? General ITEISER. In the present environment as to the term "frag- mentation" to an undesirable degree, they were pointing to the fact that we did have under the reorganization a system based upon functional supply and maintenance, which did have command responsibility at the various echelons beginning with the Department of Army, with a breakout at the Army Materiel Command level for all types of Army- managed items, all commodities, and then going further into the field having the Commander in Chief of the Overseas Command with his responsibilities and at each level down. Now what they were actually saying was that we should examine this to determine to what extent these were undesirable, and therefore attempt to eliminate them, sir. Mr. R0BAOK. In the 1962 recommendations- General HEIssu. Yes, sir. Mr. ROBACK. Reorganization, the thrust of it was to try to get all these separate centers of the Technical Corps with their own depot systems, their own logistics responsibilities somehow reorganized? General HEISER. Yes. Mr. ROBACK. So it was not as an outgrowth of reorganization as such? It is just that reorganization did not necessarily resolve all the problems, is that not the case? General HEISER. That is essentially ~orrect, and this ties in with what I was trying to say earlier, sir. Part of this is still in the process of implementation, the results and the objectives of the reorganization of 1962. Mr. ROBACK. Five or 6 years, you do not think that is a slow process? General HExsiii. Sir, it is a slow process if you look at it from one point of view, but I have to say, Mr. Roback, that slow is a relative term. The reason I say that is this: We had a system that was in operation for many, many years. This system had already started in terms of the use, for example, of APP, and the committee has shown an interest in this, so maybe this is a good example to talk to. Before the reorganization in 1962, 1 do not believe there is anyone in the Army knowledgeable of the situation but what he would admit PAGENO="0090" 84 that the situation was fragmented in terms of logistical support and systems `between the various technical services. With the abolishment of the Chiefs of the Technical Services, it was felt that standardization of the Army system in accordance with DOD directives and military standard systems would be facilitated. And, sir, experience has indicated without question that it has been facilitated, without any question. But recognize that in 1962, when the reorganization was ordered, there was a going concern, with respect to the Chief of Technical Serv- ice organization. Looking at ADP, for example, you can go to one of the commodity commands which the Army Materiel Command in- herited from the Technical Services, you can look at the Army Tank- Automotive `Command, and find that there we had the first large scale computer that was ever installed in any Army installation, the BIZMAC. The BIZMAC was a research and development item with which the Army was attempting to try to determine horw to `best use a large scale computer. Because of getting into this so early, one of the serious prthlems in terms of progress in APP and in APP effective programing was to get away from the BIZMAC, which we had, and try to catch up with the state of the art. These were procedures and these were `hardware and software that were in process, and sir, in 1962 we had gone from the BIZMAC to a process of trying to update the hardware through substitution of what became RCA 501 equipments, multiple 501 equipments to replace the high volume o'f the BIZMAC, and the procedures that went along with it were difficult to change. I might say, sir, that we are still in the process of trying to get what was working at that time under other processes standardized to meet the requirements of the Army Materiel Command. That is just one example. We have other examples in terms of training people. At the time the Chiefs of Technical Services existed, they had responsibilities to insure the `training of logistic personnel in each of their areas. I am not at this point attempting to go back in history and say that `those responsibilities were bad or good. I am not talking to that point. That is anejent history `and I do not think this is what you are really `after. What I am saying is that in the transition of going from a very strongly controlled Technical Service training program for .officer,s and men, `we have had to make `this transition into a centralized control of training and still standardize, but still apply the same importance to the training in each of the logist'ic areas so that we can come up with a fully trained man to do the job in the field, and I think, sir, very sincerely that we are still in the process of doing this. And I think that in so doing, we are discovering that we have to make improvements in our training program in order to achieve the best results in the field. Mr. HORTON. General, what is the difficulty in training `these men? I mean you talk like this takes `a long time and it `is a great problem. What is the difficulty? General HEISER. Sir, it is `a `continual problem, Mr. Horton, because, as you well know, sir, we have a large preponderance `of the U.S. Army made up of short-term people in terms of draftees, sir. PAGENO="0091" 85 Secondly, in the areas of most critical importance to us right now,- we have short tours. For example, the 1-year tour in Vietnam, which means there is a continual repetitive training problem to keep men well-trained. Mr. HORTON. The other services have this same problem, have they not, G*~neral? General HEISER. Yes, sir; I am sure they do. I am not qualified, Mr. Horton, to talk to the extent to which they have it, sir. LACK OF STANDARD ARMY SYSTEM Mr. HORTON. The difficulties pointed out by GAO, as I understand it, did not have to do with the personnel or the short term, but the fact that the Army did not have a centralized or standardized system. Now why does it not have such a system? General HEISER. Sir, you may be right, Mr. Horton, hut I did not realize that the GAO was actually indicating that we did not have that kind of a system. It was my understanding that what they were really getting at was more the fact that we had to improve this train- ing system and improve the assignment of the men that were trained as they go out to the various assignments in the field. Mr. HORTON. I do not have the specific recollection. I could pull it out from the testimony, but I have some recollection about data proc- essing equipment that was transferred from Europe to Vietnam. It was indicated that they had to do a reprograming effort because of the difference in the situation between Vietnam and Europe. Other services could take the same equipment and change it around, and the programing would be the same, because the personnel were the same and the items were the same. General HEISER. I am familiar with that, sir, and that is correct, and the observations of the GAO in this regard are correct in that we did not have a standard system in terms of software particularly in Europe, in comparison with what- Mr. HORTON. When you talk of the software, what do you mean? General HEISER. Excuse me, sir, I beg your pardon. The hardware that I referred to is the actual APP equipment sitting right there on the ground. The software consists of the programs, the paper, and the procedures which go to making the processes within which that ADP hardware works. So what I am really talking of now are the procedures, the programs. Mr. HORTON. All right. General HEISER. Now we did not have the standard program, sir, unfortunately and you have a perfect right to ask why we did not. I think, sir, that my humble answer to this question is that APP hit the field, sir, with its capabilities that everyone wanted to make use of, and the Army attempted to make use of it. We attempted to move out and allow people in the field to make use of it to the best of their ability. We did not have a standard system within which this APP would be utilized in those days, and what we find- Mr. HOLIFIELD. Was there one? General HEISER. No, sir; there was not. Mr. HOLIFIEIJD. In other words~ you were exploring? General HEISER. Yes, sir. PAGENO="0092" 86 Mr. H0LIFIELD. In the software field, yourself? General HEIsiu~. Yes, sir; we were exploring software and hard- ware, Mr. Chairman. We were trying at that time and we still are. Mr. HOLIFIELD. Put this in a bracket of years. General H1~isER. Sir, we are talking in terms of the beginnings of this-first of all, may I give just a little quick history? Mr. HOLIFIELD. Yes. General HEI5ER. We began the use of the data card as opposed to the manual requisition toward the end of our experience in Korea. This progressed, using a card and just electronic accounting machines to try and avoid having as many people and doing a job more effectively than the manual processing of supply paper. This began at the end of Korea. `Then as I say, sir, in the computer area we got into the computer area both at the National Inventory Control level and at the depot level, and also at the Field Inventory Control Center level during the mid and late fifties. For example, in the 7th Army in Europe, we had what was popularly known as a MOBIIDIC (mobile digital computer)' piece of equipment, which was supposed to be a piece of equipment that could be put in a van. It was ruggedized and you could move it around as it was. Along with this was a program, and it was really a test package, sir, but we never really got to carry out the test before things moved so fast on us. And by the way, one of the problems in this area is the state of the art moves so fast. We had MOBIDIC's that had problems, and we could not go from the MOBIDIC to something else through an evaluation process and so forth. We already had the MOBIDIC, an antique piece of equip- ment before we ever finished the test. This is one of the problems. Now, involved in this also is the fact that while we have MOBIDIC, we also get involved in Vietnam, and you might say well, why did you not put MOBIDIC in Vietnam, but we knew that MOBIDIC was not the equipment to go in Vietnam. Now also, we are attempting to start to get a standardized system. We did have problems in terms of the fact that we had equipments at that time that would not communicate one with the other. We are getting along better in this now, as I am sure, sir, there are people better able to talk to this than I who are in the room, but the fact is that some of these difficulties are being overcome. But for a while, you had to write programs that were specifically pointed at a specific piece of equipment, and you did not have the ability to communicate. We got many different pieces of equipment in an effort to try to be fair in terms of commercial practice and competition, and as a result we had different computers in our depots. What I am saying, sir, is that use of computers has grown and it. began in a logical approach to testing, but the state of the art and the dynamics of the situation occurred in such a way that in the beginning of the early sixties we did not have a standard system, and yet we had jobs to do, sir. Mr. HORTON. General, could I interrupt you there? General HEISER. Yes, sir. PAGENO="0093" 87 Mr. HORTON. On page 17 of Mr. Fasick's testimony the other day, at the bottom of the page he made this statement: 1~Jach major command in the Army has had the responsibility for determining it own data processing requirements. Although the systems must to a certain de- gree be compatible with certain standards' prescribed by the Department of Defense, each command designs its own system, devises data processing pro- grams, develops management reports and obtains data proces~h~g equipment. Then he goes on to show this illustration that I referred to a moment ago. General HEISER. Yes, sir. Mr. HORTON. Now the difficulty, it seems to me, goes not to the changing systems and all of the new innovations in data processing equipment, but goes back to the fact that the Army has the responsi- bility within each major command for determining data processing re- quirements rather than to have a centralized requirement. General HEI5ER. Mr. Horton- Mr. HORTON. Now is this still in effect? General HEI5ER. No, sir. Mr. HORTON. What is the situation now? General HEI5ER. The situation is now that we have directives, sir, which I can supply for the record, including DOD Directive 5100.40, and DOD Directive 4105.55. (See pp. 301 and 305.) Mr. HORTON. Would you give the dates of those directives? General HEISER. Yes, sir, September 28, 19~3. Mr. HORTON. What is that one? General HEI5ER. Both of them, sir, are September 28, 1963. And the last, the most recent directive that is directly pertinent to your ques- tion, sir, in the Army is Army Regulation 18-2 dated Septen~ber 1967. Now what these do, Mr. Horton, is the fact- Mr. HORTON. Excuse me. The first directives were back in 1963? General HEISER. 1963; yes, sir, broad directives. Mr. HORTON. These comments were made in 1968. There is no indi- cation in here that that has been changed. General HEISER. Sir, we began in 1963 to exert control, and the con- trols have beei~. strengthened until today, sir, what is stated here I have to say is incorrect in terms of the fact that today an overseas commander has to come in through the Department of Army and to a large extent all the way to the Secretary of Defense, in order to get a new computer and to establish a new program. Mr. HORTON. Yes, but now right there- General HEISER. Yes, sir. Mr. HORTON. In order for him to establish a new program, why should this not be done from the top level rather than from the com- mander's standpoint? General HEIsER. Sir, this is exactly why we were in the condition in the early sixties that we were in. `The Army, if it had been in position to establish a standard system, would have done it. And this is the reason I was getting into the dynamics of the situation as it occurred on the ground. We did not have that standard system. A standard system that we might have had, for example, at the field Army level was the PAGENO="0094" 88 MOBIDIC, and MOBIDIC was already out of date, and so what we had to do, in order to get on with the job, we in the Army-I say we in the Army, I was not at that level at that point-the Army had to allow the field commander some leeway in terms of getting on with the job. Mr. HORTON. Why? General HEISER. Because, sir- Mr. HORTON. You are talking about supply. I am not talking about tactics or anything like that. General HEISER. No, sir. Mr. HORTON. I am talking about supply and supplying a man in a tactical situation. Why can the programing and the supply not be done from the top level? General HEISER. Mr. Horton, it can be done if you have the pack- ages available to give them, sir. Mr. HORTON. Why can you not have them available? General HEISER. We did not in the early sixties, Mr. Horton, be- cause we had not perfected these packages. Mr. HORTON. Have you got them now? General HEISER. Yes, sir. Mr. HORTON. When you talk about packages, are you talking about programing? General HEISER. Programing for equipments, and equipments that fall in with the program, sir. Mr. HORTON. Do you have it now? General HEISER. Sir, I have to say that this is mixed. I cannot say yes or no, sir. I say yes, we have packages. However, we are only in the process of improving this, Mr. Horton. This is a changing situation, and I think, sir, I might at this time ask Mr. Tay- lor to first of all distribute some charts we have prepared which will be useful to you I think in terms of standard systems, and then, John, if you will explain these charts. Mr. TAYLOR. Yes, sir. General HEI5ER. I think it will be directly pertinent to your ques- tion if we have them now. Mr. HORTON. Let me ask you this question: Are you aiming toward the centralized system? General HEISER. Sir, there is no question about it, 100 percent. Mr. HORTON. When do you expect you will arrive at that point? General HEIsER. Sir, that depends on the level of supply management. Mr. HORTON. You take into consideration all the variables and the possibilities. What is your estimate as to when that will occur? General HEI5ER. It is going to be in the early seventies, sir. Mr. HORTON. Ndt before then? ARMY SUPPLY ADP SYSTEMS General HEISER. No, sir. However, we will have portions of this implemented before then, sir. That is my point, and I think Mr. Taylor can talk to this very clearly. Mr. HOLIFIELD. Mr. Taylor. (The chart referred to follows:) PAGENO="0095" 89 TIME PHASED PLAH ARMY SUPPLY SYSTEM. ADP STAHDARDIZATIOH I CY68~ CY69 CY7O CY7I CY72 ICY73IEQUIPMENT CONLIS WHOLESALE NAPALM BALANCE HARD (OIO SPEE DIX ~ HARD CORE BALANCE (ONUS WIDE STh TASCOM STD TASCOM ARMY WIDE MAGNETIC LEDGER CARD NON-DIV ____________ GSU/DSU 58 84 BALANCE Mr. TAYLOR. Yes, sir. The chart that you have before you is a time phased plan by calen- dar year across the top, and in the vertical column to the left you see the principal segments of the Army's logistic system starting with CONIJS wholesale. Here we are addressing the Army Materiel Com- mand, at both the national inventory control point level and the depot level, the two principal echelons of that command. CONJJS retail is the continental TJ.S. Army, and we are referring here to the numbered Army Headquarters of USCONARC. The Army in the field is broken down into the theater level, and here we indicate the two primary overseas areas, Europe and the Pa- cific, and the corps level and the division and nondiv~isional GSU-DSTJ levels. Depicted here on the chart, in terms of the acronyms, SPEED, COSMOS, and so forth, are the principal current standardization programs of the Army. Shown under calendar year 1968 are those pro- grams that are already in being or will be completed by the end of this year. Across the chart we are showing the longer range programs which carry into calendar year 19'13. I think it might he well if I went through these individually and explained them to you. At the national inventory control point level, you will note that at this tim.e we do not have standard equipments or programs. Mr. HORTON. Is that not a handicap? Mr. TAYLOR. It is a handicap, sir. Mr. HORTON. Why do you not have one? Mr. TAYLOR. Well, sir, we have been engaged for a period now of some 3 years in preparing for this program that is indicated as NAPALM, which is the national ADP program for AMO logistics management. NICP DEPOT SPIED CONUS RETAIL ARMY HO COSMOS PROTOTYPE ARMY IN THE FIELD THEATER EUROPE SAMA PACIFIC 3S CORPS ~ G3 > ~ DIVISION J PROTOTYPE 360-50/65 SPEED 1410/1401 SPEIDEX SELECTION 15 JULY 68 360.40/30 Si) TASCOM COMPETI~ lIVE SELECTION CURRENT S&MA 360.50 CURRENT 3S 7010/1460 360-40 NCR 500 PAGENO="0096" 90 This has been a tremendous task. It is now at a point where we know that we will be ready to go with our first installation on the 1st of January 1970 and complete it during that calendar year in terms of the hard-core programs. This term "hard core" refers to the pri- mary supply management programs of the National Inventory Con- trol Point. Mr. HORTON. Perhaps you are not the one that can answer this, but in relation to the other services, do they have programing at the top level or central level? Mr. TAYLOR. Are you asking me- Mr. HORTON. Are you familiar with the other services? Mr. TAYLOR. Does Air Force have it, as an example? Mr. HORTON. Air Force and the Navy? Mr. TAYLOR. Yes, they do. Air Force has it today. Their program- ing for the wholesale level is out at \`Vright-Patterson at the Air Force Logistic Command. Mr. HORTON. Why cannot the Army have it? Mr. TAYLOR. The Army does have it, sir. The Army Materiel Com- mand has such an agency at St. Louis. They are now involved in the centralized programing that will provide the NAPALM product to us in calendar 1970. Mr. HORTON. I am just trying to understand the problem that the Army had. Mr. TAYLOR. Yes. Mr. HORTON. So the Army is not at the same stage of development that the Navy and Air Force are. Have you a special problem that prevents that? Mr. TAYLOR. I think the problem, sir, as General Heiser described it, was the fact that until August of 1962 the Army had seven technical services, and at that time each of the technical services had their own inventory control points and designed their own programs. There is no question but what there was a complete diversification of programs at that time. In August of 1962, the Army Materiel Command was created and the technical services were dissolved. In September-I mentioned August as the date of the reorganization-in September, 1 month later, the commanding general of the Army Materiel Command initi- ated a study known as TASAMS, an acronym for the Army Supply and Maintenance System. The TASAMS study was completed in the spring of that following year, and provided for a realinement of the depots and the N1CPs, which AMC had inherited from the techni- cal services, and provided for the first time for a standard methodology in terms of such things as accountability, which was raised to the National Inventory Control Point level and brought about standard depot organization and a standard depot approach. What I am saying is that immediately following the reorgani- zation, some rather dramatic steps were taken. Mr. HORTON. Are you satisfied that the rate of progress is what it should be, or do you feel that you should be moving faster toward this centralization at the wholesale level? Mr. TAYLOR. I would say that at this point, sir, we are moving ex- tremely rapidly. I am sure that everyone would have liked to have seen an even quicker approach to standardization, but it was an ex- tremely difficult task. PAGENO="0097" 91 VISIBILITY FOR CONTROL Mr. HORTON. Coming to another question, there was some comment the other day in the testimony from the GAO with regard to this business of selling to the different levels. In other words, when the wholesale disposes of it, it is sold or it becomes owned by the retail level. Then, in turn, it becomes owned by the commanders in the field. There was some indication that by this process it got lost reporting- wise. It was not reported back, so that you know what the excesses were. Of course, this all goes to standardization and the like. Is there any effort to break dtwn that organization or that system? Mr. TAYLOR. I believe General Heiser should handle this. General HEISER. Mr. Horton, we to some extent talked of this yester- day. I will try to be brief, sir. Within the standardization system, there is an objective which will to the maximum extent provide visibility at the national inventory control level of assets in the field, regardless of where they are down to and in some cases including those assets that are in the hands of combat units in the field Army. So that this system that Mr. Taylor is describing called NAPALM on this chart does take the objective of extending visibility. Now I do not want to get into semantics, Mr. Horton. I am sure you do not. However, there is a question that, as I pointed out yesterday, in terms of the Army's decisions we are trying to decide is it necessary to have ownership so-called because accountability rests here in Wash- ington, D.C., with the commanding general of the Army Materiel Command, or can he just utilize visibility with the authority to control the assets that are in the field, regardless of who has paid for them in the fiscal channel or anything like that, sir. What we are attempting to arrive at is what is the most effective way of doing this, but the objective without question is headed in that direction, and as we mentioned yesterday even ahead of the NAPALM program we have started a test of this in the field. It began one way, sir. Its beginning was 1,700 or 1,800 line items. It would have been even greater except that we could not effectively handle it within our present ability at the national inventory control points, and so we started with the 1,700 or 1,800 items. We are going to evaluate this over the next few months and determine in what direction do we go in finalizing the programs which are involved in this question that Mr. Taylor has been talking to. Mr. HORTON. What you are saying, General, is that you are aiming toward a centralized, standardized program from the top level, at the wholesale level? General HEISER. Yes, sir. Mr. HORTON. But that you have not arrived at that stage yet? General HEISER. Yes, sir; but we are testing. Mr. HORTON. Do you not have this visibility at the present time? General HEISER. Sir, I would like to talk to that because this is rela- tive. We do have visibility at the present time of those items thai the Army Materiel Command has determined to be of sufficient significance that they need to know where these items are. Now we are reporting under a system, under Army Regulations 711-5 and 711-180. 97-475-68-7 PAGENO="0098" 92 These assets are reported, for example, from all depots overseas and in CONTJS, on each a monthly or quarterly basis, so that we do have this visibility on a monthly or quarterly basis. Mr. HORTON. That is a selected list of items, right? General HEI5ER. Yes, sir, but we are talking about some 35,000 items involved in this, Mr. Horton. Mr. HOLIFIELD. Most important items? General IJEISER. Most important, yes, sir. And the Army Materiel Command has the responsibility, among other things, of determining what items ought to be in here because of their significance either be- cause of criticality to weapons system or because of the money involved in this particular item. Mr. HORTON. If you have the need for parts for a NIKE system some place, can you reach down in one of the commands and pull that. item out? General HEI5ER. Sir, of course we can reach any place. At the Army Materiel Command, as I pointed out yesterday, sir, we have an Army Regulation 710-50 which we put out earlier this year, which gives AMO the responsibility of determining what items need intensive management. .AMC considers recommendations from the major com- mander in the field, if an item is critical with him, he can recommend the item for intensive management. Or AMC determines what these critical items are under this regulation, and can move these items any- where that is necessary, sir. Mr. HORTON. In other words, they can reach in? General HEISER. Yes, sir; they can. Mr. HORTON. And take them out? General HEISER. Now it is important to recognize that in order for them to be able to do this, they have to have this visibility that we have been talking about, and the reason ~cvhy there have been limits on their ability to do this in the past is because the information that they needed in order to determine how to do this redistribution between commands was not always available in a timely fashion. Now with the proper use of APP, and the changed approach to the problem, we can get closer and closer to the manager here having the ability to do this, because he has the intelligence that he needs, Mr. Horton, and that is what this system is going toward, and we are not waiting for this system. We are moving out in this direction so that. when NAPALM hits, part of this will already, in terms of a philo- sophical approach if you want to talk about it, and procedurally will already have been accomplished. Mr. HORTON. I think with this system, the thing that bothers me is that the commanders certainly are going to try to stock or build up an inventory of items which he thinks that he might need. General HEI5ER. Yes, sir. Mr. HORTON. In other words, that is going to be the tendency. General HEISER. Yes, sir.. Mr. HORTON. They like chocolate bars, there will be a tendency to build up a `supply of chocolate bars. That is why I think the centralized system can take care of that type of situation, not let the CO build up the supply so we have them sitting around someplace not being utilized. PAGENO="0099" 93 General HE~ISER. Or if he does want to build it up, at least there is going to be negotiation. Mr. HORTON. He has to justify it? General HEI5ER. Yes, sir; he is going to have to justify it, and at that point the Army Materiel Command in the Department of the Army really will then decide is the field commander going to have this exception to do something the Army Materiel Command says he should do or not. HIGH PRIORITY REQUISITIONS Mr. HORTON. One other question I have, and that has to do with this matter of priorities. We heard some testimony the other day about requisitioning on a priority basis and really it should be classified high priority, but requi- sitioned on that basis. What are you doing to correct that situation? GeneraJ HEISER. Sir, I will be brief because it is in the record. Mr. HORTON. Yes. General HEISER. We have a challenging system and we are strength- ening this challenging system beginning right at the unit commander level who initiates requisition. He has to review it before it becomes high priority, or his written designated representative has to approve high priority. Now, sir, there are weaknesses in this challenge system because it re- lies on human beings and people make mistakes and errors in judg- ment. The fact is, priority requisitioning is being policed at the unit level. Secondly, priority requisitioning is also policed at higher levels such as the 14th ICC. For example, the inventory control cetiter in Vietnam today has a block, a machine block on nonessential types of high prior- ity requisitions. Where we have a high priority because it is supposed to be a deadline piece of equipment in the hands of the soldier, we do' not challenge the requisition at that point because it takes too long and you may have lost lives, et cetera. But where the requisition is not for a combat essential kind of equipment-for example, furniture, mess equipment for base camps, this sort of thing-right now the 14th ICC has blocked priority requisitions. As a result of hearino~ the discussions that you all had here Monday, sir, I went back home t~ie night before last and we sent out a wire say- ing why can we not further extend this challenge into other areas that would be noncombat essential so that we could be sure that we are not misusing priority requisitioning. Secondly, sir, at the CONTJS level, the NICP's have a responsibility for challenging when it meets a certain criteria2 for example, if it is an exorbitant amount, in terms of past experience, et cetera, they challenge this. And then, in the last analysis, at the port we have what we call Lo- gistics Control Office, Pacific, which goes through what we call an eval- uation process, and every shipment that involves 1,000 pounds or more, is evaluated every night. The 14th ICC in Vietnam is queried as to whether this is a valid requirement to begin with or has something happened that they no ionge~r need it that fast. And so, while it is not perfect, Mr. Horton, we do have a challenge system, and we have inspections to supervise the fact that we correct PAGENO="0100" 94 those things that are not being done properly, and as I indicated in that wire the other night- Mr. HORTON. I commend you, General, on your resourcefulness there and especially for taking immediate action after you heard the corn- mittee discussion of last Monday. I really want to comrnei~d you for taking inimediate action. I think that will be very helpfu~1. I am sure you must agree with me that there is a need for restudy of this whole challenge system. General HEI5ER. Yes, sir. Mr. HORTON. In the Army, is there not? General HEISER. Yes, sir; and we are in the process of reviewing this now, sir, and the action I took the other afternoon, sir, I have to submit, Mr. Horton, what I was doing was really the attitude of the Army. We are not bulling our backs, because we have done it before we are going to continue to do it now. There is none of this resistance, Mr. Horton, and I would like to assure the committee of this, Mr. Chair- man, and I think UAO really recognizes this too. I think attitudewise, we are moving out. Mr. HORTON. That is a very helpful attitude, General. I think it is very helpful. PLANS FOR ADP SYSTEMS Mr. ROBACK. Mr. Chairman, I would like to inquire whether this time phased plan is really a plan or a sort of prediction as to when some of these developments may be instituted. General HEISER. Mr. Roback, I will turn it over to Mr. Taylor, but let me first of all say, sir, it is really both. What YOU see here are tar- get dates that are part of an integrated plan. Mr. ROBACK. Do you mean these target dates were prepared on June 25, 168? General HEISER. No, sir; they were taken from the latest status of the integrated plan, Mr. Roback. Mr. R0I3A0K. What we are concerned about is that in your testimony you have recited various studies, various critiques and certain pro- grams that you are working on, but it is hard to get a sense of the sequence and the timing; that is they have different `time frames, there are different expectations as to when they will be put into effect. The question is, do ~ou have a master plan or something that approximates that by which you are measuring milestones of achievement? General HEISER. Yes, sir. Mr. ROBACK. Does this purport to be that? General HEISER. This really demonstrates the timing that is in- volved in those milestones, sir. Mr. ROBACK. In calendar year 1968 in a narrative sense, Mr. Taylor, and briefly, what will you have in place, under this plan? Mr. TAYLOR. As indicated in the columns, and I follow right down calendar 1968, commencing with SPEED, which is the depot program for AMC, the acronym there is "Systemswide Project for Electronic Equipment at Depots." This program has been underway since 1965. It was the earliest of the AMO programs for standardization within the AMC complex, and it addressed depots. PAGENO="0101" 95 Under this program SPEED, each of AMC's depots today has standard programs. When I say "standard" in terms of Mr: Horton's earlier query, we do in this case have a central programing entity located at Chambersburg, Pa. at the Letterkenny Army Depot, where aJi of the SPEED programs are developed and maintained. These programs are standard today within each of AMC's depots. This is very close to the type of thing that the Air Force has done before. So we have standardization in terms of the AMO depots. Mr. ROBACK. What are you doing in 1968? Mr. TAYLOR. We are- Mr. ROBACK. Are you wrapping it up or merely restating what you already have? Mr. TAYLOR. No, sir; SPEEDEX, which is "SPEED Extended," is a program that AMC has been working on now for a period of better than a year, which is an updating of the current programs under SPEED and an elaboration on them, an extension of them into other areas. So in short this is a modernization of SPEED, and they are far enough along with it now that we know that by calendar 19'TO we will be prepared to put in what will be I am sure larger gear, and it will accommedate more of the depot operations than are presently covered by Project SPEED. Mr. ROBACK. What capabilities does that give you, just briefly? For example, what can you do with SPEED? Mr. TAYLOR. Well, today with SPEED, within the AMC depots they are able to accommodate all of their receipt, storage, and issue operations, as well as coverage of their maintenance and production control processes. These are the primary areas that are accommodated. Mr. ROBACK. This gives you depotwide control for commodity areas? Mr. TAYLOR. Yes, sir. Mr. ROBACX. Selected commodity areas? Mr. TAYLOR. Yes, sir. General H1~IsER. The important thing about this is this is on a standard basis whereas before the depots could do it to a greater or lesser extent depending on what they happened to have in their pro.. gram at that time. Mr. LUMAN. May I ask one question here? VISIBILITY CONCEPT Mr. ROBACK. Go ahead. Mr. LUMAN. There seems to be a little bit of ambiguity in your statement about the long-range plan for the Army with regard to overseas visibility and overseas control. On the one hand we have the statement that the commander is on the ground and knows what he needs, and there is a tendency not to want to let AMO in on control. On the other hand, m some of your high value systems, you actually do let AMC mon this kind of control. Then you point out the value of complete visibility and say you would like to have this, but you can't have it now because the computers at the NICP's aren't ready for it. We find out that you have a partiaLl program of 1,~OO items, but you are going to have a wait-and-see attitude and evaluate these next year as to whethev or net they will he extended. PAGENO="0102" 96 Do you have a firm plan? Has your logistics doctrine division de- ~cided at what stages you are going to attain what kind of visibility, or are you still searching around here? General HEISER. Sir, the objective, the `approved objective of the Department of the Army, is to central control to the extent that it will give us the most `effective and efficient support of the combat soldier in the field. Now that is the stated objective. What we have got to determine is what is that effective and efficient ivay of doing this. Now, for example, as we pointed out yesterday, we are talking about managing some 400,000-plus lines. We want to deter- mine as a result of test, and this is not a static test, we are not going to wait and see. This will develop as it ~`oes along. it is developing right now. It started out with about 1,500 lines, and it is already up to about 1,800 lines. What we are attempting to achieve is to determine what can we do at the Army Materiel Command level in terms of worldwide manage- ment, and this involves both a technical, I should say `a physical capa- bility in ADP equipment and programs, and it also involves a manage- ment capability in terms of people who can look worldwide at the situation. It also involves the question, and I have to say this now, sir, it also involves a question of not only could we do it with a Vietnam, but could we do it if we had something larger than a Vietnam, where people have to look with high priority in more than one direction, and this has to be involved in what we finally decide. Mr. HoRTON. General, could I interrupt there? Gcneral HEISER. Yes, sir. Mr. HoRToN. Isn't there a problem, isn't there an obstacle, when you have this command organization? In other words, you still have super- imposed on the problem the matter of command at these various levels. General HEI5ER. Yes, sir. Mr. HORTON. If you didn't have command at these various levels, then it seems like you could control it better from the central, from the top level. General HEISER. Mr. Horton, in theory- Mr. HORTON. Do I make my question clear? `General HEISER. Yes, sir; you do, and in theory this is 100 percent correct, sir. If everything could be relied upon to work perfectly, you can do this through central control and central management. Our problem, sir, in the practical business in the field is that every- thing doesn't work perfectly and, `for example, we must-let's assume that we have the capability at the national inventory control level and We are heading in this direction. Let's assume that, sir. Then we have to also assume that communications are going to be the kind of com- munications that we ~an depend upon. Also involved in this then is the fact that we are going to be able to get real time reporting so that the people at `the national level know exactly what happens in a place like Vietnam when it happens, to the closest extent we can. We are talking, for example,, about the man commanding the Army Materiel Command here determining how many tanks are needed in Vietnam today. Mr. HORTON. Let's leave out the combat equipment. Let's talk about noncombat equipment. There certainly can be progress made in those areas. PAGENO="0103" 97 General HEISER. Yes, sir; there can. However, sir2 I might add, and this is, of course, somewhat logical I would think, sir, and that is that the things that are most important to us in terms of money spent, and in terms of readiness of this country to defend itself, are the items that are in the combat field, sir, and these are the ones that the Army is primarily involved in managing, sir. You see, the other type of items are primarily a management responsibilty, in accordance with policy of Defense Supply Agency and the General Supply Agency. Mr. HORTON. I hate to hold up the plumbline of the other services, but they seem, to be able to do it, and I am going to be interested in their testimony. I am not sure that I understand the problem that the Army has as opposed to the Navy and the Air Force. General HEISER. Well, if I may, sir- Mr. HORTON. And the Marine Corps. General HEI5ER. I apologize for the other services, because I cer- tainly don't pose as an expert, but as one ~f the people in the system, sir, I would like to indicate this, that it h:as taken them some time to arrive at the state of the art at which they now find themselves, sir, as this committee will hear. I am sure they have certain problems, and the Air Force and I must `say, I said it yesterday, we are learning plenty. I am learning plenty and the Army from the Air Force experience. They are helping us because they have tested `out some of these areas for us. But~ sir, of the items that the Air Force have at their bases, half of those items at least I think or approximately half are not centrally controlled by the Air Force. They' are base-funded items that are controlled in the field. The centrally controlled items are the ones that are controlled by the Air Force, and to the extent that we can do this at our NICP's, we intend to get this at our NICP's, sir, to the extent that we have to have central management in order to have any efficient, effective system, as opposed to leaving the commander in the field with these prerogatives. In the last analysis, sir, I believe that even the Air Force, that is managed centrally, but when that commander on the field has to do something he does it. You have to have a sufficient flexibility even in the centrally managed things that allow that man in the field to take initiative when he knows on the ground that that initiative has to be taken. What we are at the point of `arriving `at, and I don't mean to make odious comparisions, but we are at the point of arriving at this through study, not delay, through study as aggressively as we can at what point `do you draw this line. We `are not talking, and I have to say this, we are not talking a comparative few bases. We are talking about thousands `of units, sir, and there is a real question of where do you draw this line, Mr. Horton, and that is what we have got to face u~p to, and that is what we are attempting to do. I would like to restate again we are not going so far and stopping. This thing is moving terrifically fast, Mr. Horton, and there is a lot of momentum in what Mr. Taylor has talked about here, and we are learning every `day and are rutting these lessons right into these programs. PAGENO="0104" 98 Mr. HoLu~'IELD. I think the point was made yesterday, and to clarify what you have just now said, in the Navy the ships are self-contained units for accountability and utilization of material, and the Air Force has a relatively few bases in comparison to all of the stations. I think you gave a figure of something around 276. General HEISER. 250,1 think, sir. Mr. H0LIFIELD. 250. General HEISER. That may not he `accurate. Mr. H0LIFIELD. 250 for the Army as `con'~pared with much smaller numbers- General HEISER. No, sir; I `was con~paring yesterday some 2,500 Army units whereas the air bases, which are an integral unit have, as I understand it, around 32 bases in the Pacific. Now, I am not saying what they are doing is wrong. I am saying for their peculiar circumstances it is right, `and to the extent that it is right for them we want to use it where it is right for us, and there is no ques- tion about it. Mr. H0LIFIELD. But what you are saying is that you have a much greater problem in scope. General HEI5ER. Yes, sir; volume, sir. Mr. HoLIFLsi~D. In volume. General HEIsm~. Density. Mr. H0LIFIELD. And in locations. General HEIsei~. Yes, sir. Mr. HOLIFIELD. Where `inventory is amassed and utilized. General HEISER. Yes, sir, and I would like to add, sir, beginning with the basic directives of what is authorized at the lowest unit in the Army, `we are trying, as I indicated slightly `in this prepared state- ment, we are trying to keep to `a minimum those things that we pro- liferate throughout all the Army units, and ke~p `at that level only those things that they have got to have, and those things that we know they only use less frequently, move those further hack into the system providing for this centralized management sit each higher level as we talk, sir. PLANS FOR ADP SYSTEMS Mr. ROBAOK. Mr. Taylor, you are somehow having difficulty get- ting through this thing. Can you give us a little rcandown~? What do you hope to accomplish here briefly through these programs? Mr. TAYLOR. First of `all, I would like to `address one question that you had asked just before we had the last discussion. That is that the plan that you see before you dated the 25th of June is no more than a recap of the basic Army ,plan which is supported by individual plans for each of these primary programs. Mr. ROBACK. If I went to General Heiser's office, would he have a big wall chart with milestones on it saying by calendar year 1968 we do this and each quarter, subdivided by quarter, he can measure prog- ress `and know where he stands, or are these what you might call anticipations and expectations about inWrovements along different time frames in the future? That is the thing we are grasping for. Mr. TAYLOR. No. Mr. ROBAOK. That we are grappling with. What is the Army program here? Do they have one? Maybe they don't. Maybe it is not PAGENO="0105" 99 practical. But I am asking you, does this purport to be a master plan for achieving logistics system standardization, worldwide visibility, the optimum in communications, data handling and all else that goes with logistics? You have said in various places, General Heiser, that you are striv- ing toward various kinds of standardization. It is hard to get an idea where you stand today, and where you are going to be a year from today. General HEISER. Well, sir, for exan~ple, today at the field unit level, the direct support level, we have a standard program called the National Cash Register 500, which happens to be the equipment we are using. There are 50 of these in Vietnam. These are being extended throughout the Army as a whole. This is a standard program. The program was written at Fort Lee, and the teams that went out and assigned with the equipment were trained at Fort Lee, and this is the beginning of a standard equipment at the direct si~pport level. We also are right now in the process of establishing-first of all, as was brought out yesterday, we have a `standard `system in the Pacific, which is at the inventory control center level, which is also being extended into Vietnam in the combat zone, because now we know what it can do, and it has been put into Vietnam in a combat situation. We didn't want to put it in there until we were sure it would do the job. Unfortunately that is a system that was standardized in the Pacific, across the subordinate commands. We do not have that system presently in Europe, but today presently we are examining in Europe, and at our level here, why is a system that is presently in `the Pacific not good as a basis for the system in Europe. Now here again we run into the dynamics of the problem. At the same time this is a short-term answer, really, because at the same time we have one of these projects here which is examining to determine, a study to determine what should the standard system be, based upon the third generation equipment, et cetera, of ADP both at what would be called an inventory control center level in the CONUS armies as well as the overseas armies. And so you see, what we are doing, we are in a dilemma of trying to improve the current systems to the maximum extent. At the same time we are trying to standardize in terms of the far-reaching future. And, John, you might want to elaborate on this, but this is the way we are going. Mr. ROBACK. The problem is to identify what can be accomplished within a designated time frame and then to measure whether you are doing it, and these other problems you have to determine what kind of system or what kind of equipment or even what kind of problems you want to solve. Some studies are addressing themselves to what the automatic data processing equipment looks like maybe in the 1980's, or what the trans- portation facilities looks like in the 1970's. But there are some things that you know you ought to do, and you can do, given the existing state of the art, and the question is what are they, and do you have them posted on your wallboard. Mr. TAYLOR. Yes, sir. We have these data. PAGENO="0106" 100 Mr. ROBACK. Can I go to your office and can you point them out on. the board? Mr. TAYLOR. My own office doesn't have it. Mr. BOBACK. Which office does have it on the board? Mr. TAYLOR. The office of the Assistant DCSLOG (DSR) has these data. `Mr. IROBACK. What is the room number in the Pentagon? Mr. TAYLOR. General Miller's office. Room 3E-561. Mr. ROBACK. Will you show me on a great big board and subdivided yearly by quarters, and say that we are going to do this in this term? Mr. TAYLOR. I will not be able to show it to you on a huge board. I can show it to you in terms of specific milestone charts for each item that you have before you right now. Mr. ROBACK. You have a vacant wall that you can put a board on? Mr. TAYLOR. I would be very happy to do so. Mr. ROBACK. And put this on? Mr. TAYLOR. Yes, sir. Mr. ROBACK. Then it will become visible to other people. Mr. TAYLOR. The data are available to you, Mr. Roback, and we can provide them to you as a follow-on to this session. We have detailed milestone charts for each one of the programs that you see here. Mr. ROBACK. You can give us those, and I suggest that with regard to this presentation, to make it intelligible to the lay reader or at least the readers who will peruse the record, to restate this in a narrative form, stating what you are trying to accomplish with these programs, to what extent they are in being, and how they look down the road. Mr. TAYLOR. Yes, sir. General HEISER. May I point out that I asked Mr. Taylor to devise this graphic quickly, sir. Mr. ROBA0~. I understand. General HELSER. So that we would at least have something to talk to. Mr. ROBACK. But I didn't want the impression to be left that the master plan was drawn up today for the purpose of the hearing. General HEISER. No, sir. Mr. TAYLOR. It most assuredly was not. General HEISER. This was just this chart drawn up today, sir. SUPPLY PROBLEMS IN VIETNAM Mr. ROBACK. We are going to have to conclude. The chairman has to leave. Before General Jones gets underway, Mr. Chairman, I would like to ask him for his observations about the General Accounting Office report on Army supply in Vietnam that came out a day or two ago. Are you familiar with that report? General JONES. Yes, sir; I am. Mr. ROBACK. Do you concur generally in its findings? General JONES. At the time the General Accounting Office made that investigation, I concurred generally in its findings as to the conditions. Those are not the conditions today. Mr. ROBACK. Do you think that conditions have changed? General JONES. I do, sir. Mr. ROBACK. Is there any way, I mean has that been reported'? Have you responded to the General Accounting Office on those changes? PAGENO="0107" 101 General JONES. We have not responded with respect to the progress that has been made. We have responded with respect to what we are doing about their observations. Mr. ROBACK. Can you undertake, I know you are leaving here, but can the office or the Army undertake to make some response to the matters that are in the GAO report as to what is changed, what prog- ress has been made since that time? General }]IEISER. Sir, if I may answer that question, we of course have not gotten the formal report which was I believe distributed on Friday. I would assume that we will make, we will have a chance to comment on the formal report. Mr. ROBACK. This is not a draft report. This is a blue book to the Congress now, and you don't have any more chance to comment to the GAO on this thing. So we are giving you an opportunity to comment to us on it. General Jones, in what respect would you say that this thing doesn't give the right picture now? General JONES. Well, let's talk about excesses. Mr. ROBAOK. All right. General JONES. Alleged excesses. We admitted excesses, we, the Army. We admitted them in Vietnam. We are in a huge program at the present time to identify those excesses, and to retrograde those excesses from Vietnam. The General Accounting Office pictures that I believe are in their report were generally taken at the Saigon depot, and especially at the so-called fish market which is- Mr. H0UFIELD. At about what time, what dates? General JONES. Those were in the fall, sir. I can't give you the exact date, but they were there during the period, they were just winding up at about my arrival. They wound up about November. Mr. ROBACK. Of what year? General JONES. So it is something before 1967. Mr.ROBACK. 1967? General JONES. But the pictures you see there of the fish market are not true pictures today. Mr. HOrAPIELD. In other words, there is no more fish market today? General JONES. There is a fish market, sir. Mr. HOLIFIELD. But not stacks of materiel there? General JONES. There are stacks of materiel, but we know what that materiel is. Mr. HOLIFIELD. You have not classified it, identified it? General JONES. We have, sir. It is in good storage conditions. It is warehoused properly. That which we did not need in Vietnam has retrograded to Okinawa. We have from the fish market alone retro- graded 30,000 tons of items that, (a) were either excess, or (b) that we could not identify and were sent to Okinawa for proper identifica- tion, proper repackaging, so that they could be used other places in the Army or even perhaps brought back into Vietnam in some cases. We are doing this in all the depots, but our emphasis has been on the Saigon depot, because that was especially where the General Ac- counting Office took their pictures and did a lot of their work. But we are doing this in other depots with respect to excesses. PAGENO="0108" 102 That particular area of the fish market, and I know it perfectly, I have walked it hundreds of times, is completely cleaned out, as I mentioned, as far as this junk is concerned. We are still using the fish market. We are relocating at this time the entire Saigon depot from its current locations to a new location at Long Binh, which is now under construction, and the fish market has particularly been stocks of repair parts, and those also are being relocated and physically moved at the present time. So that by 30 September we will have relocated from the fish market 50 percent of our stocks, and by March 31, based on a directive from MACV, we will have relocated all of the Saigon depot from the fish market area to its new depot location at Long Binh. Now, with respect to getting a handle on the inventory, they alleged, and properly so, that we did not know what we had, accurate counts. I am not saying that today we know that in every Federal stock number what we have by accurate counts. I can say we have made significant progress in first cleaning up our storage areas; second, getting those commodities properly located so that we could find them when we need them; and, third, physically counting those items and having that counting accurately reflected on the tape at the computer. As I say, we are not 100 percent, and I can't give you a feel on what percent we have finished up, but we are counting every day, sir. But we are finding errors every day. Humans are human. General HEISER. Again I would like to put it in context, sir, in terms of the volume that we are talking about. We are talking about ap- proximately 1 million short tons of supplies sir, and what General Jones is emphasizing is the fact that again we are moving out to improve our supply management and our storage and our depot operations, and as is always the case, there is room for improvement, and in this particular case, sir, there was definite room for improve- ment, because of the way in which this war has grown up, and the fact that we put in combat troops to do the job first. Logistic troops came in in not sufficient amounts to begin with. We had a discharging of ships problem, as you will recall, about a year and a half ago. We discharged ships very fast. We shipped stuff from the United States with a sense of urgency to support the combat soldiers; and, sir, we just didn't have a balanced capability to receive it and handle it on the far end. Mr. H0LIFIELD. Nor the facilities. General HEISER. Nor the facilities. Mr. HOLIFIELD. I want to ask you a couple of questions. Are you going to be stationed here in Washington for a while? General HEISER. No, sir. This is my last day in Washington. Mr. HOLIFIELD. This is your last day in Washington? General HEISER. Yes, sir. Mr. HOLIFIELD. You are going where? General HEISER. I am going to Southeast Asia. I am going to `be assigned wijth General Jones. Mr. HOLIFIELD. Both of you then will be leaving to go out there? PAGENO="0109" 103 General HETSER. Yes, sir. However, sir, I can delay at the con~ venience of the committee. I will change my schedule, sir. That is what I am being paid for. General JoNEs. Sir, we were criticized for not redistributing stock between depots. I would like to point out during so far this fiscal year we have redistributed about $110 million worth of stocks among and between our depots, so that if depot B did not have a particular item he needed, and it was available in depot A, depot B came to depot A rather than back to the United States for that item. Mr. HORTON. Mr. Chairman, I am not sure I understand. General, have you been reassigned? General HEIsm~. Yes, sir; I am being assigned. Mr. HORTON. And General Jones is going to be gone also. Who is going to be running this? General HEISER. General Klingenhagen, sir, that I introduced yesterday, is my deputy now; and for my present job tomorrow he becomes chief, sir. Mr. H0LIFIELD. That is the second bell. We have to answer the quorum call. We are going to adjourn now. I think it is going to be necessary for us to have some additional Army testimony; but I certainly wouldn't want to be responsible for keeping you gentlemen from your assignments. So we might have your successor. We might call him and his stafF back and go into some matters `that we haven't been able to get to. But as I say, we do not want to interfere with your assignment. You are planning to go out right away, too, are you? General HETSER. Sir, I was going out right away. I was going to take what I think is some leave that is deserved en route with my wife. So I have some flexibility, sir. It will simply mean I leave later, that is all, sir. Mr. HOLIFIELD. We wouldn't take your leave away from you. I am sure you have earned it. General HEI5ER. But, sir, I am dedicated to what I am doing, Mr. Chairman. Mr. HORTON. You are leaving anyway. We ought to get the other general. Mr. HOLIFIELD. We will stand adjourned at this time, and I will have Mr. Roback confer with you about some arrangements for some future testimony, without interfering with your assignment. General HEIsER. Thank you. Mr. H0LIFIELD. Thank you very much. General HEISER. The question is, sir, has General Jones answered your question that was asked sufficiently? Mr. H0LIFIELD. Not in the detail probably that we want, but if you could stay and talk with Mr. Roback for a little while, he will go into this a little bit further. Mr. ROBAOK. Can you submit to us a commentary on this? General JONES. Item by item on what has been done since the report. General HEISER. May I take this on for the Department of the Army? Mr. HOLIFIELD. Y~. PAGENO="0110" 104 General HEIs~a~. And indicate, sir, that we will be responsive to the question of what has occurred since then. Mr. HoLu~rEu~. And will it be all right with you for us to keep the record open for such questions as we have prepared here, and we will submit them to you and get a response in writing. General HEIs1~. All right, sir. Mr. HoLIFn~Ln. So it can be properly a part of the record. General HEISER. Yes, sir; that is certainly all right. Mr. H0LIFIEu. Thank you very much, and good luck to you in your assignment. The meeting is adjourned. (Whereupon, at 11:28 a.m., the conmdttee was in recess, to reconvene itt 10 a.m., Thursday, June 27, 1968.) PAGENO="0111" MILITARY SUPPLY SYSTEMS THURSDAY, JUNE 27, 1968 HousE or REPRESENTATIVES, MILITARY OPERATIoNs SuBCOMMITTEE' OF THE CoMMrr'rEE ON GOVERNMENT Ormt&TIoNs, Wa~1thlgto~, D.C. The subcommittee met, pursuant to recess, at 10:15 a.m., in room 2247, Rayburn Building, Hon. Ohet Holifield presiding. Present: Representatives Chet Holifield and Horton. Also present: Herbert Roback, staff administrator; Douglas Dahlin, counsel; Joseph Luman, defense analyst; and Paul Ricigely, investigator. Mr. HoLrrn~u. Off the record. (Discussion off the record.) Mr. ROBACK. We will have meetings on Monday and Tuesday, Mr. Chairman, and we will ask the DSA people to be here then. We may want to recall the Army.~We will see how it works out. Mr. HOLIFIELD. This morning we will proceed with your testimony, Admiral Oosgrove. The committee will be in order and you may proceed. STATEMENT OP REAR ADM. PAUL P. COSGROVE, JIL, SUPPLY CORPS, U.S. NAVY, DEPUTY COMMANDER, NAVAL SUPPLY SYSTEMS COMMAND FOR SUPPLY OPERATIONS; ACCOMPANIED BY COMDR~ RICHARD N. DREESE, SUPPLY CORPS, U.S. NAVY BIOGRAPHY 0]? REAR Azmr. PAUL F. OosGRovE, Jr., SUPPLY Ctnu's, U.S. NAVY Paul Francis Oosgrove, Jr., was born in Augusta, Ga., on July 14, 1918, son of Paul F. and Eleanor (Brosnan) Oosgrove. He graduated from the Georgia School of Technology at Atlanta with the class of 1939 and received the degree of bachelor of arts in industrial management. Commissioned ensign in the Supply Corps of the U.S. Navy on January 18, 1940, he subsequently advanced in rank, attaining that of rear admiral, to date from July 1, 1967. Upon receiving his commission in 1940, he reported for instruction at the Supply Corps School, Philadelphia, Pa. He completed the course there in September of that year, and was assigned as disbursing officer on the sta~ of Commander Destroyer Division 80. He conitinued to serve in that capacity until October 1941, after which he had duty as outgoing ntores officer (issuing ship~ mont) at the Naval Air Station, Pearl Harbor, Territory of Hawaii. He was in that assignment when the Japanese attacked the naval base there on Decem- ber 7, 1941. During the period June 1944 until September 1945 be was supply and commis- sary officer at the Naval Air Station, Vero Beach, Fla., and following similar duty on board the USS CABOT, he reported in June 1946 as stock control division officer for aircraft engines and propeller parts at the Aviation Supply Office, Philadelphia, Pa. In August 1948 he became stock control officer at the Electronics Supply Office, Great Lakes, Ill. He was assistant to the inventory control division (105) PAGENO="0112" 106 officer in the Bureau of Supplies and Accounts, Navy Department, Washington, D.C., from July 1950 until July 1954, and then bad instruction at the Naval War College, Newport, R.I. In July 1955 he reported for duty in connection with J-4 plans at Head- quarters of the Commander in Chief, Europe and in July 1957 joined the staff of Commander Cruiser-Destroyer Force, Pacific as force supply officer. In August 1959 he reported for duty as planning officer and comptroller, Naval Supply Cen- ter, Norfolk, Va., and later became executive officer. On January 11, 19~l2 he was ordered detached for duty as deputy commander of the Military Industrial Supply Agency, Defense Industrial Supply Agency, Philadelphia, Pa. In August 1965 he assumed command of the Naval Fleet Material Support Office, Mechanicsburg, Pa. On August 18, 19~l7 he became the deputy commander, Supply Operations, Naval Supply Systems Com~nand. Rear Adm. Cosgrove has the American Defense Service Medal; American Campaign Medal; Asiatic-Pacific Campaign Medal with one star; World War II Victory Medal; National Defense Service Medal with bronze star; Army Com- mendation Medal and the Defense Joint Services Commendation Medal. His official home address is 72 Delmont Drive, Atlanta, Ga. His wife is the former Catherine Conway of Philadelphia. Admiral COSGROVE. I am Rear Adm. Paul Cosgrove, Deputy Com- mander of the Naval Supply Systems Command for Supply Opera- tions. In the interest of saving time, and with your concurrence, sir, I pro- pose to briefly summarize the major points in my statement, and then submit the complete statement for the record, and will be prepared to answer questions. Mr. H0LIFIELD. The complete statement will be printed in the record at this point. (The complete prepared statement of Admiral Cosgrove follows:) PREPARED STATEMENT OF REAR ADi&. PAUL F. COSGROVE, JR., SC, USN, DEPUTY COMMANDER, NAVY SUPPLY SYSTEMS COMMAND FOR SUPPLY OPERATIONS Mr. Chairman and membens of the subcommittee, it is a pleasure to be here with you and to have the opportunity to present some aspects of Navy supply operations. Today I plan to outline for you some of the basic considerations involved in managing the Navy supply system. I will be touching on the nature of the inventory we manage, the manner in which our stocks are distributed, the chan- nels through which our requirements flow and the centralized control system that we utilize to manage Navy-wide inventories. I will close with a brief rundown on our supply support in Vietnam. To begin with let me state the obvious-that the Navy supply system is basically designed to provide necessary support to ships and aircraft wherever they may be deployed throughout the world. The mobile forces that we support require a supply system that has the necessary flexibility and mobility within itself to cope with rapidly changing operational situations as our customers move. In speaking on the Navy supply system I will be speaking primarily of the system by which we provide the repair parts and consumables to support the Navy's 930 ships and 8,700 aircraft. Responsibility for centralized direction of the Navy supply system is assigned to the Naval Supply Systems Command, operating under command and policy direction from the Chief of Naval Operations and the Chief of Naval Material. This responsibility encompasses Navy-wide policy determination regarding in- ventory management of secondary items and procedural direction for stock points afloat and ashore. Within the Navy supply system we manage wholesale stocks of about 850,000 line items valued at a little over $3~/2 billion. Our annual sales run at about $2 billion. The material managed by the Navy is predominantly technical in nature-that is material that is directly related to a weapons system. As you know, essentially all the general consumable material used by the Navy is now managed at the wholesale level by the Defense Supply Agency or the General Services Adminis- PAGENO="0113" 107 tration. Accordingly, almost all the material we deal with on a systeniwide basis is an integral part of a ship or aircraft or of the electronic and arjnament systems associated with these weapons. As a result of the factors I have just noted, the line items in our inventory tend to have a high unit price, long procurement leadtime, erratic and relatively low demand. A great many of the items that we manage are what are termed as in- surance items. That is they have high military essentiality and unpredictable demand patterns. Items of this type require specialized inventory control tech- niques as do repairable items which constitute a constantly increasing percentage of our total stock assets. At present about 10 percent of our line items are classi- fied as repairables-meaning that they are returned to some central point (either Navy or contractor operated) for repair upon removal from operational use. The significant point however is that this 10 percent of our line items cover about 50 percent of our inventory dollar value so we obviously are heavily involved in the management of repairable items. As I indicated earlier the Navy supply system operates under the central di- rection of the Naval Supply Systems Command. The line item management func- tion is actually carried out by three Navy ICP's (inventory control points)-the Aviation Supply Office at Philadelphia, the Electronics Supply Office at Great Lakes and the Ships Parts Control Center at Mechanicsburg, Pa. Each of these inventory control points is responsible for managing inventories of line items as- signed. In a few minutes I will provide you with a more detailed description of how these ICP's accomplish their systemwide item management function. Having briefly outlined the nature of the inventory we manage, I would now like to in- dicate how our inventory is distributed. Up to this point I have been discussing only Navy managed items. In speaking of our distribution system, however, I will be broadening the discussion to include all stock necessary for our operations in- cluding Navy retail stock of items managed by DSA and GSA on a wholesale basis. The Navy maintains three echelons of suppl3~ designed to meet the flexible needs of fleet operatio~ns throughout the world. One of the primary objectives of the Navy supply system is to provide maximum feasible endurance to fleet units. That is, to permit individual ships or groups of ships to operate without outside support for periods of time as specified in policy guidance by the Chief of Naval Operations. The requirement for self-sustaining ship and task force endurance with its obvious military advantage gives rise to the first two echelons of supply which are afloat. The first echelon of supply is those stocks placed aboard an Individual com- batant ship for its own use. The range of these stocks is tailored to the individual ship and is based on the ships hull type, the installed equipments, relative mili- tary essentiality of the ships systems, the self-maintenance capability of the ship and the sfize of its crew. The categories of material carried include: equip- ment related repair parts, general purpose industrial material, consumables, food, fuel, and ammunition. The items to be carried by a ship are specified in an allowance list individu- ally prepared for the ship concerned. Allowance lists generally provide for 90 days' endurance whenever feasible in light of shipboard space restrictions. In ad- dition to 90 days' endurance the allowance list also' provides essential insurance type repair parts where demand cannot be determined in terms of days of supply. The requirement for supporting fleet units operating for long periods of time many thousands of miles from their home ports requires that a second echelon of supply be available in mobile form that can move with the fleet. The Navy mobile logistic support force consisting of repair ships, tenders, oilers, ammu- nition ships and stores ships provide this second echelon replenishment capabil- ity. En general this force carries 90 days' fleet usage although the figure varies based on the commodity involved. It has been necessary to augment this stock in the Pacific with stock ashore due to the accelerated tempo of operations far from CONUS resupply sources. This has not been necessary in the Atlantic/Medi- terranean area. The third and last echelon of supply is that maintained by Navy stock points in the continental United States. These continental U.S. stock point's are located primarily at tidewater points and carry out the dual role of supporting ships and aircraft operating in coastal areas and supporting Navy industrial activities such as Navy shipyards and aircraft overhaul and repair activities. In addi- tion, they provide backup and replenishment support to deployed forces. 97~475 -68--------8 PAGENO="0114" 108 Third echelon stock points receive most of their Navy-managed stock directly from commercial sources as a result of contract allocations by the ICP. To the maximum extent possible stocks are placed close to the user. However, due to the technical nature of our inventory, many of our items have extremely erratic demand which precludes accurate prediction regarding place and time of need. Items of this nature are generally held by the controlling lOP at one or two U.S. stock points and shipped to the customer at the time the need arises. With this outline of the distribution system as background I would now like to turn attention to the manner in which our demands are channeled to the inventory manager. Navy requisition channels are strongly influenced by the constant movement of the customer and the necessity for keeping shipboard supply procedures as simple as possible. With these two factors in mind it becomes apparent that the simplest system is to have ships submit their requirements to the nearest stock point who will either furnish the required material or take action to obtain it from another source. If the stock point has the required material it simply issues it directly to the ship. If the stock point does not have the required item it normally for- wards the requirement to the proper inventory manager. If the item is available at another stock point, the inventory manager refers the requirement to the stock point for direct shipment to the requiring ship. If the item is not available in the supply system, it is backordered or procured for direct shipment depending on urgency of the requirement. In utilizing the requisitioning system I have described, the ship is relieved of the necessity for determining the central inventory manager for each item and is assured of receiving material at its current location if it is in fact available there. Ships which are deployed overseas, forward requisitions to elements of the mobile logistic support force that are serving their area. For information, we have 6 AKS- and AFS-type general stores and repair parts issue ships in the mobile logistic support force. The load for these ships is tailored to provide support for high-usage items and therefore a high percentage of the requirements of customer ships for these items are satisfied by the stores issue ships. The mobile logistic support force is replenished from the major tidewater stock points at Norfolk and Oakland. Major shore activities in the continental United States are replenished automatically by Navy TOP's for items which they manage. Retail stocks of DSA and GSA material are requisitioned directly from the appropriate DSA/GSA center. Having provided a broad overview of what we manage in the way of stock, and how it is distributed, I would now like to move into a little more detail as to how we manage on a centralized `system basis. In brief the policy which governs this system is developed at the headquarters of the Naval Supply Systems Command. This policy is implemented by means of a centrally designed and programed automated data processing system. The Navy's UADPS (uniform automated data processing system) for supply management provides for central system manage- ment of over 850,000 items by our three lOP's. The objectives of UADPS are to achieve more effective management control of systemwide assets and to provide increased capabilities for responding to the needs of the Navy, especially in the area of fleet support. UADPS is a complete and comprehensive automated supply operations management system for repair parts and consumable items. Principal functions affected are requisition process- ing, transaction item reporting, requirements determination, purchase, catalog/ load list/allowance list maintenance, provisioning, shipment planning, receiving, and financial controL UADPS programs have been developed and implemented at lOP's, stock points and aboard our larger ships, such as those referred to earlier as mobile logistic support force ships. A uniform ADP system has been developed for the inventory management of repair parts at the three Navy inventory control points: (1) Aviation Supply Office, Philadelphia, Pa.; (2) Electronics Supply Office, Great Lakes, Ill.; and (3) Ships Parts Control Center, Mechanicsburg, Pa. The TOP's use uniform ADP programs and will eventually be placed on direct computer-to-computer communi- cation with their respective distribution systems. The inventory control applica- tions (transaction item reporting, requirements determination, etc.) are now operational: The weapon `systenm support applications (`allowance list main- tenance, provisioning, etc.), which are currently being piloted and will be fully operational in fiscal year 1969, will provide weapon system support intelligence as well as supply management item control. PAGENO="0115" 109 The major eight naval supply centers/depots utilize compatible electronic ~ligital computers/programs and are linked into the TJADPS IC? system via Autodin. The stock point system has been operational since 1965. The immediate specific objectives are to refine existing UADPS stock point programs, to incor~ porate the new DOD Mu Standard programs, to extend UADP'S to overseas NSD's to implement the area supply support concept, and to develop UADPS programs for other stock points, thus extending UADPS to other echelons of logistic supply support. The tTADP system for shipboard supply and accounting operations is being refined iand extended to all major ships. The objective is to provide a shipboard supply system that is completely compatible with the automated supply systems ~shore. The three segments of UADPS for supply management are tied together into an integrated operational system, including the necessary interface with D'SA and GSA. A unique feature of TJADPS is the built-in capability to manage inventories on a weapons system basis as well as on the usual commodity item basis. Worldwide asset visibility of high value items is one of the special features. A high value item is one that has a unit price of $1,000 or more and has approxi- mately $50,000 annual demand. Some 6,000 items in the Navy inventory now fall into this category. For these items, the inventory control point is the center of the system and mainl~ains complete asset visibility right `down to the shipboard level. Movement `of high value items to and from ships and the stock points are repo'rted directly to the lOP. To achieve an optimum balance between economy, and the assurance of adequate anpport from our inventory levels, we have built into UADPS two sophisticated inventory models. One model tells us how much to buy utilizing economic order quantity theory based upon ordering cost and holding cost tradeoffs. The other model tells us when to buy. The computation of our reorder points is based upon the degree of risk that we are willing to accept of being out of stock. The prime tradeoff factors are unit cost and military essentiality. By varying the risk, we in effect can control our inventory levels. Our overall goal, of course, is to maximize supply system effectiveness. Or to put it `another way, to maximize fleet support. However, this `always must be done within funding constraints. Therefore, by periodically sampling our inventory with varying risk factors we can determine the necessary parameter settings for `our supply demand reviews to maximize effectiveness within dollars allocated. These models are now part of the standard UADPS package. The TJADP system has reduced our processing times considerably. For example, a stores issue ship can prepare replenishment requisitions in 30 minute's `com- pared to 16 hours under a manual system. Improvements of the same magnitu'de at stock points and lOP's under UADPS have also been realized. Finally I would like to comment on supply support in Vietnam. Navy supply support in S.E. Asia of course has two distinct aspects-first sup- port of the 7th Fleet and secondly support of ground, coastal and riverine forces from within Vietnam. Support of the 7th Fleet has been `entirely within the framework of our normal fleet support doctrine utilizing the mobile `logistic support force `supplemented by overseas bases at Subic Bay, Yoko'suka and Guam. While it was of course necessary to `build up stocks, p'articularly at Subic Bay, to support `the greatly increased number of ships operating in the South China Sea, no significant de- partures from normal support doctrine have been necessary. The first and second echelon stocks that existed in th'e Pacific are of course what gave us the time to build the necessary stock levels following the rapid buildup of demand; thus no critical stock shortages of a widespread nature developed with respect to 7th Fleet support. The situation with regard to Navy support of forces operating within Vietnam presented an entirely different aspect than 7th Fleet support in that much of the support required was for forces not previously deployed to the Western Pa- cific. Again however, procedures used to support existing Navy overseas bases were applied in establishing the Navy Support Activities at Danang and Saigon wlth successful results. These two major Navy stock po'ints in Vietnam operate under essentially the same supply Support concepts as the bases at Sable Bay PAGENO="0116" 110 and Yokosuka. Generally, requisitions from Danang and Saigon flow directly tt~ the Naval Supply Center at Oakland which either fills the requirement or takes action to provide material by other means. For example: An operating unit in Vietnam would submit its requisition `to NSA Danang. Over 90 percent of the time the item would be issued from on-hand stocks in Vietnam. If the item was not available, however, the requisition would be passed directly to NSC Oakland for supply or subsequent referral to the ICP for selection of an available source of supply or alternate supply action, I.E., backorder, spot buy. There can be no question that problems and critical supply situations developed in the early stages of Navy support operations in Vietnam. However, we feel that our organizational structure provided the flexibility to meet the many problems we faced in this difficult operation. Solutions were generally found within the normal organizational chain and no major reorganizations or disrup- ti'ons of normal support ehannnels were required. In short, we feel `that the sys- tem generally proved itself responsive to the needs of the Navy in the Pacific. Admiral CosGilovE. In my statement, I first provide a brief descrip- tion of the nature of the inventory that the Navy manages. The key point is most of our items are repair parts related to systems or equip- ments, since the majority of the consumables that were formerly man- aged by the Navy are now managed by the Defense Supply Agency or the GSA. The Navy Wholesale Inventory is managed by three inventory control points, the Aviation Supply Office at Philad~lphia, the Elec- tronic Supply Office at Great Lakes, and the Ships Parts Control Cen- ter at Mechanicsburg, Pa. Each of these inventory control points has worldwide responsibility for managing items assigned to them. These functions include determination of requirements, procurement, dis- tribution, maintenance of master asset records, and disposal. We have 850,000 items managed by these three inventory control points. Our inventory is valued at approximately $3.5 billion, with sales of about $2 billion a year. The intelligence to carry out this centralized management function at the inventory control point is provided through daily transaction item status reports from major stock points. Next, I describe the manner in which our inventories are distributed in a three-echelon system. The first echelon is aboard each combatant ship. Each ship has a tailored allowance of repair parts, consumables, that they carry aboard the ship. The second echelon is carried primarily in our `mobile logistics sup- port force ships. These are supply issue ships, reefers, tenders, oilers and so forth, that move with the fleet and replenish them on station underway afloat. We also have some of our second echelon stocks in the Pacific ashore. We found even before Vietnam that the mobile logistics force, due to the geographical dispersion of the fleet that the number of supply ships available could not entirely support them. Finally, our third echelon, by far the largest, is at major con- tinental stock points, generally located at tidewater areas. They sup- port overseas activities as well as continental U.S. industrial activities, such as Navy shipyards and Navy aviation repair facilities. Next, I want to recap the manner in which our requirements flow; and, to simplify this, our ship and shore activities submit require- ments directly to the nearest major stock point. If the requirement is filled, that is the end of it. If the material is not avail able there, it is passed on to the inventory manager, who then selects another PAGENO="0117" 111 source of supply or procures the item for direct delivery to the end user. Following this description of the basic structure of our system, I attempted to provide some insight into the manner in which we exer- cise centralized control over both inventory control point and stock point operations. This centralized control is effected through the use of packages of automated data processing procedures that are centrally designed and programed and maintained under the direction of the Naval Supply Systems Command. Specifically, there are controlled programs in operation at all con- tinental U.S. naval supply centers, which cover all of their normal functions; receipt, storage, issue, accounting, maintenance of records, and reporting of material to the appropriate inventory control point. These stock point programs were implemented and fully operational in 1965. In addition, we have standard program packages in operation at our inventory control points. We are not complete here. We have implemented what we term the inventory control series. This includes requisition processing, requirements determination, supply/demand review, procurement, and maintenance of worldwide asset records. We still have a very major package to put on at our inventory control points, which we refer to as our weapons systems file. This ifie has been 18 months in design and programing. We have it on a pilot iasis at the Electronics Supply Office, Great Lakes. The Electronics Supply Office was the only ICP that had the computer capacity at the time we put it on in March. We will run this through August. Hopefully, if the quality is what we hope and expect, we will then implement it at the Ship Parts Control Center in December of this year, and at the Aviation Supply Office, probably, about June of next year. This will give us a capability to budget and manage strictly by weapons system. Today, we are primarily on an item commodity basis. We do some management on a weapons system basis; but it is a very laborious effort to extract parts that are peculiar to a particular weapons system. We also are developing a uniform automated data processing system for use aboard our larger ships. We have four or five ships now in operation and this will be extended, I think, ultimately, to somewhere in the neighborhood of 50 to 60 ships. These are primarily the tenders, repair ships, aircraft carriers, supply issue ships, and so forth. In concluding the statement, I provide a brief summary of our efforts in support of Southeast Asia operations. Our responsibilities in this area are twofold: First, support of the 7th Fleet. And, next, support of various forces within Vietnam. Of particular interest here is that the Navy has responsibility for common item support of all forces in the I Corps tactical zone. We do this through the Navy support activity at Danang. The major point I want to make here, however, is that the pro- cedures and policies which we had in effect prior to 1965 proved capable of orderly expansion to support the current tempo of opera- tions in Vietnam, and we have had no need to change basic doctrine, policy, organization, or procedures in carrying out this effort. PAGENO="0118" 112 Of course, we experienced a number of critical supply situations in the early stages of the Vietnam operation; but we have not had any serious breakdown in supply support, and we feel that the current operation organization has been fairly successful. This concludes the brief summary I have, and I will be glad to attempt to answer any questions you may have, sir. Mr. H0LIFIELD. Mr. Roback. Mr. ROBAcK. Admiral Cosgrove, in your statement, if I may refer to it- Admiral CosoRovE. Yes, sir. WEAPON SYSTEM STIPPLY MANAGEMENT Mr. ROBACK. You say that you have a unique capability to manage inventories on a weapons system basis as well as on a commodity basis. Is this unique to the Navy? Admiral CosoRovE. I don't know. It is unique to us, I mean within the Navy. We haven't had this capability in the past, except to a very limited degree. We had it in aircraft engine repair parts for some time now, but we have gone more, as you know, Mr. Roback, to project manager support, such as the Polaris program, the surface missile program, and various programs; and while we can, as I mentioned in my brief, manually extract parts that are peculiar to a given weapons system, or missile system such as Poseidon, it is not an economic approach or a very responsive approach. When we get this weapons system file loaded and operable, we will, on a real time basis, be able to extract any information in regard to these weapons, the usage rate on these parts for example, and therefore be able to orient our management more towards this than to the past commodity item management basis as we do it today. Mr. ROBACK. The inventory control points-are they broken down into commodity areas? Admiral COSGROVE. Yes, sir; the Aviation Supply Office has re- sponsibility for all aircraft re~air parts, `the Electronic Supply Office, for all electronic items peculiar to the Navy, and the Ships Parts Control Center for ships and ordnance parts. Mr. ROBACK. Are the stock points segregated by commodity item? Admiral COSGROVE. No, sir. The stock points- Mr. ROBACK. They are general? Admiral CosoRovE. Have general items. Mr. ROBACK. Across the board? Admiral CosoRovE. Across the board. Mr. ROBAOK. What will this dual capability give you? Admiral CosoRov1~. Well, it will give us the capability to tell each project manager, each Navy hardware systems command which has the overall program support responsibility. By that, I mean the Naval Air Systems Command is responsible for the overall `support of air- craft operations, maintenance, and so forth, we will be able to give him a picture of how he stands supplywise, items supported, in any of his maintenance programs, his deployment schedules, and so forth. Mr. ROBACK. Do you have that feature now, or is that in prospect? Admiral COSGROVE. It has been designed, and this is what is being tested out at the Electronics Supply Office right now. PAGENO="0119" 113 Mr. ROBACK. Is the equipment procured, or is that still a matter of development? Admiral CosoRovE. Yes. We now have it at the Electronics Supply Office, and we expect to have the equipment installed and ready at the Ships Parts Control `Center and the Aviation Supply Office in time to make these programs operable this fiscal year. As I mentioned, the Ships Parts Control Center will be the second one which we will implement, in December, and then ASO will be the final one. They have by far the major problem in this area. Mr. IROBACK. You also state that one of the special features is world- wide asset visibility of high value items. That is a special feature of what, now, the Navy system? Admiral CosonovE. The Navy system. I am not comparing this with any system. I am familiar with the Air Force AFRAMS system. They do this today. Again, when I talk of this, I am really saying that we are able to do things we couldn't do before, except on a manual basis, m which, workloadwise, we just- Mr. ROBACK. You are not saying that the Air Force or the Army lacks this feature? Admiral COSGROVE. No, sir. Mr. ROBACK. You are just saying that it is special with the Navy~ compared with what it used to be? Admiral CosoRovE. rfhat is right, sir. Mr. ROBACK. Compared with what the system used to be? Admiral CosaRovE. That is right. VISIBILITY FOR CONTROL Mr. ROBACK. To what extent do you have worldwide asset visibil- ity? You have it for high value items; but is it a goal that you are working on for all supplies, or is this someibody else's problem because you deal only in high value items? Admiral OosGRovE. No. Most of our items are repair parts. Right today, for example, ~n the aviation system, 93.9 percent of the total item inventory is items reported to the Aviation Supply Office. Elec- tronics, 9~ percent of the items are reported. Mr. ROBACK. What is the significance of those figures, the fact that they are reported? Admiral CosoRov]~. It means that the Aviation Supply Office has visibility down to this reporting level of the assets, the amount of ma- terial on hand, the issues they have made, any planned program re- quirements, and so forth. Mr. ROBACK. Let's put it this way: on what assets do you lack visi- bility worldwide? Admiral CosoRovE. We do not have asset reporting from our indi- vidual ships, and there are small activities such as reserve air stations, Willow Grove, Pa., Brunswick, Ga., small activities- Mr. ROBACK. That is the retail level, as far as you are concerned?' Admiral CoscrnovE. It is; yes. Mr. ROBACK. Consuming level? Admiral CosoRovE. It is. Mr. ROBACK. That would be equivalent to the Army post, camp, and station. You don't have visibility there. PAGENO="0120" 114 Admiral CosunovE. Yes, sir. Mr. ROBACK. So, if there is any special problem of redistribution or excess accumulation, there aren't any control devices that extend to the level of the small station or the ship afloat? Admiral COSGROVE. That is right, for these Navy wholesale items that are in our system. Mr. HOLIFIELD. Does that include major items? Admiral Cosonovi~. No, sir. Mr. HOLIFIELD. Such as automotive equipment and things like that, or are you talking about a class of used-up items? Admiral CosoRovE. I am talking about repair parts. The hi~'h-value items and repairable items are reported by all echelons, ships, and small stations. But the secondary items, repair parts, are not reported. Mr. H0LIFIEu. For instance, you would know how many automo- biles, how many trucks-that sort of thing? Admiral COSGROVE. I don't manage automobiles in the Navy Supply System Command. The Naval Facilities and Engineering Command does. And they do manage these. Mr. HOLIFIELD. They do keep inventory? Admiral CosoRovE. Yes, sir. Mr. HOLIFIELD. Inventory records down to the lower level? Admiral CosoRovE. Yes, sir. Mr. ROBACK. What will you get by extending this uniform auto~ matic data processing system overseas? Admiral CosoRovE. Today we only have two automated depots, Subic Bay in the Philippines, with a very small computer, and Guam. We are today reporting assets from these actiVities to the Aviation Supply Office. Right now, the depot at Yokosuka is on a manual basis, and it is doing a sizable business. We feel that we can greatly improve their operation by establishing the system that we now have in the United States there, and Subic is absolutely saturated, and we have got to give them additional data processing capability. Mr. ROBACK. These are major depots or processing centers. Admiral OosoRovE. Yes, sir. Mr. ROBACK. In the Philippines or Japan; is that right? Admiral COSGROVE. There are only four overseas depots, Guam, which is not too big; Subic is the largest; Yokosuka next; then, we have Danang, where we are presently putting a small computer in right at this moment, which is in the common supply business, and they have very few technical items there. Mr. ROBACK. I asked you the question about worldwide visibility. Do I understand that at this time you do not have visibility over these major overseas depots because you do not have them automated? Admiral CosoiiovE. We do for the aviation repair parts, Mr. Ro- back, but not for the others, and we intend-we have a proposal on the street now to the manufacturers, they have to respond within 60 days. I believe within 90 days after the response, we will have equip- ment delivered and we intend to start automating Subic first-in March, I believe, of this year. And Yokosuka will follow. At that time, they will become item reporters to the Electronics Supply Office, and the Ships Parts Control Centers, as they now do to the Aviation Supply Office. PAGENO="0121" 115 Mr. ROBACK. You have said, I believe, somewhere in your statement that the Navy is concerned largely with technical items; and the more common type of items, consumables and secondary supplies, are some- body else's responsibility-either the DSA or GSA. Admiral CosonovE. Yes. Mr. ROBACK. Is that essentially true? Admiral COSGROVE. The wholesale management is their responsi- bility. We do have Navy retail stocks, which we buy from them and position to support fleet and aviation units. NAVY COOPERATION WITH nSA/GsA Mr. ROBACK. You made a statement that "retail stocks of DSA and GSA materia]s are requisitioned directly from the appropriate DSA/ GSA center." They are requisitioned not by the consumer, however, Admiral CosoRovE. In the continental United States, in many cases, they are requisitioned by the consumer. Overseas, they are not. They are requisitioned from the Naval Supply Center, Oakland. We have a~ special `arrangement with DSA, where they have their own stocks position at Oakland as part of its DSA system of stocks. Mr. ROBACK. The extent to which you use the GSA as against the DSA is determined by policy guidance, which is made at another level; is that right? I mean, you are guided by general supply classifications? Admiral COSGEOVE. Yes. Mr. ROBACK. As to what types of supplies you will draw upon GSA; or is it amatter of convenience? Admiral CosOROvE. Generally, policy direction from the Chief of Naval Operations an'd the Chief of Navy Materiel. As you kflow, the General Accounting Office went into this subject some time ago, and it is now under review within DOD. Mr. ROBACK. I wanted to ask you a question about that, because the General Accounting Office in B146828, which was a report which rep- resented that t'here were duplicate inventories in the GSA and in the Navy, by virtue of the fact that you acted as a sort of middleman- Admiral COSGROVE. Yes. Mr. ROBACK. Requisitioning the GSA supplies, putting them in your own depots, and so in effect there were GSA supplies in the Navy and GSA supplies in the GSA centers, as I understand it. Admiral CoseRovE. Yes, sir. Mr. ROBACK. And that these were, in the view of the GAO, un- necessary duplications of stocks. So if, for example, the using Navy element, whether it was a ship, let us s'ay, or a shore station, if `they requisitioned directly from the GSA, that might create some other kind of problems about types of forms you use, and one thing and another. So, GSA recommended that there be a working group set up. Now, what is the status of this problem subsequent to the GAO report? Admiral CosoRovE. As you know, in June of last year, Mr. Baird, then Assistant Secretary, now Under Secretary of the Navy, responded directly to GAO. He did not agree with the direct requisitioning by all overseas activities, directly on GSA. He offered in lieu thereof the PAGENO="0122" 116 suggestion that GSA position inventories, their own owned inventories at Oakland. We would then not position Navy inventories there. Mr. ROBACK. You mean, they would rent part of your space? Admiral CosoRovE. I don't think there would be any rental involved. We would provide space, so that we in this way could eliminate inven- tories but still maintain Navy's control over the responsiveness to individual ships and overseas customers. This was really the basis for Mr. Baird's objection to the GAO. We in the Navy Supply Systems Command, control, allocate `all of Oakland's resources to them, so we are always able to respond in any kind of an emergency to insure adequate time of response to the fleet and overseas activity. Mr. ROBACK. Responsive supply as far as the Navy is concerned? Admiral COSGROVE. Right. Mr. ROBACK. Is this only with regard to overseas requisitions, or would this apply to U.S. requisitions? Admiral CosoRovE. No; many of our activities today requisition directly onto GSA. Practically all of them in the United States. Mr. ROBACK. The Alameda station might requisition? Admiral `CosonovE. Directly to GSA. Mr. ROBACK. And also Subic? Admiral COSGROVE. Subic requisitions from Oakland. Mr. ROBACK. From Oakland? Admiral CosonovE. Yes, sir. In the continental United States, almost all of our activities, requisition directly on GSA. Mr. H0LIFIELD. That is on common use items. Admiral COSGROVD. Yes, sir. Mr. ROBACK. Do the U.S. stations requisition directly on GSA? Admiral `CosoRovE. Yes, sir. Mr. ROBACK. They all do? Admiral CosoRovE. They all do. Mr. ROBAOK. And you have no problem there? Admiral CosGRovE. No, sir. Mr. ROBACK. It is only with regard to the overseas stations? Admiral COSGROVE. That is right. Overseas stations and ships. We have had some problems of response time, but these are being resolved. I think the ninth region in San Francisco was- Mr. ROBACK. Do you know of `any other services requisition directly on the GSA from overseas? Admiral COSGROVE. I think some do; yes, sir. Mr. ROBACK. You don't know whether they have had any response problems? Admiral COSOROVE. I don't. Mr. ROBACK. You don't know that this is a response problem; but you are concerned that it might be? Admiral CosGEovE. That is right. Mr. ROBACK. And has a working group been setup on this? Admiral CosoRove. As I recafl, the latest status, Mr. Roback, is that OSA has written a letter to the Department of Defense, and this is now being reviewed within the Department of Defense. I don't know when- PAGENO="0123" 117 Mr. ROBACK. GSA is in favor of occupying some of your quarters ~tnd prepositioning their supplies and equipment there? Admiral CosonovE. I can't speak to that. I did not see this letter. I think they are in favor of getting together with DOD and resolving this problem. Mr. ROBACK. They are talking about it. Admiral CoscRovE. I don't want to state the GSA position. Mr. ROBACK. Would it be your demand, if it came to such an ar- rangement, that these supplies be prepositioned for dedicated Navy use, so that there wouldn't be any servicing of other requests? In other words, to prevent duplicate stocking of GSA stocks by both the Navy and the GSA, if the GSA came in with a Navy order, so to speak, at a Navy center, they would have to stock supplies and you would probably insist, would you not, that these supplies be avail- able for the Navy, even though they might result in some accumulations? Do you see what I mean? Admiral OO5GR0VE. No; we would make them available just as we do under IDSA agreement to other customers of GSA, Army or Air Force. We would probably like to have at least a reservation of a quan- tity that we could, when we got down to this level, we would want to make- Mr. ROBACK. I am assuming, without knowing, that you wouldn't just want to support another GSA center in your own center. Admiral Cosouovi~. No; not another GSA center, but we would be willing to support other customers of GSA, if they submit us ship- ment directives. Mr. ROBACK. Do you think some arrangement like this will prob- ably work out? Admiral CosGEovE. I think it would. I think we are doing very well with DSA on the same kind of an arrangement. Mr. ROBACK. DSA is prepositioned, in effect, I mean, their supplies? Admiral CoseRovE. They stock supplies there, and we report to them on a transaction item basis all of our issues. They then compute Oak- land, and this is only at two places, Oakland and Norfolk-they com- pute our requirements and automatically distribute material in there to keep stock on hand to meet our needs. Mr. ROBACK. Are they servicing the Air Force and the Army out of that? Admiral COSGEOVE. They do on occasion; yes, sir. They are trying to tailor this stock to Navy req~uirements, but naturally other require- ments will occur, and we do quite a bit of processing of DSA materiel MRO's for the other services. Mr. H0LIPIELD. For the record, could you clarify the difference in items handled by DSA and GSA? What is the general difference there, or is it similar? Admiral CoscRoVE. Well, the GSA items are mostly common items of supply. I happen to have had duty at the Defense Industrial Supply Center with DSA for 3 years, and the items we handled, for example, were the group 53 hardware items, the screws, fasteners, and many thousands of these types of items. We handled all metals. Mr. H0LIFIELD. Unique type. Not necessarily commercial. PAGENO="0124" 118 Admiral CosoRovE. A lot of these, I think, DSA is finding out are fairly unique; yes, sir. Even though there are many, many common items. Mr. H0LIFIELD. But they would handle always- Admiral CosGRov1~. Bearings. Mr. HOLIFIELD. Commercial specification items. Admiral CosoRovE. Yes, sir. Mr. H0LIFreLD. Of the common type. Admiral CosoRovE. I would say the majority of them are commer- cial-type items, and there are some items peculiar to the service. REQUIREMENTS URGENCY Mr. ROBACK. Your automatic data processing, you say in your state- ment, tells you how much to buy and when to buy. That applies, of course, only to the supplies in which you do have this visibility. Admiral CoscuovE. That is right, sir. Mr. R0BACK. And for those supplies, you are told what and when to buy, oniy in relation to the status of the inventory stocks; of course, not to the status of the market. Admiral OOSGROVE. That is right. Mr. R0BACK. I mean, your inventory level may tell you when to buy something, but the market may not be a good one, but that is another matter. Admiral CoscRovu. We do have an economic order quantity. Mr. ROBACK. You don't have a model simulator which tells you what the state of the economy is. Admiral Oosouovu. No, sir. Mr. ROBACK. With shoes or clothing for example, do you? Admiral ~JosGRovE. No, sir. We don't handle clothing. Mr. ROBACK. The problem that concerns us when we look at it from the standpoint of procurement, here we are talking about the invert- tory level, and what you need to replenish. Looking at it from the market side, in almost every purchase request the buyer, whether he is a Navy buyer or from another serv- ice, gets his boss to sign a form which says that the public exigency requires that we do this immediately, and we can't take time to advertise it. All these seem to be exigency items. How do you relate that frantic concern on the buying end to the information you get from your com- puter as to what the replenishment need is? There seems to be no ordered relationship, because even though your computer can tell you that your stocks are going down at a certain rate, by the time the replenishment request gets to the buyer,. he becomes frantic. Admiral CosoRovu. I don't think we have too high a percentage of these types of buys at our inventory control points, Mr. Roback. Mr. ROBACK. We had occasion to review not long ago the procure- ment of 2.75-inch rocket launchers, of which the Navy is the buyer for the Air Force, as well as for itself, and many of these requests were rushed out on the market as they came in, and they were coming in from the Air Force on a staccato basis. I don't understand. Even though you get information from your computer model as to how to buy economically, and how to buy to PAGENO="0125" 119 avoid undue consumption; that is, to keep your stock at the proper level, there seems to be no relationship, actually, between that informa- tion and the activities on the buying side. This may not be your responsibility, but somebody, somewhere, hasn't hooked up the computer machine with the market. Do you have any observations on that? Admiral COSGROVE. My observation as a supply man is, I can never get a buyer to move panicky. Mr. IR0BACK. In other words, he is usually lazy? Admiral COSGROVE. I almost know as much about ASPR as the buyers do. I get it quoted at me constantly. But for the type of items we buy, we do have sole source items, for example, that are peculiar to aircraft, and are only bought from the guy who made the aircraft. But the percentage of emergency buys in repair parts areas are now, I wouldn't think, too high. Mr. ROBACK. It only may be an impression on my part, but almost every procurement problem that comes to my attention has a public exigency attached to it. Admiral CosGuovE. Yes, sir. NAVY COMMON SUPPLY IN VIETNAM Mr. ROBACK. To what extent in Vietnam do you supply the other services? Admiral Cosouovi~i. In the I Corps Tactical Zone, we supply com- mon items of supply which are mostly the GSA-type items, and the DSA-type items; such as food. Right now, the Army submits 41 percent of our customer demands at the Naval Support Activity, Danang. I think the Marines submit 34 percent, and the rest goes to the Seabees, and the other units. Mr. ROBACK. In other words, in the north you are responsible for the main supply on the ground. Admiral CoscRovE. Of common items only. Mr. ROBACK. Common items only. Admiral Coscnovs. Not technical parts. And then, food. Mr. ROBACK. In the delta, you supply the riverine force. Do you supply the troops, the Gi's who are on those heavy armored boats? Admiral COSCROVE. I don't think we do. I am not sure. Do you know? Commander DREESE. No; we do not supply the Army. Admiral CoscRovE. We do not. We supply repair parts for the boats. Mr. ROBACK. Why wouldn't they get consumables and common sup- plies, since they are right on your boats? Admiral COSGROVE. I guess the Army supports them, sir. I don't know. Mr. ROBACK. The Army is not, you might say, predominant in the delta. Commander DREESE. The Army has the common item support, as you know, in the II and IV Corps Tactical Zones, so in fact the Navy gets their common items from the Army. Mr. ROBACK. In the whole delta area? Commander DREESE. Yes, sir. PAGENO="0126" 120 Admiral COSGROVE. Yes, sir. We supply the repair parts for those boats because they are Navy peculiar items. UNIFORMITY OF DATA PROCESSING Mr. LUMAN. May I ask a question here? You mentioned that you have had one stock point system operational since 1965, with reference to a kind of a centralized data processing. Admiral CosoRovE. Yes. Mr. LUMAN. You are now beginning to extend it overseas and de- velop it for other stock points. What were some of the things that have resulted in the delay in extending it to these others? Admiral COSGROVE. I would say that first of all we started this system, designed it in 1962, and we were operable in 1965 at our major supply centers. We had an urgent requirement at these centers because we had no automated capability except one supply center that happened to be at Oakland at that time. This required use of our total resource at the Fleet Material Support Office which actually does the centralized ADP analysis and programing. We started the process of attempting to get approval for automated data processing system. at Yokosuka and Subic Bay over a year ago. Last week we were able to get the specifications out for proposal. Mr. LUMAN. Were you not aware of the need more than a year ago, let us say at Yokosuka or Subic, from the drain at Vietnam?. Admiral CosoRovE. As I recall, it was about April that Subic-April of last year-that Subic indicated that the small computer, the 1401 they had, did not have sufficient capacity because of their increasing workload, and requested that the Naval Supply Systems Command take some action to get them a larger computer. Now when you get into this computer business, as you know, we submit our requirements for the supply application up through the Chief of Naval Material, the Chief of Naval Operations, to the Special Assistant to the Secretary of the Navy for Management Information Systems, and they look at this from all computer application possibilities. For example, at Yokosuka you `have a public works operation which is fairly sizable. You have a ships repair facility in Subic, so it is a matter of trying to evaluate how you could get one computer that will take care of not only supply and accounting functions, which we have responsibility for, but for these other functions as well, and this takes quite a bit of justification. It takes quite a bit of deliberation and evaluation of these justifications up the line, `always with the considera- tion of course of trying to get competitive sources and so forth. So this seems to be about the lead time when you start to get a computer for a new application. Mr. LUMAN. Do you now have a master plan? What happened here is that Subic, when the overload began to pinch in April 1967, came in an'd said, "We need a new computer." The process now has taken over a year and will take some time more before they get their computer. Admiral COSGROVE. That is right. Mr. LUMAN. Have you looked at the other centers and tried to an- ticipate this for them? PAGENO="0127" 121 Admiral CoscrnovE. Yes, sir; we have a master plan for the other stock points. Mr. DAHLIN. Is your present procurement that you talked about re- lated to that UADPS master plan for the other stock points? Admiral COSOROVE. Yes, sir. Mr. DAHLIN. Or is it just for that one? In other words, you are buy- ing a whole new system. Is this a specified sole-source system or is this a competitive buy? Admiral CosuRovE. It will be competitive. We expect to-we have got the approval but we had to reformat our specifications. We expect to have these specifications on the street in August. We will give, be- cause of the magnitude of this, we will give the suppliers until January to respond, and it will probably take 3 months, from January to April, to make a final selection. This will be on a competitive basis. Mr. ROBACK. Did I understand you to say that these were not ex- clusively for logistics? Admiral COSGROVE. They are for logistics as opposed to command and control but not exclusively for supply. Mr. ROBACK. How do you break down the division of labor in the computer? I notice a statement by Mr. Brooks, who is a member of the committee, reported in a recent issue of the Federal Contract Report, and he is urging the Defense Department to have standardized com- puter language which would make it possible to bring in all competitive offers, so you do not have to get stuck with one particular system, one particular hardware system. And he refers to the Navy as having a Cobol system for command and control. Do you have a computer that has both logistics and command and control? Where do you break it? Admiral CosGRov1~. These computers are under the control of the Chief of Naval Operations, command and control computers, and I have very little knowledge of this. When our third generation stock point equipment-which as I said we now have the specifications for- we intend to rewrite all of our programs into Cobol, and this will take us we estimate about 18 months. Mr. ROBACK. You write all programs into Cobol? Admiral CosCRovE. Yes, sir. Mr. ROBACK. Cobol refers to what now? Admiral Coscaiovi~. This is a common machine independent lan- guage. I am not technically competent to talk `about it in detail except right now, for example, our stock point application is on IBM equip- ment. This is written in programs dedicated to that equipment which means that at every stock point we have to have this same equipment. We are trying to get away from equipment orientation and dedication. This common business oriented language I think, which is what Cobol stands for, will do this. In other words, once your programs are writ- ten into this language, you become machine independent in the sense that when you go from one generation of hardware to the next you do not have to rewrite all your programs. The same program, as I understand it, can be run on different generations of computers that different manufacturers make. This is our goal. We are not there ~tt all now. Mr. B0BACK. If it is written in language of Cobol, can you use Cobol communications between logistics coitiputers? PAGENO="0128" 122 Admiral. CosaRovE. I cannot answer that. I do not know. Right now there is no communications problem between different computers. We have, for example, the Univac computers at our inventory control points, and we `transaction report information from our IBM com- puters over AUTODIN into- Mr. ROBAOK. I am raising the question as to what extent of multi- purpose functions you can get in computers, so that theoretically all Navy operations that go through a center, tt a headquarters, you can use them for logistics, command and control, or anything else conceivably? You see, the Air Force is buying certain kinds of automatic data processing equipment for various purposes. In other cases the equip- ment may be used only for supply purposes. In some cases you have got separate equipment for command and control purposes'. I am raising the question, flow do you divide the labor of communi- cations `and data handling to accommodate different functions? Admiral CosoRovE. You can use one for several purposes. Mr. ROBACK. To what extent can they be multipurpose? That is what I am asking. Admiral CosoRovE. What happens is that each of the responsible agencies puts in the specification on what a computer has to do. Now you can find a computer big enough that can run a supply program, that can run a public works center program, that could run possibly a command and control. I cannot envision command and control, but this is `a possibility. Most anything is possible in the computer field according to the manufacturers, if you want to pay the price. You can get computers with fantastic memory and speeds. So what you have to do is have the final selection authority decide whether he wants to go with a large computer that will handle all functions, or whether it would be more economical to have two or more computers and specialize them. Mr. ROBACK. That is not your level of concern. Admiral CosoRovE. No, sir; thank goodness. STIFFLY FOR MARINE CORPS Mr. ROBACK. We will not pursue that with you. Let me ask you this. To what extent do you supply the Marine Corps? Admiral COSGROVE. In aviation material we provide complete sup- port to the Marine Corps. We provide support in Vietnam, as I men- tioned, in the I Corps area of common supplies such as concertina wire, sand bags, and food to the Marine Corps. Mr. ROBACK. On shipboard do you supply the Marine Corps? Admiral COSOROVE. And medical supplies, General Tyler says. Ship- board we do not have many marines any more. Mr. ROBACK. You have no marines on shipboard? Admiral OOSGROVE. We have the admiral's orderly. Mr. ROBACK. Is that all you have? Admiral COSCROVE. Just about. Mr. ROBACK. I thought you have marines who are doing- Admiral CosoRovE. General Tyler knows more `about this than I do. We do have marines that are permanently on amphibious ships, which we would support aboard ship, But for their own repair parts- PAGENO="0129" 123 Mr. H0IaFIELD. You support their amphibious operations? Admiral COSOR0VE. To a degree; yes, sir. Mr. HORTON. Could I ask in that connection, you did make some comment in your statement about supply to the riverine force in the TV area. What sort of supply is that? Do you supply all of the riverine force there including the ~th Infantry Division? Admiral CoseRovE. No, sir. We supply the repair parts for the boats only. Mr. HORTON. That is all. Admiral COSGROVE. The Army has common supply responsibility in that area. Mr. IROBACK. I wonder if General Tyler could tell us what is the concept of Marine Corps supply as distinguished from Navy supply. General Tyler, do I have your name right, sir? STATEMENT OP MM. GEN. PAUL B. TYLER, QUARTERMASTER GENERAL OP THE M~ARI1~Z CORPS General TYLER. Yes~ sir. Mr. HOLIFIELD. D:id you understand the' question, General? Mr. ROBACK. Will you give us your concept of Marine Corps supply? You are a part of the Navy, but you have your own supply system, I understand. General TYLER. Yes, sir. Mr. ROBACK. Do you have some information that you could supply us for the record? General TYLER. First I would like to back up Admiral `Cosgrove's statement that the agreement between the Navy and the Marine Corps has for a number of years concluded that the Navy will ~provide to the Marine Corps the aircraft and all aircraft associated repair parts and services. Now we have been using Navy medical officers and dental officers traditionally because we have never attempted to provide our Own corps of that specialty, and the Navy also provides the supply support in that area. In the other areas we have little of our end items, which are common with the Navy, and we have developed our own supply system. Now, the Marine Corps, like the Navy, uses DSA and GSA and other integrated managers as designated by the D~fense Department. For items which the Marine Coi~ps does not get from those integrated managers, we procure ourselves. Much procurement is done through a `coordinated procurement assignment. That is, we are told who the individual or the command is that will make `the procurement for us. it it is not covered by integrated managership, where there is a requisi- tion from stock, or co'vered by coordinated procurement, where' we place requirements on another individual, we are at liberty to pick the sources from which we `will make our buys. In `accordance with the ASPIR `rules and regulations, we can go direct for requirements under a certain dollar value, and above that dollar value we go out on com- petitive bidding. Now, we have set up our own distribution system to handle the items which we purchase. Unlike the Na'vy, we have only one inventory con- trol point. 97-475----68----9 PAGENO="0130" 124 Mr. ROBAOK. General, why do you not come forward. It might be a little easier to talk to the committee. `General TmEn. I might just as well start in by reading my pr~pared statement and maybe I will have covered many `of these things that `we wottld come up with. It will take me `a little bit longer, but I might put it rn better context. if I do not put it in the right context, then I could answer the questions. Mr. ROBACK. Is the statement fairly brief? General TmER. It is 12 pages, sir. Mr. IIoLIFmLD. Go `ahead. That will flit in here. General TYu~R. Mr. `Chairman `and members of the subcommittee, I am Major General Tyler, Quartermaster General of the Marine Corps and am pleased to have this opportunity to discuss the Marine Corps supply system. My prepared text covers four major points: (1) A general description of the Marine Corps supply system; (2) inven- tory mailagement highlights; (3) standardization of supply systems; and (4) programing and acquisition of automatic data processing equipment. The Marine `Coups ;su~pply system can basically he divided into two maj or categories: (1) the "in stores" portion which includes all assets', together~with management functions `and processes pertaining thereto, which are. under central inventory control point (TOP) item and/or financial accountability and control; and (2) the "out of stores" por- tion which includes those assets held by the Fleet Marine Forces (FMF's), either by combat, combat support, o~ combat service support units. Materiel carried in the Marine Corps stock fund account (MCSFA) is in the "in stores" portion `and is sold to "out of stores" customers. The "stores system" is managed under the recently implemented~ Marine C'orps unified materiel management system (MTJMMS) whiqh encompasses 17 completely integrated subsystems, covering all man- agement functions normally associated with military supply. "Out of stores" assets are generally in the hands. of organic units (users) or service support units. The service support unit both consumes assets and issues materiel to supported tactical units. Mr. DAHLIN. Is the MIJMMS system compatible with the Navy TJADPS system or is there `any effort to coordinate with the Navy, or is this supposed to be a ind~pendent supply system that works all by itself? General TYLER. It is an independent system, and it `works individu- ally. The only compatibility between our system and the Navy's, is. that we make use of the standard definitions and processes set up under MILSTRAP and MlliSTRIP. This is `the `standard military requisitioning end issue procedure and the reporting and accounting procedure. Mr. DAHLIN. Was there any need for common equipment in the two systems? General TYLER. I do not believe so, sir. We `are not physically located where it would be particularly easy ,to use a common system. Mr. DAHLIN. You are in Vietnam. General Tmiiit. I was talking first of our system ,at the inventory control point. PAGENO="0131" 125 Mr. DAHLIN. Yes, sir. I just want to know, are your automated sys- tems and standardized systems, compatible or were they planned to be corxzpatible? Let us say the Naval Sti~pport Activity, Danang, worked along with the Marine computers for inventory control and issue and so forth, and requirements out of Vietnam. How was that supposed `to work and how did it work? General TYLER. As far as I know, there has been no effort made for compatibility between our oon~puters at the force logistics command and those in the hands of NSA, Danang. Mr. DArn~IN. Thank you, sir. Admiral COSGROVE. One point I might add is that all of these com- puters will accept the MILSTRIP document so there is no need for having the identical computers no matter what kind of a computer you have. You can insert the MILSTRIP document in it which is your requisition document. Mr. 1-I0RT0N. Has your mission, General Tyler, in Vietnam created a strain on your system? By that I mean do you have more of an infantry mission in Vietnam? I wondered whether or not your system has had some strain as a result of that? General T1n~ER. I am sure we have had strain on our system, but our system was designed so that we could absorb this. It has not caused any permanent problems. We actually have more people, more units in combat than we had during the entire Korean *ar, in which you will recall we had one division. We now have two, and temporarily 22/3 divisions in Vietnam, so we have had a higher degree of support re- quired, although we have been able to handle the thing. Mr. HORTON. Do you handle it exclusively, or do you depend on the Army for a lot of your supply there? General TYLER. Out in Vietnam we rely upon the Navy for common support. We have numerous cross-servicing agreements and in small restricted areas with the Army to take care of repair parts for certain items which we have been unable to support ourselves. But generally speaking excluding the common support which we get from Naval Support Activity, Danang, we are attempting to run our own inde- pendent system in I Corps. Mr. HORTON. So you have a separate system from the Army. General TYLER. Yes, sir. Mr. HORTON. For your supply. And this is for all combat equipment, trucks- General TYLER. Yes, sir. Mr. HORTON. Airplanes, and all the like. General TYLER. Airplanes are provided by the Navy, sir, airplanes and all the repair parts associated therewith. Mr. HORTON. Thank you. Mr. DAHLIN. We might ask further about that, General. In the United States at least, I believe that the Navy has centralized the support of type aircraft at certain airfields and repair facilities for aircraft. So that you would concentrate, perhaps, all F-4 support in the United States at one, or at the most two airfields. Is that not the case, Admiral? Admiral GOSOROVE. Yes, sir. Mr. DAJILIN. How does that work in Southeast Asia for Marine Corps, Navy, or Air Force-type equipment where they are similar or PAGENO="0132" 126 the same? Do all facilities now have to carry wider inventories of all different types of equipment, even though your system is now built to separate out different types of aircraft? Admiral COSGROVE. The aircraft support for the Marines in Vietnam is provided by the Naval Supply Depot at Subic in the Philippines, and I do not know how many types of aircraft the Marines are operating. I think they generally operate the same type of aircraft the Navy operates, and quite a few more helicopters. The Marine Air Group has a 90-day level of aviatiQn material with them, and they are replenished from the Naval Supply Center, Subic. Now, as far as the Air Force is concerned, the Air Force is now supporting the Navy to a degree on the F-4 aircraft. Mr. ROBAOK. Do the Marines use the F-4 also? Admiral CosuRovE. Yes, sir. Mr. ROBACK. Do the Marines have both shipboard and land aviation? Admiral CosuRovE. No. General TYLER. We have from time to time assigned Marine Corps aviation units to operate from carriers. Mr. ROBACK. Are you operating aviation units in Vietnam? Admiral CosuRovE. Yes, sir. General TYLER. Yes, sir. The Marine Corps has about the equiva- lent of 11/2 `aircraft wings in Vietnam. Mr. ROBACK. They are not off carriers. General TYLER. No, sir. Mr. ROBAOK. But `are you flying F-4's? General TYLER. Yes, sir. Mr. ROBACK. And is the Navy supplying you with F-4's? General TYLER. Yes,sir. Mr. ROBACK. So the Navy is supplying you and the Air Force and is supplying its own E-4's on the ground in the same area. Admiral CosunovE. The Air Force is also supplying the Navy, sir. We have this agreement with the Air Force now for a list of items called the joint stocklist, and the Air Force has this support responsi- bility. This has been in effect since February. Mr. ROBACK. Do they have the support responsibility for all of the F-4's? Admiral CosuRovE. Yes, sir. Mr. ROBACK. In all of Vietnam? Admiral CosuRovE. Yes, sir. Mr. ROBACK. For selected items? Admiral CosuRovE. Yes, sir. Mr. HORTON. What you are saying is that we have four systems over there in Vietnam supplying the Navy, the Air Force, the Marine Corps, and the Army. AdmiralCosuRovE. That is right. Mr. HORTON. And basically they are not compatible, except the Navy and the Marine Corps. Admiral CosuRovE. I do not understand the definition of "compatible." Mr. HORTON. I mean they are not centralized, so you have four separate systems. If you have a request for helicopter parts, the PAGENO="0133" 127 Marine Corps has to go back through the Navy. It is not something that could be handled centralized. Admiral COSGROVE. I think there is agreement there too where the Army is supporting helicopter support for the Marine Corps. Mr. HORTON. If there is centralization, I think it might be helpful here for you gentlemen to comment on that. General TYLER. May I make one comment about Marine aviation? Mr. HoRToN. I am not trying to have you defend Marine Corps aviation. General TYLER. I think it might clarify it. Mr. HORTON. I am talking about centralized supply. General TYLER. It might help clarify one point. When Marine avia- tion units require aviation repair parts, they go through exactly the same procedures, the same channels as the naval aviation unit. The stock levels are adjusted between the Navy and the Marine Corps so that the Navy knows what the Marine Corps has and the Marine Corps unit goes through exactly the same requisitioning procedures as the Navy unit. As far as Subic is concerned, it does not make a bit of difference whether it is from a Marine or Navy unit. They all look alike and are all handled alike. We have not attempted in the Marine Corps to set up anything different to support Marine Corps aviation, and what the Navy has done is set up a naval operation. Mr. HORTON. There are four stockpiles over there of undershirts. General TYLER. Yes, sir. Mr. HORTON. Right? General TYLER. Yes, sir. Mr. HORTON. And if a Marine needs an undershirt or a company needs undershirts then they have got to go back through the Marine Corps system to get their undershirts, is that right? General TYLER. Yes, sir. Mr. HORTON. The Navy has to do the same, the Air Force and the Army. The point I am making is that there are four systems, whether it is undershirts or whether it is ammunition or whether it is carbines or whatever it happens to be. They have four systems and they ha~ve four stockpiles. I realize there are more than four stockpiles, but there are four separate control stockpiles for the four services. Admiral CoscamovE. Not for underwear. General TYLER. I was about to make the statement, Mr. Horton, that generally you are correct. As far as underwear is concerned, it may be the common item that NSA Danang is using. Mr. HORTON. How many common items do we have? Admiral CosonovE. In Danang, for example, ~thich the Navy runs, 41 percent of all our issues in IDanang go to the Army, 34 percent go to the Marine Corps, this includes many, many items, some 80,000 odd items of common supply including clothing, including food, and com- mon use items which are generally wholesale managed by DSA. And so you can see what we are doing there. Seventy-four percent of our mission in Danang is not Navy oriented. We are only support- ing Navy Seabees ai~d repair facility people and so forth out of Danang. So we have a common support in the entire I Corps area. The Army has similar responsibilities in other areas. PAGENO="0134" 128 So when we talk common items, Mr. Horton, we have essentially ~one service assigned to support by area. Mr. HORTON. I am concerned as to how much this might affect corn- inand decisions also. If I were the commanding general of MAC/V and I wanted to move the Marine Corps operation out of I Corps and put it down in IV Corps, would this create a supply problem? General Tmnn. It would create a problem that somebody would have to plan for. Mr. HORTON. Would it create the kind of a problem that theY com- mand might be a little bit concerned about making such a move? General TYLER. I would feel that considering the size of the troops that the Marine Corps now has in I Corps, the number of suppliers we have ashore, the logistics installations which we arc now operating, that to move the entire Marine unit from I Corps down to the delta, for example, would be a tremendous logistical task. Mr. HORTON. If you had the same number of Army units down in IV Corps, and for some reason you wanted to change the mission, there would not be any compatibility with the supply system so that you could operate on their supply system, would there? General TYLER. Yes, sir; I think when Admiral Cosgrove made the `point that we `all use the same requisition, this is `the one element in which we could get compatibility. A Marine Corps unit in Vietnam can give a requisition in standard MILSTRIP procedure to an Army inventory control point and they can process it. Mr. 1-IORT0N. How about furniture? Is that a common item? If you need a sofa for the officers' quarters or something like that; is that a common item? Admiral CosoRovE. This is not in the Navy supply system. It is run by the Navy civil engineering system, and whether they support Army and Air Force I cannot answer because that is outside of my domain. Mr. HORTON. You talked about some agreements, Admiral. I think it would be helpful if you could comment on your concept of the cen- tralization of supply in Vietnam, if there is any, as a result of agree- ment. Have you had to enter into a lot of agreements in order to brin this about? And, if so, how does this affect your computerize operations? Admiral CosoRovE. The agreements, as I understand them, are made by the force commanders in the area, and I am not precisely sure how it came about that the Navy Supply Support Activity at Danang, for example, supports everybody in the I Corps area. I suppose it was because we were there and we had these common items. You get into agreements when you talk of combat and systems such as aircraft, and we do have, as I said, a current agreement with the Air Force where they are supplying all F-4 support. Mr. DARLIN. Did you say that just began in February, Admiral? Admiral CosoRoviE. It started in February; yes, sir. Tip to that time we had a different type of agreement where they procured all of this stuff, but they did not support it down to the base level. They procured requirements laid on them by the Navy centrally. Mr. DAHLIN. Presumably the Navy has some stocks that are being attrited. within that area, that have to be handled. PAGENO="0135" 129 Admiral CO5GR0vE. I did not understand. Mr. DAIILIN. Does the Navy still have some stocks of items of supply within that area- Admiral CosGRov1~. Yes, sir. Mr. IDAHLIN (continuing). Which have to be attrited? Admiral COSGROVE. And when they are attrited, we will be resup- plied from the Air Force. We also have agreements in the mill for the Navy to support the Air Force in certain aircraft. Mr. DArn4IN. Such as the A-I? Admiral CosoRovE. The A-I, CH-53 helicopter, and the OV-10 which is an observation plane. Mr. ROBACK. Wherever there is the same aircraft basically in use by more than one service, you have an agreement for one service supply, is that right? Admiral CosoRovE. We either have or will have, sir. Mr. HORTON. Take ammunition for the M-16. If you have a short- age in the I Corps area, the Marine Corps has a shortage of that am- munition, and it is needed in a hurry, where do you have to go to get your supply? In other words, I do not know what your supply route is outside of Vietnam. Let us assume it is in Okinawa. Let us also assume the Army had M-16 ammunition in Saigon. Would you be able to get that ammunition from Saigon, or would you have to go to Okinawa again? General TYLER. I think a lot of it depends upon the urgency of the requirement and the transportation time. Mr. HORTON. You need it a hurry. General TYLER. We can-we have agreements to get stuff locally. Mr. HORTON. If you did not have an agreement, then what would you do? General TYLER. Still go down and ask for it locally. Mr. R0BAOK. If you cannot get it, you steal it. General TYLER. Fortunately we have not had that problem in am- munition. Mr. HORTON. I was concerned about the supply problem from the centralized concept in Vietnam where you have a joint effort by the ~various forces as opposed to four separate systems. I am sure `the four separate systems work with regard to some items. But I am also sure `that there could be some consolidations if somebody at the top level said let's consolidate and program some of these things on a compatible `basis. It would seem to me a lot of overlap could be eliminated. I do not ex- pect ~ou to answer it. I am just making a statement. Admiral CosciRovli. I made a statement I will have to correct. I was ~slightly wrong. I said 80,000 common items. Commander Dreese says it is 11,000, so I was just slightly off. Commander DREESE. 80,000 items at Danang, 11,000 of which are ~common, but they constitute a very large percentage of the issues because of the fact that they are the common items. Mr. HOLIFIELD. General, we are going to accept your full statement as we did Admiral Cosgrove's. It seems the discussion will take care of it. It will be printed in the record in its entirety at this point. (General Taylor's biography and statement follow:) PAGENO="0136" 130 BIoGRAPHY OF MAJ. GuN. PAUL R. Txi~uu, USMC Maj. Gen. Paul Robert Tyler assumed his current assignment as Quartermaster General of the Marine Corps, March 1, 1965. General Tyler was born in Rochester, N.Y., August 13, 113. He attended Canisius College at Buffalo prior to his appointment to the Navy Academy in 1932. Upon graduation from the Naval Academy, he was commissioned a Marine lieutenant, June 4, 1936. Prior to World War II, he served with various Marine units and completed Signal Corps School, Fort Monmoutla, N.J., in 1940. During World War II, he served overseas as brigade communications officer, ~d Marine Brigade; signal officer, U.S. Marine Corps Section, Army Forces West- ern Pacific, and regimental supply officer, 7th Service Regiment. Following World War II, he served in the Office of the Chief of Naval Opera- tiOns, Washington, D.C., Electronics Supply Division, Marine Corps Supply De- pot, Camp Lejeune, N.C., and the Navy Department with the Electronics Divi- sion, Bureau of Ships. Upon graduation from the Armed Forces Industrial College in 1953, he served in Korea as division supply officer, 1st Marine Division (Reinforced), and sub- sequently as commanding officer, 1st Service Battalion. For meritorious service in Korea, he was awarded the Letter of Commendation with ribbon. Returning from Korea, Colonel Tyler was assigned to the Marine Corps Sup- ply Center, Barstow, and later to the Marine Forwarding Annex, San Francisco. He returned to Headquarters Marine Corps in 1957 and upon his promotion to brigadier general in 1958, was named Director of Materiel Division. In April 1959, General Tyler became Assistant Quartermaster General of the Marine Corps. From that time until assigned his present duties, he has served as Commanding General, Marine Corps Supply Activity, Philadelphia, Deputy Executive Director for Depots and Facilities Management, and Inspector General of the Defense Supply Agency; and as Commanding General, Marine Corps Supply Center, Albany, Ga. The Joint Services Commendation Medal was awarded him for his service with the Defense Supply Agency. He was promoted to his present rank in August 1963. General Tyler and his wife, the former Ray Rita Carrol, have four children: Marie (married to Marine Major William F. H. U'Ren, Jr.) ; Paula Jean; Carol Robin; and Paul Robert, Jr. The general's parents are Mr. and Mrs. Van Elroy Tyler. Mr. Tyler is deceased, and Mrs. Tyler now resides in St. Petersburg, Fla. PREPARED STATEMENT OF MAT. GEN. PAUL R. TYLER, QUARTERMASTER GENERAL OF THE MARINE CoRPs Mr. Chairman and members of the subcommittee, I am Major General Tyler, Quartermaster General of the Marine Corps and am pleased to have this opportu- nity to discuss the Marine Corps supply system. My prepared text covers four major points: (1) A genural description of the Marine `Corps supply system; (2) inventory management highlights; (3) standardization of supply systems; and (4) programing and acquisition of automatic data processing equipment. The Marine `Corps supply system can basically be divided into two major categories: (1) the "in stores" portion which includes all assets, together with management functions and processes pertaining thereto, which are under central inventory control point (ICP) item and/or financial accountability and control; and (2) the "out of stores" portion wtich includes those assets held lay the Fleet Marine Forces (FMF's), either by combat, combat support, or combat service support units. Material carried in the Marine Corps stock fund account (MOSFA) is in the "in stores" portion and is sold to "out of stores" customers. The "store system" is managed under the recently implemented Marine Corps unified materiel management system (MTJMMS) which encompasses 17 com- pletely integrated subsystems, covering `all management functions normally associated with military supply. "Out of stores" assets are generally in the hands of organic units (users) or service support units. The service support unit, both consumes assets and issues materiel to supported tactical units. With some exceptions, the Marine Corps `supply system is a completely in- tegra'ted autonomous system `for items stocked by the Marine Corps. The Marine Corp's Supply Activity, Philadelphia, Pa., is the sole Marine Corps inventory controy point (ICP). The TOP uses many sources for replenishment of assets for PAGENO="0137" 131 the Marine Corps integrated system. These sources include commercial pro- curement; other military services; the Defense Supply Centers (DSC's) of the Defense Supply Agency; the Army Tank and Automotive Command (ATAC), as a DOD integrated manager; and the General Services Administration. An important feature of the "stores system" is the concept of placing a selected range of low cost, fast moving items at issue points close to the consumer for sup- port at major Marine Corps bases. These outlets are self-service centers, shop stores and clothing sales stores. The management process for these issue points at the major base is designated as direct support stock control (DSSC) by the Marine Corps and is covered by one of the aforementioned MUMMiS `sulbsystem,s. The "out of stores" portion of the supply system is not part of the centrally managed MUMMS system. It is managed with separate procedures, for the organic supply accounts and service support fleet stock accounts. However, all organic accounts in the Marine Corps are operated under one set of `procedures provided by Headquater's Marine Corps and similarly, all fleet stock accounts operate under a uniform program with minor exceptions, noted in the more detailed discussion following. The assets "in stores" with central item accountability are generally dis- tributed at eight major base's called remote storage activities (RSA's). RSA's are located at the Marine Corps Supply Centers, Barstow and Albany; Marine Corps bases, Quan'tico, Camp Lejeune, Camp Pendleton, and Twentyn'ine Palms; and the Marine C'orps Recruit Depots at San Diego and Parris Island. In addition, each of these major bases operates a D'SSC `system to `position low cost, fast moving items at iss'ue points close to "on base" customers. These issue points are replenished from assets with central item accountability by requisitioning on the ICP which in turn issues a materiel release order (MRO) to the RSA. Procedures for distribution of assets under central item accountability provide that materiel will be delivered from the source to the base closest to the ultimate consumer, when issues from assets at the base represent `a significant enough percentage of total system issues to warrant such asset positioning. Accordingly, a historical demand pattern is mechanically accumulated for each item and an allocation factor (percent of total system demand) is assigned to each major base. In addition to distribution of assets at the major bases, "stores system" assets of clothing items are also positioned at 20 sales outlets throughout the coneinental United Sta'tes (CONUS) and overseas for "on base" direct support. "Out of stores" organic assets are generally held at the battalion, air squad- ron or separate company level. Service support fleet stock accounts are organic to division service battalions, force service regiments or wing support groups, and these support division, force troop, and wing units. This pattern has been changed to a certain degree in the WestPac area as a result of the evaluation of support requirements in Southeast Asia (SEA) during the past 3 years. This evolution has resulted in a Marine Corps Force Logistic Command (PLC) in the Bepublic of Vietnam (RVN). The PLC consists of one force service regiment and two division service battalions, task organized as dictated by the situation, with "In country" central item levels and accountability being maintained by the FLC at Danang. Another force service regiment on Okinawa provides support to the PLC for organizational equipment and materiel, construction materiel, major end items and repair parts. The Naval Support Activity (NSA) at Danang ptovides subsistence items, fuels and common administrative and housekeeping type supplies to the PLC. The major customers of the Marine Corps supply system are the combat, com- bat service, and service support units of the Marine Corps PMF. The FMF prin- cipally consists of four active and one reserve divisions; three active and one reserve Marine aircraft wings (including Hawk Battalions) ; and all of the supporting force troop units. Other significant customers of the Marine Corps supply system are major bases; camps; posts and stations; guard detachments, ship detachments; air stations, and air facilities. With certain exceptions, the Marine Corps integrated supply system provid'es worldwide su'pport for the customers no'ted above. I would next like to discuss briefly five inventory management functions of particular interest to the subcommittee: (1) Management of principal items; (2) determination of requirements and control of secondary items; (3) stock levels; (4) the recoverable items programs; and (5) command responsibility. Within the Marine Corps, the determination of requirements, acquisition, and allocations of principal items is the responsibiilty of Headquarters Marine Corps PAGENO="0138" 132 (HQMC). The ICP maintains asset and allowance status for major items of equipment, secondary depot reparables, and other items designated by HQMC, which are held by both major and subordinate comands. The controlled items management subsystem of MUMMS provides the means for individual item man- agement of controlled items with a minimum of administrative effort on the part of the item manager and the holding units. The subsystem provides the ability to record the inventory of in-use assets, produces reports for management re- view, and provides preprogramed file status reports, as may be required. The predominant features of the controlled items subsystem are: 1. Full asset data on controlled items is available and adjusted as issues, receipts, and disposal decisions are made. 2. Full allowance data is available for the purpose of monitoring requisitiona prior to issue. Units are only authorized to hold assets within allowances estab- lished by Headquarters Marine Corps as essential to the mission of the unit concerned. 3. Programs are available to validate allowances and to insure that assets, in stores and in use, do not exceed the total Marine Corps materiel objective. Requirements for secondary items in the stores system are centrally com- puted and assets are controlled by the single Marine Corps Inventory Control Point. Supply echelons out of the stores system compute individual require- ments for secondary items within levels established by HQMC and "feed" on the stores system. Policy direction for the entire supply system emanates from Headquarters Marine Corps The Marine Corps has recognized the general problem that assets available in one unit below the service account level are not readily visible and therefore not available to meet the needs of another unit. However, currently being pro- gramed is the supported activities supply system (SASSY) which will mechanize inventory records of organic units and provide the means for visibility and automatic redistribution of any available assets "out of stores," to satisfy known. requirements. As indicated when discussing the distribution system, Marine Corps stock levels of secondary items consist of levels for in-store assets and levels for out- of-stores assets. These levels do not necessarily represent a vertical pipeline' of the same range and depth of items to the consumer, but rather represent different stock levels designed for specific purposes with varying ranges of items. For example: (1) Repair parts requiring installation at the third or fourth echelon maintenance level are not normally stocked below the service support unit level and are therefore not included in `organic units stocks; and (2) specific criteria govern the stocking of items at `the organic level, and items not meeting established criteria, although used, are not stocked. Another important feature of inventory management relates to the recovery of reparables. The Marine Corps employs three programs involving the recovery of reparables from the user as follows: 1. The Marine Corps recoverable items program (RIP).-This progra~n pro- vides for the recovery of principal reparable items of M'a4ne Corps equipment which are predetermined as economically reparable and/or excess to the require-~ ments of a using unit, and for disposal action on those items which are beyond economical repair or the total requirements of the Marine Corps. 2. Replacement and evacnation progra~n (RtiE) .-This program is promul- gated annually by Headquarters Marine Corps and supports the commanding generals, fleet Marine forces, Atlantic and Pacific and selected Marine Corps Reserve units. This program provides for selected items `to be replaced periodi- cally by like serviceable items from the stores system, :50 as to provide `theY FMF with the best conditioned equipment possible. 3. Marine Corps secondary reparable item program.-This program provides for repair as the primary source for replenishment of serviceable assets of' secondary reparable items. Serviceable items are made available on an exchange or rapid turnaround basis to permit the parent equipment to remain opera-~ tional with minimum down time. A supply of reparable items, termed a "main- tenance float," is located at designated repair facilities, which permits this procedure to `be carried out. The unserviceable items are picked up in the mainte- nance float and promptly repaired. Economically reparable items which cannot be repaired at the facility due to a shortage of requisite skills, facilities, or' time are evacuated to the next higher maintenance echelon in exchange for' serviceable items. PAGENO="0139" 133 To insure that unnecessary delays are not encountered in evacuating recover- able reparable items to the repair facility, including CONUS depot facilities, disposition requests and instructions are transmitted electronically and retro- grade shipments are assigned high priority. In some instances, fifth echelon (depot) rebuild is being conducted on Okinawa or Japan to provide needed repair without increasing the inventory of the item concerned. The Marine Corps integrated supply system has been designed to provide the Commandant of the Marine Corps with a highly flexible and responsive logistics tool. This logistics tool is specifically tailored for the Corps amphibious role, its relatively small size, status as a constant force-in-readiness; and has the inherent flexibility to meet the needs of sustained operations in a low intensity conflict. It provides an operationally sensitive distribution system, under the Commandant's cotrol, which is capable of immediate response to meet his re- sponsibility for logistic support of Marine forces worldwide. The Marine Corps supply system retains the most simple organic supply struc- ture within the Fleet Marine Force (FMF). This doctrine has been deliberately maintained to permit tactical units to concentrate on the primary mission of combat. The assets held by FMF commands, in either service support or organic units, are controlled by that command. This concept is considered essential for timely response of the command to emergency deployment and combat situations. Standardization and simplification of supply systems within the Marine Corps has been achieved within the constraints dictated by the operational environ- ment of each system element and the relative sophistication of supporting data processing equipment. There are four separate "procedural" echelons in operation within the Marine Corps supply system. Each of the separate echelons is tailored to meet the require- ments of the activity or organization which it supports and each is integrated within the total Marine Corps system. These echelons of supply include: 1. The "in-stores" portion of the supply system is embraced by the Marine Corps Unified Materiel Management System, or MUMMS, which was mentioned earlier. MUMM~S incorporates automatic data processing techniques and standard- ized requirem~ents of the Department of Defense such as standard requisitioning and issue procedures (MILSTRIP), transaction reporting and accounting pro- cedures (MILSTRAP), transportation and movement procedures (MILS1TAMP), and supply and transportation evaluation procedures (MILSTEP). Through the medium of this standardized language, MUMMS is compatible and interfaces with the Defense Supply Agency, General ServiCes Administration, and other military services. 2. Service units, or fleet stock accounts, located in the continental United States and Hawaii all follow one standard Headquarters, Marine Corps con- trolled system. 3. The fleet stock accounts located at the 3d Force Service Regiment on Oki- nawa and the Force Logistic Command at Danang, Vietnam, utilize a standard Headquarters, Marine Corps controlled system. 4. Organic ground, aviation, and reserve supply accounts use a single manual accounting system which is controlled by Headquarters, Marine Corps. As previously mentioned, the Marine Corps is currently designing the Sup- ported Activities Supply System known by the acronym SASSY. This new system, which will be initially tested on Okinawa during calendar year 1969, will eventually replace the system which is presently used by ground, aviation, and reserve organic supply accounts. SASSY will utilize third generation computers to provide supported units with centralized automated recordkeeping and is designed to increase asset visibility and control through modern manage- ment techniques. Actual equipment requirements will be determined on the basis of the field test and evaluation. Acquisition of automatic data processing equipment (ADPI3I) is controlled and coordinated by Headquarters, Marine Corps. In order that this equipment will be applied in the most efficient, effective, and economical manner possible, Marine Corps policy dictates that automatic data processing equipment transcend functional and organizational lines and that it not be considered as the exclusive property of any one command function. For this reason ADPIfi is primarily acquired to meet total Marine Corps requirements and only Incidentally to meet logistics or supply system requirements. All requirements for ADPE within the Marine Corps are developed by the Data Systems Division, Headquarters, Marine Corps (HQMO), in response to PAGENO="0140" 134 systems needs of the Marine Corps. Equipment specifications are forwarded to the Special Assistant to the Secretary of the Navy (SASN) for approval and procurement action. SASN obtains approval from higher authority as necessary and issues Request for Proposals to vendors. The Automatic Data Processing Equipment Selection Office within the office of the Special Assistant to the Secretary of the Navy makes the actual equipment selection based on the specifications developed by the Marine Corps. After selection, Data Systems Division, HQMC, provides centralized management of all automatic data processing equipment assets within the Marine Corps. All computer procedures and programs for MUMMS, and fleet stock accounts have been centrally developed under the control and direction of Data System.s Division, Headquarters, Marine Corps. The responsibility for computer pro- graming necessary for implementing MUMMS was assigned to the commanding general, Marine Corps Supply Activity, Philadelphia, Pa. Headquarters, Marine Corps is responsible for the remaining supply programing requirements, either directly or through the technical control of the WestPac Systems Programing Unit located on Okinawa. Computer procedures and programs for SASSY are being developed within Headquarters, Marine Corps. CONCLuSION This concludes my prepared statenient. I will now be happy to answer any questions you wish to pose. Mr. H0LurIIILD. Go ahead. MARINE CORPS SUPPLY OOMPtTTERS Mr. DAHLIN. General, one of the things we found out from the Army was that they had moved a computer somewhat late into Viet.. narn. I believe they have a 1070 operating for logistics purposes in the Saigon area, and one to back it up on Okinawa. I believe the Marine Corps uses the 360 system. It has one in Vietnam, and one to back it up on Okinawa. First of all, I might ask the admiral whether there is another com- puter system working for the Navy at Danang, and whether it is compatible. But one point we could make was that at least the backup computers on Okinawa might have been consolidated if everybody had been using similar equipment, at that point, in the Vietnam supply problem. At least you might not have to have two or three backup computers on Okinawa, if the purpose, in part at least, is for backup. Is it the case that the Marine Corps had to get a computer quick and brought in a rental computer system for Vietnam? Is that correct? General TYLER. We had IBM 1401 computers in the 3d Force Servi~e Regiment in the 3d Division on Okinawa before they deployed into Vietnam. We had the same type of equipment in the 1st Marine Division before they deployed. However, at a later date, after the units were in-country, and when we had our new ICP oriented com- puter system, MUMMS, which was built around the 360 configura- tion, we upgraded the computer capability at the Force Logistics Command in Danang, and the 3d Force Service Reginient on Okinawa to a 360 model 30 computer. Mr. DARLIN. In other words, the Marine problem was the MUMMS had not come along in time and so you were not automated quickly enough so the forces in the field could use it. General TYLER. That is right. The MTJMMS really was not expected computerwise to go to the field. However, we had trained people to write programs and run the 360 computer. So in order to upgrade PAGENO="0141" 135 what we had in the field, we elected to justify the upgrading of th~ 1401 IBM into the 360, because we had the people who could write the programs and run the hardware. Now, had we not been able to justify this, shall we say, sole source, and had to go out for competitive bidding, we could have ended up with a piece of hardware for which we would have had to have trained a number of people to write the programs and run the ma- chinery. Since we already had some of the people trained, we were able to put them in much quicker, and have the upgraded system in operation more quickly than we would have had we gone out for bid advertising. Mr. DAHLIN. You are renting these computers. You did not have to purchase these; is that right? Are you taking the risk or is the con- tractor in a combat situation in Vietnam? General TYLER. I will have to provide that for the record, sir. If know that the Marine Corps owns some 360's and rents others. I just do not know about the one in Vietnam. (The following information was furnished for the record:) The Marine Corps leases the IBM 360 model 30 computer, and owns the IBM 1401-B3 card computers in Vietnam. Mr. DAHLIN. You do have support agreements for the maintenance of such equipment. General TYLER. Yes, sir. Mr. DAHLIN. You may, you think, own some of these computers. General TYLER. Yes, sir. Mr. DAHLIN. Admiral Cosgrove, what is the situation with respect to the computers at Naval Support Activity Danang? Admiral COSGROVE. We are now putting a 1401 in. We got this 1401 from the Army at Okinawa. It was excess to their requirements. Mr. DAHLIN. They did not get it from the Marine Corps, did they, Admiral? Admiral COSGROVE. Sir? Mr. DAHLIN. They did not get it from the Marine Corps, did they? Admiral CosGRovI. I do not know where they got it from. They had it. Also just today CNO has approved augmenting Subic with another 1401. Now, when we talk compatibility, I would like to make one point clear. You do not have to have identical computers with identical programs to have compatibility among the services. MILSTIRIP, which has been in effect 3 or 4 years now, DOD standard requisition procedure, has been used and has to be used by all services in any computer at any supply stock point, ICP, will accept MILSTRIP requisition~s, so you do really have compatibility between the systems insofar as interservicing. Any requisitioning that the Navy submits to any Army activity that has a computer will be processed by that computer, and vice versa, and the Marines are the same way. So when we talk of actually getting interservice support, you do not need the same computer. You do not need the same system. That computer will process that requisition, will print out a standard DOD- wide issue form which everybody in the military understands and uses. Mr. DAHLIN. That is the issue side. As far as the inventory side it may be a little more complicated. PAGENO="0142" 136 Admiral COSGROVE. Within the computer itself, the way the Army, Marine Corps, Navy, and Air Force determine their requirements will be different in all probability. INTEROHANGEABILITY OP PARTS Mr. DAHLIN. You indicated, Admiral, did you not, that there was some problem in trying to figure out whether parts were interchange- able and whether your system indicated which parts would work in Marine Corps, Army, Air Force equipment or not, that it is a specific item to go into a larger assembly and so forth-interchangeability. Admiral CosGRov1~. We are getting into another area now. The Defense Logistic Service Center assigns all stock numbers to all ~services. Mr. DAHLIN. They assign it, but you people are the only ones that ~can tell whether they actually work in the field, is that not right? Admiral CosonovE. That is right, but what they do at the time new ~parts are added to a service system, that service submits his part num- ~r description and gets a stock number. Now the stock number is the common denominator. WEAPON SYSTEM SUPPLIES Mr. DAHLIN. If that is all the problem, Admiral, why do you go to a weapons parts list? Admiral CosoRova. We go to that for our own internal management purposes. Mr. DAHLIN. Why do you need that? Admiral CosaRovE. Because we feel that we have to become more oriented toward individual weapons. Mr. DAHLIN. Why will not the catalog system kick out items that belong to your weapons system? Admiral COSGROVE. We can do this. Right now we do not have equipment-related capability. Mr. DAHLIN. In fact the catalog does not kick out items related to a weapons system. Admiral CÔSGROVE. No, sir. Mr. DAHLIN. So you had to spend a good deal of money to get your own internal inventory control system to work with the weapons system, that really is the root of the problem; is it not? Admiral COSGROVE. That (is right. Mr. DARLIN. Did you ask DSA to try to do something about that problem or is that system not compatible? Admiral CosoRovE. DSA is not oriented toward weapons support. They are oriented toward commodity support. Mr. DAHLIN. Did your programers take a look to see if there is any way it could be made compatible to serve Navy needs? How did you go about trying to solve that problem before you spent money on a uniform data system based on weapons orientation or systems orientation? Admiral OOSGROVE. No one can help us except ourselves in this re- gard. It has to come from our own data files. PAGENO="0143" 137 Mr. DAHLIN. You have some systems and the Marine Corps has some systems and the Air Force has some systems, in fact those very :aircraft systems you were talking about. Sometimes there are com- mon interchangeable parts that you cannot identify because the cata- log still has problems. Sometimes there are items that get lost because `the inventory cannot be kept up properly, because of changes. Admiral CosonovE. If an item has a Federal stock number assigned, there is no identity problem insofar as the services are concerned. Now we do not have to know, if we get a requirement from the Air Force for a certain Federal stock number where he is going to use it. It is just the fact that he wants it. He can put it in a missile, he can put it in a Ilawnmo'wer or whatever he has to do. But when you get down to the file I am talking about in the Navy, we have to have a capability today to be able on a real time basis to be able to pull out all items that are peculiar to the Poseidon weapon, for example, and know what the usage rate on these items has been and to be able to give Admiral Smith, who directs the total nuclear submarine program, how he stands inthis area, what are our support capabilities. If he wants to deploy-the ONO wants to deploy additional nuclear subs into some area, can we support them, and this is why we have to have this capability. Today we do not have it. Mr. ROBAOK. You need tighter control in the catalog identification system; i's that right? Admiral Cosonoirr~. Another round of the catalogs- Mr. ROBACK. Tighter control oriented around weapons systems capability. Admiral OOSGROVE. I think that this should be a service responsibil- ity; yes. I think we need it, and I am not sure how far the Air Force is along on this, but I am sure they have the same problem, and I am sure the Army and the Marine Corps do, too. But I cannot seer-envision myself how this co'uld be done centrally as economically and as quickly as it can be done within each service. In other words, you might have an awful lot o'f data at some central point that would take a tremen- dous amount o'f time to get it, and then a lot of it would not be of use to anybody except one service. So' my point is why- Mr. DAHLIN. Everybody thought the machines were going to solve some of those problem's with masses of data but they have not yet be- cause they still have to be managed one way or another, that is by `system or by commodity. Admiral CosoRovE. Right. Mr. 1DArn~IN. rAnd `that is still a problem. In GAO report B-133118 of September 1967, Admiral, the GAO talked abo'ut some problems in `the $2.2 billion wo'rth of aeronautical spare parts and equipment. It sa~id, "We found that the systems did not provide management with the info'rmatio'n necessary fo'r efficient and economical operations and management of `its resources." It said at that time, "The Navy is im- plementing immediate and comprehensive plans for effectiveness im- provements in the inventory accounting systems." So apparently it is not just a catalog matter and may not be even the weapons system orientation. Can you describe what kind o'f action was taken in response to that repo'rt, Admiral? PAGENO="0144" 138 Admiral COSGJIOVE. Are these the aircraft change kits? I am not f a- miliar with the report numbers. I do not recall. Mr. DATILIN. This is the inventory accounting systems of aeronauti- cal equipment, an examination of the inventory records at ASO, at se- lected fi&ld installations where they were stocked. The report talked largely about the system including high value asset control and other needs. Admiral CosoRovE. Yes, sir. We are implementing a new procedure in the control of high value items. We did respond to the GAO on this, and I think they are satisfied with the system. Mr. DAULIN. You provided a response, but are all of the correc- tions or changes now in being as of 6 or 8 months later? Admiral COSGEOVE. They either are or will be very shortly. I do not have the exact date that these programs will be implemented. Mr. DAiiLIN. Is part of the response- Admiral Cosonovi~i. As I recall, it will be next month, July or August. Mr. DAHLIN. Yoil can supply items for the record if you have some detail on that. Admiral CosoRovE. Yes, sir. (The following information was furnished for the record : STATEMENT REGARDING GENERAL AccoUNTING OFFICE REPORT B-133118 1. Report tit'e "Review of Inventory Accounting Systems for Aeronautical Equipment." B- 133118, September 29, 1967 (OSD case #2606) 2. GAO findings and reconvinendations GAO found that the usefulness of the Navy's "Inventory Accounting Systems for Aeronautical Equipment" was seriously limited because of inaccuracies lu inventory records. GAO indicated that management decisions based uipon mac- cflrate records resulted or could have resulted in premature procurements, under procurements, unnecessary grounding of aircraft, unnecessary redistribution of equipment, incorrect scheduling of overhaul and repair, and other adverse effects. 3. Navy action The Navy concurred, in general, with the GAO findings and has taken remedial action designed not only to correct the records in question, but also to institute revised procedures and management systems that will prevent a recurrence of the situations described in the GAO report. The following outlines the specific actions undertaken and their status as of July 5, 1968: (a) In order to correct the situation pointed out by the GAO wherein top management at the ASO (Aviation Supply Office) was not fully informed re- garding discrepancies in the HIVAC (high value asset control program) a relia- bility branch has been established. The ASO reliability branch is now in operation and is keeping top management advised regarding significant matters relating to inventory accounting systems. (b) Since the GAO review, a newly automated program has been instituted at ASO to assist HIVAC analysts in reconciling mismatched transactions. This program was implemented in April 1967 and through its use backlogs have been eliminated and current misimatches between ASO and field activity HIVAC records are being processed on a timely basis. A standard program for reconciling all inventory control point and field activity records throughout the Navy is scheduled for implementation in July 1969. (c) In order to provide continuous control over high value items undergoing repair, a suspense file has been established at the field activity level which indi- cates induCtion and return of repairable items to the supply system. (d) As a result oct a complete study of the HIVAC system following the GAO Report, major changes in policy, procedures and criteria for the Navy HIVAL/ PAGENO="0145" 139 HIVAO program were instituted and released nuder SEçNAV Instruction 4440.- 29A of February 8. 1968. Some additional work remains to be done, particularly in the area of programing standard Navy-wide automatic data processing sys- tems; however, corrective action has been completed on the great majority of the discrepancies pointed out by the GAO. INACTIVE ITEM ELIMINATION Mr. DARLIN. Another recent GAO report of November 19(37 dealt with the problem of eliminating low-cost, low-demand spare parts. This is related to the matter in your statement, Admiral, that you raised about your system having to contain large numbers of items which are in relatively infrequent demand but which you thought you had to still keep in the system. The GAO was dealing with items where it found there had been no requests for over 3 years. I suppose this is a matter of judgment as to just how long you have to keep things in the system in order to be able to respond. Could you tell us about that problem in a little more detail? Admiral COSGROVE. We have eliminated in fiscal year 1967 and 1968 111,000 items. In other words, we have withdrawn interest on these items, and they will be dropped from the Navy and DSA system. As you know, DSA requires each service to conduct what they term an inactive item review; items that have been inactive in their system are referred to the service which registers interest on those items, and we have dropped the total in the past 2 years of 111,000 items. I think in our most recent item management coding we dropped 68,000 items between December and March. Mr. DAHLIN. Are these substantial increases in number of items, the ones you cite for dropping out of the system? In the present high rate of turnover and obsolescence in both systems and individual items, does the Navy have the capability to really keep screening its own catalog or categories of items, or are you falling behind in that respect? Admiral CosonovE. No, we have this capability, and I think we are keeping up with this. The only problem here-and I will get back to this weapons system and I keep repeating it, there are many items in our system we do not know what the ~ippiication is, and we are reluc- tant to dispose of items that have a long procurement leadtime. It may be very difficult to even find a vendor who can make it for us so unless we know exactly what equipment it is used in, how many of those equipments are in use- Mr. DAHLIN. That was one of the defects- Admiral CosdnovE. Right. Mr. DATILIN (continuing). Of the original conception of the cata- log: It did not have an application file in it, unless it is one that is accessible only at extreme cost and time of the computer, is that the case? Admiral COSOROVE. I do not think it should be in the cataloging system. I think it would create a massive- Mr. DAHLIN. It will be in your weapons system file. Admiral CosoRovE. Yes, sir. Mr. DAHLIN. You think that is the only place even though in some cases you have to redo a lot of areas of equipment, if you keep it by weapons system; where you have common components, assemblies and 9i-475-68---iO PAGENO="0146" 140 whatnot, then you iZL effect have to redo it several times or keep it twice. Admiral CosoRovE. We do not anticipate any maintenance problem once we get this program on the machine. MARINE SASSY PROGRAM Mr. ROBAOK. GeneraJ Tyler, in your statement you talk about a third generation automatic data processing, which goes by the acronym SASSY, standing for- General TYLER. Supported Activity Supplies System. Mr. ROBACK. Is this a hardware program that you are planning, that you are developing, or you have under procurement? Where does it stand? Have you chosen the hardware, for example? General TYLER. No, sir; we have not chosen the hardware. We can- not because we have not got the thing completely designed, and we are not sure of exactly how it is going to operate. What we have done is, knowing that we have 360's in the 3rd Force Service Regiment at Okinawa and in-country, we have taken our ideas `and flow charted what we want done and have selected portions of that to write the definitive machine programs to' be rim on the 360. When we are finished with the program writing, we will make a definitive test with the assets in the hands `of the Third FSR, in the hands o'f their customers, and try to prove our system under actual conditions before we go ahead, firm it up and present it as a system for which we would get appro'vad, and then proceed to `acquire the hardware. Mr. ROBAOK. This will give you all the visibility you are looking for, the worldwide which you do not have now. General TYLER. Yes, sir. This would put it in automatic data proc- essing hardware. We do not intend to try to bring into' the record in Philadelphia the assets of every stock number in the Marine Corps system wherever it may be located. We do have a program now that has been `written and tested and it is completely functional, in which we have certain definitive listings of items in which the troops report the onhand quantities. They report every time they lose o'ne, and of course as we fill their requisitions to replenish their stock, we can make the updating for them. At the present time `we have asked the troops to verify for us the figures that our program says are in their hands. In other words, we have taken all the information we had and formulated it and gone back to the customer in effect saying, "Our records indicate you have 10 of this particular stock nunTher. Verify." So when we get the verifications back, we will have accomplished our final major step in having the entire program automated. This is appli- cable now to 1,300 end items and around 1,400 additional high value secondary repair'ables and depot repairables, Mr. HOLIFIELD. Will you kind of `define that into language a layman like me can understand? What do' you mean the repairable items? Are you talking about `automotive equipment and that sort `of thing? General TYLER. Let me state first tanks, radios, LVT's, all the major items are under this control. We are not controlling the cartridge belt PAGENO="0147" 141 for the enlisted man. There is a criteria for major items, and they are all in the system. When we talk about depot repairables, we are talking about a complete engine, a complete transmission, a transmitter of a complicated radio set or an antenna for a radar. On the secondary repairables we are moving down to a different type of item but of reasonable dollar value. These would be modules for electronic sets, other types of items for automotive equipment, not quite of the magnitude o'f a complete engine. We are trying to control the items which have significant dollar value, that can be repaired or rebuilt and turned around and sent back to the troop's. We will have asset visibility of those items from the infantiry battalion all the way back up to the inventory `~ontrol point. The bulk of these things in the infantry battalion will be the basic allowance that they are using. In other words, to move `back up to the service battalion, we will find out that at the service battalion they may have five replacement engines to put into vehicles. If so, the five will be on `our record. If they are returned to a `higher echelon for rebuild, and they draw the replacements, we will know that, so we will be able completely to' up- date the location of the items we bring into `our system. We do not intend to' bring all items, into this system. Mr. HoLU'1E11. I can s'e'e where it would burden your system with detail if you tried to take care of every item, particularly items that are usable, expendable, or losable, small items like, as you said, car- tridge belts and many other items that would fit into that category. Once that is issu:e'd, as far as you are concerned, it is off the list. General TYnDn. Yes. Mr. H0LIFIELO. And it is considered expended as far `as inventory control is concerned. General TYLER. Yes, sir. Mr. ROBACK. Do you have to get `approval at the Department of Defense level for the equi1pment? General TYLER. What equipment, sir? Mr. ROBACK. For these third generation. General TYLER. Oh, yes, the same ground rules as everybody. We will have to present up through our normal `channels-Has far as we are concerned, it is through Marine Cox~ps Headquarters to the same office in the Navy that Admiral Cosgrove mentioned, the special assistant to the Secretary of the Navy and he will have to carry it on up to the DOD I. & L., `and as far as SASSY is concerned, I am going to have to have all the necessary documentation to show what the system is, what it is s~pposed to do, and how it is sup1posed to work, and the equipment specifications for the type of hardware which would be required. Now, that will be based upon our estimates of the number of files we have to maintain, the number of transactions to be processed against those files within certain time frames, and within that there should be the opportunity then for the vendor to come in and designate the hardware he feels will do the job. Mr. LUMAN. Would this he a dedicated supply con~puter? General TYLER. I am looking at it that way. After I come up with my supply requirements, however, the fiscal officer `will pmbably get PAGENO="0148" 142 `ahold of it and decide what he thinks he might need in the way of fiscal information. Then there is `an office in Headquarters, Marine Corps, re~ponsible for determining whether or not there are other functions within this unit that can be put in the same hardware, and it may end up by being a system which may serve many purposes. Mr. H0LIFIELD. We stopped at Okinawa on a trip we had in January, where you are rebuilding the depot, the repair depot. General TYLER. Yes, sir. Mr. H0LIFJEw. We didn't have much time there. But you have got quite `an operation there of repairing all kinds of things. I am not sure if it was the Marines. Was it an Army base? General TYLE1I. We have the 3d Force Service Regiment located in Okinawa. Mr. H0LIFIELD. You do? `General TYLER. And they are storing material and doing a limited amount of fifth echelon, and as much of the third and fourth echelon repair als is necessary to fill in for the in-country forces. Mr. H0LIFIELD. Does the Army do any work for you there in the way of repairs? General TYLER. Yes, sir. Mr. HOLIFIELD. Of automotive equipment, trucks, ~and things like that? General TYLER. We have a number of agreements with the Army on Okinawa `and with the Army up in Japan to assist us in using their facilities for maj or rebuild programs. Mr. H0LIFIELD. Thank you very much, Admiral, and General Tyler. We will excuse you from the witness table now, and call General Riemondy of the Air Force to the table. I think we will put your state- ment in the record in its entirety. It is quite long, and we will proceed to discuss it by question and `answer, General. That will save your time and `ours. General RIEMONDY. Very fine, sir. (The biography and statement of General Riemondy follow:) BIOGRAPHY OF BRIG. Gux. A. A. RIRMONDY, DIRECTOR, SUPPLY AND SERVICES, DOS/S&L HEADQUARTERS, U.S. AIR FORCE Brig. Gen. A. A. Riemondy was born in Temple, Pa. on October 19, 1918. He attended Lehigh University, Bethlehem, Pa., `and received a commission as a second lieutenant July 1941. During World War II, General Riemondy served with the 4th Air Depot group in the southwest Pacific area. Since February 1946 he `has held `assignments as: Maintenance `Technical Inspector, Headquarters Air Materiel Command; Division Chief in the Office of Assistant for Develop- ment Programing, DCS/Development, Headquarters U.S. Air Force; Director of Maintenance Engineering, Central Air Materiel Area, Europe; Commander, 3134st Maintenance Group, Ohateauroux, France; Chief, Plans and Production Division, and Acting Deputy Director of Maintenance Engineering, Headquarters Air Force Logistics Command; Direc'tor of Materiel Management and Deputy Commander, Middletown Air Materiel Area; Director of Materiel Manage- men't, Ogden Air Materiel Area, Air Force Logistics Command. In October 1967 General Riemondy was promoted to `brigadier general and in February 1968 assigned as Director of Supply and Services, Headquarters U.S. Air Force. In his present position, General Riemondy is responsible for supply policy and man- agement of spares, equipment and supply services, and systems in support of Ai~ Force activities worldwide including provisioning, requirements computa- tions, financial planning, storage, issue, and disposition. PAGENO="0149" 143 PREPARED STATEMENT or BRIG. GEN. AUGUSTuS RIEMONDY, DIRECTOR OF SUPPLY AND SERVICES, U.S. AIR Foacz Mr. Chairman and members of the subcommittee, I welcome the opportunity to present information Ion the operation of the Air Force supply system and its support to our forces worldwide. Due Ito the magnitude and complexity of the system, I intend Ito present only a broad overview but will expand upon any facet that you may desire. As the Director of Supply land Services a't Headquarters U.S. Air Force (under the Deputy Chief o'f Staff for Systems and Logistics) I am responsible for all matters pertaining to these functions in the Air Force. The planning and policy guidance developed by my Directorate is `based on congressional legislation and on the decisions of the Secretaries of Defense an'd `the Air Force. My basic responsibilities are: (1) the issuance of policy directives governing the supply and service functions within the Air Force, and insuring their implementation; and (2) review of materiel requirements for su'pport of Air Force units within the framework of budgetary justification. To better understand the operation `of the Air Force supply system, a brief description of the Air Force organizational structure may be helpful. Below headquarters level, the Air Force is divided into a number of major commands. Some of these commands such as the Aerospace Defense Command and the &rategic Air Command carry direct responsibilities for the Air Force mission `of defense and retaliation respectively. Air Training Command, Systems Com- mand, land others carry out support functions for the operational commands. Logistics support of the operational and support commands is the function of the Air Force Logistics Command located a't Wright-Patterson Air Force Base, Dayton, Ohio, commanded by Gen. Jack G. Merrell. The Air Force Logistics Command's mission is to support the Air Force's aerospace weapon systems for constant readiness and it functions as the Central Spares Procurement, Support, and Maintenance Agency of *the Air Force. It must perform this mission-which is constantly growing in size and complexity- at the lowest possible cost. It must make certain that the combat and other commands have the logistics support needed to maintain their aircraft, missiles, ond support equipment c'onstantly at top efficiency. It provisions, computes requirements, stores, distributes, redistributes, and repairs almost all Air Force peculiar spares, repair parts, and equipment. Along With these basic responsibilities, AFLC prepares and defends budgets, lets procurement and maintenance contracts, and performs various maintenance functions. The big industrial~type logistics centers which carry out most of the com- mand's opera'tional functions are known as air materiel areas (AMA's). There are five of them-wholesalers-all in `the United States. They are located at Ogden, Utah; Sacramento, `Calif.; S'an Antonio, Tex.; Oklahoma City, Okla.; and W'arner Robins, Ga., near Macon. Our current five AMA operations resulted from many years of experience. As improved communication, transportation, and electronic data processing came into being we closed our overseas and many of our CONUS wholesalers. We feel our current direct wholesaler to retailer system has served us well during the SEA buildup and will continue to do so in the future as further advances are made in computer, communication, and transportation technology. Our AMA's now process approximately 17 million requisitions from field activities each year In addition, more than one and a half million items are repaired every year by the maintenance and repair facilities within the command. Among these AMA's approximately 900,000 items, with a gross inventory value o'f $11 billion, are managed by the Air Force. Another 800,000 items are secured from GSA, DSA, and the other services for the Air Force. Each AMA is organized along identical lines and carries out its responsibilities based on standard policy and procedures established by Headquarters, AFLC. Each AMA is responsible for managing particular items of supply. No other AMA has the responsibility for managing the same item, thereby eliminating any overlap of item management. Central control is our basic management philosophy. Each base activity (retailer) is advised by supply catalog data which AMA (wholesaler) is responsible for managing a particular item and therefore where to obtain the item. PAGENO="0150" 144 Within the AMA, management of items is carried out by individuals designated as item managers. This person and only this person manages his assigned items. Information which he needs to make effective management decisions is readily available to the item manager. This includes information concerning wearout rates, repair schedules, weapons application, procurement leadtime, and program data. Each AMA is also assigned management responsibility for a portion of the 30~Y various weapons and/or support systems. The system support manager (SSM) is responsible for assuring support of his system. He works in conjunction with the items managers and other commands to resolve support problems for his system. CENTRALIZED CONTROL IS THE KEY The major development which has made centralized control possible is com- puter technology combined with improved communications and air transportation. From acquisition of our first computer in 1951 until now, the Air Force has become one of the world's largest users of electronic data processing equipment. By using computers we can supply, in minutes or hours, information which would previously have taken days or weeks to compile. We are using computers to forecast inventory requirements, formulate budget and financial plans, conduct war gaming and tell us (through simulation) what downstream problems we may encounter on new systems. Since information is the lifeblood of control, we look for a vastly expanded use of computers in logistics management. Another major feature of our supply system is the elimination of intermediate echelons between our AMA (wholesalers) and our base supply or retail activities. As an example, if Cam Ranh Bay needs a peculiar F-4 part, a requsition is submitted using electrical transmission means, to our Ogden AMA, which is the item manager wholesaler. The requisition is received almost immediately by this item manager without any intervening echelons. Shipment is made direct to Cam Ranh Bay. Processing time and shipment mode are dependent upon requisition priority. If the item is not available, and base need is of sufficient priority, the manager at Ogden may direct redistribution of the part from any Air Force base having the item in stock. Ownership and control of the centrally managed item (s) in our supply system are vested in the AFLC. Many new systems have been developed to enhance management of our in- ventory. One of these new systems, pertaining to the high dollar value items, is called the Air Force recoverable assembly management system (AFRAMS) which was implemented November 1, 1967, after many months of development. It gives the AFLO item manager continuous asset information by base, by condi- tion and location, for 77,000 line items subject to repair at depot level. These items represent an investment of over $5 billion. By knowing the location and condition of the items, the item manager can redistribute those in short supply from bases where they are available to bases which have a priority need. The system permits a high degree of compatibility between total Air Force requirements (and the distribution pattern), while permitting positioning of the items at base level. AFRAMS provides the item manager a complete history of item consumption to insure greater validity in the computation ocf buy requirements. In this con- nection, it permits a closer relationship of the requirements computation with force and activity programs to insure that requiremeI~ts are predicated on the anticipated flying hours programs. Plans call for the expansion of this management system to an additional 77,000 recoverable line items having an investment value of $300 million, which are normally only repaired at base level. Here, let me describe how we tie in our procedures for reparable item control at base level. When a reparable item is removed from an aircraft (or other system) by maintenance and a demand is made for a like replacement item on supply, a due in from maintenance (DIFM) transaction is instituted to insure that the removed item is returned to supply. We do not rest until the item jieeding repair is returned to supply in a serviceable condition or maintenance indicates the item cannot or should not be repaired. These reparable procedures with the AMA/Base AFRAMS control systems, complete the loop on control of reparable items. For extremely expensive items such a~ aircraft engines, F-4 stable platforms, Minuteman missile guidance units, et cetera, we maintain even tighter controls by PAGENO="0151" 145 serial number giving us daily status. Items are moved by air and repair and handling is expedited. By using these management techniques, we have been able to significantly reduce the number of spares required for weapons support. Each of the commands has a supply staff to manage supply operations within their command to insure that central policy and control are carried out as directed by Air Force Headquarters. The various commands recommend policy changes which are approved or disapproved based on their merit, At each major base in the Air Force we have a single chief of supply who performs and supervises the retail operation of the base supply system. All activities on each base obtain their supply support from this one base supply account except for medical, cryptographic, nonappropriated funds, et cetera. This activity in turn is the only orrganization authorized to go to the wholesale organi- za/tions, such as AFLC, DSA, GSA, for items of supply. The chief of supply is' the senior supply officer on the base with broad supply background. To assist him we have individuals designated as managers for spares, equipment, fuels, et cetera. Our bases usually manage 40 to 70,000 supply line items. The chief of supply, is responsible for supporting all-and let me emphasize the all-units on the base. As an example, if ADC and SAC share a base, as they often do, there is only one supply activity on that base to support both units. Other onbase organizations such as civil engineer, communications and weather are also supported by the same single supply activity. On some bases we have as many as 75 organizations drawing support from the single supply organization. To accomplish our supply accounting functions at Air Force bases throughout the world we use UNIVAC 1050-Il computers, under program control, in a standard organization. Installation of this standard system has literally revolu- tionized our overall supply operation. We now enjoy a responsive requisitioning and inventory status reporting capability. By standardizing computer hardware, data systems, and supply procedures, we have taken a significant step forward in further improving our logistics system, resulting in reduced inventories, improved customer support to tactical units, and reallocation of several thousand manpower spaces to other essential functions. Program changes cannot be made by base personnel or the major command Owning the base. Policy and computer program changes are directed through only my `office. We can implement changes and improvements much more quickly. When my office directs program changes I am confident thuy are implemented uniformly, worldwide, on the dates dirocted. Though each of our bases has a slightly different mission, our supply system and procedures are flexible enough to effectively support all of them. Stock levels, accounting procedures, inventory techniques and frequency, funds manage- ment, reports, and organization have all been standardized and are centrally controlled. Inventory procedure is a good example of our centralized control. Here, we are striving to improve our inventory `accuracy by establishment of standards, and comparison of the performance turned in by the separate bases and commands. The amount of control exercised over our spares assets is based on the value of the items to be inventoried. We have quarterly inventories of our Hi Valu and critical items, and our objective is 100 percent accuracy. Every item must be accounited for. Equipment items are inventoried at least once each year, and again, each item must be accounted for. On our low-cost, hardware-type items, we authorize the use of sampling tech- niques, and expect an accuracy of 80 to 90 percent. Another good example of our centralized control is in the management of our bases versus AMA outstanding orders. For base orders placed on an AMA but not yet supplied, we have special programs to keep the two sets of books in agree- ment-we call this process back-order validation. When we initiated this proce- dure, we found the books to be less than 50 percent in agreement. By central con- trol of programs and command attention, our accuracy has improved to nearly 85 percent. We are refining our methods to take ad1~antage of lessons learned, and revisions to the procedures, to be implemented on November 30, should produce a 95-percent accuracy rate. Another major benefit has been the reduction In training requirements and in- creased efficiency of our supply personnel. Our personnel are now immediately productive when they are transferred between CONUS bases of different PAGENO="0152" 146 commands or between overseas and CONUS bases. They no longer have to learn a new system each time they change bases. They have only one system to know and understand and they all speak the same language. The bases and AMA's are linked by a very effective automatic digital com- munications network system called ATJ'PO'DIN. Requisitions are produced at bases by computer, transmitted over AUTODIN to the AMA, processed there by computer and status furnished back to the bases automatically. We are sometimes criticized for having a large percentage of high-priority requisitions. We are willing to accept a high rate since we don't have overseas depot stocks as buffers and our bases are on a direct wholesale-to-retail basis. We have believed for several years that rapid communications and transporta- tion are far more economical than the costs of theater depot complexes. Equipment items in the Air Force are also centrally controlled and managed. These are items which perform a function themselves such as electronic test sets, ground air conditioners for aircraft, shop equipment, and mobile radar sets re- gardless of supply source. Each piece of AMA-managed equipment in use in the Air Force is reported periodically to the AMA Item Manager. When an item is issued by the base equipment manager to a using organization, the issue is recorded by the local base equipment manager and reported to the appropriate item manager (TM). We do not permit any significant stockage of equipment items at base level. An equipment item either has a validated unit requirement, is returned to the TM, or shipped to a unit requiring the item at the direction of the TM. Again, certain items such as vehicles are very closely controlled by serial number. We feel that we have been extremely `successful, especially in the face of our expanded operation in Southeast Asia and other locations around the world. One measure we use in supply to `determine our effectiveness is rates of aircraft not operationally ready (NORS) to fly `because of a lack of parts. Our worldwide and SEA rates have shown a steady decrease over the past 18 months and are now below our 5-per~en't objective. Phi's performance has been achieved in the face of some very formidable problems. We have not realized these successes merely `by buying more and more spare's and `building up enormous stocks. The dollar value of supply stocks required to' support our increasing weapons systems costs has shown a marked `decline while the systems costs have shown a steady increase. For `example, in fiscal year 1961 our investment in combat equipment amounted `to $31 billion while the spare's necessary to support this inventory amounted to $9% billion-a 3-to-i ratio. In fiscal year 1967 we had a capital investment of over $39 billion with a spares support inventory of jus't $8 billion-a 5-to-i ratio. The Air Force is very proud of its supply record, but we are not resting on our laurels. Our management attention has been, and i's now, concentrated on several areas where we think further improvement is required. We believe our worldwide logistics `support posture, plus support of Southeast Asia, is evidence that our Air Force supply system performs "as adverti'sed." It has not been necessary to make any major realinement in our `system to supp'ort the escalation of hostilities in Southeast Asia, although we have bad some problems whic'h have `required intensive effort by our `supply personnel at all `echelons. Only through their untiring `efforts have we succeeded. T do feel, bowever, that our basic system ha's `been both cost effective and responsive. Most of `the `aircraft were initially deployed to the forward areas with kits containing spare parts to support 30-day `sustained operations. Maintenance wa's limited to removing and replacing of components. Most maintenance and corn- poneut repair was performed at the main operating base's lo'cated in the Philippines, Okinawa, an'd Japan. With the buildup of U.S. support early in 1962, the Air Force established a bose supply at Tan Son Nhut, Vietnam. This supply account provided general support and some aircraft support to all of Vietnam. AUTODTN capability was established in mid-1963. By lote i9~4, approximately 25,000 line items were stocked. The small units in Thailand during this period were supported from Clark AB. In early 1963, equipment accounts were organized and located at Tan `Son Nhut, Vietnam, and Don Muang, Thailand. They were responsible for centralized equipment management within their respective countries. These or- ganizations gave us a good nucleus for the growth that was required later, and provided adequate support during the period 1962-64. Escalation `of our forces began in earnest during 1965. During a very short period in late `1965 and early 1966 our aircraft and deployed squadrons increased PAGENO="0153" 147 by over 400 percent. The line items needed to supoprt this increase grew from 25,000 to 1.2 million. Several new bases were built and others were greatly expanded. To supply this was a great challenge that had to be met. An enormous amount of work had to be done to support the buildup. In Southeast Asia we had to expand ~ur base supplies from one to 17 new locations, all using manual account- ing systems. We also moved preassembled packages of field-type equipment and supplies which provided the items needed to initially bed down the incoming troops. These packages had been in existence as part of our war readiness ma- teriel program. Ammunition and other combat consumables were also available through this program. When units first arrived at the new bases few facilities existed, so the level of maintenance remained at the remove and replace stage until facilities could be built. During this period reparable items were evacuated to other established theater bases or to our AMA's for repair. Back at AFLC they organized the Logistics Activation Task Force (LATAF), within the command post, with the assigned top-priority mission of insuring orderly and timely logistics actions to the expanding `bases. LATAF is com- posed of experienced logistics specialists drawn from the functional staff agencies. They monitored and assisted in the equipping of newly constructed bases in order that proper facilities were prepared In advance of the arrival of assigned tactical units. In this way the time lag between deployment of a combat unit and its operational readiness within the theater was held to the minimum or eliminated altogether. Also the combat unit was assured that ita weapons systems would have equipment needed to stay at peak efficiency. LATAF estahlishe'd a program called Bitter Wine for determining new base equipment and supplies requirements, requisitioning and assembling functional packages and shipping them direct to SEA bases. By `September 1967, 339,000 line items consisting of 29 million units, weighing 124 million pounds, had been moved to SEA. As maintenance and other facilities came into being the materiel shipped under the Bitter Wine program was readily available for use. During the 1965 and 1966 buildup our basic framework of direct depot to base support `was sound. However, the startup of a new base supply activity necessarily encompasses much more work and activity than operating an already esta'blished base. We made some mistakes and our controlled system gave us the data we needed to take corrective action. For example, early in 1967 a~ equipment redistribution program was started in the Pacific which has resulted in the redistribution of equipment valued at approximately $53 million. A supply redistribution program started in June 1967, whIch is still continuing, haa resulted in a redistribution of supplies valued at $7~/2 million. We are currently participating in the Pacific Utili~atio'n and Redistribution Agency program in the Pacific and have offered $29 million of excess materiel as available. Manpower for surge work periods was provided by the A~'LO through their rapid area supply support (RASS) teams. RASS `teams are composed of AFLO `AMA civilian or military personnel of various supply skills selected `to meet the specific reqttirements of the workload that had been generated as a result of extreme emergencies. Size of the various teams and ]engtb of stay `at SEA bases varied depending on work to be done. Use of RASS teams was effective in providing newly formed supply activities the temporary help they needed to meet peak workloads. A total of 53 teams was provided to SEA from September 1965 through Janu- ary 1968. At the peak of effort in 1967, approximately 300 RAS'S personnel were continuously assigned. T'o further assist SEA bases in resolving difficulties with CONUS supplier's and to monitor intratheater redistri'butions, supply control points were established' at TAF/13AF and PAOAF. Their primary job was to act as the area focal point in redirecting critical parts between `bases as the need arose. These centers were very effective in reducing our overall NORS rates in Southeast Asia. Another highly successful innovation during the buildup period was the `special express" system of air munitions control It was developed to provide a fast, even flow of mun;itions directly from the west coast of the United States to Southeast Asia. Originally it was a five-ship shuttle system which was later expanded to include 10 additional vessels. `lthe ships were loaded like retail stores carrying various types of munitions, each in its Own temperature-controlled section of the hold. Arriving in the combat zone, they anchored offshore to be- PAGENO="0154" 148 come floating munitions warehouses. As required, shore-based offloading vessels (lighter) pulled alongside the special express Ships, and the munitions were loaded directly into mobile *weapons transporters that had been prepositioned aboard the lighter. Once back on shore, tractor trucks hauled the loaded trans- porters directly to the using base. We realized very early that manual and puncthcard accounting procedures could not keep pace with the transaction generated on these bases. The 1050-IT computer program was being successfully implemented at Air Force bases world- wide during this period, so we elected to provide them to SEA bases also. Instal- lations started during the summer of 1966 and the program is now completed in SEA, except for one base. The standard Air Force computer program has assisted greatly in improving our supply management responsiveness and establishing sound stock levels. We presently are procuring a mobile version of the 1050-Il as a spare to move to a location where computer malfunctkms, or enemy action, may generate the need for a temporary replacement. Many lessons have been learned and, of course, minor system changes have been made where necessary to resolve problems that arose during the buildup. In closing, I will say that a logistics support system, such as the Air Force has, must have one inherent quality or characteristic-it must be flexible. It must be able to respond to whatever the combat situation may `be. In the last 15 years, the IJSAF's logistics support system has demonstrated that it possesses that kind of flexibility. We have proved it in Berlin, in the Middle East, in the Congo, in Cuba, and in Santo Domingo, and we are proving it today in Southeast Asia. STATEMENT OP BRIG. GEN. AUGUSTUS RIEMONDY, DIRECTOR OP SUPPLY AND SERVICE'S, DEPUTY CHIEF OF STAFF (SUPPLY AND LOGISTICS), HEADQUARTERS, U.S. AIR FORCE; ACCIO'MPAl\TIED BY LT. COL. WILLIAM W. YARY, CONGRESSIONAL HEARINGS PROJECT OT'PICER Mr. ROBACK. This statement doesn't indicate that you have any problems in the Air Force. General RIEMONDY. If we left that impression, that is not exactly correct. I would say that we don't have any major problems. Mr. ROBAW~. I should have asked Admiral Cosgrove this also, `but I will ask you. What are the worst problems that, you have with sup- ply? I see the admiral isleaving hurriedly. Admiral CosoRovE. Just making a living. General RIDM0NDY. I think the worst problem is the ever-changing requirement that we are confronted with. Our business is to take advantage of the latest state of the art as far as weapons are concerned, and needless to say, when we do this it breeds obsolescence. So the big- gest problem is trying to balance out what we provision to support the ever-changing weapons systems, and in order to reduce the amount of obsolescence. If we would plan, for example, to satisfy every peak program and make sure that no equipment is out of commission fo'r the want of parts, why you build a certain amount of surplus into the system. What we have been trying to do is to say that at some point in time we are willing to take a calculated risk of having some equipment out of commission, so that we can reduce the amount of material which then becomes obsolete. This is a difficult job. There are certain trade-offs. So I would say that this is probably our biggest problem, to insure that we are re- sponsive to the operational commander's need, but at the same time recognizing that if you are completely responsive, having no equip- PAGENO="0155" 149 ment out at all for parts, that at some point in time you are building a lot of waste into the system. So what is the proper trade-off. Mr. ROBACK. You have been in the forefront, have you, of automatic data processing for logistics? Would you say the Air Force has been ahead of the other services? General RIEM0NDY. I think we recognized the need perhaps earlier than the other services did, and we probably moved out a little bit quicker than they did in these areas. ASSET VISIBILITY FOR CONTROL Mr. ROBACK. Do you have the kind of worldwide assets visibility that has been under discussion, which the Army lacks in some signifi- cant degree? General RIEMONDY. I would say that at this point in time we have centralized visibility of our inventories. At the present time we have worldwide visibility over 80 percent of the dollar value of our stocks. There are certain kinds of items which the chairman, spoke to a little while ago over which we do not maintain worldwide visibility on. Once we issue the material from one of our five depots that we have, ~ll located in the ZI, we don't try to trace that materiel on a daily or monthly basis. Mr. HOLIFIELD. It costs more. General RIEMONDY. These are low-cost items. Mr. HOLIFIELD. It costs more to keep track of it? General RIEMONDY. Yes, sir. Mr. HOLIFIIDLD. More paperwork and time than the article itself is worth probably. General RIEMONDY. Yes, sir. We have a concept of selective manage- ment within the Air Force, and this dictates the amount of manage- ment attention we direct toward an item. It is somewhat proportional to the dollar value of the inventory that you are talking about on an item by item basis. There are a lot of little bits and pieces which are needed to repair end items. We call them EOQ items or economical order quantity type of items. We don't try to maintain worldwide visibility on these low-cost items at all times. However, by the same token, this doesn't say that we don't exercise control over these items, because the stock leveling procedures, the amount of stock that can be stored at a particular base, how they requisition this item, how they dispose of these items, this is all centrally controlled and pretty much directed from office right here in the Air Staff in the Pentagon. So while we don't have day-to-day visibility, this does not necessarily mean we don't have control of what goes on with these assets. Mr. ROBACK. Do you have overseas depots? General RIEMONDY. None. Mr. ROBACK. You don't have any? General RIEMONDY. No. Mr. ROBACK. It has been represented in earlier testimony, as we understand generally, that the Air Force is U.S. oriented as far as its supply channels and controls go. It doesn't have the problem of the Army trying to determine the extent to which there will be centralized PAGENO="0156" 150 control over overseas depots and over logistical concentrations, complexes. General RIEMONDY. We had the problem. We had an overseas depot concept up into the midfifties. But we recognized that we could go on a direct support concept as improvements occurred in our communica- tions and transportation systems. We phased out our overseas depots. And incidentally we also phased out a lot of our depots within the ZI, too. We reduced them down to the five, we have five in being today. Mr. ROBACK. Those are the air materiel areas? General RIEMONDY. These are the air materiel areas run by the Air Force Logistics Command, within the United States. Mr. HORTON. How do you stock equipment, for example, in Thai- land, if you operate out of a depot here? General RIEMONDY. We provide to the bases which we have in Thailand under predetermined stock levels what they need to carry out their mission for a certain period of days, depending on the order and shipping time of resupplying from the ZI, these bases are then supplied with the items of supplies and equipment, whieh they need, directly from one air materiel area within the United States. Mr. HORTON. Does that apply to ammunition, bombs and all of that? General RIEMONDY. It applies to everything they need to carry out their mission. Now everything they need to do their job is not neces- sarily provided to them by one of our air materiel areas. For example, the Air Force uses about 1,700,000 line items of supply. We centrally manage, within the Air Force, about 900,000 of these line items of materiel. About 800,000 of them are provided to the Air Force from single managers, such as DSA, GSA, and in some instances the other services. AIRLIFT OF AIR FORCE SUPPLIES Mr. ROBACK. When you wrapped up the overseas complexes and came home, so to speak, this was predicated upon the availability of ample resources for airlift, and in a sense this concept was particu- larly suitable to the Air Force, because you are the flying service. General RIEMONDY. Well, I think there is an impression that has been given to the committee that I had better correct. Mr. ROBACK. Let's do that. General RIEMONDY. All right. While it is true we closed out overseas depots predicated on the advancements which were made in communications and rapid airlift or rapid transportation, it does not necessarily mean that we ship everything to our customers worldwide by air. While it is true that the single manager agency of airlift for the Department of Defense is the Military Airlift Command, this does not mean that the Air Force controls what the Military Airlift Corn- mand moves. As a matter of fact, I have some statistics here which indicate that, for example, in the month of April, the Military Airlift Command moved some 32,000 tons of material outbound, and of that 32,000, about 17,000 tons was in support of the Army. PAGENO="0157" 151 Mr. LUMAN. General, caii you express that in terms of how much of the Air Force's requirements were moved by air as compared with how much of the Army's were moved by air? Mr. ROBACK. That should be an interesting statistic. General RIEMONDY. Let me explain how the Military Airlift works a little bit. Each of the separateS services determines its requirements for air movement, and provides these requirements to the Military Airlift Command. The Military Airlift Command tries to satisfy all of these requirements. In the event there is insufficient airlift to move all this air-eligible cargo, and I think it is important that we talk to air-eligible cargo, then the Military Airlift Command, as the single agent for the Depart- ment of Defense, will try to prorate the shortages. These go back to the separate departments. If that particular department is unhappy with that allocation, the determination is made at JCS level as to which department's material will in fact move, and the amount of it. So you see, the Air Force, although they fly the airplanes, the Air Force does not have the pre- rogative of saying who will receive the lion's share. Mr. ROBACK. You are talking about the controls, which we have no question are equitably exercised, but we are still coming back to the statistics: How much of the Air Force supply moves by air compared to Army in terms of percentages of dollar volume or per- centages of total cargo, any way you want to do it. Give it to me for the last year rather than the last month, and you will see the figures will be different. It sticks in my mind that Air Force supply moves about 80 percent air compared to something like 20 percent Army. This is just a dim recollection, but I seem to recall some such ratio. General RIEMONDY. It is pretty hard to say. Mr. ROBACK. I mean the figure is available somewhere. You may not have it. General RIEMONDY. I don't have that data available. Mr. ROBACK. The Airlift Command might have it. General RIEMONDY. No. The Airlift Command wouldn't have it either, because the Airlift Command would only concern itself with that which moves by air. That which moves by sea we would have to get this from some other source. Mr. ROBACK. But there isn't any question that the Air Force is more airlift minded than the Army. In fact, there is a program afoot for the Airlift Command or the other authorities concerned with this problem to inculcate in the Army more air-mindedness. I raised a question in earlier testimony that there were apparently some con- trary tendencies at work, namely on the one hand there is the criticism of moving noneligible airlift, and on the other hand there is an effort to make the Army more airlift minded. I said if you are strict on the one, you are not going to be successful on the other. Are you aware of this problem? General RIEMONDY. I don't know the extent of the problem, but I would imagine that there are differences of opinion as to the best way to move material. PAGENO="0158" 152 Mr. R0BAGK. We are not criticizing the Air Force for using airlift as such. The question really is can the Army, which has apparently more supply problems than the Air Force, improve its supply system without having to go to airlift to the extent that the Air Force has. Now if it did, if the Army, for example, is going to move say 75 or 80 percent by air, which I think is probably in the neighborhood of the Air Force - General RIEMONDY. No. Mr. ROBACK. No? General RIEMONDY. I will give you a for instance why this isn't correct. Mr. ROBACK. Al right, we will get to that. Maybe while we are talk- ing one of your assistants can get that figure by telephone. Colonel YARY. Sir, would you state the question again? General RIEMONDY. I know the question. How much of supplies that we have a requirement for, in the overseas areas, is moved by air, and how much of it goes by surface, and the statement was made that it would be about 80 or 85 percent. Mr. Ror~AcK. Let's have a comparative figure with the Army. General RIEM0DY. I think this isn't correct. Let me say this. The big- gest commodity as far as volume is concerned, that is currently being utilized by the Air Force today, is air munitions. By the end of May this year, we had dropped more air munitions in Vietnam, than we dropped in the European theater during all of World War II. We are probably moving in the order of 100,000 tons a month of munitions by sea. Now the total amount of air movement Air Force- wide in the month of May was only 9,500 tons. So if I just talk to the one commodity, munitions alone, I can't come up with your figures of 85 percent by along shot. Mr. ROBACK. Do you move your own POL? You get it from the Army, don't you? General RIEMONDY. The Army is responsible for transporting our POL in-country. Mr. ROBACK. In-country? General RIEMONDY. Yes. Mr. ROBACK. Who moves it from the source, DSA? General RIEDMONDY. MSTS, through the single agency, DFSC, called the Defense Fuel Supply Center. Mr. LUMAN. If you exclude big bulk things like munitions, and you look at items like repair parts, isn't it true to say that because you have aircraft, more of your repair parts are deemed airworthy than the Army's? You can fly more parts for an airplane than you can for a jeep under present justification, can't you? General RIEM0NDY. But then by the same token we don't have as much of a requirement for total spares as the Army does. For example, I have some figures here that might give you a feel for the amount of material that is moved by Military Sea Transport Service and these are projections. The total Department of Defense, and this is a projection for the month of July, there is a requirement for 1,235,000 measurement tons. PAGENO="0159" 153 Of that, 753,000 is Army, 207,000 is Air Force. So you see, there is a requirement there for the Army of a little better than three times that of the Air Force. Now if we go then to air cargo movements, as I indicated earlier, and if we just talk about the outbound shipments, and not the retrograde coming back, the Military Airlift Command moved 16,750 tons by air for the Army, 9,500 tons for the Air Force, 5,600 tons for the Navy. Mr. ROBACK. These timespans are too short, because we don't know what the special situations are. Maybe the Tet offensive generated all kinds of demands. General RIEM0NDY. Let me give you a for instance. Mr. ROBACK. Give me a year. General RIEMONDY. Here is what it equates to in percentages. Forty- five percent of the material moved by the Military Airlift Command outbound is in support of the Army. Twenty-two percent is in support of Navy and 33 percent in support of Air Force. Mr. ROBACK. For a year? Mr. HOLIFIELD. Is that freight or does that include passengers? General RIEMONDY. No, this is just cargo. Mr. HOLIFIELD. Just cargo? General RIEMONDY. This is just cargo. Mr. R0I3ACK. That is for when? General RIEMONDY. Pardon? Mr. ROBACK. That is an estimate for the past fiscal year or calendar year? General RIEMONDY. It is for the first three quarters of fiscal year 1968. Mr. ROBACK. This fiscal year? General RIEMONDY. This fiscal year. Mr. ROBACK. We will ask you to submit or obtain for us an analysis over a period of the last 5 years of the material data available compar- ing the services in airlift overseas. We are not going to ask you to give us any data that is not reasonably available. General RIEMONDY. We will see what we can do. Mr. ROBACK. If you can't do it, you don't have to. General RIEMONDY. We will be glad to do it. Mr. ROBACK. It would be surprising if you don't have it. General RIEMONDY. I think you will find that the trend in recent years has been for the Army to make greater use of the single manager airlift system. Mr. ROBACK. Maybe since we last examined this problem, there has been a change. General RIEMONDY. Yes. Mr. ROBACK. The figures I used refer to some years back. General RIEMoImY. They probably do. Mr. ROBACK. But my recollection is that there is quite a disparity between the Air Force and the Army. (The information referred to follows:) The following chart outlines by service, the Military Airlift Command air cargo movements from the CONIJS outbound to ovurseas areas. The period shown is for fiscal year 1964 through the third quarter of fiscal year 19e8. It is interesting to note that the Air Force initially was the greatest user of our cargo PAGENO="0160" 154 airlift capacity; however, the trend over the past 2 years indicates that the Army is now the heaviest user. The U.S. Air Force was designated to operate the Department of Defense Single Manager Airlift Agency. The operational control of this Agency was further vested in our Military Airlift Command. The objectives for the establish- ment of a single manager for airlift was to integrate, within a single agency all transport aircraft engaged in scheduled service or aircraft whose operations were susceptible to such scheduling. This Agency operates under the principles, policy and guidelines outlined in Department of Defense (DOD) directives and provides common user airlift service for all of the DOD. All allocations of cargo airlift requirements are forecasted and submitted by each military department to the Single Manager Agency. These forecasts are used by the Agency for planning fiscal year operations in determining the airlift capability that can be applied to satisfy the requirements of each service. When a shortage of airlift exists, after allocations have been assigned, the Agency re- duces each service's allocation on a pro rata. basis, with each bearing a pro- portionate share of the shortage. All service disagreements, if any, are resolved by the Joint Chiefs of Staff. The Military Traffic Management and Terminal Service (MTMPS) in coordi- nation with the Agency, regulates the volume and rate of fio~ of traffic into the airlift system to assure efficient utilization of the airlift schedules. This Joint organization is administered by the Department of the Anpy. CARGO TONS MOVED CONUS OUTBOUND MAC CHANNEL AIRLIFTI (SOURCE DOCUMENT-RCS: MTC-J1 `INDUSTRIAL FUND STATISTICS REPORT") Fiscal year Army Navy Air Force Total 1964 1965 1966 1967 19682 30,090 37,697 68,567 174,314 151,978 17,109 24,373 42,968 92,915 75,741 82,217 109,172 119,545 145,034 109,936 129,416 171,242 2~l, 080 412,263 337,655 1 Excludes special assignment airlift. 2July 1967-April 1968. Mr. HOLIFIELD. As I understand it, all of those items were given priority that you listed. General RIEMONDY. Yes. It is all air-eligible cargo. Mr. HoLIFIEUI. By the using agency. General RIEM0NDY. Yes, sir. Mr. HOLIFIELD. Now to what extent is your increased load occurring as a result of getting in newer and bigger and better planes? Is that generating a lot of material into a high priority class that ordinarily would have been consigned to ship movement? General RIEMONDY. Needless to say, as the airlift capability in- creases, we are able to move more high priority cargo by air than we were able to move before. I think the requirement for more and more high priority movement, of course, is generated by the situation that we find ourselves in today, and as far as the Air Force is concerned, the increase in high priority requisitions or requirements for material is pretty much a result of our basic supply concept of closing out our overseas depots. There is a price to be paid for eliminating all these intermediary stockpiles. There is no doubt about it. Mr. ROBACK. The chairman was asking whether the increasing capacity, airlift capacity, was degrading the priority designation, so to speak? General RIEMONDY. I don't think so. Mr. ROBACK. Moving lower priority? PAGENO="0161" 155 Generai RIEMONDY. I don't think so. Mr. ROBACK. Just moving more of high priority? General RIEM0NDY. Yes. Mr. H0IaFIELD. And I was also wondering if the percentage that is being shipped by air is predicated upon your capability of lift just because you have that lift, rather than being sent by ship, which would be much c1ie~aper, of course, to transport in terms of tons, but might get to the user in time and not require the rush of an air trip. General RIEM0NDY. I don't feel that the fact that we have military airlift available is causing, or creating additional high priorities, and I think it is important to understand the priority system, which is pretty well spelled out at Department of Defense leveL We talked about MILSTRIP awhile ago, which is the standard requisitioning procedure, but included in MILSTRIP are priority designations. For example, the priorities go from 1 through 20, and this prior- ity is pretty much determined by need, need dates. Then there is also a Department of Defense priority system for the movement of material. These are transportation priorities. This is a combination of the MILSTRIP priority and the importance of the mission to be supported, commonly referred to as a force designator or a mission precedence. The movement is either by surface or by air, depending upon the final priority that is assigned. Mr. H0LIFIELD. These big new cargo planes, what is it, the C-5? General RIEMONDY. The C-5. Mr. H0LIFIELD. As they come into being, and as I understand it they are now coming into being, you are going to have tremendous capacity. Gen~ral RIEMONDY. Tremendous capability, yes, sir. Mr. IJ0LIFIELD. I am just wondering if that capability is going to be used without regard to urgency, just because you have it, or whether you are going to still utilize ship movement, from the standpoint of economy. General RmMONDY. I think we will always use both, Mr. Chairman. I don't think we will ever be in a position that we can move everything by air. Certainly there will be more material moved by air because the capa- bility will be there, and of course when we talk about whether or not it is cheaper, whether or not it is cost effective, I think with the intro- duction of the C-5, you will find this to be most cost effective. Of course, by the same token, a very important segment of determin- ing the amount of material that is stored at any particular base is how long does it take you to resupply. As you can cut down the order and shipping time, you reduce the amount of supplies that are stored at any particular location. As I stated previously this is principally one of the reasons we eliminated our overseas depots. We found that our logistics system could in fact be resporsive to the operational commander's need, and when we created confidence in his mind that the logistic system could in fact be responsive, then we did two things. We removed the depots from his control, the opera- tional commander's control, and then we eliminated the depot completely. 97-475-68----li PAGENO="0162" 156 Mr. HORTON. Which also cuts down on your losses overseas, the other problems of guarding it and all the other things that go with it. General RIEM0NDY. Yes. Mr. HORTON. So there must be a cost factor. General RIEMONDY. There is. Mr. HORTON. A pius there. General RIEMONDY. Yes, sir. Mr. DAHLIN. Some of your depots were eliminated for you, General. It was not so much a choice, because the territory, the base agreements and this sort of thing ran out. General RIEMONDY. No. The overseas depots were not. eliminated because of that. While it had an impact, needless to say, the decision was made to eliminate all our overseas depots, because of what I said previously. Mr. HORTON. General, what you are saying, too, coming back to the earlier question about the use or the choice of the use of air over. Navy ships, is that you don't have complete control of designation of the means of transportation. This is controlled at the Department of Defense level. General IRIEMONDY. Yes, sir. Mr. HORTON. So that you are not the one who makes the final judgment. General RIEMONDY. That is correct. Mr. HORTON. Arid even if you were tempted, you would have some- body looking over your shoulder. General RIEMONDY. Yes, sir. Mr. HORTON. Is that what you are saying? General RIEMONDY. That is exactly right. While the Air Force flys the airplanes, while the Air Force is the. single manager of the mili- tary aIrlift, it discharges these responsibilities in accordance with the specified charter which says you will move property in accordance with the priority system. Even if the Air Force wanted to use all of this airlift for itself, it could not do it. It doesn't do it. COMMUNICATIONS FOR SUPPLY Mr. LUMAN. You mentioned three things that allowed you to have centralized control, the computers, the communications, and the air transportation. You, have got the air transportation, you use it, and you have apparently been out in front in computers. Can we also assume here that the Air Force logistics people may have been able to get dedicated communications in greater degree than the logistics people in the other services have? General RIEMONDY. We had what was known as the LOG Com- mand Logistics Transceiver Network (LOGCOM), which has ~ow evolved into ATJTODIN. Our LOGCOM system, it was a dedicated Air Force system. Most of what LOGCOM did is now wrapped up in the AUTODIN system which is now a Department of Defense system. Mr. LUMAN. Can the Air Force logistics people as part of the Air Force requirement make their views known and get a sufficient amount of overseas dedicated logistics circuits to enable you to- PAGENO="0163" 157 General RIEMONDY. We don't have a dedicated Air Force system. We now have a Department of Defense system dedicated almost en- tirely to logistics. At one time LOGCOM was Air Force. LOGCOM has now become known as AUTODIN, by adding additional switching stations and so forth, and ~ATJTODIN is available to all the services within the De- partment of Defense. Mr. ROBACK. That is not limited to logistics. General RIEMONDY. No. Mr. ROBACK. So it is not dedicated for logistics. General RIEMONDY. It is not dedicated for logistics, but the great majority of the traffic over AUTODIN is in support of the logistics system. Mr. LUMAN. Do you have computers abroad with a steady line back to one of your materiel commands in the States? General RIEMONDY. No. Mr. LUMAN. You do it in spurts? General RIEMONDY. Do it through ATJTODIN. Mr. LUMAN. Do you have one line 24 hours a day? General RIEMONDY. Yes. Mr. ROBACK. The question is, do you have any communications re- straints on your worldwide logistics system? Have you got any limi- tations due to communications? General RIEMONDY. There are times, there are limitations, depend- ing upon the emergency situation, wherein the traffic is limited. There are times. But this then applies equally across the services. Mr. LUMAN. But if you have a computer on line 24 hours a day, then that particular circuit is in effcc~t dedicated to that supply com- puter, isn't it? General RIEMONDY. That communication line? Mr. LTJMAN. That particular voice circuit. General RIEMONDY. No. We transmit our requisitions over AUTODIN. Now the computer doesn't tie in directly to the ATJTODIN service. ATJTODIN is the means that we use to transmit what the computer spits out in the form of a requisition, back to the ICP in the States, AUTODIN is the means of communicating that information back to our ICP in the States. The computer over there doesn't have a hot line. For example, our base computer at Danang doesn't have a hot line directly to our depot at Sacramento. The means of transmitting the requisition, which is usually the document that has to flow, is done by way of AUTODIN. Mr. ROBACK. In Admiral Cosgrove's testimony, there was some ref- erence to computer communications ultimately. I don't know the time length that may be involved, but how far down the road are you going to have these computer link-ups? After all you are putting satellite communications up and otherwise increasing your capabilities. Maybe you can have some link up here in short order, rather than in the 1980 time frame, like the Army may be talk- ing about. General RIEMONDY. Now you are getting a little bit out of my field. PAGENO="0164" 158 Admiral COSGROVE. My peopie say 5 years, maybe. Mr. ROBACK. Five years, maybe. General RIEMONDY. Really as long as you have in being a rapid means of communication like the ATJTODIN, this is effective in getting the word back to somebody that has to take action, to supply what is needed. The ATJTODIN system is rather responsive. There is no doubt about it. Mr. HOLIFIELD. How does ATJTOD1N work? Tell me how do you use that. Is that a satellite communication? Geiieral RIEM0NDY. No, we are not using satellite. iMr. HOLIFIELD. It is processing. Oeneral RIEM0NDY. It is an acronym which means automatic digital network. Actually there are various circuits. There are electrical cir- cuits or radio circuits or cable circuits which transmit data. Mr. H0LIFIELD. I see. General RIEMONDY. It transmits data in written form, or it actually does it in tape form or card form, and it is just a rapid electrical means of transmitting data from point to point. The format that is used that makes it compatible with our com- puters, with the standard MTLSTRIP requisitioning system and the data feeds directly into our computers back at our inventory control points. They do this through various switching stations, relays and so forth, but it is an electrical transmission device. Mr. H0LIFIELD. I understand. Mr. HORTON. I was going to ask whether you are utilizing the com- munications satellite to any extent with regard to your supply problem? General RIEMONDY. Not in the supply business as yet. Mr. HORTON. Do you anticipate any such use? Have you made any request? General RIEM0NDY. Not to my knowledge. Mr. HoRToN. For utilization? General RIEMONDY. Not to my knowledge. I don't think it is beyond the realm of possibility that we will use it. We are always striving for a means of being more and more re- sponsive. As you can improve on your communications from point to point, you cut down the time. Anything that you can do to cut down the time, that is part of this order and shipping time, you can be more and more responsive and continue to cut down on levels. AIR FORCE QUICK REACTION PLANS Mr. HOLIFIELU. Mr. Dahiin? Mr. DAE1LIN. `General Riemondy, you emphasized some of the com- mon service problems in supply. In this connection, the Army in its testimony talked about creating a quick reaction inventory control center for any future crises overseas. We asked the Army why shouldn't the needs of all the services be considered? If you are going to actually create this sort of capability, common supply problems seem to lie in this area. What is the Air Force planning in arrangement for responding quickly to a need of this kind? General RIEMONDY. I think within the last few years we have gone to various systems which get the job done, and get the job done real PAGENO="0165" 159 quick. Do you have reference to RASS teams? Is this what you are talking about? Mr. DARLIN. I was asking what is your planning for responding to crises, in the same way the Army is trying to respond in the form of its QRIOC. General RIEMONDY. Based upon rapid communications again, and visibility that we talk about, we are always alert to trying to spot a problem that may come up. For example, we recognized that during the buildup in Southeast Asia that the capability of our organic forces would be severely overtaxed. As we expanded and constructed new bases, we moved in literally mountains of supplies, the job got to he a little too much for the base-assigned people. Within our depot system, the five air materiel areas, there is a responsibility to be responsive to the field commander's needs. This doesn't only mean to provide materiel. It means also to provide techni- cal assistance, in the way of higher skilled personnel. If he runs into trouble he is free to call upon our air materiel areas to give him assistance. The way we have been handling this for many, many, many years is that we have had area support teams comprised of the existing work force at the depot. In the case of Southeast Asia, we chose to call them RASS teams-rapid area supply support teams~-and when the work- load got to be too great for our field commanders, we dispatched these teams from our depots to go over there and assist them. These teams varied from a few people up to 50, 60, or 70. We sent them over there to clean up a specific job. These were principally civil service employees with a smattering of airmen. Mr. DAULIN. That is really an emergency cleanup kind of measure, isn't it? What the Army is talking about is not getting into that sort of a crisis in supply, by providing preplanning of what procedures and means will be used. If the Army goes ahead with its plan, is there any use ~he Air Force could make of it, or are the systems so incon~patible they couldn't mesh at all? General REIM0NIr. I am afraid I don't know exactly what you are talking about. Mr. DAHLIN. The Army testified that they want to produce, and they are going to produce by January 1, 19&9, a quick reaction inventory control center located on the west coast, so that it will be available, 50 that they won't have the problem in the future of starting from nothing and ending up with a problem that in your case a IRASS team would have to go in and help clean up. General RIEMONDY. I don't think they will ever get that good. Depending upon the emergency of the situation, there will always be a requirement to have a higher echelon of people, skills or what have you, to augment the forces in the field. There will always be logistic problems that are going to arise that will need additional top-level attention. I don't think we will ever be that good. Mr. DAHLIN. In this case the Navy has just testified and the Army testified that they have had to change computer systems in midcourse in the middle of a war. General RIEMoND~. OK, I am with you. Mr. DAHLIN. The whole system had to be converted over while they are working with it. Certainly that isn't desirable. PAGENO="0166" 160 General REIMONDY. No. I agree with you. Let me say this: We didn't really have to change any of our system significantly to cope with the emergency that arose in Vietnam. The logistics systems which we have had in being, which we have evolved to, are in fact responsive both in peacetime and in war. Mr. ROBACK. Of course, you had your Red Ball like the rest of them. General REIMONDY. Pardon? Mr. ROBACK. You have had your Red Ball, like the rest of them. General RIEMONDY. Yes, there are systems in being which deal with takiu~ care of the exceptionals. For example, priority systems, every priority system we have is designed to discriminate against some part of the forces which we have in being. Not every activity has the same mission importance. Therefore you create a priority system to distribute the shortages, when shortages arise, and shortages will inevitably arise when you are doing business with 4 million different kinds of items with varying demand patterns. So our system is responsive to these varying needs, and we try to create in peacetime a system which we can use to successfully pursue a war, or an emergency, as it may arise. For example, we started to computerize our bases and adopted a standard supply system worldwide. We moved into Vietnam and implemented our system just like we moved into England and imple- mented it there, in Europe, in the Z.T., without any hesitation, because we felt the system was sound, and it works; 145 bases now are on this standard supply system. STANDARD AIR FORCE SYSTEM Mr. ROBACK. The discussion involving the services proceeds from two different directions. Looking at it in one way, if you have so many exceptions that you have to generate to respond to crisis, the system is no good, because all the exceptions in a sense mean that there isn% any system; or on the other hand, if the system is good and efficient `and flexible, variations can be easily permitted and accommodated, so you have a good system. Mr. HOLIFIELD. That is what you claim, the latter. General RIEMONDY. Yes. Mr. ROBACK. You are on that side. General RIEMONDY. In the adoption of the standard supply system, which we have within `the Air Force worldwide, we have eliminated a lot of problems which would otherwise have developed. For example, the training a~pect. We can move an individual from Andrews Air Force Base, who is in the supply system, to Danang and he is right at home, because the system is the same. It is a standard system, controlled right within my directorate. These procedures are standard throughout. The equipment we use is standard. The methods of inventorying are standard, methods of issuing, redistributing, getting rid of excesses, all these are standard. Mr. DAHLIN. You are still having some problems of getting stand- ard e9uipment, as we have noticed in the procurement of ADP equip- ment in the recent past. PAGENO="0167" 161 General RIEMONDY. Not su~pply. Mr. DAHLIN. Not supply? General RrEM0NDY. We have the standard Univac 1050 computer. Mr. DAHLIN. And what about when that comes to the next genera- tion? You will have somewhat similar problems? General RIEMONDY. Again we will try to come up with standard programs. In this particular regard, all the programs which go on this con~puter are controlled through my office. As a consequence, then, when we do implement .a new program on the computer, every com- puter will take it. This program will take on every computer, because all the programs in that computer are in fact controlled. BACKORDER RECONCILIATION Mr. DAHLIN. You mentioned a couple of problems in your statement that may in fact be a little larger than you indicate. On page 11 you talk about the problem of reconciliation of orders between the bases and the AMA's. The GAO issued a report in October 1967, in which they talked about some 22 percent of the back orders being in error, and not required and the procedures were not effective, in fact, to do what they are supposed to do. What is the nature of that problem? General RIEMONDY. This is back-order reconciliation. This is the business of a base saying, "The depot at Sacramento owes me some supplies," and the depot says, "I don't have any record of it." Or the depot records will show a due-out to a particular base, and the base ~says, "I don't have a due-in. I don't have a requirement for this item." Mr. DAHLIN. If the machines are all common and keep checking ~each other out, does this lack of reconciliation happen? General RIEMONDY. It stems from the fact that this is a very dynamic business, and from a real time standpoint, things are moving both ways at all times, and the machines aren't perfect. The people who feed the machines, punch the cards, these people make mistakes. They are humans. These kinds of things cause a certain amount of due-ins and due-outs to be unreconcilable. There is no doubt about it. Mr. ROBACK. That is because you have a punchcard system. It is outmoded. General RIEMONDY. No. Even punching a tape, somebody has to feed the machine. Mr. HOLIFIELD. If we can just figure out how to do without human beings, we will be all right, won't we? General RIEMONDY. And then if we can get all the gremlins out of the machines, then we will be all right. So the Air Force recognized this was a problem, and our system of back-order validation is aimed at trying to cut down the amount of variance that exists between the base records and the depot records. Mr. DAULIN. Have you rechecked to find out whether it is working any better now? General RIEMONDY. Yes. Mr. DAITLIN. Who does your rechecks of this kind, when you are following up on this sort of a matter? Is that your office's responsibility or is that the TO? Who does that? PAGENO="0168" 162 General RIEMONDY. It is a combination of my office, the Inspector General, and the Auditor General. We all work hand in glove getting management products to be reviewed at my level and at the AMA level and the Air Force Logistics Command level, to see whether or not this program is improving. My shop gathers all kinds of data from, for example, 21 bases wherein we are constantly checking to see how well, how is the standard base suppiy system working. Mr. DAm~IN. But you don~t necessarily check this back-order prob- lem at all these bases all the time. Have you run a recent test of the back-ordering problem to make sure it is working out? General RIEMONDY. During the month of July we will have a com- plete revalidation again from depot to base, to just see how close these records match. Mr. DAHLIN. At all bases, you mean? General RIEMONDY. At all bases, worldwide, to see where we stand. This is a requirement of the Department of Defense incidentally. Mr. DAHLIN. If it was a requirement, how did it get 22 percent out of phase? ~eneral RIEMONDY. That just happens to be the statistic that fell out as a result of that reconciliation. We found that 22 percent could not be reconciled. Mr. LUMAN. You had one issue here, though. The General Account- ing Office thought your customer ought to maintain records on his requisitions to a greater degree than he had, and you disagreed. Is that disagreement still in effect? The GAO said that there was a lack of adequate records at the customer level to permit identifying these invalid requests. That was the one recommendation the General Accounting Office made here, that the Air Force didn't adopt. I think that they concurred in the remainder of them. General RIEMONDY. Well, if we treat with the computer as being the customer, the records are in the computer. This is one of the elements of data within the computer as to what are the outstanding requisitions for that particular base. So the records are automatically in the computer, in the memory devices of the computer, and periodically then we review and try to reconcile what that computer says is due at this particular base, to what the AMA's say is due-out to that particular base. If we devise computers to do our manual work, and then reduce our manpower accordingly, then we must rely on the computer to do our work. We can't have both a manual system and a mechanized system at the same time. Now this is not to say that we shouldn't periodically review just how good the computer is. Mr. ROBACK. You are not laying this on the computer. General RIEMONDY. Within the memory devices there is all kinds of data. Mr. HOLIFIELD. You are laying it on the feed-in. General RIEMONDY. Yes. Mr. HOLITIELD, To the computer. General RIEMONDY. Yes. Mr. HOLJFIELD. The computer itself is subject to the errors of the program manager. PAGENO="0169" 163 General BIEMONDY. This is correct, yes, sir. As we feed the com- puters there is no doubt about it, there are errors made from time to time, and I don't really know what par for the course is, very frankly. Mr. DAHLIN. Does 22 percent indicate what par for the course is? Does that show `that the computers are that defective or the systems, the procedures you are talking about, need to be refined? General RuiMONDY. A question of both, procedures, discipline, and trying to reconcile how much of this is really in transit. Mr. ROBACK. If your computer system is sufficiently sophisti- cated- General RIEMONDY. It is. Mr. ROBACK. There is no reason why the. computer shouldn't check this all the time. General RIEMONDY. It becomes a question, Mr. Roback, of checking what is in the base comnuter. Mr. ROBACK. There is a breakdown in communications between the receiver and the sender somewhere. General RIEMONDY. Sometimes, yes. Mr. ROBACK. And the computer can be programed to check this kind of thing, and the sophisticated computer in your third genera- tion otight to be able to do that. Maybe it will be the fourth generation, I don't know. Mr. H0LIFIELD. You said something about the disparity being in goods in transit. General RIEMONDY. Some of it could be in transit, yes. Mr. H0LIFIELD, But still your requisition order would still be in the user's hands, wouldn't it? General RIEM0NDY. Yes. Mr. 1-TOLIFIELD. As I understood it, this was a reconciliation of records in the due bills as to out bills or bills in process from the base supplier. General RIEMONDY. What we attempt to do, Mr. Chairman, at a point in time, we attempt to reconcile what the base says the depot owes me, to what the depot says I owe the base. Mr. ET0LIFIELD. And that has to incorporate, I would suppose, an estimate of the goods in transit. General RIEMONDY. Yes, sir; and that which is in transit-the depot says, "I have already shipped it" and the base says, "I haven't received it." Mr. H0LIPIELD. This is what I am wondering, if part of that 22 per- cent was called in error, to what extent does that factor enter into it, or does it enter into it? General RIEMONDY. It enters into it; yes. Mr. HOLIFIELD. But you don't know what percent. General RIEMONDY. I don't know what percent. Then an attempt must be made to reconcile each individual requisition. What I am say- ing is the volume of the business is so great that this gets to be a monumental task. For example, last year, fiscal year 1967, we processed over 17 million requisitions. This gets to be' a pretty big task, trying to reconcile each individual requisition. Now this is not to say it should not be done. But then I say I don't really know what par for the course is, as to what percentage of the PAGENO="0170" 164 outstanding requisitions that a base has should in fact have to be reconciled. Now there are programs in being that cause a reconciliation to take place every 90 days and I suppose if one would attempt to establish an audit trail behind every one of those requisitions, this would get to be a rather expensive proposition. I am not disagreeing with the fact that in this particular run 22 percent of all outstanding requi- sitions from these biases were not reconcilable. Mr. DAHLIN. We don't have to fight that percentage, General; but I suppose that it is one of the things you need to know, in `order to get your next package o'f either programs- General IRFEMONDY. Yes. Mr. DAULIN. Or computers, to find out just what that peroentage~ ought to be. General RIEMOND'Y. Yes; agreed. Mr. DAHLIN. We are no't talking about the question of following up every individual item.. It is a question of just what the capability of the equipment should be, and in making errors. Because if you can't determine that, then you can't buy any more equipment very sensibly,, can you? General RIEMONDY. No. Mr. ROBACK. I may add it also indicates that no matter how much visibility and how much control you have `at the wholesale level, when you get down to the base level you have a lot of problems on that side. The General Accounting Office recommended, which the Air Force~ apparently has not accepted, that base using activities develop a uni- form system of records, so that they won't be putting a requisition orr you when they have the item in the base supplies, for example. General RIEMONDY. Granted, agreed. Mr. ROBACK. You `don't agree with the recommendation though. General RIEM0NDY. But the recommendation wasn't just that. Mr. ROBACK. Let me read the reoonimendation. General RIEMONDY. All right. Mr. RoBAox. This is in the report to the `Congress, B-162152, dated October 31, 1967: We therefore recommend that the Secretary `of the Air Force take action to~ establith at the base using activity level a uniform system of records to ade- quately control outstanding requests. Such a system would enhance the effectiveness of the action taken by the Air Force, to shorten the interval for validating back orders and would provide continuity of recordkeeping when personnel are rotated at the user level. Furthermore, the establishment of a uniform system `at the user level wo'uid~ be consistent wi'th the already established uniform systems at the base supply and depot level for controlling and reporting `supply transactions. So you think there is too inudh work involved in that? General IRIEMONDY. Well, let me cite, then, for the record our answer. Mr. HOLIFIELD. Go ahead. General IRIEMONDY (reading): In rega'rd to the recommendations we are convinced that the supply system presently in existence can and does provide the information necessary for effe~- tive management o'f supply requirements at user `leveL Mr. ROBACK. All you are saying there is, "We think it is OK the way it is." PAGENO="0171" 165 General RIIiMONDY (reading): We also believe that our system of maintaining the necessary records on a computer at one central location and furnishing the necessary management prod- ucts from this location to the using activity level is the most cost effective method. Among other advantages this centralized operation prevents the dupli- cation of effort in the recor'dkeeping function, which would be required by manual operations at the using activity level. So, you see, all we are really saying is we set up another set of rec- ords some place else, and then you are going to have to have another validation project going on between that manual set of records and the computer. `Mr. ROBACK. I think what the Comptroller General's recommenda- tion added up to was that the base supply requisitioning process had to be improved, and if you don't improve that, no matter what kind of computer system you have, you still have trouble. So it looks to me like you are saying in effect in your answer that: "We don't want to get down to that level of regularizing the' requisitioning process. We are willing to live with that. That is a trade-off. We would rather not have a duplicate system `of reco'rdkeeping." So in effect yo'u are willing to pay the co'st. What the cost is is not too clear, although it indicates, from this sample that the GAO report is concerned with, that it would be considerable. The more back orders you have, unfilled o'rdea~s, the more unnecessary procurement, stockage, and all the rest of it. Mr. IDAIILIN. You used the phrase "uniform system" which implies that n'ow at the base level-I assume you had some sort of system for keeping track of these things manually, anyway, to a certain degree. General RIE1~ioNDr. It is in the computer. Mr. ROBACK. You construe this to mean he was going to have a coun- terpart computer. General RIEMONDY. No. I construe this to mean that the GAO' indi- cates that in addition to having all the records in the computer, they want us to maintain a manual set of records. This is the very thing we got away from. Mr. HOLIFIELD. In other words, at your bases you do not have com- puters. You have manual. General RIEMONDY. No, we have computers. We h'ave computers at our ba'ses. We have a standard computer system at 145 of them. Mr. }IOLnfIELD. Where do you get the manual in then? General RIEMONDY. This is a recommendation made by the GAO, that in addition to the records which are maintained in the computer, they want us to maintain a manual set of records. Mr. H0LIFIELD. Is that right? Mr. ROBACK. I don't know wha't it means offhand. General RIEMONDY. That was our interpretation. Mr. ROBACK. That was a misunderstanding? General RIEMONDY. It could be. Mr. ROBACK. Maybe there ought to be one more attempt to see if there is a little give on this thing. Mr. H0LIFIELD. The word "common" system. Mr. LUMAN. Uniform. Mr. HOLIFIELD. Uniform, indicates there were different systems at different bases. Whether that would be true or not I do not know. PAGENO="0172" 166 General RIEMONDY. No. Mr. HOLIFIELD. But they put it on the fact that it wasn't uniform. Mr. ROBACK. I think we had better reexamine this problem, that is the GAO and the Air Force ought to try to get a clear and mutual understanding of what is involved here and inform us about it. General RIEMONDY. We will be glad to. INVENTORY CONTROL AT BASES Mr. DAHLIN. There is one more GAO report, General, concerning a matter you raised on page 13 of your statement. You talk about cen- trally controlling and managing equipment items in the Air Force. You say you do not permit any significant stoekage of equipment items at base level. The GAO, in Report B-433361, of December 12, 1967, was following up on a report of 5 years earlier to see ~what kind of improvements you had made, and it found some improvements, but it `said that ap- proximately $44 million out of $281 million worth of equipment were unaccounted for under the system in being. It seems that there is still some problems in that sort of management also. General RIEMONDY. Yes. Mr. DAITLIN. At the base level, isn't there? General RIEMONDY. Yes. You always have the problem of reconcil- ing our assets. There is no doubt about it. However, I think we do have a good equipment management program in being within the Air Force. There is about, for example, about a half-billion dollars' worth of equipment in Southeast Asia at the present time, the equipment items we are talking about. All of this is on our records, and here again we have got a mechanized program, our Air Force equipment manage- ment program. Notwithstanding the fact that we have all this equipment, and have it on our records, periodically my office through the Air Force Logis- tics Command visits the bases worldwide and makes on-the-spot checks of the equipment which is authorized a specific activity, and incidentally there are tables of authorization which tell each base, depending upon what its mission is, what kind of equipment it can have. We can check these tables of authorization against what they say is in use, and wha't they have and it isn't uncommon to find some equip- ment which is not accounted for. Again it becomes a question of magnitude. In this particular area, we are not perfect. Again there are people in- volved. And regardless of how good the system is, mechanized or otherwise, people must make inputs. People must take care of this equipment. They must store it. They must issue it. They must account for it. And we find differences. There is no doubt about it. Mr. DAHLIN. You testified that you had to send additional support groups out to Southeast Asia to fortify the effort at base level? General RIEMONDY. Yes. Mr. DAHLIN. Have you examined your system? You say generally your system is satisfactory, and that you haven't had to make any PAGENO="0173" 167 improvements. Have you examined the system in the light of all of this experience, to find whether you can improve all those base level pro- cedures so you will be able to both meet crises and operate here in the States more effectively? General RIEMONDY. If I said that there were no improvements that had to be made, that is not so. There will always be room for improve- ment, regardless of what we do. All I said is that we had an effective system in being in peacetime, to respond to the kind of an emergency we had over there at Southeast Asia. To say that the system is absolutely perfect, not by a long shot. Mr. ROBACK. Most of the attention has been given to the wholesale system. It may be that your retail system needs a little attention. General RIEMONDY. This is why we came up with the standard system. We recognized it needed attention. We recognized that there were different ways of operating in the field. We have now come up with a standard system which is applicable to all of our bases. Mr. ROBACK. Do you use stock funds for the bases? General RIEM0NDY. There are certain commodities which are stock fund managed, yes, clothing, for example. Mr. ROBAcK. Those are not Air Force stock funds? General RIEMONDY. No. The Air Force isn't the single manager of this, but we have a clothing stock fund set up, which we support. Mr. HOLIF1ELD. As a merchant, owning and operating a merchandis- ing business outside of my congressional office, I know quite well the difference between book inventory and physical inventory. Twice a year, operating in a normal peacetime business, with no combat losses and with no pilferage, that is no major sense pilferage, with none of the urgency of quick mobility and shifting of supplies and loss in transit and all that sort of thing, we still come up with a difference between the physical count in our semiannual inventory and our book count. So I can understand this, although I am not trying to excuse the discrepancies. Mr. ROBACK. I am going to send the GAO around to your store. Mr. H0LIFIELD. It is not involved in Government business. I resent the intrusion. [Laughter.] But I can understand why operating an inventory control in a com- bat area subject to the lack of warehousing security and the habits of the people of that area in the way of pilferage, and then the occa- sional loss from bombardment of materiel, I can understand why there would be some discrepancies. General RIEMONDY. There are. Mr. H0LIFIEU. Now in the operation of your peacetime organiza- tion here in the States, I would say that there should be far less dis- crepancies in your inventory controls. General RIEMONDY. Yes. Mr. HOLIFIELD. I could sure see where there would be a much greater problem of inventory control in Vietnam, for instance. General RIEMONDY. There is. Mr. HOLIFIELD. In transit there, in transit to repair stations on Okinawa and other places, Japan. You run the risk of some type of loss in every move you make, when you are transporting goods. General RIEMONDY. Yes, sir. PAGENO="0174" 168 Mr. ROBACK. You anticipate those though. You can count your losses. When you talk about losses, you don't know about, a question is raised about inventory control. General RIEM0NDY. It is not a question of not knowing why. You can get down and reconcile this. Mr. ROBACK. You don't know whether this is due to theft or due to the fact that somebody is making mistakes. General RIEMONDY. Some of it is just in the records. Mr. HOLIFIELD. Both. General RIEMONDY. The recordkeeping, the posting of the records is not up to date. We went along with the GAO in the equipment area and said there is a lot of room for improvement. But we say we have a procedure in being which has as its objective the control of this inventory. Mr. ROBACK. Now you sound a little bit like the Army. General RIEMONDY. No. I think this should be a common objective. Mr. HoLivIEI~. The GAO didn't condemn the overall system. General RIEM0NDY. I hope not. Mr. HOLIFTELD. They condemned maybe the functioning of it, and that is their job-to deal in figures-and if they can't reconcile figures, why the world is going to come to an end. That is their job, and I ex- pect them to be that way. But other factors enter into it than those figures. Mr. ROBACK. We also expect the Air Force to report systematic progress, recognizing that there are human errors. If they are going to be working on them, we expect that they are going to be systemati- cally reduced. General RIEMONDY. Yes. Mr. DAI-ILIN. We also want to make sure, Mr. Chairman, they don't just lose inventory items by computers, too. We have to make sure that the system stays within some kind of bounds. Mr. ROBACK. It is possible under a computer system the errors can get magnified to an alarming extent. General RIEMONDY. We know about it a lot sooner, and you know the order of magnitude of it, because it pops out pretty quick. Mr. ROBACK. We have asked for some information, and it will be supplied promptly, we trust. Mr. HOLIFIELD. The record will be open for supply of the informa- tion requested. General RIEMONDY.YeS, sir; glad to provide it. Mr. HOLIPIELD. Or such other written requests as may be made before printing. Mr. ROBACK. As the chairman said, there will be no hearing tomorrow, but DSA will be on Monday, and I think we will ask the Army to come back. We will have to check on the availability of the room. Mr. HOLIFIELD. Thank you very much, General. General RIEMONDY. You are quite welcome, sir. Mr. HOLIFIELD. The meeting is adjourned. (Thereupon, at 12:55 p.m., the committee adjourned to reconvene Monday, July 1, 1968, at 10 a.m.) PAGENO="0175" MILITARY SUPPLY SYSTEMS MONDAY, JULY 1, 1968 HousE or REPRESENTATIVES, MILITARY OPERATIONS SUBCOMMITTEE OF THE CoMMIrPEE ON GOVERNMENT OPERATIONS, Washington, D.C. The subcommittee met, pursuant to recess, at 10 a.m., in room 2247, Bayburn Building, Hon. `Chet 1{olifield presiding. Present: Representatives Holifield and Moorhead. Also present: Herbert Roback, staff administrator; Douglas Dahlin, counsel, Joseph Luman, defense analyst, and Paul Ridgely, investigator. Mr. HOLIFIELD. The committee will be in order. This morning we resume again with hearings on military supply systems with Army witnesses. Following the hearing last Wednesday, we understand that General Heiser and General Jones are detached to proceed to duties in Vietnam. We understand that Brig. Gen. John Klingenhagen, who has succeeded to General Heiser's position as As- sistant Deputy Chief of Staff, Logistics Supply and Maintenance, Department of the Army, has returned today. In addition, Maj. Gen. Frank D. Miller, who is the Assistant Deputy Chief of Staff for Logistics, for doctrines, systems, and readiness, is also present. General Miller has a brief statement. (169) PAGENO="0176" 170 STATEMENT OP MAJ. GEN. PRANK D. MILLER, ASSISTANT DEPUTY CHIEF OP STAPP FOR LOGISTICS (DOCTRINE, SYSTEMS, AND READINESS); ACCOMPANIED BY BRIG. GEN. JOHN KLINGEN- RAGEN, ASSISTANT DEPUTY CHIEF OP STAFF FOR LOGISTICS (SUPPLY AND MAiNTENAI~C~E); COL PERRY S. PINNEY, JR., CHIEF, SUPPLY POLICY AND PROCEDURES DIVISION, DIRECTOR OP SUPPLY, ADCSLOG (S. & M.); COL, ANTHONY DASKEVICH, DEP- UTY ADCSLOG (S. & M.) FOR PURM; COL. NOBLE E. TAYLOR, DEPUTY CHIEF, MATERIEL MOVEMENTS DIVISION, DIRECTOR OP ARMY TRANSPORTATION; COL. J. B. HUMPHREY, CHIEF, ADSAP MANAGEMENT OTPICE, OACSI?OE; LT. COL. OSCAR I. SANDERS, STAI?F O~TICER, SUPPLY POLICY AND PROCEDURES DIVISION, DIRECTOR OP SUPPLY, ADCSLOG (S. & M.); WAYNE SMITh, TECH- NICAL ADVISER, AD'CSLOG (S. & M.); J. P. CRIBBINS, SPEQIAL AS- SISTANT FOR LOGISTIC SUPPORT OP ARMY AIRCRAFT', DCSLOG; JOHN TAYLOR, CHIEP~ LOGISTICS, DO'CThINE, AND SYSTEMS OFFICE, D'CSLOG; W. C. MURPHY, CHIEP, FIELD OPERATING SYS- TEMS, LD'SO; E. E. SEITZ, CHIEF, NATIONAL OPERATING SYSTEMS, LDSO; JOSEPH C. ZEN'GERLY, DIRECTOR OP MATERIEL READI- NESS AND SUPPORT SERVICES, ASSISTANT SECRETARY OF ARMY (INSTALLATIONS AND LOGISTICS); SHERMAN M. MEISELMAN, CHIEF, MAINTENANCE PROGRAMS BRANCH, DIRECTOR OP MAIN- TENANCE, AD'CSLOG (5. & M.) General MILLER. Mr. Chairman, members of the subcommittee, I am Maj. Gen. Frank D. Miller, Assistant Deputy Chief of Staff for Logistics in the doctrine, systems and readiness areas for the Head~ quarters, Department of Army. (Biography of General Miller follows:) BIOGRAPHY OF MAJ. GEN. FRANK D. MILLER Frank D. Miller was born in Brush Prairie, Wash., on 27 May 1914. He was graduated from Jefferson High School in Portland, Oreg., in 1931, from the IX Corps Area West PoInt Preparatory School, Fort Winfield Scott, Calif., in 1934, and from the U.S. Military Academy, West Point, N.Y., in 1938 as a second lieutenant of Infantry. General `Miller's service includes a tour of duty with the 34th Infantry, Fort George G. Meade, Md., the 93d Antitank Battalion at the same station, and the Tank Destroyer Center at Fort Hood, Tex. In August 1943, he joined the 77th Infantry Division at Camp Hyder, Ariz., as an Infantry Battalion Commander. From September to November 1943, he attended the General Staff Course at the Command and General Staff College, Fort Leavenworth, Kans. Upon completion of the course at Fort Leavenworth, he rejoined the 77th Division and his battalion at Camp Pickett. Va. In March 1944, he accompanied the 77th Division overseas to Hawaii where, in June 1944 he was assigned as Division Assistant Chief of Staff, G-3. From July 1944 to the end of September, he participated with the division in the recapture of the island of Guam in the Marianas Campaign. From November 1944 to March 1945 he participated with the division in fighting on Leyte and Samar iii the Philippines. From March to July 1945 he served as Assistant Chief of Staff, G-3, Regimental Executive Officer and Acting Commander of the 307th Infantry Regi- ment, and Executive Officer of the 305th Infantry Regiment during the capture of the Kerama Retto Islands, the island of Te Shima and the island of Okinawa, PAGENO="0177" 171 He returned to the island of Cebu in the Philippines and assisted in mopping- up actions there until the surrender of Japan in August 1945. From 25 September to 12 November 1945 be served as Executive Officer of the 305th Infantry Regi- mental Combat Team and Deputy Military Governor of Northern Hokkaido in Japan. Upon his return to the United States, he served, in the Plans Division of Army Ground Force Headquarter's, Washington, D.C. He returned to Hawaii in May 1946 and served in the G-3 Section of Head- quarters, U.S. Army Pacific until May 1949. Upon his return to the United States, he was assigned to the Department of Tactic's, U.S. Military Academy, West Point, N.Y., where he served as company tactical officer, Brigade Executive and 5-1 and Commanding Officer, Second Regiment of Cadets. During this tour of duty be attended and was gradu- ated from the Armed Forces Staff College with the class from January to July 1950. He attended the Army War College, graduating with the class of 1954. In July 1954, he was asisigned to the U.S. Army, Caribbean at Fort Amador, C.Z. He served 2 years as Assistant Chief of Staff, G-4, 14 months as Command- ing Officer, 20th infantry Regiment and 1 year as ACS/J-4, Caribbean Command. Upon his return to the United States be served for 3 years in the Office of the Assistant Chief of Staff, G-4, Headquarters Continental Army Command, Ft. Monroe, Va. During this period he was principally concerned with activities insuring the logistic readiness for contingency plans of the Strategic Army Com- mand, logistic doctrine for the Army in the Field and CONARC supervision of the Annual Logistic Exercise LOGEX. In May 1961 he attended the Military Assistance Institute in Arlington, Va. prior to reporting for duty with the Military Assistance Advisory Group in Vietnam in August 1961. He served there as Assistant Chief of Staff, J-4, until 1 March 1962 when be assumed duties as Chief of Staff, MAAG, continuing'in that position until August 1963, when be returned to the United States. From 1 September 1963 until 1 May 1965, be served as Executive Officer, Office of the Deputy Chief of Staff, Logistics, Headquarters, Department of the Army. From 1 May 1965 to 28 February 1966 be served as Assistant Chief of Staff, G-4, 8th U.S. Army in Korea. From March 25, 1966, to March 5, 1967 be served as Deputy Chief of Staff, Plans and Operations in Headquarters U.S. Army Vietnam and from March 5, 1967 to July 11, 1967, as Assistant Deputy Commanding General and Chief of Staff, United States Army Vietnam. He currently is serving as Assistant Deputy Chief of Staff Logistics (Doctrine, Systems `and Readinesis) in Headquarters, D~partment of the Army, Washington, D.C. General Miller has been awarded the Combat Infantryman's Badge, the Dis- tinguished Service Medal, the Legion of Merit with two Oak Leaf Clusters, the Bronze Star with Oak Leaf Cluster, the Air Medal and the Army Commenda- tion Medal. His foreign decorations include the Korean Order of Chung Mu and the Vietnamese National Order. General MILLER. I am pleased to have this opportunity to present information on the Army program for attaining worldwide integra- tion and standardization of its supply system. My remarks are intended to supplement the testimony previously furnished this subcommittee by General Heiser with respect to system standardization. As previously described by General Heiser, the findings of an Army study group in 1966 resulted in the establishment of my present office as a means of improving control and management of the important functions of logistic doctrine and logistic systems development. Reporting to me is the Logistics Doctrine and Systems Office- LDSO-located in the Pentagon. The LDSO is supported by a field agency-Logistics Doctrine, Systems and Readiness Agency-located at New Cumberland, Pa. The LDSO and its supporting field agency provide for the centralized general staff direction of the Armywide program of logistics system development by developing and promul- 97-475--68------12 PAGENO="0178" 172 gating design criteria and management techniques to be used in sys- tems design and development. Gentlemen, you have three charts which I believe have been fur- nished to you. I will address, if you please, chart No. 1, which is the long chart. (The chart referred to is on opposite page.) General MILLER. In discussing the Army's program for supply sys- tem standardization, it is necessary to look at the worldwide Army supply support structure, as it is today. Before you is a chart which graphically portrays the doctrinal Army supply system as well as the interfaces with DSA and GSA. You will note that the system has four principal levels of support, if you start from the right of your chart, above the consumer. These are the direct support, general support, theater support, and wholesale support levels. I will briefly review the functions of each level. The direct support level stocks limited quantities of supplies for issue to consuming units. This level serves as the retail outlet through which consuming units receive all supplies. Direct support units in the field are designed to be as mobile as the units they support. The general support level maintains inventory for the replenish- ment of stocks at the direct support level. This level serves as the elastic link in the supply pipeline between the large and relatively fixed logistics base at the theater support level and the mobile direct support elements positioned with the combat forces. This level must also be sufficiently mobile to meet changing deployment patterns of the combat forces in the field. Mr. ROBACK. General, can you give us a few examples? General MILLER. Of this elasticity? Mr. ROBACK. Of this general support level. For example, in the European theater, what is the general support level? General MILLER. In the European theater the general support level `embraces general support units so-called. These are activities which carry about 15 days of supply normally, are mobile, and are behind the direct support units. We have both supply and maintenance in this general support area. We have recently, because of the reduction of the European LOC, eliminated the general support supply depots in Europe. We do not have any in Vietnam today because of the shortened line of communications. Mr. ROBACK. A general support depot would be a smaller unit than the theater depot? General MILLER. Much, much smaller. Mr. ROBACK. And there would be more of them? General MILLER. There would be quite a number more. Generally it depends on the size of the corps, but say for a two-division corps, perhaps we would have two of these, one backing up the direct support units, and one, the corps troops behind the division level. On the other hand, if we had a four-division corps, we might have as many as three of these. Mr. ROBACK. You say in your statement there is no general support level, no general support in Vietnam? General MILLER. That is correct. They go right from the depot to the direct support units. PAGENO="0179" I. PAGENO="0180" 174 The theater support level provides the overseas logistics base, and stocks offshore inventory in support of theater operations including significant quantities of war reserve materiel. This support may be~ centralized as in Europe or decentralized as in the Pacific area. The wholesale support level is the CONUS supply base which con- sists of the Army, DSA and GSA supply managers and their support- ing depots. The general and theater support levels are intermediate levels which are not always required for the processing of supply transac- tions and in providing supply support. Various tactical and geo- graphic conditions dictate when one or both of these supply levels may be omitted. For example, in Vietnam there is no general support supply level. The direct support elements in this case, because of the relatively short supply lines, are supported by the Vietnam depots at the theater support level. Another example is in CONUS where the CONARC installations, which provide direct support to consuming units, receive supplies direct from the wholesale support area. Still another example was the action in the Dominican Republic,. where we supported our troops directly from the continental U.S. bases in Florida. Mr. ROBACK. General, this is the Air Force concept today, is it not, direct support from the United States to the unit, to the base? General MILLER. Well, there is a difference, if I can point this out,. the Air Force normally, in this type of supply, operates from a base or a given AMA area directly to an overseas base. We are talking here of supporting units in the field, which are mobile. An Air Force unit, such as a tactical fighter squadron, would operate from a base and receive its supplies from the base. There is a little difference. Mr. ROBACK. You have that extra burden of supply? General MILLER. The Army has to put out its supplies mobile be- hind the troops which are maneuvering. Where we do not have to maneuver far, we can eliminate some of the intermediate steps. If we are in a large land mass such as Europe, then we have to have the direct support, the general support, depending upon how far forward the troops push. We cannot, for example, in a mobile situation build fixed depots. As you have seen in Vietnam, the time it has taken us to build adequate depots and storage areas is usually too great to permit operation from a fixed base. So when we initially go into an area, our supplies and equipment that support those troops are mobile and go right `behind them. Mr. ROBACK. I do not want to digress too much, but does NATO have a parallel base support structure to the United States? General MILLER. The NATO infrastructure, yes, is patterned sim- ilarly in that design. I am not an expert on the NATO infrastructure, but it in general provides the same support. GENERAL SUPPORT SUPPLY ECHELON Mr. LUMAN. General Miller, do you have these GSU's anywhere but in Korea? General MILLER. We do not have them in Korea. Mr. LUMAN. The GSU is listed on your chart as one of the layers, but actually .it has been eliminated in most cases, has it not? PAGENO="0181" 175 General MILLER. Yes, since we eliminated them in Europe. Perhaps I should have explained that the four echelons on the right-hand side of the chart reflect current standard Army doctrine. However, they are not always implemented across the world, but only where they are needed. Mr. LTJMAN. Where do you have a GSTJ? General MILLER. I do not believe today that we have any, since we eliminated them in Europe. However, I would like to verify that. General KLINGENIIAGEN. Yes, we have a few. Mr. LTJMAN. Where is that? General MILLER. We have one general support unit for Hawk for example, in Korea. Mr. LI~MAN. Hawk missile? General MILLER. Yes. Mr. LUMAN. That is very specialized? General MILLER. That is. Mr. LUMAN. You still retain the concept in your doctrine for future use or future activation of this layer of support; is that right? General MILLER. As of the present time, yes. Mr. DAULIN. Is there a problem in developing a standard APP package that has to mesh at level after level? Does it provide you any sort of problem in jumping over that level in the concept? General MILLEL No, because their development there would be on a plug-in, plug-out basis. In other words, the general support unit would be automated with a capability, in terms of APPE and com- munications, of plugging into the overall system operating in the area. I think I will bring this out a little bit later. Mr. DAULIN. All right. General MILLER. In this latter case, both the general and theater support levels are omitted. It is possible that improved transportation capabilities in the future may make it possible to substantially reduce or eliminate the need for the theater support level on a worldwide basis. In this event, supplies would flow directly from the wholesale support level to the general or direct support level in overseas areas. If you will look at chart 2, I believe you examined in part during the previous testimony, you will see our time phase plan for Army supply system APP standardization. The Army has been progress- ing toward standard supply APP systems for each of the support levels. The chart before you depicts the time phasing for Army supply APP system standardization. (The chart referred to was submitted during previous testimony and appears on p. 89.) I will discuss the primary programs for each support level ~ind then describe the controls which are maintained to assure a fully inte- grated system. It is through this integrated total system that the Army expects to achieve more rapid processing of user requirements ~to the source of supply and more rapid response in issuing required supplies and equipment. At the direct support level, the Army has several APP systems under development. These are tailored to the varying requirements PAGENO="0182" 176 of nondivisional and divisional direct support units and OONUS installation support activities. In the case of the nondivisional direct support units, which operate separately, a magnetic ledger card system is used to automate supply functions. A total of 58 of these systems have been installed in direct support units, principally in Vietnam. Procurement of an additional 84 sets of equipment is in process. These will be used in nondivisional direct support maintenance units in Europe, Korea, and CONUS. This system was centrally developed and standardization is main- tained through centralized control of program changes. For the divisional direct support level, a test has been conducted in the two armored divisions of the III Armored `Corps at Fort Hood, Tex. This test involved many new concepts for improving supply and maintenance support within the combat division. The auto- mation of many functions, heretofore performed manually, were tested,. including stock control of all classes of supply, the unit property book, modification work order management, and maintenance man- agement. It is planned that the automated programs resulting from the test will be installed in some divisions as an interim capability pending the availability of the Armywide standardized division logis- tic ADP system being developed as a part of the `CS3 effort. OS3 or the combat `service supporting system, will provide trans- portable, third-generation ADPE for the processing of logistic,, per- sonnel and administrative data in the Army in the'field. The `OS3 divisional direct support logistic applications are being centrally developed and will be centrally maintained to assure Army- wide standardization and compatibility with other standard logistic' systems. A test of OS3 is scheduled to commence in late 1969. 1 believe that some of you gentlemen viewed a set of C'S3 equipment on display at the Pentagon on last Thursday. In addition to the divisional direct support level, the CS3 program encompasses the general support level at corps and field army, and the theater level OS3 envisions a standard, centrally maintained system for the Army in the field providing optimum integration, and interface of' the support echelons within the theater of operations. As a part of the CS3 program the Army has scheduled the activation,, this summer, of a quick reaction inventory control center (QRICC) capable of functioning with a separate force up to an independent corps size. The QRICC will utilize the general support programs and~ third generation hardware developed for CS3. The QRICO is intended to provide a much needed inventory con- trol and supply management capability, readily deployable in support of contingency forces. The need for such a unit was apparent in the rapid buildup in support of the war `in Vietnam. Undoubtedly, we would be having fewer supply problems there today had we had a de~ ployable inventory control unit, properly trained in standard systems and procedures, at the outset. At the theater support level, action has been initiated at the Com- bat Developments Command as part of CS3 for the design of a stand- ard automated system for USAREUR, USARPAC (including sub- commands) and other future theaters. Installation of this standard' system is planned to be completed during 1972. A lower developmental priority has been assigned to this effort because of the relatively high PAGENO="0183" 177 order of data automation now in being at the theater level in Europe and the Pacific, and the more urgent need for standardized systems at the general and direct support levels. Within the CONTJS direct support or retail structure, the Army has underway a project called COSMOS (centralization of supply man- agement operations). The prototype COSMOS at Headquarters 6th Army is being developed as a regional control center for CONUS Army Headquarters to provide centralized stock control and supply management of stocks at installations within the Army area. COS- MOS will be a standard system with centralized design, programing and maintenance. The COSMOS protot~ype commenced requisition processing in September 1967. Common program packages are being used where feasible between COSMOS and CS3 in order to increase commonality and reduce development costs, In addition, the interfaces between troop units and the direct support supply activities of COS- MOS and CS3 are being standardized so that the units can plug-out in one area and plug-in in another area without the necessity of learn- ing new supply procedures. VISIBILITY FOR CONTROL Mr. ROBACK. How deep down do you get visibility then, to use that expression, which means information on the inventories and supplies in place? General MILLER. The two systems COSMOS and CS3, will give you complete visibility of the reportable items, recognizing that cer- tam items- Mr. ROBACK. Even in the hands of troops? General MILLER. Even in the hands of troops. Mr. ROBACK. For the reportable items only? General MILLER. For reportable items only, that is correc't. This is one of the things that we were testing in the division logistic system test. The test includes automation of the unit property books, which should give us complete visibility, with the exception of expendabie~ supplies. Mr. ROBACK. What does the unit property book exclude? Does it exclude consumables? General MILLER. Yes. The property book picks up those items which are, as we call them, accountable items. In other words, the unit com- mander must account for these being in his possession, and if they are disposed of, he must go through a disposal proceeding in order to- Mr. ROBACK. Rifles would not be in the property book? General MILLER. No, sir, rifles are in the property book. Mr. ROBACK. They are? General MILLER. They are not expendable. Mr. ROBACK. Who maintains the property book? General MILLER. The supply sergeant and he has the supply- Mr. ROBACK. At the company level. General MILLER. Our test is examining where we should maintain it... We think as a result of the test to date, we probably should maintain the automated property book at division level, at least within the divisions, and then by means of printouts give back to the commanders their on-hand balances. PAGENO="0184" 178 For example, we would give the company commander a listing of the property that he is held accountable for on a printout basis, and the battalion commander would be given a copy of this so that he could exercise command management over the equipment within his battalion. Mr. ROBACK. What does the supply sergeant then have to do, keep it updated by reporting changes? General MILLER. Or by his requisitioning actions. Say an item of equipment is damaged and it has to be turned in. The actual transac- tion of requisition and receipting through the division automated sup- ply procedures would automatically adjust the property book records. Since the company commander i's held responsible for the property, the supply sergeant posts changes on the printouts, until a new print- out is received. Mr. DAHLIN. Mr. Chairman? Mr. HOLIFIELD. Mr. Dahlin. ADP PROGRAM PACKAGES Mr. DAHLIN. General, you say `that the common program packages are being used where feasible between COSMOS and CS3 On a pre- vious page you said that the general support program packages were being used for CS3. Is that the. case? General MILLER. That is correct. Mr. DAHLIN. Does that mean that you are trying to use all of these common support packages in `COSMOS `almost as developed, or is there a considerable rework involved here? General MILLER. I would like `to refer that to the expert in the detail, and perhaps the detail that you are interested in. I would like to ask Mr. Smith, who is present, to answer that as far as COSMOS is concerned. Mr. SMITH. Let's take some of the specific files. The demand analysis subsystem is one which we are trying to' use common between all of the CS3 and the COSMOS systems. When we get to a lower level, we have to strip certain elements out, but the same program logic, et cetera, is used in both systems. The same is true of the real time and the inventory subsystems. We are all trying to use the same program logic, the same code, the same formats, throughout. There is some redesign, mainly because you have a different number of customers and environment in a general support than you have in a COSMOS, so your parameters for your computation of supply levels might be different. More sophistication is required at `the Army head- quarters level than we want to be at the GS level in the field. Mr. DAHLIN. The program packages for the general support level or for the CS3 were developed by a contractor, as we understand it. Mr. SMITH. Yes, sir. Mr. DAHLIN. Is your redesign being done in-house, or is that being done by this same contractor, or a different contractor? Mr. SMITH. Sir, we have the same contractor for the demand analy- sis system in both packages. The demand analysis system in the 6th Army was developed by a contractor. The same contractor has restruc- tured this same demand analysis file for use by the Army in the field. PAGENO="0185" 179 GENERAL SUPPLY SUPPORT ECHELON Mr. DAHLIN. If it is the case that you are eliminating almost all the general support units, is it not the case that QRICC will be one of the few general support entities that will exist? Mr. SMrrH. Yes. Mr. DARLIN. When you reactivate it to fill that gap. Is that the place where it fits into the doctrine? Mr. SMITH. That is right. Mr. DAHLIN. Does that mean that you will have to keep searching for a place to use the QRICC in order to keep the doctrine up? Are you going to have to look this over to see whether QRICC belongs at some other support level than general support? General MILLER. I do not visualize a great problem here. We are going to face this within the continental United States with all of our systems. You recognize in the Army system we have a post, camp, and station in the continental United States which has a number of tenant units that live upon it. Let's take a division-size post or a corps-size post. Certain of our plans might call for those units to be deployed on a very short notice, and, when we automate', these units are automated under our current design plan. Mr. DAHLIN. Is QRICC going to be a corps-size post or division- size post? General MILLER. It can be- Mr. DAHLIN. As the first one will be used and exercised in the United States? General Mn~LER. Present plans call for it to be exercised at a division-size post. Mr. DAHLIN. Is that going to have common programing with the other divisions that are in the continental United States? Will that be common to those divisions? General MILLER. It will have a common type of programing; yes, sir. Mr. DAHLIN. So it will fit `at the division level? General MILLER. We are going to have to accept a certain amount of automation redundancy with respect to units in the continental United States. By that I mean we are going to have a field unit here, either division or corps, that requires an automated capability even though the post, camp, and station has such a capability. Now, if you have to deploy that unit, and you did not have a post, camp, and station capability, you would immediately pull out all the automation on that post, and disrupt supply support. Mr. DAHLIN. By capability, in this case you are merely saying you have to have enough machines located at this spot? General MiwR. And the procedures. Mr. DAHLIN. In order to pull out the units? General MILL1~'t. That is right. This is what I mean by a plug-in, plug-out capability. In order to exercise the people who run this sys- tem in the continental TJnited States when they are stationed there, we have to have our system so designed that the unit exercises its machines and people at the same time the post, camp, and station PAGENO="0186" 180 exercises its machines and people, so there is going to be a certain :amount of duplication of effort which efficiencywise we might other- wise be able to eliminate, but we cannot do it and still have a combat capability and a deployable capability. Mr. DAHLIN. You are trying to convey the idea that the Army, when it finally automates is going to need a lot more machines than the Air Force or Navy. Is that the picture? General MILLER. I would not make that analysis. All I am stating is the Army's requirement is going to be more than peacetime cost- effectiveness considerations might say we can get by with. You have to have this automated capability or we will have the same thing we Jaad in Vietnam when we first got there. At the CONTJS wholesale level, the Army Materiel Command has a major effort underway, the national ADP program for AMC lo- gistics management (NAPALM), which will standardize the materiel management systems of the community commands, national inventory control points, depots, and other elements of AMC. It is planned that the initial hard-core applications will be fully operational at all NICP's during 1970. In addition, the present standard depot system (SPEED) will be upgraded by a program entitled SPEEDEX (SPEED extended), also planned to be fully operational during 1970. To assure that the various horizontal operating systems under development provide a cohesive and usable vertical logistics manage- ment information system, we have underway a contract supported study and design project scheduled for completion this September. Mr. ROBACK. That is the Stanford Research Institute study? General MILLER. This is the SRI contract. The objective of this project is the establishment of an integrated supply, maintenance, and materiel readiness reporting system from the unit level up through intervening echelons to Headquarters, Department of the Army. Phase I of the study identified the essential elements of information required for management and decisionmaking at each echelon of the Army. Phase II covers system design and will provide the structure, orga- nization, procedures, management indicators, and the data base for management at each echelon. The system will provide for the collection, processing, and storage ~of management data and output to management both within the field army elements and at the national level. Data bank output will come from reporting units in a "tap the source once" type of report. The system above the unit level will rely primarily on exception type in- formation and management. The system will complement and refine the output of the horizontal operating systems previously described. The time phased approach to system development which I have described should assure standardization in each of the support levels. Interface betweon the supply systems is accomplished by use of the MILSTANDARD procedures and similar requirements promulgated by Army regulations and as a result of DOD directives. Now, if you would look at the third chart before you. As pre- viously described by General Heiser, the major commands have been required by the Department of the Army to establish central systems PAGENO="0187" 181 development and programing activities to assure centralized develop- ment and maintenance of logistics systems in their respective areas. This chart indicates the assignment of responsibilities. (The chart referred to follows:) STRUCTURE FOR LOGISTIC SYSTEM DEVELOPMENT General MILLER. The Army Materiel Command has established the automated logistics management systems activity (ALMSA) in St. Louis, Mo., for the development, control, and maintenance of NAPALM. The logistic system support center at the Letterkemny Army Depot in Chambersburg, Pa., provides ALMSA the functional systems design and programing support for depot level systems. The Continental Army Command has established a similar agency at Fort Eustis, Va., to centrally develop, control and maintain COSMOS. The Combat Developments Command at Fort Belvoir, Va., has a similar agency, the Automatic Data Field Systems Command (ADFSC), responsible for development of the combat service support system (CS3). The Deputy Chief of Staff for Logistics, Department of the Army, exercises total responsibility for logistics doctrine policy and systems, including the ADP systems used in the operation of logistic systems. I have the responsibility for formulating principles, concepts, and design criteria for the ultimate integration of these systems into a single uniform integrated logistics system. My logistics doctrine and systems office and its supporting field agency are directly responsible for this type of work. Functional systems and ADP specialists of their staffs work together to develop the regulatory guidance and policy which will insure that the major commands develop and maintain systems in a standard and uniform way. We are currently staffing an ADP management plan for the Army logistics system. Implementing directives based on this plan are being DIRECTION AND CONTROL COFSA -] AVC OF SA EDIR MGMT INFO~~j DCSLOG A D CS LOG LDSO DEVELOPMENT PAGENO="0188" 182 developed which will require armywide adoption of the management principles and techniques contained therein. While we recognize that the status of logistic system development, integration and standardi- zation is not as advanced as we would like, we believe that our phased approach is sound and realistic considering our requirement to operate the worldwide logistic system, in existence today, including our com- mitments in Southeast Asia. I want to assure you that our ultimate product will be an integrated, uniform logistics system whh~h will provide- Rapid and effective logistics response to the requirements of Army forces; Centralization of essential data required for management of material assets and requirements; Operational capability for peace and war without radical aug~ mentation or alteration; Uniform and compatible procedures for each support echelon to permit worldwide unit and personnel transfers without need for additional training. That concludes my statement, sir. Mr. H0LIFIELD. Thank you, sir. SUPPLY PROBLEMS IN VIETNAM Mr. MooimEAD. General, on page 5 of your testimony, the next to the last line, you say: "We would be having fewer supply problems there" in Vietnam today. What are the particular supply problems that we have today? I remember being over there in late 1965, when there was nothing but problems with the rapid buildup. When we were there in the be- ginning of this year, most of the supply problems seemed to have been licked. What are the problems? General MILLER. Yes, sir, if I could explain that a little further. I was assigned there for duty in March of 1966 in the midst of that trouble and served as the Deputy Chief of Staff for Plans and Opera- tions, and then later as Chief of Staff. I can assure you we had many difficulties because we were operating our logistics system manually. As you know, the decision was made to bring our combat forces into Vietnam ahead of the establishment of an adequate logistics support capability. However, there were very good reasons why this was `done. Those of us who were operating the logistics system had many~ many problems that we had to overcome, and it was not until we got the 14th Inventory Control Center, and we got trained people and ma- chinery at the depots at .Qui Nhon, at Cam Ranh Bay, at Saigon and more recently at Danang, were we able to begin to sort out and b& responsive in all areas of logistics support. No troops in Vietnam ever suffered from lack of logistics support~ but we did it the brute force way. What we are saying here now is that had we had the Inventory Control Center with trained personnel ready to operate a system at the beginning, and had moved them in there, there would have been a more orderly flow of supplies. PAGENO="0189" 183 Mr. MOORHEAD. Some of the material that wais shipped over in the early times you have had to go out- General MILLER. It was forced. Mr. MOORHEAD (continuing). And physically inventory? General MILLER. Yes, sir. Mr. MOORHEAD. Maybe all of your records are not complete. General MILLER. Yes, sir; the Army supply system by and large is based upon what we call a pull system. In other words, the customer asks for what he wants, and so it is pulled out of the CONTJS depots. In the early days of the war in Vietnam, many times, to insure that we Ihad adequate support for our troops, we pushed supplies to them. They did not ask for them. We just pushed them because we knew from experience they were going to need them. We now recognize that we have excesses over there. We are sorting these out and getting them back. But what we are saying here is to prevent this in the future we want to have the capability to deploy an inventory control organization right with the forces when they go. Mr. ROBACK. Mr. Moorhead, I suppose in comparing those two states, one might say, and I would ask the general to confirm, that the big concern of Members of Congress in the earlier years was whether there were enough supplies, and the big concern a little later on is whether there were too many supplies. The problems were of a different order a little later on. What they are grappling with now is really not shortages. Shortages is always the problem in the early part of the war. Now the problem. is excesses. Is that not so? General MILr.rn. That is correct, and this is why we are using our automated system over there today. They have just recently developed the capability to control these things, and in many instances now our problem is identifying the inventories that were brought in there and getting those on the stock records so they can get into the machines and be controlled. We recognized that in October-November of 1965. You will remem- ber all the ships that were backed up at Vung Tau that could not get unloaded and so on. This is partly because of the way they were loaded, but also because we did not have port facilities to offload them. Then when we did get them offloaded, we did not have our depots and trained people to man these things. Mr. MOORHEAD. They were warehoused just out in the open? General MILLER. Yes, sir. As our commanders now say, they have got the faucet turned on, how do you shut it off? Once you get your supply system in gear, and this is true not only of the Army, it is true of other activities, how do you shut it off? Mr. R0I3ACK. In that context, may I ask this question: The policy now appears to be increasing development, increasing attention to the capabilities of the South Vietnamese forces so they can assume an in- creasing role and responsibility. Now what happens to the supply system? Do we adjust it to supply the South Vietnamese forces, or is that to be a separate, unrelated issue? General MILLER. Maybe I had better clarify that a little bit. I notice that today is the 1st of July. We have our new 10 classes of supply in PAGENO="0190" 184 effect today but I will address the old five class categories, because I am not fully familiar with the new ones. We have class I, which is food. Generally, this is no problem to us, because this is shipped on a personnel-strength basis. You have so many men and they are going to eat three meals a day, so this is easily predictable. Then your class III, which is petroleum. This is no great problem, because it is based upon experience of consumption data. You have elasticity there in the number of tankers that you bring in the area and offload, and you can shut some of this off. That POL can always be used. Then you have class V, ammunition, which is also a fairly predictable requirement. You also have the major end items in the class II and IV type, what we call class II and IV major end items: combat vehicles, trucks, radios, and such things as that. What we are really talking about in the way of excesses in Vietnam, overages or shortages, are the repair parts that keep those combat vehicles and those wheeled vehicles and their radios operating. This is the area where we have the major problem within our supply system: control of the repair parts. When I say this, and when you talk about modernization of the Vietnamese forces, we are not talking there about the area in which we are having problems with respect to overages and shortages. We are talking about repair parts. The modernization of the Vietnamese forces are end items. I wanted to make that distinction, because it sometimes gets confused. Mr. IROBACK. But are we- General MILLER. We are not over or under end items. Mr. IROBACK. Are we going to support the South Vietnamese through this supply and logistics system or are they going to develop their own, so to speak? General MILLER. I happen to have had a previous tour in Vietnam when I helped them set up their supply system, and they have their own, and it is a very good one, and our policy has always been over there that we will, while we assist them where they have U.S.-type equip- ment, their depot system draws from our depot system, and then they run their own, and I think we should foster this. Mr. IROBACK. So if we draw down our total effort, when and if it is feasible to do so, we will also draw down our own supply. We will not be building it up, so to speak, to support them. DESIGN OP ADP SYSTEMS Mr. ROBACK. I would like to ask you this question, General: You have these various automatic data processing equipments and systems. Is the concept running ahead of or behind the machinery; that is to say, are you- General MILLER. Yes, I recognize what you are asking. We are developing our supply support concept to which we then adapt the machinery. In other words, we are not taking the machinery and then adapting our system to the machinery capabilities. As a matter of fact, I have my people working on a list, getting me a list of all manufacturers of all machinery to determine where we can PAGENO="0191" 185 take the maximum advantage in our system of the current state of the art. This is almost like a moving train, as you know. Each one of the companies is coming up with some new improvement in their product, and we want to see where we can fit that into our system to make our system more efficient. Mr. ROBACK. When computers became the thing to have, in many places in the military supply system, not necessarily in the Army, there was a rush to put in computers, and then there was a problem of what to do with them and whether they were really useful for a given purpose. In other words, the idea was good, but maybe they had not worked out the procedures for using them. I am wondering with regard to the computer designs and the actual machinery, are you ready to use them or are they ready to use you? General MILLER. To answer your question, I think the Army inclined somewhat in that direction, that is requiring machinery because it offered a promising capability in the initial days, and I think that i~ part of our problem today in developing a standardized program. Mr. ROBACK. The rush to get systems when there were a lot of dif- ferent ones? General MILLER. That is right. Now, however, we are standardizing our system, as I have pointed out, based on doctrinal study and design carried out in conjunction with an examination of available and potential machinery. In this con- nection, every day I hear about something new which might be used within our system for reducing processing time and costs. I will give you a for instance. We were trying to find in the use of third generation equipment, we were trying to find a way to read the output of a machine which operates at eight-tenths of a milli~ second and even prints out at 1,100 lines a minute. That is pretty fast But it can roll up a pile of paper to fill this room in a hurry. No one can read the resulting pile of paper in a current time frame. As an assist on this problem the Stromberg-Carlson people `have come up with a microfilm camera that operates with an open shutter. Just as fast as that computer can put out information onto magnetic tape, this camera can photograph it on microfilm, and right attached to that machine is a microfilm developer. You transfer the film out of the camera right into the developer and it goes into another machine which puts it in a cartridge, and it goes into still another machine which puts it on a reader which has an index and a button, and you can bring up in front of you what you want to read. So it takes this roomful of paper and puts it in cartridges of shoebox size. This is the kind of thing which was plaguing us, how to convert computer data to a random seek, readily available and readable form. So, we get all this output. How can we use it? Who can read it? Our Army Materiel Command is going to a micromachine program. `We have some of these microfilm readers in use in the field now-I think eventually we can take a shelf full of field manuals or technical manuals and reduce them to microfilm so that the unit in the field can carry them around in maybe not a shoe'box but a little bit larger size. This is an example of the type of thing we are looking for in the state of the art that will help us do our job better. Mr. ROBACK. It has been said in the Army and outside by some people who purport to be informed, that the Army is slow in this PAGENO="0192" 186 area, that is, in getting automated and standardized; and there are other people who have to deal with the equipments, and they say well, the Army in this case and in that case is really not prepared for it. They want the machines but they really do not know what to do with them. Those are different observations we have heard. What is your comment on them? General MILLER. Well, I would say "Yes," the Army is stow. And for a couple of reasons. I think General Heiser brought out in his testimony the other day that one of the reasons was what we call Project 80, the reorganiza- tion of the Army in 1962. We had a few things drop through the cracks as far as centralized control is concerned at the Department of Army Headquarters. This was recognized. The Deputy Chief of Staff for Logistics has now been given back this authority for centralized control over the Army logistics system, and particularly in this area. This was the reason for the establishment of my office. Mr. ROBACK. You have been fighting the reorganization for 5 years, I mean the problems. General MILLER. This is correct. I would say in a $20 to $30 billion annual business spread over all the world, you make haste slowly, and this is what the Army has done. Now I admit that perhaps in some areas we could have made haste faster, but we have also been fighting a war. We are supporting over 1 million men in Southeast Asia today with our logistics system. All of these things take time to do, but I want to assure you that we are on top of this and we are moving ahead. Our experience has shown, and I think the same is true of the other services, that no automated system has yet been put into existence and had the bugs worked out of it in less than a year and a half. Everybody looks at this beautiful machinery and says "Look what it will do." But when you come to the programing, the software pro- cedures that have to go with it, and feeding it into your system and getting your current basic system translated into this type of language, and then being sure that those bugs are worked out, because nothing is good, or I should say it is only as good, the product from that com- puter, as what the individual who is operating it puts into it. And we have found by experience that it takes at least a year and a half to pull the bugs out of the system. So I think by and large, assessing where we have been and where we are going, the Army is moving ahead pretty rapidly. Mr. HOLIFIELD. You depend upon civilian technicians to operate these computers; or are they service people? General MILLER. We have both, sir. We do not have as many mili- tary as we would like yet, and I am afraid that this is one of the fears that we have too. About the time we get a military man trained to operate one of these sophisticated machines, civilian industry is after him at about four or five times the salary, and we lose him. So this is going to be one of our continuing problems. PAGENO="0193" 187 We do not today, in my opinion, have throughout the military serv- ice sufficient in-house capability to do all that we want to do during this system's development phase at any rate of the systems. We have to rely in many cases on contract personnel in order to get it done. Mr. I{0LIFIELD. Are the military people that are in the program subject to assignment to different type duties periodically, or are they pretty well kept in that line of work specialization? General MILLER. They have been subject to other assignment, al- though we have an agreement with our Deputy Chief of Staff for Personnel that their MOS's be coded to indicate their automatic data capability, and during a shortage of these people, particularly in the critical skills, they are being assigned in the systems area. Now one of the tasks that my office has in the personnel and train- in:g element is to develop a program so that we will have career ladders in these fields in order to keep our military moving progressively along promotionwise, which may help offset this civilian industry appeal. How successful we will be, I do not know. Mr. ROBACK. Do you consider this management structure too com- plicated to work effectively? General MILLER. You mean the division of responsibility here? Mr. ROBACK. Yes. You have a lot of development. You have three major development entities, and then you have direction and control. Now there is no question but what you have direction. The question is, Do you have control? General MILLER. Yes, I think we have control. And I think this is a very good system. I will explain why. Our Combat Developments Command here is charged with the development of organizations and activities for the Army in the field. By that I mean they are charged with the development of how the division is going to look. How the corps is going to look. How the field army is going to look. Not only the logistical portion of this, but the combat portion of these activities; and so, therefore, it is perfectly natural that the logistics portion of this should be vested in the same agency. The Continental Army Command, as I mentioned, has the primary job of o1perating the posts, camps, and stetions within the continental United States, and the training centers and training areas. Therefore, it is logical that they should he the ones developing the system, what we might call the base system, and if you look at the Air Force system and the Navy system, they both have a division in that area between the operational elements in the field more or less, and those who are operat- ing the bases. AMC is responsible here for the Army wholesale system. The whole- sale system is that activity which goes to industry and procures the items needed. It stores them in depots throughout the continental United States and makes them available for issue. It is therefore logi- cal that their development and their activities and their systems are entirely different from the Army in the field. What we have to do from the Deputy Chief of Staff, Logistics, point of view is to make sure they all speak in a common language, so that the computer systems will intermesh from the bottom to the top. So I feel that the structure we have for this control for the Army is a 97-475--68----13 PAGENO="0194" 188 logical one, it is effective and it is efficient; and, as I mentioned in my statement, the peo;ple who ~perate these areas in the agencies involved here are constantly talking to one another, and having meetings, and they work on a common basis. EXTENSION OF AMC OVERSEAS Mr. ROBACK. From where you sit, and let's say from where AMC sits, the problems might look different. Do they believe that they ought to have control over the theater depots? This issue was discussed with General Heiser. There have been some study references. In his testimony there was a reference which he did not identify right there, hut I believe it was the so-called Brown report, was it not? Mr. LITMAN. It was a study entitled "Study of Extension of AMC Overseas." Mr. ROBAOK. Who made that study; was that AMC? `General MILLER. No; this was a Headquarters, Department of the Army, study. Mr. ROBACK. Was this a study that he said had some unrealistic conclusions? Mr. LUMAN. Yes. Mr. ROBACK. I wondered what were- General MILLER. I was talking to Mr. Luman before the committee assembled this morning about this particular facet, and the status of the study, because my office monitors the activities with regard to what is done with that study. It has been processed to the Chief of Staff of the Army, with a recommendation that the study results be held in abeyance unti,l the NAPALM program becomes operational. This was done for two reasons. First, we have a test of high-dollar-value items; that is, AMC's control of high dollar value items, going on now. These are some 1,780 high-dollar-value items that they are controlling worldwide. Second, the machines at the national inventory control points cur- rently are saturated. This is one reason we are going into NAPLAM as fast as we can, in order to take advantage of the greater capacity of the new machinery. Until it is installed, the NI'CP~s cannot handle the additional workload imposed by overseas extension. This is why we recommended deferment of action on the study recommendations. Philosophically the question of how far we should extend AMC is still debatable; because, as I mentioned, the key cri- terion to any logistics support system is responsiveness, specifically, response to the man `who is in command of that field unit fighting a battle, and such responsiveness must be geared to three things: time, distance, and geography. If you can do it geographically, `and I cited some examples where we could skip intermediate levels of supply, this is distance and time both. We `are devek~ping `automated systems today which are going to allow us, for example, to take a matter of hours to put a requirement from a unit in Germany hack to the national inventory control point; but the state of the art today does not allow the supplies to move to that man in the same time frame. PAGENO="0195" 189 We have it on the horizon. We are looking at this in the C-5A, our fast deployment logistics ships and so on. But you have to mesh these things together in the most economical fashion in order to get this response. Now if you move into the overseas theater, it is the same thing. We are not sure whether we would gain by extending AMO control to the depots in Vietnam at this time. We might or might not. The problem is the degree of responsiveness to the fellow that is out there forward in the field. Today you talk to any combat commander in Vietnam and he will tell you he has never had such support in his life. This is responsiveness to the field commander's requirements. The same thing is true in Europe. So what we have to do in study- ing this is ask ourselves what are we doing to our system insofar as responsiveness to the commander in the field. That is the final criteria. Mr. ROBACK. But when you get into a problem area as, for example, critical items or high dollar value items, you find AMC being ex- tended overseas in the selective sense; is that not so? General MILLER. Well, we are trying this as a test. We are trying this as a test to gain visibility. We have visibility worldwide today for at least the accountable reportable assets. Now when we get into our automated system that we contemplate here, I am not so sure where we will want to put the responsibility for those stocks. If we know at the national level where the stocks are, I do not think it makes much difference who is con- trolling in between. Mr. ROBACK. As I made clear to General Heiser, we were not neces- sarily arguing the case for AMC, but this was the thrust of the Gen- eral Accounting Office study, at least that there were some benefits to be gained. I do not know whether they made that kind of finding, but I think it was implied. Would you not say so, Mr. Luman? Mr. LTJMAN. Yes. Also, the AMC extension overseas study refers to these earlier studies and makes the same point. Mr. ROBACK. The Army studies and contract studies seem to be con- verging toward that kind of a solution, and so the question then comes up whether the issues are really not yet well enough defined or the problems are not yet well enough known, or is it simpl~ reluctance perhaps at your level to make a change like that? General MILLER. No. I do not think there is any reluctance to make the change, as I have tried to point out. We have not yet reached the point where AMC has the capability to do much more than they are already doing. Mr. ROBACK. Let me ask you this: Is that the logic of the evolution of the supply system in the Army, as far as the control of the theater depots is concerned? General MILLER. I am not sure I understood your question. Mr. ROBACK. The AMC control of the theater depot, is that the logic of the evolution of the Army supply system? General MILLER. No; I would not say that that is an evolutionary idea within the Army, because again I go back to our organizational structure, and we are studying this, for example, right now as you know in the 1980 time frame. We have not yet reached the state of the art within AMC, that per- mits extending them overseas command and controiwise and so forth. PAGENO="0196" 190 Mr. LUMAN. Could we talk to the philosophy of this for just a minute, General Miller? One of the accusations sometimes levied against the Army is that there is a heavy reliance on command prerogatives, sometimes to the detriment of efficiency, and some people say that your computers, for example, do not match because each command went out and got their own computer and designed it the way they wanted it and programed it the way they wanted it, and now you have them and they do not match with each other. The General Accounting Office and some others have said that you have the same problem here with overseas stockage, that there is a great reluctance to have the theater commander report his assets, because he is the man on the ground, and he is in command. And we have reports, one here that came out of Europe, for example, where the Army stated that permissive overstockage not to exceed ex- pected usage for 12 months is authorized. These stocks are not con- sidered part of the wholesale supply distribution system, subject to redistribution at the discretion of the CONUS NICP's, because they belong to the 7th U.S. Army, which is a tactical force having an as- signed military mission. Mr. ROBACK. Identify the study. VISIBILITY FOR CONTROL Mr. LIJMAN. This is the report to the Congress on the availability of selected stocks of the U.S. Army in Europe for requirements of other commands. Now this seems to be the Army's one position. In other words, the theater commander must have this authority, even including permission to overstock and not report the overstockage. On the other hand, as Mr. Roback has pointed out, you have these high value items, these crucial items which are already managed by AMC, and you have these intensive management items, some 35,000 of them, which General Heiser indicated AMC could require visi- bility reports on. So what is the philosophic attitude? Do you accept complete visibility or do you accept it in part? Do you want to see more or less of it? General MILLER. Yes; we want to see more of it, and more control over it naturally, because we want to know where these assets are, keep better control and track of them. I am not familiar with that report, but I feel that pei~haps there was some unfortunate worthng in there. I think that an examination as to why they were permitted this 12-month overstockage would show that those supplies were in-country. How they got there is not the point. Mr. LUMAN. The question at issue here, though, was that some of these items that they had overstockage on were crucially short some- where else. Because of the reporting system the inventory manage- ment did not know about this permissive overstockage. They were in- country, I am pretty sure, from the way the record reads. General MILLER. Well, the only reason for that would have been that it wa~ m~ore c~ost1y to return them than it was to leave them there to be attrited. PAGENO="0197" 191 Mr. LUMAN. Except the General Accounting Office makes the point that this is really a decision that ought to be made by the commodity manager who has to go out and perhaps let a new contract. If he knows, then he can discuss this with someone whether this action should be taken. GENERAL MILLER. I would pass this to General Klingenhagen be- ~~ause he is the functional manager in the supply and maintenance areas which, at the Department of the Army level, is the comptroller of this. ( General KLINGENHAGEN. The Army does have visibility on a quar- terly basis for about 80 percent of the dollar value of its items down through the depot level overseas. Now the case that you are talking about was 7th Army depots. Those have since been eliminated under the reorganization. The Army has given in March of this year authority to the NICP's to redistribute serviceable and unserviceable assets under the intensive management, and this includes about 70 to 80 percent of the dollar value of our inventory. Mr. LITMAN. These are the 35,000 items? General KLINGENHAGEN. That is right. They have full authority to direct an overseas commander to send those parts back to the States or to redirect them to another theater. However, this has only been given to AMC in March. I would say in answer to your question, "what are the trends?" the trends are for more centralization of authority and giving AMC NICP's more visibility. The degree to which we can give additional authority is dependent of course upon the degree to which we are able to give them visibility. Mr. DAHLIN. If you gave them power to redistribute, how do they get the information on which to base a redistribution? General KLINGENI-IAGEN. I say at the present time they get it through a quarterly report that we get on these items, and each NICP then can match what the assets are worldwide one against the other, and can redirect. Mr. DAHLIN. So each depot overseas has to do the same kind of op- eration that DSA is dQing back here in the States as far as matching and checking iteni~ of excess: is that the case? General KLINGENJ-TAGEN. That is right. Mr. LUMAN. This is what I did not understand. You say there are two reasons why you cannot have more visibility and perhaps overseas control. One reason is that AMC is not prepared to do it now. The other is that you have a wait and see attitude on your test. Can you state that the Army is this day progressing toward where they are going to have unlimited visibility? General KLINGENHAGEN. Yes, sir. I think we have varying degrees- Mr. LUMAN. That is your doctrine now, that you want to get corn- plete visibility? General KLINGENHAGEN. We have varying degrees of visibility, de- pendent proportionate upon the criticality of the item a~d the dollar value of the item. PAGENO="0198" 192 I would say over the past 5 years we are getting more visibility and giving AMC more control. I will give you an example. The T-53 turbine engine, in which prthably we have more money invested than any other secondary item in the Army, became critically short in supply 18 months ago. This is the engine that is installed in the Huey helicopter. The Huey buildup production rates were so high that we just could not get enough engines built at the same time. One of the first things we did a year and a half ago in order to get ~ visibility was to establish daily transaction reports on every T-53 engine by serial number wordwide exactly when it changes status. It ~ is reported into AVCOM, the responsible NIC'P. It is put into their computers. They know exactly when it is serviceable, unserviceable, when it is put on, when it is withdrawn, and where it is. Since that time we have extended this visibility to 20 high dollar value aviation items, which currently constitute 40 percent of the pro- curement dollar value of aviation repair parts. Therefore, we have this daily visibility, as you might call it, and we have given control to AVCOM for the same thing. Between that level of intensive management and the quarterly, which constitutes as II said about 80 percent of the dollar value of items-we have some items re- ported on a monthly basis. So I would say the trend is toward more visibility and more control. How far we go- Mr. LUMAN. That is not my question. In other words, assuming AMC gets this capability and they come in and say, "All right, our computers will handle it now. How about having the theater commanders report these assets to us?" Then what hanpens? You have a study that says you ought to do even more than this. General MILLER. This is right, and I believe that our overall infor- mation and management study, which is going on now, and should he finished in September, will permit us overall visibility as soon as we have these other automated systems me~hed together and in effect. De- pending on how far you want to go, and here you would have to study this from an efficiency and an economical point of view, there is no point in having reports on certain items where the expense of having the report is more costly than say throwing the item away. Mr. ROBACK. I think the discussion with General Heiser went along the line at one noint that if you had visibility, conceivably you would not necessarily have to have control. That is to say, if the information was readily available on what the assets were, you would not necessar- ily have to instruct, at least some authorities might believe you would not necessarily, as long as you knew about the information, that would be enough. You would not have to resolve the question of AMC control over the theater depots. General MILLER. I think this is to a degree true. As I have said, the key to the placement of control is responsiveness to the man in the field. The reason we have had theater stocks before is because the response time of the people involved in a theater of war was such that the com- mander there on the ground had to have those things under his control. Again, it is the same thing down at the division level. The division carries a basic load, which is normally anywhere from 3 to ~ days of PAGENO="0199" 193 supply. This is just to sustain his unit long enough for him to get a re- supply of his requirements. We back the unit up with a DSU which carries anywhere from 5 to 15 days, depending on circumstances. And then you have a general support depot behind the DSU, if your LOC is long enough, where you might have 15 more days in a mobile con- figuration. This is the response time. How long does it take you to get from the forward element who is using something back here to this fixed installation, whether it is on the theater shore or whether in the continental United States, and to get a resupply forward? These are the things that must be considered. As the state of the art changes, and you compress time and distance, and you compress the Atlantic Ocean, let's say, to a river or creek, by air capability, there are certain of these things that can be eliminated, and we certainly intend to do so. This is all in our planning, in our doctrine and our study. Mr. ROBACK. What I was getting at was this thought: that on the one hand it might be said that unless you had this kind of automatic information for visibility, you could not have AMC control over the overseas theaters. On the other hand, it might be said, once you get this kind of infor- mation, you do not need that kind of control. General MILLER. I think actually yes, depending on where you put your information. Again, this is one of the problems we have in our current management information study. How much data does a commander at each echelon really need to manage? Theoretically, if you have it all in a division data bank, for example, which we will have under the CS3 system through your com- munications to that machine down there, you can pull out everything you want to right back to the Department of Defense. But do they want all that detail there? Theoretically, you could control it right out of the Secretary of De- fense's Office, once this information system is put in. But is this feasi- ble? Is it desirable? Mr. R0BA0K. With some Secretaries of Defense, it might be tried. General MILLER. Of course this is one of the factors of automation, of centralized management. How far do you extend this control? Mr. ROBACK. This problem comes up with communications also. You get communications, let's say taetical communications where the man with a pack can communicate with the White House. You can see who is going to be running the platoon. COMPATIBILITY OF ADP SYSTEMS Mr. MOORHEAD. General, how does the meshing between the services in this system work? For instance in the case of common items, where the Marines had a surplus or a deficit, you ought to be able to call upon them or they could call upon you. General MILLER. Yes, sir. Mr. MOORHEAD. Do they mesh? General MILLER. I think that they will mesh, and I say it for this reason. Each of the services has a large number of its items managed PAGENO="0200" 194 by the Defense Supply Agency, and the General Services Administra- tion. We are deliberately, in the Army, standardizing our language- and I have attended several materiel secretaries' breakfasts where this was `discussed. The Navy, the Air Force and the Marines are doing the same thing, They are gearing their systems in the common language area, and this really in the overall, is controlled by DOD. The commonality of language will permit these systems to talk to one another at the De- fense level, and not only at Defense but at the whole Government level, because we have the General Services Administration to deal with. So I think `by and large, with that capability, at least depending on the communications circuit, you can talk to each other through our systems. This is not always necessary, but it can be done. For example, today in Danang theoretically you could have these machines capable of talking to one another. I would not say in all respects that the language at the present state of the art is that refined. I do not think it is. Mr. DAITLIN. General, we determined the other day that there were three different kinds of computers in Vietnam which did not talk to each other. General MILLER. Well, it depends. I do not know what they have there. Mr. DAHLIN. We found out, I believe, that the Navy had 1410 and the Army has 7010 and the Marine Corps has 360's. General MILLER. I will call on my expert, Mr. Taylor, to address that, but I would observe that it probably is because they are not pro- gramed at the current time in common language. Mr. DAHLIN. Is that the case, Mr. Taylor? Mr. TAYLOR. I was not here for the testimony referred to, but cer- tainly there are differences here in equipments, and I am sure that they are not commonly programed. But in indicating that they cannot speak to one another, are you saying, was the testimony to the effect that they cannot actually, in terms of inputs and output, address one another? This does not seem possible to me, because all of the services today operate under MILSTANDARD procedures, which require com- monality of documentation and communication. Mr. DAHLIN. I believe the testimony is that they are not. We can determine, or you can determine for us, whether they could, if some- body wanted them to. But I do not believe they are talking to each other, as I say, today. Mr. MOORHEAD. I think it would be helpful if you would find out and make a reply for the record. Mr. TAYLOR. Yes, sir; we will do so. (The information requested follows:) The separate service systems in Vietnam have a Thmiited capaMlity of "talking" to each other. This capability results from common service use of the DOD mili- tary standard requisition and issue procedures (MILSPRIP). The standard formats and codes under MILSTRIP are eommion to the programs for the varions types of ADPE installed by the different services. MILSTRJP permits the Air Force and Navy to requisition directly on Army sources in Vietnam, and vice versa, and assures that the subsequent shipment and hilling doenmen- PAGENO="0201" 195 tation generated by one service system is compatible and meshes with the other services. The supply management operations and the associated computer equipment within each service does vary. In this respect, the computer programs are dif- ferent and direct communication, computer to computer talking, is not feasible. There is no routine search across the various service su~~ply systems within Vietnam for assets against all service requirements generated within Vietnam. However, the unified command structure in Vietnam does result in exception management in the distribution between services of critical assets in short supply. Moreover, the common supply technique adopted for many items, wherein one service supplies the requirements for all services, is essentially a single supply system within Vietnam. Mr. LTJMAN. General, in your statement you point out on the last page that you have a realistic phased approach to logistics system development. I was wondering if you might mention a few phase lines here. Right above that paragraph is a statement that you are currently staffing an ADP management plan. I just wondered if you have any sense of the timing on when that management plan would come into effect. You mentioned on page 7 the SRI study. Are you saying here you are committed to taking action on the basis of this study? In the past the Army, for probably good reasons, has studied something and gotten a recommendation and then decided not to follow the recommendation of the study. I just wonder if you could discuss the phase lines: when you think the study is going to result in some change in the reporting system and when your ADP management plan is going to come out. General MILLER. I think we are a little premature in saying when we are going to change the system, because we do not have the results of the study or know exactly what is involved in detail at this point in time to change the system. We will have the completed study in our hands in September and I would say it is going to take us a while to analyze that, and determine what has to be done in order to change the system. I would not ex- pect anything to be changed much before January of 1969, and even that is rushing things a little bit. As far as our ADP management plan is concerned, that should be available around during August. Mr. LUMAN. On the study, you say you will have an analysis, but is it the current expectation that this is going to result in substantial changes in the reporting system? You feature it that way in your statement in one sense, you see. General MILLER. We have what we call a project advisory group which provides coordinated direction to each one of these studies. I happen to be the chairman of the advisory group for this study. While it will result in some changes, these will be long-range in na- ture, however, we are expecting some near term improvements which should be implemented almost immediately. In fact., some of these have been introduced into our division tests going on at Fort Hood and we are instituting these now. But I would say generally, that we have a course of action developed as a result of the study recommendations about the 1st of January, after we have studied all of the ramifications. We anticipate the man- agemeiit information system they are developing will be put into ef- PAGENO="0202" 196 feet in the 1970 to 1975 period which was the time frame stipulated in the study charter. EFFECT OF C-5A CAPABILITY Mr. ROBACK. Who is conducting the studies of the O-5A potential? Is that your responsibility? General MILLER. We have a paPt of it. We have LOG-ALOG study, that is the Air LOU. We are working rather closely with the Air Force in this regard to take advantage of this tremendous capability that we have. This is going to cause some revamping of our thinl~ing, the going from a 10-toll capacity to a. 100-ton capacity in one load. We have studies that are quite well down the track in this area. Our major problems are gearing our units and activities at either end of the line to take advantage of this capability, and we are working on those now. Mr. ROBACK. Do you conceive that this would eliminate some of the overseas depots? That is, if you had a well-developed C-5A capability and resource? General MILLER. I would say this, and again I go back to what I said earlier: that really we primarily are talking about repair parts and major assemblies, because I cannot visualize the bulk of our sup- plies going by air. Let's take, for example, today. At the time I left Vietnam not quite a year ago, we were feeding 11 million rations a month. We were receiving 85,000 short tons per month of ammunition. We were expending 2 million barrels of oil per month, and I mean bar- rels, not gallons. That is a tremendous tonnage. I do not know what we would require in the way of C-5A capability to lift that kind of tonnage. So I do not see at least in the near future, that we are going to go anywhere near an all Air LOU. I cannot even see it out in the 1985 time frame. Maybe it's simply beyond my perspective. What I do see is a very rapid response and a cut down of inter- mediate stockages on this very difficult to manage repair parts area. I will give you another for instance. I watched the 8th Aerial Port at Tan Son Nhut for a year and a half and this is one of the problems that we have to think about and face. They had berthing spaces for the equivalent of five C-141's and stor- age space to allow 4 million pounds to be put in there at any one time. This is about 2,000 short tons. That was a normal 3-day backlog of the in-country air capability to move it out of that port. And that 2,000 tons represents only 20 sorties o~f a C-5A. This is the kind of problem that we are looking at to determine how are we going to take maximum advantage of this tre- mendous lift capability in a theater of operations. It does no good to compress your time of delivery, if after you get it there you cannot distribute it. By the same token, we have problems on the other end. Where is this C-5A going to go to pick up that hundred tons of specific supplies that are needed by specific units in the theater on the other end? I cannot see a C-5A hopping around to 26 different locations in the United States picking up a little bit of cargo before it starts off, or we will have lost the effectiveness of this rapid movement capability. Mr. ROBACK. Maybe you need a LOGAIR type of operation in the United States. I PAGENO="0203" 197 General MILLER. As I say, these are the things we are studying and we have not gotten far enough along the track to determine just how we are going to take maximum advantage of this capability which is a tremendous one. 555 AND OSSS SYSTEMS Mr. DAHLIN. General, can one of your people describe what are the major differences between the Pacific 35 programs and the CS3 pro- grams, or just where the emphasis has been that has made the separate ~ efforts? General MILLER. I have the OS3 expert here. Mr. IDAHLIN. I see the good Colonel Humphrey who briefed us in a pouring rain last Thursday. General MILLER. Yes, Colonel Humphrey here. I would like to ask him to address that. Colonel Htn~iprnn~~. I thought we were going to have a real mobile show there that afternoon. I thought we were going to be out in the Potomac. Mr. IDAHLIN. The Army is always trying to get more of a navy. Colonel HUMPHREY. The current TJSARPAC 3*S system is oriented toward the USARPAC subcommands. The initial installations went into Hawaii, Okinawa, Japan, Korea. It since has been extended into the depots located in South Vietnam. 053 will address this area as another phase. It will get into this as the Army moves into the development of a standardized theater, Army-supported command system for the theater inventory control centers and the theater depots. This action is just comniencing, and I think it will be in the neighborhood of 30 to 36 months before you see the results of this development action. The purpose of the 053 action is to standardize worldwide at the theater level between Europe and the Pacific and between any other new theaters which might be established, whereas the current TJSARPAC effort is oriented toward standardization within the Pacific theater. Mr. DAHLIN. Was the limitation on the 3S program simply because it was using a 7010 computer, or what was the problem? Colonel HUMPHREY. No. Mr. DAHLIN. Why? Was not the 3S program flexible enough to do anything else with? Colonel HUMPHREY. Remember that 35, in itself, is a rather large undertaking. It took almost 2 years to develop that application. Mr. DAHLIN. We were told it would take 5 years. Apparently it takes 5 years to get any one of these programs put in. But let's talk about the flexibility. Is anyone sure that the CS3 hats enough flexibility to do what you want to do by the time the next 5 years go by? Colonel HUMPHREY. We think it does, sir. Mr. DAHLIN. What have you done to try to assure that? Colonel HUMPHREY. Well, CS3 has been tailored to support what is current U.S. Army doctrine. This is called PASTA 70. This has been a very large study and doctrinal effort by the U.S. Army Com- bat Developments Command. PAGENO="0204" 198 Mr. DAHLIN. Well, we suppose that by 1970 you will have TASTA 75. The problem is that in 4 more years, you are ready to have CS3 go in armywide, but by that time industry has come up with a brandnew set of computers that have all sorts of miniature memory and tiny computer capabilities. As you go along your track of miniaturization, whoever is the expert pushing that, what do you do then, start over again to develop a whole new set of programs for the new computers? Colonel HUMPHREY. No, sir. Mr. DAHLIN. How are they going to work? Colonel HUMPHREY. The way we stay abreast of this is that we are updating the TASTA 70 doctrine on a biennial basis, every 2 years. Mr. DAHLIN. Who is going to be doing that? Colonel HUMPHREY. The Combat Developments Command does this. One of the evolutionary changes which seems to be on the lioiizon is the elimination of the field army echelon of support that is shown on that long chart that you had in front of you. It appears with the advent of improved ADPE, communications, and transportation that we can cut out echelons, and the field army echelon appears to be the first candidate to be eliminated. Then, as we progress further, the three remaining echelons will have to be examined to see what changes can be made there in the division, in the corps, and in the theater support echelons. We do have enough flexibility in our systems design so that we can adapt to this sort of change. Mr. DAHLIN. It is not the Secretary of Defense who is trying to eliminate echelon. Your program is trying to cut out echelons so they can write the programs in each unit, is that it? Colonel HUMPHREY. Sir, we do not want to have any more echelons than are absolutely necessary. Mr. DAHLIN. Why? Colonel HUMPHREY. Because the echelons are expensive. Stockage is maintained there, and to some degree they slow up responsiveness. Mr. DAHLIN. And is uniformity easy to achieve between those echelons, or is that part of the problem in maintaining uniformity and compatibility? Colonel HUMPHREY. Uniformity and standardization is a very diffi- cult thing to achieve, and it is only because the field commands and the Army Headquarters have come to the realization that this is absolutely essential, and that we are working as a team to get it done that we are making any progress in this area at all. It is a very large and complex undertaking. But we are going to get it done. We ar~ going to have standardization in the Army's logistics systems. PURCHASE OF ADP EQUIPMENT Mr. DAHLIN. We understand that only one of the six CS3 computer installations was purchased, and this is the one for the Quick Reaction Center. Can you speak to that point of why this is the only one pur- chased? Colonel HUMPHREY. Yes, sir. It was the last acquired, and at th~it point it appeared that we were progressing far enough on the CS3 program where we should move from lease of the hardware into purchase of the hardware. PAGENO="0205" 199 Since that time though, the money situation has gotten tighter, and as I indicated to you all the other day, in fiscal year 1970 we will have to make a determination as to whether to buy the ADPE for the next 10 division systems, or whether to lease that ADPE, and I am sure that the decision will be dictated by the relative availability of moneys in the 0. & M.A. appropriation and in the PEMA appropriation. Mr. DAHLIN. Is it dictated oniy by the money, or are you going to have another competition at that point? General Klingenhagen, perhaps you could address that. Is this a problem where your various systems are locked in now to specific equipment? You seem to be standardizing in general on IBM 360-40's and 360-50's. Are there any of these programs that are developing going to be thrown open for further competition to see what industry can work out in the way of economies or improvements, or are you pretty well locked in here on some of these? General MILLER. I would like to defer an answer and furnish an ar~swer on that because this is controlled above our level. Mr. DAHLIN. You say controlled. Does that mean you do not plan these things? General MILLER. No. Our planning includes guidance for the devel - opment of systems specifications which form the basis for competitive selection of ADPE. (Additional information furnished for the record follows:) Army responsibilities, policies, and procedures for the selection and acqui- sition of ADPE are prescribed in Army Regulations 18-1 and 18-2. These pro- cedures provide for: Preparation of systems specifications `consisting of all data to be maintained, output, input, and description of processing. These specifications are submitted to the Assistant Vice Ohief of Staff, Headquarters, Department of Army, for staffing and approvaL The approved specifications are sent to the Comptroller of the Army for solic~tation of vendors' proposals. Evaluation of competitive proposals submitted by vendors. In evaluating the proposals, the primary objective is to insure selection of computers and software that meet all the requirements of the systems specifications and that are most advantageous to the Government. Sole source procurement only when the facts are clear and unmistakable that such action is warranted and would be in the best interests of the Govern- ment. This authority is normally retained by OSD but is delegated to the As- sistant Secretary of the Army (Financial Management), `the Army senior ADP policy official, under certain specified conditions. These procedures will be followed for the standard TASCOM system under development at TJSACDC. It is planned that future upgrade of ADP systems will follow these competitive selection procedures. Mr. DATILIN. The only selection you have listed as pending here is the one for `SPEEDEX. For the rest you have either a listing for some kind of equipment or something for the future. What I was trying to address was not the question of what the most current selection problem is, but is there any qualitative or quantita- tive planning that you take steps at some particular time to update the whole program or system that you are putting in. Could you throw it open to industry and see what kinds of new results you might get, rather than simply going down the road with whatever you are start- ing with right now? PAGENO="0206" 200 General MILLER. As I mentioned during my statement, we are stand- ardizing the language that is used in these activities. You know that initial input to most computers by means of a card, so that the language which is used on that card is being standardized not only within the Army but throughout the Department of Defense as well as the De- fense Supply Agency and General Services Administration. These are the things we are doing in standardization, and I do not think it makes any difference who gets the hardware. Mr. DAIILIN. No, I think with the number of vans you have running around with the 053 equipment, it will make quite a difference how much lighter that could be in the future- General MILLER. I certainly agree. Mr. DALTLIN (continuing). Rather than charging around the land- scape with all of that hardware. General MILLER. I agree and we would certainly be the first who would want to `take advantage of that. Mr. DAHLIN. But your answer is the same as the colonel's. It de- pends on the money as far as you are concerned. General MILLER. That is right. SUPPLY DOCTRINE Mr. LUMAN. Comparing your system with that of the other military services, General, apparently you have a somewhat different relation- ship between the supply man and the commander than the other serv- vices do. Some of the things that have been pointed out in the GAO reports appear to rest somewhat on this. For example, units are not turning in some spare parts that they should. When they draw a new item they do not turn in the reparable spare part. Sometimes the supply activity writes a letter and nothing happens. You get people who send in high priority requisitions for items which do not justify such priority. Is it in your purview to examine these kinds of problems and try to figure out how to give the supply man a little better leverage so he can insure that his customers follow the regulations without inter- fering with the command structure General MILLER. Yes, I will answer that two ways. The primary responsibility for that of course is in General Kling- enhagen's shop, who is the functional manager of the supply system. However, our office assists him in this in the development of new sys- tems, improved systems, in order to eliminate that sort of thing. Furthermore, I have another activity which is not addressed here as a part of my shop which is the readiness `portion. Readiness in this sense means an examination of the methods, procedures and the status of equipment and facilities of the units in the field, and I have readi- ness teams that go out regularly to inspect these things, and they come back and make reports to the functional manager that enable him to correct the situation. Mr. LUMAN. Who would come up, for example, if you decided that with the advent of increased data processing there was going to be more centralization of the supply function and the supply man needed more leverage. Where would a study be generated to take a look at the supply man's role compared to the other services and to see whether or not he should report through supply channels? PAGENO="0207" 201 General MILLER. These are the primary activities that are charged as I mentioned here to our logistics doctrines and systems office, which Mr. Taylor heads up here, and also assisting that is this group of experts that I have up at New Cumberland in the field agency who actually conduct many of our studies. We attempt to conduct as many of these as we can in-house. Oc- casionally we get swamped beyond our capacity. In trying to catch up we go out on contract, or we go on contract where we need a particular kind of expertise which we do not have built in-house. But generally, these are in-house type studies. General KLINGENHAGEN. May I try to address your question? The question of leverage for the supply man, I think the primary leverage is where the supply man can secure sufficient data as to who is not complying with regulations, who is not returning reparables. This is the greatest thing, because the supply man is normally also an adviser to the commander. Any time that he has sufficient data to show that a man is collecting unserviceables in the field, he can go to the commander that he is supporting, like General Heiser will be Com- mander of the 1st Logistics Command. As soon as he ha~ visibilities that somebody is collecting unserviceables, he will go to his commander, who will be General Mildren or General Palmer, right now, saying this man is collecting it. That is all the action it takes. The commander will move him out right now. The extent to which this visibility is being secured at the national level over the past year I would say we have had 50 percent improvement in the return of reparables from overeas on `the basis that we get a monthly report of unserviceables at the depot level overseas, and this is right in Depart- ment of the Army Headquarters we have this information available to us. When we see that these unserviceables are not coming bac~k, we send a directive in the name of the Chief of Staff of the Army, get those things back. The NICP's at the same time are getting those monthly reports, and analyzing them. They are responsible also for the over- haul program to make sure we get enough unserviceables back to keep feeding the overall program. When they see the unserviceables are coming down, they have reports that tell them overseas now whether a man has unserviceables, and he can, he has the authority also to direct the return of those unserviceables. So I think as our ADP is giving us more information at the NICP level and at our level, we then can exert authority, and the supply man has all the authority he needs in the world. It is a question of giving the visibility to do the directing, to do the controlling. Mr. LTJMAN. Do you feel you have enuogh today? Do you have enough communications capability for logistics purposes? I~ other words, do you have enough entries into AIJTODIN or would you like more to run an effective centralized supply system? General KLINGENHAGEN. I `think the supply man would like to have more. We would like to have always more visibility. The question again is, is it cost effective? The more information we pour into the NICP's, can we put it in the machine so it will bounce out on an exception basis and tell this man something is wrong here? But we cannot expect to' hire enough people to review all of these reports, and this is basically the problem. At PAGENO="0208" 202 what point is it cost effective? You can get beyond the point of diminishing returns, and I think all the services will agree. In reading the Air Force's testimony for example, that going beyond about an 80 percent control, in terms of dollar value, is a point of diminishing returns. It costs you more to get the information and use the informa- tion than what the item is worth. And I guess this is really what we are in the throes of. Where is the point of diminishing returns? COMM1JNICATIONS FOR LOGISTICS Mr. ROBACK. I think the question also concerned the adequacy of communications for logistics purposes. You are centralizing and standardizing, at least that is your objective, and some observations have been along this line: that logistics communications takes a low priority, and these observations have also been along the line that we really ought to have a dedicated logistics circuit. These are the types of questions. When the IDCA and General Klocks were here to talk about world- wide communications on a different problem, we raised the question with him as to what they are doing in the way of responding to re- quirements for logistics. We thought that if there was a problem here, we might intercede with DCA to get you a little more capability. General MILLER. I do not think there is a problem in that area, and I say it for this reason: We are being forced to consider the communi- cations requirements at the time we develop the system and get the AIDPE, and the reason why is pure and simple, dollars. It costs money to buy this equipment. And to take maximum advantage of its use means that you have to be able to communicate. So today in every study that we conduct, we have a member of our communica- tions staff who sits right with us. I have had occasion to see this in this new system we are putting in Europe today, for example, or taking advantage of the division tests we just conducted, the communications people go right along with the developmental teams. You must have the communications and they have to go hand in glove with the APP machinery. And so I would say by and large yes, we do have adequate com- munications as far as we have gone. Now our system becomes more sophisticated, the more we stretch, and this is out in the future, I do not know what the communicators would say because we have not really expressed our total requirements to them yet. Mr. LTJMAN. There is a statement, for example, in the study on extension of the AMC overseas about getting more visibility, which requires more reporting from overseas, to the effect that this would re- quire an expansion of the ATJTODIN. This is somewhat dated. I do not know whether that expansion has been made yet. But if you decided to have this greater visibility, and perhaps control, which would require more reports, is the present communications system sufficient or would you have to go in and get more? Would that be a block to what you might eventually decide is a better way to manage? PAGENO="0209" 203 General KLINGENHAGEN. I am not competent to answer that ques- tion, because I do not know the overall present capability of our communications system. All I can say to you is that today we have no problems with our systems, our logistics systems as far as communications are concerned. Mr. LTJMAN. But you are flying tapes, for example, from the 14th ICC back to the States instead of sending them over a voice circuit. General MILLER. I will tell you why; it has to do with atmospheric interference. We could not send requisitions by transceiver the whole time I was in Vietnam for a year and a half, without losing about 35 to 50 percent of the transmission due to atmospheric interference be- tween Vietnam and Okinawa. If we tried to go to Hawaii it was even worse. Mr. LTJMAN. Is that not a communications problem, when you have a situation like this? General MILLER. Yes; and they are updating our communications system worldwide to take care of this. I would think-and again I am not competent really to answer in this area-I would think that with more satellite communications, or systems where we can eliminate this atmospheric interference, the question then becomes one of how many circuits do you have that are capable of being used, let's say for logistics or administrative resasons. So far we are not short of communications capabilities in our system. Mr. DAHLIN. General, there are a couple of items that we need to be supplied with. One is an Army Audit Agency report on the high priority requisitions being reduced from 80 percent to 30 percent that was referred to. Can you have your people supply that for the record? General MILLER. Yes. General KLINGENHAGEN. Was this for Vietnam reduction, the high priority for Vietnam? Mr. DAHLIN. That is right. (The information requested follows:) AUDIT REPORT-ARMY'S SUPPLY SYSTEM FOR SUPPORT OF VIETNAM (U) (CLASS II AND IV MATERIEL) REQuISITION PROCRSSING A. AAA identifted pro7flem Area.-(Par. 5, p. 110.) The Army supply system is overburdened with high priority (issue priority groups 1 and 2) requisitions. For the first 2 months of calendar year 19G7, 53 perecnt of all requisitions due for shipment were high priority requisitions. During the same period, 87 percent of the requisitions for Vietnam troop support were coded high priority. B. AAA recommendation.-None. C. Comand comments.-lst Logistical Command, USARV. Unit low priority requisitions for ASL items which cannot be satisfied by the receiving DSU's and depots are backordered; high priority and fringe requisitions which cannot be satisfied by the receiving DSU or depot are passed to the 14th ICC. High priority requisitions referred to the 14th ICC which cannot be satis- fied by referral to other than the receiving depot are passed together with fringe and bulk replenishment requisitions to 2d Logistics Command. The percent of high priority requisitions (issue groups 1 and 2) received and passed through more than 100 separate DSU's throughout Vietnam are not read- ily available. Of the 1,054,100 requisitions, received by in-country depots during the period June through August 1967, 26.3 percent (277,400) were high priority. Of this 97-475-68---14 PAGENO="0210" 204 number 78.6 percent (218,000) could not be filled by depot and were passed to the 14th ICC. Of the 218,000 high priority requisitions received by the 14th ICC during the period June through August 1967 48,200 were referred for fill within country while 169,800 were passed to the 2d Logistics Command. Of the requisitions passed to the 2d Logistics Command during this period by the 14th ICC (high priority, fringe, and replenishment) 37 percent were high priority. In consideration of the above and the fact that a large number of different high priority requisitions are generated by units on a single widely distributed item-e.g., watches and tropical boots-which are passed to CONEIS supply source when a zero balance exists in-country and 2d Logistics Command, the percentage of requisitions which are high priority does not appear unreasonable. The percentage of high-priority requisitions processed out of Vietnam should be further improved by plans to hold FIA general materiel category high-priority requisitions which cannot be filled by 1st Logistics Command depots on depot due- out and cover by a consolidated 14th ICC requisition for delivery to the depot. The restrictions established by AR 735-35 on the assignment of high issue priority designators has been implemented by a similarly numbered USARV regu- lation dated June 9, 1967. The implementing regulation required that each unit commander will insure that prior to the asulgnment of Issue priority designators 02 through 10, an objective evaluation is made of the Impact that the lack of the materiel can have an accomplishing the unit's mission and required unit com- mander's signature authentication on the requisition and unit document register. This implementing regulation also makes the assignment of Issue priority des- ignators a special subject to be reviowed by Inspectors general and other inspec- tors. To assist commanders in the execution of the above-described responsibilities, arrangements are being made for support activities to bring to their attention the percent of high-priority requisitions received by depots during the preceding month. Support activities will also inform commanders of requisitions which they identify as having questionable priority designator assignments. USARPAC comments The action taken by 1st Logistical Command is adequate. D. 2d Logistical Command, USARYIS. Command comments Following are statistics extracted from 2d Log Comd files for the period 1 July 1967 to 16 September 1967. (a) Statistics: (1) Total requisitions received from RVN for supply action: 439,102 (2) RVN requisitions IPG I: 97,342 (22%) (3) RVN requisitions IPG II: 88.031 (20%) (4) RVN requisitions passed to CONTJS IPG 1: 41,090 (9%) (5) RVN requisitions passed to CONUS IPG II: 61,737 (14%) (6) RVN requisitions rejected or canceled IPG I: 6,496 (7% of IPG I) (7) RVN requisitions rejected or canceled IPG II; 10,100 (11% of IPG II) (b) RVN requisitions are carefully reviewed prior to rejection by this com- mand. Although no precise statistics are recorded on reasons for rejections, ex- perience shows that most rejections are due to absence of data or garbled data in fields which cannot be corrected. TJ~ARPAC comments The action taken by 2d Logistical Command is adequate. DA comments For over a year now DA has emphasized to commanders the necessity for con- tinuous attention to and compliance with prescribed priorities policies and pro- cedures. TJSARV's emphasis of supply discipline and enforcement of the pro- vision of AR 735-35 pertaining to unit submission of high-priority requisitions has resulted in significant reduction in priority requisitions (from as high as 63 percent in calendar year 1966 to 53 percent in January to February 1967, to 37.9 percent in July to September 1967). DA is also developing an AR on supply dis- cipline which directs continuous audit and annual review of this area. This sub- ject will continue as a special area of interest and followup. PAGENO="0211" 205 1st Logistical Command-Progress report, December 31, 1967 (a) 858,238 requisitions were received during the period September to Novem- ber (previous report showed 1,054,100 requisitions received). (b) 271,635 of all requisitions received during September to November were high priority (previous report reflected 277,400 of all requisitions were high priority). (c) 112,122 could not be filled by receiving depot and were passed to 14th ICC (previous report showed 218,000 could not be filled by receiving depot and were lassed to 14th ICC). (d) 12,618 were referred for fill in-country (previous report showed 48,200 were referred for fill in-country). (e) 99,504 were passed to 2d Logistical Command (previous report reflected 169,800 were passed to 2d Logistical Command). (1) Of all requisitions passed to 2d Logistical Command by 14th ICC (high priority, fringe, replenishment) 3.9 percent were high priority (previous re- port reflected 37.9 percent). * U$ARPAC comments-Progress report, December 31, 1967 Statistical data which reflects the requisitioning volume of IJSARV organi- zations upon their depots and those high-priority requisitions passed out of Vietnam is furnished below: Period Total requirements received High priority requirements received High priority requirements as percent of total High priority requirements passed out of Republic of Vietnam Percent high priority require- ments passed June through August September through November 1,054,100 855,200 277,400 271,600 26 31 169,800 99, 500 61 37 Although the volume of high-priority requisitions increased with respect to total requisition volume, action by USARV reflects favorable progress in achieving fill from USARV assets. DA. Comments-Progress report, December 31, 1967 DA is not satisfied with the volume of high-priority requisitions still being V received by in-country depots and has requested USARPAC to take additional action to make reductions expeditiously and permanently. Specifically IJSARPA.C has been requested to assure that support activities bring to the attention of commanders requisitioning units/activities the number and percent of high priority requisitions (IPG I and II) received by depots during the preceding week. The commanders of these requisitioning units/activities will be required to report within 5 workdays as to the various causes for these high-priority requi- sitions whenever the percentage of IPG's I and II exceed 25 percent of the totaL On a monthly basis, TJSARV (1st Logistical Command) will review the above reports to identify problem areas and assist the support commands (Depots/ DSU's/Units) to minimize/eliminate the causes resulting in over-use of high- priority requisitions. This will also be included as a major item of interest for all future IG inspections and AAA audit trends worldwide. The above concept is being formalized into appropriate AR's (AR 711-16 and AR 735-35) as a formal, uniform policy armywide. UIS~ARPA C-Progress report as of March 31, 1968 1st Logistical Command, USARV Command Comments (a) 743,190 requisitions were received during December to February. (Previ- ous report showed 858,238 requisitions received.) (b) 221,404 of all requisitions received during December to February were high priority. (Previous report reflected 271,635). (c) 97,647 could not be filled by receiving depot and were passed to 14th ICC. (Previous report showed 112,122.) (d) 26,370 were referred for fill in-country. (Previous report showed 12,618.) (e) 71,277 were passed to 2d Logistical Command. (Previous report reflected 09,505.) PAGENO="0212" 206 (f) Of all requisitions passed to 2d Logistical Command by 14th ICC (high priority, fringe, replenishment) 29.9 percent wei-e high priority (previous report reflected 35.9 percent). U~ARPAG comments Review of 1st Logistical Command comments for period December to February indicates a 2-percent improvement since the last review in the number of high- priority requisitions initiated by customers within Vietnam; and also a 5-percent reduction in high-pr~orit~ requisitions passed to 2d Logistical Command. This continued improvement on the part of Vietnam reflects favorably on that com- mand's efforts to reduce the number of high-priority requisitions at each echelon. Even this small improvement is considered commendable under conditions exist- ing in Vietnam at this time. However, further action will be taken by this head- quarters as directed in paragraph 2 of DA letter 16017, LOG/SP-PPB, dated March 15, 1968, subject: USAAA Audit Report, Army's Supply System for Sup- port of Vietnam (Classes II and IV Materiel)-Status Report (ROS CSCPR-6). DL comments-Progress report as of March 81, 1968 The continued improvement on the part of Vietnam reflects favorably on that command's efforts to reduce the number of high-priority requisitions at each echelon. At the time of the audit, 87 percent of the requisitions for Vietnam troop support were coded high priority. During the period December to February, 29.9 percent of the requisitions received were coded high priority; this represents a reduction of 58 percent since the time of the audit. The command's response and the corrective actions taken should control the overuse of high-priority requisitions, and preclude recurrence of the deficiencies found by the AAA. Recommend that this item be closed. Mr. DAHLIN. Also, do you have, first, the criteria for the selection of the 1,700 items for the AMO ownership test, and, if there is a small printout of what collective group of items are in that, we would like to have that. General KLINGENHAGEN. Right. (The requested information follows:) SELEcTIoN CRITERIA FOR OASIS ITEMs Items were selected for inclusion in the test of USAMC ownership and account- ability based on the following criteria: (a), Super high dollar value USAMO managed secondary items having a projected annual demand of at least $100,000. (b) Authorized for stockage by AMC Commodity Command based on recurring demands or essentiality. (c) Item criticality due to such problems as supply status, high unit cost, or procurement difficulties. (d) Inclusion of both preferred and all authorized substitute items. PURA PROGRAM Mr. DAITLIN. General Heiser noted that he was the project coordinator for PTJRA. and the committee has had a request for some time to get the first report of the PURA project to see what actually was going on. I do not believe the record yet shows what you have actually found from the first PURA round of activity. Do you have that now or has that still not been supplied from the field? General KLINGENHAGEN. We have a report from the field, and we have submitted a monthly report to the Secretary of Defense. I think that probably we should have this cleared with the Secretary of Defense. Mr. DAITLIN. Can you give any highlights at this time of just what the situation is? General KLINGENIIAGEN. Yes. PAGENO="0213" 207 We have reported and have among the records of .PURA about $87 million worth of items. This is for the period of April and May. In April there was $37.8 million, and we redistributed to other services $1.4 million for the month, and then in the month of May we have identified and picked up on the records an :additional $50.6 mil- lion worth of items. Mr. DAHLIN. Are the bulk of these transactions all completed in the field in Vietnam or are they going on at Okinawa or is the matching done hack here? How is that working? General KLINGENHAGEN. This that I have just reported is done com- pletely at Okinawa. Mr. DAHLIN. All at Okinawa? General KLINGENHAGEN. Where it is being accomplished inter- service between the Air Force, Navy, and Marine Corps. Mr. DAHLIN. That would seem to indicate that is the first echelon where they talk together, is it? General KLINGENHAGEN. This is the first echelon as far as the official redistribution between services. Now the Army is talking to the Air Force and Navy within Vietnam. Mr. DAHLIN. I mean as far as redistribution. General KLINGENHAGEN. Yes. Mr. DAHLIN. This function? General KLINGENHAGEN. On redistribution. However, the extent to which there have been redistributions in Vietnam I do not believe we have that information yet, do we? Colonel DASKEVICH. No, sir; we do not. RELATIONSHIP WITH PSA Mr. DAHLIN. There is one point at which the testimony concerned the field concept studies that are going on. Someone was charged with the task of studying the evaluation of mission assignments to DSA. Is the Army concerned with the general question of whether more assignments should be made to DSA or whether things should be with- drawn? `What is the purpose of studying the evolution of these assignments? Mr. ZENGERLE. The only thing we have been concerned with- General KLINGENHAGEN. This is Mr. Zengerle, in the Office of the Assistant Secretary of the Army for Installations and Logistics. Mr. ZENGERLE. We have been concerned with item coding as a process. Mr. DAHLIN. Are you still having trouble with that? Mr. ZENGERLE. Well, of course the question of evolution here of the coding gets you into a situation where you are not exactly sure whether you have done it correctly the first time. You take the Hawk system, for example. We have now coded the DSA, 7,500 items that will deadline the Hawk system. Mr. DAHLIN. Do you think that is a mistake? Mr. ZENGERLE. Well, this is what we are reviewing, whether it is or it is not, because we now have the Hawk under a stovepipe system. And I think we are going through a reassessment at the moment in terms of the initial- Mr. DAHLIN. Are these nuts and bolts or electronic tubes and this kind of thing? PAGENO="0214" 208 Mr. ZENGERLE. The question is whether they are assemblies or whether they are integral parts of the Hawk system or whether they are nuts and bolts. We will have to determine that. The assumption that they might deadline the equipments would indicate that they are rather integral to the system itself, in the recog- nition that item management coding being accomplished by many thousands of people, item managers across our TCP',s CONUS-wide, and whether there has been uniform application of the item coding procedures has to be reassessed in terms of individual equipments, and perhaps the readiness information that we have pertaining to those equipments on a worldwide basis at the moment. This is where the reassessment would be effected. FUNDING FOR WAR RESERVES Mr. DAIILIN. Last Tuesday General Heiser was talking about AMC's responsibility for determination of war reserve requirements in the overseas theaters. Does the Army perform this function in the same way as the other services? Second, is there any real problem as between any confusion about what constitutes the war reserves, how much it is going to be, or getting levels down to a changing war? Is it fitting into part of the excess problem, or is there any special significance to his discussion of that problem? We heard that you are handing some of the war reserve stockage over to GSA where they handle those items. I gather the responsi- bility for stockage in this type has to go along with the item when the item is transferred between different managers for different inten- sities of management. Is that the case? General KLINGENHAGEN. AMC does compute war reserve require- ments for both the items it manages as well as the DSA and GSA items. They then pass these requirements on to DSA and GSA for the particular items that they manage and they (AMO) have at each DSA and GSA and in TOP liaison people to work with them in the war reserve requirements. As far as comparing it with the way the other services are comput- ing their war reserves, I am really not familiar with how the other services are computing their war reserves. I believe General Heiser was trying to present the fact that AMC does have considerable to say about worldwide management of items on a worldwide basis, including and computing the war reserves, and when they compute the war reserve, they do submit to the theater commander what these require- ments look like, and the theater commander does have an opportunity to comment on the adequacy of the requirements as computed. Now, AMC a~lso of course funds for itself Army items as wefl as P5k and GSA, funds for the items that are kept in the war reserves, so this is why AMC is kept in the war reserve requirements business. TRI-SERVICE APP LOGISTICS COOPERATION Mr. DAHLIN. I think this might best be directed to General Miller with respect to your structure for logistics system development, and this is the problem of direction and control and coordination. Do you see `any need for further efforts at creating an office or would you support the efforts ~of the Department of Defense to develop a PAGENO="0215" 209 separate office to provide more planning and coordination in this area between the three services? Do you think that is a future need that the services are still building towards, until you get this compatibility problem whipped a little more? General ni~n. I think that our present system of checks and balances on the development of the systems and insurance of their compatibility is sufficient at the moment. Each service has its own peculiar requirements for certain things, and they do differ in many respects, although you could draw some sort of a comparison between let's say echelons and in general organiza- tions. I cite an example. You might say a guided missile cruiser might be comparable to an Army division, for example, insofar as its self-sufficiency is concerned. Mr. DAHLIN. I hope they do not have to drag that CS3 equipment along. General MILLER. Well, as a matter of fact, that computer equip- ment is installed onboard the ship according to the Navy testimony, and it is rather easy to carry. Mr. DAHLIN. Perhaps they are saved by the integrated management of air conditioning. General MILLER. But by and large I feel that the systems we now have developing within the service have sufficient checks and balances, and directed common language that will insure their compatibility. I would think there would be no need for a centralized direction, and they would have a horrible time trying to direct all the different systems used by the services to fit their own peculiar needs. We have a hard enough time in the Army, my office does, in being sure and controlling the system of the Army in the field, which is different from the Continental U.S. Army Command post, camp and station system, and the AMC wholesale system. And yet we have to stay on top of all those to insure that they are compatible. SUPPLY PERSONNEL Mr. ROBACK. What are you doing in the manpower field? There was some discussion by General Heiser on that. Is this a serious prob- lem or is this a routine problem? General MILLER. Well, it is a serious problem in this regard to us. We want to insure in the logistics area that we have career patterns and career ladders for the people who want to enter these fields, and this is both in the military and in our civil service employee programs. We must insure that the young man that we want to get into the sys- tems area has a clear, visible ladder up which he can go in his career. This means then that we also have to study required levels of train- ing that will enable him to advance in his job, so that at the top, hope- fully at the peak, we will have a logistician, an individual broad fr enough in scope and in training to participate in management of the whole system. Mr. ROBACK. Does this involve incentives? General MILLER. To a degree incentives, but I think it is even more than that. I am sure you have had experience with your youngsters, as I have with mine, looking forward to what they want to do. They want to see something that if they go into this certain area, as a young PAGENO="0216" 210 man or a young woman, will answer the question: "Where am I going to go if I adopt this as a career We have the same problem here. Mr. ROBACK. And there is also partly the problem with the military classifications too, is there not, `that is to say the incentive for officers in the supply area? General MILLER. Well, I do not think it is so much incentives for the officers. I would say it is more in the enlisted area. They get into the proficiency pay, and certain training and `schooling that they have. An officer is generally looking forward to the time when he can become the manager at the top. This is his goal. lie is not so much geared to incentives as he is to training, schooling, and the capacity, when he gets to the peak of his career to manage the whole thing. Mr. ROBACK. And will this require the development of a new, I mean rather drastic change in, approach? General MILLER. No, not `drastic change. It is to insure that in our redevelopment of these systems, in our realinement of things, that we do not drop things through the crack, `and that we improve wherever we can. I am `sure you recognize that with the new innovations in civilian industry, for example, and particularly with our civil service em- ployees, we are in a terrifically competitive field, and unless our em- ployees have a visible career pattern, we cannot attract young men to these jobs. They want to know where they are going. Mr. ROBACK. This is the subject of this Defense manpower program? General MILLER. Thi's is what Mr. Morris is looking into by assz~m- bling this group. Mr. ROBACK. Mr. Chairman, it is the noon hour. Tomorrow we will have the Defense Supply Agency representatives. We will ask the Army to supply information that we have requested, either in this or in previous hearings, and if there is any question about whether some of the items have already been covered, that will be taken care of by consultation with the staff. Mr. MOORHEAD. Thank you very much, General. We appreciate your testimony. The committee will stand in recess until `tomorrow at 10 o'clock. (Whereupon, at 12 noon, the committee recessed, to reconvene at 10 a.m., Tuesday, July 2, 1968.) PAGENO="0217" MILITARY SUPPLY SYSTEMS TUESDAY, JULY 2, 1968 HousE OF REPRESENTATIVES, MILITARY OPERATIoNs SUBCOMMITTEE OF TIlE COMMITTEE ON GOVERNMENT OPERATIONS, Washington, D.C. The subcommittee met, pursuant to recess, at 10 a,m., in room 2247, Rayburn Building, Hon. Chet Holifield presiding. Present: Representative Chet Holifield. Also present: Herbert Roback, staff administrator; Douglas Dahlin, counse], Joseph Luman, defense analyst, and Paul Ridgely, investigator. Mr. HoLu~IEw. The committee will be in order. We will continue our hearings this morning on the military supply systems. We have as our first witness Admiral Haddock of the Defense Supply Agency. You may proceed with your statement, Admiral. STATEMENT OP REAR ADM. I. P. HADDOCK, U.S. NAVY, ASSISTANT DIRECTOR, PLANS, PROGRAMS, AND SYSTEMS, DEFENSE SUPPLY AGENCY; ACCOMPANIED BY COL WILLIAM H. MURRAY, U.S. ARMY, CHIEF, PROGRAMS AND POLICY DIVISION PLANS, PRO~ GRAMS AND SYSTEMS DIRECTORATE; AND JOHN C. RIMEUS, ASSISTANT CHIEF, SYSTEMS DIVISION PLANS, PROGRAMS AND SYSTEMS DIRECTORATE Admiral HADDOCK. Thank you, sir. Mr. Chairman and members of the committee, I am Ira F. Haddock, rear admiral, Supply Corps, U.S. Navy, Assistant Director, Plans, Programs, and Systems, Defense Supply Agency. I have held this position since September 1967. Before my prepared statement, I would like to introduce the mem- bers of the headquarters staff who are with me today, Colonel Murray from the Defense Supply Agency Headquarters, and Mr. Rimkus from the same headquarters. (Biography of Admiral Haddock follows:) BIOGRAPHY OF REAR ADM. IRA F. HADDOCK, SC, USN, ASSISTANT DIRECTOR OF PLANS, PROGRAMS, AND SYSTEMS HEADQUARTERS, DEFENSE SUPPLY AGENCY Ira Fredrick Haddock was born in Blairsville, Pa., on April 23, 1914, son of Mrs. lola Turner Haddock and the late L. (I. Haddock, Sr. He attended East High School in Akron, Ohio, and from April 1932 until July 1934 had enlisted service in the U.S. Navy. Entering the U.S. Naval Academy, Annapolis, Md., from the Naval Academy Preparatory Class at the Naval Training Center, Norfolk, Va., in July 1934, he was graduated with the degree of bachelor of (211) PAGENO="0218" 212 science and commissioned ensign in the TJ.S. Navy on June 2, 1938. Transfarring from the line to the Supply Corps of the Navy 2 years later, he subsequently attained the rank of rear admiral, SC, USN, to date from July 1, 1964. After his enlistment in April 1932, he had recruit training at the Naval Training Center, Great Lakes, Ill., and a year's service at sea on board the TJ.S.S. Nevada, before training at the Naval Training Center, Norfolk. After graduation from the Naval Academy in 1938, he was assigned to the U.S.S. Rielvmond, in which be had duty as signal officer and in a gunnery division from June 1938 until July 1940. After brief instruction in the Bureau of Supplies and Accounts, Navy Department, Washington, D.C., he was a student at the Supply Corps School, Bayonne, N.J., from September 1940 until March 1941. From March 1941 until January 1943 he served as supply and disbursing officer of the U.S. S. NLc~qara, a motor torpedo boat tender which served the first MTB squadrons operating in the Pacific after the outbreak of World War II. He then returned to Norfolk, Va., to serve until June 1944 as assistant supply officer of the naval air station. From June to December of that year he was officer in charge of D-1 unit No. 9, staging in Pearl Harbor, and for 13 months thereafter served as executive officer of the Naval Aviation Supply Depot at Samar, Philippine Islands. He was awarded the Bronze Star Medal for meritorious service in connection with operations against the enemy as executive officer of the Avia- tion Supply Depot, Samar, from January to March 1945. During the period January 1947 until August 1949 he served as planning officer, assistant supply officer and executive assistant at the Aviation Supply Office, Philadelphia, after which he had a tour of duty as special assistant to the Chief of the Bureau of Supplies and Accounts, Navy Department. From August 1949 to July 1951 he was a student at Harvard Business School, from which he was awarded the degree of master of business administration. He then joined the U.S.S. Valley Forge, and served as supply officer while that aircraft carrier participated in operations in Korean waters under the United Nations Command in 1951-52. In December 1952 be reported to the Bureau of Supplies and Accounts for duty as special projects division director, and from September 1954 until June 1956 served as director, Inventory Control Division. In August 1956 he joined the Staff of Commander Service Force, Pacific, and served until July 1958 as assistant fleet and force supply officer. He next served as supply officer at the Naval Air Station, Norfolk, and from July 1960 until September 1961 was execu- tive officer of the Aviation Supply Office, Philadelphia. In September 1961 he became commanding officer of the Naval Ships Parts Control Center, Mechanicsburg, Pa., and on January 3, 1964 reported for duty as assistant chief of the Bureau of Supplies and Accounts for Supply Manage- ment, Navy Department. In December 1965 he was designated commander, Defense Construction Supply Center, Columbus, Ohio, a field activity oJ~ the Defense Supply Agency, and assumed command on January 12, 1966. His assignment as assistant director of plans, programs and systems was effective in September, 1967. In addition to the Bronze Star Medal, Rear Admiral Haddock has the Joint Service Commendation Medal; American Defense Service Medal; American Campaign Medal; Asiatic-Pacific Campaign Medal; World War II Victory Medal; the National Defense Service Medal; Korean Service Medal; United Nations Service Medal; and the Philippine Liberation Ribbon. Married to the former Janet F. Vosper of Akron, Ohio, he has three children, Ira Frederick Haddock, Jr., Kathleen M. Haddock, and Dustin Lee Haddock. His official residence is Akron, Ohio. Admiral HADDOCK. During your last hearings on the Defense Sup- ply Agency, General McNamara, the first director of DSA, and Admiral Lyle, his deputy, reported to you on progress in activating and putting the Agency into operation. We in the Agency welcome the opportunity to report to you again with some highlights of pres- ently significant areas of our operations. These areas were covered more comprehensively in the background material provided to your staff earlier this month. In May 1962, the `time of your last hearings concerning DSA, the Agency was in its formative stages. As you recall, it had been estab- PAGENO="0219" 213 lished in October 1961, becoming operational the following January, some four and a half months prior to your hearings. At that time DSA's mission comprised two basic responsibilities. The first was the management, control, and distribution, at the whole- sale level, of assigned material commodities and items of supply to the entire Department of Defense and other designated Federal agen- cies. And the second was the administration and management of cer- tain DOD-wide logistics services and programs. The supply management portion of our mission then included in- ( ventory management and distribution of the categories of subsistence, clothing and textiles, petroleum, medical, automotive, construction, electronics, industrial, and general supplies. To carry out the inven- tory management and control functions related to this portion of the Agency's mission, DSA was assigned the facilities and resources of the military department-operated single manager agencies. The stocks owned by these single managers, which also were transferred to DSA, were stored in 77 different locations throughout the country. The logistics services and programs portion of our mission then included responsibilities for land traffic management, the DOD co- ordinated procurement program, the Federal catalog program, the defense standardization program, the defense materiel utilization pro- gram, the defense surplus property disposal program, and for the analysis, design, and procedural development of DOD-wide supply and service systems assigned by the Secretary of Defense. Accomplishment of this last responsibility has resulted in the mili- tary standard data systems for such functions as requisitioning and issue; transportation and materiel movement; supply transaction accounting and reporting: supply and transportation evaluation procedures; and contract administration service procedures. DSA was assigned the Military Traffic Management Agency and the Armed Forces Supply Support Center to assist in carrying out assigned logis- tics services and programs. *By the end of fiscal year 1963 DSA was managing slightly over 1 million items; its inventory was valued at $2.4 billion; it had initiated procurements during the year valued at $9.6 billion; and was employ- ing 25,970 military and civilian personnel. The DSA mission is not static, however. It has changed, and we would expect it will continue to change whenever it becomes evident that, from `such change, management of supplies and logistics services will be made more efficient and responsive to the requirements of the military services. Since the 1962 hearings of this committee a number of additions and deletions have been made to the DSA mission. Among the more significant deletions have been: Transfer of responsibility for suppiy management of paints and handtools to the General Services Administration i~t the end of 1963. Transfer of responsibility for management of items peculiar to combat vehicles to the Army's Tank-Automotive Center in early 1962. Nonpeculiar items which had been managed by DSA's Auto- motive Supply Center were transferred to the DSA Defense Con- struction Supply Center in Columbus, Ohio. Consec~uently, the Defense Automotive Supply Center was disestablished. PAGENO="0220" 214 Transfer of responsibility for administration of the Defense- wide standardization program to the Office of Standardization and Technical Data Policy in the Office of the Assistant Secretary of Defense (installations and logistics) in June 1964. Designation of the Secretary of the Army as the single manager of the combined military traffic and terminal management mis- sions in November 1964. This responsibility embraces land-traffic management, the control of movement of men and materiel into and out of air and ocean terminals, and the management of com- mon-user ocean terminals. The result was elimination of DSA's responsibility for traffic management in February 1965. Transfer of management responsibilities for nonaircraft tires and tubes to the Army's Tank Automotive Center in August 1965. The more significant additions to our mission or functions have been: The assignment in March 1963 of responsibilities for manage- ment of Defense-owned industrial plant equipment. This as- signment resulted in the establishment of the Defense Industrial Plant Equipment Center to classify and identify items of in- dustrial plant equipment; develop an inventory recording and reporting system for industrial plant equipment; develop and maintain a central inventory of all but specifically exempt DOD industrial plant equipment; screen proposed new procurement of industrial plant equipment against the central inventory in the inventory available for use in lieu of procurement; and arrange for storage, movement, preservation, and rebuild of idle industrial plant equipment. Assignment to DSA in November 1963 of responsibility for the development and implementation of integrated systems for man- agement information and technical documentation in support of the DOD scientific and technical information program. Accord- ingly, the Defense Documentation Center was established and acti- vated to receive, store, and make available scientific and technical information to the Defense research and engineering commumty, and to operate a series of computerized data banks of work units of research and technology being accomplished for Defense. Assignment to DSA in June 1964 of responsibility for perfor- mance of nationwide contract administration services for the entire Department of Defense and the National Aeronautics and Space Administration. This was the largest single addition to our responsibility. Although not a change in mission, DSA's item management responsi- bility has been increased significantly since 1963 by the transfer of many thousands of items from military services management to DSA management. In broad terms, items which are major end items, rep- arable items, items which are unstable in desi.,,n, and items which are critical to service missions have been retained for management by the services. Items which are consumable, covered by fully coordinated specifications or industrial standards, or commercially available have been transferred to DSA. As a result, DSA will have been transferred, by the end of fiscal year 1968, over 467,000 additional items which formerly had been managed by the military services. PAGENO="0221" 215 Another effort which has been pursued aggressively since our pre- vious report to you has also changed DSA's management role to a significant degree. In keeping with the desires of Congress, the Depart- ment of Defense and the General Services Administration entered into an agreement in 1964 which embodied the concept that, consistent with its Defense mission, DOD should use GSA support to the degree practicable and that DOD should support other Federal agencies with the commodities in which DOD was the principle Government user when significant economies to the Government would result. ~c As a result of this agreement, DSA i~ill ~have trahsferred to GSA management, by July 1, of this year, a total of 63,000 items including f the transfer of paints and handtools back in 1963. Under terms of a more recent agreement between the Administrator of General Services and the Assistant Secretary of Defense for Installations and Logistics, GSA will also assume additional functions for those GSA items in which GSA supports DOD. These functions include maintenance of mobilization reserve stocks, coordinated procurement, and provision- ing support to the military services. The DOD/GSA agreement provides that DSA will support civil agencies when significant economies would accrue to the Government and there would be ho degradation of support to the military serviced. We made a careful review of the commodity areas of fuel, electronics, clothing and textiles, medical, and subsistence supplies. With GSA we found that significant economies would result from DSA support in fuel and electronics and that such support could be provided without adverse effect on our support to the military serv- ices. Accordingly, we will begin moving into support to civil agency users of these commodities on July 1. We will have assumed complete civil agency support for packaged fuels in January 1969, for elec- tronics in June 1969, and for bulk liquid fuels and coal items in Novem- ber 1969. Our review concluded that DSA should not at this time undertake support of civil agencies in clothing and textiles, except on a case- by-case basis, because of our already heavy workload in supporting the military services with this commodity. Periodic reviews of this area will continue, however, with the view toward full support by DSA at some future date. Medical and nonperishable subsistence support across the board did not offer sufficient economies. This is due principally to the lack of commonality between the items used by Defense and those used by the civil agencies. Limited support in a select number and type of items is being provided on a case-by-case basis, however, through individual interagency agreements. In addition, a technical review of medical and subsistence items is underway with the affected agencies to determine whether there is a substantial basis for increasing corn- monality among the items used by Defense and the civil agencies through a standardization effort. Expansion of our support in these areas will depend on the outcome of that review. In addition to the adjustments which have been made to the DSA organization as a result of these and other additions and deletions to our mission and responsibilities, we have continued to seek to refine and improve our operations. We have made some notable accomplish- PAGENO="0222" 216 ments in terms of reducing and consolidating activities with a view toward improved efficiency of our support to the military services. We have for example: Reduced the number of supply centers, or inventory control points, by consolidating in July 1965 the management functions for the commodities of clothing and textiles, subsistence, and medical supplies and materiel into a single center, the Defense Personnel Support Center at Philadelphia. The centers we had for medical materiel in New York and subsistence at Chicago were then disestablished; Consolidated the former Army and Marine Corps clothing factories; Reduced the number of activities storing DSA-managed ma- teriel from 77 to 21; Reduced from 34 to 10 the number of consolidated surplus sales offices; and Reduced from 10 to 8 the number of subsistence regional headquarters. As a result of organizational adjustments such as these, the prin- cipal elements of the DSA organization today are: The headquarters at Cameron Station in Alexandria; Six supply centers: the Personnel Sugport Center in Philadel- phia; the Construction Supply Center in Columbus, Ohio; the Electronics Supply Center in Dayton, Ohio; the Fuel Supply Center in Alexandria; the Industrial Supply Center in Phila- delphia; and the General Supply Center in Richmond; Four principal depots located at Mechanicsburg, Pa.; Memphis, Penn.; Ogden, Utah; and Tracy, Calif. We also have in our distri- bution system three other principal depots stocking a full range of DSA materiel, two colocated with Navy supply centers and one with the Army depot in Atlanta, Ga.; four specialized support depots, two stocking only selected commodities and two operated by the Navy in support of Navy's fleet and overseas units; and 10 direct supply support points which support large volume users of specific commodities such as metal bars and shapes by naval shipyards and clothing by recruit training centers; Four service centers: the Administrative Support Center at Alexandria; the Logistics Services Center at Battle Creek, Mich.; the Documentation Center at Alexandria; and th~ Industrial Plant Equipment Center at Memphis, Tenn.; and Eleven contract adminstration services regions located at At- lanta, Boston, Chicago, Cleveland, Dallas, Detroit, Los Angeles, New York City, Philadelphia, San Francisco, and St. Louis. These, and other small activities and offices of our field establish- ment, carry out our current three-part mission of: Management and distribution of designated items of supply; Provision of contract administration services; and Administration or management of designated DOD-wide logis- tics services and programs. Today the Agency employs over 59,000 military and full-time and temporary civilian personnel. We currently manage 1.7 million items, which represent 43 percent of all the items used in the Department of Defense. PAGENO="0223" 217 Other indicators of the high level of activity of our operations for fiscal year 1968 are: Our inventory is valued at $3.1 billion. This is supporting sales from the Defense stock fund which will run about $3.7 billion for the fiscal year. Our procurement awards will reach slightly over $5.1 billion. Our procurement of bulk fuels, which we do not stock, accounts for the difference between our sales and procurement. We will have processed 20.7 million requisitions for the items we stock. Our DSA supply depot facilities will have received and shipped about 3 million tons of materiel. Our Contract Administration Services is currently administer- ing some 270,000 prime and secondary contracts. We are project- ing an increase to 293,000 contracts in fiscal year 1q69. The value of materiel inspected and released for shipment by our Contract Administration Services organization is expected to reach $21.8 billion. Some 2.3 million contractor invoices will have been processed for payment. With this review of the major changes in our organization since your hearings of May 1962 and some statistical indicators of the mag- nitude of current operations in DSA, I will turn to a description of our current performance of our mission. First, supply support of the military services. The principal indicator of the effectiveness of DSA's support is stock availability, which simply is the percentage of the requisitions received which we are able to fill from available stock. Prior to the acceleration of combat operations in Vietnam in 1965 and 1966, stock availability was averaging 91-plus percent. Beginning late in fiscal year 1965, the buildup in forces for South- east Asia placed a demand on our system of such magnitude that it initially drew materiel out of our inventory faster than we could re- place it. Despite intensive efforts to keep ahead of demands, the overall stock availability percentage declined steadily from the prebuildup level of 90-plus percent to a low of 87 percent in fiscal year 19~6. The declining trend continued through October 1966, when the overall availability reached an alltime low point of 83 percent. Performance in individual commodities during that month ranged from 59 percent for clothing to 97 percent for subsistence. The effect of our efforts to rebuild our stocks began to be felt at that point in time and stock availability began a steady improvement. By the end of June 1967 we had returned to the pre-Southeast Asia buildup levels of effectiveness with an overall avaih~bility of 91 percent. Currently we are filling from available stock 90 to 91 percent of the requisitions we receive. Individual commodity performance for the year is averag- ing from 76 percent for construction supplies and materiel to 99 per- cent for subsistence. On the whole, we would categorize DSA's present support of the military services, and particularly the combat forces engaged in Southeast Asia, as quite good. In F~bruary of this year, Lieutenant General Hedlund, the Agen- cy's Director, returned from an extensive trip to the Pacific area. In PAGENO="0224" 218 Hawaii, Philippines, Japan, Vietnam, Korea, and Thailand, he visited 27 different military service headquarters and talked with command- ers and their top logisticians to develop a personal evaluation of the effectiveness and responsiveness of our support. General Hedlund knew before he left that DSA was managing about 50 percent of the items used by all military services. We all were somewhat surprised, however, to find that one maj or Pacific supply activity reported to him that DSA-managed materiel accounted for 70 percent of the line items and 90 percent of the dollar value of materiel issued by that activity to operating units in the \ western Pacific. Let me review briefly how the commanders and operating personnel described DSA's support in several commodity areas when they were briefing the Director during his visits. In the case of food, support was described as universally excellent. According to those on the scene, our servicemen are receiving the finest food support ever. Even frontline troops, for the most part, are receiving hot meals with fresh meats and produce. Clothing support was reported as generally good, although there are some shortages in some sizes of clothing items and items such as armored vests, and wear-out rates for the tropical combat boots and uniforms continue high because of the climate and terrain. In medical items, support was excellent. The medical services were outstanding in every com.mand the Director visited, and DSA's sup- port was said to be highly satisfactory. Fuel support also was described as excellent, with no significant supply problems being experienced. Support for electronics items likewise was rated as excellent. On General Hedlund's return to DSA Headquarters, he was pleased to be greeted with a message from the Air Force commander in Danang, South Vietnam, commending our Electronics Supply Center for sup- plying quickly 96 percent of the electronics materiel required to replace stocks destroyed by enemy action over the Lunar New Year period. Support for construction supplies and equipment is considered good. However, repair parts for construction, materiel-handling and power- generating equipment continue to be our most difficult support prob- lem. Many of these equipments are obsolescent today. Many of these equipments are being operated in Vietna~m under conditions and at rates which have caused parts to wear out more quickly than ever before experienced. Moreover, many of these parts have never failed before, and, there- fore, have never been stocked in our supply system. Procurement of such parts from. the manufacturers of the equipment involves long lead-times, especially in those instances where the manufacturer is no longer producing either the particular equipment or the parts required. We are slowly and gradually overcoming this situation, but substantial improvement will not be apparent until the repair parts we have on order are received from the manufacturers. Supply of industrial materiel and general supplies is considered good, with only a few scattered spare parts problems. Fortification materiel, sandbags, and concertina and barbed wire requirements continue high and while we are able to keep abreast of PAGENO="0225" 219 demands from Vietnam, special attention is required constantly to assure continued flow of these items from industry. General Hedlund's trip to the Pacific area was well received at all commands visited. Although there were areas where DSA's support requires close attention and can be improved, we were pleased with the evaluation of the quality of our performance received from the commanders on the scene. General Hedlund has said, that he returned with the conviction that DSA is playing a major role in providing supply support to the combat forces overseas, and is performing this vital mission effectively and responsibly. In order to assist us to assure the best possible supj~iort to overseas commands, General Hedlund directed the sending of customer supply assistance personnel to Southeast Asia and Europe. Three men were sent to the Pacific area and one to Europe. Those sent to the Pacific were attached on a temporary duty basis to the 5th, 7th, and 13th Air Forces to resolve any interface problems these commands might have with DSA. The Pacific group has returned after completing their p0-day tour. Their assistance was considered effective and quite worthwhile by the commands they visited and we have been asked by the com- mander, U.S. Army Pacific and the chief of staff for logistics to the commander in chief, Pacific, to continue the assignment of customer assistance personnel in the Pacific theater. Now I would like to discuss performance of our contract adminis- tration services mission. As I mentioned earlier this mission was assigned to the Agency in June 1964; implementation was completed in December 1965. Performance of field contract administration services does not em- brace the entire procurement function. It involves principally the administration of contracts in the field after they have been awarded by Defense and National Aeronautics and Space Administration pro- curement offices. Nor does our contract administration services or- ganization administer all defense contracts. As a general rule, the military services have retained cognizance of plants producing their major weapon systems such as aircraft, missiles, and ships. However our contract administration services organization does perform certain administration services for subcontracts supportiri g the services' weapon systems prime contracts. The services also ad- minister special categories of contracts such as public works contracts and contracts for research and development. We estimate that the serv- ices are currently administering approximately 40 percent of the con- tracts placed by DOD. Our contract administration services is ad- ministering the remaining 60 percent and the workload continues to grow. I can illustrate this by comparing workloads for fiscal year 1966, the first full year of operations of the contract administration services organization and current estimates for fiscal year 1968. In fiscal year 1966 DCAS administered 196,000 prime and secondary contracts. This will increase to 276,000 in fiscal year 1968. In fiscal year 1966, $11.7 billion worth of defense materiel was in- ~ spected and released for shipment. This will rise to $21.8 billion in fiscal year 1968. 97-475-68---15 PAGENO="0226" 220 In fiscal year 1~6'6 we processed 1.1 million inv'oices for payment. Fiscal year 1968 will see 2.3 million invoices processed. In fiscal year 1966, 112,000 contracts received DCAS production processing. This will increase to 229,000 in fiscal year 19'68. Our contract administration services organization has assimilated this workload and at the same time improved the responsiveness of its service to buying offices of the military services, DSA, and NASA. For example, as a result of surveys of contractor facilities and ca- pabilities prior to award of contracts and surveillance of oon'tractor\ operations through the various phases of contract execution, the num- ber of `delinquent contracts has been significantly reduced. The rate of delinquent contracts has been reduced from 15.4 percent in December 1966 to 6.5 percent in April 1968. Substantial improve- ments in invoice processing also have been made `with the result that `~ contractors are receiving payment for goods and services more promptly than ever before. The number of days invoices are held in backlog has been reduced from an average of 18.6 days in December 1966, to 9.7 days in April 1968. The Government, too, has benefited from improved invoice processing procedures. The dollars of `discounts offered by contractors which are lost by late payment as a percentage of the dollars offered have been reduced from 8.9 percent in May 1966 to 1.2 percent in April 1968. Our objective in administering the contracts entrusted to us by the military services is to improve both the effectiveness and responsive- ness of our service. To this end we are augmenting our current small- scale computer capability to process contract administration data with a tape-oriented medium scale computer sys'tem. This will increase data capacity and permit us to be more responsive to service requ'ests for, information concerning their contracts. This will also enhance our conversion to the military standard contract administration procedure which we have targeted for implementation in July 1970. Mr. Chairman, we have not attempted to cover all of the various missions and functions of the Defense Supply Agency. Indeed those touched on were not covered in any great detail. Rather, we have at- tempted to highlight the significant additions and deletions to our responsibilities since May 1962 and to describe for you the effectiveness of our curren't support to the military services. In `conclusion, we report to you that the Defense Supply Agency is carrying out its assigned missions effectively and efficiently, the ob- jective in its establishment. We can say `that in so `doing the Agency has won the respect and confidence of the military services for the quality and responsiveness of the support that we have provided them during a major war. We are pleased to be able to so report; and we think that the performance of the Agency `has proven that the concept of integrated management of a major segment of supply and logistics services operati'ons in Defense can and will work. This does n'ot imply th'at there have not been problems or that there will be none in the future. But, from our experience, we believe that the problems which may arise can be solved `and logistics support of the military forces can thereby `be enhanced. Sir, this concludes my prepared statement; we are ready for your questions. PAGENO="0227" 221 Mr. JI0LIFIELD. Thank you, Admiral, for a very informative state- ment. It certainly does show a tremendous increase in your responsi- bilities and the service that you are rendering since May 1962, when we had our last hearings. I suppose a great deal of this has been due to the Vietnamese escalation? Admiral HADDOCK. Quite a bit of it, yes, sir, in addition to just additional missions assigned. Mr. HOLIFU~LD. Mr. Roback. DSA ROLE IN VIETNAM Mr. ROBACK. What is your role in Vietnam as far as control of sup- ply goes? Do you have depots there? Admiral HADDOCK. No, sir; we do not. Mr. ROBACK. Where do you part with the materiel? Admiral HADDOCK. As of the moment, we part with it at the con- tinental waterside. Mr. ROBACK. You are in fact the purchasing agent? Admiral HADDOCK. Yes; for not-in-stock items. Mr. ROBACK. Where you do not have it in inventory, you are a ready response purchasing agency in Vietnam? Admiral HADDOCK. Of course for the bulk of the items, the 1.7 million we have in stock in continental limits, the overseas units draw it from us. In the case of fuel, we carry our responsibility further. I/Ye buy it and arrange for transportation of the fuel clear to the services' storage points overseas. Mr. ROBACK. Your concept is that of an agency supplying the mili- tary services, buying as well as a storing goods, a service agency for the military. You measure your effectiveness by your ability to respond timely to requests? Admiral HADDOCK. Yes, sir. Mr. ROBACK. From another point of view there is oversupply. To the extent that excesses accumulate, as they are apparently in Vietnam, that is somebody else's problem? Admiral HADDOCK. Well, not entirely, sir. We have been involved with the Army three times now, once when they reduced the mission of their depot on Okinawa, later when they found limited excesses in Vietnam, and now again when there are apparently larger excesses. We are helping the Army to utilize these and stopping the flow of the same kinds of items to them. Later on we will have to endeavor to determine what of these excess stocks we can take back into our system and utilize later. Mr. ROBACK. And that is your concern; to the extent that you man- age those items you want back? Admiral HADDOCK. We are an interested participant at the moment. Mr. ROBAOTc. In other words, of the excesses there will be those eligible for reentry into the supply system? Admiral HADDOCK. Yes. Mr. IROBACK. And that is your concern; to the extent that you manage those items you want back? Admiral HADDOCK. Yes. Our concern extends also at this time to knowing what these excesses are of items in the forward area, in order PAGENO="0228" 222 that requisitions we may receive from the Army units or from other services can be filled from those stocks rather than from ours or from procurement, and we are endeavoring to do this at the moment. We are interested in those excesses also in order that we may water down our past demand experience, and consequently reduce our procure- ment of these items for the immediate future. Mr. H0LIFIELD. Their requirements came directly to you from ~ Vietnam? Admiral HADDOCK. It is not quite that simple, sir. Some of them \ do, some of them do not. Some of them go through an inventory con- trol point in Vietnam, the 14th Inventory Control Point. Mr. HOLrFIELD. Would they find out there at the inventory control point whether the material was in the theater or not? Admiral HADDOCK. They are endeavoring to do that now; yes, sir. `~ç Mr. HOLIFIELD. If they cannot do it there, would you know it back here? Admiral HADDOCK. We only know of it to the extent that they tell us. The Army activities in Vietnam, in the Pacific generally, are coming directly now, with the information of what they think is excess; at the same time they are going to their own inventory control point in WESPAC. Perhaps we cannot reutilize these items ourselves, but we would like to water down our near future buys of these items. Mr. ROBACK. One of the perennial problems in supply management, where you have a common agency that services user agencies, is the extent to which you are a good servant. Admiral HADDOCK. Yes. Mr. ROBACK. And the extent to which, by being a good servant, you cater to defects in the supply system? Admiral HADDOCK. Yes. Mr. ROBACK. So that you can be be very responsive; but if requests, for example, are not well executed, are indiscriminate, overly repeti- tive, broken down in ways which do not conform to a good market buy, you can be very effective, very efficient, but the system is not. You un- derstand that problem? Admiral HADDOCK. Yes, sir. Mr. ROBACK. And we see it frequently in that the services may put ih a whole sequence of small requests, and you are running all around frying to fill them. In another field, or an ahalogous problem perhaps, is an effort to standardize. You as the service agency do not want to he prescribing standards to the user agencies, so if you cater to nonstandardization, you are being responsive- Admiral HAPDOCE. Yes, sir. ~Mr. ROBACK (continuing). To the agen.cy, but overall the supply system is not being improved. To what extent does the Defense Supply Agency try to make some inroads on management of the user's system, df the user's goods, so to speak? Admiral hADDOCK. First, to speak to one of your subjects. stand- ardization, we do take the initiative in an attempt to standardize and reduce the range of items which we are stocking and issuing to the services. We have quite. a record of accomplishment on this score. This hivolves, of course, in the final analysis service agreement to our rec- ómmendations to standardize on a narrower range of gages, or what- PAGENO="0229" 223 ever than has previously been stocked. So we do accomplish quite a bit in that area. With respect to repetitive small purchases, for the items we stock, we attempt to maintain a wholesale stock in order to be able to fill smaller requirements quickly, and we follow these small requirements for items which we may not have stocked before, and if they are re- petitive, lay down a stock, so that we are entering the market with larger buys periodically, once a quarter, once every 6 months, ra)ther than with single purchases. We have, particularly since the Vietnam war, adopted a challenge system, whereby each of our centers sets up a limit beyond which they will not issue, without challenge of the requisition. Someone asks for a quantity of supplies at a given Army activity or Air Force activity, which represents more than our total system issues for a quarter. We will challenge that and have been successful in correcting such in- advertently large requisitions. CHALLENGE SYSTEM Mr. ROBACK. This is a challenge against quantities only? Admiral HADDOCK. Yes. Mr. IROBACK. Not against quality? Admiral HADDOCK. No. Mr. ROBACK. That is to say, regarding priority of items in a critical- ity sense, no type of challenge like that. That would be within the problems of each service? Admiral HADDOCK. Not on a systematized basis. Mr. ROBACK. Excuse me? Admiral HADDOCK. Such a challenge. system for priorities is not systematized with us. We have to do it occasionally, but we do not challenge on a regular basis any priorities. Mr. ROBACK. Your challenge is to gross inconsistencies or what ap- pear to be unreasonable quantity demands? Admiral HADDOCK. Yes, sir. Mr. ROBACK. If there are any other kinds of challenge, presumably that would be a responsibility within the service? Admiral HADDOCK. Yes. Mr. ROBACK. Is that right? Admiral HADDOCK. Yes, sir; as to the priority requisitions. DSA STANDARDIZATION EFFORT Mr. ROBACK. Do you have a list of the types of standardization in which DSA has been instrumental, that you can supply? You do not have to do it right at the moment. Admiral hADDOCK. I can give you some data on numbers of items. Since 1962 we have reviewed a total of 1,567,926 items, to see whether we could standardize them. By this review we have eliminated from future stockage and issue to services 508,078. So it is a useful program. If we had not eliminated these items we would be managing today that many more than the 1.7 million items we are now managing. Mr. ROBACK. Your management is 1.7 million items? Admiral HADDOCK. Yes. PAGENO="0230" 224 Mr. ROBACK. The catalog has about 4 million. Admiral HADDOCK. Yes. Mr. ROBACK. Does that mean that many of these are not relevant to the supply system, are merely there, or does it mean that most of the items in a quantity sense are not managed by DSA? Admiral HADDOCK. The difference between the 1.7 and the 4 million for the most part represents items retained by the services for their management. Mr. IROBACK. So that in quantity terms, most of the items are service managed? Admiral HADDOCK. Yes, or GSA managed. Mr. ROBACK. Or GSA managed? Admiral IFIADDOCK. Yes. Mr. ROBACK. But the GSA manages a relatively few in numbers. The volume may be sizable within their categories? Admiral HADDOCK. Yes, sir. Mr. ROBACK. But few in numbers of items. Admiral HADDOCK. About 68,000 at the present time. DSA/GSA ROLES Mr. ROBACK. While we are on the GSA, it appears during the his- tory of the GSA relationships with the military that relatively few categories have been transferred, that there are not many more prom- ising areas of transfer. Would you say that? I mean beyond what is already done? Admiral HADDOCK. At this juncture we think we have made a good division of Federal stock classes between those of GSA's interest and those of our interest. Mr. ROBACK. Offhand, paint and handtools were two categories of commodities that were transferred within the last 3 or 4 years? Admiral HADDOCK. Office supplies, these kinds of things. Mr. ROBACK. Why not some other common category? Why paint and handtools? Merely because somebody seized upon that in a com- mittee somewhere and made an issue of it? Admiral HADDOCK. I cannot say why the decision on paint and handtool~ was made at that time. The last division of responsibility, which has been only in the last year or so, was based on the criteria that these were the kind of items in which GSA was in business to support the civil agencies. They were items that were not really vitally critical to any of our hardware systems support. They were items, the kinds of items generally fairly readily available in the marketplace, and consequently we thought there was economy to the Government in letting GSA support these. Mr. ROBACK. In a sense the DSA is the GSA for the military? Admiral 1-IADDOCK. Yes. Mr. RonAcic. You are a general service agency? Admiral 1-TADDOCK. Yes, sir. Mr. ROBACK. Not only in terms of supply but of service performance. You perform varied services for the military? Admiral HADDOCK. Yes. Mr. ROBACK. Now, in a sense the GSA, at least potentially, is your competitor in performing Government services, and it appears from PAGENO="0231" 225 your testimony that there is more promise in the DSA performing services for the civil agencies than in GSA performing services for the military, the reason being that the Defense Department, by and large, is the predominant user? Admiral i[-IADD0CK. Yes, sir. Mr. ROBACK. And if you used the predominant-user concept, you could become the GSA for the Government pretty much, isn't that so? Admiral HADDOCK. I `think at some point in time in the future this question has to be asked. Mr. ROBACK. Do you think that the evolution is that DSA will be- come Government-wide rather than GSA; that is GSA will retreat, and DSA will expand? Admiral HADDOCK. I am afraid I cannot predict how that will go, sir. Mr. ROBACK. Is that the trend? Admiral HADDOCK. I see no trend either way at the moment. We think the Office of the Secretary of Defense and GSA apparently feel they have made currently a good division of responsibility, and I do not believe anyone is attempting either to move GSA further into our support at this time or to give DSA more responsibility for civil agencies, except in those areas where we are already attempting to assume more support, subsistence, fuel, and so forth. Mr. ROBACK. You mentioned those in your testimony, including fuel and coal. Admiral HADDOCK. Electronics. COAL PROCUR1~MENT Mr. ROBACK. Take for example coal. You would be the buyer of coal and you would stock coal? Admiral HADDOCK. Yes, str. For petroleum and coal we are only buyers. We buy and arrange for delivery. Mr. ROBACK. Suppose the Interior Department, aside from the fact that it has a Bureau of Mines, I do not know what kind of coal they burn in their furnaces, but suppose they are a modest user of coal supplies in some of their outlying stations. Now would you buy coal and deliver it, have it delivered to those stations? Admiral HADDOCK. In many cases in the continental limits, partic- ularly for small users of petroleum and coal, we make service con- tracts, open-end contracts, so that small users can drop orders on the contract for small deliveries to them. Basically that is the way we do that business. Mr. ROBACK. We happen to know, and you do too, undoubtedly, that if it comes to buying coal domestically for overseas use, which the Army now does, apparently the Defense Supply Agency has been ruled out in that area? Admiral HADDOCK. Yes. Mr. ROBACK. For some reasons having to do with the responsibility on the receiving end for coal that might be less than specification coal? Admiral HADDOCK. Yes. Mr. ROBACK. But is that just a peculiar problem? Admiral }-TADDOCK. I am not really knowledgeable of this. All I know is `that we are not responsible. The Army is doing this buying PAGENO="0232" 226 overseas, particularly in Europe, and I am not familiar with the reasons for the decision. PROCUREMENT OF FORKLIFT TRUCKS Mr. ROBACK. We can understand the reason. Whether it is meritori- ous or not is another point, but in some areas it is difficult to ascertain the division of labor. For example, the DSA, when last I inquired into this subject, purchased heavy-terrain forklift trucks for the Navy and for the Marine Corps, but the Army bought its own. They use \ basically the same type of vehicle, even though the specifications may be different. The service specifications are different not because the requirements are different, but because different manufacturers have developed rather specialized modifications over time. So just offhand, why is it that the Navy and the Marine Corps can live with DSA pur- chase in this field but not the Army? Admiral HADDOCK. I am unaware that the Army is not using us under the coordinated procurement program. We should he buying their forklift trucks as well as Air Force's and Marine Corps'. Mr. ROBACK. As I say, the last time I inquired, that was not the case. Admiral HADDOCK. We just consummated a further agreement with the Mobile Equipment Command by which this command gave recog- nition that we did have these coordinated procurement responsibilities. They have transferred this procurement responsibility to us now, and to give evidence of it they have transferred quite a number of people to us or will in 1~)6~, to accomplish this for them, and perhaps- Mr. ROBACK. To do what now? Admiral HADDOCK. To procure equipment for them under the co- ordinated procurement program which in the past, recent past, they have been procuring themselves, although it was in our mission to procure it for them. Mr. ROBACK. Over the years of your existence a~ a Defense-level agency you have acquired more commodities for managing but you have lost some supply categories? Admiral HADDOCK. Yes. Mr. ROBACK. is that correct? Admiral HADDOCK. The categories we have lost, the principal ones are those that went to the GSA. and tires and tubes back to the Army single manager, ATAC. Most of our gain, however~ and it does not look so big when netted out as we have eliminated a lot of items~ but most of our gain has been represented by further item transfers from the services to our management. As they rescreened their items and got more confidence in us, they gave us a lot, recently some 470,000 items as I recall. Mr. ROBACTc. And your employment over a period of about 5 years has doubled or more? Admiral HADDOCK. Yes. Mr. ROBACK. Has that been accompanied by corresponding decreases elsewhere or is that just a net increase? Admiral HADDOCK. It is a net figure. Mr. ROBACK. In responsibilities? PAGENO="0233" 227 Admiral HADDOCK. It is a net of the standardization reductions, which I think were 508,000; the item entry control program by which we have eliminated at source, which is a better time to do it, 294,000 items; and of our inactive items review program by which since our beginning we have eliminated 398,000 items by this route. So you can see the net figure would have been much larger, had we not had the standardization program, the item entry control program, and the inactive item review program. Mr. ROBACK. So far as the physical transfer of supply items is con- cerned, you are not decreasing but you are increasing? Admiral HADDOCK. Yes, sir. Mr. ROBACK. Your responsibility? Admiral HADDOCK. Yes, sir. Mr. ROBACK. You are not becoming increasingly a service agency as against a commodity agency? Admiral HADDOCK. Well, in 1965, we got a large increase in our service agency function because of getting the contract administration responsibility. But looking at our supply management responsibility alone, it has increased year by year since DSA was established. TRAFFIC MANAGEMENT AGENCY Mr. ROBACK. What was the rationale for the withdrawal of the traffic management function? Is that because there were physical assets required for operations that you did not have? Admiral HADDOCK. We were not at that time in the terminal man- agement business, and the new Army single manager took over termi- nal management and a good companion piece for that is traffic man- agement. The Army had assets in the persons of individuals of the Army Transportation Corps, who were available to operate this single manager for them. I think the existence of the ocean terminals, them- selves, the physical facilities, numbers of which were Army facilities, and the existence of the Army Transportation Corps, probably sig- nificantly urged this move. STANDARDIZED PROCUREMENT PROCEDURES Mr. ROBACK. What are the candidates for entry or withdrawal so far as functions go? Do you have a review board on these matters that considers what ought to come in, what ought to go out? Admiral HADDOCK. Generally these kinds of things, studies, are initiated by the Office of Secretary of Defense, sometimes using our people. We are moving now into a new area, working with the services under OSD guidance in a brandnew area. This is attempting some standardization of internal services' and DSA's procedures related to certain supply functions. For examp'e, the one we are looking at now concerns some standardization of the specific procedures by which pro- curement is initiated and finally consummated,. Hopefully, someday we can develop a standard ADP program for this range of incremental functions involved in the purchase process. This is a new service area forus. Mr. ROBACK. A new service area for standardization, did you say? Admiral HADDOCK. For the purchase function. PAGENO="0234" 228 Mr. ROBACK. For the whole purchase function? Admiral HADDOCK. Procedures of the purchase function. Mr. IROBACK. How would that operate? Admiral HADDOCK. Well, we just got started on it. Mr. ROBACK. I mean, what are you trying to do now? Admiral HADDOCK. We are trying to standardize the specific pur- chase procedures from the time of initiation of the need for purchase - until it is finally consummated. And in this, where there are ADP processes involved, hopefully we will standardize these processes. Mr. ROBACK. What capability and information visibility would you get? Admiral HADDOCK. Well, we are now starting on this project in company with the experts of the services in this functional area. Mr. ROBACK. Is this to decrease the time of transactions, streamline `~- procedures? Admiral HADDOCK. Well, it is really to standardize them so that everyone is doing the job the best, hopefully the best way. MILSCAP Mr. ROBACK. Does this extend into contract administration? Admiral HADDOCK. We have standardized contract administration procedures now. In fiscal year 1970 all services and DSA will go to a standardized contract administration procedure. Mr. R0BACK. That has been agreed upon but not yet put into effect? Admiral HADDOCK. It has been agreed on, and parts of it have al- ready been put into effect on a test basis. The Navy has implemented quite a bit of it, on a test basis. We all will implement finally in July of 1970. Mr. ROBACK. Those procedures, though standardized, won't guaran- tee, for example, that even though ASPR says that the ordiDary pre- award survey should take about 7 days, one region if it is busy might take 30 days? Admiral HADDOCK. No, sir. Mr. ROBACK. And another region will take 40 days. Admiral HADDOCK. No. Mr. ROBACK. And one office will give you an oral report and fail to give you a written confirmation report, which will create some am- biguities in the procurement process. Those things won't be eliminated. Admiral HADDOCK. Well, I think they are going to have to give us a written report, because the standard system is primarily a standard communications system of coding, a format, a way of communicating between contract administrator procurement office, materiel receiving activity, and so forth. Mr. ROBACK. There is not any question that there are variations in procedures now? Admiral HADDOCK. Yes, sir. Mr. ROBACK. And some of those variations create inequities by vir- tue of delays and differential treatment, not intentionally? Admiral HADDOCK. Yes, sir. Mr. ROBACK. But by consequence? Admiral HADDOCK. Yes. Mr. ROBACK. Is that right? Admiral HADDOCK. Yes. PAGENO="0235" 229 Mr. ROBACK. You had some figures on the Defense Contract. Services Administration in terms of how many contracts they serviced, I mean percentages. Are these percentages in dollar volume or in numbers of contracts? Admiral hADDOcK. I stated they were estimates. We know how many contracts we in DSA are administering, about 273,000 now. We are not certain how many the services are administering themselves. We estimate that the services are administering about 40 percent of the DOD contracts in total. We have the balance. Mr. ROBACK. Those are numbers of contracts? Admiral HADDOCK. Numbers. Mr. ROBACK. Regardless of amounts? Admiral HADDOcK. Numbers of contracts. I would suspect that it would run the other way in dollars, because they retain contracts for ships, aircraft, and missile systems. CONTRACTOR SURVEILLANCE Mr. ROBACK. You take some credit apparently for a modest decline or a rather substantial decline in the rate of delinquent contracts. Now how did that come about? You said through closer contractor surveillance. Does this mean that they have not been able to closely surveil the contracts before and now they are giving more attention to it? Admiral HADDOCK. We did two things. First off, we have made a lot more use of the preaward survey and got a capable contractor in the first place or one who was not overloaded. Second, we have put more emphasis on product surveillance in the last couple of years than we did theretofore and, as a consequence, have reduced the contract delinquency. Some of the contractors now are not so over- loaded as they were in 1966 and 1967. Mr. LIJMAN. May I ask a question here? Mr. HOLIFIELD. Mr. Luman. COMMODITY MANAGEMENT Mr. LUMAN. Admiral, you manage in the DSA by commodities; do you not? Admiral HADDOCK. Well, we manage-generafly it is some kind of a class breakdown. When we get down to the ICP level, the supply management level, we are trying to manage on an industrial grouping basis. Mr. LTJMAN. Let us take an item like a fastener. Would you have one man manage all or a class of fasteners? Admiral HADDOCK. Yes, sir; this would be at the Defense Indus- trial Supply Center at Philadelphia. They are in this kind of business and within their supply management group their managers will be concentrating on the subcategories of industrial fasteners. Mr. LUMAN. One of these fasteners might be used to put a toolshed together and another might be a crucial part of a helicopter? Admiral HADDOCK. Yes. Mr. LUMAN, Would you explain to us the system you use, whereby your man pays more attention to the helicopter fastener than he does to the fastener that is for the toolshed? PAGENO="0236" 230 Admiral HADDOCK. Of course we cannot manage our items on a weapons system basis in the same way that the services do, but we have a proceAure whereby the services can designate certain weapons sys- tems which we support in terms of items, and ask us to give special attention to our support of these weapons systems, and there are 23 of them now, varying from the Polaris weapons system to the M-16 rifle. Then for each of these weapons systems, the concerned service desig- nates those of our items that have application to this weapons system. ~ We then code these items in our file, to indicate which items have application, 31,000 of them, to Polaris weapons systems, and this item 17,000-some-odd have application to Hawk missile system, and the supply manager then has a supply study on each of these items made at least every ouarter, and more often every month, to attempt to main- tain 100 percent of these items in stock at all times. This is the special attention we give to items nominated to us by the services for special emphasis in management. STANDARD AD]? Mr. LiIJMAN. What standardization have you achieved between your depots in terms of automatic data processing equipment? Admiral HADDOCK. As you may know, we have been long in develop- ment of a standard system, procedures, for our depots~ and have ac- quired standard or are acquiring identical ADP hardware for the APP implementation of these procedures at our depots. We have implemented the standard procedures and installod the standard hardware at our depot at Columhus~ our depot at Mechanics- burg, our depot at Tracy, our depot at Richmond, and are now getting ready to install it at our depot at Memphis. Mr. LTJMAN. These depots you mentioned, are they all five equipped with the same type of equipment? Admiral HADDOCK. The same hardware. Mr. L1IIMAN. Same procedures? Admiral HADDOCK. Using identical procedures. The program is cen- trally programed and given to them, so that the APP program is iden- tical for each one of them. Mr. LTJMAN. Do you allow any variations without your central ap- proval? Admiral HADDOCK. No, sir. The inputs are identical. The outputs are identicaL Our instructions on how to make inputs and how to use out- puts are identical for each depot. Mr. LTJMAN. One final question on another matter, The services, when making requests of the DSA, have certain priorities on these requests. `Which of the services has been generally the one who put more high-priority requisitions to you and which one has been putting fewer high-priority requisitions to you? A drniral HADDOCK. I think it is the Air Force. Mr. LtTMAN. Say if you have the figures for fiscal year 1968? Admiral HADDOCK. Well, of the two issue priority groups~ 1 and 2, our highest priority groups, the Marine Corps this year has the high- est percentage, 53 percent, Air Force 47 percent, Navy 43 percent, and Army 38 percent for issue groups 1 and 2. Mr. DAJILIN. How are your various commodities `stacking up against each other as to fill rate, filling orders in time in the terms of PAGENO="0237" 231 MILSTRIP? Is clothing still your problem area or is it now con- struction supplies? Admiral HADDOCK. I think on time fill probably does not vary very much on commodities. On the average it is slightly over 80 percent on time fill. For fiscal year 1968, construction has been 68 percent on time, electronics 85 percent on time, general 77 percent on time, industrial 84 percent on time, clothing 75 percent on time, medical 86 percent, subsistence 88 percent, and a total overall average of 81 percent. CLOTHING SUPPLY PROBLEMS Mr. DAHLIN. As clothing fell to a low of 59 percent about 2 year~ ago- Admiral HADDOCK. Yes, sir. Its availability. Mr. DAHLIN. And this was mainly due, you believe, to the Vietnam buildup and simply a lack of inventory at that time? Admiral HADDOCK. Well, of course, as we sent troops overseas in large numbers, with very short notice, our clothing stocks were drawn down rapidly, and our basic textile stocks were similarly drawn down. It took our stock down so that we were in very bad shape on many clothing items, particularly for recruits, the new recruits coming in, it took us some time then to get other manufacturers, additional manu- facturers, interested in our business. As a matter of fact, it required mandatory orders on some. Mr. DAHLIN. Does your statement indicate that you have reached the end of the mandatory orders? Admiral HADDOCK. Yes, sir. Mr. DAJILIN. Did it turn out that mandatory orders were issued only in the clothing area? Admiral HADDOCK. This is the only place we really use them; yes, sir. Mr. DAHLIN. In the light of those particular problems, have you reevaluated the closing of the clothing factories at Philadelphia? Was that a wise thing to do? Is that still cost effective? Admiral HADDOCK. We retain one clothing factory. We closed- Mr. DAHLIN. Did you have to go on two-shift operations? Admiral HADDOCK. Yes, sir. We closed the Marine Corps and one other. But we used the clothing factory significantly. But by and large we use that for odd-size uniforms, for example; for small, relatively small production requirements, where we may have difficulty in inter- esting industry; or a requirement where we have such a short dead- line that we can only get iton time using our own in-house facilities. By and large we would prefer to go to industry for our clothing require- ments. Mr. DAHLIN. Can you tell us what has been your experience so far with the pricing under the mandatory orders? Have there been any difficulties in settling up those contracts? Admiral HADDOcK. I do not think I can answer that. I would have to submit that to you. Mr. DAHLIN. Colonel Murray. Colonel MUmtAY. I do not know. Mr. DAI-TLIN. Can you supply us with a statement for the record on that, please? Admiral 1-IADDOCK. Yes. PAGENO="0238" 232 (The information furnished for the record follows:) All awards for clothing placed by mandatory orders (rated orders) were on a firm fixed-price basis; that is, quantities, delivery, prices, etc., were agreed to by the Government and the contractor prior to making the award. PSA developed initial prices for mandatory orders by using the latest published industry pricing data, or prior award prices, adjusted as necessary to reflect normal market increases. In some cases it was necessary to negotiate the award prices on man- datory orders to meet higher quality production standards of certain producers or to recognize job shop costs compared with those of mass production costs. There have been no major difficulties in closing out the contracts placed under the mandatory order concept. In fact, there have only been two claims and these resulted from conditions not related to pricing. There have been only minimal difficulties, as all contracts were awarded on a firm fixed-price basis; that is, contractors were aware of the specific prices, the quantities required, delivery schedules, specifications involved, and bad accepted the terms and conditions prior to award. Mr. IDATILIN. One of your major functions in support of Vietnam, at least at some stage, was in getting clothing orders filled and pro- viding stocks on the spot? Admiral HADDOCK. Yes. Mr. DAHLIN. Was there any discussion at the time of all of these crises of putting more DSA people in the field; and in the way that you have finally come around to it this year, to try to provide direct support to the services? Admiral HADDOCK. I am not certain that our problem with clothing or any other support stemmed from a lack of DSA people in the field because we do not have stocks over there, overseas. We do have 33 liaison people in continental limits going around to our continental customers and learning of their problems, and, as I stated, we now have four overseas. But the kinds of problems we had early in Viet- nam simply stem from lack of stocks and long procurement leadtimes in getting our stocks replenished. Mr. IDAHLIN. One of your problems still is a~pparently that you have not been able to achieve desired levels of standardization in the cloth- ing field. Somebody mentioned the undershirt the other day, and I gather there are still four or five types, not to mention size of under- shirts in the system; is that correct, Admiral? Admiral HADDOCK. I doubt there is more than one kind of under- shirt but I could be wrong. I really do not know. Mr. ROBACK. I hope there are four or five different sizes. Admiral HADDOCK. Obviously in the uniform area there is not a whole lot of standardization. I think when we started out there was only about 9 percent commonality in use of uniforms as among tb~ services. Since they do wear different uniforms, I suspect that there is still not much standardization. DSA/GSA RELATiONSHIPS Mr. DAHLIN. Can you tell us a little more about the relationship of DSA, GSA, and the services at the present time? Are you attempt- ing to back up or monitor those GSA areas in any sense? Do you both maintain stocks in some areas, or do you both maintain inven- tories to make sure that the proper stockage remains somewhere in the system, or how are you handling those 63,000 items or parts of them? PAGENO="0239" 233 Admiral HADDOCK. For the roughly 68,000 items in which GSA is now supporting the services, GSA becomes the wholesale supply sup- port; organization for the DOD activities as we are for the other items. The services will draw from DSA stocks as they need items or quantities of items to put in their retail systems such as aboard ship or in overseas bases, or in camps and stations in continental limits. Further, for these items to the extent that they can afford to do financially and agree with our computations, GSA has agreed to stock mobilization reserve quantities of items. They have agreed to accept from the services directly provisioning requests for stockage of new items in their assigned classes. Mr. ROBACK. This mobilization reserve is for all classes under their control for the military services? Admiral HADDOCK. Yes, sir. Mr. ROBACK. Supply? Admiral HADDOCK. Yes, sir. Mr. IROBACK. This means that they will have to carry stationary stocks. Admiral HADDOCK. Levels over and above what would be their nor- mal peacetime requirements to meet service peacetime demands. Mr. ROBACK. This becomes an additional budget concern? Admiral HADDOCK. Yes, sir. Mr. ROBACK. To them? Adniiral HADDOCK. Yes, sir. Mr. Abersfeller has not told me how he will do this, but he has agreed to try to do it. Mr. ROBACK. We have a GSA representative. I think we might ask him to make some observations at the appropriate time. Do we have a GSA representative who has authority to speak on the subject? Is there anybody from GSA here? Mr. CAnNEr. I am a GSA representative. Mr. ROBACK. You do not feel you can throw light on this subject? Mr. CAnNEr. I would prefer not to comment at this time on this particular subject. Mr. H0LIFIELD. What is your name, please? Mr. CAnNEr. John Carney. I would be h~ppy to provide it. Mr. ROBACK. In light of the discussion of GSA relationships here, you might present us a statement which comments on the points or makes any other observations you think we ought to have for the record. Mr. CARNEY. Yes, sir. Mr. ROBACK. Will you do that? Mr. CARNEY. I will be happy to. (The information requested follows:) GRNERAL SERvIcEs ADMINISTRATION, Washington, D.C., July 18, 1968. Hon. CURT HOLIFIELD, Chairman, Military Operations subcommittee, Committee on Government Oper- ations, House of Representatives, Washington, D.C. DEAR Mn. HOLIFIELD: As requested by Mr. Dahlin, your subcommittee staff counsel, I am pleased to submit a background summary of General Services Administration's role in the supply support of the Department of Dec~ense. Phis submittal relates to your subcommittee hearings on review of military supply system concepts, methods, and operations in the Army, Navy, Air Force, and Defense Supply Agency. PAGENO="0240" 234 Included in our summary statement are our comments on GSA's role in the management of general mobilization reserve items discussed on pages 479 and 480 of the Transcript of Hearings conducted on July 2, 1968. As a matter of general information, moist of the items we manage are commercial in nature and are generally available from commercial sources. For this reason we anticipate that relatively few items will require the stockage of additional levels of inven- tory to meet m~bilization requirements. For those few items which do qualify, we plan to finance these added levels from our general supply fund which also finances our operating inventories. Since a mechanism now exists whereby we currently stock and finance other contingency reserves within our system, we expect to expand this method of management to any additional inventories, which in our judgment, need to be placed in a reserve category for mobilization purposes. As you may know, the Business and Defense Services Administration (BDSA) by delegation 3, May 8, 1963, authorizes GSA to use DO ratings identified as K-i on contracts and delivery orders to meet procurement of stock against military requirements. Use of these priority ratings under the Defense Materials System provides GSA with a capability of preempting nonmilitary production for rapid expansion to meet the supply needs of military activities in major emergencies or in the event of war. If there are any other subjects on which you may need further clarification or comment, we would be pleased to provide them. Sincerely, LAWSON B. KNOTT, Jr., Admiaistrator. Enclosure. THE ROLE OF GENERAL SxnvlcEs ADMINISTRATION IN SUPPORT OF THE DEPARTMENT OF DEFENSE DEVELOPMENT OF A NATIONAL SUPPLY SYSTEM Since its establishment, GSA has cooperated with the Department of Defense in arriving at areas of understanding aimed toward development of a national supply system. Our primary objective has been the elimination of avoidable over- lap and duplication of procurement and supply functions throughout the Federal Government. In the early stages of thOse negotiations with DOD, interagency procurement assignments were agreed upon whereby GSA would perform single agency pro- curements for ~ariou~s commodities such as office furniture and furnishing~, military family and quarters furniture and furnishings, and similar common- user items. At the same time, items which the military inventory control points did not elect to manage within their wholesale systems were offered to GSA for military supply support either through our depot system or through our Federal supply schedule program. Since this was an elective process, the order of magni- tude of item referrals to GSA was relatively small. During 1963, a memorandum of understanding was entered into between GSA and DOD which provided for GSA assumption of responsibility for the procure- ment and management of the bulk of paint and handtool commodities managed at that time by the Defense Supply Agency. Concurrently, provisions were made wherthy DSA retained responsibility for a selected number of functions asso- ciated with management of these Federal supply classes, such as standardiza- tion, cataloging, procurement of overseas Army and Air Force decentralized items, and procurement of military service weapon system related items managed by them in these classOs. As a result of these arrangements, GSA assumed man- agement responsibility for about 33,000 items with an inventory value of $~35.4 million. As reliance on GSA for supply snpport to the military services increased, added emphasis was placed on expanding the national supply system concept. In this context, our discussions with DOD officials were directed toward estab- lishment of Government-wide common support vested in a single agency for individual commodity classes-GSA or DOD. To achieve this, compatible pro- cedures and systems were developed whereby the supply management capabilities of each agency would be fitted together to form a coordinated supply system for the Federal Government. To this end, another baisic agreement between DOD and PAGENO="0241" 235 GSA was consummated in December 1964, governing supply management relation- ships. This agreement formalized the national supply system concept and set the stage for a series of significant forward steps taken since that time. Actions to implement the 1964 agreement took various forms, the first of ~rhich was the establishment of a joint Federal Supply Service/Defense Supply Agency Materiel Management Review Committee to review a range of com- modities assigned to DSA for integrated DOD management (general, industrial, and construction) to determine whether their management should remain with DOD or transfer to GSA. This review encompassed 152 Federal supply classes of which 99 were selected for continued management by the Defense Supply Agency and 53 designated for transfer to GSA. Provisions were made for the retention by DSA of some 215 military essential items in these classes for their management as well as certain allied management functions comparable to those retained in the paint and hand tool commodities. Concurrently, with the review of the classes just referenced, DSA, in coordination with GSA undertook a "five commodity" study of the fuels, electronics, clothing and textiles, subsis- tence and medical commodities in consideration of assuming support to all Federal agencies. Early in 1967, the Defense Supply Agency completed the five commodity study and determined that it would be economical and feasible for DSA to support the Federal Government on the fuels and electronics commodities. Because of lack of item commonality involved in medical and nonperishable subsistence com- modities, it was determined that expansion of DSA support would be deferred until standardization was achieved. Clothing and textiles support would be on a case-by-case basis. Agreements have been reached whereby DSA will assume support on packaged fuel products in January 1969, with bulk fuel and coal sup- port to be phased in between July 1, 1968, and November 1969. For the electronics commodity, DSA plans to assume support of common items in November 1968, and agency peculiar items July 1, 1969. In August 1967, DOD issued a policy memorandum which in effect eliminated the management role of DSA for items and functions involving the paint and hand tool classes previously transferred as well as the 53 classes designated for management by GSA. On July 1, 1968, about 30,000 items in these classes with an inventory value of $58.8 million were transferred from DSA to GSA. An addi- tional 5,000 items with an inventory value of about $1.5 million have been trans- ferred directly from the military services to GSA for management under the revised DOD policy previously mentioned. In summary, since 1963, 65 Federal supply classes comprising some 68,000 items with an inventory value of $116.8 million and a projected annual sales volume to DOD activities of $180 million have been transferred from DOD to GSA. There are currently 57 additional Federal supply classes now managed by DSA which are subject to review for primary management assignment either to DSA or GSA. Representative commodities are lumber, air purification equipment, in- secticides and rodenticides, books, and pamphlets. Although joint time schedules have not been established, we plan to initiate review actions with DSA during the second quarter of fiscal year 1969. Early in 1968, a joint DOD/GSA study was conducted on the dual procurement practices which existed for commercial vehicles. Agreement was reached to transfer the DOD coordinated procurement responsibilities from the Depart- ment of Army to GSA for commercial passenger-carrying vehicles and trucks up to 10,000 pounds gross vehicle weight, with minor exceptions. This transfer of responsibility, effective July 1, 1968, consolidated the procurement of some 30,000 military vehicle requirements totaling approximately $65 million with the GSA civil agency procurement of about 42,000 vehicles approximating $95 million annually. Included in the various supply management functions previously performed by the Defense Supply Agency in the classes assigned to GSA is the coordinated procurement program. Under this program wholesale quantities of weapon sys- tem related items in those classes are procured by the integrated manager for the military depot system. Also in an allied category, GSA has agreed to as- sume procurement support now provided by DSA for overseas Army and Air Force activities on cataloged items in our 65 Federal supply classes which are decentralized for local procurement or are available from the GSA Federal supply schedules. 97-475-68----16 PAGENO="0242" 23fi MANAGEMENT OF GENERAL MOBILIZATION RESERVES On May 10, 1968, an agreement was reached with DSA whereby general mo- bilization reserve responsibilities would be transferred to GSA for the items it manages and GSA would assume full responsibility for supply support of mili- tary activities during periods of mobilization or war. In essence, this agreement provides that GSA will conduct industrial mobilization planning, wll determine the items and depth of stocks required, will consider and use the planning infor- mation provided by DOD activities in arriving at these judgments, will finance and acquire stocks to meet these requirements, and will advise the DOD activi- ties needing such information of the support capability we have developed to meet contingency or related mobilization plans. FEDERAL SUPPLY SERVICE OPERATIONS Four methods of supplying are employed by GSA. in carrying out our supply re- sponsibilities. First, we have the Federal supply schedule program. These are oi)en end contractual arrangements with thousands of suppliers whose products are made available to requiring activities at reasonable and competitive prices. A second method of supply is direct delivery procurement. Items in this category are centrally procured but not stocked, such as quarters furniture, household furn- ishings, etc. Our third supply method, and by far the most responsive to mili- tary priority needs, is our depot stock program. Lastly, we use the decentralized method of supply known as the local purchase program for items which are considered to be readily available on the local market. If a GSA decentralized item is not available at a particular location or the requiring activity does not possess a procurement capability, we are prepared to buy these items for any requisitioner. To provide effective supply support to DoD and civil agencies, GSA's Federal supply service maintains inventories in 27 depots which are geographically dis- persed throughout the United States. These GSA regional offices are located in Boston, New York, Washington, D.C., Atlanta, Chicago, Kansas City, Fort Worth, Denver. San Francisco, and Auburn, Wash. Overall administration is provided by the GSA central office in Washington, D.C. The GSA regional offices located in Washington, New York, Fort Worth, San Francisco, and Auburn, Wash., support overseas DoD and civil agency activities. Most of our export operations are in support of the military services, however, we have a sizable AID support mission for Southeast Asia which is controlled through a special aid logistic support control office located in San Francisco. On each regional staff we have assigned specialists known as supply service officers who maintain frequent and direct contact on site, with our supported activities here in the United States as well as overseas. At the present time, we maintain GSA representatives overseas in South Vietnam, the Philippines, Okinawa, and Germany, who serve all of the military and civilian activities in those general geographical areas. Beginning in 1962, GSA developed a system capability to interface with DoD activities in the use of the DOD standardized requisitioning system-MIL- STRIP-and the uniform military materiel issue priority system-UMMIPS. Since that time we have jointly participated with DOD in a significant array of procedures and systems development programs which allow us to interface with the military activities in all major aspects of supply operations such as the trans- ceiver network for receipt of requisitions, the automatic addressing system, cata- loging, and data flow systems. To further enhance our supply processing and control operations, we recently installed a standardized computer processing system at each of our regional offices with a centralized high speed update of our national supply asset picture. This latter office located in Washington, D.C. is known as GSA's National Inventory Control Center. In support of military service overseas activities we are capable of reacting to a number of unique service requisitioning channels. For the Air Force, which does not maintain overseas depots, we accept requisitions via the transceiver network directly from each overseas base. In the case of the Army, which op- erates out of overseas depots, GSA accepts generally larger orders from those overseas depots or inventory control centers, again via transceiver facilities or through other electrical or mail channels. Navy overseas requisitions are gen- erally processed through the Naval Supply Centers at Oakland, Calif., and Nor- folk, Va., then to GSA in case stocks are not available at the centers. The bulk of the overseas Navy requirements, however, are requisitioned by the major PAGENO="0243" 23~7 Tidewater Supply Centers directly upon GSA for replenishment in wholesale quantities at these locations. Some of the Navy overseas activities requisition directly upon GSA. In this regard, a 6-month direct requisitioning service test between the Naval Supply Center, Pearl Harbor, and our San Francisco region is expected to begin in August of this year. EMERGuNCy PREPAREDNESS In event of emergencies GSA provides a 24-hour, 7-day-a-week coverage to insure priority resiponse to the activities we support. Upon DEFCON 3 or sooner, the Federal Supply Service of GSA activates the Central Office Logistics Control Center and concurrently counterpart centers in all GSA regions are set up. In addition, we have relocation regional and central office relocation sites. Each region is capable of independent operation with its own machine system and stocks. ACTIVITY DATA Statistical information in selected GSA procurement and supply functions follows: -Procurement volume of $546 million in fiscal year 1955 increased to $2 billion in fiscal year 1967. -Inventories of Stocked items increased from $25 million in fiscal year 1955 to $221 million in fisical year 1968. -Items stocked increased from 7,933 in fiscal year 1955 to 40,487 in fiscal year 1968. -2.4 million lines shipped during fiscal year 1955 increased to 8.1 million in fiscal year 1968. -A dollar volume of $75.9 million shipped in fiscal year 1955 increased to $513 million (estimated) in fiscal year 1968. -Stock availability during fiscal year 1968 maintained a fairly steady rate of about 87.5 percent with an average priority effectiveness rate for the year of 93.1 percent excluding back orders. -Of the 8.1 million stores stock line items valued at $513 million processed from depot stocks in fiscal year 1968, 3.9 million lines valued at $377.6 million represented shipments to DOD. Mr. DAHLIN. Admiral, as far as you are concerned for D'SA, if any- body has any complaints with respect to or runs out of stock on an item that GSA handles, that is GSA's problem and you simply- Admiral HADDOCK. Yes, sir. Mr. DAHLIN (continuing). You simply send them out the door with it? Admiral HADDOCK. We have a further responsibility. We have a re- sponsibility to establish these arrangements with GSA, and we have the further responsibility assigned to us to monitor the effectiveness of GSA's support, and we were involved in some of this early in the Vietnam situation. Obviously GSA had the same kind of problems we did in meeting the tremendously expanded demand, However, I know we can say, and I think the services would agree, that GSA recovered well and is now giving them good support in those items for which they are responsible. Mr. DARLIN. Do you continue to monitor? Admiral HADDOCK. Yes, sir. It is a spot monitoring basis, largely looking at GSA via our service consumers. Mr. DAHLIN. So that if anyone has any complaints, they do come to you? Admiral HADDOCK. Yes, sir. Mr. DAHLIN. To tell you that they are not getting proper support in a given area? Admiral HADDOCK. Yes. PAGENO="0244" 238 Mr. DAHLIN. Have you had any such complaints? Admiral HADDOCK. Not since 1965-66, early on in the Vietnam buildup. Mr. DAHLIN. Have handtoois become critical at any time because of Vietnam needs? Admiral HADDOCK. Handtools, I think the whole range, practically the whole range of GSA's items as well as ours became reasonably critical during the Vietnam buildup, early stages of it, and there were some difficulties then. Mr. DAHLIN. Admiral, how does the Defense Documentation Center fit into the rest of DSA operations? Does it have any functions that relate to any of your other activities or is it simply confined to this one area of being :a repository in providing copies to all users? It does not handle any of your procurement-type information and that `sort of thing; does it? Admiral HADDOCK. No, sir. I think it is strictly a service operation. We do have a considerable amount of data processing expertise in our headquarters staff, and we `are able to help the Defense Documentation Center automate their indexes and automate their response to queries by users and so forth. It is not directly related to the balance of our mission. DSA/ADP SYSTEMS Mr. DAULIN. Perhaps Mr. Rimkus could at this time go over the full range of ADP efforts that DSA has undertaken. Could you describe both, in a document sense and the processes? Mr. RIMKIJS. You mean cover the entire DSA range? Mr. DAETLIN. Yes. Mr. RIMKTJS. I might break it out into two' phases. One is what we call our uniform automatic data processing system (UADPS) efforts, where we employ uniform systems of multiple installations. Admiral Haddock has mentioned the mechanization of warehousing and shipment procedures. We use the acronym MOWASP for this system which covers our depot operations. We have implemented this system at four of our seven depots. In addition, for our inventory control points, which we call supply centers, we have another program which we call the' standard auto- mated material management system, or the acronym SAMMS. At this point in time we are in the pro'graming and testing stage, hoping to have the system operational at our first center in January 1969 at the Defense Construction Supply Center, Columbus, Ohio. Mr. DAHLIN. Is that an effort to solve some of the problems of the construction area by backing it up with automated equipment? Has that been part of the problem in the past? Mr. IRIMKIJS. This will provide a standard system acr!oss the `board for all of our inventory control points, in addition to standard hardware. Mr. DAmAN. Are you starting the installations at those areas that have been having trouble or at those centers that have been having trouble with this? PAGENO="0245" 239 Mr. RIMKUs. Defense Construction Supply Center was picked be- cause of its colocation to our Data Systems Automation Office, which is the central programing office. In addition to these two UADPS efforts, Admiral Haddock briefly mentioned another in the contract administration area. We have an interim mechanization of contract administration services project, in which we are providing a uniform system and standard equipment at 11 contract `administration service regions. Full implementation will be attained during July 1968. By July 1979 we hope to implement Military Standard Contract Administration Services (MILS'CAP) at our regions so that we have proper interface with the military services buying offices as well as their inventory managers. Mr. DAHLIN. Your uniform automatic data processing, that you referred to, is not the same as the Navy's-even though they are using the same initials or name. You are not buying the same equipment or coordinating with them? `Admiral HADDOCK. No. Mr. RIMKUS. No, sir. All of these, all of these three systems that `I have mentioned, are based on guidelines and procedures established for the DOD military standard data systems (MILSTRTP, MILSTRAP, MILSTAMP, and MILSCAP). These provide the media for communication between and among the military services and DSA, and to insure compatibility of their systems. The DOD Military Standard Data Systems provide the military services and DSA `basic tools, or the basic foundation upon which to' build their internal systems. In addition to `these three major TJADPS efforts, we have one other program that is scheduled for implementation next year which we call the automated pay and cost accounting and personnel management system. The acronym we use is APCAPS. This one is also being centrally designed by our Columbus `office `and will have `application to all DSA `activities. In addition to uniform systems for the multiple installation, we have what we call one-of-a-kind installations. We have three of these; name- ly, the Defense Logistics Services `Center at Battle Creek, where we have a large facility eingaged primarily in the cataloging, materiel utilization, disposal operations, and a data bank for item information. Next, the Defense Documentation Center, which was discussed briefly, located at Cameron Station. And the Defense Industrial Plant Equipment Center at Memphis, whi'ch `manages industrial production equipment. These organizations do their own systems design and programing at the individual `installations rather than depend on the central pro- graming office which is concerned with uniform systems. DEFENSE AUTOMATIC ADDRESSING SYSTEM One other mission which I failed to address, which was `assigned to DSA by the DOD in 1965, was the Defense Automatic Addressing System. This system operates at two locations, Dayton, Ohio, and Sac- ramento, Calif., comprising a total of five system facilities. PAGENO="0246" 240 These facilities were established to automatically address and route requisitions and supply transactions from the military service cus- tomer to the appropriate inventory manager. This is done utilizing con~puter techmques. We have found over the years with this item management transition between the services to DSA and to GSA- Mr. DAHLIN. Nobody but the machine knows where to send the requisition now; is that the point? Mr. Rii~nius. No. The catalog information still goes out to the customers, but there is a timelag in getting this information to the individual customer. So that `in the event a requisition has the wrong addressee, by rou~ting it through the Defense Automatic Addressing System it will mechani- cally check to see if the proper address or the proper inventory man- ager is indicated on the requisition. If not, it will correct and route it to the proper inventory manager, and then report back to the requisition- ing activity that this item is no longer managed by the Defense Elec- tronic Supply Center as an example, but is now managed by the GSA or by a particular service inventory manager. This system started in 1~65, but is not implemented across the De- partment of Defense as yet. Hopefully in the latter part of fiscal year 1969 it will be implemented across the DOD spectrum as well as the GSA activities. Mr. DAHLIN. Is that where everybody's requisition has to go first nowadays? It has to go through the readdressing center to make sure it is going to the right place? Admiral HADDOCK. When the system is completed. Mr. DAJILIN. Are they coming through there now? Mr. RIMKns. A good number are. The Army particularly has con- siderable subscribers to the system. The operation is accomplished in microseconds and the requisitions are automatically addressed by the computer. Mr. DAHLIN. Is this cards, tape? What is going through? Mr. RIMKUS. Supply transactions flow through AIJTODIN chan- nels. The information is received in the computer from ATJTODIN, checked and if it is properly addressed, the data is transmitted again through ATJTODIN to the inventory manager. It will come out either on tape or card, depending on his capability to receive it. Primarily card out put as a rule. ENGINEERING DATA Mr. DAHLIN. One of the significant gaps in the past-one of the programs that never came to be, let me put it-was the so-called engineering data documentation system. I believe you transferred that out to Defense along with the standardization program, because it never got anywhere. It has always been hoped that somebody would get control of the engineering data and put it on microfilm or sonic- thing. Has DSA tried to do anything about that problem or has that been permanently transferred up to the next echelon? Admiral HADDOCK. Well, any manager I think dealing with supply items is concerned about technical information. He needs an adequate description of what it is he is stocking or procuring. He might even PAGENO="0247" 241 need to know what equipments this part fits on in order to be able to buy it intelligently. He needs a lot of technical information to catalog the item, to decide whether it is an item that is already in stock or is a unique new item. We expend a lot of effort at our centers, in the technical operations groups directorates of these centers in seeking complete technical information on our items, hopefully during provisioning, and if we fail there, to get it later. Admittedly, particularly since Vietnam, we have a lot of requests for items that we never saw before, and we do not have the technical information on the items. In those cases we were fortunate if we got the original manufacturer's name and the component that orig- inally fitted on it. But we spend a lot of our time getting technical information primarily for cataloging purposes, and as well as for filling in our basic data file in Battle Creek, so that we will know all there is to know about the characteristics of all the items we manage. Mr. DAHLIN. Who is supposed to keep it; the Logistics Service Center at Battle Creek is supposed to keep all the technical informa- tion that you have? Admiral HADDOCK. All the item characteristic information that we have for use in cataloging, for use in the utilization program, for use in offering substitutes or interchangeable items to service provision- ing requirements. And hopefully sometime in the future for use by `designers of military hardware, so that we will use items we already have in the system, rather than inventing new ones. Mr. DAHLIN. That was always the hope of the documentation system? Admiral HADDOCK. Yes. Mr. DAHLIN. But you still have no documents, and as you say, you could not even provide your people with a picture of what they are buying so that they could have some idea of its complexity. Is that what got you into the problems in the small purchase area? Admiral HADDOCK. This was a significant part of our problem. I happened to be at Columbus at the time. We were buying items that we did not recognize, have any visual recognition of. We had a part number and a manufacturer. We were under pressure to get these items quickly, and sometimes, as you know, we paid more than we should have for them. SMALL PURChASE PROCEDURES Mr. ROBACK. You might at this point tell us what new controls have been directed toward the small purchase area. Admiral HADDOCK. This problem is being addressed by OSD and DOD as a whole. I will speak to DSA actions. We first sent our small purchase buyers to school; we trained as well some of our own instructors at school. We have required that any small purchase, contrary to recent past practice, must `be approved by at least one review echelon before it ~flnally becomes an award. We have endeavored, spent a lot of time endeavoring to assure that our small-purchase people have all the documentation descriptive information on the items they are dealing with that is available, in- cluding contractors' catalogs, our own descriptions, and so forth. PAGENO="0248" 242 We took two samples, one at the time we were getting the most publicity about our small purchase, which indicated the statistical likelihood that we might have made a bad purchase Later, after we had taken these steps, we took another sample, and found that we had improved in the process, because of these actions we had taken The improvement was an order of magnitude At the first sample we took, we found that the odds were 93 5 percent that our buys, small buys, were reasonably priced The next sample we took we found that the odds were that 975 to 99 2 percent of the time our buys were reasonably priced, and we will continue to emphasize this area, primarily through the train ing of people Mr ROBACK Do you have any way of making computer checks on unreasonable prices ~ Admiral HADDOCK We do this after the fact, and we have for some time, but the horse is already out of the barn by the time that you find that this contractor has been overpricing by comparison with- Mr ROBACK There has been some interest in legislation or ASPR changes with regard to most favoied customer pricing Is there any development there ~ Admiral HADDOCK This is one other requirement we have Where we have no other means of assuring that we get a good price, we require the contractor to warrant to us that we are getting as good or better a price as any other of his customers There are variations on this war ranty, but we do require it Mr ROBACK It is required only selectively in contracts ~ Admiral HADDOCK Well, if we have competition or for other reasons we can assume that we are getting a good price, then we do not re quire it But if it is a sole source buy, and ~ ~e have no earlier price history, we will require this warranty TRIJTII IN NEGOTIATIONS ACT Mr R0BACK What is the DSA doing in improving the truth in negotiations certification and verification process ~ Admiral HADDOCK I cannot really speak on that We are complying with or are involved with OSD in developing actions, and we are complying with OSD policies and procedures on the subject Mr ROBACK Various recommendations growing out of General Accounting Office reports ~ A dmiral HADDOCK Yes, sir Mr ROBA~K Do you have a special activity going here ~ You might submit a statement on that &(lmlral HADDOCK All right, sir I do know that we have sent teams around to train our procure ment and contract administration people on the requirements of the Trii+h in Negotiations Act but that is as far as I can go on it (The information requested follows ) DSA is aggressively pursuing compliance with Public Law 87-653 truth in i~iegotiation Procurement personnel have been counseled on revisions to A~PR which provide for access to contractor records on cost performance of i'ioncompetitive fixed price contracts for more precise statements on requirements for cost or pricing data and the need for careful evaluation of contract pricing proposals- PD Form 633 PAGENO="0249" 243 Intensified training sessions have been conducted at every Defense supply center to stress the importance of compliance with the act and to fully explain requirements of such compliance. File documentation and preparation of price negotiation memoranda were emphasized. Compliance with the requirements of the act has been stressed in contract reviews performed by the contract review office and by on-sight reviews by the procurement management review team. Further training has been given to the specialized areas on a selective basis to correct deficiencies noted in these reviews. All centers were sent detailed guidance on the determination of adequacy of factual data upon which a contractor's estimate is based. Actual case analyses were included in the examples. Contract administration services personnel in the field have been: a. Issued guidance for the proper documentation and indexing of price analysis. b. Provided with a "check list" to assure that requirements of the law are complied with. c. Provided additional training on the application of the law. Provision has been made for the procurement contracting officer to submit feedback informa- tion on the adequacy of pricing data. The "Contract Administration Operational Manual" has been revised to- a. Prohibit approval of prime contractor procurement systems which fail to comply with the law. b. Prohibit approval of individual contractor purchases which do not comply with the law. The DSA auditor general is continuing to concentrate on compliance with the law during his audits and inspections of DSA activities. SUPPLY OF ARMORED VESTS Mr. DAHLIN. Admiral, on page 12 of your statement you talk about difficulties or shortages on some items such as armored vests. We heard that there is a repair operation on Okinawa, for instance, where the Army contracts to take apart armored vests and rework them to put them back into use. Have you examined the possibilities for DSA undertaking this type of operation-and perhaps on a cross-service basis-for repair and rework of this kind of item, where it is relatively simple and you can perform cross-agency functions perhaps more conveniently? Admiral HADDOCK. We do perform in-house or by contract many repair operations, and specifically in the area of clothing, and this body armor is in the area of clothing. Generally though, we do this when the services have turned the used material back to us, and we make a determination that it is cheaper or faster or both to repair the item rather than to buy new. These are not coming back to our system now, because the Army is in such dire need of them they are trying to repair them in the field themselves. Undoubtedly we could do it. Our problem here was simply that with the Tet offensive, people in bases, Air Force people who had not worn body armor before, a lot of people in Vietnam who had not wanted body armor suddenly wanted it. We were stocking this only to support projected Army-Marine Corps requirements, and suddenly our requirements for it just expanded all out of reason, and we were drawn down. We expect deliveries in the next 6 months, so we will get back in position to support the reQuirements. We will be out of the woods on body armor in October of 1968. 50 we have another 6 months or so to ito. Mr. HOLIFTELD. Is that body armor quite effective? PAGENO="0250" 244 Admiral HADDOCK. I can only deduce this from the fact that the troops all want it now, sir. Mr. H0LiriELD. What type of bullet will it take care of-the rifle AK-47? Admiral HADDOCK. I am not qualified to answer that, sir. Mr. DAHLIN. You can perhaps get the answer to that for the record, Admiral. Admiral HADDOCK. Yes. (The information requested follows:) The body armor currently being procured by DSA for issue to troops in Wet- nam, Federal stock No. 8470-823-7370 series, is a fragmentation type vest and will not protect against direct hits by small-arms fire. It is capable of defeating shrapnel falling within a relatively wide range of fragment size and impact velocity. POL SUPPLY Mr. DAULIN. On page 13 of your statement you mentioned there was no significant supply problem in the case of fuel support in the Far East-General Hedlund found this. You spoke of the transfer of re- sponsibility being at the water's edge-that is to say, when you turn your fuel over to a service facility, then you lose the responsibility for it. How is that divided as between your office and MSTS, particularly in this very complex situation where you have to sometimes run the tank- ers up and down at multiple dropoff points and this sort of problem? Admiral HADDOCK. Fuel is one of the exceptions, I think I stated, to the release of our responsibility at the continental limits, water's edge. For fuel, we buy projected requirements from the services; and at the same time, as part of the procurement action, we also arrange for the tanker delivery of it on schedules as required to overseas or continental service storage points. The Defense Fuel Supply Center makes this delivery, contracts with MSTS or commercial lines as available to effect these deliveries to overseas storage points, whether they be in Japan, Vietnam, the Philippines or wherever. Mr. DAHLIN. Your fuel supply office does that? Admiral HADDOCK. Yes, sir. Mr. DAIILIN. The Army pointed out that it was responsible inside country, I take it, for POL supply to all of the services. Does that mean your people are all here in Washington, or do you have some in the field on this problem? Admiral HADDOCK. We have inspectors in the field, but within Vietnam, for example, or within Korea, once we deliver it to the shoreside terminal point in Korea or in Vietnam, then the Army is responsible for in-country redistribution generally by trucks or pipe- lines. Mr. DAHLIN. But if a shipment does not make it up the river or it is blown up or something, it is still with you until it is delivered to the combat zone? Admiral HADDOCK. It is our responsibility until delivered; yes, sir. Mr. DAHLIN. How do you work along with the JCS responsibilities in this area? Is that coordination all here in Washington or is some of that in the field too? Admiral HADDOCK. Generally the requirement for POL and the schedule of the requirement is generated by joint petroleum offices, PAGENO="0251" 245 one in CINCPAC. Similarly every joint conunand has its joint petro- leum office. These people who are the ones who have the usage in the forward area and the stock status, project what the requirements by type of product will be in the future and they schedule when they want the product by type laid down. Then it is up to the Defense Fuel Supply Center to procure these products, and arrange for the delivery on the projected schedule. Of course, these slates as they are called, which come from the joint petroleum offices, get changed periodically, and we may have to change our contracts for product and our contracts for lift to con- form with them, and do so pretty regularly. Mr. DAHLIN. Is it your responsibility, or MSTS' responsibility, if you get a delivery offshore in the country and there is not enough storage to put it into one spot? Who decides whether to move it up and down the coast? Is that Army or is that you? Admiral HADDOCK. In that case the joint command decides where they would want it. We might assist `them in the decision, but basically it is their responsibility to tell us where to put it. Mr. DAHLIN. But you do have the problem? Admiral HADDOCK. Yes, sir; we will have to arrange for the change of destination. GENERATOR REPAIR PARTS Mr. DAHLIN. In connection with the construction supplies and equipment that you say give you the most difficult support problems, Admiral, are these areas of construction equipment, and material han- dling, and power generating, that you mention, all equally trouble~ some? Or is one of those more troublesome than the others? Admiral HADDOCK. I think probably the most difficulty we have had is with materials handling equipment repair parts, power generator parts, and construction equipment repair parts. The construction equipment repair parts and the materials han- dling equipment repair parts, for the reason that these equipments just got usage in Vietnam early on such as they never had before. Many of them were equipments that we had not stocked parts for when they were operated in continental United States, and we got way behind on this, and they are parts that are hard to get from a manufacturer in a short time. The power generating equipment had these same kinds of prob- lems, but in addition, we had a multitude of differing types of old and obsolescent power and generating equipment sent to Vietnam to take care of the requirement. Many of these had not been in manufac- ture for years, and we had difficulty finding anyone who would make the parts. Mr. J-IOLIFIELD. Were these items that were manufactured to pecu- liar specifications of the services rather than the standard items used in commercial practice? Admiral HADDOCK. In some cases, sir, yes. Mr. HOLIFTELD. I wonder to what extent the standardization pro- gram has advanced to the point where you can use standard com- mercial specifications for different types of equipment, nuts and bolts and all that sort of thing. It would seem to me that wherever possible, PAGENO="0252" 246 you should use the commercial equipment on the basis that you would have access to parts for a longer time than you would have with peculiar items. Admiral HADDOCK. We would like to get there, sir, but we are not there yet by any means. The OSD, with the Army taking the lead, now has a program to attempt to standardize power generators, so that for the future at least we will have not so many types to be supported, and hopefully they will be standard types. Mr. DAImIN. The word "standardized" has always simply meant to the Army that you get a new model and call it standard and then a few years later you get another standard. That is not quite what you are talking about? Admiral HADDOCK. No, sir. Mr. DAHLIN. On standardization? Admiral HADDOCK. No. Mr. IDAHLIN. The Air Force had a standardization program for generators here for a while. Now you say the Army is going to take the lead this time? Admiral HADD0~K. In power generating equipment; yes, sir. Mr. 1DAHLIN. How much of this is your responsibility and how much is the services'? Admiral HADDOCK. In the equipments themselves, the standardiza- tion of power generators will be the Army's responsibility with the assistance of representatives of the other services. We have a repre- sentatwe working with this group. Mr. DAm~IN. Is your main concern the fact that you will have parts support? Admiral HADDOCK. Yes, sir. Mr. DAT-JUN. For these new models? Admiral HADDOCK. Yes, sir. Mr. DAHLIN. Whatever they may be? Admiral HADDOCK. That is right; yes, sir. Mr. DAHUIN. Are you going to have any leverage to try to get com- mon parts among the models, or is that entirely the Army's responsibility? Admiral HADDOCK. The Secretary of Defense himself was knowl- edgeable of the problem we have with power generating equipment in Vietnam. From his office there is a lot of pressure to get this standardi- zation for the future, and the attempt really was started with the hope that we would get standardization of these equipments, standard equipments deployed to Vietnam, and to some degree this has been accomplished. Mr HOUIFIELD. In your Vietnam operation you we-re faced with, I imagine, the necessity `or the advisability of utilizing surplus items that were in inventory. Admiral HADDOCK. The Army needed `any equipment that was available. Mr. HOUIFIELD. Possibly stored from World War II? Admiral HADDOCK. Yes, sir; it well could have been. Mr. HOUIFIELD. Any of the motors and generators? Admiral HADDOCK. Yes, sir. Mr. HOUIFIELD. Many date hack to that point? Admiral HADDOCK. Yes. PAGENO="0253" 247 Mr. DAHLTN. In connection with the chairman's prior question, to what extent has it been possible to use commercial-type generators in Vietnam or of the voltages and cycles, et cetera; have they simply been too difficult to make it possible to do that? Admiral HADDOCK. I do not believe I could give a precise answer to that. I will try to submit one for the record. (The information requested follows:) Electric power requirements necessitated both nontactical (commercial) and tactical (military specification) generators. Nontactical generators are used at fixed installations. Tactical generators are used in the field whenever military operational characteristics are required. Nontactical generators account for ap- proximately 47.7 percent and tactical generators account for 52.3 percent of the total power equipment deployed to vietnam to date. Mr. DAIILIN. Do you buy any generators as end items, or do you stock any of the parts? Admiral HADDOCK. The construction supply center does stock some generators as supplies. This is somewhat of a happenstance, due to the fact that when we took over some of the Army supply functions, we rather inadvertently took over the small equipments and some re- pairables, which normally we would not expect to stock. We are offering these kinds of supply items back to the Army now, but in the interim period we still are supporting, stocking some generators. Mr. DAHLIN. You are offering the end items back? Admiral HADDOCK. Yes. Mr. DAHLTN. It is still the policy that you do not handle any end items? Admiral HADDOCK. That is right. We do not think we should handle these. `Mr. DAHLIN. Why do you not think you should handle them? Just offhand? Admiral HADDOCK. For these reasons- Mr. DAHLIN. Apart from the fact that your directive may deal with `that. Admiral HADDOCK. No. Mr. DAHLIN. The question of whether there should he any proposal that some things might be more appropriate for handling. How has that problem been reviewed? Admiral HADDOCK. Equipments and major repairables, depot level repairables, these are things that can be repaired and reused time after time within the service. We feel that the service which has depot level repair capability, knows how the equipments are being used, and can anticipate their return for rebuild in lieu of procuring the projected demand, is in a much better position than us to manage them. And also the service which can exercise some disciplinary control over their forward units to see that they do return these items for repair as soon as they are inoperative or removed from a major equipment. We feel that a service therefore is in a much better shape than DSA to manage these as repairables. We do not have maintenance depots. We do not really have a handle on the forward area operators to make certain that they do return these things for repair rather than just requisition a new one, and hence we think we should not be attempting PAGENO="0254" 248 to do the depot level repair of these items, nor be responsible for seeing that they are returned for repair. Mr. DAHLIN. In other words, for the future, if there is a generator problem of some consequence, it would be the concept that the services would st,ill be responsible for repair. And even if it is the same ~en- erator across the three services, if they are going to have any coordina- tion they would have to do it on a single service assignment, that sort of thing? Admiral HADDOCK. Yes, sir; except that the Army and the other services are working on a coordinated depot maintenance program for generators. Mr. DAIILIN. If it were, let us say, more economical to repair all of some particular type generator at one point, then that still would not be a DSA problem? That would be a matter for the services? Admiral HADDOCK. Yes, in coordination `and with OSD guidance. Mr. DAHLIN. To arrange among themselves? Admiral HADDOCK. Yes. Mr. DAIILIN. That is the basic concept. Have you looked at this from the point of view of all of your repair- able excess and surplus items, to see if there are any places where the DSA might provide a better service by setting up some sort of central maintenance to put things back into shape for use by one agency or another? Admiral HADDOCK. We have not really looked at this; no, sir. Mr. DAIILIN. GSA, as I understand it, in the limited area in which it operates, went fairly early into the game of repairing-say office furniture-where it was a commodity that could be reused or where it was more economical to repair it first rather than junk it and let it go. Sometimes you could not make an estimate of the real value of the material until it was repaired. Has that been reexamined lately, that problem? Admiral HADDOCK. We in DSA do do repair to that extent. We des- ignate some of our items which may not be depot level repair items from the viewpoint of the services, but our engineers, our technicians will say, "If we get these items in an unfit for issue condition returned to us, we can more quickly and more economically repair them and put them in stock than to make a new buy." So in our catalogs we code these kinds of items to say to the service users, "If you return these items to us in economically repairable con- dition, even though used, we will give you a certain percentage credit for them." When those do show up in our system then, we either repair them in-house if we have the capability, make an arrangement with the Army, Navy, or A'ir Force maintenance facility to repair them for us at a cost, or make a contract to have them repaired. Mr. DArn~IN. Have you made any job training contracts to have them repaired, along that line? Are these fairly simple, are they com- plex, or what? Admiral HADDOCK. It could be repair of generators or repair of transmissions, forklift truck transmissions. Early on in Vietnam, at Construction Supply Center, we had occasion, where we just could not get some of these items from procurement fast enough, to go to the Vietnam commanders and ask them to get these repairables back to PAGENO="0255" 249 us, so we could get them repaired, and to that extent we are involved in a repair program. We do not in our requirements computations, however, anticipate, as you would in aviation repair parts, that engines are going to come back to us on some projected schedule, so that we can offset this return and repair against future requirements, which is the thing the services do with equipments and repairables. MANAGEMENT OF FOREIGN ExCESS Mr. DAEtLIN. What about the question of all of the management of the foreign excess problem? Have your systems people or has anybody exercised this question in their recent past of how the best job can be done at identifying, handling, and eventually doing something with all the foreign excess that is generated? Could DSA do anything to attack that problem, or have you studied it? Admiral HADDOCK. As I indicated earlier, we have been working now for about 9 months with the Army, who is the executive agent for this effort in the Pacific. Mr. DAHLIN. Only in the Pacific? Admiral HADDOCK. Yes, sir. Mr. DAHLIN. You have not touched Europe- Admiral HADDOCK. No, sir. The Air Force~- Mr. DAJILIN. As far as DSA? Admiral HADDOCK. The Air Force has this responsibility in Eu- rope, as you know, to identify activity excesses, try to get them re- utilized. Finally, if there is no utilization, to dispose of them. Mr. DAHLIN. Does the Air Force use a facility like your DLSC at Battle Creek to do that kind of work? What does it do? Admiral HADDOCK. They have a somewhat similar procedure set up, about to be established. Mr. DAHLIN. About to be established? Admiral HADDOCK. The responsibility was given to them some time ago. Mr. DAHLIN. Did you get them an excess computer to set up a facility or have they got plenty of their own? Admiral HADDOCK. I probably could, since we are in the business of computer reutilization, but all I know is that they have a procedure somewhat like DLSC set up for the European theater, about to be implemented for the utilization and disposal program in Europe. Mr. DAJILIN. There has not been any coordination between the DSA and TJSAF Europe to see what might be worthwhile? Admiral HADDOCK. Not specifically; no, sir. DCAS ROLE Mr. DAHLIN. What is the relative proportion of personnel and man-hours broken `out between your Contract Administration Services and the rest of DSA? DCA has a pretty large trunk now. Admiral HADDOCK. DSA in total is slightly over 59,000 military and civilian. Defense contract administration of this is something over 23,000 people, so it is pretty large in our operation. Mr. DAHLIN. What are the responsibilities of the executive director for production in DCA and your executive director for procurement PAGENO="0256" 250 and production under the rest of DSA? How do those offices mesh and divide the job? Admiral HADDOCK. Our procurement and production directorate is primarily concerned with the procurement processes in DSA centers. Mr. DAULIN. In DSA centers? Admiral HADDOCK. How they are going, how they do their business. The production piece of it is primarily involved with production planning for specific products or industrial mobilization production planning. On the other hand, the DCAS production directorate is concerned with the overseeing, giving staff direction to the contract administra- tion production people in the contractor's plants in the field. In the case of a big contractor, we will have production men in there all the time. In the case of a smaller contractor, we will have production people from DCAS going around periodically to these plants. They are concerned with- Mr. DAHLIN. They are concerned with DSA contracts too, though- Admiral 1-IADDOCK. Yes, sir. Mr. DAHLTN. On that side, are they not? Admiral HADDOCK. That is right, yes, sir; all the PSA contracts with few exceptions are administered by the Contract Administra- tion Service. Mr. DAHLIN. But the production as far as the executive director for procurement and production is mainly in-house? Admiral hADDOCK. That is right. Mr. DAIIUIN. Are these two animals really sort of forced under the same tent? At how many points do these functions actually meet, time Contract Administration Services and the rest of DSA? Admiral HADDOCK. We, of course, have a common staff in DSA, the elements you would expect, the Comptroller's staff, the civilian personnel staff, the military personnel staff, my own staff, plans, pro- grams and systems. We are able particularly in the automation area to give the con- tract adrnini~tration staff a lot of assistance and help here that they otherwise would have to do for themselves, if they were separated. Mr. DAHLTN. It is mainly that overhead office- Admiral HADDOCK. Yes, sir. Mr. DAm~IN. That part of the overhead- Admiral HADDOCK. Yes, sir. Mr. DAHLIN (continuing). rfha( they would otherwise have to have as a separate agency? Admiral 1-IADDOCK. I think there is also an intangible advantage in the DCAS headquarters staff being a part of DSA in working with the supply and procurement people of DSA, because our prob- lems related to contract administration are the same as the service procurement officer's problems with contract administration, and to- gether we can perhaps, being under the same tent, perhaps work these problems out more easily. Mr. DATiraN. Does this colocation give any advantage in the area that was talked about before with Mr. Roback, with respect to pricing and understanding of what the items are in this? PAGENO="0257" 2M Is there any benefit that flows in that respect giving more technical help to some of the contracting people? Admiral HADDoCK. I do not quite recognize that as an `advantage. During the times when we were having difficulty getting production, we were able to use contract administration services people to expedite critical items for us through production. INDUSTRIAL PRODUCTION EQ1I[P~ENP Mr. ROBAOK. Let me ask a question, Admiral. Do you have charge now of the inventory of industrial equipment? Admiral HADDOCK. Yes, sir. Mr. ROBACK. Does that include the national inventory and the De- fense inventory? I mean do you have the total control? Admiral HADDOCK. No, sir; it is not quite that simply stated. Mr. ROBACK. Who has what you do not have? Admiral HADDOCK. We have this responsibility: for items which are identified as industrial plant equipment and the identification pri- marily involves metalworking tools over $1,000. Mr. ROBACK. Are these in-plant? Admiral HADDOCK. In contractor's plants primarily. Mr. ROBACK. You do not have control of the equipment stockpile? Admiral HADDOCK. No. Mr. ROBACK. Machine tools? Admiral HADDOCK. No, sir. Mr. ROBACK. Or anything like that? Admiral HADDOCK. No, sir. Mr. ROBACK. You just have control over the in-plant Government- owned equipment? Admiral HADDOCK. Yes, sir. Mr. ROBACK. Of certain kinds? Admiral HADDOCK. Yes, sir; that is right. Mr. ROBACK. The rest of it is managed by the services? Admiral HADDOCK. Yes, sir; and our primary purpose in being in- volved here is to know what is available in these plants, to remove them from plants, and hold them in store, in some cases renovate them, and to supply these assets, make these `assets available to meet either a military requirement or a DOD contract requirement for the future. Mr. ROBACK. Have all equipments been allocated, assigned as among the services and yourself? In other words, is there an inventory of all this? Do you know ~?h'at you own or what you manage right now? Admiral HADDOCK. We have centrally at the Defense Industrial Plant Equipment Center an inventory, which is as good as any invert- tory I guess, `and maybe a little better, since we are in the process of reconciling it now with contractors, of what these items are in the contractors' plants, and in our own storage facilities. Mr. ROBACK. Does that mean for all the services, o~ll Government- owned, or only for what you are managing? Admiral HADDOCK. All Government-owned. Mr. ROBACK. Theoretically you know where the material is and what it is? 97-475-68-17 PAGENO="0258" 252 Admiral HADDOCK. Yes, sir. Mr. ROBACK. And are you responsible for the problem of rental and permissive commercial use and other problems that have come up with respect to Government-owned equipment? Admiral HADDOCK. Well, we are involved in attempting solutions to these problems with OSD and `the other services, and of course the Defense Contract Administration Service plays a large part in this. For example, under OSD guidance, we are now conducting a test with 29 contractors I think, large contractors, to determine what it would cost them and us, if they maintained machine-by-machine uti- lization records. This has not been done before. But we will test it with these. Mr. ROBACK. So see whether that kind of- Admiral HADDOCK. Whether it is reasonable. Mr. ROBACK. If recordkeeping is economic? Admiral HADDOCK. Yes, if it is reasonable to expect or would it cost the contractor and hence us so much money that it would not be worthwhile. As I indicated, we are also involved right now for most of the con- tractors' plants in an inventory of his equipment, industrial plant equipment, and reconciliation of this inventory record with our cen- tral records at the Defense Industrial Plant Equipment Center. Mr. ROBACK. Do you have a program to sell equipment to the con- tractors in accord with a policy that there should be as much contrac- tor-owned equipment as possible in performing Government contracts. Admiral HADDOCK. OSD has a policy enunciated recently that dis- courages from here on out, furnishing equipment to contractors, and encouraging the contractor to buy his own, except in exceptional cases. It also prohibits us from here on out furnishing plant equipment under $1,000 in unit price to a contractor, this under the assumption I guess that if it is only $1,000 he can finance his operation himself. They are working with the office- Mr. ROBACK. This would be true even if it was special purpose equipment used only under Government contract? Admiral HADDOCK. Of course there are special exceptions to all these general statements, but by and large I do not think there was `an ex- ception on the $1,000 limitation. There were exceptions on the general injunction not to furnish plant equipment to a contractor, for those cases where we could not get the item we wanted any other way. For example, there is a lot of changing in this area, even with re- spect to DIPEC's responsibility, there is now a proposal by Mr. Mor- ris being considered by the services which would increase DIPEC's responsibility vis-a-vis industrial plant equipment, test equipment, and other equipment in the hands of contractors. Mr. ROBACK. You are familiar with the General Accounting Office information that was developed on commercial use of Government equipment which was not fully compensated? Admiral HADDOCK. Yes, sir. Mr. ROBACK. What is your impression of that information, of that material, as it was presented to a coiinnittee ~ PAGENO="0259" 253 I mean, do you think that there is widespread abuse or do you think that there is not any good information on it, or what? Admiral HADDOCK. Well, the reason we are making this test on machine-by-machine utilization is, we really do not think there is any good information as of now. I assume that- Mr. ROBACK. What is it-go ahead and finish your statement. Admiral HADDOCK. I am sure the specific cases cited by the GAO were factual, but I cannot extrapolate this across the whole industry. Mr. ROBACK. What is the ordinary practice now with respect to commercial use? For example, let us say that a company has a Government-owned heavy press for aircraft frames and it might want to use that for com- mercial purposes. Now how does the Government collect revenue, get any royalties or rents for such use? Is it a mere matter of contractor reporting and accepted by the Government as such? Admiral HADDOCK. Yes, sir. The procurement officer generally lays down in the contract the rules of the game. In some cases the procurement officer will say that a certain percentage of time the contractor is permitted to use the machine on his commercial work. The prices, the rates at which he will have to pay for commercial work are generally laid down by Office of Emergency Planning (OEP) guidelines. These guidelines leave something to be desired, and the Office, Sec- retary of Defense, and OEP are now working to make these more definitive. Mr. ROBACK. You mean OEP actually prescribes rental rates? Admiral HADDOCK. They furnish the guidelines by which the pro. curement officer is supposed to prescribe rental rates. There has been apparently a little bit of ambiguity in these guidelines. Mr. ROBACK. Why would they be concerned? In what sense does that bear on mobilization, that is to say, the rental? Admiral HADDOCK. This tooling I guess is a part of mobilization preparedness. Mr. ROBACK. Say that again? Admiral HADDOCK. The tooling itself represents a mobilization potential. Mr. ROBACK. I know it does. Of course there might be a mobilization impact as to the degree to which the material, the equipment, is tied up in commercial use. There would be an obvious mobilization im- pact, but what about the rentals? Are they related to that? Admiral HADDOCK. I cannot honestly state why they have this re- sponsibility except that they do have it. Mr. ROBACK. Has that responsibility been shifted to you? Admiral HADDOCK. No, sir. Mr. ROBACK. They still have it? Admiral HADDOCK. OSD is working with them now to try to get clarification of these guidelines, and a modernization of the rates to make the rates reflect a little more what the cost should be. Mr. ROBACK. You might present a brief statement as to what the problem is. PAGENO="0260" 254 Admiral HADDOCK, Yeis, sir. Mr. RoI~oK. And what is being done about it now. Admiral HADDOCK. Yes, sir. (The information requested follows:) The problems relating to the use and rental of Government-owned industrial plant equipment involve two policy areas. GAO review concluded that OEP approvui was not being obtained when use of Government-owned equipment on commercial work was anticipated to exceed 25 percent and further that clarifi- cation as to the intent of the ASPR 13-405, which sets forth the requirement for OEP approval, was needed. GAO interpreted it to mean machine by machine, whereas administrative contracting officers interpreted it to mean total facilities package. GAO also found that although uniform rates for rental of Government-owned machines had been prescribed, various bases upon which the rent payments were negotiated resulted in a lack of uniformity in the rates actually charged, inequities between contractors and, in some cases, reduced payments to the Government. Acting upon GAO recommendations, OASD (I. & L.) has provided a temporary clarification for application, to the extent possible immediately, pending publi- cation of a revision to ASPR 13-405. These instructions provide that contractors may be authorized to use Government-owned IPE for commercial work to keep the IPE in a high state of operational readiness through regular usage; or when substantial savings *to the Government would accrue through overhead cost sharing or receipt of rentals, provided no competitive advantage is conferred; or to avoid inequity when the contractor is required to retain the equipment in place, often intermingled with contractor-owned plant equipment required for the production of commercial orders. Such commercial use may be authorized for no more than 25 percent of time available for all use, based on normal work schedules. For equipment with a unit cost under $25,000, the authorization will apply to the average use, within any 3-month period, of all of the active equip- ment. For equipment with a unit acquisition cost of $25,000 or more, the authori- zation will apply to the same average use but f or each individual piece. Authori- zations may be granted up to 1 year in advance. Commercial use in excess of 25 percent will not be authorized without prior approval of ASD (I. & L.). Where required, ASD (I. & L.) ubtains approval from OEP. ASPR 13-405 sets forth the requirement for obtaining OEP approval when use on commercial work is anticipated to exceed 25 percent. The ASPR section sets forth the guidance issued by OEP in Defense Mobilization Order 8555.1 dated November 13, 1967. This order establishes policies necessary to maintain a highly effective and immediately available machine tool and equipment reserve for the emergency preparedness program of the U.S. Government. ASPR 7-702.12 also contains provisions for commercial use of equipment included in the emergency preparedness program and the specific rental to be charged. UNIFORM RATES PRESCRIBED In 1956 the need to establish uniform leasing policies with respect to rental rates was acknowledged in reports prepared by the Joint Committee on Defense Production and the Senate Select Committee on Small Business. One report states that sizable numbers of Government-owned machine tools were being leased to private industry and that, because a uniform leasing policy had not been adopted, discrimination and apparent low-rental policies tended to place small concerns at a competitive disadvantage. Moreover, the Select Committee on Small Business believed that leasing for nondefense purposes should be held to a mini- mum, a policy which i's currently reflected in OEP and DOD instructions. Therefore, an Interagency Task Group was formed with members representing the DOD and six other agencies of the Government. On June 19, 1967, the recom- mendations of the task group, which were developed by consulting representatives and leasing experts in the machine tool industry, were adopted and uniform rental rates for the leasing of Government-owned machine tools to private indus- try were established. The uniform rates, which are currently stated in OEP's Defense Mobilisation Order 8555.1 and ASPR section 7-702.12, were adopted on the premise that all lessees should be treated alike and that all pay rent at the same rates. PAGENO="0261" 255 New uniform rental rates become effective 90 days after publication of the revised Defense Mobilization Order 8555.1, now in process. The new rates shown below are expressed as percentages of the installed acquisition cost of equipment. Un percent) Age of equipment New rate Present rate Oto2years Over 2 to 3 years 3.0 2. 0 1.75 1. 5 Over3to6 years 1.5 1.5 Over6to 10 years 1.0 1.0 Overloyears 75 75 DSA STORAGE DEPOTS Mr. ROBACK. Going to another subject, there was some discussion with the Navy witness the other day about a GAO report conunenting on the duplicate stocking of GSA and Navy inventory because the Navy prefers, in dealing with its overseas destination points, to handle its own material rather than to have direct requisitioning from GSA as the other services do. The question also, I think, came up as to duplication, possible dupli- cation in depot inventories otherwise. I think you testified you are colocated with the Atlanta General Depot of the Army. Admiral JIArnocK. Yes, sir. Mr. ROBACK. Is that still called General Depot? Admiral HADDOCK. I thiuk it is. Mr. BOBACK. Time was when Atlanta General Depot had a wide range of supplies, many of which are in your management control? Admiral HADDOCK. Yes. Mr. ROBACK. If one went into the Atlanta GeneraJ Depot today, would he find items identical with those in your colocated depot? Admiral HADDOcK. No, sir. Well, it might possibly happen. Our inventory is located in Atlanta General Depot, a wide range of it. Atlanta General Depot also acts otherwise as an Army facility. Mr. ROBACK. They are landlord to you in certain respects? Admiral HADDOCK. Well, they do the operation for us at our direc- tion. They act as though they were one of our own depots. if we get a requisition for material, if Atlanta is designated as the supply point, we send them an order to ship. They ship it and they report back to us just as our depots do. Mr. ROBACK. That is your operation? Admiral HADDOCK. They are doing it for us; yes, sir. Mr. ROBACK. They do not have another corner of the depot in which they have the same types of supplies under Army management? Admiral HADDOCK. I would think not, although possibly they may have-they also do some maintenance there of course-they may have a shop store stock behind a maintenance shop of our same items which they have drawn from our stocks. Mr. ROBAOK. But theoretically the service depots, other than per- forming services at your direction, have specialized stocks that you do not manage; is that right? Admiral HADDOCK. It is probable. I do not know. PAGENO="0262" 256 Mr. ROBACK. But I mean generally they have stocks that are not managed by you? Admiral IL~jxooic. Yes, sir. Mr. R0BACK. Other than those they manage at your direction? AdmiraJ HADDOcK. They will have Army stocks, stocks of Army items there, certainly. Mr. ROBLAOK. In the surplus disposal category, are there any new developments with relation to GSA? Do you still perform by delega- tion all of these functions? Admiral HADDOCK. Yes, sir. Mr. ROBAOK. As part of the military concern? Admiral HADDOCK. Yes, sir. Mr. ROBACK. There has not been any change in the relationship? Admiral HADDOCK. No, sir. Mr. DAHLIN. Is that arrangement in Atlanta mainly for the con- venience of keeping all the personnel under one roof rather than divid- ing them between the Army and DSA? Admiral HADDOCK. There was just the desire not to break the depot into two, and at the time I assume it was felt that the Army could do the job for us there without the necessity for us mananging it completely. Mr. DAHLIN. The information you provided the committee indicates you have a current critical shortage of DSA-managed storage space. Has that come about from an attempt to consolidate too many spots too early, or how did that happen? Admiral HADDOCK. Primarily it came about because of the tremen- dous demands put on us by the Vietnam buildup, and combined for a while at least with a little difficulty in getting shipping as fast as some of the larger items were produced by our suppliers. So we had to put it down for a time, until we could get the shipping for it. This was the genesis of our storage criticality situation. But as a generality, it was just the demands of the Vietnam war requiring us to lay down more wholesale stock than we had anticipated. Mr. DAHLIN. Is there a hope to do something more wit/h the whole CONTJS arrangement of depots, either consolidate or make them more flexible? Admiral HADDOCK. We have made some appropriation channel ef- forts to get some, particularly on the west coast, a little more storage space built at some of our existing depots. This is the only thing we are doing at the moment. Mr. DARLIN. What is the purpose of this warehouse gross perform- ance measurements system that you are supposed to be developing? Is that to evaluate everybody's space, see how wefl they are using it, take it away from them if they are not? Admiral HADDOCK. This is really efficiency of warehousing perform- ance that we are attempting to measure here. We are doing this for OSD. It is an office which we administer for OSD. It is really an evaluation of the cost of the incremental efforts going into a receipt issue and warehouse operation, and comparing one ac- tivity of one service against the other in gross terms. Mr. DAHLIN. Mr. Chairman, we have this supplemental information that was referred to in the admiral's statement that we can make an PAGENO="0263" 257 appendix to the record at the appropriate point, as the committee wishes. Mr. HOLIFIELD. It will be received. (The information appears in the appendix, p. 309.) Mr. HOLmELD. Have you further questions? Thank you very much, Admiral, for your testimony, and your assistants. Admiral HADDOCK. Thank you, Mr. Chairman. Mr. HOLIFIELD. The meeting will stand adjourned to the call of the chair. We hope to have Secretary Morris before us after the Fourth of July week is finished, and after he returns from overseas. We would have had him earlier, but he was engaged overseas, we understand. (Whereupon, at 12:05 p.m., the committee adjourned, subject to call of the chair.) PAGENO="0264" PAGENO="0265" MILITARY SUPPLY SYSTEMS THURSDAY, JULY 18, 1968 HOUSE OF REPRESENTATIVES, MILITARY OPERATIONS StIBOOMMrITEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS, Washington, D.C. The subcommittee met, pursuant to recess, at 10 a.m., in room 2203, Rayburn Building, the Honorable Chet Holifield presiding. Present: Representatives Chet Holifield, Randall, Horton, and Erlenborn. Also present: Herbert Roback, staff administrator; Douglas Dahiin, counsel; Joseph C. Luman, defense analyst; and Paul Ridgely, in- vestigator. Mr. HOLIFIELD. The committee will be in order. Today we will continue and hope to complete with this session a series of hearings on military supply systems. The witness is the Honorable Thomas D. Morris, Assistant Secretary of Defense, who will introduce his associates. Secretary Morris recently returned from a special inspection trip to Southeast Asia and elsewhere. We hope to have the benefit of his recent observations on supply management deriving from the trip and any other observations he deems of interest and value to the sub- committee. Secretary Morris is an experienced and very able analyst and ad- iministrator in Defense matters. Of course, he sits in a seat of respon- sibility for policy guidance and direction of all Defense supply and logistic matters. We are very pleased to have you before us again, Mr. Secretary, and you may proceed with your statement. STATEMENT OP HON. THOMAS D. MORRIS, ASSISTANT SECRETARY OP DEPENSE (INSTALLATIONS AND LOGISTICS); ACCOMPANIED BY ROBERT A. BROOKS, ASSISTANT SECRETARY OP ARMY (IN- STALLATIONS AND LOGISTICS), AND PAUL H. RILEY, DEPUTY ASSISTANT SECRETARY OP DEPENSE (SUPPLY AND SERVIcES) Mr. MORRIS. Thank you very much, Mr. Chairman. Mr. Chairman, I am accompanied this morning by Dr. Brooks on my right, who is Assistant Secretary of Army for Installations and Logistics, who was with me during this recent trip, and also the one we had last fall. On my left is Mr. Paul Riley, the Deputy Assistant Secretary for Supply and Services. (259) PAGENO="0266" 260 Mr. Chairman and members of the committee, this committee's current hearings are the first comprehensive review of military supply systems since 1961. They are very timely and I would like to add we are very grateful for them. We have come through an era of major changes in logistics organization and procedures, and these changes are being tested under combat operations in Southeast Asia. During the past year both GAO and our own staffs have been critically examining the strengths and weaknesses of our supply systems. It is thus most appropriate, I believe, to report to this committee: (a) First, on the major developments during the past decade. (74 Second, on how well our systems are performing in Viet- nam, and (c) Third, on our objectives for future refinements and im- provements. I would like to discuss each of these matters briefly. A. MAJOR DEVELOPMENTS IN SUPPLY MANAGEMENT DURING THE PAST DECADE I would like to begin by putting in perspective the composition of the Defense inventory covering property of all kinds. Defense prop- erty is of four basic types and the aggregate value-acquistitiion cost- is now over $195 billion: Acqu~sition cost as of June 30, 1967 Types of property (billions) 1. Real property $40. 0 2. Production equipment and materials 16. 4 3. Major weapons and military equipment 95. 5 4. Supply system stccks 43.5 Total 195.5 The committee's interest has been centered on the fourth type of property since it is these items-4 million in number-which are largely consumed or expended in the operation of the Defense De- partment, and which require replacement. If we make mistakes in buying and distributing these stocks, we fail to support the troops; or we generate excesses which must be disposed of for as little as 5 cents on the dollar. Hence, skillful management of this vast segment of defense property is among the most important responsibilities of defense managers. Mr. HORTON. Mr. Secretary, could I interrupt there just for clarification ~ Mr. MORRIS. Yes, sir. Mr. HORTON. These properties you describe that are in the Defense Department, but some of them would be under the control of the van- ous services. Mr. MORRIS. Oh, yes. These properties are all under the service ownership. We simply are policymakers. Mr. HORTON. When you talk about real property you are talking about real property that is under the jurisdiction of the Army, Navy, Air Force. Mr. MORRIS. That is correct. Mr. HORTON. And some under the Defense Department as such. PAGENO="0267" 261 Mr. MORRIS. Only in Defense agencies, sir, like DSA and DCA. It would be small amounts. Mr. HORTON. Thank you. Mr. MORRIS. Since 1961 we have concentrated our efforts on improv- ing logistic readiness while minimizing the number and dollar value of these stocks. We believe that the military services have made excep- tional progress in meeting these objectives. 1. The investment in supply stocks has declined significantly in relation to the investment in major weapons and military equipment. [Dollars in billionsj June 30, 1961 June 30, 1967 Percent change 1967-61 Major weapons and military equipment (these are ships, planes, and missiles, primarily) Supply systems stocks Stocks required per dollar of weapons and equipment (money in cents).. $68. 0 44 3 65 $95. 5 43 5 46 +4th -2 -30 The reduction in supply system inventories has occurred during a period of major buildup to support Vietnam operations. In fact, active force inventories alone have increased by $3.4 billion, compared to 1961. The net reduction shown, which is on the order of $800 million, is the result of reducing overstocks and excesses by $4.2 billion through more accurate requirements determination and more effective redis- tribution of assets among the military services. If these improvements had not taken place, and the 65-cent ratio for each dollar of weapons and equipment in use were required, our supply system inventories would today be a staggering $62 billion-or almost $19 billion more than their present level. 2. The improved inventory posture has `been the result of a succes- ~ion of innovations in organization and procedures. The dramatic results portrayed in the above figures are not just happenstance. During the past 10 years there have been five principal events which have had a noteworthy influence: (a) The advent of the Federal catalog system.-The starting point for major change in supply management was the full introduction of the Federal catalog system in 1958. The catalog, for the first time, established a common supply language by assigning a discrete number and description to each separate item in the supply system. One of the most important uses of the catalog is to prevent the addition of unnecessary items to our inventories as new weapons-with their thousands of spare parts-are developed. Through our central catalog file in Battle Creek, Mich., we are now able to match every new item proposed for stockage, against all items in the system in order to determine if the same or a substitute item is available. Through this medium today we are finding that 35 to 40 percent of the parts in newly developed weapons are already in the system. Secondly, the centrally managed catalog has opened a new era in our standardiza- tion and item simplification programs by making it possible to rapidly classify and compare items so as to eliminate duplicates and to con- tinuously purify the catalog. As a result of these techniques, the catalog has expanded by only 5 percent since 1961-from 3.8 to 4.0 million items. Without this PAGENO="0268" 262 common language and the new disciplines it has brought to bear, we estimate that the growth might well have been over 50 percent, and that we would be spending at least $180 million each year in clerical and warehousing costs to manage these duplicate items, quite apart from the investment in unneeded stocks. (b) I'nte grated item management.-The creation of the Defense Supply Agency in 1962 has brought under single management over 1.8 million common items. Other single manager assignments to GSA, Army and Air Force have added another 125,000 items. Thus, about 50 percent of all items in the supply system have been assigned to one manager who buys, stores, and issues on behalf of all services. Most of the items which remain under service management are pe- culiar to the individual service, or directly related to the operation of its weapon systems. We are, of course, continuing to purify these item assignments, `but the major job has been done. Integrated item management almost immediately led to simplifi- cation in the organizational and physical structure for supply manage- ment. The number of inventory control points was shrunk from 44 to 22, and numerous storage points were closed-releasing altogether about 96 million square feet of covered space. (c) Standardization of procedure$._Begiflnilig in 1962 it became apparent that to obtain maximum benefits from integrated manage- ment and to facilitate interchange of stocks among the services, we needed one set of forms, records, and codes for use in the requisition- ing, shipping, and accounting for supplies within and among the military departments. These are the well-known MIL standards (MILSTRIP, MILSTRAP, MILSCAP, et cetera). They have been accompanied by a procedure, approved by the JCS, of uniform priority designators which estabi~sh the sequence and timing of issues from depots. I `believe these are the most massi1~e paperwork standard- ization programs ever undertaken in the Federal Government. (d) Improved comLnwnications.-A major breakthrough has been the development of high-s~peed techniques of communicating logistic data over the Defense long lines network, known as the automatic digi- tal network (AUTODIN). Under this system it is possible for depots to report transactions to inventory managers at a rate of 600,000 messages per day compared to only 35,000 possible under previous procedures. (e) Finally, automation of records.-Since 1961, the number of ,computers applied to supply management applications has grown from 260 to over 700. The benefits of the computer are, of course, not simply in their ability to rapidly store and process information on receipts, issues, and stock balances-but in their capability to prepare reorders as soon as minimum stock balances are reached, and to compute reorder quantities accurately related to usage experience. Thus computers are permitting attainment of the long-sought objective of freeing the human manager from the drudgery of detail so that he can concen- trate on special problems requiring analysis and judgment. Each of the services now has comprehensive programs of `automated inventory management; and each has established a full-time, top-level planning and control staff which is devoted to harnessing the great power of PAGENO="0269" 263 the computer to logistic and other management tasks. I will return to a discussion of future opportunities in this area later in this statement. As the committee's hearings have brought out, there are many apparent differences in concept and coverage among the supply man- agement and control systems of the four services. Before examining these differences, and our future objectives for improvement, I would like next to review- B. HOW OUR SUPPLY MANAGEMENT SYSTEMS HAVE FUNCTIONED UNDER COMBAT CONDITIONS IN SOUTHEAST ASIA In January 1965, U.S. troop strength in South Vietnam was 23,000, and the logistic base consisted of one deepwater port, three jet airfields, and virtually no capability outside of Saigon to deploy and support forces. By June 1968, our forces had grown to 534,000, with the growth occurring at the following rates: June 1965 59,900 June 1966 267, 500 June 1967 448,800 Jiuie 1968 534,000 The moist difficult problems were experienced during the first ye~ar of the buildup when 200,000 men were deployed concurrently with the construction of the logistical base. Thday-3 years later-we have moved almost 13 million short tons of materiel into the Pacific area- including 400,000 end items-and constructed 29 deepwater berths, 50 forward airfields, four major depots, petroleum storage for 4.5 million barrels, and 21 million square feet of improved open~storage area. The major problems of the buildup were, of course, experienced by Army, which has deployed over two-thirds of the men and materiel, and has the problem of operating in a highly mobile environment withoiut the benefit of fixed bases, such as characterize the Navy and Air Force environment. In addition, for most of Vietnam, Army oper- ates all ports and supplies food, petroleum and selected common items to other services and the ARVN. Navy `has these responsibilities in I Corps. I have just returned from my third inspection trip to Vietnam in 2 years and can summarize the story of SEA logistics supports in four findings: 1. The U.S. forces have never been restricted in combat operations for want of essential supplies, and have enjoyed the highest quality of personal supplies-food, clothing, medical-during wartIme. Even among units deployed in the north of SVN today, freshly baked bread, fresh fruits and veget~bies, milk and ice cream are regularly available. The availability of spare parts for aircraft, trucks, tanks, vehicles and other equipment is as high or higher than that experi- enced anywhere else in the world. These results have been achieved by the moist intensive logistics management effort in our history, includ- ing, when required, visibility of critical supplies and equipment up to the level of the Chairman of the JCS and the Secretary of Defense. Example: Every week a report is received in my office showing the percent of major Army equipments out-of-service awaiting parts. PAGENO="0270" 264 These reports have been received since December 1965. As of July 9~ this report showed the following: PERCENT OUT-OF-SERVICE Standard Actua Ion Equipment (examples) percent July 9, 1968 percent ~_ CH-47 helicopters (1st Cavalry Division) 12 5 Bulldozers (full track) 20 3 Trucks, 5-ton cargo 10 5 Materiel hanclhg equipment 20 8 M-109, 155 howitzer 15 5 Armored personnel carriers (M-118) 15 4 Tanks, M-48A3 15 2 .___ ~*~~-.*-~- The standard is established by General Abrams. The actua~l status, and this has been true now for many months, is far less than the acceptable standard. - Example: Every week the Chief of Staff, Army, publishes a report on Southeast Asia which shows numerous indicators of operational and logistic readiness, including the status of shipping and the number of vessels working, waiting, and holding at each Vietnam port. Example: Every 15 days the Chairman, JCS, and the Secretary of Defense receive reports on ammunition consumed, on hand, in transit, and in production for each of 100 key items. Immediate action is taken to readjust production and shipping schedules in accordance with, con- sumption trends. Example: Every week the status of the helicopter inventory is re- ported to the JCS showing losses, total assets on hand, and total assets operational. Daily reports are available on call. Example: During the Khesanh siege, daily reports were received by the JCS showing days of supply of rations, ammunition, and other key items at Khesanh. Example: Every evening a telephonic conference is held between Saigon and the Army's Oakland Logistics Control Office covering items requiring expedited shipments. Between 500,000 and 1 million pounds of such items, primarily spare parts, are airlifted weekly through a service known as "Red Ball Express." Example: DSA has stationed liaison officers in SEA to make certain that responsive support is furnished on its items-which represent about 50 percent of the items required to support the forces. Example: Every principal inventory control and stock point in Vietnam is today equipped with computers to assure rapid accounting of requisitions, receipts, issues, and stock balances. 2. Vietnam commanders of all services are highly cost conscious and are stressing economy in the midst of a major conflict. When oi~e is briefed at MACV Headquarters today, he is given not only a military operational and logistic posture review, but also a report on manage- ment improvement actions by all services-under a project called MACONOMY. For the 9 months ending March 31, 1968, the cost re- ductions achieved have totaled $241 million, with all services partici- pating. These actions have resulted from reducing stock levels, reduc- ing personnel, reducing contract costs, et cetera. 3. The Army has found it necessary to innovate many special tech- niques of supply management to cope with its problems. PAGENO="0271" 265 The Army mission in Vietnam, as previously noted, is immensely complex. It has some 2,500 mobile units and 250 different operating aircraft locations. It began the buildup without a body of usage expe- rience covering operations of this type. During the first 18 months of the buildup, as units deployed they were provided with a "push package" designed by CONTJS inventory control points on the basis of estimates as to what the unit might need during its first few months of deployment. These "packages" were generously built with foreknowledge that some items would be un- needed and that some quantities would prove excess to requirements. After the first few months of the buildup, out-of-service rates on equipment requiring parts became excessive, and in December 1965 the Red Ball Express serv~ice was inaugurated, with results such as those cited above. This service was immediately successful and has continued ever since under tight controls. It is undoubtedly respon- sible for assuring the highest operational rates for equipment now enjoyed by the Army throughout the world. Also, because of the criticality of Army aircraft and missile systems, the so-called Stove Pipe system of vertical management between the CONTJS inventory control points and the Army in Vietnam was established. These tech- niques resemble very closely the type of support which has been pio- neered by the Air Force in recent years between key operating bases and inventory control points. Beginning early in calendar 1967, at the request of General West- moreland, teams of trained depot and inventory specialists were sent to Vietnam on ten~porary duty by the Army Materiel Command to begin the task of placing all supplies under full control. The first step was to pull back from some 1,900 operating units the unneeded mate- rial contained in the "push packages." This was largely accomplished by the fall of 1967; but in turn it created temporary congestion at the three principal Army depots, and particularly at the inadequate Sai- gon depot known as the Fish Market. It is pictures of this facility, as it existed last November, that GAO included in its recent report. I am happy to report that today this condition has been completely corrected and that a new depot 25 miles north of Saigon is now being occupied at Long Binh. Also, since last fall a fully automated central inventory control center-known as the 14th ICC-has become operational at Long Binh and is now assuming full control of all Army depot stocks. From this experience Army has learned many valuable lessons for the future. Among these are the need for a quick reaction inventory control center to be deployed at the outset of a major buildup when logistical facilities do not exist. The importance of more trained and experienced depot management personnel has likewise been revealed. And knowledge has been gained which will enable Army to tailor "push packages" more precisely in the event of a future contingency of the Vietnam type. But it is my opinion that, regardless of needed refinements, the special procedures and innovations described earlier-including pru- dent use of airlift for critical parts, and continuous high-level visi- bility of selected items, such as ammunition and helicopters-are es- sential to a highly responsive supply system under combat conditions cf the type encountered in Vietnam. PAGENO="0272" 266 4. Major attention during the next year must continue to be de- voted to management of excesses and timely preservation of SEA stocks. During my visit to Vietnam last November in company with Assist- ant Secretary Brooks, it became apparent that we should immediately begin steps to identify and redistribute the excess inventories which had resulted from the buildup. In Korea we had failed to institute such action in a timely manner, and that conflict ended with some $12 billion i~f excess materiel, much of it in deteriorated condition. As a consequence, Secretary McNamara established on November 24, 1967, the "Pacific Utilization and Redistribution Agency" (PURA) under the Secretary of Army as executive agent, with its operating locus in Okinawa. This Agency is now functioning. Its mission is two- fold: (1) to receive, store, recondition, and issue excess Army materiel withdrawn from Vietnam; and (2) to obtain monthly lists of excesses from all services and to circulate these lists to all service installations in the Pacific area for screening. The June list, now being screened, contains 470,000 line items, valued at $144 million. Mr. HORTON. Mr. Secretary, a question on that. Does that appear to be out of line or is that what you might call a normal excess. Mr. Momus. Sir, in the first place I think this is only the begin- ning. I think we will find this figure growing over the next year as we do a better and better job of identification of stock levels required in Vietnam, and materiel not needed at current stock levels. The figure so far is very small indeed as a percent of the stocks which have been shipped and the stocks which are on hand. Materiel which cannot be reused promptly in the Pacific will be reported to CONUS for world- wide screening. As a further step the Army and the Defense Supply Agency have placed a stop order on further purchases or shipments to the Pacific of those classes of items found in greatest oversupply-primarily food preparation and housekeeping type items. In addition to the Pacific-wide redistribution program, attention is being given by each of the services to effecting redistribution of sup- plies among their units within Vietnam, Thailand and Korea. Dur- ing fiscal year 1968, Army redistributed $100 million within Vietnam and canceled $300 million in requisitions placed on CONtTS inven- tory control points. It reduced stock levels by another $50 million, in recognition of the faster order/shipping time which is being experi- enced now that the logistics base has reached an efficient operating level (including uncongested ports, use of Sea Land vans which can be rapidly unloaded and transported, as well as better stock control). Air Force has reported over $100 million in similar actions. In summary, the logistical effort in Southeast Asia has been remark- abl~y successful. Without question, we have learned many lessons which can be applied in the future to avoid mistakes and unnecessary costs. Most noteworthy has been the tim~y awareness of our military commanders to these mistakes, and the speed with which they have acted to correct them and to avoid their repetition. Finally, I would like to report to you on our- PAGENO="0273" 267 C. OB~rECTIV]31S FOR FUTURE REFINEMENTS IN StPPLY MANAGEMENT SYSTEMS AND POLICIES Our experience during the past decade, the lessons learned in Viet- nam, and the hearings of this committee have posed several impor- tant policy issues. I believe the most significant are: First, how deep in the supply chain should central control over in- ventories extend? Specifically should there be in each service one cen- tral manager responsible for asset knowledge, worldwide? Second, should the automated inventory management systems of all services be identical, or at least more uniform? Third, does the expanding capability of high-speed communica- tions and air transportation indicate the need for significant changes in inventory management concepts for the future? Before addressing these questions, I believe it will be useful to out- line in greater detail the composition of the supply system inventory, since the characteristics of the items concerned determine the degree of control which is now exercised. This is our latest data, December 31, 1967. It is in two general parts. The first is weapons and ammunition, aircraft engines, certain kinds of vehicles, electronicis and communications equipment and then other principal items. They total $19.5 billion of which weapons and ammu- nition is over half. The second group are those items typically called secondary items. Those are the consumables. They are aircraft parts, other parts, ship- board supplies, fuel, clothing and subsistence, and other supplies, with aircraft parts again being the largest single category. Supply system iuventories-Dec. 31, 1967 Value Clategorie8 (billions) Weapons and ammunition $10.9 Aircraft engines 2.3 Vehicles 1. 7 Electronics and communications equipment 1.2 Other principal items 3.4 Subtotal principal items 19. 5 Aircraft parts 9.4 Other parts 6.2 Shipboard supplies 1.0 Fuel, clothing, and subsistence 2.6 Other supplies 4.0 Subtotal secondary items 23.2 Grand total 42.7 For the most part, the "principal items" segment of the supply system has long been under intensive management in all services, including a high degree of current, worldwide visibility. The unit value of these items is high; many have a relatively long life; and are subject to control by piece. For example, in the "weapons and ammunition" category, $9.2 billion is invested in ammunition stocks; and by surveilling approximately 100 items, a major part of this in- ventory can be kept under current, DOD-wide control. Another ex- 97-475-68-18 PAGENO="0274" 268 ample is aircraft engines, which have long been controlled on a serial number basis by Air Force and Navy, and are now being placed under such control by the Army. The major problem of inventory management thus lies in the sev- eral million secondary items which have high usage rates-fluctuating with the tempo of activity-and on which a continuous evaluation of demand trends is required. It is also in this area that the highest volatility occurs-due to the continuous introduction of new items and the dropping of old items as weapons systems change. By far, the most difficult of these categories has been repair parts, many of which have erratic and unpredictable demand patterns. During the past 10 years, the services have employed the technique of "stratifying" secondary items by value and varying the intensity of management in accordance with value of annual demand. With this background, I would now like to comment on each of the issues mentioned above. 1. How deep in the supply chain should central control over in- ventories extend? As noted, the services now maintain a substantial degree of world- wide visibility over principal items, and this issue primarily concerns secondary items. I am pleased to report that studies of the military departments and my office have recently resulted in the adoption of basic policies which respond to this question. On June 12, 1968, De- partment of Defense Instruction 4140.33 was issued, prescribing four standard degrees of management intensity, based upon the value of annual demand or planned issues, as follows: Management intensity grouping Value, annual demand Very high - Over $500,000. High Over $50,000 to $500,00(1 Medium - Over $5,000 to $50,000. $5,000 or less. This new policy prescribes, for all groups, that maximum use of computers shall be made. For the top two groups, the most intensive management review and analysis is prescribed, including obtaining asset information on a worldwide basis, as fully as practicable, and the use of high-speed transportation whenever economically advantageous. The most intensive management system today covers 77,000 re- coverable Air Force items, primarily aircraft and missile parts and components. This system, installed last November, requires daily transaction reporting on a worldwide basis. The Navy has for some time maintained worldwide visibility over 6,000 items having an an- nual demand of $50,000 or greater. The Army is currently developing such worldwide procedures, based upon a test of 1,780 high-value items. In summary, it is our objective to build upon our experience with the above procedures, and to obtain a uniform degree of worldwide visibility for selected secondary items which meet the high-value criteria. I would like to add that there is no obstacle today in our judg- ment to the development of such controls because of command pre- rogatives or lack of confidence in supply responsiveness. While this has been a problem in the past, our experience in Vietnam has, I be- PAGENO="0275" 269 lieve, removed any distrust of the responsiveness of our supply systems. In any event, when problems of allocating limited critical assets arise, they are being resolved by higher military command levels, not by inventory managers. 2. Should the automated inventory management systems of the service be identical, or at least more uniform? This also has been a matter of discussion and action by the Materiel Assistant Secretaries during the past several months. As service witnesses have discussed with the committee, each has now ~r is in the process of impiementin~ a comprehensive plan of stand- ardized computer systems for (1) its inventory control points, (2) its wholesale stock points, and (3) its large base level users, both in the United States and overseas. When these plans are fully implemented in the early 1970's, each service will have achieved intraservice stand- ardization of supply systems in terms of computer hardware, and computer programs (software). During the past several years when these systems were in the de- sign stage, the role of my office was one of monitorship to assure that specifications were adequate before acquisition of hardware was un- dertaken, and to apply economic acquisition policies; that is, obtaining full competition from eligible computer suppliers, and purchasing rather than leasing equipment when this is the most economical to the Government. Concurrently we supervised the development of standard requisitioning, transportation, and accounting procedures so that the services and DSA can communicate with each other efficiently. We have not endeavored-nor do I feel it would have been prudent-to stand- ardize such internal service supply procedures under DOD-wide rules. The reason for this is that supply systems are not independent of other departmental management functions; they must be related, for example, to equipment maintenance and weapon systems; and they must produce financial and other reports tailored to the needs ~of managers and commanders. Had we insisted on standardized in- ternal supply procedures among all services, we would have stifled the creative developments which each service has now pioneered to meet its specific needs. With this phase of our planning now largely accomplished, the materiel secretaries agreed last May to establish a joint staff under the supervision of my office, manned by a highly competent systems/ ADP specialist from each service and DSA. The mission of the staff- and I quote from the letter of agreement with the services-is to re- view "the features of each of our major automated systems now in operation or planned for the future and develop compatible proce- dures and system milestones for all of us to follow over the next 5 years." This staff is now being formed, and we are planning a confer- ence next month of top service logisticians to discuss the status of system planning in each service and to lay out a work program for our joint staff. The work of the staff, and its recommendations, will be re- ported to the materiel secretaries, as a body, to aid them in defining future DOD-wide policies and concepts. It is important to stress, in discussing this issue, that we can afford major changes in automated system at intervals of only 3-5 years. ~Thus, the planning which we shall engage in during coming months will lay the foundation for improvements in the time frame of the PAGENO="0276" 270 mid-1970's. We will, in the meantime, be making continuous refine- merits in today's systems, and I can assure you that we will maintain the highest interchange of experience and ideas among the services on a current basis, so that each may benefit from the experience of the other. 3. Does the expanding capability of high-speed communications and air trar~sportation indicate the need for significant changes in inven- tory management concepts for the future. The answer to this question is clearly "Yes." The development of high-speed communications has already made feasible the Air Force system of daily worldwide transactions report- ing to central managers on 77,000 recoverable items. After a full evaluation of Air Force experience with this system, we believe its features will be incorporated in the systems of other services for a significant portion of the "Very High" and "High" value categories cited above. Similarly, the economics of jet cargo aircraft are increasingly at- tractive. Since fiscal year 19~5, the rate per ton-mile of jet cargo lift has dropped from 10.5 cents to 7.06 cents-and the rate is projected to reach a level of about 4.5 cents with the advent of the C-5A air- craft. Studies are now being made to establish the breakeven points where airlift is justified-based on item cost and the cost to order and maintain stocks-versus the savings in pipeline and reduced stockage resulting from substitution of high-speed transportation. It is appar- ent that a very fertile field of opportunity lies ahead of us in this area. The exploitation of improved communications and transportation will occur progressively in accordance with the demonstrable economic benefits obtainable. CONCLUSION Mr. Chairman, this concludes our prepared statement. I have with me today Assistant Secretary of the Army Robert Brooks, with whom I jointly inspected Soustheast Asia logistics last November and this June; he is highly expert in Army's logistics policies and practices. I am also accompanied by our Deputy Assistant Secretary for Supply and Services, Mr. Paul Riley, who oversees the development of our policies in these fields. We will now be pleased to answer your questions. Mr. HOLIFIELD. Mr. Secretary, how does that 4.5-cent rate which you project for the C-S compare with costs of ship transportation? Mr. Momns. It will still equate out to a much higher cost on a ton- mile basis than ship transportation. Mr. HOLIFIELD. Because of the reduction of the pipeline, the time saved in the pipeline, not the actual cost of transportation. Mr. MORRIS. That is correct, sir; although the narrowing gap in transportation costs also adds to the attractiveness. I am certain that we are not making as yet full economic use of air transportation as additional capacity becomes available. Perhaps the most important point about the C-5A is that it gives us additional capacity as well as lower cost. Mr. HOLIFIELD. Mr. Erlenborn. Mr. ERLENBORN. I don't believe I have any questions. Mr. H0LIFIELD. All right, Mr. Roback. Mr. ROBACK. You referred to the materiel secretaries getting to- gether with representatives of your office in a group that is to be con- PAGENO="0277" 271 cerned about automatic data processing. Do you have terms of refer- ence for this effort ~ Mr. MORRIS. At this time we have a memorandum which forms the basis for this decision, Mr. Rob'ack, which I would be pleased to fur- nish you if you would like. Mr. ROBACK. Is there any reason why it can't be printed? Mr. Momus. I think not, sir. (The information referred to follows:) ASSISTANT SECRETARY OF DzrENsE, Washington, D.C., May 4, 1~968. Memorandum for the Assistant Secretary of the Army (I. & L.); the Assistant Secretary of the Navy (I. & L.); the Assistant Secretary of the Air Force (1. & L.) ; Director, Defense Supply Agency. Subject: Review and approval of automated logistics systems. The General Accounting Office (GAO) has recently completed a study for the chairman of the House Appropriations Committee of several large automated systems projects in the Department of Defense. The study report was critical of the level of logistics systems integration and compatibility achieved thus far and the absence of effective Office of ;the Secretary of Defense review and coordi- nation of proposed automated systems. In testimony before the House Appropriations Committee in March 1968, the OSD witnesses agreed with the basic GAO recommendation that greater OSD review and coordination of these programs was `required and stated that a pro~ gram for achieving this was being established. The committee was advised that this Office believes that major progress in achieving interservice system stand- ardization has been accomplished through standard military policies and pro- cedures contained in MILSTRIP, MILSPAMP, UMMIPS, MILSTE'P, etc. These procedures were our first steps toward achieving standardization and com- patibility `between and within the automated supply systems of the military services and DSA. It was proper and prudent that we took these steps when we did. As you know, my staff and ~I have been concerned for sometime that the recent acquisition of large-scale automated data processing equipments by each of the military departments and DSA may `be getting us farther away from systems compatibility. Thus, we are making it more difficult for integrated supply man- agers to serve their customers and very difficult for one military service to support its sister services when multiuse equipments are required. The prohlems that have existed in connection with integrated support of the F-4 aircraft are a typical example of a case where incompatible systems precluded the Air Force and Navy from fully utilizing each other's common assets. This not only wastes money but degrades our support capabilities. I believe it is in the mutual interest of the military services and the DSA to have compatible, automated systems. These systems do not have to be precisely standard, but they should be compatible to the extent that communications can be passed to, and logistics support assignments made to any military service or DSA without major disruptions or expensive reprogr'aming costs. I also believe that it is in our best interest to achieve DOD compatible logistics systems through the use of an integrated staff working for the military services, DSA and OSD. I suggest that we form a joint planning team-to' report to the materiel secre- taries as a body, manned by a highly competent systems/ADP military person from each service, DSA and my office. This planning team could begin reviewing the features of our major automated systems now in operation or planned for the future and develop compatible procedural and system milestones for all of us to follow over the next 5 years. I would like to have your reaction to this memorandum in the next several days so that we can plan to establish this joint planning effort. (S) ThoMAs D. Monnis, Assistant ~5ecretary of Defense (Instaflcstions and Logistics). Mr. ROBACK. In the testimony by General Heiser, he referred' to your office, referred to your calling upon the Assistant Secretaries for I. & L. to review their manning problems in this field. Now, is that a different effort? PAGENO="0278" 272 Mr. MoRRIS. This is still a separate effort, although there is, of course, correspondence between the two groups. The manpower effort is, of course, a very broad one, in which we are concerned with the quality and quantity of manning in all logistics functions-requirements do- termination, depot operation, inventory management, transportation, communications-all functional fields. Mr. ROBAOK. Do you have a letter of reference or memorandum on that ~ Mr. MoRRIs. We have a plan of study on this which I would be pleased to furnish. Mr. ROBA9K. Thank you. (The information referred to follows:) MAT 1, 1968. Personal memorandum for Secretary Brooks, Secretary Shillito, Secretar~y Charles. Subject: Initiation of a 6-month project to develop long-range logistics manpower plans and objectives. Confirming our recent discussions on this matter, I would like to propose that we jointly agree upon the immediate initiation of the following project. The "long-range manpower planning project" should be under the continuing policy direction of a policy board consisting of the materiel secretaries, the Deputy Chiefs of Staff (Logistics), the Director, DSA, and the J-4, who, as a body, will comprise the Logistics Manpower Planning Board. It is proposed to establish an ad hoc planning task force to develop facts and prepare proposals for consideration of the Board. The chairmanship of this task force would be assigned to Col. Peter DeLonga, USAF (on detail to this office), with one representative of each of the materiel secretaries and the Director, DSA. The group would work full time. It should be stressed that this is an ad hoc factfinding and idea-creation group, and that it will not assume responsibilities for administration of any facet of the logistics manpower program, such as the joint training program,. now being supervised by Mr. Lyons at the OSD level. The procedures and objectives envisioned for the group are as follows: (1) First, by direct discussion with key logistics officials in all services and DSA, obtain a factual profile of current manning of key logistics functions (pri- marily procurement, contract administration, maintenance, depot and warehous- ing operations). The profile should statistically display the current manning of these functions, by key manpower characteristics; i.e., age, education, grade or rank, qualifications possessed, and type of career development programs pro- vided numerical staffing versus workload. The factfinding should not bog down in detail, but obtain the best possible data. In the conduct of the faetfinding, the team should give special attention to the lessons learned as a result of the South- east Asia conflict. A visit to CINCPAC and Vietnam would possibly be desirable. (2) Second, project the profile as far in the future as feasible (say 10 to 25 years) under present policies; that is, assuming no change in recruitment prac- tices, personnel ceilings, training, assignment, and promotion practices. (3) From the above two steps, and again in consultation with key logistics officials, identify the key problems in respect to both quantitative and qualitative characteristics of the logistics manpower force today, and at projected intervals in the future. (4) Based on the above findings, develop various solutions to these problems, Including a 5-year initial plan of correction, with annual goals (expressed in quantitative terms) covering `the numbers of people of given educational attain- ment `to be recruited; the numbers to be given various basic types of DOD train- ing; the numbers to be reassigned, rotated, promoted, etc. I would appreciate receiving your views (and, if possible, those of your Logistic Chief) `as early as possible so that we can begin formulation of a study plan, leading to initiation of the task force work by June 1, 1968. (Signed) Thomas D. Morris THoMAs D. Monnis~ PAGENO="0279" 273 ASSISTANT SECRETARY OF DEFENSE, Waskingto~, D.C., June 28, 1968. Memorandum for Members of the Logistics Manpower Planning Board. Subject: Progress report. On May 1, Mr. Morris wrote the materiel secretaries suggesting the estab1ish-~ ment of a joint project to develop long-range logistics manpower plans and ob- jectives. Each service has nominated a member for this task force and initial discussions have been held by its members who are: Col. Peter DeLonga, IJSAF, Chairman Mr. Walter Ilurd, Navy Capt. K. M. Beyer, USN, DSA Mr. Donald B. Churchman, Army Various approaches to the study have been considered. Because of the scope of the subject, it has been concluded that two parallel efforts should be carried on during the next month, before proposing a final study plan to the Policy Board. These efforts are (1) an inventory of the current logistics manpower posture, and (2) a model study of how to produce an optimum manpower posture in the con- tract administration function. Following completion of these two tasks, the next phase of the study can then be planned. INVENTORY OF THE CURRENT LOGISTICS MANPOWER POSTURE During the next month, two members of the task force, Colonel DeLonga and~ Mr. Hurd, will devote their full time to visiting the organizations shown in at- tachment 1 for the purpose of discussing the factual data needed. In separate letters to the Logistics Chiefs of the Services and to the Director, DSA, the kinds of data required and the format for reporting it will be outlined. Generally,. the data will cover the logistics manpower population subdivided approximately as follows: (a) By functional area for each of the following: purchasing, contract administration, inventory and support management, storage and issue. over- haul and repair. (Deliberately excluded at this time are research and de- velopment, technical, general management, communication, transportation, civil engineering and systems programs, and project manager organizations.) Definitions will be furnished with the data call. (b) With respect to each function, determine total numbers of military and civilian, by rank or grade. (e) With respect to each function, determine distribution of professional personnel by age and length of service. (GS-5 and up; Navy ensign, Army lieutenant, Air Force lieutenant, and up.) (d) With respect to each function, determine distribution of professional personnel by educational attainment (high school, college, advanced degree). Determine present turnover rates by function for fiscal year 1968 and trends for the past 3 years where the data is available. Describe current programs for' replacement including direct recruitment. Distinguished particularly between specifically planned and directly conducted recruitment programs versus those that are proceeding on an ad hoc basis. Determine the extent of training and educational opportunities provided to employees, both on the job and off the job. Identify basic gaps or deficiencies. Determine, in general, the quantitative adequacy of staffing for the foreseeable future, by function, as seen by management. Provide statistics where available' and applicable. Determine the qualitative adequacy of staffing and identify critical weaknesses, by function, as seen by management. Provide statistics where available and applicable. Data obtained from the above interviews will be systematically compiled in reference notebooks. Summaries and comparative tables will be developed into~ a succinct paper for presentation to the Policy Board at its meeting on July 18. From these data it is hoped to identify a list of special study areas to be con- ducted by the task force (with supplementation from the services and DSA; at- tachment 2 is a list of possible issues for study) arranged in priority order, with a proposed milestone schedule for further factfinding, analysis. and reporting' of recommendations to the Board during the period August-December. PAGENO="0280" 274 MODEL STUDY OF CONTRACT ADMINISTRATION Secretary Charles and General Ruegg have suggested that this area be se- lected for an immediate depth analysis. The objective would be not only to formulate a complete action program for further improvements in this' field, but to establish a model which then might be emulated in similar studies of other functional fields. It is planned that two members of the task force, Captain Beyer and Mr. Churchman, supplemented by one representative of each military department, as required, and DSA. (D'CAS), will form a special team to establish this model starting immediately. This special team will cover the full range of subjects outlined under the inventory project above. In addition, the group will endeavor, in time for the meeting on the 18th, to arrive at at least preliminary conclusions and recoin- mendations for consideration by the policy board. It is likely that this effort will generate the need for additional followthrough studies to be conducted by an appropriate group beyond the July 18 date. CONCLUSION It is hoped that the above steps will yield sufficient factual information and problem identification findings that the board can profitably spend time at the July 18 meeting in reviewing the material in detail and in formulating plans for the next stage. GLENN V. GIBSoN, Acting Assistant Elecretary of Defense (Installations and Logistics). LIST OF PERSONNEL AND PLACES TO BE VI5ITED Army-Assistant Secretary (I. & L.) 1. DCS/Logistics. 2. CG/AMC. 3. ~G/CDC for ~G CONARC. Navy-Assistant Secretary (I. & L.): 1. DCNO (Logistics). 2. ONM. 3. Commander, Navy Ships Systems Command. 4. Commander, Navy Supply Sysiems Command. Air Force-Assistant Secretary (I. & L.) 1. DCS/S. & L. 2. OG AFSO. & CO AFLC. DSA: 1. Director, DSA. 2. Deputy Director CAS. AREAS OF INTEREST FOR DISCUSSION A. Do you see any problems associated with the characteristics of the present logistic work force? Areas that may be possible subjects are: Aging of the work force. Educaflion level. Military, civilian mix. Grade and rank distribution. Personnel turnover. Quantitative staffing. B. Do you consider that there are problems in personnel requirements plan- ning? Areas for consideration may include: Determining skill requirements. Grade levels. Military, civilian mix. Advancing technology. Budgetary planning, for example, float for training. Availability of long-range plans for logistics systems. PAGENO="0281" 275 0. What problems do you encounter in personnel procurement? These may involve: Recruitment authority. Recruitment programs. Mobility of applicants. Quality of area work force. Excessive demand for rare skills. Responsiveness of the civil service system. Training versus operational requirements. Loss of available skills. P. What issues regarding development and retention of personnel do you consider problems? Possible areas may include: Career development, vertical and lateral xnovenient. Mobility, rotation. Training versus operational requirements. Job classification. Promotions. Incentives and opportunities for broad development (manager develop- ment). Educational opportunities. E. What problems may be associated with personnel management in general? Possible issues may be: Personnel managers responsiveness to mission objectives. Functional managers influence on personnel management. Mr. ROBACK. You raised some fundamental questions, but I am not sure in one case at least what the answer was. You are clear aibout the answer to No.3, which is "Yes." Mr. MoRRIs. Yes, sir. Mr. ROBACK. No. 2, you ask whether automated inventory manage- ment systems of the services should be identical or at least more uni- form. I am not sure what the answer to that is. Do you believe they should be~ Mr. Momus. The answer is that we do believe that from this point forward-after the generation of planning through which we have come-4hat we should seek, at the level of the Materiel Secretaries to examine all new systems concepts in each service as planned, and to establish the degree of compatibility which we feel is feasible and desirable. We are definitely not precise in answering that question, except that we are convinced that we need from this point forward to correlate our planning in a very formal way, which we admittedly have not done during the past 5 years. Mr. ROBACK. We will get to the first question a bit later, but dis- cussing this one for a moment, I gather that the essence of the General Accounting Office criticism is this: The services, each with its own multiple and diverse needs, develop systems which may not be alto- gether standardized within each service, or alt least compatible, and then some years later, at the coordinating level, you come in and decide that this is the time to coordinate them. The General Accounting Office is saying, if I understand their critique, that you ought to get in much earlier rather than late, after the mistakes are made. Mr. Momus. Yes. Mr. ROBAOK. Because these mistakes are costly, they commit the serv- ices to heavy investments in machinery which may be obsolete or limited in capacity or misconceived as to function, and you ought to spend a little time studying the matter before making these important PAGENO="0282" 2~6 decisions, rather than letting them be made and then coming in and saying it is time to coordinate them. Mr. Momus. And we are looking to the future agreeing with that principle. We feel that the posture that OSD has taken in this matter in the past 5 to 8 years has been the proper one. We felt that the most important first steps were to allow the services to develo~p their own systems with standardization within each service, while we in OSD concentrated on the common language standards, such as represented by the standard requisitioning, shipping and accounting procedures. We think that if we had moved other- wise we might have failed to do the latter and we might well have stifled the creativity of the services which I personally feel has been terribly important. From `this point forward we are all agreed-my counterparts in the Army, Navy, and Air Force and myself-~that we must review before ~the fact, and this we plan to do as a body, not as a unilateral OSD activity, and set common policies through such a collective mechanism. Mr. R0BAOK. Many decisions are in the making or already have been made. Many kinds of systems are in operation or about to be. Mr. Moraus. Correct, sir. Mr. ROBACK. And you are coming in at a time when perhaps these ~decisions are irrevocable? Mr. MORRIS. We do not plan to walk back the cat on the current plans of the four services as they have been explained to you. Mr. ROBACE. We are getting into second, third, and maybe later ~generation computers. We are getting into high-speed communica- tions. These are critical decisions. The technology is now available. Mr. MORRIS. Yes. Mr. ROBACK. And it looks like what you are saying now is that you have to develop some kind of coordination mechanism over the next 5 years. By that time most of `these systems will be in place. Mr. MORRIS. It is our full desire that they proceed as rapidly as possible to come into place. We think that each in its way meets a real need and is a definite advance for the service concerned. We feel with the standard communications procedures that have ~been developed, that there is no problem of communication between the services that is significant, nor no bar upon any service system to using high-speed communications. The ATJTODIN system, the Auto- ~maitic Address System and techniques of that type. What we are now looking for is the planning toward the next generation of change which would begin to occur toward the mid- 1~7O's when even newer hardware might be available. This I view as being in the nature of further refinements, and further pioneering of ~the state of the art to achieve the end goal we now describe as inte- grated logistics support. Mr. R0BACK. The General Accounting Office, at the request of the Appropriations Committee of the House, made an inquiry into auto- matic data processing. This study was published in the hearings of the committee, and it reports the opinion of the GAO that "there is ~a basic need for an overall plan within DOD that will, among other things, provide more adequate control over the planning, develop- ment and implementation of management systems." Do you subscribe ~to that opinion? PAGENO="0283" 277 Mr. MoRRIs. We do, sir. Mr. ROBACK. You do? You said yes? Mr. Moiuus. We do, sir, and that is the plan that I have outlined as we now contemplate implementing it. Mr. HoLIFIEr~D. Does that plan, as you have outlined it, coincide with the plan that the GAO had in mind or not? Mr. MORRIS. Sir, I don't know that they recommended a specific plan. They recommended that we do achieve this greater coordination before the fact. Mr. HoLIFIEw. Have they made any comment upon this method ~of approach to achieving it? Mr. Moitrtis. They have not to me, sir. Mr. ROBACK. What is the plan? Do you have a development plan published? Mr. MoRRIS. We do not. Mr. ROBACK. Promulgated? Mr. MORRIS. The first step agreed upon in late May, among the services and our office, is to establish what I have described as this joint staff of best talent from each service, DSA, under the super- vision of my staff. Its first assignment will be the development of a blueprint in concept. There are drafts of this kind of thinking already in being. We would hope that the materiel secretaries would be meeting very frequently to consider the products of this staff over the next year, coming up with approved objectives for the 5-year plan within which the service design organizations-which as you have heard are now ~quite substantial in each service-will do their own long-term design work. Mr. ROBACK. What is this plan aimed toward, compatibility among the services, standardization? Mr. MORRIS. As fully as this is a desirable thing to achieve, Mr. Roback, we are still far from certain how complete. I don't think we know enough individually or collectively as to the value of complete standardization among the services, due to their differences in mis- sion, weapons systems, operating conditions and so forth. The last thing that I personally feel we should allow to happen today is the stifling of the creative work that is going on and has been going on in the services. We need to simply pool our best talent, and agree upon those things that are wise to do in complete uni- formity, and those things which must properly deviate based on service requirements. We are still very much in a creative and research phase. Mr. ROBACK. What is the nature of compatibility? I mean, what values are you seeking? You don't know yet? Mr. MORRIS. I would define it in simple terms as being that of simply applying the best experience, and knowledge and developments of (each service across the board. Let me give you an illustration. I think the Air Force has pioneered what all services now have agreed is the farthest step forward in terms of worldwide daily transaction reporting in the selected high value critical item category called recoverable items. They are proving the feasibility of doing this. PAGENO="0284" 278 From that experience we can apply that technique in some fashion to similar requirements in each service. This is the type of cross fertilization, in the near term, that I think is most important for us. Mr. ROBACK. Now, suppose each service follows through on that type of a system, but the computers they use and the reporting system they use, let us say, are not compatible one with another in some respects. Then you have certain limitations imposed, if you want to cross-service or integrate supply in a given theater. What is the con- cern, what are you trying to get from compatibility? Mr. Momus. First of all, I think that we- Mr. ROBACK. You don't want compatibility merely for esthetic reasons? Mr. MoRRIs. No, sir; never. First of all, I think that we have full capability today for cross communication, the reuse of assets at every level. I am not concerned with this. I don't think that is the kind of prc~blem that any of us are worrying about. We are concerned that we apply the highest state of understanding, experience, and accomplishment in future systems design in all serv- ices based on the thinking and experience of each service. Mr. ROBACK. The Army in testimony over several days developed its projections, its plan for standardizing within given areas of man- agement concern, for example, the so-called NAPALM system. Mr. MORRIS. Right, sir. Mr. ROBACK. Which the Army Materiel Command is concerned with. That is right; isn't it? Mr. MORRIS. That is correct. Mr. ROBACK. The Army- Mr. MoRRIS. That is the inventory control level. Mr. ROBACK. This is a system which will take some years to develop and put into operation fully. Is that being examined at your level to see whether there are some things that ought to be done differently, not because you are trying to tell the Army how to run its business, but because there are some concerns which transcend the Army's own requirements? Mr. MORRIS. The planning for this is well along, and I would say virtually complete. We have kept in touch with its progress. I personally am satisfied it is a good plan for the Army. It will achieve, among its several inventory control points, that degree of internal standardization which is desirable if not essential within the Army. I would not plan to try to alter that basic design at all, but rather to feed into it, and it is a flexible design, the experience with AFRAMS and similar systems within the services. This can be designed within the service itself. Mr. R0BACK. Your position is that given the designs to date, and there have been many and creative ones, then it will be your effort in the next 5 years to see to what extent you can improve those or coordinate them or make them more compatible? Mr. MORRIS. We will have two objectives. One is current refinements through current cross fertilization of experience, again mentioning AFRAMS as an example, and two, planning for the complete new geiieration of systems which each service will undoubtedly start in- troducing in the 1975 and beyond era. PAGENO="0285" 279 Mr. ROBACK. I believe the General Accounting Office stricture is that you should be in on the ground floor. Is that what they are saying? Mr. MORRIS. I believe it is what they are saying as to the future, and I interpret that to mean for a new systems design of a major nature which cannot start taking place until the mid-1970 time frame. Mr. ROBACK. Do you have in your office the capability to do that kind of work for the future? Are you developing it? Mr. MoRRIs. We have a good nucleus capability which importantly will be supplemented by this joint staff that I have described. Mr. ROBACK. Let me interpose and ask if the concept of the joint staff is to make it clear that this is not an OSD-imposed operation? Is that the philosophy? Mr. MORRIS. That is partially the philosophy, but primarily we need to bring the precise and unique experience of each service to- gether and pool its understanding and knowledge. This is the way, if you will examine our history, that we have progressed in many fields over the last decade. It is the kind of evolutionary development that brought integrated management, for example, to full fruition in 19~i2. Mr. ROBACK. What is your nucleus? Have you got one man work- ing in this field, say? Mr. Momus. I would say we have a half dozen very knowledgeable people, which in terms of our staffing is pretty rich. Mr. ROBACK. And do you intend to expand that? Mr. MoRRIS. I am not certain that we will find it desirable or neces- sary, Mr. Roback. The services have several hundreds of people in their various central systems design and review offices. That is where I think the real concentration of talent belongs, as long as we can put a cap on it, both in terms of policy through the Assistant Secretaries in terms of knowledgeable staff experts working for those Assistant Secretaries as a body. Mr. R0BAGK. Can you explain the recent redirection of automatic data processing management from your office to the Comptroller's Office? What is involved there? Mr. Momus. Yes. Mr. ROBACK. And what is the status of that? Mr. MORRIS. Starting in the late fifties, when it first became appar- ent that the Secretary of Defense should exercise some coordination over the acquisition and use of computers, this function was assigned to the Assistant Secretary Comptroller-Mr. McNeil originally and later Mr. Hitch. A staff was formed there whose main job was to examine all proposed new procurements or leasing of computer systems. In 1962 that was transferred to my office at Mr. Hitch's request, because I had had a particular interest in this which he was aware of. It has now been decided that the long term best home for this function is the Comptroller's Office. It has to do primarily with the acquisition of hardware. It does not relieve us in any way of our interest in or responsibility for software or program design in the logistics field. Mr. R0BAOK. That transfer of responsibility is pointed toward procurement. Mr. Monius. Acquisition. Mr. ROBACK. Toward the market. PAGENO="0286" 2S0 Mr. Monms. Yes. Mr. ROBAOK. And not toward management systems, mternaJ man- agement `systems. Mr. MoRRIs. Of course you can never fully separate these. As I pointed out, our monitorships since 1962 in this hardware field has involved being sure that the specifications upon the basis of which new equipment was to be leased or bought were adequate before the pro- curement action took place. The Comptroller's Office will still `have properly that kind of a review interest. Mr. ROBAOK. Now, if the Comptroller's Office is interested, let us say, in a competitive procurement base, and best pricing to the Gov- ernment based on competition, your office would be concerned also, not only with that but whether this might interfere with some types of equipment for management purposes. Mr. Momus. That is correct. Mr. RORACK. This is the problem of machine independence; is it not? Mr. Momus. That is correct, and of course these things happen to- day even though my office is the coordinating point. Any financial. management systems involving computers are functionally the respon- sibility of the Comptroller, research and development is the respon- sibility of the Director of Research and Engineering; manpower is the responsibility of the Assistant Secretary for Manpower and so' on. This will continue to be the case. Mr. ROBAOK. Do you believe in machine independence? Mr. MORRIS. I would like to know a little more precisely your definition. Mr. ROBACK. Well, as I understand the problem, and we have heard' some expression about thi's, do you get locked into particular kinds of hardware? Now, `maybe I am not using the term right, but I under- stand the problem of machine independence to be: On the one hand, you want to have everybody competing when you buy all these com- puters, of which there are many, and they are expensive. On the other hand, after procurement you need programing and a language which will be able to permit communication between these different hardware types. Mr. MORRIS. This is the reason that basic systems designs must be worked out over periods of often 1, 2, or more years to completely blueprint it before we go out for major computer acquisitions. As in the case of aircraft systems or missile systems, you can get~ competition at the outset-either price or design competition-but once you have `made your `selection on a competitive basis against your master blueprint, then you are frequently and quite properly de-- sirous of standardizing on your hardware elements, as long as you retain that particular system. Mr. ROBACK. Well, the Air Force made an award to Burroughs for computers for base logistics management and control. Mr. MoRRIS. Right, sir. Mr. ROBACK. Now, can Burroughs talk to IBM, so to speak? Mr. Mom~is. To the extent that the systems need to communicate in~ terms of requisitions or transportation instructions and so on, ma-~ chine independence is not a problem. Mr. ROBACK. That is not a problem? PAGENO="0287" 281 Mr. MORRIS. Standard codes, formats, records in respect to requis~- tioning, transportation and accounting now exist. Mr. ROBAOK. Where does the problem arise? Mr. MORRIS. It would arise primarily I think internally to DSA and each of the military departments at each of their principal operat- ing levels-inventory control points, depots, major bases, et cetera. For example, the inventory control points in Army, of which there are, I believe, Dr. Brooks- Mr. BROOKS. Seven. Mr. MoRRIs. Should be able to communicate exchange tapes and have exact programs internally to their equipment. The same is cer- tainly true of DSA, Navy, and Marine Corps. But as between the services, I have doubts as to whether this is an essential requirement. Certainly it is not in today's state of the art in terms of the level of interservicing that we are engaged in. Mr. ROBACK. The question of interservice compatibility you think may be overvalued? Mr. MORRIS. I think we are achieving very great accomplishments on interservicing of supply assets under today's system. Mr. ROBACK. But I mean the compatibility of the equipment types. Is that a serious problem? Mr. Momus. My personal view is that this is not a problem of any consequence to us today. Mr. RILEY. I may try to add something to that, Mr. ROback. I think the problem has been somewhat overstated. For example, if we make an integrated supply assignment to one service to support other serv- ices, the change that that service has to go through requires some re- programing of their computers to satisfy some the policies of the other service, but it is not a major job. To give you a specific example, let's assume that the Air Force gets the job of supporting the F-4 for all services, and they have a policy of a 90-day depot level. That 90 days is programed into the Air Force computer. Now, if they want to change that in some way, because of this addi- tional responsibility and make it 120 days or 60 days, they have to reprogram the computer, because the computer will only do what you tell it to do. It will compute 90 days or 60 hut it won't do both unless it is told to do so. But these are problems. Mr. H0LIFIELD. Why should it have a different number `of days, for instance, than the service that it is supplying? Is that a reasonable question? Mr. MORRIS. Sir, we do have necessarily different stock levels among the services, depending upon their own supply echelons. For example, as you have heard, the Air Force is able under its system, which op- erates between fixed bases, to sustain a lower total inventory than the Army, which must have two or more echelons of supply. Mr. HOLIFTELD. So this is basically justified by the methods of trans- portation available to the different services, and the methods of trans portation which tlaey use, for instance, ships for the Navy, and planes for the Air Force. Mr. MORRIS. Right, sir, but importantly to the extent to which these are using forces at the end of the pipeline are fixed or mobile The PAGENO="0288" 282 Army today is very mobile in Vietnam, whereas the Air Force is fixed. Mr. HOLIFIELD. Tell me the technical answer to this question. What is the problem involved in terms of time involved in `reprograming a computer program, let us say from a 90-day stock program to `a 120- stock program? Mr. RiI~Y. Just that simple example is not a job of any real consequence. Mr. HoLnrn~LD. In other words, you could do it in a couple of hours or a day? Mr. RILEY. A few days; yes, sir. Mr. HOLIFIELD. In a few days. Mr. ROBACK. Is it true that the large problem in compatibility has to do with the training of personnel if you have different types of equipment. Even though the equipment can communicate, personnel are not necessarily interchangeable because of the special training re- quirements for that type of equipment? Is that the main problem here? Mr. RILEY. That is one of the problems. If you have different equipment and a different system then you run into a sizable training problem. Mr. ROBACK. Whose concern is this? Now, in industry there are quite a few highly developed sources of research development and produc- tion in this field, and to some extent they may be interested in devel- oping their own unique systems. The Defense Department may be interested in standardizing the training requirements so that there is interchangeability. How do you mesh? Who has the R. & D. re- sponsibilities in the Defense Department on the Government's side, and how do you disseminate or how do you convey these findings, if you get any? Mr. RILEY. Let me try to answer that this way, Mr. Roback. As you know, I am sure, over the past 10 years both Government and indus- try have had `a sizable effort going on to develop a common business type language. It is referred to as COBOL. That has now substan- tially been completed. The Defense Department is now requiring that all future computer `acquisitions for business applications will be programed to use the COBOL language. This will substantially reduce the training problem because the computers will all have the same programed language. This will greatly minimize the problem. Mr. ROBACK. Is this a specification? Mr. RILEY. Yes. Mr. ROBACK. And is this Government-developed or is this industry- developed and Government-approved? Mr. RILEY. It is jointly developed with the industry-both users and manufacturers of computers-and with the Government. The Defense Department further defined the levels of COBOL to be avail- able with different sizes of equipment and required COBOL on all machines used for logistics and other `administrative purposes. Mr. ROBACK. Is this a Navy development or OSD? Mr. RILEY. No; it was jointly developed by OSD, the military de- partments and industry. Mr. ROBACK. And how does the specification read in your procure- ment? Does it actually refer to COBOL~ PAGENO="0289" 283 Mr. Rir~y. I believe there is a specification, a clause put in the con- tract that the computer will be programed for OOBOL language. Mr. ROBAOK. You can give us the language, submit the actual lan- guage on that ~ Mr. RILEY, All right. (The information referred to follows:) EXCERPTS FROM REQUEST FOR PROPOSAL USED IN A RECENT NAVY COMPUTER AcQuIsrrIoN CHAPTER 5.-SPECIAL CONDITIONS 5-1 General-The following paragraphs prescribe certain specific conditions which must be satisfied by the vendor in order to be considered responsive, and those features, characteristics, and support which are considered desirable but not mandatory. Mandatory requirements are established in order to define the minimum acceptable system. A statement concerning the vendor's ability to ful- fill each mandatory requirement must be made in part 1, section 2, of the pro- posal. 5-2 Mandatory requirements: a. ,Systcm/8 performance.-The proposed system (s) must have sufficient speed and capacity to completely process all the programs provided in ex- hibit 1, attachment II, within 200 computer hours as described in chapter 4. This is based on the measure of the monthly workload times the extension factor. b. Availability of' equipment: (1) All components of the proposed system must have been formally announced for market purposes on or before the closing date of the RFP. (2) The selected vendor must be able to meet the schedules shown in paragraph 2-2, chapter 2, attachment II. c. Equipment characteristics: (1) Vendor must supply hardware features for multiply and divide. (2) Operator console typewriter-The computer system must in- clude a fully buffered, online console for operator-computer communi- cation. A permanent copy of operator/computer' communications, must be provided by the system. Program initiation and termination time must be provided either as it occurs or may be stored internally until re- quested by the operator. (3) Card reader/punch.-Phe proposed system must provide at the central processing facility the capability of reading and punching stand- ard 80 column, 12 row cards. The card reader and card punch must contain a check to verify the accuracy of reading and punching. (4) Magnetic tape unit-The proposed system must have at least six magnetic tape units capable of processing input/output data. Tape units proposed must include read after write checking feature. (5) Printcrs.-The proposed computer system must provide at least one line printer capable of: (a) Printing at least 800 lines per minute with a minimum of 120 print positions per line The printer must be capable of printin~, six lines per' inch and eight lines per inch. (h) Producing six legible copies of multipart paper. (c) Producing a legible last copy of DD Form 1348 using seven- part forms procured by the Navy through GSA. (d) Producing, under program control, single-space printing, double-space printing and page ejection. (6) Irnmedratc access storage-The system must include mnimediate access storage such as drum or disk storage of characters for user programs. d. Vendor support: (1) Programer support .-Tbe vendor must provide a minimum of one qualified programer/analyst, on-site, for a 6-month period beginning 4~ days after announcement of contract award. This individual will pro- vide technical assistance in programing. 97-475-68---19 PAGENO="0290" 284 (2) Training.-The vendor mnst provide training for programers and operators as specified in paragraph 2-2b, chapter 2, attachment II. (3) Maintenaaee.-Two hour oncall maintenance service will be re- quired 16 hours per day, 5 days per week. (4) Vendor will provide a means to use or must convert about 300 IBM RPG 360 programs. This requirement is separate from paragraph (1) above. e. $oftware requirement$: Software requirements are: (1) Availability.-All mandatory software must be furnished at time of installation. (2) Eceecutive control system.-The executive control system must take full advantage of the features of the computer hardware. (a) The system, together with the software, must include debug- ging, diagnostic trace, a-nd dump routines. (b) The system must control and coordinate all connected hard- ware and associated -software. (c) The syste.m -must provide for a continuous flow of externally scheduled batch processing jobs so that -operator intervention and setup time are reduced to a minimum. (d) The system, together with the associated software, must provide the capability for creating and maintaining source and object program libraries. Library access will be under executive control for object programs utilizing the object library routines during execution. (3) COBOL compilers: (a) A COBOL compiler must be delivered with the installed system. (b) U$AAS~I standard COBOL eompiler.-Within 18 months after the date of approval by the USASI of a standard for COBOL, the vendor must provide a COBOL compiler which meets the approved USASI standard level 2 and which will run on the proposed system. Nucleus 2 Table handling 2 Sequential access 2 Random access 2 Segmentation 1 Library 1 (4) $ymbolios.-A symbolic language compiler capable of operating with the -system. (5) Report generator.-A program to generate reports which will produce specific object programs that are -usable on a continuous basis and accessible from -the object program li-brary system. (6) Utility routines-General utility -programs -to perform the following: (e) lAS data to magnetic tape and vice versa. (b) Punched card data to lAS -and vice versa. (c) Magnetic tape to printer. (d) JAS data to printer. (e) lAS data to magnetic tape and vice versa. (f) Magnetic tape copy. (g) Magnetic tape -sort/merge program. (h) Any other software normally provided with the system. 5-3 Desirable features.-The following desirable items should be proposed by the vendor available. These items will be -considered in the evaluation process. a. Utilization lo~.-An automatic executive control system feature which stores and supplies a comprehensive computer system utilization -sum-mary from data gathered antomaticially during normal processing. b. Delivery-It is desirable that the system be delivered and installed within 30 days after the date of contract award. c. Ha'ndling test score papers-It is desirable to have a device capable of reading teat marks on a scoring sheet and transcribing the data to magnetic tapes. (See e~bibit 2 for a -sample sheet.) A different answer sheet form can be included ~n the proposal -by the vendor, if it allows -the same number of answers and same type of documentary information. I I I Level PAGENO="0291" 285 Mr. ROBACK. How long has this been going on? How long would you say this was a requirement ? Mr. RILEY. That requirement went out in September 1963. Mr. ROBA0K. Now, Mr. Secretary, I am not sure you answered the first question that you were asked about the penetration of the supply chain. Mr. MoRRIs. Yes, sir. Mr. ROBACK. You were asked how much central control over inven- tory should there be, and what degree of centralization should there be in the services. Now, you are familiar of course with the discussion that we have had with the Army about the role of the Army Materiel Command with relation to overseas supply depots and centers. The General Account- ing Office has been critical of lack of redistribution because there hasn't been a single place where you can get full and systematic infor- mation on worldwide supplies, worldwide inventories. How much visibility of stocks do we lack that you think we ought to have? Mr. MoRRIS. I think the important points, if I might repeat them, are as follows: Out of something over $40 billion in inventory, about half are in the so-called principal items including ammunition, where we have long had very high, worldwide intensive management of our inventories. I don't think GAO has addressed that problem. The area which we all are concerned with has been this universe of secondary items which consist of about $20 billion, of some 3.8 million items, and we estimate 30 billion to 40 billion pieces in stock located at hundreds of places throughout the world. It is obvious that it would be economically infeasible and undesir- able to try to have 100 percent worldwide control of all of those items, so we have elected the approach of the high value stratification, and we have issued the policy that I cited and would be glad to submit for the record, under which those items stratified at "very high" and "high" levels, depending on annual value of demand, will be sub~ j ected to intensive worldwide management. The Air Force has proceeded very far in that direction already with its 77,000 recoverable items, which is less than 10 percent of its second- ary items, hut yet that part which is worth worldwide control. I un'der~ stand they may proceed in the future to perhaps double that, but we are still talking about 20 percent which may ultimately prove to be feasible from an Air Force management point of view. We are committed to adopting this principle in all services. Mr. ROBACK. This policy is based upon annual demand value? Mr. Mo1u~Is. Yes, sir. Mr. ROBAGK. It is not based upon the nature of the item. Mr. MORRIS. It may in addition. Mr. ROBACK. It may be. Mr. MomlIs. There may be additions to any such list, depending upon criticality and importance of an item. Mr. ROBACK. I can't understand offhand, looking at your classifica- tion, how you oan get any necessary distinction in types of items. For example, just offhand, and this may be a PX item, I am not sure, but PAGENO="0292" 286 beer and soft drinks are very important in Vietnam and are moved there by the millions of eases. The value for beer in Vietnam would be very high. Would you then propose that beer be an airlifted item, let us say? Mr. MoRRIs. Not necessarily. It is not an appropriation funded item, so we don't have that issue, as you pointed out. Mr. ROBACK. Soda pop, isn't that- Mr. Moinus. They are all PX items, sir. Mr. ROBACK. That is all PX? Mr. MoRRIs. But sandbags, for example, we use just unbelievable quantities, hundreds of millions of sandbags. The bag itself is very inexpensive, perhaps 15 to 20 cents. But this is a high-value item that is intensively managed today, because of its criticality, large volume, high demand vaJue. Mr. ROBACK. But what items are selected for intense management depends on the demand and not on the nature of the item, so that any item at one time or another can be a candidate. Mr. MORRIS. That is right, but any item that a service judges because of criticality to be important can be included in this intensive manage- ment category. Mr. ROBACK. Is this an in and out proposition, that is, the intensive management list is changing constantly? Mr. Monms. It would certainly be changed every year, though the volatility would not be too great. Mr. ROBACK. How do you know until after the consumption that the item is eligible? I suppose this is a trial and error proposition. Mr. MORRIS. Our directive defines this as annual demand where that is fairly level, or planned issues for the coming year. Mr. ROBAOK, Sandbags became a highly valued item after the Tet offensive. Mr. MORRIS. They were well before that, I can assure you. Mr. ROBACK. That is true but the demand has grown greatly since the Pet offensive? Mr. MORRIS. Yes. Mr. ROBACK. And your annual statistics wouldn't show up the Tet offensive until the end of 1968? Mr. MoRRIS. So we can easily add and subtract, month to month if necessary. We do this in fact in ammunition control which I addressed. This has been the most highly managed segment of our inventory for the past 2 years. There are some 100 items that we are currently man- aging, hut we may add and drop items from month to month, depend- ing upon usage. Mr. RILEY. Mr. Roback, when we make up a budget you recall we are anywhere from 18 nionths to 2 years away from the beginning of the budget year. So we can project that demand at that time. We will have a high value item that we will be managing for a period of at least 3 years. The principle of the high value item is that we want to control as large a percent of our procurement dollars as we possibly can and keep them under visibility. This is the approach through the high value item, intensively manage a small number of items but a large portion of the dollars in our procurement budget. Mr. ROBACK. The high value item in one service at any given time may be low value in another. PAGENO="0293" 287 Mr. MORRIS, Quite true. Mr. RoiiAcK. So that even though you have the demand in one place and the availability in another, you couldn't necessarily match them. Mr. Mourtis. I might add one other dimension to what we call inten- sive management. In the very high category we expect this to be daily review, like the Air Force system for recoverable items. In the high category we expect this to be quarterly review. In the medium and lower categories it may be 6 months to annual review, with deliberate economin order quantity buying of large quantities so that. we. don't need the intensive review. Dr. Brooks has just prepared an analysis of the degree to which Army inventory investment is intensively managed, and it might be appropriate to ask if he would comment on this. Mr. ROBACK. Please do, but I am making the point here that in the intensive management, since it is service-oriented, you don't get the exchangeability that you would require. After all, the purpose of visi- bility is to redistribute stock as reouired; isn't it? Mr. RILEY. That is only one of the purposes. Mr. ROBACK. One of the purposes. Mr. MORRIS. Yes. Mr. IROBAcK. And that is an important purpose, to keep from gen- erating undue excesses and to move stock to points of need. Mr. MORRIS. Probably the most important purpose is to be sure we do not deadline important equipment, that we support the troops. Mr. ROBACK. Yes. Mr. MORRIS. That is the reason for the Red Bail service. Mr. ROBACK. The deadline problem is separate. You have already taken care of that in your special items. We are talking about second- arv now; are we not? Mr. MORRIS. They include the spare parts, $9 billion of aircraft parts, for example, $6 billion of other vehicle and end item parts, so two-thirds of our secondary items are in parts. Mr. ROBACK. Dr. Brooks. Mr. BROOKS. Just dealing with the problem that you raised of sec- ondary items, Mr. Roback, the Army's total procurement in 1968 of secondary items, and this includes the components and assemblies, the imvjor rep'iir'ible comDonents of end items, it includcs the hits `md pieces, spare parts and supplies, our total procurement was $1.8 billion in 1968 As the previous Army witnesses have testified, we have toward the end of the fiscal year inserted an inte.nsive management system test for AMC's oi~mnership worldwide of `t limited number of these items The number is about 1 800 `it the present time That is less than one half of 1 percent of the items that the Army is responsible for. However, the procurement value of these items in 1968 was $800 million, so that we are covering with that very small group of items about 44 percent, we fl~ure, of the total procurement value of Army items in th'mt ye'mr This is inst `mbec~inning, I should say We do plan to extend this coverage, and our goal is to cover in the secondary item area about the total perc.entage of procurement that we are covering in the principal item area, which is now be- tween 70 and 80 percent. We want to get up to that level. PAGENO="0294" 288 Mr. ROBACK. Is this a firm plan now, I mean to develop, to extend this, or are you still testing the first 1,800 items? It was a little un- clear in the record whether this was just an experimental effort or whether you are establishing this as an intensive management control system. Mr. BRooKs. The answer to both questions is, "Yes," Mr. Roback. It is ~now a test, and yes, we do intend to go further with it. Mr. ROBACK. Do you have a descriptive paper or memorandum on this that you can submit? Mr. BROOKS. On the test? Mr. ROBACK. Yes. Mr. BROOKS. Yes, sir; we can submit that for the record. (The information referred to follows:) On May 1, 1968, the Army initiated the test of an intensive management system to determine the feasibility and worth `of Army Materiel Command-AMC--- ownership overseas of a limited number of super high dollar value seeondary items. The test began on May 1, 1968, and is scheduled to run for approximately 1 year. The stated objectives of the project are: a. More responsive, efficient and effective supply support to overseas commands. b. Total asset visibility and control. c. Improved inventory management. *d. More precise definition of requirements. e. Better budgetary data. f. Basis for Department of the Army decision on extension of concept. The test is being conducted in the two major oversea commands-USAREUR and TJSARPAC-and AMC. It encompasses only secondary items, excluding prin- cipal items entirely. The secondary items selected for this `test are both PEMA and stock funded and have been selected from the high-dollar value category based upon operational significance criticality and cost value. A total of 1,783 items are included in this test, 909 of which are PEMA funded and 874 are stock funded; 1,532 are recoverable items and 251 are expendable; 995 are prime items and 788 are substitute items. The selected items represent less than one-half of 1 percent of the items the Army is responsible for; however, the procurement value of these items in fiscal year 1968 was' approximately 44 percent of the total procurement value of Army items in that year. The scope of the test is currently being expanded to include aviation items in Vietnam. A goal has been established to place under AMC visibility and "con- trol," approximately 70 to 80 percent of the procurement dollars expenditure in the secondary item area. Current plans are to increase the range of items at such time as the AMC-NJCP's are capable of assimilating and using the data. Mr. ROBACK. You mentioned "Red Ball," which is a system designed to keep equipment from being deadlined. Mr. MoRRIs. Yes. Mr. ROBACK. And we had some discussion with earlier witnesses about it. Now, the Red Ball concept, I am advised, also has been fol- lowed by the Red Ball Extended. Have you ever heard of the Red Bali Extended? Mr. BROOKS. Yes, sir. Mr. ROBACK. The Red Ball Extended, as I understand it, is designed to anticipate breakdowns and prevent them by ordering equipment when it looks like you are going to need the replacement; is that right? Mr. BROOKS. That is correct; yes, sir. Mr. ROBACK, The theory of that would be to decrease the Red Ball requirements? Mr. BROOKS. That is correct. Mr. ROBACK. If you order in advance, anticipating, then you won't need so much Red Ball? PAGENO="0295" 289 Mr. BRooKs. There are two things which decrease Red Ball require- ments, if I may talk to that, Mr. Roback. One is the Red Ball Ex- tended that you mentioned. The other is improved determination of stockage lists at the unit level, that is, what should he have in stock on a normal basis, in order to meet these demands. This has been improving, particularly in Vietnam over the last year or two, so that the total volume of Red Ball requisitions has shown a downward trend. Mr. RoBACK. U"p to a recent time, if I recollect a finding in an Army study, the Red Ball has expanded along with Red Bail Extended. This gets to be a little bit of jargon here, but the point is, if you are going to anticipate breakdowns, then you shouldn't have to be ordering so much after the breakdowns, but this hasn't shown up in the studies to date, has it? Mr. BRooKs. Yes, sir; that has been our experience. I was just look- ing at General Scott's statistics at the 1st Logistics Command. His average Red Ball during fiscal year 1967, his average number of Red Ball requisitions received per month was running around 40,000. That has shown a declining trend in 1968. It is now around 2~5~000 a month, and we anticipate that it will level off at about 20,000 a month. In other words, it has come down by about 50 percent. This is the volume of requisitions received. Now, it may be that there is a nomenclature confusion here in that I think the Red Ball Expanded means the same thing as Red Ball Extended. It is an extension of the system of ordering. The Red Ball requisitions themselves have come down in volume. Mr. ROBACK. We also heard that Red Ball was coming at them from Okinawa as well as from the States. The one that got there first won. Mr. BROOKS. Yes, sir; that is correct. Mr. ROBACK. Is that still in effect? Mr. BROOKS. Yes, sir. They get it faster from Okinawa, if Okinawa has it. Okinawa has been supplying about 20 to 30 percent of the Red Ball requisitions, even though they at the same time get it from the States we feel that since this item is in demand, it will be used. Mr. ROBACK. Mr. Secretary, you made reference to Pacific Redistri- bution Agency which has been set up. There has been some informa- tion in the earlier hearing that there is some experience gained by now. What is the experience? Can you submit something which shows its operation, the results of its operation? Mr. MORRIS. Yes, sir; we actually began our work on a test basis in January to get the procedures debugged. In the first round we cir- culated about $38 million of excess on which there was a redistribu- tion of $1.4 million. The second cycle beginning in the spring had $50 million of excess, and is still being screened, so we don't have the returns as yet. But from now on beginning in June, there will be a monthly nomination to the PURA at Okinawa by all services of items available for re- distribution. These will go through 105 days of screening in the Pacific area, and then be declared to the United States. There is $144 million of excess on Okinawa lists. The June nomina- ion, which picks up the preceding two increments as well. It will be, I would guess, about 3 months before we can begin to actually assess the value of that procedure. We are sure it is going to pay off. It will PAGENO="0296" 290 undoubtedly reveal many other problems that we will have to come to grips with. One that we have already ascertained, as a result of our recent trip, is the need for concurrent worldwide screening of certain accumula- tions of items that we are obviously not going to consume in the foreseeable future within the Pacific. As to those, we will report them concurrently to the CONTJS ICP~s and the Logistic Service Center, Battle Creek, and get a worldwide review at one time. Mr. ROBACK. Is the ultimate destiny of excess to be back in supply system if it is not otherwise drawn? Mr. MORRIS. The objective is to redistribute everything for which we have a valid or foreseeable requirement, and to idei~tify that re- sidual property on which we will have to make a decision whether to sell somewhere in the Pacific area or- Mr. RonAcic. In other words, the ultimate destiny after worldwide screening will be disposable, not return to supply system? Mr. Mojinis. Well, we will return it to the supply system if it falls within retention objectives anywhere in the world. If it does not, we will keep it in the Pacific and make disposal decisions. Mr. ROBACK. I mean if it is not drawn, then it won't be restored to some stateside depots? Mr. Momiis. Likely not, sir. Mr. HOLIFIELD. The cost of transportation back would be greater than the value? Mr. MORRIS. Right, sir. Case-by-case decisions will have to be made obviously. Mr. ROBACK, Does ARVN get in on that distribution? Mr. MORRIS. Yes, this stock will be used in meeting our ARVN requirements. And possibly in meeting some of the AID requ ire- ments on a reimbursable basis, we will permit them to see these excess lists. Mr. ROBACK. In other words, anybody who is supplying ARVN would be a claimant, and not ARVN directly? Mr. Momus. I believe that is correct. Mr. BROOKS. Yes, sir. Mr. ROBACK. Is that right? Mr. BROOKS. We supply the ARVN through MACV in Vietnam. They know the excesses. They know the ARVN requirements, and will draw as required. Mr. ROBACK. There was a certain amount of philosophic discussion with the Army about the nature of all these special adaptations, Red Ball and other responses. The General Accounting Office finding geiTi- erally was that the system, the supply system of the Army wasn't geared to effective and economical supply, and therefore a lot of adap- tations had to be made, whereas the Army was inclined to view these adaptations as examples of how well the system is working. Now, out of all this comes a proposal that if we have to do this kind of thing somewhere else again, on an emergency basis, there ought to be a relatively self-contained organization and concept that can move, and become a supply operation without going through all the trial and error, and this is known as the quick reaction inventory con- trol center. Mr. MORRIS. Right. PAGENO="0297" 291 Mr. ROBACK. What is your view of that and what is the state of development? Mr. MORRIS. Well, as I indicated on page 13 of my statement, I share the Army's characterization of many of the actions that have been taken. I think they were innovations. I think they were wise and prudent to assure responsiveness in the supply system as they have so obviously done. I believe we would use them in a future Vietnam to the extent of Red Ball, for example, and to the extent of high level 15-day visibility on ammunition stocks. These. things I think are permanent lessons learned. The quick reaction inventory control center is obviously something that the Army would need in a similar contingency. My understand- ing is that it is well along. Mr. Bnooi~s. It has been activated, yes. Mr. ROBACK. What is it? Is it a table of organization, equipment or is it hot bodies? Mr. BROOKS. It is hot bodies right now, sir. They are coining on board. I don't know if it is fully manned at this point. Mr. ROBACK. How are they disposed? What do they do when they are not needed for an emergency? Are they in sort of a standby? Are they in a simulated exerche position, or do they actually perform supply functions? Mr. BROOKS. They will be in a training position, Mr. Roback. The current plans are they will be at Fort Lewis, Wash. They will perform actual supply functions. Mr. ROBACK. But in the contingency mode, so to speak? Mr. BROOKS. In the contingency mode; yes, sir. They will train on actual supplies. rrhey will be prepared, of course, to assume a much larger responsibility than they will at that station. Mr. ROBACK. Do you have a description p~tper or reference terms for this organization? Mr. BROOKS. Yes, sir. Mr. ROBACK. That you can supply? Mr. BROOKS. Yes, sir; we can prepare such a paper. (rrhe information referred to follows:) Detachments comprising the operational elements of the first quick reaction inventory control center (QRICC) have been activated at Fort Lee, Va. The QRICC is to consist of the 15th Support Brigade Headquarters (TOE 54-22T 179 personnel), stock control detachment (TOE 29~-404T 138 personnel), mainte- iiance management detachment (TOE 29-403T 26 personnel) and a data process- ing detachment (TOE 22-550T 98 personnel). The 15th Support Brigade Headquarters will be activated at Fort Lewis, Wash., in September 1968. The stock control, maintenance management, and data processing detachments have been activated at Fort Lee, Va. These detach- ments are authorized a total of 262 personnel of which 140 are on hand. The remaining personnel are scheduled to be on board by September 1968. Training of the detachments is scheduled to be completed in December 1968. The van- mounted IBM 360 ADP equipment for the QRICC will be delivered to Fort Lee in October 1968 for use during the training period At the completion of the training program, the functional detachments and the ADP equipment will move to Fort Lewis and become operational in January 1969. At Fort Lewis the QRICC will be interposed between selected TOE units and the COSMOS stock control field office. Requests for supplies will pass from these units to the QRICC where fill will be made from GS supplies if possible Those requests that cannot be honored and replenishment requisitions for GS supply units will be forwarded to the COSMOS field office at Fort Lewis. This arrange- PAGENO="0298" 292 ment provides the means for maintaining th.e QRICC at a state of readiness which will permit operational employment in support of contingency operations. In the event of deployment of `the QRICC, the supported troop units would remain at Fort Lewis and submit their requests for supplies to the COSMOS field office, thus, the QRICC can be disconnected without disrupting the supply of troop units. Mr. ERLENBORN. I wonder if I might ask a question at this point about Red Ball. Who is operating that now? Is this done through air freight carriers, Air National Guard? Mr. MORRIs. Military Airlift Command at Travis Air Force Base actually performs the physical lift on a daily basis. They have occa- sionally used some National Guard people who came on for training purposes, and there is some contract lift, yes. Mr. }]IOLIFIELD. That Red Ball expression has an interesting back- ground, doesn't it? Mr. MORRIS. Yes, sir. Mr. HOLIFIELD. They used it from the Normandy beaches up to Paris in World War II. Mr. MORRIS. Yes, sir. Mr. ROBACK. It was presumably going toward the front while some of the soldiers were coming back at one time or another. Mr. BROOKS. That is where we deliberately took the name, Mr. Chairman. Mr. HOLIFIELD. It had priorities on the roads. When that convoy of trucks came through, why, everybody got out of the way including the VIP cars, I might add. Mr. MORRIS. You see every package has a red ball on it. and the postmasters throughout the country I am told know immediately what this is. Mr. LUMAN. Mr. Morris, toward the end of your statement you point out that you are expecting new improvements in transportation, com- inunications and data processing and that the exploitation of these will occur progressively in accordance with the economic benefits obtainable. Are you planning a set of milestones for the Defense Department to use these improvements as they become available to your systems? Do you have any plans, for example, as to when you think you might be able to cut down on overseas stockage, when you might be able to implement more visibility? Mr. MoRRIS. We are waiting right now for the completion of some very important analytical work on air transportation. It is due I think in about a month; it has been going on for a year or more, that should give us solid economic guidelines for the use of air lift in lieu of pipeline and increased overseas or CONTJS stockage. I would expect before this year is out that we will be making further progress in this area. Mr. LIJMAN. Right at this point though, you don't have any master plan for integrating all these improvements into the overall supply concept? Mr. MORRIS. No, sir; just definite plans to make same. Mr. ROBACK. Do those particular studies make assumptions about fast deployment logistic ships, things like that? Mr. MORRIS. No, sir; this is an airline of communications. Mr. ROBACK. Strictly on the airlines ~ PAGENO="0299" 293 Mr. MORRIS. At this time. Mr. ROBACK. This is air-sea cost effectiveness? Mr. Momils. Yes, sir. There have been studies of the FDL, which of course continue to be held in abeyance. Mr. ROBACK. What bearing does the FDL have on these areas of concern? Mr. MORRIS. On our immediate plans, none. Mr. ROBACK. Does this in any way affect your decisions as to whether you are going to have forward supply areas or centers in certain places? Does it make a difference, in other words, to the supply and logistics organizational structure? Can you talk to that for a minute, because this is a subject which the Congress has not yet resolved as far as its own convictions are concerned. Mr. MORRIS. Right, sir. Mr. ROBACK. About whether we should have these fast deployment logistics ships. Mr. RILEY. Actually, Mr. Rob'ack, the requirements for the C-5 and the requirements for the FDL were conceived of in conjunction, one with the other. The mission of the fast deployment ship being to store and carry to forward areas the heavy Army division equipment, so we could get it there in a short period of time. The C-5's then coming along to haul the other types of cargo and personnel to that location, closing the two at about the same time. Mr. ROBACK. So conceptually these are joined? Mr. MORRIS. Yes. Mr. ROBACK. And in planning? Mr. MORRIS. Yes. Mr. ROBACK. And while the Congress is supporting the C-5 to date, there are those in the Congress who consider these as alternatives rather than as complementary. Mr. RILEY. And in fact they were not conceived that way. They were conceived in conjunction, one with the other. Mr. ETOLIFIELD. In the absence of the FDL, you will be constrained to go to the cargo-ships, I suppose, for that heavy machinery. Mr. RILEY. We will have to; yes. Mr. BROOKS. We will be constrained also, Mr. Chairman, to prepo- sition the stock on the ground overseas in many cases. Mr. ROBAOK. The FDL was not to be in forward areas or foreign ports. It was to be in home ports; is that right? Mr. MORRIS. Yes. I think it might be apropos to respond in part to this question and the other gentleman's question in that we are always attempting to be very alert to take advantage of an improved capability. For example, one of the innovations in Vietnam has been these container vans, the sea-land vans, which can be really onloacled and offloaded. That, among other factors has contributed to the Army in Vietnam reducing order and shipping time by 30 days over the past year or so. Mr. ROBACK. Although the original inspiration was to reduce pil- lage and theft, was it not? Mr. MORRIS. No. That was, of course, a byproduct benefit of impor- tance-preservation, pilferage, and theft. But the improved turn- around time capability that this contributes is very significant to our PAGENO="0300" 294 stockage levels. The Army has reduced at least $50 million off its in- ventory, because of the reduction in order and ship time. Mr. HOLIFIELD. Are those containers brought back? Mr. MORRIS. Yes, sir. They are left out there for storage over the road transport and then brought back with return loads. Mr. RILEY. It takes 5 to 6 days to unload a conventional ship in Vietnam. It takes 24 hours to unload a container ship. Mr. HOLIFmLD. That is quite a saving, isn't it? I\Ir. MoRRIs. Yes. Mr. LUMAN. Mr. Morris, addressing again your forthcoming plans, you state that high-speed communications are making changes in in- ventory management concepts, and you refer to the Air Force world- wide transaction reporting on certain items. You make the statement, "After a full evaluation of Air Force experience we believe its features will be incorporated into the systems of the other services." When is this evaluation due to finish? Do you have definite mile- stones for the other services to meet in this regard? Mr. MORRIS. We issued on June 12 the instruction I have referred to that lays out the requirement for each service to develop its imple- menting plans. Since the AFRAMS system only became operational last Noveniber, I would expect we will be evaluating its products through the rest of this calendar year concurrently with the planning by the individual services for the adaptation of the very high and high concepts of management that we refer to. Mr. LUMAN. Then this Air Force influence probably would not be felt until when-next year? Mr. MORRIS. Next year, I would think. Mr. BROOKS. If I may add to that, Mr. Lumaii, we are not waiting for a full evaluation to get benefit from the Air Force experience. In fact the Deputy Chief of Staff for Logistics of the Army and his prin- cipal assistant for supply, General Klingenhagen, who appeared before you, were out this week with the Air Force trying to get the results to date and the indications of what they can use in the Air Force experi- ence. It is a continuing process. I think what Mr. Morris referred to was a full evaluation and final decision. Mr. L1JMAN. If I may pick up on the Army's point here, Dr. Brooks, you stated in answer to Mr. Roback's question that the high value items, some 1,800 of them, were both a test of a concept and a step toward a goal. Now, do you have milestones set up saying to the Army by a certain date you will have visibility on 20 percent of the value, 30 percent of the value, 44 percent? Mr. BRooKs. We have 44 percent under the test right now, Mr. Luman. Of course this is just going into effect, and we anticipate that we will perfect this as we go through the year. The next milestone I believe, I will correct this for the record if I am wrong, is March 1969, when the test phase will be completed. At that time we expect to be able to move further in the program. As I say, our ultimate objective is to get between 70 and 80 percent of the total pro- curement value. We don't have a date for that final objective as yet. Mr. LUMAN. Just looking at what you are doing now, it won't be until next March that your tests are completed. How mueh visibility will you have by then? PAGENO="0301" 295 Mr. BRooKs. These 1,800 items are 44 percent of the procurement dollar in 1968. We anticipate they will be about the same in 1969. Mr. LUMAN. So you won't be increasing in this substantially until after March of 1969? Mr. BRooKs. That would be my anticipation, Mr. Luman. Mr. LUMAN. And you don't have any firm date as to when you plan to hit your goal? Mr. BRooKs. We will move out as rapidly as we can thereafter, Mr. Luman. I think as the previous witnesses have testified, the only con- straint is the ability of both the oversea depots to communicate and of AMC inventory control points to accept the data. Mr. LUMAN. Mr. Morris, on your overall DOD supervision of pro- graming and computer systems, what is the first date that a computer purchase will be affected by the workings of this group? Mr. MoRRIs. Let me answer `that two ways. Every computer acquisi- tion is now governed by policy set at my level by my office: The ASD (Comptroller) is now assuming responsibility for this~ The new joint planning staff is concerned not with hardware so much as with design planning, so I would think that, in a major sense, its impact is more likely to come several years hence, in `terms of any mass procurements of computers for whole new systems designs. Mr. LIJMAN. In 1975, say. Mr. MoRRIs. Ye's, and perhaps a little earlier. There cQuld, of course, be interim impacts of the work of this planning almost from quarter to quarter from now on as we get into business. It is hard to predict what we are going to find, what the recommendations of the joint staff will be. Mr. LUMAN. You stated, your office did, in a submission to the Appropriations Committee', that under the present DOD policy "We have seen the * * * standardization of systems * * * at the service level (as evidenced by the systems re'viewed by the General Accounting Office) ." Reading the GAO report, I don't know whether they drew that conclusion. They said that the one system they thought was compatible with systems designed alongside was the Marine Co'rps system and that the Navy 3M system hadn't considered the UADPS system and so forth. Are you satisfied on the degree of standardization within the services? Mr. MoRRIs. I believe that I am satisfied each service has proceeded in a very intelligent and thorough fashion to develop its intraservice standardization programs at ICP and wholesale depot levels. Mr. LUMAN. Well, for example I notice in the Army that even under this newest plan the depot systems in the United States are being developed by the Army Materiel Command, whereas the depot pro~ grams overseas are under the Combat Developments Command. Mr. MoRRIS. Correct, but there is a single o've'rall o'verseer who' testi- fied before you, I believe it was General Miller, on all of these items. Mr. LUMAN. You would base the standardization not on the fact that the same program was being developed for depots overseas as depots in the States, but that the separately developed programs were under the supervision o'f one office. PAGENO="0302" 296 Mr. MORRIS. Yes. Mr. LTJMAN. Dr. Brooks, do you plan to make any changes in this development of programs for overseas levels, considering the fact that you are looking at extension of AMC control through your test program? Mr. BRooKs. The AMC portion of inventories that is controlled over- seas, Mr. Luman, will, of course, have to be consistent and is planned now to be consistent with the AMO central control system, that is the NAPALM overall system for AMC. It will be a problem that the cen- tral agency to which Mr. Morris referred, the Logistics Data Systems Office will have to address the compatibility of that system operating in the same depot with the items which are controlled by the oversea commander. Mr. LiJMAN. What is a little disturbing in this instance is you have a situation today where you look at the possibility of more centralized management and you say, "Well, we can't bring this about even if we want to, because of the difference in computer programs between over- seas and the States as well as difficulties of communication." Might you not find yourself in the same position later if you were to decide that AMC should extend control overseas and yet had programs in those overseas depots which were not devised by AMC but by some- one else? Mr. BROOKS. I don't know if our problem, Mr. Luman, is the incom- patibility of programs. As I say, tests began in May. So far as I knew, we are going to get the first report on it the first of August. To date we have i~ot heard that there is the problem of incompatibility, it is a problem really of data flow and capacity to transmit and accept the data in very large volumes on these items between the oversea depot, and the United States. There is not a problem so far as I know to this time of compatibility of programs. Mr. hUMAN. In the instruction for management of secondary items, there is mention of going down to the wholesaler or depot level, I believe. Mr. BROOKS. That is correct, yes. Mr. hUMAN. Now, in the definition of a depot or a wholesale level, does that include an overseas depot? Mr. BROOKS. Yes. In fact, on some items we are proceeding further than that. We have a limited group of items of extremely high unit cost and criticality, among which are aircraft engines, where we are now proceeding on an overall worldwide control system of all assets wher- ever they are, that is including the oversea depot and below the oversea depot at the direct support units and the combat units themselves. This is a much more restricted list. At present it has some 25 or 30 items on it. We plan to extend that again to the major repairable components, such as tank engines, transmissions and so forth. We want worldwide, literally worldwide visibility on that kind of thing. Mr. LUMAN. Secretary Morris, you stated that there is no bbstacle today to the development of controls for worldwide visibility because of command prerogatives. Mr. Moiuus. Right, sir. Mr. LUMAN. Among the GAO reports referred to in their testimony was one that came out in l~67, where the replies were made by the Army in 1966, on stocks in Europe, and the Army made the statement: PAGENO="0303" 297 The routine reporting of these assets by the S. & MA. TJSACOMZEUR to CONTJS NICP's is not considered appropriate because these stocks are under the control of a tactical force and not within the wholesale supply distribution system. Does that statement still stand or are you modifying the require- ments for reporting certain stocks by the S. & M.A. Mr. MoRlus. I am not intimately familiar with this case and the statement probably would still stand. The intent of the comments in my statement is to say it is the conviction of all of us that command prerogatives are no obstacle to our proceeding in the future with world- wide visibility where it makes good sense. We think that the confidence that commandeEs at all levels have gained as a result of Vietnam has dispelled this kind of a myth. Our people are getting supplies. They don't have to hoard supplies. We find that nobody wants to hold on to excess stocks. In fact, they are a great burden. The 1,900 units that the teams went out and relieved of their excess were very pleased to be relieved of those excesses. Mr. LITMAN. So you don't see any objection, from the. point of view of the commander's responsibility for assets in his theater, to requiring this commander to report on these assets. Mr. MORRIS. No, sir. Mr. BROOKS. In fact, I would say, Mr. Luman, that is one of the major vehicles for establishing confidence. I would say this in terms of command prerogatives. We have found no case where a commander overseas or any of his supply people are knowingly trying to hoard assets over and above a known requirement. The problem has been the known requirement, and the known assets. We get information and make sure that the commander has that information on what his assets are and what his requirements are; there is no problem whatsoever that we have found in redistributing assets that are over and above his requirement. It is the problem of visibility. Mr. LUMAN. I really got the impression from some of the earlier Army testimony that the belief that the commander should control his resources was the reason for saying that he can have a certain amount of permissive overstockage and he doesn't have to report it to the TOP's. Mr. BRooKs. There have been cases of permissive overstockage. However, this is not a case where the commander feels that he neces- sarily has to have this. It is a question of economics, that it is more economical to leave it there, at least temporarily until another require- ment develops, rather than to move it right away to another theater ~ back to the United States. Mr. ROBACK. Your position, then, Dr. Brooks, is that as far as visibility and control are concerned, visibility is sufficient for pur- poses of redistribution. As long as you know where the material is, there isn't any problem of moving it around? Mr. MORRIS. That is rig~it, sir. Mr. BROOKS. No proble~. Mr. ROBACK. You don't have to have specific commodity manager control over the commander's supply, so to speak. Mr. RILEY. One of the purposes of having visibility of all of your high-cost assets is that you won't buy too much and put too much over there in the first place. You will know what he needs, and what he has. PAGENO="0304" 298 Mr. IROBACK. There is aTso the problem of redistributing to other areas of need, so that you have to persuade or direct the commander to let go. Now, if you oniy persuade him, he may not let go; whereas, if you command him, that means that the Army Materiel Command may need or want to have jurisdiction. The issue of control over overseas supplies involves the question of the commodity manager making the decision. The man in charge of the commodities makes the decision as against the combat commander, so to speak. Mr. Momiis. I think that the thing that impressed me is this: It is the function of the commodity manager to obtain asset visibility and make asset knowledge available to all appropriate levels of management. Where there is a real problem of allocation of critical, scarce assets, this must be handled at higher command levels; for example, MAOV has his materiel allocations board. The Joint Chiefs of Staff have an allocations board today. It is exercised only on such things as the M-16 rifle, where we can't produce as many as we would like to have. So someone must decide priorities, and that is the job of the higher levels of military command, not of the commodity manager. Mr. LuMAc~. Do you presently have enough communications capabil- ity to run the supply system the way you think it should be run? Mr. ROBACK. Of course he is not running the supply system. Mr. MoRRIs. Well, sir, we have tremendously improved communica- tions capability. We need more capacity in certain areas, and will always perhaps want more than we have. For example, the Defense Logistics Supply Center in Battle Creek is becoming deluged with literally millions of interrogations per month. We are not able to satisfy all possible customers. This we must improve. It is both a matter of the long-lines circuit and the capability of the computers at that site. So we have strains, and the more we make use of high-speed communications, the more we generate a requirement. So it is a chicken- and-egg kind of problem. Mr. LUMAN. Take the situation today. I understand if you have a requisition from Vietnam, it goes to Okinawa to see if they can fill it out of their present stock. If they can~t it is passed on back to the States. This is an economic way to get rid of Okinaw&s surplus. But it also causes a delay of perhaps 3 to 5 days. Now, theoretically, couldn't you have a system whereby either the 14th ICC knew what was on Okinawa and therefore could direct requisitions to the right place; or the people back in the United States knew what was in Okinawa and could take all requisitions, referring back to Okinawa those that they can fill? Mr. Momiis. In time I suspect we will have that. It is not so much a matter of communications today, but again of capacity and full visi- bility. The 14th ICC would not have a capability as yet of absorbiiig this knowledge of Okinawa; I wouldn't think. Dr. Brooks? Mr. BROOKS. Not at the present time; no, sir. Mr. MORRIS. But in time it might well have. Mr. LUMAN. How about the U.S. depots, ICC's? Would they have the capability of knowing what is on Okinawa? Mr. MORRIs. As soon as Okinawa can give them full visibility. It is receiving tens of thousands of tons a month from Vietnam now, which it is having to identify, classify, and report. PAGENO="0305" 299 Mr. DAHLIN. Mr. Secretary, were you briefed on the operation of "machine block" for high-priority items at the 14th ICC? Mr. MORRIS. This occurred after we had left Long Binh. I believe it was around the 2d of July that this message went out from General user.1 Mr. DARLIN. Was there a discussion of the problem out there as towhether high-priority items were really a problem to the 14th iCC? Mr. MORRIs. Yes; there was. We talked to General Scott, Dr. Brooks and I, and he expressed his personal concern that there was perhaps overuse. I think he said that some 48 percent of their requisitions were priority designators 01 and 02, and he is personally working on this. I understand they responded immediately to General Heiser's suggestion as to th,e use of this block, and of course General Heiser will be the new commander there shortly and I am sure he will imple- ment this. Mr. BRooKs. As General Heiser pointed out, Mr. Dahlin, that mes- sage has now gone out to all major commands, a similar computer block. Mr. DAHLIN. Is there a kind of tension among the management sys- tems between commodity management and weapons systems logistic management today? Are you having to make any decisions about just how much overlap is going to be permitted in the future, and how it is going to develop? Mr. MORRIS. rfhere are no issues before me. 1 might ask Mr. Riley if he knows of any. Mr. RILEY. None that I know of. Mr. DAHLIN. It appears, for instance, the Army mentioned that they had given away, from their point of view, some items to DSA under the process of item management coding, and they have all of a sudden discovered they belong to weapons systems. Mr. RILEY. I think there were some items inadvertently transferred to DSA and they are now in the process of transferring them back to the Army, but that is no problem. Mr. DAHLIN. The primary concern of each of the three or four serv- ice systems today is reparable items. According to the testimony, this is what they are really concerned about. if that is so, is there a need to reexamine the role of the common support function as such? Should there have been this conversion from oie service to another, from one APP system to another in Vietnam-in having to flop over between services when the situation changed-or would it be better to have a common support agency designated, or let DSA go overseas or under- take some provisions for the future in this matter? Mr. Momiis. I might respond to this issue of common supply sup- port. The Army in the II, III, and IV Corps areas does provide sub- sistence and petroleum to all services plus, today, some 3,500 common items. The Navy in the I Corps has a similar mission and I think the volume of common items they supply in that area is about 8,000. The plans call for extending the 3,500 items in the II, III, and IV Corps to about 40,000 items over time. We are deliberately proceeding slowly here, because we want the 14th ICC to be fully operational and have complete records before we extend its effort. It has had 1 A review of the record revealed that the message was dispatched to USARPAC on June 24, requesting a reply by July 2, 1968. 97-475-68-----20 PAGENO="0306" 300 problems which are quite well known, and we don~t want to deny them at all. It is coming out of those problems, but I suspect it is a matter of 6 months before they should start expanding support on additional common items. Mr. DAHLIN. Was this kind of changeover between-in Vietnam you have had changeover of service, you have had changeover of systems, you have had change in the ADP. Do you think planning is going to take care of these problems a little better in the future? For instance, there is no triservice input into the Quick Reaction Inventory Control Center. Should you look at that problem? Mr. Mounis. We are learning all manner of lessons from this ex- perience. Of course, one doesn't go into a contingency like this expect- ing, necessarily, to put on a peacetime highly efficient management system. What we are learning is that we can be more efficient much faster, however, through the Quick Reaction Inventory Control Center. I don't think it needs to concern the other services, because the Army, as it does in Thailand and Korea as well as Vietnam would still be the principal housekeeper and supplier of such items in any future contingency. We want to be sure that the Army system is perfected. Mr. DAHLIN. The Air Force, for instance, had to put in some special supply support units, as one of these little deviations in the system, just to provide better support out in the field, even though it has this concept which is supposed to work entirely out of CONUS depots. Mr. MoRRIs. True, but the ability to improvise and to innovate under stress and unknown conditions, I think, is one of the great character- istics that we have all seen happen in this Vietnam experience, and we should preserve that. Mr. DAHLIN. The question is how are you going to preserve it? Do you put the Air Force effort, for instance, in quick reaction, strictly within its own system or do you want the services coordinating from the start? Mr. MoRRIs. I don't believe they have had problems of housekeeping suj~port from the Army, or petroleum or subsistence support. Mr. ROBACK. You don't know really how much these other services will be involved in any given contingency situation? Mr. MORRIS. That is right. Mr. ROBACK. You therefore can't plan too well for common support or interservicing. One might add that it has taken the U.S. military 3 or 4 years to learii how to fight the war in Vietnam and maybe your quick reaction inventory control center is not going to be too efficient until the services really know what they want in the way of war goods. Certain goods they will obviously need. They will need consumables, guns, and things like this, but there are many weapon developments and requirements which don't emerge too quickly, at least if the Viet- nam experience is going to be instructive. Mr. MORRIS. We must emphasize that we are learning much and I think that is the greatness of the system, that it causes our commanders to want to learn. Mr. ROBACK. There are some Members of Congress that wish the learning period would be over and that some results would be achieved. Mr. MORRIS. Yes, sir. PAGENO="0307" 301 Mr. DAHLIN. In your statement you also take credit for releasing 96 million square feet of war~housing. But it appears from the I)SA testimony there is a critical shortage of storage space. What is the situation there? Mr. Moinus. The DSA has on the west coast a burgeoning require- ment, due to Vietnam, for more storage, and we have all agreed and have presented a military construction project to give them an ex- panded storage capability at that location. The 96 million square feet was represented by a number of old depots, mainly in the interior, that have been closed out and excessed all to- gether in the last 7 or 8 years at very substantial savings in our oper- ating budget. They would not `have met the DSA requirement today. Mr. LIJMAN. You mentioned the stovepipe systems as being a neces- sary adjunct to any supply system. I know the Army has one with aviation materiel. Does the Army plan to expand the use of the stove- pipe system? Mr. BROOKS. We have no current plans to do so, Mr. Luman. It may be that under certain circumstances of particularly high usage, for example, of combat vehicles, it would be desirable to apply it in that area. The reason of course for the aircraft stovepipe system was the particularly heavy intensive usage, high-flying hours, combat con- ditions. Our planned maintenance turnaround times were being met a lot sooner than we expected them to in aircraft. Therefore it appears desir- able because the equipment was being so strained in use to set up the stovepipe. We don't have that problem at present with other systems. If it develops we will have to set it up. Mr. LTJMAN. So this is one of a kind. Mr. BROOKS. At present, yes, for aircraft, and missiles I should mention also. Mr. ROBACK. Mr. Morris, can you give us the directives, of one or more, which govern your-which you have issued with regard to service management of computer systems? Do you have a directive on this? Mr. Momus. There is a basic directive with respect to review, in DOD, of the computer, that is, hardware acquisition. We will be glad to supply that for the record. (The information referred to follows:) September 28, 1963 NUMBER 4105.55 ASD(I&L) DEPARTMENT or DEFENSE Dn~cTIvE Subject: Selection and acquisition of Automatic Data Processing Equipment (ADPE). References: (~) DOD Directive 5100.40, "Responsibilities for the Administration of Automatic Data Processing Equipment Program," September 28, 1963. (b) DOD Directive 4105.55, "Policy on Selection of Computers," August 15, 1961 (hereby superseded). (c) Bureau of the Budget Circular No. A-54, "Policies on Selection and Acquisition of Automatic Data Processing (ADP) Equipment," Oc- tober 14, 1961. I. PURPOSE This directive prescribes policies for the selection and acquisition of automatic data-processing equipment (ADPE) for use within the Department of Defense. PAGENO="0308" 302 II. APPLICABILITY AND SCOPE A. The provisions of this directive apply to all DOD components and cover the selection and acquisition of the following standard commercially available ADPE for any use (either for original installations, augmentation, or for replacement installation), except for exclusions in "B" lelow, including that acquired and operated by Government contractors solely to process Government data at Government expense: 1. Electronic digital computers, irrespective of use, size, capacity, or price. 2. All peripheral or auxiliary equipment used in support of electronic digital computers, whether or not cable-connected and whether selected or acquired with the computer or separately. 3. Punched card equipment, whether used in conjunction with or independent of an electronic computer. 4. Data transmission or communications equipment that is selected and acquired solely or primarily for use with a configuration of ADPE which includes an electronic digital computer. B. Items of ADPE which are (1) integral to a weapon system or (2) developed for a particular use through the expenditure of research, development, test and evaluation funds, and analog computers are excluded from the provisions of this directive. III. DEFINITIONS A. Electroaic digital computer-A machine or group of machines (input, storage, computing, control and output devices) which uses electronic circuitry in the main computing element to perform arithmetic and logical operations automatically by means of an internally or externally stored program of machine instructions. B. Data systems speciJlcattons.-Description of proposed automatic data processing (ADP) data system, including data elements and codes, input and output definitions, file and record content, flow diagrams of all functions per- formed, system performance criteria, arid such other facts necessary for full description of the system. IV. GENERAL POLICIES A. In the selection of ADPE, equal opportunity and consideration shall be accorded to all manufacturers who offer equipment capable of meeting the system specifications. B. The selection of ADPE will not be made until data system specifications have been developed independently of any particular manufacture's equipment configuration, specifying in criteria for selection, as appropriate, the factors listed in paragraph V.A. 3 below. C. Unreasonably short delivery or installation leadtimes which would serve to eliminate consideration of manufacturers of competitive and less costly equip- ment will not be established. Only clearly demonstrated operational necessity may be considered as a reason for establishing restrictive schedules. D. The method of acquiring ADPE (i.e., purchase, lease, or lease-with-option- to-purchase) will be that which offers the greatest advantage to the Government under the circumstances which pertain to each situation. B. General Services Administration Federal supply schedules will be used for acquisition of ADPE in all cases where such schedules exist. F. Programing, personnel training, or site preparation related to a specific manufacturer's equipment will not be performed in advance of final selection and approval. V. ADPE SELECTION AND ACQUISITION CRITERIA A. yelection criteria-All of the following criteria will be adhered to in selecting ADPE. 1. specifications.- (a) Data system specifications will be designed to insure full and free competition among qualified equipment manufacturers. (b) Identical data systems specifications will be furnished all qualified vendors. (c) Data system specifications for punched card equipment or other peripheral devices may be less comprehensive than those required for the PAGENO="0309" 303 selection of a computer hut should be adequate to identify the type, nature, and scope of the data processing workload involved. 2. klanufaeturcr's proposals.- (a) S~olieitation,-Except as qualified by "b" and "c" below, all interested manufacturers will be invited to submit proposals to show how their equip- ment would meet the data system specification. A letter inviting such pro- posals shall contain the following statement: "The U.S. Government does not intend to award a contract solely on the basis of any response made to the request for proposals or otherwise pay for the information solicited or obtained. The information obtained will be utilized in determining the suitability of equipment following which procurement will be initiated in accordance with GSA schedules or sub- sequent contractual action, as appropriate." A reasonable time interval shall be allowed for development of manu- facturer's proposals. This time interval shall be a minimum of 60 days for medium or large computers. Only the most urgent operational requirement will support a shorter response time. (b) Punched card equipment.- (1) In view of the considerably less intricate nature of punched card equipnient, technical judgment may be substituted for formal solicitation of proposals, provided full and impartial consideration is given to all competitive equipment in this class. (2) The senior ADP policy official within each military department and defense agency (whose designation has been provided for under reference (a)) shall determine the level and degree of control required for adequate selection processes as they pertain to punched card type equipment. Specific determinations, as required, will be furnished by the ASD (I & L) in questions involving classi- fication of equipment as punched card or AI)P. (c) Ea'ceptions to written proposals,- (1) The senior ADP policy official of each military department, the National Security Agency, Defense Supply Agency, Defense Atomic Support Agency, Defense Communications Agency, and Defense Intelligence Agency may approve certain exceptions to the requirement for formal solicitation of proposals if the facts are clear and unmistakable that such action is warranted and would be in the best interests of the government. This authority is limited to the follow- ing conditions: (a) Addition or replacement of input and output devices which do not involve modification of central processor circuitry. (b) Alteration of installed central processors to obtain immediate im- proved processing speed and equipment efficiency without reprogramming. (c) Acquisition of computers to be used exclusively for peripheral support of a larger computer complex where program compatibility is required. (d) Acquisition of equipment for applications involving the national interest where the systems specifications would require disclosure of sensi- tive cryptologic information, sensitive methods of processing, or would otherwise compromise security. Technical judgment in the selection of ADPE may be substituted for the formal solicitation to preclude such disclosures. (e) The movement or modification of ADPE configurations, the need for which has been occasioned by the transfer of jurisdictional control of the applicable activity between bureaus or major commands, may be au- thorized at the discretion of the senior ADP policy official, provided that the category and use of the equipment will be in accordance with the previously approved program for the bureau or major command. (2) The senior ADP policy officials identified in (c) (1) above will determine whether the basic intent of providing equal and fair opportunity to all interested vendors has been effected by the exception submitted for approval action. Docu- mentation to support each exception from formal solicitation of proposals will be maintained in a central location designated by time above senior ADP policy of- ficials for reference purposes as required. (3) l~ixceptions to competitive selection not provided for above will require ap- proval of the Office of the Secretary of Defense prior to equipment acquisitions. Requests for authority for such exceptions fully substantiated by supporting data will be submitted to the Assistant Secretary of Defense (Installations and Logistics). PAGENO="0310" 304 3. selection Factors.- (a) Two prime factors shall be considered in the selection of equipment (1) Its capability to fulfill the data system specifications, and (2) Its overall costs, in terms of acquisition, preparation for use, and op- eration. The term "overall costs" shall be interpreted to include such costs as personnel, purchase price and rentals, maintenance of purchased equipment; site preparation and installation, programing, and training. (b) Other factors to be considered in determining the advantages of a particu- lar equipment in satisfying DOD needs include: (1) Existence of the equipment in production model, or at least in an op~ erational prototype; (2) Reliability of the equipment where available through operating ex- perience at other installations (determination of unreliability should be fac- tually supported). (3) Performance of the equipment where simulated (bench mark) prob- lems are used as an additional means of comparison and evaluation; (4) Manufacturers' services offered such as: (a) Programing aids and assistance, including such items as Cobol (common business oriented language) or algebraic compilers, execu- tive routines, etc. (b) Maintenance service, and (c) Ability to meet required delivery schedules, both for hardware and "soft ware". (d) Cobol-Selection of electronic digital computers for business ap- plications will be limited to those computers for which Cobol compilers are available, unless it has been determined by the senior ADP policy official that the intended use of a particular computer would not benefit from the availability of a Cobol compiler. This limitation applies to all computers with internally stored program capability which exceeds $2,~OO in listed monthly rental charges for the main frame. B. Acquisition criteria.- 1. The method of acquiring ADPE will be determined after careful considera- tion of the relative merits of all methods available (i. e., purchase, lease, or lease- with option-to-purchase). The method chosen will be that w-hich offers the great- est advantage to the government under the circumstances which pertain to each situation. In this connection, the following guidelines as specified in reference (c) will be taken into account: (a) The purchase method is preferred when all of the following ~onditions exist: (1) The system study which preceded the selection of the equipment has established a reasonable expectance that the ADPE under consider- ation can be successfully and advantageously used. (2) A comparative cost analysis of the alternative methods of acquisi- tion indicates that a cost advantage can be obtained by the purchase method in 6 years or less after the date of delivery. This analysis usu- ally will include the following cost elements under each method: for the lease method-rental costs, including maintenance; for the purchase method-purchase costs, including purchase price, maintenance, and other one-time costs applicable only to purchase: for the lease-witli-op- tion-to-purchase method-rental costs, and purchase costs less credits ap- plicable upon purchase. In addition to the cost elements described above, the residual value of equipment to the Federal Government will be con- sidered as a factor in a comparative cost analysis. Trade-in allowance quoted by manufacturers may be used as a representation of the residual value. (3) The capabilities of the ADPE will continue to be needed and will be sufficient to satisfy the system requirements, current and projected, for a period beyond the point in time at which the purchase method be- gins to provide a cost advantage. The possibility that future technologi- cal advantages will render the selected equipment comparatively ob- solete before the cost advantage point is reached should not rule out purchase if the selected equipment is expected to be able to satisfy the system requirements. (b) The lease-with-option4o-purchase method is indicated when it is neces- sary or advantageous to proceed with the acquisition of the equipment that PAGENO="0311" 305 meets system specifications, but it is desirable to defer temporarily a decision on purchase when circumstances do not fully satisfy the conditions which would indicate purchase. This situation might arise when it is determined that a short period of operational experience is desirable to prove the stabil- ity of a system design on which there is no previous experience, or where decisions might substantially alter the system specifications. (c) The lease method, without option to purchase, is indicated only when It is necessary or advantageous to proceed with the acquisition of equip- ment that meets systems specifications and it has been established conclu- sively that any one of the conditions under which purchase is indicated is not attainable. 2. Negotiations or renegotiations of equipment delivery dates will he conducted in a manner which insures that firm and final commitments by the government to accept delivery of ADPE on a specific date will not be made until it has been determined through a readiness review that the using installation will be pre- pared to use the equipment productively as soon as it becomes operational. vi. SELECTION INFOEMATION FILE A. A complete file of all selections shall be maintained in a central location designated by the Senior ADP Policy Official within each DOD component for a minimum period of 3 years following installation. In this file shall 1e included: 1. A copy of the system specifications which have been provided to qualified equipment manufacturers. 2. A list of those manufacturers who have been invited to submit equipment proposals. 3. A copy of each proposal and/or response in answer to such invitations. 4. Documentation to reflect adequately the considerations taken into account and the basis for the decisions with regard to equipment selections. B. The senior ADP policy official shall use this information file to assure that equal opportunity has been afforded all qualified suppliers and that full considera- tion has been given to the method of procurement. This file will be made available to OSD and other authorized personnel for review and audit as required. VII. CANCELLATION Reference (b) is hereby superseded and canceled. viii. EFFECTIVE DATE AND IMPLEMENTATION This directive is effective immediately. Three copies of all implementing docu- ments shall be forwarded to the Assistant Secretary of Defense (installations and logistics) within 90 days of the effective date of this directive. RO5WELL GILPATRIC, Deputy Secretary of Defense. Mr. ROBACK. That is now in the Comptroller's area? Mr. MORRIS. Will be shifted to the Comptroller's office; yes, sir, but the basic directive stands. Mr. ROBACK. There is no directive about this problem of develop- ment and compatibility in terms of management systems? You don't have a general directive in that area? Mr. RILEY. There is an instruction on that. We can give you a copy of it, Mr. Roback. (The information referred to follows:) September 28, 1963 NUMBER 5100.40 ASD(I&L) DEPAETMENT OF DEFENSE DIRECTIVE * Subject: Responsibilities for the Administration of Automatic Data Processing Equipment Program. References: (a) DOD Directive 5105.11, "Responsibility for Application of Automatic Data Processing Systems to Business Procedures," January 2, 1957 (hereby canceled). PAGENO="0312" 306 (b) DOD Directive 5105.14, "Policies Governing the Justification of Auto- matic Data Processing Equipment Application to Business Proce- dures," May 6, 1958 (hereby canceled). (c) ASD (Comptroller) memorandum, "Approval of ADPS Installations,' December 14, 1960 (hereby canceled). (d) DOl) Directive 4105.55, "Selection and Acquisition of Automatic Data Processing Equipment," September 28, 1963. I. BACKGROUND AND P(TRPO5R A. The I)epartment of Defense has phnorrsd tlio application of inodoin com- puter techniques in business managoment information systems. scwnh!t(, and for other military purposes. Althouuh signiticaiit honohts and cc000Inies liavo rsultcd from the use of these advanced mcthods and teclutiquos. there is a aftil for (1 increased emphasis on improving aini standardizuiu data sy~tem~. and ~ 2 exploring more fully the potential of niodeiii data prses~iug equipment. B. This directive assigns responsihility for adniiiiistering an iiitegrated iu )1~ automatic data processing equii~nient ( ~\. 1 )l'1~ ) ~rogra iii (`orrelated ~vitli t110 ADPE selection and acquisition policies and criteria established in reference (d). II. OBJECTIVE To provide for effectiveness of management and economy of operations throughout the DOD by `the establishment of optimized data processing services. This will be achieved by; A. The attainment of optimum uniformity, compatibility and responsiveness of automated data systems between and among DOD components. B. The elimination of unnecessary duplication and overlapping of effort in automated data systems developmental activities. C. The interchange of improved automatic data processing (ADP? techniques, computer programs, and management procedures. III. APPLICABILITY AND SCOPE A. The provisions of this directive apply to all DOD components in the acquisi- tion `and management of commercially available general-purpose ADPE. B. Items of AD'PE which are (1) integral to a weapon system or (2) developed for a particular use through the expenditure of research, development, test, and evaluation funds, and analogy computers are excluded from the provisions of this directive. IV. DEFINITION As used in this directive, ADPE includes the following types of equipment, and is limited `to standard commercially available hardware: A. Electronic digital computers, irrespective of use, size, capacity or price. B. All peripheral or auxiliary equipment used in support of electronic digital computers, whether or not cable-connected and whether selected or acquired with the computer or separately. C. Punched card equipment, whether used in conjunction with or independent of an electronic computer. D. Data transmission or communications equipment that is selected and acquired solely or primarily for use with a configuration of AD'PE which includes an electronic digital computer. v. RESPONSIBILITIES A. The Assistant Secreary of Defense (Installations and Logistics) shall: 1. Serve as the Department of Defense focal point for policies, criteria, and standards governing the selection, acquisition, use and management of ADPE for all purposes within the scope of this directive; coordinating and collaborating with other principal staff assistants to the Secretary of Defense concerned with the application of ADPE in their assigned areas of responsibility. 2. Be responsive to guidance, active participation and management purview of the Director of Defense Research and Engineering in the development of policies and criteria for the application of ADPE in scientific and engineering, communications, command and control, intelligence, and tactical field operations. 3. In carrying out the above responsibilities, the ASI)(I & L) shall: PAGENO="0313" 307 (a) Foster the development of programs for improving the compatibility and responsiveness of equipment applications when management information systems are to be automated. (b) Provide guidance and direction for the development and maintenance of programing languages and other similar aids essential to effective auto- mated data systems. (e) Prescribe supplemental policies, criteria, and standards for selection, acquisition (reference (d)), use and management for ADPE. (d) Exercise approval authority for proposed acquisition of ADPFJ ill support of such special applications as may be designated from time to time. (e) Maintain current information on the development of management information systems within the DOD. (f) Conduct selective management reviews of ADP systems and installa- tions within the DOD. (g) Represent the DOD in liaison with industry and govermental agencies on ADP matters. (h) Approve all acquisitions of ADPE by OSD elements and DOD agencies not identified in C. below, including the Jont Staff and separate DOD agencies reporting to the Joint Chiefs of Staff, B. The Assistant Secretary of Defense (Comptroller) shall be responsible for the development and maintenance of standard data elements and their related machine-sensible codes so as to promote compatibility among automated data sys- tems throughout the Department of Defense. C. The Secretaries of the military departments and the directors, National Security Agency, Defense Supply Agency, Defense Atomic Support Agency, De- fense Communications Agency, and Defense Intelligence Agency shall: 1. Designate a senior ADP policy official to serve as the focal point for ADP policy and for administration of the ADP program within the military depart- ment or agency. 2. Develop and control programs for the design, improvement, and standardiza- tion of automated data systems in consonance with approved guidelines. 3. Be responsible for the management and operation of the APPE installations within the military department or agency. 4. Perform continuing analysis and planning to insure effective and economical utilization of ADPE and related techniques. 5. Evaluate performance of automated data systems. 6. Have maintained at a central point, current files of all installed ADPE and ADP systems applications. 7. Exercise approval authority for the selection of ADPE in accordance with provisions of reference (d). 8. Exercise approval authority for the acquisitions of ADPE when such acquisitions are the result of competitive processes or excepted froni the require- ments for written proposals, as provided in reference (d). This authority is inap- plicable in those special applications which may be designated from time to time as requiring Assistant Secretary of Defense (Installations and Logistics) approual. 9. Not delegate below the level of the senior ADP policy official the authorities for approval of computer main frame selections and acquisitions, as provided in paragraphs 7 and 8 above. D. Heads of all agencies and OSD elements not identified in C. above are responsible for the performance of all functions prescribed in paragraphs C 1 through 7 within their staff jurisdiction. Acquisition of ADPE by these agencies and offices shall require the approval of the ASD(I. & L.) as provided in VA. 3(h) above. VI. CANCELLATIONS References (a), (5), and (e) are hereby canceled and superseded. VII. EFFECTIVE DATE AND IMPLEMENTATION This directive is effective immediately. Three copies of all Implementing docu- ments shall he forwarded to the Assistant Secretary of Defense (Installations and Logistics) within 90 days of the effective date of this directive. ROSWELL GILPATRIC, Deputy ~eeretary of Defense. PAGENO="0314" 308 Mr. ROBACK. Mr. Chairman, I know you need to get away so we will suspend now. Mr. IToLIFIELD. Thank you, Mr. Secretary and gentlemen for your testimony this morning. We will adjourn at this time. Mr. Momus. We thank you for these hearings, Mr. Chairman. They are very helpful to all of us. Mr. HOLIFIEI D. I hope they will be helpful. That is the purpose of them. Mr. MORRIS. They will. Mr. HOLIFIELD. It is to reacquaint ourselves with the developments and also to have called problems to our attention, and if there are any suggestions that you have to make where this committee can be helpful w e will be glad to receive them. Mr. MoRRIs. Thank you. (Whereupon, at ii :55 a.m. the subcommittee adjourned.) PAGENO="0315" BACKGROUND MATERI ~L ON THE I)EFENSE SUPPLY AGENCY MAY 1968 The Defense Supply Agency has been in operation since January 1902 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 ORGAN IZATION Prior to the establishment of the Defense Supply Agency, the Secretaries of the Military Departments were designated single managers of selected supply and service activities for all components of the Department of Defense (Figure )). 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 reduc- tiomis in operating costs and inventories. Their experience demonstrated the mer- its 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 manage- ment of assigned commodity classes. Five commodity managers and one service manager were assigned to the Arniy. Two of these commodity managers, automno- tive and construction, were still in the early phases of activation. Electronics management is shown in dashed lines under the Secretary of the Air Force be- cause this commodity had already been studied and recommended for integrated management; and the present I)SA electronics center, developed from the Air Force central center for electronics materiel, was turned over to DSA at time time of DSA's establishment. Time Armed Forces Supply Support Center (AFSSC) administered the Defense-wide cataloging, standardization, and materiel utiliza- tion ~rograms and conducted integrated management studies. ACTIVATIONS AND TRANSFERS TO AND FROM DSA The establishment of DSA resulted in immediate transfer from the Services of all existing Single Manager Operating Agencies (SMOAs) except the Military Air and Military Sea Transport Services, shown in Figure (1) as single manager agencies, which remained in the Departments of the Air Force and Navy, respec- tively. Additional SMOAs in process of activation or projected, and other major functions susceptible of integrated management for all the Services, were trans- ferred progressively. (309) All APPENDIX F p PAGENO="0316" 310 FIGURE 1 SINGLE MANAGER SYSTEM The more important activations and `transfers to and from DSA occurred on the dates indicated below: Construction, Olothing and Textile, General Subsistence, and Traffic Management Agencies from the Army. Medical and Petroleum Agencies from the Navy. Armed Forces Supply Support Center from OSD (redesig- nated as Defense Logistics Services Center). 34 Surplus Sales Offices from all the Services. Military Industrial Supply Agency from the Navy. Clothing factories from the Army and Marine Corps. Defense Electronics Supply Center (new activity with as- sets from all Services including the Dayton Air Force Depot). Military Automotive Supply Agency from the Army. General Depots at Columbus, Ohio, Mechanicsburg, Pa., and `Tracy, Oalif., from the Army. Defense Industrial Plant Equipment Center (new `activity). Defense Documentation Center from the Air Force. General Depots at Memphis, Tenn., and Ogden, `Utah, from the Army. Defense Automotive Supply Center disestablished; mili- tary vehicle supply functions transferred to the Army ~~~icOuNCI1I-I SECRETARY OF DEFENSE AFSS CENTER SEC/ARMY C/S DCSIOG CHIEFS TECH SYCS j CC, AFIC MANAGER AGENCIES SINGLE MSTS ] IILECTRONICS I L_ ____._J 1C10TH & TEXTJ -{ SUBSISTENCE] -[ GENER~~] -j~ AUTOMi'i~I] -[~NSTRUCTIO~] -[TRAFFIC I Jan. 1, 19~2 - Apr. 1, 1962 - May 1, 19~2 July 1, 19~2 Jan. 1, 19t33 Mar. 1, 19~l3 Nov. 1, 1963 Jan. 1, 1964 PAGENO="0317" and commercial-type v~hicle items to the Defense Con- struetion Supply Center. Defense Traffic Management Service transferred to the Army. Eleven Defense Contract Administration Services Regions established as primary level field activities of DSA (per- sonnel and offices transferred from all the Services). 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. Providing field contract administration services to the Defense establishment and the National Aeronautics and Space Administration. PSA ORGANIZATION Figure (2) depicts the changes in the Defense supply and logistics service organization, authorized by the end of 1902. The Departmental single managers were taken over in place, as field activities of the Defense Supply Agency, with assigned personnel, funds, equipment, 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 Sup- port Center and the military surplus property sales activities, which were as- signed to the Defense Logistics Services Center, a DSA field activity. Figure (3) depicts the DSA organization today and reflects the assumption in January 1965 of contract administration functions previously performed by some 165 contract management offices of the Military Services and DSA. FIGuRE 2 DoD LOGISTICAL SYSTEM . 1962 311 Feb. 15, 1965. - September 1964 to December 1965. MISSION DEF SiJ~~öiiNCIij-1 SECRETARY OF DEFENSE F1LIW ACTiVITiES I PETRO~LEUM [~~i~H & TEXTJ [~J~IEDICAL SUBSISTENCE ri~DUsTR1AL GENERAL [~AUTOMOTIVE CONSTRLJCT1~iJ ~I~CTROfflCS LOG TRAFHC ND PLANT E~ii~J PAGENO="0318" FIGuRE 3 DEFENSE SUPPLY AGENCY DIR FUTY DiRECTOR _______________ DEPUTY DIRECTOR (CORTRACTAONIROTOATIOR SERViCES) [ COUNSEL ~ [ ~ COMPTROLLER ~ I [~ET~OIE. ~MANUO~~ITR~] ~ M~Y~~JN°N~EL CI~T~~I~1 MNOSE~T ~ [~CTR~. [~flCE~T1 CONTRACTS COMPLIANCE EXECUTIVE DIRECTOR EXECOTWEDIRECTR ~~i: EI~rR EXECUTNE DIRECTOR EXECUTIVE DrnEETOR :~`~Jt `~L~ _ _ ~ D'~' APPRUVLD~ ~ ---------- PAGENO="0319" 313 During the first 3 months of the Defense Supply Agency's existence, the Headquarters staff eonsls;ted of a planning group, most of whom were on loan from the Military Departments and the Office of the Secretary of Defense'. Selec- `tion and a's'se~ntbly of a permanent staff began after the initial organization and staffing plan `was approved in December 19A12. The present Headquarters staff, as depicted in Figure (4), `assists the Director in the direction and control of the Agency and i's concerned with broad planning `and management of the `total DSA `mission and the es'taldis'h'ment of long- `and short-range objectives and stand- ards `of performance. Its key personnel exemplify the joint military staffing principle, with each o'f the Military Services represented at the Directorate or immediately subordinate level. The Assistant Director, Plans, Programs `and Sys- tems is `principal staff `advisor and assistant `to the Director for development and application of policies, plans, programs and `systems affecting multiple D'SA functional activities. `The Comptroller assists t'he Director as principul financial management and `m'anp,olwer staff advisor. The Deputy Director for Contract Ad ministration Se'rv'i'ces `act's for `the Director, DSA, `in exercising management and operating control `over CiA'S missions, `operating programs and `supporting field activities; `he is assisted by Executive Directors `for Contrac't Administration, Quality Assurance, and Pr'oduiction, and `by Chiefs of Management Review, Man- `agemen't, Control, Plans and Management, Industrial Security, and Contracts Compliance. The Executive Director's for Su'pply `Operations, Procurement and Production, an'd Technical and Logistics Services are principal staff advisors and assistants to the Director, DIS,A, in the `development and application of poli- cies, plans programs and system's for their respective functional `areas. The Counsel, `th'e Insp~etor General, the Special Assistant for Pu'blic Affairs, and the `Staff Directors for Installations and Services, Administration, Military Per- sonnel and Civilian Personnel perform `staff support functions of a major Headquarters. FIGURE 4 ~ DEFENSE SUPPLY AGENCY 1 , DIRECTOR ~`"~` _________________ I F"'DEPXTY DIRECTOR.]' DEPUTY DIRECTOR 1 I (CONTRACT ADMIR SVCS( M*j G.~ NW Veeghe, JS~,,,,j MejG.,i A Geskee USA _____________ `1 ____ ____ I'ijCIAL ASSiI ` ~ OF MGTI 1~'~'~'i~E OF M~] COMPTRO[LER PUBlIC AFFAIR'S REVIEW CONTROl MW Bek.~ E F Ned j , ~ Ss,fed~J ~ A Se,(s,~US~j STAFF DIRECTOil EiiAFF DIRECTOi1 STAFF DIRECTOR 1 .1i?iICEOFP1VNI E~'~CEOF"1 ADMINISTRATIONI ~ PERSONNEL I I & MANAGEMENT , NOUSTRIAL Cal S MeK.,sA~S~J Cept C PeHish HAN `WE lta.aki,j :Li~~i__i F~,~Me$heUUSA~] [~ICE~T} ____________________________ ____________ [~4TRACT.COMPj EXECUTIVE' ~IAECTDR EXECUTIVE DIRECTOR EXECUTIVE DIRECTOR I 1~CUTIVE RIRECTO1 EXECUTIVE DIRECTOR SUPPLY PROCUREMENT ` TECHNICAL & I CONTRACT ` I ` AUAUTY OPERATIONS I & PRODUCTION LOGISTICS SERVICES I : ADMINISTRATION I ASSURANCE Ad I W Rents USt'~J Rig Ga, RE Les IJSAF RngG,,~i R,eshsUS~J Csl E Relasts,, USAF f~gpt F Sna,ba~aagh USN INSPECTOR FASSI DIRPINS 1 COUNSE~ GENERAL PROGRAMS & CCIRICigIASUSA ~~dnlHedJank~1 STAFF DIRECTOR INSTALLATIONS & SERVICES Cel J Cesbe.. USAF [XECUTIVE DIRECTOR 1 PRODUCTION JSGsap. The field establishment is comprised of 25 major activities, identified in, Figure (5) by name and activity bead. The military command positions are staffed on the basis o'f balanced military representation and are rotated among the Military Services. The geographical locations of the 25 major DSA field activi- ties are depicted in Figure (6). PAGENO="0320" 314 FIGURE 5 MAJOR FIELD ACTIVITIES Defense Construction Supply Center: Maj. Gen. Emmett M. Tally, Jr., USAF Defense Electronics Supply Center: Brig. Gen. Glen J. McC'lernon, USAF. Defense Fuel Supply Center: R. Adm. Fowler W. Martin, SC, USN. Defense General Supply Center: Brig. Gen. John D, Hines, USA. Defense Industrial Supply Center: R. Adm. Grover C. Heffner, SC, USN. Defense Logistics Services Center: Capt. Ross A. Porter, SC, USN. 1)efense Personnel Support Center: Brig. Gen. William M. Mantz, USA. Defense Documentation Center: Dr. Robert B. Stegrnaier, Jr. Defense Depot: Mechanicshurg: Capt C. J. Stringer, SC, USN. Memphis: Col. T. I. Martin, USA. Ogden: Col. Rthert B. Ladd, USAF. Tracy: `Capt. Robert C. Dexter, Jr., SC, TJSN. Defense Industrial Plant Equipment Center: Col. Fred H. Sitler, USAF. DSA Administrative Support Center: Col. Stuart A. McKenzie, USA. Defense Contract Administration Services Region: Atlanta: Col. Loran P. Murray, Jr., USAF. Boston: Cal. Frank A. Bogart, USA. Chicago: Col. J. P. Gibbons, USAF. Cleveland: Col. Norman T. Dennis, USA. Dallas: Capt. Walter 0. Normile, SC, USN. Detroit: Col. Kenneth R. Johnson, USA. Los Angeles: Brig. Gen. Arthur E. Exou, USAF. New York: Brig. Gen. Walter M. Vann, USA. Philadelphia: Col. Gerald Johnson, Jr., USA. San Francisco: Col. William K. Ash'by, USAF. St. Louis: Capt. Raymond 5. Sullivan, SC, USN. PAGENO="0321" I SAN FIGURE 6 DSA MAJOR FIELD ACTIVITIES * SUPPLY ~t4TI*S A URVtCS CINTERS * DEPOTS I DEFENSE CONTRACT ADMENISTRATION SERVtCE$ REGtONA~ HEADQUARTERS PAGENO="0322" 316 DSA OBJECTIVES When the Secretary of Defense 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 are measured. 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 billion. By December 1967, the number of items centrally managed (excluding items designated for local purchase) totaled 1.71 million, with a value of over $305 billion, and will ap- proximate 1.72 million items by the end of FY 1968. At that time, the inventory value is expected to be about $2.84 billion, and the annual rate of procurement will decrease to $5.1 billion. Fiouna 7 INDICATORS OF DSA GROWTH IDollars in millionsi End End End End End End Dec. 31, End fiscal January fiscal year fiscal year fiscal year fiscal year fiscal year 1967 year 1968 1962 1963 1964 1965 1966 1967 (plan) Items centrally managed 87, 000 1, 029, 000 1, 328, 000 1, 369, 000 1, 335, 000 1, 538, 000 1, 710, 000 1, 729, 000 inventory $1, 588. 0 $2, 412. 0 $2, 232. 0 $1, 977. 0 $1, 994. 0 $2, 896. 0 $3, 055 $2, 843 Net investment change -$39.4 -$261.7 -$161.2 -$50.6 +$1, 322.5 +$333.5 -$400 Procurement $2, 670. 0 $2, 701. 0 $3, 042. 0 $5, 740. 0 $6, 178. 0 $2, 604 5, 103 Personnel 9, 500 25, 970 31, 141 34, 128 1 53, 554 2 59, 604 3 58, 649 4 57, 139 £ Excludes 3,426 temporary civilian personnel. 2 Excludes 2,459 temporary civilian personnel. Excludes 886 temporary civilian personnel. Current OSD Allocation (June 30, 1968) full-time permanent civilian and military personnel. During the period 1962-1965, the Defense Stock Fund effected a net invest- ment reduction by issuing stocks in long supply without replacement. The long supply had been generated by capitaIiziu~ stock of assigned items from all the Military Services. lit FY 1966 and FY 1967, the net investment trend was re- versed as the Defense Stock Fund built up the stock position to support the in- creased demand generated from Southeast Asia. The FY 1968 net investment reduction reflects the improvement in production capability, the leveling off of Southeast Asia demand, and the drawdown of additional stocks recently assigned to the Defense Supply Agency for integrated management. 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. A reconstruction of DSA personnel changes which have taken place since 1962 as a result of functional additions and deletions are as follows: End FY 62 to End FY 63: Net Change +16,470. The increase of personnel in both Headquarters and field resulted primarily from manpower adjustment (14,000) to meet requirements for functions transferred to DSA, and from the consolidation of the Army and Marine Clothing factories and transfer to DSA (2,485). End FY 63 to End FY 64: Net Change +5,171. The increase resulted from DSA. assuming indirect support of DDC (530); OSD authorization of an additional 4,572 personnel for the Depot Distribution Plan and 594 for the estab- lishment of the Defense Industrial Plant Equipment Center; and additional personnel needed for long term training and overseas support. Decreases approxi- mating 1,800 personnel resulting from programmed reductions, and reductions in ceilings for post engineering support and Center Engineer Maintenace support. End FY 64 to End FY 65: Net Change +2,987. An increase of 4,475 personnel required by the activation of three Contract Administration Services Regions was offset by productivity programmed reductions, decrease in distribution sys- tems and cataloging. Merging of the Centers for Medical, Subsistence, and Cloth- ing support resulted in savings of 521 personneL PAGENO="0323" 317 End WY 65 to End FY 66: Net Change +19,426. Additions included over 16,000 personnel transfers in connection with assumption of the Contract Administra- tion Services functions, and approximately 9,000 additional spaces for Southeast Asia requirements. Reductions amounted to approximately 6,000 for Defense Traffic Management Service transfer to Army and in the Depot Distribution System. End FY 66 to End WY 67: Net Change +6,050. There was an increase of 6,532 spaces needed to meet the continuing demands in Southeast Asia placed on DSA by the Military Services. Offsetting this increase were reductions for productivity improvement and the consolidation of functions within DSA. End FY 67 to End FY 68: Net Change (Plan), -2,465. This reduction is pri- marily due to an OSD imposed reduction and functional transfers to the Gen- eral Services Administration. SUPPLY Surrour INVENTORY CONTROL POINTS DSA manages six supply centers (Figure 6) as follows: Defense Construction Supply Center, Columbus, Ohio. Defense Electronics Supply Center, Dayton, Ohio. Defense Fuel Supply Center, Alexandria, Virginia. Defense General Supply Center, Richmond, Virginia. Defense Industrial Supply Center, Philadelphia, Pennsylvania. Defense Personnel Support Center, Philadelphia, Pennsylvania. The Fuel Supply Center procures bulk and solid fuels but does not control in- ventories. Management of DSA inventories is currently distributed among the remaining five inventory control points, which compute replenishment require- ments for assigned items, maintain inventory and transaction records, receive and edit requisitions, procure materiel, and direct shipment or procurement action, as appropriate. Other functions performed are cataloging, standardiza- tion and installation management. Assignments of commodities to Centers were determined through separate commodity studies conducted over a six-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. Func- tional 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 improved 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 Cloth- ing and Textile Supply Center, Philadelphia, into the Defense Personnel Support Center at Philadelphia. Early in 1966, the supply centers assumed the purchasing responsibilities for ~lecentralized and nonstandard items in DSA-managed classes of materiel re- quired for support of Army and Air Force activities 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 require- ments for wholesale storage space; manages, controls and operates 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 ar- ranges 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 1 January 1962, items assigned to DSA or to be assigned to DSA were stored in 77 locations. On 1 January 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 ro itioning 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 1 July 1968. The DSA Distribution System consists of 7 Principal Depots and 4 Specialized Support Depots (Figure 8). PAGENO="0324" FIGuRE 8 DSA DISTRIBUTiON SYSTEM A Principal Distribution Depots * Specialized Missions 0 Full Management by DSA PAGENO="0325" 319 Principal elep'ots.-Tbese depots are responsible for the receipt, storage, stock readiness, inventory, and issue of DSA items of supply, including General Mo- bilization 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, Pennsylvania. Defense Depot Tracy, California. Defense Depot Ogden, Utah. Defense Depot Memphis, Tennessee. Defense General Supply Center, Richmond, Virginia. Atlanta Army Depot, Forest Park, Georgia. Specialized Support Depots.-Tiiese depots have functions similar to those of the Principal Depots, except that their missions are specialized as to type of mate- riel or scope of support. The Specialized Support Depots are: Defense Electronics Supply Center, Dayton, Ohio. Defense Personnel Support Center, Philadelphia, Pennsylvania. Naval Supply Center, Norfolk, Virginia. Naval Supply Center, Oakland, California. 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 emergency situations (Priorities 1-8) when such support is not available elsewhere in the D'SA. system. Direct Supply Support Points.-The DSA Distribution System also includes 10 Direct Supply Support Points (not included in Figure (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 F'SG 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 31 March 1968, DSA materiel was' stored at 17 tempo- rary storage locations, or attrition sites. However, the number of attrition site's 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 shortage of DSA-managed storage space is alleviated, a target date for complete elimination of attrition sites cannot be projected. DSA policy for evacu- ation of stocks from attrition sites is disposition-in-place of excesses; redistribu- tion of replenishment stocks from attrition sites into permanent depots in lieu of replenishment from procurement; attrition to satisfy customer demands; and bulk relocation into' permanent depots when economically justified. PROCUREMENT AND PRODUCTION DSA's procurement program objectives have been generally met as indicated below: Small Business-Awards to small business have been as follows: FY 1963: $943 million or 40.5% of total awards to U.S. firms. FY 1964: $101 `billion or 43% of total awards to U.S. firms. FY 1965: $1.17 billion or 43.9% of total awards to U.S. firms. FY 1966: $2.44 billion or 46.3% of total awards to U.S. firms. FY 1967: $2.59 billion or 45.8% o'f total awards to U.S. firms. FY 1968 (9 months): $1.52 billion or 43.1% of total awards to U.S. firms. It is expected that the OSD goal of 44.2% will be met by the end of the fiscal year. Labor Surplus Area Awards-Awards ($10,000 and above) to labor surplus areas have been as follows: FY 1963: $415.1 million or 22.2% of total dollar awards in U.S. & possessions. FY 1964: $447.9 million or 26.0% of total dollar `awards in, U.S. & possessions. FY 1965: $459 million or 21.6% of total dollar awards in U.S. & possessions. FY 1966: $709 million or 15.8% of total dollar awards in U.S. & possessions. FY 1967: $587 million or 12.3% of total dollar awards in U.S. & possessions. FY 1968 (9 mon'ths): $320 million or 10.6% of total `dollar awards in U.S. & possessions. The established OSD goal for FY 1968 is 10.0%. PAGENO="0326" 320 (Jom~petitive Award$.-The revised definition for competition went into effect in October 1967. Regulations formerly provided for reporting all small purchases as competitive and other purchases were presumed competitive if more than one source was solicited. Current ASPR instructions provide that all procurements under $250 made under small purchase procedures are reported as noncompeti- tire. Generally, other purchases are considered competitive only where there is more than one truly competitive response. Competitive procurement awards have been as follows: FY 1963, 91.3%; FY 1964, 91.5%; FY 1965, 90.3%; FY 1966; 92.1%; FY 1967, 91.5%. Formal Advertising.-The percentage of the value of all DSA procurements made through formal advertising have been as follows: FY 1963, 41.3%; FY 1964, 37.8%; FY 1965, 36.9%; FY 1966, 28.4%; FY 1967, 27.4%. In the first nine months of FY 1968, the rate was 32.3%. This is 2.1% above the established goal of 30.2%. The higher rate this year over last year is due mainly to the elimination of rated orders in the clothing and textile area. SUPPLY EPFECTIVENESS In November 1962, DSA implemented a uniform system for the measurement of supply effectiveness. This system employs standardized 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 and processed in FY 1967 rose slightly to 19.7 million, 2% over the number received during FY 1966. The number of requisitions received through the third quarter of FY 1968 decreased slightly to 14.28 million, 3% less than were received in the corresponding period of FY 1967. Overall availability for the PSA system averaged 86.5% for FY 1967 against 87.8% in FY 1966, and 91.5% in FY 1965. The lower stock availability in FY 1966 and FY 1967 reflects the continued pressure of Vietnam demands and the inability of industry to provide adequate replenishment stocks in sufficient time to maintain shelf stocks. However, for the first nine months of FY 1968, avail- ability averaged 90.5% compared to 85.3% for a like period in FY 1967. The higher stock availability reflects a slight decrease in the pressure of Vietnam demands and an improvement In industry's ability to provide replenishment stocks on schedule. The second indicator of system effectiveness, on-time fill, measures supply system effectiveness by the percentage of requisition lines processed for shipment by the DSA Supply System within the time frames specified in the DoD Uniform Materiel Movement Issue Priority System (UMMIPS). On-time fill for FY 1967 averaged 75.3% compared to 80.2% for FY 1966. This decrease in on-time fill was due in part to the large number of backorders released for shipment of materiel in FY 1967, most of which were late in meeting the established stand- ards. Heavy depot workloads were also an influencing factor causing this late- ness. For the first nine months of FY 1968, on-time fill averaged 79.2% compared to 73.9% for a similar period in FY 1967. The higher figure reflects improvements in industrial production on Defense orders. This Is confirmed by a 20% reduction. in the number of backorders on hand as compared to backorders for the same period in FY 1967. TECHNICAL AND LOGISTICs SERVICES AND PROGRAMs STANDARDIZATION AND CATALOGING The Defense Supply Agency now has standardization management responsibil- ity for approximately 2.4 million items or 62% 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 FY 1966, as a result of identifi- cation of duplicate or similar items and of standardization actions, decisions were made and concurred in by the Military Departments to eliminate 116,274 items. These decisions were based on a review of 283,445 items. In FY 1967, decisions were made to eliminate 97,014 items based on a review of 289,734 items. A net increase of 82,160 items was recorded in the Federal Catalog during calendar year 1967. In the first half of 1967, 202,465 items were added to the Defense Catalog and 146,476 items deleted-a net Increase of 55,989 items. This PAGENO="0327" 321 trend continued during the second half of the year. In the period July-December 1967, 175,815 items were added and 149,644 items deleted-an increase of 26,171 items. As of 31 December 1967, there were 3,989,863 items in the Federal Catalog, as compared to 3,907,703 on 31 December 1966. The net increase in catalog items can be attributed in part to the Introduction of repair parts for new major end items, arid fewer deletions due to retention of older equipments for possible use in Southeast Asia. Extended use of these older equipments in the unfavorable terrain of Southeast Asia has created repair parts demands not previously experienced. TECHNICAL DATA The extent of unavailability and inadequacy of technical data necessary to support DSA programs has been a continuing and significant problem area in Technical and Logistics Services during the past several years, whether the data were required for Standardization, Cataloging, Item Entry Control, Federal Item Identification Guides (PuG), Procurement or other logistics support opera- tions. Technical data are acquired by DSA primarily from the Military Depart- ments in support of material transferred by them to DSA for management. When the Military Departments do not provide required technical data, DSA must acticit industry for the acquisition of missing data. In order to attain the optimum level of data support, DSA has attempted to (a) revise joint DSA/Services technical data requirements regulation, (b) have ASD (I&L) accept a DSA prepared DoD Instruction to govern improved data support operations. DSA also requested assistance from ASP (I&L) in improving technical data support in conjunction with provisioning actions. DSA has initiated or participated in several actions for improvement of data management, with emphasis on securing improved technical data availability and adequacy as follows: Participation in the ASD (I&L) project to revise DoD Instruction 5010.12, Management of Technical Data. The proposed revision clarifies and strengthens data support to DSA by the Military Departments. Revision of DSAR 4185.3, Technical Data Improvement Program, to provide procedures for selectively improving data based on specific program needs accorth lug to criteria for priority of effort. Expanded reporting requirements to provide DSA with improved statistics, by Military Service, relative to data adequacy and availability in support of Provisioning Supply Support Requests (SSR). Requested Technical Data Liaison on the reactivated DoD Special Projects Group for Initial Provisioning to consider the improvement of provisioning~ support. Prepared executive level briefings for presentation to the Military Services to describe the PSA Technical Data Program and DSA problem areas wherein the Military Departments can assist DSA. Development of a provisioning data analysis plan with the objective of im. proving technical data acquisition through provisioning. Plan will include pro- visions for study and evaluation of specific technical data requirements in pro- visioning appendices/exhibits, contract administration, schedules for provision- ing, and DSA technical data manager participation in selected provisioning conferences with the Military Services. Expanded P50 technical operations' efforts to acquire pricing information, and to provide assistance to procurement personnel in determining price reasonableness. Support the installation and use, under control of PSO Technical Data Man- agers, of 16mm commercial microfilm reader-printers that display manufacturers' cataloged items. Distribution by DLSC of the consolidated Master Cross Reference List (MORL) of part numbers to Federal Stock Numbers. The MCRL is provided via 16mm film cartridges and is expected to prove a substantial aid in identifying items in the small purchase area. MATERIEL UTILIZATION Efforts are continuing toward improvement and refinement of mechanized procedures for screening releasable assets of Military Service Inventory Control Points (lOPs) against Military Service TOP requirements. A system which will provide positive advice on transactions in the screening system (PLUS) is being developed. Target date for implementing this system is 1 July 1968. Interservi~e PAGENO="0328" 322 and intraservice reutilization resulting from this process, conducted centrally at the Defense Logistics Services Center (DLSC), and from direct interrogations between TOPs, total $434 million for FY 19(37 ($348 million interservice reutilization and $86 million intraservice reutilization). For the first half of Fisal Year 1968, reutilization totalled $119 million ($87 million interservice and $32 million intraservice). Utilization of Military Service Declared Excess, which is screened primarily through manual rather than mechanized procedures, amounted to $1,106 billion in FY 1967 and $393 million in the first half of FY 1968. However, progress has been made in the establishment of mechanized procedures to the extent that the need for detailed description by reporting activities of items hav- ing 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) continued to operate in FY 1967 and FY 1968. The program centers around the publication of special utilization "Flyers" containing full data on an item, including photo- graphs, tailoring the description of these "Flyers" to selected potential users, and making a special effort toward utilization through telephone contact, as well as through research, to determine substitute an interchangeable uses for an item, In FY 1967, $55.1 million in utilization was realized from this program and $41.3 million in the first half of FY 1968. Woupon~ ~Systems Materiel Utilization Program Administered by the Defense Supply Agency in coperation with the Military Services, the Weapon Systems Materiel Utilization Program promotes Defense- wide redistribution and utilization of military weapon systems assets and other large aggregations oct 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 oct 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 develop- ment of early planning intelligence regarding military systems to be phased out or otherwise discontinued; and the development of new or alternate uses and applications of the materiel. Total utilization during FY 1967 on the mis- sile phase-out program amounted to $257.6 million. Industrial Plant lfquipment (IPJf) As a follow-on action to a 1961 GAO Review of the Management of Idle Pro- duction Equipment within the Department of Defense, OSD approved a joint study project, which resulted in a 1962 Report on the Management of Capital Plant Equipment by DSA. OSD approval of this report early in 1963 resulted in the establishment of the Defense Industrial Plant Equipment Center (DIPEC). The Center 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 FY 1967 equipment with an acquisi- tion cost of $192.7 million was redisitributed to meet Defense needs. During the first half of FY 1968, this effort amounted to $63.6 million, with the largest part going to Defense contractors in support of high urgency Southeast Asia requirements. DIPEC also maintains a central inventory record of Service- owned, high-value items oct plant equipment and provides a variety of repocrtcs 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 31 December 1967, 424,849 units of equipment with an acquisition cost of $4.23 billion were recorded in the central inventory. 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. Svbsidiary Programs Subsidiary Materiel Utilization programs, operated in addition to the basic mechanized and manual screening programs, include: PAGENO="0329" 323 A final asset screening of surplus items immediately prior to these items being offered for final disposal by sale $8.7 million of utilization was realized from this effort in FY 1967 and $50 million in first half of FY 1068. The identification of interchangeable and substitutable items to permit use of materiel for other than the purpose originally intended. An additional quan- t4ty of items worth $125.7 million were offered as a result of this procedure. Retail interservice Logistic Support to promote greater exchange of supplies and services at the local level through development of interservice support agreements. Growth of the program is reflected in the reported dollar value of retail interservicing on a world-wide DoD basis which increased from $335 million in FY 1966 to $451.7 million in FY 1967. En the same period, support agreements `decreased to 2659. MATERIEL DISPOSAL DSA is responsible for the administration of the DoD Disposal Program world-wide. This' responsibility includes the development of system~, techniques and procedures for disposable personal property in accordance with OSD' policy guidance, supervision of resource programs for DoD disposal activities, elimina- tion of disposal holding activities when practical and economical, and operation of Defense Surplus Sales Offices in CONUS. The Disposal Program involves several sub-programs, i.e., utilization of DOD excess, donation, sales, demilitarization, and scrap preparation. Under authority of the annual De- partment of Defense Appropriations Act, the costs incurred by all DoD elements engaged in the disposal of excess, surplus and foreign excess personal prop- erty 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 o'f property processed for disposal during FY 1967 totaled $5.311 billion, of which $1.965 billion was reutilized within DoD, transferred to other Federal Agencies and MAP, or dona'ted t'o authorized recipients. Value of property sold, scrapped, `abandonded or destroyed during FY 1967 was $3346 billion. Gross proceeds received from sales during FY 1967 were $101.4 million. A return of 5.4% acquisition value w'as realized for property sold, other than scrap. Disposal expenses for FY 1967 were $73.6 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 an'd displays, demilitarization, reclamation, scrap preparation, lumber and timber operations, and support costs related thereto. Efforts toward improvement of the managemenit and operation of the DoD disposal program are `continuing. Some of the major improvements completed or in process are as follows: (a) When D'SA was established, the 34 Consolidated Surplus Sales Offices (OSSOs) of the Military Departments and four Regional Sales Offices became field elements of the Defense Logistics' Services Center (DLSC). The CSSOs were redesignated as Defense Surplus Sales Offices (DiSSOs). On 29 January 1965, the four DIiSC Regional Sales Offices were eliminated; and the number of PSSOs has been progressively reduced from the original 34 to 12. Annual recurring savings from these reduction actions are $2.7 million. (b) D'SA, in coordination with the Military Services, has been engaged in a program to eliminate holding activities of DoD wherever practical and economical. On 1 January 1967, decisions were made to consolidate disposal functions at 79 holding activities. Seventy-one consolidations have been com- pleted with a resultant savings of $3.3 million. Four `planned consolidations were cancelled due to announced base closure act'ions (three) and redetermina- tion that consolidation was' not practical (one). The remaining 4 cons'olidations have `been postponed indefinitely. (c) A program to reduce costs incident to printing `and distribution of sales eatalogs. This has resulted in savings of $7.2 million through FY 1967. (d) Programs have been developed for conservation or sale of special mate~ rials, e.g., silver recovery, `special processes for `handling copper and copper- ~base alloy scrap, centralization of certain 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 prescribes development and use of time PAGENO="0330" 324 standards, valid workload data, a uniform cost accounting structure and a selective cost and performance reporting system. A draft Instruction which covers the system has been submitted to OSD (Comp) for DoD staffing and promulgation. DEFENSE DOCUMFJNTA~ION In November 1963 DSA assumed, from the Air Force, operational control of the Defense Documentation Center (DDO) which had replaced the Armed Services Technical Information Agency. Policy guidance for DDO is exercised by the Director of Technical Information, Office of the Director of Defense Research and Engineering. DDO provides classified and unclassified management infor- niation services, without charge, to Government organizations and contractors engaged in Government research and development programs. DD'O maintains and operates the Research and `Technology Work Unit Data Bank and related 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; main- tains the DOD Thesaurus of Technical Terminology; provides primary distribu- tion 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, proc- esses, techniques, services, products, and integrated systems for management information and technical documentation In support of the DOD Scientific and Technical Information Program. As continuing addition'al requirements have been imposed for services to the research and development and logistics communities, DD'O has developed from an R&D document supply activity to a major repository and retrieval activity' for technical management information. WAREHOUSING GROSS PERFORMANCE MEA5UREMENT SYSTEM On 1 February 1965, DSA was assigned responsibility for managing the Ware- housing Gross Performance Measurement System, in coordination with the Mill- tary Departments and in aeco~d'ance with instructions provided by the Assistant Secretary of Defense (Installations and Logistics). The Department of Defense Warehousing Gross Performance 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. DOD/GSA SUPI?LY RIrLATIONSHIPS-OIVIL 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 1985 to `determine appropriate supply management assignments to DSA and GSA of Federal Supply Class (FSC) groups, classes and items under POD' integrated management. Agency heads have approved initial management as- signments of 99 FS'Cs to DSA and 52 to the General Services Administration. Transfer to GSA of items In these 52 "Primary Federal Supply Service Classes" was made in July 1987. An additional FSO has been assigned to GSA-transfer scheduled prior to 1 July 1968. 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. Support studies were completed `and approved in February 1967. The principal recommendations were as follows: PueZ-D'S.A `assume mission support of fuel, with DFS'C procurement support for bulk fuels, phased over a ten-month period beginning six months from the date of the mission assignment (a total phase-in period of sixteen months) `and concurrent D'GS'C support for packaged products to begin six months from the mission assignment date. This action was estimated `to save the Government $2.5 million annually. Blectron~ios.-D~SA assume mission support for electronics, subject to PESO capa~billty to implement `and carry out civil agency support without risk of' PAGENO="0331" 325 impairment of military support. Tentative date to begin a twelve-month phase-in of civil agency support is 1 July 1068. Full support of all civil agencies by DESO is estimated to save $600,000 annually. Clothing and Tea~tiles.-Mission support not be assumed by PSA for clothing and textiles at this time and that expansion of current DSA support for clothing and textile items ~e limited to a case-by-case basis where military saipport is not affected and significant cost savings will result. Review of the feasibility of DSA mission support of all Federal civil agencies should be made from time to time as mutually agreed to by DSA and GSA. Medical a~id Nonperishable ~nbsistenoe.-Expansion of DSA support of civil agencies for medical and nonperishable si~bsistence at this time be limited to- (a)~ Flxtension of the existing VA and DSA medical commodity Inter- agency Supply Support Agreement to cover nonperishable subsistence common items; (b) Specific civil agency programs on a case-by-case basis and those clearly justified by cost savings and assurance of no impairment of DSA. military support; (c) DPSO undertake a review of medical and nonperishable subsistence items for the purpose of identifying areas in which there exists potential for increased commonality in civil agency and DSA items; and (d) Subsequent to the DPSC review, arid at a time mutually agreed to by GSA and DSA, the feasibility of DSA support for all civil agencies for medical and nonperishable subsistence again be reviewed. Progress Fnel.-Planning actions have begun for DSA assumption of fuel support. A time-phase schedule for implementation of DSA fuel support of civil agencies, based on a DSA mission assignment date of 1 July 1968, has been developed and staffed with GSA. Target dates for completion of the phase-in are January 196~t for packaged fuel items, and November 1969 for bulk fuel/coal items. Electronics.-Proceeding as scheduled on electronic support, the twelve-month implementation will begin on 1 July 1968. Medical and ~vbsistence.-DSA, in conjunction with the affected civil agencJes, are undertaking a technical review of these commodities for the purpose of identifying areas in which there exists a potential for increased commonality In DSA and civil agency items sufficient to warrant reconsideration of DSA mission support. (a) With respect to the medical review, we are proceeding first with a select group of medical supplies (FSC 6515, surgical instruments), working into the full category of medical material including drugs. This will require a compre- hensive review with the combined technical/professional talents of all the affected civil agencies. (b) With respect to the nonperishable subsistence item commonality review. no significant problems are envisioned and recommendations should be completed by the end of 1968. Under separate interagency supply support agreements currently in effect, DSA supports the Coast Guard and National Aeronautics and Space Administration with a full range of DSA material; Veterans Administration and Public Health Service with selected medical items and perishable subsistence; the Federal Aviation Agency with electronic tubes and associated items, and with individual combat meals; the Transportation and Communications Service of GSA with electronic items; Atomic Energy Commission with perishable subsistance; U.S. Agency for International Development (AID) with medical supplies for support of its functions in Vietnam, Laos and Thailand, operating through the U.S. Army Medical Depot in Ryukyu; Department of Commerce (Maritime Administration) with selected classes of all PSA commodities; the Office of Economic Opportunity with clothing and textiles and subsistence items: the Department of Interior, Bureau of Indian Affairs schools with perishable subsistence; and the Post Office Department for selected classes of electronics, general and indu~trial supplies; Department of Interior, Fish and Wildlife Service with amyl nitrite ampules: U.S. Department of Agriculture (Forest Service) with selected classes of industrial, general and clothing textiles. Interagency Comm~ittee on Food Items for Federal Hospitals-In 1967 sub- stantial progress was made in standardization reviews in perishable subsistence conducted jointly by Defense Supply Agency and Veterans Administration with full participation of the Military Service medical food service elements. 6S7 items were reviewed; 462 items (67%) were found acceptable for both military and PAGENO="0332" 326 civilian hospitals; of the remaining items, 27% were retained by agencies to meet unique dietetic requirements and 6% were deleted as no longer required. This action will provide an increase base of common items and thereby in- creases the Federal civil hospitals potential use of DSA support. To maintain this effort and proceed similarly in the non-~perishable subsistence area, an Inter- gency Committee on Food Items for Federal Hospitals has been established and a charter concluded to achieve the maximum standardization of subsistence items through exchange of information and application of professional and technical knowledge to the development of subsistence supply standards and the manage- ment of food. CONTRACT ADMINIsTRATIoN Sanvicus 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 ad- ministration of contracts in the Military Departments and DSA. A prime ob- jective of the merger was to provide a "single face to industry." During 1962 and part of 1903, a study known as Project 60 was conducted under the policy guidance of high level Department of Defense military and civilian personnel. The study indicated the existence of considerable overlap and duplication in contract administration services functions among the military services under the Army Materiel Command, the Office of Naval Material, and the Air Force Systems Command; and further indicated the feasibility of consolidat- ing the functions for centralized management. A pilot test region established at Philadelphia, Pennsylvania, in April 1964, demonstrated the feasibility and po- tential advantages of consolidating contract administration services functions on a nation-wide basis. On the basis of the success of the pilot test, the Secretary f Defense, on 4 June 1964, assigned responsibility for these functions to DSA. A National Planning Group, composed of temporary duty personnel from the miljtary services and DSA, developed a National Implementation Plan (NIP) ~ -h was approved by the Secretary on 28 December 1964. The planning group fo~i ied the nucleus of the headquarters element of the DCAS organization. During the development of the NIP, a Memorandum of Understanding was de- veloped with the National Aeronautics and Space Administration concerning CAS performance 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 rontract administration services components of the military services and PSA into eleven Defense Contract Administration Services Regions (DCASRs), re~ sponsible for administering contracts under the centralized management concept. The headquarters element was established on a permanent basis on 1 February 1965 and is now staffed with the 355 military and civilian personnel authorized. The current organizational structure of the headquarters element of DOAS is shown in Figure (3). Provision was made for required augmentation of the DSA common staff in areas where support services are furnished to DOAS. Conversion and organization of the DOAS field structure was completed on 1 December 1965, with the activation of the last two of the DCASRs at Los' Angeles and San Francisco. The geographical alignment of the Defense Contract Administration Services Regions is depicted in Figure (9), 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 in- volved the merging of 165 military service and DSA contract management offices into approximately 100 offices. Despite the many problems `associated with a con- version qifort of such magnitude, the transition was made with full consideration of the functional transfer rights and interests of the approximately 20,000 em- ployees 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. DOAS 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 pre-award surveys, review of contractor purchasing systems, quality assurance and inspection, property administration, production surveillance and reporting, transportation, PAGENO="0333" FIGuRE 9 PAGENO="0334" 328 payments to contractors, industrial security and other functions required in con- nection with industry performance on defense contracts. Responsibility for ini- tial 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 addition 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 con- struction, repair and overhaul of naval vessels. Military services are also re- sponsible for administration of those contracts in specific plants assigned by DoD under the Plant Cognizance Program. 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 DOAS has contract administration responsibility, but also all facilities where the military departments have retained plant cognizance responsibility. In addition to having responsibility for security administration of all DoD classified contracts, the Defense Industrial Security Program provides the same service for classified contracts awarded by eleven other departments and agencies of the government; namely, the Departments of State, Commerce, Treasury, Agriculture, Interior, Transportation and Health, Education and Welfare, the National Aeronautics and Space Administration, General Services Administra- tion, Small Business Administration and the National Science Poundation. In the consolidation of the Defense Industrial Security Program, procedures for processing personnel security clearances were centralized from approxi- mately 110 cognizant security offices into the Defense Industrial Security Clearance Office (DISCO). Centralization of the personnel clearance function has resulted in improved management efficiency and the ability to insure greater uni- formity in clearance determinations. Moreover, the centralized operation lends itself to future adaptation to automatic data processing. Responsibility for administering the Contract Compliance Program for the Department of Defense was transferred to the Defense Supply Agency, DCAS. from the Office of the Secretary of Defense on 1 July 1967. Implemented under Executive Order 11246 of 24 September 1965, the Contract Compliance Program is a national one, intended to insure equal treatment to all Americans employed or seeking employment with Government contractors. The program aims to assure that Defense contractors apply equal job opportunity and equal treatment in all phases of employment without regard to race, creed, color, or national origin, and that contractors adopt affirmative action programs to achieve those goals. In consolidating GAS 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 five-year period. Utilizing preconsolidation workload and manpower as a base, the ob- jective was a reduction of approximately 10% in personnel by FY 1968 to re- flect a recurring reduction in personnel costs of $19 million by FY 1969. In December 1965, the first month of full DOAS nation-wide operation, the level of workload had already increased 20% above the level prevailing when the savings estimates were made, when, for example, the number of primary and secondary contracts being administered was 138,000. By the end of FY 19643, the number was 195,000, an increase of 41.3%. A further increase to 272,000 occurred by 30 June 1967, and this number of contracts has remained constant through 31 March 1968. During the same period, the number of invoices com- pleted had changed from an annual rate of .825 million to 1.11 million, an in- crease of 34.5%. By 30 ~une 1967, the annual rate reached 1.95 million. As of 31 March 1968, invoices completed numbered 1.53 million. Still another example is the dollar value of material inspected and released for shipment which rose from an annual rate of $13729 billion in December 1965 to $19.352 billion on 30 June 1967, a 41% increase. The projected annual rate as of 30 June 1968 is $21.78 billion. To accomplish this increased workload, manpower was increased by 20%. These increases are for the most part attributed to the impact of the SEA build- up, added NASA requirements, and the transfer to DOAS of the administration PAGENO="0335" 329 of some contracts previously assigned to the Military Departments under the DoD Plant Cognizance Program. The workload increase compared with the workforce increase demonstrates a reduction in cost per work unit performed. Accordingly, the original estimate of anticipated savings appears to have been exceeded. However, a more precise computation of savings for comparison with the original estimate is not feasible because of the significant hut immeasurable influence of several factors. These include changes that have occurred in the contract administra- tion mission where the net effects on workload and resources are not clearly identifiable; the impact of SEA requirements which, on a post facto 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 notwith- standing, current workload and resource data indicate that the full savings orig- inally anticipated were being realized earlier than scheduled and will continue to recur through F! 1968. MILITARY STANDARD DATA SYSTEMS DSA administers a series of uniform standard logistics data systems used throughout DoD. These systems are: MILSTRIP, Military Standard Requisitioning and Issue Procedures, imple- mented 1 July 1962, provides a standard DoD data system for requisitioning and issuing materiel within and between the Military Departments, the U.S. Coast Guard, and General Services Administration. MILSTRAP, Militry tSandard Transaction Reporting and Accounting Pro- cedures, implemented 1 July 1966, is a DoD information system which standard- izes data elements and machine processable documents for the flow of inventory accounting information pertaining to receipt, issue and adjustment transactions between inventory control points, stock control activities, and storage depots. MILSTAMP, Military Standard Transportation and Movement Procedureis, implemented 1 October 1963, is the DoD worldwide information and control system for all shipments moving in tbe Defense Transportation System and is `tied to other DoD logistics data systems including MILSTRIP and MILSTE~P, and the Uniform Materiel Movement and Issue Priority `System. MILSTEP, Military Supply and Transportation Evaluation Procedures, is being designed to measure the effeetivepe~s of each step in the materiel req- uisitioning, issue processing, and delivery cycle. It will become fully operational by July 1968 and be an `important tool for evaluating the entire supply cycle. MILSOAP, Military Standard Contract Administration Procedures, is being de- veloped to permit a high degree of mechanized processing of Contract Ad- ministration Services transactions such as shipment notices, notices of delay in delivery, and notices of payments made against contract funds. MILSCAP is expected to `be implemented in 1970. CIVIL DETENSE LOGISTICS DSA is responsible for logistics support of the National `Oivil Defense Program under the policy control and direction of the Office of Civil Defense, Office of the Secretary of the Army. Logistics support provided the Civil Defense Program includes: (a) the operation of a nationwide distribution system to issue survival supplies for stocking public fallout shelters, (b) the storage, maintenance and `loan of OCD emergency power, water supply and purification equipment to assist State and local governments in an emergency and (c) the receipt, storage and issue of GOD `radiological instruments and equipment. During the past fiscal year, survival supplies for 5.8 million persons were issued for stocking public fallout `shelters. The total supplies i'ssued since the program began in F! 1962 are sufficient for more than 51 million persons in more than * 89,000 shelter facilities. An `evaluation of the condition of survival supplies in shelters is being conducted by DSA, utilizing th'e Veterinary Services of the Army and Air Force to inspect the supplies on a scientific sampling basis. Samples of specific items of shelter supplies are also subjected to laboratory analysis. Dur- ing the initial cycle of inspections, the condition and readiness of survival supplies ~at military installations, in Federal buildings, and in public fallout shelters PAGENO="0336" 330 nationwide were evaluated. A new cycle of inspections is now under way with a target date for completion of 1 August 1968 During FY 1967 approximately 113 miles of pipe 130 pumps and related items from the OCD inventory of emergency water supply equipment were utilized by 23 States for use in assisting 78 communities Disasers experienced during this fiscal year were mainly categorized as a continuation of persistent water supply problems in Northeastern United States and the Mississippi River floods in the Spring of 1967 DSA ACHIEVEMENTS IN REDUCING COSTS OF OPERATIONS The Defense Supply Agency has contipued support to the Military Services without interruption or impairment, during major organizaitonal change. This has involved the extension of central control over a group of hterogeneous 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 FY 1963 was based on the expectation, that the functions transferred to DSA. woulcibe 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, mak- ing a total budget cut of $30.4 million, related principally to a reduction of 3,329 civilian personnel 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 FY 1963 operating expense saving of $31.3 million. During FY 1964, this $31.3 million was augmented by addi- tional savings, realized from reorganization of the distribution system, improved use of automatic data processing equipment, consolidation of the Defense Auto- motive and Construction 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 Cen- ter resulted in a reduction of 483 civilian and 38 military Spaces, with a net sav- ing during FY 1966 of approximately $4.2 million exclusive of one-time costs. By the end of FY 1966 total savings from reduced cost of operations had reached $58.3 million. In FY 1967, the consolidation of two subsistence Regional Headquarters further reduced operating costs by $605,000 and 63 persohnel spaces so that the total savings from the above actions Is continuing at about $59 million annually. SUMMARY In the six years since its establishment, it has become appai~ent that DSA has not, and will not, solve all military supply and logistics services problems. Some of these are bound up in the complex relationships of military strategy and na- tional economics and the rapid obsolescence of military materiel caused by the for- ward sweep of technology. DSA has in this six 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 sound- ness of the concept of integrated management of common supplies and logistics services in Defense and that it can be made to work in time of war, mobilization, or peace. 0